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Segment Reporting

12 Months Ended

Dec. 31, 2017

Segment Reporting

Note 16. 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.

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 six months ended December 31, 2015, after-tax equity method investment net earnings were less than $1 million on a combined basis. Earnings from equity method investments through July 2, 2015 recorded within segment operating income were $52 million in AMEA and $4 million in North America. See Note 1, Summary of Significant Accounting Policies – Principles of Consolidation, and Note 2, Divestitures and Acquisitions, for additional information.

In 2015, we also began to report stock-based compensation for our corporate employees within general corporate expenses that were reported within our North America region. We reclassified $32 million of corporate stock-based compensation expense in 2015 from the North America segment to general corporate expenses.

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, 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, reflecting our current segment structure for all periods presented, were:

		For the Years Ended December 31,
		2017				2016				2015
		(in millions)
Net revenues:
Latin America (1)		$	3,566			$	3,392			$	4,988
AMEA (2)			5,739				5,816				6,002
Europe (2)			9,794				9,755				11,672
North America			6,797				6,960				6,974
Net revenues		$	25,896			$	25,923			$	29,636

(1) Net revenues of $1,217 million for 2015 from our Venezuelan subsidiaries are included in our 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 consolidated financial statements. Refer to Note 1, Summary of Significant Accounting Policies – 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 and AMEA segments. Net revenues of our global coffee business were $1,561 million in Europe and $66 million in AMEA for the year ended December 31, 2015. Refer to Note 2, Divestitures and Acquisitions – JDE Coffee Business Transactions, for more information.

		For the Years Ended December 31,
		2017				2016				2015
		(in millions)
Earnings before income taxes:
Operating income:
Latin America		$	565			$	271			$	485
AMEA			516				506				389
Europe			1,680				1,267				1,350
North America			1,120				1,078				1,105
Unrealized (losses)/gains on hedging activities (mark-to-market impacts)			(96	)			(94	)			96
General corporate expenses			(287	)			(291	)			(383	)
Amortization of intangibles			(178	)			(176	)			(181	)
Net gain on divestitures			186				9				6,822
Loss on deconsolidation of Venezuela			–				–				(778	)
Acquisition-related costs			–				(1	)			(8	)
Operating income			3,506				2,569				8,897
Interest and other expense, net			(382	)			(1,115	)			(1,013	)
Earnings before income taxes		$	3,124			$	1,454			$	7,884

No single customer accounted for 10% or more of our net revenues from continuing operations in 2017. Our five largest customers accounted for 15.6% and our ten largest customers accounted for 21.4% of net revenues from continuing operations in 2017.

Items impacting our segment operating results are discussed in Note 1, Summary of Significant Accounting Policies, including the Venezuela deconsolidation and currency devaluation, 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 12, 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.

Total assets, depreciation expense and capital expenditures by segment, reflecting our current segment structure for all periods presented, were:

		For the Years Ended December 31,
		2017				2016				2015
		(in millions)
Total assets:
Latin America		$	4,948			$	5,156			$	4,673
AMEA			9,883				10,031				10,460
Europe			21,611				19,934				21,026
North America			20,709				20,694				21,175
Equity method investments			6,345				5,585				5,387
Unallocated assets and adjustments (1)			(387	)			138				122
Total assets		$	63,109			$	61,538			$	62,843

(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. Final adjustments for jurisdictional netting of deferred tax assets and liabilities is done at a consolidated level.

		For the Years Ended December 31,
		2017				2016				2015
		(in millions)
Depreciation expense:
Latin America		$	107			$	92			$	94
AMEA			157				161				155
Europe			239				253				299
North America			135				141				165
Total depreciation expense		$	638			$	647			$	713

		For the Years Ended December 31,
		2017				2016				2015
		(in millions)
Capital expenditures:
Latin America		$	226			$	321			$	354
AMEA			280				349				381
Europe			278				294				517
North America			230				260				262
Total capital expenditures		$	1,014			$	1,224			$	1,514

Geographic data for net revenues (recognized in the countries where products are sold) and long-lived assets, excluding deferred tax, goodwill, intangible assets and equity method investments, were:

		For the Years Ended December 31,
		2017				2016				2015
		(in millions)
Net revenues:
United States		$	6,275			$	6,329			$	6,302
Other			19,621				19,594				23,334
Total net revenues		$	25,896			$	25,923			$	29,636

		As of December 31,
		2017				2016				2015
		(in millions)
Long-lived assets:
United States		$	1,468			$	1,508			$	1,551
Other			7,733				7,229				7,238
Total long-lived assets		$	9,201			$	8,737			$	8,789

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

Net revenues by product category, reflecting our current segment structure for all periods presented, were:

		For the Year Ended December 31, 2017
		Latin America (1)				AMEA				Europe				North America				Total (1)
		(in millions)
Biscuits		$	779			$	1,634			$	2,880			$	5,479			$	10,772
Chocolate			862				2,011				4,933				293				8,099
Gum & Candy			919				919				775				1,025				3,638
Beverages			665				569				121				–				1,355
Cheese & Grocery			341				606				1,085				–				2,032
Total net revenues		$	3,566			$	5,739			$	9,794			$	6,797			$	25,896

		For the Year Ended December 31, 2016
		Latin America (1)				AMEA				Europe				North America				Total (1)
		(in millions)
Biscuits		$	734			$	1,588			$	2,703			$	5,565			$	10,590
Chocolate			743				1,901				4,840				255				7,739
Gum & Candy			938				953				916				1,140				3,947
Beverages			657				611				177				–				1,445
Cheese & Grocery			320				763				1,119				–				2,202
Total net revenues		$	3,392			$	5,816			$	9,755			$	6,960			$	25,923

		For the Year Ended December 31, 2015
		Latin America (1)				AMEA				Europe (3)				North America				Total (1)
		(in millions)
Biscuits		$	1,605			$	1,539			$	2,680			$	5,569			$	11,393
Chocolate			840				1,928				5,050				256				8,074
Gum & Candy			1,091				1,003				1,015				1,149				4,258
Beverages (2)			767				730				1,763				–				3,260
Cheese & Grocery			685				802				1,164				–				2,651
Total net revenues		$	4,988			$	6,002			$	11,672			$	6,974			$	29,636

(1) In 2015, our consolidated net revenues included Venezuela net revenues of $763 million in biscuits, $340 million in cheese & grocery, $66 million in gum & candy and $48 million in beverages. Following the deconsolidation of our Venezuela operations at the end of 2015, our 2016 and 2017 consolidated net revenues no longer include the net revenues of our Venezuelan subsidiaries. Refer to Note 1, Summary of Significant Accounting Policies – 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 and AMEA segment beverage categories. Net revenues of our global coffee business were $1,561 million in Europe and $66 million in AMEA for the year ended December 31, 2015. Refer to Note 2, Divestitures and Acquisitions – JDE Coffee Business Transactions, for more information.

(3) During 2016, we realigned some of our products across product categories primarily within our Europe segment and as such, we reclassified the product category net revenues on a basis consistent with the 2016 presentation.

X

- 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
-URI http://asc.fasb.org/topic&trid=2134510

+ Details

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