Kellogg (K) 10-K 26 Feb 10 2010 FY Annual report Financial data

CONSOLIDATED STATEMENT OF INCOM

CONSOLIDATED STATEMENT OF INCOME (USD $)
In Millions, except Per Share data	12 Months Ended Jan. 02, 2010	12 Months Ended Jan. 03, 2009	12 Months Ended Dec. 29, 2007
Net sales	$12,575	$12,822	$11,776
Cost of goods sold	7,184	7,455	6,597
Selling, general and administrative expense	3,390	3,414	3,311
Operating profit	2,001	1,953	1,868
Interest expense	295	308	319
Other income (expense), net	(22)	(14)	(3)
Income before income taxes	1,684	1,631	1,546
Income taxes	476	485	444
Net income	1,208	1,146	1,102
Net loss attributable to noncontrolling interests	(4)	(2)	(1)
Net income attributable to Kellogg Company	$1,212	$1,148	$1,103
Per share amounts:
Basic	3.17	3.01	2.79
Diluted	3.16	2.99	2.76
Dividends per share	1.43	1.3	1.202

CONSOLIDATED BALANCE SHEET

CONSOLIDATED BALANCE SHEET (USD $)
In Millions	Jan. 02, 2010	Jan. 03, 2009
Current assets
Cash and cash equivalents	$334	$255
Accounts receivable, net	1,093	1,100
Inventories	910	897
Other current assets	221	269
Total current assets	2,558	2,521
Property, net	3,010	2,933
Goodwill	3,643	3,637
Other intangibles, net	1,458	1,461
Other assets	531	394
Total assets	11,200	10,946
Current liabilities
Current maturities of long-term debt	1	1
Notes payable	44	1,387
Accounts payable	1,077	1,135
Other current liabilities	1,166	1,029
Total current liabilities	2,288	3,552
Long-term debt	4,835	4,068
Deferred income taxes	425	300
Pension liability	430	631
Other liabilities	947	940
Equity
Common stock, $.25 par value, 1,000,000,000 shares authorized Issued: 419,058,168 shares in 2009 and 418,842,707 shares in 2008	105	105
Capital in excess of par value	472	438
Retained earnings	5,481	4,836
Treasury stock at cost 37,678,215 shares in 2009 and 36,981,580 shares in 2008	(1,820)	(1,790)
Accumulated other comprehensive income (loss)	(1,966)	(2,141)
Total Kellogg Company equity	2,272	1,448
Noncontrolling interests	3	7
Total equity	2,275	1,455
Total liabilities and equity	$11,200	$10,946

CONSOLIDATED BALANCE SHEET (Par

CONSOLIDATED BALANCE SHEET (Parenthetical) (USD $)
	Jan. 02, 2010	Jan. 03, 2009
Common stock, par value per share	0.25	0.25
Common stock, shares authorized	1,000,000,000	1,000,000,000
Common stock, Issued	419,058,168	418,842,707
Treasury stock at cost, shares	37,678,215	36,981,580

CONSOLIDATED STATEMENT OF SHARE

CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY (USD $)
In Millions	Common stock	Capital in excess of par value	Retained earnings	Treasury stock	Accumulated other comprehensive income (loss)	Total Kellogg Company equity	Non- controlling interests		Total comprehensive income (loss)	Total
Beginning Balance at Dec. 30, 2006	$105	$292	$3,630	($912)	($1,046)	$2,069	$3	[1]	$1,126	$2,072
Beginning Balance (in shares) at Dec. 30, 2006	419			21
Impact of adoption of accounting standard for uncertain tax positions			2			2				2
Common stock repurchases (in shares)				12
Common stock repurchases				(650)		(650)				(650)
Net income (loss)			1,103			1,103	(1)	[1]	1,102	1,102
Dividends			(475)			(475)				(475)
Other comprehensive income (loss)					219	219			219	219
Stock compensation		69				69				69
Stock options exercised and other (in shares)				(4)
Stock options exercised and other		27	(43)	205		189				189
Ending Balance (in shares) at Dec. 29, 2007	419			29
Ending Balance at Dec. 29, 2007	105	388	4,217	(1,357)	(827)	2,526	2	[1]	1,321	2,528
Common stock repurchases (in shares)				13
Common stock repurchases				(650)		(650)				(650)
Business acquisitions							7	[1]		7
Net income (loss)			1,148			1,148	(2)	[1]	1,146	1,146
Dividends			(495)			(495)				(495)
Other comprehensive income (loss)					(1,314)	(1,314)			(1,314)	(1,314)
Stock compensation		51				51				51
Stock options exercised and other (in shares)				(5)
Stock options exercised and other		(1)	(34)	217		182				182
Ending Balance (in shares) at Jan. 03, 2009	419			37
Ending Balance at Jan. 03, 2009	105	438	4,836	(1,790)	(2,141)	1,448	7	[1]	(168)	1,455
Common stock repurchases (in shares)				4
Common stock repurchases				(187)		(187)				(187)
Net income (loss)			1,212			1,212	(4)	[1]	1,208	1,208
Dividends			(546)			(546)				(546)
Other comprehensive income (loss)					175	175			175	175
Stock compensation		37				37				37
Stock options exercised and other (in shares)				(3)
Stock options exercised and other		(3)	(21)	157		133				133
Ending Balance (in shares) at Jan. 02, 2010	419			38
Ending Balance at Jan. 02, 2010	$105	$472	$5,481	($1,820)	($1,966)	$2,272	$3	[1]	$1,383	$2,275
[1]Refer to Note 1 for further information.

CONSOLIDATED STATEMENT OF CASH

CONSOLIDATED STATEMENT OF CASH FLOWS (USD $)
In Millions	12 Months Ended Jan. 02, 2010	12 Months Ended Jan. 03, 2009	12 Months Ended Dec. 29, 2007
Operating activities
Net income	$1,208	$1,146	$1,102
Adjustments to reconcile net income to operating cash flows:
Depreciation and amortization	384	375	372
Deferred income taxes	(40)	157	(69)
Other	13	121	184
Pension and other postretirement benefit contributions	(100)	(451)	(96)
Changes in operating assets and liabilities:
Trade receivables	(75)	48	(63)
Inventories	(13)	41	(88)
Accounts payable	(59)	32	167
Accrued income taxes	112	(85)	(67)
Accrued interest expense	(5)	3	(1)
Accrued and prepaid advertising, promotion and trade allowances	91	(10)	36
Accrued salaries and wages	21	(45)	5
Exit plan-related reserves	21	(2)	(9)
All other current assets and liabilities	85	(63)	30
Net cash provided by operating activities	1,643	1,267	1,503
Investing activities
Additions to properties	(377)	(461)	(472)
Acquisitions of businesses, net of cash acquired	0	(213)	(128)
Other	7	(7)	(1)
Net cash used in investing activities	(370)	(681)	(601)
Financing activities
Net increase (reduction) of notes payable, with maturities less than or equal to 90 days	(1,284)	23	625
Issuances of notes payable, with maturities greater than 90 days	10	190	804
Reductions of notes payable, with maturities greater than 90 days	(70)	(316)	(1,209)
Issuances of long-term debt	1,241	756	750
Reductions of long-term debt	(482)	(468)	(802)
Net issuances of common stock	131	175	163
Common stock repurchases	(187)	(650)	(650)
Cash dividends	(546)	(495)	(475)
Other	5	5	6
Net cash used in financing activities	(1,182)	(780)	(788)
Effect of exchange rate changes on cash and cash equivalents	(12)	(75)	(1)
Increase (decrease) in cash and cash equivalents	79	(269)	113
Cash and cash equivalents at beginning of year	255	524	411
Cash and cash equivalents at end of year	$334	$255	$524

ACCOUNTING POLICIES

ACCOUNTING POLICIES
	12 Months Ended Jan. 02, 2010 USD / shares
ACCOUNTING POLICIES	NOTE1 ACCOUNTING POLICIES Basis of presentation The consolidated financial statements include the accounts of Kellogg Company and its majority-owned subsidiaries (Kellogg or the Company). Intercompany balances and transactions are eliminated. The Companys fiscal year normally ends on the Saturday closest to December31 and as a result, a 53rdweek is added approximately every sixth year. The Companys 2009 and 2007 fiscal years each contained 52weeks and ended on January2, 2010 and December29, 2007, respectively. The Companys 2008 fiscal year ended on January3, 2009, and included a 53rdweek. While quarters normally consist of 13-week periods, the fourth quarter of fiscal 2008 included a 14th week. Use of estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods reported. Actual results could differ from those estimates. Cash and cash equivalents Highly liquid investments with original maturities of three months or less are considered to be cash equivalents. Accounts receivable Accounts receivable consists principally of trade receivables, which are recorded at the invoiced amount, net of allowances for doubtful accounts and prompt payment discounts. Trade receivables do not bear interest. The allowance for doubtful accounts represents managements estimate of the amount of probable credit losses in existing accounts receivable, as determined from a review of past due balances and other specific account data. Account balances are written off against the allowance when management determines the receivable is uncollectible. The Company does not have off-balance sheet credit exposure related to its customers. Inventories Inventories are valued at the lower of cost or market. Cost is determined on an average cost basis. Property The Companys property consists mainly of plants and equipment used for manufacturing activities. These assets are recorded at cost and depreciated over estimated useful lives using straight-line methods for financial reporting and accelerated methods, where permitted, for tax reporting. Major property categories are depreciated over various periods as follows (in years): manufacturing machinery and equipment 5-20; computer and other office equipment 3-5; building components 15-30; building structures 50. Cost includes interest associated with significant capital projects. Plant and equipment are reviewed for impairment when conditions indicate that the carrying value may not be recoverable. Such conditions include an extended period of idleness or a plan of disposal. Assets to be disposed of at a future date are depreciated over the remaining period of use. Assets to be sold are written down to realizable value at the time the assets are being actively marketed for sale and a sale is expected to occur within one year. As of year-end 2009 and 2008, the ca

ACQUISITIONS, GOODWILL AND OTHE

ACQUISITIONS, GOODWILL AND OTHER INTANGIBLE ASSETS
	12 Months Ended Jan. 02, 2010 USD / shares
ACQUISITIONS, GOODWILL AND OTHER INTANGIBLE ASSETS	NOTE2 ACQUISITIONS, GOODWILL AND OTHER INTANGIBLE ASSETS Acquisitions During 2008 and 2007, the Company made acquisitions in order to expand its presence geographically and increase its manufacturing capacity. Assets, liabilities, and results of operations of the acquired businesses have been included in the Companys consolidated financial statements beginning on the dates of acquisition; such amounts were insignificant to the Companys consolidated financial position and results of operations. In addition, the pro forma effect of these acquisitions on the Companys results of operations, as though these business combinations had been completed at the beginning of 2007, would have been immaterial when considered individually or in the aggregate. Specialty Cereals.In September 2008, the Company acquired Specialty Cereals of Sydney, Australia, a manufacturer and distributor of natural ready-to-eat cereals. The Company paid $37million cash in connection with the transaction, including approximately $5million to the sellers lenders to settle debt of the acquired entity. Assets acquired consisted primarily of property, plant and equipment of $19million and goodwill of $18million (which will not be deductible for income tax purposes). This acquisition has been included in the Asia Pacific operating segment. IndyBake Products/Brownie Products.In August 2008, the Company acquired certain assets and liabilities of the business of IndyBake Products and Brownie Products (collectively, IndyBake), located in Indiana and Illinois. IndyBake, a contract manufacturing business that produced cracker, cookie and frozen dough products, had been a partner to Kellogg for many years as a snacks contract manufacturer. The Company paid approximately $42million in cash in connection with the transaction, including approximately $8million to the sellers lenders. Assets acquired consisted primarily of property, plant and equipment of $12million and goodwill of $25million (which will be deductible for income tax purposes). Other assets acquired amounted to $5million, net of other liabilities acquired. This acquisition has been included in the North America operating segment. Navigable Foods.In June 2008, the Company acquired a majority interest in the business of Zhenghang Food Company Ltd. (Navigable Foods) for approximately $36million (net of cash received). Navigable Foods, a manufacturer of cookies and crackers in the northern and northeastern regions of China, included approximately 1,800employees, two manufacturing facilities and a sales and distribution network. During 2008, the Company paid a total of $31million in connection with the acquisition, including approximately $22million to lenders and other third parties to settle debt and other obligations of the acquired entity. Assets acquired consisted primarily of property, plant and equipment of $23million and goodwill of $19million (which will be deductible for income tax purposes). Other liabilities acquired amounted to $6million, net of other assets acquired. Additional purchase price payable in June 2011 amounted to $5 million and was recorded on the Companys Consolidated Balance Sheet in

EXIT OR DISPOSAL ACTIVITIES

EXIT OR DISPOSAL ACTIVITIES
	12 Months Ended Jan. 02, 2010 USD / shares
EXIT OR DISPOSAL ACTIVITIES	NOTE3 EXIT OR DISPOSAL ACTIVITIES The Company views its continued spending on cost-reduction initiatives as part of its ongoing operating principles to provide greater visibility in achieving its long-term profit growth targets. Initiatives undertaken are currently expected to recover cash implementation costs within a five-year period of completion. Upon completion (or as each major stage is completed in the case of multi-year programs), the project begins to deliver cash savings and/or reduced depreciation. Cost summary During 2009, the Company recorded $65 million of costs associated with exit or disposal activities. $44 million represented severance and other cash costs, $3 million was for pension costs, $6 million for asset write offs, and $12 million for other costs including relocation of assets and employees. $40 million of the charges were recorded in cost of goods sold (COGS) in the following operating segments (in millions): North America$14; Europe$16; Latin America$9; and Asia Pacific$1. $25 million of the charges were recorded in selling, general and administrative (SGA) expense in the following operating segments (in millions): North America$10; Europe$13; Latin America$1; and Asia Pacific$1. The Company recorded $27million of costs in 2008 associated with exit or disposal activities comprised of $7million of asset write offs, $17million of severance and other cash costs and $3million related to pension costs. $23million of the 2008 charges were recorded in COGS within the Europe operating segment, with the balance recorded in SGA expense in the Latin America operating segment. For 2007, the Company recorded charges of $100million, comprised of $7million of asset write- offs, $72million for severance and other exit costs including route franchise settlements, $15million for other cash expenditures, and $6million for a multiemployer pension plan withdrawal liability. $23million of the total 2007 charges were recorded in COGS within the Europe operating segment results, with $77million recorded in SGA expense within the North America operating results. At January2, 2010, exit cost reserves were $25 million, related to severance payments which will be made in 2010. Exit cost reserves at January3, 2009 were $2million related to severance payments. Specific initiatives 2009 activities During 2009, the Company incurred costs related to plans which will result in COGS and SGA expense savings. The COGS programs are Kelloggs lean, efficient, and agile network (K LEAN), a European manufacturing optimization in Bremen, Germany and a supply chain network rationalization in Latin America. The SGA programs focus on the efficiency and effectiveness of various support functions. K LEAN seeks to optimize the Companys global manufacturing network, reduce waste, develop best practices on a global basis and reduce capital expenditures. The Company incurred $24 million of costs for 2009 and expects to incur an additional $14 million in 2010. The charges are primarily for cash payments for severance and other cash costs for asset removal and relocation at various global manufacturing facilities. The above costs impacted oper

EQUITY

EQUITY
	12 Months Ended Jan. 02, 2010 USD / shares
EQUITY	NOTE4 EQUITY Earnings per share Basic net earnings per share is determined by dividing net income attributable to Kellogg Company by the weighted-average number of common shares outstanding during the period. Diluted net earnings per share is similarly determined, except that the denominator is increased to include the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued. Dilutive potential common shares are comprised principally of employee stock options issued by the Company. The total number of anti-dilutive potential common shares excluded from the reconciliation for each period was (in millions): 200912.2; 20082.6; 20070.8. Basic net earnings per share is reconciled to diluted net earnings per share in the following table: (millions, except per share data) Net income attributable to Kellogg Company Average shares outstanding Net earnings per share 2009 Basic $ 1,212 382 $ 3.17 Dilutive potential common shares 2 (.01 ) Diluted $ 1,212 384 $ 3.16 2008 Basic $ 1,148 382 $ 3.01 Dilutive potential common shares 3 (.02 ) Diluted $ 1,148 385 $ 2.99 2007 Basic $ 1,103 396 $ 2.79 Dilutive potential common shares 4 (.03 ) Diluted $ 1,103 400 $ 2.76 Stock transactions The Company issues shares to employees and directors under various equity-based compensation and stock purchase programs, as further discussed in Note7. The number of shares issued during the periods presented was (in millions): 20093; 20085; 20074. The Company issued shares totaling less than one million in each of the years presented under Kellogg DirectTM, a direct stock purchase and dividend reinvestment plan for U.S.shareholders. The Board of Directors authorized stock repurchases of up to $650 million for 2009. During 2009, the Company spent $187 million to purchase approximately 4million shares of common stock. The unused portion of the 2009 authorization, amounting to $463 million, was rolled over and is available to be executed in 2010. The Board of Directors has authorized an additional stock repurchase program of up to $650 million for 2010. During 2008 and 2007, the Company repurchased $650million of common stock each year under programs authorized by its Board of Directors. The number of shares repurchased amounted to approximately 13million and 12million shares, respectively, in 2008 and 2007. Comprehensive income Comprehensive income includes net income and all other changes in equity during a period except those resulting from investments by or distributions to shareholders. Other comprehensive income for the periods presented consists of foreign currency translation adjustments, unrealized gains and losses on cash flow hedges and adjustments for net experience losses and prior service cost associated with defined benefit pension and other postretirement plans. During 2008, the assets of the Companys postretirement and postemployment benefit pl

LEASES AND OTHER COMMITMENTS

LEASES AND OTHER COMMITMENTS
	12 Months Ended Jan. 02, 2010 USD / shares
LEASES AND OTHER COMMITMENTS	NOTE5 LEASES AND OTHER COMMITMENTS The Companys leases are generally for equipment and warehouse space. Rent expense on all operating leases was (in millions): 2009-$150; 2008-$145; 2007-$135. During 2008 and 2007, the Company entered into approximately $3million and $5million, respectively, in capital lease agreements to finance the purchase of equipment. The Company did not enter into any capital lease agreements during 2009. At January2, 2010, future minimum annual lease commitments under noncancelable operating and capital leases were as follows: (millions) Operating leases Capital leases 2010 $ 141 $ 2 2011 122 1 2012 91 1 2013 66 1 2014 51 2015 and beyond 133 1 Total minimum payments $ 604 $ 6 Amount representing interest (1 ) Obligations under capital leases 5 Obligations due within one year (2 ) Long-term obligations under capital leases $ 3 The Company has provided various standard indemnifications in agreements to sell and purchase business assets and lease facilities over the past several years, related primarily to pre-existing tax, environmental, and employee benefit obligations. Certain of these indemnifications are limited by agreement in either amount and/or term and others are unlimited. The Company has also provided various hold harmless provisions within certain service type agreements. Because the Company is not currently aware of any actual exposures associated with these indemnifications, management is unable to estimate the maximum potential future payments to be made. At January2, 2010, the Company had not recorded any liability related to these indemnifications.

DEBT

DEBT
	12 Months Ended Jan. 02, 2010 USD / shares
DEBT	NOTE6 DEBT The following table presents the components of notes payable at year end 2009 and 2008: (dollars in millions) 2009 2008 Principal amount Effective interest rate Principal amount Effective interest rate U.S. commercial paper $ $ 1,272 4.1% Canadian commercial paper 38 2.8% Other 44 77 $ 44 $ 1,387 Long-term debt at year end consisted primarily of issuances of fixed rate U.S.Dollar Notes, as follows: (millions) 2009 2008 (a) 7.45% U.S.Dollar Debentures due 2031 $ 1,089 $ 1,089 (a) 6.6% U.S.Dollar Notes due 2011 951 1,426 (b) 5.125% U.S.Dollar Notes due 2012 749 749 (c) 4.25% U.S.Dollar Notes due 2013 787 792 (d) 4.45% U.S.Dollar Notes due 2016 748 (e) 4.15% U.S.Dollar Notes due 2019 498 Other 14 13 4,836 4,069 Less current maturities (1 ) (1 ) Balance at year end $ 4,835 $ 4,068 (a) In March 2001, the Company issued $4.6billion of long-term debt instruments, primarily to finance the acquisition of Keebler Foods Company. The preceding table reflects the remaining principal amounts outstanding as of year-end 2009 and 2008. The effective interest rates on these Notes, reflecting issuance discount and swap settlement, were as follows: due 2011-7.08%; due 2031-7.62%. Initially, these instruments were privately placed, or sold outside the United States, in reliance on exemptions from registration under the Securities Act of 1933, as amended (the 1933Act). The Company then exchanged new debt securities for these initial debt instruments, with the new debt securities being substantially identical in all respects to the initial debt instruments, except for being registered under the 1933Act. These debt securities contain standard events of default and covenants. The Notes due 2011 and the Debentures due 2031may be redeemed in whole or in part by the Company at any time at prices determined under a formula (but not less than 100% of the principal amount plus unpaid interest to the redemption date). The Company redeemed $72 million of the Notes due 2011 in December 2007, and another $482 million in December 2009. The Company incurred $35 million of interest expense and $3 million of accelerated losses on interest rate swaps previously recorded in accumulated other comprehensive income in connection with the 2009 tender offer. In May 2009, the Company entered into interest rate swaps with notional amounts totaling $400 million, which effectively converted a portion of the Notes due 2011 from a fixed rate to a floating rate obligation for the remainder of the ten-year term. These derivative instruments, which were designated as fair value hedges of the debt obligation, resulted in an effective interest rate of 5.78% as of January2, 2010 on the portion of the debt related to the interest rate swaps. The fair value adjustment for the interest rate swaps was $6million, and was recorded as an increase in the hedged debt balance at January2, 2010. (b)

STOCK COMPENSATION

STOCK COMPENSATION
	12 Months Ended Jan. 02, 2010 USD / shares
STOCK COMPENSATION	NOTE7 STOCK COMPENSATION The Company uses various equity-based compensation programs to provide long-term performance incentives for its global workforce. Currently, these incentives consist principally of stock options, and to a lesser extent, executive performance shares and restricted stock grants. The Company also sponsors a discounted stock purchase plan in the United States and matching-grant programs in several international locations. Additionally, the Company awards restricted stock to its outside directors. These awards are administered through several plans, as described within this Note. The 2009 Long-Term Incentive Plan (2009 Plan), approved by shareholders in 2009, permits awards to employees and officers in the form of incentive and non-qualified stock options, performance units, restricted stock or restricted stock units, and stock appreciation rights. The 2009 Plan, which replaced the 2003 Long-Term Incentive Plan (2003 Plan), authorizes the issuance of a total of (a)27million shares; plus (b)the total number of shares as to which awards granted under the 2009 Plan or the 2003 or 2001 Incentive Plans expire or are forfeited, terminated or settled in cash, with no more than 5million shares to be issued in satisfaction of performance units, performance-based restricted shares and other awards (excluding stock options and stock appreciation rights), with additional annual limitations on awards or payments to individual participants. Options granted under the 2009 Plan generally vest over three years while options granted under the 2003 Plan vest over two years. At January2, 2010, there were 27million remaining authorized, but unissued, shares under the 2009 Plan. Although 2.8million shares remained available for grant under the 2003 Plan, no new awards will be granted, and the 2003 Plan will remain in existence solely for the purpose of addressing the rights of holders of existing awards already granted under the plan. The Non-Employee Director Stock Plan (2009 Director Plan) was approved by shareholders in 2009 and allows each eligible non-employee director to receive shares of the Companys common stock annually. The number of shares granted pursuant to each annual award will be determined by the Nominating and Governance Committee of the Board of Directors. The 2009 Director Plan, which replaced the 2000 Non-Employee Director Stock Plan (2000 Director Plan), reserves 500,000 shares for issuance, plus the total number of shares as to which awards granted under the 2009 Director Plan or the 2000 Director Plans expire or are forfeited, terminated or settled in cash. The 2000 Director Plan allowed each eligible non-employee director to receive 2,100shares of the Companys common stock annually and annual grants of options to purchase 5,000shares of the Companys common stock. Under both the 2009 and 2000 Director Plans, shares (other than stock options) are placed in the Kellogg Company Grantor Trust for Non-Employee Directors (the Grantor Trust). Under the terms of the Grantor Trust, shares are available to a director only upon termination of service on the Board. Under the 2009 Director Plan, 32,510 shares were awarded

PENSION BENEFITS

PENSION BENEFITS
	12 Months Ended Jan. 02, 2010 USD / shares
PENSION BENEFITS	NOTE8 PENSION BENEFITS The Company sponsors a number of U.S.and foreign pension plans to provide retirement benefits for its employees. The majority of these plans are funded or unfunded defined benefit plans, although the Company does participate in a limited number of multiemployer or other defined contribution plans for certain employee groups. Defined benefits for salaried employees are generally based on salary and years of service, while union employee benefits are generally a negotiated amount for each year of service. The Company uses its fiscal year end as the measurement date for its defined benefit plans. Obligations and funded status The aggregate change in projected benefit obligation, plan assets, and funded status is presented in the following tables. (millions) 2009 2008 Change in projected benefit obligation Beginning of year $ 3,121 $ 3,314 Service cost 79 85 Interest cost 196 197 Plan participants' contributions 4 3 Amendments 30 11 Actuarial gain (loss) 264 (18 ) Benefits paid (183 ) (211 ) Curtailment and special termination benefits 3 11 Foreign currency adjustments 102 (271 ) End of year $ 3,616 $ 3,121 Change in plan assets Fair value beginning of year $ 2,574 $ 3,613 Actual return on plan assets 719 (930 ) Employer contributions 87 354 Plan participants' contributions 4 3 Benefits paid (158 ) (177 ) Special termination benefits 3 Foreign currency adjustments 108 (292 ) Fair value end of year $ 3,334 $ 2,574 Funded status $ (282 ) $ (547 ) Amounts recognized in the Consolidated Balance Sheet consist of Other assets $ 160 $ 96 Other current liabilities (12 ) (12 ) Other liabilities (430 ) (631 ) Net amount recognized $ (282 ) $ (547 ) Amounts recognized in accumulated other comprehensive income consist of Net experience loss $ 1,287 $ 1,432 Prior service cost 102 82 Net amount recognized $ 1,389 $ 1,514 The accumulated benefit obligation for all defined benefit pension plans was $3.32billion and $2.85billion at January2, 2010 and January3, 2009, respectively. Information for pension plans with accumulated benefit obligations in excess of plan assets were: (millions) 2009 2008 Projected benefit obligation $ 2,759 $ 2,385 Accumulated benefit obligation $ 2,601 $ 2,236 Fair value of plan assets $ 2,317 $ 1,759 Expense The components of pension expense are presented in the following table. Pension expense for defined contribution plans relates principally to multiemployer plans in which the Company participates on behalf of certain unionized workforces in the United States. The 2009 defined contribution plan expense includes $12 million related to multi-employer plan obligations. The final

NONPENSION POSTRETIREMENT AND P

NONPENSION POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
	12 Months Ended Jan. 02, 2010 USD / shares
NONPENSION POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS	NOTE9 NONPENSION POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS Postretirement The Company sponsors a number of plans to provide health care and other welfare benefits to retired employees in the United States and Canada, who have met certain age and service requirements. The majority of these plans are funded or unfunded defined benefit plans, although the Company does participate in a limited number of multiemployer or other defined contribution plans for certain employee groups. The Company contributes to voluntary employee benefit association (VEBA) trusts to fund certain U.S.retiree health and welfare benefit obligations. The Company uses its fiscal year end as the measurement date for these plans. Obligations and funded status The aggregate change in accumulated postretirement benefit obligation, plan assets, and funded status is presented in the following tables. (millions) 2009 2008 Change in accumulated benefit obligation Beginning of year $ 1,108 $ 1,075 Service cost 18 17 Interest cost 65 67 Actuarial loss 25 18 Benefits paid (61 ) (60 ) Foreign currency adjustments 7 (9 ) End of year $ 1,162 $ 1,108 Change in plan assets Fair value beginning of year $ 553 $ 754 Actual return on plan assets 170 (236 ) Employer contributions 13 97 Benefits paid (64 ) (62 ) Fair value end of year $ 672 $ 553 Funded status $ 490 $ 555 Amounts recognized in the Consolidated Balance Sheet consist of Other current liabilities $ (2 ) $ (2 ) Other liabilities (488 ) (553 ) Net amount recognized $ (490 ) $ (555 ) Amounts recognized in accumulated other comprehensive income consist of Net experience loss $ 340 $ 429 Prior service credit (11 ) (14 ) Net amount recognized $ 329 $ 415 Expense Components of postretirement benefit expense were: (millions) 2009 2008 2007 Service cost $ 18 $ 17 $ 19 Interest cost 65 67 69 Expected return on plan assets (68 ) (63 ) (59 ) Amortization of unrecognized prior service credit (2 ) (3 ) (3 ) Recognized net loss 13 9 23 Postretirement benefit expense: Defined benefit plans 26 27 49 Defined contribution plans 1 2 2 Total $ 27 $ 29 $ 51 Any arising health care claims cost-related experience gain or loss is recognized in the calculated amount of claims experience over a four-year period and once recognized, is amortized using a straight-line method over 15years. Any asset-related experience gain or loss is recognized as described for pension plans in Note 8. The estimated net experience loss for defined benefit plans that will be amortized from accumulated other comprehensive income into nonpension postretirement benefit expense over

INCOME TAXES

INCOME TAXES
	12 Months Ended Jan. 02, 2010 USD / shares
INCOME TAXES	NOTE10 INCOME TAXES Income before income taxes and the provision for U.S.federal, state, and foreign taxes on these earnings were: (millions) 2009 2008 2007 Income before income taxes United States $ 1,207 $ 1,030 $ 998 Foreign 477 601 548 $ 1,684 $ 1,631 $ 1,546 Income taxes Currently payable Federal $ 331 $ 135 $ 395 State 39 3 30 Foreign 146 190 88 516 328 513 Deferred Federal (8 ) 173 (74 ) State (3 ) 22 (3 ) Foreign (29 ) (38 ) 8 (40 ) 157 (69 ) Total income taxes $ 476 $ 485 $ 444 The difference between the U.S.federal statutory tax rate and the Companys effective income tax rate was: 2009 2008 2007 U.S. statutory income tax rate 35.0% 35.0% 35.0% Foreign rates varying from 35% 4.2 5.0 4.0 State income taxes, net of federal benefit 1.4 1.0 1.1 Cost of remitted and unremitted foreign earnings .8 1.6 2.3 Tax audit settlements .9 1.5 Net change in valuation allowances .4 .5 Statutory rate changes, deferred tax impact .1 .1 .6 International restructuring 2.6 U.S. deduction for qualified production activities 1.6 Other 1.2 1.3 2.0 Effective income tax rate 28.2% 29.7% 28.7% As presented in the preceding table, the Companys 2009 consolidated effective tax rate was 28.2%, as compared to 29.7% in 2008 and 28.7% in 2007. The 2009 effective tax rate reflects the favorable impact of various audit settlements as well as a U.S. deduction for qualified production activities as defined by the Internal Revenue Code. The deduction is based on U.S. manufacturing activities. The deduction for 2008 was limited due to contributions to the Companys benefit plans. During 2009, the Company finalized its assessment of foreign earnings and capital to be repatriated under the prior year repatriation plan resulting in a favorable impact to the cost of remitted and unremitted foreign earnings. At January2, 2010, accumulated foreign subsidiary earnings of approximately $1.3 billion were considered indefinitely invested in those businesses. Accordingly, deferred income taxes have not been provided on these earnings and it is not practical to estimate the deferred tax impact of those earnings. The 2008 effective tax rate reflects the favorable impact of various tax audit settlements. In conjunction with a planned international legal restructuring, management recorded a $33million tax charge in the second quarter and an additional $9million during the third and fourth quarters for a total charge of $42million on $1billion of unremitted foreign earnings and capital. During the year, the Company repatriated approximately $710million of earnings and capital which carried a cash tax charge of $24million. This amount was less than the charge recorded durin

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS
	12 Months Ended Jan. 02, 2010 USD / shares
FAIR VALUE MEASUREMENTS	NOTE11 FAIR VALUE MEASUREMENTS The Company has categorized its financial assets and liabilities into a three-level fair value hierarchy, based on the nature of the inputs used in determining fair value. The hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs (level 3). Following is a description of each category in the fair value hierarchy and the financial assets and liabilities of the Company that are included in each category at January2, 2010 and January3, 2009. Level 1 Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market. For the Company, level 1 financial assets and liabilities consist primarily of commodity derivative contracts. Level 2 Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. For the Company, level 2 financial assets and liabilities consist of interest rate swaps and over-the-counter commodity and currency contracts. The Companys calculation of the fair value of interest rate swaps is derived from a discounted cash flow analysis based on the terms of the contract and the interest rate curve. Commodity derivatives are valued using an income approach based on the commodity index prices less the contract rate multiplied by the notional amount. Foreign currency contracts are valued using an income approach based on forward rates less the contract rate multiplied by the notional amount. Level 3 Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect managements own assumptions about the assumptions a market participant would use in pricing the asset or liability. The Company did not have any level 3 financial assets or liabilities as of January2, 2010, or January3, 2009. The following table presents the Companys fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of January2, 2010 and January3, 2009: Level 1 Level 2 Total (millions) 2009 2008 2009 2008 2009 2008 Assets: Derivatives (recorded in other current assets) $ 4 $ 9 $ 7 $ 34 $ 11 $ 43 Derivatives (recorded in other assets) 44 43 44 43 Total assets $ 4 $ 9 $ 51 $ 77 $ 55 $ 86 Liabilities: Derivatives (recorded in other current liabilities) $ $ $ (37 ) $ (17 ) $ (37 ) $ (17 ) Derivatives (recorded in other liabilities) (15 ) (4 ) (15 ) (4 ) Total liabilities $ $ $ (52 ) $ (21 ) $ (52 ) $ (21 ) Financial instruments The carryi

DERIVATIVE INSTRUMENTS AND HEDG

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
	12 Months Ended Jan. 02, 2010 USD / shares
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES	NOTE12 DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES The Company adopted a new accounting standard regarding disclosures about derivative instruments and hedging activities as of the beginning of its 2009 fiscal year. The Company is exposed to certain market risks such as changes in interest rates, foreign currency exchange rates, and commodity prices, which exist as a part of its ongoing business operations. Management uses derivative financial and commodity instruments, including futures, options, and swaps, where appropriate, to manage these risks. Instruments used as hedges must be effective at reducing the risk associated with the exposure being hedged and must be designated as a hedge at the inception of the contract. The Company designates derivatives as cash flow hedges, fair value hedges, net investment hedges, or other contracts used to reduce volatility in the translation of foreign currency earnings to U.S. dollars. The fair value of derivative instruments is recorded in other current assets, other assets, other current liabilities or other liabilities. Gains and losses representing either hedge ineffectiveness, hedge components excluded from the assessment of effectiveness, or hedges of translational exposure are recorded in the Consolidated Statement of Income in other income (expense), net. Within the Consolidated Statement of Cash Flows, settlements of cash flow and fair value hedges are classified as an operating activity; settlements of all other derivatives are classified as a financing activity. As a matter of policy, the Company does not engage in trading or speculative hedging transactions. Cash flow hedges Qualifying derivatives are accounted for as cash flow hedges when the hedged item is a forecasted transaction. Gains and losses on these instruments are recorded in other comprehensive income until the underlying transaction is recorded in earnings. When the hedged item is realized, gains or losses are reclassified from accumulated other comprehensive income (loss) (AOCI) to the Consolidated Statement of Income on the same line item as the underlying transaction. The cumulative net loss attributable to cash flow hedges recorded in AOCl at January2, 2010, was $30million, related to forward interest rate contracts settled during 2001, 2003 and 2009 in conjunction with fixed rate long-term debt issuances, 10-year natural gas price swaps entered into in 2006, commodity price cash flow hedges and net losses on foreign currency cash flow hedges. The interest rate contract losses will be reclassified into interest expense over the next 22years. The natural gas swap losses will be reclassified to COGS over the next 7years. Losses related to foreign currency and commodity price cash flow hedges will be reclassified into earnings during the next 18months. Fair value hedges Qualifying derivatives are accounted for as fair value hedges when the hedged item is a recognized asset, liability, or firm commitment. Gains and losses on these instruments are recorded in earnings, offsetting gains and losses on the hedged item. Net investment hedges Qualifying derivative and nonderivative financial instruments ar

VOLUNTARY PRODUCT WITHDRAWAL

VOLUNTARY PRODUCT WITHDRAWAL
	12 Months Ended Jan. 02, 2010 USD / shares
VOLUNTARY PRODUCT WITHDRAWAL	NOTE13 VOLUNTARY PRODUCT WITHDRAWAL On January16, 2009, the Company announced a recall of certain Austin and Keebler branded peanut butter sandwich crackers and certain Famous Amos and Keebler branded peanut butter cookies. The recall was expanded in February to include certain Bear Naked, Kashi and Special K products. The decision was made following an investigation by the United States Food and Drug Administration concerning a salmonella outbreak thought to be caused by tainted peanut-related products. The products subject to the recall contained peanut-based ingredients manufactured by the Peanut Corporation of America whose Blakely, Georgia plant was found to contain salmonella. The charges associated with the withdrawal reduced full-year operating profit by $31 million or $.06 of earnings per share for 2009 and $34 million or $0.06 of earnings per share for 2008. Estimated customer returns and consumer rebates were recorded as a reduction of net sales; costs associated with returned product and the disposal and write-off of inventory were recorded as COGS; and other recall costs were recorded as SGA expense. The following table presents a summary of the total charges for the years ended January2, 2010 and January3, 2009. (millions) 2009 2008 Total Reduction of net sales $ 12 $ 12 $ 24 Cost of goods sold 18 21 39 SGA expense 1 1 2 Total $ 31 $ 34 $ 65 The costs in the above table represent actual costs incurred, which exclude the impact of lost sales.

CONTINGENCIES

CONTINGENCIES
	12 Months Ended Jan. 02, 2010 USD / shares
CONTINGENCIES	NOTE14 CONTINGENCIES The Company is subject to various legal proceedings, claims, and governmental inspections or investigations in the ordinary course of business covering matters such as general commercial, governmental regulations, antitrust and trade regulations, product liability, environmental intellectual property, employment and other actions. Management has determined that the ultimate resolution of these matters will not have a material adverse effect on the Companys financial position or results of operations.

OTHER INCOME

OTHER INCOME (EXPENSE), NET
	12 Months Ended Jan. 02, 2010 USD / shares
OTHER INCOME (EXPENSE), NET	NOTE 15 OTHER INCOME (EXPENSE), NET Other income (expense), net includes non-operating items such as interest income, charitable donations, and gains and losses related to foreign currency transactions and remeasurements and commodity derivatives. Other income (expense), net for the periods presented was (in millions): 2009$(22); 2008$(14); 2007$(3). During 2009, the Company recorded $10 million of foreign exchange losses associated with the remeasurement of nonfunctional bolivar denominated assets and $14 million of foreign exchange losses associated with the remeasurement of U.S. dollar denominated liabilities. Currency exchange restrictions in Venezuela restrict the Companys ability to obtain U.S. dollars at the official exchange rate. U.S. dollars may be obtained through a legal parallel exchange mechanism. The Company has used this mechanism to exchange bolivars for U.S. dollars in order to satisfy U.S. dollar denominated obligations of the Companys Venezuelan subsidiary As a result, the Company determined as of the end of 2009, that the parallel rate was the appropriate rate to translate the balance sheet of its Venezuelan subsidiary into U.S. dollars. The Company recorded a negative impact of $40 million in other comprehensive income as a result of moving from the official rate to the parallel rate for translation purposes,

QUARTERLY FINANCIAL DATA

QUARTERLY FINANCIAL DATA (unaudited)
	12 Months Ended Jan. 02, 2010 USD / shares
QUARTERLY FINANCIAL DATA (unaudited)	NOTE16 QUARTERLY FINANCIAL DATA (unaudited) Net sales Gross profit (millions, except per share data) 2009 2008 2009 2008 First $ 3,169 $ 3,258 $ 1,302 $ 1,364 Second 3,229 3,343 1,404 1,444 Third 3,277 3,288 1,440 1,403 Fourth 2,900 2,933 1,245 1,156 $ 12,575 $ 12,822 $ 5,391 $ 5,367 Netincomeattributable toKelloggCompany Per share amounts 2009 2008 2009 2008 Basic Diluted Basic Diluted First $ 321 $ 315 $ .84 $ .84 $ .82 $ .81 Second 354 312 .93 .92 .82 .82 Third 361 342 .94 .94 .90 .89 Fourth 176 179 .46 .46 .47 .47 $ 1,212 $ 1,148 The principal market for trading Kellogg shares is the New York Stock Exchange (NYSE). At year-end 2009, the closing price (on the NYSE) was $53.20 and there were 41,259 shareholders of record. Dividends paid per share and the quarterly price ranges on the NYSE during the last two years were: 2009 Quarter Dividend pershare Stock price High Low First $ .3400 $ 45.94 $ 35.64 Second .3400 47.72 37.84 Third .3750 49.90 45.58 Fourth .3750 54.10 48.15 $ 1.4300 2008 Quarter First $ .3100 $ 53.00 $ 46.25 Second .3100 54.15 47.87 Third .3400 58.51 47.62 Fourth .3400 57.66 40.32 $ 1.3000

OPERATING SEGMENTS

OPERATING SEGMENTS
	12 Months Ended Jan. 02, 2010 USD / shares
OPERATING SEGMENTS	NOTE17 OPERATING SEGMENTS Kellogg Company is the worlds leading producer of cereal and a leading producer of convenience foods, including cookies, crackers, toaster pastries, cereal bars, fruit snacks, frozen waffles and veggie foods. Kellogg products are manufactured and marketed globally. Principal markets for these products include the United States and United Kingdom. The Company currently manages its operations in four geographic operating segments, comprised of North America and the three International operating segments of Europe, Latin America and Asia Pacific. The measurement of operating segment results is generally consistent with the presentation of the Consolidated Statement of Income and Consolidated Balance Sheet. Intercompany transactions between operating segments were insignificant in all periods presented. (millions) 2009 2008 2007 Net sales North America $ 8,510 $ 8,457 $ 7,786 Europe 2,361 2,619 2,357 Latin America 963 1,030 984 Asia Pacific (a) 741 716 649 Consolidated $ 12,575 $ 12,822 $ 11,776 Segment operating profit North America $ 1,569 $ 1,447 $ 1,345 Europe 348 390 397 Latin America 179 209 213 Asia Pacific (a) 86 92 88 Corporate (181 ) (185 ) (175 ) Consolidated $ 2,001 $ 1,953 $ 1,868 Depreciation and amortization North America $ 256 249 $ 239 Europe 60 72 71 Latin America 28 24 24 Asia Pacific (a) 22 23 23 Corporate 18 7 15 Consolidated $ 384 $ 375 $ 372 Interest expense North America $ $ 1 $ 2 Europe 1 2 13 Latin America 1 Asia Pacific (a) Corporate 294 305 303 Consolidated $ 295 $ 308 $ 319 Income taxes North America $ 474 $ 418 $ 388 Europe 22 25 27 Latin America 32 38 40 Asia Pacific (a) 16 16 14 Corporate (68 ) (12 ) (25 ) Consolidated $ 476 $ 485 $ 444 Total assets North America $ 8,465 $ 8,443 $ 8,255 Europe 1,630 1,545 2,017 Latin America 585 515 527 Asia Pacific (a) 535 408 397 Corporate 3,354 4,305 5,276 Elimination entries (3,369 ) (4,270 ) (5,075 ) Consolidated $ 11,200 $ 10,946 $ 11,397 Additions to long-lived assets North America $ 236 $ 262 $ 331 Europe 50 172 76 Latin America 58 70 37 Asia Pacific (a) 30 66 21 Corporate 3 6 7 Consolidated $ 377 $ 576 $ 472 (a) Includes Au

SUPPLEMENTAL FINANCIAL STATEMEN

SUPPLEMENTAL FINANCIAL STATEMENT DATA
	12 Months Ended Jan. 02, 2010 USD / shares
SUPPLEMENTAL FINANCIAL STATEMENT DATA	NOTE18 SUPPLEMENTAL FINANCIAL STATEMENT DATA Consolidated Statement of Income (millions) 2009 2008 2007 Research and development expense $ 181 $ 181 $ 179 Advertising expense $ 1,091 $ 1,076 $ 1,063 (Consolidated Balance Sheet (millions) 2009 2008 Trade receivables $ 951 $ 876 Allowance for doubtful accounts (9 ) (10 ) Other receivables 151 234 Accounts receivable, net $ 1,093 $ 1,100 Raw materials and supplies $ 214 $ 203 Finished goods and materials in process 696 694 Inventories $ 910 $ 897 Deferred income taxes $ 128 $ 112 Other prepaid assets 93 157 Other current assets $ 221 $ 269 Land $ 106 $ 94 Buildings 1,750 1,579 Machinery and equipment (a) 5,383 5,112 Construction in progress 291 319 Accumulated depreciation (4,520 ) (4,171 ) Property, net $ 3,010 $ 2,933 Other intangibles $ 1,503 $ 1,503 Accumulated amortization (45 ) (42 ) Other intangibles, net $ 1,458 $ 1,461 Pension $ 160 $ 96 Other 371 298 Other assets $ 531 $ 394 Accrued income taxes $ 33 $ 51 Accrued salaries and wages 322 280 Accrued advertising and promotion 409 357 Other 402 341 Other current liabilities $ 1,166 $ 1,029 Nonpension postretirement benefits $ 488 $ 553 Other 459 387 Other liabilities $ 947 $ 940 (a) Includes an insignificant amount of capitalized internal-use software. Allowance for doubtful accounts (millions) 2009 2008 2007 Balance at beginning of year $ 10 $ 5 $ 6 Additions charged to expense 3 6 1 Doubtful accounts charged to reserve (4 ) (1 ) (2 ) Balance at end of year $ 9 $ 10 $ 5

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS
	12 Months Ended Jan. 02, 2010 USD / shares
SUBSEQUENT EVENTS	NOTE 19 SUBSEQUENT EVENTS The Company evaluated subsequent events through the time of filing of the Annual Report on Form 10-K.

Document Information

Document Information
	12 Months Ended Jan. 02, 2010 USD / shares
Document Type	10-K
Amendment Flag	false
Document Period End Date	2010-01-02

Entity Information

Entity Information (USD $)
	12 Months Ended Jan. 02, 2010	Jan. 29, 2010	Jul. 04, 2009
Trading Symbol	K
Entity Registrant Name	KELLOGG CO
Entity Central Index Key	0000055067
Current Fiscal Year End Date	--01-02
Entity Well-known Seasoned Issuer	Yes
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		380,565,213
Entity Public Float			$13,700,000,000