Reportable Segments

9 Months Ended

Sep. 28, 2019

Reportable segments

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

On December 30, 2018 the Company reorganized its North American business. The reorganization eliminated the legacy business unit structure and internal reporting. In addition, the Company changed the internal reporting provided to the chief operating decision maker (CODM) and segment manager. As a result, the Company reevaluated its operating segments. In conjunction with the reorganization, certain global research and development resources and related activities were transferred from the North America business to Corporate. Prior period segment results were not restated for the transfer as the impacts were not considered material.

In addition, the Company transferred its Middle East, North Africa, and Turkey businesses from Kellogg Europe to Kellogg AMEA, effective December 30, 2018. This consolidated the Company's Africa business under a single regional management team. All comparable prior periods have been restated to reflect the change. For the quarter and year-to-date periods ended September 29, 2018, the change resulted in $65 million and $194 million, respectively, of reported net sales and $11 million and $35 million, respectively, of reported operating profit transferring from Kellogg Europe to Kellogg AMEA.

The Company manages its operations through four operating segments that are based on geographic location – North America which includes U.S. businesses and Canada; Europe which consists principally of European countries; Latin America which consists of Central and South America and includes Mexico; and AMEA (Asia Middle East Africa) which consists of Africa, Middle East, Australia and other Asian and Pacific markets. These operating segments also represent our reportable segments.

On July 28, 2019, the Company completed its sale of selected cookies, fruit and fruit-flavored snacks, pie crusts, and ice cream cones businesses to Ferrero for approximately $1.3 billion in cash. Both the total assets and net assets, consisting primarily of goodwill and intangibles, property, plant and equipment, and inventory, of the businesses were approximately $1.3 billion. The operating results for these businesses were primarily included in the North America reporting segment prior to the sale.

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:



	Quarter ended						Year-to-date period ended
(millions)	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
Net sales
North America	$	2,059		$	2,188		$	6,496		$	6,645
Europe	527			531			1,566			1,610
Latin America	244			239			707			710
AMEA	542			511			1,586			1,265
Consolidated	$	3,372		$	3,469		$	10,355		$	10,230
Operating profit
North America (a)(b)	$	208		$	330		$	910		$	1,114
Europe	68			63			164			210
Latin America	23			28			61			70
AMEA (c)	53			46			145			125
Total Reportable Segments	352			467			1,280			1,519
Corporate (b)	(89		)	(71		)	(239		)	(139		)
Consolidated	$	263		$	396		$	1,041		$	1,380

(a) During the third quarter of 2019, North America operating profit includes the recognition of multi-employer pension plan exit liabilities totaling $132 million.

(b) Corporate operating profit in 2019 includes the cost of certain global research and development activities that were previously included in the North America reportable segment in 2018 that totaled approximately $12 million and $36 million for the quarter and year-to-date periods, respectively.

(c) During the third quarter of 2019, AMEA operating profit includes the $13 million reversal of indirect excise tax liabilities largely the result of participating in a tax amnesty program.

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



	Quarter ended				Year-to-date period ended
(millions)	September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018
Snacks	$	1,610	$	1,688	$	5,132	$	5,146
Cereal	1,280		1,330		3,811		3,985
Frozen	260		258		786		781
Noodles and other	222		193		626		318
Consolidated	$	3,372	$	3,469	$	10,355	$	10,230