-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KEO/7Oihxvbl0RG9bpg8vzuQLkLDeTeiTqOMbL9FPVdqb8JgglLrL11P3Rpv76Ed /L0ANBy0VLHeyiZymSM/kA== 0000950124-96-003506.txt : 19960813 0000950124-96-003506.hdr.sgml : 19960813 ACCESSION NUMBER: 0000950124-96-003506 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960812 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KELLOGG CO CENTRAL INDEX KEY: 0000055067 STANDARD INDUSTRIAL CLASSIFICATION: GRAIN MILL PRODUCTS [2040] IRS NUMBER: 380710690 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04171 FILM NUMBER: 96608608 BUSINESS ADDRESS: STREET 1: ONE KELLOGG SQ STREET 2: P O BOX 3599 CITY: BATTLE CREEK STATE: MI ZIP: 49016 BUSINESS PHONE: 6169612000 MAIL ADDRESS: STREET 1: ONE KELLOGG SQUARE STREET 2: P O BOX 3599 CITY: BATTLE CREEK STATE: MI ZIP: 49016 10-Q 1 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission file number 1-4171 KELLOGG COMPANY State of Incorporation--Delaware IRS Employer Identification No.38-0710690 One Kellogg Square, P.O. Box 3599, Battle Creek, MI 49016-3599 Registrant's telephone number: 616-961-2000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Common Stock outstanding July 31, 1996 - 211,815,399 shares 2 KELLOGG COMPANY INDEX PART I - Financial Information Page Item 1: Consolidated Balance Sheet - June 30, 1996 and December 31, 1995 2 Consolidated Earnings - three and six months ended June 30, 1996 and 1995 3 Consolidated Statement of Cash Flows - six months ended June 30, 1996 and 1995 4 Notes to Consolidated Financial Statements 5-6 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations 7-11 PART II - Other Information Item 4: Submission of Matters to a Vote of Security Holders 12-13 Item 6: Exhibits and Reports on Form 8-K 13 Signatures 14 Exhibit Index 15 3
CONSOLIDATED BALANCE SHEET ===================================================================== KELLOGG COMPANY AND SUBSIDIARIES JUNE 30, December 31, (millions) 1996 1995 (unaudited) * - --------------------------------------------------------------------- CURRENT ASSETS Cash and cash equivalents $ 254.3 $ 221.9 Accounts receivable, net 634.8 590.1 Inventories: Raw materials and supplies 133.0 129.7 Finished goods and materials in process 250.5 247.0 Other current assets 310.3 240.1 - --------------------------------------------------------------------- TOTAL CURRENT ASSETS 1,582.9 1,428.8 Property, net of accumulated depreciation of $2,028.4 and $1,953.0 2,745.8 2,784.8 Other assets 253.7 201.0 - --------------------------------------------------------------------- TOTAL ASSETS $4,582.4 $4,414.6 ===================================================================== CURRENT LIABILITIES Current maturities of long-term debt $1.1 $1.9 Notes payable 537.2 188.0 Accounts payable 352.0 370.8 Income taxes 37.8 64.2 Accrued liabilities 695.8 640.5 - --------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 1,623.9 1,265.4 LONG-TERM DEBT 719.8 717.8 NONPENSION POSTRETIREMENT BENEFITS 561.2 546.1 DEFERRED INCOME TAXES AND OTHER LIABILITIES 323.1 294.4 SHAREHOLDERS' EQUITY Common stock, $.25 par value 77.8 77.8 Capital in excess of par value 114.8 105.2 Retained earnings 4,080.6 3,963.0 Treasury stock, at cost (2,719.7) (2,361.2) Currency translation adjustment (199.1) (193.9) - --------------------------------------------------------------------- TOTAL SHAREHOLDERS' EQUITY 1,354.4 1,590.9 - --------------------------------------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,582.4 $4,414.6 ===================================================================== *Condensed from audited financial statements.
See accompanying notes to consolidated financial statements. 2 4
CONSOLIDATED EARNINGS (Results are unaudited) ================================================================================================== KELLOGG COMPANY AND SUBSIDIARIES Three months ended June 30 Six months ended June 30, (millions, except per share data) 1996 1995 1996 1995 - -------------------------------------------------------------------------------------------------- NET SALES $1,651.4 $1,780.1 $3,437.3 $3,496.1 - -------------------------------------------------------------------------------------------------- Cost of goods sold 775.2 819.7 1,565.6 1,589.0 Selling and administrative expens 708.5 676.0 1,355.7 1,299.9 Non-recurring charges 26.1 52.8 35.6 52.8 - -------------------------------------------------------------------------------------------------- OPERATING PROFIT 141.6 231.6 480.4 554.4 - -------------------------------------------------------------------------------------------------- Interest expense 16.1 16.5 29.8 34.5 Other income (expense), net 0.3 5.7 0.7 16.3 - -------------------------------------------------------------------------------------------------- EARNINGS BEFORE INCOME TAXES 125.8 220.8 451.3 536.2 Income taxes 47.7 84.9 167.1 204.3 - -------------------------------------------------------------------------------------------------- NET EARNINGS $ 78.1 $ 135.9 $ 284.2 $ 331.9 ================================================================================================== EARNINGS PER SHARE $ .37 $ .62 $ 1.33 $ 1.51 - -------------------------------------------------------------------------------------------------- DIVIDENDS PER SHARE $ .39 $ .36 $ .78 $ .72 - -------------------------------------------------------------------------------------------------- AVERAGE SHARES OUTSTANDING 212.7 219.7 213.9 220.4 - --------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. 3 5
CONSOLIDATED STATEMENT OF CASH FLOWS (Results are unaudited) ============================================================================= KELLOGG COMPANY AND SUBSIDIARIES Six months ended June 30, (millions) 1996 1995 - ----------------------------------------------------------------------------- OPERATING ACTIVITIES Net earnings $ 284.2 $ 331.9 Items in net earnings not requiring (providing) cash: Depreciation 126.0 137.0 Deferred income taxes (0.5) 4.5 Non-recurring charges, net of cash paid 6.4 43.7 Other 35.2 3.1 Pension contributions (54.8) (61.0) Changes in operating assets and liabilities (87.6) 17.1 - ----------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 308.9 476.3 - ----------------------------------------------------------------------------- Investing activities Additions to properties (109.2) (144.7) Other 3.9 5.9 - ----------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (105.3) (138.8) - ----------------------------------------------------------------------------- FINANCING ACTIVITIES Net borrowings of notes payable 349.2 67.3 Reduction in long-term debt (3.1) (0.2) Common stock repurchases (356.3) (147.6) Cash dividends (166.7) (158.6) Other 7.3 14.6 - ----------------------------------------------------------------------------- NET CASH USED IN FINANCING ACTIVITIES (169.6) (224.5) - ----------------------------------------------------------------------------- Effect of exchange rate changes on cash (1.6) (2.2) - ----------------------------------------------------------------------------- Increase in cash and cash equivalents 32.4 110.8 Cash and cash equivalents at beginning of peri 221.9 266.3 - ----------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 254.3 $ 377.1 ============================================================================= See accompanying notes to consolidated financial statements.
4 6 Notes To Consolidated Financial Statements for the six months ended June 30, 1996 (Unaudited) 1. Accounting policies The unaudited interim financial information included herein reflects the adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the results of operations, financial position, and cash flows for the periods presented. Such interim information should be read in conjunction with the financial statements and notes thereto contained on pages 15 to 28 of the Company's 1995 Annual Report. The accounting policies used in preparing these financial statements are the same as those summarized in the Company's 1995 Annual Report. The results of operations for the three and six months ended June 30, 1996, are not necessarily indicative of the results to be expected for other interim periods or the full year. 2. Non-recurring charges Operating profit includes non-recurring charges for the quarter of $26.1 million ($16.9 million after tax or $.08 per share) and for the year-to-date period of $35.6 million ($23.0 million after tax or $.11 per share). Operating profit for the comparable 1995 quarter and year-to-date periods includes non-recurring charges of $52.8 million ($33.0 million after tax or $.15 per share). All of these charges primarily relate to ongoing productivity and operational streamlining initiatives in the U.S., Europe, and other international locations, and are comprised principally of expenditures for employee severance, training, and relocation; associated management consulting; and production redeployment. During 1995, the Company recorded pre-tax non-recurring charges of $348.0 million related to operational streamlining initiatives in the U.S., Australia, and Europe. As a result, approximately 2,000 employee positions will be eliminated by the end of 1996, through a combination of voluntary early retirement incentives, and voluntary and involuntary severance programs. Associated with these 1995 initiatives, the Company expects to incur an additional $30 million of costs during 1996 related to workforce and production redeployment. These costs will be recorded as non-recurring charges as incurred. These streamlining initiatives are expected to require pre-tax cash outlays of approximately $120 to $130 million during 1996, consisting of $94 million in accrued liabilities as of year-end 1995 and the aforementioned $30 million to be expensed in 1996. 5 7 In early 1996, the Company initiated a plan to consolidate and reorganize certain aspects of its European operations, and is taking action to further streamline operations in other international locations. While some of these programs are in the early stages of development, management believes that the combination of these 1996 initiatives with redeployment expenditures from 1995 initiatives could generate total pre-tax non-recurring charges during 1996 of approximately $100 million. From the 1996 initiatives currently under way, the Company expects to incur cash outlays of approximately $60 million, principally in 1996; and eliminate 475-500 employee positions by the end of 1997. 3. Earnings per share Earnings per share are based on the weighted average shares outstanding as presented. The potential dilution of earnings per share from the exercise of stock options is not material. 6 8 KELLOGG COMPANY PART I - FINANCIAL INFORMATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of operations Kellogg Company operates in a single industry - manufacturing and marketing grain-based convenience food products including ready-to-eat cereal, toaster pastries, frozen waffles, and cereal bars throughout the world. The Company holds a 42 percent volume share of the global ready-to-eat cereal market. In North America, the Company continues to hold the number one market share position in the toaster pastry, cereal/granola bar, and frozen waffle categories. The Company's second quarter 1996 results were significantly impacted by competitive conditions in the U.S. ready-to-eat cereal market. Primarily as a result of its own and competitors' pricing actions during the quarter, including heavy promotional spending, the Company reported declines in volume, net sales, net earnings, and earnings per share versus last year. However, management believes that, following a transition period during which pricing and purchasing behavior are adjusted, the Company and the ready-to-eat cereal category will be better positioned for profitable growth in the future. Since the beginning of 1996, the Company has taken several major price decreases on its U.S. brands. In January 1996, the Company announced a 9% reduction in the price of Kellogg's(R) Low Fat Granola cereal and, on April 1, 1996, the price of Kellogg's(R) Raisin Bran cereal was reduced by 16%. On June 10, 1996, the Company implemented price reductions averaging 19 percent on brands comprising approximately two-thirds of its U.S. cereal business. Additionally, during the second quarter of 1996, the Company lowered the price of Kellogg's(R) Pop-Tarts(R) toaster pastries via a combination of per-package count increases and direct price reductions. The above pricing actions were accompanied by payments to customers to extend these price reductions to existing trade inventory ("floor stock protection payments"). Cereal prices have also been reduced in some Latin American markets. These pricing actions are integral to a broad strategy initiated by management over the past two years to improve the Company's long-term pricing and cost structure. This strategy includes pricing based on brand differentiation, elimination of inefficient price promotion spending, and reduction of operating costs through productivity and streamlining programs. Management believes that the Company's implementation of certain of these pricing measures during the second quarter of 1996 improved the long-term brand value proposition to the consumer, but negatively impacted profitability in the short term. However, management believes that total year 1996 earnings per share, excluding non-recurring charges, will approximate 1995's level, based on the expectation that cereal volumes will return to modest growth and cost-savings will mitigate revenue reductions during the remainder of the year. 7 9 For the second quarter, total volume and global cereal volume were both down 2%. Cereal volume was negatively impacted by competitive pricing actions in the U.S. market and, to a lesser extent, by store-brand competition in Great Britain and economic conditions in Mexico. Other cereal markets around the world exhibited growth during the quarter, including Canada, continental Europe, Asia-Pacific, and the majority of Latin America. On a year-to-date basis, cereal volume was flat, with total volume up 1%. Other convenience foods quarterly volume was flat compared to the prior-year period, which included significant growth from three new-product introductions. However, over the past two years, other convenience foods second quarter volume has grown at a low double-digit compound annual growth rate, and management expects this rate of growth to continue. Net sales were down 7% for the quarter and 2% for the year-to-date period. This decline reflects the volume loss, price reductions, and trade payments as discussed above, and unfavorable foreign currency movements which reduced net sales by 2% for both the quarter and year-to-date periods. The gross profit margin for the quarter was 53.1%, down .9 percentage points from the comparable 1995 period. Year-to-date, the gross profit margin was 54.5%, equal to the prior year, as operational cost savings offset the decline in net sales. For the quarter, selling and administrative expense as a percentage of net sales was 42.9%, up from 38.0% in the prior year, and, on a year-to-date basis, was 39.4% versus 37.2% in 1995. This increase was primarily a result of lower volumes and selling prices, including floor stock protection payments, combined with increased promotional spending and U.S. price reduction program-specific costs. These program-specific costs were approximately $15 million ($9 million after tax or $.04 per share) and primarily consisted of expenditures for communicating the price reductions and for changing package sizes of Kellogg's(R) Pop-Tarts(R). While marketing expenditures increased during the quarter, management expects this level to be reduced during the remainder of the year, and remains committed to emphasizing efficient brand-building activities and eliminating inefficient price promotion spending. Operating profit included non-recurring charges for the quarter of $26.1 million ($16.9 million after tax or $.08 per share) and for the year-to-date period of $35.6 million ($23.0 million after tax or $.11 per share). Operating profit for the comparable 1995 quarter and year-to-date periods included non-recurring charges of $52.8 million ($33.0 million after tax or $.15 per share). All of these charges primarily related to ongoing productivity and operational streamlining initiatives in the U.S., Europe, and other international locations, and were comprised principally of expenditures for employee severance, training, and relocation; management consulting; and production redeployment. (Refer to section below on non-recurring charges.) Second quarter operating profit, excluding non-recurring charges, declined 41% to $167.7 million, reflecting decreased sales and increased marketing spending, as discussed above. Year-to-date operating profit, excluding non-recurring charges, was $516.0 million, down 15% from the prior year. The second quarter operating profit margin was 10.2%, down from 16.0% last year, and the 8 10 year-to-date margin was 15.0%, versus 17.4% in the comparable 1995 period. For the quarter, gross interest expense, prior to amounts capitalized, was $16.8 million, compared to $18.4 million in the prior year, and on a year-to-date basis, was $31.2 million versus $38.3 million in 1995. Interest expense was down slightly versus last year due to lower rates on short-term borrowings. However, due to increases in short-term debt since year-end 1995, management expects total year 1996 interest expense to approximate the 1995 level. Other income, net, decreased $5.4 million for the quarter and $15.6 million for the year-to-date period, primarily due to foreign currency losses in hyperinflationary Latin American markets and lower interest income during 1996. Excluding the effect of non-recurring charges, the Company's second quarter income tax rate was 37.5%, down from 38.3% last year, and the year-to-date rate was 36.9% versus 38.0% in 1995. The 1995 second quarter tax rate was unfavorably impacted by a retroactive statutory rate increase in Australia. The Company expects its effective income tax rate for the full year of 1996 to be between 37% and 38%, in line with 1995. Second quarter 1996 net earnings and earnings per share decreased 43% and 40%, respectively, from the second quarter of 1995. Excluding non-recurring charges, earnings per share were $.45 versus $.77 a year ago, a 42% decrease derived from $.33 in business decline and $.02 in unfavorable foreign currency movements, mitigated by $.02 from share repurchase and $.01 from the lower effective tax rate. Excluding non-recurring charges for both years, quarterly net earnings were $95.0 million for 1996, down 44% from $168.9 million in 1995. Year-to-date results, excluding non-recurring charges, were earnings per share of $1.44, compared to $1.66 in 1995, and net earnings of $307.2 million versus $364.9 million last year. The foregoing projections of market conditions, volume growth, profitability, and earnings per share are forward-looking statements which involve risks and uncertainties. Actual 1996 results may differ materially due to the impact of the Company's price reductions on volumes, the level of trade and consumer participation in promotional programs and competitive response; as well as general economic and market conditions; actual worldwide volumes and product mix; the levels of worldwide spending on advertising, promotion, and other general and administrative costs; raw material price and labor cost fluctuations; and the level of stock repurchases. Liquidity and capital resources The Company's financial condition remained solid during the second quarter of 1996, despite the decline in net earnings. A strong cash flow, combined with a program of issuing commercial paper and maintaining worldwide credit facilities, provides adequate liquidity to meet the Company's operational needs. The Company continues to enjoy the highest available credit ratings on both its long-term debt and commercial paper. Year-to-date net cash provided from operations was $308.9 million, compared to $476.3 million for the 1995 period. Cash flow from operations was down from prior year levels principally due 9 11 to decreased earnings, combined with increased employee severance payments and other cash expenditures related to the Company's ongoing productivity initiatives. The ratio of current assets to current liabilities was 1:1 as of June 30, 1996, relatively unchanged from December 31, 1995. Net cash used in investing activities was $105.3 million year-to-date, based primarily on capital spending of $109.2 million. Management anticipates that total year 1996 capital expenditures will be approximately $275-$300 million. For the year-to-date period, net cash used in financing activities was $169.6 million, principally related to common stock repurchases and dividends, net of additional short-term borrowing. Under an existing plan authorized by the Company's Board of Directors, management spent $356.3 million year-to-date to repurchase 4.8 million common shares at an average price of $74.78 per share. As of June 30, 1996, the remaining repurchase authorization was $194.4 million. Currently, management intends to fully utilize this authorization by the end of the year. During the second quarter, the Company paid $82.8 million in dividends at a rate of $.39 per common share, an 8% increase over the 1995 per share amount. On July 26, 1996, the Company's Board of Directors declared a dividend of $.42 per common share, representing a further 8% increase over the second quarter 1996 per share amount. This dividend is payable September 13, 1996, to shareholders of record at the close of business on August 30, 1996. At June 30, 1996, common shares outstanding totaled 212.1 million, compared to 219.5 million at June 30, 1995. During the quarter, the average number of shares outstanding was 212.7 million, compared to an average of 219.7 million during the prior year period. Year-to-date average shares outstanding were 213.9 million versus 220.4 million last year. Long-term debt outstanding at quarter-end consisted principally of $200 million of three-year notes issued in 1994, $200 million of five-year notes issued in 1993, and $300 million of five-year notes issued in 1992. Short-term debt outstanding at quarter-end consisted principally of U.S. commercial paper. The Company's net debt position (long-term debt plus notes payable less cash) at June 30, 1996 was $1.00 billion, up $318.0 million from December 31, 1995, principally due to an increase in short-term debt to fund common stock repurchases. The ratio of debt to total capitalization was 48%, up from 36% at December 31, 1995. At June 30, 1996, the Company had available an unused "shelf registration" of $200 million with the Securities and Exchange Commission to provide for the issuance of debt in the United States. The proceeds of such an offering would be added to the Company's working capital and be available for general corporate purposes. Management is not aware of any adverse trends that would materially affect the Company's strong financial position. Should suitable investment opportunities or working capital needs arise that would require additional financing, management believes that the Company's triple A credit rating, strong balance sheet, and solid earnings history provide a base for obtaining additional financial resources at competitive rates and terms. 10 12 Non-recurring charges During 1995, the Company recorded pre-tax non-recurring charges of $348.0 million related to operational streamlining initiatives in the U.S., Australia, and Europe. As a result, approximately 2,000 employee positions will be eliminated by the end of 1996, through a combination of voluntary early retirement incentives, and voluntary and involuntary severance programs. Associated with these 1995 initiatives, the Company expects to incur an additional $30 million of costs during 1996 related to workforce and production redeployment. These costs will be recorded as non-recurring charges as incurred. These streamlining initiatives are expected to require pre-tax cash outlays of approximately $120 to $130 million during 1996, consisting of $94 million in accrued liabilities as of year-end 1995 and the aforementioned $30 million to be expensed in 1996. From these programs, the Company expects to realize approximately $120 million of annual pre-tax savings by 1997, with about 60% of this amount to be achieved in 1996. These savings are not necessarily indicative of future incremental earnings due to management's commitment to invest in competitive business strategies, new markets, and growth opportunities. In early 1996, the Company initiated a plan to consolidate and reorganize certain aspects of its European operations, and is taking action to further streamline operations in other international locations. While some of these programs are in the early stages of development, management believes that the combination of these 1996 initiatives with redeployment expenditures from 1995 initiatives could generate total pre-tax non-recurring charges during 1996 of approximately $100 million. From the 1996 initiatives currently under way, the Company expects to incur cash outlays of approximately $60 million, principally in 1996; eliminate 475-500 employee positions by the end of 1997; and generate an estimated $20 million of annual pre-tax savings by 1998. The foregoing discussion of non-recurring charges contains forward-looking statements regarding amounts of future charges, headcount reductions, cash requirements, and realizable savings. Actual amounts may vary depending on the final determination of important factors such as the magnitude of centralization of operations, the number of employees affected and the type of separation programs, product sourcing reviews, asset utilization analyses, and other items which have yet to be determined. In addition, the recognition of future charges will depend on the timing of management approvals of elements of the streamlining plans, communication of employee severance programs, and actual incurrence of certain costs. 11 13 KELLOGG COMPANY PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders (a) The Company's Annual Meeting of Stockholders was held on April 19, 1996. Represented at the Meeting, either in person or by proxy, were 195,204,730 voting shares, of a total 215,103,803 voting shares outstanding. The matters voted upon at the Meeting are described in (c) below. (c) (i) To elect four (4) directors to serve for three-year (3) terms expiring at the 1999 Annual Meeting of Stockholders or until their respective successors are elected and qualified. All nominees are named below. Claudio X. Gonzalez Votes for Election - 193,770,557 Votes Withheld - 1,434,173 William C. Richardson Votes for Election - 193,747,386 Votes Withheld - 1,457,344 Donald Rumsfeld Votes for Election - 193,746,843 Votes Withheld - 1,457,887 John L. Zabriskie Votes for Election - 193,737,922 Votes Withheld - 1,466,807 There were no votes against, abstentions, or broker non-votes with respect to the election of any nominee named above. (ii) To approve amendment to the Company's Amended Restated Certificate of Incorporation to increase the authorized number of shares of common stock. Votes for Proposal - 188,785,005 Votes Against Proposal - 6,015,952 Votes Abstaining - 402,927 Broker Non-votes - 846 Votes Withheld - 0 12 14 (iii) To approve adoption of an Amendment to the Kellogg Company 1990 Stock Compensation Program for Non-Employee Directors. Votes for Proposal - 188,930,462 Votes Against Proposal - 5,088,726 Votes Abstaining - 1,181,575 Broker Non-votes - 3,967 Votes Withheld - 0 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 3.01 - Amended Restated Certificate of Incorporation of the Company, as amended through April 19, 1996. 4.01 - There is no instrument with respect to long-term debt of the Company that involves indebtedness or securities authorized thereunder exceeding ten percent of the total assets of the Company and its subsidiaries on a consolidated basis. The Company agrees to file a copy of any instrument or agreement defining the rights of holders of long-term debt of the Company upon request of the Securities and Exchange Commission. 10.01 - Kellogg Company 1990 Stock Compensation Program for Non-Employee Directors, as amended. 27.01- Financial Data Schedule (b) Reports on Form 8-K: On June 10, 1996, the Company filed a report on Form 8-K which included an exhibit containing a press release dated June 10, 1996. 13 15 KELLOGG COMPANY SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. KELLOGG COMPANY /s/ J. R. Hinton ------------------------------- J.R. Hinton Principal Financial Officer; Senior Vice President - Administration /s/ A. Taylor ------------------------------- A. Taylor Principal Accounting Officer; Vice President and Corporate Controller Date: August 12, 1996 14 16 KELLOGG COMPANY EXHIBIT INDEX Number Description ------ ----------- 3.01 Amended Restated Certificate of Incorporation of the Company, as amended through April 19, 1996. 10.01 Kellogg Company 1990 Stock Compensation Program for Non-Employee Directors, as amended. 27.01 Financial Data Schedule 15 EX-3.01 2 EX-3.01 1 EXHIBIT 3.01 KELLOGG COMPANY AMENDED RESTATED CERTIFICATE OF INCORPORATION (WITH ALL AMENDMENTS THROUGH APRIL 19, 1996) FIRST The name of this corporation is KELLOGG COMPANY. SECOND Its registered office, in the State of Delaware, is located at No. 100 West Tenth Street, in the City of Wilmington, County of New Castle. The name and address of its registered agent is The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware. THIRD The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be now or hereafter organized under the General Corporation Law of Delaware. FOURTH The total number of shares of capital stock which this Corporation shall have authority to issue is 500,000,000 shares of common stock of the par value of $0.25 per share. A statement of the designations, dividend rights, voting powers, preferences and rights, and the qualifications, limitations or restrictions thereof, of the shares of stock which the corporation shall be authorized to issue, is as follows: 2 COMMON STOCK 1. DIVIDENDS. Dividends may be paid upon the common stock as and when declared by the Board of Directors out of funds legally available for the payment of dividends. 2. VOTING POWERS. The holders of the common stock shall have the exclusive right to vote for the election of Directors and for all other purposes, each holder of common stock being entitled to one vote for each share thereof held. 3. PREEMPTIVE RIGHTS. No holder of stock of the Corporation shall have any preemptive right to subscribe for, purchase, or otherwise acquire shares of stock of the Corporation of any class, whether now or hereafter authorized, nor shall any holder of stock of the Corporation have any preemptive right to subscribe for, purchase, or otherwise acquire bonds, notes or other securities, whether or not convertible, into shares of stock of the Corporation of any class; and the Board of Directors may, from time-to-time, and at any time, cause shares of stock of the Corporation of any class to be issued, sold or otherwise disposed of at such price or prices and upon such terms as the Board of Directors may determine. 4. LIQUIDATION RIGHTS. Upon dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, the net assets of the Corporation shall be distributed ratably to the holders of the common stock. 5. LIABILITY TO FURTHER CALL OR ASSESSMENT. The stock heretofore issued shall be fully paid and nonassessable. 6. FRACTIONAL SHARES. No fractional shares of any class of stock shall be issued. FIFTH The number of shares with which this Corporation will commence business is ten (10) shares of common stock, which shares are without nominal or par value. 2 3 SIXTH This Corporation is to have perpetual existence. SEVENTH The private property of the stockholders shall not be subject to the payment of corporate debts to any extent whatever. EIGHTH The Corporation may, in its Bylaws, confer powers upon its Directors in addition to the powers and authorities expressly conferred upon them by statute. NINTH This Restated Certificate of Incorporation, as amended, shall be subject to alteration, amendment or repeal, and new provisions thereof may be adopted by the affirmative vote of the holders of not less than a majority of the outstanding shares of capital stock entitled to vote generally in the election of Directors (such outstanding shares hereinafter referred to collectively as the "Voting Stock"), voting together as a single class, at any regular or special meeting of the stockholders (but only if notice of the proposed change be contained in the notice to the stockholders of the proposed meeting). Notwithstanding the foregoing and in addition to any other requirements of applicable law, the alteration, amendment or repeal of, or the adoption of any provision inconsistent with, this Article NINTH or Article TENTH, ELEVENTH or TWELFTH of this Restated Certificate of Incorporation, as amended, shall require the affirmative vote of the holders of not less than two-thirds of the voting power of all shares of the Voting Stock, voting together as a single class, at any regular or special meeting of the stockholders. The Bylaws of this Corporation shall be subject to alteration, amendment or repeal, and new bylaws may be adopted (i) by the affirmative vote of the holders of not less than a majority of the voting power of all shares of the Voting Stock, voting together as a single class, at any regular or special meeting of the stockholders (but only if notice of the proposed change be contained in the notice to the stockholders of the proposed meeting), or (ii) by the affirmative vote of not less than a majority of the members of the Board of Directors at any meeting of the Board of 3 4 Directors at which there is a quorum present and voting; provided, that any alteration, amendment or repeal, or the adoption of any provision inconsistent with Article II, Section 2 or Section 6, or Article III, Section 1, Section 2 or Section 5, or Article XIV, Section 1 of the Bylaws, shall require, in the case of clause (i), the affirmative vote of the holders of not less than two-thirds of the voting power of all shares of the Voting Stock, voting together as a single class, at any regular or special meeting of the stockholders, or, in the case of clause (ii), the affirmative vote of such number of Directors constituting not less than two-thirds of the total number of directorships fixed by a resolution adopted by the Board of Directors pursuant to Article TENTH of this Restated Certificate of Incorporation, as amended, whether or not such directorships are filled at the time (such total number of directorships hereinafter referred to as the "Full Board"). TENTH The number of Directors of this Corporation shall be not less than seven (7) nor more than fifteen (15). The exact number of Directors within such limitations shall be fixed from time-to-time by a resolution adopted by not less than two-thirds of the Full Board (as defined in Article NINTH). At the 1986 Annual Meeting of Stockholders, the Directors shall be divided into three classes, as nearly equal in number as possible, with the term of office of the first class to expire at the 1987 Annual Meeting of Stockholders, the term of office of the second class to expire at the 1988 Annual Meeting of Stockholders, and the term of office of the third class to expire at the 1989 Annual Meeting of Stockholders. At each Annual Meeting of Stockholders following such initial classification and election, the class of Directors whose terms of office shall expire at such time shall be elected to hold office for terms expiring at the third succeeding Annual Meeting of Stockholders following their election. Each Director shall hold office until his successor shall be elected and shall qualify. Subject to the rights of the holders of any particular class or series of equity securities of this Corporation, (i) newly created directorships resulting from any increase in the total number of authorized Directors may be filled by the affirmative vote of not less than two-thirds of the Directors then in office, although less than a quorum, or by a sole remaining Director, at any regular or special meeting of the Board of Directors, or by the stockholders, in accordance with the Bylaws, and (ii) any vacancies on the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause may be filled only by the affirmative vote of not less than two-thirds of the Directors then in office, although less than a quorum, or by a sole remaining Director, at any regular or special meeting of the Board of Directors. Any Director so chosen shall hold office for a term expiring at the Annual Meeting of Stockholders at which the term of office of the class of Directors to which he or she has been elected expires. No decrease in the total number of 4 5 authorized Directors constituting the Board of Directors shall shorten the term of office of any incumbent Director. Subject to the rights of the holders of any particular class or series of equity securities of this Corporation, any Director may be removed only for cause and only by the affirmative vote of the holders of not less than two-thirds of the voting power of all shares of Voting Stock, voting together as a single class, at any regular or special meeting of the stockholders, subject to any requirement for a larger vote contained in any applicable law, this Corporation's Restated Certificate of Incorporation, as amended, or the Bylaws. ELEVENTH Any action required or permitted to be taken by the stockholders of this Corporation may be effected solely at an Annual or Special Meeting of Stockholders duly called and held in accordance with law and this Corporation's Restated Certificate of Incorporation, as amended, and may not be effected by any consent in writing by such stockholders or any of them. TWELFTH Except as otherwise expressly provided in the immediately following paragraph: (a) any merger or consolidation of this Corporation with or into any other corporation other than a Subsidiary (as hereinafter defined); or (b) any sale, lease, exchange or other disposition by this Corporation or any Subsidiary of assets constituting all or substantially all of the assets of this Corporation and its Subsidiaries taken as a whole, to or with, any other person or entity in a single transaction or series of related transactions; or (c) any liquidation or dissolution of this Corporation; shall require, in addition to any vote required by law or otherwise, the affirmative approval of holders of not less than two-thirds of the voting power of the Voting Stock. The provisions of this Article TWELFTH shall not apply to any transaction described in the immediately preceding paragraph if such 5 6 transaction is approved by a majority of the Continuing Directors (as hereinafter defined). For purposes of this Article TWELFTH, (a) the term "Subsidiary" means any corporation of which a majority of each class of equity security is beneficially owned, directly or indirectly, by this Corporation; (b) the term "Affiliate", as used to indicate a relationship to a specified person, shall mean a person who, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such specified person, except that, notwithstanding the foregoing, a Director of this Corporation shall not be deemed to be an Affiliate of a specified person if such Director, in the absence of being a stockholder, Director or officer of this Corporation, or a Director or officer of any Subsidiary, would not be an Affiliate of such specified person; (c) the term "Associate", as used to indicate a relationship with a specified person, shall mean (i) any corporation, partnership or other organization of which such specified person is an officer or partner, or beneficially owns, directly or indirectly, ten percent or more of any class of equity securities; (ii) any trust or other estate in which such specified person has a substantial beneficial interest, or as to which such specified person serves as trustee or in a similar fiduciary duty; (iii) any relative or spouse of such specified person, or any relative of such spouse who has the same home as such specified person; and (iv) any person who is a Director or officer of such specified person or any of its Affiliates, except that notwithstanding clauses (i), (ii), (iii) and (iv) above, a Director of this Corporation shall not be deemed to be an Associate of a specified person if such Director, in the absence of being a stockholder, Director or officer of this Corporation, or a Director or officer of any Subsidiary, would not be an Associate of such specified person; (d) the term "Transacting Entity" shall mean (i) a corporation with which this Corporation merges or consolidates in a transaction described in clause (a) of the first paragraph of this Article TWELFTH; (ii) a person or entity to which this Corporation sells, leases, exchanges or otherwise disposes of assets in a transaction described in clause (b) of the first paragraph of this Article TWELFTH; or (iii) a person, other than the Chief Executive Officer of this Corporation, or entity, who shall propose a liquidation or dissolution described in clause (c) of the first paragraph of this Article TWELFTH; and (e) the term "Continuing Director" shall mean a Director who is neither an Affiliate nor an Associate of the Transacting Entity, provided that if there be no Transacting Entity, each Director is a Continuing Director. THIRTEENTH SECTION 1. No person who is or was at any time a Director of the Corporation shall be personally liable to the Corporation or its stockholders for 6 7 monetary damages for breach of fiduciary duty as a Director; provided, however, that unless and except to the extent otherwise permitted from time-to-time by applicable law, the provisions of this Article shall not eliminate or limit the liability of a Director (i) for any breach of the Director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of Delaware, (iv) for any transaction from which the Director derived an improper personal benefit, or (v) for any act or omission occurring prior to the date this Article becomes effective. Any repeal or modification of the foregoing paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of a Director of the Corporation existing at the time of such repeal or modification. SECTION 2. (a). Right to Indemnification. Each person who was or is made a party, or is threatened to be made a party to, or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "Proceeding"), by reason of the fact that he or she is or was a Director or officer of the Corporation, where the basis of such Proceeding is an alleged action or omission in an official capacity as such, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to amendment) against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes, or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith, and such indemnification shall continue as to an indemnitee who has ceased to be a Director or officer, and shall inure to the benefit of the indemnitee's heirs, executors and administrators; provided, however. that except as provided in paragraph (b) hereof with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a Proceeding (or part thereof) initiated by such indemnitee only if such Proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this section shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such Proceeding in advance of its final disposition (hereinafter an "Advancement of Expenses"); provided, however, that if the Delaware General Corporation Law requires, an Advancement of Expenses incurred by an indemnitee in his or her capacity as a Director or officer shall be made only upon delivery to the Corporation 7 8 of an undertaking, by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision, from which there is no further right to appeal, that such indemnitee is not entitled to be indemnified for such expenses under this section or otherwise (hereinafter an "Undertaking"). (b). Right of Indemnitee to Bring Suit. If a claim under paragraph (a) of this section is not paid in full by the Corporation within sixty days after a written claim has been received by the Corporation, except in the case of a claim for an Advancement of Expenses, in which case the applicable period shall be twenty days, the indemnitee may, at any time thereafter, bring suit against the Corporation to recover the unpaid amount of the claim. If successful, in whole or in part, in any suit, or in a suit brought by the Corporation to recover an Advancement of Expenses pursuant to the terms of an Undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In (i), any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an Advancement of Expenses), it shall be a defense that, and (ii) any suit by the Corporation to recover an Advancement of Expenses pursuant to the terms of an Undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that the indemnitee has not met the applicable standard of conduct set forth in the Delaware General Corporation Law. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct, or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right hereunder, or by the Corporation to recover an Advancement of Expenses pursuant to the terms of an Undertaking, the burden of proving that the indemnitee is not entitled to be indemnified or to such Advancement of Expenses under this section or otherwise, shall be on the Corporation. (c). Non-Exclusivity of Rights. The rights to indemnification and to the Advancement of Expenses conferred in this section shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, this Certificate of Incorporation, bylaw agreement, vote of stockholders or disinterested Directors, or otherwise. 8 9 (d). Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any Director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. (e). Other Indemnification. The Corporation may, to the extent authorized from time-to-time by the Board of Directors, grant rights to indemnification and to the Advancement of Expenses to any Director, officer, employee or agent of the Corporation, whether or not acting in his or her capacity as such, or at the request of the Corporation, to the fullest extent of the provisions of this section with respect to the indemnification and Advancement of Expenses of Directors and officers of the Corporation. 9 EX-10.01 3 EX-10.01 1 EXHIBIT 10.01 STOCK COMPENSATION PROGRAM FOR NON-EMPLOYEE DIRECTORS OF KELLOGG COMPANY (AS AMENDED) This is the Stock Compensation Program for Non-Employee Directors of Kellogg Company (the "Program"). 1. Purpose. The purpose of the Program is to attract and retain outstanding non-employee directors by enabling them to participate in the Company's growth through automatic, non-discretionary awards of shares of common stock of the Company. 2. Eligibility. Eligibility for participation in the Program is limited to persons then currently serving as directors of the Company who are not "employees" of the Company (or any of its subsidiaries) within the meaning of the Employee Retirement Income Security Act of 1974 or for federal income tax withholding purposes (the "Participants"). 3. Stock Available for the Program. Shares of stock available for issuance pursuant to the Program may be either authorized but unissued shares or shares which have been or may be reacquired by the Company including Treasury shares of the common stock of the Company, $0.25 par value (the "Stock"). An aggregate of 187,200 shares of the Stock shall be so available. No awards shall be made under the Program after 1999. 4. Awards of Restricted Stock. Awards of 500 shares of Stock shall be made to each Participant with at least one year of service as a member of the Board following each Annual Meeting of Stockholders. All such Stock shall be restricted, in that the Participants may not sell, transfer or otherwise encumber the shares and the shares will be placed in a trust and will not be available to a Participant until his or her service as a member of the Board of Directors is terminated. 5. Rights of Participants. The Company shall establish a bookkeeping account in the name of each Participant (the "Stock Account"). As of the date that shares are awarded to a Participant, the Participant's Stock Account shall be adjusted to reflect such shares and an aggregate number of shares credited to each Participant on such date shall be transferred by the Company to the Kellogg Company Grantor Trust for Non-Employee Directors. Except for the right to direct the Trustee as to the manner which the shares are to be voted, a Participant shall not have any rights with respect to any shares credited to the Participant's Stock Account and transferred to the Trust until the date the Participant ceases, for any reason, to serve as a director of the Company. 6. Changes in Capitalization or Organization. Nothing contained in this document shall alter or diminish in any way the right and authority of the Company to effect changes in its capital or organizational structure; provided, however, that the following procedures shall be recognized. 6.1. Stock Split, Stock Dividend, or Extraordinary Distribution. In the event the number of shares of common stock of the Company is increased at any time by a stock split, by declaration by the Board of Directors of the Company of a dividend payable only in shares of such stock, or by any other extraordinary distribution of shares, the number of shares granted pursuant to Article 4 above shall be proportionately adjusted. 6.2. Organizational Changes. In the event a merger, consolidation, reorganization, or other change in corporate structure materially changes the terms or value of the common stock of the Company, the number of shares granted pursuant to Article 4 above shall be adjusted in such manner as the Board of Directors in its sole discretion shall determine to be equitable and consistent with the purposes of the Program. Such determination shall be conclusive for all purposes with respect to the grant made in Article 4 above. 7. Listing, Registration, and Legal Compliance. Each award made pursuant to Article 4 above shall be subject to the requirement that if at any time counsel to the Company shall determine that the listing, registration or qualification thereof or of any shares of the stock subject thereto upon any securities exchange or under any foreign, federal or state securities or other law or regulation, or the consent or approval of any governmental body or the taking of any other action to comply with or otherwise with respect to any such law or regulation, is necessary or desirable as a condition to or in connection with such award or delivery of shares of the Stock thereunder, no such award may be made or implemented unless such listing, registration, qualification, consent, approval or other action shall have been effected or obtained free of any conditions not acceptable to the Company. The holder of any such award shall supply the Company with such certificates, representations and information as the Company shall request and shall otherwise cooperate with the Company in effecting or obtaining such listing, registration, qualification, consent, approval or other action. 8. Obligation to Reelect. Nothing in this Program shall be deemed to create any obligation on the part of the Board of Directors to nominate any director for reelection by the Company's shareholders. 9. Termination or Amendment of the Program. The Board of Directors reserves the right to terminate or amend the Program at any time; provided, however, that such action shall not adversely affect the rights of any Participant under its provisions with respect to awards of the Stock theretofore made, and provided further that such action shall not increase the amount of authorized and unissued shares of the Stock available for the Program as specified in Article 3 above or materially increase the benefits to Participants. 10. Effective Date. This Program shall become effective as of the date that it is ratified by the stockholders and no award made hereunder shall be effective unless the Program is so ratified. A-1 EX-27.01 4 EX-27.01
5 1,000,000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 254 0 642 (7) 384 1,583 4,774 (2,028) 4,582 1,624 720 0 0 78 1,276 4,582 3,437 3,437 1,566 1,566 1,391 0 30 451 167 284 0 0 0 284 1.33 1.33
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