Kellogg's Company - Annual Report 1993

Kellogg's Company - Annual Report
http://apps.shareholder.com/sec/viewerContent.aspx?compan...
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended Commission File Number December 31, 1993 1-4171
KELLOGG COMPANY
(Exact Name of Registrant as Specied in its Charter)
DELAWARE STATE OF INCORPORATION 38-0710690 I.R.S. EMPLOYER IDENTIFICATION NO.
ONE KELLOGG SQUARE BATTLE CREEK, MICHIGAN 49016-3599 (Address of Principal Executive Ofces) Registrant's Telephone Number: (616) 961-2000
Securities registered pursuant to Section 12(b) of the Act:

TITLE OF EACH CLASS: Common Stock, $0.25 par value per share NAME OF EACH EXCHANGE ON WHICH REGISTERED: New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant: (1) has led all reports required to be led by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to le such reports), and (2) has been subject to such ling requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent lers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge in denitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the common stock held by non-afliates of the registrant (assuming only for purposes of this computation that directors and executive ofcers may be afliates) was $6,132,749,157 as determined by the March 1, 1994 closing price of $49.625 for one share of common stock on the New York Stock Exchange. As of March 1, 1994, 226,904,957 shares of the common stock of the registrant were issued and outstanding. Portions of the registrant's denitive Proxy Statement, dated March 22, 1994, for the Annual Meeting of Stockholders to be held April 22, 1994, are incorporated by reference into Part III of this Report.
PART I
1 of 52
10/17/11 10:36 PM
ITEM 1. BUSINESS The Company. Kellogg Company, incorporated in Delaware in 1922, and its subsidiaries are engaged in the manufacture and marketing of convenience food products on a worldwide basis. The address of the principal business ofce of Kellogg Company is One Kellogg Square, P.O. Box 3599, Battle Creek, Michigan 49016-3599. Unless otherwise indicated by the context, the term "Company" as used in this report means Kellogg Company, its divisions and subsidiaries. Principal Products. The Company's products are manufactured in 18 countries and distributed in more than 150 countries. The principal products of the Company are ready-to-eat cereals which are produced and marketed in Australia, Canada, Japan, Mexico, South Africa, South and Central America, South Korea, the United Kingdom, the United States, Europe and other countries. Ready-to-eat cereals generally are marketed under the KELLOGG'S(R) name and are sold principally to the grocery trade through direct sales forces for resale to consumers and through broker and distribution arrangements in less developed market areas. Other Convenience Food Products. In the United States and Canada, in addition to ready-to-eat cereals, the Company produces or processes and distributes toaster pastries and frozen wafes. The Company also markets, in the United States, cereal and granola bars, and markets a variety of other convenience food products in various locations throughout the world. In March 1994, the Company entered into an agreement to sell the assets of its frozen pie business to The J.M. Smucker Company. Raw Materials. Agricultural commodities are the principal raw materials used in the Company's products. World supplies and prices of such commodities are constantly monitored, as are government trade policies. The cost of raw materials used may uctuate widely due to government policy and regulation, weather conditions or other unforeseen circumstances. Continuous efforts are made to maintain and improve the qualities and supplies of raw materials for purposes of the Company's short-term and long-term requirements. The principal ingredients in ready-to-eat cereals and cereal and granola bars produced by the Company in the United States include corn grits, oats, rice, various fruits, sweeteners, wheat and wheat derivatives. Ingredients are purchased principally from sources in the United States. In producing toaster pastries and frozen wafes, the Company may use dairy products, eggs, fruit and other lling ingredients, our, shortening and sweeteners, which ingredients are obtained from various sources. Although the Company enters into some long-term contracts, the bulk of such raw materials are purchased on the open market. While the cost of raw materials may increase over time, the Company believes that it will be able to purchase an adequate supply of such raw materials as needed. Raw materials and packaging needed for internationally based operations are available in adequate supply and are sometimes imported from countries other than those where used in manufacture. Cereal processing ovens at major domestic and international facilities are regularly fueled by natural gas or propane obtained from local utilities or other local suppliers. Short-term standby propane storage exists at several plants for use in the event of interruption in natural gas supplies. Additionally, oil may be used to fuel certain plant operations in the event of natural gas shortages at various plants or when its use presents economic advantages. Trademarks and Technology. The Company's products are marketed under trademarks owned by the Company. The Company's principal trademarks are its names and designs related to cereals and convenience food products manufactured and marketed by the Company. These trademarks include Kellogg's(R), for cereals and other products of the Company and the names of certain ready-to-eat cereals, including All-Bran(R), Kellogg's(R) Squares(TM), Apple Jacks(R), Apple Raisin Crisp(R), Apple Cinnamon Rice Krispies(TM), Bran Buds(R), Kellogg's(R) Complete(R) Bran Flakes, Cocoa Krispies(R), Common Sense(R), Kellogg's Corn Flakes(R), Cracklin' Oat Bran(R), Kellogg's(R) Cinnamon Mini-Buns, Crispix(R), Double Dip Crunch(R), Froot Loops(R), Kellogg's Frosted Bran(TM), Kellogg's Frosted Flakes(R), Frosted Krispies(R), Frosted Mini-Wheats(R), Fruitful Bran(R), Fruity 2 Marshmallow Krispies(R), Just Right(R), Kenmei(R), Kellogg's(R) Low Fat Granola, Nut & Honey Crunch(R), Nut & Honey Crunch O's(R), Mueslix(R), Nutri-Grain(R), Oatbake(R), Pops(R), Product 19(R), Kellogg's(R) Raisin Bran, Rice Krispies(R), Rice Krispies Treats(TM), Smacks(R) and Special K(R). Additional Company trademarks are the names of certain combinations of Kellogg's(R) ready-to-eat cereals, including Handi-Pak(R), Snack-Pak(R),
2 of 52
10/17/11 10:36 PM
Fun Pak(R), Jumbo(R) and Variety(R). Other Company trademarks include Kellogg's(R) Corn Flake Crumbs; Croutettes(R) for herb season stufng mix; Kellogg's(R) Nutri-Grain(R) for cereal bars; Pop-Tarts(R) for toaster pastries; Mrs. Smith's(R) for pies and certain other convenience foods and Old Fashioned(R) for pies; and Eggo(R), Special K(R) and Nutri-Grain(R) for frozen wafes. Company trademarks also include depictions of certain animated characters in conjunction with certain cereals, including Snap!(R) Crackle!(R) Pop!(R) for Kellogg's(R) Frosted Krispies(R), Fruity Marshmallow Krispies(R) and Rice Krispies(R); Tony the Tiger(R) for Kellogg's Frosted Flakes(R); Toucan Sam(R) for Froot Loops(R); Dig 'Em!(R) for Smacks(R); and Coco(TM) for Cocoa Krispies(R). The slogan "The Best To You Each Morning"(R), used in connection with the Company's ready-to-eat cereals, is also an important Company trademark. The Company's use of the advertising theme "Get A Taste For The Healthy Life"(TM) represents part of its effort to establish throughout the United States and the world the concept of a nutritious breakfast. The Company considers that, taken as a whole, the rights under its various patents, which expire from time to time, are a valuable asset, but the Company does not believe that its businesses are materially dependent upon any single patent or group of related patents. The Company's activities under licenses or other franchises or concessions are not material. Seasonality. Ready-to-eat cereals, cereal and granola bars, frozen wafes and toaster pastries have approximately level demands throughout the year. Working Capital. The Company generally requires payment for goods sold eleven days subsequent to the date of invoice, with a 2% discount allowed for payment within ten days. Receipts from goods sold, supplemented as required by borrowings, provide for the Company's payment of dividends, capital expansion and for other operating expenses and working capital needs. Customers. The Company is not dependent on any single customer or a few customers for a material part of its sales. Products of the Company are sold through its own sales forces and through broker and distributor arrangements and are generally resold to consumers in retail stores, restaurants and other food service establishments. Backlog. For the most part, orders are lled within a few days of their receipt and are subject to cancellation at any time prior to shipment. The backlog of any unlled orders at any particular time is not material to the Company. Competition. The Company has experienced intense competition for sales of all of its principal products in its major markets, both domestically and internationally. The Company's products compete with advertised and branded products of a similar nature as well as unadvertised and private label products, which are typically distributed at lower prices, and generally with other food products with different characteristics. Principal methods and factors of competition include, among others, product quality, composition and nutritional value, price, advertising and promotion. The Company is the world's largest manufacturer and marketer of ready-to-eat cereals. Research and Development. Research to support and expand the use of the Company's existing products and to develop new food products is carried on at the Company's research laboratories and pilot plant facilities in Battle Creek, Michigan, and at other plant locations around the world. The Company's expenditures for research and development were approximately $40 million in 1993, $37 million in 1992 and $35 million in 1991. Environmental Matters. The Company's facilities are subject to various foreign, federal, state and local laws and regulations regarding the discharge of material into the environment and the protection of the 3 environment in other ways. The Company is not a party to any material proceedings arising under these regulations. The Company believes that compliance with existing environmental laws and regulations will not require material capital expenditures or otherwise materially affect the nancial condition or the competitive position of the Company. The Company is currently in substantial compliance with all material environmental regulations affecting the Company and its properties. Employees. At December 31, 1993, the Company had approximately 16,150 employees.
3 of 52
10/17/11 10:36 PM
Segment and Geographic Information. The Company operates in a single industry, which is the manufacture and marketing of convenience food products throughout the world. Net sales and net earnings for the years 1993, 1992 and 1991, and identiable segment assets and corporate assets, consisting principally of cash and temporary investments, at the related year-ends are presented in Note 13 of the nancial statements captioned "Operating Segments" and contained in Item 8 of this Report. ITEM 2. PROPERTIES The Company's corporate headquarters and principal research and development facilities are located in Battle Creek, Michigan. The Company operates manufacturing plants and warehouses totalling more than ten million (10,000,000) square feet of building area in the United States and other countries. The Company's plants have been designed and constructed to meet its specic production requirements, and the Company periodically invests money for capital and technological improvements. At the time of its selection, each location was considered to be favorable, based on the location of markets, sources of raw materials, availability of suitable labor, transportation facilities, location of other Company plants producing similar products and other factors. Manufacturing facilities of the Company in the United States include ve cereal plants and warehouses located in Battle Creek, Michigan; Lancaster, Pennsylvania; Memphis, Tennessee; Omaha, Nebraska; and San Leandro, California. Other of the Company's convenience foods are also manufactured in the United States at various plant locations. Outside the United States, the Company has additional manufacturing locations, some with warehousing facilities, in Australia, Canada, Europe, Japan, Mexico, South Africa, South and Central America and South Korea. The principal properties of the Company, including its major ofce facilities, are held in fee and none is subject to any major encumbrance. Distribution centers and ofces of non-plant locations generally are leased. The Company considers its facilities generally suitable, adequate and of sufcient capacity for its current operations. ITEM 3. LEGAL PROCEEDINGS The Company is not a party to any pending legal proceedings which, if decided adversely, would be material to the Company on a consolidated basis, nor are any of the Company's properties or subsidiaries subject to any such proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT Executive Ofcers of the Registrant - The names, ages as of March 1, 1994 and positions of the executive ofcers of the Company are listed below together with their business experience. Executive ofcers are elected annually by the Board of Directors at the meeting immediately following the Annual Meeting of Stockholders. 4 EXECUTIVE OFFICERS Arnold G. Langbo Chairman of the Board, President and Chief Executive Ofcer..................56 Mr. Langbo has been employed by the Company and certain of its subsidiaries since 1956. He was named President of the Company's U.S. Food Products Division in 1978, a Vice President of the Company in 1979, Executive Vice President in 1981 and Group Executive Vice President and President of Mrs. Smith's Frozen Foods Co., a subsidiary of the Company, in 1983. He was named Executive Vice President and President, Kellogg International Division, in 1986. He was named President and Chief Operating Ofcer in December 1990 and became Chairman of the Board and Chief Executive Ofcer on January 1, 1992.
4 of 52
10/17/11 10:36 PM
Charles W. Elliott Executive Vice President - Administration, Chief Financial Ofcer............62 Mr. Elliott joined the Company as Executive Vice President - Administration in February 1987. Previously, Mr. Elliott was employed for thirty years by Price Waterhouse, an independent accounting rm. At Price Waterhouse, he held various executive positions and most recently managed the tax department in its Chicago ofces and served as a member of its Policy Board. He was named Chief Financial Ofcer of the Company in December 1988. William A. Camstra Executive Vice President, Area Director - Kellogg Latin America...............61 Mr. Camstra has been employed by the Company and certain of its subsidiaries since 1956. He has worked in sales and various international operations of the Company and was named a Vice President and Director of Latin American Operations in 1983. He was named Executive Vice President of the Company on January 1, 1992. Gary E. Costley Executive Vice President, Area Director - Kellogg North America...............50 Dr. Costley has been employed by the Company since 1970. He was named Vice President - Public Affairs in 1975, Vice President - Assistant to the President in 1978, Senior Vice President - Corporate Development in 1980, Senior Vice President - Science and Quality in 1981, Executive Vice President - Science and Technology in 1985, Executive Vice President, and President, U.S. Subsidiaries, in 1986, Executive Vice President and President, U.S. Food Products Division, in December 1988, and President of Kellogg USA, Inc., a subsidiary of the Company, in 1992. Donald G. Fritz Executive Vice President, Area Director - Kellogg Asia Pacic................46 Mr. Fritz rst joined Kellogg Canada Inc., a subsidiary of the Company, in 1979. He has worked in marketing and was named General Manager - Kellogg (Aust.) Pty. Limited, a subsidiary of the Company, in 1984, and Director of Australasia in 1989, and a Vice President of the Company in January 1990. He was named Executive Vice President of the Company on January 1, 1992. Thomas A. Knowlton Executive Vice President, Area Director - Kellogg Europe......................47 Mr. Knowlton joined Kellogg Canada Inc. as Senior Vice President - Sales and Marketing in 1980, became its Executive Vice President in 1981, and its President and Chief Executive Ofcer and also a Vice President of the Company in 1983. In January 1989, he was named Managing Director, Kellogg Company of Great Britain Limited, a subsidiary of the Company, and continued as a Vice President of the Company. He was named an Executive Vice President of the Company on January 1, 1992. 5 Donald W. Thomason Executive Vice President - Corporate Services and Technology..................50 Mr. Thomason has been employed by the Company since 1966 and has worked in production, plant management, logistics and manufacturing. He was named a Vice President and Executive Vice President - Operations in the Company's U.S. Food Products Division in January 1989. He was named Executive Vice President - Corporate Services and Technology in 1990. Richard M. Clark Senior Vice President, General Counsel and Secretary..........................56 Mr. Clark joined the Company as Senior Vice President, General Counsel and Secretary in September 1989. Prior to joining the Company, Mr. Clark was Vice President, General Counsel and Secretary of SSMC Inc. Robert L. Creviston Senior Vice President - Human Resources.......................................52
5 of 52
10/17/11 10:36 PM
Mr. Creviston joined the Company as Vice President - Employee Relations in 1982. He was named Senior Vice President - Human Resources in August 1991. Daryl R. Schaller Senior Vice President - Research, Quality and Nutrition.......................50 Dr. Schaller has been employed by the Company since 1972. He was named Vice President - Director of Research in 1981, Vice President - Corporate Technology in 1983, Senior Vice President - Science and Technology in 1986, and Senior Vice President - Research, Quality and Nutrition in January 1990. Joseph M. Stewart Senior Vice President - Corporate Affairs.....................................51 Mr. Stewart has been employed by the Company since 1980. He has worked in foodservice marketing and public affairs, and was named Vice President - Public Affairs in 1985 and Senior Vice President - Corporate Affairs in 1988. Charles E. French Vice President - Finance and Treasurer........................................49 Mr. French has been employed by the Company and various subsidiaries of the Company since 1966. In 1988, he was named Director - Administration, Kellogg Company of Great Britain. In 1992, he also became Director Finance of Kellogg Europe, and in September 1993, he was named Vice President - Finance and Treasurer of the Company. Alan Taylor Corporate Controller..........................................................42 Mr. Taylor has been employed by the Company and certain of its subsidiaries since 1982. In 1987, he was named Director - Finance, Kellogg Canada Inc. He served as Director - Finance of Kellogg (Aust.) Pty. Ltd. from 1988 until 1993. He became Controller of the Company in August 1993. 6
PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The information called for by this Item is set forth in Note 12 to the Consolidated Financial Statements on page F-16 of this Report. ITEM 6. SELECTED FINANCIAL DATA The information called for by this Item is set forth on page F-1 of this Report. Such information should be read in conjunction with the Consolidated Financial Statements and Notes thereto of the Company included in Item 8, incorporated by reference from Item 14, of this Report. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS STRATEGIC AND FINANCIAL OBJECTIVES Management's primary objective is to increase shareholder value over time. To achieve this objective, the Company has implemented a long-term business strategy which focuses on continuing aggressive investment in new cereal markets, increasing returns on existing investments, maximizing cash ows, and minimizing the cost of capital through appropriate nancial policies. The success of this strategy is reected in the Company's superior earnings,
6 of 52
10/17/11 10:36 PM
return on equity, total return to shareholders, and its overall strong nancial condition. GLOBAL MARKETPLACE Because of its strong global market share leadership, the Company is uniquely positioned to benet from the continued increase in cereal consumption around the world. As of December 31, 1993, the Company's market share was 43% globally, 38% in North America, 47% in Asia-Pacic, 50% in Europe, and 78% in Latin America. This favorable positioning in existing markets is accompanied by leadership in entering new markets with substantial long-term potential. The Company opened a new cereal plant in Latvia in 1993 and has plants scheduled to begin production in India in 1994 and in China in 1995. The Company plans to make its products available to a billion new consumers by early in the next century, more than doubling its present reach. Lifestyle and demographic changes in major markets around the world favor a continued increase in consumption of ready-to-eat cereal, the Company's core product line. Two particularly important trends are ever-increasing recognition by consumers around the world of the nutritional value of cereal and the accelerating move of the "baby boom" generation from young adulthood, where cereal consumption is relatively low, to middle age, where cereal consumption grows steadily. The Company believes it has developed the worldwide infrastructure and nancial resources needed to continue its leadership of category growth. RESULTS OF OPERATIONS 1993 COMPARED TO 1992 Revenues The Company's revenues are obtained primarily from the sale of ready-to-eat cereals in more than 150 countries. The Company has been marketing cereals since 1906 and is the global market share leader by nearly a three-to-one advantage. Increased revenues are obtained by reaching consumers in both new and developed markets with products that are both nutritious and superior in quality. The introduction of new products is vital to the Company's long-term nancial strength. For 1993, the Company introduced 24 new products worldwide. Despite intense competition, continued recessions in several major markets, and unfavorable currency movements, worldwide revenues increased by 2% for 1993, marking the 49th consecutive annual increase. The increase was achieved through higher selling prices and a 2% increase in cereal volume, being negatively 7 impacted by foreign currency movements. Forty percent of all revenues are derived from outside the United States and are subject to foreign currency uctuations. Excluding the negative effects of currency movements, 1993 sales would have increased 6%. During 1993, sales within the United States rose by 6% from increased selling prices and volume for both cereal and convenience foods. 1993 European sales, which were signicantly affected by unfavorable foreign currency uctuations, were down 8%. If the effects of foreign currency are excluded, European sales would have risen 4%. Sales for other areas grew by 2% from increased volume and higher selling prices, being partially offset by the negative impact of currency uctuations. Excluding the effects of negative currency movements, other area sales would have increased 6%. Other revenue for 1993 includes a total pre-tax gain of $65.9 million ($.20 per share) from the sale of the Company's British carton-container division ($.10 per share) and its Argentine snack food business ($.10 per share). In recent years the Company has divested units that do not t with its long-term strategic plan. Other deductions for 1993 includes pre-tax charges of $64.3 million ($.18 per share) from the write-down of certain assets in Europe and North America. Expenses and prot margins Cost of goods sold as a percent of sales was 47% for the year, the lowest in the last decade. Higher selling prices, increased volume, and worldwide productivity gains in factory operations are among the factors that contributed to this lower ratio.
7 of 52
10/17/11 10:36 PM
Intense global competition requires heavy investment in value-added marketing. Selling and administrative expense represented 36% of each sales dollar in 1993. The Company is committed to building strong, long-term brand franchises through effective advertising. Gross interest expense, prior to amounts capitalized, increased to $40.4 million for 1993, compared to $33.6 million for 1992. Higher debt levels caused the increase. The Company expects average borrowing levels and related interest expense to be slightly higher during 1994. The Company's effective tax rate was 34.2% for the year, compared to 36.2% for 1992. The tax rate declined for a number of reasons. Decreased statutory rates in countries such as Germany, Australia, Canada, and South Africa more than offset the United States tax rate increase of 1993. The Company's 1994 effective tax rate is expected to be approximately 38%. For 1993, earnings per share were $2.94 and earnings were $680.7 million, compared to 1992's earnings per share of $1.81 and earnings of $431.2 million. Excluding all one-time events for both years, earnings per share were $2.92, up 6% over $2.75 in 1992; and net earnings were $675.5 million, up 3%. Without the negative impact of foreign currency uctuations, earnings per share would have been up 10% and net earnings up 6%. Geographically, earnings before the cumulative effect of an accounting change were lower by 1% for the United States and by 1% for Europe, and up 7% for other areas. Excluding all one-time events for both years, the United States would have been up 7%, Europe down 9%, and other areas up 2%. Without the negative impact of foreign currency movements, Europe would have been up 4% rather than down 9%. Statement of Financial Accounting Standards 112, "Employers' Accounting for Postemployment Benets," was issued in November 1992. This statement had no material effect on the Company's nancial condition or results of operations. 1992 COMPARED TO 1991 Worldwide revenues for 1992 increased 7% to $6.2 billion on the strength of a 5% gain in cereal volume and higher selling prices. During January 1992, the Company sold Fearn International Inc., a U.S. foodservice subsidiary. Excluding 1991 sales by Fearn, 1992 sales would have increased by 9% instead of 7%. Foreign currency uctuations had a minimal impact on 1992 worldwide revenues. 8 Sales within the United States increased by 5%; however, excluding Fearn sales from 1991, the increase was 8%. This increase resulted from increased volume coupled with higher selling prices. European sales were up a solid 14% for the year due to a volume gain of 6% coupled with higher selling prices and the positive impact of foreign currency uctuations. Sales for other areas grew by 6% from improved volume and selling prices, partially offset by negative foreign currency movements. Other revenue includes a total pre-tax gain of $58.5 million ($.16 per share) from the sale of Fearn International Inc. Other deductions includes a pre-tax charge of $22.4 million ($.05 per share) from the disposition of convenience foods operations in Canada and other North America assets. Cost of goods sold as a percent of sales was 48%, compared to 49% in 1991. Factors such as improved volume, positive inventory management, and improved factory productivity contributed to the decline. Selling and administrative expense represented 35% of each sales dollar in 1992, compared to 33% in 1991. Gross interest expense, prior to amounts capitalized, decreased to $33.6 million, compared to $60.7 million in 1991. Lower interest rates and debt levels led to the decline. The Company's effective tax rate was 36.2%, compared to 38.4% for 1991. The decline in the rate resulted from lower effective tax rates in certain international locations. For 1992, earnings per share were $1.81 and earnings were $431.2 million, compared to earnings per share of $2.51 and earnings of $606 million in 1991. Excluding all one-time events and the accounting change, earnings per share were $2.75, up 10%, and earnings were $657.1 million, up 8%. Effective January 1, 1992, the Company adopted Statement of Financial Accounting Standards (FAS) 106, "Employers' Accounting for Postretirement Benets Other Than Pensions." This standard requires that the estimated
8 of 52
10/17/11 10:36 PM
cost of postretirement benets, principally health care, be accrued over the period earned rather than expensed as incurred. The transition effect of adopting FAS 106 on the immediate recognition basis, as of January 1, 1992, resulted in an after-tax charge of $251.6 million or $1.05 per share. Geographically, earnings before the cumulative effect of the accounting change were up 18% for the United States, up 9% for Europe, and down 6% for other areas. Excluding the sale of Fearn and the one-time asset writeoffs, United States earnings would have been up 9% and other areas up 5%. LIQUIDITY AND CAPITAL RESOURCES The nancial condition of the Company remained strong during 1993. Company operations have historically provided a strong, positive cash ow which, along with the program of issuing commercial paper and maintaining worldwide credit facilities, provides adequate liquidity to meet the Company's operational needs. Cash and cash equivalents totaled $98 million at December 31, 1993, compared to $126 million at December 31, 1992. Cash provided by operating activities amounted to $800 million in 1993, compared to $742 million in 1992 and $934 million in 1991. The Company's current ratio (current assets over current liabilities) was 1.0:1.0 for 1993 and 1.2:1.0 for 1992. The Company maintains credit facilities with banking institutions in the United States and other countries where it conducts business. At year-end, the Company had $613 million of short-term lines of credit, of which $569 million were available. Funds expended for capital improvements in 1993 totaled $450 million, compared to $474 million in 1992 and $333 million in 1991. In 1994, capital expenditures are expected to be approximately $400 million as the Company continues to invest globally in expansion and modernization of its facilities. The capital program remains focused on producing the highest quality product at the lowest possible cost. The Company's debt to total capital ratio was 35% at December 31, 1993, compared to 21% in 1992. The Company's increased share repurchase program led to higher debt levels resulting in the higher ratio. The Company continues to enjoy the highest available debt ratings on both its commercial paper and long-term debt. 9 At December 31, 1993, the Company had on le a "shelf registration" of $200 million with the Securities and Exchange Commission to provide for the issuance of debt in the United States. The net proceeds from any offering under the "shelf" would be added to the Company's working capital and be available for general corporate purposes. In October of 1993, the Company issued $265 million Canadian Eurodollar 5-year Notes with a 6.25% interest rate. During 1992, $300 million 5-year Notes were issued with a 5.9 % interest rate. The rst two years of both notes were swapped into variable rate debt. In March 1992, the Company's $200 million 9.5% Eurodollar Notes matured. Notes payable are comprised principally of oating interest rate obligations that had an average interest rate of 4% in 1993, compared to 6% during 1992. Dividends paid per share of common stock rose 10% in 1993, marking the 37th consecutive year of increase. The trend of increased dividends is expected to continue in 1994. During 1993, the Company purchased 9,487,508 shares of its common stock at an average cost of $58 per share. In 1992, a total of 3,497,000 shares were purchased at an average cost of $63 per share. Treasury stock purchases were made under plans authorized by the Company's Board of Directors. At December 31, 1993, an additional $353 million of stock could be purchased through December 1994 under current Board authorization. LOOKING FORWARD Management is not aware of any adverse trends that would materially affect the Company's strong nancial position. Should suitable investment opportunities or working capital needs arise that would require additional nancing, management believes that the Company's triple A credit rating, strong balance sheet, and history of exceptional
9 of 52
10/17/11 10:36 PM
earnings provides a solid base for obtaining additional nancial resources at competitive rates and terms. The Company is a global market leader backed with a solid nancial infrastructure that provides a competitive advantage. The Company is committed to long-term earnings per share growth with above average return on equity. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information called for by this Item is contained in a separate section of this Report. See Index of Consolidated Financial Statements and Consolidated Financial Statement Schedules on page F-2 of this Report. Supplementary quarterly nancial data is set forth in Note 12 to the Consolidated Financial Statements on page F-15 of this Report. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 10
PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Directors -- See the Company's Proxy Statement dated March 22, 1994 for the Annual Meeting of Stockholders to be held on April 22, 1994, under the captions "Nominees for Election to the Board of Directors" and "Continuing Directors of the Company" on pages 5 through 8, which information is incorporated herein by reference. Executive Ofcers of the Registrant -- See "Executive Ofcers of the Registrant" under Item 4A at pages 4 through 6 of this Report. Compliance with Section 16(a) of the Securities Exchange Act -- See the Company's Proxy Statement, dated March 22, 1994 for the Annual Meeting of Stockholders to be held on April 22, 1994, at page 23, under the caption "Compliance with Section 16(a) of the Securities Exchange Act of 1934," which information is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION See the Company's Proxy Statement dated March 22, 1994 for the Annual Meeting of Stockholders to be held on April 22, 1994, under the captions "Executive Compensation" and "Selected Benet Plans and Agreements" at pages 9 and 10, 14 through 17, and 20 through 23, which information, except for those portions captioned "Report of the Compensation Committee on Executive Compensation" and "Stock Performance Graph," is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT See the Company's Proxy Statement dated March 22, 1994 for the Annual Meeting of Stockholders to be held on April 22, 1994, under the caption "Voting Securities And Ownership Thereof By Certain Persons" at pages 1 through 4, which information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS See the Company's Proxy Statement dated March 22, 1994 for the Annual Meeting of Stockholders to be held on April 22, 1994, under the captions "About The Board of Directors" at page 10, and "Selected Benet Plans and Agreements" at page 22, which information, is incorporated herein by reference. 11
10 of 52
10/17/11 10:36 PM
PART IV ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES, AND REPORTS ON FORM 8-K (A)1. CONSOLIDATED FINANCIAL STATEMENTS The Index of Consolidated Financial Statements is included on page F-2 of this Report. (A)2. CONSOLIDATED FINANCIAL STATEMENT SCHEDULES The Index of Consolidated Financial Statement Schedules is included on page F-2 of this Report. (A)3. EXHIBITS
EXHIBIT NO. 3.01 DESCRIPTION Restated Certificate of Incorporation of Kellogg Company, as amended, incorporated by reference to Exhibit 3.01 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission file number 1-4171. Bylaws of Kellogg Company, as amended. Indenture dated as of March 1, 1988 between the Company and Bankers Trust Company, incorporated by reference to Exhibit 4(a) to the Company's Registration Statement on Form S-3, Commission file number 33-20731. Form of Debt Security, incorporated by reference to Exhibit 4(d) to the Company's Registration Statement on Form S-3, Commission file number 33-20731. Supplemental Indenture, dated January 30, 1989, between the Company and Bankers Trust Company, incorporated by reference to Exhibit B to the Company's Current Report on Form 8-K, Commission file number 1-4171, dated January 31, 1989. Instrument of Resignation, Acceptance and Appointment, dated as of January 31, 1989, between the Company, Bankers Trust Company and NBD Bank, N.A. (formerly known as National Bank of Detroit), incorporated by reference to Exhibit A to the Company's Current Report on Form 8-K, Commission file number 1-4171, dated January 31, 1989. Agency Agreement, dated as of January 31, 1989, between NBD Bank, N.A. (formerly known as National Bank of Detroit) and Bankers Trust Company, incorporated by reference to Exhibit C to the Company's Current Report on Form 8-K, Commission file number 1-4171, dated January 31, 1989. Employment Agreements between the Company and C. W. Elliott, made and entered into as of January 30, 1987, incorporated by reference to Exhibit 10.02 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, Commission file number 1-4171.* Kellogg Company Excess Benefit Retirement Plan, incorporated by reference to Exhibit 10.01 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1983, Commission file number 1-4171.* Kellogg Company Supplemental Retirement Plan, incorporated by reference to Exhibit 10.05 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission file number 1-4171.* Kellogg Company Book Value Unit/Share Incentive Plan, incorporated by reference to Exhibit 10.02 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1983, Commission file number 1-4171.*
3.02 4.01 4.02 4.03 4.04
4.05
10.01
10.02 10.03 10.04
12
EXHIBIT NO. 10.05
10.06 10.07
DESCRIPTION Kellogg Company 1982 Stock Option Plan, as amended on December 7, 1990, incorporated by reference to Exhibit 10.07 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission file number 1-4171.* Kellogg Company International Retirement Plan, incorporated by reference to Exhibit 10.05 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1984, Commission file number 1-4171.* Kellogg Company Executive Survivor Income Plan, incorporated by reference to Exhibit 10.06 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1985, Commission file number 1-4171.*
11 of 52
10/17/11 10:36 PM
10.08 10.09 10.10 21.01 23.01 24.01 99.01 99.02
Kellogg Company Key Executive Benefits Plan, incorporated by reference to Exhibit 10.09 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission file number 1-4171.* Kellogg Company Key Employee Long Term Incentive Plan, incorporated by reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission file number 1-4171.* Deferred Compensation Plan for Non-Employee Directors.* Domestic and Foreign Subsidiaries of the Company, incorporated by reference to Exhibit 22.01 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission file number 1-4171. Consent of Price Waterhouse. Powers of Attorney authorizing Richard M. Clark to execute the Company's Form 10-K Annual Report for the fiscal year ended December 31, 1993 on behalf of the Board of Directors, and each of them. Kellogg Company American Federation of Grain Millers Savings and Investment Plan Form 11-K Annual Report for the fiscal year ended October 31, 1993. Kellogg Company Salaried Savings and Investment Plan Form 11-K Annual Report for the fiscal year ended October 31, 1993.
*A management contract or compensatory plan required to be led by Item 14(c) of this report. THE COMPANY AGREES TO FURNISH TO THE SECURITIES AND EXCHANGE COMMISSION, UPON ITS REQUEST, A COPY OF ANY INSTRUMENT DEFINING THE RIGHTS OF HOLDERS OF LONG-TERM DEBT OF THE COMPANY AND ITS SUBSIDIARIES AND ANY OF ITS UNCONSOLIDATED SUBSIDIARIES FOR WHICH FINANCIAL STATEMENTS ARE REQUIRED TO BE FILED. THE COMPANY WILL FURNISH ANY OF ITS STOCKHOLDERS A COPY OF ANY OF THE ABOVE EXHIBITS NOT INCLUDED HEREIN UPON THE WRITTEN REQUEST OF SUCH STOCKHOLDER AND THE PAYMENT TO THE COMPANY OF THE REASONABLE EXPENSES INCURRED BY THE COMPANY IN FURNISHING SUCH COPY OR COPIES. (B) REPORT ON FORM 8-K No report on Form 8-K was led during the Company's fourth quarter for the scal year ended December 31, 1993. 13
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, this 22nd day of March 1994. KELLOGG COMPANY
/s/ ARNOLD G. LANGBO By: Arnold G. Langbo Chairman of the Board Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
NAME - ------------------------------------------/s/ ARNOLD G. LANGBO Arnold G. Langbo
CAPACITY -----------------------------Chairman of the Board, Chief Executive Officer; Director (Principal Executive Officer)
DATE ----------------March 22, 1994
12 of 52
10/17/11 10:36 PM
/s/ CHARLES W. ELLIOTT Charles W. Elliott
Executive Vice President, Chief Financial Officer; Director (Principal Financial Officer) Corporate Controller (Principal Accounting Officer) Director Director Director Director Director Director Director Director Director Director Director
March 22, 1994
/s/
ALAN TAYLOR Alan Taylor
March 22, 1994
Norman A. Brown Claudio X. Gonzalez Gordon Gund William E. LaMothe Russell G. Mawby Ann McLaughlin J. Richard Munro Harold A. Poling Donald Rumsfeld Timothy P. Smucker Dolores D. Wharton By: /s/ Richard M. Clark Richard M. Clark As Attorney-in-Fact
March 22, 1994
14
SELECTED FINANCIAL DATA (ITEM 6) SUMMARY OF OPERATIONS (DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
NET SALES -------10-year Compound Growth Rate 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 10% $6,295.4 6,190.6 5,786.6 5,181.4 4,651.7 4,348.8 3,793.0 3,340.7 2,930.1 2,602.4 2,381.1
% GROWTH -----2 7 12 11 7 15 14 14 13 9 1
PRETAX EARNINGS -------9% $1,034.1 1,070.4 984.2 814.7 667.0 774.7 665.7 586.6 527.4 476.1 444.0
% GROWTH -----(3) 9 21 22 (14) 16 13 11 11 7 8
EARNINGS BEFORE ACCTG CHANGE -----------11% $680.7 682.8 606.0 502.8 422.1 480.4 395.9 318.9 281.1 250.5 242.7
% GROWTH ------13 21 19 (12) 21 24 13 12 3 7
(A) NET EARNINGS -------11% $680.7 431.2 606.0 502.8 470.2 480.4 395.9 318.9 281.1 250.5 242.7
% GROWTH -----58 (29) 21 7 (2) 21 24 13 12 3 7
CASH DIVIDENDS --------10-year Compound Growth Rate 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 $ 13% 1.32 1.20 1.075 .96 .86 .76 .64 .51 .45 .42 .40
BOOK VALUE ----$7.52 8.20 8.98 7.88 6.70 6.03 4.91 3.63 2.77 1.98 3.20
AVERAGE SHARES OUTSTANDING (MILLIONS) -------------231.5 238.9 241.2 241.6 244.2 246.4 247.4 247.0 246.6 298.8 305.8
SHAREHOLDERS' EQUITY ------------$ 1,713.4 1,945.2 2,159.8 1,901.8 1,634.4 1,483.2 1,211.4 898.4 683.0 487.2 977.9
13 of 52
10/17/11 10:36 PM
OTHER INFORMATION AND FINANCIAL RATIOS
FINAN ---------PROPERTY, NET --------$2,768.4 2,662.7 2,646.5 2,595.4 2,406.3 2,131.9 1,738.8 1,281.1 1,035.9 856.0 743.2 RETURN ON AVERAGE EQUITY --------<<C> 37% 21% 30% 28% 30% 36% 38% 40% 48% 27% 26% CAPITAL EXPENDITURES -----------$449.7 473.6 333.5 320.5 508.7 538.1 478.4 329.2 245.6 228.9 156.7 DEBT TO TOTAL CAPITAL ------35% 21% 18% 26% 34% 32% 27% 31% 38% 59% 4% DEPRECIATION -----------$265.2 231.5 222.8 200.2 167.6 139.7 113.1 92.7 75.4 63.9 62.8 TOTAL ASSETS -------$4,237.1 4,015.0 3,925.8 3,749.4 3,390.4 3,297.9 2,680.9 2,084.2 1,726.1 1,667.1 1,467.2 NUMBER OF EMPLOYEES --------16,151 16,551 17,017 17,239 17,268 17,461 17,762 17,383 17,082 17,239 18,293 CURRENT RATIO ------1.0 1.2 .9 .9 .9 .9 .9 1.1 1.4 1.1 1.8
1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983
CASH PROVIDED BY OPERATIONS ----------$ 800.2 741.9 934.4 819.2 533.5 492.3 523.5 542.7 449.7 331.5 347.1
LONG-TERM DEBT --------$ 521.6 314.9 15.2 295.6 371.4 272.1 290.4 264.1 392.6 364.1 18.6
1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983
(a) Net earnings for 1992 include a $251.6 million charge ($1.05 per share) resulting from the adoption of Statement of Financial Accounting Standards 106, "Employers' Accounting for Postretirement Benets Other Than Pensions," as of January 1, 1992. Net earnings for 1989 include a $48.1 million gain ($.20 per share) resulting from the adoption of Statement of Financial Accounting Standards 96, "Accounting for Income Taxes," as of January 1, 1989. F-1 KELLOGG COMPANY AND SUBSIDIARIES ANNUAL REPORT ON FORM 10-K Items 8, 14(a) and 14(d) Index of Consolidated Financial Statements and Consolidated Financial Statement Schedules
PAGE ----CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Accountants....................................... Consolidated Earnings and Retained Earnings for 1993, 1992 and 1991..... Consolidated Balance Sheet at December 31, 1993 and 1992................ Consolidated Statement of Cash Flows for 1993, 1992 and 1991............ Notes to Consolidated Financial Statements.............................. CONSOLIDATED FINANCIAL STATEMENT SCHEDULES Schedule II - Amounts Receivable from Employees......................... Schedule V - Property................................................... F-3 F-4 F-5 F-6 F-7 S-1 S-2
14 of 52
10/17/11 10:36 PM
Schedule Schedule Schedule Schedule
VI - Accumulated Depreciation of Property...................... VIII - Valuation Reserve....................................... IX - Short-Term Borrowings..................................... X - Supplementary Earnings Statement Information...............
S-3 S-3 S-4 S-4
These Consolidated Financial Statement Schedules should be read in conjunction with the Consolidated Financial Statements included in Item 8. All other Consolidated nancial statement schedules are omitted because they are not applicable or the required data is shown in the Company's Consolidated Financial Statements or the Notes thereto. F-2
REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Directors of Kellogg Company In our opinion, the consolidated nancial statements and schedules listed in the index on page F-2 present fairly, in all material respects, the nancial position of Kellogg Company and its subsidiaries at December 31, 1993 and 1992, and the results of their operations and their cash ows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. These nancial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these nancial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the nancial statements, assessing the accounting principles used and signicant estimates made by management, and evaluating the overall nancial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Notes 9 and 10 to the nancial statements, the Company changed its methods of accounting for postretirement benets other than pensions and for income taxes during 1992. PRICE WATERHOUSE Battle Creek, Michigan February 4, 1994 F-3
KELLOGG COMPANY AND SUBSIDIARIES CONSOLIDATED EARNINGS AND RETAINED EARNINGS

YEAR ENDED DECEMBER 31, ---------------------------------1993 1992 1991 ---------------------(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) $6,295.4 $6,190.6 $5,786.6 (1.5) 36.8 14.6 ---------------------6,293.9 6,227.4 5,801.2 ---------------------2,989.0 2,987.7 2,828.7 2,237.5 2,140.1 1,930.0 33.3 29.2 58.3 ---------------------5,259.8 5,157.0 4,817.0 ----------------------
Net sales................................................... Other revenue (deductions), net...........................
Cost of goods sold........................................ Selling and administrative expense........................ Interest expense..........................................
15 of 52
10/17/11 10:36 PM
Earnings before income taxes and cumulative effect of accounting change......................................... Income taxes.............................................. Earnings before cumulative effect of accounting change...... Cumulative effect of change in method of accounting for postretirement benefits other than pensions -- $1.05 a share (net of income tax benefit of $144.6).................. Net earnings -- $2.94, $1.81, $2.51 a share................. Retained earnings, beginning of year...................... Dividends paid -- $1.32, $1.20, $1.075 a share............ Retained earnings, end of year..............................
1,034.1 353.4 -------680.7
1,070.4 387.6 -------682.8
984.2 378.2 -------606.0
-------680.7 3,033.9 (305.2) -------$3,409.4 ---------------
(251.6) -------431.2 2,889.1 (286.4) -------$3,033.9 ---------------
-------606.0 2,542.4 (259.3) -------$2,889.1 ---------------
See notes to consolidated nancial statements. F-4
KELLOGG COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET

AT DECEMBER 31, ---------------------1993 1992 ----------------(IN MILLIONS) CURRENT ASSETS Cash and temporary investments......................................... Accounts receivable, less allowances of $6.0 and $6.2.................. Inventories: Raw materials and supplies........................................... Finished goods and materials in process.............................. Deferred income taxes.................................................. Prepaid expenses....................................................... Total current assets............................................ PROPERTY Land................................................................... Buildings.............................................................. Machinery and equipment................................................ Construction in progress............................................... Accumulated depreciation............................................... Property, net................................................... Intangible assets...................................................... Other assets........................................................... Total assets.................................................... CURRENT LIABILITIES Current maturities of long-term debt................................... Notes payable.......................................................... Accounts payable....................................................... Accrued liabilities: Income taxes......................................................... Salaries and wages................................................... Advertising and promotion............................................ Other................................................................ Total current liabilities....................................... Long-term debt......................................................... Nonpension postretirement benefits..................................... Deferred income taxes.................................................. Other liabilities...................................................... $ 98.1 536.8 $ 126.3 519.1
148.5 254.6 85.5 121.6 --------1,245.1 40.6 1,065.7 2,857.6 308.6 (1,504.1) --------2,768.4 59.1 164.5 --------$ 4,237.1 ----------------$ 1.5 386.7 308.8
167.7 248.7 66.2 108.6 --------1,236.6 40.5 1,021.2 2,629.4 302.6 (1,331.0) --------2,662.7 53.3 62.4 --------$ 4,015.0 ----------------$ 1.9 210.0 313.8
65.9 76.5 233.8 141.4 --------1,214.6 521.6 450.9 188.9 147.7
104.1 78.0 228.0 135.2 --------1,071.0 314.9 407.6 184.6 91.7
16 of 52
10/17/11 10:36 PM
SHAREHOLDERS' EQUITY Common stock, $.25 par value Authorized: 330,000,000 shares Issued: 310,292,753 shares in 1993 and 310,193,228 in 1992........... Capital in excess of par value......................................... Retained earnings...................................................... Treasury stock, at cost: 82,372,409 and 72,874,738 shares.............. Minimum pension liability adjustment................................... Currency translation adjustment........................................ Total shareholders' equity...................................... Total liabilities and shareholders' equity......................
77.6 72.0 3,409.4 (1,653.1) (25.3) (167.2) --------1,713.4 --------$ 4,237.1 -----------------
77.5 69.2 3,033.9 (1,105.0) (130.4) --------1,945.2 --------$ 4,015.0 -----------------
See notes to consolidated nancial statements. F-5
KELLOGG COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, ----------------------------1993 1992 1991 ------------------(IN MILLIONS) OPERATING ACTIVITIES Net earnings..................................................... Items in net earnings not requiring (providing) cash: Cumulative effect of accounting change......................... Depreciation................................................... Pre-tax gain on sale of subsidiaries........................... Deferred income taxes.......................................... Other.......................................................... Change in operating assets and liabilities: Accounts receivable............................................ Inventories.................................................... Prepaid expenses............................................... Accounts payable............................................... Accrued liabilities............................................ NET CASH PROVIDED FROM OPERATING ACTIVITIES................. INVESTING ACTIVITIES Additions to properties.......................................... Proceeds from sale of subsidiaries............................... Property disposals............................................... Other............................................................ NET CASH USED IN INVESTING ACTIVITIES....................... FINANCING ACTIVITIES Borrowings of notes payable...................................... Reduction of notes payable....................................... Issuance of long-term debt....................................... Reduction of long-term debt...................................... Issuance of common stock......................................... Purchase of treasury stock....................................... Cash dividends................................................... Other............................................................ NET CASH USED IN FINANCING ACTIVITIES....................... Effect of exchange rate changes on cash.......................... Increase (decrease) in cash and temporary investments............ Cash and temporary investments at beginning of year.............. $ 680.7 265.2 (65.9) 8.7 (19.1) (17.7) 13.3 (32.3) (5.0) (27.7) ------800.2 ------(449.7) 95.6 19.0 (25.1) ------(360.2) ------468.2 (291.5) 208.3 (1.7) 2.9 (548.1) (305.2) 2.9 ------(464.2) ------(4.0) ------(28.2) 126.3 $ 431.2 251.6 231.5 (58.5) 9.7 25.1 (99.1) (15.3) (0.9) 24.0 (57.4) ------741.9 ------(473.6) 115.0 18.8 (10.6) ------(350.4) ------192.3 (170.7) 311.7 (270.2) 13.4 (224.1) (286.4) 11.4 ------(422.6) ------(20.6) ------(51.7) 178.0 $ 606.0 222.8 (5.4) 16.8 10.2 (41.4) (22.9) 42.7 105.6 ------934.4 ------(333.5) 25.2 (11.6) ------(319.9) ------182.1 (274.0) 4.3 (126.0) 17.7 (83.6) (259.3) 1.1 ------(537.7) ------0.7 ------77.5 100.5
17 of 52
10/17/11 10:36 PM
CASH AND TEMPORARY INVESTMENTS AT END OF YEAR...............
------$ 98.1 -------------
------$ 126.3 -------------
------$ 178.0 -------------
See notes to consolidated nancial statements. F-6 KELLOGG COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 -- ACCOUNTING POLICIES Consolidation The consolidated nancial statements include the accounts of Kellogg Company and its wholly owned subsidiaries. Intercompany balances and transactions are eliminated. Certain amounts in the prior year nancial statements have been reclassied to conform to the current year presentation. Cash and temporary investments Highly liquid temporary investments with original maturities of less than three months are considered to be cash equivalents. The carrying amount approximates fair value. Inventories Inventories are valued at the lower of cost (principally average) or market. Property Fixed assets are recorded at cost and depreciated over estimated useful lives using straight-line methods for nancial reporting and accelerated methods for tax reporting. Interest cost capitalized as part of the construction cost of capital assets amounted to $7.1 million in 1993, $4.4 million in 1992, and $2.4 million in 1991. Intangible assets Intangible assets consist principally of the underfunded amount of certain pension plans. Notes payable and long-term debt The carrying amounts of the Company's notes payable, long-term debt, and other nancial instruments approximate fair value. The fair values are based primarily on quoted market prices. Net earnings per share Net earnings per share is determined by dividing net earnings by the weighted average number of common shares outstanding. All per share amounts have been restated to reect the two-for-one stock split, effective December 4, 1991. NOTE 2 -- LEASES Operating leases generally are for equipment and warehouse space. Rent expense on all operating leases, which generally are renewable at the Company's option, amounted to $46.8 million in 1993, $42.4 million in 1992, and $39.3 million in 1991. There are no signicant future minimum rental commitments under non-cancelable leases.
18 of 52
10/17/11 10:36 PM
NOTE 3 -- RESEARCH AND DEVELOPMENT Research and development costs charged to earnings approximated $39.8 million in 1993, $36.6 million in 1992, and $34.7 million in 1991. F-7 KELLOGG COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED NOTE 4 -- DIVESTITURES AND OTHER NONRECURRING ITEMS All gains from divestitures and nonrecurring charges are recorded in other revenue (deductions). None of the divestitures are signicant to the Company's consolidated revenues and earnings. During 1993, the Company recognized a pre-tax gain of $32.2 million ($.10 per share) from the sale of Cereal Packaging Ltd., a wholly owned subsidiary of Kellogg Company of Great Britain, Limited., and a pre-tax gain of $33.7 million ($.10 per share) from the sale of the Argentine snack food business. During 1992, the Company sold Fearn International Inc., a foodservice subsidiary, resulting in a pre-tax gain of $58.5 million ($.16 per share). During 1993, the Company recognized pre-tax charges of $64.3 million ($.18 per share) from the write-down of certain assets in Europe and North America. For 1992, other deductions includes a pre-tax charge of $22.4 million ($.05 per share) from the disposition of convenience foods operations in Canada and other North America assets. NOTE 5 -- SHAREHOLDERS' EQUITY On December 3, 1991, shareholders approved an increase in the authorized shares of common stock from 165 million to 330 million and approved a two-for-one stock split to shareholders of record on December 4, 1991. The stated par value per share of common stock was not changed from $.25. All share and per share amounts have been restated to retroactively reect the stock split. In 1993, the Company purchased 9,487,508 shares of its common stock at an average cost of $58; in 1992, purchased 3,497,000 shares at an average cost of $63; and in 1991, purchased 1,515,600 shares at an average cost of $52. All purchases are included in treasury stock. A summary of shareholders' equity is shown on the following page. F-8
KELLOGG COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED Most effects of exchange rate changes are reected as a currency translation adjustment in shareholders' equity. Exchange adjustments attributable to operations in highly inationary economies are reected in earnings along with those adjustments related to foreign currency transactions that affect cash ows.
CAPITAL IN EXCESS OF PAR VALUE ---------$ 81.2 17.7 (38.7) (A)MINIMUM PENSION LIABILITY ADJUSTMENT ---------CURRENCY TRANSLATION ADJUSTMENT ---------$ 36.9
COMMON STOCK -----Balance, January 1, 1991........... Stock options exercised.......... Two-for-one stock split.......... Net earnings..................... Dividends........................ Exchange adjustments............. Treasury stock purchased......... Balance, December 31, 1991......... Stock options exercised.......... Net earnings..................... $38.6 0.1 38.7
RETAINED TREASURY EARNINGS STOCK ---------------(IN MILLIONS) $2,542.4 ($797.3) 606.0 (259.3)
(22.9) -----77.4 0.1 ---------60.2 9.0 -------2,889.1 431.2 (83.6) --------(880.9) ------------------14.0
19 of 52
10/17/11 10:36 PM
Dividends........................ Exchange adjustments............. Treasury stock purchased......... Balance, December 31, 1992......... Stock options exercised.......... Net earnings..................... Dividends........................ Exchange adjustments............. Minimum pension liability adjustment.................... Treasury stock purchased......... Balance, December 31, 1993......... -----77.5 0.1 ---------69.2 2.8
(286.4) (144.4) -------3,033.9 680.7 (305.2) (36.8) ($25.3) -----$77.6 -------------------$ 72.0 -------------------------$3,409.4 --------------(548.1) --------($1,653.1) -------------------------($25.3) ---------------------------($ 167.2) ------------------(224.1) --------(1,105.0) ------------------(130.4)
(a) Refer to Note 8 for an explanation of the minimum pension liability adjustment. NOTE 6 -- DEBT Notes payable consist of borrowings in the United States of $352.9 million at 3.2% at December 31, 1993, and $148.3 million at 3.4% at December 31, 1992, and bank loans of foreign subsidiaries at competitive market rates. The majority of the borrowings within the United States are commercial paper which has the highest debt rating available. The Company has credit agreements providing for borrowing an aggregate of approximately $613 million on an unsecured basis, $569 million of which was unused at December 31, 1993. As of January 1, 1992, the Company had on le a "shelf registration" of $300 million of debt securities with the Securities and Exchange Commission. Under this registration statement, the Company issued $300 million of 5.9% notes in July 1992. In August 1993, the Company led a $200 million "shelf registration" with the Securities and Exchange Commission which remains unused at December 31, 1993. F-9
KELLOGG COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED A summary of long-term debt follows.
1993 1992 ----------(IN MILLIONS) $299.4 $299.1 200.0 23.7 17.7 ----------523.1 316.8 (1.5) (1.9) ----------$521.6 $314.9 ---------------------
5.9% Five-Year Notes due 1997(a)............................................ 6.25% Five-Year Canadian Eurodollar Note due 1998(a)........................ Other....................................................................... Less current maturities..................................................... Balance, December 31,..................................................
(a) The 6.25% Canadian Eurodollar Notes were issued in October 1993. The rst two years of both ve-year notes were swapped into variable rate debt, indexed to the London Interbank Offered Rate. Principal payments are due as follows (in millions): 1995 -- $2; 1996 -- $2; 1997 -- $302; 1998 -- $207.
20 of 52
10/17/11 10:36 PM
Interest paid, net of amounts capitalized, approximated interest expense in each of the three years ended December 31, 1993. NOTE 7 -- STOCK OPTIONS In 1991, shareholders approved the adoption of the Key Employee Long-Term Incentive Plan. The plan provides for benets to be awarded in the form of stock options, performance shares, performance units, incentive stock options, restricted stock awards, and other stock-based awards. Under this plan, options are granted at the fair market value of the Company's common stock at the time of grant. Such options are exercisable when granted and expire ten years from date of grant. The plan also contains a reload option feature. When Company stock is surrendered to pay for the exercise price of a stock option, the holder of the option is granted a new option for the number of shares surrendered. For all options reloaded, the expiration date is not changed, but the option price becomes the fair market value of the Company's stock on the date the new reload option is granted. Options for 10,756,690 and 10,620,578 shares were available for grant at January 1, 1993, and December 31, 1993, respectively. A summary of transactions under the plan follows.
Under option, January 1, 1992...................................... Granted.......................................................... Exercised........................................................ Cancelled........................................................ Under option, December 31, 1992.................................... Granted.......................................................... Exercised........................................................ Cancelled........................................................ Under option, December 31, 1993....................................
SHARES --------1,526,972 1,569,150 1,181,640 5,100 --------1,909,382 848,885 293,494 30,186 --------2,434,587 -----------------
AVERAGE PRICE ------------$ 40.72 61.83 48.12 25.99 ------------$ 52.92 62.40 45.46 59.10 ------------$ 56.95 -------------------------
NOTE 8 -- PENSION BENEFITS The Company has a number of U.S. and worldwide pension plans to provide retirement benets for its employees. Benets for salaried employees are generally based on salary and years of service, while union employee benets are generally a negotiated amount for each year of service. Plan funding strategies are F-10
KELLOGG COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED inuenced by tax regulations. Plan assets consist primarily of equity securities with smaller holdings of bonds, real estate, and other investments. Pension expense includes the following components.
1993 -----Service cost........................................................ Interest cost....................................................... Actual (return) loss on plan assets................................. Net amortization and deferral....................................... Pension expense -- Company plans.................................... Pension expense -- multi-employer plans............................. Total pension expense........................................ 1992 -----(IN MILLIONS) $ 24.9 $ 23.7 57.8 57.2 (76.3) (22.8) 26.7 (27.3) ----------33.1 30.8 3.1 1.5 ----------$ 36.2 $ 32.3 ----------1991 -----$ 23.6 52.9 (88.0) 42.3 -----30.8 1.6 -----$ 32.4 ------
21 of 52
10/17/11 10:36 PM
------
------
------
The reconciliation of the funded status of the plans at year-end follows.
UNDERFUNDED OVERFUNDED ------------------------------1993 1992 1993 1992 --------------------(IN MILLIONS) Accumulated benefit obligation: Nonvested................................................. Vested.................................................... Total....................................................... Projected salary increases.................................. Projected benefit obligation................................ Plan assets at fair value................................... Assets (less) greater than projected benefit obligation..... Unrecognized net (gain) loss................................ Unrecognized transition amount.............................. Unrecognized prior service cost............................. Minimum liability adjustment................................ Prepaid (accrued) pension................................... $ 35.3 288.8 -----324.1 13.8 -----337.9 279.5 -----(58.4) 41.3 19.3 46.3 (96.0) -----($47.5) ----------$ 23.8 229.3 -----253.1 12.3 -----265.4 214.3 -----(51.1) 6.5 22.0 30.7 (50.8) -----($42.7) ----------$ 26.9 322.3 -----349.2 86.3 -----435.5 404.4 -----(31.1) 25.7 (14.6) 21.3 -----$ 1.3 ----------$ 18.1 266.8 -----284.9 85.0 -----369.9 362.0 -----(7.9) 8.8 (18.1) 21.7 -----$ 4.5 -----------
The 1993 projected benet obligation was impacted by plan improvements that covered most U.S. employees. All gains and losses are recognized over the average remaining service period of active employees. The unfunded liability in excess of the unamortized prior service cost and the net transition obligation was recorded as a reduction in Shareholders' Equity of $25.3 million, net of tax, as of December 31, 1993. Intangible assets included $56.9 million as of December 31, 1993, and $50.8 million as of December 31, 1992, relating to the underfunded pension plans. The weighted averages for all worldwide plans of the actuarially assumed discount rate, long-term rate of compensation increase, and long-term rate of return on plan assets were 7.9, 5.4, and 9.5 percent in 1993; 9.2, 6.7, and 9.6 percent in 1992; and 9.3, 6.8, and 9.7 percent in 1991, respectively. The Company and certain of its subsidiaries sponsor 401K plans for some active employees. These costs are not signicant. F-11 KELLOGG COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED NOTE 9 -- NONPENSION POSTRETIREMENT BENEFITS Effective January 1, 1992, the Company adopted Statement of Financial Accounting Standards (FAS) 106, "Employers' Accounting for Postretirement Benets Other Than Pensions." This standard requires that the estimated cost of postretirement benets, principally health care, be accrued over the period earned rather than expensed as incurred. The transition effect of adopting FAS 106 on the immediate recognition basis, as of January 1, 1992, resulted in a charge of $251.6 million ($1.05 per share) to 1992 earnings, net of approximately $144.6 million of income tax
22 of 52
10/17/11 10:36 PM
benet. The Company adopted FAS 106 on a worldwide basis; however, costs associated with subsidiaries outside of the United States are insignicant. The Company's U.S. subsidiaries provide health care and certain other benets to substantially all retired employees, their covered dependents, and beneciaries. Generally, employees are eligible for these benets when one of the following service/age requirements are met: 30 years and any age; 20 years and age 55; 5 years and age 62. Net periodic postretirement benet cost includes the following components.
Service cost................................................... Interest cost.................................................. Net amortization and deferral.................................. Net periodic postretirement benefit cost.......................
1993 1992 --------(IN MILLIONS) $12.1 $10.9 38.6 34.9 1.0 --------$51.7 $45.8 -----------------
Actuarial assumptions used to determine the accumulated postretirement benet obligation include a discount rate of 7.75% for 1993 and 9.0% for 1992. The assumed health care cost trend was 9.5% for 1993, decreasing gradually to 5.25% by the year 2003 and remaining at that level thereafter. These trend rates reect the Company's prior experience and management's expectation that future rates will decline. Increasing the assumed health care cost trend rates by 1 percentage point in each year would increase the accumulated postretirement benet obligation as of December 31, 1993 by $70.4 million and net periodic postretirement benet cost for 1993 by $8.5 million. All gains and losses are recognized over the average remaining service period of active plan participants. The Company's postretirement healthcare plans currently are not funded. The following table sets forth the plans' combined status with the amount included in the consolidated balance sheet at year-end.
1993 1992 ----------(IN MILLIONS) Accumulated benefit obligation: Retirees................................................... Active plan participants................................... Unrecognized experience loss................................. Unrecognized prior service cost.............................. Accrued postretirement benefit cost.......................... $251.7 265.0 -----516.7 (47.2) (0.5) -----$469.0 ----------$211.2 227.9 -----439.1 (14.3) -----$424.8 -----------
NOTE 10 -- INCOME TAXES Effective January 1, 1992, the Company adopted FAS 109, "Accounting for Income Taxes." This standard requires the use of the asset and liability approach for nancial accounting and reporting of income taxes. The Company previously accounted for income taxes in conformity with FAS 96. The effect of the accounting change was not material except for allowing recognition of the tax benet associated with the F-12
KELLOGG COMPANY AND SUBSIDIARIES
23 of 52
10/17/11 10:36 PM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED cumulative effect of adopting FAS 106 (refer to Note 9). The following table summarizes the provision for U.S. federal, state, and foreign taxes on income.
1993 -------Earnings before income taxes and cumulative effect of accounting change: United States................................................ Foreign...................................................... 1992 -------(IN MILLIONS) $ 727.3 343.1 -------$1,070.4 --------------$ 226.8 27.8 132.9 -------387.5 -------(4.2) (1.0) 5.3 -------0.1 -------$ 387.6 --------------1991 --------
703.3 330.8 -------$1,034.1 --------------$ 233.0 38.0 104.7 -------375.7 -------(19.4) (2.2) (0.7) -------(22.3) -------$ 353.4 ---------------
626.0 358.2 -------$ 984.2 --------------$ 191.0 26.8 136.1 -------353.9 -------7.9 2.0 14.4 -------24.3 -------$ 378.2 ---------------
Income taxes: Currently payable: Federal................................................... State..................................................... Foreign...................................................
Deferred: Federal................................................... State..................................................... Foreign...................................................
Total income taxes......................................
The difference between the U.S. federal statutory tax rate and the Company's effective rate is as follows.
U.S. statutory rate....................................................... Foreign rates varying from 35%............................................ State income taxes, net of federal benefit................................ Other..................................................................... Effective income tax rate..........................................
1993 ---35.0% (1.5) 2.2 (1.5) ---34.2% -------
1992 ---34.0% 1.2 1.7 (0.7) ---36.2% -------
1991 ---34.0% 1.9 1.9 0.6 ---38.4% -------
F-13
KELLOGG COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED The deferred tax assets and deferred tax liabilities recorded on the balance sheet as of year-end are as follows.
DEFERRED TAX DEFERRED TAX ASSETS LIABILITIES ------------------------------1993 1992 1993 1992 --------------------(IN MILLIONS) Current: Promotion and advertising................................. $ 53.4 $ 34.1
24 of 52
10/17/11 10:36 PM
Wages and payroll taxes................................... Pension................................................... Health and postretirement benefits........................ State and property taxes.................................. Other.....................................................
10.7 13.0 9.6 17.8 -----104.5 -----12.1 157.4 8.0 6.2 -----183.7 -----$288.2 -----------
10.8 $ 7.8 26.8 -----79.5 -----155.1 5.3 7.6 -----168.0 -----$247.5 ----------9.0 $ 10.7 6.6 4.4 -----21.7 -----302.9 26.9 15.7 7.1 -----352.6 -----$374.3 ----------6.8 4.8 -----20.6 -----304.5 13.8 27.1 13.1 -----358.5 -----$379.1 -----------
Noncurrent: Depreciation and asset disposals.......................... Postretirement benefits................................... Capitalized interest...................................... State taxes............................................... Other.....................................................
Total deferred taxes...................................
At December 31, 1993, $1,145 million of foreign subsidiary earnings was considered permanently invested in those businesses. Accordingly, U.S. income taxes have not been provided for such earnings. If all these earnings were remitted, foreign withholding taxes would amount to $54 million. Cash paid for income taxes was as follows (in millions): 1993 - $425; 1992 - -$361; 1991 - $334. NOTE 11 -- FINANCIAL INSTRUMENTS AND CREDIT RISK CONCENTRATION The Company enters into foreign exchange contracts to hedge against the adverse impacts of uctuations of foreign currency-denominated receivables, payables, and other commitments. Foreign exchange contracts generally have maturities of six months or less and are entered into with major international nancial institutions. The Company's risk in these transactions is the cost of replacing, at current market rates, these contracts in the event of default by the institutions. Management believes that the risk of such losses is remote. At December 31, 1993 and 1992, the notional amounts of open forward exchange contracts and other nancial market instruments were $301 million and $168 million, respectively. Financial instruments which potentially subject the Company to concentrations of credit risk are primarily cash and temporary investments and accounts receivable. The Company places its investments in highly rated nancial institutions and investment grade short-term debt instruments, and limits the amount of credit exposure to any one entity. Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers, generally short payment terms, and their dispersion across geographic areas. F-14
KELLOGG COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED NOTE 12 -- QUARTERLY FINANCIAL DATA (UNAUDITED) (IN MILLIONS, EXCEPT PER SHARE DATA)
NET SALES -------------------1993 1992 --------------$1,518.4 $1,515.1 1,541.6 1,584.0 1,669.2 1,670.7 1,566.2 1,420.8 --------------$6,295.4 $6,190.6 ----------------------------GROSS PROFIT -------------------1993 1992 --------------$ 793.4 $ 791.0 785.7 838.9 897.3 874.3 830.0 698.7 --------------$3,306.4 $3,202.9 -----------------------------
First................................................. Second................................................ Third................................................. Fourth................................................
25 of 52
10/17/11 10:36 PM
First.................................................. Second................................................. Third.................................................. Fourth.................................................
EARNINGS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE ----------------1993 1992 ----------$179.2 $191.6 142.7 163.6 209.3 199.7 149.5 127.9 ----------$680.7 $682.8 ---------------------
EARNINGS PER SHARE BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE ---------------------1993 1992 ---------------$ .76 $ .80 .62 .68 .90 .84 .66 .54 ---------------$ 2.94 $2.86 -------------------------------
First.................................................. Second................................................. Third.................................................. Fourth.................................................
NET EARNINGS ----------------1993 1992 ----------$179.2 ($60.0) 142.7 163.6 209.3 199.7 149.5 127.9 ----------$680.7 $431.2 ---------------------
EARNINGS PER SHARE ---------------------1993 1992 ---------------$ .76 ($.25) .62 .68 .90 .84 .66 .54 ---------------$ 2.94 $1.81 -------------------------------
As discussed in Note 9, the Company adopted FAS 106 in the rst quarter of 1992. F-15 KELLOGG COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED Dividend payments for the year totaled $1.32 per share, up 10 percent from 1992, marking the 37th consecutive year of increase. The trend of increased dividends is expected to continue in 1994. The principal market for trading Kellogg shares is the New York Stock Exchange. The shares are also traded on the Boston, Cincinnati, Midwest, Pacic, and Philadelphia Stock Exchanges. The closing price (on the NYSE) on December 31, 1993 was $56 3/4. As of December 31, 1993, there were approximately 29,381 shareholders of record. Dividends paid and the quarterly price ranges on the New York Stock Exchange during the last two years are as follows.
QUARTER DIVIDEND - -------------------------------------------------------------------------1993: Fourth........................................................... $ .34 Third............................................................ .34 Second........................................................... .32 First............................................................ .32 -------$ 1.32 ---------------
HIGH -----$61.88 54.88 61.00 67.88
LOW -----$48.75 47.25 51.00 59.38
26 of 52
10/17/11 10:36 PM
1992: Fourth........................................................... Third............................................................ Second........................................................... First............................................................
.32 .32 .28 .28 -------$ 1.20 ---------------
$75.38 73.38 66.88 67.00
$65.88 62.75 54.63 54.38
F-16 KELLOGG COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED NOTE 13 -- OPERATING SEGMENTS The Company operates in a single industry -- manufacturing and marketing convenience food products throughout the world. Information presented below describes operations by geographic area. Included are the schedules of net sales and earnings before the cumulative effect of the accounting change for the years 1993, 1992, and 1991, and the related year-end identiable assets, including corporate assets that are comprised principally of cash and temporary investments.
NET SALES (millions) 1993 % CHANGE 1992 % CHANGE 1991 % CHANG - ---------------------------------------------------------------------------------------------------------United States...................... $3,783.9 +6 $3,564.9 +5 $3,411.0 +12 % of total....................... 60% 57% 59% Europe............................. 1,505.9 -8 1,643.6 +14 1,447.0 +9 % of total....................... 24% 27% 25% Other areas........................ 1,005.6 +2 982.1 +6 928.6 +14 % of total....................... 16% 16% 16% - ---------------------------------------------------------------------------------------------------------Consolidated....................... $6,295.4 +2 $6,190.6 +7 $5,786.6 +12 - ----------------------------------------------------------------------------------------------------------
EARNINGS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE (millions) 1993 % CHANGE 1992 % CHANGE 1991 % CHANG - ---------------------------------------------------------------------------------------------------------United States...................... $ 452.2 -1 $ 458.4 +18 $ 388.3 +19 % of total....................... 66% 67% 64% Europe............................. 139.8 -1 141.7 +9 130.1 +20 % of total....................... 21% 21% 22% Other areas........................ 88.7 +7 82.7 -6 87.6 +26 % of total....................... 13% 12% 14% - ---------------------------------------------------------------------------------------------------------Consolidated....................... $ 680.7 -$ 682.8 +13 $ 606.0 +21 - ----------------------------------------------------------------------------------------------------------
IDENTIFIABLE ASSETS (millions) 1993 % CHANGE 1992 % CHANGE 1991 % CHANG - ---------------------------------------------------------------------------------------------------------United States...................... $2,340.4 +13 $2,064.4 +11 $1,859.6 +1
27 of 52
10/17/11 10:36 PM
% of total....................... 55% 51% 47% Europe............................. 1,022.6 -5 1,076.6 +3 1,110.8 +1 % of total....................... 24% 27% 28% Other areas........................ 766.4 +4 738.4 -4 767.4 +8 % of total....................... 18% 18% 20% Corporate assets................... 107.7 -21 135.6 -28 188.0 +72 % of total....................... 3% 4% 5% - ---------------------------------------------------------------------------------------------------------Consolidated....................... $4,237.1 +6 $4,015.0 +2 $3,925.8 +5 - ----------------------------------------------------------------------------------------------------------
F-17
FINANCIAL SCHEDULES SCHEDULE II -- AMOUNTS RECEIVABLE FROM EMPLOYEES (IN MILLIONS)
Name of Balance, AddiCollecBalance, AddiCollecBalance, AddiCollecDebtor 12/31/90 tions tions 12/31/91 tions tions 12/31/92 tions tions - --------------------- ---------------------------------------------------D. Brett $0.2 $ 0.2 W. Camstra(1) 0.4 $0.4 $ 0.1 $0.3 M. Cook 0.1 0.1 G. Costley(1) 0.5 0.1 0.4 0.1 0.3 C. Elliott(1) 0.2 0.2 0.2 G. Franklin 0.2 0.2 0.1 0.1 $ 0.1 C. French 0.1 0.1 0.1 A. Harris $0.1 0.1 0.1 J. Hinton(1) 0.2 0.2 0.2 P. Horekens $0.1 0.1 0.1 P. Kehoe 0.2 0.1 0.1 0.1 D. Kinnisten 0.1 0.1 0.1 0.1 T. Knowlton(1) 0.2 0.1 0.1 0.1 W. LaMothe 1.6 0.5 1.1 1.1 A. Langbo(1) 0.7 0.1 0.6 0.1 0.5 0.1 J. Maisner 0.1 0.1 0.1 T. Mobsby 0.2 0.2 0.2 0.2 B. Norton(2) 0.1 0.1 0.1 W. Rogers 0.1 0.1 D. Schaller 0.2 0.1 0.1 0.1 0.1 J. Stewart(1) 0.2 0.2 0.2
(1) Amounts receivable include certain obligations payable on demand for W. Camstra, J. Hinton, T. Knowlton, A. Langbo, and J. Stewart. Other amounts are payable in 120 equal monthly installments. Payments are applied rst in reduction of interest, secondly in reduction of principal. Interest accrues at 7.11%. (2) Interest of $7,000 due annually, principal of $100,000 due in 1997; 7% interest. S-1
SCHEDULE V - PROPERTY (IN MILLIONS)

Balance, beginning of year --------$ 40.5 1,021.2 Additions at cost --------$ 2.3 72.1 Retirements ------$ 1.1 10.8 Currency translation adjustments ----------$ (1.1) (16.8)
Classification - --------------------------------------1993: Land Buildings
Balance, end of year ------$ 40.6 1,065.7
28 of 52
10/17/11 10:36 PM
Machinery and equipment Construction in progress Totals 1992: Land Buildings Machinery and equipment Construction in progress Totals 1991: Land Buildings Machinery and equipment Construction in progress Totals
2,629.4 302.6 --------$ 3,993.7 ----------------$ 40.4 1,045.5 2,635.5 168.3 --------$ 3,889.7 ----------------$ 41.0 1,026.9 2,462.8 141.3 --------$ 3,672.0 -----------------
366.8 8.5 --------$ 449.7 ----------------3.0 63.7 255.7 151.2 --------$ 473.6 ----------------68.7 481.1 (216.4) --------$ 333.4 ----------------$ $
94.9 ------$ 106.8 ------------$ 0.3 15.6 111.4
(43.7) (2.5) ----------($ 64.1) --------------------(2.6) (72.4) (150.4) (16.9) ----------($242.3) --------------------0.2 (26.3) (261.7) 243.4 ----------($ 44.4) --------------------$ $
2,857.6 308.6 -------$4,272.5 --------------$ 40.5 1,021.2 2,629.4 302.6 -------$3,993.7 --------------$ 40.4 1,045.5 2,635.5 168.3 -------$3,889.7 ---------------
------$ 127.3 ------------$ 0.8 23.8 46.7
------$ 71.3 -------------
The net change in construction in progress is reected in additions at cost. Transfers of completed construction are included in additions of other classications. Depreciation is computed at annual rates averaging approximately 4% for buildings and 9% for machinery. S-2
SCHEDULE VI - ACCUMULATED DEPRECIATION OF PROPERTY (IN MILLIONS)

Balance, beginning Classification of year - ---------------------------------------1993: Buildings $ 267.7 Machinery and equipment 1,063.3 --------Totals $ 1,331.0 ----------------1992: Buildings $ 248.9 Machinery and equipment 994.3 --------Totals $ 1,243.2 ----------------1991: Buildings $ 217.1 Machinery and equipment 859.5 --------Totals $ 1,076.6 ----------------Additions at cost --------41.1 224.1 --------$ 265.2 ----------------37.2 194.3 --------$ 231.5 ----------------36.2 186.6 --------$ 222.8 ----------------$ $ $ Retirements ------$ 2.8 66.3 ------$69.1 ------------$ 4.9 62.9 ------$67.8 ------------$ 4.0 37.5 ------$41.5 ------------Currency translation adjustments ----------($4.2) (18.8) ----------($23.0) --------------------($13.5) (62.4) ----------($ 75.9) --------------------($0.4) (14.3) ----------($14.7) ---------------------
Balance, end of year ------$ 301.8 1,202.3 -------$1,504.1 --------------$ 267.7 1,063.3 -------$1,331.0 --------------$ 248.9 994.3 -------$1,243.2 ---------------
SCHEDULE VIII - VALUATION RESERVE
29 of 52
10/17/11 10:36 PM
(IN MILLIONS)
1993 ----$ 6.2 0.9 0.7 (0.4) ----$ 6.0 --------1992 ----$ 5.8 2.4 1.0 (1.0) ----$ 6.2 --------1991 ----$ 4.8 2.3 1.3 0.0 ----$ 5.8 ---------
Balance at January 1 Addition charged to costs and expenses Doubtful accounts charged to reserves Currency translation adjustments Balance at December 31
S-3
SCHEDULE IX - SHORT-TERM BORROWINGS (IN MILLIONS)

Maximum amount outstanding during the year ----------$ 129.5 $ 511.1 $ 211.9 $ 324.6 $ 208.7 $ 254.5 Average amount outstanding during the year (2) ----------$ 112.4 $ 307.7 $ 132.3 $ 130.6 $ 187.5 $ 132.8
Balance Category of aggregate at end short-term borrowings (1) of year - ----------------------------------------1993: Notes payable to banks $ 82.4 Commercial paper $ 304.3 1992: Notes payable to banks $ 110.2 Commercial paper $ 99.7 1991: Notes payable to banks $ 98.6 Commercial paper $ 89.8
Weighted average interest rate -------6% 3% 8% 3% 7% 5%
Weighted average interest rate during th year (3) ------7% 3% 7% 4% 8% 6%
(1) Commercial paper is generally issued for a maximum of 90 days with interest at prevailing market rates. Notes payable at banks represent short-term borrowings and foreign overdraft facilities which have varying interest rates. (2) Calculated on month-end outstanding balances during the year. (3) Average amount outstanding during the year divided into actual interest expense incurred.
SCHEDULE X - SUPPLEMENTARY EARNINGS STATEMENT INFORMATION (IN MILLIONS)

Charged to costs and expenses in Maintenance and repairs Depreciation of property Advertising costs 1993 -----$252.6 $265.2 $772.4 1992 -----$244.9 $231.5 $782.3 1991 -----$248.2 $222.8 $708.3
S-4
EXHIBIT INDEX
30 of 52
10/17/11 10:36 PM
EXHIBIT NO. 3.01
3.02 4.01
4.02 4.03
4.04
4.05
10.01
10.02
10.03
10.04
10.05
DESCRIPTION Restated Certificate of Incorporation of Kellogg Company, as amended, incorporated by reference to Exhibit 3.01 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission file number 1-4171. Bylaws of Kellogg Company, as amended. Indenture, dated as of March 1, 1988, between the Company and Bankers Trust Company, incorporated by reference to Exhibit 4(a) to the Company's Registration Statement on Form S-3, Commission file number 33-20731. Form of Debt Security, incorporated by reference to Exhibit 4(d) to the Company's Registration Statement on Form S-3, Commission file number 33-20731. Supplemental Indenture, dated January 30, 1989, between the Company and Bankers Trust Company, incorporated by reference to Exhibit B to the Company's Current Report on Form 8-K, Commission file number 1-4171, dated January 31, 1989. Instrument of Resignation, Acceptance and Appointment, dated as of January 31, 1989, between the Company, Bankers Trust Company and NBD Bank, N.A. (formerly known as National Bank of Detroit), incorporated by reference to Exhibit A to the Company's Current Report on Form 8-K, Commission file number 1-4171, dated January 31, 1989. Agency Agreement, dated as of January 31, 1989, between NBD Bank, N.A. (formerly known as National Bank of Detroit) and Bankers Trust Company, incorporated by reference to Exhibit C to the Company's Current Report on Form 8-K, Commission file number 1-4171, dated January 31, 1989. Employment Agreements between the Company and C. W. Elliott, made and entered into as of January 30, 1987, incorporated by reference to Exhibit 10.02 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, Commission file number 1-4171.* Kellogg Company Excess Benefit Retirement Plan, incorporated by reference to Exhibit 10.01 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1983, Commission file number 1-4171.* Kellogg Company Supplemental Retirement Plan, incorporated by reference to Exhibit 10.05 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission file number 1-4171.* Kellogg Company Book Value Unit/Share Incentive Plan, incorporated by reference to Exhibit 10.02 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1983, Commission file number 1-4171.* Kellogg Company 1982 Stock Option Plan, as amended on December 7, 1990, incorporated by reference to Exhibit 10.07 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission file number 1-4171.*
ELECTRONIC(E) PAPER(P) INCORP.BY REF.(IBRF) IBRF
E IBRF
IBRF IBRF
IBRF
IBRF
IBRF
IBRF
IBRF
IBRF
IBRF
EXHIBIT NO. 10.06
10.07
10.08
10.09
DESCRIPTION Kellogg Company International Retirement Plan, incorporated by reference to Exhibit 10.05 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1984, Commission file number 1-4171.* Kellogg Company Executive Survivor Income Plan, incorporated by reference to Exhibit 10.06 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1985, Commission file number 1-4171.* Kellogg Company Key Executive Benefits Plan, incorporated by reference to Exhibit 10.09 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission file number 1-4171.* Kellogg Company Key Employee Long Term Incentive Plan, incorporated by reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
ELECTRONIC(E) PAPER(P) INCORP.BY REF.(IBRF) IBRF
IBRF
IBRF
IBRF
31 of 52
10/17/11 10:36 PM
10.10 21.01
23.01 24.01
99.01 99.02
1991, Commission file number 1-4171.* Deferred Compensation Plan for Non-Employee Directors.* Domestic and Foreign Subsidiaries of the Company, incorporated by reference to Exhibit 22.01 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, Commission file number 1-4171. Consent of Price Waterhouse. Powers of Attorney authorizing Richard M. Clark to execute the Company's Form 10-K Annual Report for the fiscal year ended December 31, 1993 on behalf of the Board of Directors, and each of them. Kellogg Company American Federation of Grain Millers Savings and Investment Plan Form 11-K Annual Report for the fiscal year ended October 31, 1993. Kellogg Company Salaried Savings and Investment Plan Form 11-K Annual Report for the fiscal year ended October 31, 1993.
E IBRF
E E
P** P**
*A management contract or compensatory plan required to be led by Item 14(c) of this report. **Required plan nancial statements are led under cover of Form SE pursuant to Regulation S-T Item 311(c).
EXHIBIT 3.02 Kellogg Company Bylaws As Amended KELLOGG COMPANY BYLAWS (AS AMENDED UP TO AND INCLUDING MARCH 16, 1990) ARTICLE I OFFICES SECTION 1. OFFICES. The principal ofce shall be in the City of Wilmington, County of New Castle, State of Delaware, and the name of the resident agent in charge thereof is The Corporation Trust Company. The Corporation may also have an ofce in the City of Battle Creek, State of Michigan, and also ofces at such other places as the Board of Directors may, from time-to-time, appoint, or the business of this Corporation may require. ARTICLE II STOCKHOLDERS SECTION 1. ANNUAL MEETINGS. The Annual Meeting of Stockholders of this Corporation may be held either within or without the State of Delaware at a time and place to be designated by the Board of Directors. Notice of such Annual Meeting shall be given by the Secretary, by mailing a written or printed notice stating the place, day and hour of the meeting to each stockholder of record entitled to vote at such meeting, at least ten (10) days prior to the date of such meeting, at such stockholder's last known post ofce address as the same appears upon the books of this Corporation. The Chairman of the Board, or in such ofcer's absence or incapacity, a Vice Chairman, or in such ofcer's absence or incapacity, the President and Secretary of this Corporation, shall act as president and secretary, respectively, of each stockholders' meeting unless it shall be otherwise determined at the meeting. SECTION 2. SPECIAL MEETINGS. Special meetings of the stockholders may be held either within or without the State of Delaware and may be called (i) by such number of Directors constituting not less than two-thirds of the total number of directorships xed by a resolution adopted by the Board of Directors pursuant to Article III, Section 1 of these Bylaws, whether or not such directorships are lled at the time (such total number of directorships hereinafter referred to as the "Full Board"), or by the Chairman of the Board, or in such ofcer's absence or incapacity, by a Vice Chairman, or in such ofcer's absence or incapacity, by the President, by mailing a written or printed notice at least ten (10) days prior to the date of such meeting to each stockholder of record entitled to vote at such meeting (at such
32 of 52
10/17/11 10:36 PM
2 stockholder's last known post ofce address as the same appears on the books of this Corporation), or (ii) by any stockholder or stockholders holding not less than one-third of the voting power of all of the outstanding shares of capital stock of this Corporation entitled to vote at such meeting, voting together as a single class, by mailing a written or printed notice at least thirty (30) days prior to the date of such meeting to each stockholder of record entitled to vote at such meeting. The notice required by clause (i) or (ii) of the immediately preceding sentence shall state the place, date and hour of such meeting and any and all purposes for which the meeting is called. SECTION 3. VOTES. Each stockholder shall be entitled to one (1) vote for each share of capital stock held on all matters to be voted upon. Each stockholder entitled to vote shall be entitled to vote in person or by proxy, but no proxy shall be voted on after three (3) years from its date unless said proxy provides for a longer period. Except where the transfer books of this Corporation shall have been closed, or a date shall have been xed as a record date for the determination of stockholders entitled to vote, no share of stock shall be voted on at any election for Directors which shall have been transferred on the books of this Corporation within twenty (20) days next preceding such election of Directors. SECTION 4. QUORUM. At any meeting at which the holders of capital stock shall be entitled to vote for the election of Directors or for other purposes, the holders of a majority of the outstanding shares of capital stock entitled to vote at such meeting, and present in person or by proxy, shall constitute a quorum for the purpose of electing Directors or for such other purposes. In the absence of a quorum of holders of capital stock at any meeting of stockholders at which they are entitled to vote, the holders of capital stock present at such meeting may adjourn the meeting to a future day for such vote as the holders of capital stock are entitled and wish to take without any notice other than an announcement at the meeting. At any such adjourned meeting at which a quorum shall be present, any business may be transacted by stockholders which they might have transacted at the meeting as originally notied. SECTION 5. STOCKHOLDERS LISTS. A complete list of the stockholders entitled to vote at the ensuing election, arranged in alphabetical order, with the residence of each and the number of voting shares held by each, shall be prepared by the Secretary and led in the ofce where the election is to be held at least ten (10) days before every election, and shall, at all times, during the usual hours for business, and during the whole time of said election, and at the place thereof, be open to the examination of any stockholder entitled to vote thereat. SECTION 6. CONSENTS TO CORPORATE ACTION. The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting shall be xed by the Board of Directors. Any stockholder seeking to have the stockholders authorize or take corporate action by written consent without a meeting shall, by written notice, request the Board of Directors to x a record date. The Board of Directors shall, upon receipt of such a request, x a record date, which shall be not later than the 15th day following receipt of the request, or such later date as may be specied by such stockholder. If 3 the record date falls on a Saturday, Sunday or legal holiday, the record date shall be the day next following which is not a Saturday, Sunday or legal holiday. Subject to the immediately following paragraph, the date for determining if an action has been consented to by the holder or holders of shares of outstanding stock of this Corporation having the requisite voting power to authorize or take the action specied therein (the "Consent Date") shall be the 31st day after the date on which materials soliciting consents are mailed to stockholders of this Corporation or, if no such materials are required to be mailed under applicable law, the 31st day following the record date xed by the Board pursuant to the immediately preceding paragraph. If the Consent Date falls on a Saturday, Sunday or legal holiday, the Consent Date shall be the day next following which is not a Saturday, Sunday or legal holiday. In the event of the delivery to this Corporation of a written consent or consents purporting to authorize or take corporate action and/or related revocations (each such written consent and related revocation hereinafter referred to in this Section 6 as a "Consent"), the Secretary of this Corporation shall provide for the safekeeping of such Consent and shall conduct such reasonable investigation as the Secretary deems necessary or appropriate for the purpose of
33 of 52
10/17/11 10:36 PM
ascertaining the validity of such Consent and all matters incident thereto, including, without limitation, whether the holders of shares having the requisite voting power to authorize or take the action specied in the Consent have given consent; provided, that if the corporate action to which the Consent relates is the removal or replacement of one or more members of the Board of Directors, the Secretary of this Corporation shall designate two persons, who shall not be members of the Board, to serve as inspectors with respect to such Consent, and such inspectors shall discharge the functions of the Secretary of this Corporation under this paragraph. If, after such investigation, the Secretary, or such inspectors, as the case may be, shall determine that the Consent is valid, that fact shall be certied on the records of this Corporation kept for the purpose of recording the proceedings of meetings of the stockholders, and the Consent shall be led with such records, at which time the Consent shall become effective as stockholder action; provided, that neither the Secretary, nor such inspectors, as the case may be, shall make such certication or ling, and the Consent shall not become effective as stockholder action, until the nal termination, without the availability of any further appeal, of any proceedings which may have been commenced in the Court of Chancery of the State of Delaware, or any other court of competent jurisdiction, for an adjudication of any legal issues incident to determining the validity of the Consent, unless and until such Court has determined that such proceedings are not being pursued expeditiously and in good faith. In conducting the investigation required by this paragraph, the Secretary, or such inspectors, as the case may be, may, at the expense of this Corporation, retain special legal counsel and any other necessary or appropriate professional advisors and such other personnel, as they may deem necessary or appropriate, to assist them. To the extent that this Section 6 is inconsistent with this Corporation's Restated Certicate of Incorporation, as amended, the provisions of this Corporation's Restated Certicate of Incorporation, as amended, will prevail. 4 ARTICLE III DIRECTORS SECTION 1. MEMBERSHIP. The number of Directors of this Corporation shall be not less than twelve (12) nor more than eighteen (18), the exact number of Directors to be xed from time-to-time by a Resolution adopted by not less than two-thirds of the full Board (as dened in Article NINTH of the Restated Certicate of Incorporation). Directors shall be divided into three classes, as nearly equal in number as possible, with a term of ofce of three years, one class to expire each year. At each Annual Meeting of Stockholders, the class of Directors whose terms of ofce shall expire at such time shall be elected by a plurality vote by ballot to hold ofce for terms expiring at the third Annual Meeting of Stockholders following their election and until a successor shall be elected and shall qualify. Nominations for the election of Directors may be made by the Board of Directors or a committee appointed by the Board of Directors or by any stockholder entitled to vote in the election of Directors at the particular meeting at which the nomination is to occur. However, any stockholder entitled to vote at such meeting may nominate one or more persons for election as Directors only in person or by proxy at such meeting and only if written notice of such stockholder's intent to make such nomination or nominations has been delivered personally to, or otherwise received by, the Secretary of this Corporation at least thirty (30) days, but no more than ninety (90) days prior to the anniversary date of the record date for determination of stockholders entitled to vote in the immediately preceding Annual Meeting of Stockholders. Each such notice shall contain a representation that: (i) the stockholder is, and will be, on the record date, a benecial owner or a holder of record of stock of this Corporation entitled to vote at such meeting; (ii) the stockholder has, and will have, on the record date, full voting power with respect to such shares; and (iii) the stockholder intends to appear in person or by proxy at the meeting to nominate the person or persons specied in the notice. Additionally, each such notice shall set forth: (a) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated; (b) a description of all arrangements or understandings between the stockholder and each proposed nominee, and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (c) the number and kinds of securities of this Corporation held benecially or of record by each proposed nominee; (d) such other information regarding each proposed nominee as would be required to be included in a proxy statement led pursuant to the proxy rules of the Securities and Exchange Commission for the initial election of such proposed nominee for Director; and (e) the consent of each proposed nominee to serve as a Director if so elected. The presiding ofcer of the meeting may refuse to acknowledge the nomination of any person if any of the information supplied is false or misleading or if any of the foregoing requirements are not satised.
34 of 52
10/17/11 10:36 PM
SECTION 2. VACANCIES. Subject to the rights of the holders of any particular class or series of equity securities of this Corporation, (i) newly created directorships resulting from any increase in the total number of authorized Directors may be lled by the afrmative vote of not less than two-thirds of the Directors then in ofce, although less than a quorum, or by a sole remaining Director, at any regular or special meeting 5 of the Board of Directors, or by a plurality vote of the stockholders at any regular Annual Meeting or Special Meeting of Stockholders, and (ii) any vacancies on the Board of Directors resulting from death, resignation, retirement, disqualication, removal from ofce or other cause may be lled only by the afrmative vote of not less than two-thirds of the Directors then in ofce, although less than a quorum, or by a sole remaining Director, at any regular or special meeting of the Board of Directors. SECTION 3. PLACE OF MEETINGS. The Directors may hold their meetings and have one or more ofces and keep the books of this Corporation outside of Delaware at the ofce of this Corporation, in the City of Battle Creek, Michigan, or at such other place or places as they may, from time-to-time, determine. SECTION 4. REGULAR MEETINGS. In months other than the month in which the Annual Meeting of Stockholders shall be held, regular meetings of the Board of Directors shall be held without other notice than this bylaw, on the fourth Friday of each month, if not a legal holiday, and if a legal holiday, then on the preceding business day, at such time and place as the Board of Directors may designate, or, if no such designation shall have been made, at the executive ofces of this Corporation, in the City of Battle Creek, Michigan, at the hour of 1:30 p.m., local time. A regular meeting of the Board of Directors shall also be held without other notice than this bylaw, immediately after, and at the same place as the Annual Meeting of Stockholders. The Board of Directors may provide, by resolution, the time and place for the holding of different or additional regular meetings or the cancellation of a regular meeting(s) without other notice than such resolution. SECTION 5. SPECIAL MEETINGS. Special meetings of the Board of Directors, to be held within or without the State of Delaware, may be called by the Chairman of the Board, or in such ofcer's absence or incapacity, by a Vice Chairman, or in such ofcer's absence or incapacity, by the President, or in such ofcer's absence or incapacity, by an Executive Vice President, or in such ofcer's absence or incapacity, by not less than six (6) Directors (provided, that if this Corporation's Restated Certicate of Incorporation, as amended, provides for the division of the Board of Directors into three classes, no more than two of such members of the Board of Directors shall be from the same class), by giving one day's notice thereof in the case of special meetings called by the Chairman of the Board, a Vice Chairman, the President or an Executive Vice President, as the case may be, or ten day's notice thereof in the case of all other special meetings, which notice shall, in the case of any special meeting, set forth the time and place of the meeting and be made orally, or in writing, or by telegraph or by telephone, and shall, in the case of special meetings not called by the Chairman of the Board, a Vice Chairman, the President or an Executive Vice President, also set forth in reasonable detail any and all purposes for which the special meeting is called. SECTION 6. VOTES. Any member of the Board may require the ayes and noes to be taken on any questions and recorded on the Minutes. SECTION 7. QUORUM. Except as herein otherwise specically provided, a majority of the number of Directors constituting the Full Board (as dened in Article II, Section 2) shall constitute a quorum for the transaction of business. 6 SECTION 8. COMPENSATION OF DIRECTORS. Compensation of Directors shall be as determined by the Board. Nothing contained herein shall be construed to preclude any Director from serving this Corporation in any other capacity and receiving compensation therefor. SECTION 9. NOTICES. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specied in the call or notice, or waiver of notice of such meeting, unless specically required by law, this Corporation's Restated Certicate of Incorporation, as amended, or these Bylaws. ARTICLE IV COMMITTEES
35 of 52
10/17/11 10:36 PM
SECTION 1. EXECUTIVE COMMITTEE. There may be an Executive Committee of two or more Directors, including the Chairman of the Board, designated by resolution of the Board of Directors. Said Committee may meet at stated times or on notice to all by any of their own number. During the intervals between meetings of the Board, the members of such Committee, who shall be requested to do so, shall advise and aid the ofcers in all matters concerning its interests and the management of its business, and generally perform such duties and exercise such powers as may be directed or delegated by the Board of Directors from time-to-time. The Board may delegate to such Committee authority to exercise all powers of the Board, except those powers specically excluded from committees by Section 141(c) of the Delaware General Corporation Law and except the power to authorize the issuance of stock of this Corporation while the Board is not in session. Vacancies in the membership of the Committee shall be lled by the Board of Directors at a regular meeting or at a special meeting called for that purpose. The Executive Committee may, in its discretion, keep regular minutes of its proceedings and shall report the same to the Board when required. In the absence or disqualication of a member of the Executive Committee, the member or members of the Executive Committee present at a meeting and not disqualied from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of the Board of Directors of the Company to act at the meeting in place of each such absent or disqualied member. SECTION 2. AUDIT COMMITTEE. There may be an Audit Committee of two or more Directors designated by resolution of the Board of Directors. Said Committee may meet at stated times or on notice to all by any of its own number. The Committee and its membership shall generally perform such duties and exercise such powers as may be directed or delegated by the Board of Directors from time-to-time. Vacancies in the membership of the Committee shall be lled by the Board of Directors at a regular meeting or at a special meeting called for that 7 purpose. The Committee may, in its discretion, keep regular minutes of its proceedings and shall report the same to the Board when required. SECTION 3. COMPENSATION COMMITTEE. There may be a Compensation Committee of two or more Directors designated by resolution of the Board of Directors. Said Committee may meet at stated times or on notice to all by any of its own number. The Committee and its membership shall generally perform such duties and exercise such power as may be directed or delegated by the Board of Directors from time-to-time. Vacancies in the membership of the Committee shall be lled by the Board of Directors at a regular meeting or at a special meeting called for that purpose. The Committee may, in its discretion, keep regular minutes of its proceedings and shall report the same to the Board when required. SECTION 4. EMPLOYEE BENEFITS ADVISORY COMMITTEE. There may be an Employee Benets Advisory Committee of two or more Directors designated by resolution of the Board of Directors. Said Committee may meet at stated times or on notice to all by any of its own number. The Committee and its membership shall generally perform such duties and exercise such powers as may be directed or delegated by the Board of Directors from time-to-time. Vacancies in the membership of the Committee shall be lled by the Board of Directors at a regular meeting or at a special meeting called for that purpose. The Committee may, in its discretion, keep regular minutes of its proceedings and shall report the same to the Board when required. SECTION 5. FINANCE COMMITTEE. There may be a Finance Committee of two or more Directors designated by resolution of the Board of Directors. Said Committee may meet at stated times or on notice to all by any of its own number. The Committee and its membership shall generally perform such duties and exercise such powers as may be directed or delegated by the Board of Directors from time-to-time. Vacancies in the membership of the Committee shall be lled by the Board of Directors at a regular meeting or at a special meeting called for that purpose. The Committee may, in its discretion, keep regular minutes of its proceedings and shall report the same to the Board when required. SECTION 6. NOMINATING COMMITTEE. There may be a Nominating Committee of two or more Directors designated by resolution of the Board of Directors. Said Committee may meet at stated times or on notice to all by any of its own number. The Committee and its membership shall generally perform such duties and exercise such powers as may be directed or delegated by the Board of Directors from time-to-time. Vacancies in the membership of
36 of 52
10/17/11 10:36 PM
the Committee shall be lled by the Board of Directors at a regular meeting or at a special meeting called for that purpose. The Committee may, in its discretion, keep regular minutes of its proceedings and shall report the same to the Board when required. SECTION 7. COMMITTEE ON SOCIAL RESPONSIBILITY. There may be a Committee on Social Responsibility of two or more Directors designated by resolution of the Board of Directors. Said Committee may meet at stated times or on notice to all by any of its own number. The Committee and its membership shall generally perform such duties and exercise such powers as may be directed or delegated by the Board of Directors from time-to-time. Vacancies in the membership of the Committee shall be lled by the Board of Directors at a regular meeting or at a special meeting called for that purpose. The Committee may, in its 8 discretion, keep regular minutes of its proceedings and shall report the same to the Board when required. SECTION 8. OTHER COMMITTEES. The Board of Directors, by resolution, may dissolve existing committees and may designate additional committees, each of which shall consist of not less than two Directors. Each such additional committee may meet at stated times or on notice to all by any of its own number. Each such additional committee and its membership shall generally perform such duties and exercise such powers as may be directed or delegated by the Board of Directors from time-to-time. Vacancies in the membership of any such additional committee shall be lled by the Board of Directors at a regular meeting or at a special meeting called for that purpose. Any such additional committee may, in its discretion, keep regular minutes of its proceedings and shall report the same to the Board of Directors when required. ARTICLE V OFFICERS SECTION 1. OFFICERS. The ofcers of this Corporation shall be elected by the Board of Directors and shall consist of the Chairman of the Board (if designated as the Chief Executive Ofcer by the Board), the President, one or more Vice Presidents, a Secretary, a Controller, one or more Assistant Secretaries, a Treasurer, one or more Assistant Treasurers, and such other ofcers as shall, from time-to-time, be provided by the Board of Directors, who shall perform the usual duties pertaining to their respective ofces, except as otherwise specically provided herein or by resolution of the Board of Directors. One person may hold more than one ofce except that no person shall be both the President and a Vice President. The Board of Directors may also elect one or more Vice Chairmen of the Board. SECTION 2. QUALIFICATIONS. No person shall be eligible for the Ofce of Chairman of the Board who is not a Director. Persons who are not Directors or who are not stockholders shall be eligible for all other ofces of this Corporation. SECTION 3. TERM OF OFFICE. The ofcers shall be elected at the rst regular meeting of the Board of Directors after the Annual Meeting of Stockholders and shall hold ofce for one year and until their respective successors have been duly elected and qualied; provided, however, that all ofcers of this Corporation shall be subject to removal at any time by an afrmative vote of Directors constituting not less than a majority of the Full Board (as dened in Article II, Section 2). SECTION 4. BONDS. The Directors may, by resolution, require any or all of the ofcers or employees to give bond to this Corporation with good and sufcient surety conditioned upon the faithful performance of their respective duties and ofces. 9 SECTION 5. CHAIRMAN OF THE BOARD AND VICE CHAIRMEN. The Chairman of the Board, if one is elected, shall, in addition to his duties as a Director of this Corporation, preside as Chairman at all meetings of the stockholders, of the Board of Directors, and of the Executive Committee. A Vice Chairman (if one or more is elected, in the order designated by the Board of Directors or the Chief Executive Ofcer) shall, in the absence of the Chairman of the Board, perform the duties of the Chairman of the Board provided for in this Section. SECTION 6. CHIEF EXECUTIVE OFFICER; PRESIDENT. The Chairman of the Board, if so designated by the
37 of 52
10/17/11 10:36 PM
Board of Directors, shall be the Chief Executive Ofcer of this Corporation and shall have general supervision of the affairs of this Corporation, being responsible to the Board of Directors. The President shall have general supervision of the operations of this Corporation subject to the supervision of the Chairman of the Board, except that, if the Chairman of the Board shall not also have been designated Chief Executive Ofcer, or in the absence or incapacity of the Chairman of the Board who has been so designated, the President shall be the Chief Executive Ofcer of this Corporation and have general supervision of the affairs of this Corporation, being responsible to the Board of Directors. The President shall, in the absence or incapacity of the Chairman and Vice Chairman of the Board, perform the functions of the Chairman of the Board set forth in Section 5 of this Article V. SECTION 7. VICE PRESIDENTS. One or more of the Vice Presidents elected may be designated as Executive Vice Presidents. One or more of the Vice Presidents elected may be designated as Senior Vice Presidents. Each of the Vice Presidents, including the Executive Vice Presidents and the Senior Vice Presidents, shall perform such duties as may be prescribed by the Board of Directors or the Chief Executive Ofcer from time-to-time. In the absence or disability to act of the President, any of the Executive Vice Presidents designated by the Chief Executive Ofcer or the Board of Directors shall possess all the powers and may perform any of the duties of the Ofce of the President. In the absence or disability to act of the President and all of the Executive Vice Presidents, such of the Vice Presidents designated by the Chief Executive Ofcer or the Board of Directors, or in the absence or incapacity of those designated Vice Presidents, any other person(s) designated by the Chief Executive Ofcer shall possess all of the powers and may perform all of the duties of the President. SECTION 8. SECRETARY. The Secretary, or in his or her absence, the Assistant Secretary, shall issue notices for meetings, shall keep their minutes, shall have charge of the corporate seal and corporate Minute Books, and shall make such reports and perform such other duties as are incident to his or her ofce or as are properly required of him or her by the Chief Executive Ofcer or the Board of Directors. SECTION 9. TREASURER. The Treasurer shall have custody of all monies and securities of this Corporation. He or she shall sign or countersign such instruments as require his or her signature and shall perform all duties incident to his or her ofce or that are properly required of him or her by the Board of Directors or the Chief Executive Ofcer. He or she shall give bond for the faithful performance of his or her duties in such sum and with such sureties as may be required of him or her by the Board of Directors or the Chief Executive Ofcer. 10 SECTION 10. CONTROLLER. The Controller shall have custody of all the accounting records of this Corporation and shall keep regular books of account. He or she shall sign or countersign such instruments as require his or her signature and shall perform all duties incident to this ofce or that are properly required of him or her by the Board of Directors, the Chief Executive Ofcer or the President. SECTION 11. DELEGATION. In case of the absence of any ofcer of this Corporation or for any other reason which may seem sufcient to the Board of Directors, the Board of Directors or the Chief Executive Ofcer may delegate the powers and duties of any such ofcer to any Director for the time being. ARTICLE VI EXECUTION OF CHECKS AND OTHER INSTRUMENTS SECTION 1. The funds of this Corporation shall be deposited in such bank or banks of deposit as shall be designated or authorized by the Board of Directors and in the name of Kellogg Company or such other name as the Board of Directors may designate. All checks, drafts or orders drawn against funds on deposit in any such bank shall be signed by such person or persons as may be authorized by the Board of Directors by a proper resolution spread of record. SECTION 2. All other instruments in writing involving the payment of money or of credit or liability of this Corporation, such as deeds, bonds, contracts, etc., shall be signed in the name of this Corporation by the Chairman of the Board, a Vice Chairman, the President, a Vice President or by such other person or persons as may be authorized by the Board and may be attested, and the corporate seal afxed thereto by either the Secretary or an Assistant Secretary. In the absence of the Secretary and Assistant Secretary, or their inability to act, the Treasurer or Assistant Treasurer may afx the seal. The Board of Directors, the Executive Committee or the Chief Executive Ofcer may authorize the execution of contracts and other instruments by such other ofcers, agents and employees as may be selected by them from
38 of 52
10/17/11 10:36 PM
time-to-time and with such limitations and restrictions as the authorization may require. ARTICLE VII CERTIFICATES OF STOCK SECTION 1. CERTIFICATES OF STOCK. Certicates of stock shall be signed by the Chairman of the Board, the President or a Vice President, and by the Secretary or an Assistant Secretary of this Corporation, both of whose signatures may be a facsimile, and 11 shall be numbered and entered in books of this Corporation as they are issued. They shall, in all respects, conform to the requirements of the law of the State of Delaware, and shall be otherwise in such form as may be prescribed by the Board of Directors. SECTION 2. LOST CERTIFICATES. If any person claims a certicate is lost or destroyed, a new certicate may be issued of the same tenor and for the same number of shares as the one alleged to be lost or destroyed, upon compliance with any terms and conditions which this Corporation may prescribe. ARTICLE VIII TRANSFER OF SHARES SECTION 1. TRANSFER OF SHARES. Shares of the capital stock of this Corporation shall be transferred on the books of this Corporation by the owner thereof in person or by his or her attorney upon the surrender and cancellation of certicates for a like number of shares. Upon presentation and surrender of a certicate properly endorsed and payment of all taxes thereon, the transferee shall be entitled to a new certicate or certicates in place thereof. SECTION 2. REGISTRATION. One or more Transfer Agents and Registrars of the Company's stock may be appointed by resolution of the Board of Directors for the transfer and registration of any class or classes of stock of this Corporation, and upon such appointment, no certicate for any such class of stock shall be issued or be valid for any purpose until countersigned by one such Transfer Agent and registered and countersigned by one such Registrar; provided, however, that the countersignature of such Transfer Agent may be a facsimile if such certicate is countersigned manually by a Registrar who shall be other than this Corporation or its employee. SECTION 3. CLOSING OF TRANSFER BOOKS. The Board of Directors shall have the power to close the stock transfer books of this Corporation for a period not exceeding sixty (60) days preceding the date of any meeting of stockholders, or the date of payment of any dividend or other distribution or allotment of any rights, or the effective date of any change, conversion or exchange of stock, or of any other lawful action; provided, however, that in lieu of closing the stock transfer books as aforesaid and in order that this Corporation may determine the stockholders entitled to notice or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may x, in advance, a record date, which shall not be more than sixty (60) days before the date of such meeting, nor more than sixty (60) days prior to any other action, and in such case, such stockholders, and only such stockholders as shall be stockholders of record on the date so xed, shall be entitled to such notice of, and to vote at, such meeting and any adjournment or adjournments thereof, or to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any stock 12 on the books of this Corporation after any such record date xed as aforesaid. A determination of stockholders of record entitled to notice of, or to vote at, a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may x a new record date for the adjourned meeting. SECTION 4. REGISTERED STOCKHOLDERS. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof, and accordingly, shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not it shall have
39 of 52
10/17/11 10:36 PM
express or other notice thereof, save as expressly provided by the laws of Delaware. ARTICLE IX CORPORATE SEAL SECTION 1. CORPORATE SEAL. The corporate seal shall have inscribed thereon in the center the words "Corporate Seal" and the number "1922," and in a circle around the margin the words "Kellogg Company" "Delaware". ARTICLE X DIVIDENDS SECTION 1. DIVIDENDS. Dividends upon the stock of this Corporation shall be payable from funds lawfully available therefor at such times and in such amounts as the Board of Directors, or a Committee thereof expressly authorized by resolution of the Board of Directors may, from time-to-time, direct. ARTICLE XI FISCAL YEAR SECTION 1. FISCAL YEAR. The scal year of this Corporation shall begin on the 1st day of January and end on the 31st day of December of each year. 13 ARTICLE XII INSPECTION OF BOOKS SECTION 1. INSPECTION OF BOOKS. The Directors shall determine, from time-to,-time whether, and if allowed, when, and under what conditions and regulations, the accounts and books of this Corporation (except such as may, by statute, be specically open to inspection), or any of them, shall be open to the inspection of the stockholders, and the stockholders' rights in this respect are and shall be restricted and limited accordingly. ARTICLE XIII ORDER OF BUSINESS SECTION 1. ORDER OF BUSINESS. At all stockholders' and Directors' meetings, the order of business shall be as determined by the presiding ofcer of the meeting. ARTICLE XIV AMENDMENT SECTION 1. AMENDMENT. Except to the extent otherwise provided in this Corporation's Restated Certicate of Incorporation, as amended, these Bylaws shall be subject to alteration, amendment or repeal, and new bylaws may be adopted (i) by the afrmative vote of the holders of not less than a majority of the voting power of all of the outstanding shares of capital stock of this Corporation then entitled to vote generally in the election of Directors, voting together as a single class, at any regular or special meeting of the stockholders (but only if notice of the proposed change be contained in the notice to the stockholders of the proposed action), or (ii) by the afrmative vote of not less than a majority of the members of the Board of Directors at any meeting of the Board of Directors at which there is a quorum present and voting; provided, that in the case of clause (ii), any alteration, amendment or repeal made with respect to, or the adoption of, a new bylaw inconsistent with Article II, Section 2 or Section 6, or Article III, Section 1, Section 2, or Section 5 of this Article XIV, Section 1 of these Bylaws, shall require the afrmative vote of Directors constituting not less than two-thirds of the Full Board (as dened in Article II, Section 2). 14 ARTICLE XV INDEMNIFICATION OF DIRECTORS, OFFICERS,
40 of 52
10/17/11 10:36 PM
EMPLOYEES AND AGENTS; INSURANCE SECTION 1. The Corporation shall indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of this Corporation), by reason of the fact that he is or was a Director or ofcer of this Corporation, is or was serving at the request of this Corporation as a Director, ofcer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, nes and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of this Corporation, and, with respect to any criminal action or proceeding, has no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in, or not opposed to, the best interests of this Corporation, and, with respect to any criminal action or proceeding, has reasonable cause to believe that his conduct was unlawful. SECTION 2. The Corporation shall indemnify any person who was or is a party, or is threatened to be made a party, to any threatened pending or completed action or suit by, or in the right of, this Corporation to procure a judgment in its favor by reason of the fact that he is or was a Director or ofcer of this Corporation, or, while a Director or ofcer of this Corporation, is or was serving at the request of this Corporation as a Director, ofcer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of this Corporation, and except that no indemnication shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to this Corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine, upon application, that despite the adjudication of liability, but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. SECTION 3. The Board of Directors of this Corporation shall have the power, in its discretion, to cause this Corporation to indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding referred to in Sections 1 or 2 of this Article by reason of the fact that (although not a Director or ofcer of this Corporation) he is or was an employee or agent of this Corporation, or is or was serving at the request of this Corporation as a Director, ofcer, employee or agent of 15 another corporation, partnership, joint venture, trust or other enterprise to the extent that any such person would have been entitled to be indemnied under Sections 1 and 2 had he, at all times, been a Director or ofcer of this Corporation. SECTION 4. Any indemnication under Sections 1, 2 or 3 of this Article (unless ordered by a court) shall be made by this Corporation only as authorized in the specic case upon a determination that indemnication of the Director, ofcer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Sections 1 or 2. Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of Directors who were not parties to such action, suit or proceeding, or, (2) if such a quorum is not obtainable, or, even if obtainable, a quorum of disinterested Directors so directs, by independent legal counsel in a written opinion, or (3) by the stockholders. SECTION 5. To the extent that a Director, ofcer, employee or agent has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 1, 2 or 3, or in defense of any claim, issue or matter therein, he shall be indemnied against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. SECTION 6. Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by this Corporation in advance of the nal disposition of such action, suit or proceeding upon receipt of an undertaking by, or on behalf of, the Director, ofcer, employee or agent to repay such amount if it shall ultimately be determined that he is not entitled to be indemnied by this Corporation as authorized in this Article.
41 of 52
10/17/11 10:36 PM
SECTION 7. The indemnication and advancement of expenses provided by, or granted pursuant to, this Article, shall not be deemed exclusive of any other rights to which those seeking indemnication or advancement of expenses may, at any time, be entitled under any bylaw, agreement, vote of stockholders or disinterested Directors, or otherwise, both as to action by a person in his ofcial capacity and as to action in another capacity while holding such ofce. SECTION 8. The Board of Directors shall have power to authorize and direct the purchase and maintenance of insurance on behalf of itself or any person who is or was a Director, ofcer, employee or agent of this Corporation, or is or was serving at the request of this Corporation as a Director, ofcer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not this Corporation would have the power to indemnify him against such liability under the provisions of this Article. SECTION 9. For purposes of this Article XV, reference to "this Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its Directors, ofcers and employees or agents, so that any person who is or was a Director, ofcer, employee or agent 16 of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, ofcer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article XV with respect to the resulting or surviving corporation as he or she would have with respect to such constituent corporation if its separate existence had continued. SECTION 10. For purposes of this Article XV, references to "enterprises" shall include employee benet plans; references to "nes" shall include any excise taxes assessed on a person with respect to an employee benet plan; and references to "serving at the request of this Corporation" shall include any service as a Director, ofcer, employee or agent of this Corporation which imposes duties on, or involves services by, such Director, ofcer, employee or agent with respect to an employee benet plan, its participants or beneciaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneciaries of an employee benet plan shall be deemed to have acted in a manner "not opposed to the best interests of this Corporation" as referred to in this Article XV. SECTION 11. The indemnication and advancement of expenses provided by, or granted pursuant to, this Article, shall, unless otherwise provided when authorized or ratied, continue as to a person who has ceased to be a Director, ofcer, employee or agent, and shall inure to the benet of the executors, administrators and other legal representatives and heirs of such a person. ARTICLE XVI MISCELLANY SECTION 1. The Chief Executive Ofcer or the Board of Directors may designate any order of assignment to apply within any specied group of ofcers where, as provided in these Bylaws, any such designation is to be made as to one or more of such ofcers. In the event that no such designation is made, the order of assignment within any specied group of ofcers will be according to the length of service of each particular ofcer in the specied ofce, with the ofcer serving the longest term within that particular ofce to be assigned rst, and in his or her absence or incapacity, the ofcer serving the next longest term in that particular ofce to be assigned second, and so on.
EXHIBIT 10.10 Kellogg Company Deferred Compensation Plan for Non-Employee Directors KELLOGG COMPANY
42 of 52
10/17/11 10:36 PM
DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS (AS AMENDED AND RESTATED AS OF MAY 21, 1993) The Chairman of the Board of KELLOGG COMPANY (hereinafter referred to as the "Company") a corporation with principal ofce located at One Kellogg Square, Battle Creek, Michigan 49016-3599, does hereby adopt the following amendment and restatement to the Deferred Compensation Plan for Non-Employee Directors: WHEREAS, the Employer maintains a Deferred Compensation Plan for Non-Employee Directors (hereinafter sometimes referred to as the "Plan") for the benet of its Non-Employee Directors, which Plan was last amended and restated effective February 26, 1993; and WHEREAS, under the provisions of Article XIII of the amended and restated Plan, the Employer retained the right to amend the Plan in any and all respects at any time and from time to time; and WHEREAS, the Board of Directors of the Employer, at a meeting duly held on May 21, 1993, authorized its ofcers to amend the Plan to provide for a change in the method of distribution of deferred compensation; NOW, THEREFORE, the premises considered, the Company's Deferred Compensation Plan for Non-Employee Directors is hereby amended, effective May 21, 1993: I. NAME AND PURPOSE. The name of this Plan is the Kellogg Company Deferred Compensation Plan for Non-Employee Directors. Its purpose is to provide non-employee Directors of the Company with an opportunity to defer compensation earned as a Director. II. EFFECTIVE DATE. The Plan was originally effective on August 1, 1986. This amendment and restatement shall be effective May 21, 1993. III. PARTICIPANTS. Any Director of the Company who is not an employee of the Company or of a subsidiary of the Company shall be eligible to participate in the Plan. Any such person who elects to participate in the Plan is hereinafter called a "Participant". The Plan shall establish for each Participant an unfunded deferred compensation account. 2 IV. ELECTION OF DEFERRAL. (A) On or before December 31 of any year during which the Plan is in effect, each Director shall be entitled to make an irrevocable election (in the form of Exhibit A) to defer receipt of all or a specied portion of each component of the Participant's compensation (annual retainer, Committee Chair fees and attendance fees exclusive of expense reimbursement) otherwise payable during the following February 1 to January 31 period for service on the Board of Directors of the Company and its Committees, and for attending meetings of the Board of Directors and Committees of the Board of Directors. Such compensation shall be credited to the Participant's deferred compensation account on the date the compensation is otherwise payable. (B) A newly-elected director may elect to participate in the Plan for the remainder of the calendar year and the month of January of the succeeding year in which such Director joins the Board. Any such election shall be made within one month following the date on which such Director is elected to the Board and shall be effective with respect to compensation allocable to the quarterly period following the date on which such election is made. It shall be made in the same manner as in Section IV(A) above. (C) Each annual election shall include an irrevocable election as to the method by which the amounts deferred are to be distributed in accordance with Section VI, below.
43 of 52
10/17/11 10:36 PM
(D) Such notice shall be delivered to the Company on or before December 31 of the year preceding the rst year to which such election relates, except that notice from newly-elected Directors may be delivered at any time within one month following the date of their election to the Board. The elections set forth in such notice shall be given continuing effect for subsequent years until a new notice specifying a different election shall be delivered to the Company. Any such new notice shall apply only to compensation for years (February 1 through January 31) subsequent to the calendar year in which such new notice is delivered. V. DEFERRED COMPENSATION ACCOUNTS. (A) An account shall be established and maintained for each Participant in the Plan. Units, including fractional Units, shall be credited to each Participant's account to the extent of compensation deferred pursuant to the Plan in accordance with the following procedures: (1) compensation otherwise payable to the Participant, but deferred pursuant to the Plan, arising from payment of quarterly in-advance installments of the annual standard retainer payable to all non-employee members of the Board of Directors, shall be credited to the Participant's account as Units, including fractional Units, with the actual payment date of such installments being February 1, May 1, August 1 and December 1 of each year (or, if any such day is a Saturday, Sunday or legal holiday, the next business day); (2) compensation otherwise payable to the Participant, but deferred pursuant to the Plan, arising from payment of fees 3 attributable to service as the Chairman of any Committee(s) of the Board of Directors, shall be credited to the Participant's account as Units, including fractional Units, on May 1 of each year (or, if any such day is a Saturday, Sunday or legal holiday, the next business day); (3) compensation otherwise payable to the Participant, but deferred pursuant to the Plan, arising from payment of fees attributable to attendance at meetings of the Board of Directors or any Committee(s) of the Board of Directors, shall be credited to the Participant's account as Units, including fractional Units, on the date of each and any such meetings and (4) dividend equivalents earned on the basis of whole Units previously credited to the Participant's account shall be credited to the Participant's account as Units, including fractional Units, on the date any such dividend has been declared to be payable on shares of common stock of the Company by the Board of Directors of the Company. Units, excluding fractional Units, shall earn dividend equivalents from the date of crediting until the date of nal valuation of the Units on the last day of the Participant's service as a Director. Dividend equivalents shall be computed by multiplying the dividend paid per share of common stock of the Company during the period Units are credited to a Participant's account times the number of whole Units so credited, but Units, excluding fractional Units, shall earn such dividend equivalents only as, if and when dividends are declared and paid on the common stock of the Company. (B) Each Unit shall have an initial value and be credited in respect of deferred compensation, equal to one hundred percent (100%) of the fair market value of one share of the common stock of the Company on the date, as hereinabove provided, of crediting to the Participant's account. The fair market value per Unit shall be the average between the highest and lowest quoted selling price per share of common stock on the New York Stock Exchange Corporate Transactions Tape. If there should be no sale of the shares of common stock of the Company on such date, then the price per share shall be the average between the highest and lowest quoted selling price on the Corporate Tape on the next preceding day on which there shall have been a sale. VI. METHOD OF DISTRIBUTION OF DEFERRED COMPENSATION - UNFORESEEABLE EMERGENCY. (A) No distribution of deferred compensation may be made except as provided in this Section VI. (B) The nal value of said Units, including fractional Units, shall be computed in accordance with the provisions of the second and third sentences of Section V(B) and determined on and as of the last day of a Participant's service as a Director. The value of Units, including fractional Units, credited to a Participant's deferred compensation account for each year shall be payable only in cash, either in a lump sum or in up to ten annual installments. Payment of the lump sum or the rst annual installment shall be made or shall commence, as the case may be, as soon as practicable, but not later than fteen (15) days following the date on which the Participant's service as a Director terminates. If annual installments
44 of 52
10/17/11 10:36 PM
4 are elected for any year, the amount of the rst payment shall be a fraction of the amount of the Participant's deferred compensation account for such year as of the last day of a Participant's Service as a Director, the numerator of which is one and the denominator of which is the total number of installments elected. The amount of each subsequent payment shall be a fraction of the amount as of December 31 of the year preceding each subsequent payment, the numerator of which is one and the denominator of which is the total number of installments elected minus the number of installments previously paid. (C) Each distribution of deferred compensation, subsequent to the rst distribution, in annual installments, shall be made on January 10 (or, if that date is a Saturday, Sunday or holiday, the next business day) of the year, or years, as the case may be, of distribution. (D) At the written request of a Participant, the Plan's Administrative Committee, in its sole discretion, may authorize the cessation of deferrals by such Participant under the Plan or accelerate payment of any installments at any time after the sixth month following such Participant's termination of service as a Director, upon a showing of unforeseeable emergency by such Participant. If the Administrative Committee authorizes any such distribution, valuation of the Units to be distributed shall be determined on the date of such authorization in accordance with the second and third sentences of paragraph VI(B). For purposes of this paragraph, "unforeseeable emergency" is dened as severe nancial hardship resulting from extraordinary and unanticipated circumstances arising as a result of one or more recent events beyond the control of the Participant. In any event, payment may not be made to the extent such emergency is or may be relieved: (1) through reimbursement or compensation by insurance or otherwise; (2) by liquidation of the Participant's assets, to the extent the liquidation of such assets would not, itself, cause severe nancial hardship; and (3) by cessation of deferrals under the Plan. Examples of what are not considered to be unforeseeable emergencies include the need to send a Participant's child to college or the desire to purchase a home. (E) The account will be credited with dividend equivalents in accordance with the Plan up to the date of hardship distribution on account of an unforeseeable emergency, or the last date of the Participant's service as a Director, whichever rst occurs. (F) Interest shall accrue and be payable each succeeding January 10 (or, if that date is a Saturday, Sunday or holiday, the next business day), on and with respect to the total amount credited to a Participant's account on and as of the nal valuation of said account on each Participant's last day of service as a Director through the date of initial distribution and until the subsequent January 10 (or, if that date is a Saturday, Sunday or holiday, the next business day) on the total amount less the initial distribution. Such interest shall accrue at the prime corporate rate in effect (at Morgan Guaranty, New York City) on the last day of service. Regardless, if the Participant receives a lump sum distribution, such lump sum distribution shall, include the interest accrued through such date. Thereafter, 5 interest will accrue on remaining principal amounts at the prime corporate rate in effect (at Morgan Guaranty, New York City) on January 10 of each succeeding year, and be payable in full on each immediately following January 10 (or, in each case, if such date is a Saturday, Sunday or holiday, the next business day) until all principal amounts in the Participant's account have been paid in accordance with his or her election regarding lump sum or installment payments of deferred amounts. VII. DISTRIBUTION UPON DEATH. If any Participant dies while a Director, or thereafter, before receiving all amounts credited to his or her account, the unpaid amount in the Participant's account shall be paid in one lump sum on the last business day of the month following the month of death to any beneciary or beneciaries designated by the Participant by written notice to the Company or, in the absence of such designation, to such Participant's estate. VIII. PARTICIPANT'S RIGHTS IN ACCOUNT - UNFUNDED STATUS OF THE PLAN. A Participant shall not have any interest in any amounts credited to his or her account until it is distributed in accordance with the Plan. Any and all cash payments made to a Participant pursuant to the Plan shall be made only from the general assets of the Company. All amounts deferred under the Plan shall remain the sole property of the
45 of 52
10/17/11 10:36 PM
Company, subject to the claims of its general creditors and available for its use for whatever purposes are desired. With respect to amounts deferred, a Participant is merely a general creditor of the Company; and the obligation of the Company hereunder is purely contractual and shall not be funded or secured in any way. IX. NON-ALIENABILITY AND NON-TRANSFERABILITY. The rights of a Participant to the payment of deferred compensation as provided in the Plan shall not be assigned, transferred, pledged or encumbered or be subject in any manner to alienation or anticipation. No Participant may borrow against Units or fractional Units. No Units or fractional Units shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, change, garnishment, execution or levy of any kind, whether voluntary or involuntary prior to distribution of deferred compensation in accordance with Section VI. X. STATEMENT OF ACCOUNT. Statements will be sent to Participants during February of each year as to the balance in their deferred compensation accounts as of the end of the previous calendar year. XI. ADMINISTRATION. The Administrator of this Plan shall be the Administrative Committee. The Plan's Administrative Committee, shall consist of up to (but may be less than) three (3) persons who are not and cannot be Participants in the Plan and who shall be Directors of the Company. The Administrative Committee shall be appointed annually by, and may 6 include the Chief Executive Ofcer of the Company. The Administrative Committee shall have authority to adopt rules and regulations for carrying out the Plan and to interpret, construe and implement the provisions thereof. XII. AMENDMENT AND TERMINATION. The Plan may, at any time, be amended, modied or terminated by the Board of Directors or the Executive Committee of the Company. No amendment, modication or termination shall, without the consent of a Participant, adversely affect such Participant's rights with respect to amounts accrued in his or her deferred compensation account. XIII. NOTICES. All notices to the Company hereunder shall be delivered to the attention of the Secretary of the Company. XIV. ADJUSTMENTS. If any change is made in the stock from which Units, including fractional Units, in the Plan are derived, whether through merger, consolidation, reorganization, recapitalization, stock dividend, split-up, combination of shares, change in corporate structure or otherwise, the Administrative Committee, in its sole discretion, may make appropriate adjustments in the number and value of outstanding Units, or fractional Units. The decision of the Administrative Committee as to whether to make any such adjustments, and their amount and timing, if made, shall be conclusive.
EXHIBIT 23.01
Consent of Price Waterhouse Exhibit 23.01
46 of 52
10/17/11 10:36 PM
CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statements on Form S-3 (nos. 33-20731, 33-38846 and 33-49875) and the Registration Statements on Form S-8 (nos. 2-77316, 33-27293, 33-27294 and 33-40651) of Kellogg Company of our report dated February 4, 1994 which appears on page F-3 of this Form 10-K. We also consent to the incorporation by reference in the Registration Statement on Form S-8 (no. 33-27294) of our report dated March 18, 1994 which appears on page 1 of Exhibit 99.01 of this Form 10-K and to the incorporation by reference in the Registration Statement on Form S-8 (no. 33-27293) of our report dated March 18, 1994 which appears on page 1 of Exhibit 99.02 of this Form 10-K. PRICE WATERHOUSE Battle Creek, Michigan March 25, 1994
EXHIBIT 24.01 Powers of Attorney authorizing Richard M. Clark to execute the Company's Form 10-K Annual Report for 1993 on behalf of the Board of Directors, and each of them
POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg Company, a Delaware corporation, hereby appoint Richard M. Clark, Senior Vice President, General Counsel and Secretary of Kellogg Company, as my lawful attorney-in-fact and agent, to act on my behalf, with full power of substitution, in preparing, executing and ling the Company's Annual Report on Form 10-K for scal year ended December 31, 1993, and any exhibits, amendments and other documents related thereto, with the Securities and Exchange Commission. Said ling shall be for the purpose of fullling applicable legal requirements. Whereupon, I grant unto said Richard M. Clark full power and authority to perform all necessary and appropriate acts in connection therewith, and hereby ratify and conrm all that said attorney-in-fact and agent, or his substitute, may lawfully do, or cause to be done, by virtue hereof.
/s/ Norman A. Brown Norman A. Brown Director
Dated: Jan 28 1994 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg Company, a Delaware corporation, hereby appoint Richard M. Clark, Senior Vice President, General Counsel and Secretary of Kellogg Company, as my lawful attorney-in-fact and agent, to act on my behalf, with full power of substitution, in preparing, executing and ling the Company's Annual Report on Form 10-K for scal year ended December 31, 1993, and any exhibits, amendments and other documents related thereto, with the Securities and Exchange Commission. Said ling shall be for the purpose of fullling applicable legal requirements. Whereupon, I grant unto said Richard M. Clark full power and authority to perform all necessary and appropriate acts in connection therewith, and hereby ratify and conrm all that said attorney-in-fact and agent, or his substitute, may lawfully do, or cause to be done, by virtue hereof.
47 of 52
10/17/11 10:36 PM
/s/ Charles W. Elliott Charles W. Elliott Director
/s/ Claudio X. Gonzalez Claudio X. Gonzalez Director
/s/ Gordon Gund Gordon Gund Director
Dated: Jan 26 1994 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg Company, a Delaware corporation, hereby appoint Richard M. Clark, Senior Vice President, General Counsel and Secretary of Kellogg Company, as my lawful attorney-in-fact and agent, to act on my behalf, with full power of substitution, in preparing, executing and ling the Company's Annual Report on Form 10-K for scal year ended December 31, 1993, and any exhibits, amendments and other documents related thereto, with the Securities and Exchange Commission. Said
48 of 52
10/17/11 10:36 PM
ling shall be for the purpose of fullling applicable legal requirements. Whereupon, I grant unto said Richard M. Clark full power and authority to perform all necessary and appropriate acts in connection therewith, and hereby ratify and conrm all that said attorney-in-fact and agent, or his substitute, may lawfully do, or cause to be done, by virtue hereof.
/s/ W. E. LaMothe W. E. LaMothe Director
/s/ A. G. Langbo A. G. Langbo Director
/s/ Russell G. Mawby Russell G. Mawby Director
Dated: Jan 26 1994 POWER OF ATTORNEY
49 of 52
10/17/11 10:36 PM
KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg Company, a Delaware corporation, hereby appoint Richard M. Clark, Senior Vice President, General Counsel and Secretary of Kellogg Company, as my lawful attorney-in-fact and agent, to act on my behalf, with full power of substitution, in preparing, executing and ling the Company's Annual Report on Form 10-K for scal year ended December 31, 1993, and any exhibits, amendments and other documents related thereto, with the Securities and Exchange Commission. Said ling shall be for the purpose of fullling applicable legal requirements. Whereupon, I grant unto said Richard M. Clark full power and authority to perform all necessary and appropriate acts in connection therewith, and hereby ratify and conrm all that said attorney-in-fact and agent, or his substitute, may lawfully do, or cause to be done, by virtue hereof.
/s/ Ann McLaughlin Ann McLaughlin Director
/s/ J. Richard Munro J. Richard Munro Director
Dated: Jan 27 1994 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg Company, a Delaware corporation, hereby appoint Richard M. Clark, Senior Vice President, General Counsel and Secretary of Kellogg Company, as my lawful attorney-in-fact and agent, to act on my behalf, with full power of substitution, in preparing, executing and ling the Company's Annual Report on Form 10-K for scal year ended December 31, 1993, and any exhibits, amendments and other documents related thereto, with the Securities and Exchange Commission. Said ling shall be for the purpose of fullling applicable legal requirements. Whereupon, I grant unto said Richard M. Clark full power and authority to perform all necessary and appropriate acts in connection therewith, and hereby ratify and conrm all that said attorney-in-fact and agent, or his substitute, may lawfully do, or cause to be done, by virtue hereof. Dated: Jan 26 1994
/s/ Harold A. Poling Harold A. Poling Director
POWER OF ATTORNEY
50 of 52
10/17/11 10:36 PM
KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg Company, a Delaware corporation, hereby appoint Richard M. Clark, Senior Vice President, General Counsel and Secretary of Kellogg Company, as my lawful attorney-in-fact and agent, to act on my behalf, with full power of substitution, in preparing, executing and ling the Company's Annual Report on Form 10-K for scal year ended December 31, 1993, and any exhibits, amendments and other documents related thereto, with the Securities and Exchange Commission. Said ling shall be for the purpose of fullling applicable legal requirements. Whereupon, I grant unto said Richard M. Clark full power and authority to perform all necessary and appropriate acts in connection therewith, and hereby ratify and conrm all that said attorney-in-fact and agent, or his substitute, may lawfully do, or cause to be done, by virtue hereof.
/s/ Donald Rumsfeld Donald Rumsfeld Director
/s/ Timothy P. Smucker Timothy P. Smucker Director
Dated: Jan 26 1994 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned Director of Kellogg Company, a Delaware corporation, hereby appoint Richard M. Clark, Senior Vice President, General Counsel and Secretary of Kellogg Company, as my lawful attorney-in-fact and agent, to act on my behalf, with full power of substitution, in preparing, executing and ling the Company's Annual Report on Form 10-K for scal year ended December 31, 1993, and any exhibits, amendments and other documents related thereto, with the Securities and Exchange Commission. Said ling shall be for the purpose of fullling applicable legal requirements. Whereupon, I grant unto said Richard M. Clark full power and authority to perform all necessary and appropriate acts in connection therewith, and hereby ratify and conrm all that said attorney-in-fact and agent, or his substitute, may lawfully do, or cause to be done, by virtue hereof. Dated: Feb 1 1994
/s/ Dolores D. Wharton Dolores D. Wharton Director
51 of 52
10/17/11 10:36 PM
EXHIBIT 99.01 Kellogg Company American Federation of Grain Millers Savings and Investment Plan Form 11-K Annual Report for the scal year ended October 31, 1993 KELLOGG COMPANY AMERICAN FEDERATION OF GRAIN MILLERS SAVINGS AND INVESTMENT PLAN FINANCIAL STATEMENTS AND SCHEDULES OCTOBER 31, 1993 FILED UNDER FORM SE
EXHIBIT 99.02 Kellogg Company Salaried Savings and Investment Plan Form 11-K Annual Report for the scal year ended October 31, 1993 KELLOGG COMPANY SALARIED SAVINGS AND INVESTMENT PLAN FINANCIAL STATEMENTS AND SCHEDULES OCTOBER 31, 1993 FILED UNDER FORM SE
52 of 52
10/17/11 10:36 PM

Kellogg&#39;s Company - Annual Report 1993

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Kellogg&#39;s Company - Annual Report 1993

Uploaded by

Copyright:

Available Formats

Kellogg's Company - Annual Report

SECURITIES AND EXCHANGE COMMISSION

Securities registered pursuant to Section 12(b) of the Act: