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 BAKERY, CONFECTIONERY, TOBACCO WORKERS
AND 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)
Kellogg Company
Bakery, Confectionery, Tobacco Workers and Grain Millers
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 Schedule
Schedule I: 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.
Report of Independent Registered Public Accounting Firm
To the Trustees and Participants of the
Kellogg Company Bakery, Confectionery,
Tobacco Workers and 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 Bakery, Confectionery, Tobacco Workers and Grain Millers
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
Bakery, Confectionery, Tobacco Workers and Grain Millers
Savings and Investment Plan
Statement of Net Assets Available for Benefits
December 31, 2003 and 2002
-----------------------------------------------------------------------------------------------------------------------------------
2003 2002
Assets
Investments
Plan's interest in Master Trust $ 507,351,218 $ 481,915,045
Loans to participants 6,553,633 6,893,580
------------------- ------------------
Total investments 513,904,851 488,808,625
------------------- ------------------
Total assets 513,904,851 488,808,625
------------------- ------------------
Liabilities
Accrued investment service fees 27,765
------------------- ------------------
Total liabilities - 27,765
------------------- ------------------
Net assets available for benefits $ 513,904,851 $ 488,780,860
------------------- ------------------
The accompanying notes are an integral part of these financial statements.
Kellogg Company
Bakery, Confectionery, Tobacco Workers and Grain Millers
Savings and Investment Plan
Statement of Changes in Net Assets Available for Benefits
Years Ended December 31, 2003 and 2002
-----------------------------------------------------------------------------------------------------------------------------------
2003 2002
Contributions
Employer $ 4,973,006 $ 4,879,653
Employee 12,209,917 12,131,802
Employee rollovers 203,050 849,629
------------------- -------------------
Total contributions 17,385,973 17,861,084
------------------- -------------------
Earnings on investments
Plan's interest in income of Master Trust 47,732,324 6,827,742
Interest income 438,881 521,872
Trustee fees (57,003) (89,648)
------------------- -------------------
Total earnings on investments, net 48,114,202 7,259,966
------------------- -------------------
Participant withdrawals (40,376,184) (36,616,379)
Net transfers between Plans - (457,387)
------------------- -------------------
Net increase (decrease) 25,123,991 (11,952,716)
Net assets available for benefits
Beginning of year 488,780,860 500,733,576
------------------- -------------------
End of year $ 513,904,851 $ 488,780,860
------------------- -------------------
The accompanying notes were an integral part of these financial statements.
Kellogg Company
Bakery, Confectionery, Tobacco Workers and Grain Millers
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 sponsor, 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 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.
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.
Employer Contributions Receivable
Substantially all of the employer contributions receivable relates to
employer matching contributions and related investment earnings, earned
through the year, but which were unpaid by the Plan sponsor at year end.
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 Bakery, Confectionary,
Tobacco Workers and Grain Millers 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 trustees appointed by Kellogg and employees
represented by the Bakery, Confectionery, Tobacco Workers and Grain
Millers Union.
Kellogg Company
Bakery, Confectionery, Tobacco Workers and Grain Millers
Savings and Investment Plan
Notes to Financial Statements
December 31, 2003 and 2002
--------------------------------------------------------------------------------
Plan Participation and Contribution
Generally, all Kellogg Company hourly employees belonging to the Bakery,
Confectionery, Tobacco Workers and Grain Millers Union Local Nos. 3-G,
50-G, 252-G, 274-G and 401-G 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. Participants were eligible to defer $12,000 in 2003
and $11,000 in 2002. Effective September 29, 2002, employee
contributions are matched by Kellogg Company at a 100% 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. Prior to September 29, 2002, employee contributions not
exceeding 5 percent of wages were 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.
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. 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 or installment payments. 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.
Kellogg Company
Bakery, Confectionery, Tobacco Workers and Grain Millers
Savings and Investment Plan
Notes to Financial Statements
December 31, 2003 and 2002
--------------------------------------------------------------------------------
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 administrator believes
the Plan is designed and is currently being operated in compliance with
the applicable requirements of the Internal Revenue Code.
4. 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:
Kellogg Company
Bakery, Confectionery, Tobacco Workers and Grain Millers
Savings and Investment Plan
Notes to Financial Statements
December 31, 2003 and 2002
-----------------------------------------------------------------------------------------------------------------------------------
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 41.5% 43.6%
Kellogg Company
Bakery, Confectionery, Tobacco Workers and Grain Millers
Savings and Investment Plan
Notes to Financial Statements
December 31, 2003 and 2002
-----------------------------------------------------------------------------------------------------------------------------------
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
------------------- -------------------
Kellogg Company
Bakery, Confectionery, Tobacco Workers and Grain Millers
Savings and Investment Plan
Schedule H, Line 4i
Schedule of Assets (Held at End of Year)
December 31, 2003
Schedule 1
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(a) (b) (c) (e)
Description of Investment Including
Identity of Issuer, Borrower, Maturity Date, Rate of Interest,
Lessor or Similar Party Collateral, Par or Maturity Value Current Value
Loans to participants (interest rate $ 6,553,633
of 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 - Bakery, Confectionery,
Tobacco Workers and Grain Millers 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