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Mondelez International, Inc. 10-Q 2013

Documents found in this filing:

  1. 10-Q
  2. Ex-12
  3. Ex-31.1
  4. Ex-31.2
  5. Ex-32.1
  6. Graphic
  7. Graphic
Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2013

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

 

 

LOGO

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.)

Three Parkway North,

Deerfield, Illinois

  60015
(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)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer  x  

Accelerated filer  ¨

   Non-accelerated filer  ¨   Smaller reporting company  ¨
  (Do not check if a smaller reporting company)

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 October 31, 2013, there were 1,753,787,532 shares of the registrant’s Class A common stock outstanding.

 

 

 


Table of Contents

Mondelēz International, Inc.

Table of Contents

 

         Page No.  
PART I  –  FINANCIAL INFORMATION   
Item 1.  

Financial Statements (Unaudited)

  
 

Condensed Consolidated Statements of Earnings
for the Three and Nine Months Ended September 30, 2013 and 2012

     1   
 

Condensed Consolidated Statements of Comprehensive Earnings
for the Three and Nine Months Ended September 30, 2013 and 2012

     2   
 

Condensed Consolidated Balance Sheets
at September 30, 2013 and December 31, 2012

     3   
 

Condensed Consolidated Statements of Equity
for the Year Ended December 31, 2012 and the
Nine Months Ended September 30, 2013

     4   
 

Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 2013 and 2012

     5   
 

Notes to Condensed Consolidated Financial Statements

     6   
Item 2.  

Management’s Discussion and Analysis of Financial
Condition and Results of Operations

     26   
Item 3.  

Quantitative and Qualitative Disclosures about Market Risk

     54   
Item 4.  

Controls and Procedures

     54   
PART II  –  OTHER INFORMATION   
Item 1.  

Legal Proceedings

     55   
Item 1A.  

Risk Factors

     55   
Item 2.  

Unregistered Sales of Equity Securities and Use of Proceeds

     55   
Item 6.  

Exhibits

     56   
Signature        57   

In this report, for all periods presented, “we,” “us,” “our,” and “Mondelēz International” refer to Mondelēz International, Inc. and subsidiaries (formerly Kraft Foods Inc. and subsidiaries). References to “Common Stock” refer to our Class A common stock.

 

i


Table of Contents

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     For the Nine Months Ended  
     September 30,     September 30,  
     2013      2012     2013     2012  

Net revenues

   $ 8,472       $ 8,326      $ 25,811      $ 25,520   

Cost of sales

     5,328         5,206        16,194        15,994   
  

 

 

    

 

 

   

 

 

   

 

 

 

Gross profit

     3,144         3,120        9,617        9,526   

Selling, general and administrative expenses

     1,784         2,215        6,385        6,601   

Asset impairment and exit costs

     43         13        135        84   

Gains on acquisition and divestitures, net

                    (28       

Amortization of intangibles

     55         54        164        163   
  

 

 

    

 

 

   

 

 

   

 

 

 

Operating income

     1,262         838        2,961        2,678   

Interest and other expense, net

     218         737        732        1,568   
  

 

 

    

 

 

   

 

 

   

 

 

 

Earnings from continuing operations before income taxes

     1,044         101        2,229        1,110   

Provision / (benefit) for income taxes

     14         (76     8        104   
  

 

 

    

 

 

   

 

 

   

 

 

 

Earnings from continuing operations

     1,030         177        2,221        1,006   

Earnings from discontinued operations, net of income taxes

             482               1,506   
  

 

 

    

 

 

   

 

 

   

 

 

 

Net earnings

     1,030         659        2,221        2,512   

Noncontrolling interest

     6         7        13        18   
  

 

 

    

 

 

   

 

 

   

 

 

 

Net earnings attributable to Mondelēz International

   $ 1,024       $ 652      $ 2,208      $ 2,494   
  

 

 

    

 

 

   

 

 

   

 

 

 

Per share data:

         

Basic earnings per share attributable to
Mondelēz International:

         

Continuing operations

     0.58         0.10        1.24        0.56   

Discontinued operations

             0.27               0.84   
  

 

 

    

 

 

   

 

 

   

 

 

 

Net earnings attributable to Mondelēz International

   $ 0.58       $ 0.37      $ 1.24      $ 1.40   
  

 

 

    

 

 

   

 

 

   

 

 

 

Diluted earnings per share attributable to
Mondelēz International:

         

Continuing operations

     0.57         0.10        1.23        0.55   

Discontinued operations

             0.26               0.85   
  

 

 

    

 

 

   

 

 

   

 

 

 

Net earnings attributable to Mondelēz International

   $ 0.57       $ 0.36      $ 1.23      $ 1.40   
  

 

 

    

 

 

   

 

 

   

 

 

 

Dividends declared

   $ 0.14       $ 0.29      $ 0.40      $ 0.87   

See accompanying notes to the condensed consolidated financial statements.

 

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Table of Contents

Mondelēz International, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Earnings

(in millions of U.S. dollars)

(Unaudited)

 

                                                                           
     For the Three Months Ended     For the Nine Months Ended  
     September 30,     September 30,  
     2013     2012     2013     2012  

Net earnings

   $ 1,030      $ 659      $ 2,221      $ 2,512   

Other comprehensive earnings / (losses):

        

Currency translation adjustment:

        

Translation adjustment

     778        726        (931     528   

Tax (expense) / benefit

     39        17        9        26   

Pension and other benefits:

        

Net actuarial gain / (loss) arising during period

     6        (1,583     3        (1,474

Reclassification of losses / (gains) into net earnings:

        

Amortization of experience losses and
prior service costs

     48        128        145        377   

Settlement (gains) / losses

     (2     53        3        113   

Tax (expense) / benefit

     (11     519        (37     379   

Derivatives accounted for as hedges:

        

Net derivative gains / (losses)

     10        (10     133        (366

Reclassification of losses / (gains) into net earnings

     8        446        52        589   

Tax (expense) / benefit

     (8     (164     (65     (93
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive earnings / (losses)

     868        132        (688     79   

Comprehensive earnings / (losses)

     1,898        791        1,533        2,591   

less: Comprehensive earnings / (losses) attributable to noncontrolling interests

     10        14        10        19   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive earnings / (losses) attributable to Mondelēz International

   $ 1,888      $ 777      $ 1,523      $ 2,572   
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the condensed consolidated financial statements.

 

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Table of Contents

Mondelēz International, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

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

(Unaudited)

 

                                     
     September 30,     December 31,  
     2013     2012  

ASSETS

    

Cash and cash equivalents

   $            3,692      $            4,475   

Receivables (net of allowances of $92 in 2013 and $118 in 2012)

     6,245        6,129   

Inventories, net

     4,161        3,741   

Deferred income taxes

     527        542   

Other current assets

     838        735   
  

 

 

   

 

 

 

Total current assets

     15,463        15,622   

Property, plant and equipment, net

     10,085        10,010   

Goodwill

     25,679        25,801   

Intangible assets, net

     22,111        22,552   

Prepaid pension assets

     29        18   

Other assets

     1,492        1,475   
  

 

 

   

 

 

 

TOTAL ASSETS

   $ 74,859      $ 75,478   
  

 

 

   

 

 

 

LIABILITIES

    

Short-term borrowings

   $ 2,527      $ 274   

Current portion of long-term debt

     2,303        3,577   

Accounts payable

     4,533        4,642   

Accrued marketing

     2,191        2,484   

Accrued employment costs

     1,079        1,038   

Other current liabilities

     2,636        2,858   
  

 

 

   

 

 

 

Total current liabilities

     15,269        14,873   

Long-term debt

     15,089        15,574   

Deferred income taxes

     6,218        6,302   

Accrued pension costs

     2,807        2,885   

Accrued postretirement health care costs

     470        451   

Other liabilities

     2,514        3,038   
  

 

 

   

 

 

 

TOTAL LIABILITIES

     42,367        43,123   

Commitments and Contingencies (Note 12)

    

EQUITY

    

Common Stock, no par value (1,996,537,778 shares issued in 2013 and 2012)

              

Additional paid-in capital

     31,505        31,548   

Retained earnings

     11,878        10,457   

Accumulated other comprehensive losses

     (3,318     (2,633

Treasury stock, at cost

     (7,722     (7,157
  

 

 

   

 

 

 

Total Mondelēz International Shareholders’ Equity

     32,343        32,215   

Noncontrolling interest

     149        140   
  

 

 

   

 

 

 

TOTAL EQUITY

     32,492        32,355   
  

 

 

   

 

 

 

TOTAL LIABILITIES AND EQUITY

   $ 74,859      $ 75,478   
  

 

 

   

 

 

 

See accompanying notes to the condensed consolidated financial statements.

 

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Table of Contents

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
     Noncontrolling
Interest
     Total
Equity
 

Balances at January 1, 2012

   $       $ 31,318       $ 18,012       $ (6,637    $ (7,476    $ 111       $ 35,328   

Comprehensive earnings / (losses):

                    

Net earnings

                     3,028                         27         3,055   

Other comprehensive earnings / (losses), net of income taxes

                             (304              6         (298

Exercise of stock options and issuance of other stock awards

             141         (53              319                 407   

Cash dividends declared
($1.00 per share)

                     (1,775                              (1,775

Spin-Off of Kraft Foods Group, Inc.

             89         (8,755      4,308                         (4,358

Dividends paid on noncontrolling interest and other activities

                                             (4      (4
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balances at December 31, 2012

   $       $ 31,548       $ 10,457       $ (2,633    $ (7,157    $ 140       $ 32,355   

Comprehensive earnings / (losses):

                    

Net earnings

                     2,208                         13         2,221   

Other comprehensive earnings / (losses), net of income taxes

                             (685              (3      (688

Exercise of stock options and issuance of other stock awards

             (42      (75              288                 171   

Cash dividends declared
($0.40 per share)

                     (712                              (712

Common Stock repurchased

                                     (853              (853

Dividends paid on noncontrolling interest and other activities

             (1                              (1      (2
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balances at September 30, 2013

   $       $ 31,505       $ 11,878       $ (3,318    $ (7,722    $ 149       $ 32,492   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

See accompanying notes to the condensed consolidated financial statements.

 

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Table of Contents

Mondelēz International, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in millions of U.S. dollars)

(Unaudited)

 

                                     
     For the Nine Months Ended  
     September 30,  
     2013     2012  

CASH PROVIDED BY / (USED IN) OPERATING ACTIVITIES

    

Net earnings

   $ 2,221      $ 2,512   

Adjustments to reconcile net earnings to operating cash flows:

    

Depreciation and amortization

     808        1,065   

Stock-based compensation expense

     98        135   

Deferred income tax (benefit) / provision

     (237     461   

Gains on acquisition and divestitures, net

     (28       

Unrealized loss on discontinued cash flow hedges due to Spin-Off

            436   

Asset impairments

     36        94   

Benefit from indemnification resolution

     (385       

Other non-cash expense, net

     46        98   

Change in assets and liabilities:

    

Receivables, net

     (100     (699

Inventories, net

     (502     (712

Accounts payable

     (30     (104

Other current assets

     16        149   

Other current liabilities

     (787     (1,284

Change in pension and postretirement assets and liabilities, net

     42        24   
  

 

 

   

 

 

 

Net cash provided by operating activities

     1,198        2,175   
  

 

 

   

 

 

 

CASH PROVIDED BY / (USED IN) INVESTING ACTIVITIES

    

Capital expenditures

     (1,028     (1,229

Acquisition, net of cash received

     (119       

Proceeds from divestitures, net of disbursements

     48          

Cash received from Kraft Foods Group related to the Spin-Off

     55          

Other

     29        100   
  

 

 

   

 

 

 

Net cash used in investing activities

     (1,015     (1,129
  

 

 

   

 

 

 

CASH PROVIDED BY / (USED IN) FINANCING ACTIVITIES

    

Net issuance of short-term borrowings

     1,604        83   

Issuance of commercial paper, maturities greater than 90 days

     726        1,579   

Repayments of commercial paper, maturities greater than 90 days

     (70     (1,581

Long-term debt proceeds

            6,767   

Long-term debt repaid

     (1,750     (4,336

Repurchase of Common Stock

     (793       

Dividends paid

     (696     (1,542

Other

     98        (142
  

 

 

   

 

 

 

Net cash (used in) / provided by financing activities

     (881     828   
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     (85     25   
  

 

 

   

 

 

 

Cash and cash equivalents:

    

Increase / (decrease)

     (783     1,899   

Balance at beginning of period

     4,475        1,974   
  

 

 

   

 

 

 

Balance at end of period

   $ 3,692      $ 3,873   
  

 

 

   

 

 

 

See accompanying notes to the condensed consolidated financial statements.

 

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Table of Contents

Mondelēz International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1.  Basis of Presentation

The condensed consolidated financial statements include Mondelēz International as well as our wholly owned and majority owned subsidiaries.

Our interim condensed consolidated financial statements are unaudited. Certain information and footnote disclosures normally included in 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 financial position and operating results. Net revenues and net earnings for any interim period are not necessarily indicative of future or annual results.

The condensed consolidated balance sheet data as of December 31, 2012 were derived from audited financial statements, but do not include all disclosures required by U.S. GAAP. You should read these statements in conjunction with our consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended December 31, 2012.

Accounting Calendar Change:

In connection with moving toward a common consolidation date across the company, in the first quarter of 2013, we changed the consolidation date for our Europe segment. Previously, this segment primarily reported results as of the last Saturday of each period. Subsequent to the change, our Europe segment reports results as of the last calendar day of the period. At this time, the majority of our operating subsidiaries report results as of the last calendar day of the period. Our North American operating subsidiaries report results as of the last Saturday of the period. The change in the consolidation date for our Europe segment had a favorable impact of $19 million on net revenues and $3 million on operating income for the three and nine months ended September 30, 2013.

Discontinued Operation:

On October 1, 2012, we completed the spin-off of our former North American grocery business, Kraft Foods Group, Inc. (“Kraft Foods Group”) by distributing 100% of the outstanding shares of common stock of Kraft Foods Group to holders of our Common Stock (the “Spin-Off”). We retained our global snacks business along with other food and beverage categories. The divested Kraft Foods Group is presented as a discontinued operation on the condensed consolidated statements of earnings for the three and nine months ended September 30, 2012. The other comprehensive earnings and cash flows of Kraft Foods Group are included within our condensed consolidated statements of equity, comprehensive earnings and cash flows in the prior-year period through October 1, 2012. The results from the discontinued operation are discussed in additional detail in Note 2, Divestitures and Acquisition.

Segment Reorganization:

Effective January 1, 2013, we reorganized our operations, management and segments into five reportable segments:

 

   

Latin America (formerly in our Developing Markets segment)

   

Asia Pacific (formerly in our Developing Markets segment)

   

Eastern Europe, Middle East & Africa (“EEMEA”) (formerly in our Developing Markets segment)

   

Europe (now includes certain European operations formerly in our Developing Markets segment)

   

North America.

We changed and flattened our operating structure to reflect our greater concentration of operations in high-growth emerging markets and to further enhance collaboration across regions, expedite decision making and drive greater efficiencies to fuel our growth. Coincident with the change in segment structure, segment operating income for our North America region also changed to include all U.S. pension plan expenses, a portion of which was previously excluded from segment operating results evaluated by management as the costs were centrally managed. We have presented our segment results reflecting these changes for all periods presented.

 

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Table of Contents

Highly Inflationary Accounting:

On February 8, 2013, the Venezuelan government announced the devaluation of the official Venezuelan bolivar exchange rate from 4.30 bolivars to 6.30 bolivars to the U.S. dollar and the elimination of the second-tier, government-regulated SITME exchange rate previously applied to value certain types of transactions. In connection with the announced changes, which were effective on February 13, 2013, we recorded a $54 million unfavorable foreign currency charge related to the devaluation of our net monetary assets in Venezuela. The charge was recorded in selling, general and administrative expenses within our Latin America segment. We also incurred net unfavorable devaluation-related foreign currency impacts within our pre-tax earnings of $20 million during the three months and $44 million during the nine months ended September 30, 2013 related to translating the earnings of our Venezuelan subsidiary to the U.S. dollar at the new exchange rate. As of September 30, 2013, our net monetary assets denominated in the Venezuelan bolivar were $280 million.

We began accounting for the results of our Venezuelan subsidiaries in U.S. dollars effective January 1, 2010, as prescribed under U.S. GAAP for highly inflationary economies. We use the official Venezuelan bolivar exchange rate to translate the results of our Venezuelan operations into U.S. dollars. During 2012, we recorded immaterial foreign currency impacts in connection with highly inflationary accounting for Venezuela.

Reclassification:

Our condensed consolidated cash flow statements reflect commercial paper with original maturities greater than 90 days on a gross basis in both periods.

New Accounting Pronouncements:

In July 2013, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update which requires companies to present an unrecognized tax benefit as a reduction to a deferred tax asset when the right of offset exists. The update will be effective for fiscal years beginning after December 15, 2013. We currently comply with the prescribed accounting presentation so that adopting the new guidance will have no impact on the presentation of our financial statements.

In July 2013, the FASB issued an accounting standards update which permits the inclusion of the Fed Funds Effective Swap Rate as a U.S. benchmark interest rate for hedge accounting purposes in addition to the interest rates on direct Treasury obligations of the U.S. government and the London Interbank Offered Rate (“LIBOR”). The guidance is effective for new or redesignated hedging relationships we entered into on or after July 17, 2013. The adoption of this guidance did not have and is not expected to have a material impact on our financial statements.

In March 2013, the FASB issued an accounting standards update on a parent company’s accounting for the cumulative translation adjustment (“CTA”) upon derecognition of certain subsidiaries or groups of assets within a foreign entity or an investment in a foreign entity. We plan to comply with the new requirement beginning January 1, 2014 for transactions within the scope of the standard. Application of the standard is primarily expected to impact the net gain or loss recognized on any divestitures of foreign subsidiaries after January 1, 2014.

In February 2013, the FASB issued an accounting standards update, clarifying how entities are required to measure obligations resulting from joint and several liability arrangements. We plan to comply with the new standard beginning January 1, 2014. We do not expect it to have a material effect on our consolidated financial results as our joint and several guarantee of indebtedness discussed in Note 12, Commitments and Contingencies, expires prior to the effective date. We have no other material arrangements that fall within the scope of the standard at this time.

In February 2013, the FASB issued an accounting standards update, clarifying the reporting of significant reclassifications from components of accumulated other comprehensive income (“AOCI”) and the related impacts on primarily the statement of earnings. The guidance is effective for fiscal years and interim reporting periods beginning after December 15, 2012. We adopted the guidance effective January 1, 2013 and disclose reclassifications from accumulated other comprehensive income and their impact on our condensed consolidated financial statements in Note 13, Reclassifications from Accumulated Other Comprehensive Income.

Subsequent Events:

We evaluated subsequent events and included all accounting and disclosure requirements related to material subsequent events in our condensed consolidated financial statements and related notes.

 

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Note 2.  Divestitures and Acquisition

On October 1, 2012, we completed the Spin-Off of our North American grocery business, Kraft Foods Group, to our shareholders. On October 1, 2012, each of our shareholders of record as of the close of business on September 19, 2012 (the “Record Date”), received one share of Kraft Foods Group common stock for every three shares of our Common Stock held as of the Record Date. The distribution was structured to be tax free to our U.S. shareholders for U.S. federal income tax purposes.

Kraft Foods Group is now an independent public company trading on The NASDAQ Global Select Market under the symbol “KRFT.” After the Spin-Off, we do not beneficially own any shares of Kraft Foods Group common stock.

Summary results of operations for Kraft Foods Group through September 30, 2012 were as follows:

 

                                     
    

For the Three

Months Ended

    

For the Nine

Months Ended

 
     September 30, 2012      September 30, 2012  
     (in millions)  

Net revenues

   $ 4,583       $ 13,768   
  

 

 

    

 

 

 

Earnings before income taxes

   $ 687       $ 2,266   

Provision for income taxes

     205         760   
  

 

 

    

 

 

 

Earnings from discontinued operations, net of income taxes

   $ 482       $ 1,506   
  

 

 

    

 

 

 

The results of the Kraft Foods Group discontinued operation exclude certain corporate and business unit costs, which we allocated to Kraft Foods Group historically and which continued at Mondelēz International after the Spin-Off. These costs include primarily corporate overheads, information systems and sales force support. On a pre-tax basis, these costs were estimated to be $48 million in the three months and $150 million in the nine months ended September 30, 2012.

In March 2013, we collected $55 million from Kraft Foods Group related to the net cash settlement of stock awards held by our respective employees at the time of the Spin-Off.

Spin-Off Costs:

Our results include one-time Spin-Off transaction, transition and financing and related costs (“Spin-Off Costs”) we have incurred to date. We recorded Spin-Off Costs of $9 million in the three months and $33 million in the nine months ended September 30, 2013 and $683 million in the three months and $984 million in the nine months ended September 30, 2012. The Spin-Off Costs were recorded within pre-tax earnings as follows:

 

                                                                           
     For the Three Months Ended      For the Nine Months Ended  
     September 30,      September 30,  
     2013      2012      2013      2012  
     (in millions)  

Selling, general and administrative expenses

   $ 9       $ 226       $ 33       $ 365   

Interest and other expense, net

             457                 619   
  

 

 

    

 

 

    

 

 

    

 

 

 

Spin-Off Costs

   $ 9       $ 683       $ 33       $ 984   
  

 

 

    

 

 

    

 

 

    

 

 

 

We expect to incur Spin-Off Costs of approximately $75 million in 2013 and approximately $25 million in 2014. The charges primarily relate to human resources, customer service and logistics, information systems and processes, as well as legal costs associated with revising intellectual property and other long-term agreements.

Acquisition, Other Divestitures and Sale of Property:

During the three months ended June 30, 2013, we completed two divestitures within our EEMEA segment which generated cash proceeds of $48 million and pre-tax gains of $6 million. The divestitures included a salty snacks business in Turkey and a confectionery business in South Africa. The aggregate operating results of these divestitures were not material to our condensed consolidated financial statements during the periods presented.

 

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On February 22, 2013, we acquired the remaining interest in a biscuit operation in Morocco, which is now a wholly-owned subsidiary within our EEMEA segment. We paid net cash consideration of $119 million, consisting of $155 million purchase price net of cash acquired of $36 million. Prior to the acquisition, our interest in the operation was accounted for under the equity method. As a result of obtaining a controlling interest, we consolidated the operation and recorded a preliminary estimate of the fair value of acquired assets (including estimated identifiable intangible assets of $48 million), the liabilities assumed and estimated goodwill of $209 million. We also recorded a pre-tax gain of $22 million related to the remeasurement of our previously-held equity interest in the operation to fair value in accordance with U.S. GAAP. Acquisition costs of $7 million were included within selling, general and administrative expenses and interest and other expense, net during the nine months ended September 30, 2013. The operating results of the acquisition were not material to our condensed consolidated financial statements during the periods presented.

During the three months ended December 31, 2012, we also completed several divestitures within our Europe segment which generated cash proceeds of $200 million and pre-tax gains of $107 million. The divestitures primarily included a dinners and sauces grocery business in Germany and Belgium and a canned meat business in Italy. The aggregate operating results of these divestitures were not material to our condensed consolidated financial statements during the periods presented.

In 2012, we sold property in Russia and Turkey within our EEMEA segment. The Turkey property sale generated a $22 million pre-tax gain in the second quarter of 2012 and $29 million of cash proceeds which were received primarily in the fourth quarter of 2012 upon finalization of certain terms and conditions of the sale. The Russia property sale generated a $55 million pre-tax gain and $72 million of cash proceeds in the first quarter of 2012. The gains were recorded within selling, general and administrative expenses and the cash proceeds from the Russia property sale were recorded in cash flows from other investing activities in the nine months ended September 30, 2012.

Note 3.  Inventories

Inventories at September 30, 2013 and December 31, 2012 were:

 

                                     
     September 30,
2013
     December 31,
2012
 
     (in millions)  

Raw materials

   $ 1,252       $ 1,213   

Finished product

     2,909         2,528   
  

 

 

    

 

 

 

Inventories, net

   $ 4,161       $ 3,741   
  

 

 

    

 

 

 

Note 4.  Property, Plant and Equipment

Property, plant and equipment at September 30, 2013 and December 31, 2012 were:

 

                                     
     September 30,
2013
    December 31,
2012
 
     (in millions)  

Land and land improvements

   $ 632      $ 643   

Buildings and building improvements

     3,227        3,199   

Machinery and equipment

     12,166        11,992   

Construction in progress

     1,328        1,022   
  

 

 

   

 

 

 
     17,353        16,856   

Accumulated depreciation

     (7,268     (6,846
  

 

 

   

 

 

 

Property, plant and equipment, net

   $ 10,085      $ 10,010   
  

 

 

   

 

 

 

 

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Note 5.  Goodwill and Intangible Assets

Goodwill by reportable segment at September 30, 2013 and December 31, 2012, revised to reflect our new segment structure, was:

 

                                     
     September 30,
2013
     December 31,
2012
 
     (in millions)  

Latin America

   $ 1,339       $ 1,413   

Asia Pacific

     2,560         2,738   

EEMEA

     2,806         2,767   

Europe

     9,893         9,777   

North America

     9,081         9,106   
  

 

 

    

 

 

 

Goodwill

   $ 25,679       $ 25,801   
  

 

 

    

 

 

 

Intangible assets at September 30, 2013 and December 31, 2012 were:

 

                                     
     September 30,     December 31,  
     2013     2012  
     (in millions)  

Non-amortizable intangible assets

   $ 20,131      $ 20,408   

Amortizable intangible assets

     2,852        2,861   
  

 

 

   

 

 

 
     22,983        23,269   

Accumulated amortization

     (872     (717
  

 

 

   

 

 

 

Intangible assets, net

   $ 22,111      $ 22,552   
  

 

 

   

 

 

 

Non-amortizable intangible assets consist substantially 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. At September 30, 2013, the weighted-average life of our amortizable intangible assets was 13.3 years.

Amortization expense was $55 million in the three months and $164 million in the nine months ended September 30, 2013 and $54 million in the three months and $163 million in the nine months ended September 30, 2012. We currently estimate annual amortization expense for each of the next five years to be approximately $215 million.

Changes in goodwill and intangible assets consisted of:

 

                                     
           Intangible  
     Goodwill     Assets, at Cost  
     (in millions)  

Balance at January 1, 2013

   $ 25,801      $ 23,269   

Changes due to:

    

Foreign currency

     (317     (327

Acquisition

     209        48   

Divestitures

     (10     (6

Other

     (4     (1
  

 

 

   

 

 

 

Balance at September 30, 2013

   $ 25,679      $ 22,983   
  

 

 

   

 

 

 

Refer to Note 2, Divestitures and Acquisition, for additional information related to the acquisition and divestitures.

During the nine months ended September 30, 2012, we recorded an impairment charge of $20 million within asset impairment and exit costs for the impairment of an intangible asset in Japan in our Asia Pacific segment.

 

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In connection with our 2012 annual impairment testing and subsequent impairment reviews, we noted a reporting unit, U.S. Confections, was more sensitive to near-term changes in discounted cash flow assumptions. U.S. Confections, consisting of primarily U.S. gum and candy operations, has $2,177 million of goodwill as of September 30, 2013. While the reporting unit passed the first step of the 2012 annual impairment test with an estimated excess fair value over the carrying value of net assets of 9%, if the segment operating income or other valuation assumptions were to deteriorate significantly in the future, it could adversely affect the estimated fair value of the reporting unit. We are currently evaluating our gum operations and implementing a long-term plan to improve gum operating results. If we are unsuccessful in maintaining or increasing the profitability of this business, the estimated fair value of the reporting unit may fall below carrying value and lead to a potential goodwill impairment in the future. However, we believe that it is more likely than not that the fair value of U.S. Confections exceeds its carrying value.

Note 6.  2012-2014 Restructuring Program

In 2012, our Board of Directors approved $1.5 billion of restructuring and related implementation costs (“2012-2014 Restructuring Program”) reflecting primarily severance, asset disposals and other manufacturing-related one-time costs. The primary objective of the restructuring and implementation activities was to ensure that both Mondelēz International and Kraft Foods Group were each set up to operate efficiently and execute on our respective business strategies upon separation and in the future.

Of the $1.5 billion of 2012-2014 Restructuring Program costs, we retained approximately $925 million after the Spin-Off. Since the inception of the 2012-2014 Restructuring Program, we have incurred $272 million of the estimated $925 million total 2012-2014 Restructuring Program charges.

Restructuring Costs:

We recorded restructuring charges of $43 million in the three months and $131 million in the nine months ended September 30, 2013 and $13 million in the three months and $63 million in the nine months ended September 30, 2012 within asset impairment and exit costs.

The activity in the 2012-2014 Restructuring Program liability for the nine months ended September 30, 2013 was:

 

                                                        
     Severance
and related
costs
    Asset
Write-downs
    Total  
     (in millions)  

Liability balance, January 1, 2013

   $ 36      $      $ 36   

Charges

     99        32        131   

Cash spent

     (53            (53

Non-cash settlements

     (12     (32     (44
  

 

 

   

 

 

   

 

 

 

Liability balance, September 30, 2013

   $ 70      $      $ 70   
  

 

 

   

 

 

   

 

 

 

We spent $32 million in the three months and $53 million in the nine months ended September 30, 2013 in cash severance and related costs. We also recognized non-cash pension plan settlement losses (see Note 10, Benefit Plans) and non-cash asset write-downs (including accelerated depreciation and asset impairments) totaling $12 million in the three months and $44 million in the nine months ended September 30, 2013. At September 30, 2013, a $70 million restructuring liability was recorded within other current liabilities. During the third quarter, we reevaluated a restructuring project and driven by changes to its size, scope and timing began recording it prospectively as part of the overall 2012-2014 Restructuring Program. In the first two quarters of 2013, $14 million in expenses related to this project were recorded as normal operating expenses and classified in selling, general and administrative expenses within the Latin America segment.

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 greater transparency to the total costs of our 2012-2014 Restructuring Program. We recorded implementation costs of $20 million in the three months and $31 million in the nine months ended September 30, 2013 and $5 million in the three months and $6 million in the nine months ended September 30, 2012. We recorded these costs within cost of sales and selling, general and administrative expenses within our Europe and North America segments. These costs primarily include reorganization costs to integrate and reorganize our operations and facilities, the discontinuance of certain product lines and the incremental expenses related to the closure of facilities, replicating our information systems infrastructure and reorganizing costs related to our sales function.

 

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Restructuring and Implementation Costs in Operating Income:

During the three and nine months ended September 30, 2013 and 2012, we recorded restructuring and implementation costs within operating income as follows:

 

                                                                                                                 
     For the Three Months Ended September 30, 2013      For the Nine Months Ended September 30, 2013  
     Restructuring      Implementation             Restructuring      Implementation         
     Costs      Costs      Total      Costs      Costs      Total  
     (in millions)  

Latin America

   $ 9               $ 9       $ 9       $       $ 9   

Asia Pacific

                                               

EEMEA

     3                 3         7                 7   

Europe

     18         10         28         55         14         69   

North America

     12         10         22         58         17         75   

Corporate expenses

     1                 1         2                 2   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 43       $ 20       $ 63       $ 131       $ 31       $ 162   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

                                                                                                                 
     For the Three Months Ended September 30, 2012      For the Nine Months Ended September 30, 2012  
     Restructuring      Implementation             Restructuring      Implementation         
     Costs      Costs      Total      Costs      Costs      Total  
     (in millions)  

Latin America

   $ 2       $       $ 2       $ 7       $       $ 7   

Asia Pacific

                                               

EEMEA

                                               

Europe

                                               

North America

     11         4         15         56         5         61   

Corporate Expenses

             1         1                 1         1   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 13       $ 5       $ 18       $ 63       $ 6       $ 69   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Note 7.  Integration Costs

Cadbury Integration Program:

As a result of our combination with Cadbury Limited (formerly, Cadbury plc or “Cadbury”) in 2010, we launched an integration program to realize expected annual cost savings of approximately $750 million by the end of 2013 and revenue synergies from investments in distribution, marketing and product development. In order to achieve these cost savings and synergies and combine and integrate the two businesses, we expect to incur total integration charges of approximately $1.5 billion through the end of 2013 (the “Integration Program”).

Integration Program costs include the costs associated with combining the Cadbury operations with our operations and are separate from the costs related to the acquisition. Since the inception of the Integration Program, we have incurred approximately $1.4 billion of the estimated $1.5 billion total integration charges.

Changes in the Integration Program liability during the nine months ended September 30, 2013 were (in millions):

 

                  

Balance at January 1, 2013

   $ 202   

Charges

     109   

Cash spent

     (152

Currency / other

     6   
  

 

 

 

Balance at September 30, 2013

   $ 165   
  

 

 

 

We recorded Integration Program charges of $36 million during the three months and $109 million during the nine months ended September 30, 2013 and $29 million during the three months and $107 million during the nine months ended September 30, 2012. In addition, during the three months and nine months ended September 30, 2012, we also reversed $43 million of Integration Program charges previously accrued in the fourth quarter of 2010 primarily related to planned and announced position eliminations that did not occur within our Europe segment. The reversal was based on final negotiations with local workers councils, the majority of which were concluded in April 2012. We recorded these charges in operations, as a part of selling, general and administrative expenses within our Europe, Asia Pacific, Latin America and EEMEA segments.

 

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Other Integration Costs:

In connection with our acquisition of a biscuit operation in Morocco in February 2013, we recorded integration charges of $1 million during the nine months ended September 30, 2013. We recorded these charges in selling, general and administrative expenses within our EEMEA segment. See Note 2, Divestitures and Acquisition, for more information on the acquisition.

Note 8.   Debt

Short-Term Borrowings:

At September 30, 2013 and December 31, 2012, our short-term borrowings consisted of:

 

                                                                           
     September 30, 2013      December 31, 2012  
     Amount     Weighted-      Amount     Weighted-  
     Outstanding     Average Rate      Outstanding     Average Rate  
     (in millions)            (in millions)        

Commercial paper

   $ 2,288        0.3%       $          

Bank loans

     239        8.5%         274        7.2
  

 

 

      

 

 

   

Total short-term borrowings                         

   $ 2,527         $ 274     
  

 

 

      

 

 

   

Commercial paper issuances generally have maturities ranging from 1 to 125 days. As of September 30, 2013, the commercial paper issued and outstanding had between 3 – 114 days remaining to maturity.

Bank loans include borrowings on primarily uncommitted credit lines maintained by some of our international subsidiaries to meet short-term working capital needs.

Borrowing Arrangements:

On October 11, 2013, we entered into a revolving credit agreement for a $4.5 billion five-year senior unsecured revolving credit facility. The agreement replaced our former revolving credit agreement, which was terminated upon the signing of the new agreement. The revolving credit facility agreement includes a covenant that we maintain a minimum shareholders’ equity of at least $24.6 billion, after excluding accumulated other comprehensive earnings / (losses) and the cumulative effects of any changes in accounting principles. At September 30, 2013, we met both the new and existing minimum shareholders’ equity covenant as our minimum shareholders’ equity under both agreements was $35.7 billion. The revolving credit facility agreement also contains customary representations, covenants and events of default. However, there are no credit rating triggers, provisions or other financial covenants that could require us to post collateral as security. We intend to use the revolving credit facility for general corporate purposes, including for working capital purposes and to support our commercial paper program. As of September 30, 2013, no amounts were drawn on the credit facility in place on this date.

Long-Term Debt:

On October 1, 2013, $1 billion of our 5.125% notes and $800 million of our 5.250% notes matured. The notes and accrued interest to date were paid with cash on hand and the issuance of commercial paper.

On May 8, 2013, $1 billion of our 2.625% notes matured. The notes and accrued interest to date were paid with cash on hand and the issuance of commercial paper.

On February 11, 2013, $750 million of our 6.00% notes matured. The notes and accrued interest to date were paid with cash on hand.

Fair Value of Our Debt:

The fair value of our short-term borrowings at September 30, 2013 and December 31, 2012 reflects current market interest rates and approximates the amounts we have recorded on our condensed consolidated balance sheet. 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 September 30, 2013, the aggregate fair value of our total debt was $22,074 million and its carrying value was $19,919 million. At December 31, 2012, the aggregate fair value of our total debt was $22,946 million and its carrying value was $19,425 million.

 

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Note 9.  Financial Instruments

Derivative instruments were recorded at fair value in the condensed consolidated balance sheets as of September 30, 2013 and December 31, 2012 as follows:

 

                                                                           
     September 30, 2013      December 31, 2012  
     Derivative      Derivative      Derivative      Derivative  
     Assets      Liabilities      Assets      Liabilities  
     (in millions)  

Derivatives designated as
hedging instruments:

           

Foreign exchange contracts

   $ 3       $ 8       $ 6       $ 10   

Commodity contracts

     4         10         3         34   

Interest rate contracts

     166                 16           
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 173       $ 18       $ 25       $ 44   
  

 

 

    

 

 

    

 

 

    

 

 

 

Derivatives not designated as
hedging instruments:

           

Foreign exchange contracts

   $ 52       $ 17       $ 16       $ 33   

Commodity contracts

     83         77         106         103   

Interest rate contracts

     67         41         93         61   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 202       $ 135       $ 215       $ 197   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total fair value

   $ 375       $ 153       $ 240       $ 241   
  

 

 

    

 

 

    

 

 

    

 

 

 

We record derivative assets and liabilities on a gross basis in our condensed consolidated balance sheet. The fair value of our derivative assets is recorded within other current assets and the fair value of our derivative liabilities is recorded within other current liabilities. See our consolidated financial statements and Note 1 and Note 9 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2012 for additional information on our risk management strategies and our use of derivatives and related accounting.

The fair values (asset / (liability)) of our derivative instruments at September 30, 2013 were determined using:

 

                                                                           
            Quoted Prices in               
            Active Markets     Significant      Significant  
            for Identical     Other Observable      Unobservable  
     Total      Assets     Inputs      Inputs  
     Fair Value      (Level 1)     (Level 2)      (Level 3)  
     (in millions)  

Foreign exchange contracts

   $ 30       $      $ 30       $   

Commodity contracts

             (4     4           

Interest rate contracts

     192                192           
  

 

 

    

 

 

   

 

 

    

 

 

 

Total derivatives

   $ 222       $ (4   $ 226       $   
  

 

 

    

 

 

   

 

 

    

 

 

 

The fair values (asset / (liability)) of our derivative instruments at December 31, 2012 were determined using:

 

                                                                           
           Quoted Prices in              
           Active Markets     Significant     Significant  
           for Identical     Other Observable     Unobservable  
     Total     Assets     Inputs     Inputs  
     Fair Value     (Level 1)     (Level 2)     (Level 3)  
     (in millions)  

Foreign exchange contracts

   $ (21   $      $ (21   $   

Commodity contracts

     (28     (53     25          

Interest rate contracts

     48               48          
  

 

 

   

 

 

   

 

 

   

 

 

 

Total derivatives

   $ (1   $ (53   $ 52      $   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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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. Our exchange-traded derivatives are generally subject to master netting arrangements which permit net settlement of transactions with the same counterparty when certain criteria are met, such as in the event of default. We are also required to maintain cash margin accounts in connection with funding the settlement of our open positions and the margin requirements generally fluctuate daily based on market conditions. We have recorded margin deposits related to our exchange-traded derivatives of $27 million as of September 30, 2013 and $107 million as of December 31, 2012 within other current assets. Based on our net asset or liability positions with individual counterparties, in the event of default and immediate net settlement of all of our open positions, as of September 30, 2013, our counterparties would owe us a total of $15 million, and as of December 31, 2012, all of our net derivative liabilities were fully offset by either our derivative assets or margin accounts held by counterparties.

Level 2 financial assets and liabilities consist primarily of over-the-counter (“OTC”) foreign exchange forwards, options and swaps; commodity forwards and options; and interest rate swaps. Our foreign currency 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 (“ISDA”) agreements and other standard industry contracts. Under these agreements, we do not post nor require collateral from our counterparties. Substantially all of our commodity OTC derivatives do not have a legal right of set-off. In connection with our OTC derivatives that could be net-settled in the event of default, assuming all parties were to fail to comply with the terms of the agreements, for derivatives we have in a net liability position, we would owe $54 million as of September 30, 2013 and $88 million as of December 31, 2012, and for derivatives we have in a net asset position, our counterparties would owe us a total of $275 million as of September 30, 2013 and $114 million as of December 31, 2012. 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.

Derivative Volume:

The net notional values of our derivative instruments as of September 30, 2013 and December 31, 2012 were:

 

                                     
     Notional Amount  
     September 30,      December 31,  
     2013      2012  
     (in millions)  

Foreign exchange contracts:

     

Intercompany loans and forecasted interest payments

   $ 3,956       $ 3,743   

Forecasted transactions

     1,732         1,663   

Commodity contracts

     338         620   

Interest rate contracts

     2,256         2,259   

Net investment hedge – euro notes

     1,150         1,121   

Net investment hedge – pound sterling notes

     1,052         1,057   

 

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Cash Flow Hedges:

Cash flow hedge activity, net of taxes, within accumulated other comprehensive earnings / (losses) included:

 

                                                                           
    

For the Three Months Ended

September 30,

   

For the Nine Months Ended

September 30,

 
     2013     2012     2013     2012  
     (in millions)  

Accumulated gain / (loss) at beginning of period

   $ 72      $ (439   $ (38   $ (297

Transfer of realized losses / (gains) in fair value to earnings

     6        256        38        298   

Unrealized gain / (loss) in fair value

     4        6        82        (37

Discontinued operations

            10               (131
  

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated gain / (loss) at September 30

   $ 82      $ (167   $ 82      $ (167
  

 

 

   

 

 

   

 

 

   

 

 

 
After-tax gains / (losses) reclassified from accumulated other comprehensive earnings / (losses) into net earnings were:   
     For the Three Months  Ended
September 30,
    For the Nine Months Ended
September  30,
 
     2013     2012     2013     2012  
     (in millions)  

Foreign exchange contracts –
forecasted transactions

   $ (6   $ 16      $ (18   $ 63   

Commodity contracts

            1        (19     (5

Interest rate contracts

            (273     (1     (356
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ (6   $ (256   $ (38   $ (298
  

 

 

   

 

 

   

 

 

   

 

 

 

Within the interest rate contracts, in the three months ended March 31, 2012, we recognized a $130 million loss in interest and other expense, net, related to certain forward-starting interest rate swaps for which the planned timing of the related forecasted debt was changed in March 2012 in connection with our Spin-Off plans and related debt capitalization plan. Amounts excluded from effectiveness testing during the three and nine months ended September 30, 2013 were not material.

After-tax gains / (losses) recognized in other comprehensive earnings / (losses) were:

 

                                                                           
    

For the Three Months Ended

September 30,

   

For the Nine Months Ended

September 30,

 
     2013     2012     2013     2012  
     (in millions)  

Foreign exchange contracts –
forecasted transactions

   $ (16   $ (4   $ (12   $ (4

Commodity contracts

     7        10        (1     13   

Interest rate contracts                                  

     13               95        (46
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 4      $ 6      $ 82      $ (37
  

 

 

   

 

 

   

 

 

   

 

 

 

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 commodity contracts;

   

cost of sales for foreign exchange contracts related to forecasted transactions; and

   

interest and other expense, net for interest rate contracts and foreign exchange contracts related to intercompany loans.

We expect to transfer unrealized losses of $10 million (net of taxes) for commodity cash flow hedges, unrealized losses of $3 million (net of taxes) for foreign currency cash flow hedges and unrealized losses of $2 million (net of taxes) for interest rate cash flow hedges to earnings during the next 12 months.

 

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Hedge Coverage:

As of September 30, 2013, we hedged transactions forecasted to impact cash flows over the following periods:

   

commodity transactions for periods not exceeding the next 10 months;

   

interest rate transactions for periods not exceeding the next 32 years and 5 months; and

   

foreign currency transactions for periods not exceeding the next 9 months.

Economic Hedges:

Pre-tax gains / (losses) recorded in net earnings for economic hedges which are not designated as hedging instruments were:

 

                                                                                              
     For the Three Months Ended
September 30,
    For the Nine Months Ended
September 30,
   

Location of

Gain /  (Loss)
Recognized

     2013     2012     2013      2012     in Earnings
     (in millions)      

Foreign exchange contracts:

           

Intercompany loans and forecasted interest payments

   $ 4      $ 13      $ 7       $ 64      Interest expense

Forecasted purchases

     10        (8     36         10      Cost of sales

Forecasted transactions

                           (17   Interest expense

Forecasted transactions

     (2            1              Selling, general and
administrative
expenses

Interest rate contracts

     2        2                2      Interest expense

Commodity contracts

     28        50        62         117      Cost of sales
  

 

 

   

 

 

   

 

 

    

 

 

   

Total

   $ 42      $ 57      $ 106       $ 176     
  

 

 

   

 

 

   

 

 

    

 

 

   

Hedges of Net Investments in Foreign Operations:

After-tax gains / (losses) related to hedges of net investments in foreign operations in the form of euro and pound sterling-denominated debt were:

 

                                                                                              
     For the Three Months Ended
September 30,
    For the Nine Months Ended
September 30,
    Location of
Gain /  (Loss)
Recorded in
     2013     2012     2013     2012     AOCI
     (in millions)      

Euro notes

   $ (28   $ (10   $ (18   $ (23   Currency Translation
Adjustment

Pound sterling notes

     (40     (19     3        (26   Currency Translation
Adjustment

 

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Note 10.  Benefit Plans

Pension Plans

Components of Net Periodic Pension Cost:

Net periodic pension cost for the three and nine months ended September 30, 2013 and 2012 consisted of:

 

                                                                           
     U.S. Plans     Non-U.S. Plans  
     For the Three Months  Ended
September 30,
    For the Three Months  Ended
September 30,
 
     2013     2012     2013     2012  
     (in millions)  

Service cost

   $ 17      $ 42      $ 44      $ 41   

Interest cost

     15        85        88        108   

Expected return on plan assets

     (16     (113     (108     (126

Amortization:

        

Net loss from experience differences

     14        83        34        31   

Prior service cost

     1        1               1   

Settlement (gains) / losses(1)

     (3     53        1          

Net pension costs related to
discontinued operations

            (97            (11
  

 

 

   

 

 

   

 

 

   

 

 

 

Net periodic pension cost

   $ 28      $ 54      $ 59      $ 44   
  

 

 

   

 

 

   

 

 

   

 

 

 
     U.S. Plans     Non-U.S. Plans  
     For the Nine Months Ended
September 30,
    For the Nine Months Ended
September 30,
 
     2013     2012     2013     2012  
     (in millions)  

Service cost

   $ 53      $ 123      $ 130      $ 131   

Interest cost

     45        261        265        327   

Expected return on plan assets

     (50     (341     (323     (383

Amortization:

        

Net loss from experience differences

     41        237        102        99   

Prior service cost

     2        5        1        2   

Settlement losses(1)

     2        113        1          

Net pension costs related to
discontinued operations

            (263            (29
  

 

 

   

 

 

   

 

 

   

 

 

 

Net periodic pension cost

   $ 93      $ 135      $ 176      $ 147   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

  (1) Includes settlement losses of $3 million in the three and $12 million in the nine months ended September 30, 2013 and $19 million in the three and $38 million in the nine months ended September 30, 2012 related to employees who elected to take lump-sum payments in connection with our 2012-2014 Restructuring Program. These costs are reflected within asset impairments and exit costs on the condensed consolidated statement of earnings and within the charges for severance and related costs in Note 6, 2012-2014 Restructuring Program. In the nine months ended September 30, 2013, these were partially offset by $21 million of gains due to improvements in current market rates for routine settlement losses. 

Employer Contributions:

We make contributions to our U.S. and non-U.S. pension plans primarily to the extent that they are tax deductible and do not generate an excise tax liability. During the nine months ended September 30, 2013, we contributed $12 million to our U.S. plans and $233 million to our non-U.S. Plans. Based on current tax law, we plan to make further contributions of approximately $4 million to our U.S. plans and approximately $76 million to our non-U.S. plans during the remainder of 2013. However, our actual contributions may differ due to many factors, including changes in tax and other benefit laws or significant differences between expected and actual pension asset performance or interest rates.

 

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Postretirement Benefit Plans

Net postretirement health care costs during the three and nine months ended September 30, 2013 and 2012 consisted of:

 

                                                                           
     For the Three Months  Ended
September 30,
    For the Nine Months Ended
September 30,
 
     2013     2012     2013     2012  
     (in millions)  

Service cost

   $ 4      $ 11      $ 12      $ 30   

Interest cost

     5        38        14        117   

Amortization:

        

Net loss from experience differences

     2        22        8        62   

Prior service credit

     (3     (10     (9     (28

Other(1)

            23               23   

Net postretirement health care costs related to discontinued operation

            (49            (135
  

 

 

   

 

 

   

 

 

   

 

 

 

Net postretirement health care costs

   $ 8      $ 35      $ 25      $ 69   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

  (1) In August 2012, we recorded a $23 million unfunded U.S. postretirement plan obligation related to long-term disability benefits.

Postemployment Benefit Plans

Net postemployment costs during the three and nine months ended September 30, 2013 and 2012 consisted of:

 

                                                                           
     For the Three Months  Ended
September 30,
    For the Nine Months Ended
September  30,
 
     2013      2012     2013      2012  
     (in millions)  

Service cost

   $ 2       $ 3      $ 6       $ 10   

Interest cost

     1         2        4         6   

Other

             (3             (3

Net postemployment costs related to discontinued operation

             (1             (5
  

 

 

    

 

 

   

 

 

    

 

 

 

Net postemployment costs

   $ 3       $ 1      $ 10       $ 8   
  

 

 

    

 

 

   

 

 

    

 

 

 

Note 11.  Stock Plans

Stock Options:

In February 2013, as part of our annual equity program, we granted 11.6 million stock options to eligible employees at an exercise price of $27.05 per share on the grant date. During the nine months ended September 30, 2013, we issued 0.5 million of additional stock options with a weighted-average exercise price of $28.55 per share. In total, 12.1 million stock options were granted with a weighted-average exercise price of $27.11 per share. During the nine months ended September 30, 2013, 5.5 million stock options, with an intrinsic value of $55.4 million, were exercised.

Restricted and Deferred Stock:

In January 2013, in connection with our long-term incentive plan, we granted 1.5 million shares of restricted and deferred stock at a market value on the grant date of $26.24 per share. In February 2013, as part of our annual equity program, we issued 2.3 million shares of restricted and deferred stock to eligible employees at a market value on the grant date of $27.05 per share. During the nine months ended September 30, 2013, we issued 1.2 million of additional restricted and deferred shares with a weighted-average market value on the grant date of $21.08 per share. Included in the 1.2 million of additional shares issued were 0.8 million shares for awards related to long-term incentive plan awards granted in 2010 which were issued and vested during the first quarter of 2013. The 2010 long-term incentive plan awards had a weighted-average market value of $17.97 per share, which is based on the stock price on the grant date in 2010 and adjusted to reflect the Spin-Off and related splitting of the equity awards. In total, 5.0 million restricted and deferred shares were issued with a weighted-average market value of $25.40 per share. During the nine months ended September 30, 2013, 5.3 million shares of restricted and deferred stock vested with a market value on the vesting date of $142.0 million.

 

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Stock Repurchase Program:

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 from the 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. Repurchases under the program are determined by management and are wholly discretionary. During the nine months ended September 30, 2013, we repurchased 27.4 million shares of Common Stock at an average cost of $31.13 per share, or an aggregate cost of $853 million, of which $793 million was paid during the nine months ended September 30, 2013. All share repurchases were funded through available cash and commercial paper and the repurchased shares are held in treasury. The primary objective of the program is to return cash to shareholders. As of September 30, 2013, we have $5.1 billion in remaining share repurchase capacity.

Note 12.  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.

A compliant and ethical corporate culture, which includes adhering to laws and industry regulations in all jurisdictions in which we do business, is integral to our success. Accordingly, after we acquired Cadbury in February 2010 we began reviewing and adjusting, as needed, Cadbury’s operations in light of applicable standards as well as our policies and practices. We initially focused on such high priority areas as food safety, the Foreign Corrupt Practices Act (“FCPA”) and antitrust. Based upon Cadbury’s pre-acquisition policies and compliance programs and our post-acquisition reviews, our preliminary findings indicated that Cadbury’s overall state of compliance was sound. Nonetheless, through our reviews, we determined that in certain jurisdictions, including India, there appeared to be facts and circumstances warranting further investigation. We are continuing our investigations in certain jurisdictions, including in India, and we continue to cooperate with governmental authorities.

As we previously disclosed, on February 1, 2011, we received a subpoena from the SEC in connection with an investigation under the FCPA, primarily related to a facility in India that we acquired in the Cadbury acquisition. The subpoena primarily requests information regarding dealings with Indian governmental agencies and officials to obtain approvals related to the operation of that facility. We are cooperating with the U.S. and Indian governments in their investigations of these matters. In addition, on February 28, 2013, Cadbury India Limited, a subsidiary of Mondelēz International, and other parties received a show cause notice from the Indian Department of Central Excise Authority. The notice calls upon the parties to demonstrate why the Authority should not collect approximately $46 million of unpaid excise tax as well as approximately $46 million of penalties and interest related to production at the same Indian facility. We believe that the decision to claim the excise tax benefit is valid and we are contesting the show cause notice through the administrative and judicial process.

As we previously disclosed, on March 1, 2011, the Starbucks Coffee Company (“Starbucks”) took control of the Starbucks packaged coffee business (“Starbucks CPG business”) in grocery stores and other channels. Starbucks did so without our authorization and in what we contend is a violation and breach of our license and supply agreement with Starbucks related to the Starbucks CPG business. The dispute is in arbitration in Chicago, Illinois. We are seeking appropriate remedies, including payment of the fair market value of the supply and license agreement, plus the premium this agreement specifies, prejudgment interest under New York law and attorney’s fees. Starbucks has counterclaimed for damages. Testimony and post-hearing briefing in the arbitration proceeding are completed. We await the arbitrator’s decision. Kraft Foods Group remains the named party in the proceeding. Under the Separation and Distribution Agreement between Kraft Foods Group and us, Kraft Foods Group will direct any recovery awarded in the arbitration proceeding to us. We will reimburse Kraft Foods Group for any costs and expenses it incurs in connection with the arbitration.

While we cannot predict with certainty the results of these or any other Legal Matters in which we are currently involved, we do not expect that the ultimate costs to resolve any of these Legal Matters, individually or in the aggregate, will have a material effect on our financial results.

 

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Third-Party Guarantees:

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 September 30, 2013, we had no material third-party guarantees recorded on our condensed consolidated balance sheet.

As of September 30, 2013, two of our indirect wholly owned subsidiaries and one of Kraft Foods Group’s subsidiaries are joint and several guarantors of $1.0 billion of indebtedness issued by an unrelated third party, Cadbury Schweppes U.S. Finance LLC, and maturing on October 1, 2013. We have agreed to indemnify Kraft Foods Group pursuant to a separation and distribution agreement, in the event its subsidiary is called upon to satisfy its obligation under the guarantee. On October 1, 2013, the debtor repaid the debt, and we have been relieved of any obligation related to this matter.

As part of our 2010 Cadbury acquisition, we became the responsible party for tax matters under the Cadbury Schweppes Plc and Dr Pepper Snapple Group, Inc. (“DPSG”) Tax Sharing and Indemnification Agreement dated May 1, 2008 (“Tax Indemnity”) for certain 2007 and 2008 transactions relating to the demerger of Cadbury’s Americas Beverage business. A U.S. federal tax audit of DPSG for the 2006-2008 tax years was concluded with the IRS in August 2013. As a result, we recorded a favorable impact of $336 million in selling, general and administrative expenses and $49 million in interest and other expense, net for a total pre-tax impact of $385 million ($375 million net of tax) in the three months ended September 30, 2013 due to the reversal of the accrued liability in excess of the amount we paid to DPSG under the Tax Indemnity this quarter.

Note 13.  Reclassifications from Accumulated Other Comprehensive Income

The components of accumulated other comprehensive earnings / (losses) attributable to Mondelēz International were:

 

                                                                           
     Mondelēz International Shareholders’ Equity  
     Currency
Translation
Adjustments
    Pension and
Other Benefits
    Derivatives
Accounted for
as Hedges
    Total  
     (in millions)  

Balances at January 1, 2013

   $ (366   $ (2,229   $ (38   $ (2,633

Other comprehensive earnings / (losses),
before reclassifications:

        

Currency translation adjustment(1)

     (889     (15            (904

Pension and other benefits

            3               3   

Derivatives accounted for as hedges

     (24            133        109   

Losses / (gains) reclassified into
net earnings

            148        52        200   

Tax (expense) / benefit

     9        (37     (65     (93
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive earnings / (losses)

           (685
        

 

 

 

Balances at September 30, 2013

   $ (1,270   $ (2,130   $ 82      $ (3,318
  

 

 

   

 

 

   

 

 

   

 

 

 

 

  (1) The condensed consolidated statement of comprehensive earnings for the nine months ended September 30, 2013 includes $(3) million of currency translation adjustment attributable to noncontrolling interests.

 

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Amounts reclassified from accumulated other comprehensive earnings / (losses) during the three and nine months ended September 30, 2013 and their locations in the condensed consolidated financial statements were as follows:

 

                                                        
                 Location of
Gain / (Loss)
Recognized
in Net Earnings
                
    

For the Three

Months Ended

   

For the Nine

Months Ended

   
     September 30,
2013
    September 30,
2013
   
     (in millions)      

Pension and other benefits:

      

Reclassification of losses / (gains) into net earnings:

      

Amortization of experience losses
and prior service costs

   $ 24      $ 71      Cost of sales

Amortization of experience losses
and prior service costs

     24        74      Selling, general and

administrative expenses

Settlement losses

     (1     (3   Selling, general and

administrative expenses

Settlement losses

     (4     (6   Cost of sales

Settlement losses

     3        12      Asset impairment and

exit costs

Tax impact

     (14     (43   Provision for income taxes

Derivatives accounted for as hedges:

      

Reclassification of losses / (gains) into net earnings:

      

Foreign exchange contracts – forecasted transactions

     6        20      Cost of sales

Commodity contracts

     2        31      Cost of sales

Interest rate contracts

            1      Interest and other expense, net

Tax impact

     (2     (14   Provision for income taxes
  

 

 

   

 

 

   

Total reclassifications into net earnings, net of tax

     38        143     
  

 

 

   

 

 

   

Note 14.  Income Taxes

Our effective tax rate was 1.3% in the third quarter of 2013 and 0.4% for the first nine months of 2013. The 2013 third quarter effective tax rate was favorably impacted by the mix of pre-tax income in various foreign jurisdictions as well as the non-taxable portion of the Cadbury acquisition-related indemnity resolution of $325 million which reduced our effective tax rate by 10.9 percentage points in the third quarter. The effective tax rate also reflects the impact of favorable discrete items, which totaled $122 million and reduced our effective tax rate by 11.7 percentage points in the quarter. These discrete items primarily resulted from the revaluation of U.K. deferred tax assets and liabilities of $88 million resulting from tax legislation enacted during the quarter and net favorable tax audit settlements and expirations of the statutes of limitations in several jurisdictions of $45 million. For the first nine months of 2013, our effective tax rate was favorably impacted by the mix of pre-tax income in various foreign jurisdictions as well as the non-taxable portion of the Cadbury acquisition-related indemnity resolution of $325 million which reduced our effective tax rate by 5.1 percentage points in the nine month period. The effective tax rate also reflects net favorable discrete items, which totaled $355 million and reduced our effective tax rate by 15.9 percentage points in the nine month period. These discrete items primarily resulted from net favorable tax audit settlements and expirations of the statutes of limitations in several jurisdictions of $178 million, the revaluation of U.K. deferred tax assets and liabilities of $88 million resulting from tax legislation enacted during the quarter, net favorable corrections of prior-year amounts of $47 million and tax benefits from a business divestiture of $39 million.

Our effective tax rate was (75.2)% in the third quarter of 2012 and 9.4% for the first nine months of 2012. The 2012 third quarter effective tax rate was favorably impacted by the mix of pre-tax income in various foreign jurisdictions and net favorable discrete items totaling $85 million which primarily related to the revaluation of U.K. deferred tax assets and liabilities resulting from tax legislation enacted during the third quarter of 2012 and the resolution of outstanding tax matters, principally in foreign jurisdictions. For the first nine months of 2012, our effective tax rate was favorably impacted by the mix of pre-tax income in various foreign jurisdictions and net favorable discrete items totaling $106 million, which primarily related to the revaluation of U.K. deferred tax assets and liabilities resulting from tax legislation enacted during the third quarter of 2012 and the resolution of outstanding tax matters, principally in foreign jurisdictions.

 

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Note 15.  Earnings Per Share

Basic and diluted earnings per share (“EPS”) were calculated using the following:

 

                                                                           
     For the Three Months Ended      For the Nine Months Ended  
     September 30,      September 30,  
     2013      2012      2013      2012  
     (in millions, except per share data)  

Earnings from continuing operations

   $ 1,030       $ 177       $ 2,221       $ 1,006   

Earnings from discontinued operations,
net of income taxes

             482                 1,506   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net earnings

     1,030         659         2,221         2,512   

Noncontrolling interest

     6         7         13         18   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net earnings attributable to
Mondelēz International

   $ 1,024       $ 652       $ 2,208       $ 2,494   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted-average shares for basic EPS

     1,779         1,779         1,783         1,776   

Plus incremental shares from assumed
conversions of stock options and long-
term incentive plan shares

     15         10         15         10   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted-average shares for diluted EPS

     1,794         1,789         1,798         1,786   
  

 

 

    

 

 

    

 

 

    

 

 

 

Basic earnings per share attributable to
Mondelēz International:

           

Continuing operations

   $ 0.58       $ 0.10       $ 1.24       $ 0.56   

Discontinued operations

             0.27                 0.84   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net earnings attributable to
Mondelēz International

   $ 0.58       $ 0.37       $ 1.24       $ 1.40   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted earnings per share attributable to
Mondelēz International:

           

Continuing operations

   $ 0.57       $ 0.10       $ 1.23       $ 0.55   

Discontinued operations

             0.26                 0.85   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net earnings attributable to
Mondelēz International

   $ 0.57       $ 0.36       $ 1.23       $ 1.40   
  

 

 

    

 

 

    

 

 

    

 

 

 

We exclude antidilutive Mondelēz International stock options from our calculation of weighted-average shares for diluted EPS. We excluded 8.0 million antidilutive stock options for the three months and 9.7 million antidilutive stock options for the nine months ended September 30, 2013, and we excluded 8.8 million antidilutive stock options for the three months and 10.6 million antidilutive stock options for the nine months ended September 30, 2012.

Note 16.  Segment Reporting

Effective January 1, 2013, we reorganized our operations, management and segments into five reportable segments:

   

Latin America (formerly in our Developing Markets segment)

   

Asia Pacific (formerly in our Developing Markets segment)

   

EEMEA (formerly in our Developing Markets segment)

   

Europe (now includes certain European operations formerly in our Developing Markets segment)

   

North America

We changed and flattened our operating structure to reflect our greater concentration of operations in high-growth emerging markets and to further enhance collaboration across regions, expedite decision making and drive greater efficiencies to fuel our growth. We have presented our segment results reflecting the changes for all periods presented.

We manage the operations of Latin America, Asia Pacific and EEMEA by location and Europe and North America by product category.

 

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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. Coincident with the change in reportable segment structure, segment operating income for our North America region also changed to include all U.S. pension plan expenses, a portion of which was previously excluded from segment operating results evaluated by management as the costs were centrally managed. 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), the benefit from the Cadbury acquisition-related indemnification resolution (which is a component of selling, general and administrative expenses), amortization of intangibles, gains and losses on divestitures or acquisitions, and acquisition-related costs (which are a component of selling, general and administrative expenses) for all periods presented. We exclude the unrealized gains and losses on hedging activities from segment operating income in order to provide better transparency of our segment operating results. Once realized, the gains and losses on hedging activities are recorded within segment operating results. We exclude general corporate expenses, amortization of intangibles, the benefit from the Cadbury acquisition-related indemnification resolution, gains and losses on divestitures and acquisitions and acquisition-related costs from segment operating income in order to provide better transparency of our segment operating results. Furthermore, we centrally manage 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 consisted of:

 

                                                                           
     For the Three Months Ended
September 30,
    For the Nine Months Ended
September 30,
 
     2013     2012     2013     2012  
     (in millions)  

Net revenues:

        

Latin America

   $ 1,308      $ 1,286      $ 4,045      $ 3,996   

Asia Pacific

     1,136        1,228        3,743        3,770   

EEMEA

     948        886        2,850        2,700   

Europe

     3,295        3,158        10,026        9,967   

North America

     1,785        1,768        5,147        5,087   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net revenues

   $ 8,472      $ 8,326      $ 25,811      $ 25,520   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings before income taxes:

        

Operating income:

        

Latin America

   $ 171      $ 187      $ 425      $ 556   

Asia Pacific

     81        198        399        525   

EEMEA

     109        107        282        386   

Europe

     403        449        1,178        1,307   

North America

     279        234        643        566   

Unrealized gains / (losses) on
hedging activities

     12        1        55        42   

General corporate expenses

     (74     (284     (219     (541

Amortization of intangibles

     (55     (54     (164     (163

Benefit from indemnification
resolution

     336               336          

Gains on acquisition and
divestitures, net

                   28          

Acquisition-related costs

                   (2       
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     1,262        838        2,961        2,678   

Interest and other expense, net

     (218     (737     (732     (1,568
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings before income taxes

   $ 1,044      $ 101      $ 2,229      $ 1,110   
  

 

 

   

 

 

   

 

 

   

 

 

 

Items impacting our segment operating results are discussed in Note 1, Basis of Presentation, including the Venezuelan currency devaluation, Note 2, Divestitures and Acquisition, Note 5, Goodwill and Intangible Assets, Note 6, 2012-2014 Restructuring Program, Note 7, Integration Costs and Note 12, Commitments and Contingencies.

 

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Net revenues by consumer sector were:

 

                                                                                                                 
     For the Three Months Ended September 30, 2013  
     Latin      Asia                    North         
   America      Pacific      EEMEA      Europe      America      Total  
     (in millions)  

Biscuits

   $ 329       $ 285       $ 165       $ 750       $ 1,369       $ 2,898   

Chocolate

     253         378         294         1,224         83         2,232   

Gum & Candy

     353         209         160         227         312         1,261   

Beverages

     211         99         260         759                 1,329   

Cheese & Grocery

     162         165         69         335         21         752   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total net revenues

   $ 1,308       $ 1,136       $ 948       $ 3,295       $ 1,785       $ 8,472   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     For the Three Months Ended September 30, 2012  
     Latin      Asia                    North         
   America      Pacific      EEMEA      Europe      America      Total  
     (in millions)  

Biscuits

   $ 311       $ 336       $ 145       $ 658       $ 1,326       $ 2,776   

Chocolate

     237         395         280         1,138         90         2,140   

Gum & Candy

     364         210         179         234         334         1,321   

Beverages

     208         103         228         746                 1,285   

Cheese & Grocery

     166         184         54         382         18         804   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total net revenues

   $ 1,286       $ 1,228       $ 886       $ 3,158       $ 1,768       $ 8,326   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     For the Nine Months Ended September 30, 2013  
     Latin      Asia                    North         
   America      Pacific      EEMEA      Europe      America      Total  
     (in millions)  

Biscuits

   $ 953       $ 1,028       $ 490       $ 2,231       $ 4,011       $ 8,713   

Chocolate

     901         1,190         806         3,680         214         6,791   

Gum & Candy

     1,049         638         505         702         868         3,762   

Beverages

     666         371         849         2,399                 4,285   

Cheese & Grocery

     476         516         200         1,014         54         2,260   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total net revenues

   $ 4,045       $ 3,743       $ 2,850       $ 10,026       $ 5,147       $ 25,811