REPORTABLE SEGMENTS

Kellogg Company is the world’s leading producer of cereal, second largest producer of crackers and cookies and a leading producer of savory snacks and frozen foods. Additional product offerings include toaster pastries, cereal bars, fruit-flavored snacks, veggie foods, and noodles. Kellogg products are manufactured and marketed globally. Principal markets for these products include the United States and United Kingdom.

For the periods presented, the Company has the following reportable segments: U.S. Snacks; U.S. Morning Foods; U.S. Specialty Channels; North America Other; Europe; Latin America; and Asia Pacific. The Company manages its operations through ten operating segments that are based on product category or geographic location. These operating segments are evaluated for similarity with regards to economic characteristics, products, production processes, types or classes of customers, distribution methods and regulatory environments to determine if they can be aggregated into reportable segments. The reportable segments are discussed in greater detail below.

U.S. Snacks includes crackers, cookies, cereal bars, savory snacks and fruit-flavored snacks.

The U.S. Morning Foods reportable segment includes primarily cereal and toaster pastries.

U.S. Specialty Channels primarily represents food away from home channels, including food service, convenience, vending, Girl Scouts and food manufacturing. The food service business is mostly non-commercial, serving institutions such as schools and hospitals. The convenience business includes traditional convenience stores as well as alternate retailing outlets.

North America Other includes the U.S. Frozen, Kashi, Canada, and RX operating segments. As these operating segments are not considered economically similar enough to aggregate with other operating segments and are immaterial for separate disclosure, they have been grouped together as a single reportable segment.

The three remaining reportable segments are based on geographic location — Europe which consists principally of European countries, the Middle East and Northern Africa; Latin America which consists of Central and South America and includes Mexico; and Asia Pacific which consists of Sub-Saharan Africa, Australia and other Asian and Pacific markets.

In November 2018, the Company announced plans to reorganize Kellogg North America effective at the beginning of fiscal 2019. As a result of these changes, the Company has re-evaluated its North American operating segments and determined that effective at the beginning of fiscal 2019, the Company will have the following reportable segments: North America, Europe, Latin America, and Asia Middle East and Africa (AMEA).

Additionally, the Company announced the transfer of the Middle East, Northern Africa, and Turkey businesses out of the Europe reportable segment and into Asia Pacific. The Asia Pacific reportable segment will be renamed Kellogg AMEA, at the beginning of fiscal 2019.

Also in November 2018, the Company announced that it will begin to explore the potential sale of the cookie, fruit snacks, pie crusts, and ice cream cone businesses. These businesses are primarily reported as part of the U.S. Snacks, U.S. Specialty Channels and North America Other reportable segments and represent approximately $900 million in net sales for the year ended December 29, 2018. At December 29, 2018, these businesses were not classified as held for sale based upon the status of the process and board authorization.

The measurement of reportable segment results is based on segment operating profit which is generally consistent with the presentation of operating profit in the Consolidated Statement of Income. Reportable segment results were as follows:



(millions)	2018			2017			2016
Net sales
U.S. Snacks	$	2,957		$	3,110		$	3,197
U.S. Morning Foods	2,643			2,709			2,917
U.S. Specialty Channels	1,235			1,242			1,207
North America Other	1,853			1,612			1,593
Europe	2,395			2,291			2,383
Latin America	947			944			772
Asia Pacific	1,517			946			896
Consolidated	$	13,547		$	12,854		$	12,965
Operating profit
U.S. Snacks	$	446		$	138		$	325
U.S. Morning Foods	478			567			597
U.S. Specialty Channels	251			312			279
North America Other	222			229			181
Europe	297			276			208
Latin America	102			108			84
Asia Pacific	128			84			69
Total Reportable Segments	1,924			1,714			1,743
Corporate	(218		)	(327		)	(260		)
Consolidated	$	1,706		$	1,387		$	1,483
Depreciation and amortization (a)
U.S. Snacks	$	138		$	146		$	159
U.S. Morning Foods	127			120			122
U.S. Specialty Channels	12			13			11
North America Other	64			51			56
Europe	80			80			114
Latin America	37			37			22
Asia Pacific	55			33			30
Total Reportable Segments	513			480			514
Corporate	3			1			3
Consolidated	$	516		$	481		$	517


(a)	Includes asset impairment charges as discussed in Note 14.

Certain items such as interest expense and income taxes, while not included in the measure of reportable segment operating results, are regularly reviewed by Management for the Company’s internationally-based reportable segments as shown below.



(millions)	2018		2017			2016
Interest expense
North America	$	1	$	3		$	5
Europe	10		16			8
Latin America	3		2			4
Asia Pacific	5		2			2
Corporate	268		233			387
Consolidated	$	287	$	256		$	406
Income taxes
Europe	$	22	$	(39	)	$	(16	)
Latin America	30		33			30
Asia Pacific	24		12			14
Corporate & North America	105		404			207
Consolidated	$	181	$	410		$	235

Management reviews balance sheet information, including total assets, based on geography. For all North American-based operating segments, balance sheet information is reviewed by Management in total and not on an individual operating segment basis.



(millions)	2018		2017		2016
Additions to long-lived assets
North America	$	336	$	329	$	318
Europe	90		106		125
Latin America	76		32		24
Asia Pacific	73		30		36
Corporate	3		4		4
Consolidated	$	578	$	501	$	507



(millions)	2018			2017
Total assets
North America	$	10,777		$	10,867
Europe	4,870			4,057
Latin America	1,060			1,094
Asia Pacific	2,812			1,226
Corporate	649			1,426
Elimination entries	(2,388		)	(2,319		)
Consolidated	$	17,780		$	16,351

The Company’s largest customer, Wal-Mart Stores, Inc. and its affiliates, accounted for approximately 19% of consolidated net sales during 2018, 20% in 2017, and 20% in 2016, comprised principally of sales within the United States.

Supplemental geographic information is provided below for net sales to external customers and long-lived assets:



(millions)	2018		2017		2016
Net sales
United States	$	8,176	$	8,160	$	8,413
All other countries	5,371		4,694		4,552
Consolidated	$	13,547	$	12,854	$	12,965
Long-lived assets
United States	$	2,197	$	2,195	$	2,208
All other countries	1,534		1,521		1,361
Consolidated	$	3,731	$	3,716	$	3,569

Supplemental product information is provided below for net sales to external customers:



(millions)	2018		2017		2016
Snacks	$	6,797	$	6,683	$	6,655
Cereal	5,208		5,222		5,402
Frozen and other	1,542		949		908
Consolidated	$	13,547	$	12,854	$	12,965