KELLANOVA — Regulatory Filings 2008

Jun 26, 2008

11-K 1 k27699e11vk.htm FORM 11-K e11vk PAGEBREAK

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, 2007*

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 Bakery, Confectionery, Tobacco Workers and Grain Millers 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 Bakery, Confectionery, Tobacco Workers and Grain Millers Savings and Investment Plan Financial Statements and Supplemental Schedule December 31, 2007 and 2006

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

TOC

Report of Independent Registered Public Accounting Firm	1
Financial Statements
Statement of Net Assets Available for Benefits
as of December 31, 2007 and 2006	2
Statement of Changes in Net Assets Available for Benefits
for the Years Ended December 31, 2007 and 2006	3
Notes to Financial Statements	4-10
Supplemental Schedule
Schedule I: Schedule of Assets (Held at End of Year)
as of December 31, 2007	11
Exhibit
Consent
of Independent Registered Public Accounting Firm

/TOC

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.

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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 statement of net assets available for benefits and the related statement 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 31,2007 and 2006, 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.

Detroit, Michigan June 23, 2008

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

Statement of Net Assets Available for Benefits as of December 31, 2007 and 2006

	2007
Assets
Plan’s interest in Master Trust at fair value (Note 6)	$ 524,987,448	$	528,621,984
Loans to participants	6,652,130		6,456,762
Total assets	531,639,578		535,078,746
Liabilities
Accrued investment services fees	70,435		64,615
Total liabilities	70,435		64,615
Net assets available for benefits at fair value	531,569,143		535,014,131
Adjustment from fair value to contract value for interest in
Master Trust related to fully benefit-responsive
investment contracts (Note 1)	(408,084	)	2,903,605
Net assets available for benefits	$ 531,161,059	$	537,917,736

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 for the Years Ended December 31, 2007 and 2006

	2007
Contributions
Employer	$ 5,120,580	$	5,207,915
Employee	13,295,967		13,820,335
Rollovers from other qualified plans	96,938		132,348
Total contributions	18,513,485		19,160,598
Earnings on Investments
Plan’s interest in income of Master Trust (Note 6)	26,249,827		45,913,234
Interest income	466,210		411,387
Redemption fees	(86,724	)	(22,025	)
Total earnings on investments, net	26,629,313		46,302,596
Participant withdrawals	(51,865,262	)	(45,475,200	)
Trustee fees	(34,213	)	(118,256	)
Net increase/(decrease)	(6,756,677	)	19,869,738
Net assets available for benefits
Beginning of year	537,917,736		518,047,998
End of year	$ 531,161,059	$	537,917,736

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, 2007 and 2006 and for the Years Ended December 31, 2007 and 2006

| 1. |
| --- |
| 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 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 or the fair value of the underlying assets. 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 Contracts with Insurance Companies On August 6, 2007, the Plan entered into benefit-responsive investment contracts for which
Dwight Asset Management has oversight. Dwight Asset Management 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. |
| From August 26, 1998 to August 6, 2007, the Plan entered into benefit-responsive investment
contracts for which INVESCO had oversight. INVESCO maintained the contributions in a general
account. The account was credited with earnings on the underlying investments and charged for
participant withdrawals and administrative expenses. The guaranteed investment contract issuer
was contractually obligated to repay the principal and a specified interest rate that was
guaranteed to the Plan. |
| Because the guaranteed investment contracts are 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 and Dwight Asset Management, represented 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 Bakery, Confectionery, Tobacco Workers and Grain Millers Savings and Investment Plan Notes to Financial Statements December 31, 2007 and 2006 and for the Years Ended December 31, 2007 and 2006

| There are no reserves against contract value for credit risk of the contract issuers or
otherwise. The crediting interest rate is based on a formula agreed upon with the issuers, 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 contracts do not permit the insurance company to terminate the
agreement prior to the scheduled maturity date. |

Average Yields
Based on actual earnings	5.43 %	5.14 %
Based on interest rate credited to participants	4.93 %	5.02 %

| 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 |

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Kellogg Company Bakery, Confectionery, Tobacco Workers and Grain Millers Savings and Investment Plan Notes to Financial Statements December 31, 2007 and 2006 and for the Years Ended December 31, 2007 and 2006

| | plan 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. |
| --- | --- |
| | New Accounting Guidance In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157 (SFAS
157), Fair Value Measurements . SFAS 157 provides a common definition of fair value and a
framework for measuring assets and liabilities at fair values when a particular standard
prescribes it. In addition, the Statement expands disclosures about fair value measurements.
This new accounting standard will be adopted for the plan year beginning January 1, 2008. The
adoption of this standard is not expected to have a material impact on the financial
statements. |
| 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. |
| | Plan Administration The Plan is administered by trustees appointed by Kellogg Company and employees represented by
the Bakery, Confectionery, Tobacco Workers and Grain Millers Union, 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 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, 374-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 $15,500 in 2007 and $15,000 in 2006. 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. 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 Bakery, Confectionery, Tobacco Workers and Grain Millers Savings and Investment Plan Notes to Financial Statements December 31, 2007 and 2006 and for the Years Ended December 31, 2007 and 2006

| | Starting January 1, 2007, employer matching contributions held in the Kellogg Company Stock
Fund may be transferred by a participant at any time to any other investment fund then
available under the Plan. |
| --- | --- |
| | 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 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 has been amended since receiving the determination letter. However, the Plan
administrator believes the Plan is designed and is currently being operated in compliance with
the applicable requirements of the Internal Revenue Code. |

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Kellogg Company Bakery, Confectionery, Tobacco Workers and Grain Millers Savings and Investment Plan Notes to Financial Statements December 31, 2007 and 2006 and for the Years Ended December 31, 2007 and 2006

4.	Related Party Transactions
	Certain investments held in the Master Trust are shares of Kellogg Company common stock and
short term investment funds managed by The Bank of New York Mellon Corporation. Kellogg
Company is the Plan sponsor, and The Bank of New York Mellon Corporation is the trustee as
defined by the Plan and, therefore, these transactions qualify as party-in-interest
transactions.
5.	Reconciliation of Financial Statements to Form 5500
	The following is a reconciliation of net assets available for benefits per the financial
statements as of December 31, 2007 to Form 5500:

	2007
Net assets available for benefits per the financial statements	$ 531,161,059
Adjustment from fair value to contract value for interest in Master Trust related to fully benefit-responsive
investment contracts (Note 1)	408,084
Net assets available for benefits per the Form 5500	$ 531,569,143

The following is a reconciliation of Plan’s interest in income of Master Trust per the financial statements for the year ended December 31, 2007 to Form 5500:

Plan’s interest in income of Master Trust per the financial statements	2007 — $ 26,249,827
Redemption fees	(86,724	)
Trustee fees	(34,213	)
Adjustment from fair value to contract value for interest in Master Trust related to fully benefit-responsive
investment contracts (Note 1)	408,084
Net investment gain from Master Trust investment
accounts per the Form 5500	$ 26,536,974

| 6. |
| --- |
| 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, 2007 and 2006 and the changes in net
assets for the years ended December 31, 2007 and December 31, 2006 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, 2007 and 2006 and for the Years Ended December 31, 2007 and 2006

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

	2007
Cash/equivalents
Interest bearing cash	$ 9,705,928	$	10,217,940
Total cash/equivalents	9,705,928		10,217,940
Receivables	1,076,337		1,153,662
General Investments at fair value
Long Term U.S. Govt. Securities	—		16,982,286
Short Term U.S. Govt. Securities	—		19,277,154
Corporate Debt — Long-Term	—		10,784,973
Corporate Debt — Short-Term	—		6,991,552
Corporate Stock — Kellogg Company Common Stock	130,506,187		126,074,358
Commingled Funds	215,139,223		217,982,282
Shares of Registered Investment Company	515,821,845		407,696,064
Guaranteed Investment Contracts	643,193,321		639,257,671
Long Term Government Bonds — International	—		707,277
Short Term Government Bonds — International	—		1,912,225
Total general investments	1,504,660,576		1,447,665,842
Total assets	1,515,442,841		1,459,037,444
Payables
Other payables	(901,246	)	(195,881	)
Total liabilities	(901,246	)	(195,881	)
Adjustment from fair value to contract value
for fully benefit-responsive investment contracts	(1,179,434	)	7,998,913
Net Assets	$ 1,513,362,161	$	1,466,840,476
Percentage interest held by the Plan	34.7	%	36.3	%

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Kellogg Company Bakery, Confectionery, Tobacco Workers and Grain Millers Savings and Investment Plan Notes to Financial Statements December 31, 2007 and 2006 and for the Years Ended December 31, 2007 and 2006

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

	2007
Earnings on investments
Interest	$ 33,247,242	$	33,265,656
Dividends	24,859,328		11,401,337
Net realized gain (loss)
Common Stock — Kellogg Company Common Stock	7,623,775		6,283,132
Commingled Funds	11,625,852		6,333,345
Corporate Debt — Short Term	(474,144	)	(349,400	)
Corporate Debt — Long Term	(274,875	)	(60,573	)
US Govt. Securities — Short Term	(113,153	)	(244,913	)
US Govt. Securities — Long Term	376,348		(159,458	)
International Bond — Short Term	(140,223	)	(35,826	)
International Bond — Long Term	(5,443	)	—
Shares of Registered Investment Co.	59,727,993		30,885,029
Net realized gain	78,346,130		42,651,336
Total additions	136,452,700		87,318,329
Net transfer of assets out of investment account	(30,015,129	)	(27,192,635	)
Fees and commissions	(590,039	)	(601,530	)
Total distributions	(30,605,168	)	(27,794,165	)
Change in unrealized appreciation (depreciation):
Common Stock — Kellogg Company Common Stock	(1,468,247	)	12,467,595
Commingled Funds	703,919		24,053,331
Corporate Debt — Short Term	38,016		377,287
Corporate Debt — Long Term	293,210		(188,784	)
US Govt. Securities — Short Term	101,394		331,093
US Govt. Securities — Long Term	(204,093	)	(280,258	)
International Bond — Long Term	192,109		(139,230	)
International Bond — Short Term	20,959		129,051
Shares of Registered Investment Co.	(59,003,114	)	23,526,360
Changes in unrealized appreciation	(59,325,847	)	60,276,445
Net change in assets	46,521,685		119,800,609
Net assets
Beginning of year	1,466,840,476		1,347,039,867
End of year	$ 1,513,362,161	$	1,466,840,476

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

Schedule of Assets (Held at End of Year) as of December 31, 2007 Schedule I

(a)	(b)	(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		$ 524,987,448
*	Participants	Loans, interest rates ranging from 5.00% to	$ 6,652,130
		10.00%, with due dates at various times
		through November 11, 2022.

• Parties-in-interest

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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.

	THE KELLOGG COMPANY BAKERY, CONFECTIONERY,
	TOBACCO WORKERS AND GRAIN MILLERS SAVINGS AND
	INVESTMENT PLAN
Date: June 26, 2008	By:	/s/ John A. Bryant Name: John A. Bryant Title: Executive Vice President, Chief Financial Officer, Kellogg Company and President, Kellogg North America

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EXHIBIT INDEX

Exhibit Number	Document
23.1	Consent of Independent Registered Public Accounting Firm

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