Segment Reporting

12 Months Ended

Dec. 31, 2019

Note 18. 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 across 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

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 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,
	2019		2018		2017
	(in millions)
Net revenues:
Latin America	$	3,018	$	3,202	$	3,566
AMEA	5,770		5,729		5,739
Europe	9,972		10,122		9,794
North America	7,108		6,885		6,797
Net revenues	$	25,868	$	25,938	$	25,896



Earnings before income taxes:
Operating income:
Latin America	$	341		$	410		$	564
AMEA	691			702			514
Europe	1,732			1,734			1,610
North America	1,451			849			1,144
Unrealized gains/(losses) on hedging activities (mark-to-market impacts)	91			141			(96		)
General corporate expenses	(330		)	(335		)	(282		)
Amortization of intangibles	(174		)	(176		)	(178		)
Net gains on divestitures	44			—			186
Acquisition-related costs	(3		)	(13		)	—
Operating income	3,843			3,312			3,462
Benefit plan non-service income⁽¹⁾	60			50			44
Interest and other expense, net	(456		)	(520		)	(382		)
Earnings before income taxes	$	3,447		$	2,842		$	3,124

(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 2019. Our five largest customers accounted for 17.0% and our ten largest customers accounted for 23.2% of net revenues from continuing operations in 2019.

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 6, Goodwill and Intangible Assets, Note 8, Restructuring Program, and Note 14, Commitments and Contingencies. Also see Note 9, Debt and Borrowing Arrangements, and Note 10, 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,
	2019		2018		2017
	(in millions)
Total assets:
Latin America ⁽¹⁾	$	4,716	$	4,699	$	4,948
AMEA ⁽¹⁾	9,740		9,571		9,883
Europe ⁽¹⁾	20,354		19,426		21,611
North America ⁽¹⁾	21,637		21,015		20,709
Equity method investments	7,212		7,123		6,193
Unallocated assets and adjustments ⁽²⁾	890		895		(387		)
Total assets	$	64,549	$	62,729	$	62,957


(1)	Segment assets do not reflect outstanding intercompany asset balances as intercompany accounts have been 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,
	2019		2018		2017
	(in millions)
Depreciation expense ⁽¹⁾:
Latin America	$	105	$	97	$	107
AMEA	164		159		157
Europe	238		248		239
North America	138		131		135
Total depreciation expense	$	645	$	635	$	638


(1)	Includes depreciation expense related to owned property, plant and equipment. Does not include amortization of intangible assets or leased assets. Refer to the consolidated statement of cash flows for 2019 for total depreciation and amortization expenses.



	For the Years Ended December 31,
	2019		2018		2017
	(in millions)
Capital expenditures:
Latin America	$	197	$	261	$	226
AMEA	244		277		280
Europe	297		326		278
North America	187		231		230
Total capital expenditures	$	925	$	1,095	$	1,014

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,
	2019		2018		2017
	(in millions)
Net revenues:
United States	$	6,625	$	6,401	$	6,275
Other	19,243		19,537		19,621
Total net revenues	$	25,868	$	25,938	$	25,896



	As of December 31,
	2019		2018		2017
	(in millions)
Long-lived assets:
United States	$	1,806	$	1,481	$	1,468
Other	8,370		7,539		7,733
Total long-lived assets	$	10,176	$	9,020	$	9,201

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, 2019
	Latin America		AMEA		Europe		North America		Total
	(in millions)
Biscuits	$	708	$	1,844	$	2,998	$	5,888	$	11,438
Chocolate	710		2,082		5,119		247		8,158
Gum & Candy	823		861		698		973		3,355
Beverages	452		546		97		—		1,095
Cheese & Grocery	325		437		1,060		—		1,822
Total net revenues	$	3,018	$	5,770	$	9,972	$	7,108	$	25,868



	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
	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