Equity

Earnings per share

Basic 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 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 consist principally of employee stock options issued by the Company, and to a lesser extent, certain contingently issuable performance shares. Basic earnings per share is reconciled to diluted earnings per share in the following table. There were 3 million and 2 million anti-dilutive potential common shares excluded from the reconciliation for the quarter and year-to-date periods ended July 4, 2015, respectively. There were zero and 4 million anti-dilutive potential common shares excluded from the reconciliation for the quarter and year-to-date periods ended June 28, 2014, respectively.

Quarters ended July 4, 2015 and June 28, 2014:



(millions, except per share data)	Net income attributable to Kellogg Company		Average shares outstanding	Earnings per share
2015
Basic	$	223	353	$	0.63
Dilutive potential common shares			2	—
Diluted	$	223	355	$	0.63
2014
Basic	$	295	359	$	0.82
Dilutive potential common shares			3	—
Diluted	$	295	362	$	0.82

Year-to-date periods ended July 4, 2015 and June 28, 2014:



(millions, except per share data)	Net income attributable to Kellogg Company		Average shares outstanding	Earnings per share
2015
Basic	$	450	354	$	1.27
Dilutive potential common shares			2	(0.01		)
Diluted	$	450	356	$	1.26
2014
Basic	$	701	360	$	1.95
Dilutive potential common shares			2	(0.01		)
Diluted	$	701	362	$	1.94

In February 2014, the Company’s board of directors approved a share repurchase program authorizing the repurchase of up to $1.5 billion of it's common stock through December 2015. This authorization supersedes the April 2013 authorization and is intended to allow the Company to repurchase shares for general corporate purposes and to offset issuances for employee benefit programs.

During the year-to-date period ended July 4, 2015, the Company repurchased approximately 4 million shares of common stock for a total of $285 million. During the year-to-date period ended June 28, 2014, the Company repurchased 6 million shares of common stock for a total of $329 million.

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 consists of foreign currency translation adjustments, fair value adjustments associated with cash flow hedges and adjustments for net experience losses and prior service cost related to employee benefit plans.



	Quarter ended July 4, 2015									Year-to-date period ended July 4, 2015
(Results are unaudited)	Pre-tax amount			Tax (expense) benefit			After-tax amount			Pre-tax amount			Tax (expense) benefit			After-tax amount
Net income							$	222								$	449
Other comprehensive income (loss):
Foreign currency translation adjustments	9			5			14			(54		)	(16		)	(70		)
Cash flow hedges:
Unrealized gain (loss) on cash flow hedges	(4		)	—			(4		)	4			(1		)	3
Reclassification to net income	(3		)	—			(3		)	(7		)	—			(7		)
Postretirement and postemployment benefits:
Amount arising during the period:
Prior service credit (cost)	1			—			1			—			—			—
Reclassification to net income:
Net experience loss	1			—			1			2			—			2
Prior service cost	2			(1		)	1			5			(2		)	3
Other comprehensive income (loss)	$	6		$	4		$	10		$	(50	)	$	(19	)	$	(69	)
Comprehensive income							$	232								$	380
Net income (loss) attributable to noncontrolling interests							(1		)							(1		)
Other comprehensive income (loss) attributable to noncontrolling interests							—									(1		)
Comprehensive income attributable to Kellogg Company							$	233								$	382

	Quarter ended June 28, 2014									Year-to-date period ended June 28, 2014
(Results are unaudited)	Pre-tax amount			Tax (expense) benefit			After-tax amount			Pre-tax amount			Tax (expense) benefit			After-tax amount
Net income							$	295								$	701
Other comprehensive income (loss):
Foreign currency translation adjustments	30			—			30			33			—			33
Cash flow hedges:
Unrealized gain (loss) on cash flow hedges	(23		)	7			(16		)	(24		)	7			(17		)
Reclassification to net income	(1		)	—			(1		)	(11		)	3			(8		)
Postretirement and postemployment benefits:
Amounts arising during the period:
Prior service credit (cost)	(9		)	3			(6		)	(9		)	3			(6		)
Reclassification to net income:
Net experience loss	1			—			1			2			—			2
Prior service cost	4			(1		)	3			6			(2		)	4
Other comprehensive income (loss)	$	2		$	9		$	11		$	(3	)	$	11		$	8
Comprehensive income							$	306								$	709

Reclassifications out of Accumulated Other Comprehensive Income (AOCI) for the quarter and year-to-date periods ended July 4, 2015 consisted of the following:



(millions)
Details about AOCI components	Amount reclassified from AOCI						Line item impacted within Income Statement
	Quarter ended July 4, 2015			Year-to-date period ended July 4, 2015
(Gains) losses on cash flow hedges:
Foreign currency exchange contracts	$	(9	)	$	(16	)	COGS
Foreign currency exchange contracts	2			2			SGA
Interest rate contracts	1			1			Interest expense
Commodity contracts	3			6			COGS
	$	(3	)	$	(7	)	Total before tax
	—			—			Tax (expense) benefit
	$	(3	)	$	(7	)	Net of tax
Amortization of postretirement and postemployment benefits:
Net experience loss	$	1		$	2		See Note 7 for further details
Prior service cost	2			5			See Note 7 for further details
	$	3		$	7		Total before tax
	(1		)	(2		)	Tax (expense) benefit
	$	2		$	5		Net of tax
Total reclassifications	$	(1	)	$	(2	)	Net of tax

Reclassifications out of AOCI for the quarter and year-to-date periods ended June 28, 2014 consisted of the following:



(millions)
Details about AOCI components	Amount reclassified from AOCI						Line item impacted within Income Statement
	Quarter ended June 28, 2014			Year-to-date period ended June 28, 2014
(Gains) losses on cash flow hedges:
Foreign currency exchange contracts	$	(1	)	$	(2	)	COGS
Foreign currency exchange contracts	(2		)	(3		)	SGA
Interest rate contracts	—			(9		)	Interest expense
Commodity contracts	2			3			COGS
	$	(1	)	$	(11	)	Total before tax
	—			3			Tax (expense) benefit
	$	(1	)	$	(8	)	Net of tax
Amortization of postretirement and postemployment benefits:
Net experience loss	$	1		$	2		See Note 7 for further details
Prior service cost	4			6			See Note 7 for further details
	$	5		$	8		Total before tax
	(1		)	(2		)	Tax (expense) benefit
	$	4		$	6		Net of tax
Total reclassifications	$	3		$	(2	)	Net of tax

Accumulated other comprehensive income (loss) as of July 4, 2015 and January 3, 2015 consisted of the following:



(millions)	July 4, 2015			January 3, 2015
Foreign currency translation adjustments	$	(1,188	)	$	(1,119	)
Cash flow hedges — unrealized net gain (loss)	(28		)	(24		)
Postretirement and postemployment benefits:
Net experience loss	(16		)	(18		)
Prior service cost	(49		)	(52		)
Total accumulated other comprehensive income (loss)	$	(1,281	)	$	(1,213	)

Noncontrolling interests

In December 2012, the Company entered into a series of agreements with a third party including a subordinated loan (VIE Loan) of $44 million which is convertible into approximately 85% of the equity of the entity (VIE). Due to this convertible subordinated loan and other agreements, the Company determined that the entity was a variable interest entity, the Company was the primary beneficiary and the Company consolidated the financial statements of the VIE in the U.S. Snacks operating segment. During the quarter ended April 4, 2015, the Company determined that the VIE Loan and other amounts receivable from the VIE may not be fully recoverable and recorded a non-cash charge of $25 million, which was recorded as other income (expense), net. During the quarter ended July 4, 2015, the 2012 Agreements were terminated and the VIE Loan, including related accrued interest and other receivables, were settled, resulting in a partial reversal of the prior quarter charge of $6 million for the current quarter. The net charge, in the year-to-date period of $19 million was recorded as Other income (expense), net. Upon termination of the 2012 Agreements, the Company is no longer considered the primary beneficiary of the VIE and accordingly, the VIE was deconsolidated as of July 4, 2015. In connection with the deconsolidation, the Company derecognized all assets and liabilities of the VIE, including an allocation of a portion of goodwill from the U.S. Snacks operating segment, resulting in a $67 million non-cash gain, which was recorded within SGA expense for the quarter ended July 4, 2015.