NOTE 14
OPERATING SEGMENTS
OPERATING SEGMENTS
Kellogg Company is the world’s leading producer of cereal
and a leading producer of convenience foods, including cookies,
crackers, toaster pastries, cereal bars, fruit snacks, frozen
waffles, and veggie foods. Kellogg products are manufactured and
marketed globally. Principal markets for these products include
the United States and United Kingdom. The Company currently
manages its operations in four geographic operating segments,
comprised of North America and the three International operating
segments of Europe, Latin America, and Asia Pacific. Beginning
in 2007, the Asia Pacific segment includes South Africa, which
was formerly a part of Europe. Prior years were restated for
comparison purposes.
The measurement of operating segment results is generally
consistent with the presentation of the Consolidated Statement
of Earnings and Balance Sheet. Intercompany transactions between
operating segments were insignificant in all periods presented.
| (millions) | 2007 | 2006 | 2005 | |||||||||
|
Net sales
|
||||||||||||
|
North America
|
$ | 7,786 | $ | 7,349 | $ | 6,808 | ||||||
|
Europe
|
2,357 | 2,057 | 1,925 | |||||||||
|
Latin America
|
984 | 891 | 822 | |||||||||
|
Asia Pacific (a)
|
649 | 610 | 622 | |||||||||
|
Consolidated
|
$ | 11,776 | $ | 10,907 | $ | 10,177 | ||||||
|
Segment operating profit
|
||||||||||||
|
North America
|
$ | 1,345 | $ | 1,341 | $ | 1,251 | ||||||
|
Europe
|
397 | 321 | 317 | |||||||||
|
Latin America
|
213 | 220 | 203 | |||||||||
|
Asia Pacific (a)
|
88 | 90 | 100 | |||||||||
|
Corporate
|
(175 | ) | (206 | ) | (121 | ) | ||||||
|
Consolidated
|
$ | 1,868 | $ | 1,766 | $ | 1,750 | ||||||
|
Depreciation and amortization
|
||||||||||||
|
North America
|
$ | 239 | 242 | $ | 272 | |||||||
|
Europe
|
71 | 65 | 60 | |||||||||
|
Latin America
|
24 | 22 | 20 | |||||||||
|
Asia Pacific (a)
|
23 | 19 | 22 | |||||||||
|
Corporate
|
15 | 5 | 18 | |||||||||
|
Consolidated
|
$ | 372 | 353 | $ | 392 | |||||||
|
Interest expense
|
||||||||||||
|
North America
|
$ | 2 | $ | 9 | $ | 2 | ||||||
|
Europe
|
13 | 27 | 12 | |||||||||
|
Latin America
|
1 | — | — | |||||||||
|
Asia Pacific (a)
|
— | — | — | |||||||||
|
Corporate
|
303 | 271 | 286 | |||||||||
|
Consolidated
|
$ | 319 | $ | 307 | $ | 300 | ||||||
|
Income taxes
|
||||||||||||
|
North America
|
$ | 388 | $ | 396 | $ | 373 | ||||||
|
Europe
|
27 | 7 | 27 | |||||||||
|
Latin America
|
40 | 32 | 22 | |||||||||
|
Asia Pacific (a)
|
14 | 18 | 15 | |||||||||
|
Corporate
|
(25 | ) | 14 | 8 | ||||||||
|
Consolidated
|
$ | 444 | $ | 467 | $ | 445 | ||||||
|
Total assets (b)
|
||||||||||||
|
North America
|
$ | 8,255 | $ | 7,996 | $ | 7,945 | ||||||
|
Europe
|
2,017 | 2,325 | 2,305 | |||||||||
|
Latin America
|
527 | 661 | 451 | |||||||||
|
Asia Pacific (a)
|
397 | 385 | 347 | |||||||||
|
Corporate
|
5,276 | 4,934 | 5,336 | |||||||||
|
Elimination entries
|
(5,075 | ) | (5,587 | ) | (5,809 | ) | ||||||
|
Consolidated
|
$ | 11,397 | $ | 10,714 | $ | 10,575 | ||||||
|
Additions to long-lived assets (c)
|
||||||||||||
|
North America
|
$ | 443 | $ | 316 | $ | 317 | ||||||
|
Europe
|
76 | 54 | 39 | |||||||||
|
Latin America
|
37 | 53 | 38 | |||||||||
|
Asia Pacific (a)
|
21 | 27 | 17 | |||||||||
|
Corporate
|
5 | 3 | 1 | |||||||||
|
Consolidated
|
$ | 582 | $ | 453 | $ | 412 | ||||||
| (a) | Includes Australia, Asia and South Africa. | |
| (b) | The Company adopted SFAS No. 158 “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” as of the end of its 2006 fiscal year. The standard generally requires company plan sponsors to reflect the net over- or under-funded position of a defined postretirement benefit plan as an asset or liability on the balance sheet. Accordingly, the Company’s consolidated and corporate total assets for 2006 were reduced by $512 and $152 respectively. Operating segment total assets were reduced as follows: North America-$72; Europe-$284; Latin America-$3; Asia Pacific-$1. Refer to Note 1 for further information. | |
| (c) | Includes plant, property, equipment, and purchased intangibles. |
The Company’s largest customer, Wal-Mart Stores, Inc. and
its affiliates, accounted for approximately 19% of consolidated
net sales during 2007, 18% in 2006, and 17% in 2005, 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) | 2007 | 2006 | 2005 | |||||||||
|
Net sales
|
||||||||||||
|
United States
|
$ | 7,224 | $ | 6,843 | $ | 6,351 | ||||||
|
United Kingdom
|
1,018 | 894 | 837 | |||||||||
|
Other foreign countries
|
3,534 | 3,170 | 2,989 | |||||||||
|
Consolidated
|
$ | 11,776 | $ | 10,907 | $ | 10,177 | ||||||
|
Long-lived assets (a)
|
||||||||||||
|
United States
|
$ | 6,832 | $ | 6,630 | $ | 6,577 | ||||||
|
United Kingdom
|
378 | 369 | 324 | |||||||||
|
Other foreign countries
|
745 | 685 | 641 | |||||||||
|
Consolidated
|
$ | 7,955 | $ | 7,684 | $ | 7,542 | ||||||
| (a) | Includes plant, property, equipment, and purchased intangibles. |
| (millions) | 2007 | 2006 | 2005 | |||||||||
|
North America
|
||||||||||||
|
Retail channel cereal
|
$ | 2,784 | $ | 2,667 | $ | 2,588 | ||||||
|
Retail channel snacks
|
3,553 | 3,318 | 2,977 | |||||||||
|
Frozen and specialty channels
|
1,449 | 1,364 | 1,243 | |||||||||
|
International
|
||||||||||||
|
Cereal
|
3,346 | 3,010 | 2,933 | |||||||||
|
Convenience foods
|
644 | 548 | 436 | |||||||||
|
Consolidated
|
$ | 11,776 | $ | 10,907 | $ | 10,177 | ||||||
56
