<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
COMMISSION FILE NUMBER 1-4171
---------------------------
KELLOGG COMPANY
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 38-0710690
State of Incorporation I.R.S. Employer Identification No.
ONE KELLOGG SQUARE
BATTLE CREEK, MICHIGAN 49016-3599
(Address of Principal Executive Offices)
REGISTRANT'S TELEPHONE NUMBER: (616) 961-2000
---------------------------
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class: Name of each exchange on which registered:
<S> <C>
COMMON STOCK, $0.25 PAR VALUE PER SHARE NEW YORK STOCK EXCHANGE
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: NONE
---------------------------
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 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 / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of the common stock held by non-affiliates of the
registrant (assuming only for purposes of this computation that directors and
executive officers may be affiliates) was $16,493,839,991 as determined by the
March 1, 1996 closing price of $77 for one share of common stock on the New York
Stock Exchange.
As of March 1, 1996, 215,103,803 shares of the common stock of the registrant
were issued and outstanding.
Portions of the registrant's Annual Report to Stockholders for the fiscal year
ended December 31, 1995, are incorporated by reference into Part II and Part IV
of this Report.
Portions of the registrant's definitive Proxy Statement, dated March 13, 1996,
for the Annual Meeting of Stockholders to be held April 19, 1996, are
incorporated by reference into Part III of this Report.
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PART I
ITEM 1. BUSINESS
The Company. Kellogg Company, incorporated in Delaware in 1922, and its
subsidiaries are engaged in the manufacture and marketing of ready-to-eat cereal
and other convenience food products on a worldwide basis. The address of the
principal business office of Kellogg Company is One Kellogg Square, P.O. Box
3599, Battle Creek, Michigan 49016-3599. Unless otherwise indicated by the
context, the term "Company" as used in this report means Kellogg Company, its
divisions and subsidiaries.
Principal Products. The principal products of the Company are ready-to-eat
cereals and other convenience food products which are manufactured in 20
countries and distributed in nearly 160 countries. Ready-to-eat cereals are
marketed under the KELLOGG'S(R) name and are sold principally to the grocery
trade through direct sales forces for resale to consumers and through broker and
distribution arrangements in less developed market areas.
Other Convenience Food Products. In the United States and Canada, in
addition to ready-to-eat cereals, the Company produces or processes and
distributes toaster pastries, frozen waffles and cereal bars. The Company also
markets a variety of other convenience food products in various locations
throughout the world.
Raw Materials. Agricultural commodities are the principal raw materials
used in the Company's products. World supplies and prices of such commodities
are constantly monitored, as are government trade policies. The cost of raw
materials used may fluctuate widely due to government policy and regulation,
weather conditions or other unforeseen circumstances. Continuous efforts are
made to maintain and improve the qualities and supplies of raw materials for
purposes of the Company's short-term and long-term requirements.
The principal ingredients in the products produced by the Company in the
United States include corn grits, oats, rice, various fruits, sweeteners, wheat
and wheat derivatives. Ingredients are purchased principally from sources in the
United States. In producing toaster pastries and frozen waffles, the Company may
use dairy products, eggs, fruit and other filling ingredients, flour, shortening
and sweeteners, which ingredients are obtained from various sources. Although
the Company enters into some long-term contracts, the bulk of such raw materials
are purchased on the open market. While the cost of raw materials may increase
over time, the Company believes that it will be able to purchase an adequate
supply of such raw materials as needed. The Company also uses commodity futures
and options to hedge some of its raw materials costs. See Note 11 to the
Consolidated Financial Statements contained in the Company's Annual Report for
the fiscal year ended December 31, 1995 which Note is incorporated by reference
in Item 8 of this Report.
Raw materials and packaging needed for internationally based operations are
available in adequate supply and are sometimes imported from countries other
than those where used in manufacture.
Cereal processing ovens at major domestic and international facilities are
regularly fueled by natural gas or propane obtained from local utilities or
other local suppliers. Short-term standby propane storage exists at several
plants for use in the event of interruption in natural gas supplies.
Additionally, oil may be used to fuel certain plant operations in the event of
natural gas shortages at various plants or when its use presents economic
advantages.
Trademarks and Technology. Generally, the Company's products are marketed
under trademarks owned by the Company. The Company's principal trademarks are
its housemark, brand names, slogans and designs related to cereals and other
convenience food products manufactured and marketed by the Company. These
trademarks include Kellogg's(R), for cereals and other products of the Company
and the brand names of certain ready-to-eat cereals, including All-Bran(R),
Kellogg's Squares(TM), Apple Jacks(R), Apple Raisin Crisp(R), Apple Cinnamon
Rice Krispies, Bran Buds(R), Complete(R) Bran Flakes, Cocoa Krispies(R), Common
Sense(R), Cruncheroos(TM), Kellogg's Corn Flakes(R), Cracklin' Oat Bran(R),
Kellogg's(R) Cinnamon Mini-Buns, Crispix(R), Double Dip Crunch(R), Froot
Loops(R), Kellogg's Frosted Bran(R), Kellogg's Frosted Flakes(R), Frosted
Krispies(R), Frosted Mini-Wheats(R), Fruitful Bran(R), Fruity Marshmallow
Krispies(R), Just Right(R), Kellogg's(R) Low Fat Granola, Nut & Honey Crunch(R),
Nut & Honey Crunch O's(R), Mueslix(R), Nutri-Grain(R), Pops(R), Product 19(R),
Kellogg's(R) Raisin
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Bran, Rice Krispies(R), Rice Krispies Treats(R), Smacks(R), Special K(R) and
Pop-Tarts Crunch(TM). Additional Company trademarks are the names of certain
combinations of Kellogg's(R) ready-to-eat cereals, including Handi-Pak(R),
Snack-Pak(R), Fun Pak(R), Jumbo(R) and Variety(R) Pak. Other Company brand names
include Kellogg's(R) Corn Flake Crumbs; Croutettes(R) for herb season stuffing
mix; Kellogg's(R) Nutri-Grain(R) for cereal bars; Pop-Tarts(R) for toaster
pastries; Eggo(R), Special K(R) and Nutri-Grain(R) for frozen waffles; and
Pop-Tarts Minis(TM) for pastry snacks.
Company trademarks also include depictions of certain animated characters
in conjunction with the Company's products, including Snap!(R) Crackle!(R)
Pop!(R) for Kellogg's(R) Frosted Krispies(R), Fruity Marshmallow Krispies(R) and
Rice Krispies(R); Tony the Tiger(R) for Kellogg's Frosted Flakes(R); Toucan
Sam(R) for Froot Loops(R); Dig 'Em!(R) for Smacks(R); Coco(TM) for Cocoa
Krispies(R); and Cornelius(TM) for Kellogg's Corn Flakes(R).
The slogans "The Best To You Each Morning"(R), and "They're GR-R-REAT!"(R)
used in connection with the Company's ready-to-eat cereals, are also important
Company trademarks. The Company's use of the advertising theme "Get A Taste For
The Healthy Life"(TM) represents part of its effort to establish throughout the
United States and the world the concept of a nutritious breakfast.
The Company considers that, taken as a whole, the rights under its various
patents, which expire from time to time, are a valuable asset, but the Company
does not believe that its businesses are materially dependent upon any single
patent or group of related patents. The Company's activities under licenses or
other franchises or concessions are not material.
Seasonality. Demand for the Company's products is approximately level
throughout the year.
Working Capital. Although terms vary around the world, in the United States
the Company requires payment for goods sold eleven days subsequent to the date
of invoice, with a 2% discount allowed for payment within ten days. Receipts
from goods sold, supplemented as required by borrowings, provide for the
Company's payment of dividends, capital expansion and for other operating
expenses and working capital needs.
Customers. The Company is not dependent on any single customer or a few
customers for a material part of its sales. Products of the Company are sold
through its own sales forces and through broker and distributor arrangements and
are generally resold to consumers in retail stores, restaurants and other food
service establishments.
Backlog. For the most part, orders are filled within a few days of their
receipt and are subject to cancellation at any time prior to shipment. The
backlog of any unfilled orders at any particular time is not material to the
Company.
Competition. The Company has experienced intense competition for sales of
all of its principal products in its major markets, both domestically and
internationally. The Company's products compete with advertised and branded
products of a similar nature as well as unadvertised and private label products,
which are typically distributed at lower prices, and generally with other food
products with different characteristics. Principal methods and factors of
competition include, among others, new product introductions, product quality,
composition and nutritional value, price, advertising and promotion.
Research and Development. Research to support and expand the use of the
Company's existing products and to develop new food products is carried on at
the Company's research laboratories and pilot plant facilities in Battle Creek,
Michigan, and at other plant locations around the world. The Company's
expenditures for research and development were approximately $72.2 million in
1995, $71.7 million in 1994 and $59.2 million in 1993.
Environmental Matters. The Company's facilities are subject to various
foreign, federal, state and local laws and regulations regarding the discharge
of material into the environment and the protection of the environment in other
ways. The Company is not a party to any material proceedings arising under these
regulations. The Company believes that compliance with existing environmental
laws and regulations will not materially affect the financial condition or the
competitive position of the Company. The Company is
3
<PAGE> 4
currently in substantial compliance with all material environmental regulations
affecting the Company and its properties.
Employees. At December 31, 1995, the Company had approximately 14,487
employees.
Segment and Geographic Information. The Company operates in a single
industry, which is the manufacture and marketing of convenience food products
throughout the world. Net sales and operating profit for the years 1995, 1994,
and 1993, and identifiable segment assets and corporate assets, consisting
principally of cash and cash equivalents, at the related year-ends are presented
in Note 13 of the Consolidated Financial Statements captioned "Operating
segments" and incorporated by reference in Item 8 of this Report.
ITEM 2. PROPERTIES
The Company's corporate headquarters and principal research and development
facilities are located in Battle Creek, Michigan.
The Company operates manufacturing plants and warehouses totalling more
than ten million (10,000,000) square feet of building area in the United States
and other countries. The Company's plants have been designed and constructed to
meet its specific production requirements, and the Company periodically invests
money for capital and technological improvements. At the time of its selection,
each location was considered to be favorable, based on the location of markets,
sources of raw materials, availability of suitable labor, transportation
facilities, location of other Company plants producing similar products and
other factors. Manufacturing facilities of the Company in the United States
include four cereal plants and warehouses located in Battle Creek, Michigan;
Lancaster, Pennsylvania; Memphis, Tennessee; and Omaha, Nebraska. Other of the
Company's convenience foods are also manufactured in the United States at
various plant locations.
Outside the United States, the Company has additional manufacturing
locations, some with warehousing facilities, in Argentina, Australia, Brazil,
Canada, China, Colombia, Denmark, Germany, Great Britain, Guatemala, India,
Italy, Japan, Latvia, Mexico, South Africa, South Korea, Spain and Venezuela. A
new cereal plant in Thailand is currently under construction and is expected to
commence operation in 1997.
The principal properties of the Company, including its major office
facilities, are held in fee and none is subject to any major encumbrance.
Distribution centers and offices of non-plant locations typically are leased.
The Company considers its facilities generally suitable, adequate and of
sufficient capacity for its current operations.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceedings which, if
decided adversely, would be material to the Company on a consolidated basis, nor
are any of the Company's properties or subsidiaries subject to any such
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages as of March 1, 1996 and positions of the executive officers
of the Company are listed below together with their business experience.
Executive officers are elected annually by the Board of Directors at the meeting
immediately following the Annual Meeting of Stockholders.
EXECUTIVE OFFICERS
Arnold G. Langbo
Chairman of the Board, President and Chief Executive Officer..................58
Mr. Langbo has been employed by the Company and certain of its subsidiaries
since 1956. He was named President and Chief Operating Officer in 1990 and
became Chairman of the Board and Chief Executive Officer in 1992.
William A. Camstra
Executive Vice President, President -- Kellogg Latin America..................63
Mr. Camstra has been employed by the Company and certain of its
subsidiaries since 1956. He was named Executive Vice President of the Company in
1992 and President, Kellogg Latin America in 1994.
Donald G. Fritz
Executive Vice President, President -- Kellogg Europe.........................48
Mr. Fritz joined Kellogg Canada Inc. in 1979. He was named Executive Vice
President of the Company in 1992, and President, Kellogg Europe in 1994.
Carlos M. Gutierrez
Executive Vice President, President -- Kellogg Asia-Pacific...................42
Mr. Gutierrez joined Kellogg de Mexico in 1975. In 1993, Mr. Gutierrez was
promoted to Executive Vice President, Kellogg USA and General Manager, Kellogg
USA Cereal Division. He was appointed Executive Vice President of the Company
and President, Kellogg Asia-Pacific in 1994.
Thomas A. Knowlton
Executive Vice President, President -- Kellogg North America..................49
Mr. Knowlton joined Kellogg Canada Inc. in 1980. He was named Executive
Vice President of the Company in 1992 and President, Kellogg North America in
1994.
Donald W. Thomason
Executive Vice President -- Corporate Services and Technology.................52
Mr. Thomason has been employed by the Company since 1966. He was named
Executive Vice President -- Corporate Services and Technology in 1990.
Richard M. Clark
Senior Vice President, General Counsel and Secretary..........................58
Mr. Clark joined the Company as Senior Vice President, General Counsel and
Secretary in 1989.
John R. Hinton
Senior Vice President -- Administration and Chief Financial Officer...........50
Mr. Hinton joined the Company as Assistant to the Vice President -- Finance
in 1979. He was appointed Executive Vice President -- Financial Administration
and Treasurer for Kellogg USA Inc. in 1993. In July 1995, Mr. Hinton was named
Senior Vice President -- Administration and Chief Financial Officer.
Robert L. Creviston
Senior Vice President -- Human Resources......................................54
Mr. Creviston joined the Company as Vice President -- Employee Relations in
1982. He was named Senior Vice President -- Human Resources in 1991.
Daryl R. Schaller
Senior Vice President -- Scientific Affairs...................................52
Dr. Schaller has been employed by the Company since 1972. He was named
Senior Vice President -- Research, Quality and Nutrition in 1990, and Senior
Vice President -- Scientific Affairs in 1994.
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Jay W. Shreiner
Senior Vice President and Chief Information Officer...........................46
Mr. Shreiner joined the Company as Assistant Treasurer in 1983. In 1990, he
was named Vice President -- Information Services and was named Senior Vice
President and Chief Information Officer in May 1995.
Joseph M. Stewart
Senior Vice President -- Corporate Affairs....................................53
Mr. Stewart has been employed by the Company since 1980. He was named
Senior Vice President -- Corporate Affairs in 1988.
Michael J. Teale
Senior Vice President -- Worldwide Operations and Technology..................51
Mr. Teale joined Kellogg Company of Great Britain Limited in 1966. In 1990,
he was named Vice President -- Cereal Manufacturing of the Company's U.S. Food
Products Division, and in 1994, he was named Senior Vice President -- Worldwide
Operations and Technology.
Alan Taylor
Vice President and Corporate Controller.......................................44
Mr. Taylor has been employed by the Company and certain of its subsidiaries
since 1982. He served as Director -- Finance of Kellogg (Aust.) Pty. Ltd. from
1988 until 1993. He became Controller of the Company in 1993, and was named a
Vice President in 1994.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The information called for by this Item is set forth in Note 12 to the
Consolidated Financial Statements of the Company which is incorporated by
reference into Item 8 of this Report.
ITEM 6. SELECTED FINANCIAL DATA
The information called for by this Item is incorporated herein by reference
from page 15 of the Company's Annual Report to Stockholders for the fiscal year
ended December 31, 1995. Such information should be read in conjunction with the
Consolidated Financial Statements and Notes thereto of the Company included in
Item 8 of this Report, incorporated by reference from the Company's Annual
Report to Stockholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information called for by this Item is incorporated herein by reference
from pages 16 through 19 of the Company's Annual Report to Stockholders for the
fiscal year ended December 31, 1995.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by this Item is incorporated herein by reference
from pages 20 through 28 of the Company's Annual Report to Stockholders for the
fiscal year ended December 31, 1995. Supplementary quarterly financial data,
which is also incorporated herein by reference, is set forth in Note 12 to the
Consolidated Financial Statements on page 27 of the Annual Report to
Stockholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors -- See the Company's Proxy Statement dated March 13, 1996 for the
Annual Meeting of Stockholders to be held on April 19, 1996, under the caption
"Election of Directors" on pages 3 through 7, which information is incorporated
herein by reference.
Executive Officers of the Registrant -- See "Executive Officers of the
Registrant" under Item 4A at pages 5 and 6 of this Report.
Compliance with Section 16(a) of the Securities Exchange Act -- See the
Company's Proxy Statement, dated March 13, 1996, for the Annual Meeting of
Stockholders to be held on April 19, 1996 at page 7, under the caption "About
the Board of Directors," which information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
See the Company's Proxy Statement dated March 13, 1996 for the Annual
Meeting of Stockholders to be held on April 19, 1996, under the captions
"Executive Compensation" and "Selected Benefit Plans" at pages 8 through 10 and
10 through 11, which information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See the Company's Proxy Statement dated March 13, 1996 for the Annual
Meeting of Stockholders to be held on April 19, 1996, under the caption
"Security Ownership" at pages 2 through 3, which information is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See the Company's Proxy Statement dated March 13, 1996 for the Annual
Meeting of Stockholders to be held on April 19, 1996, under the captions "About
The Board of Directors" at page 7, and "Stock Option Loans and Executive Officer
Indebtedness" at page 11, which information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES, AND REPORTS
ON FORM 8-K
The following Consolidated Financial Statements and related Notes,
together with the Report thereon of Price Waterhouse LLP dated February 2,
1996, appearing on pages 20 through 28 of the Company's Annual Report to
Stockholders for the fiscal year ended December 31, 1995 are incorporated
herein by reference:
(A)1. CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Earnings and Retained Earnings for the years ended December
31, 1995, 1994, and 1993.
Consolidated Balance Sheet at December 31, 1995 and 1994.
Consolidated Statement of Cash Flows for the years ended December 31, 1995,
1994, and 1993.
Notes to Consolidated Financial Statements.
(A)2. CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
The Financial Schedule and related Report of Independent Accountants filed
as part of this Report are as follows:
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PAGE
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Schedule II -- Valuation Reserve.................................................. 10
Report of Independent Accountants................................................. 11
</TABLE>
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This Consolidated Financial Statement Schedule should be read in
conjunction with the Consolidated Financial Statements included in the Company's
Annual Report to Stockholders for the fiscal year ended December 31, 1995.
All other financial statement schedules are omitted because they are not
applicable.
(A)3. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
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<S> <C>
3.01 Amended Restated Certificate of Incorporation of Kellogg Company.
3.02 Bylaws of Kellogg Company, as amended.
4.01 Indenture dated as of March 1, 1988 between the Company and Bankers Trust
Company, incorporated by reference to Exhibit 4(a) to the Company's Registration
Statement on Form S-3, Commission file number 33-20731.
4.02 Form of Debt Security, incorporated by reference to Exhibit 4(d) to the
Company's Registration Statement on Form S-3, Commission file number 33-20731.
4.03 Supplemental Indenture, dated January 30, 1989, between the Company and Bankers
Trust Company, incorporated by reference to Exhibit B to the Company's Current
Report on Form 8-K, Commission file number 1-4171, dated January 31, 1989.
4.04 Instrument of Resignation, Acceptance and Appointment, dated as of January 31,
1989, between the Company, Bankers Trust Company and NBD Bank, N.A. (formerly
known as National Bank of Detroit), incorporated by reference to Exhibit A to
the Company's Current Report on Form 8-K, Commission file number 1-4171, dated
January 31, 1989.
4.05 Agency Agreement, dated as of January 31, 1989, between NBD Bank, N.A. (formerly
known as National Bank of Detroit) and Bankers Trust Company, incorporated by
reference to Exhibit C to the Company's Current Report on Form 8-K, Commission
file number 1-4171, dated January 31, 1989.
10.01 Kellogg Company Excess Benefit Retirement Plan, incorporated by reference to
Exhibit 10.01 to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1983, Commission file number 1-4171.*
10.02 Kellogg Company Supplemental Retirement Plan, incorporated by reference to
Exhibit 10.05 to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, Commission file number 1-4171.*
10.03 Kellogg Company Supplemental Savings and Investment Plan, incorporated by
reference to Exhibit 10.03 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, Commission file number 1-4171.*
10.04 Kellogg Company 1982 Stock Option Plan, as amended on December 7, 1990,
incorporated by reference to Exhibit 10.07 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1990, Commission file number
1-4171.*
10.05 Kellogg Company International Retirement Plan, incorporated by reference to
Exhibit 10.05 to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1984, Commission file number 1-4171.*
10.06 Kellogg Company Executive Survivor Income Plan, incorporated by reference to
Exhibit 10.06 to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1985, Commission file number 1-4171.*
10.07 Kellogg Company Key Executive Benefits Plan, incorporated by reference to
Exhibit 10.09 to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1991, Commission file number 1-4171.*
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
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<C> <S>
10.08 Kellogg Company Key Employee Long Term Incentive Plan, incorporated by reference
to Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1991, Commission file number 1-4171.*
10.09 Deferred Compensation Plan for Non-Employee Directors, incorporated by reference
to Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, Commission file number 1-4171.*
10.10 Kellogg Company Senior Executive Officer Performance Bonus Plan.*
13.01 Pages 15 through 28 of the Company's Annual Report to Stockholders for the
fiscal year ended December 31, 1995.
21.01 Domestic and Foreign Subsidiaries of the Company, incorporated by reference to
Exhibit 21.01 to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, Commission file number 1-4171.
23.01 Consent of Price Waterhouse LLP.
23.02 Consent of Price Waterhouse LLP.
24.01 Powers of Attorney authorizing Richard M. Clark to execute the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995 on behalf of the
Board of Directors, and each of them.
27.01 Financial Data Schedule.
99.01 Kellogg Company American Federation of Grain Millers Savings and Investment Plan
Annual Report on Form 11-K for the fiscal year ended October 31, 1995.
99.02 Kellogg Company Salaried Savings and Investment Plan Annual Report on Form 11-K
for the fiscal year ended October 31, 1995.
</TABLE>
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* A management contract or compensatory plan required to be filed with this
Report.
The Company agrees to furnish to the Securities and Exchange Commission,
upon its request, a copy of any instrument defining the rights of holders of
long-term debt of the Company and its Subsidiaries and any of its unconsolidated
Subsidiaries for which Financial Statements are required to be filed.
The Company will furnish any of its Stockholders a copy of any of the above
Exhibits not included herein upon the written request of such Stockholder and
the payment to the Company of the reasonable expenses incurred by the Company in
furnishing such copy or copies.
(B) REPORT ON FORM 8-K
No report on Form 8-K was filed during the Company's fourth quarter for the
fiscal year ended December 31, 1995.
9
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SCHEDULE II -- VALUATION RESERVE
(in millions)
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Balance at January 1................................................... $ 6.2 $ 6.0 $ 6.2
Addition charged to costs and expenses................................. 0.8 1.8 0.9
Doubtful accounts charged to reserves.................................. (0.5) (0.9) (0.7)
Currency translation adjustments....................................... (0.1) (0.7) (0.4)
Balance at December 31................................................. $ 6.4 $ 6.2 $ 6.0
</TABLE>
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REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Stockholders and Board of Directors
of Kellogg Company
Our audits of the consolidated financial statements referred to in our
report dated February 2, 1996 appearing in the 1995 Annual Report to
Stockholders of Kellogg Company (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedule listed in Item 14(a)
of this Form 10-K. In our opinion, this Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
PRICE WATERHOUSE LLP
Battle Creek, Michigan
February 2, 1996
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, this 29th day of March
1996.
KELLOGG COMPANY
By: /s/ ARNOLD G. LANGBO
--------------------------------------
Arnold G. Langbo
Chairman of the Board
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME CAPACITY DATE
- ---------------------------------------- ----------------------------------- ---------------
<C> <S> <C>
/s/ ARNOLD G. LANGBO Chairman of the Board, Chief March 29, 1996
- ---------------------------------------- Executive Officer; Director
Arnold G. Langbo (Principal Executive Officer)
/s/ JOHN R. HINTON Senior Vice President, Chief March 29, 1996
- ---------------------------------------- Financial Officer (Principal
John R. Hinton Financial Officer)
/s/ ALAN TAYLOR Vice President and Corporate March 29, 1996
- ---------------------------------------- Controller (Principal Accounting
Alan Taylor Officer)
Director
- ----------------------------------------
Claudio X. Gonzalez
Director
- ----------------------------------------
Gordon Gund
Director
- ----------------------------------------
William E. LaMothe
Director
- ----------------------------------------
Russell G. Mawby
Director
- ----------------------------------------
Ann McLaughlin
Director
- ----------------------------------------
J. Richard Munro
Director
- ----------------------------------------
Harold A. Poling
Director
- ----------------------------------------
Donald Rumsfeld
Director
- ----------------------------------------
Timothy P. Smucker
Director
- ----------------------------------------
Dolores D. Wharton
Director
- ----------------------------------------
John L. Zabriskie
By: /s/ RICHARD M. CLARK March 29, 1996
- ----------------------------------------
Richard M. Clark
As Attorney-in-Fact
</TABLE>
12
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
ELECTRONIC(E)
PAPER(P)
INCORP. BY
EXHIBIT NO. DESCRIPTION REF.(IBRF)
- ----------- --------------------------------------------------------------------- -------------
<S> <C> <C>
3.01 Amended Restated Certificate of Incorporation of Kellogg Company. E
3.02 Bylaws of Kellogg Company, as amended. E
4.01 Indenture dated as of March 1, 1988 between the Company and Bankers
Trust Company, incorporated by reference to Exhibit 4(a) to the
Company's Registration Statement on Form S-3, Commission file number
33-20731. IBRF
4.02 Form of Debt Security, incorporated by reference to Exhibit 4(d) to
the Company's Registration Statement on Form S-3, Commission file
number 33-20731. IBRF
4.03 Supplemental Indenture, dated January 30, 1989, between the Company
and Bankers Trust Company, incorporated by reference to Exhibit B to
the Company's Current Report on Form 8-K, Commission file number
1-4171, dated January 31, 1989. IBRF
4.04 Instrument of Resignation, Acceptance and Appointment, dated as of
January 31, 1989, between the Company, Bankers Trust Company and NBD
Bank, N.A. (formerly known as National Bank of Detroit), incorporated
by reference to Exhibit A to the Company's Current Report on Form
8-K, Commission file number 1-4171, dated January 31, 1989. IBRF
4.05 Agency Agreement, dated as of January 31, 1989, between NBD Bank,
N.A. (formerly known as National Bank of Detroit) and Bankers Trust
Company, incorporated by reference to Exhibit C to the Company's
Current Report on Form 8-K, Commission file number 1-4171, dated
January 31, 1989. IBRF
10.01 Kellogg Company Excess Benefit Retirement Plan, incorporated by
reference to Exhibit 10.01 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1983, Commission file
number 1-4171.* IBRF
10.02 Kellogg Company Supplemental Retirement Plan, incorporated by
reference to Exhibit 10.05 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1990, Commission file
number 1-4171.* IBRF
10.03 Kellogg Company Supplemental Savings and Investment Plan,
incorporated by reference to Exhibit 10.03 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994,
Commission file number 1-4171.* IBRF
10.04 Kellogg Company 1982 Stock Option Plan, as amended on December 7,
1990, incorporated by reference to Exhibit 10.07 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1990, Commission file number 1-4171.* IBRF
10.05 Kellogg Company International Retirement Plan, incorporated by
reference to Exhibit 10.05 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1984, Commission file
number 1-4171.* IBRF
10.06 Kellogg Company Executive Survivor Income Plan, incorporated by
reference to Exhibit 10.06 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1985, Commission file
number 1-4171.* IBRF
10.07 Kellogg Company Key Executive Benefits Plan, incorporated by
reference to Exhibit 10.09 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1991, Commission file
number 1-4171.* IBRF
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
ELECTRONIC(E)
PAPER(P)
INCORP. BY
EXHIBIT NO. DESCRIPTION REF.(IBRF)
- ----------- --------------------------------------------------------------------- -------------
<S> <C> <C>
10.08 Kellogg Company Key Employee Long Term Incentive Plan, incorporated
by reference to Exhibit 10.10 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1991, Commission file
number 1-4171.* IBRF
10.09 Deferred Compensation Plan for Non-Employee Directors, incorporated
by reference to Exhibit 10.10 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1993, Commission file
number 1-4171.* IBRF
10.10 Kellogg Company Senior Executive Officer Performance Bonus Plan.* E
13.01 Pages 15 through 28 of the Company's Annual Report to Stockholders
for the fiscal year ended December 31, 1995. E
21.01 Domestic and Foreign Subsidiaries of the Company, incorporated by
reference to Exhibit 21.01 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994, Commission file
number 1-4171. IBRF
23.01 Consent of Price Waterhouse LLP. E
23.02 Consent of Price Waterhouse LLP. E
24.01 Powers of Attorney authorizing Richard M. Clark to execute the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 on behalf of the Board of Directors, and each of
them. E
27.01 Financial Data Schedule. E
99.01 Kellogg Company American Federation of Grain Millers Savings and
Investment Plan Annual Report on Form 11-K for the fiscal year ended
October 31, 1995. E
99.02 Kellogg Company Salaried Savings and Investment Plan Annual Report on
Form 11-K for the fiscal year ended October 31, 1995. E
</TABLE>
- -------------------------
* A management contract or compensatory plan required to be filed with this
Report.
The Company will furnish any of its stockholders a copy of any of the above
Exhibits not included herein upon the written request of such stockholder and
the payment to the Company of the reasonable expenses incurred by the Company in
furnishing such copy or copies.
14
<PAGE> 1
EXHIBIT 3.01
KELLOGG COMPANY
AMENDED RESTATED
CERTIFICATE OF
INCORPORATION
(With All Amendments Through April 21, 1995)
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 330,000,000 shares of common stock of the par
value of $0.25 per share. Each share of common stock, $0.25 par value per
share, of this Corporation, issued and held of record at the close of business
on December 4, 1991, including shares held by this Corporation as treasury
shares, shall automatically be converted at such time into two validly issued,
fully paid and nonassessable shares of common stock, $0.25 par value per share.
A statement of the designations, dividend rights, voting powers, preferences
and rights, and the qualifications, limitations or
<PAGE> 2
restrictions thereof, of the shares of stock which the corporation shall be
authorized to issue, is as follows:
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.
<PAGE> 3
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.
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.
3
<PAGE> 4
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 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
twelve (12) nor more than eighteen (18). 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
4
<PAGE> 5
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 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
5
<PAGE> 6
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
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"
6
<PAGE> 7
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 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
7
<PAGE> 8
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 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
8
<PAGE> 9
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.
(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
<PAGE> 10
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
Kellogg Company, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the corporation at a meeting
duly held October 21, 1994 adopted a resolution proposing and declaring the
amendment set forth below to the Corporation's Amended and Restated Certificate
of Incorporation to be advisable and calling for submission thereof to the
stockholders of the corporation at its next Annual Meeting. The resolution
setting forth the proposed amendment is as follows:
RESOLVED, That the Amended and Restated Certificate of
Incorporation of this Corporation be amended by changing the first
paragraph of Article TENTH thereof so that, as amended, said Article
shall be and read as follows:
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).
The Directors shall be divided into three classes, as nearly
equal in number as possible, with a term of office of three
years, one class to expire each year. At each Annual Meeting
of Stockholders, 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.
SECOND: That thereafter, at the Annual Meeting held April 21, 1995,
the necessary number of shares as required by the Certificate of Incorporation
and applicable bylaw were voted in favor of the amendment.
THIRD: That the aforesaid amendment was duly adopted in accordance
with the applicable provisions of Sections 222 and 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said Kellogg Company has caused this certificate
to be signed by Richard M. Clark, its Senior Vice President, General Counsel
and Secretary, this 8th day of May, 1995.
Kellogg Company
By s/ Richard M. Clark
-----------------------------------
Richard M. Clark
Senior Vice President,
Attest: General Counsel and Secretary
s/ Edward J. Gildea
- -------------------------------
Edward J. Gildea
Assistant Secretary
10
<PAGE> 1
EXHIBIT 3.02
KELLOGG COMPANY
BYLAWS
(As Amended Up To And Including April 21, 1995)
ARTICLE I
OFFICES
SECTION 1. OFFICES. The principal office shall be in the City of
Wilmington, County of New Castle, State of Delaware, and the name of the
resident agent in charge thereof is The Corporation Trust Company.
The Corporation may also have an office in the City of Battle Creek,
State of Michigan, and also offices at such other places as the Board of
Directors may, from time-to-time, appoint, or the business of this Corporation
may require.
ARTICLE II
STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. The Annual Meeting of Stockholders of
this Corporation may be held either within or without the State of Delaware at a
time and place to be designated by the Board of Directors. Notice of such
Annual Meeting shall be given by the Secretary, by mailing a written or printed
notice stating the place, day and hour of the meeting to each stockholder of
record entitled to vote at such meeting, at least ten (10) days prior to the
date of such meeting, at such stockholder's last known post office address as
the same appears upon the books of this Corporation. The Chairman of the
Board, or in such officer's absence or incapacity, a Vice Chairman, or in such
officer's absence or incapacity, the President and Secretary of this
Corporation, shall act as president and secretary, respectively, of each
stockholders' meeting unless it shall be otherwise determined at the meeting.
SECTION 2. SPECIAL MEETINGS. Special meetings of the stockholders may
be held either within or without the State of Delaware and may be called (i) by
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 III, Section 1 of these Bylaws, whether or not such
directorships are filled at the time (such total number of directorships
hereinafter referred to as the "Full Board"), or by the Chairman of the Board,
or in such officer's absence or incapacity, by a Vice Chairman, or in such
officer's
<PAGE> 2
absence or incapacity, by the President, by mailing a written or printed notice
at least ten (10) days prior to the date of such meeting to each stockholder of
record entitled to vote at such meeting (at such stockholder's last known post
office address as the same appears on the books of this Corporation), or (ii)
by any stockholder or stockholders holding not less than one-third of the
voting power of all of the outstanding shares of capital stock of this
Corporation entitled to vote at such meeting, voting together as a single
class, by mailing a written or printed notice at least thirty (30) days prior
to the date of such meeting to each stockholder of record entitled to vote at
such meeting. The notice required by clause (i) or (ii) of the immediately
preceding sentence shall state the place, date and hour of such meeting and any
and all purposes for which the meeting is called.
SECTION 3. VOTES. Each stockholder shall be entitled to one (1) vote
for each share of capital stock held on all matters to be voted upon. Each
stockholder entitled to vote shall be entitled to vote in person or by proxy,
but no proxy shall be voted on after three (3) years from its date unless said
proxy provides for a longer period. Except where the transfer books of this
Corporation shall have been closed, or a date shall have been fixed as a record
date for the determination of stockholders entitled to vote, no share of stock
shall be voted on at any election for Directors which shall have been
transferred on the books of this Corporation within twenty (20) days next
preceding such election of Directors.
SECTION 4. QUORUM. At any meeting at which the holders of capital
stock shall be entitled to vote for the election of Directors or for other
purposes, the holders of a majority of the outstanding shares of capital stock
entitled to vote at such meeting, and present in person or by proxy, shall
constitute a quorum for the purpose of electing Directors or for such other
purposes.
In the absence of a quorum of holders of capital stock at any meeting
of stockholders at which they are entitled to vote, the holders of capital
stock present at such meeting may adjourn the meeting to a future day for such
vote as the holders of capital stock are entitled and wish to take without any
notice other than an announcement at the meeting. At any such adjourned
meeting at which a quorum shall be present, any business may be transacted by
stockholders which they might have transacted at the meeting as originally
notified.
SECTION 5. STOCKHOLDERS LISTS. A complete list of the stockholders
entitled to vote at the ensuing election, arranged in alphabetical order, with
the residence of each and the number of voting shares held by each, shall be
prepared by the Secretary and filed in the office where the election is to be
held at least ten (10) days before every election, and shall, at all times,
during the usual hours for business, and during the whole time of said
election, and at the place thereof, be open to the examination of any
stockholder entitled to vote thereat.
SECTION 6. CONSENTS TO CORPORATE ACTION. The record date for
determining stockholders entitled to express consent to corporate action in
writing
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without a meeting shall be fixed by the Board of Directors. Any stockholder
seeking to have the stockholders authorize or take corporate action by written
consent without a meeting shall, by written notice, request the Board of
Directors to fix a record date. The Board of Directors shall, upon receipt of
such a request, fix a record date, which shall be not later than the 15th day
following receipt of the request, or such later date as may be specified by
such stockholder. If the record date falls on a Saturday, Sunday or legal
holiday, the record date shall be the day next following which is not a
Saturday, Sunday or legal holiday.
Subject to the immediately following paragraph, the date for
determining if an action has been consented to by the holder or holders of
shares of outstanding stock of this Corporation having the requisite voting
power to authorize or take the action specified therein (the "Consent Date")
shall be the 31st day after the date on which materials soliciting consents are
mailed to stockholders of this Corporation or, if no such materials are
required to be mailed under applicable law, the 31st day following the record
date fixed by the Board pursuant to the immediately preceding paragraph. If
the Consent Date falls on a Saturday, Sunday or legal holiday, the Consent Date
shall be the day next following which is not a Saturday, Sunday or legal
holiday.
In the event of the delivery to this Corporation of a written consent
or consents purporting to authorize or take corporate action and/or related
revocations (each such written consent and related revocation hereinafter
referred to in this Section 6 as a "Consent"), the Secretary of this
Corporation shall provide for the safekeeping of such Consent and shall conduct
such reasonable investigation as the Secretary deems necessary or appropriate
for the purpose of ascertaining the validity of such Consent and all matters
incident thereto, including, without limitation, whether the holders of shares
having the requisite voting power to authorize or take the action specified in
the Consent have given consent; provided, that if the corporate action to which
the Consent relates is the removal or replacement of one or more members of the
Board of Directors, the Secretary of this Corporation shall designate two
persons, who shall not be members of the Board, to serve as inspectors with
respect to such Consent, and such inspectors shall discharge the functions of
the Secretary of this Corporation under this paragraph. If, after such
investigation, the Secretary, or such inspectors, as the case may be, shall
determine that the Consent is valid, that fact shall be certified on the
records of this Corporation kept for the purpose of recording the proceedings
of meetings of the stockholders, and the Consent shall be filed with such
records, at which time the Consent shall become effective as stockholder
action; provided, that neither the Secretary, nor such inspectors, as the case
may be, shall make such certification or filing, and the Consent shall not
become effective as stockholder action, until the final termination, without
the availability of any further appeal, of any proceedings which may have been
commenced in the Court of Chancery of the State of Delaware, or any other court
of competent jurisdiction, for an adjudication of any legal issues incident to
determining the validity of the Consent, unless and until such Court has
determined that such proceedings are not being pursued expeditiously and in
good faith. In conducting the investigation required by this paragraph, the
Secretary, or such inspectors, as the case may be, may, at the expense of this
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Corporation, retain special legal counsel and any other necessary or
appropriate professional advisors and such other personnel, as they may deem
necessary or appropriate, to assist them.
To the extent that this Section 6 is inconsistent with this
Corporation's Restated Certificate of Incorporation, as amended, the provisions
of this Corporation's Restated Certificate of Incorporation, as amended, will
prevail.
ARTICLE III
DIRECTORS
SECTION 1. MEMBERSHIP. The number of Directors of this Corporation
shall be not less than seven (7) nor more than fifteen (15), the exact number
of Directors to 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 of the Restated
Certificate of Incorporation). Directors shall be divided into three classes,
as nearly equal in number as possible, with a term of office of three years,
one class to expire each year. At each Annual Meeting of Stockholders, the
class of Directors whose terms of office shall expire at such time shall be
elected by a plurality vote by ballot to hold office for terms expiring at the
third Annual Meeting of Stockholders following their election and until a
successor shall be elected and shall qualify.
Nominations for the election of Directors may be made by the Board of
Directors or a committee appointed by the Board of Directors or by any
stockholder entitled to vote in the election of Directors at the particular
meeting at which the nomination is to occur. However, any stockholder entitled
to vote at such meeting may nominate one or more persons for election as
Directors only in person or by proxy at such meeting and only if written notice
of such stockholder's intent to make such nomination or nominations has been
delivered personally to, or otherwise received by, the Secretary of this
Corporation at least thirty (30) days, but no more than ninety (90) days prior
to the anniversary date of the record date for determination of stockholders
entitled to vote in the immediately preceding Annual Meeting of Stockholders.
Each such notice shall contain a representation that: (i) the stockholder is,
and will be, on the record date, a beneficial owner or a holder of record of
stock of this Corporation entitled to vote at such meeting; (ii) the
stockholder has, and will have, on the record date, full voting power with
respect to such shares; and (iii) the stockholder intends to appear in person
or by proxy at the meeting to nominate the person or persons specified in the
notice. Additionally, each such notice shall set forth: (a) the name and
address of the stockholder who intends to make the nomination and of the person
or persons to be nominated; (b) a description of all arrangements or
understandings between the stockholder and each proposed nominee, and any other
person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder; (c) the number and
kinds
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of securities of this Corporation held beneficially or of record by each
proposed nominee; (d) such other information regarding each proposed nominee as
would be required to be included in a proxy statement filed pursuant to the
proxy rules of the Securities and Exchange Commission for the initial election
of such proposed nominee for Director; and (e) the consent of each proposed
nominee to serve as a Director if so elected. The presiding officer of the
meeting may refuse to acknowledge the nomination of any person if any of the
information supplied is false or misleading or if any of the foregoing
requirements are not satisfied.
SECTION 2. VACANCIES. 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 a plurality vote of the stockholders at any regular Annual
Meeting or Special Meeting of Stockholders, 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.
SECTION 3. PLACE OF MEETINGS. The Directors may hold their meetings
and have one or more offices and keep the books of this Corporation outside of
Delaware at the office of this Corporation, in the City of Battle Creek,
Michigan, or at such other place or places as they may, from time-to-time,
determine.
SECTION 4. REGULAR MEETINGS. In months other than the month in which
the Annual Meeting of Stockholders shall be held, regular meetings of the Board
of Directors shall be held without other notice than this bylaw, on the fourth
Friday of each month, if not a legal holiday, and if a legal holiday, then on
the preceding business day, at such time and place as the Board of Directors
may designate, or, if no such designation shall have been made, at the
executive offices of this Corporation, in the City of Battle Creek, Michigan,
at the hour of 1:30 p.m., local time. A regular meeting of the Board of
Directors shall also be held without other notice than this bylaw, immediately
after, and at the same place as the Annual Meeting of Stockholders. The Board
of Directors may provide, by resolution, the time and place for the holding of
different or additional regular meetings or the cancellation of a regular
meeting(s) without other notice than such resolution.
SECTION 5. SPECIAL MEETINGS. Special meetings of the Board of
Directors, to be held within or without the State of Delaware, may be called by
the Chairman of the Board, or in such officer's absence or incapacity, by a
Vice Chairman, or in such officer's absence or incapacity, by the President, or
in such officer's absence or incapacity, by an Executive Vice President, or in
such officer's absence or incapacity, by not less than six (6) Directors
(provided, that if this Corporation's Restated Certificate of
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Incorporation, as amended, provides for the division of the Board of Directors
into three classes, no more than two of such members of the Board of Directors
shall be from the same class), by giving one day's notice thereof in the case
of special meetings called by the Chairman of the Board, a Vice Chairman, the
President or an Executive Vice President, as the case may be, or ten day's
notice thereof in the case of all other special meetings, which notice shall,
in the case of any special meeting, set forth the time and place of the meeting
and be made orally, or in writing, or by telegraph or by telephone, and shall,
in the case of special meetings not called by the Chairman of the Board, a Vice
Chairman, the President or an Executive Vice President, also set forth in
reasonable detail any and all purposes for which the special meeting is called.
SECTION 6. VOTES. Any member of the Board may require the ayes and
noes to be taken on any questions and recorded on the Minutes.
SECTION 7. QUORUM. Except as herein otherwise specifically provided,
a majority of the number of Directors constituting the Full Board (as defined in
Article II, Section 2) shall constitute a quorum for the transaction of
business.
SECTION 8. COMPENSATION OF DIRECTORS. Compensation of Directors shall
be as determined by the Board. Nothing contained herein shall be construed to
preclude any Director from serving this Corporation in any other capacity and
receiving compensation therefor.
SECTION 9. NOTICES. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the Board of Directors need be
specified in the call or notice, or waiver of notice of such meeting, unless
specifically required by law, this Corporation's Restated Certificate of
Incorporation, as amended, or these Bylaws.
ARTICLE IV
COMMITTEES
SECTION 1. EXECUTIVE COMMITTEE. There may be an Executive Committee
of two or more Directors, including the Chairman of the Board, designated by
resolution of the Board of Directors. Said Committee may meet at stated times
or on notice to all by any of their own number. During the intervals between
meetings of the Board, the members of such Committee, who shall be requested to
do so, shall advise and aid the officers in all matters concerning its
interests and the management of its business, and generally perform such duties
and exercise such powers as may be directed or delegated by the Board of
Directors from time-to-time. The Board may delegate to such Committee
authority to exercise all powers of the Board, except those powers specifically
excluded from committees by Section 141(c) of the Delaware General Corporation
Law and except the power to authorize the issuance of stock of this Corporation
while the Board is not in
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session. Vacancies in the membership of the Committee shall be filled by the
Board of Directors at a regular meeting or at a special meeting called for that
purpose.
The Executive Committee may, in its discretion, keep regular minutes of
its proceedings and shall report the same to the Board when required.
In the absence or disqualification of a member of the Executive
Committee, the member or members of the Executive Committee present at a
meeting and not disqualified from voting, whether or not he, she or they
constitute a quorum, may unanimously appoint another member of the Board of
Directors of the Company to act at the meeting in place of each such absent or
disqualified member.
SECTION 2. AUDIT COMMITTEE. There may be an Audit Committee of two or
more Directors designated by resolution of the Board of Directors. Said
Committee may meet at stated times or on notice to all by any of its own
number. The Committee and its membership shall generally perform such duties
and exercise such powers as may be directed or delegated by the Board of
Directors from time-to-time. Vacancies in the membership of the Committee
shall be filled by the Board of Directors at a regular meeting or at a special
meeting called for that purpose. The Committee may, in its discretion, keep
regular minutes of its proceedings and shall report the same to the Board when
required.
SECTION 3. COMPENSATION COMMITTEE. There may be a Compensation
Committee of two or more Directors designated by resolution of the Board of
Directors. Said Committee may meet at stated times or on notice to all by any
of its own number. The Committee and its membership shall generally perform
such duties and exercise such power as may be directed or delegated by the
Board of Directors from time-to-time. Vacancies in the membership of the
Committee shall be filled by the Board of Directors at a regular meeting or at
a special meeting called for that purpose. The Committee may, in its
discretion, keep regular minutes of its proceedings and shall report the same
to the Board when required.
SECTION 4. EMPLOYEE BENEFITS ADVISORY COMMITTEE. There may be an
Employee Benefits Advisory Committee of two or more Directors designated by
resolution of the Board of Directors. Said Committee may meet at stated times
or on notice to all by any of its own number. The Committee and its membership
shall generally perform such duties and exercise such powers as may be directed
or delegated by the Board of Directors from time-to-time. Vacancies in the
membership of the Committee shall be filled by the Board of Directors at a
regular meeting or at a special meeting called for that purpose. The Committee
may, in its discretion, keep regular minutes of its proceedings and shall
report the same to the Board when required.
SECTION 5. FINANCE COMMITTEE. There may be a Finance Committee of two
or more Directors designated by resolution of the Board of Directors. Said
Committee may meet at stated times or on notice to all by any of its own
number. The Committee and its membership shall generally perform such duties
and exercise such
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powers as may be directed or delegated by the Board of Directors from
time-to-time. Vacancies in the membership of the Committee shall be filled by
the Board of Directors at a regular meeting or at a special meeting called for
that purpose. The Committee may, in its discretion, keep regular minutes of
its proceedings and shall report the same to the Board when required.
SECTION 6. NOMINATING COMMITTEE. There may be a Nominating Committee
of two or more Directors designated by resolution of the Board of Directors.
Said Committee may meet at stated times or on notice to all by any of its own
number. The Committee and its membership shall generally perform such duties
and exercise such powers as may be directed or delegated by the Board of
Directors from time-to-time. Vacancies in the membership of the Committee
shall be filled by the Board of Directors at a regular meeting or at a special
meeting called for that purpose. The Committee may, in its discretion, keep
regular minutes of its proceedings and shall report the same to the Board when
required.
SECTION 7. COMMITTEE ON SOCIAL RESPONSIBILITY. There may be a
Committee on Social Responsibility of two or more Directors designated by
resolution of the Board of Directors. Said Committee may meet at stated times
or on notice to all by any of its own number. The Committee and its membership
shall generally perform such duties and exercise such powers as may be directed
or delegated by the Board of Directors from time-to-time. Vacancies in the
membership of the Committee shall be filled by the Board of Directors at a
regular meeting or at a special meeting called for that purpose. The Committee
may, in its discretion, keep regular minutes of its proceedings and shall
report the same to the Board when required.
SECTION 8. OTHER COMMITTEES. The Board of Directors, by resolution,
may dissolve existing committees and may designate additional committees, each
of which shall consist of not less than two Directors. Each such additional
committee may meet at stated times or on notice to all by any of its own
number. Each such additional committee and its membership shall generally
perform such duties and exercise such powers as may be directed or delegated by
the Board of Directors from time-to-time. Vacancies in the membership of any
such additional committee shall be filled by the Board of Directors at a
regular meeting or at a special meeting called for that purpose. Any such
additional committee may, in its discretion, keep regular minutes of its
proceedings and shall report the same to the Board of Directors when required.
ARTICLE V
OFFICERS
SECTION 1. OFFICERS. The officers of this Corporation shall be
elected by the Board of Directors and shall consist of the Chairman of the
Board (if designated as
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the Chief Executive Officer by the Board), the President, one or more Vice
Presidents, a Secretary, a Controller, one or more Assistant Secretaries, a
Treasurer, one or more Assistant Treasurers, and such other officers as shall,
from time-to-time, be provided by the Board of Directors, who shall perform the
usual duties pertaining to their respective offices, except as otherwise
specifically provided herein or by resolution of the Board of Directors. One
person may hold more than one office except that no person shall be both the
President and a Vice President. The Board of Directors may also elect one or
more Vice Chairmen of the Board.
SECTION 2. QUALIFICATIONS. No person shall be eligible for the Office
of Chairman of the Board who is not a Director. Persons who are not Directors
or who are not stockholders shall be eligible for all other offices of this
Corporation.
SECTION 3. TERM OF OFFICE. The officers shall be elected at the first
regular meeting of the Board of Directors after the Annual Meeting of
Stockholders and shall hold office for one year and until their respective
successors have been duly elected and qualified; provided, however, that all
officers of this Corporation shall be subject to removal at any time by an
affirmative vote of Directors constituting not less than a majority of the Full
Board (as defined in Article II, Section 2).
SECTION 4. BONDS. The Directors may, by resolution, require any or
all of the officers or employees to give bond to this Corporation with good and
sufficient surety conditioned upon the faithful performance of their respective
duties and offices.
SECTION 5. CHAIRMAN OF THE BOARD AND VICE CHAIRMEN. The Chairman of
the Board, if one is elected, shall, in addition to his duties as a Director of
this Corporation, preside as Chairman at all meetings of the stockholders, of
the Board of Directors, and of the Executive Committee. A Vice Chairman (if
one or more is elected, in the order designated by the Board of Directors or
the Chief Executive Officer) shall, in the absence of the Chairman of the
Board, perform the duties of the Chairman of the Board provided for in this
Section.
SECTION 6. CHIEF EXECUTIVE OFFICER; PRESIDENT. The Chairman of the
Board, if so designated by the Board of Directors, shall be the Chief Executive
Officer of this Corporation and shall have general supervision of the affairs
of this Corporation, being responsible to the Board of Directors. The
President shall have general supervision of the operations of this Corporation
subject to the supervision of the Chairman of the Board, except that, if the
Chairman of the Board shall not also have been designated Chief Executive
Officer, or in the absence or incapacity of the Chairman of the Board who has
been so designated, the President shall be the Chief Executive Officer of this
Corporation and have general supervision of the affairs of this Corporation,
being responsible to the Board of Directors. The President shall, in the
absence or incapacity of the Chairman and Vice Chairman of the Board, perform
the functions of the Chairman of the Board set forth in Section 5 of this
Article V.
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SECTION 7. VICE PRESIDENTS. One or more of the Vice Presidents
elected may be designated as Executive Vice Presidents. One or more of the Vice
Presidents elected may be designated as Senior Vice Presidents. Each of the
Vice Presidents, including the Executive Vice Presidents and the Senior Vice
Presidents, shall perform such duties as may be prescribed by the Board of
Directors or the Chief Executive Officer from time-to-time. In the absence or
disability to act of the President, any of the Executive Vice Presidents
designated by the Chief Executive Officer or the Board of Directors shall
possess all the powers and may perform any of the duties of the Office of the
President. In the absence or disability to act of the President and all of the
Executive Vice Presidents, such of the Vice Presidents designated by the Chief
Executive Officer or the Board of Directors, or in the absence or incapacity of
those designated Vice Presidents, any other person(s) designated by the Chief
Executive Officer shall possess all of the powers and may perform all of the
duties of the President.
SECTION 8. SECRETARY. The Secretary, or in his or her absence, the
Assistant Secretary, shall issue notices for meetings, shall keep their
minutes, shall have charge of the corporate seal and corporate Minute Books,
and shall make such reports and perform such other duties as are incident to
his or her office or as are properly required of him or her by the Chief
Executive Officer or the Board of Directors.
SECTION 9. TREASURER. The Treasurer shall have custody of all monies
and securities of this Corporation. He or she shall sign or countersign such
instruments as require his or her signature and shall perform all duties
incident to his or her office or that are properly required of him or her by
the Board of Directors or the Chief Executive Officer. He or she shall give
bond for the faithful performance of his or her duties in such sum and with
such sureties as may be required of him or her by the Board of Directors or the
Chief Executive Officer.
SECTION 10. CONTROLLER. The Controller shall have custody of all the
accounting records of this Corporation and shall keep regular books of account.
He or she shall sign or countersign such instruments as require his or her
signature and shall perform all duties incident to this office or that are
properly required of him or her by the Board of Directors, the Chief Executive
Officer or the President.
SECTION 11. DELEGATION. In case of the absence of any officer of this
Corporation or for any other reason which may seem sufficient to the Board of
Directors, the Board of Directors or the Chief Executive Officer may delegate
the powers and duties of any such officer to any Director for the time being.
ARTICLE VI
EXECUTION OF CHECKS AND OTHER INSTRUMENTS
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SECTION 1. The funds of this Corporation shall be deposited in such
bank or banks of deposit as shall be designated or authorized by the Board of
Directors and in the name of Kellogg Company or such other name as the Board of
Directors may designate. All checks, drafts or orders drawn against funds on
deposit in any such bank shall be signed by such person or persons as may be
authorized by the Board of Directors by a proper resolution spread of record.
SECTION 2. All other instruments in writing involving the payment of
money or of credit or liability of this Corporation, such as deeds, bonds,
contracts, etc., shall be signed in the name of this Corporation by the
Chairman of the Board, a Vice Chairman, the President, a Vice President or by
such other person or persons as may be authorized by the Board and may be
attested, and the corporate seal affixed thereto by either the Secretary or an
Assistant Secretary. In the absence of the Secretary and Assistant Secretary,
or their inability to act, the Treasurer or Assistant Treasurer may affix the
seal.
The Board of Directors, the Executive Committee or the Chief Executive
Officer may authorize the execution of contracts and other instruments by such
other officers, agents and employees as may be selected by them from
time-to-time and with such limitations and restrictions as the authorization
may require.
ARTICLE VII
CERTIFICATES OF STOCK
SECTION 1. CERTIFICATES OF STOCK. Certificates of stock shall be
signed by the Chairman of the Board, the President or a Vice President, and by
the Secretary or an Assistant Secretary of this Corporation, both of whose
signatures may be a facsimile, and shall be numbered and entered in books of
this Corporation as they are issued. They shall, in all respects, conform to
the requirements of the law of the State of Delaware, and shall be otherwise in
such form as may be prescribed by the Board of Directors.
SECTION 2. LOST CERTIFICATES. If any person claims a certificate is
lost or destroyed, a new certificate may be issued of the same tenor and for
the same number of shares as the one alleged to be lost or destroyed, upon
compliance with any terms and conditions which this Corporation may prescribe.
ARTICLE VIII
TRANSFER OF SHARES
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SECTION 1. TRANSFER OF SHARES. Shares of the capital stock of this
Corporation shall be transferred on the books of this Corporation by the owner
thereof in person or by his or her attorney upon the surrender and cancellation
of certificates for a like number of shares. Upon presentation and surrender
of a certificate properly endorsed and payment of all taxes thereon, the
transferee shall be entitled to a new certificate or certificates in place
thereof.
SECTION 2. REGISTRATION. One or more Transfer Agents and Registrars
of the Company's stock may be appointed by resolution of the Board of Directors
for the transfer and registration of any class or classes of stock of this
Corporation, and upon such appointment, no certificate for any such class of
stock shall be issued or be valid for any purpose until countersigned by one
such Transfer Agent and registered and countersigned by one such Registrar;
provided, however, that the countersignature of such Transfer Agent may be a
facsimile if such certificate is countersigned manually by a Registrar who
shall be other than this Corporation or its employee.
SECTION 3. CLOSING OF TRANSFER BOOKS. The Board of Directors shall
have the power to close the stock transfer books of this Corporation for a
period not exceeding sixty (60) days preceding the date of any meeting of
stockholders, or the date of payment of any dividend or other distribution or
allotment of any rights, or the effective date of any change, conversion or
exchange of stock, or of any other lawful action; provided, however, that in
lieu of closing the stock transfer books as aforesaid and in order that this
Corporation may determine the stockholders entitled to notice or to vote at any
meeting of stockholders or any adjournment thereof, or entitled to receive
payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion or
exchange of stock, or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date, which shall not be more than
sixty (60) days before the date of such meeting, nor more than sixty (60) days
prior to any other action, and in such case, such stockholders, and only such
stockholders as shall be stockholders of record on the date so fixed, shall be
entitled to such notice of, and to vote at, such meeting and any adjournment or
adjournments thereof, or to receive payment of such dividend, or to receive
such allotment of rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any stock on the books of this Corporation
after any such record date fixed as aforesaid. A determination of stockholders
of record entitled to notice of, or to vote at, a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
SECTION 4. REGISTERED STOCKHOLDERS. The Corporation shall be entitled
to treat the holder of record of any share or shares of stock as the holder in
fact thereof, and accordingly, shall not be bound to recognize any equitable or
other claim to, or interest in, such share on the part of any other person,
whether or not it shall have express or other notice thereof, save as expressly
provided by the laws of Delaware.
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ARTICLE IX
CORPORATE SEAL
SECTION 1. CORPORATE SEAL. The corporate seal shall have inscribed
thereon in the center the words "Corporate Seal" and the number "1922," and in
a circle around the margin the words
"Kellogg Company"
"Delaware".
ARTICLE X
DIVIDENDS
SECTION 1. DIVIDENDS. Dividends upon the stock of this Corporation
shall be payable from funds lawfully available therefor at such times and in
such amounts as the Board of Directors, or a Committee thereof expressly
authorized by resolution of the Board of Directors may, from time-to-time,
direct.
ARTICLE XI
FISCAL YEAR
SECTION 1. FISCAL YEAR. The fiscal year of this Corporation shall
begin on the 1st day of January and end on the 31st day of December of each
year.
ARTICLE XII
INSPECTION OF BOOKS
SECTION 1. INSPECTION OF BOOKS. The Directors shall determine, from
time-to-time whether, and if allowed, when, and under what conditions and
regulations, the accounts and books of this Corporation (except such as may, by
statute, be specifically open to inspection), or any of them, shall be open to
the inspection of the stockholders, and the stockholders' rights in this
respect are and shall be restricted and limited accordingly.
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ARTICLE XIII
ORDER OF BUSINESS
SECTION 1. ORDER OF BUSINESS. At all stockholders' and Directors'
meetings, the order of business shall be as determined by the presiding officer
of the meeting.
ARTICLE XIV
AMENDMENT
SECTION 1. AMENDMENT. Except to the extent otherwise provided in this
Corporation's Restated Certificate of Incorporation, as amended, these Bylaws
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 of the outstanding shares of capital stock of this
Corporation then entitled to vote generally in the election of Directors,
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 action), 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 Directors at which there is a quorum present and
voting; provided, that in the case of clause (ii), any alteration, amendment or
repeal made with respect to, or the adoption of, a new bylaw inconsistent with
Article II, Section 2 or Section 6, or Article III, Section 1, Section 2, or
Section 5, or this Article XIV, Section 1 of these Bylaws, shall require the
affirmative vote of Directors constituting not less than two-thirds of the Full
Board (as defined in Article II, Section 2).
ARTICLE XV
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS; INSURANCE
SECTION 1. The Corporation shall indemnify any person who was or is a
party, or is threatened to be made a party, to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of this Corporation),
by reason of the fact that he is or was a Director or officer of this
Corporation, is or was serving at the request of this Corporation as a
Director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with
14
<PAGE> 15
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of this
Corporation, and, with respect to any criminal action or proceeding, has no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere, or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of this
Corporation, and, with respect to any criminal action or proceeding, has
reasonable cause to believe that his conduct was unlawful.
SECTION 2. The Corporation shall indemnify any person who was or is a
party, or is threatened to be made a party, to any threatened pending or
completed action or suit by, or in the right of, this Corporation to procure a
judgment in its favor by reason of the fact that he is or was a Director or
officer of this Corporation, or, while a Director or officer of this
Corporation, is or was serving at the request of this Corporation as a
Director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of this
Corporation, and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to this Corporation unless and only to the extent that the Court of
Chancery of the State of Delaware or the court in which such action or suit was
brought shall determine, upon application, that despite the adjudication of
liability, but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court
of Chancery or such other court shall deem proper.
SECTION 3. The Board of Directors of this Corporation shall have the
power, in its discretion, to cause this Corporation to indemnify any person who
was or is a party, or is threatened to be made a party, to any threatened,
pending or completed action, suit or proceeding referred to in Sections 1 or 2
of this Article by reason of the fact that (although not a Director or officer
of this Corporation) he is or was an employee or agent of this Corporation, or
is or was serving at the request of this Corporation as a Director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise to the extent that any such person would have been entitled to
be indemnified under Sections 1 and 2 had he, at all times, been a Director or
officer of this Corporation.
SECTION 4. Any indemnification under Sections 1, 2 or 3 of this Article
(unless ordered by a court) shall be made by this Corporation only as
authorized in the specific case upon a determination that indemnification of
the Director, officer, employee or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in Sections 1 or 2.
Such determination shall be made (1) by the Board of Directors by a majority
vote of a quorum consisting of Directors who were not parties to such action,
suit or proceeding, or, (2) if such a quorum is not obtainable, or, even if
15
<PAGE> 16
obtainable, a quorum of disinterested Directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
SECTION 5. To the extent that a Director, officer, employee or agent
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Sections 1, 2 or 3, or in defense of any claim, issue
or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
SECTION 6. Expenses incurred in defending a civil or criminal action,
suit or proceeding may be paid by this Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by, or on behalf of, the Director, officer, employee or agent to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by this Corporation as authorized in this Article.
SECTION 7. The indemnification and advancement of expenses provided by,
or granted pursuant to, this Article, shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may, at any time, be entitled under any bylaw, agreement, vote of stockholders
or disinterested Directors, or otherwise, both as to action by a person in his
official capacity and as to action in another capacity while holding such
office.
SECTION 8. The Board of Directors shall have power to authorize and
direct the purchase and maintenance of insurance on behalf of itself or any
person who is or was a Director, officer, employee or agent of this
Corporation, or is or was serving at the request of this Corporation as a
Director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not this Corporation would have the power to indemnify him against
such liability under the provisions of this Article.
SECTION 9. For purposes of this Article XV, reference to "this
Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed
in a consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its Directors, officers and
employees or agents, so that any person who is or was a Director, officer,
employee or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Article XV with respect to the resulting or surviving corporation as he or she
would have with respect to such constituent corporation if its separate
existence had continued.
SECTION 10. For purposes of this Article XV, references to
"enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes
16
<PAGE> 17
assessed on a person with respect to an employee benefit plan; and references
to "serving at the request of this Corporation" shall include any service as a
Director, officer, employee or agent of this Corporation which imposes duties
on, or involves services by, such Director, officer, employee or agent with
respect to an employee benefit plan, its participants or beneficiaries; and a
person who acted in good faith and in a manner he reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
this Corporation" as referred to in this Article XV.
SECTION 11. The indemnification and advancement of expenses provided
by, or granted pursuant to, this Article, shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
Director, officer, employee or agent, and shall inure to the benefit of the
executors, administrators and other legal representatives and heirs of such a
person.
ARTICLE XVI
MISCELLANY
SECTION 1. The Chief Executive Officer or the Board of Directors may
designate any order of assignment to apply within any specified group of
officers where, as provided in these Bylaws, any such designation is to be made
as to one or more of such officers. In the event that no such designation is
made, the order of assignment within any specified group of officers will be
according to the length of service of each particular officer in the specified
office, with the officer serving the longest term within that particular office
to be assigned first, and in his or her absence or incapacity, the officer
serving the next longest term in that particular office to be assigned second,
and so on.
17
<PAGE> 1
EXHIBIT 10.10
KELLOGG COMPANY
SENIOR EXECUTIVE OFFICER PERFORMANCE BONUS PLAN
SECTION 1.
PURPOSE AND ELIGIBILITY
The purpose of this Plan is to motivate the Company's executive officers
through awards of annual cash bonuses to achieve strategic, financial and
operating objectives, reward their contribution toward improvement in
financial performance, provide the executive officers with an additional
incentive to contribute to the success of the Company and offer a total
compensation package that is competitive in the industry, and to include a
bonus component which is intended to qualify as performance-based compensation
deductible by the Company under the Code. Such executive officers of the
Company as determined by the Compensation Committee of the Board will be
eligible to receive payments hereunder.
SECTION 2.
DEFINITIONS
"Award" shall have the meaning set forth in Section 3.
"Board" shall mean the Board of Directors of the Company.
"Bonus" shall mean a cash award payable to a participant pursuant to
the terms of the plan, including an Award.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean the Compensation Committee of the Board.
"Company" shall mean Kellogg Company, a Delaware corporation, and its
subsidiaries.
"Compensation Survey" shall mean a survey of compensation practices of
comparable companies as selected by the Committee.
"Corporate Incentive Factor" shall mean the Company's earnings per
share (as adjusted for certain extraordinary or non-recurring items) as
compared to the pre-established target earnings per share.
"Covered Employees" shall mean participants designated by the Committee
prior to the award of a Bonus opportunity hereunder who are or are expected to
be "covered employees" within the meaning of Section 162(m) of the Code for the
Measurement Period in which a Bonus hereunder is payable.
"Disinterested Person" shall mean a member of the Board who qualifies
as an "outside director" for purposes of Section 162(m) of the Code.
"Measurement Period" shall mean a period of one fiscal year, unless a
shorter period is otherwise selected and established in writing by the
Committee at the time the Performance Goals are established with respect to a
particular Award.
1
<PAGE> 2
"Net Income" shall mean net income available for common stockholders as
reported in the Company's audited financial statements, but not including
extraordinary items and the cumulative effect of accounting changes.
"Payment Date" shall mean the date following the conclusion of a
particular Measurement Period on which the Committee certifies that applicable
Performance Goals have been satisfied and authorizes payment of corresponding
Bonuses.
"Performance Goals" shall have the meaning set forth in Section 3
hereof.
SECTION 3.
ADMINISTRATION AND CALCULATION OF AWARDS
The Plan shall be administered by the Committee, consisting of
Disinterested Persons, in conformance with Section 162(m) of the Code ("Section
162(m)"). Any action by the Committee that would be violative of Section
162(m) shall be void. The Committee shall have the authority to determine
eligibility of executive officers and the financial and other performance
criteria applicable to the maximum potential recommended bonus (the "Award)
which a participating executive officer may receive for services performed
during that year. Target awards, which are a percentage of the midpoint of the
applicable salary range, shall be determined using as an objective the 75th
percentile of the Compensation Survey. Recommended Awards shall be determined
by adjusting the target awards based on individual performance factors. The
result is then adjusted further based on the Corporate Incentive Factor. This
adjustment of the recommended bonus may result in a bonus payment ranging from
0% to 150% of the recommended bonus. The Committee shall evaluate individual
performance by such performance factors as it deems appropriate. The
performance factors shall be determined by the Committee in advance of each
Measurement Period or such period as may be permitted by the regulations issued
under Section 162(m),and may include long-term financial and non-financial
objectives and Company performance ("Performance Goals"). With respect to the
Chief Executive Officer, the factors shall be the same as those utilized by the
Committee in its annual determination of performance including the Company's
earnings per share, return on equity, return on assets, growth in sales and
earnings, market share and total return to stockholders (including both the
market value of the Company's stock and dividends thereon) and the extent to
which strategic and business plan goals are met. Awards are based on the
achievement of such performance criteria. Negative discretion may be used by
the Committee to reduce the Award. In no event, however, will an exercise of
negative discretion to reduce the Award of a participating executive officer
have the effect of increasing the amount of an Award otherwise payable to any
other participating executive officer.
SECTION 4.
MAXIMUM BONUS AWARDS
The total of all Awards payable to any Covered Employee shall not under
any circumstances exceed 3/4 of 1 percent (.0075) of the Net Income of the
Company (the "Maximum Bonus Awards Pool") and no one individual may receive
more than 60% of such pool. In the event that the total of all Awards payable
to Covered Employees should exceed the Maximum Bonus Awards Pool as specified
above. The Award of each Covered Employee will be proportionately reduced such
that the total of all such Awards paid is equal to the Maximum Bonus Awards
Pool.
SECTION 5.
PAYMENT OF AWARDS
If the Performance Goals established by the Committee are satisfied and
upon written certification by the Committee that the Performance Goals have
been satisfied, payment shall be made on the Payment Date in accordance with
the terms of the Award unless the Committee determines in its sole discretion to
reduce the payment to be made.
2
<PAGE> 3
SECTION 6.
TERMINATION OF EMPLOYMENT
In the event that a participating executive officer's employment with
the Company terminates for any reason prior to the Payment Date with respect to
any Bonus, the balance of any Bonus which remains unpaid at the time of such
termination shall be payable to the participant, or forfeited by the
participant, in accordance with the terms of the Award granted by the Committee;
provided, however, that no amount shall be payable unless the Performance Goals
are satisfied unless the termination of employment of the Covered Employee is
due to death or disability. Participating executive officers who remain
employed through the Measurement Period but are terminated prior to the Payment
Date shall be entitled to receive Bonuses payable with respect to such
Measurement Period.
SECTION 7.
AMENDMENT AND TERMINATION
The Board shall have the right to modify the Plan from time to time
but no such modification shall, without prior approval of the Company's
stockholders, change Section 3 of this Plan, alter the business criteria on
which the Performance Goals may be based or to increase the amount set forth in
Section 4, materially increase the amount available for Awards, materially
increase the benefits accruing to participating executive officers, materially
modify the requirements regarding eligibility for participation in the Plan or,
without the consent of the participant affected, impair any Award made prior to
the effective date of the modification.
SECTION 8.
MISCELLANEOUS
Bonus payments shall be made from the general funds of the Company and
no special or separate fund shall be established or other segregation of assets
made to assure payment. No participant or other person shall have under any
circumstances any interest in any particular property or assets of the
Company. The Plan shall be governed by and construed in accordance with the
laws of the State of Delaware, without regard to its principles of conflict
of laws.
Neither the establishment of this Plan nor the payment of any Award
hereunder nor any action of the Company or the Committee with respect to this
Plan shall be held or construed to confer upon any participating executive
officer any legal right to be continued in the employ of the Company or to
receive any particular rate of cash Compensation other than pursuant to the
terms of this Plan and the determination of the Committee, and the Company
expressly reserves the right to discharge any participating executive officer
whenever the interest of the Company may so permit or require without liability
to the Company, the Board of Directors or the Committee, except as to any
rights which may be expressly conferred upon a participating executive officer
under this Plan.
The adoption of this Plan shall not affect any other compensation plans
in effect for the Company or any subsidiary or affiliate of the Company, nor
shall the Plan preclude the Company or any subsidiary or affiliate thereof from
establishing any other forms of incentive or other compensation for the
participating executive officers.
SECTION 9.
EFFECTIVE DATE
This Plan shall become effective upon approval by the stockholders.
3
<PAGE> 1
EXHIBIT 13.01
SELECTED FINANCIAL DATA
(millions, except per share data)
SUMMARY OF OPERATIONS
<TABLE>
<CAPTION>
========================================================================================================
EARNINGS
(a) BEFORE (a)(b)
NET % OPERATING % ACCOUNTING % NET %
SALES GROWTH PROFIT GROWTH CHANGE GROWTH EARNINGS GROWTH
- --------------------------------------------------------------------------------------------------------
10-year
Compound
Growth Rate 9% 4% 6% 6%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $7,003.7 7 $837.5 (28) $490.3 (30) $490.3 (30)
1994 6,562.0 4 1,162.6 16 705.4 4 705.4 4
1993 6,295.4 2 1,004.6 (5) 680.7 - 680.7 58
1992 6,190.6 7 1,062.8 3 682.8 13 431.2 (29)
1991 5,786.6 12 1,027.9 16 606.0 21 606.0 21
1990 5,181.4 11 886.0 21 502.8 19 502.8 7
1989 4,651.7 7 732.5 (8) 422.1 (12) 470.2 (2)
1988 4,348.8 15 794.1 15 480.4 21 480.4 21
1987 3,793.0 14 691.2 7 395.9 24 395.9 24
1986 3,340.7 14 647.4 16 318.9 13 318.9 13
1985 2,930.1 13 558.4 21 281.1 12 281.1 12
========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
============================================================================================
PER COMMON SHARE DATA (c)
-------------------------------------------
EARNINGS
BEFORE (a)(b) AVERAGE
ACCOUNTING NET CASH BOOK SHARES SHAREHOLDERS'
CHANGE EARNINGS DIVIDENDS VALUE OUTSTANDING EQUITY
- --------------------------------------------------------------------------------------------
10-year
Compound
Growth Rate 7% 7% 13%
<S> <C> <C> <C> <C> <C> <C>
1995 $2.24 $2.24 $1.50 $7.34 219.2 $1,590.9
1994 3.15 3.15 1.40 8.15 224.2 1,807.5
1993 2.94 2.94 1.32 7.52 231.5 1,713.4
1992 2.86 1.81 1.20 8.20 238.9 1,945.2
1991 2.51 2.51 1.075 8.98 241.2 2,159.8
1990 2.08 2.08 .96 7.88 241.6 1,901.8
1989 1.73 1.93 .86 6.70 244.2 1,634.4
1988 1.95 1.95 .76 6.03 246.4 1,483.2
1987 1.60 1.60 .64 4.91 247.4 1,211.4
1986 1.29 1.29 .51 3.63 247.0 898.4
1985 1.14 1.14 .45 2.77 246.6 683.0
============================================================================================
</TABLE>
OTHER INFORMATION AND FINANCIAL RATIOS
<TABLE>
<CAPTION>
============================================================================================================
PROPERTY, CAPITAL TOTAL ADVERTISING R&D NUMBER OF
NET EXPENDITURES DEPRECIATION ASSETS EXPENSE EXPENSE EMPLOYEES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $2,784.8 $315.7 $258.8 $4,414.6 $891.5 $72.2 14,487
1994 2,892.8 354.3 256.1 4,467.3 856.9 71.7 15,657
1993 2,768.4 449.7 265.2 4,237.1 772.4 59.2 16,151
1992 2,662.7 473.6 231.5 4,015.0 782.3 56.7 16,551
1991 2,646.5 333.5 222.8 3,925.8 708.3 34.7 17,017
1990 2,595.4 320.5 200.2 3,749.4 648.5 38.3 17,239
1989 2,406.3 508.7 167.6 3,390.4 611.4 42.9 17,268
1988 2,131.9 538.1 139.7 3,297.9 560.9 42.0 17,461
1987 1,738.8 478.4 113.1 2,680.9 486.9 40.0 17,762
1986 1,281.1 329.2 92.7 2,084.2 355.6 38.2 17,383
1985 1,035.9 245.6 75.4 1,726.1 302.2 33.9 17,082
============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
=========================================================================================================
FINANCIAL RATIOS
-------------------------------------------
PRETAX CASH (USED IN)/
INTEREST RETURN ON DEBT TO CASH PROVIDED BY
CURRENT COVERAGE AVERAGE TOTAL PROVIDED BY FINANCING LONG-TERM
RATIO (TIMES) EQUITY CAPITAL OPERATIONS ACTIVITIES DEBT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1995 1.1 12 29% 36% $1,041.0 ($759.2) $717.8
1994 1.2 23 40% 36% 966.8 (559.5) 719.2
1993 1.0 27 37% 35% 800.2 (464.2) 521.6
1992 1.2 33 21% 21% 741.9 (422.6) 314.9
1991 .9 17 30% 18% 934.4 (537.7) 15.2
1990 .9 10 28% 26% 819.2 (490.9) 295.6
1989 .9 10 30% 34% 533.5 (143.2) 371.4
1988 .9 14 36% 32% 492.3 52.1 272.1
1987 .9 14 38% 27% 523.5 (130.5) 290.4
1986 1.1 13 40% 31% 542.7 (144.1) 264.1
1985 1.4 11 48% 38% 449.7 (384.4) 392.6
=========================================================================================================
</TABLE>
(a) Operating profit for 1995 includes non-recurring charges of $421.8
million ($271.3 million after tax or $1.24 per share). Operating profit
for 1993 includes non-recurring charges of $64.3 million ($41.1 million
after tax or $.18 per share). See Management's Discussion and Analysis on
pages 16-19 and Note 4 within Notes to Consolidated Financial Statements
for further explanation.
(b) Effective January 1, 1992, the Company adopted Statement of Financial
Accounting Standards (SFAS) #106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." The transition effect of adopting SFAS #106
on the immediate recognition basis, as of January 1, 1992, resulted in a
charge of $251.6 million ($1.05 per share) to 1992 earnings, net of $144.6
million of income tax benefit. The Company adopted SFAS #106 on a
worldwide basis; however, costs associated with subsidiaries outside North
America are insignificant. Net earnings for 1989 include a $48.1 million
gain ($.20 per share) resulting from the adoption of SFAS #96, "Accounting
for Income Taxes," as of January 1, 1989.
(c) All per share data retroactively restated to reflect 2 for 1 stock splits
in 1991 and 1986.
15
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
1995 COMPARED TO 1994
Kellogg revenues are generated from the sale of ready-to-eat cereals and other
grain-based convenience foods in nearly 160 countries. During 1995, the
Company continued to demonstrate strong global market leadership with a 42%
annual share of worldwide cereal category volume; 36% in North America, 48% in
Europe, 48% in Asia-Pacific, and 69% in Latin America.
1995 was a year in which the Company took major steps to position itself for
the future, initiating various programs to streamline operations and improve
productivity. These initiatives, and related non-recurring charges incurred,
are described below. Excluding these non-recurring charges, the Company
exhibited strong increases in earnings and earnings per share, driven by a
return to growth in the U.S. cereal business, low double-digit volume growth in
other convenience foods, and an aggressive focus on cost efficiencies.
[GRAPH]
1995 Geographic Net Sales - The 1995 Geographic Net Sales graph shows in pie
chart form, the relative proportion of the Company's 1995 net sales
attributable to major geographic segments as follows: United States 58%,
Europe 26%, Other 16%.
[END GRAPH]
Consolidated net sales increased 7% over 1994, principally from volume growth
and product mix improvements. On a geographic basis, sales increased 6% in the
U.S., 9% in Europe, and 5% in all other areas. Foreign currency movements had
an insignificant effect on consolidated net sales, but contributed favorably by
7% in Europe and unfavorably by 13% in other non-U.S. areas, primarily due to
the significant currency devaluation in Mexico.
The Company's total volume was up 4% versus the prior year. Excluding results
of divested businesses, total volume increased 5%. Despite intense competitive
pressure in all developed markets, Kellogg's global cereal volume grew 3%
during 1995, driven by shipment increases in North American, Continental
Europe, and Asia-Pacific markets. Latin America experienced slightly lower
shipments, as a volume reduction in Mexico, resulting from the effect on the
local economy of 1994's peso devaluation, was partially offset by strong growth
in other Latin American markets. Other convenience foods volume growth was
driven by strong sales of new products in the North American market, where the
Company continues to hold the number one position in dollar sales in the
toaster pastry, cereal/granola bar, and frozen waffle categories.
The gross profit margin decreased to 54.6% from 55.0% in 1994, primarily due to
changes in product mix and higher costs in North American operations.
Management expects 1996 margins to be in line with 1995, with increased plant
efficiencies and productivity improvements helping to offset continued pressure
from higher raw material and packaging costs.
Selling and administrative expense for 1995 was up 5% over 1994, and
represented 36.6% of net sales, down .7 percentage points from the prior year.
The decrease in selling and administrative expense as a percentage of net sales
reflects the Company's continued emphasis on cost containment and carefully
managed marketing spending. In line with the Company's long-term strategy,
which was initiated in early 1994, there has been a shift over the last two
years from price promotion on established brands toward advertising and other
brand value-building activities. Management believes that this strategy,
combined with a strong new-product development program, will assist in adding
further value to the Company's brand portfolio, thereby delivering long-term
profitable growth.
<TABLE>
<CAPTION>
================================================================================================================
Operating Profit by Area United
(millions) States Europe Other Consolidated
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 operating profit as reported $443.1 $293.6 $100.8 $ 837.5
Non-recurring charges 325.0 38.4 58.4 421.8
- ----------------------------------------------------------------------------------------------------------------
Operating profit excluding non-recurring charges $768.1 $332.0 $159.2 $1,259.3
- ----------------------------------------------------------------------------------------------------------------
1994 operating profit as reported $708.5 $287.5 $166.6 $1,162.6
- ----------------------------------------------------------------------------------------------------------------
% growth - 1995 versus 1994, excluding non-recurring charges +8% +15% -4% +8%
================================================================================================================
</TABLE>
Operating profit, excluding non-recurring charges of $421.8 million, increased
8% to $1.26 billion. Operating profit, excluding the charges, was up 8% in the
U.S., up 15% in Europe, and down 4% in all other areas. Excluding both
non-recurring charges and foreign currency impact, operating profit was up 7%
in Europe and up 18% in other non-U.S. areas. While foreign currency movements
had a significant impact on geographic results, the net unfavorable impact on
consolidated operating profit was only 1%.
Gross interest expense, prior to amounts capitalized, increased to $69.8
million for 1995, up $17.5 million from 1994, due primarily to increased
interest rates on short-term borrowings. This increase in interest expense was
substantially offset by increases in interest income due to higher average cash
balances throughout the year. The Company expects interest expense during 1996
to remain at 1995 levels.
Other income for 1994 included a gain of $21.1 million ($13.3 million after tax
or $.06 per share) from the sale of the Mrs. Smith's Frozen Foods pie business.
Other
16
<PAGE> 3
expense for 1994 included a charge of $20.5 million ($13.1 million after tax or
$.06 per share), primarily from the initial funding of the Kellogg's Corporate
Citizenship Fund, a private trust established for charitable donations.
The Company's effective income tax rate for the year, excluding the effect of
non-recurring charges, was 37.5%, .1 percentage point lower than the
comparable rate for 1994. The Company expects its effective income tax rate
for 1996 to remain between 37% and 38%. The Company's effective income tax
rate for 1995, including the effect of non-recurring charges, was 38.4%.
Earnings per share for 1995 were $2.24, compared to $3.15 in 1994. Net
earnings were $490.3 million versus $705.4 million for the prior year.
Excluding all non-recurring events for both years, net earnings for 1995 were
$761.6 million, up 8%, and earnings per share were $3.48, up 10% or $.33 over
1994, derived from $.31 in business growth, $.05 in share repurchase, and $.01
in tax rate reduction, partially offset by a $.04 negative foreign currency
exchange effect. Foreign currency movements contributed favorably to net
earnings by 6% in Europe and unfavorably by 21% in other non-U.S. areas,
netting to an unfavorable consolidated impact of only 1%.
[GRAPH]
Drivers of EPS Growth - 1995 vs. 1994 (excluding non-recurring events) - The
Drivers of EPS Growth graph shows, in a stacked single cylinder form, the
relative contributions to the Company's 1995 earnings per share increase versus
1994, excluding non-recurring events in both periods. The drivers were
Business Growth, Share Repurchase, Tax Rate, and Foreign Exchange for $.31,
$.05, $.01, and ($.04), respectively.
[END GRAPH]
1994 COMPARED TO 1993
Consolidated 1994 net sales increased 4% over 1993, principally from higher
selling prices and, to a lesser extent, product mix improvements and lower
trade spending. Excluding the results of the Mrs. Smith's Frozen Foods pie
business, divested during the first quarter of 1994, and the Argentine snack
business, divested during the fourth quarter of 1993, consolidated 1994 net
sales increased 7%. On a geographic basis, excluding the results of divested
businesses, sales increased 5% in the U.S., 9% in Europe, and 9% in all other
areas.
The Company's total volume was down 2% in 1994 versus 1993. However, excluding
results of divested businesses, total volume increased 2% over 1993, buoyed by
strong growth in the U.S. convenience foods market.
Kellogg's global cereal volume grew 1% during 1994, with a volume decline in
the U.S. cereal market more than offset by volume growth in non-U.S. markets.
The volume decline in the U.S. cereal market reflected competitive pressure and
the Company's introduction of its new strategy on pricing and market spending.
The gross profit margin strengthened to 55.0%, up 2 percentage points over
1993. This increase in gross margin was the result of favorable pricing,
combined with cost containment programs and productivity improvements which
held cost of goods sold essentially flat on a per-kilo basis.
Selling and administrative expense for 1994 was up 9% over 1993, and was 37.3%
of net sales, up one percentage point from the prior year, representing
investment in value-added marketing and new-product research and development.
Operating profit was $1.16 billion, up 9% from 1993 operating profit,
excluding non-recurring charges. Excluding the results of divested businesses
and non-recurring charges, operating profit was up 11% in total, 10% in the
U.S., 15% in Europe, and 11% in all other areas. Foreign currency movements
contributed favorably by 3% in Europe and less than 1% in other non-U.S. areas.
Reported operating profit for 1993 was $1.00 billion and included non-recurring
charges of $64.3 million ($41.1 million after tax or $.18 per share)
principally from the write-down of certain assets in Europe and North America.
Other income for 1993 included a gain of $32.2 million ($24.1 million after tax
or $.10 per share) from the sale of Cereal Packaging Ltd., a wholly owned
subsidiary of Kellogg Company of Great Britain Ltd., and a gain of $33.7
million ($22.2 million after tax or $.10 per share) from the sale of the
Company's Argentine snack food business.
Gross interest expense, prior to amounts capitalized, increased to $52.3
million for 1994 compared to $40.4 million for 1993, due to higher debt levels,
incurred primarily to fund common stock repurchases, and increased interest
rates on short-term borrowings.
The Company's effective income tax rate for the year was 37.6%, 3.4 percentage
points higher than the comparable rate for 1993. A primary factor contributing
to this variance was the one-time favorable impact of statutory rate reductions
in several foreign jurisdictions during 1993.
Earnings per share for 1994 were $3.15, up 7%. Net earnings were $705.4
million, an increase of 4%. Excluding all non-recurring events and the
results of divested businesses, earnings per share for 1994 were $3.16, up 10%
over 1993, and net earnings were $708.8 million, up 7%.
17
<PAGE> 4
LIQUIDITY AND CAPITAL RESOURCES
The financial condition of the Company remained strong during 1995. Consistent
with historical results, operations provided a strong, positive cash flow
during 1995 which resulted in net cash provided from operations of $1.04
billion, principally due to higher net earnings, adjusted for the non-cash
components of non-recurring events, and improved working capital management.
The 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 maintains credit facilities with
banking institutions in the United States and other countries where it conducts
business. At year-end, the Company had $623.5 million of short-term lines of
credit, of which $607.9 million were available. The ratio of current assets to
current liabilities was 1.1:1.0 as of December 31, 1995, and 1.2:1.0 at
December 31, 1994.
Net cash used in investing activities for 1995 was $308.9 million, primarily
related to capital spending of $315.7 million. Capital expenditures decreased
by $38.6 million from $354.3 million during 1994, reflecting the Company's
application of value-based management principles and the ongoing strategy of
improving return on invested capital. Over the past several years, investment
has been focused on gaining entrance to relatively untapped markets, which are
expected to provide significant long-term growth potential in ready-to-eat
cereal and other convenience foods consumption. As a result, the Company
opened new plants in Latvia in 1993, India in 1994, China and Argentina in
1995, and commenced construction of a new plant in Thailand in early 1996.
Also, construction began in 1995 on the Company's new food research center, the
W. K. Kellogg Institute, located in Battle Creek, Michigan. This facility is
expected to be completed in 1997 with a total investment of approximately $65
million. Management anticipates that 1996 capital expenditures will be
$300-$350 million.
Net cash used in financing activities was $759.2 million related primarily to
common stock repurchases and dividends. During 1995, the Company spent $374.7
million to purchase 5,684,864 shares of its common stock, contributing $.05 to
earnings per share growth over that time period. Stock repurchases are made
under plans authorized by the Company's Board of Directors. On September 21,
1995, the Board authorized the additional purchase of up to $400 million in
Company stock through December 31, 1996. As of December 31, 1995, the total
remaining authorized purchase amount was $350.7 million. Market conditions
permitting, management intends to fully utilize this authorization by the end
of 1996.
[GRAPH]
Stock Repurchased Since 1984 (based on shares outstanding at 12/31/83) - The
Stock Repurchased Since 1984 graph shows in pie chart form the relative
proportion of the Company's Common Stock repurchased versus outstanding as a
percentage of shares outstanding at 12/31/83. Common Stock repurchased and
outstanding were 31% and 69% respectively.
[END GRAPH]
Dividends paid per share of common stock increased 7% to $1.50 in 1995,
marking the 39th consecutive year of increase. Management believes the trend
of increased dividends will continue in 1996. Total dividends paid during 1995
were $328.5 million.
Long-term debt outstanding at year-end 1995 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 year-end 1995 and 1994 consisted principally of U.S.
commercial paper. The Company continues to enjoy the highest available debt
ratings on both its long-term debt and commercial paper.
The Company's net debt position (long-term debt plus notes payable less cash)
at December 31, 1995, was $685.8 million, down $42.8 million from December 31,
1994, as the increase in operating cash flow during the year allowed the
Company to reduce short-term debt. The ratio of debt to total capitalization
was 36%, unchanged from December 31, 1994.
At December 31, 1995, 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.
NON-RECURRING CHARGES
Management's objective to maximize shareholder value includes a constant
reassessment of its business strategies. The Company's commitment to be
positioned for future success was the basis of several initiatives announced
during 1995 to improve productivity and streamline global operations.
During 1995, the Company recorded total non-recurring charges of $421.8 million
($271.3 million after tax or $1.24 per share), primarily related to
streamlining initiatives. Approximately 2,000 employee positions will be
eliminated by the end of 1996, nearly 13% of the global workforce at December
1994, through a combination of voluntary early retirement incentives, and
voluntary and involuntary severance programs. These initiatives required
pre-tax cash outlays of approximately $40 million in 1995 and will require
additional cash outlays of approximately $120 to $130 million in 1996. The
Company expects to realize approximately $120 million of annual pre-tax savings
by 1997, with about 60% of this amount being achieved in 1996. These savings
are not necessarily indicative of future incremental earnings due to
management's commitment to hold product pricing below the
18
<PAGE> 5
rate of inflation, while investing in competitive business strategies, new
markets, and growth opportunities.
During the first half of 1995, plans were announced to improve manufacturing
efficiency in the U.S., Australia, and Great Britain. As a result, the
Company reported total pre-tax charges during the second quarter of $52.8
million related primarily to severance and early retirement programs which
eliminated 475 employee positions.
During the fourth quarter, the Company reported pre-tax charges totaling $369.0
million, comprised of $295.2 million to further streamline operations and $73.8
million for asset impairment losses. The streamlining initiatives were
primarily related to hourly workforce and capacity realignments in the
Company's U.S., European, and Australian manufacturing operations.
Approximately 50% of the streamlining charges relate to employee retirement and
severance benefits, with the remainder consisting principally of asset
write-off and removal costs resulting from a plant closing in San Leandro,
California, and production realignments in other locations.
The asset impairment losses of $73.8 million consisted principally of the
write-down of certain operating assets in North America and the Asia-Pacific
region, and resulted from the evaluation of the Company's ability to recover
asset costs given changes in local market conditions, sourcing of products, and
other strategic factors.
Associated with the 1995 streamlining efforts were additional costs incurred to
redeploy manufacturing and employee resources. The charges reported included
total expenses of $18 million incurred for employee retraining and relocation,
consulting, and relocated production line start-up. The Company expects an
additional $30 million of similar costs in 1996 which will be recorded as
non-recurring charges as incurred. These additional costs are included in the
estimated cash outlay figures for 1996 stated above.
The Company continues to focus on optimizing its worldwide efficiency through
improvements in its manufacturing, marketing, logistics, and customer service
processes while lowering costs and more effectively utilizing human and
financial resources. In early 1996, the Company commenced a plan to
consolidate and reorganize certain aspects of its European operations to better
serve the Pan-European marketplace. Also, the Company intends to further
streamline operations in Australia. As a result, the Company expects to incur
pre-tax non-recurring charges during 1996 of approximately $45 to $70 million
related to these initiatives. The foregoing is a forward-looking statement.
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 these charges will be dependent
upon the timing of management approvals of elements of the reorganization plan
and specific communications to employees.
For all of the initiatives described above, the combined non-recurring charges
expected to be recognized during 1996 are $75 to $100 million. Refer to Note 4
to the consolidated financial statements for further explanation of
non-recurring charges.
1996 OUTLOOK
Management anticipates that 1996 will be another year of growth for the
Company, achieved through increases in global volume, the continuation of
product pricing below inflation, continual improvements in operating
efficiencies, strong cash flows, and continued share repurchase activity. The
Company's business environment remains highly competitive around the world.
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 its solid earnings history provide a base for obtaining additional
financial resources at competitive rates and terms.
NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) #121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". This new
standard requires that long-lived assets be reviewed for impairment whenever
the carrying amount of that asset may not be recoverable. The recoverability
is based on the estimated future cash flows resulting from the use of the
asset. Adoption of SFAS #121 is required in 1996. The Company does not
expect the adoption of SFAS #121 to have a significant impact on the Company's
financial condition or results of operations.
In October 1995, the FASB issued SFAS #123, "Accounting for Stock-based
Compensation". This new standard encourages, but does not require, a
fair-value based method of accounting for stock-based compensation plans.
Adoption of the disclosure requirements of SFAS #123 is required in 1996. The
Company has decided to adopt only the disclosure provisions of SFAS #123 and,
therefore, there will be no impact on the Company's financial condition or
results of operations.
19
<PAGE> 6
Kellogg Company and Subsidiaries
CONSOLIDATED EARNINGS AND RETAINED EARNINGS
Year ended December 31,
<TABLE>
<CAPTION>
===============================================================================================
(millions, except per share data) 1995 1994 1993
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $7,003.7 $6,562.0 $6,295.4
- -----------------------------------------------------------------------------------------------
Cost of goods sold 3,177.7 2,950.7 2,989.0
Selling and administrative expense 2,566.7 2,448.7 2,237.5
Non-recurring charges 421.8 - 64.3
- -----------------------------------------------------------------------------------------------
OPERATING PROFIT 837.5 1,162.6 1,004.6
- -----------------------------------------------------------------------------------------------
Interest expense 62.6 45.4 33.3
Other income (expense), net 21.1 12.8 62.8
- -----------------------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES 796.0 1,130.0 1,034.1
Income taxes 305.7 424.6 353.4
- -----------------------------------------------------------------------------------------------
NET EARNINGS - $2.24, $3.15, $2.94 PER SHARE 490.3 705.4 680.7
Retained earnings, beginning of year 3,801.2 3,409.4 3,033.9
Dividends paid - $1.50, $1.40, $1.32 per share (328.5) (313.6) (305.2)
- -----------------------------------------------------------------------------------------------
RETAINED EARNINGS, END OF YEAR $3,963.0 $3,801.2 $3,409.4
===============================================================================================
</TABLE>
See notes to consolidated financial statements.
20
<PAGE> 7
Kellogg Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
At December 31,
<TABLE>
<CAPTION>
=======================================================================================================
(millions, except share data) 1995 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 221.9 $ 266.3
Accounts receivable, less allowances of $6.4 and $6.2 590.1 564.5
Inventories 376.7 396.3
Other current assets 240.1 206.4
- -------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 1,428.8 1,433.5
- -------------------------------------------------------------------------------------------------------
PROPERTY, NET 2,784.8 2,892.8
OTHER ASSETS 201.0 141.0
- -------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 4,414.6 $ 4,467.3
=======================================================================================================
CURRENT LIABILITIES
Current maturities of long-term debt $ 1.9 $ .9
Notes payable 188.0 274.8
Accounts payable 370.8 334.5
Accrued liabilities 704.7 575.0
- -------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 1,265.4 1,185.2
- -------------------------------------------------------------------------------------------------------
LONG-TERM DEBT 717.8 719.2
OTHER LIABILITIES 840.5 755.4
SHAREHOLDERS' EQUITY
Common stock, $.25 par value, 330,000,000 shares authorized
Issued: 311,128,152 shares in 1995 and 310,356,488 in 1994 77.8 77.6
Capital in excess of par value 105.2 68.6
Retained earnings 3,963.0 3,801.2
Treasury stock, at cost: 94,423,270 shares in 1995 and 88,655,238 in 1994 (2,361.2) (1,980.6)
Currency translation adjustment (193.9) (159.3)
- -------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 1,590.9 1,807.5
- -------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,414.6 $ 4,467.3
=======================================================================================================
</TABLE>
See notes to consolidated financial statements.
21
<PAGE> 8
Kellogg Company and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended December 31,
<TABLE>
<CAPTION>
================================================================================================
(millions) 1995 1994 1993
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 490.3 $ 705.4 $ 680.7
Items in net earnings not requiring (providing) cash:
Depreciation 258.8 256.1 265.2
Pre-tax gain on sale of subsidiaries -- (26.7) (65.9)
Deferred income taxes (78.7) 24.5 (22.3)
Non-recurring charges, net of cash paid 385.3 -- 64.3
Other 9.1 22.2 15.6
Pension contributions (74.5) (71.5) (68.0)
Changes in operating assets and liabilities 50.7 56.8 (69.4)
- ------------------------------------------------------------------------------------------------
NET CASH PROVIDED FROM OPERATING ACTIVITIES 1,041.0 966.8 800.2
- ------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Additions to properties (315.7) (354.3) (449.7)
Proceeds from sale of subsidiaries -- 95.5 95.6
Property disposals 6.3 15.6 19.0
Other .5 7.8 (25.1)
- ------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (308.9) (235.4) (360.2)
- ------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net borrowings of notes payable (86.8) (111.9) 176.7
Issuance of long-term debt -- 200.0 208.3
Reduction in long-term debt (.4) (2.9) (1.7)
Issuance of common stock 36.8 2.3 2.9
Common stock repurchases (374.7) (327.3) (548.1)
Cash dividends (328.5) (313.6) (305.2)
Other (5.6) (6.1) 2.9
- ------------------------------------------------------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (759.2) (559.5) (464.2)
- ------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (17.3) (3.7) (4.0)
- ------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (44.4) 168.2 (28.2)
Cash and cash equivalents at beginning of year 266.3 98.1 126.3
- ------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 221.9 $ 266.3 $ 98.1
================================================================================================
</TABLE>
See notes to consolidated financial statements.
22
<PAGE> 9
KELLOGG COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 ACCOUNTING POLICIES
Consolidation
The consolidated financial statements include the accounts of Kellogg Company
and its majority-owned subsidiaries. Intercompany balances and transactions
are eliminated.
Certain amounts in the prior year financial statements have been reclassified
to conform to the current year presentation.
Cash and cash equivalents
Highly liquid temporary investments with original maturities of less than three
months are considered to be cash equivalents. The carrying amount approximates
fair value.
Inventories
Inventories are valued at the lower of cost (principally average) or market.
Property
Fixed assets are recorded at cost and depreciated over estimated useful lives
using straight-line methods for financial reporting and accelerated methods for
tax reporting. Cost includes an amount of capitalized interest associated with
significant capital additions.
Advertising
The costs of advertising are generally expensed as incurred.
Net earnings per share
Net earnings per share is determined by dividing net earnings by the weighted
average number of common shares outstanding during the period.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 2 LEASES
Operating leases generally are for equipment and warehouse space. Rent expense
on all operating leases, which generally are renewable at the Company's option,
was $32.0 million in 1995, $37.5 million in 1994, and $43.7 million in 1993.
At December 31, 1995, future minimum annual rental commitments under
non-cancelable operating leases totalled $47.4 million consisting of $15.7
million for 1996, $11.0 million for 1997, $6.2 million for 1998, $4.1 million
for 1999, $3.6 million for 2000, and $6.8 million in later years.
NOTE 3 OTHER INCOME AND EXPENSE
Other income and expense includes non-operating items such as interest income,
foreign exchange gains and losses, and charitable donations.
Other income for 1994 includes a gain of $21.1 million ($13.3 million after tax
or $.06 per share) from the sale of the Mrs. Smith's Frozen Foods pie business
to The J. M. Smucker Co. Other expense for 1994 includes a charge of $20.5
million ($13.1 million after tax or $.06 per share) primarily from the initial
funding of the Kellogg's Corporate Citizenship Fund, a private trust
established for charitable donations.
Other income for 1993 includes a gain of $32.2 million ($24.1 million after tax
or $.10 per share) from the sale of Cereal Packaging, Ltd., a wholly owned
subsidiary of Kellogg Company of Great Britain, Ltd., and a gain of $33.7
million ($22.2 million after tax or $.10 per share) from the sale of the
Argentine snack food business.
NOTE 4 NON-RECURRING CHARGES
Operating profit for 1995 includes total non-recurring charges of $421.8
million ($271.3 million after tax or $1.24 per share), comprised of $348.0
million related to streamlining initiatives and $73.8 million for asset
impairment losses.
The streamlining initiatives primarily concerned operational workforce and
capacity realignments in the U.S., Australia, and Europe, eliminating
approximately 2,000 employee positions by the end of 1996 through a
combination of voluntary early retirement incentives, and voluntary and
involuntary severance programs. These initiatives required pre-tax cash
outlays of approximately $40 million in 1995 and will require additional cash
outlays of approximately $120 to $130 million in 1996. The Company expects to
realize approximately $120 million of annual pre-tax savings by 1997, with
about 60% of this amount being achieved in 1996.
Associated with the 1995 streamlining efforts were additional costs incurred to
redeploy manufacturing and employee resources. The charges reported included
total expenses of $18 million incurred for employee retraining and relocation,
consulting, and relocated production line start-up. The Company expects an
additional $30 million of similar costs in 1996 which will be recorded as
non-recurring charges as incurred. These additional costs are included in the
estimated cash outlay figures for 1996 stated above.
The components of the streamlining charges, as well as reserve balances
remaining at December 31, 1995, were:
<TABLE>
<CAPTION>
=========================================================================================
Amounts charged
--------------------------- Amounts Remaining
(millions) Cash Non-cash Total utilized reserve
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Employee retirement
and severance benefits (a) $183.6 $183.6 $126.1 $57.5
Asset write-offs 106.5 106.5 106.5 ---
Asset removal 39.5 39.5 3.0 36.5
Other 18.4 18.4 18.4 ---
- -----------------------------------------------------------------------------------------
$241.5 $106.5 $348.0 $254.0 $94.0
=========================================================================================
</TABLE>
(a) Includes approximately $100 million of pension and post-retirement health
care curtailment losses and special termination benefits recognized in the
current year. Refer to Notes 8 and 9.
The asset impairment losses of $73.8 million consist principally of the
write-down of certain operating assets in North America and the Asia-Pacific
region, and result from the evaluation of the Company's ability to recover
asset costs given changes in local market conditions, sourcing of products, and
other strategic factors.
Operating profit for 1993 includes non-recurring charges of $64.3 million
($41.1 million after tax or $.18 per share) principally from the write-down of
certain assets in Europe and North America.
NOTE 5 SHAREHOLDERS' EQUITY
Under plans authorized by the Board of Directors, the Company purchased
5,684,864 shares of its common stock in 1995, 6,194,500 shares in 1994, and
9,487,508 shares in 1993. All purchases are included in treasury stock. Net
exchange gains or losses resulting from the translation of assets and
liabilities of foreign subsidiaries, except those in highly inflationary
economies, are accumulated in the currency translation component of
shareholders' equity.
23
<PAGE> 10
Components of shareholders' equity were:
<TABLE>
<CAPTION>
===================================================================================================================================
Minimum
Common stock Capital in Treasury stock pension Currency
----------------- excess of Retained ----------------- liability translation
(millions) shares amount par value earnings shares amount adjustment adjustment
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1993 310.2 $77.5 $69.2 $3,033.9 72.9 ($1,105.0) $ -- ($130.4)
Stock options exercised .1 .1 2.8
Net earnings 680.7
Dividends (305.2)
Exchange adjustments (36.8)
Minimum pension liability adjustment (25.3)
Common stock repurchases 9.5 (548.1)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 310.3 77.6 72.0 3,409.4 82.4 (1,653.1) (25.3) (167.2)
Stock options exercised .1 2.3
Net earnings 705.4
Dividends (313.6)
Exchange adjustments 7.9
Minimum pension liability adjustment 25.3
Common stock repurchases 6.2 (327.3)
Other (5.7) .1 (.2)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 310.4 77.6 68.6 3,801.2 88.7 (1,980.6) -- (159.3)
Stock options exercised .7 .2 36.6
Net earnings 490.3
Dividends (328.5)
Exchange adjustments (34.6)
Common stock repurchases 5.7 (374.7)
Other -- (5.9)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1995 311.1 $77.8 $105.2 $3,963.0 94.4 ($2,361.2) $ -- ($193.9)
===================================================================================================================================
</TABLE>
NOTE 6 DEBT
Notes payable consist principally of commercial paper borrowings in the United
States at the highest credit rating available and, to a lesser extent, bank
loans of foreign subsidiaries at competitive market rates. U.S. borrowings at
December 31, 1995, were $173.4 million with an effective interest rate of 5.7%
and at December 31, 1994, were $243.3 million with an effective interest rate
of 5.9%. At December 31, 1995, the Company had $623.5 million of short-term
lines of credit, of which $607.9 million were unused and available for
borrowing on an unsecured basis.
Long-term debt at year-end consisted of:
<TABLE>
<CAPTION>
===========================================================
(millions) 1995 1994
- -----------------------------------------------------------
<S> <C> <C> <C>
(a) Three-Year Notes due 1997 $200.0 $200.0
(b) Five-Year Notes due 1998 200.0 200.0
(c) Five-Year Notes due 1997 299.6 299.4
Other 20.1 20.7
- -----------------------------------------------------------
719.7 720.1
Less current maturities (1.9) (.9)
- -----------------------------------------------------------
Balance, December 31 $717.8 $719.2
===========================================================
</TABLE>
(a) In September 1994, the Company issued $200 million of three-year debt
consisting of both 8.125% Euro Canadian Dollar Secured Notes and 5.25%
Swiss Franc Secured Notes. These Notes were swapped into U.S. dollar
obligations, with a variable rate indexed to the Federal Reserve AA
composite rate on 30-day commercial paper, for the duration of the
three-year term.
(b) In October 1993, the Company issued $200 million of five-year 6.25% Euro
Canadian Dollar Notes which were swapped into 4.629% fixed rate U.S.
dollar obligations for the duration of the five-year term. In December
1993, the Notes were swapped into variable rate debt for a two-year
period, indexed to the London Interbank Offered Rate. This swap expired
in December 1995.
(c) In July 1992, the Company issued $300 million of five-year 5.9% U.S.
dollar obligations. The Notes were swapped into variable rate debt for a
two-year period expiring July 1994, indexed to the London Interbank
Offered Rate.
In August 1993, the Company filed a $200 million "shelf registration" with the
Securities and Exchange Commission which remains unused at December 31, 1995.
Scheduled principal repayments on long-term debt are (in millions): 1996-$2,
1997-$502, 1998-$206, 1999-$1, 2000-$1.
Interest paid, net of amounts capitalized, approximated interest expense in
each of the three years ended December 31, 1995. Interest expense capitalized
as part of the construction cost of fixed assets was (in millions):
1995-$7.2; 1994-$6.9; 1993-$7.1.
NOTE 7 STOCK OPTIONS
The Key Employee Long-Term Incentive Plan provides for benefits to be awarded
to executive-level employees in the form of stock options, performance shares,
performance units, incentive stock options, restricted stock grants, and other
stock-based awards. The Kellogg Employee Stock Ownership Plan is designed to
offer stock and other incentive awards based on Company performance to
employees who are not eligible to participate in the Key Employee Long-Term
Incentive Plan. Under these plans, options have been granted with exercise
prices equal to the fair market value of the Company's common stock at the time
of grant, exercisable for a 10-year period following the date of grant, subject
to vesting rules. Options awarded to executive-level employees are vested at
the date of grant, while options awarded to other employees are subject to
graded vesting over a five-year period.
The Key Employee Long-Term Incentive Plan also contains a reload option
feature. When Company stock is surrendered to pay the exercise price of a
stock option, the holder of the option is granted a new option for the number
of shares surrendered. For all options reloaded, the expiration date is not
changed, but the option price becomes the fair market value of the Company's
stock on the date the new reload option is granted.
Under the Key Employee Long-Term Incentive Plan, options for 9,949,433 and
8,905,323 shares were available for grant at January 1, 1995, and December 31,
1995, respectively. Under the Kellogg Employee Stock Ownership Plan, options
for 5,228,710 and 4,616,160 shares were available for grant at January 1, 1995,
and December 31, 1995, respectively.
24
<PAGE> 11
Transactions under these plans were:
<TABLE>
<CAPTION>
=======================================================================================
1995 1994 1993
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Under option, January 1 3,805,335 2,434,587 1,909,382
Granted 2,588,928 1,607,984 848,885
Exercised (1,915,322) (85,647) (293,494)
Cancelled (56,183) (151,589) (30,186)
- --------------------------------------------------------------------------------------
Under option, December 31 4,422,758 3,805,335 2,434,587
- --------------------------------------------------------------------------------------
Exercisable, December 31 3,052,873 3,034,195 2,434,587
- --------------------------------------------------------------------------------------
Shares available, December 31, for
options that may be granted 13,521,483 15,178,143 10,620,578
- --------------------------------------------------------------------------------------
Average prices per share
Exercised $54.61 $38.20 $45.46
Under option, December 31 $59.15 $56.03 $56.95
======================================================================================
</TABLE>
NOTE 8 PENSION BENEFITS
The Company has a number of U.S. and worldwide pension plans to provide
retirement benefits for its employees. Benefits for salaried employees are
generally based on salary and years of service, while union employee benefits
are generally a negotiated amount for each year of service. Plan funding
strategies are influenced by tax regulations. Plan assets consist primarily of
equity securities with smaller holdings of bonds, real estate, and other
investments. Investment in Company common stock represented 8.9% and 7.7% of
consolidated plan assets at December 31, 1995 and 1994, respectively.
The components of pension expense were:
<TABLE>
<CAPTION>
========================================================================================
(millions) 1995 1994 1993
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $27.4 $29.0 $24.9
Interest cost 66.0 60.3 57.8
Actual (return) loss on plan assets (163.3) (3.5) (76.3)
Net amortization and deferral 100.3 (51.0) 26.7
Curtailment loss and special termination benefits expense 77.7 - -
- ----------------------------------------------------------------------------------------
Pension expense - Company plans 108.1 34.8 33.1
Pension expense - multiemployer plans 1.8 2.0 3.1
- ----------------------------------------------------------------------------------------
Total pension expense $109.9 $36.8 $36.2
========================================================================================
</TABLE>
The worldwide weighted average actuarial assumptions were:
<TABLE>
<CAPTION>
=========================================================================================
1995 1994 1993
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.5% 8.3% 7.9%
Long-term rate of compensation increase 5.1% 5.3% 5.4%
Long-term rate of return on plan assets 9.6% 9.5% 9.5%
=========================================================================================
</TABLE>
Reconciliation of funded status of the plans at year-end was:
<TABLE>
<CAPTION>
========================================================================================
UNDERFUNDED Overfunded
(millions) 1995 1994 1995 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Accumulated benefit obligation:
Nonvested $ 43.3 $ 5.6 $ 37.3 $ 51.7
Vested 228.9 35.0 562.9 592.4
- ----------------------------------------------------------------------------------------
Total 272.2 40.6 600.2 644.1
Projected salary increases 60.9 14.6 45.0 89.7
- ----------------------------------------------------------------------------------------
Projected benefit obligation 333.1 55.2 645.2 733.8
Plan assets at fair value 227.8 9.5 680.3 711.9
- ----------------------------------------------------------------------------------------
Assets (less) greater than
projected benefit obligation (105.3) (45.7) 35.1 (21.9)
Unrecognized net (gain) loss 46.0 7.7 22.8 83.3
Unrecognized transition amount (5.1) (2.5) 2.2 .4
Unrecognized prior service cost 11.8 4.9 38.5 56.3
Minimum liability adjustment (7.3) (1.9) - -
- ----------------------------------------------------------------------------------------
Prepaid (accrued) pension ($59.9) ($37.5) $98.6 $118.1
========================================================================================
</TABLE>
Curtailment losses and special termination benefits expense recognized in 1995
relate to operational workforce reduction initiatives undertaken during the
year and are recorded as a component of non-recurring charges. Refer to Note 4
for further explanation.
The amount of intangible assets related to underfunded pension plans was $7.3
million and $1.9 million at year-end 1995 and 1994, respectively. All gains
and losses, other than curtailment losses, are recognized over the average
remaining service period of active employees.
The Company and certain subsidiaries sponsor 401(k) or similar savings plans
for active employees. Expense related to these plans was (in millions):
1995-$18; 1994-$16; 1993-$16.
NOTE 9 NONPENSION POSTRETIREMENT BENEFITS
The Company and its North American subsidiaries provide health care and certain
other benefits to substantially all retired employees, their covered
dependents, and beneficiaries. Generally, employees are eligible for these
benefits when one of the following service/age requirements is met: 30 years
and any age; 20 years and age 55; 5 years and age 62.
Components of postretirement benefit expense were:
<TABLE>
<CAPTION>
==========================================================================================
(millions) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $11.8 $13.3 $12.1
Interest cost 41.5 39.2 38.6
Net amortization and deferral (.6) 3.1 1.0
Curtailment loss 26.3 - -
- ------------------------------------------------------------------------------------------
Postretirement benefit expense $79.0 $55.6 $51.7
==========================================================================================
Discount rate used for accumulated benefit obligation 7.25% 8.50% 7.75%
==========================================================================================
</TABLE>
The assumed health care cost trend rate was 8.0% for 1995, decreasing gradually
to 4.75% by the year 2003 and remaining at that level thereafter. These trend
rates reflect the Company's prior experience and management's expectation that
future rates will decline. Increasing the assumed health care cost trend rates
by 1 percentage point in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1995, by $68.9 million and
postretirement benefit expense for 1995 by $8.5 million. All gains and losses,
other than curtailment losses, are recognized over the average remaining
service period of active plan participants. Curtailment losses recognized in
1995 relate to operational workforce reduction initiatives undertaken during
the year and are recorded as a component of non-recurring charges. Refer to
Note 4 for further explanation. The Company's postretirement health care plans
currently are not funded.
The accrued postretirement benefit cost included in the balance sheet at
year-end was:
<TABLE>
<CAPTION>
================================================================================
(millions) 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Accumulated benefit obligation:
Retirees $270.2 $250.7
Active plan participants 300.9 254.5
- --------------------------------------------------------------------------------
571.1 505.2
Unrecognized experience gain (loss) (14.2) 1.0
Unrecognized prior service adjustments 9.2 (.5)
- --------------------------------------------------------------------------------
Accrued postretirement benefit cost $566.1 $505.7
================================================================================
</TABLE>
25
<PAGE> 12
NOTE 10 INCOME TAXES
Earnings before income taxes and the provision for U.S. federal, state, and
foreign taxes on these earnings were:
<TABLE>
<CAPTION>
================================================================================
(millions) 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Earnings before income taxes:
United States $463.1 $ 741.1 $ 703.3
Foreign 332.9 388.9 330.8
- --------------------------------------------------------------------------------
$796.0 $1,130.0 $1,034.1
================================================================================
Income taxes:
Currently payable:
Federal $205.2 $ 207.4 $ 233.0
State 34.7 42.4 38.0
Foreign 144.5 150.3 104.7
- --------------------------------------------------------------------------------
384.4 400.1 375.7
- --------------------------------------------------------------------------------
Deferred:
Federal (81.0) 18.1 (19.4)
State (10.7) .2 (2.2)
Foreign 13.0 6.2 (.7)
- --------------------------------------------------------------------------------
(78.7) 24.5 (22.3)
- --------------------------------------------------------------------------------
Total income taxes $305.7 $ 424.6 $ 353.4
================================================================================
</TABLE>
The difference between the U.S. federal statutory tax rate and the Company's
effective rate was:
<TABLE>
<CAPTION>
================================================================================
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. statutory rate 35.0% 35.0% 35.0%
Foreign rates varying from 35% .2 .2 (1.5)
State income taxes, net of federal benefit 2.0 2.5 2.2
Net change in valuation allowance 1.9 .1 --
Other (.7) (.2) (1.5)
- --------------------------------------------------------------------------------
Effective income tax rate 38.4% 37.6% 34.2%
================================================================================
</TABLE>
The deferred tax assets and liabilities included in the balance sheet at
year-end were:
<TABLE>
<CAPTION>
==================================================================================
Deferred Deferred
tax assets tax liabilities
(millions) 1995 1994 1995 1994
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Current:
Promotion and advertising $ 43.3 $ 46.0 $ 6.3 $ 5.8
Wages and payroll taxes 24.9 14.4
Health and postretirement benefits 15.5 15.4 10.4 9.5
State taxes 9.8 8.4
Other 17.3 23.0 18.2 13.9
- ----------------------------------------------------------------------------------
110.8 107.2 34.9 29.2
- ----------------------------------------------------------------------------------
Less valuation allowance (4.0)
- ----------------------------------------------------------------------------------
110.8 103.2 34.9 29.2
- ----------------------------------------------------------------------------------
Noncurrent:
Depreciation and asset disposals 24.7 7.0 280.2 313.9
Postretirement benefits 196.3 174.9 6.7 25.2
Capitalized interest 3.1 3.5 32.8 32.7
State taxes 11.1 1.7
Other 13.2 13.8 9.9 8.2
- ----------------------------------------------------------------------------------
248.4 200.9 329.6 380.0
- ----------------------------------------------------------------------------------
Less valuation allowance (32.7) (13.9)
- ----------------------------------------------------------------------------------
215.7 187.0 329.6 380.0
- ----------------------------------------------------------------------------------
Total deferred taxes $326.5 $290.2 $364.5 $409.2
==================================================================================
</TABLE>
The 1995 increase in valuation allowance on deferred tax assets and
corresponding impact on the effective income tax rate, as presented above,
primarily relate to asset impairment losses recorded as non-recurring charges
(refer to Note 4) for which no tax benefit was currently provided, based on
management's assessment of the likelihood of recovering such benefits in future
years.
At December 31, 1995, foreign subsidiary earnings of $1.21 billion were
considered permanently invested in those businesses. Accordingly, U.S. income
taxes have not been provided on these earnings. Foreign withholding taxes of
approximately $74 million would be payable upon remittance of these earnings.
Subject to certain limitations, the withholding taxes would then be available
for use as credits against the U.S. tax liability.
Cash paid for income taxes was (in millions): 1995-$404; 1994-$396; 1993-$425.
NOTE 11 FINANCIAL INSTRUMENTS AND CREDIT RISK CONCENTRATION
The fair values of the Company's financial instruments are based on carrying
value in the case of short-term items, quoted market prices for derivatives and
investments, and, in the case of long-term debt, incremental borrowing rates
currently available on loans with similar terms and maturities. The carrying
amounts of the Company's cash, cash equivalents, receivables, notes payable,
and long-term debt approximate fair value.
The Company uses derivative financial instruments only for the purpose of
hedging currency, price, and interest rate exposures which exist as a part of
its ongoing business operations. The Company, as a matter of policy, does not
engage in speculative transactions.
The Company enters into forward contracts and options to hedge against the
adverse impact of fluctuations in foreign currency-denominated receivables,
payables, intercompany loans, and other commitments. Gains and losses on
forward contracts and options are not significant and are recognized in the
earnings statement in the same period as the hedged transaction. Gains and
losses related to currency hedges of net investments in foreign subsidiaries
are recorded in the cumulative translation adjustment component of
shareholders' equity.
Forward contracts and options generally have maturities of twelve months or
less and are entered into with major international financial institutions. The
notional amounts of open forward contracts and options were $131.1 million and
$91.2 million at December 31, 1995 and 1994, respectively.
The Company enters into currency and interest rate swaps in connection with
certain debt issues (refer to Note 6 for a description of outstanding swaps).
Currency swaps are used to convert foreign currency-denominated debt to U.S.
dollars, thereby minimizing the risk of currency fluctuations in these debt
issues. The Company enters into interest rate swaps to reduce borrowing costs
and to achieve a desired proportion of variable versus fixed rate debt, based
on current and projected market conditions.
26
<PAGE> 13
Gains and losses from currency and interest rate swaps are not significant and
are recognized over the life of the debt issue as a component of interest
expense. The notional amounts of currency and interest rate swaps were $400
million and $600 million at December 31, 1995 and 1994, respectively.
The Company also uses commodity futures and options to hedge raw material
costs. Gains and losses realized upon sale or exchange of these contracts are
not significant and are recognized in cost of goods sold.
The Company is exposed to credit loss in the event of nonperformance by
counterparties on foreign exchange forward contracts and options, and currency
and interest rate swaps. This credit loss is limited to the cost of replacing
these contracts at current market rates. Management believes that the
probability of such loss is remote.
Financial instruments which potentially subject the Company to concentrations
of credit risk are primarily cash, cash equivalents, and accounts receivable.
The Company places its investments in highly rated financial institutions and
investment grade short-term debt instruments, and limits the amount of credit
exposure to any one entity. Concentrations of credit risk with respect to
accounts receivable are limited due to the large number of customers, generally
short payment terms, and their dispersion across geographic areas.
NOTE 12 QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
====================================================================================
(millions, except
per share data) Net sales Gross profit
1995 1994 1995 1994
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First $1,716.0 $1,611.2 $ 946.7 $ 879.2
Second 1,780.1 1,616.9 960.4 888.2
Third 1,844.7 1,741.9 1,009.1 985.7
Fourth 1,662.9 1,592.0 909.8 858.2
- ------------------------------------------------------------------------------------
$7,003.7 $6,562.0 $3,826.0 $3,611.3
====================================================================================
<CAPTION>
Net earnings Earnings per share
1995 1994 1995 1994
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First $196.0 $183.9 $ .89 $.81
Second (a) 135.9 151.5 .62 .68
Third 230.0 216.7 1.05 .96
Fourth (a) (71.6) 153.3 (.33) .70
- ------------------------------------------------------------------------------------
$490.3 $705.4
====================================================================================
</TABLE>
(a) Second quarter of 1995 includes non-recurring charges of $33.0 million
after tax or $.15 per share. Fourth quarter of 1995 includes non-recurring
charges of $238.3 million after tax or $1.10 per share. Refer to Note 4 for
further explanation.
The principal market for trading Kellogg shares is the New York Stock Exchange
(NYSE). The shares are also traded on the Boston, Chicago, Cincinnati, Pacific,
and Philadelphia Stock Exchanges. At year-end 1995, the closing price (on the
NYSE) was $77.25 and there were 28,073 shareholders of record. Dividends paid
per share of common stock increased 7% to $1.50 in 1995, marking the 39th
consecutive year of increase. Management believes the trend of increased
dividends will continue in 1996.
Dividends paid and the quarterly price ranges on the NYSE during the last two
years were:
<TABLE>
<CAPTION>
==========================================================
1995 - QUARTER Dividend High Low
<S> <C> <C> <C>
Fourth $ .39 $79.50 $70.50
Third .39 73.63 66.75
Second .36 73.88 58.00
First .36 60.38 52.50
- ----------------------------------------------------------
$1.50
==========================================================
1994 - Quarter
- ----------------------------------------------------------
<S> <C> <C> <C>
Fourth $ .36 $60.50 $56.38
Third .36 57.38 51.25
Second .34 56.38 47.75
First .34 58.00 48.25
- ----------------------------------------------------------
$1.40
==========================================================
</TABLE>
NOTE 13 OPERATING SEGMENTS
The 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 following
table describes operations by geographic area. Geographic operating profit
includes allocated corporate overhead expenses. Corporate assets are comprised
principally of cash and cash equivalents held for general corporate purposes.
<TABLE>
<CAPTION>
(millions)
=========================================================================================
% % %
NET SALES 1995 CHANGE 1994 change 1993 change
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
United States $4,080.3 + 6 $3,840.8 + 2 $3,783.9 + 6
% of total 58% 59% 60%
Europe 1,829.1 + 9 1,683.7 + 9 1,545.8 - 8
% of total 26% 26% 25%
Other areas 1,094.3 + 5 1,037.5 + 7 965.7 + 2
% of total 16% 15% 15%
- -----------------------------------------------------------------------------------------
Consolidated $7,003.7 + 7 $6,562.0 + 4 $6,295.4 + 2
=========================================================================================
<CAPTION>
% % %
OPERATING PROFIT (a) 1995 CHANGE 1994 change 1993 change
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
United States $443.1 -37 $ 708.5 + 14 $ 621.6 + 3
% of total 53% 61% 62%
Europe 293.6 + 2 287.5 + 24 231.0 -19
% of total 35% 25% 23%
Other areas 100.8 -39 166.6 + 10 152.0 -13
% of total 12% 14% 15%
- -------------------------------------------------------------------------------------------
Consolidated $837.5 -28 $1,162.6 + 16 $1,004.6 - 5
===========================================================================================
<CAPTION>
% % %
IDENTIFIABLE ASSETS 1995 CHANGE 1994 change 1993 change
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
United States $2,286.0 + 2 $2,242.0 - 4 $2,344.8 +14
% of total 52% 50% 55%
Europe 1,269.4 - 1 1,282.5 + 21 1,060.0 - 6
% of total 29% 29% 25%
Other areas 838.5 - 9 923.8 + 14 809.4 + 5
% of total 19% 21% 19%
Corporate assets 20.7 + 9 19.0 - 17 22.9 -49
% of total -- -- 1%
- -------------------------------------------------------------------------------------------
Consolidated $4,414.6 - 1 $4,467.3 + 5 $4,237.1 + 6
===========================================================================================
</TABLE>
(a) Operating profit for 1995 includes non-recurring charges of $421.8 million
consisting of $325.0, $38.4, and $58.4 million for United States, Europe,
and other areas, respectively. Operating profit for 1993 includes
non-recurring changes of $64.3 million consisting of $36.4, $19.1, and
$8.8 million for the United States, Europe, and other areas, respectively.
Refer to Note 4.
27
<PAGE> 14
NOTE 14 SUPPLEMENTAL FINANCIAL STATEMENT DATA (millions)
<TABLE>
<CAPTION>
============================================================================================
STATEMENT OF EARNINGS 1995 1994 1993
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Research and development expense $ 72.2 $ 71.7 $ 59.2
Advertising expense $891.5 $856.9 $772.4
============================================================================================
<CAPTION>
============================================================================================
STATEMENT OF CASH FLOWS 1995 1994 1993
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Change in operating assets and liabilities:
Accounts receivable ($25.6) ($27.7) ($17.7)
Inventories 19.6 6.8 13.3
Other current assets (33.7) (5.4) (32.3)
Accounts payable 36.3 25.7 (5.0)
Accrued liabilities 54.1 57.4 (27.7)
- --------------------------------------------------------------------------------------------
Total change in operating assets and liabilities $50.7 $56.8 ($69.4)
============================================================================================
<CAPTION>
===============================================================================
BALANCE SHEET 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
Raw materials and supplies $ 129.7 $ 141.7
Finished goods and materials in process 247.0 254.6
- -------------------------------------------------------------------------------
Total inventories 376.7 396.3
- -------------------------------------------------------------------------------
Deferred income taxes 91.2 79.4
Other current assets 148.9 127.0
- -------------------------------------------------------------------------------
Total other current assets 240.1 206.4
- -------------------------------------------------------------------------------
Land 50.0 47.3
Buildings 1,202.8 1,122.6
Machinery and equipment 3,283.0 3,141.0
Construction in progress 202.0 289.6
Accumulated depreciation (1,953.0) (1,707.7)
- -------------------------------------------------------------------------------
Property, net 2,784.8 2,892.8
- -------------------------------------------------------------------------------
Accrued income taxes 64.2 72.0
Accrued salaries and wages 121.8 80.5
Accrued advertising and promotion 266.3 257.5
Other accrued liabilities 252.4 165.0
- -------------------------------------------------------------------------------
Total accrued liabilities 704.7 575.0
- -------------------------------------------------------------------------------
Nonpension postretirement benefits 546.1 486.8
Deferred income taxes 201.7 198.1
Other liabilities 92.7 70.5
- -------------------------------------------------------------------------------
Total other liabilities $ 840.5 $ 755.4
- -------------------------------------------------------------------------------
===============================================================================
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
To the Shareholders and Board of Directors of Kellogg Company
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of earnings and retained earnings and of cash flows
present fairly, in all material respects, the financial position of Kellogg
Company and its subsidiaries at December 31, 1995 and 1994, and the results of
their operations and cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company'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
generally accepted auditing standards 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 the
opinion expressed above.
Price Waterhouse LLP
Battle Creek, Michigan
February 2, 1996
28
<PAGE> 1
EXHIBIT 23.01
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 (Nos. 33-20731,
33-38846 and 33-49875) and the Registration Statements on Form S-8 (Nos.
2-77316, 33-27293, 33-27294, 33-40651 and 33-53403) of Kellogg Company of our
report dated February 2, 1996 appearing on page 28 of the Annual Report to
Stockholders which is incorporated in this Annual Report on Form 10-K. We also
consent to the incorporation by reference of our report on the Financial
Statement Schedule, which appears on page 11 of this Form 10-K.
PRICE WATERHOUSE LLP
Battle Creek, Michigan
March 25, 1996
<PAGE> 1
EXHIBIT 23.02
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-27294) of Kellogg Company of our report dated
March 8, 1996 which appears on page 1 of Exhibit 99.01 of this Form 10-K and to
the incorporation by reference in the Registration Statement on Form S-8 (No.
33-27293) of Kellogg Company of our report dated March 8, 1996 which appears on
page 1 of Exhibit 99.02 of this Form 10-K.
PRICE WATERHOUSE LLP
Battle Creek, Michigan
March 25, 1996
<PAGE> 1
EXHIBIT 24.01
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg
Company, a Delaware corporation, hereby appoint Richard M. Clark, Senior Vice
President, General Counsel and Secretary of Kellogg Company, as my lawful
attorney-in-fact and agent, to act on my behalf, with full power of
substitution, in preparing, executing and filing the Company's Annual Report on
Form 10-K for fiscal year ended December 31, 1995, and any exhibits, amendments
and other documents related thereto, with the Securities and Exchange
Commission. Said filing shall be for the purpose of fulfilling applicable legal
requirements.
Whereupon, I grant unto said Richard M. Clark full power and authority to
perform all necessary and appropriate acts in connection therewith, and hereby
ratify and confirm all that said attorney-in-fact and agent, or his substitute,
may lawfully do, or cause to be done, by virtue hereof.
/s/ C.X. Gonzalez
-----------------------
Director
Dated: January 19, 1996
-----------
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg
Company, a Delaware corporation, hereby appoint Richard M. Clark, Senior Vice
President, General Counsel and Secretary of Kellogg Company, as my lawful
attorney-in-fact and agent, to act on my behalf, with full power of
substitution, in preparing, executing and filing the Company's Annual Report on
Form 10-K for fiscal year ended December 31, 1995, and any exhibits, amendments
and other documents related thereto, with the Securities and Exchange
Commission. Said filing shall be for the purpose of fulfilling applicable legal
requirements.
Whereupon, I grant unto said Richard M. Clark full power and authority to
perform all necessary and appropriate acts in connection therewith, and hereby
ratify and confirm all that said attorney-in-fact and agent, or his substitute,
may lawfully do, or cause to be done, by virtue hereof.
/s/ Gordon Gund
-----------------------
Director
Dated: January 25, 1996
-----------
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg
Company, a Delaware corporation, hereby appoint Richard M. Clark, Senior Vice
President, General Counsel and Secretary of Kellogg Company, as my lawful
attorney-in-fact and agent, to act on my behalf, with full power of
substitution, in preparing, executing and filing the Company's Annual Report on
Form 10-K for fiscal year ended December 31, 1995, and any exhibits, amendments
and other documents related thereto, with the Securities and Exchange
Commission. Said filing shall be for the purpose of fulfilling applicable legal
requirements.
Whereupon, I grant unto said Richard M. Clark full power and authority to
perform all necessary and appropriate acts in connection therewith, and hereby
ratify and confirm all that said attorney-in-fact and agent, or his substitute,
may lawfully do, or cause to be done, by virtue hereof.
/s/ Ann McLaughlin
-----------------------
Director
Dated: January 30, 1996
-----------
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg
Company, a Delaware corporation, hereby appoint Richard M. Clark, Senior Vice
President, General Counsel and Secretary of Kellogg Company, as my lawful
attorney-in-fact and agent, to act on my behalf, with full power of
substitution, in preparing, executing and filing the Company's Annual Report on
Form 10-K for fiscal year ended December 31, 1995, and any exhibits, amendments
and other documents related thereto, with the Securities and Exchange
Commission. Said filing shall be for the purpose of fulfilling applicable legal
requirements.
Whereupon, I grant unto said Richard M. Clark full power and authority to
perform all necessary and appropriate acts in connection therewith, and hereby
ratify and confirm all that said attorney-in-fact and agent, or his substitute,
may lawfully do, or cause to be done, by virtue hereof.
/s/ Russell G. Mawby
-----------------------
Director
Dated: January 24, 1996
-----------
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg
Company, a Delaware corporation, hereby appoint Richard M. Clark, Senior Vice
President, General Counsel and Secretary of Kellogg Company, as my lawful
attorney-in-fact and agent, to act on my behalf, with full power of
substitution, in preparing, executing and filing the Company's Annual Report on
Form 10-K for fiscal year ended December 31, 1995, and any exhibits, amendments
and other documents related thereto, with the Securities and Exchange
Commission. Said filing shall be for the purpose of fulfilling applicable legal
requirements.
Whereupon, I grant unto said Richard M. Clark full power and authority to
perform all necessary and appropriate acts in connection therewith, and hereby
ratify and confirm all that said attorney-in-fact and agent, or his substitute,
may lawfully do, or cause to be done, by virtue hereof.
/s/ W. E. LaMothe
-----------------------
Director
Dated: January 18, 1996
-----------
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg
Company, a Delaware corporation, hereby appoint Richard M. Clark, Senior Vice
President, General Counsel and Secretary of Kellogg Company, as my lawful
attorney-in-fact and agent, to act on my behalf, with full power of
substitution, in preparing, executing and filing the Company's Annual Report on
Form 10-K for fiscal year ended December 31, 1995, and any exhibits, amendments
and other documents related thereto, with the Securities and Exchange
Commission. Said filing shall be for the purpose of fulfilling applicable legal
requirements.
Whereupon, I grant unto said Richard M. Clark full power and authority to
perform all necessary and appropriate acts in connection therewith, and hereby
ratify and confirm all that said attorney-in-fact and agent, or his substitute,
may lawfully do, or cause to be done, by virtue hereof.
/s/ Dolores D. Wharton
-----------------------
Director
Dated: January 23, 1996
-----------
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg
Company, a Delaware corporation, hereby appoint Richard M. Clark, Senior Vice
President, General Counsel and Secretary of Kellogg Company, as my lawful
attorney-in-fact and agent, to act on my behalf, with full power of
substitution, in preparing, executing and filing the Company's Annual Report on
Form 10-K for fiscal year ended December 31, 1995, and any exhibits, amendments
and other documents related thereto, with the Securities and Exchange
Commission. Said filing shall be for the purpose of fulfilling applicable legal
requirements.
Whereupon, I grant unto said Richard M. Clark full power and authority to
perform all necessary and appropriate acts in connection therewith, and hereby
ratify and confirm all that said attorney-in-fact and agent, or his substitute,
may lawfully do, or cause to be done, by virtue hereof.
/s/ T. P. Smucker
-----------------------
Director
Dated: January 25, 1996
-----------
<PAGE> 8
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg
Company, a Delaware corporation, hereby appoint Richard M. Clark, Senior Vice
President, General Counsel and Secretary of Kellogg Company, as my lawful
attorney-in-fact and agent, to act on my behalf, with full power of
substitution, in preparing, executing and filing the Company's Annual Report on
Form 10-K for fiscal year ended December 31, 1995, and any exhibits, amendments
and other documents related thereto, with the Securities and Exchange
Commission. Said filing shall be for the purpose of fulfilling applicable legal
requirements.
Whereupon, I grant unto said Richard M. Clark full power and authority to
perform all necessary and appropriate acts in connection therewith, and hereby
ratify and confirm all that said attorney-in-fact and agent, or his substitute,
may lawfully do, or cause to be done, by virtue hereof.
/s/ Harold A. Poling
-----------------------
Director
Dated: January 22, 1996
-----------
<PAGE> 9
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg
Company, a Delaware corporation, hereby appoint Richard M. Clark, Senior Vice
President, General Counsel and Secretary of Kellogg Company, as my lawful
attorney-in-fact and agent, to act on my behalf, with full power of
substitution, in preparing, executing and filing the Company's Annual Report on
Form 10-K for fiscal year ended December 31, 1995, and any exhibits, amendments
and other documents related thereto, with the Securities and Exchange
Commission. Said filing shall be for the purpose of fulfilling applicable legal
requirements.
Whereupon, I grant unto said Richard M. Clark full power and authority to
perform all necessary and appropriate acts in connection therewith, and hereby
ratify and confirm all that said attorney-in-fact and agent, or his substitute,
may lawfully do, or cause to be done, by virtue hereof.
/s/ J. R. Munro
-----------------------
Director
Dated: January 24, 1996
-----------
<PAGE> 10
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg
Company, a Delaware corporation, hereby appoint Richard M. Clark, Senior Vice
President, General Counsel and Secretary of Kellogg Company, as my lawful
attorney-in-fact and agent, to act on my behalf, with full power of
substitution, in preparing, executing and filing the Company's Annual Report on
Form 10-K for fiscal year ended December 31, 1995, and any exhibits, amendments
and other documents related thereto, with the Securities and Exchange
Commission. Said filing shall be for the purpose of fulfilling applicable legal
requirements.
Whereupon, I grant unto said Richard M. Clark full power and authority to
perform all necessary and appropriate acts in connection therewith, and hereby
ratify and confirm all that said attorney-in-fact and agent, or his substitute,
may lawfully do, or cause to be done, by virtue hereof.
/s/ A. G. Langbo
-----------------------
Director
Dated: January 18, 1996
-----------
<PAGE> 11
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg
Company, a Delaware corporation, hereby appoint Richard M. Clark, Senior Vice
President, General Counsel and Secretary of Kellogg Company, as my lawful
attorney-in-fact and agent, to act on my behalf, with full power of
substitution, in preparing, executing and filing the Company's Annual Report on
Form 10-K for fiscal year ended December 31, 1995, and any exhibits, amendments
and other documents related thereto, with the Securities and Exchange
Commission. Said filing shall be for the purpose of fulfilling applicable legal
requirements.
Whereupon, I grant unto said Richard M. Clark full power and authority to
perform all necessary and appropriate acts in connection therewith, and hereby
ratify and confirm all that said attorney-in-fact and agent, or his substitute,
may lawfully do, or cause to be done, by virtue hereof.
/s/ John L. Zabriskie
-----------------------
Director
Dated: January 25, 1996
-----------
<PAGE> 12
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg
Company, a Delaware corporation, hereby appoint Richard M. Clark, Senior Vice
President, General Counsel and Secretary of Kellogg Company, as my lawful
attorney-in-fact and agent, to act on my behalf, with full power of
substitution, in preparing, executing and filing the Company's Annual Report on
Form 10-K for fiscal year ended December 31, 1995, and any exhibits, amendments
and other documents related thereto, with the Securities and Exchange
Commission. Said filing shall be for the purpose of fulfilling applicable legal
requirements.
Whereupon, I grant unto said Richard M. Clark full power and authority to
perform all necessary and appropriate acts in connection therewith, and hereby
ratify and confirm all that said attorney-in-fact and agent, or his substitute,
may lawfully do, or cause to be done, by virtue hereof.
/s/ Donald Rumsfeld
-----------------------
Director
Dated: January 26, 1996
-----------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Kellogg
Company and subsidiaries Consolidated financial statements for the year ended
December 31, 1995 and is qualified in its entirety by reference to such
Financial Statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 222
<SECURITIES> 0
<RECEIVABLES> 596
<ALLOWANCES> (6)
<INVENTORY> 377
<CURRENT-ASSETS> 1,429
<PP&E> 4,738
<DEPRECIATION> (1,953)
<TOTAL-ASSETS> 4,415
<CURRENT-LIABILITIES> 1,265
<BONDS> 718
0
0
<COMMON> 78
<OTHER-SE> 1,513
<TOTAL-LIABILITY-AND-EQUITY> 4,415
<SALES> 7,004
<TOTAL-REVENUES> 7,004
<CGS> 3,178
<TOTAL-COSTS> 3,178
<OTHER-EXPENSES> 2,966
<LOSS-PROVISION> 1
<INTEREST-EXPENSE> 63
<INCOME-PRETAX> 796
<INCOME-TAX> 306
<INCOME-CONTINUING> 490
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 490
<EPS-PRIMARY> 2.24
<EPS-DILUTED> 2.24
</TABLE>
<PAGE> 1
EXHIBIT 99.01
KELLOGG COMPANY AMERICAN
FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
FINANCIAL STATEMENTS
AND ADDITIONAL INFORMATION
OCTOBER 31, 1995
<PAGE> 2
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, 1995
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)
<PAGE> 3
KELLOGG COMPANY
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
Index to Financial Statements and Additional Information
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
REPORT OF INDEPENDENT ACCOUNTANTS 1
FINANCIAL STATEMENTS AS OF OCTOBER 31, 1995
AND 1994 AND FOR THE YEAR ENDED OCTOBER 31, 1995:
Statement of assets available for benefits, with fund
information 2-3
Statement of changes in assets available for benefits, with
fund information 4
Notes to financial statements 5-9
ADDITIONAL INFORMATION:
Item 27a - Schedule of assets held for investment
purposes - October 31, 1995 10
Item 27b - Schedule of loans or fixed income obligations -
October 31, 1995 11-13
Item 27d - Schedule of reportable transactions -
year ended October 31, 1995 14
</TABLE>
<PAGE> 4
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 assets available for benefits
and the related statement of changes in assets available for benefits present
fairly, in all material respects, the assets available for benefits of the
Kellogg Company American Federation of Grain Millers Savings and Investment
Plan at October 31, 1995 and 1994, and the changes in assets available for
benefits for the year ended October 31, 1995, in conformity with generally
accepted accounting principles. 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 generally accepted auditing
standards 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 the opinion expressed above.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information included on
pages 10 - 14 is presented for purposes of additional analysis and is not a
required part of the basic financial statements but is additional information
required by ERISA. The fund information in the statements of assets available
for benefits and the statement of changes in assets available for benefits is
presented for purposes of additional analysis rather than to present the assets
available for plan benefits and changes in assets available for benefits of
each fund. The additional information and the fund information have been
subjected to the auditing procedures applied in the audit 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.
PRICE WATERHOUSE LLP
Battle Creek, Michigan
March 8, 1996
<PAGE> 5
KELLOGG COMPANY
AMERICAN FEDERATION OF GRAIN MILLERS 2
SAVINGS AND INVESTMENT PLAN
STATEMENT OF ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
OCTOBER 31, 1995
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FIXED
LOAN BOND INCOME
TOTAL FUND FUND FUND
<S> <C> <C> <C> <C>
Receivables:
Employer contributions $ 484,554 $ - $ 6,010 $ 283,613
Interest 415 415
---------------- ---------------- ---------------- ----------------
Total receivables 484,969 6,010 284,028
---------------- ---------------- ---------------- ----------------
Investments:
Plan's interest in Master Trust 123,586,199 4,876,840
Interfund borrowings (922,676)
Guaranteed investment contracts 542,063,681 542,063,681
Loans to participants 14,631,203 14,631,203
TBC Pooled Funds Daily Liquidity 86,931 86,931
---------------- ---------------- ---------------- ----------------
Total investments 680,368,014 14,631,203 4,876,840 541,227,936
---------------- ---------------- ---------------- ----------------
Assets available for benefits $ 680,852,983 $ 14,631,203 $ 4,882,850 $ 541,511,964
================ ================ ================ ================
<CAPTION>
COMPANY
EQUITY STOCK
FUND FUND
<S> <C> <C>
Receivables:
Employer contributions $ 34,636 $ 160,295
Interest
---------------- ----------------
Total receivables 34,636 160,295
---------------- ----------------
Investments:
Plan's interest in Master Trust 29,690,301 89,019,058
Interfund borrowings 922,676
Guaranteed investment contracts
Loans to participants
TBC Pooled Funds Daily Liquidity
---------------- ----------------
Total investments 30,612,977 89,019,058
---------------- ---------------
Assets available for benefits $ 30,647,613 $ 89,179,353
================ ===============
</TABLE>
See accompanying notes to financial statements
<PAGE> 6
KELLOGG COMPANY
AMERICAN FEDERATION OF GRAIN MILLERS 3
SAVINGS AND INVESTMENT PLAN
STATEMENT OF ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
OCTOBER 31, 1994
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FIXED
LOAN BOND INCOME
TOTAL FUND FUND FUND
<S> <C> <C> <C> <C>
ASSETS:
Receivables:
Employer contributions $ 515,950 $ - $ 6,500 $ 298,270
Interest 133,139 133,139
---------------- ---------------- ---------------- ----------------
Total receivables 649,089 6,500 431,409
---------------- ---------------- ---------------- ----------------
Investments
Plan's interest in Master Trust 134,687,224 4,124,385 3,207,217
Guaranteed investment contracts 478,739,579 478,739,579
TBC Pooled Funds Daily Liquidity 1,199 1,199
Loans to participants 10,562,350 10,562,350
---------------- ---------------- ---------------- ----------------
Total investments 623,990,352 10,562,350 4,124,385 481,947,995
---------------- ---------------- ---------------- ----------------
Assets available for benefits $ 624,639,441 $ 10,562,350 $ 4,130,885 $ 482,379,404
================ ================ ================ ================
<CAPTION>
COMPANY
EQUITY STOCK
FUND FUND
<S> <C> <C>
ASSETS:
Receivables:
Employer contributions $ 28,161 $ 183,019
Interest
---------------- ----------------
Total receivables 28,161 183,019
---------------- ----------------
Investments
Plan's interest in Master Trust 21,108,072 106,247,550
Guaranteed investment contracts
TBC Pooled Funds Daily Liquidity
Loans to participants
---------------- ----------------
Total investments 21,108,072 106,247,550
---------------- ----------------
Assets available for benefits $ 21,136,233 $ 106,430,569
================ ================
</TABLE>
See accompanying notes to financial statements
<PAGE> 7
KELLOGG COMPANY
AMERICAN FEDERATION OF GRAIN MILLERS 4
SAVINGS AND INVESTMENT PLAN
STATEMENT OF CHANGES IN ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
OCTOBER 31, 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
FIXED
LOAN BOND INCOME
TOTAL FUND FUND FUND
<S> <C> <C> <C> <C>
Contributions:
Employer $ 6,893,623 $ - $ 78,020 $ 4,219,403
Employee 16,817,030 199,446 11,635,400
Loans repaid (3,829,688) 89,769 2,382,599
Rollover from other qualified plans 5,102 1,425
---------------- ---------------- ---------------- ----------------
Total contributions 23,715,755 (3,829,688) 367,235 18,238,827
---------------- ----------------- ---------------- ----------------
Earnings on Investments:
Plan's interest in income of Master Trust 27,550,917 631,411 284,531
Interest income 37,979,201 1,069,706 36,909,495
Investment services fees (61,871) (435) (49,178)
Trustee fees (62,448) (320) (55,763)
---------------- ---------------- ---------------- ----------------
Total earnings on investments, net 65,405,799 1,069,706 630,656 37,089,085
---------------- ---------------- ---------------- ----------------
Net transfers between funds 35,792 37,887,631
Participant withdrawals (32,892,681) (153,086) (214,006) (29,598,875)
New loan distributions 6,981,921 (62,966) (4,476,880)
Net transfers between Plans (15,331) (4,746) (7,228)
---------------- ---------------- ---------------- ----------------
Net increase (decrease) 56,213,542 4,068,853 751,965 59,132,560
---------------- ---------------- ---------------- ----------------
Assets available for benefits at
beginning of year 624,639,441 10,562,350 4,130,885 482,379,404
---------------- ---------------- ---------------- ----------------
Assets available for benefits at
end of year $ 680,852,983 $ 14,631,203 $ 4,882,850 $ 541,511,964
================ ================ ================ ================
<CAPTION>
COMPANY
EQUITY STOCK
FUND FUND
<S> <C> <C>
Contributions:
Employer $ 400,769 $ 2,195,431
Employee 1,129,922 3,852,262
Loans repaid 328,542 1,028,778
Rollover from other qualified plans 3,677
---------------- ---------------
Total contributions 1,859,233 7,080,148
---------------- ----------------
Earnings on Investments:
Plan's interest in income of Master Trust 5,912,260 20,722,715
Interest income
Investment services fees (2,195) (10,063)
Trustee fees (1,775) (4,590)
---------------- ---------------
Total earnings on investments, net 5,908,290 20,708,062
---------------- ---------------
Net transfers between funds 2,943,455 (40,866,878)
Participant withdrawals (645,332) (2,281,382)
New loan distributions (552,925) (1,889,150)
Net transfers between Plans (1,341) (2,016)
---------------- ---------------
Net increase (decrease) 9,511,380 (17,251, 216)
---------------- ----------------
Assets available for benefits at
beginning of year 21,136,233 106,430,569
---------------- ----------------
Assets available for benefits at
end of year $ 30,647,613 $ 89,179,353
================ ===============
</TABLE>
See accompanying notes to financial statements
<PAGE> 8
KELLOGG COMPANY 5
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. The
following investments exceeded five percent of the assets available for
benefits at October 31, 1995 and 1994:
<TABLE>
<CAPTION>
INTEREST OCTOBER 31,
DESCRIPTION RATE 1995 1994
<S> <C> <C> <C>
Brundage, Story & Rose Managed
Synthetic GIC Fund Variable $ 52,042,315 $ 34,537,855
Putnam Horizon Managed Synthetic
GIC Fund Variable 51,877,407 34,472,455
Morgan Bank GIC #41 9.37% 79,004,435 108,353,894
Allstate Life Ins. GAC #5686A 8.13% 42,826,850 -
John Hancock GAC #5916-10000 8.30% - 59,553,995
John Hancock GAC #5916-10001 8.82% 99,791,611 91,720,860
John Hancock GAC #7605 7.87% 43,362,646 -
Plan's Interest in Master Trust Variable 123,586,199 134,687,224
</TABLE>
ALLOCATION OF NET INVESTMENT INCOME TO PARTICIPANTS
Net investment income related to the respective investment options
described in Note 2 is allocated monthly to participant accounts in
proportion to their respective ownership at the beginning of the month.
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 assets
available for benefit 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.
<PAGE> 9
KELLOGG COMPANY 6
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
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.
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. 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 an equity, bond, fixed income
or Kellogg Company stock fund or a combination thereof in multiples of one
percent.
VESTING
Participant account balances are fully vested.
PARTICIPANT LOANS
Effective September 1, 1994, 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 rate equal to one percent over the
prime rate. Principal and interest are paid ratably through monthly
payroll deductions.
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.
<PAGE> 10
KELLOGG COMPANY 7
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
2. PROVISIONS OF THE PLAN (CONTINUED)
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
$3,500 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.
3. INCOME TAX STATUS
The Plan administrator has received a favorable letter from the Internal
Revenue Service 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 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 assets held by the Plan and the Kellogg Company Salaried
Savings and Investment Plan at October 31, 1995 and November 1, 1994 and
the changes in assets for the period ended October 31, 1995 are as follows:
<PAGE> 11
KELLOGG COMPANY
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. MASTER TRUST (CONTINUED)
<TABLE>
<CAPTION>
KELLOGG COMPANY SAVINGS AND INVESTMENT PLANS: FOR THE PLAN YEAR ENDED OCTOBER 31, 1995
SCHEDULE OF ASSETS AND LIABILITIES FOR MASTER TRUST INVESTMENT ACCOUNTS
SHORT TERM BOND FUND FIXED INCOME FUND EQUITY FUND
INVESTMENT ACCOUNT INVESTMENT ACCOUNT INVESTMENT ACCOUNT INVESTMENT ACCOUNT
10/31/94 10/31/95 10/31/94 10/31/95 10/31/94 10/31/95 10/31/94 10/31/95
---------------------- ----------------------- ------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CASH/EQUIVALENTS:
Non-Interest Bearing $2,615 $21,959 $0 $0 $0 $0 $0 $0
Interest Bearing Cash $0 $0 $149,329 $0 $0 $0 $0 $0
---------------------- ----------------------- ------------------- -----------------------
TOTAL CASH/EQUIVAL $2,615 $21,959 $149,329 $0 $0 $0 $0 $0
---------------------- ----------------------- ------------------- -----------------------
RECEIVABLES $6,610 $5,187 $355,046 $191,402 $9 $0 $221 $134
---------------------- ----------------------- ------------------- -----------------------
GENERAL INVESTMENTS:
Long Term U.S. Gov't Securities $0 $0 $6,909,396 $8,478,055 $0 $0 $0 $0
Short Term U.S. Gov't Securities $0 $0 $0 $470,954 $0 $0 $0 $0
Corporate Debt - Long Term $0 $0 $1,816,556 $2,148,889 $0 $0 $0 $0
Corporate Debt - Short Term $0 $0 $90,822 $225,136 $0 $0 $0 $0
Corporate Stocks - Common $0 $0 $0 $0 $0 $0 $52,686,114 $77,007,278
Value of Interest in Pooled Funds $1,343,305 $174,695 $279,481 $ 222,051 $2,014 $0 $49,776 $27,418
Guaranteed Investment Contracts $0 $0 $0 $0 $7,200,983 $0 $0 $0
---------------------- ----------------------- ------------------- -----------------------
TOTAL INVESTMENTS $1,343,305 $174,695 $9,096,255 $11,545,085 $7,202,997 $0 $52,735,890 $77,034,696
---------------------- ----------------------- ------------------- -----------------------
TOTAL ASSETS $1,352,530 $201,841 $9,600,630 $11,736,487 $7,203,006 $0 $52,736,111 $77,034,830
---------------------- ----------------------- ------------------- -----------------------
PAYABLES $0 $0 $(105,531) $0 $0 $0 $0 $0
---------------------- ----------------------- ------------------- -----------------------
TOTAL LIABILITIES $0 $0 $(105,531) $0 $0 $0 $0 $0
---------------------- ----------------------- ------------------- -----------------------
NET ASSETS $1,352,530 $201,841 $9,495,099 $11,736,487 $7,203,006 $0 $52,736,111 $77,034,830
====================== ======================= =================== =======================
<CAPTION>
COMPANY STOCK FUND
INVESTMENT ACCOUNT
-------------------------
10/31/94 10/31/95
-------------------------
<S> <C> <C>
CASH/EQUIVALENTS:
Non-Interest Bearing $0 $0
Interest Bearing Cash $0 $0
-------------------------
TOTAL CASH/EQUIVAL $0 $0
-------------------------
RECEIVABLES $4,188 $884
-------------------------
GENERAL INVESTMENTS:
Long Term U.S. Gov't Securities $0 $0
Short Term U.S. Gov't Securities $0 $0
Corporate Debt - Long Term $0 $0
Corporate Debt - Short Term $0 $0
Corporate Stocks - Common $155,887,191 $132,601,292
Value of Interest in Pooled Funds $1,059,640 $20,895
Guaranteed Investment Contracts $0 $0
-------------------------
TOTAL INVESTMENTS $156,946,831 $132,622,187
-------------------------
TOTAL ASSETS $156,951,019 $132,623,071
-------------------------
PAYABLES $0 $0
-------------------------
TOTAL LIABILITIES $0 $0
-------------------------
NET ASSETS $156,951,019 $132,623,071
=========================
</TABLE>
<PAGE> 12
KELLOGG COMPANY
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. MASTER TRUST (CONTINUED)
KELLOGG COMPANY MASTER TRUST
FOR THE PLAN YEARS ENDED OCTOBER 31, 1995
SCHEDULE OF INCOME AND EXPENSES, CHANGES IN NET ASSETS
AND NET INCREASE (DECREASE) IN NET ASSETS OF MASTER TRUST INVESTMENT ACCOUNTS
<TABLE>
<CAPTION>
SHORT TERM BOND FUND FIXED INCOME FUND EQUITY FUND COMPANY STOCK
INVESTMENT ACCOUNT ADVISORY ACCOUNT ADVISORY ACCOUNT ADVISORY ACCOUNT ADVISORY ACCOUNT
------------------ ---------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Transfer of Assets Into
Investment Account $239,061,840 $2,057,000 $0 $23,980,000 $5,275,000
Earnings on Investments
Interest $85,839 $723,835 $494,662 $3,053 $34,566
Dividends $0 $0 $0 $0 $3,259,625
Net Realized Gain/(Loss) $0 ($120,303) $0 $2,686,388 $7,282,937
------------------ ---------------- ----------------- ---------------- ----------------
TOTAL ADDITIONS $239,147,679 $2,660,532 $494,662 $26,669,441 $15,852,128
------------------ ---------------- ----------------- ---------------- ----------------
Transfer of Assets Out of
Investment Account ($240,298,368) ($1,290,000) ($7,697,668) ($15,005,000) ($60,926,196)
Fees and Commissions $0 ($6,886) $0 ($25,499) $0
------------------ ---------------- ----------------- ---------------- ----------------
TOTAL DISTRIBUTIONS ($240,298,368) ($1,296,886) ($7,697,668) ($15,030,499) ($60,926,196)
------------------ ---------------- ----------------- ---------------- ----------------
Change in Unrealized Appreciation $0 $877,742 $0 $12,659,777 $20,746,120
------------------ ---------------- ----------------- ---------------- ----------------
NET CHANGE IN ASSETS ($1,150,689) $2,241,388 ($7,203,006) $24,298,719 ($24,327,948)
------------------ ---------------- ----------------- ---------------- ----------------
NET ASSETS AT 10/31/94 $1,352,530 $9,495,099 $7,203,006 $52,736,111 $156,951,019
------------------ ---------------- ----------------- ---------------- ----------------
NET ASSETS AT 10/31/95 $201,841 $11,736,487 $0 $77,034,830 $132,623,071
================== ================ ================= ================ ================
</TABLE>
<PAGE> 13
KELLOGG COMPANY 10
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27A - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES - OCTOBER 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET UNREALIZED
SECURITY DESCRIPTION COST PRICE VALUE GAIN/LOSS
<S> <C> <C> <C> <C>
TBC, Inc. Pooled Employee Funds
Daily Liquidity Fund $ 86,931 1.000 $ 86,931 $ -
Loans to participants 14,631,203 1.000 14,631,203
Brundage Story & Rose Managed
Synthetic GIC Fund Variable Rate 52,042,315 1.000 52,042,315
Morgan Bank GIC #41
9.37% 6/1/96 79,004,435 1.000 79,004,435
John Hancock GAC #5916-10001
8.82% 6/1/97 99,791,611 1.000 99,791,611
Protective Life Ins. GIC #807-B
6.08% 1/31/97 29,005,356 1.000 29,005,356
Provident Life GIC #627-05439-01A
6.24% 6/30/97 16,700,317 1.000 16,700,317
Protective Life Ins. GIC #893-B
4.68% 6/1/96 14,648,382 1.000 14,648,382
Provident Life GIC #627-05439-02A
4.60% 6/3/96 14,493,110 1.000 14,493,110
Putnam Horizon Managed Synthetic
GIC Variable Rate 6/1/99 51,877,407 1.000 51,877,407
Principal Mutual GAC #4-12130-01
5.30% 12/1/98 18,865,959 1.000 18,865,959
Peoples Security Ins #BDA00378FR
5.15% 12/1/97 18,450,962 1.000 18,450,962
Allstate Life Ins. GAC #5686A
8.13% 12/1/98 42,826,850 1.000 42,826,850
Commonwealth Life #ADA00687FR
7.54% 6/1/98 27,698,479 1.000 27,698,479
John Hancock GAC #7605
7.87% 12/1/98 43,362,646 1.000 43,362,646
Commonwealth Life GIC
6.19% 6/1/98 6,992,148 1.000 6,992,148
Metropolitan Life GIC
6.27% 6/1/99 17,648,727 1.000 17,648,727
New York Life GIC
6.20% 6/1/98 8,654,977 1.000 8,654,977
----------------- ----------------- -------
$ 556,781,815 $ 556,781,815 $ -
================= ================= =======
</TABLE>
<PAGE> 14
KELLOGG COMPANY 11
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID
IDENTITY AND ADDRESS AMOUNT --------------------- BALANCE AT
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END
<S> <C> <C> <C> <C>
Otis J. Akins, Jr. $ 3,640 $ 128 $ 75 $ 3,512
8261 Manor
Detroit, MI 48204
Paulettte P. Archie 18,891 1,207 623 17,428
480 Arcadia Blvd.
Battle Creek, MI 49017
Eric G. Ivany, Jr. 7,600 341 202 7,195
21972 Bedford Rd.
Battle Creek, MI 49017
Robert C. Putnam 30,000 819 542 29,181
3331 Putnam Ct.
Battle Creek, MI 49017
Guadalupe G. Buentello 8,847 153 118 8,694
67225 M-66
Sturgis, MI 49091
Mary L. Kerr 3,000 123 43 2,877
300 Morgan Rd., Lot 8
Battle Creek, MI 49017
<CAPTION>
IDENTITY AND ADDRESS TERMS AMOUNT OVERDUE
OF OBLIGOR --------------------------------------- -----------------------
LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C>
Otis J. Akins, Jr. 09/30/94 8.8% 09/30/98 $ 3,512 $ 26
8261 Manor
Detroit, MI 48204
Paulettte P. Archie 08/31/94 8.3% 08/31/99 17,428 599
480 Arcadia Blvd.
Battle Creek, MI 49017
Eric G. Ivany, Jr. 08/31/94 8.3% 08/31/99 7,195 297
21972 Bedford Rd.
Battle Creek, MI 49017
Robert C. Putnam 08/31/94 8.3% 08/31/99 29,181 1,003
3331 Putnam Ct.
Battle Creek, MI 49017
Guadalupe G. Buentello 08/31/94 8.3% 08/31/99 8,694 479
67225 M-66
Sturgis, MI 49091
Mary L. Kerr 09/30/94 8.8% 09/30/97 2,877 189
300 Morgan Rd., Lot 8
Battle Creek, MI 49017
</TABLE>
<PAGE> 15
KELLOGG COMPANY 12
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID
IDENTITY AND ADDRESS AMOUNT ---------------------- BALANCE AT
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END
<S> <C> <C> <C> <C>
Victory Chaney $ 4,500 $ 242 $ 90 $ 4,179
407 Edgmont Dr.
Willow Street, PA 17584
Michael R. Laprairie 9,000 1,004 465 7,920
2649 E. State Rd.
Hastings, MI 49058
Joseph A. Varga 30,000 1,210 647 28,790
4411 Altahesa Blvd.
Forth Worth, TX 76133
Milo E. Gilbert 4,000 2,815 147 864
122 N. 21st St.
Battle Creek, MI 49015
Anthony L. Rogers 12,000 - - 12,000
30 Sherman Rd.
Battle Creek, MI 49017
Jack L. Sheppard 15,000 2,063 650 12,569
56 W. Glenurban
Battle Creek, MI 49017
<CAPTION>
TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS ---------------------------------------- ---------------------
OF OBLIGOR LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C>
Victory Chaney 08/31/94 8.3% 08/31/98 $ 4,179 $ 144
407 Edgmont Dr.
Willow Street, PA 17584
Michael R. Laprairie 08/31/94 8.3% 08/31/99 7,920 164
2649 E. State Rd.
Hastings, MI 49058
Joseph A. Varga 09/30/94 8.8% 09/30/99 28,790 1,050
4411 Altahesa Blvd.
Forth Worth, TX 76133
Milo E. Gilbert 08/31/94 8.3% 08/31/95 864 12
122 N. 21st St.
Battle Creek, MI 49015
Anthony L. Rogers 08/31/94 8.3% 08/31/99 - 1,155
30 Sherman Rd.
Battle Creek, MI 49017
Jack L. Sheppard 08/31/94 8.3% 08/31/97 12,569 432
56 W. Glenurban
Battle Creek, MI 49017
</TABLE>
<PAGE> 16
KELLOGG COMPANY 13
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGIANL YEAR UNPAID
IDENTITY AND ADDRESS AMOUNT ---------------------- BALANCE AT
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END
<S> <C> <C> <C> <C>
Martha N. Rideout $ 10,000 $ 129 $ 83 $ 9,871
2025 - 88th Ave.
Oakland, CA 94621
Arty D. Barron 4,000 595 206 3,405
5044 Hickory Bark Dr.
Memphis, TN 38141
<CAPTION>
TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS ---------------------------------------- ---------------------
OF OBLIGOR LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C>
Martha N. Rideout 04/30/95 10.0% 04/30/00 $ 9,871 $ 494
2025 - 88th Ave.
Oakland, CA 94621
Arty D. Barron 12/31/94 9.5% 12/31/97 3,405 27
5044 Hickory Bark Dr.
Memphis, TN 38141
</TABLE>
<PAGE> 17
KELLOGG COMPANY
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27D - SCHEDULE OF REPORTABLE TRANSACTIONS - YEAR ENDED OCTOBER 31, 1995 (1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CURRENT VALUE AT TRANSACTION DATE COST OF NET
NET NET SECURITIES REALIZED
IDENTITY OF ISSUE PURCHASE PRICE SALES PRICE SOLD GAIN
<S> <C> <C> <C> <C>
Allstate Life GIC # 5686-01
8.13% 12/1/98 $ 35,583,414 $ - $ - $ -
Morgan Bank GIC #41
9.37% 6/1/96 38,773,699 38,773,699
John Hancock GIC #7605
7.87% 12/1/98 38,014,830
John Hancock GAC #5916-1000
8.30% 6/1/97 60,936,276 60,936,276
</TABLE>
(1) Represents Plan's interest in a transaction (or a series of transactions
of the same issue) in excess of five percent of the Plan's assets
available at November 1, 1994.
<PAGE> 1
EXHIBIT 99.02
KELLOGG COMPANY SALARIED
SAVINGS AND INVESTMENT PLAN
FINANCIAL STATEMENTS
AND ADDITIONAL INFORMATION
OCTOBER 31, 1995
<PAGE> 2
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, 1995
COMMISSION FILE NUMBER 1-4171
KELLOGG COMPANY SALARIED
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)
<PAGE> 3
KELLOGG COMPANY SALARIED
SAVINGS AND INVESTMENT PLAN
INDEX TO FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
<S> <C>
REPORT OF INDEPENDENT ACCOUNTANTS 1
FINANCIAL STATEMENTS AS OF OCTOBER 31, 1995
AND 1994 AND FOR THE YEAR ENDED OCTOBER 31, 1995:
Statement of assets available for benefits, with fund information 2-3
Statement of changes in assets available for benefits, with
fund information 4
Notes to financial statements 5-9
ADDITIONAL INFORMATION:
Item 27a - Schedule of assets held for investment
purposes - October 31, 1995 10
Item 27b - Schedule of loans or fixed income obligations -
October 31, 1995 11-13
Item 27d - Schedule of reportable transactions -
year ended October 31, 1995 14
</TABLE>
<PAGE> 4
REPORT OF INDEPENDENT ACCOUNTANTS
To the ERISA Finance Committee
and Participants of the Kellogg Company
Salaried Savings and Investment Plan
In our opinion, the accompanying statements of assets available for benefits
and the related statement of changes in assets available for benefits present
fairly, in all material respects, the assets available for benefits of the
Kellogg Company Salaried Savings and Investment Plan at October 31, 1995 and
1994, and the changes in assets available for benefits for the year ended
October 31, 1995, in conformity with generally accepted accounting principles.
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
generally accepted auditing standards 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 the
opinion expressed above.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information included on
pages 10 - 14 is presented for purposes of additional analysis and is not a
required part of the basic financial statements but is additional information
required by ERISA. The fund information in the statements of assets available
for benefits and the statement of changes in assets available for benefits is
presented for purposes of additional analysis rather than to present the assets
available for plan benefits and changes in assets available for benefits of
each fund. The additional information and the fund information have been
subjected to the auditing procedures applied in the audit 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.
PRICE WATERHOUSE LLP
Battle Creek, Michigan
March 8, 1996
<PAGE> 5
KELLOGG COMPANY SALARIED 2
SAVINGS AND INVESTMENT PLAN
STATEMENT OF ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
OCTOBER 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIXED
LOAN BOND INCOME
TOTAL FUND FUND FUND
<S> <C> <C> <C> <C>
ASSETS:
Receivables:
Employer contributions $ 390,747 $ - $ 14,036 $ 162,153
Employee contributions 742 742
Interest 329 329
---------------- ---------------- ---------------- ----------------
Total receivables 391,818 14,036 163,224
---------------- ---------------- ---------------- ----------------
Investments:
Plan's interest in Master Trust 98,010,029 6,949,613
Interfund borrowings (1,056,536)
Guaranteed investment contracts 288,935,607 288,935,607
Loans to participants 4,941,740 4,941,740
TBC Pooled Funds Daily Liquidity 67,912 4 67,908
---------------- ---------------- ---------------- ----------------
Total investments 391,955,288 4,941,740 6,949,617 287,946,979
---------------- ---------------- ---------------- ----------------
Assets available for benefits $ 392,347,106 $ 4,941,740 $ 6,963,653 $ 288,110,203
================ ================ ================ ================
<CAPTION>
COMPANY
EQUITY STOCK
FUND FUND
<S> <C> <C>
ASSETS:
Receivables:
Employer contributions $ 85,646 $ 128,912
Employee contributions
Interest
---------------- ----------------
Total receivables 85,646 128,912
---------------- ----------------
Investments:
Plan's interest in Master Trust 47,787,040 43,273,376
Interfund borrowings 1,056,536
Guaranteed investment contracts
Loans to participants
TBC Pooled Funds Daily Liquidity
---------------- ----------------
Total investments 48,843,576 43,273,376
---------------- ---------------
Assets available for benefits $ 48,929,222 $ 43,402,288
================ ===============
</TABLE>
See accompanying notes to financial statements
<PAGE> 6
KELLOGG COMPANY SALARIED 3
SAVINGS AND INVESTMENT PLAN
STATEMENT OF ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
OCTOBER 31, 1994
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIXED
LOAN BOND INCOME
TOTAL FUND FUND FUND
<S> <C> <C> <C> <C>
ASSETS:
Receivables:
Employer contributions $ 391,817 $ - $ 14,237 $ 162,273
Employee contributions 96 96
Interest 76,387 4 76,383
---------------- ---------------- ---------------- ----------------
Total receivables 468,300 14,241 238,752
---------------- ---------------- ---------------- ----------------
Investments:
Plan's interest in Master Trust 93,050,541 5,359,818 3,778,593
Guaranteed investment contracts 255,403,672 255,403,672
Loans to participants 3,465,644 3,465,644
TBC Pooled Funds Daily Liquidity 14,702 14,702
---------------- ---------------- ---------------- ----------------
Total investments 351,934,559 3,465,644 5,359,818 259,196,967
---------------- ---------------- ---------------- ----------------
Assets available for benefits $ 352,402,859 $ 3,465,644 $ 5,374,059 $ 259,435,719
================ ================ ================ ================
<CAPTION>
COMPANY
EQUITY STOCK
FUND FUND
<S> <C> <C>
ASSETS:
Receivables:
Employer contributions $ 68,377 $ 146,930
Employee contributions
Interest
---------------- ----------------
Total receivables 68,377 146,930
---------------- ----------------
Investments:
Plan's interest in Master Trust 33,849,932 50,062,198
Guaranteed investment contracts
Loans to participants
TBC Pooled Funds Daily Liquidity
---------------- ----------------
Total investments 33,849,932 50,062,198
---------------- ----------------
Assets available for benefits $ 33,918,309 $ 50,209,128
================ ================
</TABLE>
See accompanying notes to financial statements
<PAGE> 7
KELLOGG COMPANY SALARIED 4
SAVINGS AND INVESTMENT PLAN
STATEMENT OF CHANGES IN ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
OCTOBER 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIXED
LOAN BOND INCOME
TOTAL FUND FUND FUND
<S> <C> <C> <C> <C>
Contributions:
Employer $ 5,756,723 $ - $ 185,623 $ 2,661,762
Employee 12,875,500 511,775 6,221,383
Loans repaid (1,454,867) 49,013 704,899
Rollover from other qualified plans 215,449 22,100 46,348
---------------- ---------------- ---------------- ----------------
Total contributions 18,847,672 (1,454,867) 768,511 9,634,392
---------------- ----------------- ---------------- ----------------
Earnings on Investments:
Plan's interest in income of Master Trust 21,150,938 844,826 264,568
Interest income 19,905,897 346,424 19,559,473
Trustee fees (35,227) (555) (26,319
Administrative fees (175,712) (2,459) (136,650
---------------- ---------------- ----------------- ----------------
Total earnings on investments, net 40,845,896 346,424 841,812 19,661,072
---------------- ---------------- ---------------- ----------------
Net transfers between funds 332,359 17,302,474
Participant withdrawals (19,764,652) (351,982) (299,382) (16,415,743
Loans to participants 2,936,521 (58,452) (1,514,939
Net transfers between Plans 15,331 4,746 7,228
---------------- ---------------- ---------------- ----------------
Net increase (decrease) 39,944,247 1,476,096 1,589,594 28,674,484
Assets available for benefits at
beginning of year 352,402,859 3,465,644 5,374,059 259,435,719
---------------- ---------------- ---------------- ----------------
Assets available for benefits at
end of year $ 392,347,106 $ 4,941,740 $ 6,963,653 $ 288,110,203
================ ================ ================ ================
<CAPTION>
COMPANY
EQUITY STOCK
FUND FUND
<S> <C> <C>
Contributions:
Employer $ 1,036,407 $ 1,872,931
Employee 2,931,395 3,210,947
Loans repaid 261,588 439,367
Rollover from other qualified plans 99,941 47,060
---------------- ---------------
Total contributions 4,329,331 5,570,305
---------------- ----------------
Earnings on Investments:
Plan's interest in income of Master Trust 9,450,049 10,591,495
Interest income
Trustee fees (3,482) (4,871)
Administrative fees (16,188) (20,415)
---------------- ----------------
Total earnings on investments, net 9,430,379 10,566,209
---------------- ----------------
Net transfers between funds 2,978,628 (20,613,461)
Participant withdrawals (1,155,409) (1,542,136)
Loans to participants (573,357) (789,773)
Net transfers between Plans 1,341 2,016
---------------- ---------------
Net increase (decrease) 15,010,913 (6,806,840)
Assets available for benefits at
beginning of year 33,918,309 50,209,128
---------------- ---------------
Assets available for benefits at
end of year $ 48,929,222 $ 43,402,288
================ ===============
</TABLE>
See accompanying notes to financial statements
<PAGE> 8
KELLOGG COMPANY SALARIED 5
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The Kellogg Company Salaried 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.
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. The
following investments exceeded five percent of the assets available for
benefits at October 31, 1995 and 1994:
<TABLE>
<CAPTION>
INTEREST OCTOBER 31,
DESCRIPTION RATE 1995 1994
<S> <C> <C> <C>
Putnam Horizon Managed Synthetic
GIC Fund Variable $ 28,395,496 $ -
Brundage Story & Rose Managed
Synthetic GIC Fund Variable 28,480,679 -
Morgan Bank GIC #40 9.37% 34,922,275 47,895,595
John Hancock GAC #5917-10000 8.30% - 33,910,889
John Hancock GAC #5917-10001 8.82% 56,874,232 52,274,469
Protective Life Ins. GIC #807-A 6.08% 18,850,129 17,769,730
Allstate Life Ins. GAC #5686 8.13% 24,127,523 -
John Hancosk GAC #7606 7.87% 23,463,837 -
Plan's interest in Master Trust Variable 98,010,029 93,050,541
</TABLE>
ALLOCATION OF NET INVESTMENT INCOME TO PARTICIPANTS
Net investment income related to the respective investment options
described in Note 2 is allocated monthly to participant accounts in
proportion to their respective ownership at the beginning of the month.
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 assets
available for benefit 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.
<PAGE> 9
KELLOGG COMPANY SALARIED 6
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. PROVISIONS OF THE PLAN
PLAN ADMINISTRATION
The Plan is administered by the ERISA Administrative Committee appointed by
Kellogg Company.
PLAN PARTICIPATION
Generally, all salaried employees of Kellogg Company and its U.S.
subsidiaries 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. 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 as well as
their account balances in an equity, bond, fixed income or Kellogg Company
stock fund or a combination thereof in multiples of one percent.
VESTING
Participant account balances are fully vested.
PARTICIPANT LOANS
Effective September 1, 1994, 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 rate equal to one percent over the
prime rate. Principal and interest are paid ratably through monthly
payroll deductions.
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
$3,500 the terminated participant will receive the account balance in a
lump sum.
<PAGE> 10
KELLOGG COMPANY SALARIED 7
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. PROVISIONS OF THE PLAN (CONTINUED)
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.
3. INCOME TAX STATUS
The Plan administrator has received a favorable letter from the Internal
Revenue Service 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 American Federation of Grain Millers Savings and
Investment Plan and Kellogg Company sponsored pension plans in a Master
Trust.
The Plan has an undivided interest in the 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 assets held by the Plan and the Kellogg Company American
Federation of Grain Millers Savings and Investment Plan at October 31, 1995
and November 1, 1994 and the changes in assets for the period ended October
31, 1995 are as follows:
<PAGE> 11
KELLOGG COMPANY
SALARIED SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. MASTER TRUST (CONTINUED)
KELLOGG COMPANY SAVINGS AND INVESTMENT PLANS:
FOR THE PLAN YEAR ENDED OCTOBER 31, 1995
SCHEDULE OF ASSETS AND LIABILITIES FOR MASTER TRUST INVESTMENT ACCOUNTS
<TABLE>
<CAPTION>
SHORT TERM BOND FUND FIXED INCOME FUND EQUITY FUND
INVESTMENT ACCOUNT INVESTMENT ACCOUNT INVESTMENT ACCOUNT INVESTMENT ACCOUNT
10/31/94 10/31/95 10/31/94 10/31/95 10/31/94 10/31/95 10/31/94 10/31/95
--------------------- ---------------------- ------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CASH/EQUIVALENTS:
Non-Interest Bearing $2,615 $21,959 $0 $0 $0 $0 $0 $0
Interest Bearing Cash $0 $0 $149,329 $0 $0 $0 $0 $0
--------------------- ---------------------- ------------------- -----------------------
TOTAL CASH/EQUIVALENTS $2,615 $21,959 $149,329 $0 $0 $0 $0 $0
--------------------- ---------------------- ------------------- -----------------------
RECEIVABLES $6,610 $5,187 $355,046 $191,402 $9 $0 $221 $134
--------------------- ---------------------- ------------------- -----------------------
GENERAL INVESTMENTS:
Long Term U.S. Gov't Securities $0 $0 $6,909,396 $8,478,055 $0 $0 $0 $0
Short Term U.S. Gov't Securities $0 $0 $0 $470,954 $0 $0 $0 $0
Corporate Debt - Long Term $0 $0 $1,816,556 $2,148,889 $0 $0 $0 $0
Corporate Debt - Short Term $0 $0 $90,822 $225,136 $0 $0 $0 $0
Corporate Stocks - Common $0 $0 $0 $0 $0 $0 $52,686,114 $77,007,278
Value of Interest in Pooled Funds $1,343,305 $174,695 $279,481 $222,051 $2,014 $0 $49,776 $27,418
Guaranteed Investment Contracts $0 $0 $0 $0 $7,200,983 $0 $0 $0
--------------------- ---------------------- ------------------- -----------------------
TOTAL INVESTMENTS $1,343,305 $174,695 $9,096,255 $11,545,085 $7,202,997 $0 $52,735,890 $77,034,696
--------------------- ---------------------- ------------------- -----------------------
TOTAL ASSETS $1,352,530 $201,841 $9,600,630 $11,736,487 $7,203,006 $0 $52,736,111 $77,034,830
--------------------- ---------------------- ------------------- -----------------------
PAYABLES $0 $0 ($105,531) $0 $0 $0 $0 $0
--------------------- ---------------------- ------------------- -----------------------
TOTAL LIABILITIES $0 $0 ($105,531) $0 $0 $0 $0 $0
--------------------- ---------------------- ------------------- -----------------------
NET ASSETS $1,352,530 $201,841 $9,495,099 $11,736,487 $7,203,006 $0 $52,736,111 $77,034,830
===================== ====================== =================== =======================
<CAPTION>
COMPANY STOCK FUND
INVESTMENT ACCOUNT
10/31/94 10/31/95
---------------------------
<S> <C> <C>
CASH/EQUIVALENTS:
Non-Interest Bearing $0 $0
Interest Bearing Cash $0 $0
---------------------------
TOTAL CASH/EQUIVALENTS $0 $0
---------------------------
RECEIVABLES $4,188 $884
---------------------------
GENERAL INVESTMENTS:
Long Term U.S. Gov't Securities $0 $0
Short Term U.S. Gov't Securities $0 $0
Corporate Debt - Long Term $0 $0
Corporate Debt - Short Term $0 $0
Corporate Stocks - Common $155,887,191 $132,601,292
Value of Interest in Pooled Funds $1,059,640 $20,895
Guaranteed Investment Contracts $0 $0
---------------------------
TOTAL INVESTMENTS $156,946,831 $132,622,187
---------------------------
TOTAL ASSETS $156,951,019 $132,623,071
---------------------------
PAYABLES $0 $0
---------------------------
TOTAL LIABILITIES $0 $0
---------------------------
NET ASSETS $156,951,019 $132,623,071
===========================
</TABLE>
<PAGE> 12
KELLOGG COMPANY SALARIED
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. MASTER TRUST (CONTINUED)
KELLOGG COMPANY MASTER TRUST
FOR THE PLAN YEARS ENDED OCTOBER 31, 1995
SCHEDULE OF INCOME AND EXPENSES, CHANGES IN NET ASSETS
AND NET INCREASE (DECREASE) IN NET ASSETS OF MASTER TRUST INVESTMENT ACCOUNTS
<TABLE>
<CAPTION>
SHORT TERM BOND FUND FIXED INCOME FUND EQUITY FUND COMPANY STOCK
INVESTMENT ADVISORY ADVISORY ADVISORY ADVISORY
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
------------- ---------- ----------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Transfer of Assets Into
Investment Account $239,061,840 $2,057,000 $0 $23,980,000 $5,275,000
Earnings on Investments
Interest $85,839 $723,835 $494,662 $3,053 $34,566
Dividends $0 $0 $0 $0 $3,259,625
Net Realized Gain/(Loss) $0 ($120,303) $0 $2,686,388 $7,282,937
------------- ----------- ----------- ------------ ------------
TOTAL ADDITIONS $239,147,679 $2,660,532 $494,662 $26,669,441 $15,852,128
------------- ----------- ----------- ------------ ------------
Transfer of Assets Out of
Investment Account ($240,298,368) ($1,290,000) ($7,697,668) ($15,005,000) ($60,926,196)
Fees and Commissions $0 ($6,886) $0 ($25,499) $0
------------- ----------- ----------- ------------ ------------
TOTAL DISTRIBUTIONS ($240,298,368) ($1,296,886) ($7,697,668) ($15,030,499) ($60,926,196)
------------- ----------- ----------- ------------ ------------
Change in Unrealized Appreciation $0 $877,742 $0 $12,659,777 $20,746,120
------------- ----------- ----------- ------------ ------------
NET CHANGE IN ASSETS ($1,150,689) $2,241,388 ($7,203,006) $24,298,719 ($24,327,948)
------------- ----------- ----------- ------------ ------------
NET ASSETS AT 10/31/94 $1,352,530 $9,495,099 $7,203,006 $52,736,111 $156,951,019
------------- ----------- ----------- ------------ ------------
NET ASSETS AT 10/31/95 $201,841 $11,736,487 $0 $77,034,830 $132,623,071
============= =========== =========== ============ ============
</TABLE>
<PAGE> 13
KELLOGG COMPANY SALARIED 10
SAVINGS AND INVESTMENT PLAN
ITEM 27A - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES - OCTOBER 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET UNREALIZED
SECURITY DESCRIPTION COST PRICE VALUE GAIN/LOSS
<S> <C> <C> <C> <C>
TBC, Inc. Pooled Employee Funds
Daily Liquidity Fund $ 67,912 1.000 $ 67,912 $ -
Loans to participants 4,941,740 1.000 4,941,740
Brundage Story & Rose Managed
Synthetic GIC Fund Variable Rate 28,480,679 1.000 28,480,679
Morgan Bank GIC #40
9.37% 6/1/96 34,922,275 1.000 34,922,275
John Hancock GAC #5917-10001
8.82% 6/1/97 56,874,232 1.000 56,874,232
Protective Life Ins. GIC #807-A
6.08% 1/31/97 18,850,129 1.000 18,850,129
Provident Life GAC #627-05437-01A
6.24% 6/30/97 14,071,168 1.000 14,071,168
Protective Life Ins. GIC #893-A
4.86% 6/1/96 7,784,527 1.000 7,784,527
Provident Life GAC #627-05437-02A
4.60% 6/3/96 7,797,998 1.000 7,797,998
Principal Mutual GAC #4-11730-01
5.30% 12/1/98 8,264,184 1.000 8,264,184
Putnam Horizon Managed Synthetic
GIC Variable Rate 6/1/99 28,395,496 1.000 28,395,496
Peoples Security Ins Co #BDA00379FR
5.15% 12/1/97 8,615,377 1.000 8,615,377
Allstate Life Insurance GAC #5686
8.13% 12/1/98 24,127,523 1.000 24,127,523
Commonwealth Life #ADA00668FR
7.64% 6/1/98 15,409,517 1.000 15,409,517
John Hancock GAC #7606
7.87% 12/1/98 23,463,837 1.000 23,463,837
Commonwealth Life GIC
6.19% 6/1/98 2,494,523 1.000 2,494,523
Metropolitan Life GIC
6.27% 6/1/99 6,296,498 1.000 6,296,498
New York Life GIC
6.20% 6/1/98 3,087,644 1.000 3,087,644
----------------- ----------------- ---------
$ 293,945,259 $ 293,945,259 $ -
================= ================= =========
</TABLE>
<PAGE> 14
KELLOGG COMPANY SALARIED 11
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID
IDENTITY AND ADDRESS AMOUNT ---------------------- BALANCE AT
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END
<S> <C> <C> <C> <C>
James F. Fabry $ 35,000 $ - $ - $ 34,884
3262 South Tulare Circle
Denver, CO 80231
David J. Hambright 4,800 64 35 4,736
2061 Blair Street
Williamsport, PA 17701
Eugene Carter 10,000 1,457 506 8,367
75 Candle Light Ln. S.W.
Atlanta, GA 30331
Ashley J. Oudekerk 1,652 181 92 1,471
1291 Springmont Court
Lawrenceville, GA 30243
Kathryn M. Calhoun 50,000 2,056 1,003 47,268
2247 Saluda Lane
Acworth, GA 30101
Ernest E. Rice 40,000 4,947 2,483 35,053
3171 Harrison Road
East Leroy, MI 49051
<CAPTION>
TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS ---------------------------------------- ---------------------
OF OBLIGOR LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C>
James F. Fabry 08/31/94 8.3% 08/31/99 $ 34,884 $ 2,159
3262 South Tulare Circle
Denver, CO 80231
David J. Hambright 10/31/94 8.8% 10/31/99 4,736 311
2061 Blair Street
Williamsport, PA 17701
Eugene Carter 08/31/94 8.3% 08/31/98 8,367 115
75 Candle Light Ln. S.W.
Atlanta, GA 30331
Ashley J. Oudekerk 10/31/94 8.8% 10/31/99 1,471 -
1291 Springmont Court
Lawrenceville, GA 30243
Kathryn M. Calhoun 08/31/94 8.3% 08/31/99 47,268 1,625
2247 Saluda Lane
Acworth, GA 30101
Ernest E. Rice 09/30/94 8.8% 09/30/99 35,053 767
3171 Harrison Road
East Leroy, MI 49051
</TABLE>
<PAGE> 15
KELLOGG COMPANY SALARIED 12
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID
IDENTITY AND ADDRESS AMOUNT ---------------------- BALANCE AT
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END
<S> <C> <C> <C> <C>
Lynn M. Hagelshaw $ 33,000 $ 3,682 $ 1,703 $ 28,872
1410 Eight Mile Road
Union City, MI 49094
David A. Brewer 15,000 1,378 634 13,622
294 Battle Creek Avenue
Battle Creek, MI 49015
Charlie H. Lake 50,000 5,476 2,875 44,524
1013 Northway Drive
Charlotte, MI 48813
Brenda Christopher 2,400 369 72 2,031
130 Cheever
Dracut, MA 01826
Richard L. Kilgore 7,000 483 231 6,422
67841 N. Big Hill Rd.
Sturgis, MI 49091
Edward L. Johnson 37,281 2,678 980 33,944
891 N. Washington
Battle Creek, MI 49017
Pamela S. Wilcox 20,000 519 331 19,481
194 Eldred Street
Battle Creek, MI 49015
<CAPTION>
TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS ---------------------------------------- ---------------------
OF OBLIGOR LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C>
Lynn M. Hagelshaw 08/31/94 8.3% 08/31/99 $ 28,872 $ 397
1410 Eight Mile Road
Union City, MI 49094
David A. Brewer 09/30/94 8.8% 09/30/99 13,622 596
294 Battle Creek Avenue
Battle Creek, MI 49015
Charlie H. Lake 09/30/94 8.8% 09/30/99 44,524 649
1013 Northway Drive
Charlotte, MI 48813
Brenda Christopher 01/31/95 9.5% 01/31/97 2,031 -
130 Cheever
Dracut, MA 01826
Richard L. Kilgore 08/31/94 8.3% 08/31/99 6,422 309
67841 N. Big Hill Rd.
Sturgis, MI 49091
Edward L. Johnson 08/31/94 8.3% 08/31/98 33,944 1,167
891 N. Washington
Battle Creek, MI 49017
Pamela S. Wilcox 03/31/95 10.0% 03/31/00 19,481 325
194 Eldred Street
Battle Creek, MI 49015
</TABLE>
<PAGE> 16
KELLOGG COMPANY SALARIED
SAVINGS AND INVESTMENT PLAN
13
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID
IDENTITY AND ADDRESS AMOUNT ---------------------- BALANCE AT
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END
<S> <C> <C> <C> <C>
Rebecca A. Clark $ 12,000 $ 1,339 $ 619 $ 10,499
5267 Longmeadow Dr.
Memphis, TN 38134
Dolores M. Smith 20,000 2,231 1,060 17,498
723 W. Service Dr.
Coldwater, MS 38618
Jerry L. Warren 50,000 5,578 2,580 43,746
Route 5, Box 77
Council Bluffs, IA 51503
Dixie J. Coss 3,500 433 122 3,067
23233 Mulvaney Road
Battle Creek, MI 49017
<CAPTION>
TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS ---------------------------------------- ---------------------
OF OBLIGOR LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C>
Rebecca A. Clark 08/31/94 8.3% 08/31/99 $ 10,499 $ 144
5267 Longmeadow Dr.
Memphis, TN 38134
Dolores M. Smith 08/31/94 8.3% 08/31/99 17,498 241
723 W. Service Dr.
Coldwater, MS 38618
Jerry L. Warren 08/31/94 8.3% 08/31/99 43,746 602
Route 5, Box 77
Council Bluffs, IA 51503
Dixie J. Coss 09/30/94 8.8% 09/30/97 3,067 112
23233 Mulvaney Road
Battle Creek, MI 49017
</TABLE>
<PAGE> 17
KELLOGG COMPANY SALARIED 14
SAVINGS AND INVESTMENT PLAN
ITEM 27D - SCHEDULE OF REPORTABLE TRANSACTIONS - YEAR ENDED OCTOBER 31, 1995 (1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CURRENT VALUE AT TRANSACTION DATE COST OF NET
NET NET SECURITIES REALIZED
IDENTITY OF ISSUE PURCHASE PRICE SALES PRICE SOLD GAIN
<S> <C> <C> <C> <C>
Allstate Life GIC #5686-01
8.13% 12/1/98 $19,248,097 $ - $ - $ -
John Hancock GAC 5917-10000
8.30% 6/1/95 34,697,979 34,697,979
John Hancock GIC #7606
7.87% 12/1/98 19,061,335
</TABLE>
(1) Represents Plan's interest in a transaction (or a series of transactions
of the same issue) in excess of five percent of the Plan's assets
available at November 1, 1994.
