11-K 1 f11k_kelloggsavings-12312003.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 11-K ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003 COMMISSION FILE NUMBER 1-4171 THE KELLOGG COMPANY SAVINGS AND INVESTMENT PLAN (Full Title of the Plan) KELLOGG COMPANY (Name of Issuer) ONE KELLOGG SQUARE BATTLE CREEK, MICHIGAN 49016-3599 (Principal Executive Office) Kellogg Company Savings and Investment Plan Index December 31, 2003 and 2002 -------------------------------------------------------------------------------
Page(s) Report of Independent Registered Public Accounting Firm.................1 Financial Statements Statement of Net Assets Available for Benefits..........................2 Statement of Changes in Net Assets Available for Benefits...............3 Notes to Financial Statements.........................................4-8 Supplemental Schedules Schedule of Assets (Held at End of Year)................................9
Note:Other schedules required by Section 2520.103-10 of the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act ("ERISA") of 1974 have been omitted because they are not applicable. 1 Report of Independent Registered Public Accounting Firm To the Trustees and Participants of the Kellogg Company Savings and Investment Plan In our opinion, the accompanying statements of net assets available for benefits and the related statements of changes in net assets available for benefits present fairly, in all material respects, the net assets available for benefits of the Kellogg Company Savings and Investment Plan (the "Plan") at December 31, 2003 and 2002, and the changes in net assets available for benefits for the years then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets (held at end of year) is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ PricewaterhouseCoopers LLP Battle Creek, Michigan May 17, 2004 Kellogg Company Savings and Investment Plan Statement of Net Assets Available for Benefits December 31, 2003 and 2002 ------------------------------------------------------------------------------------------
2003 2002 Assets Receivables Employee contributions $ - $ 250,457 ------------------ ------------------ Total receivables - 250,457 ------------------ ------------------ Amount due from prior trustee (Note 1) - 123,031 Investments Plan's interest in Master Trust 714,742,615 623,841,143 Loans to participants 10,799,720 9,558,982 ------------------ ------------------ Total investments 725,542,335 633,400,125 ------------------ ------------------ Total assets 725,542,335 633,773,613 ------------------ ------------------ Liabilities Investment services fees 24,017 39,862 Amount due Plan sponsor - 13,895 ------------------ ------------------ Total liabilities 24,017 53,757 ------------------ ------------------ Net assets available for benefits $ 725,518,318 $ 633,719,856 ------------------ ------------------
The accompanying notes are an integral part of these financial statements. Kellogg Company Savings and Investment Plan Statement of Changes in Net Assets Available for Benefits December 31, 2003 and 2002
---------------------------------------------------------------------------------------------------------- 2003 2002 Contributions Employer $ 14,584,793 $ 11,097,348 Employee 37,157,751 26,857,382 Employee rollovers 1,703,776 706,859 ------------------- ------------------- Total contributions 53,446,320 38,661,589 ------------------- ------------------- Earnings on Investments Plan's interest in income (loss) of Master Trust 88,858,491 (16,962,167) Interest income 619,747 455,408 Trustee fees (98,181) (101,776) Administrative fees (1,175,414) (758,799) ------------------- ------------------- Total earnings (loss) on investments, net 88,204,643 (17,367,334) ------------------- ------------------- Participant withdrawals (49,851,165) (45,045,121) Net transfers between Plans - 457,387 Transfers to/from prior trustees (Note 1) (1,336) 217,343,117 ------------------- ------------------- Net increase 91,798,462 194,049,638 Net assets available for benefits Beginning of year 633,719,856 439,670,218 ------------------- ------------------- End of year $ 725,518,318 $ 633,719,856 ------------------- -------------------
The accompanying notes are an integral part of these financial statements. Kellogg Company Savings and Investment Plan Notes to Financial Statements December 31, 2003 and 2002 ------------------------------------------------------------------------------- 1. Summary of Significant Accounting Policies Basis of Accounting The Plan operates as a qualified defined contribution plan and was established under Section 401(k) of the Internal Revenue Code. The accounts of the Plan are maintained on the accrual basis. Expenses of administration are paid by the Plan. Plan Mergers On March 1, 2002, the Worthington Foods, Inc. 401(k) Profit Sharing Plan merged with the Plan. Plan assets of $1,624,593 consisting primarily of participant investment balances and participant loans receivable were transferred to the Plan on March 1, 2002. On March 28, 2002, the Mondo Baking 401(k) Plan merged with the Plan. Plan assets of $3,410,229 consisting primarily of participant investment balances and participant loan receivables were transferred to the Plan on March 28, 2002. On April 29, 2002, the Keebler Puerto Rico 401(k) Savings Plan merged with the Plan. Plan assets of $99,470 consisting primarily of participant investment balances were transferred to the Plan on April 29, 2002. On June 28, 2002, the Keebler Company Salaried Savings Plan merged with the Plan. Plan assets of $183,562,777 consisting primarily of participant investment balances and participant loan receivables were transferred to the Plan on June 28, 2002. On June 28, 2002, the Keebler Company Union Savings Plan merged with the Plan. Plan assets of $19,687,050 consisting primarily of participant investment balances and participant loan receivables were transferred to the Plan on June 28, 2002. On June 28, 2002, the Keebler Company Savings Plan for Hourly Associates of Cary Bakery merged with the Plan. Net plan assets of $8,958,998 consisting primarily of participant investment balances and participant loan receivables were transferred to the Plan on June 28, 2002. Investments All investments are reported at current quoted market values except for guaranteed insurance contracts, which are reported at contract value and represent contributions made plus interest at the contract rate. These contracts are maintained in the Stable Value Fund of the Kellogg Company Master Trust. The Plan presents in the statement of changes in net assets available for benefits the Plan's interest in income of Master Trust, which consists primarily of the realized gains or losses on the fair value of the Master Trust investments and the unrealized appreciation (depreciation) on those investments. Employer Contributions Receivable Substantially all of the employer contributions receivable relate to employer matching contributions and related investment earnings, earned through the year, but which were unpaid by the Plan sponsor at year end. Amount Due from Prior Trustee At December 31, 2002 amount due from prior trustee represents a receivable from the former trustee of the Keebler Company Savings Plan for Hourly Associates of Cary Bakery. Kellogg Company Savings and Investment Plan Notes to Financial Statements December 31, 2003 and 2002 ------------------------------------------------------------------------------- Allocation of Net Investment Income to Participants Net investment income is allocated to participant accounts daily, in proportion to their respective ownership on that day. Risks and Uncertainties The Plan provides for various investment options in several investment securities. Investment securities are exposed to various risks, such as interest rate, market and credit. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible the changes in risk in the near term would materially affect participants' account balances and the amounts reported in the statement of net assets available for benefits and the statement of changes in net assets available for benefits. Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Plan's management to make estimates and assumptions that affect the reported amounts of net assets available for benefits at the date of the financial statements and changes in net assets available for benefits during the reporting period. Actual results could differ from those estimates. 2. Provisions of the Plan The following description of the Kellogg Company Savings and Investment Plan (the "Plan") is provided for general information purposes only. Participants should refer to the plan document for a more comprehensive description of the Plan's provisions. Plan Administration The Plan is administered by the ERISA Finance Committee and the ERISA Administrative Committee appointed by Kellogg Company. Plan Participation Generally, all salaried employees of Kellogg Company and its U.S. subsidiaries, employees of the Company's Worthington Foods subsidiary covered by a collective bargaining agreement, employees of the Company's Cary Bakery facility covered by a collective bargaining agreement and employees of the Company's Keebler subsidiary covered by a collective bargaining agreement are eligible to participate in the Plan. Subject to limitations prescribed by the Internal Revenue Service, participants may elect to contribute from 1 percent to 50 percent of their annual wages. Participents were eligible to defer $12,000 in 2003 and $11,000 in 2002. Employee contributions are matched by Kellogg Company at a 100 percent rate on the first 3 percent and a 50 percent rate on the next 2 percent, with 12.5 percent of the Company match restricted for investment in the Kellogg Company stock fund, except for employees of certain Company facilities covered by a collective bargaining agreement. Please refer to the Plan document for additional information. Employees may contribute to the Plan from their date of hire; however, the monthly contributions are not matched by the Company until the participant has completed one year of service. Participants of the Plan may elect to invest the contributions to their accounts as well as their account balances in various equity, bond, fixed income or Kellogg Company stock funds or a combination thereof in multiples of one percent. Vesting Participant account balances are fully vested. Kellogg Company Savings and Investment Plan Notes to Financial Statements December 31, 2003 and 2002 ------------------------------------------------------------------------------- Participant Loans Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their account balance. Participants may have only one loan outstanding at any time. Loan transactions are treated as transfers between the Loan fund and the other funds. Loan terms range from 12 to 60 months, except for principal residence loans, which must be repaid within 15 years (or 180 months). Interest is paid at a constant rate equal to one percent over the prime rate in the month the loan begins. Principal and interest are paid ratably through monthly payroll deductions. Loans that are considered to be uncollectible at year end result in the outstanding principal being considered a hardship withdrawal from the participant's plan account. Participant Distributions Participants may request an in-service withdrawal of all or a portion of certain types of contributions under standard in-service withdrawal rules. The withdrawal of any participant contributions which were not previously subject to income tax is restricted by Internal Revenue Service regulations. Participants who terminate employment before retirement, by reasons other than death or disability, may remain in the Plan or receive payment of their account balances in a lump sum. If the account balance is $5,000 or less, the terminated participant will receive the account balance in a lump sum. Participants are eligible to retire from the Company at age 62, upon reaching 55 with 20 years of service, or after 30 years of service. Upon retirement, disability, or death, a participant's account balance may be received in a lump sum or installment payments. Termination While the Company has expressed no intentions to do so, the Plan may be terminated at any time. 3. Income Tax Status The Plan administrator has received a favorable letter from the Internal Revenue Service dated March 18, 2004 regarding the Plan's qualification under applicable income tax regulations. The Plan has been amended since the last determination letter. The Plan administrator believes the Plan is designed and is currently being operated in compliance with the applicable requirements of the Internal Revenue Code. 4. Subsequent Event On January 1, 2004 the Keebler Company Local 184-L 401(k) Plan and Trust merged with the Plan. Plan assets of $2,395,447 consisting primarily of participant investment balances were transferred to the Plan on January 1, 2004. As of January 1, 2004 participants of the Keebler Company Local 184-L 401(k) Plan and Trust were eligible to participate in the Kellogg Company Savings and Investment Plan subject to the same provisions as the Keebler Company Local 184-L 401(k) Plan and Trust. 5. Kellogg Company Master Trust The Plan has an undivided interest in the net assets held in the Kellogg Company Master Trust in which interests are determined on the basis of cumulative funds specifically contributed on behalf of the Plan adjusted for an allocation of income. Such income allocation is based on the Plan's funds available for investment during the year. Kellogg Company Master Trust net assets at December 31, 2003 and 2002 and the changes in net assets for the years ended December 31, 2003 and December 31, 2002 are as follows: Schedule of Net Assets of Master Trust Investment Accounts ----------------------------------------------------------------------------------------------------------
2003 2002 Cash/equivalents Interest bearing cash $ 12,791,710 $ 21,986,590 ------------------- ------------------- Total cash/equivalents 12,791,710 21,986,590 ------------------- ------------------- Receivables 1,888,051 2,227,281 ------------------- ------------------- General Investments Long Term U.S. Gov't Securities 19,060,041 21,757,942 Short Term U.S. Gov't Securities 5,793,346 19,216,568 Corporate Debt - Long-Term 21,930,624 4,944,928 Corporate Debt - Short-Term 3,665,846 7,262,014 Corporate Stocks - Common 84,130,906 95,922,038 Commingled Funds 200,998,048 164,020,605 Shares of Registered Investment Company 207,592,300 100,512,901 Guaranteed Investment Contracts 664,410,052 674,814,554 ------------------- ------------------- Total general investments 1,207,581,163 1,088,451,550 ------------------- ------------------- Total investments 1,222,260,924 1,112,665,421 ------------------- ------------------- Payables Unsettled trades (167,091) (6,909,233) ------------------- ------------------- Total liabilities (167,091) (6,909,233) ------------------- ------------------- Net assets $ 1,222,093,833 $ 1,105,756,188 ------------------- ------------------- Percentage interest held by the Plan 58.5% 56.4%
Schedule of Changes in Net Assets of Master Trust Investment Accounts ----------------------------------------------------------------------------------------------------------
2003 2002 Transfers from prior Trustees $ - $ 211,752,913 Earnings on investments Interest 32,450,775 34,075,591 Dividends 9,152,649 7,584,737 Net realized gain (loss) 2,385,239 (14,486,361) ------------------- ------------------- Total additions 43,988,663 238,926,880 ------------------- ------------------- Net transfer of assets out of investment account (20,635,134) (25,570,131) Fees and commissions (611,058) (543,969) ------------------- ------------------- Total distributions (21,246,192) (26,114,100) ------------------- ------------------- Change in unrealized appreciation (depreciation) 93,595,174 (36,262,450) ------------------- ------------------- Net change in assets 116,337,645 176,550,330 Net assets at beginning of year 1,105,756,188 929,205,858 ------------------- ------------------- Net assets at end of year $ 1,222,093,833 $ 1,105,756,188 ------------------- -------------------
Schedule H, Line 4i Schedule of Assets (Held at End of Year) December 31, 2003 Schedule I -------------------------------------------------------------------------------------------------------------------------- (a) (b) (c) (e) Description of Investment Including Identity of Issuer, Borrower, Lessor Maturity Date, Rate of Interest, or Similar Party Collateral, Par or Maturity Value Current Value Loans to participants (interest rate of $ 10,799,720 5.25% to 13.69%)
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. Date: June 18, 2004 The Kellogg Company Savings and Investment Plan By: /s/ Jeffrey M. Boromisa ------------------------------- Jeffrey M. Boromisa Senior Vice President and Chief Financial Officer, Kellogg Company INDEX TO EXHIBITS TO FORM 11-K EXHIBIT NUMBER DESCRIPTION OF DOCUMENT 23 Consent of Independent Registered Public Accounting Firm