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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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, 1996
COMMISSION FILE NUMBER 1-4171
---------------------------
KELLOGG COMPANY
(Exact Name of Registrant as Specified in its Charter)
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DELAWARE 38-0710690
State of Incorporation I.R.S. Employer Identification No.
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ONE KELLOGG SQUARE
BATTLE CREEK, MICHIGAN 49016-3599
(Address of Principal Executive Offices)
REGISTRANT'S TELEPHONE NUMBER: (616) 961-2000
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class: Name of each exchange on which registered:
COMMON STOCK, $0.25 PAR VALUE PER SHARE NEW YORK STOCK EXCHANGE
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Securities registered pursuant to Section 12(g) of the Act: NONE
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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. [X]
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 $7,657,691,738 as determined by the
February 28, 1997 closing price of $68.50 for one share of common stock on the
New York Stock Exchange.
As of February 28, 1997, 208,986,548 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, 1996, are incorporated by reference into Part II and Part IV
of this Report.
Portions of the registrant's definitive Proxy Statement, dated March 13, 1997,
for the Annual Meeting of Stockholders to be held April 25, 1997, 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 and distributes toaster
pastries, frozen waffles, crispy marshmallow squares, and cereal bars. The
Company also markets several other convenience food products in various
locations throughout the world. On December 16, 1996, the Company acquired the
Lender's(R) Bagels business from Kraft Foods, Inc. The purchase included three
Lender's plants and is further described in the Company's Annual Report under
the caption "Liquidity and capital resources" on Page 17 and in Note 2 to the
Consolidated Financial Statements on Page 23. In 1996 the Company also purchased
a convenience foods plant in Pikeville, Kentucky.
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 material costs. Refer to Note 11 to
the Consolidated Financial Statements contained in the Company's Annual Report
on Pages 26 and 27.
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
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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) Two Scoops(R) Raisin Bran, Rice Krispies(R), Rice
Krispies Treats(R), Smacks(R), Special K(R)and Kellogg's Honey Crunch Corn
Flakes(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; Lender's(R) for
Bagels; and Rice Krispies Treats(TM) for crispy marshmallow squares.
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(R) for Kellogg's Corn Flakes(R).
The slogans "The Best To You Each Morning"(R), "The Original and Best", 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 generally 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 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 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 $84.3 million in
1996, $72.2 million in 1995, and $71.7 million in 1994.
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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 currently in substantial
compliance with all material environmental regulations affecting the Company and
its properties.
Employees. At December 31, 1996, the Company had 14,511 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 ended
December 31, 1996, 1995, and 1994, and identifiable segment assets and corporate
assets, consisting principally of cash and cash equivalents, at the related
year-ends are presented in Note 13 to the Consolidated Financial Statements on
Page 27 of the Company's Annual 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 totaling 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 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 expected to commence operation in 1997. The
Company also purchased a cereal plant in Ecuador in early 1997.
The Company is currently constructing the W.K. Kellogg Institute for Food
and Nutrition Research, which is expected to open in late 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 February 28, 1997, 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..................59
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..................64
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.........................49
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.
Jean-Louis Gourbin
Executive Vice President, President -- Kellogg Asia-Pacific...................49
Mr. Gourbin joined Kellogg France in 1983. He was promoted to President and
CEO -- Kellogg Canada Inc. in 1990. In 1995, he was named Managing Director --
Kellogg (Aust.) Pty. Ltd. Mr. Gourbin was appointed Executive Vice President and
President, Kellogg Asia-Pacific in December 1996.
Carlos M. Gutierrez
Executive Vice President -- Business Development..............................43
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, and Executive Vice President --
Business Development in December 1996.
Thomas A. Knowlton
Executive Vice President, President -- Kellogg North America..................50
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.................53
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..........................59
Mr. Clark joined the Company as Senior Vice President, General Counsel and
Secretary in 1989.
Robert L. Creviston
Senior Vice President -- Human Resources......................................55
Mr. Creviston joined the Company as Vice President -- Employee Relations in
1982. He was named Senior Vice President -- Human Resources in 1991.
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John R. Hinton
Senior Vice President -- Administration and Chief Financial Officer...........51
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.
Jay W. Shreiner
Senior Vice President and Chief Information Officer...........................47
Mr. Shreiner joined the Company as Assistant Treasurer in 1983. He was
named Vice President -- Information Services in 1990 and Senior Vice President
and Chief Information Officer in 1995.
Joseph M. Stewart
Senior Vice President -- Corporate Affairs....................................54
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..................52
Mr. Teale joined Kellogg Company of Great Britain Limited in 1966. He was
named Vice President -- Cereal Manufacturing of the Company's U.S. Food Products
Division in 1990 and Senior Vice President -- Worldwide Operations and
Technology in 1994.
Alan Taylor
Vice President -- Corporate Controller........................................45
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 on page 27 of the
Company's Annual Report 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 pages 14 and 15 of the Company's Annual Report. Such information should be
read in conjunction with the Consolidated Financial Statements of the Company
and Notes thereto included in Item 8 of this Report.
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 14 through 19 of the Company's Annual Report.
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. 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 Company's
Annual Report.
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 -- Refer to the Company's Proxy Statement dated March 13, 1997,
for the Annual Meeting of Stockholders to be held on April 25, 1997, under the
caption "Election of Directors" on pages 3 through 7, which information is
incorporated herein by reference.
Executive Officers of the Registrant -- Refer to "Executive Officers of the
Registrant" under Item 4A at pages 5 and 6 of this Report.
ITEM 11. EXECUTIVE COMPENSATION
Refer to the Company's Proxy Statement dated March 13, 1997, for the Annual
Meeting of Stockholders to be held on April 25, 1997, under the captions
"Executive Compensation" and "Selected Benefit Plans" at pages 10 through 12 and
12 through 13, which information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Refer to the Company's Proxy Statement dated March 13, 1997, for the Annual
Meeting of Stockholders to be held on April 25, 1997, under the caption
"Security Ownership" at pages 2 through 3, which information is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Refer to the Company's Proxy Statement dated March 13, 1997, for the Annual
Meeting of Stockholders to be held on April 25, 1997, under the captions "About
The Board of Directors" at page 5, and "Stock Option Loans and Executive Officer
Indebtedness" at page 13, 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 January 31,
1997, appearing on pages 20 through 28 of the Company's Annual Report to
Stockholders for the fiscal year ended December 31, 1996, are incorporated
herein by reference:
(A)1. CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Earnings for the years ended December 31, 1996,
1995, and 1994.
Consolidated Statement of Shareholders' Equity for the years ended December
31, 1996, 1995, and 1994.
Consolidated Balance Sheet at December 31, 1996 and 1995.
Consolidated Statement of Cash Flows for the years ended December 31, 1996,
1995, and 1994.
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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Schedule II -- Valuation Reserve............................ 10
Report of Independent Accountants........................... 11
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This Consolidated Financial Statement Schedule should be read in
conjunction with the Consolidated Financial Statements and Notes thereto
included in the Company's Annual Report to Stockholders for the fiscal year
ended December 31, 1996.
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All other financial statement schedules are omitted because they are not
applicable.
(A)3. EXHIBITS
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EXHIBIT NO. DESCRIPTION
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3.01 Amended Restated Certificate of Incorporation of Kellogg
Company.
3.02 Bylaws of Kellogg Company, as amended, incorporated by
reference to Exhibit 3.02 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995,
Commission file number 1-4171.
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.*
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.*
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<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
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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, incorporated by reference to Exhibit 10.10 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, Commission file number 1-4171.*
10.11 Stock Compensation Program for Non-Employee Directors of
Kellogg Company, as amended.*
13.01 Pages 14 through 28 of the Company's Annual Report to
Stockholders for the fiscal year ended December 31, 1996.
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, 1996, 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, 1996.
99.02 Kellogg Company Salaried Savings and Investment Plan Annual
Report on Form 11-K for the fiscal year ended October 31,
1996.
</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
On November 18, 1996 the Company filed a Form 8-K in connection with the
purchase of the Lenders(R) Bagels business from Kraft Foods, Inc.
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SCHEDULE II -- VALUATION RESERVE
(in millions)
<TABLE>
<CAPTION>
1996 1995 1994
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<S> <C> <C> <C>
Balance at January 1........................................ $ 6.4 $ 6.2 $ 6.0
Addition charged to costs and expenses...................... 0.7 0.8 1.8
Doubtful accounts charged to reserves....................... (0.4) (0.5) (0.9)
Currency translation adjustments............................ (0.1) (0.1) (0.7)
----- ----- -----
Balance at December 31...................................... $ 6.6 $ 6.4 $ 6.2
===== ===== =====
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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 January 31, 1997, appearing in the 1996 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
January 31, 1997
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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 27th day of March
1997.
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 27, 1997
--------------------------------------------- Executive Officer; Director
Arnold G. Langbo (Principal Executive Officer)
/s/ JOHN R. HINTON Senior Vice President, Chief March 27, 1997
--------------------------------------------- Financial Officer (Principal
John R. Hinton Financial Officer)
/s/ ALAN TAYLOR Vice President and Corporate March 27, 1997
--------------------------------------------- Controller (Principal Officer)
Alan Taylor
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 27, 1997
---------------------------------------
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)
- ----------- ----------- -------------
<C> <S> <C>
3.01 Amended Restated Certificate of Incorporation of Kellogg
Company. E
3.02 Bylaws of Kellogg Company, as amended, incorporated by
reference to Exhibit 3.02 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995,
Commission file number 1-4171. IBRF
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
</TABLE>
13
<PAGE> 14
<TABLE>
<C> <S> <C>
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
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, incorporated by
reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, Commission file number 1-4171.* IBRF
10.11 Stock Compensation Program for Non-Employee Directors of Kellogg Company, as amended.* E
13.01 Pages 14 through 28 of the Company's Annual Report to Stockholders for the fiscal year
ended December 31, 1996. 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, 1996, 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, 1996. E
99.02 Kellogg Company Salaried Savings and Investment Plan Annual Report on Form 11-K for
the fiscal year ended October 31, 1996. 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 19, 1996)
FIRST
The name of this corporation is KELLOGG COMPANY.
SECOND
Its registered office, in the State of Delaware, is located at No. 100
West Tenth Street, in the City of Wilmington, County of New Castle. The name
and address of its registered agent is The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware.
THIRD
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be now or hereafter organized under the
General Corporation Law of Delaware.
FOURTH
The total number of shares of capital stock which this Corporation
shall have authority to issue is 500,000,000 shares of common stock of the par
value of $0.25 per share. A statement of the designations, dividend rights,
voting powers, preferences and rights, and the qualifications, limitations or
<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
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.
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> 1
EXHIBIT 10.11
STOCK COMPENSATION PROGRAM FOR
NON-EMPLOYEE DIRECTORS OF KELLOGG COMPANY (AS AMENDED)
This is the Stock Compensation Program for Non-Employee Directors of Kellogg
Company (the "Program").
1. Purpose. The purpose of the Program is to attract and retain outstanding
non-employee directors by enabling them to participate in the Company's growth
through automatic, non-discretionary awards of shares of common stock of the
Company.
2. Eligibility. Eligibility for participation in the Program is limited to
persons then currently serving as directors of the Company who are not
"employees" of the Company (or any of its subsidiaries) within the meaning of
the Employee Retirement Income Security Act of 1974 or for federal income tax
withholding purposes (the "Participants").
3. Stock Available for the Program. Shares of stock available for issuance
pursuant to the Program may be either authorized but unissued shares or shares
which have been or may be reacquired by the Company including Treasury shares of
the common stock of the Company, $0.25 par value (the "Stock"). An aggregate of
187,200 shares of the Stock shall be so available. No awards shall be made under
the Program after 1999.
4. Awards of Restricted Stock. Awards of 500 shares of Stock shall be made to
each Participant with at least one year of service as a member of the Board
following each Annual Meeting of Stockholders. All such Stock shall be
restricted, in that the Participants may not sell, transfer or otherwise
encumber the shares and the shares will be placed in a trust and will not be
available to a Participant until his or her service as a member of the Board of
Directors is terminated.
5. Rights of Participants. The Company shall establish a bookkeeping account in
the name of each Participant (the "Stock Account"). As of the date that shares
are awarded to a Participant, the Participant's Stock Account shall be adjusted
to reflect such shares and an aggregate number of shares credited to each
Participant on such date shall be transferred by the Company to the Kellogg
Company Grantor Trust for Non-Employee Directors. Except for the right to direct
the Trustee as to the manner which the shares are to be voted, a Participant
shall not have any rights with respect to any shares credited to the
Participant's Stock Account and transferred to the Trust until the date the
Participant ceases, for any reason, to serve as a director of the Company.
6. Changes in Capitalization or Organization. Nothing contained in this document
shall alter or diminish in any way the right and authority of the Company to
effect changes in its capital or organizational structure; provided, however,
that the following procedures shall be recognized.
6.1. Stock Split, Stock Dividend, or Extraordinary Distribution. In the event
the number of shares of common stock of the Company is increased at any time by
a stock split, by declaration by the Board of Directors of the Company of a
dividend payable only in shares of such stock, or by any other extraordinary
distribution of shares, the number of shares granted pursuant to Article 4 above
shall be proportionately adjusted.
6.2. Organizational Changes. In the event a merger, consolidation,
reorganization, or other change in corporate structure materially changes the
terms or value of the common stock of the Company, the number of shares granted
pursuant to Article 4 above shall be adjusted in such manner as the Board of
Directors in its sole discretion shall determine to be equitable and consistent
with the purposes of the Program. Such determination shall be conclusive for all
purposes with respect to the grant made in Article 4 above.
7. Listing, Registration, and Legal Compliance. Each award made pursuant to
Article 4 above shall be subject to the requirement that if at any time counsel
to the Company shall determine that the listing, registration or qualification
thereof or of any shares of the stock subject thereto upon any securities
exchange or under any foreign, federal or state securities or other law or
regulation, or the consent or approval of any governmental body or the taking of
any other action to comply with or otherwise with respect to any such law or
regulation, is necessary or desirable as a condition to or in connection with
such award or delivery of shares of the Stock thereunder, no such award may be
made or implemented unless such listing, registration, qualification, consent,
approval or other action shall have been effected or obtained free of any
conditions not acceptable to the Company. The holder of any such award shall
supply the Company with such certificates, representations and information as
the Company shall request and shall otherwise cooperate with the Company in
effecting or obtaining such listing, registration, qualification, consent,
approval or other action.
8. Obligation to Reelect. Nothing in this Program shall be deemed to create any
obligation on the part of the Board of Directors to nominate any director for
reelection by the Company's shareholders.
9. Termination or Amendment of the Program. The Board of Directors reserves the
right to terminate or amend the Program at any time; provided, however, that
such action shall not adversely affect the rights of any Participant under its
provisions with respect to awards of the Stock theretofore made, and provided
further that such action shall not increase the amount of authorized and
unissued shares of the Stock available for the Program as specified in Article 3
above or materially increase the benefits to Participants.
10. Effective Date. This Program shall become effective as of the date that it
is ratified by the stockholders and no award made hereunder shall be effective
unless the Program is so ratified.
A-1
<PAGE> 1
Exhibit 13.01
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
OVERVIEW
Kellogg Company operates in a single industry - manufacturing and marketing
grain-based convenience food products including ready-to-eat cereal, toaster
pastries, frozen waffles, cereal bars, and bagels throughout the world. During
1996, the Company maintained its global market leadership position with a 40%
annual share of worldwide cereal category volume; 34% in North America, 46% in
Europe, 45% in Asia-Pacific, and 63% in Latin America. In North America, the
Company continued to hold the number one market share position in the toaster
pastry, cereal/granola bar, and frozen waffle categories. With the recent
acquisition of the Lender's Bagels business, the Company has added to its
product portfolio the largest U.S. manufacturer of pre-packaged bagels.
[GRAPH]
1996 Global Market Share (volume) - The 1996 Global Market Share (volume) graph
shows in pie chart form, the relative proportion of the Company's 1996 global
market share volume compared to others as follows: Kellogg 40%, Other 60%.
[END GRAPH]
The Company's 1996 results were negatively impacted by competitive conditions
in the U.S. ready-to-eat cereal market, in which significant price reductions
were undertaken by all major competitors during the year. In an effort to
improve the brand value proposition to the consumer, the Company implemented
several pricing actions in 1996, most notably reductions announced June 10,
1996, averaging 19% on brands comprising approximately two-thirds of its U.S.
cereal business. Following an integrated strategy, the Company combined its
price reductions with reduced marketing expenditures, while competitors
continued heavy deep-discount promotional spending during most of the year. As
a result, the Company reported declines in ready-to-eat cereal volume,
consolidated net sales, net earnings and earnings per share (excluding
non-recurring charges and other unusual items) versus 1995.
Despite the negative impact on profitability in the short term,
management believes these pricing actions are a necessary part of a long-term
strategy initiated in early 1994 to improve the Company's pricing and cost
structure. This strategy includes pricing based on brand differentiation,
elimination of inefficient price promotion spending, and reduction of operating
costs through productivity and streamlining programs. Management continues to
believe that execution of this long-term strategy has positioned both the
Company and the ready-to-eat cereal category for profitable growth in future
years.
14
<PAGE> 2
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(millions, except per share data and number of employees)
(a)(b)
Earnings
(a) before Average
Net % Operating % accounting % shares
sales Growth profit Growth change Growth outstanding
- --------------------------------------------------------------------------------------------------
10-year
compound
growth rate 7% 4% 5%
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $6,676.6 (5)% $958.9 14 % $531.0 8% 212.4
1995 7,003.7 7 837.5 (28) 490.3 (30) 219.2
1994 6,562.0 4 1,162.6 16 705.4 4 224.2
1993 6,295.4 2 1,004.6 (5) 680.7 - 231.5
1992 6,190.6 7 1,062.8 3 682.8 13 238.9
1991 5,786.6 12 1,027.9 16 606.0 21 241.2
1990 5,181.4 11 886.0 21 502.8 19 241.6
1989 4,651.7 7 732.5 (8) 422.1 (12) 244.2
1988 4,348.8 15 794.1 15 480.4 21 246.4
1987 3,793.0 14 691.2 7 395.9 24 247.4
1986 3,340.7 14 647.4 16 318.9 13 247.0
==================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Per Common Share Data (c)
----------------------------------------
(a)(b) Net Cash
Earnings (d) Net Cash provided by/
before Price/ Stock provided by (used in) Common
accounting Cash earnings price operating financing stock
change dividends ratio range activities activities repurchases
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10-year
compound
growth rate 7% 12%
1996 $2.50 $1.62 26 $62 - 81 $711.5 $94.0 $535.7
1995 2.24 1.50 34 53 - 80 1,041.0 (759.2) 374.7
1994 3.15 1.40 18 48 - 61 966.8 (559.5) 327.3
1993 2.94 1.32 19 47 - 68 800.2 (464.2) 548.1
1992 2.86 1.20 23 54 - 75 741.9 (422.6) 224.1
1991 2.51 1.075 26 35 - 67 934.4 (537.7) 83.6
1990 2.08 0.96 18 29 - 39 819.2 (490.9) 86.9
1989 1.73 0.86 20 29 - 41 533.5 (143.2) 78.6
1988 1.95 0.76 16 25 - 34 492.3 52.1 33.6
1987 1.60 0.64 16 19 - 34 523.5 (130.5) 22.6
1986 1.29 0.51 20 17 - 29 542.7 (144.1) -
=============================================================================================
</TABLE>
<TABLE>
<CAPTION>
Return on Return on
Total average Shareholders' average Property, Capital
assets assets equity equity net expenditures Depreciation
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $5,050.0 11 % $1,282.4 37 % $2,932.9 $307.3 $251.5
1995 4,414.6 11 1,590.9 29 2,784.8 315.7 258.8
1994 4,467.3 16 1,807.5 40 2,892.8 354.3 256.1
1993 4,237.1 16 1,713.4 37 2,768.4 449.7 265.2
1992 4,015.0 11 1,945.2 21 2,662.7 473.6 231.5
1991 3,925.8 16 2,159.8 30 2,646.5 333.5 222.8
1990 3,749.4 14 1,901.8 28 2,595.4 320.5 200.2
1989 3,390.4 14 1,634.4 30 2,406.3 508.7 167.6
1988 3,297.9 16 1,483.2 36 2,131.9 538.1 139.7
1987 2,680.9 17 1,211.4 38 1,738.8 478.4 113.1
1986 2,084.2 17 898.4 40 1,281.1 329.2 92.7
======================================================================================================
</TABLE>
<TABLE>
<CAPTION>
(e) Pretax
Debt to interest (f)
Long-term market coverage Current Advertising R&D Number of
debt capitalization (times) ratio expense expense employees
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $726.7 14 % 13 0.7 $778.9 $84.3 14,511
1995 717.8 5 12 1.1 891.5 72.2 14,487
1994 719.2 8 23 1.2 856.9 71.7 15,657
1993 521.6 7 27 1.0 772.4 59.2 16,151
1992 314.9 3 33 1.2 782.3 56.7 16,551
1991 15.2 3 17 0.9 708.3 34.7 17,017
1990 295.6 7 10 0.9 648.5 38.3 17,239
1989 371.4 10 10 0.9 611.4 42.9 17,268
1988 272.1 9 14 0.9 560.9 42.0 17,461
1987 290.4 7 14 0.9 486.9 40.0 17,762
1986 264.1 6 13 1.1 355.6 38.2 17,383
=============================================================================================
</TABLE>
(a) Operating profit for 1996 includes non-recurring charges of $136.1 ($97.8
after tax or $.46 per share). Other expense for 1996 includes a charge of $35.0
($22.3 after tax or $.11 per share) for a contribution to the Kellogg's
Corporate Citizenship Fund. Operating profit for 1995 includes non-recurring
charges of $421.8 ($271.3 after tax or $1.24 per share). Operating profit for
1993 includes non-recurring charges of $64.3 ($41.1 after tax or $.18 per
share). Refer to Management's Discussion and Analysis on pages 14-19 and Notes 3
and 4 within the Notes to Consolidated Financial Statements for further
explanation of non-recurring charges and other unusual items for years 1994 -
1996.
(b) Earnings before accounting change exclude the effect of adopting the
following Statements of Financial Accounting Standards (SFAS): in 1992 a charge
of $251.6 ($1.05 per share) net of $144.6 of income tax benefit for the
transition effect of SFAS #106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," and in 1989 a gain of $48.1 ($.20 per share) for
SFAS #96 "Accounting for Income Taxes."
(c) All per share data retroactively restated to reflect a 2 for 1 stock split
in 1991.
(d) The price/earnings ratio was calculated based on year-end stock price
divided by earnings before the accounting changes referred to in note (b). These
earnings include the non-recurring charges and other unusual items referred to
in note (a). Excluding the impact of these unusual items, the price/earnings
ratio in 1996, 1995, and 1993 would have been 21, 22, and 19, respectively.
(e) Debt to market capitalization was calculated based on year-end total debt
balance divided by market capitalization. Market capitalization was calculated
based on year-end stock price multiplied by the number of shares outstanding at
year-end.
(f) The number of employees for 1996 includes approximately 1,100 positions
added as a result of the acquisition of Lender's Bagels and other businesses
during the year.
15
<PAGE> 3
1996 COMPARED TO 1995
Total volume was up 1% for 1996, led by strength in the Company's Asia-Pacific
and Latin American ready-to-eat cereal shipments and low double-digit growth in
other convenience foods volume. These volume gains offset softness in the
Company's U.S. and United Kingdom ready-to-eat cereal markets. Significantly
impacted by a U.S. ready-to-eat cereal volume decline of 4%, global cereal
volume was down 1%.
Net sales were down 5%, primarily reflecting the price reductions, ready-to-eat
cereal volume loss, and unfavorable product mix and foreign currency movements.
On a geographic basis, net sales versus the prior year were:
<TABLE>
<CAPTION>
================================================================================
NET SALES BY GEOGRAPHIC AREA - 1996 VS. 1995 % CHANGE
- --------------------------------------------------------------------------------
U.S. Europe All other Consolidated
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Business -7% -1% +8% -4%
Foreign currency
impact -- -3% -3% -1%
- --------------------------------------------------------------------------------
Total change -7% -4% +5% -5%
================================================================================
</TABLE>
The gross profit margin was 53.2%, down 1.4 percentage points from the prior
year, reflecting the price reductions, partially offset by operational cost
savings which resulted in an improvement over 1995 in the cost of goods sold
per unit volume shipped.
Selling and administrative expense as a percentage of net sales (SGA%) was
36.8%, essentially flat with the prior year. The SGA% was maintained at a
constant level primarily through a reduction in advertising and promotional
spending in the U.S. market, which offset the negative impact on this ratio of
reduced prices versus last year.
Operating profit included non-recurring charges primarily related to
streamlining initiatives of $136.1 million for 1996 ($97.8 million after tax or
$.46 per share) and $421.8 million for 1995 ($271.3 million after tax or $1.24
per share). (Refer to the section on non-recurring charges on pages 18 and 19
for further information.)
<PAGE> 4
Excluding non-recurring charges, operating profit declined 13% to $1.09
billion, principally attributable to the decrease in net sales. Operating
profit results on a geographic basis were:
<TABLE>
<CAPTION>
================================================================================
OPERATING PROFIT BY GEOGRAPHIC AREA - 1996 VS. 1995
- --------------------------------------------------------------------------------
(millions) U.S. Europe All other Consolidated
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996 operating
profit as reported $611.2 $204.4 $143.3 $958.9
Non-recurring charges 24.1 76.5 35.5 136.1
- --------------------------------------------------------------------------------
1996 OPERATING
PROFIT EXCLUDING
NON-RECURRING
CHARGES $635.3 $280.9 $178.8 $1,095.0
- --------------------------------------------------------------------------------
1995 operating
profit as reported $443.1 $293.6 $100.8 $837.5
Non-recurring charges 325.0 38.4 58.4 421.8
- --------------------------------------------------------------------------------
1995 OPERATING
PROFIT EXCLUDING
NON-RECURRING
CHARGES $768.1 $332.0 $159.2 $1,259.3
- --------------------------------------------------------------------------------
% change - 1996 vs.
1995 excluding
non-recurring
charges:
Business -17% -11% +16% -11%
Foreign currency impact -- -4% -4% -2%
- --------------------------------------------------------------------------------
TOTAL CHANGE -17% -15% +12% -13%
================================================================================
</TABLE>
Gross interest expense, prior to amounts capitalized, was $69.4 million, in
line with the prior-year amount. Despite an increase in debt during the year,
total interest expense was maintained at prior-year levels due to the favorable
effect of lower rates on short-term borrowings.
Other expense for 1996 included a charge of $35.0 million ($22.3 million after
tax or $.11 per share), for a contribution to the Kellogg's Corporate
Citizenship Fund, a private trust established for charitable donations. This
contribution is expected to satisfy the charitable-giving plans of the trust
through the year 2000. Excluding this
<PAGE> 5
unusual item, other income, net, decreased $19.5 million to $1.6 million,
primarily due to foreign currency losses in Latin American markets and lower
interest income during 1996.
Excluding the effect of non-recurring charges and other unusual items, the
Company's 1996 effective income tax rate was 36.8%, down .7 percentage points
from the prior year, primarily due to favorable audit settlements in foreign
jurisdictions and country mix. The effective tax rate based on earnings as
reported was 38.2%.
Net earnings and earnings per share for 1996, as reported, increased 8% and
12%, respectively, from 1995. Excluding non-recurring charges and other
unusual items, earnings per share were $3.07, down 12% or $.41, consisting of
$.46 in business decline and $.05 in unfavorable foreign currency movements,
mitigated by $.07 from common stock repurchases and $.03 from the lower
effective tax rate. Excluding non-recurring charges and other unusual items,
net earnings were $651.1 million, down 14%. Foreign currency movements
negatively impacted net earnings by 3% in Europe, 4% in other non-U.S. areas,
and 1% on a consolidated basis.
1995 COMPARED TO 1994
The Company's total 1995 volume was up 4% versus the prior year, driven by
ready-to-eat cereal shipments in North American, Continental European, and
Asia-Pacific markets, combined with low double-digit growth in the Company's
other convenience foods volume. Latin America experienced slightly lower
cereal shipments, primarily due to recessionary conditions in Mexico. Global
ready-to-eat cereal volume increased 3%.
Consolidated net sales increased 7%, principally from volume growth and product
mix improvements. On a geographic basis, net sales versus the prior year were:
<TABLE>
<CAPTION>
================================================================================
NET SALES BY GEOGRAPHIC AREA - 1995 VS. 1994 % CHANGE
- --------------------------------------------------------------------------------
U.S. Europe All other Consolidated
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Business +6% +2% +18% +7%
Foreign currency impact -- +7% -13% --
- --------------------------------------------------------------------------------
TOTAL CHANGE +6% +9% +5% +7%
================================================================================
</TABLE>
16
<PAGE> 6
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.
Selling and administrative expense represented 36.6% of net sales, down .7
percentage points from the prior year. The decrease in SGA% reflected the
Company's continuing emphasis on cost containment and carefully managed
marketing spending.
Operating profit, excluding non-recurring charges of $421.8 million, increased
8% to $1.26 billion. Operating profit results on a geographic basis were:
<TABLE>
<CAPTION>
================================================================================
OPERATING PROFIT BY GEOGRAPHIC AREA - 1995 VS. 1994
- --------------------------------------------------------------------------------
(millions) U.S. Europe All other Consolidated
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 OPERATING
PROFIT EXCLUDING
NON-RECURRING
CHARGES (a) $768.1 $332.0 $159.2 $1,259.3
- --------------------------------------------------------------------------------
1994 OPERATING
PROFIT AS REPORTED $708.5 $287.5 $166.6 $1,162.6
- --------------------------------------------------------------------------------
% change - 1995 vs.
1994 excluding
non-recurring
charges:
Business +8% +7% +18% +9%
Foreign currency impact -- +8% -22% -1%
- --------------------------------------------------------------------------------
TOTAL CHANGE +8% +15% -4% +8%
================================================================================
</TABLE>
(a) Refer to operating profit table on page 16.
Gross interest expense, prior to amounts capitalized, increased to $69.8
million, 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.
Other income, net, 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 and expenses 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.
<PAGE> 7
The Company's effective income tax rate for 1995, excluding the effect of
non-recurring charges, was 37.5%, comparable to the 1994 rate of 37.6%. The
effective income tax rate based on earnings as reported was 38.4%.
Due primarily to the significant effect of non-recurring charges on 1995
results, net earnings and earnings per share, as reported, were down 30% and
29%, respectively, versus 1994. Excluding non-recurring charges and other
unusual items, net earnings were $761.6 million, up 8%, and earnings per share
were $3.48, up 10% or $.33, consisting of $.31 in business growth, $.05 in
common stock repurchases, and $.01 in tax rate reduction, partially offset by
$.04 in unfavorable foreign currency movements. 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 1%.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial condition remained strong during 1996. A strong cash
flow, combined with a program of issuing commercial paper and maintaining
worldwide credit facilities, provides adequate liquidity to meet the Company's
operational needs.
Net cash provided by operating activities during 1996 was $711.5 million,
compared to $1.04 billion in 1995. Cash flow from operations was down from
prior-year levels, due principally to decreased earnings, combined with
increased employee severance payments and other cash expenditures related to
the Company's ongoing productivity initiatives. (Refer to the section on
non-recurring charges on pages 18 and 19 for further information.)
Additionally, the Company contributed $81 million to a voluntary employee
benefit association (VEBA) trust for the initial funding of its nonpension
postretirement benefit obligations. The ratio of current assets to current
liabilities was .7 as of December 31, 1996, down from 1.1 at December 31, 1995,
primarily due to a reclassification of $500 million in long-term debt to
current maturity status.
Net cash used in investing activities was $786.8 million, principally comprised
of $307.3 million in capital spending and $505.2 million for the purchase of
the Lender's Bagels business and other acquisitions during the year.
Net cash provided by financing activities was $94.0 million, related to
issuances of debt to fund common stock repurchases and the acquisition of the
Lender's Bagels business, reduced by actual repurchases and dividend payments.
Dividends paid per share of common stock increased 8% to $1.62 in 1996.
<PAGE> 8
On December 16, 1996, the Company purchased certain assets and liabilities of
the Lender's Bagels business from Kraft Foods, Inc. for $466 million of cash,
including related acquisition costs. The acquisition was accounted for as a
purchase. Accordingly, the assets and liabilities of the acquired business are
included in the consolidated balance sheet as of December 31, 1996. The results
of Lender's operations from the date of the acquisition to December 31, 1996,
were not significant. The acquisition was initially financed through commercial
paper borrowings that were replaced on January 29, 1997, with $500 million of
7-year notes, at an effective interest rate of 6.354%. Accordingly, an
equivalent amount of commercial paper borrowings were classified as long-term
debt in the December 31, 1996, balance sheet.
17
<PAGE> 9
The remainder of long-term debt outstanding at year-end consisted principally
of $200 million of three-year notes issued in 1994, $200 million of five-year
notes issued in 1993, and $300 million of five-year notes issued in 1992. The
$200 million of three-year notes and the $300 million of five-year notes will
mature during the third quarter of 1997 and are classified in current
maturities as of December 31, 1996. Management currently intends to replace
these borrowings with new long-term debt issuances as of the maturity dates
and, as of year-end 1996, had entered into $150 million notional amount of
interest rate hedges to effectively fix the U.S. Treasury rate on which an
equivalent amount of future issuances would be priced. Short-term debt
outstanding at year-end consisted principally of U.S. commercial paper. The
ratio of total debt to market capitalization at December 31, 1996, was 14%, up
from 5% at December 31, 1995.
Under existing plans authorized by the Company's Board of Directors, management
spent $535.7 million during 1996 to repurchase 7.4 million shares of the
Company's common stock at an average price of $73 per share. On December 6,
1996, the Company's Board of Directors authorized an additional repurchase
amount of up to $400 million, bringing the open authorization to $415.1 million
as of December 31, 1996.
During 1996, the Company continued to enjoy the highest available credit
ratings on both its long-term debt and commercial paper. In January 1997, both
Standard & Poor's and Moody's lowered their ratings on the Company's senior
notes from Aaa to Aa and Aa1, respectively, citing the expectation that debt
will constitute a much larger component of the Company's capital structure in
the future, as a result of large stock repurchases, acquisition of the Lender's
business, and recent charges for streamlining initiatives. Both ratings
agencies confirmed the Company's Prime-1 commercial paper rating. Despite the
reduction, the Company's senior debt continues to carry one of the highest
credit ratings in the food industry, and management believes that this change
will have an insignificant impact on future borrowing costs.
At December 31, 1996, the Company had available an unused "shelf registration"
of $200 million with the Securities and Exchange Commission to provide for the
issuance of debt in the United States. The proceeds of such an offering would
be added to the Company's working capital and be available for general
corporate purposes.
NON-RECURRING CHARGES AND OTHER UNUSUAL ITEMS
During 1995 and 1996, management commenced numerous productivity and
operational streamlining initiatives around the world in an effort to optimize
the Company's cost structure and move toward a global business model. The
consolidation of functions and the rationalization of capacity resulted in
significant non-recurring charges during 1995 and 1996 which are expected to be
far outweighed by ongoing annual savings in future years.
During 1995, the Company incurred pre-tax non-recurring charges of $348.0
million related to operational streamlining initiatives in the U.S., Australia,
and Europe. The Company eliminated approximately 2,000 employee positions by
the end of 1996, through a combination of voluntary early retirement
incentives, voluntary and involuntary severance programs, and attrition.
Associated with these 1995 initiatives, the Company incurred during 1996 an
additional $22 million in costs related to workforce and production
redeployment which were expensed as incurred throughout the year. At year-end
1995, the Company had $94 million of reserves for future cash outlays related
to these programs, of which $23 million was reversed during 1996 due to lower
than expected employee severance payments, asset removal costs, and other
favorable factors.
In 1996, the Company initiated a plan to better serve the Pan-European
marketplace by consolidating and reorganizing certain aspects of its European
operations, and took action to further streamline operations in the U.S. and
other international locations. As a result, approximately 600 additional
employee positions are expected to be eliminated by the end of 1997. Charges
related to 1996 initiatives were $122.1 million, which, in combination with the
aforementioned reversals of $23 million and redeployment expenditures of $22
million, resulted in net pre-tax non-recurring charges during 1996 of $121.1
million.
The charges incurred in 1995 and 1996 were comprised principally of costs for
employee retirement and severance benefits, training, and relocation; asset
write-off and removal; production redeployment; and related management
consulting. (Refer to Note 3 within the Notes to Consolidated Financial
Statements for further analysis of the charges and reserve utilization.) From
all of the streamlining initiatives currently under way, the Company incurred
pre-tax cash outlays of approximately $120 million in 1996 and expects to incur
$50 million in 1997. From these programs, the Company realized approximately
$80 million of pre-tax savings in 1996, and expects to achieve average annual
pre-tax savings
18
<PAGE> 10
of $160 million in 1997 and future years. These savings are not necessarily
indicative of future incremental earnings due to management's commitment to
invest in competitive business strategies, new markets, and growth
opportunities.
In addition to the non-recurring charges reported during 1995 and 1996 for
streamlining initiatives, the Company incurred charges for the following
unusual items:
- -- During 1995, the Company included in non-recurring charges $73.8 million
of asset impairment losses, which 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 in its North
American and Asia-Pacific operations.
- -- During the third quarter of 1996, the Company included in non-recurring
charges a provision of $15.0 million for the potential settlement of
certain litigation.
- -- During the fourth quarter of 1996, the Company included in other expense
a charge of $35.0 million for a contribution to the Kellogg's Corporate
Citizenship Fund, which is expected to satisfy the charitable-giving plans
of this private trust through the year 2000.
In summary, total pre-tax non-recurring charges and other unusual items were
$421.8 million in 1995 ($271.3 million after tax or $1.24 per share) and $171.1
million in 1996 ($120.1 million after tax or $.57 per share).
The foregoing discussion of non-recurring charges contains forward-looking
statements regarding amounts of headcount reductions, cash requirements, and
realizable savings. Actual amounts may vary depending on the final
determination of important factors such as identification of specific
employees to be separated from pre-determined pools; the impact of attrition on
involuntary separation programs; the level of employee participation in
out-placement programs, health care, and other separation benefits; actual
amounts of asset removal and relocation costs; dates of asset disposal and
costs to maintain assets up to the date of disposal; proceeds from asset
disposals; final negotiation of third party contract buy-outs; and other items.
<PAGE> 11
1997 OUTLOOK
Management believes the Company's implementation of certain pricing measures
during 1996 improved the long-term brand value proposition to the consumer, but
has negatively impacted profitability in the short term, extending through the
first quarter of 1997. However, management believes that, during 1997, the
Company will derive benefits from the continued implementation of its global
business model, including innovative and differentiated new-product
introductions and further operational efficiencies. The Company will continue
to pursue streamlining and productivity initiatives to optimize its cost
structure. Additionally, management expects continued record cereal volume
levels in the Company's Latin American and Asia-Pacific regions and strong
growth in other convenience foods volume.
Additional expectations for 1997 include an effective tax rate of 36-37%,
capital spending in line with the prior-year level of approximately $300
million, continued increases in shareholder dividends, and common stock
repurchase activity of approximately $415 million. Management expects total
interest expense for 1997 to increase by 70-80% over 1996 amounts due to higher
debt levels.
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 strong credit rating, balance sheet,
and earnings history provide a base for obtaining additional financial
resources at competitive rates and terms.
The foregoing projections of volume growth, profitability, capital spending,
shareholder dividends, and common stock repurchase activity are forward-looking
statements which involve risks and uncertainties. Actual 1997 results may
differ materially due to the impact of the Company's pricing strategies on
volumes; the level of marketing spending and/or incremental pricing actions
required to maintain the Company's market share leadership position; general
economic and market conditions; actual volumes and product mix; the levels of
spending on capital, continued streamlining initiatives, and other general and
administrative costs; raw material price and labor cost fluctuations; changes
in statutory tax law; interest rates available on short-term financing; the
impact of stock market conditions on common stock repurchase activity; and
other items.
19
<PAGE> 12
Kellogg Company and Subsidiaries
CONSOLIDATED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
Year ended December 31,
==========================================================================================
(millions, except per share data) 1996 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $6,676.6 $7,003.7 $6,562.0
- ------------------------------------------------------------------------------------------
Cost of goods sold 3,122.9 3,177.7 2,950.7
Selling and administrative expense 2,458.7 2,566.7 2,448.7
Non-recurring charges 136.1 421.8 -
- ------------------------------------------------------------------------------------------
OPERATING PROFIT 958.9 837.5 1,162.6
- ------------------------------------------------------------------------------------------
Interest expense 65.6 62.6 45.4
Other income (expense), net (33.4) 21.1 12.8
- ------------------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES 859.9 796.0 1,130.0
Income taxes 328.9 305.7 424.6
- ------------------------------------------------------------------------------------------
NET EARNINGS $531.0 $490.3 $705.4
- ------------------------------------------------------------------------------------------
NET EARNINGS PER SHARE $2.50 $2.24 $3.15
==========================================================================================
</TABLE>
Refer to Notes to Consolidated Financial Statements.
<PAGE> 13
Kellogg Company and Subsidiaries
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
========================================================================================================
Common stock Capital in Treasury stock
-------------------- excess of Retained ------------------
(millions, except per share data) shares amount par value earnings shares amount
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994 310.3 $77.6 $72.0 $3,409.4 82.4 ($1,653.1)
Stock options exercised 0.1 2.3
Net earnings 705.4
Dividends ($1.40 per share) (313.6)
Exchange adjustments
Minimum pension liability adjustment
Common stock repurchases 6.2 (327.3)
Other (5.7) 0.1 (0.2)
- --------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1994 310.4 77.6 68.6 3,801.2 88.7 (1,980.6)
Stock options exercised 0.7 0.2 36.6
Net earnings 490.3
Dividends ($1.50 per share) (328.5)
Exchange adjustments
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)
Stock options exercised 0.4 0.1 18.7
Net earnings 531.0
Dividends ($1.62 per share) (343.7)
Exchange adjustments
Common stock repurchases 7.4 (535.7)
Other 0.1 (6.5)
- --------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996 311.5 $77.9 $123.9 $4,150.3 101.9 ($2,903.4)
========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
=============================================================================
Minimum
pension Currency Total
liability translation shareholders'
(millions, except per share data) adjustment adjustment equity
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, January 1, 1994 ($25.3) ($167.2) $1,713.4
Stock options exercised 2.3
Net earnings 705.4
Dividends ($1.40 per share) (313.6)
Exchange adjustments 7.9 7.9
Minimum pension liability adjustment 25.3 25.3
Common stock repurchases (327.3)
Other (5.9)
- -----------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1994 -- (159.3) 1,807.5
Stock options exercised 36.8
Net earnings 490.3
Dividends ($1.50 per share) (328.5)
Exchange adjustments (34.6) (34.6)
Common stock repurchases (374.7)
Other (5.9)
- -----------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1995 -- (193.9) 1,590.9
Stock options exercised 18.8
Net earnings 531.0
Dividends ($1.62 per share) (343.7)
Exchange adjustments 27.6 27.6
Common stock repurchases (535.7)
Other (6.5)
- -----------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996 $ -- ($166.3) $1,282.4
=============================================================================
</TABLE>
Refer to Notes to Consolidated Financial Statements.
20
<PAGE> 14
Kellogg Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
At December 31,
==========================================================================================
(millions, except share data) 1996 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $243.8 $221.9
Accounts receivable, less allowances of $6.6 and $6.4 592.3 590.1
Inventories 424.9 376.7
Other current assets 267.6 240.1
- ------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 1,528.6 1,428.8
- ------------------------------------------------------------------------------------------
PROPERTY, NET 2,932.9 2,784.8
OTHER ASSETS 588.5 201.0
- ------------------------------------------------------------------------------------------
TOTAL ASSETS $5,050.0 $4,414.6
==========================================================================================
CURRENT LIABILITIES
Current maturities of long-term debt $501.2 $1.9
Notes payable 652.6 188.0
Accounts payable 335.2 370.8
Other current liabilities 710.0 704.7
- ------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 2,199.0 1,265.4
- ------------------------------------------------------------------------------------------
LONG-TERM DEBT 726.7 717.8
OTHER LIABILITIES 841.9 840.5
SHAREHOLDERS' EQUITY
Common stock, $.25 par value, 500,000,000 shares authorized
Issued: 311,524,437 shares in 1996 and 311,128,152 in 1995 77.9 77.8
Capital in excess of par value 123.9 105.2
Retained earnings 4,150.3 3,963.0
Treasury stock, at cost:
101,876,325 shares in 1996 and 94,423,270 in 1995 (2,903.4) (2,361.2)
Currency translation adjustment (166.3) (193.9)
- ------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 1,282.4 1,590.9
- ------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $5,050.0 $4,414.6
==========================================================================================
</TABLE>
Refer to Notes to Consolidated Financial Statements.
21
<PAGE> 15
KELLOGG COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
=========================================================================================
(millions) 1996 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings $531.0 $490.3 $705.4
Items in net earnings not requiring (providing) cash:
Depreciation 251.5 258.8 256.1
Pre-tax gain on sale of subsidiaries --- --- (26.7)
Deferred income taxes 58.0 (78.7) 24.5
Non-recurring charges, net of cash paid 90.6 385.3 ---
Other 14.5 9.1 22.2
Postretirement benefit contributions (156.8) (74.5) (71.5)
Changes in operating assets and liabilities (77.3) 50.7 56.8
- -----------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 711.5 1,041.0 966.8
- -----------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Additions to properties (307.3) (315.7) (354.3)
Acquisitions of businesses (505.2) --- ---
Proceeds from sale of subsidiaries --- --- 95.5
Property disposals 11.6 6.3 15.6
Other 14.1 0.5 7.8
- -----------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (786.8) (308.9) (235.4)
- -----------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net issuances (reductions) of notes payable,
with maturities less than or equal to 90 days 906.6 (86.8) (111.9)
Issuances of notes payable, with maturities
greater than 90 days 137.0 --- ---
Reductions of notes payable, with maturities
greater than 90 days (79.0) --- ---
Issuances of long-term debt --- --- 200.0
Reductions of long-term debt (3.4) (0.4) (2.9)
Issuances of common stock 18.8 36.8 2.3
Common stock repurchases (535.7) (374.7) (327.3)
Cash dividends (343.7) (328.5) (313.6)
Other (6.6) (5.6) (6.1)
- -----------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 94.0 (759.2) (559.5)
- -----------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 3.2 (17.3) (3.7)
- -----------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 21.9 (44.4) 168.2
Cash and cash equivalents at beginning of year 221.9 266.3 98.1
- -----------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $243.8 $221.9 $266.3
=========================================================================================
</TABLE>
Refer to Notes to Consolidated Financial Statements.
22
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Kellogg Company and Subsidiaries
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 interest associated with
significant capital projects.
Advertising
The costs of advertising are generally expensed as incurred.
Stock compensation
The Company follows Accounting Principles Board Opinion (APB) #25, "Accounting
for Stock Issued to Employees," in accounting for its employee stock options
and other stock-based compensation. Under APB #25, because the exercise price
of the Company's employee stock options equals the market price of the
underlying stock on the date of the grant, no compensation expense is
recognized. As permitted, the Company has elected to adopt the disclosure
provisions only of Statement of Financial Accounting Standards (SFAS) #123,
"Accounting for Stock-Based Compensation." (Refer to Note 7 for further
information.)
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.
<PAGE> 17
NOTE 2 ACQUISITION
On December 16, 1996, the Company purchased certain assets and liabilities of
the Lender's Bagels business from Kraft Foods, Inc. for $466 million in cash,
including related acquisition costs. The acquisition was accounted for as a
purchase. Accordingly, the assets and liabilities of the acquired business are
included in the consolidated balance sheet as of December 31, 1996. The results
of Lender's operations from the date of the acquisition to December 31, 1996,
were not significant. The acquisition was initially financed through commercial
paper borrowings which were replaced with long-term debt in January 1997.
The components of intangible assets included in the allocation of purchase
price, along with the related straight-line amortization periods, were:
<TABLE>
<CAPTION>
=============================================================
Amount Amortization
(millions) period (yrs.)
- -------------------------------------------------------------
<S> <C> <C>
Trademarks and tradenames $150.0 40
Non-compete covenants 20.0 5
Goodwill 183.6 40
- -------------------------------------------------------------
Total $353.6
=============================================================
</TABLE>
The unaudited pro forma combined historical results, as if the Lender's Bagels
business had been acquired at the beginning of fiscal 1996 and 1995,
respectively, are estimated to be:
<TABLE>
<CAPTION>
=============================================================
(millions, except per share data) 1996 1995
- -------------------------------------------------------------
<S> <C> <C>
Net sales $6,873.1 $7,219.4
Net earnings $524.3 $489.3
Net earnings per share $2.47 $2.23
=============================================================
</TABLE>
The pro forma results include amortization of the intangibles presented above
and interest expense on debt assumed issued to finance the purchase. The pro
forma results are not necessarily indicative of what actually would have
occurred if the acquisition had been completed as of the beginning of each of
the fiscal periods presented, nor are they necessarily indicative of future
consolidated results.
<PAGE> 18
NOTE 3 NON-RECURRING CHARGES
Operating profit for 1996 includes non-recurring charges of $136.1 million
($97.8 million after tax or $.46 per share), comprised of $121.1 million for
streamlining initiatives and $15.0 million for potential settlement of certain
litigation.
Operating profit for 1995 includes non-recurring charges of $421.8 million
($271.3 million after tax or $1.24 per share), comprised of $348.0 million for
streamlining initiatives and $73.8 million for asset impairment losses.
Streamlining initiatives
During 1995, the Company incurred pre-tax non-recurring charges of $348.0
million related to operational streamlining initiatives in the U.S., Australia,
and Europe. The Company eliminated approximately 2,000 employee positions by
the end of 1996, through a combination of voluntary early retirement
incentives, voluntary and involuntary severance programs, and attrition.
Associated with these 1995 initiatives, the Company incurred during 1996 an
additional $22 million in costs related to workforce and production
redeployment which were expensed as incurred throughout the year. At year-end
1995, the Company had $94 million of reserves for future cash outlays related
to these programs, of which $23 million was reversed during 1996 due to lower
than expected employee severance payments, asset removal costs, and other
favorable factors.
In 1996, the Company initiated a plan to better serve the Pan-European
marketplace by consolidating and reorganizing certain aspects of its European
operations, and took action to further streamline operations in the U.S. and
other international locations. As a result, approximately 600 additional
employee positions are expected to be eliminated by the end of 1997. Charges
related to 1996 initiatives were $122.1 million, which, in combination with the
aforementioned reversals of $23 million and redeployment expenditures of $22
million, resulted in net pre-tax non-recurring charges during 1996 of $121.1
million.
23
<PAGE> 19
From all of the streamlining initiatives currently underway, the Company
incurred pre-tax cash outlays of approximately $120 million in 1996 and expects
to incur $50 million in 1997. The components of the streamlining charges, as
well as reserve balances remaining at December 31, 1996 and 1995, were:
<TABLE>
<CAPTION>
=====================================================================================
Employee
retirement &
severance Asset Asset Other
(millions) benefits (a) write-offs removal costs Total
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 streamlining charges $183.6 $106.5 $39.5 $18.4 $348.0
Amounts utilized during 1995 (126.1) (106.5) (3.0) (18.4) (254.0)
- -------------------------------------------------------------------------------------
Remaining reserve at
December 31, 1995 57.5 --- 36.5 --- 94.0
1996 streamlining charges 31.4 37.5 13.5 38.7 121.1
Amounts utilized during 1996 (65.0) (37.5) (19.6) (38.7) (160.8)
- -------------------------------------------------------------------------------------
Remaining reserve at
December 31, 1996 $23.9 $ --- $30.4 $ --- $54.3
=====================================================================================
</TABLE>
(a) Includes approximately $100 and $5 of pension and postretirement health
care curtailment losses and special termination benefits recognized in 1995 and
1996, respectively. (Refer to Notes 8 and 9.)
Other
Also included in the 1995 charges were $73.8 million of asset impairment
losses, which 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 in its North American and Asia-Pacific operations.
NOTE 4 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 expense for 1996 includes a charge of $35.0 million ($22.3 million after
tax or $.11 per share) for a contribution to the Kellogg's Corporate
Citizenship Fund, a private trust established for charitable donations. This
contribution is expected to satisfy the charitable-giving plans of this trust
through the year 2000.
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 charges 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.
NOTE 5 LEASES
Operating leases are generally for equipment and warehouse space. Rent expense
on all operating leases was $37.9 million in 1996, $32.0 million in 1995, and
$37.5 million in 1994. At December 31, 1996, future minimum annual rental
commitments under non-cancelable operating leases totaled $51 million
consisting of (in millions): 1997-$17; 1998-$10; 1999-$7; 2000-$5; 2001-$5;
2002 and beyond-$7.
<PAGE> 20
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, 1996 (including $500 million classified in long-term debt, as
discussed in (d) below), were $1.12 billion with an effective interest rate of
5.4% and at December 31, 1995, were $173.4 million with an effective interest
rate of 5.7%. At December 31, 1996, the Company had $899.6 million of
short-term lines of credit, of which $866.8 million were unused and available
for borrowing on an unsecured basis.
Long-term debt at year-end consisted of:
<TABLE>
<CAPTION>
========================================================
(millions) 1996 1995
- --------------------------------------------------------
<S> <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 299.9 299.6
(d)Commercial paper 500.0 ---
Other 28.0 20.1
- --------------------------------------------------------
1,227.9 719.7
Less current maturities (501.2) (1.9)
- --------------------------------------------------------
Balance, December 31 $726.7 $717.8
========================================================
</TABLE>
(a) In September 1994, the Company issued $200 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 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 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.
(d) At December 31, 1996, $500 of the Company's commercial paper was
classified as long-term, based on the Company's intent and ability to
refinance as evidenced by an issuance of $500 of 7-year 6.625% fixed rate
Euro Dollar Notes on January 29, 1997. In conjunction with this issuance,
the Company settled $500 notional amount of interest rate forward swap
agreements which effectively fixed the interest rate on this debt at
6.354%. This debt was issued primarily to finance the purchase of the
Lender's Bagels business on December 16, 1996. (Refer to Note 2 for further
information.)
The $200 million of three-year notes and $300 million of five-year notes will
mature during the third quarter of 1997 and are classified in current
maturities as of December 31, 1996. Management currently intends to replace
these borrowings with new long-term debt issuances as of the maturity dates
and, as of year-end 1996, had entered into $150 million notional amount of
interest rate forward swap agreements to pay fixed and receive variable
interest, effectively fixing the U.S. Treasury rate on which an equivalent
amount of future issuances would be priced.
<PAGE> 21
In August 1993, the Company filed a $200 million "shelf registration" with the
Securities and Exchange Commission which remained unused at December 31, 1996.
Scheduled principal repayments on long-term debt are (in millions): 1997-$501;
1998-$214; 1999-$1; 2000-$1; 2001-$1; 2002 and beyond-$510.
Interest paid, net of amounts capitalized, approximated interest expense in
each of the three years ended December 31, 1996. Interest expense capitalized
as part of the construction cost of fixed assets was (in millions):
1996-$3.8; 1995-$7.2; 1994-$6.9.
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 8,905,323 and
7,767,979 shares were available for grant at January 1, 1996, and December 31,
1996, respectively. Under the Kellogg Employee Stock Ownership Plan, options
24
<PAGE> 22
for 4,822,437 and 4,140,065 shares were available for grant at January 1, 1996,
and December 31, 1996, respectively.
Transactions under these plans were:
<TABLE>
<CAPTION>
======================================================================================
1996 1995 1994
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Under option, January 1 4,216,481 3,805,335 2,434,587
Granted 2,589,163 2,392,201 1,607,984
Exercised (1,051,583) (1,915,322) (85,647)
Cancelled (130,004) (65,733) (151,589)
- --------------------------------------------------------------------------------------
Under option, December 31 5,624,057 4,216,481 3,805,335
======================================================================================
Exercisable, December 31 3,822,441 3,052,873 3,034,195
======================================================================================
Shares available, December 31, for
options that may be granted 11,908,044 13,727,760 15,178,143
======================================================================================
Average prices per share
Under option, January 1 $59 $56 $57
Granted 75 61 53
Exercised 60 55 38
Cancelled 59 53 55
- --------------------------------------------------------------------------------------
Under option, December 31 $66 $59 $56
- --------------------------------------------------------------------------------------
Exercisable, December 31 $69 $62 $58
======================================================================================
</TABLE>
The Company has adopted the disclosure provisions of SFAS #123 "Accounting for
Stock-Based Compensation." This standard requires pro forma disclosures of net
earnings and earnings per share as if the Company had accounted for its
employee stock options using a fair value method. The fair value of these
options was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted average assumptions:
<TABLE>
<CAPTION>
======================================================
1996 1995
- ------------------------------------------------------
<S> <C> <C>
Risk free interest rate 6.16% 6.89%
Dividend yield 2.30% 2.30%
Volatility 19.16% 21.45%
Average expected term (years) 3.34 3.02
======================================================
</TABLE>
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period.
The Company's pro forma results, including the impact of employee stock options
granted after December 31, 1994, are estimated to be:
<TABLE>
<CAPTION>
==============================================================
(millions, except per share data) 1996 1995
- --------------------------------------------------------------
<S> <C> <C>
Compensation expense
recognized for stock options
net of income tax effect of
$10.0 and $8.2 $16.9 $13.9
Net earnings $514.1 $476.4
Net earnings per share $2.42 $2.18
==============================================================
</TABLE>
Employee stock options outstanding and exercisable under these plans as of
December 31, 1996, were:
<TABLE>
<CAPTION>
==============================================================================
Weighted
Weighted average Weighted
Range of average remaining average
exercise exercise contractual exercise
prices Outstanding price life (yrs.) Exercisable price
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$30 - 49 88,284 $37 3.2 88,284 $37
50 - 59 1,705,736 54 7.2 664,950 57
60 - 69 1,064,766 65 5.1 1,064,766 65
70 - 79 2,765,271 75 8.3 2,004,441 76
- ------------------------------------------------------------------------------
5,624,057 3,822,441
==============================================================================
</TABLE>
<PAGE> 23
NOTE 8 PENSION BENEFITS
The Company has a number of U.S. and foreign 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 6.8% and 8.9% of
consolidated plan assets at December 31, 1996 and 1995, respectively.
The components of pension expense were:
<TABLE>
<CAPTION>
===================================================================
(millions) 1996 1995 1994
- -------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $27.6 $27.4 $29.0
Interest cost 72.8 66.0 60.3
Actual return on plan assets (102.8) (163.3) (3.5)
Net amortization and deferral 19.7 100.3 (51.0)
Curtailment loss and special
termination benefits expense 4.0 77.7 ---
- -------------------------------------------------------------------
Pension expense - Company plans 21.3 108.1 34.8
Pension expense - multiemployer plans 2.0 1.8 2.0
- -------------------------------------------------------------------
Total pension expense $23.3 $109.9 $36.8
===================================================================
</TABLE>
The worldwide weighted average actuarial assumptions were:
<TABLE>
<CAPTION>
========================================================================
1996 1995 1994
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.9% 7.5% 8.3%
Long-term rate of compensation increase 5.2% 5.1% 5.3%
Long-term rate of return on plan assets 10.5% 9.6% 9.5%
========================================================================
</TABLE>
Reconciliation of funded status of the plans at year-end was:
<TABLE>
<CAPTION>
========================================================================
Underfunded Overfunded
(millions) 1996 1995 1996 1995
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Accumulated benefit obligation:
Nonvested $6.0 $43.3 $46.9 $37.3
Vested 41.5 228.9 845.2 562.9
- ------------------------------------------------------------------------
Total 47.5 272.2 892.1 600.2
Projected salary increases 17.4 60.9 79.3 45.0
- ------------------------------------------------------------------------
Projected benefit obligation 64.9 333.1 971.4 645.2
Plan assets at fair value --- 227.8 1,048.7 680.3
- ------------------------------------------------------------------------
Assets (less) greater than
projected benefit obligation (64.9) (105.3) 77.3 35.1
Unrecognized net loss 15.0 46.0 28.8 22.8
Unrecognized transition amount (2.8) (5.1) 0.6 2.2
Unrecognized prior service cost 3.4 11.8 49.3 38.5
Minimum liability adjustment (5.7) (7.3) --- ---
- ------------------------------------------------------------------------
Prepaid (accrued) pension ($55.0) ($59.9) $156.0 $98.6
========================================================================
</TABLE>
Curtailment losses and special termination benefits expense recognized in 1995
and 1996 relate to operational workforce reduction initiatives undertaken
during these years and are recorded as a component of non-recurring charges.
(Refer to Note 3 for further information.)
The amount of intangible assets related to underfunded pension plans was $5.7
million and $7.3 million at year-end 1996 and 1995, respectively. All gains
and losses, other than curtailment losses, are recognized over the average
remaining service period of active employees.
Certain of the Company's subsidiaries sponsor 401(k) or similar savings plans
for active employees. Expense related to these plans was (in millions):
1996-$17; 1995-$18; 1994-$16.
<PAGE> 24
NOTE 9 NONPENSION POSTRETIREMENT BENEFITS
Certain of the Company's North American subsidiaries provide health care and
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) 1996 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $11.2 $11.8 $13.3
Interest cost 40.2 41.5 39.2
Net amortization and deferral 0.3 (0.6) 3.1
Curtailment loss 1.0 26.3 -
- ----------------------------------------------------------------------------
Postretirement benefit expense $52.7 $79.0 $55.6
============================================================================
Discount rate used for accumulated
benefit obligation 7.75% 7.25% 8.50%
============================================================================
</TABLE>
25
<PAGE> 25
The assumed health care cost trend rate was 7.5% for 1996, decreasing gradually
to 5.0% by the year 2002 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, 1996, by $59.8 million and
postretirement benefit expense for 1996 by $7.2 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 and 1996 relate to operational workforce reduction initiatives undertaken
during these years and were recorded as a component of non-recurring charges.
(Refer to Note 3 for further information.) In December 1996, the Company
contributed $81 million to a voluntary employee benefit association (VEBA)
trust for the initial funding of its nonpension postretirement benefit
obligations. Plan assets consist primarily of equity securities with smaller
holdings of bonds.
The accrued postretirement benefit cost included in the balance sheet at
year-end was:
<TABLE>
<CAPTION>
=======================================================================
(millions) 1996 1995
- -----------------------------------------------------------------------
<S> <C> <C>
Accumulated benefit obligation:
Retirees $305.9 $270.2
Active plan participants 188.2 300.9
- -----------------------------------------------------------------------
494.1 571.1
Plan assets at fair value (81.0)
- -----------------------------------------------------------------------
Accumulated benefit obligation greater than assets 413.1 571.1
Unrecognized experience gain (loss) 95.1 (14.2)
Unrecognized prior service adjustments 8.6 9.2
- -----------------------------------------------------------------------
Accrued postretirement benefit cost $516.8 $566.1
=======================================================================
</TABLE>
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) 1996 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Earnings before income taxes:
United States $516.7 $430.9 $729.9
Foreign 343.2 365.1 400.1
- ----------------------------------------------------------------------------
$859.9 $796.0 $1,130.0
============================================================================
Income taxes:
Currently payable:
Federal $130.6 $205.2 $207.4
State 21.9 34.7 42.4
Foreign 118.4 144.5 150.3
- ----------------------------------------------------------------------------
270.9 384.4 400.1
- ----------------------------------------------------------------------------
Deferred:
Federal 45.7 (81.0) 18.1
State 11.4 (10.7) 0.2
Foreign 0.9 13.0 6.2
- ----------------------------------------------------------------------------
58.0 (78.7) 24.5
- ----------------------------------------------------------------------------
Total income taxes $328.9 $305.7 $424.6
============================================================================
</TABLE>
The difference between the U.S. federal statutory tax rate and the Company's
effective rate was:
<TABLE>
<CAPTION>
=============================================================================
1996 1995 1994
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. statutory rate 35.0% 35.0% 35.0%
Foreign rates varying from 35% 0.7 0.2 0.2
State income taxes, net of federal benefit 2.5 2.0 2.5
Net change in valuation allowance (0.1) 1.9 0.1
Other 0.1 (0.7) (0.2)
- -----------------------------------------------------------------------------
Effective income tax rate 38.2% 38.4% 37.6%
=============================================================================
</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 3) for which no tax benefit was currently provided, based on
management's assessment of the likelihood of recovering such benefit in future
years.
The deferred tax assets and liabilities included in the balance sheet at
year-end were:
<TABLE>
<CAPTION>
=========================================================================================
Deferred tax assets Deferred tax liabilities
(millions) 1996 1995 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Current:
Promotion and advertising $78.4 $43.3 $6.7 $6.3
Wages and payroll taxes 13.8 24.9 --- ---
Health and postretirement benefits 17.2 15.5 6.3 10.4
State taxes 8.6 9.8 --- ---
Other 23.5 17.3 23.3 18.2
- -----------------------------------------------------------------------------------------
141.5 110.8 36.3 34.9
Less valuation allowance (2.5) --- --- ---
- -----------------------------------------------------------------------------------------
139.0 110.8 36.3 34.9
=========================================================================================
Noncurrent:
Depreciation and asset disposals 25.6 24.7 337.0 280.2
Postretirement benefits 179.4 196.3 43.0 6.7
Capitalized interest 3.3 3.1 31.5 32.8
State taxes 0.9 11.1 --- ---
Other 27.9 13.2 0.7 9.9
- -----------------------------------------------------------------------------------------
237.1 248.4 412.2 329.6
Less valuation allowance (29.1) (32.7) --- ---
- -----------------------------------------------------------------------------------------
208.0 215.7 412.2 329.6
- -----------------------------------------------------------------------------------------
Total deferred taxes $347.0 $326.5 $448.5 $364.5
=========================================================================================
</TABLE>
At December 31, 1996, foreign subsidiary earnings of $1.31 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 $72 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): 1996-$281; 1995-$404; 1994-$396.
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 fair values of derivative financial
instruments held by the Company were not significant during the periods
presented.
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
statement of earnings 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 $80.0 million and
$131.1 million at December 31, 1996 and 1995, respectively.
26
<PAGE> 26
The Company enters into currency and interest rate swaps, including forward
swaps, in connection with certain debt issues. 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. Interest rate forward swaps are used to effectively fix the
U.S. Treasury or other benchmark rate on which planned future issuances of
long-term debt will be priced, thereby minimizing the risk of fluctuations in
future borrowing costs related to short-term interest rate movements. 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 $1.05 billion at
December 31, 1996, of which $500 million were settled in conjunction with an
issuance of long-term debt in January 1997. The notional amounts of currency
and interest rate swaps were $400 million at December 31, 1995. (Refer to Note
6 for further information.)
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.
<PAGE> 27
NOTE 12 QUARTERLY FINANCIAL DATA (unaudited)
<TABLE>
<CAPTION>
=====================================================================
(millions, except Net sales Gross profit
per share data) 1996 1995 1996 1995
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
First $1,785.9 $1,716.0 $995.5 $946.7
Second 1,651.4 1,780.1 876.2 960.4
Third 1,681.6 1,844.7 865.6 1,009.1
Fourth 1,557.7 1,662.9 816.4 909.8
- ---------------------------------------------------------------------
$6,676.6 $7,003.7 $3,553.7 $3,826.0
=====================================================================
</TABLE>
<TABLE>
<CAPTION>
Net earnings (a) Earnings per share (a)
1996 1995 1996 1995
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
First $206.1 $196.0 $0.96 $0.89
Second 78.1 135.9 .37 0.62
Third 159.5 230.0 .75 1.05
Fourth 87.3 (71.6) 0.42 (0.33)
- ---------------------------------------------------------------------
$531.0 $490.3
=====================================================================
</TABLE>
(a) The quarterly results of 1996 and 1995 include the following non-recurring
charges and other unusual items. (Refer to Notes 3 and 4 for
further information.)
<TABLE>
<CAPTION>
==================================================
Net earnings Earnings per share
1996 1995 1996 1995
--------------------------------------------------
<S> <C> <C> <C> <C>
First ($6.1) $ --- ($0.03) $ ---
Second (16.9) (33.0) (0.08) (0.15)
Third (21.3) --- (0.10) ---
Fourth (75.8) (238.3) (0.36) (1.10)
--------------------------------------------------
($120.1) ($271.3)
==================================================
</TABLE>
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 1996, the closing price (on the
NYSE) was $65 5/8 and there were 26,751 shareholders of record. Dividends
paid per share of common stock increased 8% to $1.62 in 1996, marking the 40th
consecutive year of increase.
Dividends paid and the quarterly price ranges on the NYSE during the last two
years were:
<TABLE>
<CAPTION>
=========================================================
1996 - Quarter Dividend High Low
- ---------------------------------------------------------
<S> <C> <C> <C>
Fourth $0.42 $69.13 $62.00
Third 0.42 77.38 65.63
Second 0.39 75.75 67.38
First 0.39 80.63 72.50
- ---------------------------------------------------------
$1.62
- ---------------------------------------------------------
1995 - Quarter
- ---------------------------------------------------------
Fourth $0.39 $79.50 $70.50
Third 0.39 73.63 66.75
Second 0.36 73.88 58.00
First 0.36 60.68 52.50
- ---------------------------------------------------------
$1.50
=========================================================
</TABLE>
<PAGE> 28
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, cereal bars, and bagels 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) 1996 change 1995 change 1994 change
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET SALES
- ---------------------------------------------------------------------------------------------
United States $3,779.5 -7 $4,080.3 6 $3,840.8 2
% of total 57% 58% 59%
Europe 1,749.6 -4 1,829.1 9 1,683.7 9
% of total 26% 26% 26%
Other areas 1,147.5 5 1,094.3 5 1,037.5 7
% of total 17% 16% 15%
- ---------------------------------------------------------------------------------------------
Consolidated $6,676.6 -5 $7,003.7 7 $6,562.0 4
=============================================================================================
OPERATING PROFIT (a)
- ---------------------------------------------------------------------------------------------
United States $611.2 38 $443.1 -37 $708.5 14
% of total 64% 53% 61%
Europe 204.4 -30 293.6 2 287.5 24
% of total 21% 35% 25%
Other areas 143.3 42 100.8 -39 166.6 10
% of total 15% 12% 14%
- ---------------------------------------------------------------------------------------------
Consolidated $958.9 14 $837.5 -28 $1,162.6 16
=============================================================================================
IDENTIFIABLE ASSETS
- ---------------------------------------------------------------------------------------------
United States $2,785.9 27 $2,194.8 -1 $2,222.7 -5
% of total 55% 50% 50%
Europe 1,258.2 -1 1,269.4 -1 1,282.5 21
% of total 25% 29% 29%
Other areas 973.3 5 929.7 -1 943.2 17
% of total 19% 21% 21%
Corporate assets 32.6 57 20.7 9 18.9 -17
% of total 1% - -
- ---------------------------------------------------------------------------------------------
Consolidated $5,050.0 14 $4,414.6 -1 $4,467.3 5
=============================================================================================
</TABLE>
(a) Operating profit for 1996 and 1995 includes the following non-recurring
charges, by geographic area. (Refer to Note 3 and to Management's Discussion &
Analysis on pages 14-19 for further information.)
<TABLE>
<CAPTION>
=====================================================
1996 1995
<S> <C> <C>
----------------------------------------------------
United States ($24.1) ($325.0)
Europe (76.5) (38.4)
All other (35.5) (58.4)
----------------------------------------------------
Consolidated ($136.1) ($421.8)
=====================================================
</TABLE>
27
<PAGE> 29
NOTE 14 SUPPLEMENTAL FINANCIAL STATEMENT DATA
<TABLE>
<CAPTION>
(millions)
========================================================================================
Consolidated Statement of Earnings 1996 1995 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Research and development expense $84.3 $72.2 $71.7
Advertising expense $778.9 $891.5 $856.9
========================================================================================
</TABLE>
<TABLE>
<CAPTION>
========================================================================================
Consolidated Statement of Cash Flows 1996 1995 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Accounts receivable $10.9 ($25.6) ($27.7)
Inventories (35.4) 19.6 6.8
Other current assets (0.5) (33.7) (5.4)
Accounts payable (41.0) 36.3 25.7
Other current liabilities (11.3) 54.1 57.4
- ----------------------------------------------------------------------------------------
CHANGES IN OPERATING ASSETS AND LIABILITIES ($77.3) $50.7 $56.8
========================================================================================
</TABLE>
<TABLE>
<CAPTION>
========================================================================================
CONSOLIDATED BALANCE SHEET 1996 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials and supplies $135.2 $129.7
Finished goods and materials in process 289.7 247.0
- ----------------------------------------------------------------------------------------
INVENTORIES $424.9 $376.7
- ----------------------------------------------------------------------------------------
Deferred income taxes $117.9 $91.2
Prepaid advertising and promotion 83.4 77.6
Other 66.3 71.3
- ----------------------------------------------------------------------------------------
OTHER CURRENT ASSETS $267.6 $240.1
- ----------------------------------------------------------------------------------------
Land $52.4 $50.0
Buildings 1,226.1 1,202.8
Machinery and equipment 3,464.1 3,283.0
Construction in progress 277.5 202.0
Accumulated depreciation (2,087.2) (1,953.0)
- ----------------------------------------------------------------------------------------
PROPERTY, NET $2,932.9 $2,784.8
- ----------------------------------------------------------------------------------------
Goodwill $193.7 $2.2
Other intangibles 186.6 7.4
Other 208.2 191.4
- ----------------------------------------------------------------------------------------
OTHER ASSETS $588.5 $201.0
- ----------------------------------------------------------------------------------------
Accrued income taxes $50.5 $64.2
Accrued salaries and wages 84.6 121.8
Accrued advertising and promotion 336.8 266.3
Other 238.1 252.4
- ----------------------------------------------------------------------------------------
OTHER CURRENT LIABILITIES $710.0 $704.7
- ----------------------------------------------------------------------------------------
Nonpension postretirement benefits $494.2 $546.1
Deferred income taxes 226.3 201.7
Other 121.4 92.7
- ----------------------------------------------------------------------------------------
OTHER LIABILITIES $841.9 $840.5
- ----------------------------------------------------------------------------------------
========================================================================================
</TABLE>
<PAGE> 30
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, of shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of Kellogg
Company and its subsidiaries at December 31, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996, 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
January 31, 1997
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 January 31, 1997 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 26, 1997
<PAGE> 1
EXHIBIT 23.02
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement of Form S-8 (No. 33-27294) of Kellogg Company of our report dated
March 11, 1997 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 11, 1997 which
appears on page 1 of Exhibit 99.02 of this Form 10-K.
PRICE WATERHOUSE LLP
Battle Creek, Michigan
March 26, 1997
<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, 1996, 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.
[sig]
------------------------------
Director
Dated: January 24, 1997 C.X. Gonzalez
January 27, 1997 Gordon Gund
January 30, 1997 W.E. LaMothe
January 30, 1997 A. G. Langbo
January 23, 1997 Russell G. Mawby
January 30, 1997 Ann McLaughlin
January 22, 1997 J. R. Munro
January 22, 1997 H. A. Poling
January 30, 1997 William C. Richardson
January 30, 1997 Donald Rumsfeld
February 1, 1997 Tim Smucker
January 27, 1997 Dolores D. Wharton
January 23, 1997 John L. Zabriskie
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM KELLOGG
COMPANY AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR THE TWELVE MONTHS
ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 244
<SECURITIES> 0
<RECEIVABLES> 599
<ALLOWANCES> (7)
<INVENTORY> 425
<CURRENT-ASSETS> 1,529
<PP&E> 5,020
<DEPRECIATION> (2,087)
<TOTAL-ASSETS> 5,050
<CURRENT-LIABILITIES> 2,199
<BONDS> 727
0
0
<COMMON> 78
<OTHER-SE> 1,204
<TOTAL-LIABILITY-AND-EQUITY> 5,050
<SALES> 6,677
<TOTAL-REVENUES> 6,677
<CGS> 3,123
<TOTAL-COSTS> 3,123
<OTHER-EXPENSES> 2,628
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 66
<INCOME-PRETAX> 860
<INCOME-TAX> 329
<INCOME-CONTINUING> 531
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 531
<EPS-PRIMARY> 2.50
<EPS-DILUTED> 2.50
</TABLE>
<PAGE> 1
KELLOGG COMPANY AMERICAN
FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
FINANCIAL STATEMENTS
AND ADDITIONAL INFORMATION
OCTOBER 31, 1996
<PAGE> 2
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, 1996
AND 1995 AND FOR THE YEARS THEN ENDED:
Statement of assets available for benefits, with fund information 2-3
Statement of changes in assets available for benefits, with
fund information 4-5
Notes to financial statements 6-10
ADDITIONAL INFORMATION:
Item 27a - Schedule of assets held for investment
purposes - October 31, 1996 11
Item 27b - Schedule of loans or fixed income obligations -
October 31, 1996 12-48
Item 27d - Schedule of reportable transactions -
year ended October 31, 1996 49
</TABLE>
<PAGE> 3
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Participants of the
Kellogg Company American Federation
of Grain Millers Savings and Investment Plan
In our opinion, the accompanying statements of 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, 1996 and 1995, and the changes in assets available for
benefits for the years then ended, 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 11 - 49 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 11, 1997
<PAGE> 4
KELLOGG COMPANY 2
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
STATEMENT OF ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
OCTOBER 31, 1996
<TABLE>
<CAPTION>
FIXED COMPANY
LOAN BOND INCOME EQUITY STOCK
TOTAL FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Receivables:
Employer contributions $ 553,041 $ - $ 7,926 $ 288,952 $ 88,533 $ 167,630
Employee contributions 14,639 14,639
Interest 53,867 53,867
------------ ----------- ---------- ------------ ----------- -----------
Total receivables 621,547 7,926 357,458 88,533 167,630
------------ ----------- ---------- ------------ ----------- -----------
Investments:
Plan's interest in Master Trust 138,574,423 6,564,519 65,003,279 67,006,625
Interfund borrowings 1,108,530 (1,108,530)
Guaranteed investment contracts 472,790,551 472,790,551
Loans to participants 10,692,528 10,692,528
TBC Pooled Funds Daily Liquidity 7,304,194 7,304,194
------------ ----------- ---------- ------------ ----------- -----------
Total investments 629,361,696 10,692,528 6,564,519 481,203,275 63,894,749 67,006,625
------------ ----------- ---------- ------------ ----------- -----------
Assets available for benefits $629,983,243 $10,692,528 $6,572,445 $481,560,733 $63,983,282 $67,174,255
============ =========== ========== ============ =========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE> 5
KELLOGG COMPANY 3
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
STATEMENT OF ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
OCTOBER 31, 1995
<TABLE>
<CAPTION>
FIXED COMPANY
LOAN BOND INCOME EQUITY STOCK
TOTAL FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Receivables:
Employer contributions $ 484,554 $ - $ 6,010 $ 283,613 $ 34,636 $ 160,295
Interest 415 415
------------ ----------- ---------- ------------ ----------- -----------
Total receivables 484,969 6,010 284,028 34,636 160,295
------------ ----------- ---------- ------------ ----------- -----------
Investments:
Plan's interest in Master Trust 123,586,199 4,876,840 29,690,301 89,019,058
Interfund borrowings (922,676) 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 30,612,977 89,019,058
------------ ----------- ---------- ------------ ----------- -----------
Assets available for benefits $680,852,983 $14,631,203 $4,882,850 $541,511,964 $30,647,613 $89,179,353
============ =========== ========== ============ =========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE> 6
KELLOGG COMPANY 4
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
STATEMENT OF CHANGES IN ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
FOR THE YEAR ENDED OCTOBER 31, 1996
<TABLE>
<CAPTION>
FIXED COMPANY
LOAN BOND INCOME EQUITY STOCK
TOTAL FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C>
Contributions:
Employer $ 6,643,589 $ - $ 100,981 $ 3,723,157 $ 787,452 $ 2,031,999
Employee 16,411,046 275,076 10,182,593 2,440,596 3,512,781
Loans repaid (5,577,494) 109,771 3,376,738 858,091 1,232,894
Rollover from other qualified plans 38,482 37,680 802
------------- ----------- ---------- ------------ ----------- ------------
Total contributions 23,093,117 (5,577,494) 485,828 17,320,168 4,086,139 6,778,476
------------- ----------- ---------- ------------ ----------- ------------
Earnings on Investments:
Plan's interest in income of Master Trust 2,965,475 270,576 (1,587) 10,087,708 (7,391,222)
Interest income 36,025,322 1,086,360 34,938,962
Investment services fees (70,588) (555) (56,763) (3,558) (9,712)
Trustee fees (15,492) (15,492)
------------- ----------- ---------- ------------ ----------- ------------
Total earnings on investments, net 38,904,717 1,086,360 270,021 34,865,120 10,084,150 (7,400,934)
------------- ----------- ---------- ------------ ----------- ------------
Net transfers between funds 1,862,524 (15,714,715) 26,992,837 (13,140,646)
Participant withdrawals (112,865,444) (2,653,632) (843,331) (94,475,192) (7,387,039) (7,506,250)
New loan distributions 3,206,091 (85,447) (1,946,254) (439,240) (735,150)
Net transfers between Plans (2,130) (358) (1,178) (594)
------------- ----------- ---------- ------------ ----------- ------------
Net increase (decrease) (50,869,740) (3,938,675) 1,689,595 (59,951,231) 33,335,669 (22,005,098)
Assets available for benefits at
beginning of year 680,852,983 14,631,203 4,882,850 541,511,964 30,647,613 89,179,353
------------- ----------- ---------- ------------ ----------- ------------
Assets available for benefits at
end of year $629,983,243 $10,692,528 $6,572,445 $481,560,733 $63,983,282 $67,174,255
============= =========== ========== ============ =========== ============
</TABLE>
See accompanying notes to financial statements
<PAGE> 7
KELLOGG COMPANY 5
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
STATEMENT OF CHANGES IN ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
FOR THE YEAR ENDED OCTOBER 31, 1995
<TABLE>
<CAPTION>
FIXED COMPANY
LOAN BOND INCOME EQUITY STOCK
TOTAL FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C>
Contributions:
Employer $ 6,893,623 $ - $ 78,020 $ 4,219,403 $ 400,769 $ 2,195,431
Employee 16,817,030 199,446 11,635,400 1,129,922 3,852,262
Loans repaid (3,829,688) 89,769 2,382,599 328,542 1,028,778
Rollover from other qualified plans 5,102 1,425 3,677
------------ ----------- ---------- ------------ ----------- ------------
Total contributions 23,715,755 (3,829,688) 367,235 18,238,827 1,859,233 7,080,148
------------ ----------- ---------- ------------ ----------- ------------
Earnings on Investments:
Plan's interest in income of Master Trust 27,550,917 631,411 284,531 5,912,260 20,722,715
Interest income 37,979,201 1,069,706 36,909,495
Investment services fees (61,871) (435) (49,178) (2,195) (10,063)
Trustee fees (62,448) (320) (55,763) (1,775) (4,590)
------------ ----------- ---------- ------------ ----------- ------------
Total earnings on investments, net 65,405,799 1,069,706 630,656 37,089,085 5,908,290 20,708,062
------------ ----------- ---------- ------------ ----------- ------------
Net transfers between funds 35,792 37,887,631 2,943,455 (40,866,878)
Participant withdrawals (32,892,681) (153,086) (214,006) (29,598,875) (645,332) (2,281,382)
New loan distributions 6,981,921 (62,966) (4,476,880) (552,925) (1,889,150)
Net transfers between Plans (15,331) (4,746) (7,228) (1,341) (2,016)
------------ ----------- ---------- ------------ ----------- ------------
Net increase (decrease) 56,213,542 4,068,853 751,965 59,132,560 9,511,380 (17,251,216)
Assets available for benefits at
beginning of year 624,639,441 10,562,350 4,130,885 482,379,404 21,136,233 106,430,569
------------ ----------- ---------- ------------ ----------- ------------
Assets available for benefits at
end of year $680,852,983 $14,631,203 $4,882,850 $541,511,964 $30,647,613 $89,179,353
============ =========== ========== ============ =========== ============
</TABLE>
See accompanying notes to financial statements
<PAGE> 8
KELLOGG COMPANY 6
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, 1996 or 1995:
<TABLE>
<CAPTION>
INTEREST OCTOBER 31,
DESCRIPTION RATE 1996 1995
<S> <C> <C> <C>
Brundage, Story & Rose Managed
Synthetic GIC Fund Variable $51,000,246 $52,042,315
Putnam Horizon Managed Synthetic
GIC Fund Variable 54,897,596 51,877,407
Morgan Bank GIC #41 9.37% - 79,004,435
Allstate Life Ins. GAC #5686A 8.13% 46,308,672 42,826,850
John Hancock GAC #5919-10001 8.82% 71,360,224 99,791,611
John Hancock GAC #7605 7.87% 46,775,286 43,362,646
Metropolitan Life GIC 6.27% 34,863,169 17,648,727
New York Life GAC #3032100 6.72% 40,704,874 -
Plan's Interest in Master Trust Variable 138,574,423 123,586,199
</TABLE>
ALLOCATION OF NET INVESTMENT INCOME TO PARTICIPANTS
Net investment income related to the respective investment options 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 7
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 constant rate equal to one percent over the
prime rate in the month the loan begins. Principal and interest are paid
ratably through monthly payroll deductions. Loans that are considered to be
uncollectible at year end result in the outstanding principal being
considered a hardship withdrawal from the participant's plan account.
PARTICIPANT DISTRIBUTIONS
Participants may elect to withdraw all or a portion of their contributions
made after October 31, 1978, plus related net investment income. The
withdrawal of any participant contributions which were not previously
subject to income tax is restricted by Internal Revenue Service regulations.
Under certain circumstances and subject to approval by the Trustees,
participants may request withdrawal of a portion of Company contributions
and their own contributions made prior to November 1, 1978, including net
investment income thereon.
<PAGE> 10
KELLOGG COMPANY 8
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 at October 31, 1996 and 1995 and the changes in assets
for the periods then ended are as follows:
<PAGE> 11
KELLOGG COMPANY 9
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
4. MASTER TRUST (CONTINUED)
KELLOGG COMPANY MASTER TRUST
SCHEDULE OF ASSETS AND LIABILITIES FOR MASTER TRUST INVESTMENT ACCOUNTS
<TABLE>
<CAPTION>
Pension Plans Savings & Investment Plans Total
10/31/95 10/31/96 10/31/95 10/31/96 10/31/95 10/31/96
---------------------------- --------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
CASH/EQUIVALENTS:
Non-Interest Bearing $217,156 $1,316 $21,959 $431 $239,115 $1,747
Interest Bearing Cash $3,233,903 $2,771,776 $0 $0 $3,233,903 $2,771,776
---------------------------- --------------------------- ---------------------------
TOTAL CASH/EQUIVALENTS $3,451,059 $2,773,092 $21,959 $431 $3,473,018 $2,773,523
---------------------------- --------------------------- ---------------------------
RECEIVABLES $43,951,125 $60,900,475 $197,607 $274,793 $44,148,732 $61,175,268
---------------------------- --------------------------- ---------------------------
GENERAL INVESTMENTS:
Long Term U.S. Gov't Securities $39,730,104 $50,267,438 $8,478,055 $7,389,825 $48,208,159 $57,657,263
Short Term U.S. Gov't Securities $0 $0 $470,954 $402,416 $470,954 $402,416
Corporate Debt - Long Term $11,602,092 $14,301,477 $2,148,889 $7,648,217 $13,750,981 $21,949,694
Corporate Debt - Short Term $820,221 $0 $225,136 $25,139 $1,045,357 $25,139
Corporate Stocks - Preferred $1,250,342 $1,838,037 $0 $0 $1,250,342 $1,838,037
Corporate Stocks - Convertible $2,821,724 $5,419,318 $0 $0 $2,821,724 $5,419,318
Corporate Stocks - Common $419,250,631 $477,113,443 $209,608,570 $252,507,733 $628,859,201 $729,621,176
Real Estate Pooled Funds $19,350,020 $17,810,044 $0 $0 $19,350,020 $17,810,044
Value of Interest in
Pooled Funds $2,025,248 $8,948,629 $445,059 $333,995 $2,470,307 $9,282,624
Guaranteed Investment Contracts $53,760,024 $68,035,400 $0 $0 $53,760,024 $68,035,400
---------------------------- --------------------------- ---------------------------
TOTAL INVESTMENTS $550,610,406 $643,733,786 $221,376,663 $268,307,325 $771,987,069 $912,041,111
---------------------------- --------------------------- ---------------------------
TOTAL ASSETS $598,012,590 $707,407,353 $221,596,229 $268,582,549 $819,608,819 $975,989,902
---------------------------- --------------------------- ---------------------------
PAYABLES ($41,486,770) ($62,117,871) $0 $0 ($41,486,770) ($62,117,871)
---------------------------- --------------------------- ---------------------------
TOTAL LIABILITIES ($41,486,770) ($62,117,871) $0 $0 ($41,486,770) ($62,117,871)
---------------------------- --------------------------- ---------------------------
NET ASSETS $556,525,820 $645,289,482 $221,596,229 $268,582,549 $778,122,049 $913,872,031
============================ =========================== ===========================
Percentage Interest held by
the Plan 0.0% 0.0% 55.8% 51.6% 15.9% 15.2%
</TABLE>
<PAGE> 12
KELLOGG COMPANY 10
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
4. MASTER TRUST (CONTINUED)
KELLOGG COMPANY MASTER TRUST
SCHEDULE OF INCOME AND EXPENSES, CHANGES IN NET ASSETS
AND NET INCREASE (DECREASE) IN NET ASSETS OF MASTER TRUST INVESTMENT ACCOUNTS
<TABLE>
<CAPTION>
Pension Plans Savings & Investment Plans Total
10/31/95 10/31/96 10/31/95 10/31/96 10/31/95 10/31/96
----------------------------- ------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C>
Transfer of Assets Into
Investment Account $39,000,063 $60,000,541 $270,373,840 $471,493,020 $309,373,903 $531,493,561
Earnings on Investments
Interest $11,111,429 $7,804,578 $1,341,964 $1,153,223 $12,453,393 $8,957,801
Dividends $3,457,702 $2,789,517 $3,259,625 $2,829,397 $6,717,327 $5,618,914
Corporate Actions $6,150 $1,597,268 $0 $0 $6,150 $1,597,268
Pooled Fund Distributions $1,824,378 $4,177,043 $0 $0 $1,824,378 $4,177,043
Miscellaneous $661 $125 $0 $0 $661 $125
Net Realized Gain/(Loss) $7,153,214 $26,178,076 $9,849,022 $18,018,388 $17,002,236 $44,196,464
----------------------------- ------------------------------- ------------------------------
TOTAL ADDITIONS $62,553,597 $102,547,148 $284,824,451 $493,494,028 $347,378,048 $596,041,176
----------------------------- ------------------------------- ------------------------------
Transfer of Assets Out of
Investment Account ($9,692,814) ($38,227,387) ($325,217,232) ($437,982,138) ($334,910,046) ($476,209,525)
Fees and Commissions ($1,036,664) ($1,487,578) ($32,385) ($58,996) ($1,069,049) ($1,546,574)
----------------------------- ------------------------------- ------------------------------
TOTAL DISTRIBUTIONS ($10,729,478) ($39,714,965) ($325,249,617) ($438,041,134) ($335,979,095) ($477,756,099)
----------------------------- ------------------------------- ------------------------------
Change in Unrealized
Appreciation $51,175,245 $25,931,479 $34,283,639 ($8,466,574) $85,458,884 $17,464,905
----------------------------- ------------------------------ ------------------------------
NET CHANGE IN ASSETS $102,999,364 $88,763,662 ($6,141,527) $46,986,320 $96,857,837 $135,749,982
Net Assets at Beginning
of Year $453,526,456 $556,525,820 $227,737,756 $221,596,229 $681,264,212 $778,122,049
----------------------------- ------------------------------- ------------------------------
Net Assets at End of Year $556,525,820 $645,289,482 $221,596,229 $268,582,549 $778,122,049 $913,872,031
============================= =============================== ==============================
</TABLE>
<PAGE> 13
KELLOGG COMPANY 11
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27A - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES - OCTOBER 31, 1996
<TABLE>
<CAPTION>
MARKET UNREALIZED
SECURITY DESCRIPTION COST PRICE VALUE GAIN/LOSS
<S> <C> <C> <C> <C>
TBC, Inc. Pooled Employee Funds
Daily Liquidity Fund $ 7,304,194 1.00 $ 7,304,194 $ -
Loans to participants 10,692,528 1.00 10,692,528
Brundage Story & Rose Managed
Synthetic GIC Fund Variable Rate 51,000,246 1.00 51,000,246
John Hancock GAC #5919-10001
8.82% 6/1/97 71,360,224 1.00 71,360,224
Protective Life Ins. GIC #807-B
6.08% 1/31/97 10,256,570 1.00 10,256,570
Provident Life GIC #627-05439-01A
6.24% 6/30/97 17,742,908 1.00 17,742,908
Putnam Horizon Managed Synthetic
GIC Variable Rate 6/1/99 54,897,596 1.00 54,897,596
Principal Mutual GAC #4-12130-01
5.30% 12/1/98 19,867,729 1.00 19,867,729
Peoples Security Ins #BDA00378FR
5.15% 12/1/97 19,402,973 1.00 19,402,973
Allstate Life Ins. GAC #5686A
8.13% 12/1/98 46,308,672 1.00 46,308,672
Commonwealth Life #ADA00687FR
7.54% 6/1/98 29,814,742 1.00 29,814,742
John Hancock GAC #7605
7.87% 12/1/98 46,775,286 1.00 46,775,286
Commonwealth Life GIC
6.19% 6/1/98 13,826,157 1.00 13,826,157
Metropolitan Life GIC
6.27% 6/1/99 34,863,169 1.00 34,863,169
New York Life GIC
6.20% 6/1/98 15,969,405 1.00 15,969,405
New York Life GAC #30321002
6.72% 6/1/00 40,704,874 1.00 40,704,874
------------ ------------ ----------
$490,787,273 $490,787,273 $ -
============ ============ ==========
</TABLE>
<PAGE> 14
KELLOGG COMPANY 12
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lurener M. Harris $ 1,100 $ 16 $ 12 $ 907 08/31/94 8.3% 08/31/99 $ 907 $ 6
P.O. Box 532
908 N. Clinton
Albion, MI 49224
Vicki L. Goodman 6,737 5,126 548 1,611 12/31/94 9.5% 12/31/99 1,611 115
115 W. Orange Street
Lititz, PA 17543
Mary A. Richmond 15,000 1,386 549 11,087 09/30/94 8.8% 09/30/99 11,087 404
350 Sun Valley Drive
Leola, PA 17450
W.L. Spivey 4,000 1,248 130 1,338 12/31/94 9.5% 12/31/96 1,338 42
5320 Peach Trail
Southhaven, MS 38671
Jim F. Height 17,000 2,605 1,080 12,047 11/30/94 8.8% 11/30/99 12,047 88
P.O. Box 721
Battle Creek, MI 49016
Margueritte Miller 3,940 76 45 1 08/31/94 8.3% 08/31/99 1 -
60 Illinois
Battle Creek, MI 49017
</TABLE>
<PAGE> 15
KELLOGG COMPANY 13
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Kenneth A. Dunbar $ 5,000 $ 706 $ 187 $ 3,581 08/31/94 8.3% 08/31/99 $ 3,581 $123
393 N. Kendall Street
Battle Creek, MI 49017
Gregory J. Miller 4,823 103 179 4,398 08/31/94 8.3% 08/31/99 4,398 182
42 N. 22nd Street
Battle Creek, MI 49015
Marshall D. Parsons 25,000 3,518 1,794 19,499 03/31/95 10.0% 03/31/00 19,499 325
145 S. Wattles Road
Battle Creek, 49017
Shelly R. Wilson 2,900 96 54 2,332 10/31/94 8.8% 10/31/99 2,332 153
140 N. 32nd Street
Battle Creek, MI 49015
Edwin J. Skinner 1,500 43 19 1,273 11/30/94 8.8% 11/30/99 1,273 93
1455 103rd
Oakland, CA 94603
Jarittie J. McGuire, Jr. 25,000 4,097 1,293 16,608 08/31/94 8.3% 08/31/99 4,097 -
P.O. Box 2243
Battle Creek, MI 49016
</TABLE>
<PAGE> 16
KELLOGG COMPANY 14
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Steven K. Perry $12,079 $ 903 $329 $ 8,961 08/31/94 8.3% 08/31/99 $ 8,961 $432
3280 Academy Boulevard
Lot 247
Colorado Springs, CO 80916
Arniece Smith-Bell 8,000 5,846 369 198 11/30/94 8.8% 11/30/97 198 1
54 S. McKinley
Battle Creek, MI 49017
Russell E. Upston 3,200 110 77 2,947 06/30/95 10.0% 06/30/00 2,947 147
11601 22 Mile Road
Marshall, MI 49068
Ronald W. Price 11,000 524 352 10,188 07/31/95 10.0% 07/31/00 10,188 509
881 N. Wattles Road
Battle Creek, MI 49017
Brenda K. Begg 14,000 1,260 453 10,172 08/31/94 8.3% 08/31/99 10,172 420
748 E. Prospect
Marshall, MI 49068
Cindy L. Evans 6,195 823 59 2,179 08/31/94 8.3% 08/31/96 2,179 90
112 Cliff Street
Battle Creek, MI 49017
</TABLE>
<PAGE> 17
KELLOGG COMPANY 15
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Eileen J. Moore $12,000 $10,421 $748 $ 128 10/31/94 8.8% 10/31/99 $ 128 $ -
8024 E. Drive North
Battle Creek, MI 49017
Kelly R. Brophy 7,500 - - 6,611 11/30/94 8.8% 11/30/99 6,611 413
319 Country Club Boulevard
Battle Creek, MI 49015
Bettie C. Frantz 23,696 - 212 19,702 08/31/94 8.3% 08/31/99 19,702 1,490
2635 DR Drive South
East Leroy, MI 49051
Thelma Williams 20,646 985 380 15,942 08/31/94 8.3% 08/31/99 15,942 658
168 Foote Road
Battle Creek, MI 49017
Frank Jarman, Jr. 9,500 1,066 274 5,975 08/31/94 8.2% 08/31/98 5,975 123
56 Brown Drive
Battle Creek, MI 49017
Brenda R. Towery 4,400 206 94 3,850 02/28/95 9.5% 02/28/00 3,850 275
297 Silver
Battle Creek, MI 49017
</TABLE>
<PAGE> 18
KELLOGG COMPANY 16
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gerrie A. Petch $ 4,450 $ 4,414 $ 275 $ 36 11/30/95 9.8% 11/30/00 $ 35 $ -
22275 14 Mile Road
Bellevue, MI 49021
Ella M. Quarles 3,500 335 86 2,442 01/31/95 9.5% 01/31/98 2,442 116
116 Winding Way
Battle Creek, MI 49015
Gary A. Bristol 15,000 721 474 13,689 06/30/95 10.0% 06/30/00 13,689 1,113
1653 Pifer Road
Delton, MI 49046
Duane L. Robinson 17,000 15,409 1,219 160 01/31/95 9.5% 01/31/00 160 -
9995 6 1/2 Mile Road
Ceresco, MI 49033
William W. Trinklein 14,000 1,415 355 10,272 02/28/95 9.5% 02/28/98 10,272 651
6178 Ormada
Kalamazoo, MI 49004
Patrick W. Dougherty 15,000 1,427 485 10,975 08/31/94 8.3% 08/31/99 10,975 302
287 S. Wattles Road
Battle Creek, MI 49017
</TABLE>
<PAGE> 19
KELLOGG COMPANY 17
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Robert A. Cook $22,000 $ 3,238 $1,137 $14,727 08/31/94 8.3% 08/31/99 $14,727 $ 202
7990 S. 43rd Street
Scotts, MI 49088
Roger D. Albright 30,000 21,928 681 2,263 08/31/94 8.3% 08/31/99 2,263 93
580 Farrand Road
Sherwood, MI 49089
Kenneth J. Miles 5,000 709 235 3,374 08/31/94 8.3% 08/31/99 3,374 -
15011 W. Michigan Avenue
Lot 13
Marshall, MI 49068
Ruth E. VanDyke 26,000 1,130 480 21,039 10/31/94 8.8% 10/31/99 21,039 1,074
116 Wanondoger Trail
Battle Creek, MI 49017
Rose M. Miles 20,000 3,380 581 11,680 10/31/94 8.8% 10/31/97 11,680 426
4283 Mt. Hood #7
Memphis, TN 38118
David J. Coffing 50,000 1,673 1,103 39,382 08/31/94 8.3% 08/31/99 39,382 1,896
515 N. Park Street
Union City, MI 49094
Mary J. Alexander 12,600 1,867 651 8,499 08/31/94 8.3% 08/31/99 8,499 117
68 Lathrop
Battle Creek, MI 49017
</TABLE>
<PAGE> 20
KELLOGG COMPANY 18
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Morton Hawkins $10,000 $1,244 $510 $ 7,087 09/30/94 8.8% 09/30/99 $ 7,087 $ 155
15 Eagle Street
Battle Creek, MI 49017
Kerryn S. Schira 12,000 966 187 8,675 08/31/94 8.3% 08/31/98 8,675 358
585 Fairfield
Battle Creek, MI 49015
Thomas L. Conant 7,000 775 296 4,941 08/31/94 8.3% 08/31/99 4,941 136
204 W. Mill Street
Athens, MI 49011
Norman D. Dudley, Jr. 50,000 144 649 48,651 08/31/94 8.3% 08/31/99 48,651 2,007
2787 E. Oak Lane
Layton, UT 84040
Jeffrey W. Wilson 8,500 1,331 599 6,189 12/31/94 9.5% 12/31/99 6,189 -
149 Moonwood Trail
Battle Creek, MI 49017
Rick J. Labrecque 10,000 9,131 863 636 08/31/94 8.3% 08/31/99 636 22
100 Minges Creek Place
Battle Creek, MI 49015
</TABLE>
<PAGE> 21
KELLOGG COMPANY 19
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sally A. Farrington $15,000 $ 473 $ 251 $11,735 08/31/94 8.3% 08/31/99 $11,735 $ 565
92 East Avenue North
Battle Creek, MI 49017
Robert G. Orns 30,000 2,847 971 21,956 08/31/94 8.3% 08/31/99 21,956 906
7541 12 Mile Road
Burlington, MI 49029
Richard B. Whitfield 6,500 652 243 4,656 08/31/94 8.2% 08/31/99 4,656 96
508 Haven Road
Albion, MI 49224
Jerry A. Ure 25,000 - 66 24,234 09/30/94 8.8% 09/30/99 24,234 1,591
289 Oak Lawn Drive
Battle Creek, MI 49017
Jon D. Robnolt 30,000 440 172 24,504 08/31/94 8.3% 08/31/99 24,504 1,685
1773 Lakeside Drive
Ceresco, MI 49033
Cynthia L. Ackley 9,091 1,435 609 6,936 02/28/95 9.5% 02/28/00 6,936 -
204 Electric Avenue
Battle Creek, MI 49017
</TABLE>
<PAGE> 22
KELLOGG COMPANY 20
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Keith L. Fitzpatrick $ 9,744 $ 630 $ 215 $ 7,476 08/31/94 8.3% 08/31/99 $ 7,476 $411
310 Cornell
Battle Creek, MI 49017
William L. Brenner 25,000 1,613 681 18,547 08/31/94 8.3% 08/31/99 18,547 893
11657 3 1/2 Mile Road
Battle Creek, MI 49017
James A. Newman 2,000 213 76 1,467 12/31/94 9.5% 12/31/98 1,467 70
314 N. 20th Street
Battle Creek, MI 49015
Lawrence E. Lawyer 40,000 3,605 1,494 29,059 08/31/94 8.3% 08/31/99 29,059 599
10450 6 Mile Road, Lot 280
Battle Creek, MI 49017
Fred J. Sebright 16,000 793 268 12,354 08/31/94 8.3% 08/31/99 12,354 595
127 S. Stone
Battle Creek, MI 49017
Marie L. Southern 4,600 628 216 3,152 08/31/94 8.3% 08/31/99 3,152 65
182 N. Wabash
Battle Creek, MI 49107
</TABLE>
<PAGE> 23
KELLOGG COMPANY 21
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dawn E. Quada $ 1,480 $ 124 $ 10 $ 634 08/31/94 8.3% 08/31/96 $ 634 $ 44
19278 Homer Road
Marshall, MI 49068
Rick Allen Frey 4,559 68 101 3,819 10/31/94 8.8% 10/31/99 3,819 195
8192 Bird Road
Hastings, MI 49058
Boyd M. Crannell 20,000 16,922 396 1 12/31/94 9.5% 12/31/98 1 -
6219 Butterfield Highway
Bellevue, MI 49021
William H. Richardson 35,000 2,646 1,133 25,935 08/31/94 8.3% 08/31/99 25,935 892
25 Convis Street, Apt. 37
Battle Creek, MI 49017
Jeffrey A. Starring 7,000 - - 6,805 10/31/94 8.8% 10/31/99 6,805 99
506 Eldred
Battle Creek, MI 49015
David R. Curtis 13,500 1,412 437 10,008 08/31/94 8.3% 08/31/99 10,008 413
3850 Andrus Road
Hastings, MI 49058
</TABLE>
<PAGE> 24
KELLOGG COMPANY 22
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
William H. Hubbard $14,000 $ 553 $ 243 $11,022 08/31/94 8.3% 08/31/99 $11,022 531
201 Shellenberger Avenue
Battle Creek, MI 49017
David R. Kidder 14,000 68 74 13,625 08/31/94 8.3% 08/31/99 13,625 187
10450 6 Mile Road
Lot 232
Battle Creek, MI 49017
Robert W. Fales 7,000 6,733 577 100 08/31/95 9.8% 08/31/00 100 -
202 Indian Road
Battle Creek, MI 49017
Kenneth M. Lewandowski 12,000 375 183 9,649 10/31/94 8.8% 10/31/99 9,649 422
79 Winter Street
Battle Creek, MI 49015
Rusty A. Herwarth 16,400 702 275 12,774 08/31/94 8.3% 08/31/99 12,774 791
10741 L. Drive North
Battle Creek, MI 49017
Donald M. Nelson 50,000 4,438 1,753 37,215 09/30/94 8.8% 09/30/99 37,215 1,086
4998 F Drive S
East Leroy, MI 49051
</TABLE>
<PAGE> 25
KELLOGG COMPANY 23
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Eugene R. Weeks $20,000 $14,118 $772 $516 11/30/94 8.8% 11/30/97 $516 $15
251 Main
East Leroy, MI 49051
Paul E. Coats 50,000 4,438 1,753 37,215 09/30/94 8.8% 09/30/99 37,215 1,628
20445 14 Mile Road
Battle Creek, MI 49017
Jeanette R. Willard 3,500 650 58 1,214 09/30/94 8.8% 09/30/96 1,214 26
232 S. Lavista Boulevard
Battle Creek, MI 49015
Michael M. Campbell 35,000 1,817 545 24,801 08/31/94 8.3% 08/31/98 24,801 1,194
7441 - 3 1/2 Mile Road
East Leroy, MI 49051
Bertha K. Brazie 50,000 6,593 2,585 33,981 08/31/94 8.3% 08/31/99 33,981 467
14 Jericho Road
Battle Creek, MI 49014
Vanessa A. Scott 7,700 679 275 5,887 10/31/94 8.8% 10/31/99 5,887 215
729 North Avenue
Battle Creek, MI 49017
</TABLE>
<PAGE> 26
KELLOGG COMPANY 24
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loretta S. Trewhalla $15,000 $1,757 $874 $10,938 11/30/94 8.8% 11/30/99 $10,938 $ -
144 Heather
Marshall, MI 49068
Thomas K. Allen 10,295 - - 9,138 08/31/94 8.3% 08/31/99 9,138 503
450 Orleans
Battle Creek, MI 49015
Dennis D. McKinley 5,500 76 55 5,351 03/31/95 10.0% 03/31/00 5,351 268
95 Greenwood
Battle Creek, MI 49017
Gail D. Campbell 3,000 193 178 2,481 09/30/94 8.8% 09/30/99 2,481 72
303 Redner Avenue
Battle Creek, MI 49017
Barbara A. Bowen 18,300 1,274 499 13,670 08/31/94 8.3% 08/31/99 13,670 658
22100 Struwin Road
Battle Creek, MI 49017
Phyllis J. Russell 15,000 518 170 229 08/31/94 8.3% 08/31/99 229 13
15700 Mann Road
Nashville, MI 49073
</TABLE>
<PAGE> 27
KELLOGG COMPANY 25
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Louise P. Perry $2,000 $47 $49 $1,879 07/31/95 10.0% 07/31/00 $1,879 $141
50 West Pitman
Battle Creek, MI 49017
Joann Hill 30,500 1,013 511 24,204 08/31/94 8.3% 08/31/99 24,204 1,332
74 Keith Drive
Battle Creek, MI 49017
David L. Farmer 5,000 165 71 4,419 01/31/95 9.5% 01/31/00 4,419 280
2563 Hickory Road
Battle Creek, MI 49017
Richard A. Ray 38,000 3,425 1,420 27,218 08/31/94 8.3% 08/31/99 27,218 936
4207 W. Dickman Road, Apt. 1A
Battle Creek, MI 49017
David R. Lewis 3,980 273 117 3,064 09/30/94 8.8% 09/30/99 3,064 22
61 Boyd Street
Battle Creek, MI 49017
Donald K. Ivens 3,500 531 173 2,409 12/31/94 9.5% 12/31/98 2,409 76
184 N. Gardner Avenue
Battle Creek, MI 49017
</TABLE>
<PAGE> 28
KELLOGG COMPANY 26
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Anna L. Butler $10,000 $393 $167 $7,823 08/31/94 8.3% 08/31/99 $7,823 $376
P.O. Box 521
Battle Creek, MI 49016
Richard L. Nava 21,000 763 450 18,262 02/28/95 9.5% 02/28/00 18,262 1,012
54 Wren Street
Battle Creek, MI 49017
Terry A. Vanvleet 17,000 618 364 14,784 02/28/95 9.5% 02/28/00 14,784 1,053
10450 6 Mile Road, Lot 254
Hickory Hills
Battle Creek, MI 49017
Suzanne E. Bamfield 5,000 283 89 3,813 11/30/94 8.8% 11/30/98 3,813 195
14800 Banfield Road
Battle Creek, MI 49017
Donald Shipley 20,000 1,089 441 15,243 08/31/94 8.3% 08/31/99 15,243 839
7710 Day Road
Bellevue, MI 49021
Patricia A. McCleary 50,000 2,088 884 40,283 08/31/94 8.3% 08/31/99 40,283 1,662
8164 Reynolds Road
Bellevue, MI 49021
</TABLE>
<PAGE> 29
KELLOGG COMPANY 27
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Carole S. Kidder $4,500 $14 $25 $4,074 08/31/94 8.3% 08/31/99 $4,074 $370
10450 6 Mile Road, Lot 232
Battle Creek, MI 49017
Larry K. Noga 7,800 244 233 6,860 08/31/94 8.3% 08/31/99 6,860 378
P.O. Box 53
Ceresco, MI 49033
Catherine L. Kline 2,500 10 16 2,261 10/31/94 8.8% 10/31/99 2,261 165
343 Pine Knoll Drive, Apt. 1B
Battle Creek, MI 49017
Edward H. Rigel 3,500 351 131 2,507 08/31/94 8.3% 08/31/99 2,507 86
259 N. Wheatfield Drive
Sherwood, MI 49089
Barbara J. Cotton 25,000 3,086 1,300 18,102 10/31/94 8.8% 12/31/99 18,102 396
5572 I Drive South
East Leroy, MI 49051
Susan J. Hopkins 12,000 - 86 11,442 12/31/94 9.5% 12/31/98 11,442 906
330 E. Sunset Boulevard
Battle Creek, MI 49017
</TABLE>
<PAGE> 30
KELLOGG COMPANY 28
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Jayne A. Orns $14,700 $1,323 $476 $10,681 08/31/94 8.3% 08/31/99 $10,681 $73
14200 - 18 1/2 Mile Road
Marshall, MI 49068
Barbara Thompson 4,000 318 98 2,855 01/31/95 9.5% 01/31/98 2,855 181
104 Sundown
Springfield, MI 49015
Linda J. Fish 20,000 1,497 919 18,503 01/31/96 9.5% 01/31/01 18,503 293
4224 Watkins Road
Battle Creek, MII 49017
Gary L. Gunberg 6,000 352 143 4,646 09/30/94 8.8% 09/30/99 4,646 271
737 Calico
Portage, MI 49002
Ronald S. Niebauer 25,000 5,812 872 10,853 08/31/94 8.3% 08/31/97 10,853 75
1241 Clear Lake
Dowling, MI 49050
Roger N. Coult 25,000 737 283 20,050 08/31/94 8.3% 08/31/99 20,050 1,241
10450 6 Mile Road, Lot 221
Battle Creek, MI 49017
</TABLE>
<PAGE> 31
KELLOGG COMPANY 29
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Johnny A. Suggs $25,000 $815 $283 $20,050 08/31/94 8.3% 08/31/99 $20,050 $1,379
818 Pinewood
Battle Creek, MI 49017
Beverly A. Olds 21,500 4,956 1,897 14,297 08/31/94 8.3% 08/31/99 14,297 -
P.O. Box 828
Battle Creek, MI 49016
Johnnie M. Brown 25,000 3,947 1,407 16,467 08/31/94 8.3% 08/31/99 16,647 -
17 Gladys Court
Portage, MI 49081
Dennis E. Buchanan 27,000 4,028 1,544 18,855 10/31/94 8.8% 10/31/99 18,855 275
P.O. Box 1202
Battle Creek, MI 49016
Carol A. Icard 40,000 3,264 1,294 29,399 08/31/94 8.3% 08/31/99 29,399 809
12060 11 Mile Road
Ceresco, MI 49033
Judith A. Brown 5,000 4,682 429 43 03/31/95 10.0% 03/31/00 43 -
8261 Swift Road
Battle Creek, MI 49017
</TABLE>
<PAGE> 32
KELLOGG COMPANY 30
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ervin R. Babcock $31,299 $26,976 $774 $161 11/30/94 8.8% 11/30/99 $161 $7
11200 Banfield Road
Delton, MI 49046
George W. Burrows 40,000 580 229 32,679 08/31/94 8.3% 08/31/99 32,679 2,247
605 Golden Avenue
Nashville, MI 49073
Shirley A. Case 27,000 472 385 24,004 01/31/95 9.5% 01/31/00 24,004 1,521
435 Cooper Street
Battle Creek, MI 49015
Tyrone G. Edgerton 50,000 1,609 837 39,221 08/31/94 8.3% 08/31/99 39,221 2,427
P.O. Box 8
Bedford, MI 49020
Carol A. Dennison 10,000 352 232 9,043 04/30/95 10.0% 04/30/00 9,043 528
28 S. Cedar
Battle Creek, MI 49017
Linda S. Cooper 1,600 181 55 1,016 08/31/94 8.3% 08/31/98 1,016 21
5564 E. Halbert
Battle Creek, MI 49017
</TABLE>
<PAGE> 33
KELLOGG COMPANY 31
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Patricia E. Blaskie $13,800 $1,244 $516 $10,025 08/31/94 8.3% 08/31/99 $10,025 $207
22100 Struwin
Battle Creek, MI 49017
Jamie L. Todd 15,500 1,150 635 12,679 01/31/95 9.5% 01/31/00 12,679 502
13194 11 Mile Road
Ceresco, MI 49033
Daniel L. Savage 2,000 246 22 837 09/30/94 8.8% 09/30/96 837 55
P.O. Box 75
Bedford, MI 49020
Richard G. Robinson 20,000 192 114 16,438 08/31/84 8.3% 08/31/99 16,438 1,131
83 Lathrop Street
Battle Creek, MI 49017
Henry C. Garbe 10,000 286 127 8,477 11/30/94 8.8% 11/30/99 8,477 619
19000 Mines road
Livermore, CA 94550
Katharine R. Noble 1,351 291 89 1,060 11/30/95 9.8% 11/30/98 1,060 9
6982 Juanita Circle, S.
Memphis, TN 38133
</TABLE>
<PAGE> 34
KELLOGG COMPANY 32
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
William Hayes $15,000 $514 $251 $11,735 08/31/94 8.3% 08/31/99 $11,735 $565
470 Shofner Avenue
Memphis, TN 38122
Larry E. Quinn, Sr. 17,000 1,384 550 12,498 08/31/94 8.3% 08/31/99 12,498 516
3632 Horn Lake
Memphis, TN 38109
Crystal D. Ballard 1,053 154 8 496 03/31/95 10.1% 03/31/96 496 37
4819 Winchester Road
Memphis, TN 38118
Carlean Ryan 13,000 383 214 10,233 08/31/94 8.3% 08/31/99 10,233 281
2154 Alcy Road
Memphis, TN 38114
Shirlee M. Cardwell 15,000 38 120 14,962 08/31/95 9.8% 08/31/00 14,962 851
3048 Queensgate
Memphis, TN 38118
Robert J. Broom 16,000 792 353 12,276 08/31/94 8.3% 08/31/99 12,276 253
3291 Brookmead Street
Memphis, TN 38127
</TABLE>
<PAGE> 35
KELLOGG COMPANY 33
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Margie M. Dowery $25,000 $1,111 $419 $19,803 08/31/94 8.3% 08/31/99 $19,803 $953
1451 Haverwood Avenue
Memphis, TN 38116
Luther Clayton 25,000 3,239 1,276 17,588 09/30/94 8.8% 09/30/99 17,588 257
3407 Berea
Memphis, TN 38109
Charles B. Fisher 2,000 49 29 1,788 02/28/95 9.5% 02/28/00 1,788 142
4758 Fair Avenue
Oakland, CA 94619
James E. Brown 24,000 - - 23,669 08/31/94 8.3% 08/31/99 23,669 -
4472 Tracy Lynn
Memphis, TN 38125
Teresa L. Young 7,500 5,971 464 304 08/31/94 8.3% 08/31/99 304 -
1001 Sheridan
Memphis, TN 38107
Sharilyn Mathena 1,661 14 13 1,607 10/31/95 9.8% 10/31/98 1,607 118
5181 Brushwood
Memphis, TN 38109
</TABLE>
<PAGE> 36
KELLOGG COMPANY 34
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Robert L. Mayweather $50,000 $6,827 $2,351 $34,002 08/31/94 8.3% 08/31/99 $34,002 $ -
1895 Fairmeade
Memphis, TN 38114
J.D. Walker 40,000 1,973 882 30,690 08/31/94 8.3% 08/31/99 30,690 1,266
4588 White Fox
Memphis, TN 38109
Marcellus Martin 50,000 6,317 2,351 34,512 08/31/94 8.3% 08/31/99 34,512 237
3564 Dalebranch #1
Memphis, TN 38116
Dorothy B. Lewis 40,000 6,176 2,492 27,724 10/31/94 8.8% 10/31/99 27,724 202
5025 Whitworth
Nesbit, MS 38651
Hazel L. Ivy 10,000 2,768 378 3,898 08/31/94 8.3% 08/31/97 3,898 -
4932 N. 52nd Street
Omaha, NE 68104
Gwendolyn G. Glover 32,000 1,347 1,020 30,653 11/30/95 9.8% 11/30/00 30,653 996
4616 Tulane
Memphis, TN 38109
</TABLE>
<PAGE> 37
KELLOGG COMPANY 35
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beverly V. Shelton $1,000 $68 $13 $740 03/31/95 10.0% 03/31/97 $740 $56
3030 Estes Street
Memphis, TN 38115
Charles M. Phillips, Jr. 45,000 2,370 1,112 36,414 11/30/94 8.8% 11/30/99 36,414 1,593
4957 Parkside Avenue
Memphis, TN 38117
Steve Ballard 50,000 6,572 2,351 34,257 08/31/94 8.3% 08/31/99 34,257 236
4598 Tulane Road
Memphis, TN 38019
Betty C. Ferrell 6,000 876 462 4,680 03/31/95 10.0% 03/31/00 4,680 39
P.O. Box 718
Munford, TN 38058
Andre A. Winrow 2,153 89 29 1,312 08/31/94 8.3% 08/31/97 1,312 81
5669 Jardin Place
Memphis, TN 38115
Nancy E. Bowman 13,000 444 159 10,587 09/30/94 8.8% 09/30/99 10,587 309
995 Hunters Retreat
Collierville, TN 38017
</TABLE>
<PAGE> 38
KELLOGG COMPANY 36
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Danny L. Downing $20,000 $685 $335 $15,647 08/31/94 8.3% 08/31/99 $15,647 $753
12249 Highway 51 S
Atoka, TN 38004
Gregory B. Jordan 9,000 878 269 7,043 08/31/94 8.3% 08/31/99 7,043 339
3623 Vanuy's
Memphis, TN 38111
Carolyn A. Taylor 1,250 172 12 440 08/31/94 8.3% 08/31/96 440 24
1644 Castalia Street
Memphis, TN 38114
Brian C. Miller 1,839 22 12 1,557 12/31/94 9.5% 12/31/98 1,557 99
137 Hillside Drive
Potts Camp, MS 38659
Kevin M. Kelly 6,400 31 50 6,340 09/30/95 9.8% 09/30/99 6,340 464
10087 Curtiss
Olive Branch, MS 38615
Jo A. Smith 17,000 1,357 464 12,612 08/31/94 8.3% 08/31/99 12,612 607
1500 Bonnie Drive
Memphis, TN 38116
</TABLE>
<PAGE> 39
KELLOGG COMPANY 37
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
De Lois H. Jackocks $6,000 $297 $ 101 $4,633 08/31/94 8.3% 08/31/99 $4,633 $287
4555 Ridgewood
Memphis, TN 38116
Erma R. Gipson 3,500 61 49 3,061 01/31/95 9.5% 01/31/00 3,061 218
3421 Cody Drive
Memphis, TN 38115
Kenneth A. Woodard 4,500 377 31 1,826 08/31/94 8.3% 08/31/96 1,826 126
4417 Trout Valley Drive
Memphis, TN 38141
Sandra F. Henderson 4,700 195 19 2,362 09/30/94 8.8% 09/30/96 2,362 17
3359 Foxgate Drive
Memphis, TN 38115
R. Moore 14,000 551 234 10,953 08/31/94 8.3% 08/31/99 10,953 678
3670 Shady Hollow Lane
Memphis, TN 38116
Adell H. Waller 5,000 764 282 3,319 08/31/94 8.3% 08/31/99 3,319 23
5051 Ridgewood
Memphis, TN 38109
</TABLE>
<PAGE> 40
KELLOGG COMPANY 38
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mon Blair, Jr. $10,000 $318 $208 $8,465 12/31/94 9.5% 12/31/99 $8,465 $469
230 Cochran, #6
Memphis, TN 38125
Van D. Ranklin, Jr. 4,239 - - 3,890 09/30/94 8.8% 09/30/99 3,890 256
1498 Livewell
Memphis, TN 38114
Buford Harbin, Jr. 50,000 1,684 838 39,146 08/31/94 8.3% 08/31/99 39,146 1,884
1802 Marjorie
Memphis, TN 38106
Julia F. Scarborough 11,000 1,246 514 8,134 10/31/94 8.8% 10/31/99 8,134 237
230 Cole Road
Atoka, TN 38004
Billye C. Alsobrook 18,000 616 301 14,082 08/31/94 8.3% 08/31/99 14,082 872
3574 Hawkins Mill Road
Memphis, TN 38128
Bennett G. Johnson 8,000 356 134 6,177 08/31/94 8.3% 08/31/99 6,177 298
1898 Shadowlawn
Boulevard
Memphis, TN 38106
</TABLE>
<PAGE> 41
KELLOGG COMPANY 39
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Michael E. McGee $2,167 $223 $24 $907 09/30/94 8.8% 09/30/96 $907 $46
3242 Sharpe Avenue
Memphis, TN 38111
Roy D. Fowler 14,000 551 234 10,953 08/31/94 8.3% 08/31/99 10,953 527
5166 Marlboro Court
Memphis, TN 38125
Keith C. McBride 2,000 179 29 1,608 05/31/95 10.0% 05/31/97 1,607 94
P.O. Box 1704
San Leandro, CA 94578
Ernestyne D. Toney 31,100 4,577 1,608 20,819 08/31/94 8.3% 08/31/99 20,819 143
4790 Hornsby
Memphis, TN 38116
Truman L. May 11,000 101 69 9,382 10/31/94 8.8% 10/31/99 9,382 342
Route 3, Box 55
Coldwater, MS 38618
Isaac C. Mills 9,000 515 122 5,485 08/31/94 8.3% 08/31/97 5,485 302
Route 1, Box 198
Hickory Flat, MS 38633
</TABLE>
<PAGE> 42
KELLOGG COMPANY 40
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mary L. Anderson $42,000 $1,283 $703 $33,227 08/31/94 8.3% 08/31/99 $33,227 $1,371
5295 Patrick Henry Drive
Memphis, TN 38134
Roy F. Davis 50,000 1,322 766 48,678 04/30/96 9.3% 04/30/01 48,678 375
5730 Highway 195
Somerville, TN 38068
Diannna C. Broadway 1,000 304 10 175 03/31/95 10.0% 03/31/96 175 10
P.O. Box 1552
Cordova, TN 38088
James Lias 15,000 442 170 12,030 08/31/94 8.3% 08/31/99 12,030 827
320 Bristol Boulevard
San Leandro, CA 94577
Manuel C. Holmes, Jr. 7,500 179 85 6,287 08/31/94 8.3% 08/31/99 6,287 389
27716 Calaroga Avenue
Hayward, CA 94545
Ethel Heard 40,000 1,158 578 35,695 02/28/95 9.5% 02/28/00 35,695 1,978
2002 64th Avenue
Oakland, CA 94621
</TABLE>
<PAGE> 43
KELLOGG COMPANY 41
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Patricia E. Daws $5,000 $168 $151 $4,515 03/31/95 10.0% 03/31/00 $4,515 $301
6195 Morgan Road
Battle Creek, MI 49017
Donald R. Miller 35,000 1,016 429 28,655 09/30/94 8.8% 09/30/99 28,655 1,672
515 North Midway Road
Tracy, CA 95376
Doris L. Seeley 15,000 1,331 821 13,277 07/31/95 10.0% 07/31/00 13,277 553
Box 123
2035 Sunset Drive
Cedar Creek, NE 68106
Josephine Spencer 45,800 148 329 41,356 01/31/95 9.5% 01/31/00 41,356 3,275
181 Foote Road
Battle Creek, MI 49017
Kim Ivan Bailey 4,500 1,061 25 99 12/31/94 9.5% 12/31/95 99 5
5502 Browne Street
Omaha, NE 68104
Donnal D. David 20,000 2,419 845 13,913 08/31/94 8.3% 08/31/99 13,913 383
19150 Bennington Road
Bennington, NE 68007
</TABLE>
<PAGE> 44
KELLOGG COMPANY 42
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Robert E. Heldt $6,000 $726 $254 $4,174 08/31/94 8.3% 08/31/99 $4,174 $115
12206 Gail Avenue
Omaha, NE 68137
Al R. Heinen 6,000 841 388 4,397 12/31/94 9.5% 12/31/99 4,397 70
12005 William Plaza, Apt. 104
Omaha, NE 68144
Raymond L. Collins 30,000 3,628 1,268 20,870 08/31/94 8.3% 08/31/99 20,870 574
6843 North 64th Street
Omaha, NE 68152
Richard D. Hassler 40,000 4,349 1,832 28,964 09/30/94 8.8% 09/30/99 28,964 211
Route 1
Vutan, NE 68073
Donald Wright 37,000 - 121 30,953 08/31/94 8.3% 08/31/99 30,953 1,277
8805 Q Street, 101A
Omaha, NE 68127
Bettie G. Young 25,000 2,891 934 17,779 08/31/94 8.3% 08/31/99 17,779 611
P.O. Box 11976
Omaha, NE 68111
</TABLE>
<PAGE> 45
KELLOGG COMPANY 43
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sarah E. Coleman $7,000 $311 $153 $5,405 08/31/94 8.3% 08/31/99 $5,405 $223
10515 Ellison Plaza, #8
Omaha, NE 68134
Geoffrey D. Heim 25,000 737 283 20,050 08/31/94 8.3% 08/31/99 20,050 1,103
33245 Alvarado Ave.
Fremont, CA 94555
Dewey D. Martin 20,000 580 245 16,374 09/30/94 8.8% 09/30/99 16,374 836
45 Minerva Streete
San Francisco, CA 94112
Jacob R. Samorano 27,000 795 306 21,654 08/31/94 8.3% 08/31/99 21,654 1,191
775 Lawn Court
Tracy, CA 95376
Jeremiah Richards 5,000 135 77 4,536 03/31/95 10.0% 03/31/00 4,536 340
558 Walavista Avenue
Oakland, CA 94610
William V. Hazelwood 42,500 624 243 34,713 08/31/94 8.3% 08/31/99 34,713 1,671
34839 Ozark River Way
Fremont, CA 94555
</TABLE>
<PAGE> 46
KELLOGG COMPANY 44
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Paul R. Blackburn $12,000 $10,168 $337 $10,168 01/31/95 9.5% 01/31/00 $10,168 $ -
1433 Abbey Avenue
San Leandro, CA 94579
Arturo M. Moreno 25,000 737 283 20,050 08/31/94 8.3% 08/31/99 20,050 1,379
26802 Lakewood Way
Hayward, CA 94544
Mary C. Lopez 9,000 265 102 7,218 08/31/94 8.3% 08/31/99 7,218 497
5235 Amberwood Drive
Freemont, CA 94555
A. Martinez 5,000 65 29 4,110 08/31/94 8.3% 08/31/99 4,110 283
3525 Allendale Avenue
Oakland, CA 94619
Ben Salazar 24,500 701 311 20,770 11/31/94 8.8% 11/31/99 20,770 1,515
4338 Gregory Street
Castro Valley, CA 94546
Jeannie L. Burns 28,000 825 317 22,456 08/31/94 8.3% 08/31/99 22,456 1,235
2345 High Street
Oakland, CA 94601
</TABLE>
<PAGE> 47
KELLOGG COMPANY 45
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Eric H. Daffin $29,500 $869 $334 $23,659 08/31/94 8.3% 08/31/99 $23,659 $1,139
14744 Washington Avenue, #201
San Leandro, CA 94578
Janice Foy 21,222 625 241 17,020 08/31/94 8.3% 08/31/99 17,020 1,054
173 Ruby Lane
Vallejo, CA 94590
Steven D. Knight 15,000 195 122 14,805 09/30/95 9.8% 09/30/00 14,805 842
1354 7th Street
Rodeo, CA 94572
Jeanne McAfee 3,035 88 37 2,485 09/30/94 8.8% 09/30/99 2,485 163
2229 Church Street
Oakland, CA 94605
Caroline D. Sanchez 5,000 169 63 4,239 11/30/94 8.8% 11/30/99 4,239 278
1055 Almond Blossom Drive
Tracy, CA 95376
Sylvia J. Lyons 7,000 342 110 6,318 06/30/95 10.0% 06/30/98 6,318 369
888 David, #202
San Leandro, CA 94577
Paul V. Rushing 29,510 20,512 742 7,061 03/31/95 10.0% 03/31/00 7,061 412
385 Cornell Avenue
Hayward, CA 94544
</TABLE>
<PAGE> 48
KELLOGG COMPANY 46
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Jimmy F. Peterson $5,000 $3,994 $178 $245 09/30/94 8.8% 09/30/99 $245 $9
9411 E Street
Oakland, CA 94603
Rubin J. Ellis, Jr. 6,866 225 99 6,127 02/28/95 9.5% 02/28/00 6,127 340
7617 Halliday Avenue
Oakland, CA 94605
Gilbert V. Sanchez 30,000 928 464 27,219 03/31/95 10.0% 03/31/00 27,219 681
1335 Via Madera
San Lorenzo, CA 94580
Larry L. Himango 20,000 691 227 16,040 08/31/95 8.3% 08/31/99 16,040 1,103
6335 Leona Street
San Leandro, CA 94605
Daniel J. Magalhaes 6,000 143 74 4,917 09/30/94 8.8% 09/30/99 4,917 251
16829 Los Reyes
San Leandro, CA 94577
Annie R. Ralls 20,000 - 105 19,774 02/28/95 9.5% 02/28/00 19,774 1,409
9855 St. Elmo Drive
Oakland, CA 94603
Rosary Mansfield 10,000 356 151 8,778 03/31/95 10.0% 03/31/99 8,778 512
4141 Deep Creek Road
Apt. 164
Fremont, CA 94555
</TABLE>
<PAGE> 49
KELLOGG COMPANY 47
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Larry J. Faria $4,000 $311 $58 $3,231 05/31/95 10.0% 05/31/97 $3,231 $189
2965 Oakes Drive
Hayward, CA 94542
Carlos M. Diaz 2,000 156 29 1,606 05/31/95 10.0% 05/31/97 1,606 54
14371 Pepperdine Street
San Leandro, CA 94579
Kenny L. Marcantelli 8,000 236 91 6,416 08/31/94 8.3% 08/31/99 6,416 309
25172 Soto Road
Hayward, CA 94544
Christen N. Griffin 15,000 402 235 13,813 04/30/95 10.0% 04/30/00 13,813 806
2439 107th Avenue
Oakland, CA 94603
Rebecca Basco 3,700 102 54 3,302 02/28/95 9.5% 02/28/00 3,302 235
928 N. Airport Way
Stockton, CA 95205
Gilberto R. Nunez 2,200 85 23 1,629 08/31/94 8.3% 08/31/98 1,629 112
122 Edward Court
Tracy, CA 95376
Carol L. Stewart 10,000 295 113 8,020 08/31/94 8.3% 08/31/99 8,020 496
7527 Weld Street
Oakland, CA 94601
</TABLE>
<PAGE> 50
KELLOGG COMPANY 48
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27B - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Karen D. Thomas $6,000 $207 $68 $4,812 08/31/94 8.3% 08/31/99 $4,812 $331
900 143rd Avenue, #42
San Leandro, CA 94577
Wilton S. Watson 20,000 589 227 16,040 08/31/94 8.3% 08/31/99 16,040 1,103
1390 E. 31st Street
Oakland, CA 94610
Barbara A. Brown 10,000 185 125 8,436 10/31/94 8.8% 10/31/99 8,436 616
1314 89th Street
Oakland, CA 94621
Thomas S. Cambra 12,000 354 136 9,624 08/31/94 8.3% 08/31/99 9,624 595
935 Martin Boulevard
San Leandro, CA 94577
Barbara J. Gibson 7,913 210 126 7,394 05/31/95 10.0% 05/31/00 7,394 432
P.O. Box 5210
Oakland, CA 94605
Fazal A. Ahmadyar 10,000 377 118 7,812 10/31/94 8.8% 10/31/98 7,812 399
8507 Beverly Lane
Dublin, CA 94598
</TABLE>
<PAGE> 51
KELLOGG COMPANY 49
AMERICAN FEDERATION OF GRAIN MILLERS
SAVINGS AND INVESTMENT PLAN
ITEM 27D - SCHEDULE OF REPORTABLE TRANSACTIONS - YEAR ENDED OCTOBER 31, 1996 (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>
Morgan Bank GIC #41
9.370% 6/1/96 $ - $70,699,393 $70,699,393 $ -
Metropolitan Life GIC
6.27% 6/1/99 22,514,441
Hancock John GAC 5919-1001
8.30% 6/1/97 36,552,406 36,552,406
New York Life GA 30321002
6.72% 6/1/00 47,848,759
</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, 1995.
<PAGE> 1
KELLOGG COMPANY SALARIED
SAVINGS AND INVESTMENT PLAN
FINANCIAL STATEMENTS
AND ADDITIONAL INFORMATION
OCTOBER 31, 1996
<PAGE> 2
KELLOGG COMPANY SALARIED
SAVINGS AND INVESTMENT PLAN
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION
- ------------------------------------------------------------------------------
PAGE
<S> <C>
REPORT OF INDEPENDENT ACCOUNTANTS 1
FINANCIAL STATEMENTS AS OF OCTOBER 31, 1996
AND 1995 AND FOR THE YEARS THEN ENDED:
Statement of assets available for benefits, with fund information 2-3
Statement of changes in assets available for benefits, with
fund information 4-5
Notes to financial statements 6-10
ADDITIONAL INFORMATION:
Item 27a - Schedule of assets held for investment
purposes - October 31, 1996 11
Item 27b - Schedule of loans or fixed income obligations -
October 31, 1996 12-16
Item 27d - Schedule of reportable transactions -
year ended October 31, 1996 17
</TABLE>
<PAGE> 3
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, 1996 and
1995, and the changes in assets available for benefits for the years then
ended, 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 11 - 17 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 11, 1997
<PAGE> 4
KELLOGG COMPANY SALARIED 2
SAVINGS AND INVESTMENT PLAN
STATEMENT OF ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
OCTOBER 31, 1996
<TABLE>
<CAPTION>
FIXED COMPANY
LOAN BOND INCOME EQUITY STOCK
TOTAL FUND FUND FUND FUND FUND
----- ----- ---- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Receivables:
Employer contributions $ 372,162 $ - $ 14,708 $ 120,899 $ 125,311 $ 111,244
Employee contributions 3,296 3,296
Interest 19,702 19,702
------------ ---------- ---------- ------------ ----------- -----------
Total receivables 395,160 14,708 143,897 125,311 111,244
------------ ---------- ---------- ------------ ----------- -----------
Investments:
Plan's interest in Master Trust 130,008,126 9,333,237 84,379,931 36,294,958
Interfund borrowings (16,615) 16,615
Guaranteed investment contracts 262,368,944 262,368,944
Loans to participants 4,650,237 4,650,237
TBC Pooled Funds Daily Liquidity 5,386,548 5,386,548
------------ ---------- ---------- ------------ ----------- -----------
Total investments 402,413,855 4,650,237 9,333,237 267,738,877 84,396,546 36,294,958
------------ ---------- ---------- ------------ ----------- -----------
Assets available for benefits $402,809,015 $4,650,237 $9,347,945 $267,882,774 $84,521,857 $36,406,202
============ ========== ========== ============ =========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE> 5
KELLOGG COMPANY SALARIED 3
SAVINGS AND INVESTMENT PLAN
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
OCTOBER 31, 1995
- ---------------------------------------------------------------------------------------------------------------
FIXED COMPANY
LOAN BOND INCOME EQUITY STOCK
TOTAL FUND FUND FUND FUND FUND
---- ---- ---- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Receivables:
Employer contributions $ 390,747 $ - $ 14,036 $ 162,153 $ 85,646 $ 128,912
Employee contributions 742 742
Interest 329 329
------------ ---------- ---------- ------------ ----------- -----------
Total receivables 391,818 14,036 163,224 85,646 128,912
------------ ---------- ---------- ------------ ----------- -----------
Investments:
Plan's interest in Master Trust 98,010,029 6,949,613 47,787,040 43,273,376
Interfund borrowings (1,056,536) 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 48,843,576 43,273,376
------------ ---------- ---------- ------------ ----------- -----------
Assets available for benefits $392,347,106 $4,941,740 $6,963,653 $288,110,203 $48,929,222 $43,402,288
============ ========== ========== ============ =========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE> 6
KELLOGG COMPANY SALARIED 4
SAVINGS AND INVESTMENT PLAN
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
OCTOBER 31, 1996
- ----------------------------------------------------------------------------------------------------------------------
FIXED COMPANY
LOAN BOND INCOME EQUITY STOCK
TOTAL FUND FUND FUND FUND FUND
----- ---- ---- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C>
Contributions:
Employer $ 5,359,464 $ - $ 211,000 $ 1,927,927 $ 1,474,352 $ 1,746,185
Employee 12,956,687 611,442 5,179,614 4,261,610 2,904,021
Loans repaid (2,086,990) 66,617 899,071 585,481 535,821
Rollover from other qualified plans 392,994 45,796 33,086 205,038 109,074
------------ ----------- ---------- ------------ ----------- -----------
Total contributions 18,709,145 (2,086,990) 934,855 8,039,698 6,526,481 5,295,101
------------ ----------- ---------- ------------ ----------- -----------
Earnings on Investments:
Plan's interest in income of Master Trust 10,509,961 421,398 1,261 14,388,278 (4,300,976)
Interest income 19,313,397 422,481 18,890,916
Trustee fees (38,253) (737) (27,760) (4,888) (4,868)
Administrative fees (252,891) (5,080) (183,020) (37,200) (27,591)
------------ ----------- ---------- ------------ ----------- -----------
Total earnings on investments, net 29,532,214 422,481 415,581 18,681,397 14,346,190 (4,333,435)
------------ ----------- ---------- ------------ ----------- -----------
Net transfers between funds 1,645,007 (16,245,305) 18,920,456 (4,320,158)
Participant withdrawals (37,781,580) (312,680) (563,265) (29,844,720) (3,831,863) (3,229,052)
Loans to participants 1,685,686 (47,886) (858,857) (369,807) (409,136)
Net transfers between Plans 2,130 358 1,178 594
------------ ----------- ---------- ------------ ----------- -----------
Net increase (decrease) 10,461,909 (291,503) 2,384,292 (20,227,429) 35,592,635 (6,996,086)
Assets available for benefits at
beginning of year 392,347,106 4,941,740 6,963,653 288,110,203 48,929,222 43,402,288
------------ ----------- ---------- ------------ ----------- -----------
Assets available for benefits at
end of year $402,809,015 $4,650,237 $9,347,945 $267,882,774 $84,521,857 $36,406,202
============ =========== ========== ============ =========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE> 7
KELLOGG COMPANY SALARIED 5
SAVINGS AND INVESTMENT PLAN
<TABLE>
STATEMENT OF CHANGES IN ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
OCTOBER 31, 1995
- ----------------------------------------------------------------------------------------------------------------------------
FIXED COMPANY
LOAN BOND INCOME EQUITY STOCK
TOTAL FUND FUND FUND FUND FUND
----- ---- ---- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C>
Contributions:
Employer $ 5,756,723 $ - $ 185,623 $ 2,661,762 $ 1,036,407 $ 1,872,931
Employee 12,875,500 511,775 6,221,383 2,931,395 3,210,947
Loans repaid (1,454,867) 49,013 704,899 261,588 439,367
Rollover from other qualified plans 215,449 22,100 46,348 99,941 47,060
------------ ----------- ---------- ------------ ----------- ------------
Total contributions 18,847,672 (1,454,867) 768,511 9,634,392 4,329,331 5,570,305
------------ ----------- ---------- ------------ ----------- ------------
Earnings on Investments:
Plan's interest in income of Master Trust 21,150,938 844,826 264,568 9,450,049 10,591,495
Interest income 19,905,897 346,424 19,559,473
Trustee fees (35,227) (555) (26,319) (3,482) (4,871)
Administrative fees (175,712) (2,459) (136,650) (16,188) (20,415)
------------ ----------- ---------- ------------ ----------- ------------
Total earnings on investments, net 40,845,896 346,424 841,812 19,661,072 9,430,379 10,566,209
------------ ----------- ---------- ------------ ----------- ------------
Net transfers between funds 332,359 17,302,474 2,978,628 (20,613,461)
Participant withdrawals (19,764,652) (351,982) (299,382) (16,415,743) (1,155,409) (1,542,136)
Loans to participants 2,936,521 (58,452) (1,514,939) (573,357) (789,773)
Net transfers between Plans 15,331 4,746 7,228 1,341 2,016
------------ ----------- ---------- ------------ ----------- ------------
Net increase (decrease) 39,944,247 1,476,096 1,589,594 28,674,484 15,010,913 (6,806,840)
Assets available for benefits at
beginning of year 352,402,859 3,465,644 5,374,059 259,435,719 33,918,309 50,209,128
------------ ----------- ---------- ------------ ----------- ------------
Assets available for benefits at
end of year $392,347,106 $ 4,941,740 $6,963,653 $288,110,203 $48,929,222 $ 43,402,288
============ =========== ========== ============ =========== ============
</TABLE>
See accompanying notes to financial statements
<PAGE> 8
KELLOGG COMPANY SALARIED 6
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, 1996 or 1995:
<TABLE>
<CAPTION>
INTEREST OCTOBER 31,
DESCRIPTION RATE 1996 1995
<S> <C> <C> <C>
Putnam Horizon Managed Synthetic
GIC Fund Variable $ 30,048,621 $28,395,496
Brundage Story & Rose Managed
Synthetic GIC Fund Variable 30,184,431 28,480,679
Morgan Bank GIC #40 9.37% - 34,922,275
John Hancock GAC #5917-10001 8.82% 40,670,332 56,874,232
Protective Life Ins. GIC #807-A 6.08% 6,665,585 18,850,129
Allstate Life Ins. GAC #5686 8.13% 26,089,091 24,127,523
John Hancock GAC #7606 7.87% 25,310,440 23,463,837
New York Life GAC #30320002 6.72% 30,310,832 -
Plan's interest in Master Trust Variable 130,008,126 98,010,029
</TABLE>
ALLOCATION OF NET INVESTMENT INCOME TO PARTICIPANTS
Net investment income related to the respective investment options 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.
2. PROVISIONS OF THE PLAN
PLAN ADMINISTRATION
The Plan is administered by the ERISA Administrative Committee appointed by
Kellogg Company.
<PAGE> 9
KELLOGG COMPANY SALARIED 7
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
2. PROVISIONS OF THE PLAN (CONTINUED)
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 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 constant rate equal to one percent over the
prime rate in the month the loan begins. Principal and interest are paid
ratably through monthly payroll deductions. Loans that are considered to be
uncollectible at year end result in the outstanding principal being
considered a hardship withdrawal from the participant's plan account.
PARTICIPANT DISTRIBUTIONS
Participants may elect to withdraw all or a portion of their contributions
made after October 31, 1978, plus related net investment income. The
withdrawal of any participant contributions which were not previously
subject to income tax is restricted by Internal Revenue Service regulations.
Under certain circumstances and subject to approval by the Trustees,
participants may request withdrawal of a portion of Company contributions
and their own contributions made prior to November 1, 1978, including net
investment income thereon.
Participants who terminate employment before retirement, by reasons other
than death or disability, may remain in the Plan or receive payment of their
account balances in a lump sum. If the account balance is less than $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.
<PAGE> 10
KELLOGG COMPANY SALARIED 8
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
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 at October 31, 1996 and 1995 and the changes in assets
for the periods then ended are as follows:
<PAGE> 11
KELLOGG COMPANY SALARIED
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS 9
- -------------------------------------------------------------------------------
4. MASTER TRUST (CONTINUED)
KELLOGG COMPANY MASTER TRUST
SCHEDULE OF ASSETS AND LIABILITIES FOR MASTER TRUST INVESTMENT ACCOUNTS
<TABLE>
<CAPTION>
PENSION PLANS SAVINGS & INVESTMENT PLANS TOTAL
10/31/95 10/31/96 10/31/95 10/31/96 10/31/95 10/31/96
CASH/EQUIVALENTS: ------------------------------ --------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Non-Interest Bearing $ 217,156 $ 1,316 $ 21,959 $ 431 $ 239,115 $ 1,747
Interest Bearing Cash $ 3,233,903 $ 2,771,776 $ 0 $ 0 $ 3,233,903 $ 2,771,776
------------------------------ --------------------------- ---------------------------
TOTAL CASH/EQUIVALENTS $ 3,451,059 $ 2,773,092 $ 21,959 $ 431 $ 3,473,018 $ 2,773,523
------------------------------ --------------------------- ---------------------------
RECEIVABLES $ 43,951,125 $ 60,900,475 $ 197,607 $ 274,793 $ 44,148,732 $ 61,175,268
------------------------------ --------------------------- ---------------------------
GENERAL INVESTMENTS:
Long Term U.S. Gov't Securities $ 39,730,104 $ 50,267,438 $ 8,478,055 $ 7,389,825 $ 48,208,159 $ 57,657,263
Short Term U.S. Gov't Securitie $ 0 $ 0 $ 470,954 $ 402,416 $ 470,954 $ 402,416
Corporate Debt - Long Term $ 11,602,092 $ 14,301,477 $ 2,148,889 $ 7,648,217 $ 13,750,981 $ 21,949,694
Corporate Debt - Short Term $ 820,221 $ 0 $ 225,136 $ 25,139 $ 1,045,357 $ 25,139
Corporate Stocks - Preferred $ 1,250,342 $ 1,838,037 $ 0 $ 0 $ 1,250,342 $ 1,838,037
Corporate Stocks - Convertible $ 2,821,724 $ 5,419,318 $ 0 $ 0 $ 2,821,724 $ 5,419,318
Corporate Stocks - Common $ 419,250,631 $477,113,443 $209,608,570 $252,507,733 $628,859,201 $729,621,176
Real Estate Pooled Funds $ 19,350,020 $ 17,810,044 $ 0 $ 0 $ 19,350,020 $ 17,810,044
Value of Interest in Pooled Funds $ 2,025,248 $ 8,948,629 $ 445,059 $ 333,995 $ 2,470,307 $ 9,282,624
Guaranteed Investment Contracts $ 53,760,024 $ 68,035,400 $ 0 $ 0 $ 53,760,024 $ 68,035,400
------------------------------ --------------------------- ---------------------------
TOTAL INVESTMENTS $ 550,610,406 $643,733,786 $221,376,663 $268,307,325 $771,987,069 $912,041,111
------------------------------ --------------------------- ---------------------------
TOTAL ASSETS $ 598,012,590 $707,407,353 $221,596,229 $268,582,549 $819,608,819 $975,989,902
------------------------------ --------------------------- ---------------------------
PAYABLES ($41,486,770) ($62,117,871) $ 0 $ 0 ($41,486,770) ($62,117,871)
------------------------------ --------------------------- ---------------------------
TOTAL LIABILITIES ($41,486,770) ($62,117,871) $ 0 $ 0 ($41,486,770) ($62,117,871)
------------------------------ --------------------------- ---------------------------
NET ASSETS $ 556,525,820 $645,289,482 $221,596,229 $268,582,549 $778,122,049 $913,872,031
============================== =========================== ===========================
Percentage Interest held by the Plan 0.0% 0.0% 44.2% 48.4% 12.6% 14.2%
</TABLE>
<PAGE> 12
KELLOGG COMPANY SALARIED
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS 10
- --------------------------------------------------------------------------------
4. MASTER TRUST (CONTINUED)
KELLOGG COMPANY MASTER TRUST
SCHEDULE OF INCOME AND EXPENSES, CHANGES IN NET ASSETS
AND NET INCREASE (DECREASE) IN NET ASSETS OF MASTER TRUST INVESTMENT ACCOUNTS
<TABLE>
<CAPTION>
PENSION PLANS SAVINGS & INVESTMENT PLANS TOTAL
10/31/95 10/31/96 10/31/95 10/31/96 10/31/95 10/31/96
----------------------------- ---------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Transfer of Assets Into
Investment Account $ 39,000,063 $ 60,000,541 $270,373,840 $471,493,020 $309,373,903 $531,493,561
Earnings on Investments
Interest $ 11,111,429 $ 7,804,578 $ 1,341,964 $ 1,153,223 $ 12,453,393 $ 8,957,801
Dividends $ 3,457,702 $ 2,789,517 $ 3,259,625 $ 2,829,397 $ 6,717,327 $ 5,618,914
Corporate Actions $ 6,150 $ 1,597,268 $ 0 $ 0 $ 6,150 $ 1,597,268
Pooled Fund Distributions $ 1,824,378 $ 4,177,043 $ 0 $ 0 $ 1,824,378 $ 4,177,043
Miscellaneous $ 661 $ 125 $ 0 $ 0 $ 661 $ 125
Net Realized Gain/(Loss) $ 7,153,214 $ 26,178,076 $ 9,849,022 $ 18,018,388 $ 17,002,236 $ 44,196,464
----------------------------- ---------------------------- ---------------------------
TOTAL ADDITIONS $ 62,553,597 $102,547,148 $284,824,451 $493,494,028 $347,378,048 $596,041,176
----------------------------- ---------------------------- ---------------------------
Transfer of Assets Out of
Investment Account ($9,692,814) ($38,227,387) ($325,217,232) ($437,982,138) ($334,910,046) ($476,209,525)
Fees and Commissions ($1,036,664) ($1,487,578) ($32,385) ($58,996) ($1,069,049) ($1,546,574)
----------------------------- ---------------------------- ---------------------------
TOTAL DISTRIBUTIONS ($10,729,478) ($39,714,965) ($325,249,617) ($438,041,134) ($335,979,095) ($477,756,099)
----------------------------- ---------------------------- ---------------------------
Change in Unrealized Appreciation $ 51,175,245 $ 25,931,479 $ 34,283,639 ($8,466,574) $ 85,458,884 $ 17,464,905
----------------------------- ---------------------------- ---------------------------
NET CHANGE IN ASSETS $102,999,364 $ 88,763,662 ($6,141,527) $ 46,986,320 $ 96,857,837 $135,749,982
Net Assets at Beginning of Year $453,526,456 $556,525,820 $227,737,756 $221,596,229 $681,264,212 $778,122,049
----------------------------- ---------------------------- ---------------------------
Net Assets at End of Year $556,525,820 $645,289,482 $221,596,229 $268,582,549 $778,122,049 $913,872,031
============================= ============================ ===========================
</TABLE>
<PAGE> 13
KELLOGG COMPANY SALARIED 11
SAVINGS AND INVESTMENT PLAN
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES - OCTOBER 31, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET UNREALIZED
SECURITY DESCRIPTION COST PRICE VALUE GAIN/LOSS
<S> <C> <C> <C> <C>
TBC, Inc. Pooled Employee Funds
Daily Liquidity Fund $ 5,386,548 1.00 $ 5,386,548 $ -
Loans to participants 4,650,237 1.00 4,650,237
Brundage Story & Rose Managed
Synthetic GIC Fund Variable Rate 30,184,431 1.00 30,184,431
John Hancock GAC #5917-10001
8.82% 6/1/97 40,670,332 1.00 40,670,332
Protective Life Ins. GIC #807-A
6.08% 1/31/97 6,665,585 1.00 6,665,585
Provident Life GAC #627-05437-01A
6.24% 6/30/97 14,949,623 1.00 14,949,623
Principal Mutual GAC #4-11730-01
5.30% 12/1/98 8,703,007 1.00 8,703,007
Putnam Horizon Managed Synthetic
GIC Variable Rate 6/1/99 30,048,621 1.00 30,048,621
Peoples Security Ins Co #BDA00379FR
5.15% 12/1/97 9,059,903 1.00 9,059,903
Allstate Life Insurance GAC #5686
8.13% 12/1/98 26,089,091 1.00 26,089,091
Commonwealth Life #ADA00668FR
7.64% 6/1/98 16,586,859 1.00 16,586,859
John Hancock GAC #7606
7.87% 12/1/98 25,310,440 1.00 25,310,440
Commonwealth Life GIC
6.19% 6/1/98 7,121,328 1.00 7,121,328
Metropolitan Life GIC
6.27% 6/1/99 11,226,304 1.00 11,226,304
New York Life GIC
6.20% 6/1/98 5,442,588 1.00 5,442,588
New York Life #GA3032002
6.72% 6/1/00 30,310,832 1.00 30,310,832
------------ ------------ ----------
$272,405,729 $272,405,729 $ -
============ ============ ==========
</TABLE>
<PAGE> 14
KELLOGG COMPANY SALARIED 12
SAVINGS AND INVESTMENT PLAN
ITEM 27b - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Christine M. Chalovich $ 7,500 $1,208 $218 $4,202 10/31/94 8.8% 10/31/97 $ 4,202 $ 123
608 Rockcrossing Lane
Allen, TX 75002
Michael Lastra 7,000 203 86 5,628 09/30/94 8.8% 09/30/99 5,628 82
1440 Greenfield Circle
Pinole, CA 94564
Paul M. Cannella 50,000 1,305 807 48,695 12/31/95 9.8% 12/31/00 48,695 1,978
67 Paumanake Avenue
Babylon, NY 11702
Michael A. Cramer 7,000 523 191 5,193 08/31/94 8.3% 08/31/99 5,193 250
499 Nixon Road
Cheswick, PA 15024
Wendy Baum 2,000 1,027 17 182 09/30/94 8.8% 09/30/96 182 11
9946 Aloma Bend Lane
Ovedo, FL 32765
Thomas A. Lawrence 10,500 309 119 8,265 08/31/94 8.3% 08/31/99 8,265 568
1322 Scott Road
Papillion, NE 68046
</TABLE>
<PAGE> 15
KELLOGG COMPANY SALARIED 13
SAVINGS AND INVESTMENT PLAN
ITEM 27b - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Robyn R. Daly $ 1,800 $245 $ 39 $ 956 08/31/94 8.3% 08/31/97 $ 956 $ 40
2582 Marcia Drive
Lawrenceville, GA 30244
Anita J. Lewis 3,000 172 51 2,172 09/30/94 8.8% 09/30/98 2,172 143
840 117th Terrace North, Apt. 6
St. Petersburg, FL 33716
Rhonda J. Haynes 3,647 - - 3,647 07/31/96 9.3% 07/31/01 3,647 -
515 Stonegate Circle
Schaumburg, IL 60193
Frank S. Gant 2,000 284 103 1,349 08/31/94 8.3% 08/31/99 1,349 182
16094 Harden Circle
Southfield, MI 48075
Gregory A. Chapman 10,000 295 113 8,020 08/31/94 8.3% 08/31/99 8,020 496
2161 E. Gore Road
Erie, PA 16510
Archie L. Moore 5,000 217 92 4,020 10/31/94 8.8% 10/31/99 4,020 235
3342 Desertwood Lane
San Jose, CA 95132
</TABLE>
<PAGE> 16
KELLOGG COMPANY SALARIED 14
SAVINGS AND INVESTMENT PLAN
ITEM 27b - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Randall K. Abrahmas $10,000 $290 $123 $8,041 09/30/94 8.8% 09/30/99 $8,041 $587
3174 62nd Street
Saugatauck, MI 49453
Erick V. Lashley 6,000 837 438 4,767 4/30/95 10.0% 04/30/00 4,767 -
Marriott Residence Inn 1901
201 East Walton
Chicago, IL 60611
Debra E. Lendino 6,000 177 141 5,508 05/31/95 10.0% 05/31/00 5,508 321
5435 N. Dakia
Chicago, IL 60641
Charlene J. Cribbs 20,130 - - 17,322 08/31/94 8.3% 08/31/99 17,322 1,310
49 Rose Street
Battle Creek, MI 49017
David M. Boles 50,000 - - 44,460 08/31/94 8.3% 08/31/99 44,460 3,057
14672 Bower Road
Bellevue, MI 49021
Kathey A. Stayner 3,950 239 31 1,986 09/30/94 8.8% 09/30/96 1,986 145
7074 S. 34th Street
Scotts, MI 49088
</TABLE>
<PAGE> 17
KELLOGG COMPANY SALARIED 15
SAVINGS AND INVESTMENT PLAN
ITEM 27b - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dale Taplin $32,000 $ 545 463 $28,892 02/28/95 9.5% 02/28/00 $28,892 $2,059
6019 Cypress
Portage, MI 49002
David H. King 10,915 - - 9,720 09/30/94 8.8% 09/30/99 9,720 142
260 N. Wood Street
Battle Creek, MI 49017
Donald E. Oliver 15,000 1,814 634 10,435 08/31/94 8.3% 08/31/99 10,435 215
9507 2 1/2 Mile Road
East Leroy, MI 49051
Herbert L. Payne 50,000 1,341 784 45,366 04/30/95 10.0% 04/30/00 45,366 3,478
4996 Whitworth
Memphis, TN 38116
Gloston Anderson, Jr. 20,000 589 227 15,743 08/31/94 8.3% 08/31/99 15,743 1,083
439 Dreger Avenue
Memphis, TN 38109
Gary H. Bishop 12,500 368 142 9,839 08/31/94 8.3% 08/31/99 9,839 271
4874 Harvest Knoll
Avenue Germantown,
TN 38125
</TABLE>
<PAGE> 18
KELLOGG COMPANY SALARIED 16
SAVINGS AND INVESTMENT PLAN
ITEM 27b - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS - OCTOBER 31, 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT RECEIVED
DURING REPORTING
ORIGINAL YEAR UNPAID TERMS AMOUNT OVERDUE
IDENTITY AND ADDRESS AMOUNT ------------------- BALANCE AT ---------------------------------- -------------------
OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR END LOAN DATE INTEREST RATE MATURITY PRINCIPAL INTEREST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Jean A. Cisler $ 1,200 $ 99 10 $ 576 10/31/94 8.8% 10/31/96 $ 576 $ 33
6711 S. 49th Avenue
Omaha, NE 68117
Ronald C. Clark 10,000 1,640 465 6,174 09/30//94 8.8% 09/30/98 6,174 45
5190 S.W. Greenwood
Tualatin, OR 97062
Lynn Beeson 2,300 36 38 2,235 07/31/95 10.0% 07/31/00 2,235 205
180 San Tomas Aquino Road #19
Campbell, CA 95008
Cheryl H. Washington 2,040 56 29 1,792 02/28/95 9.5% 02/28/00 1,792 28
7617 Halliday Avenue
Oakland, CA 94605
Barry A. Yerman 10,000 398 239 9,209 06/30/95 10.0% 06/30/00 9,209 307
6849 Penguin Street
Ventura, CA 93003
Anne E. Jones-Schlagel 3,600 61 52 3,200 02/28/95 9.5% 02/28/00 3,200 228
461 Pismo Court
Livermore, CA 94550
</TABLE>
<PAGE> 19
KELLOGG COMPANY SALARIED 17
SAVINGS AND INVESTMENT PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS - YEAR ENDED OCTOBER 31, 1996 (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>
New York Life GA 3032002
6.720% 6/1/00 $35,583,846 $ - $ - $ -
Morgan Bank GIC #40
9.370% 6/1/96 31,251,206 31,251,206
John Hancock GAC #5917-0001
8.30% 6/1/95 20,832,312 20,832,312
</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, 1995.
