14. Shares and Stockholders’ Equity

Common Shares

The changes in our common stock (number of shares) were as follows:



	For the Years Ended December 31,
	2017		2016		2015
Common Stock
Balance as of beginning-of-year	226,335,105		243,835,893		256,551,440
Stock issued for exercise of warrants	344,901		79,397		1,168,966
Stock compensation/issued for benefit plans	1,793,234		1,732,812		2,108,155
Retirement/cancellation of shares	(10,383,126	)	(19,312,997	)	(15,992,668	)
Balance as of end-of-year	218,090,114		226,335,105		243,835,893

Common Stock as of End-of-Year
Basic basis	218,090,114		226,335,105		243,835,893
Diluted basis	221,309,830		230,126,820		247,732,609

Our common stock is without par value.

Average Shares

A reconciliation of the denominator (number of shares) in the calculations of basic and diluted earnings (loss) per common share was as follows:



	For the Years Ended December 31,
	2017		2016		2015
Weighted-average shares, as used in basic calculation	222,128,687		234,181,717		250,629,243
Shares to cover exercise of outstanding warrants	761,353		1,089,221		1,389,768
Shares to cover non-vested stock	1,626,908		1,109,490		1,302,859
Average stock options outstanding during the year	2,360,372		2,256,720		3,162,508
Assumed acquisition of shares with assumed proceeds
from exercising outstanding warrants	(109,034	)	(248,402	)	(262,709	)
Assumed acquisition of shares with assumed
proceeds and benefits from exercising stock
options (at average market price for the year)	(1,414,857	)	(1,508,620	)	(2,258,658	)
Shares repurchasable from measured but
unrecognized stock option expense	(53,241	)	(49,839	)	(45,958	)
Average deferred compensation shares	920,792		-		1,021,059
Weighted-average shares, as used in diluted calculation	226,220,980		236,830,287		254,938,112

In the event the average market price of LNC common stock exceeds the issue price of stock options and the options have a dilutive effect to our EPS, such options will be shown in the table above.

We have participants in our deferred compensation plans who selected LNC stock as the measure for the investment return attributable to all or a portion of their deferral amounts. For the years ended December 2017 and 2015, the effect of settling this obligation in LNC stock (“equity classification”) was more dilutive than the scenario of settling in cash (“liability classification”). Therefore, for our EPS calculation for these periods, we added these shares to the denominator and adjusted the numerator to present net income as if the shares had been accounted for under equity classification by removing the mark-to-market adjustment included in net income attributable to these deferred units of LNC stock. The amount of this adjustment was $(7) million and $4 million for the years ended December 31, 2017 and 2015, respectively.

As of December 31, 2017, we had 598,935 outstanding warrants. The warrants, each representing the right to purchase one share of our common stock had an exercise price of $9.91 as of December 31, 2017, subject to adjustment. The warrants expire on July 10, 2019, and are listed on the New York Stock Exchange under the symbol “LNC WS.”

AOCI

The following summarizes the components and changes in AOCI (in millions):



	For the Years Ended December 31,
	2017			2016			2015
Unrealized Gain (Loss) on AFS Securities
Balance as of beginning-of-year	$	1,784		$	991		$	3,213
Unrealized holding gains (losses) arising during the year		3,032			1,600			(4,541	)
Change in foreign currency exchange rate adjustment		134			(99	)		(45	)
Change in DAC, VOBA, DSI, future contract benefits and other contract holder funds		(705	)		(456	)		1,294
Income tax benefit (expense)		(797	)		(370	)		1,147
Less:
Reclassification adjustment for gains (losses) included in net income (loss)		(39	)		(158	)		145
Associated amortization of DAC, VOBA, DSI and DFEL		(20	)		(23	)		(27	)
Income tax benefit (expense)		21			63			(41	)
Balance as of end-of-year	$	3,486		$	1,784		$	991
Unrealized OTTI on AFS Securities
Balance as of beginning-of-year	$	25		$	26		$	26
(Increases) attributable to:
Gross OTTI recognized in OCI during the year		-			(55	)		(30	)
Change in DAC, VOBA, DSI and DFEL		-			12			4
Income tax benefit (expense)		-			15			9
Decreases attributable to:
Changes in fair value, sales, maturities or other settlements of AFS securities		34			54			43
Change in DAC, VOBA, DSI and DFEL		(5	)		(12	)		(17	)
Income tax benefit (expense)		(10	)		(15	)		(9	)
Balance as of end-of-year	$	44		$	25		$	26
Unrealized Gain (Loss) on Derivative Instruments
Balance as of beginning-of-year	$	49		$	132		$	139
Unrealized holding gains (losses) arising during the year		27			(215	)		(241	)
Change in foreign currency exchange rate adjustment		(137	)		96			48
Change in DAC, VOBA, DSI and DFEL		2			3			2
Income tax benefit (expense)		38			41			66
Less:
Reclassification adjustment for gains (losses) included in net income (loss)		13			14			(183	)
Associated amortization of DAC, VOBA, DSI and DFEL		(1	)		(1	)		1
Income tax benefit (expense)		(4	)		(5	)		64
Balance as of end-of-year	$	(29	)	$	49		$	132
Foreign Currency Translation Adjustment
Balance as of beginning-of-year	$	(27	)	$	(5	)	$	(3	)
Foreign currency translation adjustment arising during the year		13			(22	)		(2	)
Balance as of end-of-year	$	(14	)	$	(27	)	$	(5	)
Funded Status of Employee Benefit Plans
Balance as of beginning-of-year	$	(265	)	$	(299	)	$	(279	)
Adjustment arising during the year		18			43			(21	)
Income tax benefit (expense)		(10	)		(9	)		1
Balance as of end-of-year	$	(257	)	$	(265	)	$	(299	)

The following summarizes the reclassifications out of AOCI (in millions) and the associated line item in the Consolidated Statements of Comprehensive Income (Loss):



	For the Years Ended December 31,
	2017			2016			2015
Unrealized Gain (Loss) on AFS Securities
Gross reclassification	$	(39	)	$	(158	)	$	145		Total realized gain (loss)
Associated amortization of DAC,
VOBA, DSI and DFEL		(20	)		(23	)		(27	)	Total realized gain (loss)
Reclassification before income										Income (loss) from continuing
tax benefit (expense)		(59	)		(181	)		118		operations before taxes
Income tax benefit (expense)		21			63			(41	)	Federal income tax expense (benefit)
Reclassification, net of income tax	$	(38	)	$	(118	)	$	77		Net income (loss)

Unrealized OTTI on AFS Securities
Gross reclassification	$	5		$	3		$	2		Total realized gain (loss)
Change in DAC, VOBA, DSI and DFEL		(1	)		-			-		Total realized gain (loss)
Reclassification before income										Income (loss) from continuing
tax benefit (expense)		4			3			2		operations before taxes
Income tax benefit (expense)		(1	)		-			-		Federal income tax expense (benefit)
Reclassification, net of income tax	$	3		$	3		$	2		Net income (loss)

Unrealized Gain (Loss) on Derivative Instruments
Gross reclassifications:
Interest rate contracts	$	4		$	5		$	(190	)	Net investment income
Interest rate contracts		(18	)		(10	)		1		Interest and debt expense
Interest rate contracts		-			1			-		Total realized gain (loss)
Foreign currency contracts		18			11			6		Net investment income
Foreign currency contracts		9			7			-		Total realized gain (loss)
Total gross reclassifications		13			14			(183	)
Associated amortization of DAC,
VOBA, DSI and DFEL		(1	)		(1	)		1		Commissions and other expenses
Reclassifications before income										Income (loss) from continuing
tax benefit (expense)		12			13			(182	)	operations before taxes
Income tax benefit (expense)		(4	)		(5	)		64		Federal income tax expense (benefit)
Reclassifications, net of income tax	$	8		$	8		$	(118	)	Net income (loss)