Mondelez International, Inc. 10-Q

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 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 Asset impairment and exit costs 123 134 253 169 Net gain on divestiture — ( 3 ) — ( 44 ) Amortization of intangibles 50 43 143 130 Operating income 1,135 876 2,704 2,937 Benefit plan non-service income ( 38 ) ( 13 ) ( 102 ) ( 42 ) Interest and other expense, net 89 205 364 386 Earnings before income taxes 1,084 684 2,442 2,593 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 ) Net earnings attributable to Mondelēz International $ 1,119 $ 1,426 $ 2,399 $ 3,196 Per share data: Basic earnings per share attributable to Mondelēz International $ 0.78 $ 0.99 $ 1.68 $ 2.21 Diluted earnings per share attributable to Mondelēz International $ 0.78 $ 0.98 $ 1.66 $ 2.19 See accompanying notes to the condensed consolidated financial statements. 1 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 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: Currency translation adjustment 213 ( 347 ) ( 1,077 ) ( 154 ) Pension and other benefit plans ( 37 ) 89 28 144 Derivative cash flow hedges ( 4 ) 36 55 ( 91 ) Total other comprehensive earnings/(losses) 172 ( 222 ) ( 994 ) ( 101 ) Comprehensive earnings/(losses) 1,294 1,209 1,416 3,107 less: Comprehensive earnings/(losses) attributable to noncontrolling interests 11 ( 4 ) 18 4 Comprehensive earnings/(losses) attributable to Mondelēz International $ 1,283 $ 1,213 $ 1,398 $ 3,103 See accompanying notes to the condensed consolidated financial statements. 2 Table of Contents Mondelēz International, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (in millions of U.S. dollars, except share data) (Unaudited) September 30, 2020 December 31, 2019 ASSETS Cash and cash equivalents $ 2,759 $ 1,291 Trade receivables (net of allowances of $ 41 at September 30, 2020 and $ 35 at December 31, 2019) 2,491 2,212 Other receivables (net of allowances of $ 40 at September 30, 2020 and $ 44 at December 31, 2019) 565 715 Inventories, net 2,840 2,546 Other current assets 791 866 Total current assets 9,446 7,630 Property, plant and equipment, net 8,533 8,733 Operating lease right of use assets 661 568 Goodwill 21,335 20,848 Intangible assets, net 18,056 17,957 Prepaid pension assets 654 516 Deferred income taxes 799 726 Equity method investments 6,488 7,178 Other assets 277 359 TOTAL ASSETS $ 66,249 $ 64,515 LIABILITIES Short-term borrowings $ 199 $ 2,638 Current portion of long-term debt 999 1,581 Accounts payable 5,597 5,853 Accrued marketing 2,028 1,836 Accrued employment costs 760 769 Other current liabilities 3,102 2,645 Total current liabilities 12,685 15,322 Long-term debt 18,916 14,207 Long-term operating lease liabilities 484 403 Deferred income taxes 3,387 3,338 Accrued pension costs 1,115 1,190 Accrued postretirement health care costs 373 387 Other liabilities 2,261 2,351 TOTAL LIABILITIES 39,221 37,198 Commitments and Contingencies (Note 12) EQUITY Common Stock, no par value ( 5,000,000,000 shares authorized and 1,996,537,778 shares issued at September 30, 2020 and December 31, 2019) — — Additional paid-in capital 32,054 32,019 Retained earnings 27,702 26,615 Accumulated other comprehensive losses ( 11,255 ) ( 10,254 ) 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 See accompanying notes to the condensed consolidated financial statements. 3 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 Non-controlling Interest Total Equity 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 — — 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 — — 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 — — — — — ( 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 — — — — — ( 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. 4 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, 2020 2019 CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES Net earnings $ 2,410 $ 3,208 Adjustments to reconcile net earnings to operating cash flows: Depreciation and amortization 813 777 Stock-based compensation expense 97 101 U.S. tax reform transition tax — 2 Deferred income tax benefit ( 103 ) ( 738 ) Asset impairments and accelerated depreciation 141 103 Net gain on divestiture — ( 44 ) (Gain)/loss on equity method investment transactions ( 537 ) 2 Equity method investment net earnings ( 311 ) ( 389 ) Distributions from equity method investments 220 217 Other non-cash items, net 225 70 Change in assets and liabilities, net of acquisitions and divestitures: Receivables, net ( 259 ) ( 217 ) Inventories, net ( 314 ) ( 219 ) Accounts payable 129 ( 259 ) Other current assets ( 64 ) ( 113 ) Other current liabilities 44 ( 499 ) Change in pension and postretirement assets and liabilities, net ( 176 ) ( 120 ) Net cash provided by operating activities 2,315 1,882 CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES Capital expenditures ( 630 ) ( 686 ) Acquisition, net of cash received ( 1,142 ) ( 284 ) Proceeds from divestitures including equity method investments 1,357 166 Other 58 69 Net cash used in investing activities ( 357 ) ( 735 ) CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES Issuances of commercial paper, maturities greater than 90 days 677 809 Repayments of commercial paper, maturities greater than 90 days ( 1,119 ) ( 2,367 ) Net issuances of other short-term borrowings ( 2,001 ) 1,637 Long-term debt proceeds 5,987 1,596 Long-term debt repaid ( 2,196 ) ( 415 ) Repurchase of Common Stock ( 720 ) ( 1,143 ) Dividends paid ( 1,227 ) ( 1,131 ) Other 104 328 Net cash used in financing activities ( 495 ) ( 686 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 1 ) ( 24 ) Cash, cash equivalents and restricted cash: Increase 1,462 437 Balance at beginning of period 1,328 1,100 Balance at end of period $ 2,790 $ 1,537 See accompanying notes to the condensed consolidated financial statements. 5 Table of Contents Mondelēz International, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited) Note 1. Basis of Presentation Our interim condensed consolidated financial statements are unaudited. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted. It is management’s opinion that these financial statements include all normal and recurring adjustments necessary for a fair presentation of our results of operations, financial position and cash flows. Results of operations for any interim period are not necessarily indicative of future or annual results. For a complete set of consolidated financial statements and related notes, refer to our Annual Report on Form 10-K for the year ended December 31, 2019. Principles of Consolidation: The condensed consolidated financial statements include Mondelēz International, Inc. as well as our wholly owned and majority owned subsidiaries, except our Venezuelan subsidiaries that were deconsolidated in 2015. All intercompany transactions are eliminated. The noncontrolling interest represents the noncontrolling investors' interests in the results of subsidiaries that we control and consolidate. We account for investments over which we exercise significant influence under the equity method of accounting. Investments over which we do not have significant influence or control are not material and are carried at cost as there is no readily determinable fair value for the equity interests. Currency Translation and Highly Inflationary Accounting : We translate the results of operations of our subsidiaries from multiple currencies using average exchange rates during each period and translate balance sheet accounts using exchange rates at the end of each period. We record currency translation adjustments as a component of equity (except for highly inflationary currencies) and realized exchange gains and losses on transactions in earnings. Highly inflationary accounting is triggered when a country’s three-year cumulative inflation rate exceeds 100%. It requires the remeasurement of financial statements of subsidiaries in the country from the functional currency of the subsidiary to our U.S. dollar reporting currency, with currency remeasurement gains or losses recorded in earnings. As discussed below, beginning on July 1, 2018, we began to apply highly inflationary accounting for our operations in Argentina. Argentina. During the second quarter of 2018, primarily based on published estimates that indicated that Argentina's three-year cumulative inflation rate exceeded 100%, we concluded that Argentina became a highly inflationary economy for accounting purposes. As of July 1, 2018, we began to apply highly inflationary accounting for our Argentinian subsidiaries and changed their functional currency from the Argentinian peso to the U.S. dollar. On July 1, 2018, both monetary and non-monetary assets and liabilities denominated in Argentinian pesos were remeasured into U.S. dollars using the exchange rate as of the balance sheet date, with remeasurement and other transaction gains and losses recorded in net earnings. As of 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. Brexit . 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. 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 6 Table of Contents 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. Since we sell our products in over 150 countries and have operations in approximately 80 countries, we monitor economic and currency-related risks and seek to take protective measures in response to these exposures, including the impacts related to the global outbreak of the novel coronavirus (“COVID-19”) in 2020. Most countries in which we do business have recently experienced periods of significant economic uncertainty as well as exchange rate volatility. We continue to monitor COVID-19 and other impacts to our business operations, currencies and net monetary exposures in the countries in which we operate. At this time, except for Argentina which is accounted for as a highly inflationary economy, we do not anticipate any other countries in which we operate to be at risk of becoming highly inflationary countries. Cash, Cash Equivalents and Restricted Cash: Cash and cash equivalents include demand deposits with banks and all highly liquid investments with original maturities of three months or less. 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: The allowances for credit losses are recorded against our receivables. They are developed at a country and region level based on historical collection experiences, current economic condition of specific customers and the forecasted economic condition of countries using various factors such as bond default rates and consumption indexes. We write off receivables once it is determined that the receivables are no longer collectible and as allowed by local laws. Changes in allowances for credit losses consisted of: Allowance for Trade Receivables Allowance for Other Current Receivables Allowance for Long-Term Receivables (in millions) Balance at January 1, 2020 $ ( 35 ) $ ( 44 ) $ ( 14 ) Current period provision for expected credit losses ( 9 ) ( 1 ) ( 2 ) Write-offs charged against the allowance 1 2 — Currency 2 3 5 Balance at September 30, 2020 $ ( 41 ) $ ( 40 ) $ ( 11 ) Transfers of Financial Assets: We account for transfers of financial assets, such as uncommitted revolving non-recourse accounts receivable factoring arrangements, when we have surrendered control over the related assets. Determining whether control has transferred requires an evaluation of relevant legal considerations, an assessment of the nature and extent of our continuing involvement with the assets transferred and any other relevant considerations. We use receivable factoring arrangements periodically when circumstances are favorable to manage liquidity. We have non-recourse factoring arrangements in which we sell eligible trade receivables primarily to banks in exchange for cash. We may then continue to collect the receivables sold, acting solely as a collecting agent on behalf of the banks. The outstanding principal amount of receivables under these arrangements amounted to $ 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. The proceeds from the sales of receivables are included in cash from operating activities in the condensed consolidated statements of cash flows. Non-Cash Lease Transactions: 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. 7 Table of Contents New Accounting Pronouncements: In December 2019, the Financial Accounting Standards Board ("FASB") issued an Accounting Standards Update ("ASU") that removes certain exceptions in accounting for income taxes, improves consistency in application and clarifies existing guidance. This ASU is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. We do not expect this ASU to have a material impact on our consolidated financial statements. In August 2018, the FASB issued an ASU that modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The ASU is effective for fiscal years ending after December 15, 2020, with early adoption permitted. We will adopt this standard and reflect the changes to our 2020 annual disclosures. This ASU is not expected to have an impact on our consolidated financial statements. Reclassifications: Certain amounts previously reported have been reclassified to conform to current-year presentation. During the second quarter of 2020, in connection with the JDE Peet's (as defined below) transaction (refer to Note 6, Equity Method Investments ), we changed our accounting principle to reflect our share of Jacobs Douwe Egberts ("JDE") historical results and JDE Peet's ongoing results on a one-quarter lag basis while we continue to record dividends when cash is received. This change was applied retrospectively to all periods presented. Note 2. Acquisitions and Divestitures On April 1, 2020, we acquired a majority interest in Give & Go, a North American leader in fully-finished sweet baked goods and owner of the famous two-bite ® brand of brownies and the Create-A-Treat ® brand, known for cookie and gingerbread house decorating kits. The acquisition of Give & Go provides access to the in-store bakery channel and expands our position in broader snacking. The purchase consideration for Give & Go totaled $ 1,142 million, net of cash received. 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 $ 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. refrigerated nutrition bar company, Perfect Snacks, within our North America segment for $ 284 million cash paid, net of cash received, and expanded our position in broader snacking. 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. 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 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. 8 Table of Contents Note 3. Inventories Inventories consisted of the following: As of September 30, 2020 As of December 31, 2019 (in millions) Raw materials $ 772 $ 707 Finished product 2,183 1,953 2,955 2,660 Inventory reserves ( 115 ) ( 114 ) Inventories, net $ 2,840 $ 2,546 Note 4. Property, Plant and Equipment Property, plant and equipment consisted of the following: As of September 30, 2020 As of December 31, 2019 (in millions) Land and land improvements $ 413 $ 422 Buildings and building improvements 3,128 3,140 Machinery and equipment 11,419 11,295 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 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 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 Total $ ( 13 ) $ 39 $ ( 5 ) $ 44 9 Table of Contents Note 5. Goodwill and Intangible Assets Goodwill by segment was: As of September 30, 2020 As of December 31, 2019 (in millions) 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 September 30, 2020 As of December 31, 2019 (in millions) Non-amortizable intangible assets $ 17,032 $ 17,296 Amortizable intangible assets 2,831 2,374 19,863 19,670 Accumulated amortization ( 1,807 ) ( 1,713 ) Intangible assets, net $ 18,056 $ 17,957 Non-amortizable intangible assets consist principally of brand names purchased through our acquisitions of Nabisco Holdings Corp., the Spanish and Portuguese operations of United Biscuits, the global LU biscuit business of Groupe Danone S.A. and Cadbury Limited. Amortizable intangible assets consist primarily of brands, customer-related intangibles, process technology, licenses and non-compete agreements. 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 (in millions) Balance at January 1, 2020 $ 20,848 $ 19,670 Currency ( 42 ) ( 216 ) Acquisition 529 553 Asset impairments — ( 144 ) Balance at September 30, 2020 $ 21,335 $ 19,863 Changes to goodwill and intangibles were: • Acquisition – In connection with our acquisition of a majority interest in Give & Go during the second quarter of 2020, we recorded a preliminary purchase price allocation of $ 529 million to goodwill and $ 553 million to intangible assets. See Note 2, Acquisitions and Divestitures , for additional information. • 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. 10 Table of Contents 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. 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. Note 6. Equity Method Investments Equity method investments consist of our investments in entities in which we maintain an equity ownership interest and apply the equity method of accounting due to our ability to exert significant influence over decisions relating to their operating and financial affairs. Revenue and expenses of our equity method investees are not consolidated into our financial statements; rather, our proportionate share of the earnings of each investee is reflected as equity method investment net earnings . The carrying values of our equity method investments are also impacted by our proportionate share of items impacting the investee's accumulated other comprehensive income or losses and other items, such as our share of investee dividends. Our equity method investments include, but are not limited to, our ownership interests in JDE Peet's (Euronext Amsterdam: "JDEP"), Keurig Dr Pepper Inc. (NASDAQ: "KDP"), Dong Suh Foods Corporation and Dong Suh Oil & Fats Co. Ltd. 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. 11 Table of Contents 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: On March 7, 2016, we exchanged a portion of our 43.5 % JDE equity interest for a new equity interest in Keurig Green Mountain, Inc. ("Keurig"). Following the transaction, our JDE equity interest became 26.5 % and our new Keurig equity interest was 24.2 %. During the first quarter of 2016, we recorded the difference between the $ 2.0 billion fair value of Keurig and our basis in the exchanged JDE shares as a gain of $ 43 million. In the second quarter of 2019, we determined an adjustment to accumulated other comprehensive losses related to our JDE investment was required, which reduced our previously reported gain by $ 29 million. We recorded the adjustment in the net loss on equity method transactions in the second quarter of 2019. Keurig Dr Pepper Transactions: On July 9, 2018, Keurig closed on its definitive merger agreement with Dr Pepper Snapple Group, Inc., and formed KDP, a publicly traded company. Following the close of the transaction, our 24.2 % investment in Keurig together with our shareholder loan receivable became a 13.8 % investment in KDP. During 2018, we recorded a net pre-tax gain of $ 778 million (or $ 586 million after-tax). In connection with this transaction, we changed our accounting principle during the third quarter of 2018 to reflect our share of Keurig's historical and KDP's ongoing earnings on a one-quarter lag basis while we continue to record dividends when cash is received. We determined a lag was preferable as it enables us to continue to report our quarterly and annual results on a timely basis and to record our share of KDP’s ongoing results once KDP has publicly reported its results. The change was retrospectively applied to all prior periods presented. During the first quarter of 2019, we recognized a pre-tax gain of $ 23 million (or $ 18 million after-tax) related to the impact of a KDP acquisition that decreased our ownership interest from 13.8 % to 13.6 %. On March 4, 2020, we participated in a secondary offering of KDP shares and sold approximately 6.8 million shares, which reduced our ownership interest by 0.5 % to 13.1 % of the total outstanding shares. 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. 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. 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. JDE Peet’s Transaction: On May 19, 2020, JDE Peet’s B.V. (renamed JDE Peet’s N.V. immediately prior to Settlement (as defined below), “JDE Peet’s”) announced its intention to launch an offering of its ordinary shares (the “offering”) and to apply for admission to listing and trading of all of its ordinary shares on Euronext Amsterdam, a regulated market operated by Euronext Amsterdam N.V. (the “admission”). On May 26, 2020, JDE Peet’s published a prospectus in connection with the offering and the admission. On May 29, 2020, JDE Peet’s announced the final pricing terms of the offering, and JDE Peet’s and the selling shareholders, including us, agreed to sell at a price of € 31.50 per ordinary share a total of approximately 82.1 million ordinary shares, including ordinary shares subject to an over-allotment option. The ordinary shares were listed and first traded on May 29, 2020, and payment for, and delivery of, the ordinary shares sold in the offering (excluding ordinary shares subject to the over-allotment option) took place on June 2, 2020 (“Settlement”). Prior to Settlement, we exchanged our 26.4 % ownership interest in JDE for a 26.5 % equity interest in JDE Peet’s. We did not invest new capital in connection with the transaction and the exchange was accounted for as a change in interest transaction. 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 12 Table of Contents option. 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 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. This change in accounting principle was applied retrospectively to all periods. The following tables show the primary line items on the condensed consolidated statements of earnings and comprehensive earnings and the condensed consolidated balance sheet that changed as a result of the lag. The condensed consolidated statements of cash flow and equity were also updated to reflect these changes. For the Three Months Ended 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) Statements of Earnings Equity method investment net earnings $ 111 $ 114 $ 337 $ 389 Net earnings 1,428 1,431 3,156 3,208 Net earnings attributable to Mondelēz International 1,423 1,426 3,144 3,196 Earnings per share attributable to 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 Currency translation adjustment $ ( 314 ) $ ( 347 ) $ ( 157 ) $ ( 154 ) Pension and other benefit plans 86 89 150 144 Derivative cash flow hedges 43 36 ( 88 ) ( 91 ) Total other comprehensive earnings/(losses) ( 185 ) ( 222 ) ( 95 ) ( 101 ) Comprehensive earnings/(losses) attributable to Mondelēz International 1,247 1,213 3,057 3,103 As of December 31, 2019 As Reported As Recast (in millions) Balance Sheet Equity method investments $ 7,212 $ 7,178 Total assets 64,549 64,515 Retained earnings 26,653 26,615 Accumulated other comprehensive losses ( 10,258 ) ( 10,254 ) Total Mondelēz International shareholders' equity 27,275 27,241 Total equity 27,351 27,317 13 Table of Contents Note 7. Restructuring Program On May 6, 2014, our Board of Directors approved a $ 3.5 billion 2014-2018 restructuring program and up to $ 2.2 billion of capital expenditures. On August 31, 2016, our Board of Directors approved a $ 600 million reallocation between restructuring program cash costs and capital expenditures so the $ 5.7 billion program consisted of approximately $ 4.1 billion of restructuring program charges ($ 3.1 billion cash costs and $ 1.0 billion non-cash costs) and up to $ 1.6 billion of capital expenditures. On September 6, 2018, our Board of Directors approved an extension of the restructuring program through 2022, an increase of $ 1.3 billion in the program charges and an increase of $ 700 million in capital expenditures. The total $ 7.7 billion program now consists of $ 5.4 billion of program charges ($ 4.1 billion of cash costs and $ 1.3 billion of non-cash costs) and total capital expenditures of $ 2.3 billion to be incurred over the life of the program. The current restructuring program, as increased and extended by these actions, is now called the Simplify to Grow Program. The primary objective of the Simplify to Grow Program is to reduce our operating cost structure in both our supply chain and overhead costs. The program covers severance as well as asset disposals and other manufacturing and procurement-related one-time costs. Since inception, we have incurred total restructuring and implementation charges of $ 4.6 billion related to the Simplify to Grow Program. We expect to incur the program charges by year-end 2022. Restructuring Costs : The Simplify to Grow Program liability activity for the nine months ended September 30, 2020 was: Severance and related costs Asset 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 ) 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: Implementation costs are directly attributable to restructuring activities; however, they do not qualify for special accounting treatment as exit or disposal activities. We believe the disclosure of implementation costs provides readers of our financial statements with more information on the total costs of our Simplify to Grow Program. Implementation costs primarily relate to reorganizing our operations and facilities in connection with our supply chain reinvention program and other identified productivity and cost saving initiatives. The costs include incremental expenses related to the closure of facilities, costs to terminate certain contracts and the simplification of our information systems. Within our continuing results of operations, we recorded implementation costs of $ 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. 14 Table of Contents Restructuring and Implementation Costs: 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: Latin America AMEA Europe North America Corporate Total (in millions) For the Three Months Ended September 30, 2020 Restructuring Costs $ 1 $ 21 $ 40 $ 3 $ 3 $ 68 Implementation Costs 4 6 15 15 6 46 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 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 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) Restructuring Costs $ 536 $ 560 $ 1,128 $ 472 $ 141 $ 2,837 Implementation Costs 281 218 488 420 348 1,755 Total $ 817 $ 778 $ 1,616 $ 892 $ 489 $ 4,592 Note 8. Debt and Borrowing Arrangements Short-Term Borrowings: Our short-term borrowings and related weighted-average interest rates consisted of: As of September 30, 2020 As of December 31, 2019 Amount Outstanding Weighted- Average Rate Amount Outstanding Weighted- Average Rate (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 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 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. 15 Table of Contents 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. On April 1, 2020, we increased the credit facility from $ 1.75 billion to $ 1.95 billion. 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. 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. 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. On May 6, 2020, we terminated this facility after issuing long-term debt and repaying previous drawdowns. On February 26, 2020, we entered into a $ 1.5 billion revolving credit agreement for a 364 -day senior unsecured credit facility that expires on February 24, 2021. 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 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. The credit facility is scheduled to expire on February 27, 2024. The revolving credit agreement includes a covenant that we maintain a minimum shareholders' equity of at least $ 24.6 billion, excluding accumulated other comprehensive earnings/(losses), the cumulative effects of any changes in accounting principles and earnings/(losses) recognized in connection with the ongoing application of any mark-to-market accounting for pensions and other retirement plans. At 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 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 16 Table of Contents 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. dollar-denominated notes that mature on July 1, 2022. We received proceeds of $ 998.1 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 $ 1.9 million of discounts and deferred financing costs that will be amortized evenly into interest expense over the life of the notes. On May 7, 2020, $ 750 million of our 3.000 % U.S. dollar-denominated notes matured. 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 $ 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 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. On April 13, 2020, we issued $ 500 million of 2.750 % U.S. dollar-denominated notes that mature on April 13, 2030. On May 4, 2020, we issued an additional $ 750 million of notes bringing the aggregate principal issued and due on April 13, 2030 to $ 1.25 billion. We received proceeds of $ 1,283.9 million, net of premium and associated financing costs. 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 $ 33.9 million of premium and deferred financing costs that will be amortized evenly into interest expense over the life of the notes. On April 13, 2020, we issued $ 500 million of 2.125 % U.S. dollar-denominated notes that mature on April 13, 2023. We received proceeds of $ 497.8 million, net of discounts and associated financing costs. The proceeds were used to repay amounts outstanding under our revolving credit agreement. 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 0.050 % 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-denominated notes matured. The notes and accrued interest to date were paid with the issuance of commercial paper and cash on hand. 17 Table of Contents Fair Value of Our Debt: 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 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. Interest and Other Expense, net: Interest and other expense, net consisted of: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2020 2019 2020 2019 (in millions) Interest expense, debt $ 104 $ 121 $ 322 $ 371 Loss related to interest rate swaps — 111 103 111 Other (income)/expense, net ( 15 ) ( 27 ) ( 61 ) ( 96 ) 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 $ 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. Note 9. Financial Instruments Fair Value of Derivative Instruments: Derivative instruments were recorded at fair value in the condensed consolidated balance sheets as follows: As of September 30, 2020 As of December 31, 2019 Asset Derivatives Liability Derivatives Asset Derivatives Liability Derivatives (in millions) Derivatives designated as accounting hedges: Interest rate contracts $ 13 $ 176 $ 19 $ 190 Net investment hedge derivative contracts (1) 275 74 312 65 $ 288 $ 250 $ 331 $ 255 Derivatives not designated as accounting hedges: Currency exchange contracts $ 88 $ 74 $ 67 $ 50 Commodity contracts 170 162 201 120 $ 258 $ 236 $ 268 $ 170 Total fair value $ 546 $ 486 $ 599 $ 425 (1) Net investment hedge derivative contracts consist of cross-currency interest rate swaps and forward contracts. We also designate some of our non-U.S. dollar denominated debt to hedge a portion of our net investments in our non-U.S. operations. This debt is not reflected in the table above, but is included in long-term debt discussed in Note 8, Debt and Borrowing Arrangements . Both net investment hedge derivative contracts and non-U.S. dollar denominated debt acting as net investment hedges are also disclosed in the Derivative Volume table and the Hedges of Net Investments in International Operations section appearing later in this footnote. Derivatives designated as accounting hedges include cash flow and net investment hedge derivative contracts. Our currency exchange and commodity derivative contracts are economic hedges that are not designated as accounting hedges. We record derivative assets and liabilities on a gross basis on our condensed consolidated balance sheets. The fair value of our asset derivatives is recorded within other current assets and the fair value of our liability derivatives is recorded within other current liabilities. 18 Table of Contents The fair values (asset/(liability)) of our derivative instruments were determined using: As of September 30, 2020 Total Fair Value of Net Asset/(Liability) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (in millions) Currency exchange contracts $ 14 $ — $ 14 $ — Commodity contracts 8 18 ( 10 ) — Interest rate contracts ( 163 ) — ( 163 ) — Net investment hedge contracts 201 — 201 — Total derivatives $ 60 $ 18 $ 42 $ — As of December 31, 2019 Total Fair Value of Net Asset/(Liability) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (in millions) Currency exchange contracts $ 17 $ — $ 17 $ — Commodity contracts 81 27 54 — Interest rate contracts ( 171 ) — ( 171 ) — Net investment hedge contracts 247 — 247 — Total derivatives $ 174 $ 27 $ 147 $ — Level 1 financial assets and liabilities consist of exchange-traded commodity futures and listed options. The fair value of these instruments is determined based on quoted market prices on commodity exchanges. Level 2 financial assets and liabilities consist primarily of over-the-counter (“OTC”) currency exchange forwards, options and swaps; commodity forwards and options; and interest rate swaps. Our currency exchange contracts are valued using an income approach based on observable market forward rates less the contract rate multiplied by the notional amount. Commodity derivatives are valued using an income approach based on the observable market commodity index prices less the contract rate multiplied by the notional amount or based on pricing models that rely on market observable inputs such as commodity prices. Our calculation of the fair value of interest rate swaps is derived from a discounted cash flow analysis based on the terms of the contract and the observable market interest rate curve. Our calculation of the fair value of financial instruments takes into consideration the risk of nonperformance, including counterparty credit risk. Our OTC derivative transactions are governed by International Swap Dealers Association agreements and other standard industry contracts. Under these agreements, we do not post nor require collateral from our counterparties. The majority of our derivative contracts do not have a legal right of set-off. We manage the credit risk in connection with these and all our derivatives by entering into transactions with counterparties with investment grade credit ratings, limiting the amount of exposure with each counterparty and monitoring the financial condition of our counterparties. 19 Table of Contents Derivative Volume: The notional values of our hedging instruments were: Notional Amount As of September 30, 2020 As of December 31, 2019 (in millions) Currency exchange contracts: Intercompany loans and forecasted interest payments $ 2,206 $ 2,474 Forecasted transactions 4,117 3,993 Commodity contracts 8,136 7,238 Interest rate contracts 3,500 5,250 Net investment hedges: Net investment hedge derivative contracts 6,168 6,864 Non-U.S. dollar debt designated as net investment hedges Euro notes 3,592 3,436 British pound sterling notes 340 349 Swiss franc notes 1,276 1,448 Canadian dollar notes 450 462 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, 2020 2019 2020 2019 (in millions) Accumulated (loss)/gain at beginning of period $ ( 154 ) $ ( 295 ) $ ( 213 ) $ ( 168 ) Transfer of realized losses/(gains) in fair value to earnings 65 111 153 123 Unrealized (loss)/gain in fair value ( 69 ) ( 75 ) ( 98 ) ( 214 ) Accumulated (loss)/gain at end of period $ ( 158 ) $ ( 259 ) $ ( 158 ) $ ( 259 ) 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, 2020 2019 2020 2019 (in millions) Interest rate contracts $ ( 65 ) $ ( 111 ) $ ( 153 ) $ ( 123 ) 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 September 30, For the Nine Months Ended September 30, 2020 2019 2020 2019 (in millions) Currency exchange contracts – forecasted transactions $ — $ — $ ( 1 ) $ 3 Interest rate contracts ( 69 ) ( 75 ) ( 97 ) ( 217 ) Total $ ( 69 ) $ ( 75 ) $ ( 98 ) $ ( 214 ) Cash flow hedge ineffectiveness was not material for all periods presented. 20 Table of Contents 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 interest and other expense, net for interest rate contracts. Based on current market conditions, we would expect to transfer losses of $ 20 million (net of taxes) for interest rate cash flow hedges to earnings during the next 12 months. Cash Flow Hedge Coverage: 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: Net investment hedge ("NIH") derivative contracts: We enter into cross-currency interest rate swaps and forwards to hedge certain investments in our non-U.S. operations against movements in exchange rates. 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 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. The cash flows from the settled contracts are reported within other investing activities in the condensed consolidated statement of cash flows. For the Three Months Ended September 30, For the Nine Months Ended September 30, 2020 2019 2020 2019 (in millions) Amounts excluded from the assessment of 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. Non-U.S. dollar debt designated as net investment hedges: After-tax gains/(losses) related to hedges of net investments in international operations in the form of euro, British pound sterling, Swiss franc and Canadian dollar-denominated debt were recorded within the cumulative translation adjustment section of other comprehensive income and were: For the Three 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 Swiss franc notes ( 27 ) 24 ( 47 ) 16 Canadian notes ( 6 ) 4 9 ( 10 ) 21 Table of Contents Economic Hedges: Pre-tax gains/(losses) recorded in net earnings for economic hedges were: For the Three Months Ended September 30, For the Nine Months Ended September 30, Location of Gain/(Loss) Recognized in Earnings 2020 2019 2020 2019 (in millions) Currency exchange contracts: Intercompany loans and forecasted interest payments $ 7 $ 60 $ ( 73 ) $ 71 Interest and other expense, net Forecasted transactions 28 50 50 30 Cost of sales Forecasted transactions 6 ( 1 ) ( 3 ) ( 2 ) Interest and other expense, net Forecasted transactions ( 1 ) ( 1 ) ( 2 ) ( 6 ) Selling, general and administrative expenses Commodity contracts 136 ( 38 ) ( 47 ) 28 Cost of sales Total $ 176 $ 70 $ ( 75 ) $ 121 Note 10. Benefit Plans Pension Plans Components of Net Periodic Pension Cost: Net periodic pension cost consisted of the following: U.S. Plans Non-U.S. Plans 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 Expected return on plan assets ( 19 ) ( 22 ) ( 100 ) ( 99 ) Amortization: Net loss from experience differences 5 9 29 36 Prior service cost/(benefit) 1 — ( 2 ) ( 2 ) Settlement losses and other expenses (1) 3 5 — — Net periodic pension cost $ 3 $ 17 $ ( 6 ) $ 14 U.S. Plans Non-U.S. Plans 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 Expected return on plan assets ( 58 ) ( 66 ) ( 295 ) ( 303 ) Amortization: Net loss from experience differences 13 19 86 111 Prior service cost/(credit) 1 1 ( 5 ) ( 5 ) Settlement losses and other expenses (1) 15 13 2 3 Net periodic pension cost $ 13 $ 41 $ ( 13 ) $ 48 (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. 22 Table of Contents Employer Contributions: 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. pension plans, including $ 70 million to plans in the United Kingdom and Ireland. We make contributions to our pension plans in accordance with local funding arrangements and statutory minimum funding requirements. Discretionary contributions are made to the extent that they are tax deductible and do not generate an excise tax liability. 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. plans. Our actual contributions may be different due to many factors, including changes in tax and other benefit laws, significant differences between expected and actual pension asset performance or interest rates. Multiemployer Pension Plans: On July 11, 2019, we received an undiscounted withdrawal liability assessment related to our complete withdrawal from the Bakery and Confectionery Union and Industry International Pension Fund totaling $ 526 million requiring pro-rata monthly payments over 20 years. We began making monthly payments during the third quarter of 2019. 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 $ 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 Net periodic postretirement health care benefit consisted of the following: For the Three 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 Amortization: Net loss from experience differences 1 2 5 5 Prior service credit ( 8 ) ( 10 ) ( 23 ) ( 29 ) Net periodic postretirement health care benefit $ ( 3 ) $ ( 3 ) $ ( 5 ) $ ( 9 ) Postemployment Benefit Plans Net periodic postemployment cost consisted of the following: For the Three 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 Amortization of net gains ( 1 ) ( 1 ) ( 3 ) ( 2 ) Net periodic postemployment cost $ 1 $ 1 $ 4 $ 5 23 Table of Contents Note 11. Stock Plans Stock Options: Stock option activity is reflected below: Shares Subject to Option Weighted- Average Exercise or Grant Price Per Share Average Remaining Contractual Term Aggregate Intrinsic Value Balance at January 1, 2020 33,855,948 $ 36.19 5 years $ 640 million Annual grant to eligible employees 2,280,440 59.04 Additional options issued 131,970 49.23 Total options granted 2,412,410 58.50 Options exercised (1) ( 6,737,525 ) 30.71 $ 173 million Options canceled ( 558,246 ) 44.10 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: Number of Shares Grant Date Weighted-Average Fair Value Per Share (3) Weighted-Average Aggregate Fair Value (3) Balance at January 1, 2020 5,661,945 $ 46.90 Annual grant to eligible employees: Feb. 20, 2020 Performance share units 825,230 65.83 Deferred stock units 545,550 59.04 Additional shares granted (1) 371,761 Various 56.82 Total shares granted 1,742,541 61.78 $ 108 million Vested (2) ( 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. (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. The Monte Carlo simulation model incorporates the probability of achieving the total shareholder return market condition. Compensation expense is recognized using the grant date fair values regardless of whether the market condition is achieved, so long as the requisite service has been provided. Share Repurchase Program: Between 2013 and 2017, our Board of Directors authorized the repurchase of a total of $ 13.7 billion of our Common Stock through December 31, 2018. On January 31, 2018, our Finance Committee, with authorization delegated from our Board of Directors, approved an increase of $ 6.0 billion in the share repurchase program, raising the authorization to $ 19.7 billion of Common Stock repurchases, and extended the program through December 31, 2020 . Repurchases under the program are determined by management and are wholly discretionary. Prior to January 1, 2020, we had repurchased $ 16.5 billion of Common Stock pursuant to this authorization. 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 September 30, 2020, we have $ 2.5 billion in remaining share repurchase capacity. 24 Table of Contents Note 12. Commitments and Contingencies Legal Proceedings: We routinely are involved in legal proceedings, claims, disputes, regulatory matters and governmental inspections or investigations arising in the ordinary course of or incidental to our business, including those noted below in this section. We record provisions in the consolidated financial statements for pending litigation when we determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. For matters we have not provided for that are reasonably possible to result in an unfavorable outcome, management is unable to estimate the possible loss or range of loss or such amounts have been determined to be immaterial. At present we believe that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm our financial position, results of operations or cash flows. However, legal proceedings and government investigations are subject to inherent uncertainties, and unfavorable rulings or other events could occur. Unfavorable resolutions could involve substantial monetary damages. In addition, in matters for which conduct remedies are sought, unfavorable resolutions could include an injunction or other order prohibiting us from selling one or more products at all or in particular ways, precluding particular business practices or requiring other remedies. An unfavorable outcome might result in a material adverse impact on our business, results of operations or financial position. On April 1, 2015 , the U.S. Commodity Futures Trading Commission ("CFTC") filed a complaint against Kraft Foods Group and Mondelēz Global LLC (“Mondelēz Global”) in the U.S. District Court for the Northern District of Illinois (the "District Court"), Eastern Division (the “CFTC action”) following its investigation of activities related to the trading of December 2011 wheat futures contracts that occurred prior to the spin-off of Kraft Foods Group. The complaint alleges that Kraft Foods Group and Mondelēz Global (1) manipulated or attempted to manipulate the wheat markets during the fall of 2011; (2) violated position limit levels for wheat futures and (3) engaged in non-competitive trades by trading both sides of exchange-for-physical Chicago Board of Trade wheat contracts. The CFTC seeks civil monetary penalties of either triple the monetary gain for each violation of the Commodity Exchange Act (the “Act”) or $ 1 million for each violation of Section 6(c)(1), 6(c)(3) or 9(a)(2) of the Act and $ 140,000 for each additional violation of the Act, plus post-judgment interest; an order of permanent injunction prohibiting Kraft Foods Group and Mondelēz Global from violating specified provisions of the Act; disgorgement of profits; and costs and fees. On August 15, 2019, the District Court approved a settlement agreement between the CFTC and Mondelēz Global. The terms of the settlement, which are available in the District Court’s docket, had an immaterial impact on our financial position, results of operations and cash flows. On October 23, 2019, following a ruling by the United States Court of Appeals for the Seventh Circuit regarding Mondelēz Global's allegations that the CFTC and its Commissioners violated certain terms of the settlement agreement and the CFTC's argument that the Commissioners were not bound by the terms of the settlement agreement, the District Court vacated the settlement agreement and reinstated all pending motions that the District Court had previously mooted as a result of the settlement. The parties have reached a new agreement in principle to resolve the CFTC action and have submitted the settlement to the District Court for approval. The District Court cancelled a scheduled conference on June 4, 2020 to discuss the proposed settlement agreement but indicated that it would rule on pending motions in due course . Additionally, several class action complaints were filed against Kraft Foods Group and Mondelēz Global in the District Court by investors in wheat futures and options on behalf of themselves and others similarly situated. The complaints make similar allegations as those made in the CFTC action, and the plaintiffs are seeking class action certification; monetary damages, interest and unjust enrichment; costs and fees; and injunctive, declaratory and other unspecified relief. In June 2015, these suits were consolidated in the District Court. On January 3, 2020, the District Court granted plantiffs' request to certify a class. It is not possible to predict the outcome of these matters; however, based on our Separation and Distribution Agreement with Kraft Foods Group dated as of September 27, 2012, we expect to bear any monetary penalties or other payments in connection with the CFTC action. Although the CFTC action and the class action complaints involve the same alleged conduct, a resolution or decision with respect to one of the matters may not be dispositive as to the outcome of the other matter. In November 2019, the European Commission informed us that it has initiated an investigation into our alleged infringement of European Union competition law through certain practices restricting cross-border trade within the European Economic Area. We are cooperating with the investigation and expect to engage further with the European Commission as their investigation proceeds. It is not possible to predict how long the investigation will take or the ultimate outcome of this matter. 25 Table of Contents Third-Party Guarantees: We enter into third-party guarantees primarily to cover long-term obligations of our vendors. As part of these transactions, we guarantee that third parties will make contractual payments or achieve performance measures. At September 30, 2020, we had no material third-party guarantees recorded on our condensed consolidated balance sheet. Tax Matters: We are a party to various tax matter proceedings incidental to our business. These proceedings are subject to inherent uncertainties, and unfavorable outcomes could subject us to additional tax liabilities and could materially adversely impact our business, results of operations or financial position. 26 Table of Contents Note 13. Reclassifications from Accumulated Other Comprehensive Income 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 September 30, For the Nine Months Ended September 30, 2020 2019 2020 2019 (in millions) Currency Translation Adjustments: Balance at beginning of period $ ( 9,609 ) $ ( 8,430 ) $ ( 8,320 ) $ ( 8,622 ) Currency translation adjustments 184 ( 316 ) ( 1,071 ) ( 144 ) Reclassification to earnings related to: Equity method investment transactions (1) — — 29 — Tax (expense)/benefit 29 ( 31 ) ( 35 ) ( 10 ) Other comprehensive earnings/(losses) 213 ( 347 ) ( 1,077 ) ( 154 ) Less: other comprehensive (earnings)/loss attributable to noncontrolling interests ( 8 ) 9 ( 7 ) 8 Balance at end of period ( 9,404 ) ( 8,768 ) ( 9,404 ) ( 8,768 ) Pension and Other Benefit Plans: Balance at beginning of period $ ( 1,656 ) $ ( 1,799 ) $ ( 1,721 ) $ ( 1,854 ) Net actuarial gain/(loss) arising during period 2 4 ( 22 ) ( 28 ) Tax (expense)/benefit on net actuarial gain/(loss) — ( 1 ) ( 1 ) 6 Losses/(gains) reclassified into net earnings: Amortization of experience losses and prior service costs (2) 25 34 74 100 Settlement losses and other expenses (1) 3 5 18 33 Tax expense/(benefit) on reclassifications (3) ( 7 ) ( 7 ) ( 22 ) ( 25 ) Currency impact ( 60 ) 54 ( 19 ) 58 Other comprehensive earnings/(losses) ( 37 ) 89 28 144 Balance at end of period ( 1,693 ) ( 1,710 ) ( 1,693 ) ( 1,710 ) Derivative Cash Flow Hedges: Balance at beginning of period $ ( 154 ) $ ( 295 ) $ ( 213 ) $ ( 168 ) Net derivative gains/(losses) ( 67 ) ( 74 ) ( 123 ) ( 232 ) Tax (expense)/benefit on net derivative gain/(loss) 1 10 27 28 Losses/(gains) reclassified into net earnings: Interest rate contracts (1) (4) 66 111 179 123 Tax expense/(benefit) on reclassifications (3) ( 1 ) — ( 26 ) — Currency impact ( 3 ) ( 11 ) ( 2 ) ( 10 ) Other comprehensive earnings/(losses) ( 4 ) 36 55 ( 91 ) Balance at end of period ( 158 ) ( 259 ) ( 158 ) ( 259 ) Accumulated other comprehensive income attributable to Mondelēz International: Balance at beginning of period $ ( 11,419 ) $ ( 10,524 ) $ ( 10,254 ) $ ( 10,644 ) Total other comprehensive earnings/(losses) 172 ( 222 ) ( 994 ) ( 101 ) Less: other comprehensive (earnings)/loss attributable to noncontrolling interests ( 8 ) 9 ( 7 ) 8 Other comprehensive earnings/(losses) attributable to Mondelēz International 164 ( 213 ) ( 1,001 ) ( 93 ) Balance at end of period $ ( 11,255 ) $ ( 10,737 ) $ ( 11,255 ) $ ( 10,737 ) (1) These amounts include equity method investment transactions recorded within gain/(loss) on equity method investment transactions. (2) These reclassified losses are included in net periodic benefit costs disclosed in Note 10, Benefit Plans . (3) Taxes reclassified to earnings are recorded within the provision for income taxes. (4) These reclassified gains or losses are recorded within interest and other expense, net.. 27 Table of Contents Note 14. Income Taxes 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. tax laws and our tax related to earnings from equity method investments (the earnings are reported separately on our statement of earnings and thus not included in earnings before income taxes), partially offset by favorable impacts from the mix of pre-tax income in various non-U.S. jurisdictions. 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. tax laws and our tax related to earnings from equity method investments (the earnings are reported separately on our statement of earnings and thus not included in earnings before income taxes), partially offset by favorable impacts from the mix of pre-tax income in various non-U.S. 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. 28 Table of Contents Note 15. Earnings per Share Basic and diluted earnings per share (“EPS”) were calculated as follows: For the Three 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 ) Net earnings attributable to Mondelēz International $ 1,119 $ 1,426 $ 2,399 $ 3,196 Weighted-average shares for basic EPS 1,432 1,445 1,432 1,446 Plus incremental shares from assumed conversions of stock options and long-term incentive plan shares 10 13 10 13 Weighted-average shares for diluted EPS 1,442 1,458 1,442 1,459 Basic earnings per share attributable to Mondelēz International $ 0.78 $ 0.99 $ 1.68 $ 2.21 Diluted earnings per share attributable to Mondelēz International $ 0.78 $ 0.98 $ 1.66 $ 2.19 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 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. Note 16. Segment Reporting We manufacture and market primarily snack food products, including biscuits (cookies, crackers and salted snacks), chocolate, gum & candy and various cheese & grocery products, as well as powdered beverage products. We manage our global business and report operating results through geographic units. We manage our operations by region to leverage regional operating scale, manage different and changing business environments more effectively and pursue growth opportunities as they arise across our key markets. Our regional management teams have responsibility for the business, product categories and financial results in the regions. Our operations and management structure are organized into four operating segments: • Latin America • AMEA • Europe • North America We use segment operating income to evaluate segment performance and allocate resources. We believe it is appropriate to disclose this measure to help investors analyze segment performance and trends. Segment operating income excludes unrealized gains and losses on hedging activities (which are a component of cost of sales), general corporate expenses (which are a component of selling, general and administrative expenses), amortization of intangibles, gains and losses on divestitures and acquisition-related costs (which are a component of selling, general and administrative expenses) in all periods presented. We exclude these items from segment operating income in order to provide better transparency of our segment operating results. Furthermore, we centrally manage benefit plan non-service income and interest and other expense, net. Accordingly, we do not present these items by segment because they are excluded from the segment profitability measure that management reviews. 29 Table of Contents Our segment net revenues and earnings were: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2020 2019 2020 2019 (in millions) Net revenues: 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: Operating income: 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 gains/(losses) on hedging activities (mark-to-market impacts) 145 20 ( 42 ) 69 General corporate expenses ( 66 ) ( 76 ) ( 253 ) ( 264 ) Amortization of intangibles ( 50 ) ( 43 ) ( 143 ) ( 130 ) Net gain on divestiture — 3 — 44 Acquisition-related costs — ( 1 ) ( 15 ) ( 2 ) Operating income 1,135 876 2,704 2,937 Benefit plan non-service income 38 13 102 42 Interest and other expense, net ( 89 ) ( 205 ) ( 364 ) ( 386 ) Earnings before income taxes $ 1,084 $ 684 $ 2,442 $ 2,593 Items impacting our segment operating results are discussed in Note 1, Basis of Presentation , Note 2, Acquisitions and Divestitures, Note 4, Property, Plant and Equipment, Note 5, Goodwill and Intangible Assets, and Note 7, Restructuring Program . Also see Note 8, Debt and Borrowing Arrangements , and Note 9, Financial Instruments, for more information on our interest and other expense, net for each period. 30 Table of Contents Net revenues by product category were: For the Three Months Ended September 30, 2020 Latin 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 September 30, 2019 Latin 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 Nine Months Ended September 30, 2020 Latin 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 Nine Months Ended September 30, 2019 Latin 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 Total net revenues $ 2,273 $ 4,312 $ 7,175 $ 5,195 $ 18,955 31 Table of Contents