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Segment Reporting | 9 Months Ended
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Sep. 30, 2015
Segment Reporting | Note 15. Segment Reporting We manufacture and market primarily snack food products, including biscuits (cookies, crackers and salted snacks), chocolate, gum & candy and various cheese & grocery products, as well as powdered beverage 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 and pursue growth opportunities as they arise in our key markets. Historically, we have recorded income from equity method investments within our operating income as these investments operated as extensions of our base business. Beginning in the third quarter of 2015, to align with the accounting for our new coffee equity method investment in JDE, we began to record the earnings from our equity method investments in after-tax equity method investment earnings outside of segment operating income. Earnings from equity method investments through July 2, 2015 recorded within segment operating income were $49 million in Asia Pacific, $3 million in EEMEA and $4 million in North America. For the three months ended September 30, 2014, these earnings were $19 million in Asia Pacific, $1 million in EEMEA and $3 million in North America. For the nine months ended September 30, 2014, these earnings were $73 million in Asia Pacific, $3 million in EEMEA and $7 million in North America. Also in 2015, we began to report stock-based compensation for our corporate employees, which was previously reported within our North America region, within general corporate expenses. We reclassified corporate stock-based compensation expense out of the North America segment of $7 million during the three months and $22 million during the nine months ended September 30, 2015. 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, gains and losses on divestitures or acquisitions, gain on the coffee business transactions 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 / (income). 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 Three Months Ended |  |  | For the Nine Months Ended |
| September 30, |  |  | September 30, |
|  | 2015 |  |  | 2014 |  |  | 2015 |  |  | 2014 |
|  | (in millions) |
Net revenues: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Latin America |  | $ | 1,233 |  |  | $ | 1,315 |  |  | $ | 3,730 |  |  | $ | 3,913 |
Asia Pacific |  |  | 1,101 |  |  |  | 1,153 |  |  |  | 3,278 |  |  |  | 3,460 |
EEMEA |  |  | 586 |  |  |  | 894 |  |  |  | 2,150 |  |  |  | 2,740 |
Europe |  |  | 2,173 |  |  |  | 3,215 |  |  |  | 7,963 |  |  |  | 10,151 |
North America |  |  | 1,756 |  |  |  | 1,760 |  |  |  | 5,151 |  |  |  | 5,150 |
Net revenues |  | $ | 6,849 |  |  | $ | 8,337 |  |  | $ | 22,272 |  |  | $ | 25,414 |
|  | For the Three Months Ended |  |  | For the Nine Months Ended |
|  | September 30, |  |  | September 30, |
|  | 2015 |  |  | 2014 |  |  | 2015 |  |  | 2014 |
|  | (in millions) |
Earnings before income taxes: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Operating income: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Latin America |  | $ | 134 |  |  | $ | 120 |  |  | $ | 422 |  |  | $ | 304 |
Asia Pacific |  |  | 71 |  |  |  | 65 |  |  |  | 321 |  |  |  | 364 |
EEMEA |  |  | 52 |  |  |  | 93 |  |  |  | 184 |  |  |  | 303 |
Europe |  |  | 298 |  |  |  | 368 |  |  |  | 885 |  |  |  | 1,294 |
North America |  |  | 275 |  |  |  | 272 |  |  |  | 817 |  |  |  | 744 |
Unrealized gains / (losses) on hedging activities |  |  | (4 | ) |  |  | 39 |  |  |  | 75 |  |  |  | (8 | )
General corporate expenses |  |  | (95 | ) |  |  | (56 | ) |  |  | (240 | ) |  |  | (191 | )
Amortization of intangibles |  |  | (45 | ) |  |  | (48 | ) |  |  | (137 | ) |  |  | (157 | )
Gains on coffee business transactions and divestiture |  |  | 7,122 |  |  |  | – |  |  |  | 7,135 |  |  |  | – |
Acquisition-related costs |  |  | (6 | ) |  |  | – |  |  |  | (8 | ) |  |  | – |
Operating income |  |  | 7,802 |  |  |  | 853 |  |  |  | 9,454 |  |  |  | 2,653 |
Interest and other (expense) / income |  |  | (114 | ) |  |  | 227 |  |  |  | (814 | ) |  |  | (717 | )
Earnings before income taxes |  | $ | 7,688 |  |  | $ | 1,080 |  |  | $ | 8,640 |  |  | $ | 1,936 |
Items impacting our segment operating results are discussed in Note 1, Basis of Presentation, including the Venezuelan currency devaluation, Note 2, Divestitures and Acquisitions, and Note 6, Restructuring Programs. Also see Note 7, Debt, and Note 8, Financial Instruments, for more information on our interest and other expense / (income) for each period. Total assets by segment were:
|  | As of September 30, |  |  | As of December 31, |
|  | 2015 |  |  | 2014 |
|  | (in millions) |
Total assets (1): |  |  |  |  |  |  |  |
Latin America |  | $ | 5,654 |  |  | $ | 6,470 |
Asia Pacific (2) |  |  | 8,057 |  |  |  | 8,068 |
EEMEA (2) |  |  | 4,100 |  |  |  | 5,153 |
Europe (2) |  |  | 21,993 |  |  |  | 24,568 |
North America |  |  | 21,332 |  |  |  | 21,287 |
Equity method investments |  |  | 4,895 |  |  |  | 662 |
Unallocated assets (3) |  |  | 359 |  |  |  | 607 |
Total assets |  | $ | 66,390 |  |  | $ | 66,815 |
| (1) | Beginning in the third quarter of 2015, earnings from equity method investees are reported outside of segment operating income, as discussed above in this Note and Note 1, Basis of Presentation – Equity Method Investments, and outside of segment assets. We reclassified equity method investments above as of December 31, 2014 on a basis consistent with the 2015 presentation.
| (2) | On July 2, 2015, we deconsolidated our global coffee businesses, primarily from our Europe, EEMEA and Asia Pacific segments. See Note 2, Divestitures and Acquisitions – Coffee Business Transactions, for more information.
| (3) | 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.
Net revenues by product category were:
|  | For the Three Months Ended September 30, 2015 |
|  | Latin |  |  | Asia |  |  |  |  |  |  |  |  | North |  |  |  |
| America |  |  | Pacific |  |  | EEMEA |  |  | Europe |  |  | America |  |  | Total |
|  | (in millions) |
Biscuits |  | $ | 428 |  |  | $ | 356 |  |  | $ | 125 |  |  | $ | 592 |  |  | $ | 1,403 |  |  | $ | 2,904 |
Chocolate |  |  | 184 |  |  |  | 370 |  |  |  | 232 |  |  |  | 1,086 |  |  |  | 64 |  |  |  | 1,936 |
Gum & Candy |  |  | 262 |  |  |  | 171 |  |  |  | 134 |  |  |  | 177 |  |  |  | 289 |  |  |  | 1,033 |
Beverages (1) |  |  | 178 |  |  |  | 76 |  |  |  | 45 |  |  |  | 43 |  |  |  | – |  |  |  | 342 |
Cheese & Grocery |  |  | 181 |  |  |  | 128 |  |  |  | 50 |  |  |  | 275 |  |  |  | – |  |  |  | 634 |
Total net revenues |  | $ | 1,233 |  |  | $ | 1,101 |  |  | $ | 586 |  |  | $ | 2,173 |  |  | $ | 1,756 |  |  | $ | 6,849 |
|  | For the Three Months Ended September 30, 2014 (2) |
|  | Latin |  |  | Asia |  |  |  |  |  |  |  |  | North |  |  |  |
| America |  |  | Pacific |  |  | EEMEA |  |  | Europe |  |  | America |  |  | Total |
|  | (in millions) |
Biscuits |  | $ | 338 |  |  | $ | 294 |  |  | $ | 165 |  |  | $ | 712 |  |  | $ | 1,382 |  |  | $ | 2,891 |
Chocolate |  |  | 253 |  |  |  | 408 |  |  |  | 287 |  |  |  | 1,214 |  |  |  | 76 |  |  |  | 2,238 |
Gum & Candy |  |  | 314 |  |  |  | 191 |  |  |  | 152 |  |  |  | 216 |  |  |  | 302 |  |  |  | 1,175 |
Beverages (1) |  |  | 232 |  |  |  | 100 |  |  |  | 227 |  |  |  | 723 |  |  |  | – |  |  |  | 1,282 |
Cheese & Grocery |  |  | 178 |  |  |  | 160 |  |  |  | 63 |  |  |  | 350 |  |  |  | – |  |  |  | 751 |
Total net revenues |  | $ | 1,315 |  |  | $ | 1,153 |  |  | $ | 894 |  |  | $ | 3,215 |  |  | $ | 1,760 |  |  | $ | 8,337 |
|  | For the Nine Months Ended September 30, 2015 |
|  | Latin |  |  | Asia |  |  |  |  |  |  |  |  | North |  |  |  |
| America |  |  | Pacific |  |  | EEMEA |  |  | Europe |  |  | America |  |  | Total |
|  | (in millions) |
Biscuits |  | $ | 1,144 |  |  | $ | 940 |  |  | $ | 396 |  |  | $ | 1,828 |  |  | $ | 4,161 |  |  | $ | 8,469 |
Chocolate |  |  | 680 |  |  |  | 1,074 |  |  |  | 627 |  |  |  | 3,204 |  |  |  | 161 |  |  |  | 5,746 |
Gum & Candy |  |  | 852 |  |  |  | 550 |  |  |  | 418 |  |  |  | 558 |  |  |  | 829 |  |  |  | 3,207 |
Beverages (1) |  |  | 570 |  |  |  | 324 |  |  |  | 502 |  |  |  | 1,493 |  |  |  | – |  |  |  | 2,889 |
Cheese & Grocery |  |  | 484 |  |  |  | 390 |  |  |  | 207 |  |  |  | 880 |  |  |  | – |  |  |  | 1,961 |
Total net revenues |  | $ | 3,730 |  |  | $ | 3,278 |  |  | $ | 2,150 |  |  | $ | 7,963 |  |  | $ | 5,151 |  |  | $ | 22,272 |
|  | For the Nine Months Ended September 30, 2014 (2) |
|  | Latin |  |  | Asia |  |  |  |  |  |  |  |  | North |  |  |  |
| America |  |  | Pacific |  |  | EEMEA |  |  | Europe |  |  | America |  |  | Total |
|  | (in millions) |
Biscuits |  | $ | 998 |  |  | $ | 898 |  |  | $ | 483 |  |  | $ | 2,228 |  |  | $ | 4,121 |  |  | $ | 8,728 |
Chocolate |  |  | 833 |  |  |  | 1,155 |  |  |  | 751 |  |  |  | 3,804 |  |  |  | 189 |  |  |  | 6,732 |
Gum & Candy |  |  | 893 |  |  |  | 585 |  |  |  | 499 |  |  |  | 677 |  |  |  | 840 |  |  |  | 3,494 |
Beverages (1) |  |  | 684 |  |  |  | 359 |  |  |  | 782 |  |  |  | 2,348 |  |  |  | – |  |  |  | 4,173 |
Cheese & Grocery |  |  | 505 |  |  |  | 463 |  |  |  | 225 |  |  |  | 1,094 |  |  |  | – |  |  |  | 2,287 |
Total net revenues |  | $ | 3,913 |  |  | $ | 3,460 |  |  | $ | 2,740 |  |  | $ | 10,151 |  |  | $ | 5,150 |  |  | $ | 25,414 |
| (1) | On July 2, 2015, we contributed our global coffee businesses primarily from our Europe, EEMEA and Asia Pacific segment beverage categories. The year-over-year decrease in beverages primarily reflects the coffee business transactions and unfavorable currency on our remaining beverage business. The impact of deconsolidating our coffee businesses on July 2, 2015 was $670 million in Europe, $169 million in EEMEA and $16 million in Asia Pacific on a year-over-year third quarter and constant currency basis. The impact of deconsolidating our coffee businesses on July 2, 2015 was $824 million in Europe, $250 million in EEMEA, $10 million in Asia Pacific and $2 million in Latin America on a year-over-year nine month period and constant currency basis. Refer to Note 2, Divestitures and Acquisitions – Coffee Business Transactions, for more information.
| (2) | During 2014, we realigned some of our products across product categories and as such, we reclassified the product category net revenues on a basis consistent with the 2015 presentation.

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 34 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8981-108599 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 41 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e9038-108599 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 33 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8971-108599 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 12 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8595-108599 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8380-108599 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8933-108599 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 26 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8844-108599 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 35 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8984-108599 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 40 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e9031-108599 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 42 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e9054-108599 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8538-108599 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 29 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8864-108599 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 31 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8924-108599 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8906-108599 + Details
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