KELLANOVA — Regulatory Filings 2005

Jun 16, 2005

11-K 1 k95707e11vk.htm ANNUAL REPORT ON FORM 11-K e11vk PAGEBREAK

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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, 2004

COMMISSION FILE NUMBER 1-4171

THE KELLOGG COMPANY BAKERY, CONFECTIONERY, TOBACCO WORKERS AND GRAIN MILLERS SAVINGS AND INVESTMENT PLAN (Full Title of the Plan)

KELLOGG COMPANY

(Name of Issuer)

ONE KELLOGG SQUARE BATTLE CREEK, MICHIGAN 49016-3599 (Principal Executive Office)

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Kellogg Company Bakery, Confectionery, Tobacco Workers and Grain Millers Savings and Investment Plan Index December 31, 2004 and 2003

Report of Independent Registered Public Accounting Firm	1
Financial Statements
Statement of Net Assets Available for Benefits	2
Statement of Changes in Net Assets Available for Benefits	3
Notes to Financial Statements	4–8
Supplemental Schedule
Schedule I: Schedule of Assets (Held at End of Year)	9

Note:
Exhibits
Consent of Independent Registered Public Accounting Firm

/TOC

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Report of Independent Registered Public Accounting Firm

To the Participants and Administrator of the Kellogg Company Bakery, Confectionery, Tobacco Workers and Grain Millers Savings and Investment Plan

In our opinion, the accompanying statements of net assets available for benefits and the related statements of changes in net assets available for benefits present fairly, in all material respects, the net assets available for benefits of the Kellogg Company Bakery, Confectionery, Tobacco Workers and Grain Millers Savings and Investment Plan (the “Plan”) at December 31, 2004 and 2003, and the changes in net assets available for benefits for the years then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets (held at end of year) is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

Battle Creek, Michigan May 26, 2005

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Kellogg Company Bakery, Confectionery, Tobacco Workers and Grain Millers Savings and Investment Plan

Statement of Net Assets Available for Benefits December 31, 2004 and 2003

	2004	2003
Assets
Plan’s interest in Master Trust (Note 4)	$ 517,222,487	$ 507,351,218
Loans to participants	6,477,038	6,553,633
Total assets	523,699,525	513,904,851
Liabilities
Accrued investment services fees	75,861	—
Total liabilities	75,861	—
Net assets available for benefits	$ 523,623,664	$ 513,904,851

The accompanying notes are an integral part of these financial statements.

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Kellogg Company Bakery, Confectionery, Tobacco Workers and Grain Millers Savings and Investment Plan

Statement of Changes in Net Assets Available for Benefits Years Ended December 31, 2004 and 2003

	2004
Contributions
Employer	$ 5,082,726	$	4,973,006
Employee	12,835,419		12,209,917
Rollovers from other qualified plans	593,801		203,050
Total contributions	18,511,946		17,385,973
Earnings on Investments
Plan’s interest in income of Master Trust (Note 4)	36,097,353		47,732,324
Interest income	348,766		438,881
Redemption fees	(62,360	)	—
Total earnings on investments, net	36,383,759		48,171,205
Participant withdrawals	(45,033,992	)	(40,376,184	)
Trustee fees	(142,900	)	(57,003	)
Net increase	9,718,813		25,123,991
Net assets available for benefits
Beginning of year	513,904,851		488,780,860
End of year	$ 523,623,664	$	513,904,851

The accompanying notes are an integral part of these financial statements.

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Kellogg Company Bakery, Confectionery, Tobacco Workers and Grain Millers Savings and Investment Plan

Notes to Financial Statements December 31, 2004 and 2003

1.	Summary of Significant Accounting Policies
	Basis of Accounting The Kellogg Company Bakery, Confectionery, Tobacco Workers and Grain Millers Savings and
Investment Plan (the “Plan”) operates as a qualified defined contribution plan and was
established under Section 401(k) of the Internal Revenue Code. The accounts of the Plan are
maintained on the accrual basis. Expenses of administration are paid by the Plan sponsor,
Kellogg Company.
	Investments All investments are reported at current quoted market values except for guaranteed insurance
contracts, which are reported at contract value and represent contributions made plus
interest at the contract rate. These contracts are maintained in the Stable Value Fund of
the Kellogg Company Master Trust.
	The Plan presents in the statement of changes in net assets available for benefits the Plan’s
interest in income of Master Trust, which consists primarily of the realized gains or losses
on the fair value of the Master Trust investments and the unrealized appreciation
(depreciation) on those investments.
	Allocation of Net Investment Income to Participants Net investment income is allocated to participant accounts daily, in proportion to their
respective ownership on that day.
	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 Plan is provided for general information purposes only.
Participants should refer to the plan document for a more comprehensive description of the
Plan’s provisions.

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Kellogg Company Bakery, Confectionery, Tobacco Workers and Grain Millers Savings and Investment Plan Notes to Financial Statements December 31, 2004 and 2003

| Plan Administration The following description of the Plan is administered by trustees appointed by Kellogg and
employees represented by the Bakery, Confectionery, Tobacco Workers and Grain Millers Union. |
| --- |
| Redemption Fees Effective August 16, 2004 the Plan began charging a 2 percent redemption fee for transfers

and/or reallocations of units that have been in a fund for less than five business days.
Fees collected are used to help offset trustee expenses. |
| Plan Participation and Contribution Generally, all Kellogg Company hourly employees belonging to the Bakery, Confectionery,
Tobacco Workers and Grain Millers Union Local Nos. 3-G, 50-G, 252-G, 274-G and 401-G are
eligible to participate in the Plan. |
| Subject to limitations prescribed by the Internal Revenue Service, participants may elect to
contribute from 1 percent to 50 percent of their annual wages. Participants were eligible to
defer $13,000 in 2004 and $12,000 in 2003. Employee contributions are matched by Kellogg
Company at a 100% rate on the first 3 percent and a 50 percent rate on the next 2 percent
with 12.5 percent of the Company match restricted for investment in the Kellogg Company stock
fund. Employees may contribute to the Plan from their date of hire; however, the monthly
contributions are not matched by the Company until the participant has completed one year of
service. |
| Participants of the Plan may elect to invest the contributions to their accounts as well as
their account balances in various equity, bond, fixed income or Kellogg Company stock funds
or a combination thereof in multiples of one percent. |
| Vesting Participant account balances are fully vested. |
| 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. |

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Kellogg Company Bakery, Confectionery, Tobacco Workers and Grain Millers Savings and Investment Plan Notes to Financial Statements December 31, 2004 and 2003

| | Participants who terminate employment before retirement, by reasons other than death or
disability, may remain in the Plan or receive payment of their account balances in a lump
sum. If the account balance is $5,000 or less, the terminated participant will receive the
account balance in a lump sum or installment payments. Participants are eligible to retire
from the Company at age 62, upon reaching 55 with 20 years of service, or after 30 years of
service. Upon retirement, disability, or death, a participant’s account balance may be
received in a lump sum or installment payments. |
| --- | --- |
| | Termination While the Company has expressed no intentions to do so, the Plan may be terminated at any
time. |
| 3. | Income Tax Status |
| | The Plan administrator has received a favorable letter from the Internal Revenue Service
dated March 18, 2004 regarding the Plan’s qualification under applicable income tax
regulations. The Plan administrator believes the Plan is designed and is currently being
operated in compliance with the applicable requirements of the Internal Revenue Code. |
| 4. | Kellogg Company Master Trust |
| | The Plan has an undivided interest in the net assets held in the Kellogg Company Master Trust
in which interests are determined on the basis of cumulative funds specifically contributed
on behalf of the Plan adjusted for an allocation of income. Such income allocation is based
on the Plan’s funds available for investment during the year. |
| | Kellogg Company Master Trust net assets at December 31, 2004 and 2003 and the changes in net
assets for the years ended December 31, 2004 and December 31, 2003 are as follows: |

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Kellogg Company Bakery, Confectionery, Tobacco Workers and Grain Millers Savings and Investment Plan Notes to Financial Statements December 31, 2004 and 2003

Schedule of Net Assets of Master Trust Investment Accounts

	2004
Cash/equivalents
Interest bearing cash	$ 15,615,882	$	12,791,710
Total cash/equivalents	15,615,882		12,791,710
Receivables	1,116,271		1,888,051
General Investments
Long Term U.S. Govt. Securities	24,914,061		19,060,041
Short Term U.S. Govt. Securities	—		5,793,346
Corporate Debt - Long-Term	19,350,278		21,930,624
Corporate Debt - Short-Term	—		3,665,846
Corporate Stocks - Common	113,775,950		84,130,906
Commingled Funds	212,891,676		200,998,048
Shares of Registered Investment Company	282,032,008		207,592,300
Guaranteed Investment Contracts	634,279,171		664,410,052
Long Term Government Bonds - International	3,204,550		—
Total general investments	1,290,447,694		1,207,581,163
Total investments	1,307,179,847		1,222,260,924
Payables
Other payables	(175,924	)	(167,091	)
Total liabilities	(175,924	)	(167,091	)
Net Assets	$ 1,307,003,923	$	1,222,093,833
Percentage interest held by the Plan	39.6	%	41.5	%

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Kellogg Company Bakery, Confectionery, Tobacco Workers and Grain Millers Savings and Investment Plan Notes to Financial Statements December 31, 2004 and 2003

Schedule of Changes in Net Assets of Master Trust Investment Accounts

Transfer of assets from Keebler Company Local 184-L 401(k) Plan	2004 — $ 2,395,447	$	—
Earnings on investments
Interest	30,552,802		32,450,775
Dividends	6,366,300		9,152,649
Net realized gain (loss)
Common Stocks	11,044,446		843,692
Commingled Funds	6,076,947		(7,776,374	)
Corporate Debt-Short Term	(72,165	)	(16,025	)
Corporate Debt-Long Term	(34,712	)	51,449
US Govt. Securities-Short Term	(149,346	)	(10,668	)
US Govt. Securities-Long Term	73,635		933,038
International Bond-Short Term	(17,903	)	—
International Bond-Long Term	(7,706	)	—
Shares of Registered Investment Co.	17,980,537		8,360,127
Net realized gain	34,893,733		2,385,239
Total additions	74,208,282		43,988,663
Net transfer of assets out of investment account	(20,477,691	)	(20,635,134	)
Fees and commissions	(597,515	)	(611,058	)
Total distributions	(21,075,206	)	(21,246,192	)
Change in unrealized appreciation (depreciation):
Common Stocks	3,571,974		7,503,635
Commingled Funds	15,082,158		52,865,988
Corporate Debt-Short Term	3,115		(148,571	)
Corporate Debt-Long Term	(213,582	)	(456,780	)
US Govt. Securities-Short Term	56,750		(755	)
US Govt. Securities-Long Term	(295,908	)	(1,537,017	)
International Bond-Long Term	(67,929	)	—
Shares of Registered Investment Co.	13,640,436		35,368,674
Changes in unrealized appreciation	31,777,014		93,595,174
Net change in assets	84,910,090		116,337,645
Net assets
Beginning of year	1,222,093,833		1,105,756,188
End of year	$ 1,307,003,923	$	1,222,093,833

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Kellogg Company Bakery, Confectionery, Tobacco Workers and Grain Millers Savings and Investment Plan Schedule H, Line 4i

Schedule of Assets (Held at End of Year)
December 31, 2004	Schedule I

(a)	(c)
	Description of Investment Including Maturity
Identity of Issue, Borrower, Lessor	Date, Rate of Interest, Collateral, Par or
or Similar Party	Maturity Value	Current Value
Loans to participants (interest rate		$ 6,447,038
of 5.00% to 10.72%)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: June 10, 2005
By:	/s/ Jeffrey M. Boromisa
	Jeffrey M. Boromisa
	Senior Vice President and Chief
Financial Officer, Kellogg Company

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EXHIBIT INDEX

EXHIBIT NO.	DESCRIPTION
EX-23	Consent of Independent Registered Public Accounting Firm.