Mondelez International, Inc. [MDLZ] Filings

10-Q 1 mdlz-20220630.htm 10-Q mdlz-20220630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


			☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022


			☐			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		52-2284372
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

905 West Fulton Market, Suite 200
Chicago,	Illinois	60607
(Address of principal executive offices)		(Zip Code)

(Registrant’s telephone number, including area code) (847) 943-4000

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Tile of each class

Trading
Symbol(s)

Name of each exchange on which registered

Class A Common Stock, no par value

MDLZ

The Nasdaq Global Select Market

1.625% Notes due 2027

MDLZ27

The Nasdaq Stock Market LLC

0.250% Notes due 2028

MDLZ28

The Nasdaq Stock Market LLC

0.750% Notes due 2033

MDLZ33

The Nasdaq Stock Market LLC

2.375% Notes due 2035

MDLZ35

The Nasdaq Stock Market LLC

4.500% Notes due 2035

MDLZ35A

The Nasdaq Stock Market LLC

1.375% Notes due 2041

MDLZ41

The Nasdaq Stock Market LLC

3.875% Notes due 2045

MDLZ45

The Nasdaq Stock Market LLC

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 ¨

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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

Accelerated filer

☐

Non-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 Exchange Act). Yes ☐ No x

At July 22, 2022, there were 1,370,566,113 shares of the registrant’s Class A Common Stock outstanding.

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Mondelēz International, Inc.

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		Page No.
PART I -	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Statements of Earnings for the Three and Six Months Ended June 30, 2022 and 2021	1

	Condensed Consolidated Statements of Comprehensive Earnings for the Three and Six Months Ended June 30, 2022 and 2021	2

	Condensed Consolidated Balance Sheets at June 30, 2022 and December 31, 2021	3

	Condensed Consolidated Statements of Equity for the Three and Six Months Ended June 30, 2022 and 2021	4

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	63

Item 4.	Controls and Procedures	64

PART II -	OTHER INFORMATION

Item 1.	Legal Proceedings	65

Item 1A.	Risk Factors	65

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	65

Item 6.	Exhibits	66

Signature		67

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.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Mondelēz International, Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings

(in millions of U.S. dollars, except per share data)

(Unaudited)


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
Net revenues	$	7,274	$	6,642	$	15,038	$	13,880
Cost of sales	4,633		4,011		9,414		8,283
Gross profit	2,641		2,631		5,624		5,597
Selling, general and administrative expenses	1,676		1,593		3,369		3,157
Asset impairment and exit costs	6		134		170		224
Gain on acquisition	—		—		—		(9)
Amortization of intangible assets	32		32		64		70
Operating income	927		872		2,021		2,155
Benefit plan non-service income	(30)		(54)		(63)		(98)
Interest and other expense, net	98		58		266		276
Earnings before income taxes	859		868		1,818		1,977
Income tax provision	(201)		(398)		(411)		(610)
(Loss)/gain on equity method investment transactions	(8)		502		(13)		495
Equity method investment net earnings	98		107		215		185
Net earnings	748		1,079		1,609		2,047
Noncontrolling interest earnings	(1)		(1)		(7)		(8)
Net earnings attributable to Mondelēz International	$	747	$	1,078	$	1,602	$	2,039
Per share data:
Basic earnings per share attributable to Mondelēz International	$	0.54	$	0.77	$	1.16	$	1.45
Diluted earnings per share attributable to Mondelēz International	$	0.54	$	0.76	$	1.15	$	1.44

See accompanying notes to the condensed consolidated financial statements.

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Mondelēz International, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Earnings

(in millions of U.S. dollars)

(Unaudited)


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
Net earnings	$	748	$	1,079	$	1,609	$	2,047
Other comprehensive earnings/(losses), net of tax:
Currency translation adjustment	(399)		157		(349)		21
Pension and other benefit plans	167		2		260		71
Derivative cash flow hedges	8		17		60		19
Total other comprehensive earnings/(losses)	(224)		176		(29)		111
Comprehensive earnings/(losses)	524		1,255		1,580		2,158
less: Comprehensive earnings/(losses) attributable to noncontrolling interests	(10)		3		(8)		1
Comprehensive earnings/(losses) attributable to Mondelēz International	$	534	$	1,252	$	1,588	$	2,157

See accompanying notes to the condensed consolidated financial statements.

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Mondelēz International, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in millions of U.S. dollars, except share data)

(Unaudited)


	June 30, 2022		December 31, 2021
ASSETS
Cash and cash equivalents	$	1,924	$	3,546
Trade receivables (net of allowances of $45 at June 30, 2022 and $37 at December 31, 2021)	2,467		2,337
Other receivables (net of allowances of $48 at June 30, 2022 and $49 at December 31, 2021)	715		851
Inventories, net	3,038		2,708
Other current assets	1,066		900
Total current assets	9,210		10,342
Property, plant and equipment, net	8,753		8,658
Operating lease right of use assets	626		613
Goodwill	22,103		21,978
Intangible assets, net	18,339		18,291
Prepaid pension assets	1,141		1,009
Deferred income taxes	551		541
Equity method investments	4,655		5,289
Other assets	636		371
TOTAL ASSETS	$	66,014	$	67,092
LIABILITIES
Short-term borrowings	$	605	$	216
Current portion of long-term debt	746		1,746
Accounts payable	6,787		6,730
Accrued marketing	2,151		2,097
Accrued employment costs	729		822
Other current liabilities	2,560		2,397
Total current liabilities	13,578		14,008
Long-term debt	17,861		17,550
Long-term operating lease liabilities	489		459
Deferred income taxes	3,580		3,444
Accrued pension costs	591		681
Accrued postretirement health care costs	299		301
Other liabilities	2,063		2,326
TOTAL LIABILITIES	38,461		38,769
Commitments and Contingencies (Note 12)
EQUITY
Common Stock, no par value (5,000,000,000 shares authorized and 1,996,537,778 shares issued at June 30, 2022 and December 31, 2021)	—		—
Additional paid-in capital	32,086		32,097
Retained earnings	31,431		30,806
Accumulated other comprehensive losses	(10,638)		(10,624)
Treasury stock, at cost (624,240,103 shares at June 30, 2022 and 604,907,239 shares at December 31, 2021)	(25,368)		(24,010)
Total Mondelēz International Shareholders’ Equity	27,511		28,269
Noncontrolling interest	42		54
TOTAL EQUITY	27,553		28,323
TOTAL LIABILITIES AND EQUITY	$	66,014	$	67,092

See accompanying notes to the condensed consolidated financial statements.

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Mondelēz International, Inc. and Subsidiaries

Condensed Consolidated Statements of Equity

(in millions of U.S. dollars, except per share data)

(Unaudited)


	Mondelēz International Shareholders’ Equity
	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Earnings/ (Losses)		Treasury Stock		Non-controlling Interest		Total Equity
Three Months Ended June 30, 2022
Balances at April 1, 2022	$	—	$	32,053	$	31,163	$	(10,425)	$	(24,630)	$	55	$	28,216
Comprehensive earnings/(losses):
Net earnings	—		—		747		—		—		1		748
Other comprehensive earnings/(losses), net of income taxes	—		—		—		(213)		—		(11)		(224)
Exercise of stock options and issuance of other stock awards	—		33		—		—		32		—		65
Common Stock repurchased	—		—		—		—		(770)		—		(770)
Cash dividends declared ($0.350 per share)	—		—		(482)		—		—		—		(482)
Dividends paid on noncontrolling interest and other activities	—		—		3		—		—		(3)		—
Balances at June 30, 2022	$	—	$	32,086	$	31,431	$	(10,638)	$	(25,368)	$	42	$	27,553
Six Months Ended June 30, 2022
Balances at January 1, 2022	$	—	$	32,097	$	30,806	$	(10,624)	$	(24,010)	$	54	$	28,323
Comprehensive earnings/(losses):
Net earnings	—		—		1,602		—		—		7		1,609
Other comprehensive earnings/(losses), net of income taxes	—		—		—		(14)		—		(15)		(29)
Exercise of stock options and issuance of other stock awards	—		(11)		(11)		—		147		—		125
Common Stock repurchased	—		—		—		—		(1,505)		—		(1,505)
Cash dividends declared ($0.700 per share)	—		—		(969)		—		—		—		(969)
Dividends paid on noncontrolling interest and other activities	—		—		3		—		—		(4)		(1)
Balances at June 30, 2022	$	—	$	32,086	$	31,431	$	(10,638)	$	(25,368)	$	42	$	27,553
Three Months Ended June 30, 2021
Balances at April 1, 2021	$	—	$	32,009	$	28,903	$	(10,746)	$	(23,091)	$	74	$	27,149
Comprehensive earnings/(losses):
Net earnings	—		—		1,078		—		—		1		1,079
Other comprehensive earnings/(losses), net of income taxes	—		—		—		174		—		2		176
Exercise of stock options and issuance of other stock awards	—		33		(3)		—		77		—		107
Common Stock repurchased	—		—		—		—		(451)		—		(451)
Cash dividends declared ($0.315 per share)	—		—		(444)		—		—		—		(444)
Dividends paid on noncontrolling interest and other activities	—		—		4		—		—		—		4
Balances at June 30, 2021	$	—	$	32,042	$	29,538	$	(10,572)	$	(23,465)	$	77	$	27,620
Six Months Ended June 30, 2021
Balances at January 1, 2021	$	—	$	32,070	$	28,402	$	(10,690)	$	(22,204)	$	76	$	27,654
Comprehensive earnings/(losses):
Net earnings	—		—		2,039		—		—		8		2,047
Other comprehensive earnings/(losses), net of income taxes	—		—		—		118		—		(7)		111
Exercise of stock options and issuance of other stock awards	—		(28)		(18)		—		207		—		161
Common Stock repurchased	—		—		—		—		(1,468)		—		(1,468)
Cash dividends declared ($0.630 per share)	—		—		(889)		—		—		—		(889)
Dividends paid on noncontrolling interest and other activities	—		—		4		—		—		—		4
Balances at June 30, 2021	$	—	$	32,042	$	29,538	$	(10,572)	$	(23,465)	$	77	$	27,620

See accompanying notes to the condensed consolidated financial statements.

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Mondelēz International, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in millions of U.S. dollars)

(Unaudited)


	For the Six Months Ended June 30,
	2022		2021
CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES
Net earnings	$	1,609	$	2,047
Adjustments to reconcile net earnings to operating cash flows:
Depreciation and amortization	548		564
Stock-based compensation expense	56		63

Deferred income tax (benefit)/provision	(32)		92
Asset impairments and accelerated depreciation	163		152
Loss on early extinguishment of debt	38		110
Gain on acquisition	—		(9)
Loss/(gain) on equity method investment transactions	13		(495)
Equity method investment net earnings	(215)		(185)
Distributions from equity method investments	121		94
Other non-cash items, net	150		(5)
Change in assets and liabilities, net of acquisitions and divestitures:
Receivables, net	(227)		42
Inventories, net	(366)		(289)
Accounts payable	183		182
Other current assets	(142)		(190)
Other current liabilities	179		(231)
Change in pension and postretirement assets and liabilities, net	(111)		(150)
Net cash provided by operating activities	1,967		1,792
CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES
Capital expenditures	(385)		(410)
Acquisitions, net of cash received	(1,402)		(833)
Proceeds from divestitures including equity method investments	595		998
Proceeds from sale of property, plant and equipment and other	193		25
Net cash used in investing activities	(999)		(220)
CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES


Net issuances/(repayments) of other short-term borrowings	219		37
Long-term debt proceeds	1,991		2,378
Long-term debt repayments	(2,329)		(3,376)
Repurchases of Common Stock	(1,506)		(1,498)
Dividends paid	(977)		(896)
Other	86		127
Net cash used in financing activities	(2,516)		(3,228)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(70)		(25)
Cash, cash equivalents and restricted cash:
(Decrease)/Increase	(1,618)		(1,681)
Balance at beginning of period	3,553		3,650
Balance at end of period	$	1,935	$	1,969

See accompanying notes to the condensed consolidated financial statements.

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Mondelēz International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1. Basis of Presentation

Our interim condensed consolidated financial statements are unaudited. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted. It is management’s opinion that these financial statements include all normal and recurring adjustments necessary for a fair presentation of our results of operations, financial position and cash flows. Results of operations for any interim period are not necessarily indicative of future or annual results. For a complete set of consolidated financial statements and related notes, refer to our Annual Report on Form 10-K for the year ended December 31, 2021.

Principles of Consolidation:

The condensed consolidated financial statements include Mondelēz International, Inc. as well as our wholly owned and majority owned subsidiaries, except our Venezuelan subsidiaries that 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 as there are no readily determinable fair values for the equity interests, these investments are carried at cost with changes in the investment recognized to the extent cash is received.

War in Ukraine

In February 2022, Russia began a military invasion of Ukraine and we closed our operations and facilities in Ukraine. In March 2022, our two Ukrainian manufacturing facilities in Trostyanets and Vyshhorod were significantly damaged. During the first quarter of 2022, we evaluated and impaired these and other assets. We recorded $143 million of total expenses ($145 million after-tax) incurred as a direct result of the war, including $75 million recorded in asset impairment and exit costs, $44 million in cost of sales and $24 million in selling, general and administrative expenses. We recorded $75 million of property, plant and equipment impairments, $33 million of estimated inventory write-offs, $19 million of increased estimated allowances for trade receivables and $16 million in accrued expenses. During the second quarter of 2022, we reversed approximately $15 million of previously recorded charges as a result of higher than expected collection of trade receivables and inventory recoveries. We continue to consolidate both our Ukrainian and Russian subsidiaries and continue to evaluate our ability to control our operating activities and businesses on an ongoing basis. In connection with these findings and impacts, we have made estimates and assumptions based on information available to us. We base our estimates on historical experience, expectations of future impacts and other assumptions that we believe are reasonable. Given the uncertainty of the ongoing effects of the war in Ukraine, and its impact on the global economic environment, our estimates could be significantly different than future performance.

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 currency 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. Local currency monetary assets and liabilities are remeasured into U.S. dollars using exchange rates as of the latest balance sheet date, with remeasurement gains and losses recognized in net earnings.

Türkiye. During the first quarter of 2022, primarily based on data published by the Türkiye Statistical Institute that indicated that Türkiye's three-year cumulative inflation rate exceeded 100%, we concluded that Türkiye became a highly inflationary economy for accounting purposes. As of April 1, 2022, we began to apply highly inflationary accounting for our subsidiaries operating in Türkiye and change their functional currency from the Turkish lira to the U.S. dollar. Our operations in Türkiye contributed $46 million or 0.6% of our condensed consolidated net revenues in the three months and $90 million or 0.6% of our condensed consolidated net revenues in the six months ended June 30, 2022. As of June 30, 2022, our operations in Türkiye had $11 million of Turkish lira denominated net

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monetary liabilities. Within selling, general and administrative expenses, we recorded a remeasurement loss of less than $1 million during the three months ended June 30, 2022 related to the revaluation of the Turkish lira denominated net monetary position during the quarter.

Argentina. During the second quarter of 2018, primarily based on published estimates that 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. Our operations in Argentina contributed $138 million or 1.9% of consolidated net revenues in the three months and $268 million or 1.8% of our condensed consolidated net revenues in the six months ended June 30, 2022. As of June 30, 2022, our Argentinean operations had $28 million of Argentinean peso denominated net monetary assets. Within selling, general and administrative expenses, we recorded a remeasurement loss of $10 million during the three months and $15 million during the six months ended June 30, 2022 as well as a remeasurement loss of $3 million during the three months and $8 million during the six months ended June 30, 2021 related to the revaluation of the Argentinean peso denominated net monetary position over these periods.

Other Countries. Since we sell our products in over