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 four reportable operating segments:

•

Latin America

•

AMEA

•

Europe

•

North America

On October 1, 2016, we integrated our EEMEA operating segment into our Europe and Asia Pacific operating segments to further leverage and optimize the operating scale built within the Europe and Asia Pacific regions. Russia, Ukraine, Turkey, Belarus, Georgia and Kazakhstan were combined within our Europe operating segment, while the remaining Middle East and African countries were combined within our Asia Pacific region to form the AMEA operating segment. We have reflected the segment change as if it had occurred in all periods presented.

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.

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 and gains and losses on divestitures 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, revised to reflect our new segment structure, were:


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2017			2016			2017			2016
	(in millions)

Net revenues:
Latin America	$	908		$	868		$	2,666		$	2,528
AMEA		1,405			1,443			4,290			4,404
Europe		2,442			2,332			6,978			7,073
North America		1,775			1,753			4,996			5,148

Net revenues	$	6,530		$	6,396		$	18,930		$	19,153

Earnings before income taxes:
Operating income:
Latin America	$	255		$	92		$	469		$	191
AMEA		82			165			425			504
Europe		410			316			1,158			924
North America		318			274			824			840
Unrealized gains/(losses) on hedging activities (mark-to-market impacts)		28			(12	)		(69	)		(49	)
General corporate expenses		(54	)		(89	)		(196	)		(216	)
Amortization of intangibles		(45	)		(44	)		(133	)		(132	)
Net gain on divestitures		187			–			184			–

Operating income		1,181			702			2,662			2,062
Interest and other expense, net		(19	)		(145	)		(262	)		(540	)

Earnings before income taxes	$	1,162		$	557		$	2,400		$	1,522

Items impacting our segment operating results are discussed in Note 1, Basis of Presentation, Note 2, Divestitures and Acquisitions, Note 4, Property, Plant and Equipment, Note 5, Goodwill and Intangible Assets, Note 6, 2014-2018 Restructuring Program and Note 11, Commitments and Contingencies. 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, revised to reflect our new segment structure, were:


	For the Three Months Ended September 30, 2017
	Latin America		AMEA		Europe		North America		Total
	(in millions)

Biscuits	$	210	$	444	$	761	$	1,427	$	2,842
Chocolate		207		520		1,196		74		1,997
Gum & Candy		247		228		185		274		934
Beverages		155		104		23		–		282
Cheese & Grocery		89		109		277		–		475

Total net revenues	$	908	$	1,405	$	2,442	$	1,775	$	6,530


	For the Three Months Ended September 30, 2016
	Latin America		AMEA		Europe		North America		Total
	(in millions)
Biscuits	$	191	$	416	$	677	$	1,403	$	2,687
Chocolate		185		508		1,124		65		1,882
Gum & Candy		247		239		218		285		989
Beverages		164		107		37		–		308
Cheese & Grocery		81		173		276		–		530

Total net revenues	$	868	$	1,443	$	2,332	$	1,753	$	6,396


	For the Nine Months Ended September 30, 2017
	Latin America		AMEA		Europe		North America		Total
	(in millions)

Biscuits	$	580	$	1,198	$	2,130	$	4,061	$	7,969
Chocolate		660		1,460		3,365		194		5,679
Gum & Candy		701		695		582		741		2,719
Beverages		477		466		88		–		1,031
Cheese & Grocery		248		471		813		–		1,532

Total net revenues	$	2,666	$	4,290	$	6,978	$	4,996	$	18,930


	For the Nine Months Ended September 30, 2016
	Latin America		AMEA		Europe		North America		Total
	(in millions)
Biscuits	$	551	$	1,179	$	2,039	$	4,162	$	7,931
Chocolate		562		1,393		3,368		153		5,476
Gum & Candy		713		745		688		833		2,979
Beverages		466		513		124		–		1,103
Cheese & Grocery		236		574		854		–		1,664

Total net revenues	$	2,528	$	4,404	$	7,073	$	5,148	$	19,153