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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, 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
 
 

 


 

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

 


 

Kellogg Company
Bakery, Confectionery, Tobacco Workers and Grain Millers
Savings and Investment Plan
Index
 
         
    Page(s)  
    1  
 
Financial Statements
       
 
    2  
 
    3  
 
    4-10  
 
Supplemental Schedule
       
 
    11  
 
Exhibit
       
 
       
       
     
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.

 


 

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.
(PRICEWATERHOUSECOOPERS LLP)
Detroit, Michigan
June 23, 2008

1


 

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     2006  
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.

2


 

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     2006  
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.

3


 

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.   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
 
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.

4


 

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.
                 
    2007   2006
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

5


 

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.

6


 

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.

7


 

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:
         
    2007  
Plan’s interest in income of Master Trust per the financial statements
  $ 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.   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, 2007 and 2006 and the changes in net assets for the years ended December 31, 2007 and December 31, 2006 are as follows:

8


 

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     2006  
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 %

9


 

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     2006  
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  
 
           

10


 

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

11


 

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

 


 

EXHIBIT INDEX
     
Exhibit
Number
  Document
23.1
  Consent of Independent Registered Public Accounting Firm