UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003
COMMISSION FILE NUMBER 1-4171
THE KELLOGG COMPANY SAVINGS AND INVESTMENT PLAN
(Full Title of the Plan)
KELLOGG COMPANY
(Name of Issuer)
ONE KELLOGG SQUARE
BATTLE CREEK, MICHIGAN 49016-3599
(Principal Executive Office)
Kellogg Company
Savings and Investment Plan
Index
December 31, 2003 and 2002
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Page(s)
Report of Independent Registered Public Accounting Firm.................1
Financial Statements
Statement of Net Assets Available for Benefits..........................2
Statement of Changes in Net Assets Available for Benefits...............3
Notes to Financial Statements.........................................4-8
Supplemental Schedules
Schedule of Assets (Held at End of Year)................................9
Note:Other schedules required by Section 2520.103-10 of the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the
Employee Retirement Income Security Act ("ERISA") of 1974 have been
omitted because they are not applicable.
1
Report of Independent Registered Public Accounting Firm
To the Trustees and Participants of the
Kellogg Company Savings
and Investment Plan
In our opinion, the accompanying statements of net assets available for benefits
and the related statements of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the Kellogg Company Savings and Investment Plan (the "Plan") at December 31,
2003 and 2002, and the changes in net assets available for benefits for the
years then ended, in conformity with accounting principles generally accepted in
the United States of America. These financial statements are the responsibility
of the Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States) and auditing standards generally accepted in the
United States of America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets (held
at end of year) is presented for the purpose of additional analysis and is not a
required part of the basic financial statements but is supplementary information
required by the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974. This
supplemental schedule is the responsibility of the Plan's management. The
supplemental schedule has been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
/s/ PricewaterhouseCoopers LLP
Battle Creek, Michigan
May 17, 2004
Kellogg Company
Savings and Investment Plan
Statement of Net Assets Available for Benefits
December 31, 2003 and 2002
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2003 2002
Assets
Receivables
Employee contributions $ - $ 250,457
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Total receivables - 250,457
------------------ ------------------
Amount due from prior trustee (Note 1) - 123,031
Investments
Plan's interest in Master Trust 714,742,615 623,841,143
Loans to participants 10,799,720 9,558,982
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Total investments 725,542,335 633,400,125
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Total assets 725,542,335 633,773,613
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Liabilities
Investment services fees 24,017 39,862
Amount due Plan sponsor - 13,895
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Total liabilities 24,017 53,757
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Net assets available for benefits $ 725,518,318 $ 633,719,856
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The accompanying notes are an integral part of these financial statements.
Kellogg Company
Savings and Investment Plan
Statement of Changes in Net Assets Available for Benefits
December 31, 2003 and 2002
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2003 2002
Contributions
Employer $ 14,584,793 $ 11,097,348
Employee 37,157,751 26,857,382
Employee rollovers 1,703,776 706,859
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Total contributions 53,446,320 38,661,589
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Earnings on Investments
Plan's interest in income (loss) of Master Trust 88,858,491 (16,962,167)
Interest income 619,747 455,408
Trustee fees (98,181) (101,776)
Administrative fees (1,175,414) (758,799)
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Total earnings (loss) on investments, net 88,204,643 (17,367,334)
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Participant withdrawals (49,851,165) (45,045,121)
Net transfers between Plans - 457,387
Transfers to/from prior trustees (Note 1) (1,336) 217,343,117
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Net increase 91,798,462 194,049,638
Net assets available for benefits
Beginning of year 633,719,856 439,670,218
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End of year $ 725,518,318 $ 633,719,856
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The accompanying notes are an integral part of these financial statements.
Kellogg Company
Savings and Investment Plan
Notes to Financial Statements
December 31, 2003 and 2002
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1. Summary of Significant Accounting Policies
Basis of Accounting
The Plan operates as a qualified defined contribution plan and was
established under Section 401(k) of the Internal Revenue Code. The
accounts of the Plan are maintained on the accrual basis. Expenses of
administration are paid by the Plan.
Plan Mergers
On March 1, 2002, the Worthington Foods, Inc. 401(k) Profit Sharing Plan
merged with the Plan. Plan assets of $1,624,593 consisting primarily of
participant investment balances and participant loans receivable were
transferred to the Plan on March 1, 2002.
On March 28, 2002, the Mondo Baking 401(k) Plan merged with the Plan.
Plan assets of $3,410,229 consisting primarily of participant investment
balances and participant loan receivables were transferred to the Plan
on March 28, 2002.
On April 29, 2002, the Keebler Puerto Rico 401(k) Savings Plan merged
with the Plan. Plan assets of $99,470 consisting primarily of
participant investment balances were transferred to the Plan on April
29, 2002.
On June 28, 2002, the Keebler Company Salaried Savings Plan merged with
the Plan. Plan assets of $183,562,777 consisting primarily of
participant investment balances and participant loan receivables were
transferred to the Plan on June 28, 2002.
On June 28, 2002, the Keebler Company Union Savings Plan merged with the
Plan. Plan assets of $19,687,050 consisting primarily of participant
investment balances and participant loan receivables were transferred to
the Plan on June 28, 2002.
On June 28, 2002, the Keebler Company Savings Plan for Hourly Associates
of Cary Bakery merged with the Plan. Net plan assets of $8,958,998
consisting primarily of participant investment balances and participant
loan receivables were transferred to the Plan on June 28, 2002.
Investments
All investments are reported at current quoted market values except for
guaranteed insurance contracts, which are reported at contract value and
represent contributions made plus interest at the contract rate. These
contracts are maintained in the Stable Value Fund of the Kellogg Company
Master Trust.
The Plan presents in the statement of changes in net assets available
for benefits the Plan's interest in income of Master Trust, which
consists primarily of the realized gains or losses on the fair value of
the Master Trust investments and the unrealized appreciation
(depreciation) on those investments.
Employer Contributions Receivable
Substantially all of the employer contributions receivable relate to
employer matching contributions and related investment earnings,
earned through the year, but which were unpaid by the Plan sponsor at
year end.
Amount Due from Prior Trustee
At December 31, 2002 amount due from prior trustee represents a
receivable from the former trustee of the Keebler Company Savings Plan
for Hourly Associates of Cary Bakery.
Kellogg Company
Savings and Investment Plan
Notes to Financial Statements
December 31, 2003 and 2002
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Allocation of Net Investment Income to Participants
Net investment income is allocated to participant accounts daily, in
proportion to their respective ownership on that day.
Risks and Uncertainties
The Plan provides for various investment options in several investment
securities. Investment securities are exposed to various risks, such as
interest rate, market and credit. Due to the level of risk associated
with certain investment securities and the level of uncertainty related
to changes in the value of investment securities, it is at least
reasonably possible the changes in risk in the near term would
materially affect participants' account balances and the amounts
reported in the statement of net assets available for benefits and the
statement of changes in net assets available for benefits.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
the Plan's management to make estimates and assumptions that affect the
reported amounts of net assets available for benefits at the date of the
financial statements and changes in net assets available for benefits
during the reporting period. Actual results could differ from those
estimates.
2. Provisions of the Plan
The following description of the Kellogg Company Savings and Investment
Plan (the "Plan") is provided for general information purposes only.
Participants should refer to the plan document for a more comprehensive
description of the Plan's provisions.
Plan Administration
The Plan is administered by the ERISA Finance Committee and the ERISA
Administrative Committee appointed by Kellogg Company.
Plan Participation
Generally, all salaried employees of Kellogg Company and its U.S.
subsidiaries, employees of the Company's Worthington Foods subsidiary
covered by a collective bargaining agreement, employees of the Company's
Cary Bakery facility covered by a collective bargaining agreement and
employees of the Company's Keebler subsidiary covered by a collective
bargaining agreement are eligible to participate in the Plan.
Subject to limitations prescribed by the Internal Revenue Service,
participants may elect to contribute from 1 percent to 50 percent of
their annual wages. Participents were eligible to defer $12,000 in 2003
and $11,000 in 2002. Employee contributions are matched by Kellogg
Company at a 100 percent rate on the first 3 percent and a 50 percent
rate on the next 2 percent, with 12.5 percent of the Company match
restricted for investment in the Kellogg Company stock fund, except for
employees of certain Company facilities covered by a collective
bargaining agreement. Please refer to the Plan document for additional
information. Employees may contribute to the Plan from their date of
hire; however, the monthly contributions are not matched by the Company
until the participant has completed one year of service.
Participants of the Plan may elect to invest the contributions to their
accounts as well as their account balances in various equity, bond,
fixed income or Kellogg Company stock funds or a combination thereof in
multiples of one percent.
Vesting
Participant account balances are fully vested.
Kellogg Company
Savings and Investment Plan
Notes to Financial Statements
December 31, 2003 and 2002
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Participant Loans
Participants may borrow from their fund accounts a minimum of $1,000 up
to a maximum equal to the lesser of $50,000 or 50% of their account
balance. Participants may have only one loan outstanding at any time.
Loan transactions are treated as transfers between the Loan fund and the
other funds. Loan terms range from 12 to 60 months, except for principal
residence loans, which must be repaid within 15 years (or 180 months).
Interest is paid at a constant rate equal to one percent over the prime
rate in the month the loan begins. Principal and interest are paid
ratably through monthly payroll deductions. Loans that are considered to
be uncollectible at year end result in the outstanding principal being
considered a hardship withdrawal from the participant's plan account.
Participant Distributions
Participants may request an in-service withdrawal of all or a portion of
certain types of contributions under standard in-service withdrawal
rules. The withdrawal of any participant contributions which were not
previously subject to income tax is restricted by Internal Revenue
Service regulations.
Participants who terminate employment before retirement, by reasons
other than death or disability, may remain in the Plan or receive
payment of their account balances in a lump sum. If the account balance
is $5,000 or less, the terminated participant will receive the account
balance in a lump sum.
Participants are eligible to retire from the Company at age 62, upon
reaching 55 with 20 years of service, or after 30 years of service. Upon
retirement, disability, or death, a participant's account balance may be
received in a lump sum or installment payments.
Termination
While the Company has expressed no intentions to do so, the Plan may be
terminated at any time.
3. Income Tax Status
The Plan administrator has received a favorable letter from the Internal
Revenue Service dated March 18, 2004 regarding the Plan's qualification
under applicable income tax regulations. The Plan has been amended since
the last determination letter. The Plan administrator believes the Plan
is designed and is currently being operated in compliance with the
applicable requirements of the Internal Revenue Code.
4. Subsequent Event
On January 1, 2004 the Keebler Company Local 184-L 401(k) Plan and Trust
merged with the Plan. Plan assets of $2,395,447 consisting primarily of
participant investment balances were transferred to the Plan on January
1, 2004. As of January 1, 2004 participants of the Keebler Company Local
184-L 401(k) Plan and Trust were eligible to participate in the Kellogg
Company Savings and Investment Plan subject to the same provisions as
the Keebler Company Local 184-L 401(k) Plan and Trust.
5. Kellogg Company Master Trust
The Plan has an undivided interest in the net assets held in the Kellogg
Company Master Trust in which interests are determined on the basis of
cumulative funds specifically contributed on behalf of the Plan adjusted
for an allocation of income. Such income allocation is based on the
Plan's funds available for investment during the year.
Kellogg Company Master Trust net assets at December 31, 2003 and 2002 and
the changes in net assets for the years ended December 31, 2003 and December 31,
2002 are as follows:
Schedule of Net Assets of Master Trust Investment Accounts
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2003 2002
Cash/equivalents
Interest bearing cash $ 12,791,710 $ 21,986,590
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Total cash/equivalents 12,791,710 21,986,590
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Receivables 1,888,051 2,227,281
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General Investments
Long Term U.S. Gov't Securities 19,060,041 21,757,942
Short Term U.S. Gov't Securities 5,793,346 19,216,568
Corporate Debt - Long-Term 21,930,624 4,944,928
Corporate Debt - Short-Term 3,665,846 7,262,014
Corporate Stocks - Common 84,130,906 95,922,038
Commingled Funds 200,998,048 164,020,605
Shares of Registered Investment Company 207,592,300 100,512,901
Guaranteed Investment Contracts 664,410,052 674,814,554
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Total general investments 1,207,581,163 1,088,451,550
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Total investments 1,222,260,924 1,112,665,421
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Payables
Unsettled trades (167,091) (6,909,233)
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Total liabilities (167,091) (6,909,233)
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Net assets $ 1,222,093,833 $ 1,105,756,188
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Percentage interest held by the Plan 58.5% 56.4%
Schedule of Changes in Net Assets of Master Trust Investment Accounts
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2003 2002
Transfers from prior Trustees $ - $ 211,752,913
Earnings on investments
Interest 32,450,775 34,075,591
Dividends 9,152,649 7,584,737
Net realized gain (loss) 2,385,239 (14,486,361)
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Total additions 43,988,663 238,926,880
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Net transfer of assets out of investment account (20,635,134) (25,570,131)
Fees and commissions (611,058) (543,969)
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Total distributions (21,246,192) (26,114,100)
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Change in unrealized appreciation (depreciation) 93,595,174 (36,262,450)
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Net change in assets 116,337,645 176,550,330
Net assets at beginning of year 1,105,756,188 929,205,858
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Net assets at end of year $ 1,222,093,833 $ 1,105,756,188
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Schedule H, Line 4i
Schedule of Assets (Held at End of Year)
December 31, 2003 Schedule I
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(a) (b) (c) (e)
Description of Investment Including
Identity of Issuer, Borrower, Lessor Maturity Date, Rate of Interest,
or Similar Party Collateral, Par or Maturity Value Current Value
Loans to participants (interest rate of $ 10,799,720
5.25% to 13.69%)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
Date: June 18, 2004 The Kellogg Company Savings and
Investment Plan
By: /s/ Jeffrey M. Boromisa
-------------------------------
Jeffrey M. Boromisa
Senior Vice President and Chief
Financial Officer, Kellogg Company
INDEX TO EXHIBITS TO FORM 11-K
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT
23 Consent of Independent Registered Public Accounting Firm