Note 17. Segment Reporting

We manufacture and market primarily snack food and beverage products, including biscuits (cookies, crackers and salted snacks), chocolate, gum & candy, coffee & powdered beverages and various cheese & grocery products. We manage our global business and report operating results through geographic units.

Our operations and management structure are organized into five reportable operating segments:

•

Latin America

•

Asia Pacific

•

EEMEA

•

Europe

•

North America

We manage our operations by region to leverage regional operating scale, manage different and changing business environments more effectively at a local level and pursue growth opportunities as they arise in our key markets. Beginning in 2015, within each region, we also manage by product category. The change will not affect our operating or reportable segments. In the historical periods within our consolidated financial statements, we managed our operations within Latin America, Asia Pacific and EEMEA by location and within Europe and North America by product category.

We use segment operating income to evaluate segment performance and allocate resources. We believe it is appropriate to disclose this measure to help investors analyze segment performance and trends. Segment operating income excludes unrealized gains and losses on hedging activities (which are a component of cost of sales), general corporate expenses (which are a component of selling, general and administrative expenses), amortization of intangibles, the benefit from the Cadbury acquisition-related indemnification resolution (which is a component of selling, general and administrative expenses), gains and losses on divestitures or acquisitions and acquisition-related costs (which are a component of selling, general and administrative expenses) in all periods presented. We exclude these items from segment operating income in order to provide better transparency of our segment operating results. Furthermore, we centrally manage interest and other expense, net. Accordingly, we do not present these items by segment because they are excluded from the segment profitability measure that management reviews.

Our segment net revenues and earnings were:


	For the Years Ended December 31,
	2014			2013			2012
	(in millions)

Net revenues:
Latin America	$	5,153		$	5,382		$	5,396
Asia Pacific		4,605			4,952			5,164
EEMEA		3,638			3,915			3,735
Europe		13,912			14,059			13,817
North America		6,936			6,991			6,903

Net revenues	$	34,244		$	35,299		$	35,015


	For the Years Ended December 31,
	2014			2013			2012
				(in millions)

Earnings from continuing operations before income taxes:
Operating income:
Latin America	$	475		$	570		$	769
Asia Pacific		385			512			657
EEMEA		327			379			506
Europe		1,770			1,699			1,762
North America		922			889			781
Unrealized gains / (losses) on hedging activities		(112	)		62			1
General corporate expenses		(317	)		(287	)		(728	)
Amortization of intangibles		(206	)		(217	)		(217	)
Benefit from indemnification resolution		–			336			–
Gains on acquisition and divestitures, net		–			30			107
Acquisition-related costs		(2	)		(2	)		(1	)

Operating income		3,242			3,971			3,637
Interest and other expense, net		(688	)		(1,579	)		(1,863	)

Earnings from continuing operations before income taxes	$	2,554		$	2,392		$	1,774

No single customer accounted for 10% or more of our net revenues from continuing operations in 2014. Our five largest customers accounted for 15.7% and our ten largest customers accounted for 23.7% of net revenues from continuing operations in 2014.

Items impacting our segment operating results are discussed in Note 1, Summary of Significant Accounting Policies, including the Venezuelan currency devaluation, Note 2, Divestitures and Acquisitions, Note 5, Goodwill and Intangible Assets, Note 6, Restructuring Programs, and Note 7,Integration Program and Cost Saving Initiatives. Also see Note 8, Debt and Borrowing Arrangements, and Note 9, Financial Instruments, for more information on our interest and other expense, net for each period.

Total assets, depreciation expense and capital expenditures by segment were:


	As of December 31,
	2014		2013		2012
	(in millions)

Total assets:
Latin America	$	6,470	$	6,860	$	7,018
Asia Pacific		8,620		9,032		9,748
EEMEA		5,247		7,045		7,105
Europe		24,568		27,599		27,513
North America		21,303		21,723		22,158
Unallocated assets ⁽¹⁾		607		256		1,935

Total assets	$	66,815	$	72,515	$	75,477

(1)

Unallocated assets consist primarily of cash and cash equivalents, deferred income taxes, centrally held property, plant and equipment, prepaid pension assets and derivative financial instrument balances.


	For the Years Ended December 31,
	2014		2013		2012
	(in millions)

Depreciation expense:
Latin America	$	118	$	107	$	98
Asia Pacific		112		107		100
EEMEA		90		88		77
Europe		359		359		368
North America		174		199		224

Total – continuing operations		853		860		867
Discontinued operations		–		–		261

Total depreciation expense	$	853	$	860	$	1,128


	For the Years Ended December 31,
	2014		2013		2012
	(in millions)

Capital Expenditures:
Latin America	$	460	$	412	$	220
Asia Pacific		356		268		250
EEMEA		219		254		227
Europe		429		478		414
North America		178		210		217

Total – continuing operations		1,642		1,622		1,328
Discontinued operations		–		–		282

Total capital expenditures	$	1,642	$	1,622	$	1,610

During 2014, we realigned some of our products across product categories and as such, we have reclassified the 2013 and 2012 product category net revenues below on a consistent basis.

Net revenues by product category were:


	For the Year Ended December 31, 2014
	Latin		Asia						North
	America		Pacific		EEMEA		Europe		America		Total
	(in millions)

Biscuits	$	1,322	$	1,177	$	642	$	2,882	$	5,486	$	11,509
Chocolate		1,054		1,555		1,082		5,394		296		9,381
Gum & Candy		1,176		776		646		908		1,154		4,660
Beverages		940		465		981		3,292		–		5,678
Cheese & Grocery		661		632		287		1,436		–		3,016

Total net revenues	$	5,153	$	4,605	$	3,638	$	13,912	$	6,936	$	34,244


	For the Year Ended December 31, 2013
	Latin		Asia						North
	America		Pacific		EEMEA		Europe		America		Total
	(in millions)

Biscuits	$	1,288	$	1,311	$	677	$	2,940	$	5,480	$	11,696
Chocolate		1,143		1,632		1,181		5,385		326		9,667
Gum & Candy		1,380		849		673		968		1,185		5,055
Beverages		907		470		1,113		3,340		–		5,830
Cheese & Grocery		664		690		271		1,426		–		3,051

Total net revenues	$	5,382	$	4,952	$	3,915	$	14,059	$	6,991	$	35,299


	For the Year Ended December 31, 2012
	Latin		Asia						North
	America		Pacific		EEMEA		Europe		America		Total
	(in millions)

Biscuits	$	1,208	$	1,374	$	595	$	2,709	$	5,267	$	11,153
Chocolate		1,127		1,686		1,139		5,067		336		9,355
Gum & Candy		1,433		899		726		1,000		1,280		5,338
Beverages		953		453		1,025		3,411		1		5,843
Cheese & Grocery		675		752		250		1,630		19		3,326

Total net revenues	$	5,396	$	5,164	$	3,735	$	13,817	$	6,903	$	35,015

Geographic data for net revenues and long-lived assets, excluding deferred tax, goodwill and intangible assets, were:


	For the Years Ended December 31,
	2014		2013		2012
	(in millions)

Net revenues:
United States	$	6,143	$	5,965	$	5,974
Other		28,101		29,334		29,041

Total net revenues	$	34,244	$	35,299	$	35,015


	As of December 31,
	2014		2013		2012
	(in millions)

Long-lived assets:
United States	$	1,270	$	1,375	$	1,475
Other		9,802		10,142		9,814

Total long-lived assets	$	11,072	$	11,517	$	11,289

No individual country within Other exceeded 10% of our net revenues or long-lived assets for all periods presented.