UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark one)
☒
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ______________
COMMISSION FILE NUMBER 1-16483
Mondelēz International, Inc.
(Exact name of registrant as specified in its charter)
Virginia
(State or other jurisdiction of
incorporation or organization)
Three Parkway North
Deerfield,
Illinois
(Address of principal executive offices)
52-2284372
(I.R.S. Employer
Identification No.)
60015
(Zip Code)
Securities registered pursuant to Section 12(b) of the Act:
Registrant’s telephone number, including area code: 847-943-4000
Title of each class
Class A Common Stock, no par value
2.375% Notes due 2021
1.000% Notes due 2022
1.625% Notes due 2023
1.625% Notes due 2027
2.375% Notes due 2035
4.500% Notes due 2035
3.875% Notes due 2045
Trading
Symbol(s)
MDLZ
MDLZ21
MDLZ22
MDLZ23
MDLZ27
MDLZ35
MDLZ35A
MDLZ45
Name of each exchange on which registered
The Nasdaq Global Select Market
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
Note: Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act
from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
Non-accelerated filer
¨
Accelerated filer
Smaller reporting company
Emerging growth company
¨
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No x
The aggregate market value of the shares of Class A Common Stock held by non-affiliates of the registrant, computed by reference to the
closing price of such stock on June 30, 2019, was $76.7 billion. At January 31, 2020, there were 1,432,943,006 shares of the registrant’s Class A
Common Stock outstanding.
Portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission in connection with its annual
meeting of shareholders expected to be held on May 13, 2020 are incorporated by reference into Part III hereof.
Documents Incorporated by Reference
1
Mondelēz International, Inc.
Page No.
Part I –
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Part II –
Item 5.
Item 6.
Item 7.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations:
Summary of Results
Financial Outlook
Discussion and Analysis of Historical Results
Critical Accounting Estimates
Liquidity and Capital Resources
Commodity Trends
Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
Equity and Dividends
Non-GAAP Financial Measures
Item 7A.
Item 8.
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data:
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Earnings
for the Years Ended December 31, 2019, 2018 and 2017
Consolidated Statements of Comprehensive Earnings
for the Years Ended December 31, 2019, 2018 and 2017
Consolidated Balance Sheets as of December 31, 2019 and 2018
Consolidated Statements of Equity
for the Years Ended December 31, 2019, 2018 and 2017
Consolidated Statements of Cash Flows
for the Years Ended December 31, 2019, 2018 and 2017
Notes to Consolidated Financial Statements
Item 9.
Item 9A.
Item 9B.
Part III –
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Part IV –
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Item 15.
Exhibits and Financial Statement Schedules
Item 16.
Form 10-K Summary
Signatures
Valuation and Qualifying Accounts
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S-1
In this report, for all periods presented, “we,” “us,” “our,” “the Company” and “Mondelēz International” refer to
Mondelēz International, Inc. and subsidiaries. References to “Common Stock” refer to our Class A Common Stock.
i
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Forward-Looking Statements
This report contains a number of forward-looking statements. Words, and variations of words, such as “will,” “may,”
“expect,” “would,” “could,” “might,” “plan,” “believe,” “estimate,” “anticipate,” “likely,” “drive,” “seek,” “aim,” “potential,”
“project,” “outlook” and similar expressions are intended to identify our forward-looking statements, including but not
limited to statements about: our future performance, including our future revenue growth, profitability and earnings;
our strategic plan and our plan to accelerate consumer-centric growth, drive operational excellence and create a
winning growth culture; our leadership position in snacking; our ability to meet consumer needs and demand and
identify innovation and renovation opportunities; the results of driving operational excellence; price volatility and
pricing actions; the cost environment and measures to address increased costs; our tax rate, tax positions,
transition tax liability and the impact of U.S. and Swiss tax reform on our future results; market share; the United
Kingdom’s withdrawal from the European Union and its impact on our results, including the consequences of any
trade or other cross-border operating agreements, or failure to reach agreements, following the United Kingdom's
withdrawal from the European Union; the costs of, timing of expenditures under and completion of our restructuring
program; category growth; our effect on demand and our market position; consumer snacking behaviors;
commodity prices and supply; investments; research, development and innovation; political and economic
conditions and volatility; consumer confidence; the effect of the imposition of increased or new tariffs, quotas, trade
barriers or similar restrictions on our sales or key commodities and potential changes in U.S. trade programs, trade
relations, regulations, taxes or fiscal policies; currency exchange rates, controls and restrictions and volatility in
foreign currencies; the application of highly inflationary accounting for our Argentinean subsidiaries and the potential
for and impacts from currency devaluation in other countries; our e-commerce channel strategies; manufacturing
and distribution capacity; changes in laws and regulations, regulatory compliance and related costs; our ownership
interest in Keurig Dr Pepper; operating lease liability; the outcome and effects on us of legal proceedings and
government investigations; the estimated value of goodwill and intangible assets; amortization expense for
intangible assets; impairment of goodwill and intangible assets and our projections of operating results and other
factors that may affect our impairment testing; our accounting estimates and judgments and the impact of new
accounting pronouncements; pension obligations, expenses, contributions and assumptions; employee benefit plan
expenses, obligations and assumptions; compensation expense; our sustainability and mindful snacking strategies,
goals and initiatives and the impacts of climate change; the Brazilian indirect tax matter; our liability related to our
withdrawal from the Bakery and Confectionery Union and Industry International Pension Fund; the impacts of the
malware incident; our ability to prevent and respond to cybersecurity breaches and disruptions; our liquidity, funding
sources and uses of funding, including our use of commercial paper; the planned phase out of London Interbank
Offered Rates; our risk management program, including the use of financial instruments and the impacts and
effectiveness of our hedging activities; working capital; capital expenditures and funding; share repurchases;
dividends; long-term value for our shareholders; guarantees; and our contractual obligations.
These forward-looking statements involve risks and uncertainties, many of which are beyond our control. Important
factors that could cause actual results to differ materially from those described in our forward-looking statements
include, but are not limited to, risks from operating globally including in emerging markets; changes in currency
exchange rates, controls and restrictions; continued volatility of commodity and other input costs; weakness in
economic conditions; weakness in consumer spending; pricing actions; tax matters including changes in tax rates
and laws, disagreements with taxing authorities and imposition of new taxes; use of information technology and
third party service providers; unanticipated disruptions to our business, such as the malware incident, cyberattacks
or other security breaches; competition; protection of our reputation and brand image; our ability to innovate and
differentiate our products; the restructuring program and our other transformation initiatives not yielding the
anticipated benefits; changes in the assumptions on which the restructuring program is based; management of our
workforce; consolidation of retail customers and competition with retailer and other economy brands; changes in our
relationships with suppliers or customers; legal, regulatory, tax or benefit law changes, claims or actions; the impact
of climate change on our supply chain and operations; strategic transactions; significant changes in valuation
factors that may adversely affect our impairment testing of goodwill and intangible assets; perceived or actual
product quality issues or product recalls; failure to maintain effective internal control over financial reporting;
volatility of and access to capital or other markets; pension costs; the expected discontinuance of London Interbank
Offered Rates and transition to any other interest rate benchmark; and our ability to protect our intellectual property
and intangible assets. We disclaim and do not undertake any obligation to update or revise any forward-looking
statement in this report except as required by applicable law or regulation.
1
Item 1. Business.
General
PART I
We are one of the world’s largest snack companies with global net revenues of $25.9 billion and net earnings of
$3.9 billion in 2019. We make and sell primarily snacks, including biscuits (cookies, crackers and salted snacks),
chocolate, gum & candy, as well as various cheese & grocery and powdered beverage products. We have
operations in approximately 80 countries and sell our products in over 150 countries around the world. Our portfolio
includes iconic snack brands such as Cadbury, Milka and Toblerone chocolate; Oreo, belVita and LU biscuits; Halls
candy; Trident gum and Tang powdered beverages.
We are proud members of the Dow Jones Sustainability Index, Standard and Poor’s 500 and Nasdaq 100. Our
Common Stock trades on The Nasdaq Global Select Market under the symbol “MDLZ.” Mondelēz International has
been incorporated in the Commonwealth of Virginia since 2000.
Strategy
We aim to be the global leader in snacking by focusing on growth, execution and culture. In 2019, we began to
operate under a new strategic plan that builds on our strong foundations, including our unique portfolio of iconic
global and local brands, our attractive global footprint, our market leadership in developed and emerging markets,
our deep innovation, marketing and distribution capabilities, and our margin expansion in recent years that allows
us to make ongoing investments in our product portfolio.
Our plan to drive long-term growth includes three strategic priorities: accelerating consumer-centric growth, driving
operational excellence and creating a winning growth culture.
•
•
•
Accelerate consumer-centric growth. As demands on consumers’ time increase and consumer eating habits
evolve, we aim to meet consumers' snacking needs by providing the right snack, for the right moment,
made the right way. We have developed innovative approaches to identify and address how consumers
snack across different emotional and functional needs and occasions that we believe will allow us to meet
their needs and identify new innovation and renovation opportunities. We plan to test, learn and scale new
product offerings quickly to meet diverse and evolving local and global snacking demand. We believe our
understanding of consumers’ behavior will continue to lead to our meeting more of their needs and the
growing demand for snacks.
Drive operational excellence. Our operational excellence and continuous improvement plans include a
special focus on the consumer-facing areas of our business and optimizing our sales, marketing and
customer service efforts. To drive productivity gains and cost improvements across our business, we also
plan to continue leveraging our global shared services platform, driving greater efficiencies in our supply
chain and continuing to utilize Zero-Based Budgeting across our operations. We expect the improvements
and efficiencies we drive will fuel our growth and continue to expand profit dollars. At the same time, we are
continuing our efforts to sustainably source key ingredients, reduce our end-to-end environmental impact
and innovate our processes and packaging to reduce waste and promote recycling.
Build a winning growth culture. To support the acceleration of our growth, we are becoming more agile,
digital and local-consumer focused. We are giving our local teams more autonomy to drive commercial and
innovation plans as they are closer to the needs and desires of consumers. We will continue to leverage the
efficiency and scale of our regional operating units while empowering our local commercial operations to
respond faster to changing consumer preferences and capitalize on growth opportunities. Our digital
transformation program will also help to enable consumer demand and sales opportunities. We believe
these operating and cultural shifts will help drive profitable top-line growth.
We run our business with a long-term perspective, and we believe the successful delivery of our strategic plan will
drive top- and bottom-line growth and enable us to create long-term value for our shareholders.
2
Operating Segments
Our operations and management structure are organized into four operating segments:
•
•
•
•
Latin America
Asia, Middle East and Africa (“AMEA”)
Europe
North America
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.
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. For a definition
and reconciliation of segment operating income to consolidated pre-tax earnings as well as other information on our
segments, see Note 18, Segment Reporting.
Our segment net revenues for each of the last three years were:
Net revenues:
Latin America
AMEA
Europe
North America
For the Years Ended December 31,
2019
2018
2017
(in millions)
$
3,018 $
5,770
3,202 $
5,729
9,972
7,108
10,122
6,885
3,566
5,739
9,794
6,797
$
25,868 $
25,938 $
25,896
Our segment operating income for each of the last three years was:
For the Years Ended December 31,
2019
2018
2017
(in millions, except percentages)
Segment operating income:
Latin America
AMEA
Europe
North America
$
$
341
691
1,732
1,451
4,215
8.1% $
16.4%
41.1%
34.4%
100.0% $
410
702
1,734
849
3,695
11.1% $
19.0%
46.9%
23.0%
100.0% $
564
514
1,610
1,144
3,832
14.7%
13.4%
42.0%
29.9%
100.0%
Please see Management’s Discussion and Analysis of Financial Condition and Results of Operations for items
affecting the comparability of results and a review of our operating results.
Our brands span five product categories:
Biscuits (including cookies, crackers and salted snacks)
•
•
Chocolate
• Gum & candy
Beverages
•
Cheese & grocery
•
3
During 2019, our segments contributed to our net revenues in the following product categories:
Segment
Latin America
AMEA
Europe
North America
Percentage of 2019 Net Revenues by Product Category
Biscuits
Chocolate
Gum &
Candy
Beverages
Cheese &
Grocery
Total
2.7%
7.1%
11.6%
22.8%
44.2%
2.7%
8.0%
19.8%
1.0%
31.5%
3.2%
3.3%
2.7%
3.8%
13.0%
1.7%
2.1%
0.4%
—%
4.2%
1.3%
1.7%
4.1%
—%
7.1%
11.6%
22.2%
38.6%
27.6%
100.0%
Within our product categories, classes of products that contributed 10% or more to consolidated net revenues were:
Biscuits - Cookies, crackers and other
Chocolate - Tablets, bars and other
Divestitures and Acquisitions
For the Years Ended December 31,
2019
2018
2017
37%
32%
36%
32%
36%
31%
For information on divestitures and acquisitions that impacted our results, please refer to Note 2, Divestitures and
Acquisitions.
Customers
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.
Seasonality
Demand for our products is generally balanced over the second and third quarters of the year and increases in the
first and fourth quarters primarily because of holidays and other seasonal events. Depending on when Easter falls,
Easter holiday sales may shift between the first and second quarter. We build inventory based on expected demand
and typically fill customer orders within a few days of receipt so the backlog of unfilled orders is not material.
Funding for working capital items, including inventory and receivables, is normally sourced from operating cash
flows and short-term commercial paper borrowings. For additional information on our liquidity, working capital
management, cash flow and financing activities, see Liquidity and Capital Resources, Note 1, Summary of
Significant Accounting Policies, and Note 9, Debt and Borrowing Arrangements, appearing later in this 10-K filing.
Competition
We face competition in all aspects of our business. Competitors include large multinational as well as numerous
local and regional companies. Some competitors have different profit objectives and investment time horizons than
we do and therefore approach pricing and promotional decisions differently. We compete based on product quality,
brand recognition and loyalty, service, product innovation, taste, convenience, nutritional value, the ability to identify
and satisfy consumer preferences, effectiveness of digital and other sales and marketing, routes to market and
distribution networks, promotional activity and price. Improving our market position or introducing a new product
requires substantial research, development, advertising and promotional expenditures. We believe these
investments lead to better products for the consumer and support our growth and market position.
Distribution and Marketing
We generally sell our products to supermarket chains, wholesalers, supercenters, club stores, mass merchandisers,
distributors, convenience stores, gasoline stations, drug stores, value stores and other retail food outlets. We
distribute our products through direct store delivery, company-owned and satellite warehouses, distribution centers
and other facilities. We use the services of independent sales offices and agents in some of our international
locations.
4
Through our global e-commerce organization and capabilities, we pursue online growth with partners in key
markets around the world, including both pure e-tailers and brick-and-mortar retailers. We continue to invest in both
talent and digital capabilities. Our e-commerce channel strategies will play a critical role in our ambition to be the
best snacking company in the world.
We conduct marketing efforts through three principal sets of activities: (i) consumer marketing and advertising
including on-air, print, outdoor, digital and social media and other product promotions; (ii) consumer sales incentives
such as coupons and rebates; and (iii) trade promotions to support price features, displays and other merchandising
of our products by our customers.
Raw Materials and Packaging
We purchase and use large quantities of commodities, including cocoa, dairy, wheat, palm and other vegetable oils,
sugar and other sweeteners, flavoring agents and nuts. In addition, we purchase and use significant quantities of
packaging materials to package our products and natural gas, fuels and electricity for our factories and
warehouses. We monitor worldwide supply, commodity cost and currency trends so we can sustainably and cost-
effectively secure ingredients, packaging and fuel required for production.
A number of external factors such as changing weather patterns and conditions, commodity market conditions,
currency fluctuations and the effects of governmental agricultural or other programs affect the cost and availability
of raw materials and agricultural materials used in our products. We address higher commodity costs and currency
impacts primarily through hedging, higher pricing and manufacturing and overhead cost control. We use hedging
techniques to limit the impact of fluctuations in the cost of our principal raw materials; however, we may not be able
to fully hedge against commodity cost changes, and our hedging strategies may not protect us from increases in
specific raw material costs.
Due to factors noted above, the costs of our principal raw materials fluctuate. At this time, we believe there will
continue to be an adequate supply of the raw materials we use and that they will generally remain available from
numerous sources. However, we continue to monitor the long-term impacts of climate change and related factors
that could affect the availability or cost of raw materials, packaging and energy. For additional information on our
commodity costs, refer to the Commodity Trends section within Management’s Discussion and Analysis of Financial
Condition and Results of Operations. For information on our ongoing sustainability efforts and programs, refer to
Sustainability and Well-Being below.
Intellectual Property
Our intellectual property rights (including trademarks, patents, copyrights, registered designs, proprietary trade
secrets, technology and know-how) are material to our business.
We own numerous trademarks and patents in many countries around the world. Depending on the country,
trademarks remain valid for as long as they are in use or their registration status is maintained. Trademark
registrations generally are for renewable, fixed terms. We also have patents for a number of current and potential
products. Our patents cover inventions ranging from packaging techniques to processes relating to specific
products and to the products themselves. Our issued patents extend for varying periods according to the date of
patent application filing or grant and the legal term of patents in the various countries where patent protection is
obtained. The actual protection afforded by a patent, which can vary from country to country, depends upon the type
of patent, the scope of its coverage as determined by the patent office or courts in the country, and the availability of
legal remedies in the country. While our patent portfolio is material to our business, the loss of one patent or a
group of related patents would not have a material adverse effect on our business.
From time to time, we grant third parties licenses to use one or more of our trademarks, patents and/or proprietary
trade secrets in connection with the manufacture, sale or distribution of third party products. Similarly, we sell some
products under brands, patents and/or proprietary trade secrets we license from third parties. In our agreement with
Kraft Foods Group, Inc. (which is now part of The Kraft Heinz Company), we each granted the other party various
licenses to use certain of our and their respective intellectual property rights in named jurisdictions following the
spin-off of our North American grocery business.
5
Research and Development
We pursue four objectives in research and development: food safety and quality, growth through new products,
superior consumer satisfaction and reduced production costs. Our innovation efforts focus on anticipating consumer
demands and adapting quickly to changing market trends. Well-being and sustainability are a significant focus of
our current research and development initiatives. These initiatives aim to accelerate our growth and margins by
addressing consumer needs and market trends and leveraging scalable innovation platforms, sustainability
programs and initiatives as well as breakthrough technologies. In 2019, we completed a $65 million plan to build out
and modernize our network of global research and development facilities. We modernized our technical center
facilities at Suzhou, China; Jurong, Singapore and Thane, India in 2018. In 2019, we also completed the
modernization of technical centers in Curitiba, Brazil and Mexico City, Mexico. In addition, we have invested in the
Pasuruan Cocoa Technology Centre in Indonesia, which is scheduled to fully open in 2020. We are focusing our
technical resources at twelve key locations to drive growth and innovation. Our network of technical centers enable
greater effectiveness, improved efficiency and accelerated project delivery. These locations are in Curitiba, Brazil;
Suzhou, China; Thane, India; Pasuruan, Indonesia; Mexico City, Mexico; East Hanover, New Jersey; Wroclaw,
Poland; Jurong, Singapore; Bournville, United Kingdom; Reading, United Kingdom; Saclay, France and Munich,
Germany.
At December 31, 2019, within our global research, development & quality services area, we had approximately
2,400 scientists, engineers and other personnel, of which 1,900 are primarily focused on research and development
and the remainder are primarily focused on quality assurance and regulatory affairs. Our research and development
expense was $351 million in 2019, $362 million in 2018 and $366 million in 2017.
Regulation
Our food products and ingredients are subject to local, national and multinational regulations related to labeling,
health and nutrition claims, packaging, pricing, marketing and advertising, data privacy and related areas. In
addition, various jurisdictions regulate our operations by licensing and inspecting our manufacturing plants and
facilities, enforcing standards for select food products, grading food products, and regulating trade practices related
to the sale and pricing of our food products. Many of the food commodities we use in our operations are subject to
government agricultural policy and intervention. These policies have substantial effects on prices and supplies and
are subject to periodic governmental and administrative review. In addition, increased attention to environmental
issues in industry supply chains has led to developing different types of regulation in many countries. The lack of a
harmonized approach can lead to uneven scrutiny or enforcement, which can impact our operations.
Examples of laws and regulations that affect our business include selective food taxes, labeling requirements such
as front-of-pack labeling and nutrient profiling, media and marketing restrictions such as restrictions on advertising
products with specified nutrition profiles on certain channels or platforms or during certain hours of the day, potential
withdrawal of trade concessions as dispute settlement retaliation, sanctions on sales or sourcing of raw materials,
and extended producer responsibility fees and packaging taxes. We will continue to monitor developments in laws
and regulations. At this time, we do not expect the cost of complying with existing laws and regulations will be
material. Also refer to Note 1, Summary of Significant Accounting Policies – Currency Translation and Highly
Inflationary Accounting, for additional information on government regulations and currency-related impacts on our
operations in the United Kingdom, Argentina and other countries.
Environmental Regulation
Throughout the countries in which we do business, we are subject to local, national and multinational environmental
laws and regulations relating to the protection of the environment. We have programs across our business units
designed to meet applicable environmental compliance requirements. In the United States, the laws and regulations
include the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act and the
Comprehensive Environmental Response, Compensation, and Liability Act. We track regulatory developments in
various jurisdictions relating to the use of plastic in packaging materials and taxes linked to the costs of waste so
that we can comply with evolving requirements. We believe that our compliance with existing environmental laws
and regulations will not have a material effect on our financial results.
6
Sustainability and Well-Being
Our 2025 sustainable snacking strategy provides a clear roadmap, which we believe puts us at the forefront of
sustainable ingredient sourcing and continuing to contribute to addressing climate change by reducing emissions.
We are focused on making our snacks with less energy, water and waste, with ingredients consumers know and
trust. We have specific goals to which we hold ourselves accountable, and we are continuing to make progress in
our efforts to deliver meaningful change.
We are proud of the progress we achieved to date and excited about where we are going. By living our purpose to
empower people to snack right, we believe we can continue to have a positive impact on the lives of our consumers
and the world around us. We have been focused on sustainability for many years and we continue to enhance and
evolve our sustainability goals and reporting. We will issue our 2019 Snacking Made Right report, which will include
our progress toward our sustainability goals, later this year.
Our 2025 sustainability and mindful snacking goals include:
• Minimizing food waste, end-to-end CO2 emissions and priority water usage by 2025
• Making all packaging recyclable by 2025 to further reduce our environmental footprint
•
Scaling our Cocoa Life sustainability program even further so that by 2025, Cocoa Life will produce 100%
of the cocoa volume we require for our chocolate brands
• Growing portion control products to 20 percent of snacks net revenue by 2025
•
Including portion amounts and mindful snacking information on all packages globally by 2025
Our 2025 sustainability goals are designed to make a meaningful impact on how we address climate change and
are based on an end-to-end, science-based approach to reducing our carbon footprint, including reducing our
absolute CO2 emissions from manufacturing and addressing deforestation in key raw material supply chains. We
are also working to cut our absolute water footprint in manufacturing, focusing on priority sites where water is most
scarce. We continue to work on reducing waste in manufacturing and packaging.
In ingredient sourcing, we continue to leverage our global operating scale to secure sustainable raw materials and
work with suppliers to drive meaningful social and environmental changes, focusing where we can make the
greatest impact. For example, we launched our Cocoa Life program in 2012 and are investing up to $400 million
through 2022 to build a sustainable cocoa supply. We are also improving sustainability in our wheat supply by
working with farmers in North America and through our Harmony program in Europe.
We are focused on consumer well-being. Our mindful snacking strategy aligns with our purpose to empower people
to snack right. Continuing to evolve our portfolio so that we are offering a broad range of high-quality snacks to
meet consumers' expanding needs is central to our strategy of accelerating our growth. At the same time, we are
working to empower and encourage consumers to snack mindfully with portion control offerings and labeling.
Expanding our portion control options – snacks that are 200 calories or less and are individually wrapped – enables
people to enjoy the treats they love, become more mindful about what they eat and manage their daily calorie
intake.
The Governance, Membership and Public Affairs Committee of our Board of Directors is responsible for overseeing
our sustainable snacking and mindful snacking strategies. Our goals are part of our strategic planning process, and
therefore, progress and key activities are regularly reported to the Board of Directors and the business leadership
teams. Climate change, CO2 emissions, energy, well-being and other sustainability matters are key focus areas in
our strategy.
We have a robust Enterprise Risk Management ("ERM") process for identifying, measuring, monitoring and
managing risks, with oversight by the Risk and Compliance Committee ("MRCC"), which reports annually to the
Audit Committee of our Board of Directors. The purpose of the MRCC is to oversee how we identify and assess the
most significant inherent risks to our business so we may adequately mitigate them or monitor them across the
Company. All identified risks are vetted by the MRCC and remain under the MRCC’s governance. Ownership of
specific risks is assigned at the Mondelēz Leadership Team ("MLT") level (MLT members report directly to the
CEO). As owners of each specific risk, MLT members are responsible for verifying that appropriate mitigation
controls and monitoring systems are in place. The risk universe considered during this process is wide and varied.
Climate change is included in this risk universe as well as other sustainability and well-being issues.
7
Our ERM methodology is governed by the MRCC and includes annual reviews with our four operating regions,
considering Company-level risks by using information gathered at the asset level (regions, countries, individual
facilities and separate business units). The following key risk drivers for climate change, sustainability and well-
being risks are captured in the ERM framework: a sustainability mindset within the organization and suppliers,
governance and monitoring of the sustainability agenda, monitoring climate change impact, assessing reputation
and brand image, the well-being portfolio and marketing strategy, changes in regulations and changes in consumer
preferences.
In addition, we work with internal and external experts to review the impact of major societal issues on our business
and to shape our strategic responses to them. Materials and processes that guide our assessment include our ERM
process; analysis of stakeholder and regulatory issues; our total greenhouse gas, land and water footprint;
proprietary consumer insight data; and publicly available data on societal issues, including statistics and reports
from authorities, non-governmental organizations and peer companies.
We have been recognized for our ongoing economic, environmental and social contributions. Each year since we
created Mondelēz International in 2012 we have been listed on the Dow Jones Sustainability Index (“DJSI”) – World
and North American Indices. The DJSI selects the top 10% of global companies and top 20% of North American
companies based on an extensive review of financial and sustainability programs within each industry. We are at
the 95th percentile of our industry and achieved perfect scores in the areas of health & nutrition and addressing
water-related risks.
We also participate in CDP Climate and Water disclosures and continue to work to reduce our carbon and water
footprints. We are committed to continue this and other related work in the areas of sustainable resources and
agriculture, well-being snacks, community partnerships and safety of our products and people.
Employees
In our consolidated subsidiaries worldwide, we employed approximately 80,000 people at December 31, 2019 and
December 31, 2018. Employees represented by labor unions or workers’ councils represent approximately 63% of
our 68,000 employees outside the United States and approximately 27% of our 12,000 U.S. employees. Our
business units are subject to various local, national and multinational laws and regulations relating to their
relationships with their employees. In accordance with European Union requirements, we also have established a
European Workers Council composed of management and elected members of our workforce. We or our
subsidiaries are a party to numerous collective bargaining agreements and we work to renegotiate these collective
bargaining agreements on satisfactory terms when they expire.
International Operations
Based on where we sell our products, we generated 74.4% of our 2019 net revenues, 75.3% of our 2018 net
revenues and 75.8% of our 2017 net revenues from continuing operations outside the United States. We sell our
products to consumers in over 150 countries. At December 31, 2019, we had operations in approximately 80
countries and made our products at approximately 126 manufacturing and processing facilities in 44 countries.
Refer to Note 18, Segment Reporting, for additional information on our U.S. and non-U.S. operations. Refer to Item
2, Properties, for more information on our manufacturing and other facilities. Also, for a discussion of risks related to
our operations outside the United States, see Item 1A, Risk Factors.
8
Information about our Executive Officers
The following are our executive officers as of February 7, 2020:
Name
Dirk Van de Put
Luca Zaramella
Paulette Alviti
Maurizio Brusadelli
Vinzenz P. Gruber
Robin S. Hargrove
Sandra MacQuillan
Gerhard W. Pleuhs
Gustavo C. Valle
Henry Glendon (Glen) Walter IV
Age Title
59
Chief Executive Officer
50
49
51
54
54
53
63
55
51
Executive Vice President and Chief Financial Officer
Executive Vice President and Chief People Officer
Executive Vice President and President, Asia Pacific, Middle East and
Africa
Executive Vice President and President, Europe
Executive Vice President, Research, Development and Quality
Executive Vice President and Chief Supply Chain Officer
Executive Vice President, Corporate & Legal Affairs and General
Counsel
Executive Vice President and President, Latin America
Executive Vice President and President, North America
Mr. Van de Put became Chief Executive Officer and a director in November 2017 and became Chairman of the
Board of Directors in April 2018. He formerly served as President and Chief Executive Officer of McCain Foods
Limited, a multinational frozen food provider, from July 2011 to November 2017 and as its Chief Operating Officer
from May 2010 to July 2011. Mr. Van de Put served as President and Chief Executive Officer, Global Over-the-
Counter, Consumer Health Division of Novartis AG, a global healthcare company, from 2009 to 2010. Prior to that,
he worked for 24 years in a variety of leadership positions for several global food and beverage providers, including
Danone SA, The Coca-Cola Company and Mars, Incorporated.
Mr. Zaramella became Executive Vice President and Chief Financial Officer in August 2018. He previously
served as Senior Vice President Corporate Finance, CFO Commercial and Treasurer from June 2016 to July
2018. He also served as Interim Lead Finance North America from April to November 2017. Prior to that, he
served as Senior Vice President and Corporate Controller from December 2014 to August 2016 and Senior
Vice President, Finance of Mondelēz Europe from October 2011 to November 2014. Mr. Zaramella joined
Mondelēz International in 1996.
Ms. Alviti became Executive Vice President and Chief Human Resources Officer (now Executive Vice President and
Chief People Officer) in June 2018. Before joining Mondelēz International, Ms. Alviti served as Senior Vice
President and Chief Human Resources Officer of Foot Locker, Inc., a leading global retailer of athletically inspired
shoes and apparel, from June 2013 to May 2018. Prior to that, Ms. Alviti spent 17 years at PepsiCo, Inc., a global
snack and beverage company, in various leadership roles, including Senior Vice President and Chief Human
Resources Officer Asia, Middle East, Africa from March 2010 to May 2013.
Mr. Brusadelli became Executive Vice President and President, Asia Pacific in January 2016 and Executive Vice
President and President, Asia Pacific, Middle East and Africa in October 2016. He previously served as President
Biscuits Business, South East Asia, Japan and Sales Asia Pacific from September 2015 to December 2015,
President Markets and Sales Asia Pacific from September 2014 to September 2015 and President United Kingdom,
Ireland and Nordics from September 2012 to August 2014. Prior to that, Mr. Brusadelli held various positions of
increasing responsibility. Mr. Brusadelli joined Mondelēz International in 1993.
Mr. Gruber became Executive Vice President and President, Europe on January 1, 2019. He previously served as
President, Western Europe from October 2016 to December 2018 and President, Chocolate, Europe from August
2011 to September 2016. Mr. Gruber was formerly employed by Mondelēz International, in various capacities, from
1989 until 2000 and resumed his employment in September 2007.
Mr. Hargrove became Executive Vice President, Research, Development, Quality and Innovation in April 2015 and
as of January 2019 serves as Executive Vice President, Research, Development and Quality. Prior to that, he
served as Senior Vice President, Research, Development & Quality for Mondelēz Europe from January 2013 to
March 2015. Before joining Mondelēz International, Mr. Hargrove worked at PepsiCo, Inc., a global snack and
9
beverage company, for 19 years in a variety of leadership positions, most recently as Senior Vice President,
Research and Development, Europe from December 2006 to December 2012.
Ms. MacQuillan became Executive Vice President, Integrated Supply Chain (now Executive Vice President and
Chief Supply Chain Officer) in June 2019. Before joining Mondelēz International, Ms. MacQuillan served as Chief
Supply Chain Officer and Senior Vice President, Supply Chain, at Kimberly-Clark Corporation, a global
manufacturer of personal care consumer products, from April 2015 to June 2019. Prior to that, Ms. MacQuillan
spent more than 20 years at Mars, Incorporated, a global manufacturer of confectionery, pet food and other food
products, in various leadership roles, including Global Vice President, Supply for Mars Global Petcare.
Mr. Pleuhs became Executive Vice President and General Counsel in April 2012 and as of May 2019 serves as
Executive Vice President, Corporate & Legal Affairs and General Counsel. In this role, Mr. Pleuhs oversees the
legal, compliance, security, corporate and governance affairs functions within Mondelēz International. He has
served in various positions of increasing responsibility since joining Mondelēz International in 1990. Mr. Pleuhs has
a law degree from the University of Kiel, Germany and is licensed to practice law in Germany and admitted as
house counsel in Illinois.
Mr. Valle became Executive Vice President and President, Latin America in February 2020. Before joining
Mondelēz International, Mr. Valle served as Chief Executive Officer of Axia Plus, LLC, a management consulting
firm, from February 2018 to January 2020. Prior to that he spent more than 20 years at Groupe Danone SA, a
multinational provider of packaged water, dairy and baby food products, in a variety of leadership positions, most
recently as Executive Vice President, Dairy Division Worldwide, from January 2015 to January 2018, and Vice
President Dairy Division Europe, from January 2014 until December 2014.
Mr. Walter became Executive Vice President and President, North America in November 2017. Before joining
Mondelēz International, Mr. Walter worked at The Coca-Cola Company, a global beverage company, in a variety of
leadership positions, most recently as Chief Executive Officer of Coca-Cola Industries China from February 2014 to
October 2017 and President and Chief Operating Officer of Cola-Cola Refreshments in North America from January
2013 to February 2014.
Ethics and Governance
We adopted the Mondelēz International Code of Conduct, which qualifies as a code of ethics under Item 406 of
Regulation S-K. The code applies to all of our employees, including our principal executive officer, principal financial
officer, principal accounting officer or controller, and persons performing similar functions. Our code of ethics is
available free of charge on our web site at www.mondelezinternational.com/investors/corporate-governance and will
be provided free of charge to any shareholder submitting a written request to: Corporate Secretary, Mondelēz
International, Inc., Three Parkway North, Deerfield, IL 60015. We will disclose any waiver we grant to an executive
officer or director under our code of ethics, or certain amendments to the code of ethics, on our web site at
www.mondelezinternational.com/investors/corporate-governance.
In addition, we adopted Corporate Governance Guidelines, charters for each of the Board’s four standing
committees and the Code of Business Conduct and Ethics for Non-Employee Directors. All of these materials are
available on our web site at www.mondelezinternational.com/investors/corporate-governance and will be provided
free of charge to any shareholder requesting a copy by writing to: Corporate Secretary, Mondelēz International, Inc.,
Three Parkway North, Deerfield, IL 60015.
Available Information
Our Internet address is www.mondelezinternational.com. Our Annual Reports on Form 10-K, Quarterly Reports on
Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available free
of charge as soon as possible after we electronically file them with, or furnish them to, the U.S. Securities and
Exchange Commission (the “SEC”). You can access our filings with the SEC by visiting
ir.mondelezinternational.com/sec-filings. The information on our web site is not, and shall not be deemed to be, a
part of this Annual Report on Form 10-K or incorporated into any other filings we make with the SEC.
10
Item 1A. Risk Factors.
You should carefully read the following discussion of significant factors, events and uncertainties when evaluating
our business and the forward-looking information contained in this Annual Report on Form 10-K. The events and
consequences discussed in these risk factors could materially and adversely affect our business, operating results,
liquidity and financial condition. While we believe we have identified and discussed below the key risk factors
affecting our business, these risk factors do not identify all the risks we face, and there may be additional risks and
uncertainties that we do not presently know or that we do not currently believe to be significant that may have a
material adverse effect on our business, performance or financial condition in the future.
We operate in a highly competitive industry and we face risks related to the execution of our strategy and
our timely response to pricing and other competitive pressures.
The food and snacking industry is highly competitive. Our principal competitors include food, snack and beverage
companies that operate in multiple geographic areas and numerous local and regional companies. Failure to
effectively respond to challenges from our competitors could adversely affect our business.
Competitor and customer pressures require that we timely and effectively respond to new distribution channels and
technological developments and may require that we reduce our prices. These pressures also affect our ability to
increase prices in response to commodity and other cost increases. Failure to effectively and timely assess new or
developing trends, technological advancements or changes in distribution methods and set proper pricing or
effective trade incentives will negatively impact our operating results, achievement of our strategic and financial
goals and our ability to capitalize on new revenue or value-producing opportunities. The rapid evolution of new
distribution channels, in particular in e-commerce, may disrupt our current operations or strategies more quickly
than we planned for, create consumer price deflation, alter the buying behavior of consumers or disrupt our retail
customer relationships. We may need to increase or reallocate spending on existing and new distribution channels
and technologies, marketing, advertising and new product innovation to protect or increase revenues, market share
and brand significance. These expenditures may not be successful, including those related to our e-commerce and
other technology-focused efforts, and might not result in trade and consumer acceptance of our efforts, which could
materially and adversely affect our product sales, financial condition and results of operations. These new
distribution channels as well as growing opportunities to utilize external manufacturers allow smaller competitors to
more effectively gain market share. Additionally, if we reduce prices but cannot increase sales volumes, or our labor
or other costs increase but we cannot increase prices to offset those changes, our financial condition and results of
operations will suffer.
During 2019, we operated under our new strategy, which focuses on accelerating consumer-centric and volume-
driven growth, operational excellence driven by cost discipline and continuous operational improvement including in
areas like sales execution, and building a winning growth culture with a “local first” commercial approach. Failure to
achieve these objectives or effectively operate under our strategy in a way that minimizes disruptions to our
business could materially and adversely affect our financial condition and results of operations.
Promoting and protecting our reputation and brand image and health is essential to our business success.
Our success depends on our ability to maintain and enhance our brands, expand to new geographies and new
distribution platforms, including e-commerce, and evolve our portfolio with new product offerings that meet
consumer expectations.
We seek to strengthen our brands through investments in our product quality, product renovation, innovation and
marketing investments, including consumer-relevant advertising, digital transformation and consumer promotions.
Failure to effectively address the continuing global focus on consumer-centric well-being, including changing
consumer acceptance of certain ingredients, nutritional expectations of our products, and the sustainability of our
ingredients, our supply chain and our packaging could adversely affect our brands. Increased attention from the
media, governments, shareholders and other stakeholders in these areas as well as on the role of food marketing
could adversely affect our brand image. Undue caution or inaction on our part in addressing these challenges and
trends could weaken our competitive position. Such pressures could also lead to stricter regulations, industry self-
regulation that is unevenly adopted among companies, and increased focus on food and snacking marketing
practices. Increased legal or regulatory restrictions on our labeling, advertising and consumer promotions, or our
response to those restrictions, could limit our efforts to maintain, extend and expand our brands. Moreover, adverse
publicity, regulatory developments or legal action against us, our employees or our licensees related to product
quality and safety, where and how we manufacture our products, environmental risks, human and workplace rights
11
across our supply chain, or antitrust, anti-bribery and anti-corruption compliance could damage our reputation and
brand health. Such actions could undermine our customers’ and shareholders’ confidence and reduce demand for
our products, even if the regulatory or legal action is unfounded or these matters are immaterial to our operations.
Our product sponsorship relationships, including those with celebrity spokespersons, influencers or group
affiliations, could also subject us to negative publicity.
In addition, our success in maintaining and enhancing our brand image depends on our ability to anticipate change
and adapt to a rapidly changing marketing and media environment, including our increasing reliance on established
and emerging social media and online platforms, digital and mobile dissemination of marketing and advertising
campaigns, targeted marketing and the increasing accessibility and speed of dissemination of information. A variety
of legal and regulatory restrictions limit how and to whom we market our products. These restrictions may limit our
brand renovation, innovation, marketing and promotion plans, particularly as social media and the communications
environment continue to evolve. Negative posts or comments about Mondelēz International, our brands or our
employees on social media or web sites (whether factual or not) or security breaches related to use of our social
media accounts and failure to respond effectively to these posts, comments or activities could damage our
reputation and brand image across the various regions in which we operate. Our brands may be associated with or
appear alongside harmful content before these platforms or our own social media monitoring can detect this risk to
our brand health. In addition, we might fail to invest sufficiently in maintaining, extending and expanding our brands,
our marketing efforts might not achieve desired results and we might be required to recognize impairment charges
on our brands or related intangible assets or goodwill. Furthermore, third parties may sell counterfeit or imitation
versions of our products that are inferior or pose safety risks. When consumers confuse these counterfeit products
for our products or have a bad experience with the counterfeit brand, they might refrain from purchasing our brands
in the future, which could harm our brand image and sales. Failure to successfully maintain and enhance our
reputation and brand health could materially and adversely affect our company and product brands as well as our
product sales, financial condition and results of operations.
We must correctly predict, identify and interpret changes in consumer preferences and demand and offer
new and improved products that meet those changes.
Consumer preferences for food and snacking products change continually. Our success depends on our ability to
predict, identify and interpret the tastes, dietary habits, packaging, sales channel and other preferences of
consumers around the world and to offer products that appeal to these preferences in the places and ways
consumers want to shop. There may be further shifts in the relative size of shopping channels in addition to the
increasing role of e-commerce for consumers. Our success relies upon managing this complexity to promote and
bring our products to consumers effectively. Moreover, weak economic conditions, recession, equity market volatility
or other factors, such as severe or unusual weather events, can affect consumer preferences and demand. Failure
to offer products that appeal to consumers or to correctly judge consumer demand for our products will impact our
ability to meet our growth targets, and our sales and market share could decrease and our profitability could suffer.
We must distinguish between short-term fads and trends and long-term changes in consumer preferences. When
we do not accurately predict which shifts in consumer preferences or category trends will be long-term or fail to
introduce new and improved products to satisfy changing preferences, our sales can be adversely affected. In
addition, because of our varied and geographically diverse consumer base, we must be responsive to local
consumer needs, including with respect to when and how consumers snack and their desire for premium or value
offerings, provide an array of products that satisfy the broad spectrum of consumer preferences and use data-
driven marketing and advertising to reach consumers at the right time with the right message. Failure to expand our
product offerings successfully across product categories, rapidly develop products in faster growing and more
profitable categories or reach consumers in efficient and effective ways leveraging data and analytics could cause
demand for our products to decrease and our profitability to suffer.
Prolonged negative perceptions concerning the health, environmental and social implications of certain food
products, ingredients, packaging materials, sourcing or production methods could influence consumer preferences
and acceptance of some of our products and marketing programs. For example, consumers have increasingly
focused on well-being, including reducing sodium and added sugar consumption, as well as the source and
authenticity of the foods they consume. Continuing to expand our well-being offerings and refining the ingredient
and nutrition profiles of existing products is important to our growth, as is maintaining focus on ethical sourcing and
supply chain management opportunities to address evolving consumer preferences. In addition, consumer
preferences differ by region, and we must monitor and adjust our use of ingredients to respond to these regional
preferences. We might be unsuccessful in our efforts to effectively respond to changing consumer preferences and
12
social expectations. Continued negative perceptions and failure to satisfy consumer preferences could materially
and adversely affect our reputation, brands, product sales, financial condition and results of operations.
We are subject to risks from operating globally.
We are a global company and generated 74.4% of our 2019 net revenues, 75.3% of our 2018 net revenues and
75.8% of our 2017 net revenues outside the United States. We manufacture and market our products in over 150
countries and have operations in approximately 80 countries. Therefore, we are subject to risks inherent in global
operations. Those risks include:
•
•
•
•
•
•
•
•
•
•
•
compliance with U.S. laws affecting operations outside of the United States, including anti-bribery laws such
as the Foreign Corrupt Practices Act (“FCPA”);
the imposition of increased or new tariffs, sanctions, quotas, trade barriers, price floors or similar restrictions
on our sales or key commodities like cocoa, potential changes in U.S. trade programs and trade relations
with other countries, or regulations, taxes or policies that might negatively affect our sales or profitability;
compliance with antitrust and competition laws, trade laws, data privacy laws, anti-bribery laws, human
rights laws and a variety of other local, national and multinational regulations and laws in multiple regimes;
currency devaluations or fluctuations in currency values, including in developing markets such as Argentina,
Brazil, China, Mexico, Russia, Ukraine, Turkey, Egypt, Nigeria, South Africa and Pakistan as well as in
developed markets such as the United Kingdom and other countries within the European Union. This
includes events like applying highly inflationary accounting as we did for our Argentinean subsidiaries
beginning in July 2018;
changes in capital controls, including currency exchange controls, government currency policies or other
limits on our ability to import raw materials or finished product into various countries or repatriate cash from
outside the United States;
increased sovereign risk, such as default by or deterioration in the economies and credit ratings of
governments, particularly in our Latin America and AMEA regions;
changes in local regulations and laws, the uncertainty of enforcement of remedies in non-U.S. jurisdictions,
and foreign ownership restrictions and the potential for nationalization or expropriation of property or other
resources;
varying abilities to enforce intellectual property and contractual rights;
discriminatory or conflicting fiscal policies;
greater risk of uncollectible accounts and longer collection cycles; and
design, implementation and use of effective control environment processes across our diverse operations
and employee base.
In addition, political and economic changes or volatility, geopolitical regional conflicts, terrorist activity, political
unrest, civil strife, acts of war, government shutdowns, travel or immigration restrictions, public health risks or
pandemics, public corruption, expropriation and other economic or political uncertainties, including inaccuracies in
our assumptions about these factors, could interrupt and negatively affect our business operations or customer
demand. High unemployment or the slowdown in economic growth in some markets could constrain consumer
spending. Declining consumer purchasing power could result in loss of market share and adversely impact our
profitability. Continued instability in the banking and governmental sectors of certain countries or the dynamics and
uncertainties associated with the United Kingdom’s planned exit from the European Union (“Brexit”) could have a
negative effect on our business. (See below and Management’s Discussion and Analysis of Financial Condition and
Results of Operations - Financial Outlook for more information on Brexit.)
All of these factors could result in increased costs or decreased revenues and could materially and adversely affect
our product sales, financial condition, results of operations, and our relationships with customers, suppliers and
employees in the short or long term.
We face risks related to tax matters, including changes in tax laws and rates, disagreements with taxing
authorities and imposition of new taxes.
In December 2017, the United States enacted tax reform legislation (“U.S. tax reform”). The legislation implements
many new U.S. domestic and international tax provisions. While additional guidance has been issued by the
Internal Revenue Service (“IRS”) and the U.S. Treasury Department during 2018 and 2019, there are still some
areas that need to be clarified. Also, a number of U.S. states have not updated their laws to take into account the
new federal legislation. As a result, there may be further impact of the new laws on our future results of operations
and financial condition. Changes in U.S. tax law, including further interpretations of the 2017 U.S. tax reform, could
have a material adverse effect on us.
13
In addition, tax legislation enacted by foreign jurisdictions could significantly affect our ongoing operations. For
example, during the third quarter of 2019, Swiss Federal and Zurich Cantonal events took place that resulted in
enacted tax law changes under U.S. GAAP (“Swiss tax reform”). The new legislation is intended to replace certain
preferential tax regimes with a new set of internationally accepted measures. We will continue to monitor Swiss tax
reform for any additional interpretative guidance that could result in changes to the amounts we have recorded.
Further, foreign tax authorities could impose rate changes along with additional corporate tax provisions that would
disallow or tax perceived base erosion or profit shifting payments or subject us to new types of taxes such as digital
taxes. Aspects of U.S. tax reform may lead foreign jurisdictions to respond by enacting additional tax legislation that
is unfavorable to us.
Adverse changes in the underlying profitability or financial outlook of our operations in several jurisdictions could
lead to changes in the realizability of our deferred tax assets and result in a charge to our income tax provision.
Additionally, changes in tax laws in the U.S. or in other countries where we have significant operations could
materially affect deferred tax assets and liabilities and our income tax provision.
We are also subject to tax audits by governmental authorities. Although we believe our tax estimates are
reasonable, if a taxing authority disagrees with the positions we have taken, we could face additional tax liabilities,
including interest and penalties. Unexpected results from one or more such tax audits could significantly adversely
affect our income tax provision and our results of operations.
Our operations in certain emerging markets expose us to political, economic and regulatory risks.
Our growth strategy depends in part on our ability to expand our operations in emerging markets, including among
others Brazil, China, India, Mexico, Russia, Argentina, the Middle East, Africa, Southeast Asia and Ukraine.
However, some emerging markets have greater political, economic and currency volatility and greater vulnerability
to infrastructure and labor disruptions than more established markets. In many countries, particularly those with
emerging economies, engaging in business practices prohibited by laws and regulations with extraterritorial reach,
such as the FCPA and the U.K. Bribery Act, or local anti-bribery laws may be more common. These laws generally
prohibit companies and their employees, contractors or agents from making improper payments to government
officials, including in connection with obtaining permits or engaging in other actions necessary to do business.
Failure to comply with these laws could subject us to civil and criminal penalties that could materially and adversely
affect our reputation, financial condition and results of operations.
In addition, competition in emerging markets is increasing as our competitors grow their global operations and low-
cost local manufacturers improve and expand their production capacities. Our success in emerging markets is
critical to achieving our growth strategy. Failure to successfully increase our business in emerging markets and
manage associated political, economic and regulatory risks could adversely affect our product sales, financial
condition and results of operations.
Our use of information technology and third-party service providers exposes us to cybersecurity breaches
and other business disruptions.
We use information technology and third-party service providers to support our global business processes and
activities, including supporting critical business operations such as manufacturing and distribution; communicating
with our suppliers, customers and employees; maintaining effective accounting processes and financial and
disclosure controls; executing mergers and acquisitions and other corporate transactions; conducting research and
development activities; meeting regulatory, legal and tax requirements; and executing various digital marketing and
consumer promotion activities. Global shared service centers managed by third parties provide an increasing
amount of services important to conducting our business, including a number of accounting, internal control, human
resources and computing functions.
Continuity of business applications and services has been, and may in the future be, disrupted by events such as
infection by viruses or malware, including the June 2017 malware incident that affected a significant portion of our
global sales, distribution and financial networks (the “malware incident”) (see Management’s Discussion and
Analysis of Financial Condition and Results of Operations – Recent Developments and Significant Items Affecting
Comparability – Malware Incident and – Financial Outlook – Cybersecurity Risks); other cybersecurity attacks;
issues with or errors in systems’ maintenance or security; power outages; hardware or software failures; denial of
service attacks; telecommunication failures; natural disasters; terrorist attacks; and other catastrophic occurrences.
Our use of new and emerging technologies such as cloud-based services and mobile applications continues to
14
evolve, presenting new and additional risks in managing access to our data, relying on third-parties to manage and
safeguard data, ensuring access to our systems and availability of third-party systems.
Cybersecurity breaches of our or third-party systems, whether from circumvention of security systems, denial-of-
service attacks or other cyberattacks such as hacking, phishing attacks, computer viruses, ransomware or malware,
employee or insider error, malfeasance, social engineering, physical breaches or other actions may cause
confidential information belonging to us or our employees, customers, consumers, partners, suppliers, or
governmental or regulatory authorities to be misused or breached. When risks such as these materialize, the need
for us to coordinate with various third-party service providers and for third-party service providers to coordinate
amongst themselves might increase challenges and costs to resolve related issues. Additionally, new initiatives,
such as those related to e-commerce and direct sales, that increase the amount of confidential information that we
process and maintain increase our potential exposure from a cybersecurity breach. If our controls, disaster recovery
and business continuity plans or those of our third-party providers do not effectively respond to or resolve the issues
related to any such disruptions in a timely manner, our product sales, financial condition and results of operations
may be materially and adversely affected, and we might experience delays in reporting our financial results, loss of
intellectual property and damage to our reputation or brands.
We continue to devote focused resources to network security, backup and disaster recovery, enhanced training and
other security measures to protect our systems and data, such as advanced email protection to reduce the
likelihood of credential thefts and electronic fraud attempts. We also focus on enhancing the monitoring and
detection of threats in our environment, including but not limited to the manufacturing environment and operational
technologies, as well as adjusting information security controls based on the updated threat. However, security
measures cannot provide absolute security or guarantee that we will be successful in preventing or responding to
every breach or disruption on a timely basis. Due to the constantly evolving and complex nature of security threats,
we cannot predict the form and impact of any future incident, and the cost and operational expense of
implementing, maintaining and enhancing protective measures to guard against increasingly complex and
sophisticated cyber threats could increase significantly.
We regularly transfer data across national borders to conduct our operations, and we are subject to a variety of
continuously evolving and developing laws and regulations in numerous jurisdictions regarding privacy, data
protection and data security, including those related to the collection, storage, handling, use, disclosure, transfer
and security of personal data. Privacy and data protection laws may be interpreted and applied differently from
jurisdiction to jurisdiction and may create inconsistent or conflicting requirements. The European Union’s General
Data Protection Regulation (“GDPR”), which has greatly increased the jurisdictional reach of European Union law
and became effective in May 2018, adds a broad array of requirements for handling personal data including the
public disclosure of significant data breaches, and imposes substantial penalties for non-compliance of up to 4% of
global annual revenue for the preceding financial year. The California Consumer Privacy Act (“CCPA”), which
became effective on January 1, 2020, imposes new responsibilities on us for the handling, disclosure and deletion
of personal information for consumers who reside in California. The CCPA permits California to assess potentially
significant fines for violating CCPA and creates a right for individuals to bring class action suits seeking damages for
violations. Our efforts to comply with GDPR, CCPA and other privacy and data protection laws may impose
significant costs and challenges that are likely to increase over time, and we could incur substantial penalties or be
subject to litigation related to violation of existing or future data privacy laws and regulations.
We are subject to risks from unanticipated business disruptions.
We manufacture and source products and materials on a global scale. We utilize an integrated supply chain - a
complex network of suppliers and material needs, owned and leased manufacturing locations, co-manufacturing
locations, distribution networks, shared service delivery centers and information systems that support our ability to
provide our products to our customers consistently. Factors that are hard to predict or beyond our control, like
weather (including any potential effects of climate change), natural disasters, water availability, supply and
commodity shortages, terrorism, political unrest, cybersecurity breaches, generalized labor unrest, government
shutdowns or health pandemics could damage or disrupt our operations or those of our suppliers, their suppliers, or
our co-manufacturers or distributors. Failure to effectively plan for and respond to disruptions in our operations, for
example, by not finding alternative suppliers or replacing capacity at key or sole manufacturing or distribution
locations or by not quickly repairing damage to our information, production or supply systems, can cause delays in
delivering or the inability to deliver products to our customers as we experienced in connection with the malware
incident (see Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent
Developments and Significant Items Affecting Comparability – Malware Incident and – Financial Outlook –
Cybersecurity Risks), and the quality and safety of our products might be negatively affected. The occurrence of a
15
material or extended disruption may cause us to lose our customers’ or business partners’ confidence or suffer
damage to our reputation, and long-term consumer demand for our products could decline. In addition, we are
subject to risk related to our own execution. This includes risk of disruption caused by operational error including
fire, explosion or accidental contamination as well as our inability to achieve our strategic objectives due to
capability or technology deficiencies related to our ongoing reconfiguration of our supply chain to drive efficiencies
and fuel growth. Further, our ability to supply multiple markets with a streamlined manufacturing footprint may be
negatively impacted by portfolio complexity, significant changes in trade policies, changes in volume produced and
changes to regulatory restrictions or labor-related or other constraints on our ability to adjust production capacity in
the markets in which we operate. These events could materially and adversely affect our product sales, financial
condition and results of operations.
We are subject to currency exchange rate fluctuations.
At December 31, 2019, we sold our products in over 150 countries and had operations in approximately 80
countries. Consequently, a significant portion of our business is exposed to currency exchange rate fluctuations.
Our financial results and capital ratios are sensitive to movements in currency exchange rates because a large
portion of our assets, liabilities, revenue and expenses must be translated into U.S. dollars for reporting purposes or
converted into U.S. dollars to service obligations such as our U.S. dollar-denominated indebtedness and to pay
dividends to our shareholders. In addition, movements in currency exchange rates affect transaction costs because
we source product ingredients from various countries. Our efforts to mitigate our exposure to exchange rate
fluctuations, primarily on cross-currency transactions, may not be successful. We hedge a number of risks including
exposures to foreign exchange rate movements and volatility of interest rates that could impact our future borrowing
costs. Hedging of these risks could potentially subject us to counter-party credit risk. In addition, local economies,
monetary policies and currency hedging availability affect our ability to hedge against currency-related economic
losses. We might not be able to successfully mitigate our exposure to currency risks due to factors such as
continued global and local market volatility, actions by foreign governments, political uncertainty, inflation and
limited hedging opportunities. Accordingly, changes in the currency exchange rates that we use to translate our
results into U.S. dollars for financial reporting purposes or for transactions involving multiple currencies could
materially and adversely affect future demand for our products, our financial condition and results of operations, and
our relationships with customers, suppliers and employees in the short or long-term.
Commodity and other input prices are volatile and may increase or decrease significantly or availability of
commodities may become constrained.
We purchase and use large quantities of commodities, including cocoa, dairy, wheat, palm and other vegetable oils,
sugar and other sweeteners, flavoring agents and nuts. In addition, we purchase and use significant quantities of
product packaging materials, natural gas, fuel and electricity for our factories and warehouses, and we also incur
expenses in connection with the transportation and delivery of our products. Costs of raw materials, other supplies
and services and energy are volatile and fluctuate due to conditions that are difficult to predict. These conditions
include global competition for resources, currency fluctuations, geopolitical conditions or conflicts, tariffs or other
trade barriers, government intervention to introduce living income premiums or similar requirements such as those
announced in 2019 in two cocoa-growing countries, severe weather, the potential longer-term consequences of
climate change on agricultural productivity, crop disease or pests, water risk, health pandemics, forest fires,
consumer or industrial demand, and changes in governmental trade policy and regulations, alternative energy and
agricultural programs. Increased government intervention and consumer or activist responses caused by increased
focus on climate change, deforestation, water, plastic waste, animal welfare and human rights concerns and other
risks associated with the global food system could adversely affect our or our suppliers’ reputation and business
and our ability to procure the materials we need to operate our business. Some commodities are grown by
smallholder farmers who might not be able to invest to increase productivity or adapt to changing conditions.
Although we monitor our exposure to commodity prices and hedge against input price increases, we cannot fully
hedge against changes in commodity costs, and our hedging strategies may not protect us from increases in
specific raw material costs. Continued volatility in the prices of commodities and other supplies we purchase or
changes in the types of commodities we purchase as we continue to evolve our product and packaging portfolio
could increase or decrease the costs of our products, and our profitability could suffer as a result. Moreover,
increases in the price of our products, including increases to cover higher input, packaging and transportation costs,
may result in lower sales volumes, while decreases in input costs could require us to lower our prices and thereby
affect our revenues, profits or margins. Likewise, constraints in the supply or availability of key commodities,
including necessary services such as transportation, may limit our ability to grow our net revenues and earnings. If
our mitigation activities are not effective, if we are unable to price to cover increased costs or must reduce our
16
prices, or if we are limited by supply or distribution constraints, our financial condition and results of operations can
be materially adversely affected.
We face risks related to complying with changes in and inconsistencies among laws and regulations in
many countries in which we operate.
Our activities around the world are highly regulated and subject to government oversight. Various laws and
regulations govern food production, packaging and waste management, storage, distribution, sales, advertising,
labeling and marketing, as well as intellectual property, competition, antitrust, trade, labor, tax and environmental
matters, privacy, data protection, and health and safety practices. Government authorities regularly change laws
and regulations as well as their interpretations of existing laws and regulations. Our failure to comply with existing
laws and regulations, or to make changes necessary to comply with new or revised laws and regulations or evolving
interpretations and application of existing laws and regulations, could materially and adversely affect our product
sales, financial condition and results of operations. For instance, our financial condition and results of operations
could be negatively affected by the regulatory and economic impact of changes in taxation and trade relations
among the United States and other countries, including a new United States-Mexico-Canada Agreement when
ratified, developments in U.S. trade relations with China or changes with or in the European Union such as Brexit.
We continue to monitor Brexit and its potential impacts on our results of operations and financial condition. In 2019,
we generated 8.6% of our net revenues in the United Kingdom, and our supply chain in this market relies on
imports of raw and packaging materials as well as finished goods. Volatility in foreign currencies and other markets
is expected to continue as the United Kingdom executes its exit from the European Union. If the U.K.'s membership
in the European Union terminates without trade and other cross-border operating agreements, there could be
increased costs from re-imposition of tariffs on trade between the United Kingdom and other countries, including
those in the European Union, shipping delays because of the need for customs inspections and procedures and
shortages of certain goods. The United Kingdom will also need to negotiate its own tax and trade treaties with
countries all over the world, which could take years to complete. If the ultimate terms of the U.K.’s separation from
the European Union negatively impact the U.K. economy or result in disruptions to sales or our supply chain, the
imposition of tariffs or currency devaluation in the United Kingdom, the impact to our consolidated revenue,
earnings and cash flow could be material. (See Management’s Discussion and Analysis of Financial Condition and
Results of Operations – Financial Outlook – Brexit for more information.)
We may be unable to hire or retain and develop key personnel or a highly skilled and diverse global
workforce or manage changes in our workforce.
We must hire, retain and develop effective leaders and a highly skilled and diverse global workforce. We compete to
hire new personnel with a variety of capabilities in the many countries in which we manufacture and market our
products and then to develop and retain their skills and competencies. Unplanned or increased turnover of
employees with key capabilities, failure to attract and develop personnel with key emerging capabilities such as e-
commerce and digital marketing skills, or failure to develop adequate succession plans for leadership positions or to
hire and retain a workforce with the skills and in the locations we need to operate and grow our business could
deplete our institutional knowledge base and erode our competitiveness. Changes in our operating model and
business processes, including building a winning growth culture, implementing our “local first” commercial
approach, utilizing our global shared services capability and reconfiguring our supply chain, could lead to
operational challenges and changes in the skills we require to achieve our business goals. Failure to achieve a
more diverse workforce and leadership team, compensate our employees competitively and fairly or maintain a safe
and inclusive environment could affect our reputation and also result in lower performance and an inability to retain
valuable employees.
We might be unable to manage appropriately changes in, or that affect, our workforce or satisfy the legal
requirements associated with how we manage and compensate our employees. This includes our management of
employees represented by labor unions or workers’ councils, who represent approximately 63% of our 68,000
employees outside the United States and approximately 27% of our 12,000 U.S. employees. Strikes, work
stoppages or other forms of labor unrest by our employees or those of our suppliers or distributors, or situations like
the renegotiation of collective bargaining agreements that expired in February 2016 and that cover eight U.S.
facilities, could cause disruptions to our supply chain, manufacturing or distribution processes. Changes in
immigration laws and policies, including in connection with Brexit, could also make it more difficult for us to recruit or
relocate skilled employees.
17
These risks could materially and adversely affect our reputation, ability to meet the needs of our customers, product
sales, financial condition and results of operations.
Our retail customers are consolidating, and we must leverage our value proposition in order to compete
against retailer and other economy brands.
Retail customers, such as supermarkets, discounters, e-commerce merchants, warehouse clubs and food
distributors in the European Union, the United States and other major markets, continue to consolidate, form buying
alliances or be acquired by new entrants in the food retail market, resulting in fewer, larger customers. Large retail
customers and customer alliances can delist our products or reduce the shelf space allotted to our products and
demand lower pricing, increased promotional programs or longer payment terms. Retail customers might also adopt
these tactics in their dealings with us in response to the significant growth in online retailing for consumer products,
which is outpacing the growth of traditional retail channels. The emergence of alternative online retail channels,
such as direct to consumer and e-business to business, may adversely affect our relationships with our large retail
and wholesale customers.
In addition, larger retail customers have the scale to develop supply chains that permit them to operate with
reduced inventories or to develop and market their own retailer and other economy brands that compete with some
of our products. Our products must provide higher quality or value to our consumers than the less expensive
alternatives, particularly during periods of economic uncertainty. Consumers may not buy our products when they
perceive little difference between the quality or value of our products and those of retailer or other economy brands.
When consumers prefer or otherwise choose to purchase the retailer or other economy brands, we can lose market
share or sales volumes, or we may need to shift our product mix to lower margin offerings.
Retail consolidation also increases the risk that adverse changes in our customers’ business operations or financial
performance will have a corresponding material adverse effect on us. For example, if our customers cannot access
sufficient funds or financing, then they may delay, decrease or cancel purchases of our products, or delay or fail to
pay us for previous purchases.
Failure to effectively respond to retail consolidation, increasing retail power and competition from retailer and other
economy brands could materially and adversely affect our reputation, brands, product sales, financial condition and
results of operations.
We are subject to changes in our relationships with significant customers, suppliers and distributors.
During 2019, our five largest customers accounted for 17.0% of our net revenues. There can be no assurance that
our customers will continue to purchase our products in the same mix or quantities or on the same terms as in the
past, particularly as increasingly powerful retailers continue to demand lower pricing and develop their own brands.
The loss of or disruptions related to significant customers could result in a material reduction in sales or change in
the mix of products we sell to a significant customer. This could materially and adversely affect our product sales,
financial condition and results of operations.
Disputes with significant suppliers or distributors, including disputes related to pricing or performance, could
adversely affect our ability to supply or deliver products to our customers or operate our business and could
materially and adversely affect our product sales, financial condition and results of operations. In addition, the
financial condition of our significant customers, suppliers and distributors are affected by events that are largely
beyond our control. Deterioration in the financial condition of significant customers, suppliers or distributors could
materially and adversely affect our product sales, financial condition and results of operations.
We may decide or be required to recall products or be subjected to product liability claims.
We could decide, or laws or regulations could require us, to recall products due to suspected or confirmed
deliberate or unintentional product contamination, including contamination of ingredients we use in our products that
third parties supply, spoilage or other adulteration, product mislabeling or product tampering. In addition, if another
company recalls or experiences negative publicity related to a product in a category in which we compete,
consumers might reduce their overall consumption of products in this category. Any of these events could materially
and adversely affect our reputation, brands, product sales, financial condition and results of operations.
We may also suffer losses when our products or operations or those of our suppliers violate applicable laws or
regulations, or when our or our suppliers’ products cause injury, illness or death. In addition, our marketing could
18
face claims of false or deceptive advertising or other criticism. A significant product liability or other legal judgment
against us, a related regulatory enforcement action, a widespread product recall or attempts to manipulate us based
on threats related to the safety of our products could materially and adversely affect our reputation and profitability.
Moreover, even if a product liability, consumer fraud or other claim is unsuccessful, has no merit or is not pursued,
the negative publicity surrounding assertions against our products or processes could materially and adversely
affect our reputation, brands, product sales, product inventory, financial condition and results of operations.
We face risks related to legal or tax claims or other regulatory enforcement actions.
We are a large snack food company operating in highly regulated environments and constantly evolving legal, tax
and regulatory frameworks around the world. Consequently, we are subject to greater risk of litigation, legal or tax
claims or other regulatory enforcement actions. We have implemented policies and procedures designed to
promote compliance with existing laws and regulations; however, there can be no assurance that we maintain
effective control environment processes, including in connection with our global shared services capability. Actions
by our employees, contractors or agents in violation of our policies and procedures could lead to violations,
unintentional or otherwise, of laws and regulations. When litigation, legal or tax claims or regulatory enforcement
actions arise out of our failure or alleged failure to comply with applicable laws, regulations or controls, we could be
subject to civil and criminal penalties that could materially and adversely affect our reputation, product sales,
financial condition and results of operations.
Climate change might adversely impact our supply chain or our operations.
Scientific evidence collected by the Intergovernmental Panel on Climate Change demonstrates that carbon dioxide
and other greenhouse gases in the atmosphere have caused and will in the future cause changes in weather
patterns around the globe. These changes are expected to increase the frequency of extreme weather events and
natural disasters and affect water availability and quality. These impacts increase risks for the global food
production and distribution system. Decreased agricultural productivity caused by climate change might limit the
availability of the commodities we purchase and use. These include cocoa, which is a critical raw material for our
chocolate and biscuit portfolios that is particularly sensitive to changes in climate, as well as other raw materials
such as wheat, vegetable oils, sugar, nuts and dairy. Localized weather events such as floods, severe storms or
water shortages that are partially caused or exacerbated by climate change might disrupt our business operations
or those of our suppliers, their suppliers, or our co-manufacturers or distributors.
Concern about climate change might result in new legal and regulatory requirements to reduce or mitigate the
effects of climate change. These changes could increase our operating costs for things like energy through taxes or
regulations. Concern about climate change might cause consumer preferences to switch away from products or
ingredients considered to have high climate change impact. Furthermore, we might fail to effectively address
increased attention from the media, shareholders, activists and other stakeholders on climate change and related
environmental sustainability matters, including deforestation, land use, water use and packaging, including plastic.
Finally, the fact that consumers are exposed to rising temperatures could affect demand for our products, such as
decreased demand we have experienced for chocolate during periods when temperatures are warmer.
Taken together these risks could materially and adversely affect our ability to meet the needs of our customers,
reputation, product sales, financial condition and results of operations.
We may not successfully identify, complete or manage strategic transactions.
We regularly evaluate a variety of potential strategic transactions, including acquisitions, divestitures, joint ventures,
equity method investments and other strategic alliances that could further our strategic business objectives. We
may not successfully identify, complete or manage the risks presented by these strategic transactions. Our success
depends, in part, upon our ability to identify suitable transactions; negotiate favorable contractual terms; comply
with applicable regulations and receive necessary consents, clearances and approvals (including regulatory and
antitrust clearances and approvals); integrate or separate businesses; realize the full extent of the benefits, cost
savings or synergies presented by strategic transactions; effectively implement control environment processes with
employees joining us as a result of a transaction; minimize adverse effects on existing business relationships with
suppliers and customers; achieve accurate estimates of fair value; minimize potential loss of customers or key
employees; and minimize indemnities and potential disputes with buyers, sellers and strategic partners. In addition,
execution or oversight of strategic transactions may result in the diversion of management attention from our
existing business and may present financial, managerial and operational risks.
19
With respect to acquisitions and joint ventures in particular, we are also exposed to potential risks based on our
ability to conform standards, controls, policies and procedures, and business cultures; consolidate and streamline
operations and infrastructures; identify and eliminate, as appropriate, redundant and underperforming operations
and assets; manage inefficiencies associated with the integration of operations; and coordinate timely and ongoing
compliance with antitrust and competition laws in the United States, the European Union and other jurisdictions.
Joint ventures and similar strategic alliances pose additional risks, as we share ownership in both public and private
companies and in some cases management responsibilities with one or more other parties whose objectives for the
alliance may diverge from ours over time, who may not have the same priorities, strategies or resources as we do,
or whose interpretation of applicable policies may differ from our own. Strategic alliances we have entered into
include our investments in Jacobs Douwe Egberts and Keurig Dr Pepper Inc. Transactions or ventures into which
we enter might not meet our financial and non-financial control and compliance expectations or yield the anticipated
benefits. Depending on the nature of the business ventures, including whether they operate globally, these ventures
could also be subject to many of the same risks we are, including political, economic, regulatory and compliance
risks, currency exchange rate fluctuations, and volatility of commodity and other input prices. Either partner might
fail to recognize an alliance relationship that could expose the business to higher risk or make the venture not as
productive as expected.
Furthermore, we may not be able to complete, on terms favorable to us, desired or proposed divestitures of
businesses that do not meet our strategic objectives or our growth or profitability targets. Our divestiture activities,
or related activities such as reorganizations, restructuring programs and transformation initiatives, may require us to
recognize impairment charges or to take action to reduce costs that remain after we complete a divestiture. Gains
or losses on the sales of, or lost operating income from, those businesses may also affect our profitability.
Any of these risks could materially and adversely affect our business, product sales, financial condition and results
of operations.
We could fail to maintain effective internal control over financial reporting.
The accuracy of our financial reporting depends on the effectiveness of our internal control over financial reporting.
Internal control over financial reporting can provide only reasonable assurance with respect to the preparation and
fair presentation of financial statements and may not prevent or detect misstatements because of its inherent
limitations. These limitations include, among others, the possibility of human error, inadequacy or circumvention of
controls and fraud. If we do not maintain effective internal control over financial reporting or design and implement
controls sufficient to provide reasonable assurance with respect to the preparation and fair presentation of our
financial statements, including in connection with controls executed for us by third parties, we might fail to timely
detect any misappropriation of corporate assets or inappropriate allocation or use of funds and could be unable to
file accurate financial reports on a timely basis. As a result, our reputation, results of operations and stock price
could be materially adversely affected.
Weak financial performance, downgrades in our credit ratings, illiquid global capital markets and volatile
global economic conditions could limit our access to the global capital markets, reduce our liquidity and
increase our borrowing costs.
We access the long-term and short-term global capital markets to obtain financing. Our financial performance, our
short-and long-term debt credit ratings, interest rates, the stability of financial institutions with which we partner, the
liquidity of the overall global capital markets and the state of the global economy, including the food industry, could
affect our access to, and the availability or cost of, financing on acceptable terms and conditions and our ability to
pay dividends in the future. There can be no assurance that we will have access to the global capital markets on
terms we find acceptable.
We regularly access the commercial paper markets in the United States and Europe for ongoing funding
requirements. A downgrade in our credit ratings by a credit rating agency could increase our borrowing costs and
adversely affect our ability to issue commercial paper. Disruptions in the global commercial paper market or other
effects of volatile economic conditions on the global credit markets also could reduce the amount of commercial
paper that we could issue and raise our borrowing costs for both short- and long-term debt offerings.
Limitations on our ability to access the global capital markets, a reduction in our liquidity or an increase in our
borrowing costs could materially and adversely affect our financial condition and results of operations.
20
Volatility in the equity markets, interest rates, our participation in multiemployer pension plans and other
factors could increase our costs relating to our employees’ pensions.
We sponsor defined benefit pension plans for a number of our employees throughout the world and also contribute
to other employees’ pensions under defined benefit plans that we do not sponsor. At the end of 2019, the projected
benefit obligation of the defined benefit pension plans we sponsor was $12.2 billion and plan assets were $11.5
billion.
For defined benefit pension plans that we maintain, the difference between plan obligations and assets, or the
funded status of the plans, significantly affects the net periodic benefit costs of our pension plans and the ongoing
funding requirements of those plans. Our largest funded defined benefit pension plans are funded with trust assets
invested in a globally diversified portfolio of investments, including equities and corporate and government debt.
Among other factors, changes in interest rates, mortality rates, early retirement rates, investment returns, funding
requirements in the jurisdictions in which the plans operate and the market value of plan assets affect the level of
plan funding, cause volatility in the net periodic pension cost and impact our future funding requirements.
Legislative and other governmental regulatory actions may also increase funding requirements for our pension
plans’ benefits obligation. Volatility in the global capital markets may increase the risk that we will be required to
make additional cash contributions to these company-sponsored pension plans and recognize further increases in
our net periodic pension cost.
We also participate in multiemployer pension plans for certain U.S. union-represented employees. As a participating
employer under multiemployer pension plans, we may owe more than the contributions we are required to make
under the applicable collective bargaining agreements. For example, if we partially or completely withdraw from a
multiemployer pension plan, we may be required to pay a partial or complete withdrawal liability. This withdrawal
liability will generally increase if there is also a mass withdrawal of other participating employers or if the plan
terminates. In 2018, we executed a complete withdrawal from the Bakery and Confectionery Union and Industry
International Pension Fund (the "Fund") and recorded a $429 million estimated withdrawal liability. On July 11,
2019, we received an undiscounted withdrawal liability assessment from the Fund totaling $526 million requiring
pro-rata monthly payments over 20 years and we recorded a $35 million final adjustment to reduce our withdrawal
liability as of June 30, 2019. We began making monthly payments during the third quarter of 2019. As of December
31, 2019, the remaining discounted withdrawal liability was $391 million, with $14 million recorded in other current
liabilities and $377 million recorded in long-term other liabilities. See Note 11, Benefit Plans, to the consolidated
financial statements for more information on our multiemployer pension plans.
A significant increase in our pension benefit obligations or funding requirements could curtail our ability to invest in
the business and adversely affect our financial condition and results of operations.
We face risks related to adequately protecting our valuable intellectual property rights.
We consider our intellectual property rights, particularly and most notably our trademarks, but also our patents,
trade secrets, copyrights and licensing agreements, to be a significant and valuable part of our business. We
attempt to protect our intellectual property rights by taking advantage of a combination of patent, trademark,
copyright and trade secret laws in various countries, as well as licensing agreements, third-party nondisclosure and
assignment agreements and policing of third-party misuses and infringement of our intellectual property. Our failure
to obtain or adequately protect our intellectual property rights, or any change in law or other changes that serve to
lessen or remove the current legal protections of our intellectual property, may diminish our competitiveness and
could materially harm our business and financial condition.
We may be unaware of potential third-party claims of intellectual property infringement relating to our technology,
brands or products. Any litigation regarding patents or other intellectual property could be costly and time-
consuming and could divert management’s and other key personnel’s attention from our business operations. Third-
party claims of intellectual property infringement might require us to pay monetary damages or enter into costly
license agreements. We also may be subject to injunctions against development and sale of certain of our products,
which could include removal of existing products from sale. Any of these occurrences could materially and
adversely affect our reputation, brand health, ability to introduce new products or improve the quality of existing
products, product sales, financial condition and results of operations.
21
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
On December 31, 2019, we had approximately 126 manufacturing and processing facilities in 44 countries and 110
distribution centers and depots worldwide that we owned or leased. During 2019, the number of manufacturing
facilities decreased by 6 mainly due to divestitures and the number of distribution facilities decreased by 13
primarily due to the expiration of lease agreements and consolidation of facilities. In addition to our owned or leased
properties, we also utilize a highly distributed network of warehouses and distribution centers that are owned or
leased by third party logistics partners, contract manufacturers, co-packers or other strategic partners. We believe
we have or will add sufficient capacity to meet our planned operating needs. It is our practice to maintain all of our
plants and other facilities in good condition.
Latin America (1)
AMEA
Europe
North America
Total
Owned
Leased
Total
As of December 31, 2019
Number of
Manufacturing
Facilities
Number of
Distribution
Facilities
13
43
55
15
126
118
8
126
13
21
23
53
110
13
97
110
(1) Excludes our deconsolidated Venezuela operations. Refer to Note 1, Summary of Significant Accounting Policies, for more
information.
Item 3. Legal Proceedings.
Information regarding legal proceedings is available in Note 14, Commitments and Contingencies, to the
consolidated financial statements in this report.
Item 4. Mine Safety Disclosures.
Not applicable.
22
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
We have listed our Common Stock on The Nasdaq Global Select Market under the symbol “MDLZ.” At January 31,
2020, there were 44,764 holders of record of our Common Stock.
Comparison of Five-Year Cumulative Total Return
The following graph compares the cumulative total return on our Common Stock with the cumulative total return of
the S&P 500 Index and the Mondelēz International performance peer group index. The graph assumes, in each
case, that an initial investment of $100 is made at the beginning of the five-year period. The cumulative total return
reflects market prices at the end of each year and the reinvestment of dividends each year.
As of December 31,
2014
2015
2016
2017
2018
2019
Mondelēz
International
S&P 500
$
100.00 $
125.39
100.00 $
101.38
Performance
Peer Group
100.00
126.10
124.11
118.82
166.85
113.51
138.29
132.23
173.86
102.59
102.96
120.31
113.19
143.50
The Mondelēz International performance peer group consists of the following companies considered our market
competitors or that have been selected on the basis of industry, global focus or industry leadership: Campbell Soup
Company, The Coca-Cola Company, Colgate-Palmolive Company, Danone S.A., General Mills, Inc., The Hershey
Company, Kellogg Company, The Kraft Heinz Company, Nestlé S.A., PepsiCo, Inc., The Procter & Gamble
Company and Unilever PLC. The Kraft Heinz Company performance history is included for 2016 through 2019 only
as the company was formed in 2015.
23
Issuer Purchases of Equity Securities
Our stock repurchase activity for each of the three months in the quarter ended December 31, 2019 was:
Period
October 1-31, 2019
November 1-30, 2019
December 1-31, 2019
For the Quarter Ended
December 31, 2019
Total Number
of Shares
Purchased (1)
Average Price Paid
per Share (1)
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs (2)
Approximate Dollar
Value of Shares
That May Yet Be
Purchased Under
the Plans or
Programs (2)
1,295,595 $
2,946,093
2,472,223
6,713,911
53.76
52.18
54.42
53.31
1,281,313 $
2,831,683
2,467,098
6,580,094
3,433
3,286
3,151
(1) The total number of shares purchased (and the average price paid per share) reflects: (i) shares purchased pursuant to the
repurchase program described in (2) below; and (ii) shares tendered to us by employees who used shares to exercise
options and to pay the related taxes for grants of deferred stock units that vested, totaling 14,282 shares, 114,410 shares
and 5,125 shares for the fiscal months of October, November and December 2019, respectively.
(2) Dollar values stated in millions. Our Board of Directors has authorized the repurchase of $19.7 billion of our Common Stock
through December 31, 2020. Specifically, on March 12, 2013, our Board of Directors authorized the repurchase of up to the
lesser of 40 million shares or $1.2 billion of our Common Stock through March 12, 2016. On August 6, 2013, our Audit
Committee, with authorization delegated from our Board of Directors, increased the repurchase program capacity to
$6.0 billion of Common Stock repurchases and extended the expiration date to December 31, 2016. On December 3, 2013,
our Board of Directors approved an increase of $1.7 billion to the program related to a new accelerated share repurchase
program, which concluded in May 2014. On July 29, 2015, our Finance Committee, with authorization delegated from our
Board of Directors, approved a $6.0 billion increase that raised the repurchase program capacity to $13.7 billion and
extended the program through December 31, 2018. On January 31, 2018, our Finance Committee, with authorization
delegated from our Board of Directors, approved an increase of $6.0 billion in the share repurchase program, raising the
authorization to $19.7 billion of Common Stock repurchases, and extended the program through December 31, 2020. See
related information in Note 13, Capital Stock.
24
Item 6. Selected Financial Data
Mondelēz International, Inc.
Selected Financial Data – Five Year Review (1)
Continuing Operations (2)
Net revenues
Earnings from continuing operations,
net of taxes
Net earnings attributable to
Mondelēz International
Per share, basic
Per share, diluted
Cash Flow and Financial Position (3)
Net cash provided by operating activities
Capital expenditures
Property, plant and equipment, net
Total assets
Long-term debt
Total Mondelēz International
shareholders’ equity
Shares outstanding at year end (4)
Per Share and Other Data
2019
2018
2017
2016
2015
(in millions, except per share and employee data)
$
25,868 $
25,938 $
25,896 $
25,923 $
29,636
3,885
3,870
2.68
2.65
3,965
925
8,733
64,549
14,207
3,395
3,381
2.30
2.28
3,948
1,095
8,482
62,729
12,532
2,842
2,828
1.87
1.85
2,593
1,014
8,677
62,957
12,972
1,645
1,635
1.05
1.04
2,838
1,224
8,229
61,506
13,217
7,291
7,267
4.49
4.44
3,728
1,514
8,362
62,843
14,557
$
27,275 $
25,637 $
25,994 $
25,141 $
28,012
1,435
1,451
1,488
1,528
1,580
Book value per shares outstanding
Dividends declared per share (5)
Common Stock closing price at year end
$
$
$
19.01 $
1.09 $
55.08 $
17.67 $
0.96 $
40.03 $
17.47 $
0.82 $
42.80 $
16.45 $
0.72 $
44.33 $
17.73
0.64
44.84
Number of employees
80,000
80,000
83,000
90,000
99,000
(1) The selected financial data should be read in conjunction with Management’s Discussion and Analysis of Financial
Condition and Results of Operations and our consolidated financial statements and related notes included elsewhere in this
Annual Report on Form 10-K and Annual Reports on Form 10-K for earlier periods. During 2018, we moved to a quarter lag
for recording Keurig Green Mountain, Inc. ("Keurig") and Keurig Dr Pepper Inc. ("KDP") results and we recast all prior
periods since the inception of our investment in Keurig in 2016 on the same quarter lag basis. Please see Note 7, Equity
Method Investments, for more information. During 2018, we adopted the new revenue recognition accounting standard
update, and it did not have a material impact on any reported periods. See Note 1, Summary of Significant Accounting
Policies, for more information. During 2019, we adopted the new lease accounting standard and related updates, and we
disclose the impacts to our 2019 financial statements in Note 1, Summary of Significant Accounting Policies. A significant
portion of our business is exposed to currency exchange rate fluctuation as a large portion of our assets, liabilities, revenue
and expenses must be translated into U.S. dollars for reporting purposes. Refer to Management’s Discussion and Analysis
of Financial Condition and Results of Operations for a discussion of operating results on a constant currency basis where
noted.
(2) Significant items impacting the comparability of our results from continuing operations include: the Simplify to Grow
Program; the contribution of our global coffee businesses and investment in Jacobs Douwe Egberts ("JDE") and related
gain in 2015; gain on equity method investment transactions in 2016-2018; other divestitures and sales of property in
2015-2019; acquisitions in 2015-2016 and 2018-2019; losses on debt extinguishment in 2015-2018; unrealized gains on the
coffee business transaction currency hedges in 2015; debt tender offers completed in 2015-2016 and 2018; loss on
deconsolidation of Venezuela in 2015; the remeasurement of net monetary assets in Venezuela in 2015 and Argentina in
2018-2019; accounting calendar changes in 2015; impairment charges related to intangible assets in 2015-2019; losses or
gains related to interest rate swaps in 2015-2016 and 2018-2019; impacts from the resolution of tax matters in 2017-2018;
impacts from pension participation changes in 2018-2019; CEO transition remuneration in 2017-2019; malware incident
incremental expenses in 2017; and our provision for income taxes in all years, including the U.S. tax reform discrete net tax
benefits or expenses in primarily 2017-2018 and Swiss tax reform net impacts in 2019. Please refer to Note 1, Summary of
Significant Accounting Policies; Note 2, Divestitures and Acquisitions; Note 5, Leases; Note 6, Goodwill and Intangible
Assets; Note 7, Equity Method Investments; Note 8, Restructuring Program; Note 9, Debt and Borrowing Arrangements;
Note 10, Financial Instruments; Note 11, Benefit Plans; Note 14, Commitments and Contingencies; Note 16, Income Taxes;
25
(3)
and Note 18, Segment Reporting, and our Annual Reports on Form 10-K for earlier periods for additional information
regarding items affecting comparability of our results from continuing operations.
Items impacting comparability primarily relate to the Keurig and JDE coffee business transactions in 2015-2016 and the loss
on deconsolidation of Venezuela in 2015. Please also refer to our previously filed Annual Reports on Form 10-K for
additional information.
(4) Refer to Note 13, Capital Stock, for additional information on our share repurchase program activity.
(5) Refer to the Equity and Dividends section within Management’s Discussion and Analysis of Financial Condition and Results
of Operations for information on our dividends.
26
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis contains forward-looking statements. It should be read in conjunction with the
other sections of this Annual Report on Form 10-K, including the consolidated financial statements and related
notes contained in Forward-Looking Statements and Item 1A, Risk Factors.
Overview of Business and Strategy
We make and sell primarily snacks, including biscuits (cookies, crackers and salted snacks), chocolate, gum &
candy, as well as various cheese & grocery and powdered beverage products. We have operations in
approximately 80 countries and sell our products in over 150 countries.
We aim to be the global leader in snacking. Our strategy is to drive long-term growth by focusing on three strategic
priorities: accelerating consumer-centric growth, driving operational excellence and creating a winning growth
culture. We believe the successful implementation of our strategic priorities and the leveraging of our strong
foundation of iconic global and local brands, an attractive global footprint, our market leadership in developed and
emerging markets, our deep innovation, marketing and distribution capabilities, and our efficiency and sustainability
efforts, will drive top- and bottom-line growth, enabling us to continue to create long-term value for our
shareholders.
For more detailed information on our business and strategy, refer to Item 1, Business.
Recent Developments and Significant Items Affecting Comparability
Swiss and U.S. Tax Reform
On August 6, 2019, Switzerland published changes to its Federal tax law in the Official Federal Collection of
Laws. On September 27, 2019, the Zurich Canton published their decision on the September 1, 2019 Zurich Canton
public vote regarding the Cantonal changes associated with the Swiss Federal tax law change. The intent of these
tax law changes was to replace certain preferential tax regimes with a new set of internationally accepted measures
that are hereafter referred to as “Swiss tax reform”. Based on these Federal / Cantonal events, our position is the
enactment of Swiss tax reform for U.S. GAAP purposes was met as of September 30, 2019, and we recorded the
impacts in the third quarter 2019. The net impact was a benefit of $767 million, which consisted of a $769 million
reduction in deferred tax expense from an allowed step-up of intangible assets for tax purposes and
remeasurement of our deferred tax balances, partially offset by a $2 million indirect tax impact in selling, general
and administrative expenses. The future rate impacts of these Swiss tax reform law changes are effective starting
January 1, 2020. We will continue to monitor Swiss tax reform for any additional interpretative guidance that could
result in changes to the amounts we have recorded.
On December 22, 2017, the United States enacted tax reform legislation ("U.S. tax reform") that included a broad
range of business tax provisions, including but not limited to a reduction in the U.S. federal tax rate from 35% to
21%, as well as provisions that limit or eliminate various deductions or credits. The legislation causes certain U.S.
allocated expenses (e.g. interest and general administrative expenses) to be taxed and imposes a tax on U.S.
cross-border payments. Furthermore, the legislation included a one-time transition tax on accumulated foreign
earnings and profits. While clarifying guidance was issued by the U.S. Treasury Department and Internal Revenue
Service ("IRS") during 2018 and 2019, we continue to evaluate the impacts as additional guidance on implementing
the legislation becomes available. The impact of adopting the new provisions was a discrete net tax expense of $5
million in 2019 and $19 million in 2018 and a discrete net tax benefit of $44 million in 2017.
Refer to Note 16, Income Taxes, for more information on our annual effective tax rates and Swiss and U.S. tax
reform.
27
Multiemployer Pension Plan Withdrawal
In the United States, we contribute to multiemployer pension plans based on obligations arising from our collective
bargaining agreements. The most individually significant multiemployer plan we participated in prior to the second
quarter of 2018 was the Bakery and Confectionery Union and Industry International Pension Fund (the "Fund"). Our
obligation to contribute to the Fund arose with respect to 8 collective bargaining agreements covering most of our
employees represented by the Bakery, Confectionery, Tobacco and Grain Millers Union ("BCTGM"). All of those
collective bargaining agreements expired in 2016 and we continued to contribute to the Fund through 2018.
In 2018, we executed a complete withdrawal from the Fund and recorded a $429 million estimated withdrawal
liability. On July 11, 2019, we received an undiscounted withdrawal liability assessment from the Fund totaling $526
million requiring pro-rata monthly payments over 20 years and we recorded a $35 million final adjustment to reduce
our withdrawal liability as of June 30, 2019. We began making monthly payments during the third quarter of 2019.
As of December 31, 2019, the remaining discounted withdrawal liability was $391 million, with $14 million recorded
in other current liabilities and $377 million recorded in long-term other liabilities.
Adoption of New Lease Accounting Standard
As further described in Note 1, Summary of Significant Accounting Policies, we adopted the new lease accounting
standard on January 1, 2019. The impact of adopting the standard included the initial recognition as of January 1,
2019, of $710 million of lease-related assets and $730 million of lease-related liabilities on our consolidated balance
sheet. The transition method we elected for adoption required a cumulative effect adjustment to retained earnings
as of January 1, 2019, which was not material. For additional information on leases, refer to Note 5, Leases.
Keurig Dr Pepper Transaction
On July 9, 2018, Keurig Green Mountain, Inc. ("Keurig") closed on its definitive merger agreement with Dr Pepper
Snapple Group, Inc., and formed Keurig Dr Pepper Inc. (NYSE: "KDP"), a publicly traded company. Following the
close of the transaction, our 24.2% investment in Keurig together with our shareholder loan receivable became a
13.8% investment in KDP. During 2018, we recorded a pre-tax gain of $778 million (or $586 million after-tax). Also,
during the first quarter of 2019, we recognized a $23 million pre-tax gain related to the impact of a KDP acquisition
that decreased our ownership interest from 13.8% to 13.6%. In connection with the KDP transaction, in the third
quarter of 2018, we changed our accounting principle to reflect our share of Keurig's historical and KDP's ongoing
earnings on a one-quarter lag basis for all periods presented while we continue to record dividends when cash is
received. Refer to Note 7, Equity Method Investments, for additional information on KDP and the transaction.
Malware Incident
On June 27, 2017, a global malware incident impacted our business. The malware affected a significant portion of
our global sales, distribution and financial networks. Following the incident, we executed business continuity and
contingency plans to contain the impact, minimize damages and restore our systems environment. We also
restored our main operating systems and processes and enhanced our system security. To date, we have not
found, nor do we expect to find, any instances of Company or personal data released externally.
During 2017, we estimated the malware incident had a negative impact of 0.4% on our net revenue and Organic
Net Revenue growth as we recognized the majority of delayed second quarter shipments in our third quarter 2017
results and we also permanently lost some revenue. We incurred total incremental expenses of $84 million
predominantly during the second half of 2017 as part of the recovery effort. The recovery from the incident was
largely resolved by the end of 2017 and we continued efforts to strengthen our security measures and enhance
general information technology, business process and disclosure controls.
28
Summary of Results
•
Net revenues were approximately $25.9 billion in both 2019 and 2018, a decrease of 0.3% in 2019 and an
increase of 0.2% in 2018. In 2019, net revenues declined due to the impact of unfavorable currency
translation and the impact of the divestiture of most of our cheese business in the Middle East and Africa.
Net revenues were positively affected by higher net pricing and favorable volume/mix, as well as the
acquisitions of a majority interest in Perfect Snacks in 2019 and a U.S. premium biscuit company, Tate's
Bake Shop, in 2018. In 2018, net revenues grew due to higher net pricing and favorable volume/mix. Net
revenues were also positively affected by the acquisition of Tate's Bake Shop. Net revenue growth was
negatively affected by the impact of unfavorable currency translation and the impact of several business
divestitures that occurred in 2017 which reduced net revenues in 2018 as compared to the prior year.
• Organic Net Revenue increased 4.1% to $26.9 billion in 2019 and increased 2.4% to $26.1 billion in 2018.
In both 2019 and 2018, Organic Net Revenue increased as a result of higher net pricing and favorable
volume/mix. Organic Net Revenue is on a constant currency basis and excludes revenue from divestitures
and acquisitions. We use Organic Net Revenue as it provides improved year-over-year comparability of our
underlying operating results (see the definition of Organic Net Revenue and our reconciliation with net
revenues within Non-GAAP Financial Measures appearing later in this section).
•
•
Diluted EPS attributable to Mondelēz International increased 16.2% to $2.65 in 2019 and increased 23.2%
to $2.28 in 2018. Diluted EPS increased in 2019 primarily driven by the benefit from Swiss tax reform,
lapping the prior-year impact from pension participation changes, operating gains, lower Simplify to Grow
program costs, lapping the prior-year loss on debt extinguishment, fewer shares outstanding, a gain on
divestiture, an increase in equity method investment earnings, lower interest expense and a benefit from
current-year pension participation changes, partially offset by lapping the prior-year gain on equity method
investment transactions, unfavorable currency translation, a loss related to interest rate swaps, the expense
from the resolution of tax matters in 2019 and an unfavorable year-over-year change in mark-to-market
impacts from currency and commodity derivatives. Diluted EPS increased in 2018 primarily driven by the
after-tax gain on the KDP transaction, a favorable year-over-year change in mark-to-market impacts from
currency and commodity derivatives, operating gains, lower costs incurred for the Simplify to Grow
Program, fewer shares outstanding, lower taxes and increased equity method investment earnings, partially
offset by the impact from pension participation changes, lapping the benefit from the resolution of tax
matters and lapping a prior-year net gain on divestitures. See our Discussion and Analysis of Historical
Results appearing later in this section for further details.
Adjusted EPS increased 2.1% to $2.47 in 2019 and increased 14.2% to $2.42 in 2018. On a constant
currency basis, Adjusted EPS increased 8.3% to $2.62 in 2019 and increased 15.6% to $2.45 in 2018. For
2019, operating gains, fewer shares outstanding, increased equity method investment earnings, lower
interest expense and lower taxes drove the Adjusted EPS growth. For 2018, operating gains, fewer shares
outstanding, lower taxes, increased equity method investment earnings and lower interest expense drove
the Adjusted EPS growth. Adjusted EPS and Adjusted EPS on a constant currency basis are non-GAAP
financial measures. We use these measures as they provide improved year-over-year comparability of our
underlying results (see the definition of Adjusted EPS and our reconciliation with diluted EPS within Non-
GAAP Financial Measures appearing later in this section).
29
Financial Outlook
We seek to achieve profitable, long-term growth and manage our business to attain this goal using our key
operating metrics: Organic Net Revenue, Adjusted Operating Income and Adjusted EPS. We use these non-GAAP
financial metrics and related computations, particularly growth in profit dollars, to evaluate and manage our
business and to plan and make near-and long-term operating and strategic decisions. As such, we believe these
metrics are useful to investors as they provide supplemental information in addition to our U.S. Generally Accepted
Accounting Principles (“U.S. GAAP”) financial results. We believe it is useful to provide investors with the same
financial information that we use internally to make comparisons of our historical operating results, identify trends in
our underlying operating results and evaluate our business. We believe our non-GAAP financial measures should
always be considered in relation to our GAAP results. We have provided reconciliations between our GAAP and
non-GAAP financial measures in Non-GAAP Financial Measures, which appears later in this section.
In addition to monitoring our key operating metrics, we monitor a number of developments and trends that could
impact our revenue and profitability objectives.
Long-Term Demographics and Consumer Trends – Snack food consumption is highly correlated to GDP growth,
urbanization of populations and rising discretionary income levels associated with a growing middle class,
particularly in emerging markets. Snacking behavior is on the rise around the world according to the first annual
“State of Snacking” report, commissioned by Mondelēz International and issued in November 2019, which
summarizes the findings from interviews with thousands of consumers across 12 countries. A majority of adults, and
an even higher percentage of Millennial consumers, indicated they prefer to eat small bites throughout the day as
opposed to larger meals. The report concludes that consumer needs are evolving in response to busy modern
lifestyles, the desire for community connections and a more holistic sense of well-being. Also, the way consumers
snack and buy snacks around the world is diverse, with consumers purchasing snacks across evolving retail and
digital landscapes. We expect these trends to continue and, in order to position ourselves for long-term growth, we
are investing in our well-being and other snack offerings, product and marketing innovation and new routes to
market including e-commerce.
Demand – We monitor consumer spending and our market share within the food and beverage categories in which
we sell our products. Over the last three years, we have been seeing improvements in regional economic growth,
consumer confidence and growth in our categories. However, geopolitical and economic uncertainties from time to
time may continue to affect economic growth, consumer confidence and category growth. As part of our new
strategic plan, we seek to drive category growth by offering snack innovations, leveraging our local and consumer-
focused commercial approach, making investments in our brand and snacks portfolio, building strong routes to
market in both emerging and developed markets and improving our position across multiple channels. We believe
these actions will help drive demand in our categories and strengthen our positions across markets.
Volatility of Global Markets – Our growth strategy depends in part on our ability to expand our operations, including
in emerging markets. Some emerging markets have greater political, economic and currency volatility and greater
vulnerability to infrastructure and labor disruptions. Volatility in these markets affects demand for and the costs of
our products and requires frequent changes in how we operate our business. See below for a discussion of Brexit
as well as Argentina, which was designated a highly inflationary economy in 2018. In addition, the imposition of
increased or new tariffs, quotas, trade barriers or similar restrictions on our sales or key commodities and potential
changes in U.S. trade programs, trade relations, regulations, taxes or fiscal policies might negatively affect our
sales or profitability. To help mitigate adverse effects of ongoing volatility across markets, we aim to protect
profitability through the management of costs (including hedging) and pricing as well as targeted investments in our
brands and new routes to market.
Coronavirus – We have been monitoring the outbreak of a new coronavirus that originated in China. We believe it
could have a negative impact on our results in the short term and we are taking steps to protect our employees,
consumers and business.
Competition – We operate in highly competitive markets that include global, regional and local competitors. Our
advantaged geographic footprint, operating scale and portfolio of brands have all significantly contributed to building
our market-leading positions across most of the product categories in which we sell. To grow and maintain our
market positions, we focus on meeting consumer needs and preferences through a local-first commercial focus,
new digital and other sales and marketing initiatives, product innovation and high standards of product quality. We
30
also continue to optimize our manufacturing and other operations and invest in our brands through ongoing
research and development, advertising, marketing and consumer promotions.
Pricing – Our net revenue growth and profitability may be affected as we adjust prices to address new conditions.
We adjust our product prices based on a number of variables including demand, the competitive environment and
changes in our product input costs. We generally have increased prices in response to higher commodity costs,
currency and other market factors. In 2020, we anticipate changing market conditions to continue to impact pricing.
Price changes may affect net revenues or market share in the near term as the market adjusts to changes in input
costs and other market conditions.
Operating Costs – Our operating costs include raw materials, labor, selling, general and administrative expenses,
taxes, currency impacts and financing costs. We manage these costs through cost saving and productivity
initiatives, sourcing and hedging programs, pricing actions, refinancing and tax planning. To remain competitive on
our operating structure, we continue to work on programs to expand our profitability, such as our Simplify to Grow
Program, which is designed to bring about significant reductions in our operating cost structure in both our supply
chain and overhead costs.
Multiemployer pension plan – In 2018, we executed a complete withdrawal from the Fund and recorded a $429
million estimated withdrawal liability. On July 11, 2019, we received an undiscounted withdrawal liability assessment
from the Fund totaling $526 million and we recorded a $35 million final adjustment to reduce our withdrawal liability
at that time. During the third quarter of 2019, we began making monthly pro-rata payments on the 20-year
obligation. As of December 31, 2019, the remaining discounted withdrawal liability was $391 million.
Taxes – During the third quarter of 2019, Swiss Federal and Zurich Cantonal tax events drove our recognition of a
$767 million Swiss tax reform net benefit to our results of operations. The future tax rate impacts of the Swiss tax
reform law changes became effective on January 1, 2020 and are not expected to have a material impact on our
overall results of operations. We will continue to monitor Swiss tax reform for any additional interpretative guidance
that could result in changes to the amounts we have recorded. In the United States, while the 2017 U.S. tax reform
reduced the U.S. corporate tax rate and included some beneficial provisions, other provisions have, and in the
future will have, an adverse effect on our results. We continue to evaluate the impacts as additional guidance on
implementing the legislation becomes available. While additional guidance has been issued by the IRS and the U.S.
Treasury Department, there are still some areas that may not be clarified for some time. Also, a number of U.S.
states have not updated their laws to take into account the new federal legislation. As a result, there may be
additional impacts of the new laws on our future results of operations and financial condition. It is possible that U.S.
tax reform or related interpretations could change and have an adverse effect on us that could be material.
Currency – As a global company with 74.4% of our net revenues generated outside the United States, we are
continually exposed to changes in global economic conditions and currency movements. While we hedge significant
forecasted currency exchange transactions as well as currency translation impacts from certain net assets of our
non-U.S. operations, including the United Kingdom, we cannot fully predict or eliminate all adverse impacts arising
from changes in currency exchange rates on our consolidated financial results. To partially offset currency
translation impacts arising from our overseas operations, we enter into net investment hedges primarily in the form
of local currency-denominated debt, cross-currency swaps and other financial instruments. While we work to
mitigate our exposure to currency risks, factors such as continued global and local market volatility, actions by
foreign governments, political uncertainty, limited hedging opportunities and other factors could lead to unfavorable
currency impacts in the future and could adversely affect our results of operations or financial position. See
additional discussion of Brexit and Argentina below and refer also to Note 1, Summary of Significant Accounting
Policies – Currency Translation and Highly Inflationary Accounting, and Note 10, Financial Instruments, for
additional information on how we manage currency and related risks. As currency movements can make
comparison of year-over-year operating performance challenging, we isolate the impact of currency and also report
growth on a constant currency basis, holding prior-year currency exchange rates constant, so that prior-year and
current-year results can be compared on a consistent basis.
Brexit – On January 31, 2020, the United Kingdom began the withdrawal process from the European Union under
the European and U.K. Parliament approved Withdrawal Agreement. During a transition period currently scheduled
to end on December 31, 2020, the United Kingdom will effectively remain in the E.U.’s customs union and single
market while a trade deal with the European Union is negotiated. The deadline for extending the transition period
ends on June 30, 2020. If the transition period is not extended, on December 31, 2020, the United Kingdom will
either exit the European Union without a trade deal or will begin a new trade relationship with the European Union.
31
During the transition period, we continue to take protective measures in response to the potential impacts on our
results of operations and financial condition. Our exposure to disruptions to our supply chain, the imposition of
tariffs and currency devaluation in the United Kingdom could result in a material impact to our consolidated
revenue, earnings and cash flow. In 2019, we generated 8.6% of our net revenues in the United Kingdom and our
supply chain in this market relies on imports of raw and packaging materials as well as finished goods. Following
the Brexit vote in June 2016, there was significant volatility in the global stock markets and currency exchange
rates. The value of the British pound sterling relative to the U.S. dollar declined significantly and negatively affected
our translated results reported in U.S. dollars. The volatility in foreign currencies and other markets is expected to
continue as the United Kingdom executes its exit from the European Union. If the U.K.'s membership in the
European Union terminates without trade and other cross-border operating agreements, there could be increased
costs from re-imposition of tariffs on trade between the United Kingdom and other countries, including those in the
European Union, shipping delays because of the need for customs inspections and procedures and shortages of
certain goods. The United Kingdom will also need to negotiate its own tax and trade treaties with countries all over
the world, which could take years to complete. If the ultimate terms of the U.K.’s separation from the European
Union negatively impact the U.K. economy or result in disruptions to sales or our supply chain, the impact to our
results of operations and financial condition could be material. We have taken measures to increase our resources
in customer service & logistics together with increasing our inventory levels of imported raw materials, packaging
and finished goods in the United Kingdom to help us manage through the Brexit transition and the inherent risks.
Resulting impacts and market volatility can vary significantly depending on the final terms of the U.K.’s exit from the
European Union.
Argentina – as further discussed in Note 1, Summary of Significant Accounting Policies – Currency Translation and
Highly Inflationary Accounting, on July 1, 2018, we began to apply highly inflationary accounting for our Argentinean
subsidiaries. As a result, we recorded a remeasurement gain of $4 million in 2019 and a remeasurement loss of $11
million in 2018 within selling, general and administrative expenses related to the revaluation of the Argentinean
peso denominated net monetary position over these periods. The mix of monetary assets and liabilities and the
exchange rate to convert Argentinean pesos to U.S. dollars could change over time, so it is difficult to predict the
overall impact of the Argentina highly inflationary accounting on future net earnings.
Financing Costs – We regularly evaluate our variable and fixed-rate debt. We continue to use low-cost, short- and
long-term debt to finance our ongoing working capital, capital expenditures and other investments, dividends and
share repurchases. Our weighted-average interest rate on our total debt as of December 31, 2019 was 2.2%, down
from 2.3% as of December 31, 2018 and up from 2.1% as of December 31, 2017, primarily reflecting changes in
our interest rates on commercial paper borrowings over these periods. We continue to use interest rate swaps and
other financial instruments to manage our exposure to interest rate and cash flow variability, protect the value of our
existing currency assets and liabilities and protect the value of our debt. We also enter into cross-currency interest
rate swaps and forwards to hedge our non-U.S. net investments against adverse movements in exchange rates.
Our net investment hedge derivative contracts have had and are expected to have a favorable impact and reduce
some of the financing costs and related currency impacts within our interest costs. Refer to Note 9, Debt and
Borrowing Arrangements, and Note 10, Financial Instruments, for additional information on our debt and derivative
activity.
Cybersecurity Risks – In 2017, the malware incident impacted our operating systems and results. We continue to
devote focused resources to network security, backup and disaster recovery, enhanced training and other security
measures to protect our systems and data. We also focus on enhancing the monitoring and detection of threats in
our environment, including but not limited to the manufacturing environment and operational technologies, as well
as adjusting information security controls based on updated threats. While we have taken a number of security
measures to protect our systems and data, security measures cannot provide absolute certainty or guarantee that
we will be successful in preventing or responding to every breach or disruption on a timely basis.
32
Discussion and Analysis of Historical Results
Items Affecting Comparability of Financial Results
The following table includes significant income or (expense) items that affected the comparability of our results of
operations and our effective tax rates. Please refer to the notes to the consolidated financial statements indicated
below for more information. Refer also to the Consolidated Results of Operations – Net Earnings and Earnings per
Share Attributable to Mondelēz International table for the after-tax per share impacts of these items.
See Note
2019
2018
2017
For the Years Ended December 31,
(in millions, except percentages)
Simplify to Grow Program
Restructuring Charges
Implementation Charges
Intangible asset impairment charges
Mark-to-market gains/(losses) from derivatives (1)
Malware incident incremental expenses
Acquisition and divestiture-related costs
Note 8
Note 6
Note 10
Note 2
Acquisition integration costs
Acquisition-related costs
Divestiture-related costs
Net gain on divestitures
Remeasurement of net monetary position
Impact from pension participation changes (1)
Impact from resolution of tax matters
CEO transition remuneration (2)
(Loss)/gain related to interest rate swaps
Loss on debt extinguishment
Swiss tax reform net impacts
U.S. tax reform discrete net tax impacts
Net (loss)/gain on equity method
investment transactions (3)
Equity method investee acquisition-related
and other (charges)/benefits (4)
Effective tax rate
$
$
(176)
(272)
(57)
90
—
—
(3)
(6)
44
4
29
(85)
(9)
(111)
—
767
(5)
(2)
(61)
$
(316)
(315)
(68)
142
—
(3)
(13)
1
—
(11)
(429)
11
(22)
10
(140)
—
(19)
778
54
(535)
(257)
(109)
(96)
(84)
(3)
—
(34)
186
—
—
281
(14)
—
(11)
—
44
40
(69)
Note 11
Note 14
Note 9 & 10
Note 9
Note 16
Note 16
Note 7
Note 16
0.1%
27.2%
21.3%
Includes impacts recorded in operating income and interest expense and other, net.
(1)
(2) Please see the Non-GAAP Financial Measures section at the end of this item for additional information.
(3) The net gain/(loss) on equity method investment transactions is recorded outside pre-tax operating results on the
consolidated statement of earnings.
(4) Amount for 2018 primarily relates to a deferred tax benefit Keurig recorded as a result of U.S. tax reform.
33
Consolidated Results of Operations
The following discussion compares our consolidated results of operations for 2019 with 2018 and 2018 with 2017.
2019 compared with 2018
Net revenues
Operating income
Earnings from continuing operations
Net earnings attributable to
Mondelēz International
Diluted earnings per share attributable to
Mondelēz International
For the Years Ended
December 31,
2019
2018
$ change
% change
(in millions, except per share data)
$
25,868 $
25,938 $
3,843
3,885
3,870
2.65
3,312
3,395
3,381
2.28
(70)
531
490
489
0.37
(0.3)%
16.0 %
14.4 %
14.5 %
16.2 %
Net Revenues – Net revenues decreased $70 million (0.3%) to $25,868 million in 2019, and Organic Net
Revenue (1) increased $1,067 million (4.1%) to $26,879 million. Emerging markets net revenues increased 0.2%,
including an unfavorable currency impact, and emerging markets Organic Net Revenue increased 7.7%. The
underlying changes in net revenues and Organic Net Revenue are detailed below:
Change in net revenues (by percentage point)
Total change in net revenues
Add back the following items affecting comparability:
Unfavorable currency
Impact of divestiture
Impact of acquisitions
Total change in Organic Net Revenue (1)
Higher net pricing
Favorable volume/mix
2019
(0.3 )%
4.5pp
0.3pp
(0.4)pp
4.1 %
2.2pp
1.9pp
(1) Please see the Non-GAAP Financial Measures section at the end of this item.
Net revenue decrease of 0.3% was driven by unfavorable currency and the impact of a divestiture, partially offset by
our underlying Organic Net Revenue growth of 4.1% and the impact of acquisitions. Unfavorable currency impacts
decreased net revenues by $1,154 million, due primarily to the strength of the U.S. dollar relative to most
currencies, including the Argentinean peso, euro, Brazilian real, British pound sterling, Australian dollar, Chinese
yuan, Indian rupee, Turkish lira and South African rand. The impact of the divestiture of most of our cheese
business in the Middle East and Africa on May 28, 2019 resulted in a year-over-year decline in net revenues of $71
million. Our underlying Organic Net Revenue growth was driven by higher net pricing and favorable volume/mix.
Net pricing was up, which includes the benefit of carryover pricing from 2018 as well as the effects of input cost-
driven pricing actions taken during 2019. Higher net pricing was reflected in Latin America, North America and
AMEA as net pricing in Europe was flat. Favorable volume/mix was reflected in Europe and AMEA, partially offset
by unfavorable volume/mix in Latin America and North America. The July 16, 2019 acquisition of a majority interest
in Perfect Snacks added net revenues of $53 million and the June 7, 2018 acquisition of Tate’s Bake Shop added
incremental net revenues of $35 million in 2019. Refer to Note 2, Divestitures and Acquisitions, for more
information.
34
Operating Income – Operating income increased $531 million (16.0%) to $3,843 million in 2019, Adjusted Operating
Income (1) decreased $38 million (0.9%) to $4,264 million and Adjusted Operating Income on a constant currency
basis (1) increased $189 million (4.4%) to $4,491 million due to the following:
Operating
Income
(in millions)
Change
Operating Income for the Year Ended December 31, 2018
$
Simplify to Grow Program (2)
Intangible asset impairment charges (3)
Mark-to-market gains from derivatives (4)
Acquisition integration costs (5)
Acquisition-related costs (6)
Divestiture-related costs (6)
Operating income from divestitures (6)
Remeasurement of net monetary position (7)
Impact from pension participation changes (8)
Impact from resolution of tax matters (9)
CEO transition remuneration (1)
Adjusted Operating Income (1) for the Year Ended December 31, 2018
$
Higher net pricing
Higher input costs
Favorable volume/mix
Higher selling, general and administrative expenses
VAT-related settlements
Impact from acquisitions (6)
Other
Total change in Adjusted Operating Income (constant currency) (1)
Unfavorable currency translation
Total change in Adjusted Operating Income (1)
Adjusted Operating Income (1) for the Year Ended December 31, 2019
$
Simplify to Grow Program (2)
Intangible asset impairment charges (3)
Mark-to-market gains from derivatives (4)
Acquisition-related costs (6)
Divestiture-related costs (6)
Operating income from divestiture (6)
Net gain on divestiture (6)
Remeasurement of net monetary position (7)
Impact from pension participation changes (8)
Impact from resolution of tax matters (9)
CEO transition remuneration (1)
Swiss tax reform impact (10)
Operating Income for the Year Ended December 31, 2019
$
3,312
626
68
(141)
3
13
(1)
(19)
11
423
(15)
22
4,302
576
(340)
140
(173)
(32)
6
12
189
(227)
(38)
4,264
(442)
(57)
91
(3)
(6)
9
44
4
35
(85)
(9)
(2)
3,843
4.4 %
(0.9)%
16.0 %
(1) Refer to the Non-GAAP Financial Measures section at the end of this item.
(2) Refer to Note 8, Restructuring Program, for more information.
(3) Refer to Note 6, Goodwill and Intangible Assets, for more information on intangible asset impairments.
(4) Refer to Note 10, Financial Instruments, Note 18, Segment Reporting, and Non-GAAP Financial Measures section at the
end of this item for more information on the unrealized gains/losses on commodity and forecasted currency transaction
derivatives.
(5) Refer to our Annual Report on Form 10-K for the year ended December 31, 2018 for more information on the acquisition of
a biscuit business in Vietnam.
35
(6) Refer to Note 2, Divestitures and Acquisitions, for more information on the July 16, 2019 acquisition of a majority interest in
Perfect Snacks, the May 28, 2019 divestiture of most of our cheese business in the Middle East and Africa and the June 7,
2018 acquisition of Tate's Bake Shop.
(7) Refer to Note 1, Summary of Significant Accounting Policies – Currency Translation and Highly Inflationary Accounting, for
information on our application of highly inflationary accounting for Argentina.
(8) Refer to Note 11, Benefit Plans, for more information.
(9) Refer to Note 14, Commitments and Contingencies – Tax Matters, for more information.
(10) Refer to Note 16, Income Taxes, for more information on Swiss tax reform.
During 2019, we realized higher net pricing, which was partially offset by increased input costs. Higher net pricing,
which included the carryover impact of pricing actions taken in 2018 as well as the effects of input cost-driven
pricing actions taken during 2019, was reflected in Latin America, North America and AMEA as net pricing in Europe
was flat. The increase in input costs was driven by higher raw material costs, partially offset by lower manufacturing
costs due to productivity efforts. Higher raw material costs were in part due to higher currency exchange transaction
costs on imported materials, as well as higher packaging, energy, dairy, grains, cocoa and oils costs, partially offset
by lower costs for sugar and nuts. Favorable volume/mix was driven by Europe and AMEA, which was partially
offset by unfavorable volume/mix in Latin America and North America.
Total selling, general and administrative expenses decreased $339 million from 2018, due to a number of factors
noted in the table above, including in part, the lapping of the prior-year impact from pension participation changes,
favorable currency impact, the benefit from current-year pension participation changes, favorable change in
remeasurement on net monetary position in Argentina (remeasurement gain in 2019 as compared to a
remeasurement loss in 2018), the lapping of a prior-year expense from the resolution of a tax matter, lower CEO
transition remuneration and lower acquisition-related costs. These decreases were partially offset by the expenses
from the resolution of tax matters in 2019, higher implementation costs incurred for the Simplify to Grow program,
the impact of acquisitions, the lapping of a benefit from a prior-year value-added tax (“VAT”) related settlement, a
VAT cost settlement in 2019 and higher divestiture-related costs. Excluding these factors, selling, general and
administrative expenses increased $173 million from 2018. The increase was driven primarily by higher overheads
reflecting route-to-market investments and higher advertising and consumer promotion costs.
We recorded an expense of $11 million from a VAT-related settlement in Latin America in 2019 and a benefit of $21
million from a VAT-related settlement in Latin America in 2018. Unfavorable currency changes decreased operating
income by $227 million due primarily to the strength of the U.S. dollar relative to most currencies, including the
euro, Argentinean peso, British pound sterling, Brazilian real, Australian dollar, Chinese yuan and Indian rupee.
Operating income margin increased from 12.8% in 2018 to 14.9% in 2019. The increase in operating income
margin was driven primarily by the lapping of the prior-year impact from pension participation changes, lower
Simplify to Grow Program costs, a gain on divestiture, the benefit from current-year pension participation changes,
the lapping of a prior-year expense from the resolution of a tax matter and lower CEO transition remuneration,
partially offset by the expenses from the resolution of tax matters in 2019 and the year-over-year unfavorable
change in mark-to-market gains/(losses) from currency and commodity hedging activities. Adjusted Operating
Income margin decreased from 16.7% in 2018 to 16.5% in 2019. The decrease in Adjusted Operating Income
margin was driven primarily by higher raw material costs, mostly offset by higher pricing and lower manufacturing
costs.
36
Net Earnings and Earnings per Share Attributable to Mondelēz International – Net earnings attributable to Mondelēz
International of $3,870 million increased by $489 million (14.5%) in 2019. Diluted EPS attributable to Mondelēz
International was $2.65 in 2019, up $0.37 (16.2%) from 2018. Adjusted EPS (1) was $2.47 in 2019, up $0.05 (2.1%)
from 2018. Adjusted EPS on a constant currency basis (1) was $2.62 in 2019, up $0.20 (8.3%) from 2018.
Diluted EPS
Diluted EPS Attributable to Mondelēz International for the Year Ended December 31, 2018 $
Simplify to Grow Program (2)
Intangible asset impairment charges (2)
Mark-to-market gains from derivatives (2)
Acquisition integration costs (2)
Acquisition-related costs (2)
Divestiture-related costs (2)
Net earnings from divestitures (2)
Remeasurement of net monetary position (2)
Impact from pension participation changes (2)
Impact from resolution of tax matters (2)
CEO transition remuneration (2)
Net gain related to interest rate swaps (3)
Loss on debt extinguishment (4)
U.S. tax reform discrete net tax expense (5)
Gain on equity method investment transaction (6)
Equity method investee acquisition-related and other charges/(benefits) (7)
Adjusted EPS (1) for the Year Ended December 31, 2018
Increase in operations
Increase in equity method investment net earnings
VAT-related settlements
Changes in interest and other expense, net (8)
Changes in income taxes (9)
Changes in shares outstanding (10)
Adjusted EPS (constant currency) (1) for the Year Ended December 31, 2019
Unfavorable currency translation
Adjusted EPS (1) for the Year Ended December 31, 2019
Simplify to Grow Program (2)
Intangible asset impairment charges (2)
Mark-to-market gains from derivatives (2)
Divestiture-related costs (2)
Net earnings from divestiture (2)
Net gain on divestiture (2)
Impact from pension participation changes (2)
Impact from resolution of tax matters (2)
CEO transition remuneration (2)
Loss related to interest rate swaps (3)
Swiss tax reform net impacts (5)
U.S. tax reform discrete net tax expense (5)
Net loss on equity method investment transactions (6)
Equity method investee acquisition-related and other (charges)/benefits (7)
$
$
$
Diluted EPS Attributable to Mondelēz International for the Year Ended December 31, 2019 $
(1) Refer to the Non-GAAP Financial Measures section appearing later in this section.
(2) See the Operating Income table above and the related footnotes for more information.
37
2.28
0.32
0.03
(0.09)
—
0.01
—
(0.01)
0.01
0.22
(0.01)
0.01
(0.01)
0.07
0.01
(0.39)
(0.03)
2.42
0.11
0.02
(0.01)
0.02
0.01
0.05
2.62
(0.15)
2.47
(0.24)
(0.03)
0.05
(0.01)
0.01
0.03
0.02
(0.05)
(0.01)
(0.08)
0.53
—
(0.01)
(0.03)
2.65
(3) Refer to Note 10, Financial Instruments, for information on interest rate swaps no longer designated as cash flow hedges.
(4) Refer to Note 9, Debt and Borrowing Arrangements, for more information on losses on debt extinguishment.
(5) Refer to Note 16, Income Taxes, for more information on the impacts of U.S. and Swiss tax reform.
(6) Refer to Note 7, Equity Method Investments, for more information on the gain and net loss on equity method investment
transactions.
(7) Includes our proportionate share of unusual or infrequent items, such as acquisition and divestiture-related costs,
restructuring program costs and discrete U.S. tax reform impacts recorded by our JDE and Keurig equity method investees.
(8) Excludes the currency impact on interest expense related to our non-U.S. dollar-denominated debt which is included in
currency translation.
(9) Refer to Note 16, Income Taxes, for more information on the items affecting income taxes.
(10) Refer to Note 12, Stock Plans, for more information on our equity compensation programs and share repurchase program
and Note 17, Earnings per Share, for earnings per share weighted-average share information.
38
2018 compared with 2017
Net revenues
Operating income
Earnings from continuing operations
Net earnings attributable to
Mondelēz International
Diluted earnings per share attributable to
Mondelēz International
For the Years Ended
December 31,
2018
2017
$ change
% change
(in millions, except per share data)
$
25,938 $
25,896 $
3,312
3,395
3,381
2.28
3,462
2,842
2,828
1.85
42
(150)
553
553
0.43
0.2 %
(4.3)%
19.5 %
19.6 %
23.2 %
Net Revenues – Net revenues increased $42 million (0.2%) to $25,938 million in 2018, and Organic Net Revenue (1)
increased $609 million (2.4%) to $26,103 million. Emerging markets net revenues decreased 0.5%, including an
unfavorable currency impact, and emerging markets Organic Net Revenue increased 5.9%. The underlying
changes in net revenues and Organic Net Revenue are detailed below:
Change in net revenues (by percentage point)
Total change in net revenues
Add back the following items affecting comparability:
Unfavorable currency
Impact of acquisition
Impact of divestitures
Total change in Organic Net Revenue (1)
Higher net pricing
Favorable volume/mix
2018
0.2 %
1.4pp
(0.2)pp
1.0pp
2.4 %
1.3pp
1.1pp
(1) Please see the Non-GAAP Financial Measures section at the end of this item.
Net revenue increase of 0.2% was driven by our underlying Organic Net Revenue growth of 2.4% and the impact of
an acquisition, mostly offset by unfavorable currency and the impact of divestitures. Our underlying Organic Net
Revenue growth was driven by higher net pricing and favorable volume/mix. Net pricing was up, which includes the
benefit of carryover pricing from 2017 as well as the effects of input cost-driven pricing actions taken during 2018.
Higher net pricing was reflected in Latin America, AMEA and North America, partially offset by lower net pricing in
Europe. Favorable volume/mix was reflected in Europe and AMEA, partially offset by unfavorable volume/mix in
Latin America and North America. The June 7, 2018 acquisition of a U.S. premium biscuit company, Tate’s Bake
Shop, added net revenues of $52 million in 2018. Unfavorable currency impacts decreased net revenues by $343
million, due primarily to the strength of the U.S. dollar relative to several other currencies, including the Argentinean
peso, Brazilian real, Russian ruble, Indian rupee and Turkish lira, partially offset by the strength of several
currencies relative to the U.S. dollar, including the euro, British pound sterling and Chinese yuan. Businesses
divested in 2019 and 2017 resulted in a decline in net revenues of $276 million. Refer to Note 2, Divestitures and
Acquisitions, for more information.
39
Operating Income – Operating income decreased $150 million (4.3%) to $3,312 million in 2018, Adjusted Operating
Income (1) increased $214 million (5.2%) to $4,302 million and Adjusted Operating Income on a constant currency
basis (1) increased $269 million (6.6%) to $4,357 million due to the following:
Operating
Income
(in millions)
Change
Operating Income for the Year Ended December 31, 2017
$
Simplify to Grow Program (2)
Intangible asset impairment charges (3)
Mark-to-market losses from derivatives (4)
Malware incident incremental expenses
Acquisition integration costs (5)
Divestiture-related costs (6)
Operating income from divestitures (6)
Net gain on divestitures (6)
Impact from resolution of tax matters (7)
CEO transition remuneration (1)
Other/rounding
Adjusted Operating Income (1) for the Year Ended December 31, 2017
$
Higher net pricing
Higher input costs
Favorable volume/mix
Higher selling, general and administrative expenses
VAT-related settlement in 2018
Property insurance recovery in 2017
Impact from acquisition (6)
Other
Total change in Adjusted Operating Income (constant currency) (1)
Unfavorable currency translation
Total change in Adjusted Operating Income (1)
Adjusted Operating Income (1) for the Year Ended December 31, 2018
$
Simplify to Grow Program (2)
Intangible asset impairment charges (3)
Mark-to-market gains from derivatives (4)
Acquisition integration costs (5)
Acquisition-related costs (6)
Divestiture-related costs (6)
Operating income from divestitures (6)
Remeasurement of net monetary position (8)
Impact from pension participation changes (9)
Impact from resolution of tax matters (7)
CEO transition remuneration (1)
Operating Income for the Year Ended December 31, 2018
$
3,462
777
109
96
84
3
31
(92)
(186)
(209)
14
(1)
4,088
322
(26)
48
(75)
21
(27)
7
(1)
269
(55)
214
4,302
(626)
(68)
141
(3)
(13)
1
19
(11)
(423)
15
(22)
3,312
6.6 %
5.2 %
(4.3)%
(1) Refer to the Non-GAAP Financial Measures section at the end of this item.
(2) Refer to Note 8, Restructuring Program, for more information.
(3) Refer to Note 6, Goodwill and Intangible Assets, for more information on intangible asset impairments.
(4) Refer to Note 10, Financial Instruments, Note 18, Segment Reporting, and Non-GAAP Financial Measures section at the
end of this item for more information on the unrealized gains/losses on commodity and forecasted currency transaction
derivatives.
(5) Refer to our Annual Report on Form 10-K for the year ended December 31, 2018 for more information on the acquisition of
a biscuit business in Vietnam.
40
(6) Refer to Note 2, Divestitures and Acquisitions, for more information on the June 7, 2018 acquisition of Tate's Bake Shop and
2019 and 2017 divestitures.
(7) Refer to Note 14, Commitments and Contingencies – Tax Matters, for more information.
(8) Refer to Note 1, Summary of Significant Accounting Policies – Currency Translation and Highly Inflationary Accounting, for
information on our application of highly inflationary accounting for Argentina.
(9) Refer to Note 11, Benefit Plans, for more information.
During 2018, we realized higher net pricing, which was partially offset by increased input costs. Higher net pricing,
which included the carryover impact of pricing actions taken in 2017 as well as the effects of input cost-driven
pricing actions taken during 2018, was reflected across all regions except Europe. The increase in input costs was
driven by higher raw material costs, mostly offset by lower manufacturing costs due to productivity efforts. Higher
raw material costs were primarily due to higher currency exchange transaction costs on imported materials, as well
as higher packaging, dairy and energy, partially offset primarily by lower cocoa costs. Favorable volume/mix was
driven by Europe and AMEA, which was partially offset by unfavorable volume/mix in North America and Latin
America.
Total selling, general and administrative expenses increased $537 million from 2017, due to a number of factors
noted in the table above, including in part, the impact from pension participation changes, lapping of prior-year
benefits from the resolution of tax matters, lapping of a prior-year property insurance recovery, acquisition-related
costs, remeasurement of net monetary position in Argentina, the impact of an acquisition and higher CEO transition
remuneration. The increases were partially offset by favorable currency impact, lower implementation costs incurred
for the Simplify to Grow Program, lower divestiture-related costs, the lapping of prior-year malware incident
incremental costs, a VAT related settlement in 2018, the impact of divestitures and the net benefit from the
resolution of tax matters in 2018. Excluding these factors, selling, general and administrative expenses increased
$75 million from 2017. The increase was driven by the year-over year net unfavorable change in miscellaneous
other income and expense items within selling, general and administrative expenses and higher overhead costs,
which more than offset lower advertising and consumer promotion costs.
We recorded a benefit of $21 million from a VAT-related settlement in Latin America in 2018. We recorded a benefit
of $27 million from an insurance recovery in AMEA in 2017. Unfavorable currency changes decreased operating
income by $55 million due primarily to the strength of the U.S. dollar relative to several currencies, including the
Brazilian real, Argentinean peso, Russian ruble and Turkish lira, partially offset by the strength of several currencies
relative to the U.S. dollar, including the euro and British pound sterling.
Operating income margin decreased from 13.4% in 2017 to 12.8% in 2018. The decrease in operating income
margin was driven by the impact from pension participation changes, the lapping of prior-year benefits from the
resolution of tax matters, the lapping of a prior-year gain on divestiture and higher CEO transition remuneration.
These unfavorable items were partially offset by the year-over-year favorable change in mark-to-market gains/
(losses) from currency and commodity hedging activities, lower Simplify to Grow Program costs, an increase in our
Adjusted Operating Income margin, the lapping of prior-year malware incident incremental costs, lower divestiture-
related costs and lower intangible asset impairment charges. Adjusted Operating Income margin increased from
16.0% in 2017 to 16.7% in 2018. The increase in Adjusted Operating Income margin was driven primarily by higher
net pricing, lower manufacturing costs due to continued cost reduction efforts and lower advertising and consumer
promotion costs, partially offset by higher raw material costs.
41
Net Earnings and Earnings per Share Attributable to Mondelēz International – Net earnings attributable to Mondelēz
International of $3,381 million increased by $553 million (19.6%) in 2018. Diluted EPS attributable to Mondelēz
International was $2.28 in 2018, up $0.43 (23.2%) from 2017. Adjusted EPS (1) was $2.42 in 2018, up $0.30
(14.2%) from 2017. Adjusted EPS on a constant currency basis (1) was $2.45 in 2018, up $0.33 (15.6%) from 2017.
Diluted EPS
Diluted EPS Attributable to Mondelēz International for the Year Ended December 31, 2017 $
Simplify to Grow Program (2)
Intangible asset impairment charges (2)
Mark-to-market losses from derivatives (2)
Malware incident incremental expenses
Acquisition integration costs (2)
Divestiture-related costs (2)
Net earnings from divestitures (2)
Net gain on divestitures (2)
Impact from resolution of tax matters (2)
CEO transition remuneration (2)
U.S. tax reform discrete net tax benefit (3)
Gain on equity method investment transaction (4)
Equity method investee acquisition-related and other charges/(benefits) (5)
Adjusted EPS (1) for the Year Ended December 31, 2017
Increase in operations
Increase in equity method investment net earnings
VAT-related settlements in 2018
Property insurance recovery in 2017
Impact from acquisition (2)
Changes in interest and other expense, net (6)
Changes in income taxes (7)
Changes in shares outstanding (8)
Adjusted EPS (constant currency) (1) for the Year Ended December 31, 2018
Unfavorable currency translation
Adjusted EPS (1) for the Year Ended December 31, 2018
Simplify to Grow Program (2)
Intangible asset impairment charges (2)
Mark-to-market gains from derivatives (2)
Acquisition integration costs (2)
Acquisition-related costs (2)
Divestiture-related costs (2)
Net earnings from divestitures (2)
Remeasurement of net monetary position (2)
Impact from pension participation changes (2)
Impact from resolution of tax matters (2)
CEO transition remuneration (2)
Net gain related to interest rate swaps (9)
Loss on debt extinguishment (10)
U.S. tax reform discrete net tax expense (3)
Gain on equity method investment transaction (4)
Equity method investee acquisition-related and other (charges)/benefits (5)
$
$
$
Diluted EPS Attributable to Mondelēz International for the Year Ended December 31, 2018 $
42
1.85
0.39
0.05
0.06
0.04
—
0.02
(0.05)
(0.11)
(0.13)
0.01
(0.03)
(0.02)
0.04
2.12
0.13
0.05
0.01
(0.01)
—
0.02
0.06
0.07
2.45
(0.03)
2.42
(0.32)
(0.03)
0.09
—
(0.01)
—
0.01
(0.01)
(0.22)
0.01
(0.01)
0.01
(0.07)
(0.01)
0.39
0.03
2.28
(1) Refer to the Non-GAAP Financial Measures section appearing later in this section.
(2) See the Operating Income table above and the related footnotes for more information.
(3) Refer to Note 16, Income Taxes, for more information on the impact of the U.S. tax reform.
(4) Refer to Note 7, Equity Method Investments, for more information on the KDP transaction in 2018 and the 2017 sale of an
interest in one of our equity method investments.
(5) Includes our proportionate share of unusual or infrequent items, such as acquisition and divestiture-related costs,
restructuring program costs and discrete U.S. tax reform impacts recorded by our JDE and Keurig equity method investees.
(6) Excludes the currency impact on interest expense related to our non-U.S. dollar-denominated debt which is included in
currency translation.
(7) Refer to Note 16, Income Taxes, for more information on the items affecting income taxes.
(8) Refer to Note 12, Stock Plans, for more information on our equity compensation programs and share repurchase program
and Note 17, Earnings per Share, for earnings per share weighted-average share information.
(9) Refer to Note 10, Financial Instruments, for information on interest rate swaps no longer designated as cash flow hedges.
(10) Refer to Note 9, Debt and Borrowing Arrangements, for more information on losses on debt extinguishment.
43
Results of Operations by Operating Segment
Our operations and management structure are organized into four operating segments:
•
•
•
•
Latin America
AMEA
Europe
North America
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.
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. See Note 18,
Segment Reporting, for additional information on our segments and Items Affecting Comparability of Financial
Results earlier in this section for items affecting our segment operating results.
Our segment net revenues and earnings were:
Net revenues:
Latin America
AMEA
Europe
North America
Net revenues
Earnings before income taxes:
Operating income:
Latin America
AMEA
Europe
North America
Unrealized gains/(losses) on hedging activities
(mark-to-market impacts)
General corporate expenses
Amortization of intangibles
Net gains on divestitures
Acquisition-related costs
Operating income
Benefit plan non-service income
Interest and other expense, net
Earnings before income taxes
For the Years Ended December 31,
2019
2018
(in millions)
2017
3,018 $
5,770
9,972
7,108
3,202 $
5,729
10,122
6,885
3,566
5,739
9,794
6,797
25,868 $
25,938 $
25,896
For the Years Ended December 31,
2019
2018
(in millions)
2017
341 $
691
410 $
702
1,732
1,451
91
(330)
(174)
44
(3)
3,843
1,734
849
141
(335)
(176)
—
(13)
3,312
60
(456)
3,447 $
50
(520)
2,842 $
564
514
1,610
1,144
(96)
(282)
(178)
186
—
3,462
44
(382)
3,124
$
$
$
$
44
Latin America
Net revenues
Segment operating income
Net revenues
Segment operating income
2019 compared with 2018:
For the Years Ended
December 31,
2019
2018
$ change
% change
(in millions)
3,018 $
341
3,202 $
410
(184)
(69)
(5.7)%
(16.8)%
For the Years Ended
December 31,
2018
2017
$ change
% change
(in millions)
3,202 $
410
3,566 $
564
(364)
(154)
(10.2)%
(27.3)%
$
$
Net revenues decreased $184 million (5.7%), due to unfavorable currency (13.5 pp) and unfavorable volume/mix
(2.1 pp), partially offset by higher net pricing (9.9 pp). Unfavorable currency impacts were due primarily to the
strength of the U.S. dollar relative to most currencies in the region including the Argentinean peso and Brazilian
real. Unfavorable volume/mix was due to the impact of pricing-related elasticity, and was driven by declines in
refreshment beverages, candy, cheese & grocery and chocolate, partially offset by gains in biscuits and gum.
Higher net pricing was reflected across all categories, driven primarily by Argentina, Brazil and Mexico.
Segment operating income decreased $69 million (16.8%), primarily due to higher raw material costs, unfavorable
currency, unfavorable volume/mix, the lapping of the 2018 benefit from the resolution of a Brazilian indirect tax
matter of $26 million, higher manufacturing costs and higher other selling, general and administrative expenses
(including lapping the benefit from a VAT-related settlement in 2018 and the expense of a VAT-related settlement in
2019). These unfavorable items were partially offset by higher net pricing, lower costs incurred for the Simplify to
Grow Program, favorable change in remeasurement on net monetary position in Argentina (remeasurement gain in
2019 as compared to a remeasurement loss in 2018) and lower advertising and consumer promotion costs.
2018 compared with 2017:
Net revenues decreased $364 million (10.2%), due to unfavorable currency (13.8 pp) and unfavorable volume/mix
(2.6 pp), partially offset by higher net pricing (6.2 pp). Unfavorable currency impacts were due primarily to the
strength of the U.S. dollar relative to most currencies in the region including the Argentinean peso, Brazilian real
and Mexican peso. Unfavorable volume/mix was due primarily to the impact of pricing-related elasticity, as well as
in part due to the negative impact of the Brazil trucking strike that occurred in the second quarter. Unfavorable
volume/mix was driven by declines in all categories except biscuits. Higher net pricing was reflected across all
categories, driven primarily by Argentina, Mexico and Brazil.
Segment operating income decreased $154 million (27.3%), primarily due to lapping last year's benefit from the
resolution of a Brazilian indirect tax matter of $153 million, higher raw material costs, unfavorable currency, higher
other selling, general and administrative expenses (net of the benefit from a VAT-related settlement in 2018),
unfavorable volume/mix and a loss from the remeasurement of the net monetary position in Argentina. These
unfavorable items were partially offset by higher net pricing, lower manufacturing costs, the 2018 benefit from the
resolution of a Brazilian tax matter of $26 million, lower advertising and consumer promotion costs, lower costs
incurred for the Simplify to Grow Program and the lapping of the 2017 intangible asset impairment charges.
45
AMEA
Net revenues
Segment operating income
Net revenues
Segment operating income
2019 compared with 2018:
For the Years Ended
December 31,
2019
2018
$ change
% change
(in millions)
5,770 $
691
5,729 $
702
41
(11)
0.7 %
(1.6)%
For the Years Ended
December 31,
2018
2017
$ change
% change
(in millions)
5,729 $
702
5,739 $
514
(10)
188
(0.2)%
36.6 %
$
$
Net revenues increased $41 million (0.7%), due to favorable volume/mix (3.6 pp) and higher net pricing (1.7 pp),
mostly offset by unfavorable currency (3.3 pp) and the impact of a divestiture (1.3 pp). Favorable volume/mix was
driven by gains across all categories except refreshment beverages and candy. Higher net pricing was reflected
across all categories. Unfavorable currency impacts were due to the strength of the U.S. dollar relative to several
currencies in the region, including the Australian dollar, Chinese yuan, Indian rupee and South African rand. The
divestiture of most of our cheese business in the Middle East and Africa on May 28, 2019, resulted in a year-over-
year decline in net revenues of $71 million.
Segment operating income decreased $11 million (1.6%), primarily due to higher raw material costs, expenses from
the resolution of tax matters in India totaling $87 million, higher advertising and consumer promotion costs,
unfavorable currency, higher other selling, general and administrative expenses, the impact of the divestiture and
higher intangible asset impairment charges. These unfavorable items were partially offset by lower manufacturing
costs, higher net pricing, lower costs incurred for the Simplify to Grow Program and favorable volume/mix.
2018 compared with 2017:
Net revenues decreased $10 million (0.2%), due to the impact of divestitures (2.6 pp) and unfavorable currency (1.3
pp), partially offset by favorable volume/mix (2.2 pp) and higher net pricing (1.5 pp). The impact of divestitures
related to most of our cheese business in the Middle East and Africa on May 28, 2019, the grocery & cheese
business in Australia and New Zealand that was divested on July 4, 2017 and the confectionery business in Japan
that was divested on December 28, 2017, and resulted in a year-over-year decline in net revenues of $139 million
for 2018. Unfavorable currency impacts were due primarily to the strength of the U.S. dollar relative to several
currencies in the region, including the Indian rupee, Australian dollar and Philippine peso, partially offset by the
strength of several currencies in the region relative to the U.S. dollar, including the Chinese yuan and Japanese
yen. Favorable volume/mix was driven by gains in chocolate and biscuits, including the shift of volume into the first
quarter of 2018 due to the timing of Chinese New Year, partially offset by declines in refreshment beverages,
cheese & grocery, gum and candy. Higher net pricing was reflected across all categories except gum and candy.
Segment operating income increased $188 million (36.6%), primarily due to higher net pricing, lower costs incurred
for the Simplify to Grow Program, lower manufacturing costs, lower intangible asset impairment charges, lower
advertising and consumer promotion costs and favorable volume/mix. These favorable items were partially offset by
higher raw material costs, the impact of divestitures, unfavorable currency and higher other selling, general and
administrative expenses (net of prior-year property insurance recovery).
46
Europe
Net revenues
Segment operating income
$
9,972 $
1,732
10,122 $
1,734
(150)
(2)
(1.5)%
(0.1)%
For the Years Ended
December 31,
2019
2018
$ change
% change
(in millions)
For the Years Ended
December 31,
2018
2017
$ change
% change
(in millions)
$
10,122 $
1,734
9,794 $
1,610
328
124
3.3 %
7.7 %
Net revenues
Segment operating income
2019 compared with 2018:
Net revenues decreased $150 million (1.5%), due to unfavorable currency (5.2 pp), partially offset by favorable
volume/mix (3.7 pp), as net pricing was flat. Unfavorable currency impacts reflected the strength of the U.S. dollar
relative to most currencies in the region, primarily the euro, British pound sterling, Turkish lira and Swedish krona.
Favorable volume/mix was driven by gains across all categories except gum. Net pricing was flat as higher net
pricing in gum and candy was offset by lower net pricing in all other categories.
Segment operating income decreased $2 million (0.1%), primarily due to unfavorable currency, higher raw material
costs and higher advertising and consumer promotion costs. These unfavorable items were mostly offset by
favorable volume/mix, lower manufacturing costs and lower intangible asset impairment charges.
2018 compared with 2017:
Net revenues increased $328 million (3.3%), due to favorable volume/mix (3.1 pp) and favorable currency (2.3 pp),
partially offset by the impact of divestitures (1.5 pp) and lower net pricing (0.6 pp). Favorable volume/mix was driven
by chocolate, biscuits and candy, partially offset by declines in cheese & grocery, gum and refreshment beverages.
Favorable currency impacts reflected the strength of several currencies relative to the U.S. dollar, primarily the euro,
British pound sterling, Polish zloty and Czech koruna, partially offset by the strength of the U.S. dollar relative to
several currencies, primarily the Russian ruble and Turkish lira. The impact of divestitures, due to the sale of a
confectionery business in France and the termination of certain Kraft Heinz Company-owned grocery brand
licenses, resulted in a year-over-year decline in net revenues of $137 million for 2018. Lower net pricing was driven
by chocolate and biscuits, partially offset by higher net pricing in cheese & grocery, candy and gum.
Segment operating income increased $124 million (7.7%), primarily due to favorable volume/mix, lower
manufacturing costs, lower costs incurred for the Simplify to Grow Program, favorable currency, lower raw material
costs, lower divestiture-related costs and the lapping of prior-year malware incident incremental costs. These
favorable items were partially offset by higher advertising and consumer promotion costs, higher other selling,
general and administrative expenses, lower net pricing, lapping the prior-year benefit from the settlement of a
Cadbury tax matter, higher intangible asset impairment charges and the impact from divestitures.
47
North America
Net revenues
Segment operating income
Net revenues
Segment operating income
2019 compared with 2018:
For the Years Ended
December 31,
2019
2018
$ change
% change
(in millions)
7,108 $
1,451
6,885 $
849
223
602
3.2 %
70.9 %
For the Years Ended
December 31,
2018
2017
$ change
% change
(in millions)
6,885 $
849
6,797 $
1,144
88
(295)
1.3 %
(25.8)%
$
$
Net revenues increased $223 million (3.2%), due to higher net pricing (2.3 pp) and the impact of acquisitions (1.3
pp), partially offset by unfavorable currency (0.3 pp) and unfavorable volume/mix (0.1 pp). Higher net pricing was
reflected across all categories except chocolate. The July 16, 2019 acquisition of a majority interest in Perfect
Snacks added net revenues of $53 million and the June 7, 2018 acquisition of Tate’s Bake Shop added incremental
net revenues of $35 million in 2019. Unfavorable currency impact was due to the strength of the U.S. dollar relative
to the Canadian dollar. Unfavorable volume/mix was driven by declines in gum, chocolate and candy, mostly offset
by favorable volume/mix in biscuits.
Segment operating income increased $602 million (70.9%), primarily due to lapping prior-year pension participation
changes, higher net pricing, lower manufacturing costs, lower costs incurred for the Simplify to Grow Program,
benefit from current-year pension participation changes, lapping prior-year intangible asset impairment charges and
the impact from the acquisitions of Perfect Snacks and Tate's Bake Shop. These favorable items were partially
offset by higher raw material costs, higher other selling, general and administrative expenses and unfavorable
volume/mix.
2018 compared with 2017:
Net revenues increased $88 million (1.3%), due to higher net pricing (1.1 pp) and the impact of an acquisition (0.8
pp), partially offset by unfavorable volume/mix (0.5 pp) and unfavorable currency (0.1 pp). Higher net pricing was
reflected in biscuits and gum, partially offset by lower net pricing in chocolate and candy. The June 7, 2018
acquisition of a U.S. premium biscuit company, Tate’s Bake Shop, added net revenues of $52 million in 2018.
Unfavorable volume/mix, which was net of the benefit from lapping last year's negative impact from the 2017
malware incident, reflected declines in gum and chocolate, partially offset by gains in biscuits and candy.
Unfavorable currency impact was due to the strength of the U.S. dollar relative to the Canadian dollar.
Segment operating income decreased $295 million (25.8%), primarily due to the impact from pension participation
changes, higher manufacturing costs, unfavorable volume/mix, higher raw material costs and higher other selling,
general and administrative expenses. These unfavorable items were partially offset by lower advertising and
consumer promotion costs, higher net pricing, the lapping of prior-year malware incident incremental costs, lower
costs incurred for the Simplify to Grow Program, lower intangible asset impairment charges and the impact from the
acquisition of Tate's Bake Shop.
48
Critical Accounting Estimates
We prepare our consolidated financial statements in conformity with U.S. GAAP. The preparation of these financial
statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the
periods presented. Actual results could differ from those estimates and assumptions. Note 1, Summary of
Significant Accounting Policies, to the consolidated financial statements includes a summary of the significant
accounting policies we used to prepare our consolidated financial statements. We have discussed the selection and
disclosure of our critical accounting policies and estimates with our Audit Committee. The following is a review of
our most significant assumptions and estimates.
Goodwill and Non-Amortizable Intangible Assets:
We test goodwill and non-amortizable intangible assets for impairment on an annual basis on July 1. We assess
goodwill impairment risk throughout the year by performing a qualitative review of entity-specific, industry, market
and general economic factors affecting our goodwill reporting units. We review our operating segment and reporting
unit structure for goodwill testing annually or as significant changes in the organization occur. Annually, we may
perform qualitative testing, or depending on factors such as prior-year test results, current year developments,
current risk evaluations and other practical considerations, we may elect to do quantitative testing instead. In our
quantitative testing, we compare a reporting unit’s estimated fair value with its carrying value. We estimate a
reporting unit’s fair value using a discounted cash flow method which incorporates planned growth rates, market-
based discount rates and estimates of residual value. This year, for our Europe and North America reporting units,
we used a market-based, weighted-average cost of capital of 5.9% to discount the projected cash flows of those
operations. For our Latin America and AMEA reporting units, we used a risk-rated discount rate of 8.9%. Estimating
the fair value of individual reporting units requires us to make assumptions and estimates regarding our future plans
and industry and economic conditions, and our actual results and conditions may differ over time. If the carrying
value of a reporting unit’s net assets exceeds its fair value, we would recognize an impairment charge for the
amount by which the carrying value exceeds the reporting unit fair value.
In 2019, 2018 and 2017, there were no impairments of goodwill. In connection with our 2019 annual impairment
testing, each of our reporting units had sufficient fair value in excess of carrying value. While all reporting units
passed our annual impairment testing, if planned business performance expectations are not met or specific
valuation factors outside of our control, such as discount rates, change significantly, then the estimated fair values
of a reporting unit or reporting units might decline and lead to a goodwill impairment in the future.
Annually, we assess non-amortizable intangible assets for impairment by performing a qualitative review and
assessing events and circumstances that could affect the fair value or carrying value of the indefinite-lived
intangible assets. If significant potential impairment risk exists for a specific asset, we quantitatively test it for
impairment by comparing its estimated fair value with its carrying value. We determine estimated fair value using
planned growth rates, market-based discount rates and estimates of royalty rates. If the carrying value of the asset
exceeds its estimated fair value, the asset is impaired and its carrying value is reduced to the estimated fair value.
During our 2019 annual testing of non-amortizable intangible assets, we recorded $57 million of impairment
charges in the third quarter of 2019 related to nine brands. The impairments arose due to lower than expected
brand earnings growth. We recorded charges related to gum, chocolate, biscuits and candy brands of $39 million in
Europe, $15 million in AMEA and $3 million in Latin America. The impairment charges were calculated as the
excess of the carrying value over the estimated fair value of the intangible assets on a global basis and were
recorded within asset impairment and exit costs. We use several accepted valuation methods, including relief of
royalty, excess earnings and excess margin, that utilize estimates of future sales, earnings growth rates, royalty
rates and discount rates in determining a brand's global fair value. We also identified fourteen brands, including the
nine impaired brands, with $635 million of aggregate book value as of December 31, 2019 that each had a fair
value in excess of book value of 10% or less. We believe our current plans for each of these brands will allow them
to not be impaired, but if the brand earnings expectations are not met or specific valuation factors outside of our
control, such as discount rates, change significantly, then a brand or brands could become impaired in the future. In
2018, we recorded charges related to gum, chocolate, biscuits and candy brands of $45 million in Europe, $14
million in North America and $9 million in AMEA. In 2017, we recorded charges related to candy and gum brands of
$52 million in AMEA, $11 million in Europe, $5 million in Latin America and $2 million in North America.
Refer to Note 6, Goodwill and Intangible Assets, for additional information.
49
Trade and marketing programs:
We promote our products with trade and sales incentives as well as marketing and advertising programs. These
programs include, but are not limited to, new product introduction fees, discounts, coupons, rebates and volume-
based incentives as well as cooperative advertising, in-store displays and consumer marketing promotions. Trade
and sales incentives are recorded as a reduction to revenues based on amounts estimated due to customers and
consumers at the end of a period. We base these estimates principally on historical utilization and redemption rates.
For interim reporting purposes, advertising and consumer promotion expenses are charged to operations as a
percentage of volume, based on estimated sales volume and estimated program spending. We do not defer costs
on our year-end consolidated balance sheet and all marketing and advertising costs are recorded as an expense in
the year incurred.
Employee Benefit Plans:
We sponsor various employee benefit plans throughout the world. These include primarily pension plans and
postretirement healthcare benefits. For accounting purposes, we estimate the pension and postretirement
healthcare benefit obligations utilizing assumptions and estimates for discount rates; expected returns on plan
assets; expected compensation increases; employee-related factors such as turnover, retirement age and mortality;
and health care cost trends. We review our actuarial assumptions on an annual basis and make modifications to the
assumptions based on current rates and trends when appropriate. Our assumptions also reflect our historical
experiences and management’s best judgment regarding future expectations. These and other assumptions affect
the annual expense and obligations recognized for the underlying plans.
As permitted by U.S. GAAP, we generally amortize the effect of changes in the assumptions over future periods.
The cost or benefit of plan changes, such as increasing or decreasing benefits for prior employee service (prior
service cost), is deferred and included in expense on a straight-line basis over the average remaining service period
of the employees expected to receive benefits.
Since pension and postretirement liabilities are measured on a discounted basis, the discount rate significantly
affects our plan obligations and expenses. For plans that have assets held in trust, the expected return on plan
assets assumption affects our pension plan expenses. The assumptions for discount rates and expected rates of
return and our process for setting these assumptions are described in Note 11, Benefit Plans, to the consolidated
financial statements.
While we do not anticipate further changes in the 2020 assumptions for our U.S. and non-U.S. pension and
postretirement health care plans, as a sensitivity measure, a fifty-basis point change in our discount rates or the
expected rate of return on plan assets would have the following effects, increase/(decrease), on our annual benefit
plan costs:
Effect of change in discount rate on
pension costs
Effect of change in expected rate of return on
plan assets on pension costs
Effect of change in discount rate on
postretirement health care costs
As of December 31, 2019
U.S. Plans
Fifty-Basis-Point
Non-U.S. Plans
Fifty-Basis-Point
Increase
Decrease
Increase
Decrease
(in millions)
$
(14) $
15
$
(30) $
(8)
(3)
8
3
(48)
—
62
48
—
In accordance with obligations we have under collective bargaining agreements, we participate in multiemployer
pension plans. In 2017, the only individually significant multiemployer plan we contributed to was the Bakery and
Confectionery Union and Industry International Pension Fund. Our obligation to contribute to the Fund arose with
respect to 8 collective bargaining agreements covering most of our employees represented by the BCTGM. All of
those collective bargaining agreements expired in 2016. In 2018, we executed a complete withdrawal from the Fund
and recorded a $429 million estimated withdrawal liability. On July 11, 2019, we received an undiscounted
withdrawal liability assessment from the Fund totaling $526 million requiring pro-rata monthly payments over 20
years and we recorded a $35 million final adjustment to reduce our withdrawal liability as of June 30, 2019. We
50
began making monthly payments during the third quarter of 2019. As of December 31, 2019, the remaining
discounted withdrawal liability was $391 million.
See additional information on our employee benefit plans in Note 11, Benefit Plans.
Income Taxes:
As a global company, we calculate and provide for income taxes in each tax jurisdiction in which we operate. The
provision for income taxes includes the amounts payable or refundable for the current year, the effect of deferred
taxes and impacts from uncertain tax positions. Our provision for income taxes is significantly affected by shifts in
the geographic mix of our pre-tax earnings across tax jurisdictions, changes in tax laws and regulations, tax
planning opportunities available in each tax jurisdiction and the ultimate outcome of various tax audits.
Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary
differences between the financial statement and tax bases of our assets and liabilities and for operating losses and
tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates that will apply to
taxable income in the years in which those differences are expected to be recovered or settled. Valuation
allowances are established for deferred tax assets when it is more likely than not that a tax benefit will not be
realized.
We believe our tax positions comply with applicable tax laws and that we have properly accounted for uncertain tax
positions. We recognize tax benefits in our financial statements from uncertain tax positions only if it is more likely
than not that the tax position will be sustained by the taxing authorities based on the technical merits of the position.
The amount we recognize is measured as the largest amount of benefit that is greater than 50 percent likely of
being realized upon resolution. We evaluate uncertain tax positions on an ongoing basis and adjust the amount
recognized in light of changing facts and circumstances, such as the progress of a tax audit or expiration of a
statute of limitations. We believe the estimates and assumptions used to support our evaluation of uncertain tax
positions are reasonable. However, final determination of historical tax liabilities, whether by settlement with tax
authorities, judicial or administrative ruling or due to expiration of statutes of limitations, could be materially different
from estimates reflected on our consolidated balance sheet and historical income tax provisions. The outcome of
these final determinations could have a material effect on our provision for income taxes, net earnings or cash flows
in the period in which the determination is made.
As a result of Swiss and U.S. tax reform and the related SEC guidance, we finalized our accounting for the
legislation based on guidance issued prior to 2019 year end. See Note 16, Income Taxes, for further discussion of
the amounts recorded related to Swiss and U.S. tax reform in our financial statements, as well as additional
information on our effective tax rate, current and deferred taxes, valuation allowances and unrecognized tax
benefits.
Contingencies:
See Note 14, Commitments and Contingencies, to the consolidated financial statements.
New Accounting Guidance:
See Note 1, Summary of Significant Accounting Policies, to the consolidated financial statements for a discussion of
new accounting standards.
51
Liquidity and Capital Resources
We believe that cash from operations, our revolving credit facilities, short-term borrowings and our authorized long-
term financing will provide sufficient liquidity for our working capital needs, planned capital expenditures and future
payments of our U.S. tax reform transition tax liability, contractual and benefit plan obligations, share repurchases
and quarterly dividends. We continue to utilize our commercial paper program, international credit lines and long-
term debt issuances for our funding requirements. We also use intercompany loans with our international
subsidiaries to improve financial flexibility. Overall, we do not expect any negative effects to our funding sources
that would have a material effect on our liquidity.
Net Cash Provided by Operating Activities:
Operating activities provided net cash of $3,965 million in 2019, $3,948 million in 2018 and $2,593 million in 2017.
The increase in net cash provided by operating activities in 2019 relative to 2018 was due primarily to higher
earnings, increased distributions from equity method investments and lower pension contributions, partially offset by
increased working capital requirements including higher tax payments. Cash flows from operating activities were
higher in 2018 than 2017 primarily due to higher cash flow from working capital, higher net earnings as well as
lower pension contributions.
Net Cash Used in Investing Activities:
Net cash used in investing activities was $960 million in 2019, $1,224 million in 2018 and $301 million in 2017. The
decrease in net cash used in investing activities in 2019 relative to 2018 was primarily due to less cash expended
for acquisitions in 2019 than in 2018, lower capital expenditures and the 2019 cash proceeds from the divestiture of
primarily our cheese business in the Middle East and Africa, partially offset by lower cash received as a result of the
settlement and replacement of several net investment hedge derivative contracts and cash paid to settle our
forward-starting interest rate swaps. The increase in net cash used in investing activities in 2018 relative to 2017
was primarily due to cash received in 2017 from proceeds from divestitures, cash expenditures in 2018 for an
acquisition and higher capital expenditures in 2018, partially offset by cash received as a result of the settlement
and replacement of several net investment hedge derivative contracts.
Capital expenditures were $925 million in 2019, $1,095 million in 2018 and $1,014 million in 2017. We continue to
make capital expenditures primarily to modernize manufacturing facilities and support new product and productivity
initiatives. We expect 2020 capital expenditures to be up to $0.9 billion, including capital expenditures in connection
with our Simplify to Grow Program. We expect to continue to fund these expenditures from operations.
Net Cash Used in Financing Activities:
Net cash used in financing activities was $2,787 million in 2019, $2,329 million in 2018 and $3,361 million in 2017.
The increase in net cash used in financing activities in 2019 relative to 2018 was primarily due to lower net debt
issuances and higher dividends paid in 2019, partially offset by lower share repurchases. The decrease in net cash
used in financing activities in 2018 relative to 2017 was primarily due to higher net debt issuances and lower share
repurchases partially offset by higher dividends paid.
Debt:
From time to time we refinance long-term and short-term debt. Refer to Note 9, Debt and Borrowing Arrangements,
for details of our recent tender offers, debt issuances and maturities. The nature and amount of our long-term and
short-term debt and the proportionate amount of each varies as a result of current and expected business
requirements, market conditions and other factors. Due to seasonality, in the first and second quarters of the year,
our working capital requirements grow, increasing the need for short-term financing. The second half of the year
typically generates higher cash flows. As such, we may issue commercial paper or secure other forms of financing
throughout the year to meet short-term working capital or other financing needs.
One of our subsidiaries, Mondelez International Holdings Netherlands B.V. (“MIHN”), has outstanding debt. Refer to
Note 9, Debt and Borrowing Arrangements. The operations held by MIHN generated approximately 73.0% (or $18.9
billion) of the $25.9 billion of consolidated net revenue during fiscal year 2019 and represented approximately
87.2% (or $23.9 billion) of the $27.4 billion of net assets as of December 31, 2019.
On February 7, 2019, our Board of Directors approved a new $5.0 billion long-term financing authority to replace
the prior $5.0 billion authority. As of December 31, 2019, we had $1.8 billion of long-term financing authority
remaining.
52
In the next 12 months, we expect approximately $1.5 billion of long-term debt will mature as follows: $427 million in
February 2020, $233 million in March 2020, $750 million in May 2020 and $140 million in October 2020. We expect
to fund these repayments with a combination of cash from operations, short-term debt, including issuance of
commercial paper and long-term debt.
Our total debt was $18.4 billion at December 31, 2019 and $18.4 billion at December 31, 2018. Our debt-to-
capitalization ratio was 0.40 at December 31, 2019 and 0.42 at December 31, 2018. At December 31, 2019, the
weighted-average term of our outstanding long-term debt was 5.8 years. Our average daily commercial borrowings
were $4.1 billion in 2019, $4.5 billion in 2018 and $4.4 billion in 2017. We had $2.6 billion of commercial paper
borrowings outstanding at December 31, 2019 and $3.1 billion outstanding as of December 31, 2018. We expect to
continue to use commercial paper to finance various short-term financing needs. We continue to comply with our
debt covenants. Refer to Note 9, Debt and Borrowing Arrangements, for more information on our debt and debt
covenants.
Commodity Trends
We regularly monitor worldwide supply, commodity cost and currency trends so we can cost-effectively secure
ingredients, packaging and fuel required for production. During 2019, the primary drivers of the increase in our
aggregate commodity costs were higher currency exchange transaction costs on imported materials, as well as
increased costs for packaging, energy, dairy, grains, cocoa and oils, partially offset by lower costs for sugar and
nuts.
A number of external factors such as weather conditions, commodity market conditions, currency fluctuations and
the effects of governmental agricultural or other programs affect the cost and availability of raw materials and
agricultural materials used in our products. We address higher commodity costs and currency impacts primarily
through hedging, higher pricing and manufacturing and overhead cost control. We use hedging techniques to limit
the impact of fluctuations in the cost of our principal raw materials; however, we may not be able to fully hedge
against commodity cost changes, such as dairy, where there is a limited ability to hedge, and our hedging strategies
may not protect us from increases in specific raw material costs. Due to competitive or market conditions, planned
trade or promotional incentives, fluctuations in currency exchange rates or other factors, our pricing actions may
also lag commodity cost changes temporarily.
We expect price volatility and a higher aggregate cost environment to continue in 2020. While the costs of our
principal raw materials fluctuate, we believe there will continue to be an adequate supply of the raw materials we
use and that they will generally remain available from numerous sources.
Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
We have no significant off-balance sheet arrangements other than the contractual obligations discussed below.
Guarantees:
As discussed in Note 14, Commitments and Contingencies, we enter into third-party guarantees primarily to cover
the long-term obligations of our vendors. As part of these transactions, we guarantee that third parties will make
contractual payments or achieve performance measures. At December 31, 2019, we had no material third-party
guarantees recorded on our consolidated balance sheet.
Guarantees do not have, and we do not expect them to have, a material effect on our liquidity.
53
Aggregate Contractual Obligations:
The following table summarizes our contractual obligations at December 31, 2019.
Total
2020
2021-22
2023-24
2025 and
Thereafter
Payments Due
Debt (1)
Interest expense (2)
Finance leases (3)
Operating leases
Purchase obligations: (4)
Inventory and production costs
Other
U.S. tax reform transition liability (5)
Multiemployer pension plan
withdrawal liability (6)
Other long-term liabilities (7)
Total
$
15,741 $
3,253
134
652
4,613
1,151
25,544
1,008
(in millions)
1,549 $
390
38
197
5,038 $
658
57
248
3,412
801
6,387
93
652
221
6,874
187
3,634 $
476
24
110
207
118
4,569
362
515
222
27,289 $
$
26
16
6,522 $
53
36
7,150 $
53
41
5,025 $
5,520
1,729
15
97
342
11
7,714
366
383
129
8,592
(1) Amounts include the expected cash payments of our long-term debt, including the current portion and excluding finance
leases, which are presented separately in the table above. The amounts also exclude $76 million of net unamortized non-
cash bond premiums, discounts, bank fees and mark-to-market adjustments related to our interest rate swaps recorded in
total debt.
(2) Amounts represent the expected cash payments of our interest expense on our long-term debt. Interest calculated on our
non-U.S. dollar denominated debt was forecasted using currency exchange rates as of December 31, 2019.
(3) Amounts exclude imputed interest on finance leases of $11 million.
(4) Purchase obligations for inventory and production costs (such as raw materials, indirect materials and supplies, packaging,
co-manufacturing arrangements, storage and distribution) are commitments for projected needs to be utilized in the normal
course of business. Other purchase obligations include commitments for marketing, advertising, capital expenditures,
information technology and professional services. Arrangements are considered purchase obligations if a contract specifies
all significant terms, including fixed or minimum quantities to be purchased, a pricing structure and approximate timing of the
transaction. Most arrangements are cancelable without a significant penalty and with short notice (usually 30 days). Any
amounts reflected on the consolidated balance sheet as accounts payable and accrued liabilities are excluded from the
table above.
In connection with U.S. tax reform, we estimate paying a total $1.3 billion transition tax liability through 2026. As of
December 31, 2019, the amount outstanding was $1.0 billion. The amounts and timing of our tax payments may change as
a result of additional guidance issued. See Note 16, Income Taxes, for additional information on U.S. tax reform and its
impact on our financial statements.
(5)
(6) During 2018, we executed a complete withdrawal liability from our most individually significant multiemployer pension plan.
On July 11, 2019, we received an undiscounted withdrawal liability assessment from the Fund totaling $526 million requiring
pro-rata monthly payments over 20 years through 2039. See Note 11, Benefit Plans, for additional information on our
multiemployer pension plan withdrawal liability.
(7) Other long-term liabilities in the table above include the long-term liabilities and any current portion of these obligations. We
have included the estimated future benefit payments for our postretirement health care plans through December 31, 2029 of
$198 million. We are unable to reliably estimate the timing of the payments beyond 2029; as such, they are excluded from
the above table. There are also another $1 million of various other long-term liabilities that are expected to be paid over the
next 5 years. In addition, the following long-term liabilities included on the consolidated balance sheet are excluded from the
table above: accrued pension costs, unrecognized tax benefits, insurance accruals and other accruals. As of December 31,
2019, our unrecognized tax benefit, including associated interest and penalties, classified as a long-term payable is $507
million. We currently expect to make approximately $246 million in contributions to our pension plans in 2020.
54
Equity and Dividends
Stock Plans:
See Note 12, Stock Plans, to the consolidated financial statements for more information on our stock plans and
grant activity during 2017-2019.
Share Repurchases:
See Note 13, Capital Stock, to the consolidated financial statements for more information on our share repurchase
program.
Between 2013 and 2017, our Board of Directors authorized the repurchase of a total of $13.7 billion of our Common
Stock through December 31, 2018. On January 31, 2018, our Finance Committee, with authorization delegated
from our Board of Directors, approved an increase of $6.0 billion in the share repurchase program, raising the
authorization to $19.7 billion of Common Stock repurchases, and extended the program through December 31,
2020. Through December 31, 2019, we repurchased approximately $16.5 billion of shares ($1.5 billion in 2019, $2.0
billion in 2018, $2.2 billion in 2017, $2.6 billion in 2016, $3.6 billion in 2015, $1.9 billion in 2014 and $2.7 billion in
2013), at a weighted-average cost of $39.65 per share. The number of shares that we ultimately repurchase under
our share repurchase program may vary depending on numerous factors, including share price and other market
conditions, our ongoing capital allocation planning, levels of cash and debt balances, other demands for cash, such
as acquisition activity, general economic or business conditions and board and management discretion. Additionally,
our share repurchase activity during any particular period may fluctuate. We may accelerate, suspend, delay or
discontinue our share repurchase program at any time, without notice.
Dividends:
We paid dividends of $1,542 million in 2019, $1,359 million in 2018 and $1,198 million in 2017. On July 30, 2019,
the Finance Committee, with authorization delegated from our Board of Directors, declared a quarterly cash
dividend of $0.285 per share of Class A Common Stock, an increase of 10 percent, which would be $1.14 per
common share on an annualized basis. On July 25, 2018, the Finance Committee, with authorization delegated
from our Board of Directors, declared a quarterly cash dividend of $0.26 per share of Class A Common Stock, an
increase of 18 percent, which would be $1.04 per common share on an annualized basis. On August 2, 2017, the
Finance Committee, with authorization delegated from our Board of Directors, approved a 16% increase in the
quarterly dividend to $0.22 per common share or $0.88 per common share on an annualized basis. The declaration
of dividends is subject to the discretion of our Board of Directors and depends on various factors, including our net
earnings, financial condition, cash requirements, future prospects and other factors that our Board of Directors
deems relevant to its analysis and decision making.
For U.S. income tax purposes only, the Company has determined that 100% of the distributions paid to its
shareholders in 2019 are characterized as a qualified dividend paid from U.S. earnings and profits. Shareholders
should consult their tax advisors for a full understanding of the tax consequences of the receipt of dividends.
55
Non-GAAP Financial Measures
We use non-GAAP financial information and believe it is useful to investors as it provides additional information to
facilitate comparisons of historical operating results, identify trends in our underlying operating results and provide
additional insight and transparency on how we evaluate our business. We use non-GAAP financial measures to
budget, make operating and strategic decisions and evaluate our performance. We have detailed the non-GAAP
adjustments that we make in our non-GAAP definitions below. The adjustments generally fall within the following
categories: acquisition & divestiture activities, gains and losses on intangible asset sales and non-cash
impairments, major program restructuring activities, constant currency and related adjustments, major program
financing and hedging activities and other major items affecting comparability of operating results. We believe the
non-GAAP measures should always be considered along with the related U.S. GAAP financial measures. We have
provided the reconciliations between the GAAP and non-GAAP financial measures below, and we also discuss our
underlying GAAP results throughout our Management’s Discussion and Analysis of Financial Condition and Results
of Operations in this Form 10-K.
Our primary non-GAAP financial measures are listed below and reflect how we evaluate our current and prior-year
operating results. As new events or circumstances arise, these definitions could change. When our definitions
change, we provide the updated definitions and present the related non-GAAP historical results on a comparable
basis (1).
•
•
•
“Organic Net Revenue” is defined as net revenues excluding the impacts of acquisitions, divestitures (2) and
currency rate fluctuations (3). We also evaluate Organic Net Revenue growth from emerging and developed
markets.
• Our emerging markets include our Latin America region in its entirety; the AMEA region, excluding
Australia, New Zealand and Japan; and the following countries from the Europe region: Russia,
Ukraine, Turkey, Kazakhstan, Belarus, Georgia, Poland, Czech Republic, Slovak Republic, Hungary,
Bulgaria, Romania, the Baltics and the East Adriatic countries. Our developed markets include the
entire North America region, the Europe region excluding the countries included in the emerging
markets definition, and Australia, New Zealand and Japan from the AMEA region.
“Adjusted Operating Income” is defined as operating income excluding the impacts of the Simplify to Grow
Program (4); gains or losses (including non-cash impairment charges) on goodwill and intangible assets;
divestiture (2) or acquisition gains or losses and related divestiture (2), acquisition and integration costs (2); the
operating results of divestitures (2); remeasurement of net monetary position (5); mark-to-market impacts from
commodity and forecasted currency transaction derivative contracts (6); impact from resolution of tax matters
(7); CEO transition remuneration (8); impact from pension participation changes (9); Swiss tax reform impacts
(10); and incremental expenses related to the 2017 malware incident. We also present “Adjusted Operating
Income margin,” which is subject to the same adjustments as Adjusted Operating Income. We also evaluate
growth in our Adjusted Operating Income on a constant currency basis (3).
“Adjusted EPS” is defined as diluted EPS attributable to Mondelēz International from continuing operations
excluding the impacts of the items listed in the Adjusted Operating Income definition as well as losses on
debt extinguishment and related expenses; gain on equity method investment transactions; net earnings
from divestitures (2); gains or losses on interest rate swaps no longer designated as accounting cash flow
hedges due to changed financing and hedging plans and U.S. and Swiss tax reform impacts (10). Similarly,
within Adjusted EPS, our equity method investment net earnings exclude our proportionate share of our
investees’ unusual or infrequent items (11). We also evaluate growth in our Adjusted EPS on a constant
currency basis (3).
(1) When items no longer impact our current or future presentation of non-GAAP operating results, we remove these items from
our non-GAAP definitions. During 2019, we added to the non-GAAP definitions the exclusion of the impact from Swiss tax
reform as described in footnote (10) below. During 2018, we added to the non-GAAP definitions the exclusion of:
remeasurement gains or losses related to remeasuring net monetary assets or liabilities in Argentina (see footnote (5)
below) and the impact from pension participation changes (see footnote (9) below).
(2) Divestitures include completed sales of businesses and exits of major product lines upon completion of a sale or licensing
agreement. See Note 2, Divestitures and Acquisitions, for information on divestitures and acquisitions impacting the
comparability of our results.
(3) Constant currency operating results are calculated by dividing or multiplying, as appropriate, the current-period local
currency operating results by the currency exchange rates used to translate the financial statements in the comparable
prior-year period to determine what the current-period U.S. dollar operating results would have been if the currency
exchange rate had not changed from the comparable prior-year period.
56
(4) Non-GAAP adjustments related to the Simplify to Grow Program reflect costs incurred that relate to the objectives of our
program to transform our supply chain network and organizational structure. Costs that do not meet the program objectives
are not reflected in the non-GAAP adjustments.
(5) During the third quarter of 2018, as we began to apply highly inflationary accounting for Argentina (refer to Note 1, Summary
of Significant Accounting Policies), we excluded the remeasurement gains or losses related to remeasuring net monetary
assets or liabilities in Argentina to be consistent with our prior accounting for these remeasurement gains/losses for
Venezuela when it was subject to highly inflationary accounting prior to 2016.
(6) During the third quarter of 2016, we began to exclude unrealized gains and losses (mark-to-market impacts) from
outstanding commodity and forecasted currency transaction derivatives from our non-GAAP earnings measures until such
time that the related exposures impact our operating results. Since we purchase commodity and forecasted currency
transaction contracts to mitigate price volatility primarily for inventory requirements in future periods, we made this
adjustment to remove the volatility of these future inventory purchases on current operating results to facilitate comparisons
of our underlying operating performance across periods. We also discontinued designating commodity and forecasted
currency transaction derivatives for hedge accounting treatment. To facilitate comparisons of our underlying operating
results, we have recast all historical non-GAAP earnings measures to exclude the mark-to-market impacts.
(7) See Note 14, Commitments and Contingencies – Tax Matters, for additional information.
(8) On November 20, 2017, Dirk Van de Put succeeded Irene Rosenfeld as CEO of Mondelēz International in advance of her
retirement at the end of March 2018. In order to incent Mr. Van de Put to join us, we provided him compensation with a total
combined target value of $42.5 million to make him whole for incentive awards he forfeited or grants that were not made to
him when he left his former employer. The compensation we granted took the form of cash, deferred stock units,
performance share units and stock options. In connection with Irene Rosenfeld’s retirement, we made her outstanding
grants of performance share units for the 2016-2018 and 2017-2019 performance cycles eligible for continued vesting and
approved a $0.5 million salary for her service as Chairman from January through March 2018. We refer to these elements of
Mr. Van de Put’s and Ms. Rosenfeld’s compensation arrangements together as “CEO transition remuneration.” We are
excluding amounts we expense as CEO transition remuneration from our non-GAAP results because those amounts are not
part of our regular compensation program and are incremental to amounts we would have incurred as ongoing CEO
compensation. As a result, in 2017, we excluded amounts expensed for the cash payment to Mr. Van de Put and partial
vesting of his equity grants. In 2018, we excluded amounts paid for Ms. Rosenfeld’s service as Chairman and partial vesting
of Mr. Van de Put’s and Ms. Rosenfeld’s equity grants. In 2019, we excluded amounts related to the partial vesting of Mr.
Van de Put’s equity grants.
(9) The impact from pension participation changes represents the charges incurred when employee groups are withdrawn from
multiemployer pension plans and other changes in employee group pension plan participation. We exclude these charges
from our non–GAAP results because those amounts do not reflect our ongoing pension obligations. See Note 11, Benefit
Plans, for more information on the multiemployer pension plan withdrawal.
(10) We exclude the impact of the 2019 Swiss tax reform and 2017 U.S. tax reform. During the third quarter of 2019, Swiss
Federal and Zurich Cantonal tax events drove our recognition of a Swiss tax reform net benefit to our results of operations.
On December 22, 2017, the United States enacted tax reform legislation that included a broad range of business tax
provisions. We exclude these tax reform impacts from our Adjusted EPS as they do not reflect our ongoing tax obligations
under the new tax reforms. Refer to Note 16, Income Taxes, for more information on our current year estimated annual
effective tax rate and U.S. and Swiss tax reform.
(11) We have excluded our proportionate share of our equity method investees’ unusual or infrequent items such as acquisition
and divestiture related costs, restructuring program costs and discrete U.S. tax reform impacts, in order to provide investors
with a comparable view of our performance across periods. Although we have shareholder rights and board representation
commensurate with our ownership interests in our equity method investees and review the underlying operating results and
unusual or infrequent items with them each reporting period, we do not have direct control over their operations or resulting
revenue and expenses. Our use of equity method investment net earnings on an adjusted basis is not intended to imply that
we have any such control. Our GAAP “diluted EPS attributable to Mondelēz International from continuing operations”
includes all of the investees’ unusual and infrequent items.
We believe that the presentation of these non-GAAP financial measures, when considered together with our U.S.
GAAP financial measures and the reconciliations to the corresponding U.S. GAAP financial measures, provides you
with a more complete understanding of the factors and trends affecting our business than could be obtained absent
these disclosures. Because non-GAAP financial measures vary among companies, the non-GAAP financial
measures presented in this report may not be comparable to similarly titled measures used by other companies.
Our use of these non-GAAP financial measures is not meant to be considered in isolation or as a substitute for any
U.S. GAAP financial measure. A limitation of these non-GAAP financial measures is they exclude items detailed
below that have an impact on our U.S. GAAP reported results. The best way this limitation can be addressed is by
evaluating our non-GAAP financial measures in combination with our U.S. GAAP reported results and carefully
evaluating the following tables that reconcile U.S. GAAP reported figures to the non-GAAP financial measures in
this Form 10-K.
57
Organic Net Revenue:
Applying the definition of “Organic Net Revenue”, the adjustments made to “net revenues” (the most comparable
U.S. GAAP financial measure) were to exclude the impact of currency, acquisitions and divestitures. We believe
that Organic Net Revenue reflects the underlying growth from the ongoing activities of our business and provides
improved comparability of results. We also evaluate our Organic Net Revenue growth from emerging markets, and
these underlying measures are also reconciled to U.S. GAAP below.
Net Revenue
Impact of currency
Impact of acquisitions
Impact of divestitures
Organic Net Revenue
Net Revenue
Impact of currency
Impact of acquisitions
Impact of divestitures
Organic Net Revenue
For the Year Ended December 31, 2019
For the Year Ended December 31, 2018
Emerging
Markets
Developed
Markets
(in millions)
Total
Emerging
Markets
Developed
Markets
(in millions)
Total
$
9,675
$
16,193
$
25,868
$
9,659
$
16,279
$
25,938
651
—
(55)
503
(88)
—
1,154
(88)
(55)
—
—
(126)
—
—
—
—
—
(126)
$
10,271
$
16,608
$
26,879
$
9,533
$
16,279
$
25,812
For the Year Ended December 31, 2018
For the Year Ended December 31, 2017
Emerging
Markets
Developed
Markets
(in millions)
Total
Emerging
Markets
Developed
Markets
(in millions)
Total
$
9,659
$
16,279
$
25,938
$
9,707
$
16,189
$
25,896
604
—
(126)
(261)
(52)
—
343
(52)
(126)
—
—
(132)
—
—
(270)
—
—
(402)
$
10,137
$
15,966
$
26,103
$
9,575
$
15,919
$
25,494
58
Adjusted Operating Income:
Applying the definition of “Adjusted Operating Income”, the adjustments made to “operating income” (the most
comparable U.S. GAAP financial measure) were to exclude Simplify to Grow Program; intangible asset impairment
charges; mark-to-market impacts from commodity and forecasted currency transaction derivative contracts;
malware incident incremental expenses, acquisition integration costs; acquisition and divestiture-related costs;
operating income from divestitures; net gains from divestitures; the remeasurement of net monetary position; impact
from pension participation changes; impact from the resolution of tax matters; CEO transition remuneration and
Swiss tax reform impact. We also evaluate Adjusted Operating Income on a constant currency basis. We believe
these measures provide improved comparability of underlying operating results.
Operating Income
Simplify to Grow Program (1)
Intangible asset impairment charges (2)
Mark-to-market gains from derivatives (3)
Acquisition integration costs (4)
Acquisition-related costs (5)
Divestiture-related costs (5)
Operating income from divestiture (5)
Net gain on divestiture (5)
Remeasurement of net monetary position (6)
Impact from pension participation changes (7)
Impact from resolution of tax matters (8)
CEO transition remuneration (9)
Swiss tax reform impact (10)
Adjusted Operating Income
Unfavorable currency translation
Adjusted Operating Income (constant currency)
For the Years Ended
December 31,
2019
2018
$ Change
% Change
(in millions)
$
3,843 $
442
3,312 $
626
57
(91)
—
3
6
(9)
(44)
(4)
(35)
85
9
68
(141)
3
13
(1)
(19)
—
11
423
(15)
22
2
4,264 $
227
4,491 $
—
4,302 $
—
4,302 $
$
$
531
(184)
(11)
50
(3)
(10)
7
10
(44)
(15)
(458)
100
(13)
2
(38)
227
189
16.0 %
(0.9)%
4.4 %
59
Operating Income
Simplify to Grow Program (1)
Intangible asset impairment charges (2)
Mark-to-market (gains)/losses from derivatives (3)
Malware incident incremental expenses
Acquisition integration costs (4)
Acquisition-related costs (5)
Divestiture-related costs (5)
Operating income from divestitures (5)
Net gain on divestitures (5)
Remeasurement of net monetary position (6)
Impact from pension participation changes (7)
Impact from resolution of tax matters (8)
CEO transition remuneration (9)
Other/rounding
Adjusted Operating Income
Unfavorable currency translation
Adjusted Operating Income (constant currency)
For the Years Ended
December 31,
2018
2017
$ Change
% Change
(in millions)
$
3,312 $
626
3,462 $
777
68
(141)
—
3
13
(1)
(19)
—
11
423
(15)
22
—
4,302 $
55
4,357 $
$
$
109
96
84
3
—
31
(92)
(186)
—
—
(209)
14
(1)
4,088 $
—
4,088 $
(150)
(151)
(41)
(237)
(84)
—
13
(32)
73
186
11
423
194
8
1
214
55
269
(4.3)%
5.2 %
6.6 %
(1) Refer to Note 8, Restructuring Program, for more information.
(2) Refer to Note 6, Goodwill and Intangible Assets, for more information on trademark impairments.
(3) Refer to Note 10, Financial Instruments, Note 18, Segment Reporting, and Non-GAAP Financial Measures section at the
end of this item for more information on the unrealized gains/losses on commodity and forecasted currency transaction
derivatives.
(4) Refer to Note 2, Divestitures and Acquisitions, for more information on the acquisition of a biscuit business in Vietnam.
(5) Refer to Note 2, Divestitures and Acquisitions, for more information on prior-year divestitures, intangible asset sales and the
June 7, 2018 acquisition of Tate's Bake Shop.
(6) Refer to Note 1, Summary of Significant Accounting Policies – Currency Translation and Highly Inflationary Accounting, for
information on our application of highly inflationary accounting for Argentina.
(7) Refer to Note 11, Benefit Plans, for more information.
(8) Refer to Note 14, Commitments and Contingencies – Tax Matters, for more information.
(9) Refer to the Non-GAAP Financial Measures definition and related table notes.
(10) Refer to Note 16, Income Taxes, for more information on Swiss tax reform.
60
Adjusted EPS:
Applying the definition of “Adjusted EPS” (1), the adjustments made to “diluted EPS attributable to Mondelēz
International” (the most comparable U.S. GAAP financial measure) were to exclude the impacts of the items listed
in the Adjusted Operating Income tables above as well as gains/(losses) related to interest rate swaps; loss on debt
extinguishment; U.S. tax reform discrete net tax impact; net gains/(losses) on equity method investment
transactions; and our proportionate share of unusual or infrequent items recorded by our JDE and Keurig equity
method investees. We also evaluate Adjusted EPS on a constant currency basis. We believe Adjusted EPS
provides improved comparability of underlying operating results.
For the Years Ended
December 31,
2019
2018
$ Change
% Change
Diluted EPS attributable to Mondelēz International
Simplify to Grow Program (2)
Intangible asset impairment charges (2)
Mark-to-market gains from derivatives (2)
Acquisition-related costs (2)
Divestiture-related costs (2)
Net earnings from divestiture (2)
Net gain on divestiture (2)
Remeasurement of net monetary position (2)
Impact from pension participation changes (2)
Impact from resolution of tax matters (2)
CEO transition remuneration (2)
Net loss/(gain) related to interest rate swaps (3)
Loss on debt extinguishment (4)
Swiss tax reform net impacts (2)
U.S. tax reform discrete net tax expense (5)
Net loss/(gain) on equity method
investment transactions (6)
Equity method investee acquisition-related
and other charges/(benefits) (7)
Adjusted EPS
Unfavorable currency translation
Adjusted EPS (constant currency)
$
2.65 $
0.24
2.28 $
0.32
0.03
(0.05)
—
0.01
(0.01)
(0.03)
—
(0.02)
0.05
0.01
0.08
—
(0.53)
—
0.01
0.03
(0.09)
0.01
—
(0.01)
—
0.01
0.22
(0.01)
0.01
(0.01)
0.07
—
0.01
(0.39)
0.03
2.47 $
0.15
2.62 $
(0.03)
2.42 $
—
2.42 $
$
$
0.37
(0.08)
—
0.04
(0.01)
0.01
—
(0.03)
(0.01)
(0.24)
0.06
—
0.09
(0.07)
(0.53)
(0.01)
0.40
0.06
0.05
0.15
0.20
16.2%
2.1%
8.3%
61
For the Years Ended
December 31,
2018
2017
$ Change
% Change
Diluted EPS attributable to Mondelēz International
Simplify to Grow Program (2)
Intangible asset impairment charges (2)
Mark-to-market (gains)/losses from derivatives (2)
Malware incident incremental expenses
Acquisition integration costs (2)
Acquisition-related costs (2)
Divestiture-related costs (2)
Net earnings from divestitures (2)
Net gain on divestitures (2)
Remeasurement of net monetary position (2)
Impact from pension participation changes (2)
Impact from resolution of tax matters (2)
CEO transition remuneration (2)
Net gain related to interest rate swaps (3)
Loss on debt extinguishment (4)
U.S. tax reform discrete net tax expense/(benefit) (5)
Gains on equity method investment transactions (6)
Equity method investee acquisition-related
and other charges/(benefits) (7)
Adjusted EPS
Unfavorable currency translation
Adjusted EPS (constant currency)
$
2.28 $
0.32
1.85 $
0.39
0.03
(0.09)
—
—
0.01
—
(0.01)
—
0.01
0.22
(0.01)
0.01
(0.01)
0.07
0.01
(0.39)
0.05
0.06
0.04
—
—
0.02
(0.05)
(0.11)
—
—
(0.13)
0.01
—
—
(0.03)
(0.02)
(0.03)
2.42 $
0.03
2.45 $
$
$
0.04
2.12 $
—
2.12 $
0.43
(0.07)
(0.02)
(0.15)
(0.04)
—
0.01
(0.02)
0.04
0.11
0.01
0.22
0.12
—
(0.01)
0.07
0.04
(0.37)
(0.07)
0.30
0.03
0.33
23.2%
14.2%
15.6%
(1) The tax expense/(benefit) of each of the pre-tax items excluded from our GAAP results was computed based on the facts
and tax assumptions associated with each item, and such impacts have also been excluded from Adjusted EPS.
•
2019 taxes for the: Simplify to Grow Program were $(103) million, intangible asset impairment charges were $(14)
million, mark-to-market gains from derivatives were $19 million, divestiture-related costs were zero, net earnings from
divestiture were zero, net gain on divestiture were $3 million, impact from pension participation changes were $8 million,
impact from resolution of tax matters were $(21) million, CEO transition remuneration were zero, net loss related to
interest rate swaps were zero, Swiss tax reform were $(769) million, net loss on equity method investment transactions
were $6 million and equity method investee and other charges/benefits were $(12) million.
2018 taxes for the: Simplify to Grow Program were $(156) million, intangible asset impairment charges were $(16)
million, mark-to-market gains from derivatives were $10 million, acquisition-related costs were $(3) million, net earnings
from divestiture were zero, impact from pension participation changes were $(108) million, impact from resolution of tax
matters were $(6) million, CEO transition remuneration were $(5) million, net gain related to interest rate swaps were $2
million, loss on debt extinguishment were $(35) million, U.S. tax reform were $19 million, gain on equity method
investment transaction were $192 million and equity method investee and other charges/benefits were $16 million.
2017 taxes for the: Simplify to Grow Program were $(190) million, intangible asset impairment charges were $(30)
million, mark-to-market losses from derivatives were $(6) million, malware incident incremental costs were $(27) million,
divestiture-related costs were $8 million, net earnings from divestitures were $16 million, net gain on divestitures were $7
million, impact from resolution of tax matters were $75 million, CEO transition remuneration were $(5) million, U.S. tax
reform were $(44) million, gain on equity method investment transactions were $15 million and equity method investee
and other charges/benefits were $(10) million.
•
•
(2) See the Adjusted Operating Income table above and the related footnotes for more information.
(3) Refer to Note 10, Financial Instruments, for information on interest rate swaps no longer designated as cash flow hedges.
(4) Refer to Note 9, Debt and Borrowing Arrangements, for more information on losses on debt extinguishment.
(5) Refer to Note 16, Income Taxes, for more information on the impact of U.S. tax reform.
(6) Refer to Note 7, Equity Method Investments, for more information on the KDP transaction in 2018, the 2017 sale of an
interest in one of our equity method investments and the 2016 acquisition of an interest in Keurig.
(7) Includes our proportionate share of unusual or infrequent items, such as acquisition and divestiture-related costs,
restructuring program costs and discrete U.S. tax reform impacts recorded by our JDE and Keurig equity method investees.
62
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
As we operate globally, we are primarily exposed to currency exchange rate, commodity price and interest rate
market risks. We monitor and manage these exposures as part of our overall risk management program. Our risk
management program focuses on the unpredictability of financial markets and seeks to reduce the potentially
adverse effects that the volatility of these markets may have on our operating results. We principally utilize
derivative instruments to reduce significant, unanticipated earnings fluctuations that may arise from volatility in
currency exchange rates, commodity prices and interest rates. For additional information on our derivative activity
and the types of derivative instruments we use to hedge our currency exchange, commodity price and interest rate
exposures, see Note 1, Summary of Significant Accounting Policies, and Note 10, Financial Instruments.
Many of our non-U.S. subsidiaries operate in functional currencies other than the U.S. dollar. Fluctuations in
currency exchange rates create volatility in our reported results as we translate the balance sheets, operating
results and cash flows of these subsidiaries into the U.S. dollar for consolidated reporting purposes. The translation
of non-U.S. dollar denominated balance sheets and statements of earnings of our subsidiaries into the U.S. dollar
for consolidated reporting generally results in a cumulative translation adjustment to other comprehensive income
within equity. A stronger U.S. dollar relative to other functional currencies adversely affects our consolidated
earnings and net assets while a weaker U.S. dollar benefits our consolidated earnings and net assets. While we
hedge significant forecasted currency exchange transactions as well as certain net assets of non-U.S. operations
and other currency impacts, we cannot fully predict or eliminate volatility arising from changes in currency exchange
rates on our consolidated financial results. See Consolidated Results of Operations and Results of Operations by
Reportable Segment under Discussion and Analysis of Historical Results for currency exchange effects on our
financial results. For additional information on the impact of currency policies, recent currency devaluations and
highly inflationary accounting on our financial condition and results of operations, also see Note 1, Summary of
Significant Accounting Policies—Currency Translation and Highly Inflationary Accounting.
We also continually monitor the market for commodities that we use in our products. Input costs may fluctuate
widely due to international demand, weather conditions, government policy and regulation and unforeseen
conditions. To manage input cost volatility, we enter into forward purchase agreements and other derivative financial
instruments. We also pursue productivity and cost saving measures and take pricing actions when necessary to
mitigate the impact of higher input costs on earnings.
We regularly evaluate our variable and fixed-rate debt as well as current and expected interest rates in the markets
in which we raise capital. Our primary exposures include movements in U.S. Treasury rates, corporate credit
spreads, commercial paper rates as well as limited debt tied to London Interbank Offered Rates (“LIBOR”). The
Financial Conduct Authority in the United Kingdom plans to phase out LIBOR by the end of 2021. We do not
anticipate a significant impact to our financial position from the planned phase out of LIBOR given our current mix of
variable and fixed-rate debt. We periodically use interest rate swaps and forward interest rate contracts to achieve a
desired proportion of variable versus fixed-rate debt based on current and projected market conditions. Our
weighted-average interest rate on our total debt was 2.2% as of December 31, 2019, down from 2.3% as of
December 31, 2018, primarily due to lower interest rates on commercial paper borrowings.
Beginning in 2018, we entered into new investment hedge derivative contracts, specifically, cross-currency interest
rate swaps and forwards, to hedge certain investments in our non-U.S. operations against movements in exchange
rates. See Note 10, Financial Instruments, for more information on our derivative activity.
Value at Risk:
We use a value at risk (“VAR”) computation to estimate: 1) the potential one-day loss in the fair value of our interest
rate-sensitive financial instruments; and 2) the potential one-day loss in pre-tax earnings of our currency and
commodity price-sensitive derivative financial instruments. The VAR analysis was done separately for our currency
exchange, fixed income and commodity risk portfolios as of each quarter end during the periods presented below.
The instruments included in the VAR computation were currency exchange forwards and options for currency
exchange risk, debt and swaps for interest rate risk, and commodity forwards, futures and options for commodity
risk. Excluded from the computation were anticipated transactions, currency trade payables and receivables, and
net investments in non-U.S. subsidiaries, which the above-mentioned instruments are intended to hedge.
63
The VAR model assumes normal market conditions, a 95% confidence interval and a one-day holding period. A
parametric delta-gamma approximation technique was used to determine the expected return distribution in interest
rates, currencies and commodity prices for the purpose of calculating the fixed income, currency exchange and
commodity VAR, respectively. The parameters used for estimating the expected return distributions were
determined by observing interest rate, currency exchange and commodity price movements over the prior quarter
for the calculation of VAR amounts at December 31, 2019 and 2018, and over each of the four prior quarters for the
calculation of average VAR amounts during each year. The values of currency and commodity options do not
change on a one-to-one basis with the underlying currency or commodity and were valued accordingly in the VAR
computation.
As of December 31, 2019 and December 31, 2018, the estimated potential one-day loss in fair value of our interest
rate-sensitive instruments, primarily debt, and the estimated potential one-day loss in pre-tax earnings from our
currency and commodity instruments, as calculated in the VAR model, were:
Pre-Tax Earnings Impact
Fair Value Impact
At 12/31/19
Average
High
Low
At 12/31/19
Average
High
Low
(in millions)
Instruments sensitive to:
Interest rates
Foreign currency rates
$
Commodity prices
15 $
11
19 $
13
25 $
14
15
11
$
86 $
70 $
97 $
49
Pre-Tax Earnings Impact
Fair Value Impact
At 12/31/18
Average
High
Low
At 12/31/18
Average
High
Low
(in millions)
Instruments sensitive to:
Interest rates
Foreign currency rates
$
Commodity prices
19 $
15
30 $
16
39 $
17
19
15
$
35 $
33 $
36 $
27
This VAR computation is a risk analysis tool designed to statistically estimate the maximum expected daily loss,
under the specified confidence interval and assuming normal market conditions, from adverse movements in
interest rates, currency exchange rates and commodity prices. The computation does not represent actual losses in
fair value or earnings we will incur, nor does it consider the effect of favorable changes in market rates. We cannot
predict actual future movements in market rates and do not present these VAR results to be indicative of future
movements in market rates or to be representative of any actual impact that future changes in market rates may
have on our future financial results.
64
Item 8. Financial Statements and Supplementary Data.
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Mondelēz International, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Mondelēz International, Inc. and its
subsidiaries (the "Company") as of December 31, 2019 and 2018, and the related consolidated statements of
earnings, comprehensive earnings, equity and cash flows for each of the three years in the period ended
December 31, 2019, including the related notes and financial statement schedule for each of the three years in the
period ended December 31, 2019 listed in the index appearing under Item 15(a) (collectively referred to as the
“consolidated financial statements”). We also have audited the Company’s internal control over financial reporting
as of December 31, 2019, based on criteria established in Internal Control—Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2019 in conformity with accounting principles
generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in
Internal Control—Integrated Framework (2013) issued by the COSO.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it
accounts for leases in 2019.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting, included in the Report of Management on Internal Control Over Financial Reporting appearing under Item
9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the
Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are
free of material misstatement, whether due to error or fraud, and whether effective internal control over financial
reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of
the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our opinions.
65
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that (i)
relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our
especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter
in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Non-Amortizable Intangible Assets Impairment Assessment
As described in Notes 1 and 6 to the consolidated financial statements, the Company’s consolidated non-
amortizable intangible assets balance was $17.3 billion as of December 31, 2019, and an impairment charge of $57
million was recorded in the year ended December 31, 2019. Annually, management assesses non-
amortizable intangible assets, which principally consist of brand names, for impairment by performing a qualitative
review and assessing events and circumstances that could affect the fair value or carrying value of the non-
amortizable intangible assets. If significant potential impairment risk exists for a specific asset, management
quantitatively tests the asset for impairment by comparing its estimated fair value with its carrying value.
Management estimates fair value for each asset using several accepted valuation methods, including relief of
royalty, excess earnings and excess margin, that utilize estimates of future sales, earnings growth rates, royalty
rates and discount rates.
The principal considerations for our determination that performing procedures relating to the non-amortizable
intangible assets impairment assessment is a critical audit matter are there was significant judgment by
management when developing the fair value measurement of the non-amortizable intangible assets. This in turn led
to a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate management’s
fair value estimates and significant assumptions, including estimates of future sales, earnings growth rates, royalty
rates, and discount rates. In addition, the audit effort involved the use of professionals with specialized skill and
knowledge to assist in performing these procedures and evaluating the audit evidence obtained.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of
controls relating to the non-amortizable intangible assets impairment assessment, including controls over the
determination of the fair values of the Company’s non-amortizable intangible assets as part of the annual
impairment assessment. These procedures also included, among others, testing management’s process for
developing the fair value estimate; evaluating the appropriateness of the valuation methods; testing the
completeness and accuracy of underlying data used in the valuation methods; and evaluating the significant
assumptions used by management, including the estimates of future sales, earnings growth rates, royalty rates, and
discount rates. Evaluating management’s assumptions related to estimates of future sales and earnings growth
rates involved evaluating whether the assumptions used by management were reasonable considering (i) the
66
current and past performance of the non-amortizable intangible assets, (ii) the consistency with external market and
industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the
audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s
valuation methods and certain significant assumptions, including the royalty rates and discount rates.
/s/ PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
February 7, 2020
We have served as the Company’s auditor since 2001.
67
Mondelēz International, Inc. and Subsidiaries
Consolidated Statements of Earnings
For the Years Ended December 31
(in millions of U.S. dollars, except per share data)
Net revenues
Cost of sales
Gross profit
Selling, general and administrative expenses
Asset impairment and exit costs
Net gains on divestitures
Amortization of intangibles
Operating income
Benefit plan non-service income
Interest and other expense, net
Earnings before income taxes
Provision for income taxes
Net (loss)/gain on equity method investment transactions
Equity method investment net earnings
Net earnings
Noncontrolling interest earnings
Net earnings attributable to Mondelēz International
Per share data:
Basic earnings per share attributable to Mondelēz International
Diluted earnings per share attributable to Mondelēz International
2019
2018
2017
$
25,868 $
15,531
25,938 $
15,586
10,337
6,136
10,352
6,475
228
(44)
174
3,843
(60)
456
3,447
(2)
(2)
442
389
—
176
3,312
(50)
520
2,842
(773)
778
548
3,885
(15)
3,870 $
3,395
(14)
3,381 $
2.68 $
2.65 $
2.30 $
2.28 $
$
$
$
25,896
15,862
10,034
5,938
642
(186)
178
3,462
(44)
382
3,124
(666)
40
344
2,842
(14)
2,828
1.87
1.85
See accompanying notes to the consolidated financial statements.
68
Mondelēz International, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Earnings
For the Years Ended December 31
(in millions of U.S. dollars)
Net earnings
Other comprehensive earnings/(losses), net of tax:
Currency translation adjustment
Pension and other benefit plans
Derivative cash flow hedges
Total other comprehensive earnings/(losses)
Comprehensive earnings
2019
2018
2017
$
3,885 $
3,395 $
2,842
299
116
(45)
370
4,255
(865)
284
(54)
(635)
2,760
1,198
(57)
8
1,149
3,991
42
3,949
less: Comprehensive earnings/(losses) attributable to
noncontrolling interests
Comprehensive earnings attributable to Mondelēz International
13
4,242 $
12
2,748 $
$
See accompanying notes to the consolidated financial statements.
69
Mondelēz International, Inc. and Subsidiaries
Consolidated Balance Sheets, as of December 31
(in millions of U.S. dollars, except share data)
2019
2018
$
1,291 $
ASSETS
Cash and cash equivalents
Trade receivables (net of allowances of $35 at December 31, 2019
and $40 at December 31, 2018)
Other receivables (net of allowances of $44 at December 31, 2019
and $47 at December 31, 2018)
Inventories, net
Other current assets
Total current assets
Property, plant and equipment, net
Operating lease right of use assets
Goodwill
Intangible assets, net
Prepaid pension assets
Deferred income taxes
Equity method investments
Other assets
TOTAL ASSETS
LIABILITIES
Short-term borrowings
Current portion of long-term debt
Accounts payable
Accrued marketing
Accrued employment costs
Other current liabilities
Total current liabilities
Long-term debt
Long-term operating lease liabilities
Deferred income taxes
Accrued pension costs
Accrued postretirement health care costs
Other liabilities
TOTAL LIABILITIES
Commitments and Contingencies (Note 14)
EQUITY
Common Stock, no par value (5,000,000,000 shares authorized and
1,996,537,778 shares issued at December 31, 2019 and December 31, 2018)
Additional paid-in capital
Retained earnings
Accumulated other comprehensive losses
Treasury stock, at cost (561,531,524 shares at December 31, 2019 and
545,537,923 shares at December 31, 2018)
Total Mondelēz International Shareholders’ Equity
Noncontrolling interest
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
$
$
$
2,212
715
2,546
866
7,630
8,733
568
20,848
17,957
516
726
7,212
359
64,549 $
2,638 $
1,581
5,853
1,836
769
2,645
15,322
14,207
403
3,338
1,190
387
2,351
37,198
1,100
2,262
744
2,592
906
7,604
8,482
—
20,725
18,002
132
255
7,123
406
62,729
3,192
2,648
5,794
1,756
701
2,646
16,737
12,532
—
3,552
1,221
351
2,623
37,016
—
32,019
26,653
(10,258)
(21,139)
27,275
76
27,351
64,549 $
—
31,961
24,491
(10,630)
(20,185)
25,637
76
25,713
62,729
See accompanying notes to the consolidated financial statements.
70
Mondelēz International, Inc. and Subsidiaries
Consolidated Statements of Equity
(in millions of U.S. dollars, except per share data)
Mondelēz International Shareholders’ Equity
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Earnings/
(Losses)
Treasury
Stock
Non-
controlling
Interest
Total
Equity
Balances at January 1, 2017
$ — $ 31,847 $ 21,125 $
(11,118) $(16,713) $
54 $ 25,195
Comprehensive earnings/(losses):
Net earnings
Other comprehensive earnings/
(losses), net of income taxes
Exercise of stock options and
issuance of other stock awards
Common Stock repurchased
Cash dividends declared
($0.82 per share)
Dividends paid on noncontrolling
interest and other activities
Balances at December 31, 2017
Comprehensive earnings/(losses):
Net earnings
Other comprehensive earnings/
(losses), net of income taxes
Exercise of stock options and
issuance of other stock awards
Common Stock repurchased
Cash dividends declared
($0.96 per share)
Dividends paid on noncontrolling
interest and other activities
Balances at December 31, 2018
Comprehensive earnings/(losses):
Net earnings
Other comprehensive earnings/
(losses), net of income taxes
Exercise of stock options and
issuance of other stock awards
Common Stock repurchased
Cash dividends declared
($1.09 per share)
Dividends paid on noncontrolling
interest and other activities
Balances at December 31, 2019
—
—
—
—
—
—
—
68
—
—
2,828
—
(83)
—
(1,239)
—
—
$ — $ 31,915 $ 22,631 $
—
—
—
—
—
—
—
—
46
—
—
3,381
—
(118)
—
(1,409)
—
—
$ — $ 31,961 $ 24,491 $
6
—
—
—
—
—
—
—
58
—
—
3,870
—
(132)
—
(1,576)
—
—
$ — $ 32,019 $ 26,653 $
—
—
1,121
—
—
—
—
—
—
360
(2,202)
—
—
(9,997) $(18,555) $
—
(633)
—
—
—
—
—
—
364
(1,994)
—
—
(10,630) $(20,185) $
—
372
—
—
—
—
—
—
545
(1,499)
—
—
(10,258) $(21,139) $
14
28
—
—
—
2,842
1,149
345
(2,202)
(1,239)
(16)
(16)
80 $ 26,074
14
(2)
—
—
—
3,395
(635)
292
(1,994)
(1,409)
(16)
(10)
76 $ 25,713
15
(2)
—
—
—
3,885
370
471
(1,499)
(1,576)
(13)
(13)
76 $ 27,351
See accompanying notes to the consolidated financial statements.
71
Mondelēz International, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended December 31
(in millions of U.S. dollars)
CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES
Net earnings
Adjustments to reconcile net earnings to operating cash flows:
Depreciation and amortization
Stock-based compensation expense
U.S. tax reform transition tax/(benefit)
Deferred income tax (benefit)/provision
Asset impairments and accelerated depreciation
Loss on early extinguishment of debt
Net gain on divestitures
Net loss/(gain) on equity method investment transactions
Equity method investment net earnings
Distributions from equity method investments
Other non-cash items, net
Change in assets and liabilities, net of acquisitions and divestitures:
Receivables, net
Inventories, net
Accounts payable
Other current assets
Other current liabilities
Change in pension and postretirement assets and liabilities, net
Net cash provided by operating activities
CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES
Capital expenditures
Acquisitions, net of cash received
Proceeds from divestitures, net of disbursements
Proceeds from sale of property, plant and equipment and other
Net cash used in investing activities
CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES
Issuances of commercial paper, maturities greater than 90 days
Repayments of commercial paper, maturities greater than 90 days
Net issuances/(repayments) of other short-term borrowings
Long-term debt proceeds
Long-term debt repayments
Repurchases of Common Stock
Dividends paid
Other
Net cash used in financing activities
Effect of exchange rate changes on cash, cash equivalents and
restricted cash
Cash, cash equivalents and restricted cash:
Increase/(decrease)
Balance at beginning of period
Balance at end of period
Cash paid:
Interest
Income taxes
2019
2018
2017
$
3,885 $
3,395 $
2,842
1,047
135
5
(631)
109
—
(44)
2
(442)
250
97
124
31
4
(77)
(362)
(168)
3,965
(925)
(284)
167
82
(960)
1,306
(2,367)
524
3,136
(2,677)
(1,480)
(1,542)
313
(2,787)
811
128
(38)
233
141
140
—
(778)
(548)
180
381
257
(204)
236
(25)
(136)
(225)
3,948
(1,095)
(528)
1
398
(1,224)
3,981
(2,856)
(1,413)
2,948
(1,821)
(2,020)
(1,359)
211
(2,329)
816
137
1,317
(1,228)
334
11
(186)
(40)
(344)
152
(225)
(24)
(18)
5
14
(637)
(333)
2,593
(1,014)
—
604
109
(301)
1,808
(1,911)
1,027
350
(1,470)
(2,174)
(1,198)
207
(3,361)
10
(56)
89
228
1,100
1,328 $
339
761
1,100 $
486 $
981 $
491 $
864 $
(980)
1,741
761
398
848
$
$
$
See accompanying notes to the consolidated financial statements.
72
Mondelēz International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
Description of Business:
Mondelēz International, Inc. was incorporated in 2000 in the Commonwealth of Virginia. Mondelēz International,
Inc., through its subsidiaries (collectively “Mondelēz International,” “we,” “us” and “our”), sells food and beverage
products to consumers in over 150 countries.
Principles of Consolidation:
The consolidated financial statements include Mondelēz International, Inc. as well as our wholly owned and majority
owned subsidiaries, except our Venezuelan subsidiaries which were deconsolidated in 2015. All intercompany
transactions are eliminated. The noncontrolling interest represents the noncontrolling investors’ interests in the
results of subsidiaries that we control and consolidate. We account for investments over which we exercise
significant influence under the equity method of accounting. Investments over which we do not have significant
influence or control are not material and are carried at cost as there is no readily determinable fair value for the
equity interests. Under the cost method of accounting, earnings are recognized to the extent cash is received.
Use of Estimates:
We prepare our consolidated financial statements in accordance with accounting principles generally accepted in
the United States of America (“U.S. GAAP”), which require us to make estimates and assumptions that affect a
number of amounts in our consolidated financial statements. Significant accounting policy elections, estimates and
assumptions include, among others, pension and benefit plan assumptions, valuation assumptions of goodwill and
intangible assets, useful lives of long-lived assets, restructuring program liabilities, marketing program accruals,
insurance and self-insurance reserves and income taxes. We base our estimates on historical experience and other
assumptions that we believe are reasonable. If actual amounts differ from estimates, we include the revisions in our
consolidated results of operations in the period the actual amounts become known. Historically, the aggregate
differences, if any, between our estimates and actual amounts in any year have not had a material effect on our
consolidated financial statements.
Our operations and management structure are organized into four operating segments:
•
•
•
•
Latin America
AMEA
Europe
North America
See Note 18, Segment Reporting, for additional information on our segments.
Currency Translation and Highly Inflationary Accounting:
We translate the results of operations of our subsidiaries from multiple currencies using average exchange rates
during each period and translate balance sheet accounts using exchange rates at the end of each period. We
record currency translation adjustments as a component of equity (except for highly inflationary currencies) and
realized exchange gains and losses on transactions in earnings.
Highly inflationary accounting is triggered when a country’s three-year cumulative inflation rate exceeds 100%. It
requires the remeasurement of financial statements of subsidiaries in the country, from the functional currency of
the subsidiary to our U.S. dollar reporting currency, with currency remeasurement gains or losses recorded in
earnings. As discussed below, beginning on July 1, 2018, we began to apply highly inflationary accounting for our
operations in Argentina.
Argentina. During the second quarter of 2018, primarily based on published estimates which indicated that
Argentina's three-year cumulative inflation rate exceeded 100%, we concluded that Argentina became a highly
inflationary economy for accounting purposes. As of July 1, 2018, we began to apply highly inflationary accounting
for our Argentinean subsidiaries and changed their functional currency from the Argentinean peso to the U.S. dollar.
On July 1, 2018, both monetary and non-monetary assets and liabilities denominated in Argentinean pesos were
remeasured into U.S. dollars using the exchange rate as of the balance sheet date, with remeasurement and other
transaction gains and losses recorded in net earnings. As of December 31, 2019, our Argentinean operations had
less than $1 million of Argentinean peso denominated net monetary liabilities. Our Argentinean operations
contributed $382 million, or 1.5% of consolidated net revenues in 2019. We recorded a remeasurement gain of
73
$4 million in 2019 and a remeasurement loss of $11 million in 2018 within selling, general and administrative
expenses related to the revaluation of the Argentinean peso denominated net monetary position over these periods.
Brexit. In 2019, we generated 8.6% of our net revenues in the United Kingdom. On January 31, 2020, the United
Kingdom began the withdrawal process from the European Union under the European and U.K. Parliament
approved Withdrawal Agreement. During a transition period currently scheduled to end on December 31, 2020, the
United Kingdom will effectively remain in the E.U.’s customs union and single market while a trade deal with the
European Union is negotiated. The deadline for extending the transition period ends on June 30, 2020. If the
transition period is not extended, on December 31, 2020, the United Kingdom will either exit the European Union
without a trade deal or will begin a new trade relationship with the European Union. During the transition period, we
continue to take protective measures in response to the potential impacts on our results of operations and financial
condition. Following the Brexit vote in June 2016, there was significant volatility in the global stock markets and
currency exchange rates. The value of the British pound sterling relative to the U.S. dollar declined significantly and
negatively affected our translated results reported in U.S. dollars. If the ultimate terms of the United Kingdom’s
separation from the European Union negatively impact the U.K. economy or result in disruptions to sales or our
supply chain, the impact to our results of operations and financial condition could be material. We have taken
measures to increase our resources in customer service & logistics together with increasing our inventory levels of
imported raw materials, packaging and finished goods in the United Kingdom to help us manage through the Brexit
transition and the inherent risks.
Other Countries. Since we sell our products in over 150 countries and have operations in approximately 80
countries, we monitor economic and currency-related risks and seek to take protective measures in response to
these exposures. Some of the countries in which we do business have recently experienced periods of significant
economic uncertainty and exchange rate volatility, including Brazil, China, Mexico, Russia, Ukraine, Turkey, Egypt,
Nigeria, South Africa and Pakistan. We continue to monitor operations, currencies and net monetary exposures in
these countries. At this time, we do not anticipate that these countries are at risk of becoming highly inflationary
economies.
Cash, Cash Equivalents and Restricted Cash:
Cash and cash equivalents include demand deposits with banks and all highly liquid investments with original
maturities of three months or less. As of December 31, 2019, we also had $37 million of restricted cash recorded
within other current assets. Total cash, cash equivalents and restricted cash was $1,328 million as of December 31,
2019.
Transfers of Financial Assets:
We account for transfers of financial assets, such as uncommitted revolving non-recourse accounts receivable
factoring arrangements, when we have surrendered control over the related assets. Determining whether control
has transferred requires an evaluation of relevant legal considerations, an assessment of the nature and extent of
our continuing involvement with the assets transferred and any other relevant considerations. We use receivable
factoring arrangements periodically when circumstances are favorable to manage liquidity. We have nonrecourse
factoring arrangements in which we sell eligible trade receivables primarily to banks in exchange for cash. We may
then continue to collect the receivables sold, acting solely as a collecting agent on behalf of the banks. The
outstanding principal amount of receivables under these arrangements amounted to $760 million as of
December 31, 2019, $819 million as of December 31, 2018 and $843 million as of December 31, 2017. The
incremental costs of factoring receivables under this arrangement were approximately $10 million or less in each of
the years presented. The proceeds from the sales of receivables are included in cash from operating activities in
the consolidated statements of cash flows.
Inventories:
We record our inventory using the average cost method and record inventory allowances for overstock and
obsolete inventory.
Long-Lived Assets:
Property, plant and equipment are stated at historical cost and depreciated by the straight-line method over the
estimated useful lives of the assets. Machinery and equipment are depreciated over periods ranging from 3 to
20 years and buildings and building improvements over periods up to 40 years.
We review long-lived assets, including amortizable intangible assets, for realizability on an ongoing basis. Changes
in depreciation, generally accelerated depreciation, are determined and recorded when estimates of the remaining
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useful lives or residual values of long-term assets change. We also review for impairment when conditions exist that
indicate the carrying amount of the assets may not be fully recoverable. In those circumstances, we perform
undiscounted operating cash flow analyses to determine if an impairment exists. When testing for asset impairment,
we group assets and liabilities at the lowest level for which cash flows are separately identifiable. Any impairment
loss is calculated as the excess of the asset’s carrying value over its estimated fair value. Fair value is estimated
based on the discounted cash flows for the asset group over the remaining useful life or based on the expected
cash proceeds for the asset less costs of disposal. Any significant impairment losses would be recorded within
asset impairment and exit costs in the consolidated statements of earnings.
Leases:
We determine whether a contract is or contains a lease at contract inception. On January 1, 2019, we began to
record operating leases on our consolidated balance sheet. We elected not to recognize right-of-use ("ROU")
assets and lease liabilities for short-term operating leases with terms of 12 months or less. Long-term operating
lease ROU assets and long-term operating lease liabilities are presented separately and operating lease liabilities
payable in the next twelve months are recorded in other current liabilities. Finance lease ROU assets continue to be
presented in property, plant and equipment and the related finance lease liabilities continue to be presented in the
current portion of long-term debt and long-term debt.
Lease ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent
our obligation to make lease payments arising from the lease. ROU assets are recognized at commencement date
at the value of the lease liability, adjusted for any prepayments, lease incentives received and initial direct costs
incurred. Lease liabilities are recognized at commencement date based on the present value of remaining lease
payments over the lease term. The non-recurring fair value measurement is classified as Level 3 as no fair value
inputs are observable. As the rate implicit in the lease is not readily determinable in most of our leases, we use our
country-specific incremental borrowing rate based on the lease term using information available at commencement
date in determining the present value of lease payments. Our lease terms may include options to extend or
terminate the lease when it is reasonably certain that we will exercise that option. Many of our leases contain non-
lease components (e.g. product costs, common-area or other maintenance costs) that relate to the lease
components of the agreement. Non-lease components and the lease components to which they relate are
accounted for as a single lease component as we have elected to combine lease and non-lease components for all
classes of underlying assets.
Amortization of ROU lease assets is calculated on a straight-line basis over the lease term with the expense
recorded in cost of sales or selling, general and administrative expenses depending on the nature of the leased
item. Interest expense is recorded over the lease term and is recorded in interest expense (based on a front-loaded
interest expense pattern) for finance leases and is recorded in cost of sales or selling, general and administrative
expenses (on a straight-line basis) for operating leases. All operating lease cash payments and interest on finance
leases are recorded within cash flows from operating activities and all finance lease principal payments are
recorded within cash flows from financing activities in the consolidated statements of cash flows.
Software Costs:
We capitalize certain computer software and software development costs incurred in connection with developing or
obtaining computer software for internal use. Capitalized software costs are included in property, plant and
equipment and amortized on a straight-line basis over the estimated useful lives of the software, which do not
exceed seven years.
Goodwill and Non-Amortizable Intangible Assets:
We test goodwill and non-amortizable intangible assets for impairment on an annual basis on July 1. We assess
goodwill impairment risk throughout the year by performing a qualitative review of entity-specific, industry, market
and general economic factors affecting our goodwill reporting units. We review our operating segment and reporting
unit structure for goodwill testing annually or as significant changes in the organization occur. Annually, we may
perform qualitative testing, or depending on factors such as prior-year test results, current year developments,
current risk evaluations and other practical considerations, we may elect to do quantitative testing instead. In our
quantitative testing, we compare a reporting unit’s estimated fair value with its carrying value. We estimate a
reporting unit’s fair value using a discounted cash flow method that incorporates planned growth rates, market-
based discount rates and estimates of residual value. This year, for our Europe and North America reporting units,
we used a market-based, weighted-average cost of capital of 5.9% to discount the projected cash flows of those
operations. For our Latin America and AMEA reporting units, we used a risk-rated discount rate of 8.9%. Estimating
the fair value of individual reporting units requires us to make assumptions and estimates regarding our future
75
plans, industry and economic conditions, and our actual results and conditions may differ over time. If the carrying
value of a reporting unit’s net assets exceeds its fair value, we would recognize an impairment charge for the
amount by which the carrying value exceeds the reporting unit’s fair value.
Annually we assess non-amortizable intangible assets for impairment by performing a qualitative review and
assessing events and circumstances that could affect the fair value or carrying value of the indefinite-lived
intangible assets. If significant potential impairment risk exists for a specific asset, we quantitatively test it for
impairment by comparing its estimated fair value with its carrying value. We determine estimated fair value using
estimates of future sales, earnings growth rates, royalty rates and discount rates. If the carrying value of the asset
exceeds its fair value, we consider the asset impaired and reduce its carrying value to the estimated fair value. We
amortize definite-lived intangible assets over their estimated useful lives and evaluate them for impairment as we do
other long-lived assets.
Insurance and Self-Insurance:
We use a combination of insurance and self-insurance for a number of risks, including workers’ compensation,
general liability, automobile liability, product liability and our obligation for employee healthcare benefits. We
estimate the liabilities associated with these risks on an undiscounted basis by evaluating and making judgments
about historical claims experience and other actuarial assumptions and the estimated impact on future results.
Revenue Recognition:
We predominantly sell food and beverage products across several product categories and in all regions as
disclosed in Note 18, Segment Reporting. We recognize revenue when control over the products transfers to our
customers, which generally occurs upon delivery or shipment of the products. A small percentage of our net
revenues relates to the licensing of our intellectual property, predominantly brand and trade names, and we record
these revenues when earned within the period of the license term. We account for product shipping, handling and
insurance as fulfillment activities with revenues for these activities recorded within net revenue and costs recorded
within cost of sales. Any taxes collected on behalf of government authorities are excluded from net revenues.
Revenues are recorded net of trade and sales incentives and estimated product returns. Known or expected pricing
or revenue adjustments, such as trade discounts, rebates or returns, are estimated at the time of sale. We base
these estimates of expected amounts principally on historical utilization and redemption rates. Estimates that affect
revenue, such as trade incentives and product returns, are monitored and adjusted each period until the incentives
or product returns are realized.
Key sales terms, such as pricing and quantities ordered, are established on a frequent basis such that most
customer arrangements and related incentives have a one year or shorter duration. As such, we do not capitalize
contract inception costs and we capitalize product fulfillment costs in accordance with U.S. GAAP and our inventory
policies. We generally do not have any unbilled receivables at the end of a period. Deferred revenues are not
material and primarily include customer advance payments typically collected a few days before product delivery, at
which time deferred revenues are reclassified and recorded as net revenues. We generally do not receive noncash
consideration for the sale of goods nor do we grant payment financing terms greater than one year.
Marketing, Advertising and Research and Development:
We promote our products with marketing and advertising programs. These programs include, but are not limited to,
cooperative advertising, in-store displays and consumer marketing promotions. For interim reporting purposes,
advertising, consumer promotion and marketing research expenses are charged to operations as a percentage of
volume, based on estimated sales volume and estimated program spending. We do not defer costs on our year-end
consolidated balance sheet and all marketing and advertising costs are recorded as an expense in the year
incurred. Advertising expense was $1,208 million in 2019, $1,173 million in 2018 and $1,248 million in 2017. We
expense product research and development costs as incurred. Research and development expense was $351
million in 2019, $362 million in 2018 and $366 million in 2017. We record marketing and advertising as well as
research and development expenses within selling, general and administrative expenses.
Stock-based Compensation:
Stock-based compensation awarded to employees and non-employee directors is valued at fair value on the grant
date. We record stock-based compensation expense over the vesting period, generally three years. Forfeitures are
estimated on the grant date for all of our stock-based compensation awards.
76
Employee Benefit Plans:
We provide a range of benefits to our current and retired employees including pension benefits, defined contribution
plan benefits, postretirement health care benefits and postemployment primarily severance-related benefits
depending upon local statutory requirements, employee tenure and service requirements as well as other factors.
The cost for these plans is recognized in earnings primarily over the working life of the covered employee.
Financial Instruments:
We use financial instruments to manage our currency exchange rate, commodity price and interest rate risks. We
monitor and manage these exposures as part of our overall risk management program, which focuses on the
unpredictability of financial markets and seeks to reduce the potentially adverse effects that the volatility of these
markets may have on our operating results. A principal objective of our risk management strategies is to reduce
significant, unanticipated earnings fluctuations that may arise from volatility in currency exchange rates, commodity
prices and interest rates, principally through the use of derivative instruments.
We use a combination of primarily currency forward contracts, futures, options and swaps; commodity forward
contracts, futures and options; and interest rate swaps to manage our exposure to cash flow variability, protect the
value of our existing currency assets and liabilities and protect the value of our debt. See Note 10, Financial
Instruments, for more information on the types of derivative instruments we use.
We record derivative financial instruments on a gross basis and at fair value in our consolidated balance sheets
within other current assets or other current liabilities due to their relatively short-term duration. Cash flows related to
the settlement of derivative instruments designated as net investment hedges of foreign operations are classified in
the consolidated statements of cash flows within investing activities. All other cash flows related to derivative
instruments that are designated, and those that are economic hedges, are classified in the same line item as the
cash flows of the related hedged item, which is generally within operating activities. Cash flows related to the
settlement of all other free-standing derivative instruments are classified within investing activities. Changes in the
fair value of a derivative that is designated as a cash flow hedge, to the extent that the hedge is effective, are
recorded in accumulated other comprehensive earnings/(losses) and reclassified to earnings when the hedged item
affects earnings. Changes in fair value of economic hedges and the ineffective portion of all hedges are recognized
in current period earnings. Changes in the fair value of a derivative that is designated as a fair value hedge, along
with the changes in the fair value of the related hedged asset or liability, are recorded in earnings in the same
period. We use non-U.S. dollar denominated debt to hedge a portion of our net investment in non-U.S. operations
against adverse movements in exchange rates. Currency movements related to our non-U.S. debt and our net
investments in non-U.S. operations, as well as the related deferred taxes, are recorded within currency translation
adjustment in accumulated other comprehensive earnings/(losses).
In order to qualify for hedge accounting, a specified level of hedging effectiveness between the derivative
instrument and the item being hedged must exist at inception and throughout the hedged period. We must also
formally document the nature of and relationship between the derivative and the hedged item, as well as our risk
management objectives, strategies for undertaking the hedge transaction and method of assessing hedge
effectiveness. Additionally, for a hedge of a forecasted transaction, the significant characteristics and expected term
of the forecasted transaction must be specifically identified, and it must be probable that the forecasted transaction
will occur. If it is no longer probable that the hedged forecasted transaction will occur, we would recognize the gain
or loss related to the derivative in earnings.
When we use derivatives, we are exposed to credit and market risks. Credit risk exists when a counterparty to a
derivative contract might fail to fulfill its performance obligations under the contract. We reduce our credit risk by
entering into transactions with counterparties with high quality, investment grade credit ratings, limiting the amount
of exposure with each counterparty and monitoring the financial condition of our counterparties. We also maintain a
policy of requiring that all significant, non-exchange traded derivative contracts with a duration of one year or longer
are governed by an International Swaps and Derivatives Association master agreement. Market risk exists when the
value of a derivative or other financial instrument might be adversely affected by changes in market conditions and
commodity prices, currency exchange rates or interest rates. We manage derivative market risk by limiting the
types of derivative instruments and derivative strategies we use and the degree of market risk that we plan to hedge
through the use of derivative instruments.
Commodity derivatives. We are exposed to price risk related to forecasted purchases of certain commodities that
we primarily use as raw materials. We enter into commodity forward contracts primarily for wheat, sugar and other
sweeteners, soybean and vegetable oils and cocoa. Commodity forward contracts generally are not subject to the
77
accounting requirements for derivative instruments and hedging activities under the normal purchases exception.
We also use commodity futures and options to hedge the price of certain input costs, including cocoa, energy costs,
sugar and other sweeteners, wheat, packaging, dairy, corn, and soybean and vegetable oils. We also sell
commodity futures to unprice future purchase commitments, and we occasionally use related futures to cross-
hedge a commodity exposure. We are not a party to leveraged derivatives and, by policy, do not use financial
instruments for speculative purposes.
Currency exchange derivatives. We use various financial instruments to mitigate our exposure to changes in
exchange rates from third-party and intercompany current and forecasted transactions. These instruments may
include currency exchange forward contracts, futures, options and swaps. Based on the size and location of our
businesses, we use these instruments to hedge our exposure to certain currencies, including the euro, pound
sterling, Swiss franc, Canadian dollar and Mexican peso. Any unrealized gains or losses (mark-to-market impacts)
and realized gains or losses are recorded in earnings (see Note 10, Financial Instruments, for additional
information).
Interest rate cash flow and fair value hedges. We manage interest rate volatility by modifying the pricing or maturity
characteristics of certain liabilities so that the net impact on expense is not, on a material basis, adversely affected
by movements in interest rates. As a result of interest rate fluctuations, hedged fixed-rate liabilities appreciate or
depreciate in market value. We expect the effect of this unrealized appreciation or depreciation to be substantially
offset by our gains or losses on the derivative instruments that are linked to these hedged liabilities. We use
derivative instruments, including interest rate swaps that have indices related to the pricing of specific liabilities as
part of our interest rate risk management strategy. As a matter of policy, we do not use highly leveraged derivative
instruments for interest rate risk management. We use interest rate swaps to economically convert a portion of our
fixed-rate debt into variable-rate debt. Under the interest rate swap contracts, we agree with other parties to
exchange, at specified intervals, the difference between fixed-rate and floating-rate interest amounts, which is
calculated based on an agreed-upon notional amount. We use interest rate swaps to hedge the variability of interest
payment cash flows on a portion of our future debt obligations. We also execute cross-currency interest rate swaps
to hedge interest payments on newly issued debt denominated in a different currency than the functional currency
of the borrowing entity. Substantially all of these derivative instruments are highly effective and qualify for hedge
accounting treatment.
Hedges of net investments in non-U.S. operations. We have numerous investments outside the United States. The
net assets of these subsidiaries are exposed to changes and volatility in currency exchange rates. We use local
currency denominated debt to hedge our non-U.S. net investments against adverse movements in exchange rates.
We designated our euro, pound sterling, Swiss franc and Canadian dollar-denominated borrowings as a net
investment hedge of a portion of our overall international operations. The gains and losses on our net investment in
these designated international operations are economically offset by losses and gains on our euro, pound sterling,
Swiss franc and Canadian dollar-denominated borrowings. The change in the debt’s value, net of deferred taxes, is
recorded in the currency translation adjustment component of accumulated other comprehensive earnings/(losses).
Additionally, beginning in the first quarter of 2018, we entered into cross-currency interest rate swaps and forwards
to hedge certain investments in our non-U.S. operations against movements in exchange rates. The after-tax gain/
(loss) on these net investment hedge contracts is recorded in the cumulative translation adjustment section of other
comprehensive income and the pre-tax impacts of the cash flows from these contracts are reported as other
investing activities in the consolidated statement of cash flows.
Income Taxes:
Our provision for income taxes includes amounts payable or refundable for the current year, the effects of deferred
taxes and impacts from uncertain tax positions. We recognize deferred tax assets and liabilities for the expected
future tax consequences of temporary differences between the financial statement and tax basis of our assets and
liabilities, operating loss carryforwards and tax credit carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply in the years in which those differences are expected to reverse.
The realization of certain deferred tax assets is dependent on generating sufficient taxable income in the
appropriate jurisdiction prior to the expiration of the carryforward periods. Deferred tax assets are reduced by a
valuation allowance if it is more likely than not that some portion, or all, of the deferred tax assets will not be
realized. When assessing the need for a valuation allowance, we consider any carryback potential, future reversals
of existing taxable temporary differences (including liabilities for unrecognized tax benefits), future taxable income
and tax planning strategies.
78
We recognize tax benefits in our financial statements from uncertain tax positions only if it is more likely than not
that the tax position will be sustained based on the technical merits of the position. The amount we recognize is
measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon resolution.
Future changes related to the expected resolution of uncertain tax positions could affect tax expense in the period
when the change occurs.
We monitor for changes in tax laws and reflect the impacts of tax law changes in the period of enactment. When
there is refinement to tax law changes in subsequent periods, we account for the new guidance in the period when
it becomes known.
New Accounting Pronouncements:
In December 2019, the Financial Accounting Standards Board ("FASB") issued an Accounting Standards Update
("ASU") that removes certain exceptions in accounting for income taxes, improves consistency in application and
clarifies existing guidance. This ASU is effective for fiscal years beginning after December 15, 2020, with early
adoption permitted. We do not expect this ASU to have a material impact on our consolidated financial statements.
In October 2018, the FASB issued an ASU that permits the use of the Secured Overnight Financing Rate ("SOFR")
Overnight Index Swap ("OIS") Rate as a U.S. benchmark interest rate for hedge accounting purposes. We adopted
the new standard on January 1, 2019 and there was no material impact to our consolidated financial statements
upon adoption.
In August 2018, the FASB issued an ASU that aligns the requirements for capitalizing implementation costs incurred
in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs for
internal-use software. This ASU is effective for fiscal years beginning after December 15, 2019, with early adoption
permitted. We will adopt this ASU as of January 1, 2020 and we do not expect this ASU to have a material impact
on our consolidated financial statements.
In August 2018, the FASB issued an ASU that modifies the disclosure requirements for employers that sponsor
defined benefit pension or other postretirement plans. The ASU is effective for fiscal years ending after December
15, 2020, with early adoption permitted. We will adopt this ASU as of December 31, 2020. The new standard will
impact our year-end disclosures only and is not expected to have an impact on our consolidated financial
statements.
In August 2018, the FASB issued an ASU that modifies the disclosure requirements on fair value measurements.
The ASU is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. We will
adopt this ASU as of January 1, 2020. The new standard will impact our disclosures and is not expected to have an
impact on our consolidated financial statements.
In June 2018, the FASB issued an ASU that requires entities to record share-based payment transactions for
acquiring goods and services from non-employees at fair value as of adoption date. The ASU is effective for fiscal
years beginning after December 15, 2018, with early adoption permitted. We adopted the standard as of January 1,
2019 and there was no material impact to our consolidated financial statements upon adoption.
In February 2018, the FASB issued an ASU that permits entities to elect a reclassification from accumulated other
comprehensive income to retained earnings for stranded tax effects resulting from the 2017 enactment of U.S. tax
reform legislation. The ASU is effective for fiscal years beginning after December 15, 2018, with early adoption
permitted. We did not elect to reclassify these stranded tax effects from U.S. tax reform when we adopted this ASU
in the first quarter of 2019. As such, this ASU did not have a material impact on our consolidated financial
statements. Our policy is to release stranded tax effects from accumulated other comprehensive income under the
portfolio method rather than on an individual item by item basis.
In July 2017, the FASB issued an ASU on financial instruments that allows for the exclusion of a down round feature
when evaluating whether or not the instrument or embedded feature requires derivative classification. The ASU is
effective for fiscal years beginning after December 15, 2018, with early adoption permitted. We adopted the
standard as of January 1, 2019 and there was no material impact to our consolidated financial statements upon
adoption.
In June 2016, the FASB issued an ASU on the measurement of credit losses on financial instruments. This ASU
requires entities to measure the impairment of certain financial instruments, including trade receivables, based on
79
expected losses rather than incurred losses. This ASU is effective for fiscal years beginning after December 15,
2019, with early adoption permitted for financial statement periods beginning after December 15, 2018. We will
adopt this ASU as of January 1, 2020 and we do not expect this ASU to have a material impact on our consolidated
financial statements.
In February 2016, the FASB issued an ASU on lease accounting to increase transparency and comparability among
organizations by requiring the recognition of Right of Use ("ROU") assets and lease liabilities on the balance sheet
and disclosing key information about leasing arrangements. The ASU revises existing U.S. GAAP and outlines a
new model for lessors and lessees to use in accounting for lease contracts. The guidance requires lessees to
recognize a ROU asset and a lease liability on the balance sheet for all leases, with the exception of short-term
leases. In the statement of earnings, lessees will classify leases as either operating or financing. In July 2018, the
FASB issued an ASU which allows for an alternative transition approach, which will not require adjustments to
comparative prior-period amounts. The ASU is effective for fiscal years beginning after December 15, 2018, with
early adoption permitted. We adopted the new standard on January 1, 2019. We elected to apply the package of
practical expedients that allowed us not to reassess the lease classification and initial direct costs for expired or
existing leases or whether expired or existing contracts contain leases. We elected not to separate non-lease
components from lease components and to account for both as a single lease component by class of the underlying
asset. The impact of adopting the standard included the initial recognition as of January 1, 2019, of $710 million of
lease related assets and $730 million of lease related liabilities on our consolidated balance sheet. The transition
method we elected for adoption a cumulative effect adjustment to retained earnings as of January 1, 2019, which
was not material.
Note 2. Divestitures and Acquisitions
On July 16, 2019, we acquired a majority interest in a U.S. refrigerated nutrition bar company, Perfect Snacks,
within our North America segment for $284 million cash paid, net of cash received, and expanded our position in
broader snacking. We are working to complete the valuation work and have recorded a preliminary purchase price
allocation of $31 million to definite-lived intangible assets, $107 million to indefinite-lived intangible assets, $150
million to goodwill, $1 million to property, plant and equipment, $12 million to inventory, $8 million to accounts
receivable, $13 million to current liabilities, $3 million to deferred tax liabilities and $9 million to other liabilities. The
acquisition added incremental net revenues of $53 million and an immaterial amount of incremental operating
income in 2019.
On May 28, 2019, we completed the sale of most of our cheese business in the Middle East and Africa to Arla
Foods of Denmark. In 2019, we received cash proceeds of $161 million and divested $19 million of current assets
and $96 million of non-current assets. We also paid $2 million of transaction costs and recorded a net pre-tax gain
of $44 million on the sale.
On June 7, 2018, we acquired a U.S. premium biscuit company, Tate’s Bake Shop, within our North America
segment and extended our premium biscuit offering. During the second quarter of 2018, we paid $528 million, net of
cash received, and during the second quarter of 2019, we finalized the purchase price at $527 million. The
purchase price allocation included $45 million to definite-lived intangible assets, $205 million to indefinite-lived
intangible assets, $297 million to goodwill, $16 million to property, plant and equipment, $5 million to inventory, $9
million to accounts receivable, $7 million to current liabilities and $43 million to deferred tax liabilities. Through the
one-year anniversary of the acquisition, Tate's added incremental net revenues of $35 million and an immaterial
amount of incremental operating income.
On December 28, 2017, we completed the sale of a confectionery business in Japan. We received cash proceeds
of ¥2.8 billion ($24 million as of December 28, 2017) and recorded an immaterial pre-tax loss on the divestiture
within our AMEA segment.
In connection with the 2012 spin-off of Kraft Foods Group, Inc. (now a part of The Kraft Heinz Company (“KHC”)),
Kraft Foods Group and we each granted the other various licenses to use certain trademarks in connection with
particular product categories in specified jurisdictions. On August 17, 2017, we entered into two agreements with
KHC to terminate the licenses of certain KHC-owned brands used in our grocery business within our Europe region
and to transfer to KHC inventory and certain other assets. On August 17, 2017, the first transaction closed and we
received cash proceeds of €9 million ($11 million as of August 17, 2017) and on October 23, 2017, the second
transaction closed and we received cash proceeds of €2 million ($3 million as of October 23, 2017). The gain on
both transactions combined was immaterial.
80
On July 4, 2017, we completed the sale of most of our grocery business in Australia and New Zealand to Bega
Cheese Limited for $456 million Australian dollars ($347 million as of July 4, 2017). We divested $27 million of
current assets, $135 million of non-current assets and $4 million of current liabilities based on the July 4, 2017
exchange rate. We recorded a pre-tax gain of $247 million Australian dollars ($187 million as of July 4, 2017) on the
sale. We also recorded divestiture-related costs of $2 million and a foreign currency hedge loss of $3 million during
2017. In the fourth quarter of 2017, we recorded a $3 million inventory-related working capital adjustment,
increasing the pre-tax gain to $190 million in 2017.
On April 28, 2017, we completed the sale of several manufacturing facilities in France and the sale or license of
several local confectionery brands. We received cash of approximately €157 million ($169 million as of April 28,
2017), net of cash divested with the businesses. On April 28, 2017, we divested $44 million of current assets, $155
million of non-current assets, $8 million of current liabilities and $22 million of non-current liabilities based on the
April 28, 2017 exchange rate. We recorded a $3 million loss on the sale and divestiture-related costs of $27 million
in 2017 and $84 million in 2016. These divestiture-related costs were recorded within cost of sales and selling,
general and administrative expenses primarily within our Europe segment. In prior periods, we recorded a $5 million
impairment charge in May 2016 for a candy trademark to reduce the overall net assets to the estimated net sales
proceeds after transaction costs. On March 31, 2016, we recorded a $14 million impairment charge for another
gum & candy trademark as a portion of its carrying value would not be recoverable based on future cash flows
expected under a planned license agreement with the buyer.
Note 3. Inventories
Inventories consisted of the following:
Raw materials
Finished product
Inventory reserves
Inventories, net
Note 4. Property, Plant and Equipment
Property, plant and equipment consisted of the following:
Land and land improvements
Buildings and building improvements
Machinery and equipment
Construction in progress
Accumulated depreciation
Property, plant and equipment, net
As of December 31,
2019
2018
(in millions)
707 $
1,953
2,660
(114)
2,546 $
726
1,987
2,713
(121)
2,592
As of December 31,
2019
2018
(in millions)
422 $
3,140
11,295
680
15,537
(6,804)
8,733 $
424
2,984
10,943
894
15,245
(6,763)
8,482
$
$
$
$
Capital expenditures as presented on the statement of cash flow were $0.9 billion, $1.1 billion and $1.0 billion for
the years ending December 31, 2019, 2018 and 2017 and excluded $334 million, $331 million and $357 million for
accrued capital expenditures not yet paid.
In connection with our restructuring program, we recorded non-cash property, plant and equipment write-downs
(including accelerated depreciation and asset impairments) of $50 million in 2019, $59 million in 2018 and
$206 million in 2017 (see Note 8, Restructuring Program). These charges related to property, plant and equipment
81
were recorded in the consolidated statements of earnings within asset impairment and exit costs and in the
segment results as follows:
Latin America
AMEA
Europe
North America
Corporate
Non-cash property, plant and equipment write-downs
Note 5. Leases
For the Years Ended December 31,
2019
2018
(in millions)
2017
$
$
— $
(2)
46
5
1
25 $
5
15
13
1
50 $
59 $
36
81
58
30
1
206
We have operating and finance leases for manufacturing and distribution facilities, vehicles, equipment and office
space. Our leases have remaining lease terms of 1 to 10 years, some of which include options to extend the leases
for up to 6 years. We assume the majority of our termination options will not be exercised when determining the
lease term of our leases. We do not include significant restrictions or covenants in our lease agreements, and
residual value guarantees are generally not included within our operating leases, with the exception of some fleet
leases. Some of our leasing arrangements require variable payments that are dependent on usage or output or may
vary for other reasons, such as product costs, insurance and tax payments. These variable payment leases are not
included in our recorded lease assets and liabilities and are expensed as incurred. Certain leases are tied to a
variable index or rate and are included in our lease assets and liabilities based on the indices or rates as of lease
commencement.
The components of lease costs were as follows:
Operating lease cost
Finance lease cost:
Amortization of right-of-use assets
Interest on lease liabilities
Short-term lease cost
Variable lease cost
Sublease income
Total lease cost
For the Year Ended
December 31, 2019
(in millions)
$
$
222
29
4
39
474
(6)
762
Rent expenses under prior lease accounting rules (ASC 840) recorded in continuing operations were $260 million in
2018 and $284 million in 2017.
82
Supplemental cash flow information related to leases was as follows:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
Operating cash flows from finance leases
Financing cash flows from finance leases
Right-of-use assets obtained in exchange for lease obligations:
Operating leases
Finance leases
Supplemental balance sheet information related to leases was as follows:
Operating Leases:
Operating lease right-of-use assets, net of amortization
Other current liabilities
Long-term operating lease liabilities
Total operating lease liabilities
Finance Leases:
Finance leases, net of amortization (within property, plant & equipment)
Current portion of long-term debt
Long-term debt
Total finance lease liabilities
Weighted Average Remaining Lease Term
Operating leases
Finance leases
Weighted Average Discount Rate
Operating leases
Finance leases
For the Year Ended
December 31, 2019
(in millions)
$
$
(234)
(4)
(27)
95
99
As of December 31,
2019
(in millions)
$
$
$
$
$
$
568
178
403
581
122
32
91
123
5.2 years
4.6 years
3.5%
3.7%
In 2020, we expect to record a $45 million operating lease liability for a 15 year lease that has not yet commenced.
83
Future lease payments under non-cancelable leases under the new lease accounting rules (ASC 842) that went
into effect on January 1, 2019 were as follows:
Year Ending December 31:
2020
2021
2022
2023
2024
Thereafter
Total future undiscounted lease payments
Less imputed interest
Total reported lease liability
As of December 31, 2019
Operating Leases
Finance Leases
(in millions)
197 $
146
102
68
42
97
652 $
(71)
581 $
38
34
23
15
9
15
134
(11)
123
$
$
$
As of December 31, 2018, minimum rental commitments under non-cancelable operating leases under prior lease
accounting rules (ASC 840) were (in millions):
2019
2020
2021
2022
2023
Thereafter
Total
$
208 $
165 $
114 $
79 $
57 $
157 $
780
Note 6. Goodwill and Intangible Assets
Goodwill by operating segment was:
Latin America
AMEA
Europe
North America
Goodwill
Intangible assets consisted of the following:
Non-amortizable intangible assets
Amortizable intangible assets
Accumulated amortization
Intangible assets, net
As of December 31,
2019
2018
(in millions)
818 $
3,151
7,523
9,356
20,848 $
823
3,210
7,519
9,173
20,725
As of December 31,
2019
2018
(in millions)
17,296 $
2,374
19,670
(1,713)
17,957 $
17,201
2,328
19,529
(1,527)
18,002
$
$
$
$
Non-amortizable intangible assets consist principally of brand names purchased through our acquisitions of
Nabisco Holdings Corp., the Spanish and Portuguese operations of United Biscuits, the global LU biscuit business
of Groupe Danone S.A. and Cadbury Limited. Amortizable intangible assets consist primarily of trademarks,
customer-related intangibles, process technology, licenses and non-compete agreements.
84
Amortization expense for intangible assets was $174 million in 2019, $176 million in 2018 and $178 million in 2017.
For the next five years, we estimate annual amortization expense of approximately $175 million next year,
approximately $90 million in year two and approximately $85 million in years three to five, reflecting December 31,
2019 exchange rates.
Changes in goodwill and intangible assets consisted of:
Balance at January 1
Changes due to:
Currency
Divestitures
Acquisitions
Asset impairments
Balance at December 31
2019
2018
Goodwill
Intangible
Assets, at cost
Goodwill
Intangible
Assets, at cost
$
20,725 $
19,529 $
21,085 $
20,057
(in millions)
17
(43)
149
—
20,848 $
60
—
138
(57)
19,670 $
(658)
—
298
—
20,725 $
(710)
—
250
(68)
19,529
$
Changes to goodwill and intangibles were:
•
•
•
Divestitures – During the second quarter of 2019, we divested the net assets of most of our cheese
business in the Middle East and Africa to Arla Foods of Denmark resulting in a goodwill decrease of $43
million. See Note 2, Divestitures and Acquisitions, for additional information.
Acquisitions – In connection with the acquisition of a majority interest in Perfect Snacks during the third
quarter of 2019, we recorded a preliminary purchase price allocation of $150 million to goodwill and $138
million to intangible assets. In the second quarter of 2019, we also finalized the purchase price allocation for
the 2018 acquisition of Tate's Bake Shop, resulting in a $1 million adjustment to goodwill. During 2018, we
recorded a preliminary purchase price allocation of $298 million to goodwill and $250 million to intangible
assets related to the acquisition of Tate's Bake Shop in the second quarter of 2018. See Note 2,
Divestitures and Acquisitions, for additional information.
Asset impairments – As further discussed below, we recorded $57 million of intangible asset impairments in
2019 and $68 million in 2018.
In 2019, 2018 and 2017, there were no goodwill impairments and each of our reporting units had sufficient fair value
in excess of its carrying value. While all reporting units passed our annual impairment testing, if planned business
performance expectations are not met or specific valuation factors outside of our control, such as discount rates,
change significantly, then the estimated fair values of a reporting unit or reporting units might decline and lead to a
goodwill impairment in the future.
During our 2019 annual testing of non-amortizable intangible assets, we recorded $57 million of impairment
charges in the third quarter related to nine brands. We recorded charges related to gum, chocolate, biscuits and
candy brands of $39 million in Europe, $15 million in AMEA and $3 million in Latin America. We also identified
fourteen brands, including the nine impaired trademarks, with $635 million of aggregate book value as of December
31, 2019 that each had a fair value in excess of book value of 10% or less. We believe our current plans for each of
these brands will allow them to not be impaired, but if the brand earnings expectations are not met or specific
valuation factors outside of our control, such as discount rates, change significantly, then a brand or brands could
become impaired in the future. In 2018, we recorded $68 million of impairment charges for gum, chocolate, biscuits
and candy brands of $45 million in Europe, $14 million in North America and $9 million in AMEA. In 2017, we
recorded $109 million of impairment charges, of which $70 million related to annual testing impairment charges for
candy and gum brands of $52 million in AMEA, $11 million in Europe, $5 million in Latin America and $2 million in
North America. During 2017, we also recorded a $38 million intangible asset impairment charge resulting from a
category decline and lower than expected product growth related to a gum brand in our North America segment and
a $1 million intangible asset impairment charge related to a transaction.
85
Note 7. Equity Method Investments
Our investments accounted for under the equity method of accounting totaled $7,212 million as of December 31,
2019 and $7,123 million as of December 31, 2018. In both years, our largest equity method investments were in
Jacobs Douwe Egberts (“JDE”) and Keurig Green Mountain, Inc. ("Keurig") prior to July 9, 2018 and Keurig Dr
Pepper Inc. (NYSE: "KDP”) subsequent to July 9, 2018.
JDE:
As of December 31, 2019, we held a 26.5% voting interest, a 26.4% ownership interest and a 26.3% profit and
dividend sharing interest in JDE. We recorded JDE equity earnings of $195 million in 2019, $230 million in 2018
(which includes a deferred tax benefit from a Dutch tax rate reduction) and $129 million in 2017. We also recorded
$73 million of cash dividends received in both 2019 and 2018 and $49 million of cash dividends received in 2017.
JDE / Keurig Exchange:
On March 7, 2016, we exchanged a portion of our JDE equity interest for a new equity interest in Keurig. As a result
of the exchange, we recorded the difference between the $2.0 billion fair value of Keurig and our basis in the
exchanged JDE shares as a gain of $43 million. In the second quarter of 2019, we determined an adjustment to
accumulated other comprehensive losses related to our JDE investment was required, which reduced our
previously reported gain by $29 million. We recorded the adjustment as a loss on equity method transactions.
Keurig Dr Pepper Transaction:
On July 9, 2018, Keurig closed on its definitive merger agreement with Dr Pepper Snapple Group, Inc., and formed
KDP, a publicly traded company. Following the close of the transaction, our 24.2% investment in Keurig together
with our shareholder loan receivable became a 13.8% investment in KDP. During 2018, we recorded a net pre-tax
gain of $778 million (or $586 million after-tax).
We hold two director positions on the KDP board as well as additional governance rights. As we continue to have
significant influence, we continue to account for our investment in KDP under the equity method, resulting in
recognizing our share of their earnings within our earnings and our share of their dividends within our cash flows.
In connection with this transaction, we changed our accounting principle during the third quarter of 2018 to reflect
our share of Keurig's historical and KDP's ongoing earnings on a one-quarter lag basis while we continue to record
dividends when cash is received. We determined a lag was preferable as it enables us to continue to report our
quarterly and annual results on a timely basis and to record our share of KDP’s ongoing results once KDP has
publicly reported its results. The change was retrospectively applied to all prior periods presented.
As of December 31, 2019, we held a 13.6% ownership interest in KDP valued at approximately $5.5 billion (based
on KDP's closing stock price), which exceeded the carrying value of our KDP investment. Our KDP ownership
interest could change over time due to stock-based compensation arrangements or other KDP transactions. During
the first quarter of 2019, due to the impact of a KDP acquisition that decreased our ownership interest from 13.8%
to 13.6%, we recognized a $23 million pre-tax gain.
Keurig and KDP equity earnings, as adjusted for the one-quarter lag basis, totaled $160 million in 2019, $213
million in 2018 (includes a deferred tax benefit Keurig recorded as a result of U.S. tax reform) and $92 million in
2017. Within equity method investment net earnings, we also recorded shareholder loan interest income of $12
million in 2018 and $24 million in 2017. We received shareholder loan interest payments of $12 million in 2018 and
$30 million in 2017 and dividends of $115 million in 2019, $34 million in 2018 and $14 million in 2017.
Other Equity Method Investment transactions:
On October 2, 2017, we completed the sale of one of our equity method investments and received cash proceeds
of $65 million. We recorded a pre-tax gain of $40 million within the gain on equity method investment transactions
and $15 million of tax expense. During the second quarter of 2019, we recorded an additional pre-tax gain of $4
million related to the sale and release of indemnity-related funds previously held in escrow that were released.
86
Summary Financial Information for Equity Method Investments:
Summarized financial information related to our equity method investments is reflected below.
Current assets
Noncurrent assets
Total assets
Current liabilities
Noncurrent liabilities
Total liabilities
Equity attributable to shareowners of investees
Equity attributable to noncontrolling interests
Total net equity of investees
Mondelēz International ownership interests
Equity method investments (1)
As of December 31,
2019
2018
(in millions)
$
$
$
$
$
$
$
5,650 $
69,232
74,882 $
10,037 $
27,642
37,679 $
37,170 $
33
37,203 $
13-50%
7,212 $
5,695
69,445
75,140
9,434
29,296
38,730
36,365
46
36,411
13-50%
7,123
Net revenues
Gross profit
Income from continuing operations
Net income
Net income attributable to investees
Mondelēz International ownership interests
Mondelēz International share of investee net income
Keurig shareholder loan interest income
Equity method investment net earnings
For the Years Ended December 31,
2019
2018
(in millions)
2017
19,410 $
14,185 $
12,824
9,733
1,991
1,991
1,981 $
6,076
1,980
1,980
1,970 $
4,913
1,118
1,118
1,115
13-50%
13-50%
24-50%
442 $
—
442 $
536 $
12
548 $
320
24
344
$
$
$
$
(1)
Includes a basis difference of approximately $330 million as of December 31, 2019 and $340 million as of December 31, 2018 between the
U.S. GAAP accounting basis for our equity method investments and the U.S. GAAP accounting basis of our investees’ equity.
Note 8. Restructuring Program
On May 6, 2014, our Board of Directors approved a $3.5 billion 2014-2018 restructuring program and up to $2.2
billion of capital expenditures. On August 31, 2016, our Board of Directors approved a $600 million reallocation
between restructuring program cash costs and capital expenditures so the $5.7 billion program consisted of
approximately $4.1 billion of restructuring program costs ($3.1 billion cash costs and $1.0 billion non-cash costs)
and up to $1.6 billion of capital expenditures. On September 6, 2018, our Board of Directors approved an extension
of the restructuring program through 2022, an increase of $1.3 billion in the program charges and an increase of
$700 million in capital expenditures. The total $7.7 billion program now consists of $5.4 billion of program charges
($4.1 billion of cash costs and $1.3 billion of non-cash costs) and total capital expenditures of $2.3 billion to be
incurred over the life of the program. The current restructuring program, as increased and extended by these
actions, is now called the Simplify to Grow Program.
The primary objective of the Simplify to Grow Program is to reduce our operating cost structure in both our supply
chain and overhead costs. The program covers severance as well as asset disposals and other manufacturing and
procurement-related one-time costs. Since inception, we have incurred total restructuring and related
implementation charges of $4.3 billion related to the Simplify to Grow Program. We expect to incur the program
charges by year-end 2022.
87
Restructuring Costs:
The Simplify to Grow Program liability activity for the years ended December 31, 2019 and 2018 was:
Liability Balance, January 1, 2018
Charges (1)
Cash spent
Non-cash settlements/adjustments
Currency
Liability Balance, December 31, 2018
Charges (1)
Cash spent
Non-cash settlements/adjustments (2)
Currency
Liability Balance, December 31, 2019
Severance
and related
costs
Asset
Write-downs
(in millions)
Total
$
$
$
464 $
253
(310)
(4)
(30)
373 $
125
(162)
(31)
(4)
301 $
— $
63
—
(63)
—
— $
51
—
(51)
—
— $
464
316
(310)
(67)
(30)
373
176
(162)
(82)
(4)
301
(1)
Includes settlement losses of $5 million in 2019 and $5 million in 2018 recorded within benefit plan non-service income on our consolidated
statements of earnings.
(2) We adopted the new lease accounting ASU as of January 1, 2019. The ASU requires recording onerous lease liabilities netted with right of
use assets. Therefore, during the first quarter of 2019, we reclassified onerous lease liabilities that totaled $23 million as of March 31, 2019,
from accrued liabilities and other accrued liabilities to operating lease right of use assets.
We recorded restructuring charges of $176 million in 2019, $316 million in 2018 and $535 million in 2017 within
asset impairment and exit costs and benefit plan non-service income. We spent $162 million in 2019 and $310
million in 2018 in cash severance and related costs. We also recognized non-cash pension settlement losses (See
Note 11, Benefit Plans), non-cash asset write-downs (including accelerated depreciation and asset impairments)
and other non-cash adjustments (including a transfer of onerous lease liabilities to operating lease ROU assets
during the first quarter of 2019) totaling $82 million in 2019 and $67 million in 2018. At December 31, 2019, $275
million of our net restructuring liability was recorded within other current liabilities and $26 million was recorded
within other long-term liabilities.
Implementation Costs:
Implementation costs are directly attributable to restructuring activities; however, they do not qualify for special
accounting treatment as exit or disposal activities. We believe the disclosure of implementation costs provides
readers of our financial statements with more information on the total costs of our Simplify to Grow Program.
Implementation costs primarily relate to reorganizing our operations and facilities in connection with our supply
chain reinvention program and other identified productivity and cost saving initiatives. The costs include incremental
expenses related to the closure of facilities, costs to terminate certain contracts and the simplification of our
information systems. Within our continuing results of operations, we recorded implementation costs of $272 million
in 2019, $315 million in 2018 and $257 million in 2017. We recorded these costs within cost of sales and general
corporate expense within selling, general and administrative expenses.
88
Restructuring and Implementation Costs in Operating Income:
During 2019, 2018 and 2017, and since inception of the Simplify to Grow Program, we recorded the following
restructuring and implementation costs within segment operating income and earnings before income taxes:
For the Year Ended
December 31, 2019
Restructuring Costs
Implementation Costs
Total
For the Year Ended
December 31, 2018
Restructuring Costs
Implementation Costs
Total
For the Year Ended
December 31, 2017
Restructuring Costs
Implementation Costs
Total
Total Project (3)
Restructuring Costs
Implementation Costs
Total
Latin
America
AMEA
Europe
North
America (1)
Corporate (2)
Total
(in millions)
$
$
$
$
$
$
$
$
24 $
50
74 $
63 $
67
18 $
38
56 $
105 $
103
208 $
69 $
39
132 $
73
16 $
52
68 $
32 $
79
130 $
108 $
205 $
111 $
93 $
43
140 $
195 $
43
68
84 $
58
136 $
183 $
263 $
142 $
13 $
29
42 $
20 $
57
77 $
23 $
45
68 $
176
272
448
316
315
631
535
257
792
517 $
269
786 $
535 $
206
741 $
1,076 $
448
1,524 $
469 $
384
853 $
129 $
307
436 $
2,726
1,614
4,340
(1) During 2017-2019, our North America region implementation costs included incremental costs that we incurred related to renegotiating
collective bargaining agreements that expired in February 2016 for eight U.S. facilities and related to executing business continuity plans for
the North America business.
(2) Benefit plan non-service income amounts associated with restructuring program activities that are no longer recorded in segment operating
income are included in the Corporate column in the table above for all periods presented. The Corporate column also includes minor
adjustments for pension settlement losses and rounding.
Includes all charges recorded since program inception on May 6, 2014 through December 31, 2019.
(3)
Note 9. Debt and Borrowing Arrangements
Short-Term Borrowings:
Our short-term borrowings and related weighted-average interest rates consisted of:
Commercial paper
Bank loans
Total short-term borrowings
As of December 31,
2019
2018
Amount
Outstanding
(in millions)
$
$
2,581
57
2,638
Weighted-
Average Rate
Amount
Outstanding
(in millions)
Weighted-
Average Rate
2.0% $
5.2%
$
3,054
138
3,192
2.9%
10.5%
As of December 31, 2019, commercial paper issued and outstanding had between 2 and 52 days remaining to
maturity. Commercial paper borrowings decreased since the 2018 year-end primarily as a result of repayments from
operating cash flow and proceeds from long-term debt issuances net of repayments, partially offset by increased
borrowings for shareholder dividends and share repurchases.
89
Some of our international subsidiaries maintain primarily uncommitted credit lines to meet short-term working
capital needs. Collectively, these credit lines amounted to $1.7 billion at December 31, 2019 and at December 31,
2018. Borrowings on these lines were $57 million at December 31, 2019 and $138 million at December 31, 2018.
Borrowing Arrangements:
On September 13, 2019, Mondelez International Holdings Netherlands B.V. ("MIHN"), a wholly owned Dutch
subsidiary of Mondelēz International, Inc., entered into a term loan agreement pursuant to which MIHN may incur
up to $500 million of term loans with a three-year term and $500 million of term loans with a five-year term.
Proceeds from the term loan may be used for general corporate purposes, including repayment of debt. On October
25, 2019, we fully drew on the term loans and received proceeds of $1.0 billion. We also entered into cross-
currency swaps, serving as cash flow hedges, so that the U.S. dollar-denominated debt payments will effectively be
paid in euros over the life of the debt.
On February 27, 2019, to supplement our commercial paper program, we entered into a $1.5 billion revolving credit
agreement for a 364-day senior unsecured credit facility that is scheduled to expire on February 26, 2020. The
agreement replaces our previous credit agreement that matured on February 27, 2019 and includes the same terms
and conditions as our existing $4.5 billion multi-year credit facility discussed below. As of December 31, 2019, no
amounts were drawn on the facility.
On February 27, 2019, we entered into a $4.5 billion multi-year senior unsecured revolving credit facility for general
corporate purposes, including working capital needs, and to support our commercial paper program. This
agreement replaced our $4.5 billion amended and restated five-year revolving credit agreement, dated as of
October 14, 2016. The revolving credit agreement is scheduled to expire on February 27, 2024. The revolving credit
agreement includes a covenant that we maintain a minimum shareholders' equity of at least $24.6 billion, excluding
accumulated other comprehensive earnings/(losses), the cumulative effects of any changes in accounting principles
and earnings/(losses) recognized in connection with the ongoing application of any mark-to-market accounting for
pensions and other retirement plans. At December 31, 2019, we complied with this covenant as our shareholders'
equity, as defined by the covenant, was $37.5 billion. The revolving credit facility also contains customary
representations, covenants and events of default. There are no credit rating triggers, provisions or other financial
covenants that could require us to post collateral as security. As of December 31, 2019, no amounts were drawn on
the facility.
On April 2, 2018, in connection with the tender offer described below, we entered into a $2.0 billion revolving credit
agreement for a 364-day senior unsecured credit facility that was due to expire on April 1, 2019. The agreement
included the same terms and conditions as our existing $4.5 billion multi-year credit facility discussed above. On
April 17, 2018, we borrowed $714 million on this facility to fund the debt tender described below and availability
under the facility was reduced to match the borrowed amount. On May 7, 2018, we repaid the $714 million from the
net proceeds received from the May 2018 $2.5 billion long-term debt issuance and terminated this credit facility.
90
Long-Term Debt:
Our long-term debt consisted of (interest rates are as of December 31, 2019):
As of December 31,
2019
2018
(in millions)
U.S. dollar notes, 0.163% to 7.000% (weighted-average effective rate 3.107%),
due through 2048
$
9,442 $
9,492
Euro notes, 0.875% to 2.375% (weighted-average effective rate 1.696%),
due through 2035
Pound sterling notes, 3.875% to 4.500% (weighted-average effective rate 4.151%),
due through 2045
Swiss franc notes, 0.050% to 1.125% (weighted-average effective rate 0.703%),
due through 2025
Canadian dollar notes, 3.250% (effective rate 3.320%),
due through 2025
Finance leases and other obligations
Total
Less current portion of long-term debt
Long-term debt
3,968
3,492
346
333
1,449
1,424
460
123
15,788
(1,581)
14,207 $
437
2
15,180
(2,648)
12,532
$
Deferred debt issuance costs of $33 million as of December 31, 2019 and $32 million as of December 31, 2018 are
netted against the related debt in the table above. Deferred financing costs related to our revolving credit facility are
classified in long-term other assets and were immaterial for all periods presented.
As of December 31, 2019, aggregate maturities of our debt and finance leases based on stated contractual
maturities, excluding unamortized non-cash bond premiums, discounts, bank fees and mark-to-market adjustments
of $(76) million and imputed interest on finance leases of $(11) million, were (in millions):
2020
$1,587
2021
$3,356
2022
$1,739
2023
$1,824
2024
$1,834
Thereafter
$5,535
Total
$15,875
On October 28, 2019, $1.75 billion of our 1.625% MIHN notes and $500 million of floating rate MIHN notes
matured. The notes and accrued interest to date were paid with the term loans drawn on October 25, 2019 and U.S.
dollar-denominated notes issued by MIHN on September 19, 2019.
On October 2, 2019, MIHN issued €500 million of 0.875% euro-denominated notes guaranteed by Mondelēz
International, Inc. that mature on October 1, 2031. We received €491 million (or $538 million) of proceeds, net of
discounts and associated financing costs of $11 million, which will be amortized into interest expense over the life of
the loans. The proceeds were earmarked for general corporate purposes, including repayment of debt.
On September 19, 2019, MIHN issued $1.0 billion of U.S. dollar-denominated notes guaranteed by Mondelēz
International, Inc. and consisting of $500 million 2.125% notes that mature on September 19, 2022 and $500 million
2.25% notes that mature on September 19, 2024. We received $997 million of proceeds, net of discounts and
associated financing costs. The proceeds were earmarked for general corporate purposes, including repayment of
debt. We recorded approximately $4 million of deferred financing costs and discounts, which will be amortized into
interest expense over the life of the notes. In connection with this debt issuance, we entered into cross-currency
swaps, serving as cash flow hedges, so that the U.S. dollar-denominated debt payments will effectively be paid in
euros over the life of the debt.
On February 13, 2019, we issued $600 million of 3.625% U.S. dollar-denominated notes that are scheduled to
mature February 13, 2026. We received $595 million of net proceeds that were used to repay outstanding
commercial paper borrowings and other debt. We recorded approximately $5 million of discounts and deferred
financing costs, which will be amortized into interest expense over the life of the notes.
91
On February 1, 2019, $400 million of our U.S. dollar variable rate notes matured. The notes and accrued interest to
date were paid with the issuance of commercial paper and cash on hand.
On August 23, 2018, $280 million of our 6.125% U.S. dollar notes matured. The notes and accrued interest to date
were paid with the issuance of commercial paper and cash on hand.
On July 18, 2018, £76 million (or $99 million) of our 7.25% pound sterling notes matured. The notes and accrued
interest to date were paid with the issuance of commercial paper and cash on hand.
On May 3, 2018, we issued $2.5 billion of U.S. dollar-denominated, fixed-rate notes consisting of:
•
•
•
•
$750 million of 3.000% notes that mature in May 2020
$750 million of 3.625% notes that mature in May 2023
$700 million of 4.125% notes that mature in May 2028
$300 million of 4.625% notes that mature in May 2048
On May 7, 2018, we received net proceeds of $2.48 billion that were used to repay amounts outstanding under our
revolving credit agreement facility and for other general corporate purposes, including the repayment of outstanding
commercial paper borrowings and other debt. We recorded approximately $22 million of discounts and deferred
financing costs net of various fees associated for the bond transaction and underwriter fee reimbursement, which
will be amortized into interest expense over the life of the notes.
On April 17, 2018, we completed a cash tender offer and retired $570 million of the long-term U.S. dollar debt
consisting of:
•
•
•
•
•
•
•
$241 million of our 6.500% notes due in February 2040
$97.6 million of our 5.375% notes due in February 2020
$75.8 million of our 6.500% notes due in November 2031
$72.1 million of our 6.875% notes due in February 2038
$42.6 million of our 6.125% notes due in August 2018
$29.3 million of our 6.875% notes due in January 2039
$11.7 million of our 7.000% notes due in August 2037
We financed the repurchase of the notes, including the payment of accrued interest and other costs incurred, from
the $2.0 billion revolving credit agreement entered into on April 2, 2018. We recorded a loss on debt extinguishment
of $140 million within interest and other expense, net related to the amount we paid to retire the debt in excess of its
carrying value and from recognizing unamortized discounts, deferred financing and other cash costs in earnings at
the time of the debt extinguishment. Cash costs related to tendering the debt are included in long-term debt
repayments in the consolidated statement of cash flows for 2018.
On March 2, 2018, we launched an offering of C$600 million of 3.250% Canadian-dollar denominated notes that
mature on March 7, 2025. On March 7, 2018, we received C$595 million (or $461 million) of proceeds, net of
discounts and underwriting fees, to be used for general corporate purposes. We recorded approximately $4 million
of discounts and deferred financing costs, which will be amortized into interest expense over the life of the notes.
On February 1, 2018, $478 million of our 6.125% U.S. dollar notes matured. The notes and accrued interest to date
were paid with the issuance of commercial paper and cash on hand.
On January 26, 2018, fr.250 million (or $260 million) of our 0.080% Swiss franc notes matured. The notes and
accrued interest to date were paid with the issuance of commercial paper and cash on hand.
Our weighted-average interest rate on our total debt was 2.2% as of December 31, 2019, 2.3% as of December 31,
2018 and 2.1% as of December 31, 2017.
Fair Value of Our Debt:
The fair value of our short-term borrowings at December 31, 2019 and December 31, 2018 reflects current market
interest rates and approximates the amounts we have recorded on our consolidated balance sheets. The fair value
of our long-term debt was determined using quoted prices in active markets (Level 1 valuation data) for the publicly
traded debt obligations. At December 31, 2019, the aggregate fair value of our total debt was $19,388 million and its
carrying value was $18,426 million. At December 31, 2018, the aggregate fair value of our total debt was $18,650
million and its carrying value was $18,372 million.
92
Interest and Other Expense, net:
Interest and other expense, net within our results of continuing operations consisted of:
Interest expense, debt
Loss on debt extinguishment and related expenses
Loss/(gain) related to interest rate swaps
Other (income)/expense, net
Interest and other expense, net
For the Years Ended December 31,
2019
2018
2017
(in millions)
$
$
484 $
—
111
(139)
456 $
462 $
140
(10)
(72)
520 $
396
11
—
(25)
382
See Note 10, Financial Instruments, for information on the gain/loss related to U.S. dollar interest rate swaps no
longer designated as accounting cash flow hedges during 2019 and 2018 and for information on amounts in other
income related to our net investment hedge derivative contracts and the amounts excluded from hedge
effectiveness of $133 million in 2019 and $120 million in 2018. See Note 14, Commitments and Contingencies, for
information on the $59 million of other income recorded in 2017 in connection with the resolution of a Brazilian
indirect tax matter and the reversal of related accrued interest.
Note 10. Financial Instruments
Fair Value of Derivative Instruments:
Derivative instruments were recorded at fair value in the consolidated balance sheets as follows:
As of December 31,
2019
2018
Asset
Derivatives
Liability
Derivatives
Asset
Derivatives
Liability
Derivatives
Derivatives designated as
accounting hedges:
Interest rate contracts
Net investment hedge derivative contracts (1)
Derivatives not designated as
accounting hedges:
Currency exchange contracts
Commodity contracts
Total fair value
$
$
$
$
$
19 $
312
331 $
67 $
201
268 $
599 $
(in millions)
190 $
65
255 $
50 $
120
170 $
425 $
17 $
337
354 $
72 $
191
263 $
617 $
355
28
383
37
210
247
630
(1) Net investment hedge contracts consist of cross-currency interest rate swaps and forward contracts. We also designate some of our non-
U.S. dollar denominated debt to hedge a portion of our net investments in our non-U.S. operations. This debt is not reflected in the table
above, but is included in long-term debt discussed in Note 9, Debt and Borrowing Arrangements. Both net investment hedge derivative
contracts and non-U.S. dollar denominated debt acting as net investment hedges are also disclosed in the Derivative Volume table and the
Hedges of Net Investments in International Operations section appearing later in this footnote.
Derivatives designated as accounting hedges above include cash flow and net investment hedge derivative
contracts. Our currency exchange and commodity derivative contracts are economic hedges that are not
designated as accounting hedges. We record derivative assets and liabilities on a gross basis on our consolidated
balance sheets. The fair value of our asset derivatives is recorded within other current assets and the fair value of
our liability derivatives is recorded within other current liabilities.
93
The fair values (asset/(liability)) of our derivative instruments were determined using:
Currency exchange contracts
Commodity contracts
Interest rate contracts
Net investment hedge contracts
Total derivatives
Currency exchange contracts
Commodity contracts
Interest rate contracts
Net investment hedge contracts
Total derivatives
As of December 31, 2019
Total
Fair Value of Net
Asset/(Liability)
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
$
$
17 $
81
(171)
247
174 $
(in millions)
— $
27
—
—
27 $
17 $
54
(171)
247
147 $
—
—
—
—
—
As of December 31, 2018
Total
Fair Value of Net
Asset/(Liability)
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
$
$
35 $
(19)
(338)
309
(13) $
(in millions)
— $
(1)
—
—
(1) $
35 $
(18)
(338)
309
(12) $
—
—
—
—
—
Level 1 financial assets and liabilities consist of exchange-traded commodity futures and listed options. The fair
value of these instruments is determined based on quoted market prices on commodity exchanges.
Level 2 financial assets and liabilities consist primarily of over-the-counter (“OTC”) currency exchange forwards,
options and swaps; commodity forwards and options; and interest rate swaps. Our currency exchange contracts are
valued using an income approach based on observable market forward rates less the contract rate multiplied by the
notional amount. Commodity derivatives are valued using an income approach based on the observable market
commodity index prices less the contract rate multiplied by the notional amount or based on pricing models that rely
on market observable inputs such as commodity prices. Our calculation of the fair value of interest rate swaps is
derived from a discounted cash flow analysis based on the terms of the contract and the observable market interest
rate curve. Our calculation of the fair value of financial instruments takes into consideration the risk of
nonperformance, including counterparty credit risk. Our OTC derivative transactions are governed by International
Swap Dealers Association agreements and other standard industry contracts. Under these agreements, we do not
post nor require collateral from our counterparties. The majority of our derivative contracts do not have a legal right
of set-off. We manage the credit risk in connection with these and all our derivatives by entering into transactions
with counterparties with investment grade credit ratings, limiting the amount of exposure with each counterparty and
monitoring the financial condition of our counterparties.
94
Derivative Volume:
The gross notional values of our derivative instruments were:
Currency exchange contracts:
Intercompany loans and forecasted interest payments
$
Forecasted transactions
Commodity contracts(1)
Interest rate contracts
Net investment hedges:
Net investment hedge derivative contracts
Non-U.S. dollar debt designated as net investment hedges
Euro notes
British pound sterling notes
Swiss franc notes
Canadian dollar notes
Notional Amount
As of December 31,
2019
2018
(in millions)
2,474 $
3,993
7,238
5,250
6,864
3,436
349
1,448
462
3,239
2,396
6,706
8,679
6,678
3,514
336
1,424
440
(1) During the fourth quarter of 2019, we changed how we report our commodity contract notional values from a net to a gross basis in line with
how we report our other instruments. We have recast 2018 to be consistent with current year presentation.
Cash Flow Hedges:
Cash flow hedge activity, net of taxes, within accumulated other comprehensive earnings/(losses) included:
Accumulated (loss)/gain at beginning of period
Transfer of realized (gains)/losses in fair value to earnings
Unrealized gain/(loss) in fair value
Accumulated (loss)/gain at end of period
For the Years Ended December 31,
2019
2018
(in millions)
2017
$
$
(167) $
154
(199)
(212) $
(113) $
(9)
(45)
(167) $
(121)
27
(19)
(113)
After-tax gains/(losses) reclassified from accumulated other comprehensive earnings/(losses) into net earnings
were:
Currency exchange contracts – forecasted transactions
Commodity contracts
Interest rate contracts
Total
For the Years Ended December 31,
2019
2018
(in millions)
2017
$
$
— $
—
(154)
(154) $
— $
—
9
9 $
(3)
(24)
—
(27)
Within interest and other expense, net, we recognized a loss of $111 million in 2019 and a gain of $10 million in
2018 related to certain forward-starting interest rate swaps for which the planned timing and currency of the related
forecasted debt was changed. During the second quarter of 2019, we also recognized a loss of $12 million related
to the net loss on equity method investment transactions noted in Note 7, Equity Method Investments - JDE / Keurig
Exchange.
95
After-tax gains/(losses) recognized in other comprehensive earnings/(losses) were:
Currency exchange contracts – forecasted transactions
Commodity contracts
Interest rate contracts
Total
For the Years Ended December 31,
2019
2018
(in millions)
2017
$
$
3 $
—
(202)
(199) $
— $
—
(45)
(45) $
(38)
7
12
(19)
Cash flow hedge ineffectiveness was not material for all periods presented.
We record pre-tax (i) gains or losses reclassified from accumulated other comprehensive earnings/(losses) into
earnings, (ii) gains or losses on ineffectiveness and (iii) gains or losses on amounts excluded from effectiveness
testing in:
•
•
•
cost of sales for currency exchange contracts related to forecasted transactions;
cost of sales for commodity contracts; and
interest and other expense, net for interest rate contracts and currency exchange contracts related to
intercompany loans.
Based on current market conditions, we would expect to transfer losses of $15 million (net of taxes) for interest rate
cash flow hedges to earnings during the next 12 months.
Cash Flow Hedge Coverage:
As of December 31, 2019, our longest dated cash flow hedges were interest rate swaps that hedge forecasted
interest rate payments over the next 4 years and 9 months.
Hedges of Net Investments in International Operations:
Net investment hedge ("NIH") derivative contracts:
We enter into cross-currency interest rate swaps and forwards to hedge certain investments in our non-U.S.
operations against movements in exchange rates. As of December 31, 2019, the aggregate notional value of these
NIH derivative contracts was $6.9 billion and their impact on other comprehensive earnings and net earnings during
the years presented below were as follows:
After-tax gain/(loss) on NIH contracts(1)
$
(6) $
191 $
—
(1) Amounts recorded for unsettled and settled NIH derivative contracts are recorded in the cumulative translation adjustment within other
comprehensive earnings. The cash flows from the settled contracts are reported within other investing activities in the consolidated
statement of cash flows.
For the Years Ended December 31,
2019
2018
(in millions)
2017
Amounts excluded from the assessment of
hedge effectiveness(1)
$
133 $
120 $
—
(1) We elected to record changes in the fair value of amounts excluded from the assessment of effectiveness in net earnings within interest
and other expense, net.
For the Years Ended December 31,
2019
2018
(in millions)
2017
96
Non-U.S. dollar debt designated as net investment hedges:
After-tax gains/(losses) related to hedges of net investments in international operations in the form of euro, British
pound sterling, Swiss franc and Canadian dollar-denominated debt were recorded within the cumulative translation
adjustment section of other comprehensive income and were:
Euro notes
British pound sterling notes
Swiss franc notes
Canadian notes
For the Years Ended December 31,
2019
2018
(in millions)
2017
$
60 $
(10)
(19)
(17)
126 $
19
7
17
(323)
(26)
(49)
—
Economic Hedges:
Pre-tax gains/(losses) recorded in net earnings for economic hedges were:
Currency exchange contracts:
Intercompany loans and
forecasted interest payments
Forecasted transactions
Forecasted transactions
Forecasted transactions
Commodity contracts
Total
For the Years Ended December 31,
2019
2018
(in millions)
2017
Recognized
in Earnings
$
100 $
17
(3)
(8)
67
98 $
103
(4)
(3)
40
$
173 $
234 $
Interest and other
expense, net
Cost of sales
Interest and other
expense, net
Selling, general
and administrative
expenses
Cost of sales
13
(37)
(2)
3
(218)
(241)
97
Note 11. Benefit Plans
Pension Plans
Obligations and Funded Status:
The projected benefit obligations, plan assets and funded status of our pension plans were:
U.S. Plans
Non-U.S. Plans
2019
2018
2019
2018
1,511 $
38
(in millions)
1,762 $
43
9,578 $
122
Projected benefit obligation at January 1
$
Service cost
Interest cost
Benefits paid
Settlements paid
Actuarial (gains)/losses
Currency
Other
Projected benefit obligation at December 31
Fair value of plan assets at January 1
Actual return on plan assets
Contributions
Benefits paid
Settlements paid
Currency
Fair value of plan assets at December 31
60
(40)
(73)
251
—
1
1,748
1,510
334
8
(40)
(73)
—
1,739
61
(29)
(118)
(208)
—
—
1,511
1,717
(99)
39
(29)
(118)
—
1,510
10,852
146
199
(462)
(2)
(640)
(528)
13
9,578
9,327
(243)
323
(462)
(2)
(478)
8,465
(1,113)
202
(424)
(1)
761
207
13
10,458
8,465
1,211
261
(424)
(1)
246
9,758
(700) $
Net pension (liabilities)/assets at December 31
$
(9) $
(1) $
The accumulated benefit obligation, which represents benefits earned to the measurement date, for U.S. pension
plans was $1,741 million at December 31, 2019 and $1,488 million at December 31, 2018. The accumulated benefit
obligation for non-U.S. pension plans was $10,236 million at December 31, 2019 and $9,374 million at
December 31, 2018.
Salaried and non-union hourly employees hired after January 1, 2009 in the U.S. and after January 1, 2011 in
Canada (or earlier for certain legacy Cadbury employees) are no longer eligible to participate in the defined benefit
pension plans. Benefit accruals for salaried and non-union hourly employee participants in the U.S. and Canada
defined benefit pension plans ceased on December 31, 2019. These employees instead receive Company
contributions to the employee defined contribution plans.
The combined U.S. and non-U.S. pension plans resulted in a net pension liability of $709 million at December 31,
2019 and $1,114 million at December 31, 2018. We recognized these amounts in our consolidated balance sheets
as follows:
Prepaid pension assets
Other current liabilities
Accrued pension costs
As of December 31,
2019
2018
(in millions)
516 $
(35)
(1,190)
(709) $
132
(25)
(1,221)
(1,114)
$
$
98
Certain of our U.S. and non-U.S. plans are underfunded with accumulated benefit obligations in excess of plan
assets. For these plans, the projected benefit obligations, accumulated benefit obligations and the fair value of plan
assets were:
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
U.S. Plans
Non-U.S. Plans
As of December 31,
As of December 31,
2019
2018
2019
2018
$
55 $
55
2
(in millions)
52 $
50
2
3,613 $
3,447
2,443
3,343
3,194
2,169
We used the following weighted-average assumptions to determine our benefit obligations under the pension plans:
Discount rate
Expected rate of return on plan assets
Rate of compensation increase
U.S. Plans
Non-U.S. Plans
As of December 31,
As of December 31,
2019
2018
2019
2018
3.44%
5.00%
4.00%
4.40%
5.75%
4.00%
1.74%
4.20%
3.17%
2.45%
4.80%
3.31%
Year-end discount rates for our U.S., Canadian, Eurozone and U.K. plans were developed from a model portfolio of
high quality, fixed-income debt instruments with durations that match the expected future cash flows of the benefit
obligations. Year-end discount rates for our remaining non-U.S. plans were developed from local bond indices that
match local benefit obligations as closely as possible. Changes in our discount rates were primarily the result of
changes in bond yields year-over-year. We determine our expected rate of return on plan assets from the plan
assets’ historical long-term investment performance, current asset allocation and estimates of future long-term
returns by asset class.
For the periods presented, we measure service and interest costs by applying the specific spot rates along a yield
curve used to measure plan obligations to the plans’ liability cash flows. We believe this approach provides a more
precise measurement of service and interest costs by aligning the timing of the plans’ liability cash flows to the
corresponding spot rates on the yield curve.
Components of Net Periodic Pension Cost:
Net periodic pension cost consisted of the following:
Service cost
Interest cost
Expected return on plan assets
Amortization:
Net loss from experience differences
Prior service cost/(benefit)
Settlement losses and other expenses (1)
Net periodic pension cost
U.S. Plans
Non-U.S. Plans
For the Years Ended December 31,
For the Years Ended December 31,
2019
2018
2017
2019
2018
2017
$
$
38 $
60
(88)
30
1
16
57 $
43 $
61
(88)
32
2
35
85 $
(in millions)
46 $
62
(101)
122 $
202
(404)
146 $
199
(448)
37
2
35
81 $
148
(6)
(3)
59 $
163
(2)
5
63 $
156
199
(434)
167
(3)
6
91
(1) Settlement losses of $5 million in 2019, $5 million in 2018 and $11 million in 2017 were incurred in connection with our
Simplify to Grow Program. See Note 8, Restructuring Program, for more information. Net settlement losses of $12 million
for our U.S. plans and settlement gains of $4 million for our non-U.S. plans in 2019, and settlement losses of $31 million for
our U.S. plans and $4 million for our non-U.S. plans in 2018 and $21 million for our U.S. plans and $6 million for our non-
U.S. plans in 2017 related to lump-sum payment elections made by retired employees.
99
For the U.S. plans, we determine the expected return on plan assets component of net periodic benefit cost using a
calculated market return value that recognizes the cost over a four year period. For our non-U.S. plans, we utilize a
similar approach with varying cost recognition periods for some plans, and with others, we determine the expected
return on plan assets based on asset fair values as of the measurement date.
As of December 31, 2019, for the combined U.S. and non-U.S. pension plans, we expected to amortize from
accumulated other comprehensive earnings/(losses) into net periodic pension cost during 2020:
•
•
an estimated $133 million of net loss from experience differences; and
an estimated $6 million of prior service credit.
We used the following weighted-average assumptions to determine our net periodic pension cost:
Discount rate
Expected rate of return
on plan assets
Rate of compensation increase
U.S. Plans
Non-U.S. Plans
For the Years Ended December 31,
For the Years Ended December 31,
2019
2018
2017
2019
2018
2017
4.40%
3.68%
4.19%
2.45%
2.20%
2.31%
5.75%
4.00%
5.50%
4.00%
6.25%
4.00%
4.80%
3.31%
4.90%
3.31%
5.14%
3.29%
Plan Assets:
The fair value of pension plan assets was determined using the following fair value measurements:
Asset Category
U.S. equity securities
Non-U.S. equity securities
Pooled funds - equity securities
Total equity securities
Government bonds
Pooled funds - fixed-income securities
Corporate bonds and other
fixed-income securities
Total fixed-income securities
Real estate
Private equity
Cash
Other
Total assets in the fair value hierarchy
Investments measured at net asset value
Total investments at fair value
As of December 31, 2019
Quoted Prices
in Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total Fair
Value
2 $
2
(in millions)
2 $
2
— $
—
890
894
53
417
66
536
124
—
117
1,296
1,296
3,275
158
825
4,258
—
—
5
1
1,672 $
—
5,559 $
2,186
2,190
3,328
575
2,727
6,630
186
3
122
2
9,133 $
2,297
11,430
—
—
—
—
—
—
1,836
1,836
62
3
—
1
1,902
$
$
$
100
Asset Category
U.S. equity securities
Non-U.S. equity securities
Pooled funds - equity securities
Total equity securities
Government bonds
Pooled funds - fixed-income securities
Corporate bonds and other
fixed-income securities
Total fixed-income securities
Real estate
Private equity
Cash
Other
Total assets in the fair value hierarchy
Investments measured at net asset value
Total investments at fair value
As of December 31, 2018
Quoted Prices
in Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total Fair
Value
2 $
5
(in millions)
2 $
5
— $
—
743
750
62
429
87
578
108
—
32
1,208
1,208
3,094
144
931
4,169
—
—
12
1
1,469 $
—
5,389 $
1,951
1,958
3,156
573
2,050
5,779
130
2
44
2
7,915 $
1,993
9,908
$
$
$
—
—
—
—
—
—
1,032
1,032
22
2
—
1
1,057
We excluded plan assets of $67 million at December 31, 2019 and December 31, 2018 from the above tables
related to certain insurance contracts as they are reported at contract value, in accordance with authoritative
guidance.
Fair value measurements:
•
•
•
Level 1 – includes primarily U.S and non-U.S. equity securities and government bonds valued using quoted
prices in active markets.
Level 2 – includes primarily pooled funds, including assets in real estate pooled funds, valued using net asset
values of participation units held in common collective trusts, as reported by the managers of the trusts and as
supported by the unit prices of actual purchase and sale transactions. Level 2 plan assets also include
corporate bonds and other fixed-income securities, valued using independent observable market inputs, such
as matrix pricing, yield curves and indices.
Level 3 – includes investments valued using unobservable inputs that reflect the plans’ assumptions that market
participants would use in pricing the assets, based on the best information available.
•
Fair value estimates for pooled funds are calculated by the investment advisor when reliable quotations or
pricing services are not readily available for certain underlying securities. The estimated value is based on
either cost or last sale price for most of the securities valued in this fashion.
Fair value estimates for private equity investments are calculated by the general partners using the market
approach to estimate the fair value of private investments. The market approach utilizes prices and other
relevant information generated by market transactions, type of security, degree of liquidity, restrictions on
the disposition, latest round of financing data, company financial statements, relevant valuation multiples
and discounted cash flow analyses.
Fair value estimates for private debt placements are calculated using standardized valuation methods,
including but not limited to income-based techniques such as discounted cash flow projections or market-
based techniques utilizing public and private transaction multiples as comparables.
Fair value estimates for real estate investments are calculated by investment managers using the present
value of future cash flows expected to be received from the investments, based on valuation methodologies
such as appraisals, local market conditions, and current and projected operating performance.
Fair value estimates for fixed-income securities that are buy-in annuity policies are calculated on a
replacement policy value basis by discounting the projected cash flows of the plan members using a
discount rate based on risk-free rates and adjustments for estimated levels of insurer pricing.
•
•
•
•
•
Net asset value – primarily includes equity funds, fixed income funds, real estate funds, hedge funds and
private equity investments for which net asset values are normally used.
101
Changes in our Level 3 plan assets, which are recorded in other comprehensive earnings/(losses), included:
Asset Category
January 1,
2019
Balance
Net Realized
and Unrealized
Gains/
(Losses)
Net Purchases,
Issuances and
Settlements
Net Transfers
Into/(Out of)
Level 3
Currency
Impact
December 31,
2019
Balance
Corporate bond and other
fixed-income securities
Real estate
$
Private equity and other
Total Level 3 investments $
1,032 $
22
3
1,057 $
(in millions)
727 $
3
—
730 $
8 $
36
1
45 $
— $
—
—
— $
69 $
1,836
1
—
70 $
62
4
1,902
January 1,
2018
Balance
Net Realized
and Unrealized
Gains/
(Losses)
Net Purchases,
Issuances and
Settlements
Net Transfers
Into/(Out of)
Level 3
Currency
Impact
December 31,
2018
Balance
Asset Category
Corporate bond and other
fixed-income securities
Real estate
Private equity and other
Total Level 3 investments $
$
790 $
23
3
816 $
(in millions)
236 $
(1)
—
235 $
62 $
1
—
63 $
— $
—
—
— $
(56) $
(1)
—
(57) $
1,032
22
3
1,057
The increase in Level 3 pension plan investments during 2019 was primarily due to additional purchases of a buy-in
annuity and other fixed income securities, and the increase in 2018 was primarily due to additional purchases of
corporate bond and other fixed income securities, which includes private debt placements.
The percentage of fair value of pension plan assets was:
Asset Category
Equity securities
Fixed-income securities
Real estate
Hedge funds
Buy-in annuity policies
Cash
Total
U.S. Plans
As of December 31,
Non-U.S. Plans
As of December 31,
2019
2018
2019
2018
15%
85%
—
—
—
—
100%
15%
85%
—
—
—
—
100%
26%
54%
6%
1%
12%
1%
100%
26%
59%
6%
2%
6%
1%
100%
For our U.S. plans, our investment strategy is to reduce the risk of underfunded plans in part through appropriate
asset allocation within our plan assets. We attempt to maintain our target asset allocation by rebalancing between
asset classes as we make contributions and monthly benefit payments. The strategy involves using indexed U.S.
equity and international equity securities and actively managed U.S. investment grade fixed-income securities
(which constitute 95% or more of fixed-income securities) with smaller allocations to high yield fixed-income
securities.
For our non-U.S. plans, the investment strategy is subject to local regulations and the asset/liability profiles of the
plans in each individual country. In aggregate, the asset allocation targets of our non-U.S. plans are broadly
characterized as a mix of approximately 25% equity securities, 57% fixed-income securities, 12% buy-in annuity
policies and 6% real estate.
Employer Contributions:
In 2019, we contributed $8 million to our U.S. pension plans and $248 million to our non-U.S. pension plans. In
addition, employees contributed $13 million to our non-U.S. plans. We make contributions to our pension plans in
accordance with local funding arrangements and statutory minimum funding requirements. Discretionary
contributions are made to the extent that they are tax deductible and do not generate an excise tax liability.
102
In 2020, we estimate that our pension contributions will be $16 million to our U.S. plans and $230 million to our non-
U.S. plans based on current tax laws. Our actual contributions may be different due to many factors, including
changes in tax and other benefit laws, significant differences between expected and actual pension asset
performance or interest rates.
Future Benefit Payments:
The estimated future benefit payments from our pension plans at December 31, 2019 were (in millions):
U.S. Plans
Non-U.S. Plans
$
167 $
380
102 $
376
105 $
385
105 $
395
108 $
403
513
2,126
2020
2021
2022
2023
2024
2025-2029
Multiemployer Pension Plans:
In accordance with obligations we have under collective bargaining agreements, we made contributions to
multiemployer pension plans of $5 million in 2019, $17 million in 2018 and $26 million in 2017. In 2017, the only
individually significant multiemployer plan we contributed to was the Bakery and Confectionery Union and Industry
International Pension Fund (the “Fund;” Employer Identification Number 52-6118572). Our obligation to contribute
to the Fund arose with respect to 8 collective bargaining agreements covering most of our employees represented
by the Bakery, Confectionery, Tobacco and Grain Millers Union. All of those collective bargaining agreements
expired in 2016 and we continued to contribute to the Fund through December 2018. Our contributions to the Fund
were $12 million in 2018 and $22 million in 2017. Our contributions to other multiemployer pension plans that were
not individually significant were $5 million in 2019, $5 million in 2018 and $4 million in 2017. Our contributions are
based on our contribution rates under our collective bargaining agreements, the number of our eligible employees
and Fund surcharges.
In 2018, we executed a complete withdrawal from the Fund and recorded a $429 million estimated withdrawal
liability. On July 11, 2019, we received an undiscounted withdrawal liability assessment from the Fund totaling $526
million requiring pro-rata monthly payments over 20 years and we recorded a $35 million final adjustment to reduce
our withdrawal liability as of June 30, 2019. We began making monthly payments during the third quarter of 2019.
As of December 31, 2019, the remaining discounted withdrawal liability was $391 million, with $14 million recorded
in other current liabilities and $377 million recorded in long-term other liabilities.
Other Costs:
We sponsor and contribute to employee defined contribution plans. These plans cover eligible salaried, non-union
and union employees. Our contributions and costs are determined by the matching of employee contributions, as
defined by the plans. Amounts charged to expense in continuing operations for defined contribution plans totaled
$72 million in 2019, $57 million in 2018 and $43 million in 2017.
Postretirement Benefit Plans
Obligations:
Our postretirement health care plans are not funded. The changes in and the amount of the accrued benefit
obligation were:
Accrued benefit obligation at January 1
Service cost
Interest cost
Benefits paid
Currency
Assumption changes
Actuarial losses/(gains)
Accrued benefit obligation at December 31
As of December 31,
2019
2018
(in millions)
366 $
5
15
(16)
5
34
(6)
403 $
435
6
15
(19)
(11)
(39)
(21)
366
$
$
The current portion of our accrued postretirement benefit obligation of $16 million at December 31, 2019 and $15
million at December 31, 2018 was included in other current liabilities.
103
We used the following weighted-average assumptions to determine our postretirement benefit obligations:
Discount rate
Health care cost trend rate assumed for next year
Ultimate trend rate
Year that the rate reaches the ultimate trend rate
U.S. Plans
Non-U.S. Plans
As of December 31,
As of December 31,
2019
2018
2019
2018
3.41%
6.00%
5.00%
2024
4.37%
6.25%
5.00%
2024
3.86%
5.42%
5.42%
2019
4.40%
5.44%
5.44%
2018
Year-end discount rates for our U.S., Canadian and U.K. plans were developed from a model portfolio of high
quality, fixed-income debt instruments with durations that match the expected future cash flows of the benefit
obligations. Year-end discount rates for our remaining non-U.S. plans were developed from local bond indices that
match local benefit obligations as closely as possible. Changes in our discount rates were primarily the result of
changes in bond yields year-over-year. Our expected health care cost trend rate is based on historical costs.
For the periods presented, we measure service and interest costs for other postretirement benefits by applying the
specific spot rates along a yield curve used to measure plan obligations to the plans’ liability cash flows. We believe
this approach provides a good measurement of service and interest costs by aligning the timing of the plans’ liability
cash flows to the corresponding spot rates on the yield curve.
Assumed health care cost trend rates have a significant impact on the amounts reported for the health care plans. A
one-percentage-point change in assumed health care cost trend rates would have the following effects:
Effect on postretirement benefit obligation
Effect on annual service and interest cost
Components of Net Periodic Postretirement Health Care Costs:
Net periodic postretirement health care costs consisted of the following:
As of December 31, 2019
One-Percentage-Point
Increase
Decrease
$
(in millions)
39 $
3
Service cost
Interest cost
Amortization:
Net loss from experience differences
Prior service credit
Net periodic postretirement health care costs/(benefit)
For the Years Ended December 31,
2019
2018
(in millions)
2017
$
$
5 $
15
6
(38)
(12) $
6 $
14
15
(39)
(4) $
(33)
(2)
7
15
14
(40)
(4)
As of December 31, 2019, we expected to amortize from accumulated other comprehensive earnings/(losses) into
pre-tax net periodic postretirement health care costs during 2020:
•
•
an estimated $10 million of net loss from experience differences, and
an estimated $30 million of prior service credit.
104
We used the following weighted-average assumptions to determine our net periodic postretirement health care cost:
Discount rate
Health care cost trend rate
U.S. Plans
Non-U.S. Plans
For the Years Ended December 31,
For the Years Ended December 31,
2019
4.37%
6.25%
2018
3.66%
6.25%
2017
4.14%
6.50%
2019
4.40%
5.44%
2018
4.24%
5.56%
2017
4.55%
5.50%
Future Benefit Payments:
Our estimated future benefit payments for our postretirement health care plans at December 31, 2019 were (in
millions):
U.S. Plans
Non-U.S. Plans
$
11 $
5
12 $
5
13 $
5
14 $
6
15 $
6
74
32
2020
2021
2022
2023
2024
2025-2029
Other Costs:
We made contributions to multiemployer medical plans totaling $20 million in 2019, $19 million in 2018 and $18
million in 2017. These plans provide medical benefits to active employees and retirees under certain collective
bargaining agreements.
Postemployment Benefit Plans
Obligations:
Our postemployment plans are not funded. The changes in and the amount of the accrued benefit obligation at
December 31, 2019 and 2018 were:
Accrued benefit obligation at January 1
Service cost
Interest cost
Benefits paid
Assumption changes
Actuarial losses/(gains)
Accrued benefit obligation at December 31
As of December 31,
2019
2018
(in millions)
74 $
6
5
(9)
3
(13)
66 $
76
6
4
(7)
(1)
(4)
74
$
$
The accrued benefit obligation was determined using a weighted-average discount rate of 5.3% in 2019 and 6.7%
in 2018, an assumed weighted-average ultimate annual turnover rate of 0.3% in 2019 and 2018, assumed
compensation cost increases of 4.0% in 2019 and 2018 and assumed benefits as defined in the respective plans.
Postemployment costs arising from actions that offer employees benefits in excess of those specified in the
respective plans are charged to expense when incurred.
105
Components of Net Periodic Postemployment Costs:
Net periodic postemployment costs consisted of the following:
Service cost
Interest cost
Amortization of net gains
Net periodic postemployment costs
For the Years Ended December 31,
2019
2018
(in millions)
2017
$
$
6 $
5
(4)
7 $
6 $
4
(3)
7 $
5
4
(3)
6
As of December 31, 2019, the estimated net gain for the postemployment benefit plans that we expect to amortize
from accumulated other comprehensive earnings/(losses) into net periodic postemployment costs during 2020 is
approximately $4 million.
Note 12. Stock Plans
Under our Amended and Restated 2005 Performance Incentive Plan (the “Plan”), we are authorized through
May 21, 2024 to issue a maximum of 243.7 million shares of our Common Stock to employees and non-employee
directors. As of December 31, 2019, there were 56.2 million shares available to be granted under the Plan.
Stock Options:
Stock options (including stock appreciation rights) are granted at an exercise price equal to the market value of the
underlying stock on the grant date, generally become exercisable in three annual installments beginning on the first
anniversary of the grant date and have a maximum term of ten years.
We account for our employee stock options under the fair value method of accounting using a Black-Scholes
methodology or a Lattice Model to measure stock option expense at the date of grant. The fair value of the stock
options at the date of grant is amortized to expense over the vesting period. We recorded compensation expense
related to stock options held by our employees of $38 million in 2019, $43 million in 2018 and $50 million in 2017 in
our results from continuing operations. The deferred tax benefit recorded related to this compensation expense was
$8 million in 2019, $7 million in 2018 and $12 million in 2017. The unamortized compensation expense related to
our employee stock options was $35 million at December 31, 2019 and is expected to be recognized over a
weighted-average period of 1.2 years.
Our weighted-average Black-Scholes and Lattice Model fair value assumptions were:
2019
2018
2017
Risk-Free
Interest Rate
Expected Life
Expected
Volatility
Expected
Dividend Yield
Fair Value
at Grant Date
2.46%
2.68%
2.04%
5 years
5 years
6 years
19.96%
20.96%
22.75%
2.37% $
2.02% $
1.74% $
7.83
8.30
8.57
The risk-free interest rate represents the constant maturity U.S. government treasuries rate with a remaining term
equal to the expected life of the options. The expected life is the period over which our employees are expected to
hold their options. Volatility reflects historical movements in our stock price for a period commensurate with the
expected life of the options. The dividend yield reflects the dividend yield in place at the time of the historical grants.
106
Stock option activity is reflected below:
Balance at January 1, 2017
Annual grant to eligible employees
Additional options issued
Total options granted
Options exercised (1)
Options cancelled
Balance at December 31, 2017
Annual grant to eligible employees
Additional options issued
Total options granted
Options exercised (1)
Options cancelled
Balance at December 31, 2018
Annual grant to eligible employees
Additional options issued
Total options granted
Options exercised (1)
Options cancelled
Balance at December 31, 2019
Exercisable at December 31, 2019
Shares Subject
to Option
53,601,612 $
6,012,140
162,880
6,175,020
(9,431,009)
(1,910,968)
48,434,655
5,666,530
168,306
5,834,836
(9,333,271)
(1,117,390)
43,818,830
4,793,570
68,420
4,861,990
(13,668,354)
(1,156,518)
33,855,948
25,121,711
Weighted-
Average
Exercise or
Grant Price
Per Share
Average
Remaining
Contractual
Term
28.02
43.20
42.54
43.18
26.17
38.10
29.92
43.51
31.40
43.16
25.16
42.93
32.36
47.72
50.82
47.76
27.53
42.22
36.19
32.89
5 years
4 years
Aggregate
Intrinsic
Value
874 million
170 million
626 million
170 million
371 million
306 million
640 million
557 million
$
$
$
$
$
$
$
$
(1) Cash received from options exercised was $369 million in 2019, $231 million in 2018 and $257 million in 2017. The actual
tax benefit realized and recorded in the provision for income taxes for the tax deductions from the option exercises totaled
$40 million in 2019, $21 million in 2018 and $31 million in 2017.
Deferred Stock Units, Performance Share Units and Restricted Stock:
Historically we have made grants of deferred stock units, performance share units and restricted stock. Beginning in
2016, we only grant deferred stock units and performance share units and no longer grant restricted stock. Deferred
stock units granted to eligible employees have most shareholder rights, except that they may not sell, assign,
pledge or otherwise encumber the shares and our deferred stock units do not have voting rights until vested.
Shares of deferred stock units are subject to forfeiture if certain employment conditions are not met. Deferred stock
units generally vest on the third anniversary of the grant date. Performance share units granted under our 2005
Plan vest based on varying performance, market and service conditions. The unvested performance share units
have no voting rights and do not pay dividends. Dividend equivalents accumulated over the vesting period are paid
only after the performance share units vest.
The fair value of the deferred stock units, performance share units and restricted stock at the date of grant is
amortized to earnings over the vesting period. The fair value of our deferred stock units and restricted stock is
measured at the market price of our Common Stock on the grant date. Performance share unit awards generally
have targets tied to both performance and market-based conditions. For market condition components, market
volatility and other factors are taken into consideration in determining the grant date fair value and the related
compensation expense is recognized regardless of whether the market condition is satisfied, provided that the
requisite service has been provided. For performance condition components, we estimate the probability that the
performance conditions will be achieved each quarter and adjust compensation expenses accordingly. The grant
date fair value of performance share units is determined based on the Monte Carlo simulation model for the market-
based total shareholder return component and the market price of our Common Stock on the grant date for
performance-based components. The number of performance share units that ultimately vest ranges from 0-200
percent of the number granted, based on the achievement of the performance and market-based components.
107
We recorded compensation expense related to deferred stock units, performance share units and restricted stock of
$97 million in 2019, $85 million in 2018 and $87 million in 2017 in our results from continuing operations. The
deferred tax benefit recorded related to this compensation expense was $16 million in 2019, $12 million in 2018 and
$23 million in 2017. The unamortized compensation expense related to our deferred stock units, performance share
units and restricted stock was $106 million at December 31, 2019 and is expected to be recognized over a
weighted-average period of 1.5 years.
Our performance share unit, deferred stock unit and restricted stock activity is reflected below:
Balance at January 1, 2017
Annual grant to eligible employees:
Performance share units
Deferred stock units
Additional shares granted (1)
Total shares granted
Vested (2) (3)
Forfeited (2)
Balance at December 31, 2017
Annual grant to eligible employees:
Performance share units
Deferred stock units
Additional shares granted (1)
Total shares granted
Vested (2) (3)
Forfeited (2)
Balance at December 31, 2018
Annual grant to eligible employees:
Performance share units
Deferred stock units
Additional shares granted (1)
Total shares granted
Vested (3)
Forfeited
Balance at December 31, 2019
Grant Date
Feb. 16, 2017
Number
of Shares
7,593,627
1,087,010
845,550
1,537,763
Various
3,470,323
(2,622,807)
(771,438)
7,669,705
1,048,770
788,310
446,752
2,283,832
(2,511,992)
(882,535)
6,559,010
891,210
666,880
205,073
1,763,163
(2,007,848)
(652,380)
5,661,945
Feb. 22, 2018
Various
Feb. 22, 2019
Various
Weighted-
Average
Fair Value
Per Share (4)
$
36.90
Weighted-
Average
Aggregate
Fair Value (3)
43.14
43.20
42.22
42.75 $
35.78 $
38.69
39.74
51.23
43.51
41.78
46.72 $
38.91 $
42.00
42.19
57.91
47.72
54.81
53.69 $
37.81 $
45.88
46.90
148 million
94 million
107 million
98 million
95 million
76 million
Includes performance share units and deferred stock units.
Includes performance share units, deferred stock units and historically granted restricted stock.
(1)
(2)
(3) The actual tax benefit/(expense) realized and recorded in the provision for income taxes for the tax deductions from the
shares vested totaled $2 million in 2019, $3 million in 2018 and $7 million in 2017.
(4) The grant date fair value of performance share units is determined based on the Monte Carlo simulation model for the
market-based total shareholder return component and the closing market price of the Company’s stock on the grant date for
performance-based components. The Monte Carlo simulation model incorporates the probability of achieving the total
shareholder return market condition. Compensation expense is recognized using the grant date fair values regardless of
whether the market condition is achieved, so long as the requisite service has been provided.
108
Note 13. Capital Stock
Our amended and restated articles of incorporation authorize 5.0 billion shares of Class A common stock (“Common
Stock”) and 500 million shares of preferred stock. There were no preferred shares issued and outstanding at
December 31, 2019, 2018 and 2017. Shares of Common Stock issued, in treasury and outstanding were:
Balance at January 1, 2017
Shares repurchased
Exercise of stock options and issuance of
other stock awards
Balance at December 31, 2017
Shares repurchased
Exercise of stock options and issuance of
other stock awards
Balance at December 31, 2018
Shares repurchased
Exercise of stock options and issuance of
other stock awards
Balance at December 31, 2019
Shares Issued
1,996,537,778
—
—
1,996,537,778
—
—
1,996,537,778
—
—
1,996,537,778
Treasury Shares
(468,172,237)
(50,598,902)
Shares
Outstanding
1,528,365,541
(50,598,902)
10,369,445
(508,401,694)
(47,258,884)
10,369,445
1,488,136,084
(47,258,884)
10,122,655
(545,537,923)
(30,902,465)
10,122,655
1,450,999,855
(30,902,465)
14,908,864
(561,531,524)
14,908,864
1,435,006,254
Stock plan awards to employees and non-employee directors are issued from treasury shares. At December 31,
2019, 96 million shares of Common Stock held in treasury were reserved for stock options and other stock awards.
Share Repurchase Program:
Between 2013 and 2017, our Board of Directors authorized the repurchase of a total of $13.7 billion of our Common
Stock through December 31, 2018. On January 31, 2018, our Finance Committee, with authorization delegated
from our Board of Directors, approved an increase of $6.0 billion in the share repurchase program, raising the
authorization to $19.7 billion of Common Stock repurchases, and extended the program through December 31,
2020. Repurchases under the program are determined by management and are wholly discretionary. Prior to
January 1, 2019, we had repurchased approximately $15.0 billion of Common Stock pursuant to this authorization.
During 2019, we repurchased approximately 30.9 million shares of Common Stock at an average cost of $48.51 per
share, or an aggregate cost of approximately $1.5 billion, all of which was paid during the period except for
approximately $19 million settled in January 2020. All share repurchases were funded through available cash and
commercial paper issuances. As of December 31, 2019, we have approximately $3.2 billion in remaining share
repurchase capacity.
Note 14. Commitments and Contingencies
Legal Proceedings:
We routinely are involved in legal proceedings, claims and governmental inspections or investigations ("Legal
Matters") arising in the ordinary course of our business.
In February 2013 and March 2014, Cadbury India Limited (now known as Mondelez India Foods Private Limited), a
subsidiary of Mondelēz International, and other parties received show cause notices from the Indian Central Excise
Authority (the “Excise Authority”) calling upon the parties to demonstrate why the Excise Authority should not collect
a total of 3.7 billion Indian rupees ($52 million as of December 31, 2019) ("Period 1") of unpaid excise tax and an
equivalent amount of penalties, as well as interest, related to production at the same Indian facility. We contested
these demands and on March 27, 2015, the Commissioner of the Excise Authority (the "Commissioner") issued an
order denying the excise exemption that we claimed for Period 1. We appealed this order in June 2015. The Excise
Authority issued additional show cause notices in February 2015, December 2015 and October 2017 on the same
issue covering additional periods through June 2017 ("Period 2"). These three notices added a total of 4.9 billion
Indian rupees ($68 million as of December 31, 2019) of allegedly unpaid excise taxes subject to penalties up to an
equivalent amount plus accrued interest. We contested these demands, and on May 25, 2019, the Commissioner
issued an order denying the excise exemption that we claimed for Period 2. We appealed this order in August 2019.
With the implementation of the Goods and Services Tax ("GST") in India in July 2017, we stopped receiving show
109
cause notices for additional amounts on this issue. Beginning in the fall of 2019, the government of India made
available an amnesty to resolve legacy tax issues following the GST implementation. Under the amnesty, upon
payment of 50% of the principal demand for cases pending adjudication or appeal as of June 30, 2019 and 60% of
the principal demand for cases where the appeal was filed after June 30, 2019, the government would waive the
remainder of the principal demand as well as any penalties imposed and interest, and it would also grant immunity
from prosecution. Although we continue to believe that our decision to claim the excise tax benefit was valid, in
December 2019, we filed for the amnesty and accrued a total of 4.6 billion Indian rupees ($65 million as of
December 31, 2019) in selling, general and administrative expenses for this matter. In January 2020, we made the
related payments under the amnesty. This matter is now resolved, and the resolution was not material to our
business or financial condition.
On April 1, 2015, the U.S. Commodity Futures Trading Commission ("CFTC") filed a complaint against Kraft Foods
Group and Mondelēz Global LLC (“Mondelēz Global”) in the U.S. District Court for the Northern District of Illinois
(the "District Court"), Eastern Division (the “CFTC action”) following its investigation of activities related to the
trading of December 2011 wheat futures contracts that occurred prior to the spin-off of Kraft Foods Group. The
complaint alleges that Kraft Foods Group and Mondelēz Global (1) manipulated or attempted to manipulate the
wheat markets during the fall of 2011; (2) violated position limit levels for wheat futures and (3) engaged in non-
competitive trades by trading both sides of exchange-for-physical Chicago Board of Trade wheat contracts. The
CFTC seeks civil monetary penalties of either triple the monetary gain for each violation of the Commodity
Exchange Act (the “Act”) or $1 million for each violation of Section 6(c)(1), 6(c)(3) or 9(a)(2) of the Act and $140,000
for each additional violation of the Act, plus post-judgment interest; an order of permanent injunction prohibiting
Kraft Foods Group and Mondelēz Global from violating specified provisions of the Act; disgorgement of profits; and
costs and fees. On August 15, 2019, the District Court approved a settlement agreement between the CFTC and
Mondelēz Global. The terms of the settlement, which are available in the District Court’s docket, had an immaterial
impact on our financial position, results of operations and cash flows. On October 23, 2019, following a ruling by the
United States Court of Appeals for the Seventh Circuit (the "Seventh Circuit") regarding Mondelēz Global's
allegations that the CFTC and its Commissioners violated certain terms of the settlement agreement and the
CFTC's argument that the Commissioners were not bound by the terms of the settlement agreement, the District
Court vacated the settlement agreement and reinstated all pending motions that the District Court had previously
mooted as a result of the settlement. Additionally, several class action complaints were filed against Kraft Foods
Group and Mondelēz Global in the District Court by investors in wheat futures and options on behalf of themselves
and others similarly situated. The complaints make similar allegations as those made in the CFTC action, and the
plaintiffs are seeking class action certification; monetary damages, interest and unjust enrichment; costs and fees;
and injunctive, declaratory and other unspecified relief. In June 2015, these suits were consolidated in the District
Court. On January 3, 2020, the District Court granted plaintiffs' request to certify a class. On January 17, 2020, we
filed a petition for an interlocutory appeal of the District Court's class certification decision to the Seventh Circuit. It
is not possible to predict the outcome of these matters; however, based on our Separation and Distribution
Agreement with Kraft Foods Group dated as of September 27, 2012, we expect to bear any monetary penalties or
other payments in connection with the CFTC action. Although the CFTC action and the class action complaints
involve the same alleged conduct, a resolution or decision with respect to one of the matters may not be dispositive
as to the outcome of the other matter.
In November 2019, the European Commission informed us that it has initiated an investigation into our alleged
infringement of European Union competition law through certain practices restricting cross-border trade within the
European Economic Area. We are cooperating with the investigation. The fact that an investigation has been
initiated does not mean that the European Commission has concluded that there is an infringement. It is not
possible to predict how long the investigation will take or the ultimate outcome of this matter.
On August 21, 2018, the Virginia Department of Environmental Quality (“VDEQ”) issued a Notice of Violation
(“NOV”) to Mondelēz Global. In the NOV, the VDEQ alleges that in our Richmond bakery, one operating line did not
have the proper minimum temperature on its pollution control equipment and that the bakery failed to provide
certain observation and training records. The VDEQ indicated that the alleged violations may lead to a fine and/or
injunctive relief. We are working with the VDEQ to reach a resolution of this matter, and we do not expect this
matter to have a material effect on our financial results.
We are a party to various legal proceedings, including disputes, litigation and regulatory matters, incidental to our
business, including those noted above in this section. We record provisions in the consolidated financial statements
for pending litigation when we determine that an unfavorable outcome is probable and the amount of the loss can
be reasonably estimated. For matters that are reasonably possible to result in an unfavorable outcome,
110
management is unable to estimate the possible loss or range of loss or such amounts have been determined to be
immaterial. At present we believe that the ultimate outcome of these proceedings, individually and in the aggregate,
will not materially harm our financial position, results of operations or cash flows. However, legal proceedings and
government investigations are subject to inherent uncertainties, and unfavorable rulings or other events could
occur. Unfavorable resolutions could involve substantial monetary damages. In addition, in matters for which
conduct remedies are sought, unfavorable resolutions could include an injunction or other order prohibiting us from
selling one or more products at all or in particular ways, precluding particular business practices or requiring other
remedies. An unfavorable outcome might result in a material adverse impact on our business, results of operations
or financial position.
Third-Party Guarantees:
We enter into third-party guarantees primarily to cover long-term obligations of our vendors. As part of these
transactions, we guarantee that third parties will make contractual payments or achieve performance measures. At
December 31, 2019, we had no material third-party guarantees recorded on our consolidated balance sheet.
Tax Matters:
We are a party to various tax matter proceedings incidental to our business. These proceedings are subject to
inherent uncertainties, and unfavorable outcomes could subject us to additional tax liabilities and could materially
adversely impact our business, results of operations or financial position.
During the fourth quarter of 2019, we resolved several indirect tax matters and recorded $85 million of net indirect
tax expenses within selling, general and administrative expenses. These amounts primarily include the matter
resolved under the tax amnesty described above under “Legal Proceedings.”
A tax indemnification matter related to our 2007 acquisition of the LU biscuit business was closed during the quarter
ended June 30, 2018. The closure had no impact on net earnings, however, it did result in a $15 million tax benefit
that was fully offset by an $11 million expense in selling, general and administrative expenses and a $4 million
expense in interest and other expense, net.
During the first quarter of 2017, the Brazilian Supreme Court (the “Court”) ruled against the Brazilian tax authorities
in a leading case related to the computation of certain indirect taxes. The Court ruled that the indirect tax base
should not include a value-added tax known as “ICMS”. By removing the ICMS from the tax base, the Court
effectively eliminated a “tax on a tax.” In lower courts, our Brazilian subsidiaries filed lawsuits to recover amounts
paid and to discontinue subsequent payments related to the “tax on a tax.” Our Brazilian subsidiaries received
injunctions against making payments for the “tax on a tax” in 2008 and since that time until December 2016, had
accrued this portion of the tax each quarter in the event that the tax was reaffirmed by the Brazilian courts. On
September 30, 2017, based on legal advice and the publication of the Court’s decision related to this case, we
determined that the likelihood that the increased tax base would be reinstated and assessed against us was
remote. Accordingly, we reversed our accrual of 667 million Brazilian reais, or $212 million as of September 30,
2017, of which $153 million was recorded within selling, general and administrative expenses and $59 million was
recorded within interest and other expense, net. In connection with the Court's 2017 decision, the Brazilian tax
authority filed a motion seeking clarification and adjustment of the terms of enforcement and that motion is still to be
decided. We continue to monitor developments in this matter and currently do not expect a material future impact
on our financial statements. During the fourth quarter of 2018, in one of our lower court cases, the Brazilian Federal
Court of Appeals ruled in our favor against the Brazilian tax authority, allowing one of our Brazil subsidiaries to
recover amounts previously paid. As a result, we recorded a net benefit in selling, general and administrative
expenses of $26 million.
As part of our 2010 Cadbury acquisition, we became the responsible party for tax matters under a February 2, 2006
dated Deed of Tax Covenant between the Cadbury Schweppes PLC and related entities (“Schweppes”) and Black
Lion Beverages and related entities. The tax matters included an ongoing transfer pricing case with the Spanish tax
authorities related to the Schweppes businesses Cadbury divested prior to our acquisition of Cadbury. During the
first quarter of 2017, the Spanish Supreme Court decided the case in our favor. As a result of the final ruling, during
the first quarter of 2017, we recorded a favorable earnings impact of $46 million in selling, general and
administrative expenses and $12 million in interest and other expense, net, for a total pre-tax impact of $58 million
due to the non-cash reversal of Cadbury-related accrued liabilities related to this matter. We recorded a total of $4
million of income over the third and fourth quarters of 2017 in connection with the related bank guarantee releases.
111
Note 15. Reclassifications from Accumulated Other Comprehensive Income
The following table summarizes the changes in the accumulated balances of each component of accumulated other
comprehensive earnings/(losses) attributable to Mondelēz International. Amounts reclassified from accumulated
other comprehensive earnings/(losses) to net earnings (net of tax) were net losses of $279 million in 2019, $169
million in 2018 and $174 million in 2017.
Currency Translation Adjustments:
Balance at beginning of period
Currency translation adjustments
Reclassification to earnings related to:
Equity method investment transactions
Tax (expense)/benefit
Other comprehensive earnings/(losses)
Less: other comprehensive (earnings)/loss attributable to
noncontrolling interests
Balance at end of period
Pension and Other Benefit Plans:
Balance at beginning of period
Net actuarial gain/(loss) arising during period
Tax (expense)/benefit on net actuarial gain/(loss)
Losses/(gains) reclassified into net earnings:
Amortization of experience losses and prior service costs (1)
Settlement losses and other expenses (1)
Tax expense/(benefit) on reclassifications (2)
Currency impact
Other comprehensive earnings/(losses)
Balance at end of period
Derivative Cash Flow Hedges:
Balance at beginning of period
Net derivative gains/(losses)
Tax (expense)/benefit on net derivative gain/(loss)
Losses/(gains) reclassified into net earnings:
Currency exchange contracts - forecasted transactions (3)
Commodity contracts (3)
Interest rate contracts (4)
Tax expense/(benefit) on reclassifications (2)
Currency impact
Other comprehensive earnings/(losses)
Balance at end of period
Accumulated other comprehensive income attributable to
Mondelēz International:
Balance at beginning of period
Total other comprehensive earnings/(losses)
Less: other comprehensive (earnings)/loss attributable to
noncontrolling interests
Other comprehensive earnings/(losses)
attributable to Mondelēz International
Balance at end of period
112
For the Years Ended December 31,
2019
2018
2017
(in millions)
$
(8,603) $
250
(7,740) $
(698)
(8,910)
984
—
49
299
2
(8,302)
6
(173)
(865)
2
(8,603)
(1,860) $
(10)
20
(2,144) $
36
(16)
137
30
(42)
(19)
116
(1,744)
168
40
(36)
92
284
(1,860)
(167) $
(224)
19
(113) $
(58)
6
—
—
155
(1)
6
(45)
(212)
—
—
(11)
2
7
(54)
(167)
—
214
1,198
(28)
(7,740)
(2,087)
(71)
50
174
38
(65)
(183)
(57)
(2,144)
(121)
(17)
9
4
29
—
(6)
(11)
8
(113)
(10,630) $
370
(9,997) $
(635)
(11,118)
1,149
2
2
(28)
372
(10,258) $
(633)
(10,630) $
1,121
(9,997)
$
$
$
$
(1) These reclassified losses are included in net periodic benefit costs disclosed in Note 11, Benefit Plans, and net loss on
equity method investment transactions.
(2) Taxes reclassified to earnings are recorded within the provision for income taxes.
(3) These reclassified gains or losses are recorded within cost of sales.
(4) These reclassified losses are recorded within interest and other expense, net and net loss on equity method investment
transactions.
Note 16. Income Taxes
On August 6, 2019, Switzerland published changes to its Federal tax law in the Official Federal Collection of Laws.
On September 27, 2019, the Zurich Canton published their decision on the September 1, 2019 Zurich Canton public
vote regarding the Cantonal changes associated with the Swiss Federal tax law change. The intent of these tax law
changes was to replace certain preferential tax regimes with a new set of internationally accepted measures that
are hereafter referred to as "Swiss tax reform". Based on these Federal/Cantonal events, our position is the
enactment of Swiss tax reform for U.S. GAAP purposes was met as of September 30, 2019, and we recorded the
impacts in the third quarter 2019. The net impact was a benefit of $767 million, which consisted of a $769 million
reduction in deferred tax expense from an allowed step-up of intangible assets for tax purposes (recorded net of
valuation allowance) and remeasurement of our deferred tax balances, partially offset by a $2 million indirect tax
impact in selling, general and administrative expenses. The future rate impacts of these Swiss tax reform law
changes are effective starting January 1, 2020. We will continue to monitor Swiss tax reform for any additional
interpretative guidance that could result in changes to the amounts we have recorded.
On December 22, 2017, new U.S. tax reform legislation ("U.S. tax reform") was enacted that included a broad
range of complex provisions impacting the taxation of businesses. Certain impacts of the new legislation would
have generally required accounting to be completed and incorporated into our 2017 year-end financial statements,
however in response to the complexities of this new legislation, the SEC issued guidance to provide companies with
relief. The SEC provided up to a one-year window for companies to finalize the accounting for the impacts of this
new legislation. We finalized our accounting for the new provisions during the fourth quarter of 2018. U.S. tax
reform resulted in a total transition tax liability of $1,284 million ($1,279 million as of December 31, 2018 and $5
million of 2019 related updates) based on the deemed repatriation of our accumulated foreign earnings and profits,
which will be paid in installments through 2026, and a related change in our indefinite reinvestment assertion for
most companies owned directly by our U.S. subsidiaries. In addition, the legislation reduced the U.S. federal tax
rate from 35% to 21% and established various new provisions, including a new provision that taxes U.S. allocated
expenses (e.g. interest and general administrative expenses) as well as currently taxes certain income from foreign
operations (Global Intangible Low-Tax Income, or “GILTI”).
113
Earnings/(losses) from continuing operations before income taxes and the provision for income taxes consisted of:
$
$
$
Earnings/(losses) from continuing operations before income taxes:
United States
Outside United States
Provision for income taxes:
United States federal:
Current
Deferred
State and local:
Current
Deferred
Total United States
Outside United States:
Current
Deferred
Total outside United States
For the Years Ended December 31,
2019
2018
2017
(in millions)
751 $
2,696
3,447 $
(170) $
3,012
2,842 $
354
2,770
3,124
(34) $
171
137
1,322
(1,274)
48
145 $
97
242
29
45
74
316
459
(773)
(314)
23
61
84
221
552
—
552
32
30
62
110
541
15
556
666
Total provision for income taxes
$
2 $
773 $
The effective income tax rate on pre-tax earnings differed from the U.S. federal statutory rate as follows:
U.S. federal statutory rate
Increase/(decrease) resulting from:
State and local income taxes, net of federal tax benefit
Foreign rate differences
Changes in judgment on realizability of deferred tax assets
Reversal of other tax accruals no longer required
Tax accrual on investment in Keurig (including tax impact of the
gain from the KDP transaction)
Excess tax benefits from equity compensation
Tax legislation (non-U.S. and non-Swiss tax reform)
Swiss tax reform
U.S. tax reform - deferred benefit from tax rate change
U.S. tax reform - transition tax
U.S. tax reform - changes in indefinite reinvestment assertion
Foreign tax provisions under TCJA (GILTI, FDII and BEAT)(1)
Other
Effective tax rate
For the Years Ended December 31,
2019
2018
2017
21.0 %
21.0 %
35.0 %
1.3 %
0.2 %
(0.3)%
(3.0)%
0.8 %
(1.2)%
0.4 %
(22.3)%
—
0.1 %
—
2.5 %
0.6 %
0.1 %
0.4 %
(1.9)%
(0.4)%
(1.8)%
8.4 %
(0.8)%
0.3 %
—
—
(1.3)%
2.1 %
1.1 %
0.1 %
27.2 %
0.8 %
(10.8)%
3.2 %
(1.7)%
1.2 %
(1.2)%
(2.6)%
— %
(41.5)%
42.2 %
(2.0)%
—
(1.3)%
21.3 %
(1) The Tax Cuts and Jobs Act of 2017 ("TCJA") established the Global Intangible Low-Tax Income ("GILTI") provision, which
taxes U.S. allocated expenses and certain income from foreign operations; the Foreign-Derived Intangible Income ("FDII")
114
provision, which allows a deduction against certain types of US taxable income resulting in a lower effective US tax rate on
such income; and the Base Erosion Anti-abuse Tax ("BEAT"), which is a new minimum tax based on cross-border service
payments by U.S. entities.
Our 2019 effective tax rate of 0.1% was significantly impacted by the $769 million net deferred tax benefit related to
Swiss tax reform in the third quarter of 2019. Excluding this impact, our 2019 effective tax rate was 22.4%, which
reflects unfavorable provisions from U.S. tax reform and taxes on earnings from equity method investments (these
earnings are reported separately on our consolidated statements of earnings and not within earnings before income
taxes), largely offset by favorable impacts from the mix of pre-tax income in various non-U.S. jurisdictions and
discrete net tax benefits of $176 million. The discrete net tax benefits were primarily driven by a $128 million net
benefit from the release of liabilities for uncertain tax positions due to expirations of statutes of limitations and audit
settlements in several jurisdictions.
Our 2018 effective tax rate of 27.2% was unfavorably impacted by net tax expenses from $128 million of discrete
one-time events as well as unfavorable provisions within the new U.S. tax reform legislation and taxes on earnings
from equity method investments (these earnings are reported separately on our consolidated statements of
earnings and not within earnings before income taxes), partially offset by the favorable mix of pre-tax income in
various non-U.S. tax jurisdictions as well as the reduction in the U.S. federal tax rate. The discrete net tax expenses
included a $192 million deferred tax expense related to a $778 million gain on the KDP transaction reported as a
gain on equity method investment as well as $19 million expense from the final updates to the provisional impacts
from U.S. tax reform reported as of 2017 year-end, partially offset by an $81 million benefit from favorable audit
settlements and statutes of limitations in various jurisdictions.
Our 2017 effective tax rate of 21.3% was favorably impacted by the mix of pre-tax income in various non-U.S. tax
jurisdictions and net tax benefits from $97 million of discrete one-time events, partially offset by domestic earnings
taxed at the higher pre-U.S. tax reform rate of 35% as well as taxes on earnings from equity method investments
(these earnings are reported separately on our consolidated statements of earnings and not within earnings before
income taxes). The discrete net tax benefits included the provisional net impact from U.S. tax reform discussed
previously, favorable audit settlements and statutes of limitations in various jurisdictions, and the net reduction of
our French and Belgian deferred tax liabilities resulting from tax legislation enacted during 2017 that reduced the
corporate income tax rates in each country, partially offset by the addition of a valuation allowance in one of our
Chinese entities.
115
Tax effects of temporary differences that gave rise to deferred income tax assets and liabilities consisted of:
Deferred income tax assets:
Accrued postretirement and postemployment benefits
Accrued pension costs
Other employee benefits
Accrued expenses
Loss carryforwards
Tax credit carryforwards
Other
Total deferred income tax assets
Valuation allowance
Net deferred income tax assets
Deferred income tax liabilities:
Intangible assets, including impact from Swiss tax reform
Property, plant and equipment
Other
Total deferred income tax liabilities
Net deferred income tax liabilities
As of December 31,
2019
2018
(in millions)
$
$
$
$
150 $
272
160
287
589
729
438
2,625
(1,243)
1,382 $
(2,772) $
(663)
(559)
(3,994)
(2,612) $
147
349
147
283
707
747
302
2,682
(1,153)
1,529
(3,861)
(473)
(492)
(4,826)
(3,297)
Our significant valuation allowances are in the U.S., Switzerland and China. The U.S. valuation allowance relates to
excess foreign tax credits generated by the deemed repatriation under U.S. tax reform while the Swiss valuation
allowance brings the allowed step-up of intangible assets recorded under Swiss tax reform to the amount more
likely than not to be realized. The valuation allowance in China relates to character-specific deferred tax assets of
one of our Chinese entities.
At December 31, 2019, the Company has pre-tax loss carryforwards of $3,491 million, of which $691 million will
expire at various dates between 2020 and 2039 and the remaining $2,800 million can be carried forward
indefinitely.
The unremitted earnings as of December 31, 2019 in those subsidiaries where we continue to be indefinitely
reinvested is approximately $1.6 billion. We currently have not recognized approximately $75 million of deferred tax
liabilities related to those unremitted earnings. Future tax law changes or changes in the needs of our non-U.S.
subsidiaries could require us to recognize deferred tax liabilities on a portion, or all, of our accumulated earnings
that are currently indefinitely reinvested.
116
The changes in our unrecognized tax benefits were:
January 1
Increases from positions taken during prior periods
Decreases from positions taken during prior periods
Increases from positions taken during the current period
Decreases relating to settlements with taxing authorities
Reductions resulting from the lapse of the applicable
statute of limitations
Currency/other
For the Years Ended December 31,
2019
2018
2017
(in millions)
$
516 $
579 $
27
(35)
50
(64)
(64)
(4)
426 $
36
(43)
57
(45)
(31)
(37)
516 $
610
33
(93)
64
(54)
(29)
48
579
December 31
$
As of January 1, 2019, our unrecognized tax benefits were $516 million. If we had recognized all of these benefits,
the net impact on our income tax provision would have been $463 million. Our unrecognized tax benefits were $426
million at December 31, 2019, and if we had recognized all of these benefits, the net impact on our income tax
provision would have been $364 million. Within the next 12 months, our unrecognized tax benefits could increase
by approximately $30 million due to unfavorable audit developments or decrease by approximately $140 million due
to audit settlements and the expiration of statutes of limitations in various jurisdictions. We include accrued interest
and penalties related to uncertain tax positions in our tax provision. We had accrued interest and penalties of $180
million as of January 1, 2019 and $170 million as of December 31, 2019. Our 2019 provision for income taxes
included $5 million benefit for interest and penalties.
Our income tax filings are regularly examined by federal, state and non-U.S. tax authorities. U.S. federal, state and
non-U.S. jurisdictions have statutes of limitations generally ranging from three to five years; however, these statutes
are often extended by mutual agreement with the tax authorities. The earliest year still open to examination by U.S.
federal and state tax authorities is 2016 and years still open to examination by non-U.S. tax authorities in major
jurisdictions include (earliest open tax year in parentheses): Brazil (2014), China (2009), France (2015), India
(2005), Russia (2013) and Switzerland (2014).
Note 17. Earnings per Share
Basic and diluted earnings per share (“EPS”) were calculated as follows:
Net earnings
Noncontrolling interest earnings
Net earnings attributable to Mondelēz International
Weighted-average shares for basic EPS
Plus incremental shares from assumed conversions
of stock options and long-term incentive plan shares
Weighted-average shares for diluted EPS
Basic earnings per share attributable to
Mondelēz International
Diluted earnings per share attributable to
Mondelēz International
For the Years Ended December 31,
2019
2018
2017
(in millions, except per share data)
3,885 $
(15)
3,870 $
1,445
3,395 $
(14)
3,381 $
1,472
13
1,458
14
1,486
2.68 $
2.30 $
2.65 $
2.28 $
2,842
(14)
2,828
1,513
18
1,531
1.87
1.85
$
$
$
$
We exclude antidilutive Mondelēz International stock options from our calculation of weighted-average shares for
diluted EPS. We excluded antidilutive stock options and long-term incentive plan shares of 5.2 million for the year
ended December 31, 2019, 11.6 million for the year ended December 31, 2018 and 8.5 million for the year ended
December 31, 2017.
117
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:
Net revenues:
Latin America
AMEA
Europe
North America
Net revenues
Earnings before income taxes:
Operating income:
Latin America
AMEA
Europe
North America
Unrealized gains/(losses) on hedging activities
(mark-to-market impacts)
General corporate expenses
Amortization of intangibles
Net gains on divestitures
Acquisition-related costs
Operating income
Benefit plan non-service income (1)
Interest and other expense, net
Earnings before income taxes
118
For the Years Ended December 31,
2019
2018
2017
(in millions)
$
3,018 $
5,770
9,972
7,108
3,202 $
5,729
10,122
6,885
3,566
5,739
9,794
6,797
$
25,868 $
25,938 $
25,896
$
$
341 $
691
410 $
702
1,732
1,451
91
(330)
(174)
44
(3)
3,843
1,734
849
141
(335)
(176)
—
(13)
3,312
60
(456)
3,447 $
50
(520)
2,842 $
564
514
1,610
1,144
(96)
(282)
(178)
186
—
3,462
44
(382)
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:
Total assets:
Latin America (1)
AMEA (1)
Europe (1)
North America (1)
Equity method investments
Unallocated assets and adjustments (2)
Total assets
For the Years Ended December 31,
2019
2018
2017
(in millions)
$
$
4,716 $
9,740
4,699 $
9,571
20,354
21,637
7,212
19,426
21,015
7,123
890
64,549 $
895
62,729 $
4,948
9,883
21,611
20,709
6,193
(387)
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.
Depreciation expense (1):
Latin America
AMEA
Europe
North America
Total depreciation expense
For the Years Ended December 31,
2019
2018
2017
(in millions)
$
$
105 $
164
238
138
645 $
97 $
159
248
131
635 $
107
157
239
135
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.
119
Capital expenditures:
Latin America
AMEA
Europe
North America
Total capital expenditures
For the Years Ended December 31,
2019
2018
2017
(in millions)
$
$
197 $
244
297
187
925 $
261 $
277
326
231
1,095 $
226
280
278
230
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:
Net revenues:
United States
Other
Total net revenues
Long-lived assets:
United States
Other
Total long-lived assets
For the Years Ended December 31,
2019
2018
2017
(in millions)
6,625 $
6,401 $
19,243
25,868 $
19,537
25,938 $
6,275
19,621
25,896
As of December 31,
2019
2018
2017
(in millions)
1,806 $
8,370
10,176 $
1,481 $
7,539
9,020 $
1,468
7,733
9,201
$
$
$
$
No individual country within Other exceeded 10% of our net revenues or long-lived assets for all periods presented.
120
Net revenues by product category, reflecting our current segment structure for all periods presented, were:
Biscuits
Chocolate
Gum & Candy
Beverages
Cheese & Grocery
Total net revenues
Biscuits
Chocolate
Gum & Candy
Beverages
Cheese & Grocery
Total net revenues
Biscuits
Chocolate
Gum & Candy
Beverages
Cheese & Grocery
Total net revenues
For the Year Ended December 31, 2019
Latin
America
AMEA
Europe
(in millions)
North
America
Total
708 $
710
823
452
325
3,018 $
1,844 $
2,082
2,998 $
5,119
5,888 $
247
861
546
698
97
973
—
437
5,770 $
1,060
9,972 $
—
7,108 $
11,438
8,158
3,355
1,095
1,822
25,868
For the Year Ended December 31, 2018
Latin
America
AMEA
Europe
(in millions)
North
America
Total
727 $
747
865
533
330
3,202 $
1,724 $
2,080
3,127 $
5,083
879
553
493
5,729 $
736
98
1,078
10,122 $
5,607 $
267
1,011
—
—
6,885 $
11,185
8,177
3,491
1,184
1,901
25,938
For the Year Ended December 31, 2017
Latin
America
AMEA
Europe
(in millions)
North
America
Total
779 $
862
919
665
341
3,566 $
1,637 $
2,008
2,944 $
4,869
919
569
775
121
606
5,739 $
1,085
9,794 $
5,479 $
293
1,025
—
—
6,797 $
10,839
8,032
3,638
1,355
2,032
25,896
$
$
$
$
$
$
121
Note 19. Quarterly Financial Data (Unaudited)
Our summarized operating results by quarter are detailed below.
Net revenues
$
Gross profit
(Provision)/benefit for income taxes (1)
Gain/(loss) on equity method investment transactions
Equity method investment net earnings
Net earnings
Noncontrolling interest
Net earnings attributable to Mondelēz International
$
Weighted-average shares for basic EPS
Plus incremental shares from assumed conversions of
stock options and long-term incentive plan shares
Weighted-average shares for diluted EPS
Per share data:
Basic EPS attributable to Mondelēz International:
Diluted EPS attributable to Mondelēz International:
Dividends declared
Net revenues
Gross profit
$
$
$
$
Provision for income taxes
Gain on equity method investment transactions
Equity method investment net earnings
Net earnings
Noncontrolling interest
Net earnings attributable to Mondelēz International
$
Weighted-average shares for basic EPS
Plus incremental shares from assumed conversions of
stock options and long-term incentive plan shares
Weighted-average shares for diluted EPS
Per share data:
Basic EPS attributable to Mondelēz International:
Diluted EPS attributable to Mondelēz International:
Dividends declared
$
$
$
2019 Quarters
First
Second
Third
Fourth
(in millions, except per share data)
6,538 $
2,593
(189)
23
113
920
(6)
914 $
1,449
12
1,461
0.63 $
0.63 $
0.26 $
6,062 $
2,469
(216)
(25)
113
808
(1)
807 $
1,445
13
1,458
0.56 $
0.55 $
0.26 $
6,355 $
2,516
633
—
111
1,428
(5)
1,423 $
1,445
13
1,458
0.98 $
0.98 $
0.285 $
6,913
2,759
(230)
—
105
729
(3)
726
1,441
12
1,453
0.50
0.50
0.285
2018 Quarters
First
Second
Third
Fourth
(in millions, except per share data)
6,765 $
2,849
(337)
—
232
1,052
(6)
1,046 $
1,489
16
1,505
0.70 $
0.70 $
0.22 $
6,112 $
2,540
(15)
—
87
320
(2)
318 $
1,475
13
1,488
0.22 $
0.21 $
0.22 $
6,288 $
2,414
(310)
757
80
1,197
(3)
1,194 $
1,466
14
1,480
0.81 $
0.81 $
0.26 $
6,773
2,549
(111)
21
149
826
(3)
823
1,457
13
1,470
0.56
0.56
0.26
(1) The third quarter of 2019 was significantly impacted by the $769 million net deferred tax benefit related to Swiss tax reform. Refer to Note
16, Income Taxes for more information.
Basic and diluted EPS are computed independently for each of the periods presented. Accordingly, the sum of the
quarterly EPS amounts may not equal the total for the year.
122
During 2019 and 2018, we recorded the following pre-tax (charges)/benefits in earnings from continuing operations:
Asset impairment and exit costs
Divestiture-related costs
Net gain on divestiture
Impact from pension participation changes
Impact from the resolution of tax matters
Loss related to interest rate swaps
Net gain/(loss) on equity method investment
transactions
Asset impairment and exit costs
Divestiture-related costs
Impact from pension participation changes
Impact from the resolution of tax matters
Gain/(loss) related to interest rate swaps
Loss on early extinguishment of
debt and related expenses
Gain on equity method investment transaction
First
Second
Third
Fourth
2019 Quarters
(20) $
1
—
—
—
—
23
4 $
(in millions)
(15) $
(11)
41
35
—
—
(134) $
4
3
(3)
—
(111)
(59)
—
—
(3)
(85)
—
(25)
25 $
—
(241) $
—
(147)
2018 Quarters
First
Second
Third
Fourth
(54) $
3
—
—
14
—
—
(37) $
(in millions)
(111) $
—
(409)
(15)
(5)
(140)
—
(680) $
(125) $
—
(3)
—
1
—
757
630 $
(99)
(2)
(17)
26
—
—
21
(71)
$
$
$
$
Items impacting our operating results are discussed in Note 1, Summary of Significant Accounting Policies, Note 2,
Divestitures and Acquisitions, Note 6, Goodwill and Intangible Assets, Note 7, Equity Method Investments, Note 8,
Restructuring Program, Note 9, Debt and Borrowing Arrangements, Note 10, Financial Instruments, Note 11,
Benefit Plans and Note 14, Commitments and Contingencies – Tax Matters.
123
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We have established disclosure controls and procedures that are designed to ensure that information required to be
disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the SEC, and such information is accumulated
and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer
(“CFO”), as appropriate to allow timely decisions regarding required disclosure. Management, together with our
CEO and CFO, evaluated the effectiveness of the Company’s disclosure controls and procedures as of December
31, 2019. Based on this evaluation, the CEO and CFO concluded that our disclosure controls and procedures were
effective as of December 31, 2019.
Report of Management on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a
process designed by, or under the supervision of, our CEO and CFO, or persons performing similar functions, and
effected by the Company’s Board of Directors, management and other personnel to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. Our internal control over financial reporting includes
those written policies and procedures that:
•
•
•
•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles;
provide reasonable assurance that receipts and expenditures are being made only in accordance with
management and director authorization; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2019.
Management based this assessment on criteria for effective internal control over financial reporting described in
Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (“COSO”).
Based on this assessment, management concluded that the Company’s internal control over financial reporting is
effective as of December 31, 2019, based on the criteria in Internal Control Integrated Framework issued by the
COSO.
PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the effectiveness of
our internal control over financial reporting as of December 31, 2019, as stated in their report that appears under
Item 8.
February 7, 2020
124
Changes in Internal Control Over Financial Reporting
Management, together with our CEO and CFO, evaluated the changes in our internal control over financial
reporting during the quarter ended December 31, 2019. We continued to refine information technology security
measures and business process controls. There were no changes in our internal control over financial reporting
during the quarter ended December 31, 2019, that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
Item 9B. Other Information.
None.
125
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
Information required by this Item 10 is included under the heading “Information about our Executive Officers” in Part
I, Item 1 of this Form 10-K, as well as under the headings “Election of Directors,” “Corporate Governance –
Governance Guidelines,” “Corporate Governance – Codes of Conduct,” “Board Committees and Membership –
Audit Committee” and if applicable, "Delinquent Section 16(a) Reports" in our definitive Proxy Statement for our
Annual Meeting of Shareholders scheduled to be held on May 13, 2020 (“2020 Proxy Statement”). All of this
information from the 2020 Proxy Statement is incorporated by reference into this Annual Report.
The information on our web site is not, and shall not be deemed to be, a part of this Annual Report or incorporated
into any other filings we make with the SEC.
Item 11. Executive Compensation.
Information required by this Item 11 is included under the headings “Board Committees and Membership – Human
Resources and Compensation Committee,” “Compensation of Non-Employee Directors,” “Compensation
Discussion and Analysis,” “Executive Compensation Tables,” “Human Resources and Compensation Committee
Report for the Year Ended December 31, 2019” and "CEO Pay Ratio" in our 2020 Proxy Statement. All of this
information is incorporated by reference into this Annual Report.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
The number of shares to be issued upon exercise or vesting of grants issued under, and the number of shares
remaining available for future issuance under, our equity compensation plans at December 31, 2019 were:
Equity Compensation Plan Information
Number of Securities to
be Issued Upon Exercise
of Outstanding
Options, Warrants
and Rights (1)
(a)
Weighted Average
Exercise Price of
Outstanding Options,
Warrants and Rights (2)
(b)
Number of Securities
Remaining Available for
Future Issuance under
Equity Compensation
Plans (excluding
securities reflected
in column (a)) (3)
(c)
Equity compensation plans
approved by security holders
39,498,687 $
36.19
56,200,802
Includes outstanding options, deferred stock units and performance share units and excludes restricted stock.
(1)
(2) Weighted average exercise price of outstanding options only.
(3) Shares available for grant under our Amended and Restated 2005 Performance Incentive Plan.
Information related to the security ownership of certain beneficial owners and management is included in our 2020
Proxy Statement under the heading “Ownership of Equity Securities” and is incorporated by reference into this
Annual Report.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Information required by this Item 13 is included under the headings “Corporate Governance – Director
Independence” and “Corporate Governance – Review of Transactions with Related Persons” in our 2020 Proxy
Statement. All of this information is incorporated by reference into this Annual Report.
Item 14. Principal Accountant Fees and Services.
Information required by this Item 14 is included under the heading “Board Committees and Membership – Audit
Committee” in our 2020 Proxy Statement. All of this information is incorporated by reference into this Annual Report.
126
PART IV
Item 15. Exhibits and Financial Statement Schedules.
(a)
Index to Consolidated Financial Statements and Schedules
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Earnings for the Years Ended December 31, 2019, 2018 and 2017
Consolidated Statements of Comprehensive Earnings for the Years Ended December 31, 2019, 2018 and 2017
Consolidated Balance Sheets as of December 31, 2019 and 2018
Consolidated Statements of Equity for the Years Ended December 31, 2019, 2018 and 2017
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, 2018 and 2017
Notes to Consolidated Financial Statements
Financial Statement Schedule-Valuation and Qualifying Accounts
65
68
69
70
71
72
73
S-1
Schedules other than those listed above have been omitted either because such schedules are not required or are
not applicable.
(b)
The following exhibits are filed as part of, or incorporated by reference into, this Annual Report:
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
3.1
3.2
4.1
Separation and Distribution Agreement between the Registrant and Kraft Foods Group, Inc., dated
as of September 27, 2012 (incorporated by reference to Exhibit 2.1 to the Registrant’s Current
Report on Form 8-K filed with the SEC on October 1, 2012).
Canadian Asset Transfer Agreement, by and between Mondelez Canada Inc. and Kraft Canada Inc.,
dated as of September 29, 2012 (incorporated by reference to Exhibit 2.3 to the Registrant’s Annual
Report on Form 10-K filed with the SEC on February 25, 2013).
Master Ownership and License Agreement Regarding Patents, Trade Secrets and Related
Intellectual Property, among Kraft Foods Global Brands LLC, Kraft Foods Group Brands LLC, Kraft
Foods UK Ltd. and Kraft Foods R&D Inc., dated as of October 1, 2012 (incorporated by reference to
Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 1, 2012).
Master Ownership and License Agreement Regarding Trademarks and Related Intellectual Property,
by and between Kraft Foods Global Brands LLC and Kraft Foods Group Brands LLC., dated as of
September 27, 2012 (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on
Form 8-K filed with the SEC on October 1, 2012).
First Amendment to the Master Ownership and License Agreement Regarding Trademarks and
Related Intellectual Property, among Intercontinental Great Brands LLC and Kraft Foods Group
Brands LLC, dated as of July 15, 2013 (incorporated by reference to Exhibit 2.1 to the Registrant’s
Quarterly Report on Form 10-Q filed with the SEC on April 30, 2015).
Second Amendment to the Master Ownership and License Agreement Regarding Trademarks and
Related Intellectual Property, among Intercontinental Great Brands LLC and Kraft Foods Group
Brands LLC, dated as of October 1, 2014 (incorporated by reference to Exhibit 2.2 to the
Registrant’s Quarterly Report on Form 10-Q filed with the SEC on April 30, 2015).
Amendment to the Master Ownership and License Agreement Regarding Trademarks and Related
Intellectual Property, among Intercontinental Great Brands LLC and Kraft Foods Group Brands LLC,
effective as of September 28, 2016 (incorporated by reference to Exhibit 2.1 to the Registrant’s
Quarterly Report on Form 10-Q filed with the SEC on August 2, 2017).
Fourth Amendment to the Master Ownership and License Agreement Regarding Trademarks and
Related Intellectual Property, among Intercontinental Great Brands LLC and Kraft Foods Group
Brands LLC, dated as of October 28, 2019.
Amended and Restated Articles of Incorporation of the Registrant, effective March 14, 2013
(incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q filed with
the SEC on May 8, 2013).
Amended and Restated By-Laws of the Registrant, effective as of October 9, 2015 (incorporated by
reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on
October 7, 2015).
Description of the Registrant's capital stock and debt securities registered under Section 12 of the
Exchange Act.
127
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
10.1
10.2
10.3
10.4
10.5
10.6
10.7
The Registrant agrees to furnish to the SEC upon request copies of any instruments defining the
rights of holders of long-term debt of the Registrant and its consolidated subsidiaries that does not
exceed 10 percent of the total assets of the Registrant and its consolidated subsidiaries.
Indenture, by and between the Registrant and Deutsche Bank Trust Company Americas (as
successor trustee to The Bank of New York and The Chase Manhattan Bank), dated as of
October 17, 2001 (incorporated by reference to Exhibit 4.1 to the Registrant’s Registration
Statement on Form S-3 (Reg. No. 333-86478) filed with the SEC on April 18, 2002).
Supplemental Indenture, by and between the Registrant and Deutsche Bank Trust Company
Americas, Deutsche Bank AG, London Branch and Deutsche Bank Luxembourg S.A., dated as of
December 11, 2013 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on
Form 8-K filed with the SEC on December 11, 2013).
Indenture between the Registrant and Deutsche Bank Trust Company Americas, as trustee, dated
as of March 6, 2015 (incorporated by reference to Exhibit 4.4 to the Registrant’s Annual Report on
Form 10-K filed with the SEC on February 24, 2017).
Supplemental Indenture No. 1, dated February 13, 2019, between the Registrant and Deutsche
Bank Trust Company Americas (incorporated by reference to Exhibit 4.2 to the Registrant's Current
Report on Form 8-K filed with the SEC on February 13, 2019).
Indenture, by and between Mondelez International Holdings Netherlands B.V, the Registrant and
Deutsche Bank Trust Company Americas, dated as of October 28, 2016 (incorporated by reference
to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 28,
2016).
First Supplemental Indenture, dated as of September 19, 2019, by and among Mondelez
International Holdings Netherlands B.V., as issuer, Mondelēz International, Inc., as guarantor, and
Deutsche Bank Trust Company Americas, as trustee (incorporated by reference to Exhibit 4.2 to the
Registrant’s Current Report on Form 8-K filed with the SEC on September 20, 2019).
Second Supplemental Indenture, dated as of October 2, 2019, by and among Mondelez
International Holdings Netherlands B.V., as issuer, Mondelēz International, Inc., as guarantor, and
Deutsche Bank Trust Company Americas, as trustee (incorporated by reference to Exhibit 4.2 to the
Registrant’s Current Report on Form 8-K filed with the SEC on October 2, 2019).
Five-Year Revolving Credit Agreement, dated February 27, 2019, by and among the Registrant, the
lenders named therein and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by
reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on
February 27, 2019).
$1.5 Billion Term Loan Agreement, by and among Mondelēz International Holdings Netherlands B.V.,
the Registrant, the lenders named therein and JPMorgan Chase Bank, N.A., as administrative
agent, dated October 14, 2016 (incorporated by reference to Exhibit 10.2 to the Registrant’s Annual
Report on Form 10-K filed with the SEC on February 24, 2017).
364-Day Revolving Credit Agreement, dated February 27, 2019, by and among Mondelēz
International, Inc., the lenders named therein and JPMorgan Chase Bank, N.A., as Administrative
Agent (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed
with the SEC on February 27, 2019).
Term Loan Agreement, dated September 13, 2019, by and among Mondelez International Holdings
Netherlands B.V., as borrower, Mondelēz International, Inc., as guarantor, the lenders named
therein, MUFG Bank, Ltd., BofA Securities, Inc., Barclays Bank PLC, Credit Suisse Loan Funding
LLC, JPMorgan Chase Bank, N.A., Mizuho Bank, Ltd., TD Securities (USA) LLC and Wells Fargo
Securities, LLC, as joint lead arrangers, and MUFG Bank, Ltd. as administrative agent (incorporated
by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the SEC on
September 13, 2019).
Tax Sharing and Indemnity Agreement, by and between the Registrant and Kraft Foods Group, Inc.,
dated as of September 27, 2012 (incorporated by reference to Exhibit 10.1 to the Registrant’s
Current Report on Form 8-K filed with the SEC on October 1, 2012).
Global Contribution Agreement by and among Mondelēz International Holdings, LLC, Acorn
Holdings B.V., Charger Top HoldCo B.V. and Charger OpCo B.V., dated May 7, 2014 (incorporated
by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on
August 8, 2014).*
Amendment Agreement to Global Contribution Agreement by and among Mondelēz International
Holdings LLC, Acorn Holdings B.V., Jacobs Douwe Egberts B.V. (formerly Charger Top HoldCo B.V.)
and Jacobs Douwe Egberts International B.V. (formerly Charger OpCo B.V.), dated July 28, 2015
(incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed
with the SEC on July 31, 2015).*
128
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
Amended and Restated Shareholders’ Agreement Relating to Charger Top Holdco B.V. by and
among Delta Charger Holdco B.V., JDE Minority Holdings B.V., Mondelēz Coffee Holdco B.V. and
Jacobs Douwe Egberts B.V., dated March 7, 2016 (incorporated by reference to Exhibit 10.1 to the
Registrant’s Quarterly Report on Form 10-Q filed with the SEC on April 28, 2016).*
Shareholders’ Agreement Relating to Maple Parent Holdings Corp. by and among Maple Holdings II
B.V., Mondelēz International Holdings LLC and Maple Parent Holdings Corp., dated March 7, 2016
(incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed
with the SEC on April 28, 2016).*
Investor Rights Agreement by and among Keurig Dr Pepper Inc., Maple Holdings B.V. and Mondelēz
International Holdings LLC, dated July 9, 2018 (incorporated by reference to Exhibit 10.1 to the
Registrant’s Current Report on Form 8-K filed with the SEC on July 10, 2018).
Second Amended and Restated Shareholders’ Agreement Relating to Jacobs Douwe Egberts B.V.
by and among Delta Charger Holdco B.V., JDE Minority Holdings B.V., Mondelēz Coffee Holdco B.V.
and Jacobs Douwe Egberts B.V., dated July 9, 2018 (incorporated by reference to Exhibit 10.2 to the
Registrant’s Current Report on Form 8-K filed with the SEC on July 10, 2018).*
Amendment and Termination Agreement of the Shareholders’ Agreement Relating to Maple Parent
Holdings Corp. by and among Maple Holdings B.V., Mondelēz International Holdings LLC and Maple
Parent Holdings Corp., dated July 9, 2018 (incorporated by reference to Exhibit 10.3 to the
Registrant’s Current Report on Form 8-K filed with the SEC on July 10, 2018).
Settlement Agreement, between the Registrant and Kraft Foods Group, Inc., dated June 22, 2015
(incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed
with the SEC on July 31, 2015).
Mondelēz International, Inc. Amended and Restated 2005 Performance Incentive Plan, amended
and restated as of February 3, 2017 (incorporated by reference to Exhibit 10.2 to the Registrant’s
Quarterly Report on Form 10-Q filed with the SEC on May 3, 2017).+
Form of Mondelēz International, Inc. Amended and Restated 2005 Performance Incentive Plan Non-
Qualified Global Stock Option Agreement (incorporated by reference to Exhibit 10.3 to the
Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 3, 2017).+
Form of Mondelēz International, Inc. Amended and Restated 2005 Performance Incentive Plan Non-
Qualified Global Stock Option Agreement (incorporated by reference to Exhibit 10.2 to the
Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 2, 2018).+
Form of Mondelēz International, Inc. Amended and Restated 2005 Performance Incentive Plan Non-
Qualified Global Stock Option Agreement (incorporated by reference to Exhibit 10.3 to the
Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 1, 2019).+
Form of Mondelēz International, Inc. Amended and Restated 2005 Performance Incentive Plan
Global Long-Term Incentive Grant Agreement (incorporated by reference to Exhibit 10.4 to the
Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 3, 2017).+
Form of Mondelēz International, Inc. Amended and Restated 2005 Performance Incentive Plan
Global Long-Term Incentive Grant Agreement (incorporated by reference to Exhibit 10.3 to the
Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 2, 2018).+
Form of Mondelēz International, Inc. Amended and Restated 2005 Performance Incentive Plan
Global Long-Term Incentive Grant Agreement (incorporated by reference to Exhibit 10.4 to the
Registrant's Quarterly Report on Form 10-Q filed with the SEC on May 1, 2019).+
Form of Mondelēz International, Inc. Amended and Restated 2005 Performance Incentive Plan
Global Deferred Stock Unit Agreement (incorporated by reference to Exhibit 10.13 to the
Registrant’s Annual Report on Form 10-K filed with the SEC on February 9, 2018).+
Form of Mondelēz International, Inc. Amended and Restated 2005 Performance Incentive
Plan Global Deferred Stock Unit Agreement (incorporated by reference to Exhibit 10.4 to the
Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 2, 2018).+
Form of Mondelēz International, Inc. Amended and Restated 2005 Performance Incentive Plan
Global Deferred Stock Unit Agreement (incorporated by reference to Exhibit 10.5 to the Registrant's
Quarterly Report on Form 10-Q filed with the SEC on May 1, 2019).+
Mondelēz Global LLC Supplemental Benefits Plan I, effective as of September 1, 2012 (incorporated
by reference to Exhibit 10.10 to the Registrant’s Annual Report on Form 10-K filed with the SEC on
February 25, 2013).+
First Amendment to the Mondelēz Global LLC Supplemental Benefits Plan I, dated December 20,
2016 (incorporated by reference to Exhibit 10.26 to the Registrant's Annual Report on Form 10-K
filed with the SEC on February 8, 2019).+
129
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
10.37
10.38
10.39
10.40
10.41
10.42
10.43
Mondelēz Global LLC Supplemental Benefits Plan II, effective as of September 1, 2012
(incorporated by reference to Exhibit 10.11 to the Registrant’s Annual Report on Form 10-K filed with
the SEC on February 25, 2013).+
First Amendment to the Mondelēz Global LLC Supplemental Benefits Plan II, dated December 20,
2016 (incorporated by reference to Exhibit 10.28 to the Registrant's Annual Report on Form 10-K
filed with the SEC on February 8, 2019).+
Form of Mondelēz Global LLC Amended and Restated Cash Enrollment Agreement (incorporated by
reference to Exhibit 10.12 to the Registrant’s Annual Report on Form 10-K filed with the SEC on
February 25, 2013).+
Form of Mondelēz Global LLC Amended and Restated Employee Grantor Trust Enrollment
Agreement (incorporated by reference to Exhibit 10.13 to the Registrant’s Annual Report on
Form 10-K filed with the SEC on February 25, 2013).+
Mondelēz International, Inc. Amended and Restated 2006 Stock Compensation Plan for Non-
Employee Directors, amended and restated as of October 1, 2012 (incorporated by reference to
Exhibit 10.14 to the Registrant’s Annual Report on Form 10-K filed with the SEC on February 25,
2013).+
Mondelēz International, Inc. 2001 Compensation Plan for Non-Employee Directors, amended as of
December 31, 2008 and restated as of January 1, 2013 (incorporated by reference to Exhibit 10.15
to the Registrant’s Annual Report on Form 10-K filed with the SEC on February 25, 2013).+
Mondelēz International, Inc. Change in Control Plan for Key Executives, amended May 14, 2019
(incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed
with the SEC on July 31, 2019).+
Mondelēz Global LLC Executive Deferred Compensation Plan, effective as of October 1, 2012
(incorporated by reference to Exhibit 10.17 to the Registrant’s Annual Report on Form 10-K filed with
the SEC on February 25, 2013).+
Mondelēz Global LLC Executive Deferred Compensation Plan Adoption Agreement, effective as of
October 1, 2012 (incorporated by reference to Exhibit 10.18 to the Registrant’s Annual Report on
Form 10-K filed with the SEC on February 25, 2013).+
Deferred Compensation Plan Trust Document, by and between Mondelēz Global LLC and
Wilmington Trust Retirement and Institutional Services Company, dated as of September 18, 2012
(incorporated by reference to Exhibit 10.19 to the Registrant’s Annual Report on Form 10-K filed with
the SEC on February 25, 2013).+
Kraft Foods Deutschland Pension Scheme Supplementary Benefits 2005/ Deferral (Non-Qualified
Deferred Compensation Plan) (English translation), effective as of September 1, 2005 (incorporated
by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on
July 26, 2018).+
Annex to Kraft Foods Deutschland Pension Scheme Supplementary Benefits 2005/ Deferral (Non-
Qualified Deferred Compensation Plan), effective as of January 1, 2013 (incorporated by reference
to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on July 26,
2018).+
Offer of Employment Letter, between the Registrant and Dirk Van de Put, dated July 27, 2017
(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with
the SEC on August 2, 2017).+
Offer of Employment Letter, between the Registrant and Irene B. Rosenfeld, dated June 22, 2006
(incorporated by reference to Exhibit 10.29 to the Registrant’s Quarterly Report on Form 10-Q filed
with the SEC on August 8, 2006).+
Amendment to Offer of Employment Letter, between the Registrant and Irene B. Rosenfeld,
amended as of December 31, 2008 (incorporated by reference to Exhibit 10.20 to the Registrant’s
Annual Report on Form 10-K filed with the SEC on February 27, 2009).+
Offer of Employment Letter, between the Registrant and Daniel P. Myers, dated June 20, 2011
(incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed
with the SEC on November 4, 2011).+
Offer of Employment Letter, between Mondelēz Global LLC and Glen Walter, dated October 15,
2017 (incorporated by reference to Exhibit 10.31 to the Registrant’s Annual Report on Form 10-K
filed with the SEC on February 9, 2018).+
Employment Letter (English Translation), between Kraft Foods Europe and Hubert Weber, dated
August 11, 2010 (incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on
Form 10-Q filed with the SEC on July 26, 2018).+
130
10.44
10.45
10.46
10.47
10.48
10.49
10.50
10.51
10.52
10.53
10.54
10.55
10.56
18.1
21.1
23.1
31.1
31.2
32.1
101
Employment Letter, between Mondelēz Global LLC and Gerhard Pleuhs, dated August 23, 2016
(incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q filed
with the SEC on July 26, 2018).+
Offer of Employment Letter, between Mondelēz Global LLC and Paulette Alviti, dated April 12, 2018
(incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q filed
with the SEC on July 26, 2018).+
International Permanent Transfer Letter, between Mondelēz Global LLC and Luca Zaramella,
effective August 1, 2018 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report
on Form 8-K filed with the SEC on August 7, 2018).+
Employment Letter, between Mondelez Europe and Vinzenz P. Gruber, dated November 29, 2018
(incorporated by reference to Exhibit 10.6 to the Registrant's Quarterly Report on Form 10-Q filed
with the SEC on May 1, 2019).+
Offer of Employment Letter, between Mondelēz Global LLC and Sandra MacQuillan, dated April 23,
2019 (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q
filed with the SEC on July 31, 2019).+
Separation Agreement and General Release, between Mondelēz Global LLC and Roberto de
Oliveira Marques, dated May 24, 2017 (incorporated by reference to Exhibit 10.1 to the Registrant’s
Current Report on Form 8-K filed with the SEC on May 26, 2017).+
Retirement Letter, between Mondelēz International, Inc. and Irene B. Rosenfeld, effective April 30,
2018 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed
with the SEC on May 4, 2018).+
Settlement Agreement between Mondelez Deutschland Services GmbH & Co KG and Hubert
Weber, dated December 14, 2018 (incorporated by reference to Exhibit 10.53 to the Registrant's
Annual Report on Form 10-K filed with the SEC on February 8, 2019).+
Settlement Agreement between Mondelez Europe GmbH and Hubert Weber, dated December 14,
2018 (incorporated by reference to Exhibit 10.54 to the Registrant's Annual Report on Form 10-K
filed with the SEC on February 8, 2019).+
Separation Agreement and General Release between Mondelēz Global LLC and Timothy Cofer,
dated August 26, 2019 (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report
on Form 8-K filed with the SEC on August 30, 2019).+
Form of Indemnification Agreement for Non-Employee Directors (incorporated by reference to
Exhibit 10.28 to the Registrant’s Annual Report on Form 10-K filed with the SEC on February 27,
2009).+
Indemnification Agreement between the Registrant and Irene B. Rosenfeld, dated January 27, 2009
(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with
the SEC on February 2, 2009).+
Indemnification Agreement between the Registrant and Dirk Van de Put, dated November 20, 2017
(incorporated by reference to Exhibit 10.37 to the Registrant’s Annual Report on Form 10-K filed with
the SEC on February 9, 2018).+
Letter of PricewaterhouseCoopers LLP, dated October 29, 2018, relating to Change in Accounting
Principle (incorporated by reference to Exhibit 18.1 to the Registrant’s Quarterly Report on Form 10-
Q filed with the SEC on October 30, 2018).
Subsidiaries of the Registrant.
Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.
Certification of the Registrant’s Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the
Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.
Certification of the Registrant’s Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the
Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.
Certifications of the Registrant’s Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
The following materials from Mondelēz International’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2019, formatted in iXBRL (Inline eXtensible Business Reporting
Language): (i) the Consolidated Statements of Earnings, (ii) the Consolidated Statements of
Comprehensive Earnings, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of
Equity, (v) the Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial
Statements.
131
104
The cover page from Mondelēz International’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2019, formatted in Inline XBRL (included as Exhibit 101).
*
+
Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for
confidential treatment and have been separately filed with the SEC.
Indicates a management contract or compensatory plan or arrangement.
Item 16. Form 10-K Summary
None.
132
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
MONDELĒZ INTERNATIONAL, INC.
By:
/s/ LUCA ZARAMELLA
Luca Zaramella
Executive Vice President
and Chief Financial Officer
(Duly Authorized Officer)
Date: February 7, 2020
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature
Title
Date
/s/ DIRK VAN DE PUT
(Dirk Van de Put)
/s/ LUCA ZARAMELLA
(Luca Zaramella)
/s/ NELSON URDANETA
(Nelson Urdaneta)
/s/ LEWIS W.K. BOOTH
(Lewis W.K. Booth)
/s/ CHARLES E. BUNCH
(Charles E. Bunch)
/s/ DEBRA A. CREW
(Debra A. Crew)
/s/ LOIS D. JULIBER
(Lois D. Juliber)
/s/ MARK D. KETCHUM
(Mark D. Ketchum)
/s/ PETER W. MAY
(Peter W. May)
/s/ JORGE S. MESQUITA
(Jorge S. Mesquita)
/s/ JOSEPH NEUBAUER
(Joseph Neubauer)
/s/ FREDRIC G. REYNOLDS
(Fredric G. Reynolds)
/s/ CHRISTIANA S. SHI
(Christiana S. Shi)
/s/ PATRICK T. SIEWERT
(Patrick T. Siewert)
/s/ JEAN-FRANÇOIS M. L. VAN BOXMEER
(Jean-François M. L. van Boxmeer)
Director, Chairman and
Chief Executive Officer
Executive Vice President and
Chief Financial Officer
Senior Vice President,
Corporate Controller and
Chief Accounting Officer
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
133
February 7, 2020
February 7, 2020
February 7, 2020
February 7, 2020
February 7, 2020
February 7, 2020
February 7, 2020
February 7, 2020
February 7, 2020
February 7, 2020
February 7, 2020
February 7, 2020
February 7, 2020
February 7, 2020
February 7, 2020
Mondelēz International, Inc. and Subsidiaries
Valuation and Qualifying Accounts
For the Years Ended December 31, 2019, 2018 and 2017
(in millions)
Col. A
Col. B
Col. C
Additions
Col. D
Col. E
Description
2019:
Allowance for trade receivables
Allowance for other current receivables
Allowance for long-term receivables
Allowance for deferred taxes
2018:
Allowance for trade receivables
Allowance for other current receivables
Allowance for long-term receivables
Allowance for deferred taxes
2017:
Allowance for trade receivables
Allowance for other current receivables
Allowance for long-term receivables
Allowance for deferred taxes
Balance at
Beginning
of Period
Charged to
Costs and
Expenses
Charged to
Other
Accounts
Deductions
Balance at
End of
Period
(a)
(b)
$
$
$
$
$
$
40 $
47
24
1,153
1,264 $
50 $
98
21
853
1,022 $
58 $
93
20
310
481 $
2 $
(1)
—
349
350 $
3 $
(10)
—
409
402 $
21 $
6
(1)
549
575 $
(4) $
1
—
1
(2) $
(6) $
(24)
3
4
(23) $
(8) $
6
3
25
26 $
3 $
3
10
260
276 $
7 $
17
—
113
137 $
21 $
7
1
31
60 $
35
44
14
1,243
1,336
40
47
24
1,153
1,264
50
98
21
853
1,022
Notes:
(a) Primarily related to divestitures, acquisitions and currency translation.
(b) Represents charges for which allowances were created.
S-1
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-216408)
and Form S-8 (Nos. 333-197088, 333-184178, 333-183993, 333-182066, 333-174665, 333-165736, 333-133559
and 333-125992) of Mondelēz International, Inc. of our report dated February 7, 2020 relating to the consolidated
financial statements, financial statement schedule and the effectiveness of internal control over financial reporting,
which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
Chicago, IL
February 7, 2020
Certifications
EXHIBIT 31.1
I, Dirk Van de Put, certify that:
1.
I have reviewed this annual report on Form 10-K of Mondelēz International, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: February 7, 2020
/s/ DIRK VAN DE PUT
Dirk Van de Put
Chairman and Chief Executive Officer
Certifications
EXHIBIT 31.2
I, Luca Zaramella, certify that:
1.
I have reviewed this annual report on Form 10-K of Mondelēz International, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: February 7, 2020
/s/ LUCA ZARAMELLA
Luca Zaramella
Executive Vice President and
Chief Financial Officer
EXHIBIT 32.1
CERTIFICATIONS OF
CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Dirk Van de Put, Chairman and Chief Executive Officer of Mondelēz International, Inc. (“Mondelēz International”),
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that Mondelēz International’s Annual Report on Form 10-K for the year ended December 31, 2019, fully complies
with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information
contained in Mondelēz International’s Annual Report on Form 10-K fairly presents in all material respects
Mondelēz International’s financial condition and results of operations.
/s/ DIRK VAN DE PUT
Dirk Van de Put
Chairman and Chief Executive Officer
February 7, 2020
I, Luca Zaramella, Executive Vice President and Chief Financial Officer of Mondelēz International, Inc.
(“Mondelēz International”), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that Mondelēz International’s Annual Report on Form 10-K for the year ended
December 31, 2019, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 and that the information contained in Mondelēz International’s Annual Report on Form 10-K fairly presents
in all material respects Mondelēz International’s financial condition and results of operations.
/s/ LUCA ZARAMELLA
Luca Zaramella
Executive Vice President and
Chief Financial Officer
February 7, 2020
A signed original of these written statements required by Section 906, or other document authenticating,
acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this
written statement required by Section 906, has been provided to Mondelēz International, Inc. and will be retained by
Mondelēz International, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
BR609207-0220-10K