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.

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) and amortization of intangibles, gains and losses on divestitures 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 benefit plan non-service income and 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 June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017
	(in millions)
Net revenues:
Latin America	$	774		$	848		$	1,665		$	1,758
AMEA	1,360			1,394			2,902			2,885
Europe	2,303			2,171			5,009			4,536
North America	1,675			1,573			3,301			3,221
Net revenues	$	6,112		$	5,986		$	12,877		$	12,400
Earnings before income taxes:
Operating income:
Latin America	$	92		$	102		$	218		$	213
AMEA	177			161			405			342
Europe	367			321			864			714
North America	(95		)	225			180			517
Unrealized gains/(losses) on hedging activities (mark-to-market impacts)	88			(46		)	294			(97		)
General corporate expenses	(91		)	(80		)	(155		)	(137		)
Amortization of intangibles	(44		)	(44		)	(88		)	(88		)
Loss on divestiture	—			(3		)	—			(3		)
Acquisition-related costs	(13		)	—			(13		)	—
Operating income	481			636			1,705			1,461
Benefit plan non-service income ⁽¹⁾	15			5			28			20
Interest and other expense, net	(248		)	(124		)	(328		)	(243		)
Earnings before income taxes	$	248		$	517		$	1,405		$	1,238

(1)

During the first quarter of 2018, in connection with adopting a new pension cost classification accounting standard, we reclassified certain of our benefit plan component costs other than service costs out of operating income into a new line item, benefit plan non-service income, on our condensed consolidated statements of earnings. As such, we have recast our historical operating income and segment operating income to reflect this reclassification, which had no impact to earnings before income taxes or net earnings.

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 7, 2014-2018 Restructuring Program, and Note 12, Commitments and Contingencies. 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.

Net revenues by product category were:



	For the Three Months Ended June 30, 2018
	Latin America		AMEA		Europe		North America		Total
	(in millions)
Biscuits	$	192	$	387	$	810	$	1,403	$	2,792
Chocolate	161		440		1,003		46		1,650
Gum & Candy	224		236		200		226		886
Beverages	116		173		19		—		308
Cheese & Grocery	81		124		271		—		476
Total net revenues	$	774	$	1,360	$	2,303	$	1,675	$	6,112

	For the Three Months Ended June 30, 2017 ⁽¹⁾
	Latin America		AMEA		Europe		North America		Total
	(in millions)
Biscuits	$	200	$	356	$	734	$	1,301	$	2,591
Chocolate	194		424		930		50		1,598
Gum & Candy	241		238		204		222		905
Beverages	129		189		24		—		342
Cheese & Grocery	84		187		279		—		550
Total net revenues	$	848	$	1,394	$	2,171	$	1,573	$	5,986



	For the Six Months Ended June 30, 2018
	Latin America		AMEA		Europe		North America		Total
	(in millions)
Biscuits	$	375	$	829	$	1,605	$	2,736	$	5,545
Chocolate	404		1,013		2,426		103		3,946
Gum & Candy	448		471		386		462		1,767
Beverages	277		345		47		—		669
Cheese & Grocery	161		244		545		—		950
Total net revenues	$	1,665	$	2,902	$	5,009	$	3,301	$	12,877

	For the Six Months Ended June 30, 2017 ⁽¹⁾
	Latin America		AMEA		Europe		North America		Total
	(in millions)
Biscuits	$	370	$	756	$	1,399	$	2,634	$	5,159
Chocolate	453		938		2,139		120		3,650
Gum & Candy	454		467		397		467		1,785
Beverages	322		362		65		—		749
Cheese & Grocery	159		362		536		—		1,057
Total net revenues	$	1,758	$	2,885	$	4,536	$	3,221	$	12,400


(1)	During the first quarter of 2018, 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 2018 presentation.