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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
FORM 11-K
ANNUAL REPORT PURSUANT
TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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
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, 2004 and 2003
| Page(s) | ||||
Report of Independent Registered Public Accounting Firm |
1 | |||
Financial Statements |
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| 2 | ||||
| 3 | ||||
| 4–8 | ||||
Supplemental Schedule |
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| 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. | |||||||
Exhibits |
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| Consent of Independent Registered Public Accounting Firm | ||||||||
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Participants and Administrator 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, 2004 and 2003, 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). 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.
Battle Creek, Michigan
May 26, 2005
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Kellogg Company
Bakery, Confectionery, Tobacco Workers and Grain Millers
Savings and Investment Plan
December 31, 2004 and 2003
| 2004 | 2003 | |||||||
Assets |
||||||||
Plan’s interest in Master Trust (Note 4) |
$ | 517,222,487 | $ | 507,351,218 | ||||
Loans to participants |
6,477,038 | 6,553,633 | ||||||
Total assets |
523,699,525 | 513,904,851 | ||||||
Liabilities |
||||||||
Accrued investment services fees |
75,861 | — | ||||||
Total liabilities |
75,861 | — | ||||||
Net assets available for benefits |
$ | 523,623,664 | $ | 513,904,851 | ||||
The accompanying notes are an integral part of these financial statements.
2
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Kellogg Company
Bakery, Confectionery, Tobacco Workers and Grain Millers
Savings and Investment Plan
Years Ended December 31, 2004 and 2003
| 2004 | 2003 | |||||||
Contributions |
||||||||
Employer |
$ | 5,082,726 | $ | 4,973,006 | ||||
Employee |
12,835,419 | 12,209,917 | ||||||
Rollovers from other qualified plans |
593,801 | 203,050 | ||||||
Total contributions |
18,511,946 | 17,385,973 | ||||||
Earnings on Investments |
||||||||
Plan’s interest in income of Master Trust (Note 4) |
36,097,353 | 47,732,324 | ||||||
Interest income |
348,766 | 438,881 | ||||||
Redemption fees |
(62,360 | ) | — | |||||
Total earnings on investments, net |
36,383,759 | 48,171,205 | ||||||
Participant withdrawals |
(45,033,992 | ) | (40,376,184 | ) | ||||
Trustee fees |
(142,900 | ) | (57,003 | ) | ||||
Net increase |
9,718,813 | 25,123,991 | ||||||
Net assets available for benefits |
||||||||
Beginning of year |
513,904,851 | 488,780,860 | ||||||
End of year |
$ | 523,623,664 | $ | 513,904,851 | ||||
The accompanying notes are an integral part of these financial statements.
3
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Kellogg Company
Bakery, Confectionery, Tobacco Workers and Grain Millers
Savings and Investment Plan
December 31, 2004 and 2003
| 1. | Summary of Significant Accounting Policies | |||
| Basis of Accounting The Kellogg Company Bakery, Confectionery, Tobacco Workers and 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 the Plan sponsor, Kellogg Company. |
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| 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. |
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| 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. |
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| 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. |
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| 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. |
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| 2. | Provisions of the Plan | |||
| The following description of 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. | ||||
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Kellogg Company
Bakery, Confectionery, Tobacco Workers and Grain Millers
Savings and Investment Plan
Notes to Financial Statements
December 31, 2004 and 2003
| Plan Administration The following description of the Plan is administered by trustees appointed by Kellogg and employees represented by the Bakery, Confectionery, Tobacco Workers and Grain Millers Union. |
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| Redemption Fees Effective August 16, 2004 the Plan began charging a 2 percent redemption fee for transfers and/or reallocations of units that have been in a fund for less than five business days. Fees collected are used to help offset trustee expenses. |
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| 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. |
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| 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 $13,000 in 2004 and $12,000 in 2003. 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. 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. |
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| 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. |
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| 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. |
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Kellogg Company
Bakery, Confectionery, Tobacco Workers and Grain Millers
Savings and Investment Plan
Notes to Financial Statements
December 31, 2004 and 2003
| 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. | ||||
| Termination While the Company has expressed no intentions to do so, the Plan may be terminated at any time. |
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| 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, 2004 and 2003 and the changes in net assets for the years ended December 31, 2004 and December 31, 2003 are as follows: | ||||
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Kellogg Company
Bakery, Confectionery, Tobacco Workers and Grain Millers
Savings and Investment Plan
Notes to Financial Statements
December 31, 2004 and 2003
Schedule of Net Assets of Master Trust Investment Accounts
| 2004 | 2003 | |||||||
Cash/equivalents |
||||||||
Interest bearing cash |
$ | 15,615,882 | $ | 12,791,710 | ||||
Total cash/equivalents |
15,615,882 | 12,791,710 | ||||||
Receivables |
1,116,271 | 1,888,051 | ||||||
General Investments |
||||||||
Long Term U.S. Govt. Securities |
24,914,061 | 19,060,041 | ||||||
Short Term U.S. Govt. Securities |
— | 5,793,346 | ||||||
Corporate Debt - Long-Term |
19,350,278 | 21,930,624 | ||||||
Corporate Debt - Short-Term |
— | 3,665,846 | ||||||
Corporate Stocks - Common |
113,775,950 | 84,130,906 | ||||||
Commingled Funds |
212,891,676 | 200,998,048 | ||||||
Shares of Registered Investment Company |
282,032,008 | 207,592,300 | ||||||
Guaranteed Investment Contracts |
634,279,171 | 664,410,052 | ||||||
Long Term Government Bonds - International |
3,204,550 | — | ||||||
Total general investments |
1,290,447,694 | 1,207,581,163 | ||||||
Total investments |
1,307,179,847 | 1,222,260,924 | ||||||
Payables |
||||||||
Other payables |
(175,924 | ) | (167,091 | ) | ||||
Total liabilities |
(175,924 | ) | (167,091 | ) | ||||
Net Assets |
$ | 1,307,003,923 | $ | 1,222,093,833 | ||||
Percentage interest held by the Plan |
39.6 | % | 41.5 | % | ||||
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Kellogg Company
Bakery, Confectionery, Tobacco Workers and Grain Millers
Savings and Investment Plan
Notes to Financial Statements
December 31, 2004 and 2003
Schedule of Changes in Net Assets of Master Trust Investment Accounts
| 2004 | 2003 | |||||||
Transfer of assets from Keebler Company Local 184-L 401(k) Plan |
$ | 2,395,447 | $ | — | ||||
Earnings on investments |
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Interest |
30,552,802 | 32,450,775 | ||||||
Dividends |
6,366,300 | 9,152,649 | ||||||
Net realized gain (loss) |
||||||||
Common Stocks |
11,044,446 | 843,692 | ||||||
Commingled Funds |
6,076,947 | (7,776,374 | ) | |||||
Corporate Debt-Short Term |
(72,165 | ) | (16,025 | ) | ||||
Corporate Debt-Long Term |
(34,712 | ) | 51,449 | |||||
US Govt. Securities-Short Term |
(149,346 | ) | (10,668 | ) | ||||
US Govt. Securities-Long Term |
73,635 | 933,038 | ||||||
International Bond-Short Term |
(17,903 | ) | — | |||||
International Bond-Long Term |
(7,706 | ) | — | |||||
Shares of Registered Investment Co. |
17,980,537 | 8,360,127 | ||||||
Net realized gain |
34,893,733 | 2,385,239 | ||||||
Total additions |
74,208,282 | 43,988,663 | ||||||
Net transfer of assets out of investment account |
(20,477,691 | ) | (20,635,134 | ) | ||||
Fees and commissions |
(597,515 | ) | (611,058 | ) | ||||
Total distributions |
(21,075,206 | ) | (21,246,192 | ) | ||||
Change in unrealized appreciation (depreciation): |
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Common Stocks |
3,571,974 | 7,503,635 | ||||||
Commingled Funds |
15,082,158 | 52,865,988 | ||||||
Corporate Debt-Short Term |
3,115 | (148,571 | ) | |||||
Corporate Debt-Long Term |
(213,582 | ) | (456,780 | ) | ||||
US Govt. Securities-Short Term |
56,750 | (755 | ) | |||||
US Govt. Securities-Long Term |
(295,908 | ) | (1,537,017 | ) | ||||
International Bond-Long Term |
(67,929 | ) | — | |||||
Shares of Registered Investment Co. |
13,640,436 | 35,368,674 | ||||||
Changes in unrealized appreciation |
31,777,014 | 93,595,174 | ||||||
Net change in assets |
84,910,090 | 116,337,645 | ||||||
Net assets |
||||||||
Beginning of year |
1,222,093,833 | 1,105,756,188 | ||||||
End of year |
$ | 1,307,003,923 | $ | 1,222,093,833 | ||||
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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, 2004 | Schedule I |
(a)
|
(b) | (c) | (e | ) | ||||
| Description of Investment Including Maturity | ||||||||
| Identity of Issue, Borrower, Lessor | Date, Rate of Interest, Collateral, Par or | |||||||
| or Similar Party | Maturity Value | Current Value | ||||||
| Loans to participants (interest rate | $ | 6,447,038 | ||||||
| of 5.00% to 10.72%) | ||||||||
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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 10, 2005 | The Kellogg Company – Bakery, Confectionery, Tobacco Workers and Grain Millers Savings and Investment Plan |
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| By: | /s/ Jeffrey M. Boromisa | |||
| Jeffrey M. Boromisa | ||||
| Senior Vice President and Chief
Financial Officer, Kellogg Company |
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EXHIBIT INDEX
| EXHIBIT NO. | DESCRIPTION | |
EX-23 |
Consent of Independent Registered Public Accounting Firm. | |