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Segment Reporting
 3 Months Ended
Mar. 31, 2016
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. Our regional management teams have responsibility for the business, product categories and financial results in the regions.

Historically, we have recorded income from equity method investments within our operating income as these investments were part 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 equity method investment earnings outside of segment operating income. For the three months ended March 31, 2016, equity method investment net earnings were $85 million. Earnings from equity method investments for the three months ended March 31, 2015 recorded within segment operating income were $22 million in Asia Pacific, $3 million in North America and $1 million in EEMEA. See Note 1, Basis of Presentation – Principles of Consolidation, for additional information.

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 JDE coffee business transactions, gain on equity method investment exchange, loss on deconsolidation of Venezuela 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 Three Months Ended  
   March 31,  
     2016      2015  
     (in millions)  

Net revenues:

      

Latin America (1)

    $ 817       $ 1,257   

Asia Pacific (2)

      1,127         1,153   

EEMEA (2)

      547         695   

Europe (2)

      2,289         2,975   

North America

      1,675         1,682   
  

 

 

     

 

 

  

Net revenues

    $ 6,455       $ 7,762   
  

 

 

     

 

 

  

 

  (1) For the three months ended March 31, 2015, net revenues of $218 million from our Venezuelan subsidiaries are included in our condensed consolidated financial statements. Beginning in 2016, we account for our Venezuelan subsidiaries using the cost method of accounting and no longer include net revenues of our Venezuelan subsidiaries within our condensed consolidated financial statements. Refer to Note 1, Basis of Presentation – Currency Translation and Highly Inflationary Accounting: Venezuela, for more information.
  (2) On July 2, 2015, we contributed our global coffee businesses primarily from our Europe, EEMEA and Asia Pacific segments. The net revenues of our global coffee business for the three months ended March 31, 2015 were $618 million in Europe, $116 million in EEMEA and $18 million in Asia Pacific. Refer to Note 2, Divestitures and Acquisitions – JDE Coffee Business Transactions, for more information.

 

                                     
     For the Three Months Ended  
     March 31,  
     2016      2015  
     (in millions)  

Earnings from continuing operations before income taxes:

      

Operating income:

      

Latin America

    $ 67       $ 154   

Asia Pacific

      148         146   

EEMEA

      51         32   

Europe

      343         326   

North America

      271         281   

Unrealized gains / (losses) on hedging activities

      (54 )       (7 ) 

General corporate expenses

      (60 )       (74 ) 

Amortization of intangibles

      (44 )       (46 ) 

Acquisition-related costs

      –         (1 ) 
  

 

 

     

 

 

  

Operating income

      722         811   

Interest and other expense, net

      (244 )       (386 ) 
  

 

 

     

 

 

  

Earnings from continuing operations before income taxes

    $ 478       $ 425   
  

 

 

     

 

 

  

Items impacting our segment operating results are discussed in Note 1, Basis of Presentation, including the Venezuela deconsolidation and currency devaluation, Note 2, Divestitures and Acquisitions, Note 5, Goodwill and Intangible Assets, and Note 6, 2014-2018 Restructuring Program. Also see Note 7, Debt and Borrowing Arrangements, and Note 8, Financial Instruments, for more information on our interest and other expense, net for each period.

 

Net revenues by product category were:

 

                                                                                                                 
     For the Three Months Ended March 31, 2016  
     Latin      Asia                    North         
   America      Pacific      EEMEA      Europe      America      Total  
     (in millions)  

Biscuits

    $ 164       $ 336       $ 125       $ 589       $ 1,361       $ 2,575   

Chocolate

      198         393         160         1,203         45         1,999   

Gum & Candy

      216         186         114         172         269         957   

Beverages (1)

      164         96         82         47         –         389   

Cheese & Grocery

      75         116         66         278         –         535   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total net revenues

    $ 817       $ 1,127       $ 547       $ 2,289       $ 1,675       $ 6,455   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

                                                                                                                 
     For the Three Months Ended March 31, 2015  
     Latin      Asia                    North         
   America (2)      Pacific      EEMEA      Europe (3)      America      Total  
     (in millions)  

Biscuits

    $ 309       $ 316       $ 124       $ 594       $ 1,358       $ 2,701   

Chocolate

      294         402         199         1,234         56         2,185   

Gum & Candy

      295         191         118         183         268         1,055   

Beverages (1)

      214         115         185         674         –         1,188   

Cheese & Grocery

      145         129         69         290         –         633   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total net revenues

    $ 1,257       $ 1,153       $ 695       $ 2,975       $ 1,682       $ 7,762   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

  (1) On July 2, 2015, we contributed our global coffee businesses primarily from our Europe, EEMEA and Asia Pacific segment beverage categories. The net revenues of our global coffee business for the three months ended March 31, 2015 were $618 million in Europe, $116 million in EEMEA and $18 million in Asia Pacific. Refer to Note 2, Divestitures and Acquisitions – JDE Coffee Business Transactions, for more information.
  (2) For the three months ended March 31, 2015, our Venezuelan subsidiaries net revenues of $104 million in biscuits, $63 million in cheese & grocery, $35 million in gum & candy and $16 million in beverages are included in our condensed consolidated financial statements. Beginning in 2016, we account for our Venezuelan subsidiaries using the cost method of accounting and no longer include net revenues of our Venezuelan subsidiaries within our condensed consolidated financial statements. Refer to Note 1, Basis of Presentation – Currency Translation and Highly Inflationary Accounting: Venezuela, for more information.
  (3) During 2016, we realigned some of our products across product categories within our Europe segment and as such, we reclassified the product category net revenues on a basis consistent with the 2016 presentation.