What changed in this filing

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Item 1. Financial Statements

2020-11-03 compared with 2020-07-29 · 413 added, 187 removed, 816 unchanged (42% of the section changed)

6 unchanged sentences

For the Three Months Ended

For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2020 2019 2020 2019

Net revenues $ 6,665 $ 6,355 $ 19,283 $ 18,955

Cost of sales 3,873 3,839 11,709 11,377

Gross profit 2,792 2,516 7,574 7,578

Selling, general and administrative expenses 1,484 1,466 4,474 4,386

6 unchanged sentences

Earnings before income taxes 1,084 684 2,442 2,593

Provision for income taxes

Income tax (provision)/benefit ( 391 ) 633 ( 880 ) 228

Gain/(loss) on equity method investment

transactions 345 — 537 ( 2 )

Equity method investment net earnings 84 114 311 389

Net earnings 1,122 1,431 2,410 3,208

Noncontrolling interest earnings ( 3 ) ( 5 ) ( 11 ) ( 12 )

12 unchanged sentences

For the Three Months Ended

For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2020 2019 2020 2019

Net earnings $ 1,122 $ 1,431 $ 2,410 $ 3,208

Other comprehensive earnings/(losses), net of tax:

7 unchanged sentences

Comprehensive earnings/(losses) attributable to Mondelēz International

$ 1,283 $ 1,213 $ 1,398 $ 3,103

See accompanying notes to the condensed consolidated financial statements.

4 unchanged sentences

dollars, except share data)

September 30,

2020 December 31, 2019

Cash and cash equivalents $ 2,759 $ 1,291

Trade receivables (net of allowances of $40 at June 30, 2020

Trade receivables (net of allowances of $ 41 at September 30, 2020

and $ 35 at December 31, 2019)

Other receivables (net of allowances of $40 at June 30, 2020

Other receivables (net of allowances of $ 40 at September 30, 2020

and $ 44 at December 31, 2019)

4 unchanged sentences

Operating lease right of use assets 661 568

Goodwill 21,335 20,848

Intangible assets, net 18,056 17,957

2 unchanged sentences

Equity method investments 6,488 7,178

Other assets 277 359

TOTAL ASSETS $ 66,249 $ 64,515

Short-term borrowings $ 199 $ 2,638

14 unchanged sentences

Common Stock, no par value ( 5,000,000,000 shares authorized and

1,996,537,778 shares issued at June 30, 2020 and December 31, 2019)

1,996,537,778 shares issued at September 30, 2020 and December 31, 2019)

Additional paid-in capital 32,054 32,019

1 unchanged sentence

Accumulated other comprehensive losses ( 11,255 ) ( 10,254 )

Treasury stock, at cost (568,483,191 shares at June 30, 2020 and

Treasury stock, at cost ( 566,694,393 shares at September 30, 2020 and

561,531,524 shares at December 31, 2019)

( 21,558 ) ( 21,139 )

Total Mondelēz International Shareholders’ Equity 26,943 27,241

Noncontrolling interest 85 76

TOTAL EQUITY 27,028 27,317

TOTAL LIABILITIES AND EQUITY $ 66,249 $ 64,515

6 unchanged sentences

Mondelēz International Shareholders’ Equity

Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Non-controlling

Three Months Ended June 30, 2020

Balances at April 1, 2020

(Losses) Treasury

Stock Non-controlling

Interest Total

Three Months Ended September 30, 2020

Balances at July 1, 2020 $ — $ 32,022 $ 27,040 $ ( 11,419 ) $ ( 21,625 ) $ 79 $ 26,097

Comprehensive earnings/(losses):

Net earnings — — 1,119 — — 3 1,122

Other comprehensive earnings/(losses),

net of income taxes

— — — 164 — 8 172

Exercise of stock options and issuance of

other stock awards

— 32 ( 7 ) — 67 — 92

Common Stock repurchased — — — — — — —

Cash dividends declared ($ 0.315 per share)

— — ( 452 ) — — — ( 452 )

Dividends paid on noncontrolling interest

and other activities

Balances at June 30, 2020

Six Months Ended June 30, 2020

— — 2 — — ( 5 ) ( 3 )

Balances at September 30, 2020 $ — $ 32,054 $ 27,702 $ ( 11,255 ) $ ( 21,558 ) $ 85 $ 27,028

Nine Months Ended September 30, 2020

Balances at January 1, 2020 $ — $ 32,019 $ 26,615 $ ( 10,254 ) $ ( 21,139 ) $ 76 $ 27,317

Comprehensive earnings/(losses):

Net earnings — — 2,399 — — 11 2,410

Other comprehensive earnings/(losses),

net of income taxes

— — — ( 1,001 ) — 7 ( 994 )

Exercise of stock options and issuance of

other stock awards

— 35 ( 48 ) — 282 — 269

Common Stock repurchased — — — — ( 701 ) — ( 701 )

Cash dividends declared ($ 0.885 per share)

— — ( 1,269 ) — — — ( 1,269 )

Dividends paid on noncontrolling interest

and other activities

Balances at June 30, 2020

Three Months Ended June 30, 2019

Balances at April 1, 2019

— — 5 — — ( 9 ) ( 4 )

Balances at September 30, 2020 $ — $ 32,054 $ 27,702 $ ( 11,255 ) $ ( 21,558 ) $ 85 $ 27,028

Three Months Ended September 30, 2019

Balances at July 1, 2019 $ — $ 31,970 $ 25,300 $ ( 10,524 ) $ ( 20,684 ) $ 81 $ 26,143

Comprehensive earnings/(losses):

Net earnings — — 1,426 — — 5 1,431

Other comprehensive earnings/(losses),

net of income taxes

— — — ( 213 ) — ( 9 ) ( 222 )

Exercise of stock options and issuance of

other stock awards

— 28 ( 15 ) — 70 — 83

Common Stock repurchased — — — — ( 206 ) — ( 206 )

Cash dividends declared ($ 0.285 per share)

— — ( 411 ) — — — ( 411 )

Dividends paid on noncontrolling interest

and other activities

Balances at June 30, 2019

Six Months Ended June 30, 2019

— — — — — ( 9 ) ( 9 )

Balances at September 30, 2019 $ — $ 31,998 $ 26,300 $ ( 10,737 ) $ ( 20,820 ) $ 68 $ 26,809

Nine Months Ended September 30, 2019

Balances at January 1, 2019 $ — $ 31,961 $ 24,394 $ ( 10,644 ) $ ( 20,185 ) $ 76 $ 25,602

Comprehensive earnings/(losses):

Net earnings — — 3,196 — — 12 3,208

Other comprehensive earnings/(losses),

net of income taxes

— — — ( 93 ) — ( 8 ) ( 101 )

Exercise of stock options and issuance of

other stock awards

— 37 ( 126 ) — 512 — 423

Common Stock repurchased — — — — ( 1,147 ) — ( 1,147 )

Cash dividends declared ($ 0.805 per share)

— — ( 1,164 ) — — — ( 1,164 )

Dividends paid on noncontrolling interest

and other activities

Balances at June 30, 2019

— — — — — ( 12 ) ( 12 )

Balances at September 30, 2019 $ — $ 31,998 $ 26,300 $ ( 10,737 ) $ ( 20,820 ) $ 68 $ 26,809

See accompanying notes to the condensed consolidated financial statements.

3 unchanged sentences

(in millions of U.S.

For the Six Months Ended

For the Nine Months Ended

September 30,

CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES

Net earnings $ 2,410 $ 3,208

Adjustments to reconcile net earnings to operating cash flows:

2 unchanged sentences

tax reform transition tax — 2

Deferred income tax (benefit)/provision

Deferred income tax benefit ( 103 ) ( 738 )

Asset impairments and accelerated depreciation 141 103

25 unchanged sentences

Dividends paid ( 1,227 ) ( 1,131 )

Other 104 328

Net cash used in financing activities ( 495 ) ( 686 )

2 unchanged sentences

Cash, cash equivalents and restricted cash:

Increase 1,462 437

Balance at beginning of period 1,328 1,100

29 unchanged sentences

dollars using the exchange rate as of the balance sheet date, with remeasurement and other transaction gains and losses recorded in net earnings.

As of June 30, 2020 , our Argentinian operations had $ 3 million of Argentinian peso denominated net monetary assets .

Our Argentinian operations contributed $ 76 million , or 1.3 % of consolidated net revenues in the three months and $ 174 million , or 1.4 % of consolidated net revenues in the six months ended June 30, 2020 .

Within selling, general and administrative expenses, we recorded a remeasurement loss of $ 3 million during the three months and $ 5 million during the six months ended June 30, 2020 as well as a remeasurement gain of $ 1 million during the three months and a remeasurement loss of $ 1 million during the six months ended June 30, 2019 related to the revaluation of the Argentinian peso denominated net monetary position over these periods.

In the six months ended June 30, 2020 , we generated 8.8 % of our consolidated net revenues in the United Kingdom.

As of September 30, 2020, our Argentinian operations had $ 6 million of Argentinian peso denominated net monetary assets.

Our Argentinian operations contributed $ 77 million, or 1.2 % of consolidated net revenues in the three months and $ 252 million, or 1.3 % of consolidated net revenues in the nine months ended September 30, 2020.

Within selling, general and administrative expenses, we recorded a remeasurement loss of $ 2 million during the three months and $ 7 million during the nine months ended September 30, 2020 as well as a remeasurement loss of $ 1 million during the three months and $ 2 million during the nine months ended September 30, 2019 related to the revaluation of the Argentinian peso denominated net monetary position over these periods.

In the nine months ended September 30, 2020, we generated 8.8 % of our consolidated net revenues in the United Kingdom.

On January 31, 2020, the United Kingdom began the withdrawal process from the European Union under the European and U.K.

Parliament approved Withdrawal Agreement.

During a transition period scheduled to end on December 31, 2020, the United Kingdom will effectively remain in the E.U.’s customs union and single market while a trade deal with the European Union is negotiated.

The deadline for extending the transition period was June 30, 2020 and the United Kingdom did not seek an extension.

As a result, on December 31, 2020, the United Kingdom will either exit the European Union and begin a new trade relationship with the European Union or will exit without a trade deal.

During the transition period, we continue to take protective measures in response to the potential impacts on our results of operations and financial condition.

Through December 31, 2020, the United Kingdom will effectively remain in the E.U.’s customs union and single market while a trade deal with the European Union is negotiated.

On December 31, 2020, the United Kingdom will either exit the European Union and begin a new trade relationship with the European Union or will exit without a trade deal.

As we approach the planned U.K.

exit at the end of 2020, we are taking protective measures in response to the potential impacts on our results of operations and financial condition.

If the ultimate terms of the United Kingdom’s separation from the European Union negatively impact the U.K.

economy or result in disruptions to sales or our supply chain,

the impact to our results of operations and financial condition could be material.

We are taking measures to increase our resources in customer service & logistics together with increasing our inventory levels of imported raw materials, packaging and finished goods in the United Kingdom to help us manage through the Brexit transition and the inherent risks.

economy or result in disruptions to sales or our supply chain, the impact to our results of operations and financial condition could be material.

We are taking measures to increase our resources in

customer service & logistics together with increasing our inventory levels of imported raw materials, packaging and finished goods in the United Kingdom to help us manage through Brexit and the inherent risks.

Other Countries.

5 unchanged sentences

Cash and cash equivalents include demand deposits with banks and all highly liquid investments with original maturities of three months or less.

We also have restricted cash that is recorded within other current assets and which was $ 29 million as of June 30, 2020 and $ 37 million as of December 31, 2019.

Total cash, cash equivalents and restricted cash was $ 1,631 million as of June 30, 2020 and $ 1,328 million as of December 31, 2019.

We also have restricted cash that is recorded within other current assets and which was $ 31 million as of September 30, 2020 and $ 37 million as of December 31, 2019.

Total cash, cash equivalents and restricted cash was $ 2,790 million as of September 30, 2020 and $ 1,328 million as of December 31, 2019.

Allowances for Credit Losses:

3 unchanged sentences

Changes in allowances for credit losses consisted of:

Allowance for Trade Receivables

Allowance for Other Current Receivables

Allowance for Long-Term Receivables

Allowance for Trade Receivables Allowance for Other Current Receivables Allowance for Long-Term Receivables

(in millions)

2 unchanged sentences

Write-offs charged against the allowance 1 2 —

Balance at June 30, 2020

Currency 2 3 5

Balance at September 30, 2020 $ ( 41 ) $ ( 40 ) $ ( 11 )

Transfers of Financial Assets:

4 unchanged sentences

We may then continue to collect the receivables sold, acting solely as a collecting agent on behalf of the banks.

The outstanding principal amount of receivables under these arrangements amounted to $ 686 million as of June 30, 2020 and $ 760 million as of December 31, 2019 .

The outstanding principal amount of receivables under these arrangements amounted to $ 778 million as of September 30, 2020 and $ 760 million as of December 31, 2019.

The incremental cost of factoring receivables under this arrangement was not material for all periods presented.

1 unchanged sentence

Non-Cash Lease Transactions:

We recorded $ 122 million in operating lease and $ 68 million in finance lease right-of-use assets obtained in exchange for lease obligations during the six months ended June 30, 2020 and $ 78 million in operating lease and $ 17 million in finance lease right-of-use assets obtained in exchange for lease obligations during the six months ended June 30, 2019 .

We recorded $ 187 million in operating lease and $ 129 million in finance lease right-of-use assets obtained in exchange for lease obligations during the nine months ended September 30, 2020 and $ 91 million in operating lease and $ 48 million in finance lease right-of-use assets obtained in exchange for lease obligations during the nine months ended September 30, 2019.

New Accounting Pronouncements:

15 unchanged sentences

We are working to complete the valuation and have recorded a preliminary purchase price allocation of $ 511 million to definite-lived intangible assets, $ 42 million to indefinite-lived intangible assets, $ 529 million to goodwill, $ 137 million to property, plant and equipment, $ 59 million to operating lease right of use assets, $ 38 million to inventory, $ 29 million to accounts receivable, $ 5 million to other current assets, $ 41 million to current liabilities, $ 83 million to deferred tax liabilities, $ 56 million to long-term operating lease liabilities, $ 6 million to long-term debt and $ 19 million to long-term other liabilities.

The acquisition added incremental net revenues of $ 91 million and an operating loss of $ 8 million during the three and six months ended June 30, 2020 .

We incurred $ 10 million of acquisition-related costs during the three months and $ 15 million during the six months ended June 30, 2020.

The acquisition added incremental net revenues of $ 125 million in the three months and $ 216 million in the nine months ended September 30, 2020, and operating income of $ 14 million during the three months and $ 6 million in the nine months ended September 30, 2020.

We incurred an immaterial amount of acquisition-related costs during the three months and $ 15 million during the nine months ended September 30, 2020.

On July 16, 2019, we acquired a majority interest in a U.S.

1 unchanged sentence

During the first quarter of 2020, we finalized the purchase price allocation of $ 31 million to definite-lived intangible assets, $ 107 million to indefinite-lived intangible assets, $ 150 million to goodwill, $ 1 million to property, plant and equipment, $ 12 million to inventory, $ 8 million to accounts receivable, $ 13 million to current liabilities, $ 3 million to deferred tax liabilities and $ 9 million to other liabilities.

The acquisition added incremental net revenues of $ 23 million in the three months and $ 55 million in the six months ended June 30, 2020 , and an immaterial amount of incremental operating income during the three and six months ended June 30, 2020 .

Through the one-year anniversary of the acquisition, Perfect Snacks added incremental net revenues of $ 55 million and an immaterial amount of incremental operating income in 2020.

On May 28, 2019, we completed the sale of most of our cheese business in the Middle East and Africa to Arla Foods of Denmark.

In 2019, we received cash proceeds of $ 161 million , $ 158 million of which was received in the second quarter of 2019, and divested $ 19 million of current assets and $ 96 million of non-current assets.

During 2019, we recorded a net pre-tax gain of $ 44 million on the sale, $ 41 million of which was recorded in the second quarter of 2019.

The divestiture resulted in a year-over-year decline in net revenues of $ 22 million during the three months and $ 55 million during the six months ended June 30, 2020, and a year-over-year decline in operating income of $ 5 million during the three months and $ 9 million during the six months ended June 30, 2020 .

During the three and six months ended June 30, 2020, we recorded a $ 2 million reversal of divestiture-related cost accruals no longer required.

We incurred divestiture-related costs of $ 11 million in the three months and $ 10 million in the six months ended June 30, 2019.

In 2019, we received cash proceeds of $ 161 million and divested $ 19 million of current assets and $ 96 million of non-current assets.

During 2019, we recorded a net pre-tax gain of $ 44 million on the sale.

The divestiture resulted in year-over-year declines in net revenues of $ 55 million and operating income of $ 9 million during the nine months ended September 30, 2020.

We incurred divestiture-related costs of $ 6 million in the three months and $ 4 million (including the reversal of $ 2 million divestiture-related costs no longer required) in the nine months ended September 30, 2020.

We also reversed divestiture-related costs of $ 4 million in the three months and incurred $ 6 million in the nine months ended September 30, 2019.

Inventories consisted of the following:

As of June 30,

As of September 30,

2020 As of December 31, 2019

6 unchanged sentences

Property, plant and equipment consisted of the following:

As of June 30,

As of September 30,

2020 As of December 31, 2019

4 unchanged sentences

Construction in progress 612 680

15,572 15,537

Accumulated depreciation ( 7,039 ) ( 6,804 )

Property, plant and equipment, net $ 8,533 $ 8,733

For the six months ended June 30, 2020 , capital expenditures of $ 445 million excluded $ 195 million of accrued capital expenditures remaining unpaid at June 30, 2020 and included payment for $ 334 million of capital expenditures that were accrued and unpaid at December 31, 2019 .

For the six months ended June 30, 2019 , capital expenditures of $ 465 million excluded $ 217 million of accrued capital expenditures remaining unpaid at June 30, 2019 and included payment for $ 331 million of capital expenditures that were accrued and unpaid at December 31, 2018 .

In connection with our restructuring program, we recorded non-cash property, plant and equipment write-downs (including accelerated depreciation and asset impairments) in the condensed consolidated statements of earnings within asset impairment and exit costs and within the segment results as follows (refer to Note 7, Restructuring Program ).

For the nine months ended September 30, 2020, capital expenditures of $ 630 million excluded $ 203 million of accrued capital expenditures remaining unpaid at September 30, 2020 and included payment for $ 334 million of capital expenditures that were accrued and unpaid at December 31, 2019.

For the nine months ended September 30, 2019, capital expenditures of $ 686 million excluded $ 203 million of accrued capital expenditures remaining unpaid at September 30, 2019 and included payment for $ 331 million of capital expenditures that were accrued and unpaid at December 31, 2018.

In connection with our restructuring program, we recorded non-cash property, plant and equipment write-downs (including accelerated depreciation and asset impairments) and losses/(gains) on disposal in the condensed consolidated statements of earnings within asset impairment and exit costs and within the segment results as follows (refer to Note 7, Restructuring Program ).

For the Three Months Ended

For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2020 2019 2020 2019

(in millions)

Latin America $ ( 13 ) $ 1 $ ( 13 ) $ 1

AMEA — ( 5 ) 4 ( 7 )

Europe 1 42 3 45

North America ( 1 ) 1 1 5

Non-cash property, plant and equipment write-downs

Total $ ( 13 ) $ 39 $ ( 5 ) $ 44

Goodwill and Intangible Assets

Goodwill by segment was:

As of June 30,

As of September 30,

2020 As of December 31, 2019

1 unchanged sentence

Latin America $ 654 $ 818

AMEA 3,147 3,151

Europe 7,668 7,523

North America 9,866 9,356

Goodwill $ 21,335 $ 20,848

Intangible assets consisted of the following:

As of June 30,

As of September 30,

2020 As of December 31, 2019

2 unchanged sentences

Amortizable intangible assets 2,831 2,374

19,863 19,670

Accumulated amortization ( 1,807 ) ( 1,713 )

3 unchanged sentences

Amortizable intangible assets consist primarily of brands, customer-related intangibles, process technology, licenses and non-compete agreements.

Amortization expense for intangible assets was $ 50 million for the three months and $ 93 million for the six months ended June 30, 2020 and $ 43 million for the three months and $ 87 million for the six months ended June 30, 2019 .

For the next five years, we currently estimate annual amortization expense of approximately $ 190 million in 2020, approximately $ 120 million in 2021 and approximately $ 110 million in 2022-2024 (reflecting June 30, 2020 exchange rates).

Amortization expense for intangible assets was $ 50 million for the three months and $ 143 million for the nine months ended September 30, 2020 and $ 43 million for the three months and $ 130 million for the nine months ended September 30, 2019.

For the next five years, we currently estimate annual amortization expense of approximately $ 190 million in 2020, approximately $ 120 million in 2021 and approximately $ 115 million in 2022-2024 (reflecting September 30, 2020 exchange rates).

Changes in goodwill and intangible assets consisted of:

Goodwill Intangible

Assets, at cost

1 unchanged sentence

Balance at January 1, 2020 $ 20,848 $ 19,670

Currency ( 42 ) ( 216 )

Acquisition 529 553

Asset impairments — ( 144 )

Balance at June 30, 2020

Balance at September 30, 2020 $ 21,335 $ 19,863

Changes to goodwill and intangibles were:

1 unchanged sentence

See Note 2, Acquisitions and Divestitures , for additional information.

Asset impairments – As further described below, during the second quarter of 2020, we recorded $ 90 million of intangible asset impairments resulting primarily from the impacts of COVID-19 that led to lower than expected growth for six brands across our segments.

During the first six months of 2020, we evaluated our goodwill and intangible asset impairment risk using both qualitative and quantitative analysis and in light of the ongoing COVID-19 global pandemic.

We will continue to monitor the potential for asset impairment risk over coming quarters.

Goodwill – Based on the financial performance of our goodwill reporting units during the first half of 2020 and review of other significant fair value assumptions and qualitative factors, we concluded that no goodwill impairment indicators were present that would require additional goodwill impairment evaluation and that our goodwill as of June 30, 2020 is fairly stated.

Intangible Assets – In connection with the ongoing COVID-19 global pandemic, during the second quarter of 2020, we identified a decline in demand for certain of our brands, primarily in the gum category, that prompted additional evaluation of our indefinite-life (non-amortizable) intangible assets.

We estimated the fair value of the brands using several acceptable valuation methods, including relief of royalty, excess earnings and excess margin models.

Those models required us to make assumptions related to the future sales and earnings growth rates for the brands, as well as royalty rates and discount rates.

We made our best estimate of those assumptions using the information available;

however, given the uncertainty of the global economic environment and the impact of COVID-19, those estimates could be significantly different than future performance.

In certain instances, the estimated fair value of the brand was below the carrying value, which resulted in four gum brands, a small biscuit brand and a small candy brand being impaired as a result of lower than originally expected sales growth.

We recorded $ 90 million of impairment charges:

$ 50 million in Europe, $ 36 million in North America and $ 4 million in AMEA.

• Asset impairments – As further described below, during the nine months ended September 30, 2020, we recorded $ 144 million of intangible asset impairments resulting primarily from the impacts of COVID-19 that led to lower than expected growth for eight brands across our segments.

During the first six months of 2020, we evaluated our goodwill and intangible asset impairment risk using qualitative analysis.

In light of the ongoing COVID-19 global pandemic, we performed further quantitative analysis over non-amortizable intangible assets during the second quarter of 2020, resulting in approximately $ 90 million of intangible asset impairment charges.

During the third quarter of 2020, we performed our annual impairment assessment test for goodwill and non-amortizable intangible assets as of July 1, 2020.

Our 2020 annual testing of goodwill resulted in no impairments as each reporting unit had sufficient fair value in excess of its carrying value.

As part of our goodwill quantitative annual impairment testing, we compare a reporting unit's estimated fair value with its carrying value.

If the carrying value of a reporting unit's net assets exceeds its fair value, we would record an impairment based on the difference between the carrying value and fair value of the reporting unit.

We estimate a reporting unit's fair value using a discounted cash flow method that incorporates planned growth rates, market-based discount rates and estimates of residual value.

This year, for our Europe and North America reporting units, we used a market based, weighted-average cost of capital of 6.1 % to discount the projected cash flows of those operations.

For our Latin America and AMEA reporting units, we used a risk-rated discount rate of 9.1 %.

Estimating the fair value of individual reporting units requires us to make assumptions and estimates regarding our future plans and industry and economic conditions based on available information.

Given the uncertainty of the global economic environment and the impact of COVID-19, those estimates could be significantly different than future performance.

While all reporting units passed our annual impairment testing, if planned business performance expectations are not met or specific valuation factors outside of our control, such as discount rates, change significantly, then the estimated fair values of a reporting unit or reporting units might decline and lead to a goodwill impairment in the future.

During our 2020 annual testing of non-amortizable intangible assets, we recorded approximately $ 54 million of impairment charges in the third quarter of 2020 related to three gum and chocolate bran ds.

The ongoing impact of the pandemic resulted in greater declines in the sales and earnings for certain brands, particularly our gum brands.

We have incorporated the latest results and a slower expected recovery for these brands in the revenue and earnings projections incorporated in our annual impairment testing.

We recorded charges of $ 47 million in North America, $ 3 million in Europe and $ 3 million in Latin America.

The impairment charges were calculated as the excess of the carrying value over the estimated fair value of the intangible assets on a global basis and were recorded within asset impairment and exit costs.

During our 2019 annual testing of non-amortizable intangible assets, we recorded $ 57 million of impairment charges in the third quarter of 2019 related to nine gum, chocolate, biscuits and candy brands:

$ 39 million in Europe, $ 15 million in AMEA and $ 3 million in Latin America.

Following our 2019 and 2020 impairment testing to date, we identified eight brands with fair value in excess of book value of 10% or less that totaled $ 576 million of aggregate book value as of June 30, 2020 .

We continue to monitor our brand performance, particularly in light of the COVID-19 pandemic and related impacts to our business.

While we did not identify impairment triggers for our other brands, there is significant uncertainty due to the pandemic.

We use several accepted valuation methods, including relief of royalty, excess earnings and excess margin, that utilize estimates of future sales, earnings growth rates, royalty rates and discount rates in determining a brand's global fair value.

We also identified nine brands, including the three brands impaired in third quarter of 2020, with $ 712 million of aggregate book value as of September 30, 2020, that each had a fair value in excess of book value of 10% or less.

We continue to monitor our brand performance, particularly in light of the significant uncertainty due to the COVID-19 pandemic and related impacts to our business.

If the brand earnings expectations are not met or specific valuation factors outside of our control, such as discount rates, change significantly, then a brand or brands could become impaired in the future.

7 unchanged sentences

"KDP"), Dong Suh Foods Corporation and Dong Suh Oil & Fats Co.

As of June 30, 2020 , we owned 22.9 % , 13.1 % , 50.0 % and 49.0 % , respectively, of these companies' outstanding shares.

Our investments accounted for under the equity method of accounting totaled $ 6,659 million as of June 30, 2020 and $ 7,178 million as of December 31, 2019 .

We recorded equity earnings and cash dividends of $ 106 million and $ 28 million in the second quarter of 2020 and equity earnings and cash dividends of $ 109 million and $ 28 million in the second quarter of 2019 .

We recorded equity earnings and cash dividends of $ 227 million and $ 193 million in the first six months of 2020 and equity earnings and cash dividends of $ 275 million and $ 188 million in the first six months of 2019 .

Based on the quoted closing price as of June 30, 2020, the fair value of our publicly-traded investments in KDP and JDEP was $ 9.9 billion , and for each investment, its fair value exceeded its carrying value.

As of September 30, 2020, we owned 22.9 %, 11.2 %, 50.0 % and 49.0 %, respectively, of these companies' outstanding shares.

Our investments accounted for under the equity method of accounting totaled $ 6,488 million as of September 30, 2020 and $ 7,178 million as of December 31, 2019.

We recorded equity earnings and cash dividends of $ 84 million and $ 27 million in the third quarter of 2020 and equity earnings and cash dividends of $ 114 million and $ 29 million in the third quarter of 2019.

We recorded equity earnings and cash dividends of $ 311 million and $ 220 million in the first nine months of 2020 and equity earnings and cash dividends of $ 389 million and $ 217 million in the first nine months of 2019.

Based on the quoted closing prices as of September 30, 2020, the combined fair value of our publicly-traded investments in JDEP and KDP was $ 9.0 billion, and for each investment, its fair value exceeded its carrying value.

JDE / Keurig Exchange:

8 unchanged sentences

During 2018, we recorded a net pre-tax gain of $ 778 million (or $ 586 million after-tax).

We hold two director positions on the KDP board as well as additional governance rights.

As we continue to have significant influence, we continue to account for our investment in KDP under the equity method, resulting in recognizing our share of their earnings within our earnings and our share of their dividends within our cash flows.

In connection with this transaction, we changed our accounting principle during the third quarter of 2018 to reflect our share of Keurig's historical and KDP's ongoing earnings on a one-quarter lag basis while we continue to record dividends when cash is received.

4 unchanged sentences

We received $ 185 million of proceeds and recorded a pre-tax gain of $ 71 million (or $ 54 million after-tax) during the first quarter of 2020.

We continue to retain significant influence.

On August 3, 2020, we sold approximately 14.1 million shares of KDP, which reduced our ownership interest by 1.0 % to 12.1 % of the total outstanding shares.

We received $ 414 million of proceeds and recorded a pre-tax gain of $ 181 million (or $ 139 million after-tax) during the third quarter of 2020.

On September 9, 2020, we sold approximately 12.5 million shares of KDP, which reduced our ownership interest by 0.9 % to 11.2 % of the total outstanding shares.

We received $ 363 million of proceeds and recorded a pre-tax gain of $ 154 million (or $ 119 million after-tax) during the third quarter of 2020.

We hold two director positions on the KDP board as well as additional governance rights.

JDE Peet’s Transaction:

9 unchanged sentences

Upon Settlement, we sold approximately 9.7 million of our ordinary shares in JDE Peet’s in the offering for gross proceeds of € 304 million ($ 343 million).

We subsequently sold approximately 1.4 million additional shares and received gross proceeds of € 46 million ( $ 51 million ) upon exercise of the over-allotment option.

Following Settlement and the exercise of the over-allotment option, we hold a 22.9 % equity interest in JDE Peet’s.

As a result of the Settlement and the subsequent sale of shares, we recorded a preliminary gain of $ 121 million , net of $ 33 million released from accumulated other comprehensive losses, and $ 48 million of transaction costs.

We subsequently sold approximately 1.4 million additional shares and received gross proceeds of € 46 million ($ 51 million) upon exercise of the over-allotment

Following Settlement and the exercise of the over-allotment option, we held a 22.9 % equity interest in JDE Peet’s.

During the second quarter of 2020, we recorded a preliminary gain of $ 121 million, net of $ 33 million released from accumulated other comprehensive losses, and $ 48 million of transaction costs.

During the third quarter of 2020, we increased our preliminary gain by $ 10 million to $ 131 million.

As was the case in our ownership interest in JDE, we have significant influence with respect to JDE Peet’s, and we will continue to account for our investment in JDE Peet’s under the equity method, resulting in recognizing our share of JDE Peet’s earnings within our earnings and our share of JDE Peet’s dividends within our cash flows.

In connection with this transaction, we changed our accounting principle to reflect our share of JDE’s historical and JDE Peet’s ongoing earnings on a one-quarter lag basis, although we continue to record dividends when cash is

In the second quarter of 2020, in connection with this transaction, we changed our accounting principle to reflect our share of JDE’s historical and JDE Peet’s ongoing earnings on a one-quarter lag basis, although we continue to record dividends when cash is received.

We determined a lag was preferable as it enables us to continue to report our quarterly and annual results on a timely basis, while recording our share of JDE Peet’s ongoing results after JDE Peet’s has publicly reported its results.

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For the Three Months Ended

June 30, 2019

For the Six Months Ended

June 30, 2019

September 30, 2019 For the Nine Months Ended

September 30, 2019

As Reported As Recast As Reported As Recast

(in millions, except per share data)

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Equity method investment net earnings $ 111 $ 114 $ 337 $ 389

Net earnings 1,428 1,431 3,156 3,208

Net earnings attributable to

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Mondelēz International:

Basic EPS $ 0.98 $ 0.99 $ 2.17 $ 2.21

Diluted EPS $ 0.98 $ 0.98 $ 2.15 $ 2.19

Statements of Other Comprehensive Earnings

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As of December 31, 2019

As Reported As Recast

(in millions)

1 unchanged sentence

Equity method investments $ 7,212 $ 7,178

Total assets 64,549 64,515

Retained earnings 26,653 26,615

1 unchanged sentence

Total Mondelēz International shareholders' equity 27,275 27,241

Total equity 27,351 27,317

Restructuring Program

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Restructuring Costs :

The Simplify to Grow Program liability activity for the six months ended June 30, 2020 was:

The Simplify to Grow Program liability activity for the nine months ended September 30, 2020 was:

Write-downs Total

(in millions)

Liability balance, January 1, 2020 $ 301 $ — $ 301

Charges 116 ( 5 ) 111

Cash spent ( 113 ) — ( 113 )

Non-cash settlements/adjustments ( 6 ) 5 ( 1 )

Liability balance, June 30, 2020

We recorded restructuring charges of $ 28 million in the second quarter of 2020 and $ 20 million in the second quarter of 2019 and $ 43 million in the first six months of 2020 and $ 40 million in the first six months of 2019 within asset impairment and exit costs and benefit plan non-service income.

We spent $ 32 million in the second quarter of 2020 and $ 36 million in the second quarter of 2019 and $ 69 million in the first six months of 2020 and $ 89 million in the first six months of 2019 in cash severance and related costs.

We also recognized non-cash pension settlement losses (refer to Note 10, Benefit Plans ), non-cash asset write-downs (including accelerated depreciation and asset impairments) and other non-cash adjustments totaling $ 11 million in the second quarter of 2020 and $ 6 million in the second quarter of 2019 and $ 14 million in the first six months of 2020 and $ 35 million in the first six months of 2019 .

At June 30, 2020 , $ 220 million of our net restructuring liability was recorded within other current liabilities and $ 32 million was recorded within other long-term liabilities.

Currency ( 2 ) — ( 2 )

Liability balance, September 30, 2020 $ 296 $ — $ 296

• We recorded restructuring charges of $ 68 million in the third quarter of 2020 and $ 77 million in the third quarter of 2019 and $ 111 million in the first nine months of 2020 and $ 117 million in the first nine months of 2019 within asset impairment and exit costs and benefit plan non-service income.

• We spent $ 44 million in the third quarter of 2020 and $ 35 million in the third quarter of 2019 and $ 113 million in the first nine months of 2020 and $ 124 million in the first nine months of 2019 in cash severance and related costs.

• We also recognized a gain on the sale of assets included in the restructuring program, partially offset by non-cash pension settlement losses (refer to Note 10, Benefit Plans ), non-cash asset write-downs (including accelerated depreciation and asset impairments) and other non-cash adjustments totaling $ 13 million in the third quarter of 2020 and $ 41 million in the third quarter of 2019 and $ 1 million in the first nine months of 2020 and $ 76 million in the first nine months of 2019.

• At September 30, 2020, $ 258 million of our net restructuring liability was recorded within other current liabilities and $ 38 million was recorded within other long-term liabilities.

Implementation Costs:

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The costs include incremental expenses related to the closure of facilities, costs to terminate certain contracts and the simplification of our information systems.

Within our continuing results of operations, we recorded implementation costs of $ 52 million in the second quarter of 2020 and $ 68 million in the second quarter of 2019 and $ 95 million in the first six months of 2020 and $ 118 million in the first six months of 2019 .

Within our continuing results of operations, we recorded implementation costs of $ 46 million in the third quarter of 2020 and $ 75 million in the third quarter of 2019 and $ 141 million in the first nine months of 2020 and $ 193 million in the first nine months of 2019.

We recorded these costs within cost of sales and general corporate expense within selling, general and administrative expenses.

Restructuring and Implementation Costs:

During the three and six months ended June 30, 2020 and June 30, 2019 , and since inception of the Simplify to Grow Program, we recorded the following restructuring and implementation costs within segment operating income and earnings before income taxes:

During the three and nine months ended September 30, 2020 and September 30, 2019, and since inception of the Simplify to Grow Program, we recorded the following restructuring and implementation costs within segment operating income and earnings before income taxes:

America AMEA Europe North

America Corporate Total

(in millions)

For the Three Months Ended June 30, 2020

For the Three Months Ended September 30, 2020

Restructuring Costs $ 1 $ 21 $ 40 $ 3 $ 3 $ 68

Implementation Costs 4 6 15 15 6 46

For the Three Months Ended June 30, 2019

Total $ 5 $ 27 $ 55 $ 18 $ 9 $ 114

For the Three Months Ended September 30, 2019

Restructuring Costs $ 3 $ ( 3 ) $ 73 $ 1 $ 3 $ 77

Implementation Costs 8 9 27 9 22 75

For the Six Months Ended June 30, 2020

Total $ 11 $ 6 $ 100 $ 10 $ 25 $ 152

For the Nine Months Ended September 30, 2020

Restructuring Costs $ 19 $ 25 $ 52 $ 3 $ 12 $ 111

Implementation Costs 12 12 40 36 41 141

For the Six Months Ended June 30, 2019

Total $ 31 $ 37 $ 92 $ 39 $ 53 $ 252

For the Nine Months Ended September 30, 2019

Restructuring Costs $ 10 $ 6 $ 84 $ 7 $ 10 $ 117

Implementation Costs 36 22 55 22 58 193

Total $ 46 $ 28 $ 139 $ 29 $ 68 $ 310

Total Project (Inception to Date)

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Implementation Costs 281 218 488 420 348 1,755

Total $ 817 $ 778 $ 1,616 $ 892 $ 489 $ 4,592

Debt and Borrowing Arrangements

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Our short-term borrowings and related weighted-average interest rates consisted of:

As of June 30, 2020

As of December 31, 2019

As of September 30, 2020 As of December 31, 2019

Outstanding Weighted-

Average Rate Amount

Outstanding Weighted-

(in millions, except percentages)

Commercial paper $ 139 0.4 % $ 2,581 2.0 %

Bank loans 60 4.9 % 57 5.2 %

Total short-term borrowings $ 199 $ 2,638

As of June 30, 2020 , commercial paper issued and outstanding had between 1 and 154 days remaining to maturity.

Commercial paper borrowings since year end increased to finance the payment of long-term debt maturities, share repurchases and dividend payments offset in part by proceeds from issuances of long-term debt and operating cash flows.

As of September 30, 2020, commercial paper issued and outstanding had between 1 and 62 days remaining to maturity.

Commercial paper borrowings since year end decreased due to proceeds from issuances of long-term debt, sales of shares of KDP and JDEP stock holdings and operating cash flows offset in part by payments of long-term debt, share repurchases and dividend payments.

Some of our international subsidiaries maintain primarily uncommitted credit lines to meet short-term working capital needs.

Collectively, these credit lines amounted to $ 1.5 billion at June 30, 2020 and $ 1.7 billion at December 31, 2019 .

Borrowings on these lines were $ 73 million at June 30, 2020 and $ 57 million at December 31, 2019 .

Collectively, these credit lines amounted to $ 1.5 billion at September 30, 2020 and $ 1.7 billion at December 31, 2019.

Borrowings on these lines were $ 60 million at September 30, 2020 and $ 57 million at December 31, 2019.

Borrowing Arrangements:

On September 24, 2020, Mondelēz International Holdings B.V.

(“MIHN”) repaid a $ 750 million term loan.

The term loan and accrued interest to date were paid with the euro-denominated notes issued by MIHN on September 23, 2020 that are described below.

On March 24, 2020, we entered into a $ 1.75 billion revolving credit agreement for a 364 -day senior unsecured credit facility that expires on March 23, 2021.

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The agreement includes the same terms and conditions as our existing $ 4.5 billion multi-year credit facility discussed below with the exception that proceeds from a long-term debt issuance would be used to reduce the credit facility.

As of June 30, 2020 , no amounts were drawn on the facility.

On July 2, 2020 we issued $ 1.0 billion of long-term debt and reduced the size of the credit facility to $ 0.95 billion .

On September 8, 2020, we terminated this facility after issuing long-term debt.

On March 6, 2020, we entered into a $ 2.5 billion credit agreement for a 364 -day unsecured credit facility that expires on March 5, 2021.

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The agreement replaces our previous credit agreement that was scheduled to expire on February 26, 2020 and includes the same terms and conditions as our existing $ 4.5 billion multi-year credit facility discussed below.

As of June 30, 2020 , no amounts were drawn on the facility.

As of September 30, 2020, no amounts were drawn on the facility.

We also maintain a $ 4.5 billion multi-year senior unsecured revolving credit facility for general corporate purposes, including working capital needs, and to support our commercial paper program.

1 unchanged sentence

The revolving credit agreement includes a covenant that we maintain a minimum shareholders' equity of at least $ 24.6 billion, excluding accumulated other comprehensive earnings/(losses), the cumulative effects of any changes in accounting principles and earnings/(losses) recognized in connection with the ongoing application of any mark-to-market accounting for pensions and other retirement plans.

At June 30, 2020 , we complied with this covenant as our shareholders' equity, as defined by the covenant, was $ 37.4 billion .

At September 30, 2020, we complied with this covenant as our shareholders' equity, as defined by the covenant, was $ 38.2 billion.

The revolving credit facility also contains customary representations, covenants and events of default.

There are no credit rating triggers, provisions or other financial covenants that could require us to post collateral as security.

As of June 30, 2020 , no amounts were drawn on the facility.

As of September 30, 2020, no amounts were drawn on the facility.

Long-Term Debt:

On October 16, 2020, we completed a cash tender offer and retired $ 949.7 million of long term U.S.

dollar-denominated debt consisting of:

• $ 359 million of our 3.625 % notes due on May 2023

• $ 203 million of our 4.000 % notes due on February 2024

• $ 248 million of our 3.625 % notes due on February 2026

• $ 27 million of our 4.125 % notes due on May 2028

• $ 5 million of our 6.500 % notes due on November 2031

• $ 1 million of our 7.000 % notes due on August 2037

• $ 24 million of our 6.875 % notes due on February 2038

• $ 10 million of our 6.875 % notes due on January 2039

• $ 1 million of our 6.500 % notes due on February 2040

• $ 71 million of our 4.625 % notes due on May 2048

We financed the repurchase of these notes, including the payment of accrued interest and other costs incurred, from net proceeds received from the October 15, 2020 issuances totaling $ 1.25 billion described below.

During the fourth quarter of 2020 we expect to record a loss on debt extinguishment of approximately $ 150 million within interest and other expense, net related to the amount we paid in excess of the carrying value of the debt and from recognizing unamortized discounts and deferred financing in earnings at the time of the debt extinguishment.

Cash costs related to our tender for the debt will be included in other financing activities in the consolidated statement of cash flows and we will record $ 3.9 million of charges within interest and other expense, net from hedging instruments related to the retired debt.

Upon the extinguishment of debt, the deferred cash flow hedge amounts were recorded in earnings.

On October 15, 2020, we issued $ 625 million of 1.875 % U.S.

dollar-denominated notes that mature on October 15, 2032.

We received proceeds of $ 621.2 million, net of discounts and associated financing costs.

The proceeds were used to fund the October 2020 debt tender and general corporate purposes .

We recorded approximately $ 3.8

million of discounts and deferred financing costs that will be amortized evenly into interest expense over the life of the notes.

On October 15, 2020, we issued $ 625 million and on September 4, 2020 we issued $ 500 million of 2.625 % U.S.

dollar-denominated notes for a total aggregate principal of $ 1.13 billion that matures on September 4, 2050.

We received proceeds of $ 1,093.8 million, net of discounts and associated financing costs.

The proceeds were used to fund the October 2020 debt tender and general corporate purposes.

We recorded approximately $ 31.2 million of discounts and deferred financing costs that will be amortized evenly into interest expense over the life of the notes.

On October 6, 2020, fr 135 million (or $ 147 million) of our 0.625 % Swiss franc-denominated notes matured.

The notes and accrued interest to date were paid with cash on hand.

On September 23, 2020, MIHN issued € 1.25 billion of euro-denominated notes guaranteed by Mondelēz International, Inc.

consisting of € 500 million 0.000 % notes that mature on September 23, 2026 and € 750 million 0.375 % notes that mature on September 23, 2029.

We received proceeds of € 1.24 billion (or $ 1.46 billion), net of discounts and associated financing costs.

The proceeds were used for general corporate purposes, including repayment of the MIHN term loan.

We recorded approximately € 11.6 million (or $ 13.7 million) of discounts and deferred financing costs that will be amortized evenly into interest expense over the life of the notes.

On September 4, 2020, we issued $ 500 million of 1.500 % U.S.

dollar-denominated notes that mature on February 4, 2031.

We received proceeds of $ 494.8 million, net of discounts and associated financing costs.

The proceeds were used to repay outstanding commercial paper borrowings and for general corporate purposes.

We recorded approximately $ 5.2 million of discounts and deferred financing costs that will be amortized evenly into interest expense over the life of the notes.

On July 2, 2020, we issued $ 1.0 billion of 0.625 % U.S.

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The notes and accrued interest to date were paid with the issuance of commercial paper and cash on hand.

On May 4, 2020, we issued an $ 750 million of 1.500 % U.S.

On May 4, 2020, we issued $ 750 million of 1.500 % U.S.

dollar-denominated notes that mature on May 4, 2025.

We received proceeds of $ 743.9 million, net of discounts and associated financing costs.

The proceeds were used to repay amounts outstanding under our revolving credit agreement and commercial paper borrowings and used for general corporate purposes .

The proceeds were used to repay amounts outstanding under our revolving credit agreement and commercial paper borrowings and for general corporate purposes .

We recorded approximately $ 6.1 million of discounts and deferred financing costs that will be amortized evenly into interest expense over the life of the notes.

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We recorded approximately $ 2.2 million of discounts and deferred financing costs that will be amortized evenly into interest expense over the life of the notes.

On March 30, 2020, fr 225 million (or $ 235 million ) of our 0.05 % Swiss franc notes matured.

On March 30, 2020, fr 225 million (or $ 235 million) of our 0.050 % Swiss franc-denominated notes matured.

The notes and accrued interest to date were paid from the amounts drawn on our 364 -day revolving credit facility, commercial paper and cash on hand.

On February 10, 2020, $ 427 million of our 5.375 % U.S.

dollar notes matured.

The bonds and accrued interest to date were paid with the issuance of commercial paper and cash on hand.

dollar-denominated notes matured.

The notes and accrued interest to date were paid with the issuance of commercial paper and cash on hand.

Fair Value of Our Debt:

The fair value of our short-term borrowings at June 30, 2020 and December 31, 2019 reflects current market interest rates and approximates the amounts we have recorded on our condensed consolidated balance sheets.

The fair value of our short-term borrowings at September 30, 2020 and December 31, 2019 reflects current market interest rates and approximates the amounts we have recorded on our condensed consolidated balance sheets.

The fair value of our long-term debt was determined using quoted prices in active markets (Level 1 valuation data) for the publicly traded debt obligations.

At June 30, 2020 , the aggregate fair value of our total debt was $ 21,055 million and its carrying value was $ 19,704 million .

At September 30, 2020, the aggregate fair value of our total debt was $ 21,638 million and its carrying value was $ 20,114 million.

At December 31, 2019, the aggregate fair value of our total debt was $ 19,388 million and its carrying value was $ 18,426 million.

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For the Three Months Ended

For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2020 2019 2020 2019

(in millions)

3 unchanged sentences

Interest and other expense, net $ 89 $ 205 $ 364 $ 386

Other income includes amounts excluded from hedge effectiveness related to our net investment hedge derivative contracts and totaled $ 31 million and $ 64 million for the three and six months ended June 30, 2020 and $ 34 million and $ 67 million for the three and six months ended June 30, 2019 .

Other income includes amounts excluded from hedge effectiveness related to our net investment hedge derivative contracts and totaled $ 28 million and $ 92 million for the three and nine months ended September 30, 2020 and $ 34 million and $ 101 million for the three and nine months ended September 30, 2019.

Financial Instruments

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Derivative instruments were recorded at fair value in the condensed consolidated balance sheets as follows:

As of June 30, 2020

As of December 31, 2019

As of September 30, 2020 As of December 31, 2019

Derivatives Liability

Derivatives Asset

Derivatives Liability

(in millions)

3 unchanged sentences

Net investment hedge derivative contracts (1)

275 74 312 65

$ 288 $ 250 $ 331 $ 255

Derivatives not designated as

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Commodity contracts 170 162 201 120

$ 258 $ 236 $ 268 $ 170

Total fair value $ 546 $ 486 $ 599 $ 425

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The fair values (asset/(liability)) of our derivative instruments were determined using:

As of June 30, 2020

As of September 30, 2020

Fair Value of Net

Asset/(Liability)

Quoted Prices in

Asset/(Liability) Quoted Prices in

Active Markets

for Identical

(Level 1) Significant

Other Observable

(Level 2) Significant

(in millions)

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Fair Value of Net

Asset/(Liability)

Quoted Prices in

Asset/(Liability) Quoted Prices in

Active Markets

for Identical

(Level 1) Significant

Other Observable

(Level 2) Significant

(in millions)

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Notional Amount

As of June 30, 2020

As of September 30,

2020 As of December 31, 2019

2 unchanged sentences

Intercompany loans and forecasted interest payments

$ 2,206 $ 2,474

Forecasted transactions

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For the Three Months Ended

For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2020 2019 2020 2019

(in millions)

1 unchanged sentence

Transfer of realized losses/(gains) in fair value

to earnings 65 111 153 123

Unrealized (loss)/gain in fair value ( 69 ) ( 75 ) ( 98 ) ( 214 )

2 unchanged sentences

For the Three Months Ended

For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2020 2019 2020 2019

(in millions)

Interest rate contracts $ ( 65 ) $ ( 111 ) $ ( 153 ) $ ( 123 )

Within interest and other expense, net, during the six months ended June 30, 2020, we recognized an after-tax loss of $ 79 million ( $ 103 million pre-tax) in the first quarter of 2020 related to certain forward-starting interest rate swaps for which the planned tenor of the related forecasted debt was changed.

Within interest and other expense, net, we recognized losses related to forward-starting interest rate swaps of $ 79 million ($ 103 million pre-tax) within the first quarter of 2020 and $ 111 million for the three and nine months ended September 30, 2019 due to the changes in related forecasted debt.

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

For the Three Months Ended

For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2020 2019 2020 2019

(in millions)

2 unchanged sentences

Interest rate contracts ( 69 ) ( 75 ) ( 97 ) ( 217 )

Total $ ( 69 ) $ ( 75 ) $ ( 98 ) $ ( 214 )

Cash flow hedge ineffectiveness was not material for all periods presented.

2 unchanged sentences

Cash Flow Hedge Coverage:

As of June 30, 2020 , our longest dated cash flow hedges were interest rate swaps that hedge forecasted interest rate payments over the next 4 years and 3 months.

As of September 30, 2020, our longest dated cash flow hedges were interest rate swaps that hedge forecasted interest rate payments over the next 4 years.

Hedges of Net Investments in International Operations:

2 unchanged sentences

operations against movements in exchange rates.

The aggregate notional value as of June 30, 2020 was $ 6.9 billion .

The aggregate notional value as of September 30, 2020 was $ 6.2 billion.

The impacts of the net investment hedge derivative contracts on other comprehensive earnings and net earnings were as follows:

For the Three Months Ended

For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2020 2019 2020 2019

(in millions)

After-tax gain/(loss) on NIH contracts (1)

$ ( 223 ) $ 193 $ ( 6 ) $ 260

(1) Amounts recorded for unsettled and settled NIH derivative contracts are recorded in the cumulative translation adjustment within other comprehensive earnings.

1 unchanged sentence

For the Three Months Ended

For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2020 2019 2020 2019

(in millions)

1 unchanged sentence

hedge effectiveness (1)

$ 28 $ 34 $ 92 $ 101

(1) We elected to record changes in the fair value of amounts excluded from the assessment of effectiveness in net earnings within interest and other expense, net.

2 unchanged sentences

For the Three Months Ended

For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2020 2019 2020 2019

(in millions)

Euro notes $ ( 122 ) $ 111 $ ( 135 ) $ 133

British pound sterling notes ( 10 ) 8 7 9

4 unchanged sentences

For the Three Months Ended

For the Six Months Ended

Location of Gain/(Loss) Recognized in Earnings

September 30, For the Nine Months Ended

September 30, Location of Gain/(Loss) Recognized in Earnings

2020 2019 2020 2019

(in millions)

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( 1 ) ( 1 ) ( 2 ) ( 6 ) Selling, general and administrative expenses

Commodity contracts

Cost of sales

Commodity contracts 136 ( 38 ) ( 47 ) 28 Cost of sales

Total $ 176 $ 70 $ ( 75 ) $ 121

Benefit Plans

2 unchanged sentences

Net periodic pension cost consisted of the following:

For the Three Months Ended

Plans Non-U.S.

For the Three Months Ended

September 30, For the Three Months Ended

September 30,

2020 2019 2020 2019

(in millions)

Service cost $ 1 $ 10 $ 30 $ 30

Interest cost 12 15 37 49

5 unchanged sentences

Net periodic pension cost $ 3 $ 17 $ ( 6 ) $ 14

For the Six Months Ended

Plans Non-U.S.

For the Nine Months Ended

September 30, For the Nine Months Ended

September 30,

2020 2019 2020 2019

(in millions)

Service cost $ 4 $ 28 $ 89 $ 91

Interest cost 38 46 110 151

5 unchanged sentences

Net periodic pension cost $ 13 $ 41 $ ( 13 ) $ 48

In connection with our Simplify to Grow Program, settlement losses and other expenses were $ 4 million for the three and six months ended June 30, 2020 and $ 5 million for the three and six months ended June 30, 2019 .

(1) In connection with our Simplify to Grow Program, settlement losses and other expenses were less than $ 1 million for the three months and $ 4 million for the nine months ended September 30, 2020 and $ 2 million for the three months and $ 7 million for the nine months ended September 30, 2019.

These losses were recorded within benefit plan non-service income on our condensed consolidated statements of earnings.

Employer Contributions:

During the six months ended June 30, 2020 , we contributed $ 11 million to our U.S.

During the nine months ended September 30, 2020, we contributed $ 12 million to our U.S.

pension plans and $ 147 million to our non-U.S.

2 unchanged sentences

Discretionary contributions are made to the extent that they are tax deductible and do not generate an excise tax liability.

As of June 30, 2020 , over the remainder of 2020 , we plan to make further contributions of approximately $ 5 million to our U.S.

As of September 30, 2020, over the remainder of 2020, we plan to make further contributions of approximately $ 4 million to our U.S.

plans and approximately $ 43 million to our non-U.S.

4 unchanged sentences

Within selling, general and administrative expenses, we recorded a $ 35 million ($ 26 million net of tax) adjustment in the three months ended June 30, 2019 related to the discounted withdrawal liability.

We recorded accreted interest of $ 3 million and $ 6 million for the three and six months ended June 30, 2020 and an immaterial amount for the three and six months ended June 30, 2019 on the long-term liability within interest and other expense, net.

As of June 30, 2020 , the remaining discounted withdrawal liability was $ 383 million , with $ 14 million recorded in other current liabilities and $ 369 million recorded in long-term other liabilities.

We recorded accreted interest of $ 3 million and $ 9 million for the three and nine months ended September 30, 2020 and an immaterial amount for the three and nine months ended September 30, 2019 on the long-term liability within interest and other expense, net.

As of September 30, 2020, the remaining discounted withdrawal liability was $ 379 million, with $ 14 million recorded in other current liabilities and $ 365 million recorded in long-term other liabilities.

Postretirement Benefit Plans

1 unchanged sentence

For the Three Months Ended

For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2020 2019 2020 2019

(in millions)

Service cost $ 1 $ 1 $ 4 $ 4

Interest cost 3 4 9 11

6 unchanged sentences

For the Three Months Ended

For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2020 2019 2020 2019

(in millions)

Service cost $ 1 $ 1 $ 4 $ 4

Interest cost 1 1 3 3

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Shares Subject

Balance at January 1, 2020

to Option Weighted-

Per Share Average

Term Aggregate

Balance at January 1, 2020 33,855,948 $ 36.19 5 years $ 640 million

Annual grant to eligible employees 2,280,440 59.04

2 unchanged sentences

Options exercised (1)

( 6,737,525 ) 30.71 $ 173 million

Options canceled ( 558,246 ) 44.10

Balance at June 30, 2020

Cash received from options exercised was $ 23 million in the three months and $ 142 million in the six months ended June 30, 2020 .

The actual tax benefit realized and recorded in the provision for income taxes for the tax deductions from the option exercises totaled $ 1 million in the three months and $ 18 million in the six months ended June 30, 2020 .

Balance at September 30, 2020 28,972,587 39.16 5 years $ 533 million

(1) Cash received from options exercised was $ 59 million in the three months and $ 201 million in the nine months ended September 30, 2020.

The actual tax benefit realized and recorded in the provision for income taxes for the tax deductions from the option exercises totaled $ 5 million in the three months and $ 23 million in the nine months ended September 30, 2020.

Performance Share Units and Other Stock-Based Awards:

Our performance share unit, deferred stock unit and historically granted restricted stock activity is reflected below:

Weighted-Average

of Shares Grant Date Weighted-Average

Per Share (3)

6 unchanged sentences

Additional shares granted (1)

Total shares granted

Balance at June 30, 2020

371,761 Various 56.82

Total shares granted 1,742,541 61.78 $ 108 million

( 1,718,365 ) 43.04 $ 74 million

Forfeited ( 422,229 ) 47.33

Balance at September 30, 2020 5,263,892 53.05

(1) Includes performance share units and deferred stock units.

The actual tax benefit/(expense) realized and recorded in the provision for income taxes for the tax deductions from the shares vested totaled less than $ 1 million in the three months and $ 3 million in the six months ended June 30, 2020 .

(2) The actual tax benefit/(expense) realized and recorded in the provision for income taxes for the tax deductions from the shares vested totaled less than $ 1 million in the three months and $ 3 million in the nine months ended September 30, 2020.

(3) The grant date fair value of performance share units is determined based on the Monte Carlo simulation model for the market-based total shareholder return component and the closing market price of the Company’s stock on the grant date for performance-based components.

6 unchanged sentences

Prior to January 1, 2020, we had repurchased $ 16.5 billion of Common Stock pursuant to this authorization.

During the six months ended June 30, 2020 , we repurchased approximately 12.9 million shares of Common Stock at an average cost of $ 54.25 per share, or an aggregate cost of approximately $ 0.7 billion , all of which was paid during the period.

During the nine months ended September 30, 2020, we repurchased approximately 12.9 million shares of Common Stock at an average cost of $ 54.25 per share, or an aggregate cost of approximately $ 0.7 billion, all of which was paid during the period.

All share repurchases were funded through available cash and commercial paper issuances.

As of June 30, 2020 , we have $ 2.5 billion in remaining share repurchase capacity.

As of September 30, 2020, we have $ 2.5 billion in remaining share repurchase capacity.

Commitments and Contingencies

38 unchanged sentences

As part of these transactions, we guarantee that third parties will make contractual payments or achieve performance measures.

At June 30, 2020 , we had no material third-party guarantees recorded on our condensed consolidated balance sheet.

At September 30, 2020, we had no material third-party guarantees recorded on our condensed consolidated balance sheet.

We are a party to various tax matter proceedings incidental to our business.

1 unchanged sentence

Reclassifications from Accumulated Other Comprehensive Income

The following table summarizes the changes in the accumulated balances of each component of accumulated other comprehensive earnings/(losses) attributable to Mondelēz International.

Amounts reclassified from accumulated other comprehensive earnings/(losses) to net earnings (net of tax) were net losses of $ 62 million in the second quarter of 2020 and $ 59 million in the second quarter of 2019 and $ 166 million in the first six months of 2020 and $ 88 million in the first six months of 2019 .

The following table summarizes the changes in accumulated balances of each component of accumulated other comprehensive earnings/(losses) attributable to Mondelēz International.

Amounts reclassified from accumulated other comprehensive earnings/(losses) to net earnings (net of tax) were net losses of $ 86 million in the third quarter of 2020 and $ 143 million in the third quarter of 2019 and $ 252 million in the first nine months of 2020 and $ 231 million in the first nine months of 2019.

For the Three Months Ended

For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2020 2019 2020 2019

(in millions)

18 unchanged sentences

Tax expense/(benefit) on reclassifications (3)

( 7 ) ( 7 ) ( 22 ) ( 25 )

Currency impact ( 60 ) 54 ( 19 ) 58

7 unchanged sentences

Interest rate contracts (1) (4)

66 111 179 123

Tax expense/(benefit) on reclassifications (3)

( 1 ) — ( 26 ) —

Currency impact ( 3 ) ( 11 ) ( 2 ) ( 10 )

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(4) These reclassified gains or losses are recorded within interest and other expense, net..

As of the second quarter of 2020 , our estimated annual effective tax rate, which excludes discrete tax impacts, was 27.5 % .

As of the third quarter of 2020, our estimated annual effective tax rate, which excludes discrete tax impacts, was 27.3 %.

This rate reflected the impact of unfavorable foreign provisions under U.S.

1 unchanged sentence

jurisdictions.

Our 2020 second quarter effective tax rate of 51.7 % was unusually high due to a $ 261 million tax expense incurred in connection with the JDE Peet's transaction (the related gains are reported separately in our statement of earnings and thus not included in earnings before income taxes).

Excluding this impact, our second quarter effective tax rate was 12.1 % reflecting a discrete net tax benefit of $ 72 million .

The discrete net tax benefit primarily consisted of a $ 70 million net benefit from the release of a valuation allowance in China as we now expect to utilize prior-year carryforward tax benefits to offset future taxable income.

Our effective tax rate for the six months ended June 30, 2020 of 36.0 % was also unusually high due to the $ 261 million net tax expense incurred in connection with the JDE Peet's transaction.

Excluding this impact, our effective tax rate for the six months ended June 30, 2020 was 16.8 % , which was favorably impacted by discrete net tax benefits of $ 100 million , primarily driven by the $ 70 million net benefit from the release of the China valuation allowance and a $ 24 million net benefit from the release of liabilities for uncertain tax positions due to expirations of statutes of limitations and audit settlements in several jurisdictions.

As of the second quarter of 2019 , our estimated annual effective tax rate, which excluded discrete tax impacts, was 25.5 % .

Our 2020 third quarter effective tax rate of 36.1 % was high due to a $ 77 million tax expense incurred in connection with two KDP share sales that occurred during the third quarter (the related gains are reported separately in our statement of earnings and thus not included in earnings before income taxes).

Excluding this impact, our third quarter effective tax rate was 29.0 %, reflecting a discrete net tax expense of $ 22 million.

The discrete net tax expense primarily consisted of a $ 30 million net expense from the increase of our U.K.

deferred tax liabilities resulting from tax legislation enacted during the third quarter that increased the corporate income tax rate in the United Kingdom, partially offset by a $ 7 million net benefit from the release of liabilities for uncertain tax positions due to expirations of statutes of limitations and audit settlements in several jurisdictions.

Our effective tax rate for the nine months ended September 30, 2020 of 36.0 % was also high due to the $ 355 million net tax expense incurred in connection with the JDE Peet's transaction and three KDP share sales (one in the first quarter and two in the third quarter) that occurred during 2020.

Excluding these impacts, our effective tax rate for the nine months ended September 30, 2020 was 21.5 %, which was favorably impacted by discrete net tax benefits of $ 96 million, primarily driven by the $ 70 million net benefit from the release of the China valuation allowance and a $ 31 million net benefit from the release of liabilities for uncertain tax positions due to expirations of statutes of limitations and audit settlements in several jurisdictions.

On August 6, 2019, Switzerland published changes to its Federal tax law in the Official Federal Collection of Laws.

On September 27, 2019, the Zurich Canton published their decision on the September 1, 2019 Zurich Canton public vote regarding the Cantonal changes associated with the Swiss Federal tax law change.

The intent of these tax law changes was to replace certain preferential tax regimes with a new set of internationally accepted measures that are hereafter referred to as "Swiss tax reform".

Based on these Federal/Cantonal events, it is our position that enactment of Swiss tax reform for U.S.

GAAP purposes was met as of September 30, 2019, and we recorded the impacts in the third quarter 2019.

The net impact was a benefit of $ 767 million, which consisted of a $ 769 million reduction in deferred tax expense from an allowed step-up of intangible assets for tax purposes (recorded net of valuation allowance) and remeasurement of our deferred tax balances, partially offset by a $ 2 million indirect tax impact in selling, general and administrative expenses.

The future rate impacts of these Swiss tax reform law changes were effective starting January 1, 2020.

As of the third quarter of 2019, our estimated annual effective tax rate, which excluded discrete tax impacts, was 25.4 %.

This rate reflected the impact of unfavorable foreign provisions under U.S.

1 unchanged sentence

jurisdictions.

Our 2019 second quarter effective tax rate of 23.1 % was impacted by a discrete net tax benefit of $ 8 million .

The discrete net tax benefit primarily consisted of a $ 24 million net benefit from the release of uncertain tax positions due to the expirations of statutes of limitations and audit settlements in several jurisdictions, partially offset by $ 15 million expense from U.S.

state legislative changes.

Our effective tax rate for the six months ended June 30, 2019 of 21.2 % was favorably impacted by discrete net tax benefits of $ 71 million , primarily driven by $ 84 million of benefit from the release of liabilities for uncertain tax positions due to expirations of statutes of limitations and audit settlements in various jurisdictions.

Our 2019 third quarter effective tax rate of ( 92.5 )% was significantly impacted by the $ 769 million net deferred tax benefit related to Swiss tax reform.

Excluding this impact, our third quarter effective tax rate was 20.0 %, reflecting a discrete net tax benefit of $ 39 million.

The discrete net tax benefit primarily consisted of a $ 17 million net benefit from the release of uncertain tax positions due to the expirations of statutes of limitations and audit settlements in several jurisdictions and a $ 12 million net benefit related to the release of valuation allowances in non-U.S.

jurisdictions.

Our effective tax rate for the nine months ended September 30, 2019 of ( 8.8 )% was also impacted by the $ 769 million net deferred tax benefit related to Swiss tax reform.

Excluding this impact, our effective tax rate for the nine months was 20.9 %, which reflects discrete net tax benefits of $ 110 million.

The discrete net tax benefits were primarily driven by a $ 101 million net benefit from the release of liabilities for uncertain tax positions due to expirations of statutes of limitations and audit settlements in several jurisdictions.

Earnings per Share

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For the Three Months Ended

For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2020 2019 2020 2019

(in millions, except per share data)

Net earnings $ 1,122 $ 1,431 $ 2,410 $ 3,208

Noncontrolling interest earnings ( 3 ) ( 5 ) ( 11 ) ( 12 )

10 unchanged sentences

We exclude antidilutive Mondelēz International stock options from our calculation of weighted-average shares for diluted EPS.

We excluded antidilutive stock options and performance share units of 5.6 million in the second quarter of 2020 and 4.2 million in the second quarter of 2019 and 4.8 million in the first six months of 2020 and 7.3 million in the first six months of 2019 .

We excluded antidilutive stock options and performance share units of 2.8 million in the third quarter of 2020 and 2.8 million in the third quarter of 2019 and 3.6 million in the first nine months of 2020 and 4.8 million in the first nine months of 2019.

Segment Reporting

14 unchanged sentences

For the Three Months Ended

For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2020 2019 2020 2019

(in millions)

1 unchanged sentence

Latin America $ 610 $ 736 $ 1,847 $ 2,273

AMEA 1,470 1,419 4,209 4,312

Europe 2,526 2,377 7,248 7,175

North America 2,059 1,823 5,979 5,195

Net revenues $ 6,665 $ 6,355 $ 19,283 $ 18,955

Earnings before income taxes:

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Latin America $ 77 $ 84 $ 149 $ 250

AMEA 210 188 615 635

Europe 432 331 1,201 1,239

North America 387 370 1,192 1,096

Unrealized (losses)/gains on hedging activities

Unrealized gains/(losses) on hedging activities

(mark-to-market impacts) 145 20 ( 42 ) 69

10 unchanged sentences

Net revenues by product category were:

For the Three Months Ended June 30, 2020

For the Three Months Ended September 30, 2020

America AMEA Europe North

America Total

(in millions)

Biscuits $ 172 $ 550 $ 803 $ 1,768 $ 3,293

Chocolate 151 533 1,255 61 2,000

Gum & Candy 103 173 153 230 659

Beverages 102 109 23 — 234

Cheese & Grocery 82 105 292 — 479

Total net revenues $ 610 $ 1,470 $ 2,526 $ 2,059 $ 6,665

For the Three Months Ended June 30, 2019

For the Three Months Ended September 30, 2019

America AMEA Europe North

America Total

(in millions)

Biscuits $ 186 $ 495 $ 752 $ 1,514 $ 2,947

Chocolate 164 526 1,177 61 1,928

Gum & Candy 212 213 165 248 838

Beverages 93 103 21 — 217

Cheese & Grocery 81 82 262 — 425

Total net revenues $ 736 $ 1,419 $ 2,377 $ 1,823 $ 6,355

For the Six Months Ended June 30, 2020

For the Nine Months Ended September 30, 2020

America AMEA Europe North

America Total

(in millions)

Biscuits $ 500 $ 1,516 $ 2,243 $ 5,170 $ 9,429

Chocolate 464 1,437 3,619 156 5,676

Gum & Candy 350 511 461 653 1,975

Beverages 294 437 68 — 799

Cheese & Grocery 239 308 857 — 1,404

Total net revenues $ 1,847 $ 4,209 $ 7,248 $ 5,979 $ 19,283

For the Six Months Ended June 30, 2019

For the Nine Months Ended September 30, 2019

America AMEA Europe North

America Total

(in millions)

Biscuits $ 542 $ 1,361 $ 2,253 $ 4,337 $ 8,493

Chocolate 551 1,521 3,543 162 5,777

Gum & Candy 621 662 519 696 2,498

Beverages 324 444 67 — 835

Cheese & Grocery 235 324 793 — 1,352

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements