Mondelez International Reports Q3 2012 Results and Confirms 2013 Guidance

DEERFIELD, Ill., Nov. 7, 2012 /PRNewswire/ -- Mondelez International, Inc. (NASDAQ: MDLZ) today reported third quarter 2012 results.  

(Logo: http://photos.prnewswire.com/prnh/20121003/MM86695LOGO)

On Oct. 1, 2012, Mondelez International, formerly known as Kraft Foods Inc., completed the spin-off of its North American grocery business, Kraft Foods Group, Inc.  Beginning in the fourth quarter 2012, Kraft Foods Group's historical financial results for periods prior to Oct. 1, 2012, will be reflected in the company's financial statements as a discontinued operation.

Results Under the Kraft Foods Inc. Structure

  • Net revenues declined 2.4% to $12.9 billion; Organic Net Revenues1 increased 2.1%
  • Operating income declined 2.7%; Adjusted Operating Income1 increased 6.8%
  • Diluted EPS was $0.36; Operating EPS1 was $0.64, up 10.3%

On a reported basis, including Kraft Foods Group, net revenues were $12.9 billion, down 2.4 percent, including a 4.5 percentage point headwind from currency.  Organic Net Revenues increased 2.1 percent. 

Operating income was $1.7 billion, and operating income margin was 12.8 percent.  Adjusted Operating Income, which excludes Integration Program2 costs, Restructuring Program3 costs and Spin-Off Costs4, grew 6.8 percent to $1.9 billion.  Adjusted Operating Income margin increased 1.3 percentage points to 15.0 percent. 

Diluted EPS was $0.36, while Operating EPS was $0.64, up 10.3 percent, or 15.5 percent on a constant currency basis.

Results for Mondelez International on an
Adjusted Pro Forma Continuing Operations Basis

  • Net revenues declined 5.1% to $8.3 billion; Organic Net Revenues5 increased 1.5%
  • Operating income increased 2.2%, up 7.5% on a constant currency basis
  • Diluted EPS declined 2.6% to $0.37, up 2.6% on a constant currency basis
  • Company reaffirmed 2013 guidance of Organic Net Revenue growth at the low end of 5%-7% range, and Operating EPS of $1.50 to $1.55 based on average August 2012 foreign currency rates

The following discussion highlights standalone financial results for Mondelez International on an Adjusted Pro Forma continuing operations basis.  This reflects the spin-off and removal of the divested Kraft Foods Group business from all periods presented. It also includes the impacts of the following transactions as if they occurred at the beginning of the periods presented:  the transfer of certain North American benefit plan obligations to Kraft Foods Group; and the reduction of debt related to the completion of the spin-off capitalization plans. The Adjusted Pro Forma results exclude Spin-Off Costs, 2012-2014 Restructuring Program costs and Integration Program costs.  The company introduced Adjusted Pro Forma results of operations in a Form 8-K filing on October 5, 2012 to facilitate comparisons of past and future operating performance.

"As we expected, our top-line growth this quarter was modest," said Irene Rosenfeld, Chairman and CEO.  "This reflected the lapping of our exceptional performance in the third quarter last year and a lower contribution from pricing.  We also had some short-term executional missteps in a few key countries, but these issues should be largely resolved by the end of the year.  Growth in our core categories continues to be robust.  And we remain confident in our ability to deliver our 2013 and long-term targets."

Net revenues were $8.3 billion, down 5.1 percent, including a 6.6 percentage point headwind from currency.  Organic Net Revenues increased 1.5 percent despite lapping 9.4 percent growth in the prior year third quarter.  The increase was driven by 6 percent growth from global and regional Power Brands.  Favorable pricing of 2.2 percentage points was partially offset by 0.7 percentage points from lower volume/mix.  Through the first nine months of 2012, Organic Net Revenues increased 4.6 percent.

Operating income was $1.1 billion, up 2.2 percent, or 7.5 percent on a constant currency basis, as the effective management of input costs and lower SG&A more than offset the impact of lower volume/mix.   Operating income margin rose 0.9 percentage points to 13.1 percent.  Year-to-date, operating income grew 4.8 percent, or 9.3 percent on a constant currency basis, while operating income margin increased 0.9 percentage points to 12.7 percent.

Diluted EPS was $0.37, down 2.6 percent, including a $0.02 negative impact from currency.  On a constant currency basis, diluted EPS increased 2.6 percent in the third quarter and 7.8 percent year to date.  The increase was driven primarily by operating gains, mostly offset by an increase in taxes due to significant one-time benefits in the prior year.      

Mixed Results in Developing Markets
Developing Markets delivered modest organic revenue growth reflecting a difficult comparison to the prior year quarter as well as some executional issues in a few key markets. 

Net revenues in the third quarter decreased 6.0 percent, including a negative 7.7 percentage point impact from currency.  Organic Net Revenues6 grew 1.7 percent, with higher pricing partially offset by lower volume/mix.  The modest rise in Organic Net Revenue reflected difficult comparisons to the 15.5 percent growth generated in the prior year quarter, when many customers increased purchases ahead of announced price increases.  The region's Power Brands grew about 7 percent, led by Cadbury Dairy Milk, Lacta and Milka chocolate, and Oreo and Barni biscuits.

Revenue growth reflected mixed performance across the region.  Key markets such as China, India and the Middle East & Africa grew strongly, but this was tempered by weak results in Brazil and Russia due to short-term executional issues.  The company has taken actions to address these issues, and expects fourth quarter 2012 Organic Net Revenue in the region to grow high single digits.    

Segment operating income decreased 6.3 percent, including a negative 5.3 percentage point impact from currency.  Excluding currency, segment operating income was essentially flat as lower volume/mix largely offset the effective management of input costs.

Solid Performance in Europe
Europe delivered solid results in a difficult environment through volume/mix gains and continued benefits from a focus on productivity and overhead reduction.    

Net revenues in the third quarter decreased 8.1 percent, including a negative 8.8 percentage point impact from currency.  Organic Net Revenues increased 0.7 percent, driven by solid volume/mix growth, particularly in chocolate and coffee.  The volume/mix gains in the quarter were consistent with the performance in the first half of the year.  These gains were partially offset by lower pricing, primarily in coffee.  The region's Power Brands grew 2 percent, led by Milka and Cadbury Dairy Milk chocolate, Oreo and belVita biscuits, the chocobakery platform and Tassimo beverages. 

Segment operating income decreased 0.8 percent, including an unfavorable 8.2 percentage point impact from currency.  Excluding currency, Europe's segment operating income grew mid-to-high single digits, and includes the favorable impact of a one-time item.

Strong Biscuit Growth Drove Gains in North America
Strong U.S. biscuit performance drove solid top- and bottom-line growth in North America. 

Net revenues in the third quarter increased 1.9 percent.  Organic Net Revenues7 grew 2.2 percent, driven by higher pricing, partially offset by lower volume/mix due to product pruning in Canada.  Biscuits in the U.S. increased mid-single-digits, reflecting the benefits of a more focused direct store delivery sales force.  Gum and candy was flat as double-digit growth in candy and the launch of Stride ID offset weakness in other gum brands.  The region's Power Brands grew 9 percent, led by Honey Maid, Ritz, Triscuit and Oreo biscuits and Halls candy. 

Segment operating income increased 14.5 percent reflecting strong gains from pricing and productivity that more than offset a significant increase in advertising and consumer promotions support behind Power Brands. 

Outlook
"We remain confident in the 2013 guidance that we outlined in September," said David Brearton, Executive Vice President and CFO.  "As a result, we are reaffirming our 2013 Organic Net Revenue growth outlook to be at the low end of our long-term growth target of 5 to 7 percent, and Operating EPS1 to be $1.50 to $1.55, based on average August 2012 foreign currency rates.  Using average foreign currency rates for October 2012, the company's 2013 Operating EPS guidance would be approximately 5 cents higher." 

Conference Call
Mondelez International will host a conference call for investors with accompanying slides to review its results at 5 p.m. EST today.  Access to a live audio webcast with accompanying slides is available at www.mondelezinternational.com, and a replay of the event will also be available on the company's web site.

About Mondelez International
Mondelez International, Inc. (NASDAQ: MDLZ) is a world leader in chocolate, biscuits, gum, candy, coffee and powdered beverages.  The company comprises the global snacking and food brands of the former Kraft Foods Inc. following the spin-off of its North American grocery operations in October 2012.  Mondelez International's portfolio includes several billion-dollar brands such as Cadbury and Milka chocolate, Jacobs coffee, LU, Nabisco and Oreo biscuits, Tang powdered beverages and Trident gum. Mondelez International has annual revenue of approximately $36 billion and operations in more than 80 countries.  Visit www.mondelezinternational.com and www.facebook.com/mondelezinternational.  

Forward-Looking Statements
This press release contains a number of forward-looking statements.  Words, and variations of words such as "reaffirms," "expect," "should," "confident," "anticipate" and similar expressions are intended to identify our forward-looking statements, including but not limited to, statements about: 2013 guidance; timing of the resolution of executional missteps; 2013 and long-term targets; Developing Markets 2012 Organic Net Revenue; and our Outlook, in particular, 2013 Organic Net Revenue growth and Operating EPS.  These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, which could cause our actual results to differ materially from those indicated in our forward-looking statements.  Such factors include, but are not limited to, continued volatility of and increase in input costs, pricing actions, increased competition, continued economic weakness and tax law changes.  Please also see our risk factors, as they may be amended from time to time, set forth in our filings with the SEC, including our most recently filed Annual Report on Form 10-K and subsequent reports on Forms 10-Q and 8-K.  Mondelez International disclaims and does not undertake any obligation to update or revise any forward-looking statement in this press release, except as required by applicable law or regulation.  

Non-GAAP Financial Measures
The company reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP"). 

The company's top-line measure is Organic Net Revenues, which excludes the impacts of divestitures, currency and accounting calendar changes.  The company uses Organic Net Revenues and corresponding metrics as non-GAAP financial measures.  Management believes Organic Net Revenues better reflects the underlying growth from the ongoing activities of our business and provides improved comparability of results.

The company uses Adjusted Operating Income and Adjusted Segment Operating Income (formerly known as "Underlying Operating Income" and "Underlying Segment Operating Income," respectively), which is defined as operating income (or segment operating income) excluding costs related to:  the Integration Program; the Restructuring Program; and Spin-Off Costs, including transaction fees and other costs associated with the Spin-Off of the North American grocery business.  The company uses Adjusted Operating Income, Adjusted Segment Operating Income and corresponding metrics as non-GAAP financial measures.  Management believes Adjusted Operating Income and Adjusted Segment Operating Income provide improved comparability of operating results.

The company uses Operating EPS, which is defined as diluted EPS attributable to Mondelez International excluding costs related to:  the Integration Program; the Restructuring Program; and Spin-Off Costs.  The company uses Operating EPS and corresponding metrics as non-GAAP financial measures.  Management believes Operating EPS provides improved comparability of operating results.

The company uses Adjusted Pro Forma Results from Continuing Operations (also, "Adjusted Pro Forma" or "Adjusted Pro Forma Continuing Operations"), which is defined as including the following adjustments from the beginning of all periods presented:

  • removal of Kraft Foods Group results of operations ("Kraft Foods Group Operation") which was divested on October 1, 2012;
  • removal of Integration Program costs;
  • removal of 2012-2014 Restructuring Program costs;
  • removal of Spin-Off Costs, including transaction fees and other costs associated with the Spin-Off of Kraft Foods Group;
  • adjustment to reduce benefit plan expense in connection with the transfer of certain employee benefit plan obligations to Kraft Foods Group in the Spin-Off transaction;
  • adjustment to reflect the finalization of the Spin-Off capitalization plan at Mondelez International and the assumed pay down of approximately $6 billion of our debt and the related estimated reduction in our interest expense as a result of cash received from Kraft Foods Group.

The company uses Adjusted Pro Forma Continuing Operations and corresponding metrics as non-GAAP financial measures to present operating results on a standalone company basis.  Management believes Adjusted Pro Forma Continuing Operations provides improved comparability of operating results as a standalone company. The adjusted pro forma information is for informational purposes only and is not intended to represent what our results of operations or financial position would have been had the Spin-Off and related transactions and adjustments occurred at an earlier time within the periods presented, nor should it be considered indicative of our future results of operations as a standalone company. 

Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the company's results prepared in accordance with GAAP.  In addition, the non-GAAP measures the company is using may differ from non-GAAP measures used by other companies.  Because GAAP financial measures on a forward-looking basis are neither accessible nor deemed to be significantly different from the non-GAAP financial measures, and reconciling information is not available without unreasonable effort, with regard to the non-GAAP financial measures in the company's Outlook, the company has not provided that information. 

See the attached schedules for supplemental financial data and corresponding reconciliations of the non-GAAP financial measures referred to above to the most comparable GAAP financial measures for the three and nine months ended September 30, 2012 and 2011. 

Segment Operating Income
Management uses segment operating income to evaluate segment performance and allocate resources.  The company believes 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), certain components of its U.S. pension plan cost (which is a component of selling, general and administrative expenses), general corporate expenses (which are a component of selling, general and administrative expenses) and amortization of intangibles for all periods presented.  The company centrally manages pension plan funding decisions and determination of discount rate, expected rate of return on plan assets and other actuarial assumptions.  Therefore, the company allocates only the service cost component of its U.S. pension plan expense to segment operating income.  The company excludes the unrealized gains and losses on hedging activities from segment operating income to provide better transparency of its segment operating results.  Once realized, the company records the gains and losses on hedging activities within segment operating results.  Accordingly, the company does not present these items by segment because they are excluded from the segment profitability measure that management reviews.

1 Please see discussion of Non-GAAP Financial Measures at the end of this press release.

2 Integration Program costs are defined as the costs associated with combining the Kraft Foods and Cadbury businesses, and are separate from those costs associated with the acquisition.

3 Restructuring Program costs represent non-recurring restructuring and related implementation costs reflecting primarily severance, asset disposals and other manufacturing related non-recurring costs.

4 Spin-Off Costs represent non-recurring transaction and transition costs associated with preparing the businesses for independent operations consisting primarily of financial advisory fees, legal fees, accounting fees, tax services and information systems infrastructure duplication.  In addition, Spin-Off costs include financing and related costs to redistribute debt and secure investment grade credit ratings for both Mondelez International and Kraft Foods Group.

5 Please see discussion of Non-GAAP Financial Measures at the end of this press release.

6 Please see discussion of Non-GAAP Financial Measures at the end of this press release.

7 Please see discussion of Non-GAAP Financial Measures at the end of this press release.

 

 

 

Mondelez International, Inc. and Subsidiaries


(Includes the Results of Kraft Foods Group, Inc.)


Condensed Consolidated Statements of Earnings

Schedule 1

For the Three Months Ended September 30, 


(in millions of dollars, except per share data)  (Unaudited)













As Reported (GAAP) 




2012


2011


% Change
Fav / (Unfav)









Net revenues


$12,909


$13,226


(2.4)%









Cost of sales


8,191


8,611


4.9%










Gross profit


4,718


4,615


2.2%


Gross profit margin


36.5%


34.9%











Selling, general and administrative expenses


2,955


2,866


(3.1)%









Asset impairment and exit costs


57


(7)


(100.0+)%









Amortization of intangibles


54


58


6.9%










Operating income


1,652


1,698


(2.7)%


Operating income margin


12.8%


12.8%











Interest and other expense, net


864


425


(100.0+)%










Earnings before income taxes


788


1,273


(38.1)%









Provision for income taxes


129


346


62.7%

Effective tax rate


16.4%


27.2%












Net earnings


$        659


$        927


(28.9)%









Noncontrolling interest


7


5


(40.0)%










Net earnings attributable to Mondelez International


$        652


$        922


(29.3)%









Per share data:








Basic earnings per share attributable to Mondelez International


$       0.37


$       0.52


(28.8)%










Diluted earnings per share attributable to Mondelez International


$       0.36


$       0.52


(30.8)%









Average shares outstanding:








Basic


1,779


1,770


(0.5)%


Diluted


1,789


1,777


(0.7)%

 

Mondelez International, Inc. and Subsidiaries


(Includes the Results of Kraft Foods Group, Inc.)


Reconciliation of GAAP to Non-GAAP Information


Net Revenues

Schedule 2

For the Three Months Ended September 30, 


($ in millions)  (Unaudited)


























% Change



Organic Growth Drivers


As Reported (GAAP)


Impact of Currency


Organic (Non-GAAP)



As Reported (GAAP)


Organic (Non-GAAP)



Vol / Mix


Price

2012
































U.S. Beverages

$      682


$         -


$          682



0.1%


0.1%



0.7pp


(0.6)pp

U.S. Cheese

917


-


917



1.7%


1.7%



6.0


(4.3)

U.S. Convenient Meals

891


-


891



3.2%


3.2%



0.8


2.4

U.S. Grocery

898


-


898



7.4%


7.4%



3.8


3.6

U.S. Snacks

1,621


-


1,621



2.7%


2.7%



(0.7)


3.4

Canada & N.A. Foodservice

1,286


15


1,301



1.1%


2.3%



2.9


(0.6)

Mondelez North America

$   6,295


$      15


$       6,310



2.6%


2.9%



2.0


0.9

















Mondelez Europe

2,849


273


3,122



(8.1)%


0.7%



1.4


(0.7)

Mondelez Developing Markets

3,765


301


4,066



(5.7)%


1.8%



(2.5)


4.3

















Mondelez International

$ 12,909


$    589


$     13,498



(2.4)%


2.1%



0.6pp


1.5pp

































2011
































U.S. Beverages

$      681


$         -


$          681











U.S. Cheese

902


-


902











U.S. Convenient Meals

863


-


863











U.S. Grocery

836


-


836











U.S. Snacks

1,579


-


1,579











Canada & N.A. Foodservice

1,272


-


1,272











Mondelez North America

$   6,133


$         -


$       6,133



























Mondelez Europe

3,099


-


3,099











Mondelez Developing Markets

3,994


-


3,994



























Mondelez International

$ 13,226


$         -


$     13,226











 

Mondelez International, Inc. and Subsidiaries


(Includes the Results of Kraft Foods Group, Inc.)


Operating Income by Reportable Segments

Schedule 3

For the Three Months Ended September 30,


($ in millions)  (Unaudited)

























2011 Impacts


2012 Impacts






2011 Operating Income -   As Reported (GAAP)


Integration Program costs (1)


Asset Impairment & Exit costs (2)


Integration Program costs (1)


Impact of Currency


Spin-Off Costs (3)


2012-2014 Restructuring Program costs (4)


Operations(2)


2012 Operating Income - As Reported (GAAP)


% Change

Segment Operating Income:




















U.S. Beverages

$    101


$       -


$          (1)


$       -


$      -


$     -


$              (24)


$        -


$      76


(24.8)%

U.S. Cheese

145


-


-


-


-


-


(11)


25


159


9.7%

U.S. Convenient Meals

105


-


-


-


-


-


(6)


17


116


10.5%

U.S. Grocery

292


-


-


-


-


-


(7)


(1)


284


(2.7)%

U.S. Snacks

221


14


(1)


(3)


-


-


(17)


27


241


9.0%

Canada & N.A. Foodservice

171


5


-


-


(1)


-


(2)


18


191


11.7%

Mondelez North America

$ 1,035


$     19


$          (3)


$      (3)


$    (1)


$     -


$              (67)


$      87


$ 1,067


3.1%





















Mondelez Europe

334


56


(3)


28


(32)


-


-


32


415


24.3%

Mondelez Developing Markets

582


31


(1)


(11)


(32)


(25)


(2)


(3)


539


(7.4)%





















Unrealized G/(L) on Hedging Activities

(4)


-


-


-


-


-


-


58


54



HQ Pension

(57)


-


-


-


-


-


-


(33)


(90)



General Corporate Expenses

(134)


6


-


-


1


(201)


-


49


(279)



Amortization of Intangibles

(58)


-


-


-


1


-


-


3


(54)



Mondelez International

$ 1,698


$   112


$          (7)


$     14


$  (63)


$(226)


$              (69)


$    193


$ 1,652


(2.7)%

 

(1) 

Integration Program costs are defined as the costs associated with combining the Mondelez International and Cadbury businesses, and are separate from those costs associated with the acquisition. In Q3 2012, $6 million was recorded in Cost of Sales and $(20) million was recorded in Selling, General and Administrative expenses. In Q3 2011, $38 million was recorded in Cost of Sales and $74 million was recorded in Selling, General and Administrative expenses.

(2) 

May not foot due to rounding.

(3) 

Spin-Off Costs represent non-recurring transaction and transition costs associated with preparing the businesses for independent operations consisting primarily of financial advisory fees, legal fees, accounting fees, tax services and information systems infrastructure duplication.

(4) 

Restructuring Program costs represent non-recurring restructuring and related implementation costs reflecting primarily severance, asset disposals and other manufacturing related non-recurring costs.



 

Mondelez International, Inc. and Subsidiaries


(Includes the Results of Kraft Foods Group, Inc.)


Reconciliation of GAAP to Non-GAAP Information


Operating Income

Schedule 4

For the Three Months Ended September 30,


($ in millions)  (Unaudited)















As Reported (GAAP)


Integration Program costs (1)


Spin-Off Costs (2)


2012-2014 Restructuring Program costs (3)


Adjusted
(Non-GAAP)

2012











Net Revenues


$12,909


$                  -


$                 -


$                  -


$  12,909












Operating Income


$  1,652


$              (14)


$             226


$               69


$    1,933












Operating Income Margin


12.8%








15.0%












2011











Net Revenues


$13,226


$                  -


$                 -


$                  -


$  13,226












Operating Income


$  1,698


$             112


$                 -


$                  -


$    1,810












Operating Income Margin


12.8%








13.7%

 

(1) 

Integration Program costs are defined as the costs associated with combining the Mondelez International and Cadbury businesses, and are separate from those costs associated with the acquisition.

(2) 

Spin-Off Costs represent non-recurring transaction and transition costs associated with preparing the businesses for independent operations consisting primarily of financial advisory fees, legal fees, accounting fees, tax services and information systems infrastructure

duplication.

(3) 

Restructuring Program costs represent non-recurring restructuring and related implementation costs reflecting primarily severance, asset disposals and other manufacturing related non-recurring costs.

 

Mondelez International, Inc. and Subsidiaries


(Includes the Results of Kraft Foods Group, Inc.)


Reconciliation of GAAP to Non-GAAP Information


Diluted EPS

Schedule 5

(Unaudited)











Diluted EPS


% Growth








Diluted EPS Attributable to Mondelez International for the Three






Months Ended September 30, 2011 (GAAP)


$         0.52




Integration Program costs (1)


0.06




Operating EPS for the Three Months Ended September 30, 2011 (Non-GAAP)


0.58










Increases in operations


0.05




Change in unrealized gains/losses on hedging activities


0.02




Accounting calendar changes


-




Unfavorable foreign currency (2)


(0.03)




Lower interest and other expense, net (3)


0.01




Changes in taxes


0.01




Higher shares outstanding


-




Operating EPS for the Three Months Ended September 30, 2012 (Non-GAAP)


0.64


10.3%


Integration Program costs (1)


-




Spin-Off Costs (4)


(0.25)




2012-2014 Restructuring Program costs (5)


(0.03)




Diluted EPS Attributable to Mondelez International for the Three






Months Ended September 30, 2012 (GAAP)


$         0.36


(30.8)%

 

(1) 

Integration Program costs are defined as the costs associated with combining the Mondelez International and Cadbury businesses, and are separate from those costs associated with the acquisition. Integration Program costs were $(14) million, or $(5) million after-tax including certain tax costs associated with the integration of Cadbury, for the three months ended September 30, 2012, as compared to $112 million, or $111 million after-tax for the three months ended September 30, 2011.

(2) 

Includes the favorable foreign currency impact on Mondelez International foreign denominated debt and interest expense due to the strength of the U.S. dollar.

(3) 

Excludes financing costs/other fees related to our planned Spin-Off.

(4) 

Spin-Off Costs represent non-recurring transaction and transition costs associated with preparing the businesses for independent operations consisting primarily of financial advisory fees, legal fees, accounting fees, tax services and information systems infrastructure duplication, and financing and related costs to redistribute debt and secure investment grade ratings for both the Kraft Foods Group Business and the Mondelez International Business. Spin-Off Costs for the three months ended September 30, 2012 were $683 million, or $452 million after-tax and include $457 million of pre-tax financing costs/other fees recorded in interest and other expense, net.

(5) 

Restructuring Program costs for the three months ended September 30, 2012 were $69 million, or $43 million after-tax and represent non-recurring restructuring and related implementation costs reflecting primarily severance, asset disposals and other manufacturing related non-recurring costs.

 

Mondelez International, Inc. and Subsidiaries


(Includes the Results of Kraft Foods Group, Inc.)


Reconciliation of GAAP to Non-GAAP Information


Diluted Earnings Per Share

Schedule 6

Constant Currency Growth


For the Three Months Ended September 30, 


(Unaudited)


















% Growth



As Reported (GAAP)


Integration Program costs (1)


Spin-Off Cost (2)


2012 - 2014 Restructuring Program costs (3)


Operating (Non-GAAP)


Currency (4)


Operating Constant FX (Non-GAAP)



As Reported EPS Growth (GAAP)


Operating EPS Growth (Non-GAAP)


Operating Constant FX EPS Growth (Non-GAAP)

2012












































Diluted EPS attributable to Mondelez International


$         0.36


$        -


$             0.25


$               0.03


$         0.64


$       0.03


$         0.67



(30.8)%


10.3%


15.5%























2011












































Diluted EPS attributable to Mondelez International


$         0.52


$     0.06


$                 -


$                   -


$         0.58


$          -


$         0.58








 

(1) 

Integration Program costs are defined as the costs associated with combining the Mondelez International and Cadbury businesses, and are separate from those costs associated with the acquisition.

(2) 

Spin-Off Costs represent non-recurring transaction and transition costs associated with preparing the businesses for independent operations consisting primarily of financial advisory fees, legal fees, accounting fees, tax services and information systems infrastructure duplication, and financing and related costs to redistribute debt and secure investment grade ratings for both the Kraft Foods Group Business and the Mondelez International Business.

(3) 

Restructuring Program costs represent non-recurring restructuring and related implementation costs reflecting primarily severance, asset disposals  and other manufacturing related non-recurring costs.

(4) 

Includes the favorable foreign currency impact on Mondelez International foreign denominated debt and interest expense due to the strength of the U.S. dollar.

 

Mondelez International, Inc. and Subsidiaries


(Includes the Results of Kraft Foods Group, Inc.)


Condensed Consolidated Statements of Earnings

Schedule 7

For the Nine Months Ended September 30, 


(in millions of dollars, except per share data)  (Unaudited)













As Reported (GAAP) 




2012


2011


% Change
Fav / (Unfav)









Net revenues


$     39,288


$    39,677


(1.0)%









Cost of sales


25,033


25,555


2.0%










Gross profit


14,255


14,122


0.9%


Gross profit margin


36.3%


35.6%











Selling, general and administrative expenses


8,631


8,807


2.0%









Asset impairment and exit costs


239


(7)


(100.0+)%









Amortization of intangibles


163


172


5.2%










Operating income


5,222


5,150


1.4%


Operating income margin


13.3%


13.0%











Interest and other expense, net


1,846


1,312


(40.7)%










Earnings before income taxes


3,376


3,838


(12.0)%









Provision for income taxes


864


1,133


23.7%









Effective tax rate


25.6%


29.5%












Net earnings


$          2,512


$         2,705


(7.1)%









Noncontrolling interest


18


8


(100.0+)%










Net earnings attributable to Mondelez International


$          2,494


$         2,697


(7.5)%









Per share data:








Basic earnings per share attributable to Mondelez International


$            1.40


$           1.53


(8.5)%










Diluted earnings per share attributable to Mondelez International


$            1.40


$           1.52


(7.9)%









Average shares outstanding:








Basic


1,776


1,763


(0.7)%


Diluted


1,786


1,770


(0.9)%

 

Mondelez International, Inc. and Subsidiaries


(Includes the Results of Kraft Foods Group, Inc.)


Reconciliation of GAAP to Non-GAAP Information


Net Revenues

Schedule 8

For the Nine Months Ended September 30,


($ in millions)  (Unaudited)






















































% Change



Organic Growth Drivers


As Reported (GAAP)


Impact of Divestitures (1)


Impact of Accounting Calendar Changes


Impact of Currency


Organic (Non-GAAP)



As Reported (GAAP)


Organic (Non-GAAP)



Vol / Mix


Price

2012








































U.S. Beverages

$   2,168


$                -


$            -


$         -


$       2,168



(5.0)%


(1.2)%



(2.2)pp


1.0pp

U.S. Cheese

2,749


-


-


-


2,749



3.7%


3.7%



0.0


3.7

U.S. Convenient Meals

2,601


-


-


-


2,601



2.6%


2.6%



0.4


2.2

U.S. Grocery

2,739


-


-


-


2,739



5.2%


5.2%



1.4


3.8

U.S. Snacks

4,716


-


-


-


4,716



2.9%


2.9%



(3.1)


6.0

Canada & N.A. Foodservice

3,725


-


-


60


3,785



(0.3)%


1.4%



(0.6)


2.0

Mondelez North America

$ 18,698


$                -


$            -


$      60


$     18,758



1.7%


2.5%



(0.9)


3.4





















Mondelez Europe

9,004


-


-


653


9,657



(6.6)%


3.1%



1.6


1.5

Mondelez Developing Markets

11,586


-


-


760


12,346



(0.5)%


6.8%



1.0


5.8





















Mondelez International

$ 39,288


$                -


$            -


$  1,473


$     40,761



(1.0)%


3.9%



0.2pp


3.7pp









































2011








































U.S. Beverages

$   2,281


$            (87)


$            -


$         -


$       2,194











U.S. Cheese

2,651


-


-


-


2,651











U.S. Convenient Meals

2,536


-


-


-


2,536











U.S. Grocery

2,603


-


-


-


2,603











U.S. Snacks

4,581


-


-


-


4,581











Canada & N.A. Foodservice

3,735


(4)


-


-


3,731











Mondelez North America

$ 18,387


$            (91)


$            -


$         -


$     18,296































Mondelez Europe

9,640


-


(269)


-


9,371











Mondelez Developing Markets

11,650


-


(92)


-


11,558































Mondelez International

$ 39,677


$            (91)


$      (361)


$         -


$     39,225



















































(1)  Impact of divestitures includes for reporting purposes Starbucks CPG business.


 

Mondelez International, Inc. and Subsidiaries


(Includes the Results of Kraft Foods Group, Inc.)


Operating Income by Reportable Segments

Schedule 9

For the Nine Months Ended September 30, 


($ in millions)  (Unaudited)





2011 Impacts


2012 Impacts












2011 Operating Income - As Reported (GAAP)


Integration Program costs (1)


Asset Impairment & Exit costs (6)


Impact of Divestitures (3)


Impact of Accounting Calendar Changes


Integration Program costs (1)


Asset Impairment & Exit costs (2)


Impact of Currency


Spin-off Costs (4)


2012-2014 Restructuring Program costs (5)


Operations(6)


2012 Operating Income -     As Reported (GAAP)


% Change

Segment Operating Income:


























U.S. Beverages

$       400


$       -


$          (1)


$         (13)


$         -


$       -


$                  -


$      -


$     -


$              (41)


$     (37)


$       308


(23.0)%

U.S. Cheese

422


-


-


-


-


-


-


-


-


(56)


116


482


14.2%

U.S. Convenient Meals

309


-


-


-


-


-


-


-


-


(18)


47


338


9.4%

U.S. Grocery

963


-


-


-


-


-


-


-


-


(24)


35


974


1.1%

U.S. Snacks

606


29


(1)


-


-


(5)


-


-


-


(63)


77


643


6.1%

Canada & N.A. Foodservice

510


12


-


(2)


-


1


-


(9)


-


(29)


8


491


(3.7)%

Mondelez North America

$     3,210


$     41


$          (3)


$         (15)


$         -


$      (4)


$                  -


$    (9)


$     -


$            (231)


$    247


$     3,236


0.8%



























Mondelez Europe

1,057


165


(3)


-


(41)


(8)


-


(82)


-


-


107


1,195


13.1%

Mondelez Developing Markets

1,505


121


(1)


-


(10)


(50)


(21)


(72)


(25)


(7)


168


1,608


6.8%



























Unrealized G/(L) on Hedging Activities

(42)


-


-


-


-


-


-


-


-


-


143


101



HQ Pension

(143)


-


-


-


-


-


-


-


-


-


(94)


(237)



General Corporate Expenses

(265)


25


-


-


-


(2)


-


8


(340)


-


56


(518)



Amortization of Intangibles

(172)


-


-


-


-


-


-


8


-


-


1


(163)





























Mondelez International

$     5,150


$   352


$          (7)


$         (15)


$     (51)


$    (64)


$               (21)


$(147)


$(365)


$            (238)


$    628


$     5,222


1.4%

 

(1) 

Integration Program costs are defined as the costs associated with combining the Mondelez International and Cadbury businesses, and are separate from those costs associated with the acquisition. For the nine months ended September 30, 2012, $14 million was recorded in Cost of Sales and $50 million was recorded in Selling, General and Administrative expenses. For the nine months ended September 30, 2011, $60 million was recorded in Cost of Sales and $292 million was recorded in Selling, General and Administrative expenses.

(2) 

Includes an asset impairment charge related to a trademark in Japan.

(3) 

Impact of divestitures includes for reporting purposes Starbucks CPG business.

(4) 

Spin-Off Costs represent non-recurring transaction and transition costs associated with preparing the businesses for independent operations consisting primarily of financial advisory fees, legal fees, accounting fees, tax services and information systems infrastructure duplication.

(5) 

Restructuring Program costs represent non-recurring restructuring and related implementation costs reflecting primarily severance, asset disposals and other manufacturing related non-recurring costs.

(6) 

May not foot due to rounding.

 

Mondelez International, Inc. and Subsidiaries


(Includes the Results of Kraft Foods Group, Inc.)


Reconciliation of GAAP to Non-GAAP Information


Operating Income

Schedule 10

For the Nine Months Ended September 30,


($ in millions)  (Unaudited)















As Reported (GAAP)


Integration Program costs (1)


Spin-off Costs (2)


2012-2014 Restructuring Program costs (3)


Adjusted
(Non-GAAP)

2012











Net Revenues


$39,288


$                  -


$                 -


$                  -


$  39,288












Operating Income


$  5,222


$               64


$            365


$             238


$    5,889












Operating Income Margin


13.3%








15.0%












2011











Net Revenues


$39,677


$                  -


$                 -


$                  -


$  39,677












Operating Income


$  5,150


$             352


$                 -


$                  -


$    5,502












Operating Income Margin


13.0%








13.9%

 

(1) 

Integration Program costs are defined as the costs associated with combining the Mondelez International and Cadbury businesses, and are separate from those costs associated with the acquisition.

(2) 

Spin-Off Costs represent non-recurring transaction and transition costs associated with preparing the businesses for independent operations consisting primarily of financial advisory fees, legal fees, accounting fees, tax services and information systems infrastructure

duplication.

(3) 

Restructuring Program costs represent non-recurring restructuring and related implementation costs reflecting primarily severance, asset disposals and other manufacturing related non-recurring costs.

 

Mondelez International, Inc. and Subsidiaries


(Includes the Results of Kraft Foods Group, Inc.)


Reconciliation of GAAP to Non-GAAP Information


Diluted EPS

Schedule 11

(Unaudited)











Diluted EPS


% Growth








Diluted EPS Attributable to Mondelez International for the Nine






Months Ended September 30, 2011 (GAAP)


$         1.52




Integration Program costs (1)


0.20




Operating EPS for the Nine Months Ended September 30, 2011 (Non-GAAP)


1.72










Increases in operations


0.17




Change in unrealized gains/losses on hedging activities


0.05




Gain on sale of property


0.02




Accounting calendar changes


(0.02)




Decreased operating income from the Starbucks CPG business cessation (2)


(0.01)




Asset impairment charge


(0.01)




Unfavorable foreign currency (3)


(0.05)




Lower interest and other expense, net (4)


0.03




Changes in taxes


-




Higher shares outstanding


(0.02)




Operating EPS for the Nine Months Ended September 30, 2012 (Non-GAAP)


1.88


9.3%


Integration Program costs (1)


(0.04)




Spin-Off Costs (5)


(0.36)




2012-2014 Restructuring Program costs (6)


(0.08)




Diluted EPS Attributable to Mondelez International for the Nine






Months Ended September 30, 2012 (GAAP)


$         1.40


(7.9)%

 

(1) 

Integration Program costs are defined as the costs associated with combining the Mondelez International and Cadbury businesses, and are separate from those costs associated with the acquisition. Integration Program costs were $64 million, or $68 million after-tax including certain tax costs associated with the integration of Cadbury, for the nine months ended September 30, 2012, as compared to $352 million, or $345 million after-tax for the nine months ended September 30, 2011.

(2) 

Effective March 1, 2011 Starbucks unilaterally took control of the sale and distribution of the packaged coffee business in grocery stores and other channels by terminating its agreements with Mondelez International and in a manner that Mondelez International believes violates the terms of those agreements.

(3) 

Includes the favorable foreign currency impact on Mondelez International foreign denominated debt and interest expense due to the strength of the U.S. dollar.

(4) 

Excludes financing costs/other fees related to our planned Spin-Off.

(5) 

Spin-Off Costs represent non-recurring transaction and transition costs associated with preparing the businesses for independent operations consisting primarily of financial advisory fees, legal fees, accounting fees, tax services and information systems infrastructure duplication, and financing and related costs to redistribute debt and secure investment grade ratings for both the Kraft Foods Group Business and the Mondelez International Business. Spin-Off Costs for the nine months ended September 30, 2012 were $984 million, or $654 million after-tax and include $619 million of pre-tax financing and related costs recorded in interest and other expense, net.

(6) 

Restructuring Program costs for the nine months ended September 30, 2012 were $238 million, or $150 million after-tax and represent non-recurring restructuring and related implementation costs reflecting primarily severance, asset disposals and other manufacturing related non-recurring costs.

 

Mondelez International, Inc. and Subsidiaries


(Includes the Results of Kraft Foods Group, Inc.)


Reconciliation of GAAP to Non-GAAP Information


Diluted Earnings Per Share

Schedule 12

Constant Currency Growth


For the Nine Months Ended September 30, 


(Unaudited)









































% Growth



As Reported (GAAP)


Integration Program costs (1)


Spin-off Costs (2)


2012 - 2014 Restructuring Program costs (3)


Operating (Non-GAAP)


Currency (4)


Operating Constant FX (Non-GAAP)



As Reported EPS Growth (GAAP)


Operating EPS Growth (Non-GAAP)


Operating Constant FX EPS Growth (Non-GAAP)

2012












































Diluted EPS attributable to Mondelez International


$         1.40


$     0.04


$  0.36


$            0.08


$         1.88


$       0.06


$         1.94



(7.9)%


9.3%


12.8%













































2011












































Diluted EPS attributable to Mondelez International


$         1.52


$     0.20


$      -


$               -


$         1.72


$          -


$         1.72








 

(1) 

Integration Program costs are defined as the costs associated with combining the Mondelez International and Cadbury businesses, and are separate from those costs associated with the acquisition.

(2) 

Spin-Off Costs represent non-recurring transaction and transition costs associated with preparing the businesses for independent operations consisting primarily of financial advisory fees, legal fees, accounting fees, tax services and information systems infrastructure duplication, and financing and related costs to redistribute debt and secure investment grade ratings for both the Kraft Foods Group Business and the Mondelez International Business.

(3) 

Restructuring Program costs represent non-recurring restructuring and related implementation costs reflecting primarily severance, asset disposals and other manufacturing related non-recurring costs.

(4) 

Includes the favorable foreign currency impact on Mondelez International foreign denominated debt and interest expense due to the strength of the U.S. dollar.

 

Mondelez International, Inc. and Subsidiaries


Reconciliation of GAAP to Non-GAAP Information


Adjusted Pro Forma Consolidated Statement of Earnings

Schedule 13

($ in millions) (Unaudited)














Three Months Ended September 30, 2012



GAAP

Kraft Foods Group Operation

Integration Program costs

Spin-Off Costs

Restructuring Program costs

Pension

Interest

Adjusted Pro Forma (Non-GAAP)



(a)

(b)

(c)

(d)

(e)

(f)

(g)


Net Revenues

$12,909

$           (4,583)

$                 -

$                 -

$                 -

$       -

$      -

$         8,326

COGS

8,191

(2,985)

(6)

-

(1)

(11)

-

5,188

Gross Profit

4,718

(1,598)

6

-

1

11

-

3,138

% NR

36.5%







37.7%











SG&A

2,955

(740)

20

(226)

(4)

(12)

-

1,993

Asset impairment & exit costs

57

(44)

-

-

(13)

-

-

-

Amortization of intangibles

54

-

-

-

-

-

-

54











Operating Income

1,652

(814)

(14)

226

18

23

-

1,091

% NR

12.8%







13.1%











Interest and other expense, net

864

(127)

-

(457)

-

-

(26)

254