ANNUAL REPORT 2007

 

 

NOTE 5
EQUITY

 

 

During the year ended December 30, 2006, the Company revised the classification of $101 million of prior net losses realized upon reissuance of treasury shares from capital in excess of par value to retained earnings on the Consolidated Balance Sheet. Such reissuances occurred in connection with employee and director stock option exercises and other share-based settlements. The revision did not have an effect on the Company’s results of operations, total shareholders’ equity, or cash flows.

 

Earnings per share

Basic net earnings per share is determined by dividing net earnings 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. Basic net earnings per share is reconciled to diluted net earnings per share in the following table. The total number of anti-dilutive potential common shares excluded from the reconciliation for each period was (in millions): 2007–.8; 2006–.7; 2005–1.5.

 

 

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): 2007–4; 2006–7; 2005–8. Additionally, during 2006, the Company established Kellogg Direct^tm, a direct stock purchase and dividend reinvestment plan for U.S. shareholders. The total number of shares issued for that purpose was less than one million in both 2007 and 2006.

To offset these issuances and for general corporate purposes, the Company’s Board of Directors has authorized management to repurchase specified amounts of the Company’s common stock in each of the periods presented. In 2007, the Company spent $650 million to repurchase approximately 12 million shares. In 2006, the Company spent $650 million to repurchase approximately 15 million shares. This activity consisted principally of a February 2006 private transaction with the W. K. Kellogg Foundation Trust to repurchase approximately 13 million shares for $550 million. In 2005, the Company spent $664 million to repurchase approximately 16 million shares. This activity consisted principally of a November 2005 private transaction with the W. K. Kellogg Foundation Trust to repurchase approximately 9 million shares for $400 million.

 

 

On October 26, 2007, the Company’s Board of Directors authorized a stock repurchase program of up to $650 million for 2008.

 

Comprehensive income

Comprehensive income includes net earnings 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 pursuant to SFAS No. 52 “Foreign Currency Translation,” unrealized gains and losses on cash flow hedges pursuant to SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities.” Additionally, other comprehensive income for 2007 includes adjustments for net experience losses and prior service cost pursuant to SFAS No. 158 “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans.” The Company adopted SFAS No. 158 as of the end of its 2006 fiscal year. Refer to Note 1 for further information. Comprehensive income for prior years included minimum pension liability adjustments pursuant to SFAS No. 87 “Employers Accounting for Pensions.”

 

 

Accumulated other comprehensive income (loss) at year end consisted of the following: