FORM 11-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT
PURSUANT TO SECTION 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED OCTOBER 31, 2001
COMMISSION FILE NUMBER 1-4171
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 TO FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION
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PAGE
REPORT OF INDEPENDENT ACCOUNTANTS 1
FINANCIAL STATEMENTS AS OF OCTOBER 31, 2001
AND 2000 AND FOR THE YEARS THEN ENDED:
Statement of net assets available for benefits 2
Statement of changes in net assets available for benefits 3
Notes to financial statements 4-9
ADDITIONAL INFORMATION:
Schedule of assets (held at end of year) - October 31, 2001 10
Schedule of reportable transactions - Year Ended October 31, 2001 11
REPORT OF INDEPENDENT ACCOUNTANTS
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 October 31,
2001 and 2000, 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 auditing standards generally accepted in the
United States of America 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 our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets held
for investment purposes and reportable transactions are presented for the
purpose of additional analysis and are not a required part of the basic
financial statements but are 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. These supplemental
schedules are the responsibility of the Plan's management. The supplemental
schedules have been subjected to the auditing procedures applied in the audits
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.
PricewaterhouseCoopers LLP
Battle Creek, Michigan
April 5, 2002
KELLOGG COMPANY 2
SAVINGS AND INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
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OCTOBER 31,
2001 2000
ASSETS:
Receivables:
Employer contributions $ 5,608 $ -
Employee contributions 22,449
Interest 934
------------ ------------
Total receivables 28,991 -
------------ ------------
Investments:
Plan's interest in Master Trust 425,504,045 472,394,424
Loans to participants 4,125,981 4,217,598
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Total investments 429,630,026 476,612,022
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Total assets 429,659,017 476,612,022
------------ ------------
LIABILITIES:
Benefits payable 17,041
Investment services fees 24,292 26,615
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Total liabilities 24,292 43,656
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Net assets available for benefits $429,634,725 $476,568,366
============ ============
See accompanying notes to financial statements
KELLOGG COMPANY 3
SAVINGS AND INVESTMENT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
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OCTOBER 31,
2001 2000
Contributions:
Employer $ 5,959,618 $ 6,191,555
Employee 15,713,791 16,347,944
Rollovers from other qualified plans 749,021 10,457,407
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Total contributions 22,422,430 32,996,906
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Earnings on Investments:
Plan's interest in (loss) income of Master Trust (18,700,675) 8,481,098
Interest income 378,683 383,476
Trustee fees (92,909) (90,814)
Administrative fees (495,313) (151,307)
------------- -------------
Total (loss) earnings on investments, net (18,910,214) 8,622,453
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Participant withdrawals (50,539,117) (74,776,476)
Net transfers between Plans 93,260
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Net decrease (46,933,641) (33,157,117)
Net assets available for benefits at beginning of year 476,568,366 509,725,483
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Net assets available for benefits at end of year $ 429,634,725 $ 476,568,366
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See accompanying notes to financial statements
KELLOGG COMPANY 4
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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. Through October 31, 1999, the Plan was
named the Kellogg Company Salaried Savings and Investment Plan. On November
1,1999, the Plan name was amended to be the Kellogg Company Savings and
Investment Plan. 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. 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 net appreciation (depreciation) in the fair value of its
investments which consists of the realized gains or losses 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.
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 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
PLAN ADMINISTRATION
The Plan is administered by the ERISA Administration Committee appointed by
Kellogg Company.
PLAN PARTICIPATION
Generally, all salaried employees of Kellogg Company and its U.S.
subsidiaries and employees of the Company's Worthington Foods subsidiary
covered by a collective bargaining agreement are eligible to participate in
the Plan.
KELLOGG COMPANY 5
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
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2. PROVISIONS OF THE PLAN (CONTINUED)
Subject to limitations prescribed by the Internal Revenue Service,
participants may elect to contribute from 1 percent to 21 percent of their
annual wages. Total deferrals in any taxable year may not exceed $10,500.
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 various equity, bond, fixed
income or Kellogg Company stock funds or a combination thereof in multiples
of one percent. Following is a summary of the Plan's investment options:
The BOND INDEX FUND invests only in top-rated securities, as well as
certain mortgage-backed securities to compensate for yield. This fund
seeks to meet or exceed the total return of the Lehman Brothers
Government/Corporate Bond Index, a standard benchmark for this type of
fund.
The STABLE VALUE FUND invests primarily in investment contracts issued
by a diversified group of insurance companies and other financial
institutions. This fund seeks to provide a generally steady level of
current income, plus stability of principal.
The U.S. EQUITY INDEX FUND buys and holds securities in the same
capitalization weight ratio as they appear in the S&P 500 Index.
Securities are traded only when there is contribution or redemption
activity, a change in the composition of the S&P 500 Index or the
receipt of dividend income.
The KELLOGG COMPANY STOCK FUND provides returns in the form of dividend
income and stock price changes. Return is based solely on the Company's
stock performance.
The LARGE COMPANY EQUITY FUND is a value-oriented growth and income
fund. The fund seeks investment opportunities in U.S. common stocks that
are not overly recommended and are considered to be good values.
The SMALL COMPANY EQUITY FUND invests primarily in common stocks of
small, rapidly growing U.S. companies. The fund seeks to provide
long-term growth of capital and income by investing in U.S.-based equity
securities.
The INTERNATIONAL EQUITY FUND invests in common and preferred stocks,
convertibles, American Depositary Receipts, Global Depositary Receipts,
bonds (generally rated "A" or better), government securities,
nonconvertible preferred stocks, and cash. At least 65% of assets will
be invested in issuers in Europe or the Pacific Basin.
The CONSERVATIVE PRE-MIXED FUND is a combination of the Fixed Income
Fund (10%), the Bond Index Fund (50%), the U.S. Equity Index Fund (20%),
the International Equity Fund (10%) and the Small Company Equity Fund
(10%).
KELLOGG COMPANY 6
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
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2. PROVISIONS OF THE PLAN (CONTINUED)
The AGGRESSIVE PRE-MIXED FUND is a combination of the U.S. Equity Index
Fund (25%), the Large Company Equity Fund (25%), the International
Equity Fund (20%) and the Small Company Equity Fund (30%).
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. 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
$5,000, 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. In the event of termination of the Plan, the
account of each participant will be fully vested.
KELLOGG COMPANY 7
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
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3. INCOME TAX STATUS
The Plan administrator has received a favorable letter from the Internal
Revenue Service dated November 25, 1996 regarding the Plan's qualification
under applicable income tax regulations as an entity exempt from federal
income taxes. 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.
4. KELLOGG COMPANY MASTER TRUST
Through May 31, 2001, assets of the Plan have been combined for investment
purposes with assets of the Kellogg Company Bakery, Confectionery, Tobacco
Workers and Grain Millers Savings and Investment Plan and Kellogg Company
sponsored pension plans in the Kellogg Company Master Trust. On June 1,
2001, the assets of the Kellogg Company sponsored pension plans were
transferred from the Kellogg Company Master Trust to the Kellogg Company
Master Retirement 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 October 31, 2001 and 2000 and
the changes in net assets for the periods then ended are as follows:
KELLOGG COMPANY 8
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
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4. KELLOGG COMPANY MASTER TRUST (CONTINUED)
KELLOGG COMPANY MASTER TRUST
SCHEDULE OF ASSETS AND LIABILITIES FOR MASTER TRUST INVESTMENT ACCOUNTS
PENSION PLANS SAVINGS & INVESTMENT PLANS TOTAL
10/31/01 10/31/00 10/31/01 10/31/00 10/31/01 10/31/00
----------------------------- ----------------------------- ------------------------------
CASH/EQUIVALENTS:
Non-Interest Bearing $ 0 $ 0 $ 0 $ 190,786 $ 0 $ 190,786
Interest Bearing Cash 23,743 $ 15,268,851 472,627 15,268,851 496,370
----------------------------- ----------------------------- ------------------------------
TOTAL CASH/EQUIVALENTS 23,743 15,268,851 663,413 15,268,851 687,156
----------------------------- ----------------------------- ------------------------------
RECEIVABLES 39,320,271 2,472,616 3,323,841 2,472,616 42,644,112
----------------------------- ----------------------------- ------------------------------
GENERAL INVESTMENTS:
Long Term U.S. Gov't Securities 194,205,671 20,021,549 10,019,273 20,021,549 204,224,944
Short Term U.S. Gov't Securities (28,334) 2,077,233 2,077,233 (28,334)
Corporate Debt - Long Term 100,421,709 10,902,625 6,747,697 10,902,625 107,169,406
Corporate Debt - Short Term 2,758,280 2,758,280
Corporate Stocks - Preferred 902,900 902,900
Corporate Stocks - Convertible 1,060,539 1,060,539
Corporate Stocks - Common 651,736,336 334,188,529 454,948,112 334,188,529 1,106,684,448
Real Estate Pooled Funds 7,654,432 7,654,432
Value of Interest in Pooled Funds 24,333,746 14,015,544 38,349,290
Guaranteed Investment Contracts 531,282,331 499,923,163 531,282,331 499,923,163
----------------------------- ----------------------------- ------------------------------
TOTAL INVESTMENTS 980,286,999 901,230,547 985,653,789 901,230,547 1,965,940,788
----------------------------- ----------------------------- ------------------------------
TOTAL ASSETS 1,019,631,013 918,972,014 989,641,043 918,972,014 2,009,272,056
----------------------------- ----------------------------- ------------------------------
PAYABLES
Unsettled Trades (138,538,930) (6,755,042) (347,078) (6,755,042) (138,886,008)
Investment Service Fees (983,952) (983,952)
----------------------------- ----------------------------- ------------------------------
TOTAL LIABILITIES (139,522,882) (6,755,042) (347,078) (6,755,042) (139,869,960)
----------------------------- ----------------------------- ------------------------------
NET ASSETS $ 0 $ 880,108,131 $912,216,972 $989,293,965 $912,216,972 $1,869,402,096
============================= ============================= ==============================
Percentage Interest held by the Plan 46.6% 47.8% 46.6% 25.3%
KELLOGG COMPANY 9
SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
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4. KELLOGG COMPANY 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
PENSION PLANS SAVINGS & INVESTMENT PLANS TOTAL
10/31/01 10/31/00 10/31/01 10/31/00 10/31/01 10/31/00
------------------------------- ------------------------------- ---------------------------------
Transfer of Assets Into
Investment Account $ 36,648,054 $ 43,770,563 $ 714,055,873 $ 634,660,118 $ 750,703,927 $ 678,430,681
Earnings on Investments
Interest 8,833,924 13,452,506 32,788,527 34,233,989 41,622,451 47,686,495
Dividends 2,952,001 4,332,396 4,335,875 4,300,646 7,287,876 8,633,042
Corporate Actions 247,797 247,797
Pooled Fund Income 221,702 471,987 221,702 471,987
Miscellaneous (97,541) (57,530) (3) (97,541) (57,533)
Net Realized Gain/(Loss) 32,433,806 75,156,499 (7,923,772) 23,830,925 24,510,034 98,987,424
------------------------------- ------------------------------- ---------------------------------
TOTAL ADDITIONS 80,991,946 137,374,218 743,256,503 697,025,675 824,248,449 834,399,893
------------------------------- ------------------------------- ---------------------------------
Transfer of Assets Out of
Investment Account (68,736,883) (98,028,663) (771,745,394) (800,395,482) (840,482,277) (898,424,145)
Fees and Commissions (909,924) (3,257,254) (502,897) (541,627) (1,412,821) (3,798,881)
Transfers To Kellogg Company
Master Retirement Trust (839,885,857) (839,885,857)
------------------------------- ------------------------------- ---------------------------------
TOTAL DISTRIBUTIONS (909,532,664) (101,285,917) (772,248,291) (800,937,109) (1,681,780,955) (902,223,026)
------------------------------- ------------------------------- ---------------------------------
Change in Unrealized Appreciation (51,567,413) (34,599,231) (48,085,205) (45,648,925) (99,652,618) (80,248,156)
------------------------------- ------------------------------- ---------------------------------
NET CHANGE IN ASSETS (880,108,131) 1,489,070 (77,076,993) (149,560,359) (957,185,124) (148,071,289)
Net Assets at Beginning of Year 880,108,131 878,619,061 989,293,965 1,138,854,324 1,869,402,096 2,017,473,385
------------------------------- ------------------------------- ---------------------------------
Net Assets at End of Year $ 0 $ 880,108,131 $ 912,216,972 $ 989,293,965 $ 912,216,972 $1,869,402,096
=============================== =============================== =================================
KELLOGG COMPANY 10
SAVINGS AND INVESTMENT PLAN
SCHEDULE OF ASSETS (HELD AT END OF YEAR) - OCTOBER 31, 2001
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MARKET
SECURITY DESCRIPTION COST VALUE
Loans to participants $ - $ 4,125,981
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KELLOGG COMPANY 11
SAVINGS AND INVESTMENT PLAN
SCHEDULE OF REPORTABLE TRANSACTIONS - YEAR ENDED OCTOBER 31, 2001
--------------------------------------------------------------------------------
CURRENT VALUE AT TRANSACTION DATE
----------------------------------- COST OF NET
NET NET SECURITIES REALIZED
IDENTITY OF ISSUE PURCHASE PRICE SALES PRICE SOLD GAIN
None
12
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: April 29, 2002 Kellogg Company Savings and
Investment Plan
/s/ John A. Bryant
-------------------------------------
John A. Bryant
Senior Vice President and Chief
Financial Officer, Kellogg Company
13
EXHIBIT PAGE
23 Consent of Independent Accountants 14