11-K 1 k61971e11-k.txt ANNUAL REPORT 1 FORM 11-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ANNUAL REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR FISCAL YEAR ENDED OCTOBER 31, 2000 COMMISSION FILE NUMBER 1-4171 KELLOGG COMPANY AMERICAN FEDERATION OF GRAIN MILLERS 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) 2 KELLOGG COMPANY AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN INDEX TO FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION --------------------------------------------------------------------------------
PAGE REPORT OF INDEPENDENT ACCOUNTANTS 1 FINANCIAL STATEMENTS AS OF OCTOBER 31, 2000 AND 1999 AND FOR THE YEARS THEN ENDED: Statement of net assets available for benefits 2 Statement of changes in net assets available for benefits 3 Notes to financial statements 4-9 ADDITIONAL INFORMATION: Schedule of assets held for investment purposes - October 31, 2000 10 Schedule of loans or fixed income obligations - October 31, 2000 11-12 Schedule of reportable transactions - Year Ended October 31, 2000 13
3 REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees and Participants of the Kellogg Company American Federation of Grain Millers 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 American Federation of Grain Millers Savings and Investment Plan at October 31, 2000 and 1999, 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 auditing standards generally accepted in the United States of America which 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 schedules of assets held for investment purposes, loans or fixed income obligations and reportable transactions are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplemental information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These supplementary schedules are the responsibility of the Plan's management. The supplemental schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. PricewaterhouseCoopers LLP Battle Creek, Michigan April 20, 2001 4 KELLOGG COMPANY 2 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS --------------------------------------------------------------------------------
OCTOBER 31, 2000 1999 ASSETS: Receivables: Employer contributions $ - $ 97,299 Employee contributions 254,829 Interest 6,733 ---------------- --------------- Total receivables 358,861 ---------------- --------------- Investments: Plan's interest in Master Trust 516,813,560 633,692,754 Loans to participants 7,563,150 7,868,259 Cash 299 ---------------- --------------- Total investments 524,376,710 641,561,312 ---------------- --------------- Total assets 524,376,710 641,920,173 ---------------- --------------- LIABILITIES: Benefits payable 35,897 12,500 Investment services fees 33,007 75,627 ---------------- --------------- Total liabilities 68,904 88,127 ---------------- --------------- Net assets available for benefits $ 524,307,806 $ 641,832,046 ================ ===============
See accompanying notes to financial statements 5 KELLOGG COMPANY 3 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS --------------------------------------------------------------------------------
OCTOBER 31, 2000 1999 Contributions: Employer $ 4,894,755 $ 5,681,271 Employee 12,436,819 14,218,642 Rollovers from other qualified plans 6,273 36,033 ---------------- --------------- Total contributions 17,337,847 19,935,946 ---------------- --------------- Earnings on Investments: Plan's interest in income of Master Trust 8,107,125 72,195,128 Interest income 609,780 660,828 Trustee fees (57,571) (176,020) ---------------- --------------- Total earnings on investments, net 8,659,334 72,679,936 ---------------- --------------- Participant withdrawals (143,521,421) (64,081,064) ---------------- --------------- Net (decrease) increase (117,524,240) 28,534,818 Net assets available for benefits at beginning of year 641,832,046 613,297,228 ---------------- --------------- Net assets available for benefits at end of year $ 524,307,806 $ 641,832,046 ================ ===============
See accompanying notes to financial statements 6 KELLOGG COMPANY 4 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING The Kellogg Company American Federation of Grain Millers Savings and Investment Plan ("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 Kellogg Company. 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 net appreciation (depreciation) in the fair value of its investments which consists of the realized gains or losses and the unrealized appreciation (depreciation) on those investments. 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. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS The preparation of financial statements in conformity with generally accepted accounting principles 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 PLAN ADMINISTRATION The Plan is administered by trustees appointed by Kellogg and employees represented by the American Federation of Grain Millers. 7 KELLOGG COMPANY 5 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- 2. PROVISIONS OF THE PLAN (CONTINUED) PLAN PARTICIPATION Generally, all Kellogg Company hourly employees belonging to American Federation of Grain Millers Union Local Nos. 3, 50, 211, 252, 374 and 401 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 16 percent of their annual wages. Total deferrals in any taxable year may not exceed $10,500. Employee contributions not exceeding 5 percent of wages are matched by Kellogg Company at an 80 percent rate, with 12.5 percent of the Company match restricted for investment in the Kellogg Company stock fund. 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. Following is a summary of the Plan's investment options: The BOND INDEX FUND invests only in top-rated securities, as well as certain mortgage-backed securities to compensate for yield. This fund seeks to meet or exceed the total return of the Lehman Brothers Government/Corporate Bond Index, a standard benchmark for this type of fund. The STABLE VALUE FUND invests primarily in investment contracts issued by a diversified group of insurance companies and other financial institutions. This fund seeks to provide a generally steady level of current income, plus stability of principal. The U.S. EQUITY INDEX FUND buys and holds securities in the same capitalization weight ratio as they appear in the S&P 500 Index. Securities are traded only when there is contribution or redemption activity, a change in the composition of the S&P 500 Index or the receipt of dividend income. The KELLOGG COMPANY STOCK FUND provides returns in the form of dividend income and stock price changes. Return is based solely on the Company's stock performance. The LARGE COMPANY EQUITY FUND is a value-oriented growth and income fund. The fund seeks investment opportunities in U.S. common stocks that are not overly recommended and are considered to be good values. The SMALL COMPANY EQUITY FUND invests primarily in common stocks of small, rapidly growing U.S. Companies. The fund seeks to provide long-term growth of capital and income by investing in U.S.-based equity securities. 8 KELLOGG COMPANY 6 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- 2. PROVISIONS OF THE PLAN (CONTINUED) The INTERNATIONAL EQUITY FUND invests in common and preferred stocks, convertibles, American Depositary Receipts, Global Depositary Receipts, bonds (generally rated "A" or better), government securities, nonconvertible preferred stocks, and cash. At least 65% of assets will be invested in issuers in Europe or the Pacific Basin. The CONSERVATIVE PRE-MIXED FUND is a combination of the Fixed Income Fund (10%), the Bond Index Fund (50%), the U.S. Equity Index Fund (20%), the International Equity Fund (10%) and the Small Company Equity Fund (10%). The AGGRESSIVE PRE-MIXED FUND is a combination of the U.S. Equity Index Fund (25%), the Large Company Equity Fund (25%), the International Equity Fund (20%) and the Small Company Equity Fund (30%). VESTING Participant account balances are fully vested. 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. Loan transactions are treated as transfers between the Loan fund and the other funds. Loan terms range from 12 to 60 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 elect to withdraw all or a portion of their contributions made after October 31, 1978, plus related net investment income. The withdrawal of any participant contributions which were not previously subject to income tax is restricted by Internal Revenue Service regulations. Under certain circumstances and subject to approval by the Trustees, participants may request withdrawal of a portion of Company contributions and their own contributions made prior to November 1, 1978, including net investment income thereon. 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 less than $5,000, 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. 9 KELLOGG COMPANY 7 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- 2. PROVISIONS OF THE PLAN (CONTINUED) TERMINATION While the Company has expressed no intentions to do so, the Plan may be terminated at any time. In the event of termination of the Plan, the account of each participant will be fully vested. 3. INCOME TAX STATUS The Plan administrator has received a favorable letter from the Internal Revenue Service dated November 25, 1996 regarding the Plan's qualification under applicable income tax regulations as an entity exempt from federal income taxes. 4. MASTER TRUST Assets of the Plan have been combined for investment purposes with assets of the Kellogg Company Salaried Savings and Investment Plan and Kellogg Company sponsored pension plans in a Master Trust. The Plan has an undivided interest in the net assets held in the 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. Master Trust net assets at October 31, 2000 and 1999 and the changes in net assets for the periods then ended are as follows: 10 KELLOGG COMPANY AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- 4. MASTER TRUST (CONTINUED) KELLOGG COMPANY MASTER TRUST SCHEDULE OF ASSETS AND LIABILITIES FOR MASTER TRUST INVESTMENT ACCOUNTS
PENSION PLANS SAVINGS & INVESTMENT PLANS TOTAL 10/31/1999 10/31/2000 10/31/1999 10/31/2000 10/31/1999 10/31/2000 ---------------------------- ----------------------------- ------------------------------ CASH/EQUIVALENTS: Non-Interest Bearing $ 14,657 $ -- $ -- $ 190,786 $ 14,657 $ 190,786 Interest Bearing Cash 36,158 23,743 472,627 36,158 496,370 ---------------------------- ----------------------------- ------------------------------ TOTAL CASH/EQUIVALENTS 50,815 23,743 663,413 50,815 687,156 ---------------------------- ----------------------------- ------------------------------ RECEIVABLES 23,574,559 39,320,271 1,038,888 3,323,841 24,613,447 42,644,112 ---------------------------- ----------------------------- ------------------------------ GENERAL INVESTMENTS: Long Term U.S. Gov't Securities 61,379,222 194,205,671 14,548,720 10,019,273 75,927,942 204,224,944 Short Term U.S. Gov't Securities (28,334) (28,334) Corporate Debt - Long Term 106,986,013 100,421,709 7,132,367 6,747,697 114,118,380 107,169,406 Corporate Debt - Short Term 1,072,045 72,075 1,144,120 Corporate Stocks - Preferred 463,000 902,900 463,000 902,900 Corporate Stocks - Convertible 1,300,767 1,060,539 1,300,767 1,060,539 Corporate Stocks - Common 703,540,062 651,736,336 515,745,616 454,948,112 1,219,285,678 1,106,684,448 Real Estate Pooled Funds 11,121,415 7,654,432 11,121,415 7,654,432 Value of Interest in Pooled Funds 8,857,891 24,333,746 31,630,627 14,015,544 40,488,518 38,349,290 Guaranteed Investment Contracts 568,829,667 499,923,163 568,829,667 499,923,163 ---------------------------- ----------------------------- ------------------------------ TOTAL INVESTMENTS 894,720,415 980,286,999 1,137,959,072 985,653,789 2,032,679,487 1,965,940,788 ---------------------------- ----------------------------- ------------------------------ TOTAL ASSETS 918,345,789 1,019,631,013 1,138,997,960 989,641,043 2,057,343,749 2,009,272,056 ---------------------------- ----------------------------- ------------------------------ PAYABLES Unsettled Trades (38,878,979) (138,538,930) (143,636) (347,078) (39,022,615) (138,886,008) Investment Service Fees (847,748) (983,952) (847,748) (983,952) ---------------------------- ----------------------------- ------------------------------ TOTAL LIABILITIES (39,726,727) (139,522,882) (143,636) (347,078) (39,870,363) (139,869,960) ---------------------------- ----------------------------- ------------------------------ NET ASSETS $878,619,062 $ 880,108,131 $1,138,854,324 $989,293,965 $2,017,473,386 $1,869,402,096 ============================ ============================= ============================== Percentage Interest held by the Plan 55.6% 52.2% 31.4% 27.6%
11 KELLOGG COMPANY 9 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- 4. MASTER TRUST (CONTINUED) KELLOGG COMPANY MASTER TRUST SCHEDULE OF INCOME AND EXPENSES, CHANGES IN NET ASSETS AND NET INCREASE (DECREASE) IN NET ASSETS OF MASTER TRUST INVESTMENT ACCOUNTS
PENSION PLANS SAVINGS & INVESTMENT PLANS TOTAL 10/31/1999 10/31/2000 10/31/1999 10/31/2000 10/31/1999 10/31/2000 ------------------------------- ------------------------------- ------------------------------- Transfer of Assets Into Investment Account $58,559,477 $43,770,563 $418,241,471 $634,660,118 $476,800,948 $678,430,681 Earnings on Investments Interest 11,651,791 13,452,506 39,044,057 34,233,989 50,695,848 47,686,495 Dividends 2,889,101 4,332,396 3,356,244 4,300,646 6,245,345 8,633,042 Corporate Actions 1,307,988 247,797 1,307,988 247,797 Pooled Fund Income 698,314 471,987 698,314 471,987 Miscellaneous 4,496 (57,530) 80 (3) 4,576 (57,533) Net Realized Gain/(Loss) 32,986,430 75,156,499 18,365,583 23,830,925 51,352,013 98,987,424 ------------------------------- ------------------------------- ------------------------------- TOTAL ADDITIONS 108,097,597 137,374,218 479,007,435 697,025,675 587,105,032 834,399,893 ------------------------------- ------------------------------- ------------------------------- Transfer of Assets Out of Investment Account (102,383,002) (98,028,663) (488,585,583) (800,395,482) (590,968,585) (898,424,145) Fees and Commissions (3,251,323) (3,257,254) (482,824) (541,627) (3,734,147) (3,798,881) ------------------------------- ------------------------------- ------------------------------- TOTAL DISTRIBUTIONS (105,634,325) (101,285,917) (489,068,407) (800,937,109) (594,702,732) (902,223,026) ------------------------------- ------------------------------- ------------------------------- Change in Unrealized Appreciation 109,113,740 (34,599,231) 77,623,576 (45,648,925) 186,737,316 (80,248,156) ------------------------------- ------------------------------- ------------------------------- NET CHANGE IN ASSETS 111,577,012 1,489,070 67,562,604 (149,560,359) 179,139,616 (148,071,289) Net Assets at Beginning of Year 767,042,050 878,619,061 1,071,291,720 1,138,854,324 1,838,333,770 2,017,473,385 ------------------------------- ------------------------------- ------------------------------- Net Assets at End of Year $878,619,062 $880,108,131 $1,138,854,324 $989,293,965 $2,017,473,386 $1,869,402,096 =============================== =============================== ===============================
12 KELLOGG COMPANY 10 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES - OCTOBER 31, 2000 --------------------------------------------------------------------------------
MARKET UNREALIZED SECURITY DESCRIPTION COST PRICE VALUE GAIN/LOSS Loans to participants $ 7,563,150 $ 7,563,150 $ - ================= ================= ==========
13 KELLOGG COMPANY 11 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 2000 --------------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ------------------------------------ OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY AMOUNTS OVERDUE --------------- Linda D. Davis $ 3,000 $ - $ - $ 2,722 09/30/96 9.27% 03/31/02 $ 2,722 918-B Live Oak Circle Harlingen, TX 78550 Linda J. Morrow 3,546 3,546 06/02/00 10.5% 06/07/05 3,546 Box 24 Silver Springs, PA 17575 Ronald M. Sweet 19,998 19,998 11/08/99 9.25% 11/10/04 19,998 P.O. Box 734 Battle Creek, MI 49016 Arthur L. Belk 23,000 122 23,000 02/02/00 9.50% 02/03/05 23,000 31 Broadway Blvd. Battle Creek, MI 49017 Debra A. Iden 3,500 3,500 10/12/99 9.25% 10/12/04 3,500 219 Dundee Dr. Battle Creek, MI 49014 Kevin D. Andrews 22,300 22,300 11/01/99 9.25% 11/03/04 22,300 1130 Patricia Dr. Papillion, NE 68046 Denise L. Brice 10,200 10,200 11/05/99 9.25% 11/10/04 10,200 220 East Emmett St. Battle Creek, MI 49017
14 KELLOGG COMPANY 12 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 2000 --------------------------------------------------------------------------------
AMOUNT RECEIVED DURING REPORTING ORIGINAL YEAR UNPAID TERMS IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ------------------------------------ OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY AMOUNTS OVERDUE --------------- Dave L. McKeen $ 22,000 $ - $ - $ 2,965 08/31/94 8.25% 11/12/99 $ 2,965 22980 B Drive South Marshall, MI 49068 Jeff S. McClung 15,000 15,000 04/01/99 8.75% 04/07/04 15,000 8381 17 Mile Rd. Marshall, MI 49068 Mary E. Brown 13,000 13,000 04/13/00 10.0% 04/19/05 13,000 22321 East Ave. N Battle Creek, MI 49017 Amyjon Smith 14,788 77 6,573 06/30/96 9.25% 01/29/01 6,573 12442 S. 32nd St. Omaha, NE 68123
15 KELLOGG COMPANY 13 AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN SCHEDULE OF REPORTABLE TRANSACTIONS - YEAR ENDED OCTOBER 31, 2000 --------------------------------------------------------------------------------
CURRENT VALUE AT TRANSACTION DATE --------------------------------- COST OF NET NET NET SECURITIES REALIZED IDENTITY OF ISSUE PURCHASE PRICE SALES PRICE SOLD GAIN None
16 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: April 30, 2001 American Federation of Grain Millers Savings and Investment Plan /s/ Thomas J. Webb ------------------------------------- Thomas J. Webb Executive Vice President and Chief Financial Officer, Kellogg Company 17 EXHIBITS 23 Consent of Independent Accountants