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:



(millions, except per share data)	Net income attributable to Kellogg Company		Average shares outstanding	Earnings per share
2015
Basic	$	614	354	$	1.74
Dilutive potential common shares			2	(0.02		)
Diluted	$	614	356	$	1.72
2014
Basic	$	632	358	$	1.76
Dilutive potential common shares			2	(0.01		)
Diluted	$	632	360	$	1.75
2013
Basic	$	1,807	363	$	4.98
Dilutive potential common shares			2	(0.04		)
Diluted	$	1,807	365	$	4.94

The total number of anti-dilutive potential common shares excluded from the reconciliation for each period was (in millions): 2015-2.7; 2014-5.0; 2013-5.0.

Stock transactions

The Company issues shares to employees and directors under various equity-based compensation and stock purchase programs, as further discussed in Note 8. The number of shares issued during the periods presented was (in millions): 2015–5; 2014–4; 2013–10. The Company issued shares totaling less than one million in each of the years presented under Kellogg Direct^™ , a direct stock purchase and dividend reinvestment plan for U.S. shareholders.

In April 2013, the Company’s board of directors approved an authorization to repurchase up to $1 billion in shares through April 2014. In February 2014, the Company’s board of directors approved a new authorization to repurchase up to $1.5 billion in shares through December 2015. This authorization supersedes the April 2013 authorization and is intended to allow the Company to repurchase shares to offset issuances for employee benefit programs. In December 2015, the Company's board of directors approved an authorization to repurchase up to $1.5 billion in shares beginning in 2016 through December 2017.

In May 2013, the Company entered into an Accelerated Share Repurchase (ASR) Agreement with a financial institution counterparty and paid $355 million for the repurchase of shares during the term of the Agreement which extended through August 2013. During the second quarter of 2013, 4.9 million shares were initially delivered to the Company and accounted for as a reduction to Kellogg Company equity. The transaction was completed during the third quarter, at which time the Company received 0.6 million additional shares. The total number of shares delivered upon settlement of the ASR was based upon the volume weighted average price of the Company’s stock over the term of the agreement.

During 2015, the Company repurchased 11 million million shares of common stock for a total of $731 million . During 2014, the Company repurchased 11 million million shares of common stock for a total of $690 million . During 2013, the Company repurchased 9 million shares of common stock at a total cost of $544 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 for all years presented 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. During the year ended January 2, 2016, the Company amended a U.S. postretirement health plan as well as a U.S. pension plan. As a result of the U.S. postretirement health plan amendment, a prior service credit was recognized in other comprehensive income with an offsetting reduction in the accumulated postretirement benefit obligation. The U.S. pension plan amendment increased the Company's pension benefit obligation with an offsetting increase in prior service costs in other comprehensive income. See Notes 9 and 10 for further details.



	2015									2014									2013
	Pre-tax			Tax (expense)			After-tax			Pre-tax			Tax (expense)			After-tax			Pre-tax			Tax (expense)			After-tax
	amount			benefit			amount			amount			benefit			amount			amount			benefit			amount
Net income							$	614								$	633								$	1,808
Other comprehensive income:
Foreign currency translation adjustments	$	(170	)	$	(26	)	(196		)	$	(231	)	$	(32	)	$	(263	)	$	(24	)	—			(24		)
Cash flow hedges:
Unrealized gain (loss) on cash flow hedges	8			(3		)	5			(35		)	18			(17		)	11			(1		)	10
Reclassification to net income	(23		)	3			(20		)	(10		)	2			(8		)	(6		)	—			(6		)
Postretirement and postemployment benefits:
Amounts arising during the period:
Net experience gain (loss)	—			—			—			(8		)	3			(5		)	17			(6		)	11
Prior service credit (cost)	63			(24		)	39			10			(3		)	7			9			(2		)	7
Reclassification to net income:
Net experience loss	3			(1		)	2			3			(1		)	2			5			(2		)	3
Prior service cost	9			(3		)	6			10			(3		)	7			13			(4		)	9
Other comprehensive income (loss)	$	(110	)	$	(54	)	$	(164	)	$	(261	)	$	(16	)	$	(277	)	$	25		$	(15	)	$	10
Comprehensive income							$	450								$	356								$	1,818
Net income (loss) attributable to noncontrolling interests							—									1									1
Other comprehensive income (loss) attributable to noncontrolling interests							(1		)							—									—
Comprehensive income attributable to Kellogg Company							$	451								$	355								$	1,817

Reclassifications out of Accumulated Other Comprehensive Income (AOCI) for the year ended January 2, 2016 and January 3, 2015, consisted of the following:



Details about AOCI Components	Amount reclassified from AOCI									Line item impacted within Income Statement
(millions)	2015			2014			2013
Gains and losses on cash flow hedges:
Foreign currency exchange contracts	$	(40	)	$	(5	)	$	(10	)	COGS
Foreign currency exchange contracts	2			(3		)	(2		)	SGA
Interest rate contracts	3			(9		)	(4		)	Interest expense
Commodity contracts	12			7			10			COGS
	$	(23	)	$	(10	)	$	(6	)	Total before tax
	3			2			—			Tax (expense) benefit
	$	(20	)	$	(8	)	$	(6	)	Net of tax
Amortization of postretirement and postemployment benefits:
Net experience loss	$	3		$	3		$	5		(a)
Prior service cost	9			10			13			(a)
	$	12		$	13		$	18		Total before tax
	(4		)	(4		)	(6		)	Tax (expense) benefit
	$	8		$	9		$	12		Net of tax
Total reclassifications	$	(12	)	$	1		$	6		Net of tax

(a) See Note 9 and Note 10 for further details.

Accumulated other comprehensive income (loss) as of January 2, 2016 and January 3, 2015 consisted of the following:



(millions)	January 2, 2016			January 3, 2015
Foreign currency translation adjustments	$	(1,314	)	$	(1,119	)
Cash flow hedges — unrealized net gain (loss)	(39		)	(24		)
Postretirement and postemployment benefits:
Net experience loss	(16		)	(18		)
Prior service cost	(7		)	(52		)
Total accumulated other comprehensive income (loss)	$	(1,376	)	$	(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 2015, the 2012 Agreements were terminated and the VIE Loan, including related accrued interest and other receivables, were settled, resulting in a charge of $19 million, which was recorded as Other income (expenses) in the year ended January 2, 2016. Upon termination of the 2012 Agreements, the Company was no longer considered the primary beneficiary of the VIE, the VIE was deconsolidated, and 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 year ended January 2, 2016.