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Segment Reporting

12 Months Ended

Dec. 31, 2018

Note 17. 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.

Our operations and management structure are organized into four 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 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, net gain 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, reflecting our current segment structure for all periods presented, were:



	For the Years Ended December 31,
	2018		2017		2016
	(in millions)
Net revenues:
Latin America	$	3,202	$	3,566	$	3,392
AMEA	5,729		5,739		5,816
Europe	10,122		9,794		9,755
North America	6,885		6,797		6,960
Net revenues	$	25,938	$	25,896	$	25,923



	For the Years Ended December 31,
	2018			2017			2016
	(in millions)
Earnings before income taxes:
Operating income:
Latin America	$	410		$	564		$	272
AMEA	702			514			505
Europe	1,734			1,610			1,198
North America	849			1,144			1,128
Unrealized gains/(losses) on hedging activities (mark-to-market impacts)	141			(96		)	(94		)
General corporate expenses	(335		)	(282		)	(287		)
Amortization of intangibles	(176		)	(178		)	(176		)
Net gain on divestitures	—			186			9
Acquisition-related costs	(13		)	—			(1		)
Operating income	3,312			3,462			2,554
Benefit plan non-service income⁽¹⁾	50			44			15
Interest and other expense, net	(520		)	(382		)	(1,115		)
Earnings before income taxes	$	2,842		$	3,124		$	1,454

(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 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.

No single customer accounted for 10% or more of our net revenues from continuing operations in 2018. Our five largest customers accounted for 16.8% and our ten largest customers accounted for 23.0% of net revenues from continuing operations in 2018.

Items impacting our segment operating results are discussed in Note 1, Summary of Significant Accounting Policies, Note 2, Divestitures and Acquisitions, Note 4, Property, Plant and Equipment, Note 5, Goodwill and Intangible Assets, Note 7, Restructuring Program, and Note 13, 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.

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,
	2018		2017			2016
	(in millions)
Total assets:
Latin America ⁽¹⁾	$	4,699	$	4,948		$	5,156
AMEA ⁽¹⁾	9,571		9,883			10,031
Europe ⁽¹⁾	19,426		21,611			19,934
North America ⁽¹⁾	21,015		20,709			20,694
Equity method investments	7,123		6,193			5,553
Unallocated assets and adjustments ⁽²⁾	895		(387		)	138
Total assets	$	62,729	$	62,957		$	61,506


(1)	Segment assets do not reflect outstanding intercompany asset balances as intercompany accounts are eliminated at a segment level.


(2)	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,
	2018		2017		2016
	(in millions)
Depreciation expense:
Latin America	$	97	$	107	$	92
AMEA	159		157		161
Europe	248		239		253
North America	131		135		141
Total depreciation expense	$	635	$	638	$	647



	For the Years Ended December 31,
	2018		2017		2016
	(in millions)
Capital expenditures:
Latin America	$	261	$	226	$	321
AMEA	277		280		349
Europe	326		278		294
North America	231		230		260
Total capital expenditures	$	1,095	$	1,014	$	1,224

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,
	2018		2017		2016
	(in millions)
Net revenues:
United States	$	6,401	$	6,275	$	6,329
Other	19,537		19,621		19,594
Total net revenues	$	25,938	$	25,896	$	25,923



	As of December 31,
	2018		2017		2016
	(in millions)
Long-lived assets:
United States	$	1,481	$	1,468	$	1,508
Other	7,539		7,733		7,229
Total long-lived assets	$	9,020	$	9,201	$	8,737

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, 2018
	Latin America		AMEA		Europe		North America		Total
	(in millions)
Biscuits	$	727	$	1,724	$	3,127	$	5,607	$	11,185
Chocolate	747		2,080		5,083		267		8,177
Gum & Candy	865		879		736		1,011		3,491
Beverages	533		553		98		—		1,184
Cheese & Grocery	330		493		1,078		—		1,901
Total net revenues	$	3,202	$	5,729	$	10,122	$	6,885	$	25,938



	For the Year Ended December 31, 2017 ⁽¹⁾
	Latin America		AMEA		Europe		North America		Total
	(in millions)
Biscuits	$	779	$	1,637	$	2,944	$	5,479	$	10,839
Chocolate	862		2,008		4,869		293		8,032
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⁽¹⁾
	Latin America		AMEA		Europe		North America		Total
	(in millions)
Biscuits	$	734	$	1,592	$	2,765	$	5,565	$	10,656
Chocolate	743		1,897		4,778		255		7,673
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


(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.