KELLANOVA — Regulatory Filings 2007

Jun 29, 2007

11-K 1 k16143e11vk.htm ANNUAL REPORT ON FORM 11-K e11vk PAGEBREAK

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 11-K

(Mark One)

þ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

*For the fiscal year ended December 31, 2006*

OR

o TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES

*For the transition period from to*

Commission File No.: 001-04171

A. Full title of the plan and the address of the plan, if different from that of the issuer named below:

The Kellogg Company Savings and Investment Plan

B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:

Kellogg Company One Kellogg Square Battle Creek, Michigan 49016-3599

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Kellogg Company

Savings and Investment Plan

Financial Statements and

Supplemental Schedule December 31, 2006 and 2005

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TOC

Kellogg Company Savings and Investment Plan

Index
Report of Independent Registered Public Accounting Firm	1
Financial Statements
Statement of Net Assets Available for Benefits
as of December 31, 2006 and 2005	2
Statement of Changes in Net Assets Available for Benefits
for the Years Ended December 31, 2006 and 2005	3
Notes to Financial Statements	4–9
Supplemental Schedule
Schedule I: Schedule of Assets (Held at End of Year)
as of December 31, 2006	10

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Note: Other schedules required by Section 2520.103-10 of the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act (“ERISA”) of 1974 have been omitted because they are not applicable.

Exhibits
Consent of
Independent Registered Public Accounting Firm

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Report of Independent Registered Public Accounting Firm

To the Participants and Administrator 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, 2006 and 2005, 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.

As further described in Note 1, the Plan adopted FSP AAG INV-1 and SOP 94-4-1, Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Health and Welfare and Pension Plans (“FSP”) for the years ended December 31, 2006 and 2005.

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.

Grand Rapids, Michigan June 21, 2007

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Kellogg Company Savings and Investment Plan

Statement of Net Assets Available for Benefits as of December 31, 2006 and 2005

	2006	2005
Assets
Plan’s interest in Master Trust at fair value (Note 4)	$ 930,219,580	$ 832,874,132
Loans to participants	13,898,401	12,725,597
Total assets	944,117,981	845,599,729
Liabilities
Accrued investment services fees	113,879	132,203
Accrued administrative service fees	110,287	145,066
Total liabilities	224,166	277,269
Net assets available for benefits at fair value	943,893,815	845,322,460
Adjustment from fair value to contract value for interest in
Master Trust related to fully benefit-responsive
investment contracts (Note 1)	5,095,308	2,955,417
Net assets available for benefits	$ 948,989,123	$ 848,277,877

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

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Kellogg Company Savings and Investment Plan

Statement of Changes in Net Assets Available for Benefits for the Years Ended December 31, 2006 and 2005

	2006
Contributions
Employer	$ 19,356,254	$	17,218,511
Employee	48,859,431		43,917,820
Rollovers from other qualified plans	2,749,260		4,598,845
Total contributions	70,964,945		65,735,176
Earnings on Investments
Plan’s interest in income of Master Trust (Note 4)	100,383,004		44,261,235
Interest income	840,492		622,935
Redemption fees	(18,351	)	(26,929	)
Total earnings on investments, net	101,205,145		44,857,241
Participant withdrawals	(70,359,388	)	(63,478,066	)
Trustee fees	(168,249	)	(155,021	)
Administrative fees	(931,207	)	(838,677	)
Transfer from prior trustee (Note 1)	—		1,420,446
Net increase	100,711,246		47,541,099
Net assets available for benefits
Beginning of year	848,277,877		800,736,778
End of year	$ 948,989,123	$	848,277,877

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

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Kellogg Company Savings and Investment Plan

Notes to Financial Statements December 31, 2006 and 2005 and for the Years Ended December 31, 2006 and 2005

| 1. |
| --- |
| Basis of Accounting |
| The Kellogg Company 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. |
| Plan Mergers |
| On March 1, 2005 the Mountaintop Baking 401(k) Retirement Savings Plan merged with the Plan.
Plan assets of $1,420,446 consisting primarily of participant investment balances were
transferred to the Plan on March 1, 2005. As of March 1, 2005 union participants of the
Mountaintop Baking 401(k) Retirement Savings Plan were eligible to participate in the Plan
subject to the same provisions as the Mountaintop Baking 401(k) Retirement Savings Plan. As
of January 1, 2005 non-union participants of the Mountaintop Baking 401(k) Retirement Savings
Plan were eligible to participate in the Plan subject to the same provisions of other
salaried and non-union hourly participants in the Plan. |
| Investments |
| The Plan’s investments are stated at fair value. Quoted market prices are used to value
investments. Shares of mutual funds are valued at the net asset value of shares held by the
Plan at year end. Participant loans are valued at their outstanding balances, which
approximate fair value. The fair value of the guaranteed investment contract is calculated by
discounting the related cash flows based on current yields of similar instruments with
comparable durations. 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 the 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. |
| Investment Contract with Insurance Company |
| In 1998, the Plan entered into benefit-responsive investment contracts for which INVESCO has
oversite. INVESCO maintains the contributions in a general account. The account is credited
with earnings on the underlying investments and charged for participant withdrawals and
administrative expenses. The guaranteed investment contract issuer is contractually obligated
to repay the principal and a specified interest rate that is guaranteed to the Plan. |
| Because the guaranteed investment contract is fully benefit-responsive, contract value is the
relevant measurement attribute for that portion of the net assets available for benefits
attributable to the guaranteed investment contract. Contract value, as reported to the Plan
by INVESCO, represents contributions made under the contract, plus earnings, less participant
withdrawals and administrative expenses. Participants may ordinarily direct the withdrawal or
transfer of all or a portion of their investment at contract value. |

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Kellogg Company Savings and Investment Plan Notes to Financial Statements December 31, 2006 and 2005 and for the Years Ended December 31, 2006 and 2005

| There are no reserves against contract value for credit risk of the contract issuer or
otherwise. The crediting interest rate is based on a formula agreed upon with the issuer, but
it may not be less than zero percent. Such interest rates are reviewed on a monthly basis for
resetting. |
| --- |
| Certain events limit the ability of the Plan to transact at contract value with the issuer.
Such events include the following: (1) amendments to the plan documents (including complete
or partial plan termination or merger with another plan), (2) bankruptcy of the plan sponsor
or other plan sponsor events (for example, divestitures or spin-offs of a subsidiary) that
cause a significant withdrawal from the plan, or (3) the failure of the trust to qualify for
exemption from federal income taxes or any required prohibited transaction exemption under
Employee Retirement Income Security Act of 1974. The Plan administrator does not believe that
the occurrence of any such value event, which would limit the Plan’s ability to transact at
contract value with participants, is probable. |
| The guaranteed investment contract does not permit the insurance company to terminate the
agreement prior to the scheduled maturity date. |

Average yields
Based on actual earnings	5.14 %	4.86 %
Based on interest rate credited to participants	5.02 %	4.65 %

| 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. |
| As described in Financial Accounting Standards Board Staff Position, FSP AAG INV-1 and SOP
94-4-1, Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment
Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Health
and Welfare and Pension Plans (the FSP), investment contracts held by a defined-contribution
plan |

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Kellogg Company Savings and Investment Plan Notes to Financial Statements December 31, 2006 and 2005 and for the Years Ended December 31, 2006 and 2005

are required to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a defined-contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the plan. As required by the FSP, the Statement of Net Assets Available for Benefits presents the fair value of the investment contracts as well as the adjustment of the fully benefit-responsive investment contracts from fair value to contract value. The Statement of Changes in Net Assets Available for Benefits is prepared on a contract value basis.

| 2. |
| --- |
| 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. |
| Plan Administration |
| The Plan is administered by the ERISA Finance Committee and the ERISA Administrative
Committee appointed by Kellogg Company. |
| Redemption Fees |
| The Plan charges 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 |
| Generally, all salaried employees and non-union hourly 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, employees of the Company’s Keebler subsidiary covered by a
collective bargaining agreement and employees of the Company’s Mountaintop Baking facility
covered by a collective bargaining agreement and non-union hourly employees 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 $15,000 in 2006 and $14,000 in 2005. 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. |

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Kellogg Company Savings and Investment Plan Notes to Financial Statements December 31, 2006 and 2005 and for the Years Ended December 31, 2006 and 2005

| | 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. |
| | 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 $1,000 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 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 |

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Kellogg Company Savings and Investment Plan Notes to Financial Statements December 31, 2006 and 2005 and for the Years Ended December 31, 2006 and 2005

| 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, 2006 and 2005 and the changes in net
assets for the years ended December 31, 2006 and December 31, 2005 are as follows: |

Kellogg Company Master Trust Schedule of Net Assets of Master Trust Investment Accounts

	2006
Cash/equivalents
Interest bearing cash	$ 10,217,940	$	13,672,373
Total cash/equivalents	10,217,940		13,672,373
Receivables	1,153,662		893,621
General Investments
Long Term U.S. Govt. Securities	16,982,286		17,245,904
Short Term U.S. Govt. Securities	19,277,154		16,279,545
Corporate Debt — Long-Term	10,784,973		8,198,000
Corporate Debt — Short-Term	6,991,552		8,960,891
Corporate Stock — Kellogg Company Common Stock	126,074,358		127,144,034
Commingled Funds	217,982,282		200,780,541
Shares of Registered Investment Company	407,696,064		317,499,870
Guaranteed Insurance Contracts	647,256,584		633,675,888
Long Term Government Bonds — International	707,277		836,553
Short Term Government Bonds — International	1,912,225		2,082,500
Short Term International Corporate Bonds	—		716,700
Total general investments	1,455,664,755		1,333,420,426
Total investments	1,467,036,357		1,347,986,420
Payables
Other payables	(196,185	)	(356,673	)
Unsettled Trades	304		(589,880	)
Total liabilities	(195,881	)	(946,553	)
Net Assets	$ 1,466,840,476	$	1,347,039,867
Percentage interest held by the Plan	63.7	%	62.0	%

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Kellogg Company Savings and Investment Plan Notes to Financial Statements December 31, 2006 and 2005 and for the Years Ended December 31, 2006 and 2005

Kellogg Company Master Trust Schedule of Changes in Net Assets of Master Trust Investment Accounts

Transfer of assets from Mountain Top 401(k) Plan	2006 — $ —	$	1,420,446
Earnings on investments
Interest	33,265,656		31,565,638
Dividends	11,401,337		7,598,087
Net realized gain (loss)
Common Stock — Kellogg Company Common Stock	6,283,132		5,252,512
Commingled Funds	6,333,345		6,640,105
Corporate Debt — Short Term	(349,400	)	17,462
Corporate Debt — Long Term	(60,573	)	4,875
US Govt. Securities — Short Term	(244,913	)	(133,374	)
US Govt. Securities — Long Term	(159,458	)	54,678
International Bond -Short Term	(35,826	)	(35,071	)
International Bond — Long Term	—		(1,165	)
Shares of Registered Investment Co.	30,885,029		27,772,797
Net realized gain	42,651,336		39,572,819
Total additions	87,318,329		80,156,990
Net transfer of assets out of investment account	(27,192,635	)	(26,515,304	)
Fees and commissions	(601,530	)	(599,986	)
Total distributions	(27,794,165	)	(27,115,290	)
Change in unrealized appreciation (depreciation):
Common Stock — Kellogg Company Common Stock	12,467,595		(9,157,055	)
Commingled Funds	24,053,331		2,724,158
Corporate Debt — Short Term	377,287		(330,761	)
Corporate Debt — Long Term	(188,784	)	(117,444	)
US Govt. Securities — Short Term	331,093		(288,436	)
US Govt. Securities — Long Term	(280,258	)	(165,279	)
International Bond — Long Term	(139,230	)	(7,866	)
Shares of Registered Investment Co.	23,526,360		(5,558,416	)
International Bond — Short Term	129,051		(104,657	)
Changes in unrealized appreciation	60,276,445		(13,005,756	)
Net change in assets	119,800,609		40,035,944
Net assets
Beginning of year	1,347,039,867		1,307,003,923
End of year	$ 1,466,840,476	$	1,347,039,867

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Kellogg Company Savings and Investment Plan

Schedule of Assets (Held of End Year) for the Year Ended December 31, 2006

Schedule I

(a)	(c)	(e)
	Description of Investment Including Maturity
Identity of Issue, Borrower, Lessor	Date, Rate of Interest, Collateral, Par or
or Similar Party	Maturity Value	Current Value
Plan’s interest in
Master Trust at fair value		$ 930,219,580
Loans to participants (interest rate		$ 13,898,401
of 4.00% to 10.75%)

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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.

/s/ John A. Bryant
Name:	John A. Bryant
Title:	Executive Vice
President, Chief Financial Officer, Kellogg Company and President,
Kellogg International

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EXHIBIT INDEX

Exhibit
Number	Document
23.1	Consent of Independent Registered Public Accounting Firm

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