Mondelez International, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Description of the Company We make and sell primarily snacks, including biscuits (cookies, crackers and salted snacks), chocolate, gum & candy as well as various cheese & grocery and powdered beverage products. We have operations in approximately 80 countries and sell our products in over 150 countries. We aim to be the global leader in snacking. Our strategy is to drive long-term growth by focusing on three strategic priorities: accelerating consumer-centric growth, driving operational excellence and creating a winning growth culture. We believe the successful implementation of our strategic priorities and leveraging our strong foundation of iconic global and local brands, an attractive global footprint, our market leadership in developed and emerging markets, our deep innovation, marketing and distribution capabilities, and our efficiency and sustainability efforts, will drive top- and bottom-line growth, enabling us to continue to create long-term value for our shareholders. Recent Developments and Significant Items Affecting Comparability COVID-19 We have been actively monitoring the outbreak of COVID-19 and its impact globally. Our highest priorities continue to be the safety of our employees and working with our employees and network of suppliers and customers to help maintain the global food supply chain. During the first nine months of 2020, we experienced a significant increase in demand and revenue growth as consumers increased their food purchases for in-home consumption. Results were particularly strong in modern trade (such as large grocery supermarkets and retail chains) and e-commerce, and especially for categories such as biscuits. Other parts of our business were negatively affected by mandated lockdowns and other related restrictions including some of our emerging markets with a greater concentration of traditional trade (such as small family-run stores) as well as our world travel retail (such as international duty-free stores) and foodservice businesses. During the second quarter especially, lockdowns and other related measures or restrictions had a negative impact on emerging markets with a greater concentration of traditional trade due to store closures (particularly in our Latin America region as well as parts of our AMEA region) as well as in categories like gum and candy, which are more traditionally purchased and consumed out of home. In the third quarter, demand grew in both developed and emerging markets as the negative impacts of COVID-19 during the second quarter subsided and a number of our key markets returned to higher growth. A sharp reduction in global travel continues to negatively impact our world travel retail business, and lower out-of-home consumption continues to negatively impact our foodservice business as well as sales of our gum and candy products. During the first nine months of 2020, we also experienced temporary disruptions in operations in some of our emerging markets that were not material to our consolidated results. We discuss these and other impacts of COVID-19 below. Our Employees, Customers and Communities We have taken a number of actions to promote the health and safety of our employees, customers and consumers, which is our first priority: • We implemented enhanced protocols to provide a safe and sanitary working environment for our employees. In many locations, our employees are working remotely whenever possible. For employees who are unable to work remotely, we have adopted a number of heightened protocols, consistent with those prescribed by the World Health Organization, related to social distancing (including staggering lunchtimes and shifts where possible and restricting in-person gatherings and non-essential travel) and enhanced hygiene and workplace sanitation. At a local level, we have also provided additional flexibility and support to employees in our manufacturing facilities, distribution and logistics operations and sales organization. • We have been hiring frontline employees in the U.S. and other locations to meet additional marketplace demand and promote uninterrupted functioning of our manufacturing, distribution and sales network. • We increased our $15 million global commitment to assist those most impacted by COVID-19 to nearly $27 million to date. We have been supporting local and global organizations that are responding to food instability and providing emergency relief. 32 Table of Contents Our Supply Chain and Operations We operate in the food and beverages industry and are part of the global food supply chain. One of our main objectives during the pandemic is to maintain the availability of our products to meet the needs of our consumers. In response to increased demand, we have increased production and, to date, we have not experienced material disruptions in our supply chain or operations: • We were able to leverage learnings from our timely response to the initial outbreak in China, and we put in place procedures across our supply chain to help mitigate the risk that our manufacturing sites will experience material closures or disruptions. • We have been able to continue to source raw ingredients, packaging, energy and transportation and deliver our products to our customers. • We have not experienced material disruptions in our workforce; however, mandatory and voluntary stay-at-home restrictions have resulted in increased levels of absenteeism. • Commodity costs have become more volatile due to the COVID-19 outbreak. Although we monitor our exposure to commodity prices and hedge against input price increases, we cannot fully hedge against changes in commodity costs, and our hedging strategies may not protect us from increases in specific raw material costs. We anticipate continued commodity cost volatility as the pandemic continues. • We have experienced temporary disruptions in operations in some of our emerging markets. The disruptions were not material to our consolidated results for the first nine months of 2020. In the future, the ongoing COVID-19 outbreak could disrupt our global supply chain, operations and routes to market or those of our suppliers, their suppliers, or our co-manufacturers or distributors. These disruptions or our failure to effectively respond to them could increase product or distribution costs, prices and potentially affect the availability of our products. • Our net revenue and net earnings in U.S. dollars for the nine months ended September 30, 2020 were negatively affected by currency translation losses from a generally stronger U.S. dollar relative to other currencies in the countries in which we operate. • During the second quarter of 2020, we incurred higher operating costs primarily for labor, customer service and logistics, security, personal protective equipment and cleaning. In the third quarter of 2020, our spending in these areas was significantly less but still above pre-COVID levels. We continued to incur higher costs in these areas in response to the ongoing pandemic as we worked to protect our employees and deliver our products timely and safely to our customers. Most other aspects of our global supply chain and operations did not change materially during the first nine months of 2020. While we have not had material disruptions to date, we do not know whether or how our supply chain or operations may be negatively affected if the pandemic persists for an extended period or worsens. As we respond to this evolving situation, we intend to continue to execute on our strategic operating plans. However, disruptions, higher operating costs or uncertainties like those noted above could result in delays or modifications to our plans and initiatives. Our Liquidity We believe the steps we have taken to enhance our capital structure and liquidity over the last several years and months have strengthened our ability to operate through current conditions: • During 2019, we generated $4.0 billion of cash from operations, or $3.0 billion after deducting capital expenditures. • During the first nine months of 2020, we generated $2.3 billion of cash from operations, or $1.7 billion after capital expenditures. Also, as of September 30, 2020, we had $2.8 billion of cash and cash equivalents on hand. • During the first nine months of 2020, we also received cash of €350 million ($394 million) from our participation in the JDE Peet's public share offerings, $185 million from our participation in the KDP secondary offering and $777 million from subsequent KDP share sales (see additional information below and in Note 6, Equity Method Investments ). • As a precautionary measure, in March, we also suspended our share repurchase program. • In connection with various legislatively authorized tax payment deferral mechanisms available for income tax, indirect tax (such as value-added tax) and payroll tax in a number of jurisdictions, we were able to defer certain of these tax payments, which provided a cash benefit that will reverse when the cash tax payments become due. The benefits associated with the deferral of these tax payments were not material to our financial statements. • Based on our current available cash and access to financing markets, we do not anticipate any issue in funding our next long-term debt maturity of approximately $800 million in January 2021. • We also have access to short-term and long-term financing markets and have actively utilized these markets in 2020. During the initial outbreak of COVID-19 in March, we put supplemental short-term credit 33 Table of Contents facilities in place, which we have since retired in full. We also continued to utilize the commercial paper markets in the United States and Europe for flexible, low-cost, short-term financing. We have also issued additional long-term debt several times this year due to favorable market conditions and opportunities to shift a portion of our funding mix from short-term debt to long-term debt at a low cost. We continue to have $6.0 billion of undrawn credit facilities as well as other forms of short-term and long-term financing options available (refer to the Liquidity and Capital Resources section). We have been, and we expect to continue to be, in compliance with our debt covenants. Our Financial Position • We evaluated the realizability of our assets and whether there are any impairment indicators. We reviewed our receivables, inventory, right-of-use lease assets, long-lived assets, equity method and other long-term investments, deferred tax assets, goodwill and intangible assets. • In connection with the ongoing pandemic, we identified a decline in demand for certain of our brands, primarily in the gum category, that prompted additional evaluation of our indefinite-life intangible assets during the second quarter in addition to our annual testing in the third quarter of 2020. In connection with the testing, we concluded that eight brands were impaired and we recorded a total of $144 million of impairment charges year to date. While we did not identify impairment triggers for other brands, there is significant uncertainty due to the current pandemic. If 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. Refer to Note 5, Goodwill and Intangible Assets , for additional details on our intangible asset impairment evaluation. • Restructuring and implementation activities were in line with our Simplify to Grow Program strategic objectives. • Our equity investments in JDE Peet's and KDP give us additional financial flexibility. • We will continue to monitor the quality of our assets and our overall financial position over coming quarters. • We continue to maintain oversight over our core process controls through our centralized shared service model, and our key controls are operating as designed. While some of the initial impacts of the pandemic on our business have moderated in the third quarter of 2020, the business and economic environment remains uncertain and additional impacts may arise that we cannot currently anticipate. Barring material business disruptions or other negative developments, we expect to continue to meet the demand of consumers for our snacks, food and beverage products. However, the elevated consumer demand we experienced primarily in some of our developed market countries in the first nine months of 2020 may not continue. We are unable to predict how long this sustained demand will last or how significant it will be. We expect the COVID-19 outbreak to result in lower revenues primarily in some of our emerging market countries that have a higher concentration of traditional trade outlets (such as small family-run stores), our gum and candy categories (which are more instant consumption in nature), as well as our world travel retail (such as international duty-free stores) and foodservice businesses. As we continue to proactively manage our business in response to the evolving impacts of the pandemic, we continue to communicate with and support our employees and customers; monitor and take steps to further safeguard our supply chain, operations, technology and assets; protect our liquidity and financial position; work toward our strategic priorities and monitor our financial performance as we seek to position the Company to withstand the current uncertainty related to this pandemic. KDP and JDE Peet's Equity Method Investment Transactions 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. During the first quarter of 2020, we received $185 million of proceeds and recorded a pre-tax gain of $71 million (or $54 million after-tax). Subsequently, on August 3, 2020, we sold approximately 14.1 million shares and on September 9, 2020, we sold approximately 12.5 million shares, which reduced our KDP ownership interest to 11.2% of total outstanding shares. During the third quarter of 2020, we received $777 million of proceeds and recorded pre-tax gains of $335 million (or $258 million after-tax). The cash taxes associated with the KDP share sales are payable by the end of 2020. Refer to Note 6, Equity Method Investments , for additional information. During the second quarter of 2020, in connection with the JDE Peet's offering of its ordinary shares, we exchanged our 26.4% ownership interest in JDE for a 26.5% equity interest in JDE Peet’s. On May 29, 2020, we participated in the JDE Peet's offering and, with the subsequent exercise of the over-allotment option, we sold a total of approximately 11.1 million shares during the second quarter, retaining a 22.9% ownership interest in JDE Peet's. We received €350 million ($394 million) of total proceeds from the sales of JDE Peet's shares and we recorded a 34 Table of Contents preliminary pre-tax gain of $121 million during the second quarter. We also incurred a $261 million tax expense that is payable in 2020 and 2021. During the third quarter of 2020, we increased our preliminary gain by $10 million to $131 million. Consistent with our accounting for KDP and in connection with JDE Peet's becoming a public company, during the second quarter of 2020, we changed our accounting principle to reflect our share of 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. 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 JDE Peet's ongoing results once JDE Peet's has publicly reported its results. This change was applied retrospectively to all periods presented. Refer to Note 6, Equity Method Investments , and Note 14, Income Taxes , for additional information. Swiss Tax Reform 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 has been 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 consists of a $769 million reduction in deferred tax expense from an allowed step-up of intangible assets for tax purposes 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. Refer to Note 14, Income Taxes , for more information on our current- and prior-year estimated annual effective tax rates and Swiss tax reform. Summary of Results • Net revenues increased 4.9% to $6.7 billion in the third quarter of 2020 and increased 1.7% to $19.3 billion in the first nine months of 2020 as compared to the same periods in the prior year. During the third quarter and the first nine months of 2020, net revenues were significantly impacted by the COVID-19 outbreak and response. In developed markets, particularly North America, demand for our products grew significantly as consumers increased their food purchases for in-home consumption. In some of our emerging markets, where we have a greater concentration of traditional trade, as well as in our gum and candy, world travel retail and foodservice businesses, where we sell products that are typically consumed away from home, net revenues were negatively affected by mandated lockdowns and other related restrictions. In the third quarter the negative impacts we experienced from COVID-19, particularly during the second quarter, subsided, resulting in a return to revenue growth across a number of our key markets. In addition, growth in the third quarter benefited from the impact of trade restocking to return inventory levels closer to pre-COVID-19 rates as spikes in North America biscuit and European retail, and traditional trade closures in emerging markets resulted in trade inventories below historical levels as we exited the second quarter. – Net revenue increased in the third quarter of 2020, driven by favorable volume/mix, higher net pricing and incremental net revenues from our April 1, 2020 acquisition of Give & Go, partially offset by the impact of unfavorable currency translation, as the U.S. dollar strengthened against most currencies in which we operate compared to exchange rates in the prior year. – Net revenue increased in the first nine months of 2020, driven by favorable volume/mix, higher net pricing and incremental net revenues from our acquisitions of Give & Go and Perfect Snacks. These items were partially offset by the significant impact of unfavorable currency translation, as the U.S. dollar strengthened against most currencies in which we operate compared to exchange rates in the prior year, as well as the May 28, 2019 divestiture of most of our cheese business in the Middle East and Africa. • Organic Net Revenue, a non-GAAP financial measure, increased 4.4% to $6.6 billion in the third quarter of 2020 and increased 3.9% to $19.6 billion in the first nine months of 2020 as compared to same periods in the prior year. During the third quarter and first nine months of 2020, Organic Net Revenue grew due to favorable volume/mix and higher net pricing. Refer to our Recent Developments and Significant Items Affecting Comparability above and Discussion and Analysis of Historical Results below , including the Results of Operations by Reportable Segment, for additional information. Organic Net Revenue is on a constant currency basis and excludes revenue from acquisitions and divestitures. We use Organic Net 35 Table of Contents Revenue as it provides improved year-over-year comparability of our underlying operating results (see the definition of Organic Net Revenue and our reconciliation with net revenues within Non-GAAP Financial Measures appearing later in this section). • Diluted EPS attributable to Mondelēz International decreased 20.4% to $0.78 in the third quarter of 2020 and decreased 24.2% to $1.66 in the first nine months of 2020 as compared to the same periods in the prior year. – Diluted EPS decreased in the third quarter of 2020, primarily driven by lapping the prior-year benefit from Swiss tax reform (refer to Note 14, Income Taxes ), partially offset by gains on equity method investment transactions, lapping the prior-year loss on interest rate swaps, favorable year-over-year mark-to-market impacts from currency and commodity derivatives and lower Simplify to Grow program costs. – Diluted EPS decreased during the first nine months of 2020, primarily driven by lapping the prior-year benefit from Swiss tax reform, costs associated with the JDE Peet's transaction, unfavorable year-over-year mark-to-market impacts from currency and commodity derivatives, higher intangible asset impairment charges, lapping a prior-year gain on divestiture, lapping the prior-year benefit from pension participation changes and lapping prior-year net earnings from divestitures. These factors were partially offset by gains on equity method investment transactions, higher Adjusted EPS, lower Simplify to Grow program costs and lower losses related to interest rate swaps. • Adjusted EPS, a non-GAAP financial measure, decreased 1.6% to $0.63 in the third quarter of 2020 and increased 2.7% to $1.92 in the first nine months of 2020 as compared to the same periods in the prior year. On a constant currency basis, Adjusted EPS was flat at $0.64 in the third quarter of 2020 and increased 5.9% to $1.98 in the first nine months of 2020 as compared to the same periods in the prior year. – Adjusted EPS decreased in the third quarter of 2020, driven by higher taxes, primarily due to non-recurring discrete tax items and changes in our mix of earnings, and unfavorable currency translation, mostly offset by gains in operating activities, an increase in benefit plan non-service income and fewer shares outstanding. – Adjusted EPS increased in the first nine months of 2020, driven by gains in operating activities, an increase in benefit plan non-service income, fewer shares outstanding and lower interest expense, net, partially offset by unfavorable currency translation, higher taxes and a decrease in equity method investment earnings. Adjusted EPS and Adjusted EPS on a constant currency basis are non-GAAP financial measures. We use these measures as they provide improved year-over-year comparability of our underlying results (see the definition of Adjusted EPS and our reconciliation with diluted EPS within Non-GAAP Financial Measures appearing later in this section). 36 Table of Contents Financial Outlook We seek to achieve profitable, long-term growth and manage our business to attain this goal using our key operating metrics: Organic Net Revenue, Adjusted Operating Income and Adjusted EPS. We use these non-GAAP financial metrics and related computations, particularly growth in profit dollars, to evaluate and manage our business and to plan and make near- and long-term operating and strategic decisions. As such, we believe these metrics are useful to investors as they provide supplemental information in addition to our U.S. Generally Accepted Accounting Principles ("U.S. GAAP") financial results. We believe it is useful to provide investors with the same financial information that we use internally to make comparisons of our historical operating results, identify trends in our underlying operating results and evaluate our business. We believe our non-GAAP financial measures should always be considered in relation to our GAAP results. We have provided reconciliations between our GAAP and non-GAAP financial measures in Non-GAAP Financial Measures , which appears later in this section. In addition to monitoring our key operating metrics, we monitor developments and trends that could impact our revenue and profitability objectives, similar to those we highlighted in our most recently filed Annual Report on Form 10-K for the year ended December 31, 2019 and discussed in the footnotes to our financial statements. • Market conditions. Snack categories continued to grow in the first nine months of 2020, in part due to increased consumer demand for snacks purchases for in-home consumption during the COVID-19 outbreak. As further discussed below and in Item 3, Quantitative and Qualitative Disclosures about Market Risk , volatility in global consumer, commodity, currency and capital markets increased significantly during the first nine months of 2020 and is expected to continue until the COVID-19 outbreak is largely resolved. • COVID-19. We continue to monitor and respond to the COVID-19 outbreak. While its full impact is not yet known, it has had a material negative effect on the economy and could have a material negative effect on our business and results in the future, particularly if there are significant adverse changes to consumer demand or significant disruptions to the supply, production or distribution of our products or the credit or financial stability of our customers and other business partners. An economic or credit crisis could occur and impair credit availability and our ability to raise capital when needed. A disruption in the financial markets may also have a negative effect on our derivative counterparties and could also impair our banking or other business partners, on whom we rely for access to capital and as counterparties for a number of our derivative contracts. Any of these and other developments could materially harm our business, results of operations and financial condition. We will continue to prioritize the safety of our employees and consumers. As we manage operations during the pandemic, we may continue to incur increased labor, customer service, logistics and other costs. As consumer demand for our products evolves, we could see continued shifts in product mix that could have a negative impact on results. As discussed in Recent Developments and Significant Items Affecting Comparability , we are working to mitigate any negative impacts to our business from the COVID-19 outbreak, but we may not be able to fully predict or respond to all impacts on a timely basis to prevent near- and long-term adverse impacts to our results. • Brexit. On December 31, 2020, the United Kingdom will be completing the withdrawal process from the European Union. 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. Our exposure to disruptions to our supply chain, the imposition of tariffs and currency devaluation in the United Kingdom could result in a material impact to our consolidated revenue, earnings and cash flow. In the nine months ended September 30, 2020, we generated 8.8% of our consolidated net revenues in the United Kingdom and our supply chain in this market relies on imports of raw and packaging materials as well as finished goods. Following the Brexit vote in June 2016, there was significant volatility in the global stock markets and currency exchange rates. The value of the British pound sterling relative to the U.S. dollar declined significantly and negatively affected our translated results reported in U.S. dollars. The volatility in foreign currencies and other markets is expected to continue as the United Kingdom executes its exit from the European Union. If the U.K.'s membership in the European Union terminates without trade and other cross-border operating agreements, there could be increased costs from re-imposition of tariffs on trade between the United Kingdom and other countries, including those in the European Union, increased shipping costs and delays because of the need for customs inspections and procedures, and shortages or elimination of certain goods if supplies are disrupted or it becomes cost prohibitive for us to offer those goods. The United Kingdom will also need to negotiate its own tax and trade treaties with countries all over the world, which could take years to complete. If the ultimate terms of the 37 Table of Contents U.K.’s separation from the European Union negatively impact the U.K. economy or result in disruptions to sales or our supply chain, the impact to our results of operations and financial condition could be material. We are taking measures to increase our resources in customer service & logistics together with increasing our inventory levels of imported raw materials, packaging and finished goods in the United Kingdom to help us manage through Brexit and the inherent risks. Resulting impacts and market volatility can vary significantly depending on the final terms of the U.K.’s exit from the European Union. • Taxes . During the third quarter of 2019, we recorded the impact of Swiss tax reform, and we continue to monitor for any additional interpretative guidance that could result in changes to the amounts we have recorded. In the United States, while the 2017 U.S. tax reform reduced the U.S. corporate tax rate and included some beneficial provisions, other provisions have, and in the future will have, an adverse effect on our results. We continue to evaluate the impacts as additional guidance on implementing the legislation becomes available. While additional guidance has been issued by the IRS and the U.S. Treasury Department, there are still some areas that may not be clarified for some time. Also, a number of U.S. states have not updated their laws to take into account the new federal legislation. As a result, there may be additional impacts of the new laws on our future results of operations and financial condition. It is possible that U.S. or Swiss tax reform or related interpretations could change and have an adverse effect on us that could be material. Refer to Note 14, Income Taxes , and our Annual Report on Form 10-K for the year ended December 31, 2019 for more information on Swiss and U.S. tax reform. • Argentina . As further discussed in Note 1, Basis of Presentation – Currency Translation and Highly Inflationary Accounting, we continue to apply highly inflationary accounting for our Argentinian subsidiaries, and during the nine months ended September 30, 2020, we recorded a remeasurement loss of $7 million within selling, general and administrative expenses related to the revaluation of our Argentinian peso denominated net monetary position. The mix of monetary assets and liabilities and the exchange rate to convert Argentinian pesos to U.S. dollars could change over time, so it is difficult to predict the overall impact of the Argentina highly inflationary accounting on future net earnings. 38 Table of Contents Discussion and Analysis of Historical Results Items Affecting Comparability of Financial Results The following table includes significant income or (expense) items that affected the comparability of our results of operations and our effective tax rates. Please refer to the notes to the condensed consolidated financial statements indicated below for more information. Refer also to the Consolidated Results of Operations – Net Earnings and Earnings per Share Attributable to Mondelēz International table for the after-tax per share impacts of these items. For the Three Months Ended September 30, For the Nine Months Ended September 30, See Note 2020 2019 2020 2019 (in millions, except percentages) Simplify to Grow Program Note 7 Restructuring charges $ (68) $ (77) $ (111) $ (117) Implementation charges (46) (75) (141) (193) Intangible asset impairment charges (54) (57) (144) (57) Mark-to-market gains/(losses) from derivatives (1) Note 9 148 18 (38) 67 Acquisition and divestiture-related costs Acquisition integration costs — — (2) — Acquisition-related costs — (1) (15) (2) Divestiture-related costs (6) 4 (4) (6) Net gain on divestiture — 3 — 44 Costs associated with JDE Peet's transaction Note 6 — — (48) — Remeasurement of net monetary position Note 1 (2) (1) (7) (2) Impact from pension participation changes (1) Note 10 (3) (3) (9) 32 CEO transition remuneration (2) — (3) — (9) Loss related to interest rate swaps Note 8 & 9 — (111) (103) (111) Swiss tax reform net impacts Note 14 — 767 — 767 Gain/(loss) on equity method investment transactions (3) Note 6 345 — 537 (2) Equity method investee items (4) (41) (11) (82) (40) Effective tax rate (5) Note 14 36.1 % (92.5) % 36.0 % (8.8) % (1) Includes impacts recorded in operating income and interest expense and other, net. (2) Please see the Non-GAAP Financial Measures section at the end of this item for additional information. (3) Gain/(loss) on equity method investment transactions is recorded outside pre-tax operating results on the condensed consolidated statement of earnings. (4) Includes our proportionate share of significant operating and non-operating items recorded by our JDE Peet's and KDP equity method investees, including acquisition and divestiture-related costs and restructuring program costs. (5) Refer to Note 14, Income Taxes , for more information on our effective tax rate and Swiss tax reform and to our Annual Report on Form 10-K for the year ended December 31, 2019 for more information on the impact of Swiss and U.S. tax reform. 39 Table of Contents Consolidated Results of Operations Three Months Ended September 30: For the Three Months Ended September 30, 2020 2019 $ change % change (in millions, except per share data) Net revenues $ 6,665 $ 6,355 $ 310 4.9 % Operating income 1,135 876 259 29.6 % Net earnings attributable to Mondelēz International 1,119 1,426 (307) (21.5) % Diluted earnings per share attributable to Mondelēz International 0.78 0.98 (0.20) (20.4) % Net Revenues – Net revenues increased $310 million (4.9%) to $6,665 million in the third quarter of 2020, and Organic Net Revenue (1) increased $277 million (4.4%) to $6,632 million. Developed markets net revenue increased 9.6% and developed markets Organic Net Revenue increased 3.8% (1) . Emerging markets net revenues decreased 3.1%, including an unfavorable currency impact, and emerging markets Organic Net Revenue increased 5.3% (1) . The underlying changes in net revenues and Organic Net Revenue are detailed below: 2020 Change in net revenues (by percentage point) Total change in net revenues 4.9 % Add back the following items affecting comparability: Unfavorable currency 1.4 pp Impact of acquisition (1.9) pp Total change in Organic Net Revenue (1) 4.4 % Favorable volume/mix 2.4 pp Higher net pricing 2.0 pp (1) Please see the Non-GAAP Financial Measures section at the end of this item. Net revenue increase of 4.9% was driven by our underlying Organic Net Revenue growth of 4.4% and the impact of an acquisition, partially offset by unfavorable currency. For the third quarter of 2020, net revenues were higher in developed markets, primarily North America and Europe, where due to the COVID-19 outbreak and response, demand for our products, particularly biscuits and chocolate, grew significantly as consumers increased their food purchases for in-home consumption. However, our gum and candy categories, as well as our world travel retail and foodservice businesses, continued to be negatively impacted by COVID-19. In emerging markets, where we have a greater concentration of traditional trade, the majority of our markets grew but some markets were still challenged by COVID-19 impacts, particularly those with significant gum and candy portfolios. Overall, as the negative impacts of COVID-19 experienced earlier in the year subsided in the third quarter, revenue growth returned in a number of our key emerging markets, though overall emerging markets net revenues declined due to unfavorable currency impacts. In addition, growth in the quarter benefited from the impact of trade restocking to return inventory levels closer to pre-COVID-19 rates as spikes in North America biscuit and European retail, and traditional trade closures in emerging markets resulted in trade inventories below historical levels as we exited the second quarter. Organic Net Revenue growth was driven by favorable volume/mix and higher net pricing. Favorable volume/mix in all regions except Latin America was driven by strong volume gains tempered by unfavorable mix reflecting shifts in consumer purchases in response to the COVID-19 outbreak. Higher net pricing in all regions except Europe was due to the benefit of carryover pricing from 2019 as well as the effects of input cost-driven pricing actions taken during the first nine months of 2020. The April 1, 2020 acquisition of Give & Go added incremental net revenues of $125 million. Refer to Note 2, Acquisitions and Divestitures, for additional information. Unfavorable currency impacts decreased net revenues by $92 million, due primarily to the strength of the U.S. dollar relative to several currencies, including the Brazilian real, Argentinian peso, Russian ruble, Mexican peso and Indian rupee, partially offset by the strength of several currencies relative to the U.S. dollar, including the euro, British pound sterling and Australian dollar. 40 Table of Contents Operating Income – Operating income increased $259 million (29.6%) to $1,135 million in the third quarter of 2020. Adjusted Operating Income (1) increased $100 million (9.4%) to $1,165 million and Adjusted Operating Income on a constant currency basis (1) increased $112 million (10.5%) to $1,177 million due to the following: Operating Income % Change (in millions) Operating Income for the Three Months Ended September 30, 2019 $ 876 Simplify to Grow Program (2) 151 Intangible asset impairment charges (3) 57 Mark-to-market gains from derivatives (4) (20) Acquisition-related costs (5) 1 Divestiture-related costs (5) (4) Net gain on divestiture (5) (3) Remeasurement of net monetary position (6) 1 CEO transition remuneration (1) 3 Swiss tax reform impact (7) 2 Other/rounding 1 Adjusted Operating Income (1) for the Three Months Ended September 30, 2019 $ 1,065 Higher net pricing 129 Higher input costs (63) Favorable volume/mix 53 Higher selling, general and administrative expenses (22) Impact from acquisitions (5) 15 Total change in Adjusted Operating Income (constant currency) (1) 112 10.5 % Unfavorable currency translation (12) Total change in Adjusted Operating Income (1) 100 9.4 % Adjusted Operating Income (1) for the Three Months Ended September 30, 2020 $ 1,165 Simplify to Grow Program (2) (114) Intangible asset impairment charges (3) (54) Mark-to-market gains from derivatives (4) 145 Divestiture-related costs (5) (6) Remeasurement of net monetary position (6) (2) Other/rounding 1 Operating Income for the Three Months Ended September 30, 2020 $ 1,135 29.6 % (1) Refer to the Non-GAAP Financial Measures section at the end of this item. (2) Refer to Note 7, Restructuring Program, for more information. (3) Refer to Note 5, Goodwill and Intangible Assets , for more information. (4) Refer to Note 9, Financial Instruments , Note 16, Segment Reporting , and Non-GAAP Financial Measures section at the end of this item for more information on the unrealized gains/losses on commodity and forecasted currency transaction derivatives. (5) Refer to Note 2, Acquisitions and Divestitures , for more information on the April 1, 2020 acquisition of a significant majority interest in Give & Go, the July 16, 2019 acquisition of a majority interest in Perfect Snacks and the May 28, 2019 divestiture of most of our cheese business in the Middle East and Africa. (6) Refer to Note 1, Basis of Presentation – Currency Translation and Highly Inflationary Accounting , for information on our application of highly inflationary accounting for Argentina. (7) Refer to Note 14, Income Taxes, and our Annual Report on Form 10-K for the year ended December 31, 2019 for more information on Swiss tax reform. 41 Table of Contents During the third quarter of 2020, we realized higher net pricing and favorable volume/mix, which was partially offset by increased input costs. Higher net pricing, which included the carryover impact of pricing actions taken in 2019 as well as the effects of input cost-driven pricing actions taken during the first nine months of 2020, was reflected across all regions except Europe. Favorable volume/mix, primarily due to overall volume increases tempered by the net negative volume impact on some parts of our business from the COVID-19 outbreak, was driven by North America, Europe and AMEA, which was partially offset by unfavorable volume/mix in Latin America. The increase in input costs was driven by higher raw material costs, partially offset by lower manufacturing costs driven by productivity net of incremental COVID-19 related costs. Higher raw material costs were in part due to higher currency exchange transaction costs on imported materials, as well as higher cocoa, energy, grains, nuts, packaging, sugar, oils and other ingredients costs, partially offset by lower costs for dairy. Total selling, general and administrative expenses increased $18 million from the third quarter of 2019, due to a number of factors noted in the table above, including in part, the impact of acquisitions and higher divestiture-related costs, which were more than offset by lower implementation costs incurred for the Simplify to Grow Program, a favorable currency impact related to expenses and lapping prior-year CEO transition remuneration. Excluding these factors, selling, general and administrative expenses increased $22 million from the third quarter of 2019. The increase was driven primarily by higher overhead costs reflecting route-to-market investments as well as incremental COVID-19 related costs and higher advertising and consumer promotion costs. Unfavorable currency changes decreased operating income by $12 million due primarily to the strength of the U.S. dollar relative to several currencies, including the Brazilian real, Russian ruble, Indian rupee and South African rand, partially offset by the strength of several currencies relative to the U.S. dollar, including the euro, British pound sterling and Australian dollar. Operating income margin increased from 13.8% in the third quarter of 2019 to 17.0% in the third quarter of 2020. The increase in operating income margin was driven primarily by the year-over-year favorable change in mark-to-market gains/(losses) from currency and commodity hedging activities, higher Adjusted Operating Income margin and lower Simplify to Grow program costs. Adjusted Operating Income margin increased from 16.8% for the third quarter of 2019 to 17.5% for the third quarter of 2020. The increase in Adjusted Operating Income margin was driven primarily by higher net pricing, lower manufacturing costs and selling, general and administrative cost leverage, partially offset by higher raw material costs. 42 Table of Contents Net Earnings and Earnings per Share Attributable to Mondelēz International – Net earnings attributable to Mondelēz International of $1,119 million decreased by $307 million (21.5%) in the third quarter of 2020. Diluted EPS attributable to Mondelēz International was $0.78 in the third quarter of 2020, down $0.20 (20.4%) from the third quarter of 2019. Adjusted EPS (1) was $0.63 in the third quarter of 2020, down $0.01 (1.6%) from the third quarter of 2019. Adjusted EPS on a constant currency basis (1) was $0.64 in the third quarter of 2020, flat from the third quarter of 2019. Diluted EPS Diluted EPS Attributable to Mondelēz International for the Three Months Ended September 30, 2019 $ 0.98 Simplify to Grow Program (2) 0.08 Intangible asset impairment charges (2) 0.03 Mark-to-market gains from derivatives (2) (0.01) Loss related to interest rate swaps (3) 0.08 Swiss tax reform net impacts (2) (0.53) Equity method investee items (4) 0.01 Adjusted EPS (1) for the Three Months Ended September 30, 2019 $ 0.64 Increase in operations 0.05 Impact from acquisition (2) 0.01 Changes in benefit plan non-service income 0.01 Changes in income taxes (5) (0.08) Changes in shares outstanding (6) 0.01 Adjusted EPS (constant currency) (1) for the Three Months Ended September 30, 2020 $ 0.64 Unfavorable currency translation (0.01) Adjusted EPS (1) for the Three Months Ended September 30, 2020 $ 0.63 Simplify to Grow Program (2) (0.06) Intangible asset impairment charges (2) (0.03) Mark-to-market gains from derivatives (2) 0.08 Gain on equity method investment transactions (7) 0.19 Equity method investee items (4) (0.03) Diluted EPS Attributable to Mondelēz International for the Three Months Ended September 30, 2020 $ 0.78 (1) Refer to the Non-GAAP Financial Measures section appearing later in this section. (2) See the Operating Income table above and the related footnotes for more information. (3) Refer to Note 9, Financial Instruments, for information on our interest swaps that we no longer designate as cash flow hedges. (4) Includes our proportionate share of significant operating and non-operating items recorded by our JDE Peet's and KDP equity investees, such as acquisition and divestiture-related costs and restructuring program costs. (5) Refer to Note 14, Income Taxes , for more information on the items affecting income taxes. (6) Refer to Note 11, Stock Plans , for more information on our equity compensation programs and share repurchase program and Note 15, Earnings per Share , for earnings per share weighted-average share information. (7) Refer to Note 6, Equity Method Investments, for more information on the gain/(loss) on equity method investment transactions. 43 Table of Contents Nine Months Ended September 30: For the Nine Months Ended September 30, 2020 2019 $ change % change (in millions, except per share data) Net revenues $ 19,283 $ 18,955 $ 328 1.7 % Operating income 2,704 2,937 (233) (7.9) % Net earnings attributable to Mondelēz International 2,399 3,196 (797) (24.9) % Diluted earnings per share attributable to Mondelēz International 1.66 2.19 (0.53) (24.2) % Net Revenues – Net revenues increased $328 million (1.7%) to $19,283 million in the first nine months of 2020, and Organic Net Revenue (1) increased $736 million (3.9%) to $19,636 million. Developed markets net revenue increased 7.1% and developed markets Organic Net Revenue increased 5.2%. Emerging markets net revenues decreased 7.2%, including an unfavorable currency impact, and emerging markets Organic Net Revenue increased 1.7% (1) . The underlying changes in net revenues and Organic Net Revenue are detailed below: 2020 Change in net revenues (by percentage point) Total change in net revenues 1.7 % Add back the following items affecting comparability: Unfavorable currency 3.3 pp Impact of divestiture 0.3 pp Impact of acquisitions (1.4) pp Total change in Organic Net Revenue (1) 3.9 % Favorable volume/mix 2.0 pp Higher net pricing 1.9 pp (1) Please see the Non-GAAP Financial Measures section at the end of this item. Net revenue increase of 1.7% was driven by our underlying Organic Net Revenue growth of 3.9% and the impact of acquisitions, mostly offset by unfavorable currency and the impact of a prior-year divestiture. Net revenues were higher in developed markets, particularly North America, where due to the COVID-19 outbreak and response, demand for our products, primarily biscuits and chocolate, grew significantly as consumers increased their food purchases for in-home consumption. However, our gum and candy categories as well as our world travel retail and foodservice businesses were negatively impacted by COVID-19. In emerging markets, where we have a greater concentration of traditional trade, several markets were challenged by COVID-19 impacts, particularly those with significant gum and candy portfolios. Overall, as the negative impacts of COVID-19 experienced earlier in the year subsided in the third quarter, revenue growth began to recover in a number of our key emerging markets, though overall emerging markets net revenues declined due to unfavorable currency impacts. Organic Net Revenue growth was driven by favorable volume/mix and higher net pricing. Favorable volume/mix in all regions except Latin America and AMEA included strong volume gains tempered by unfavorable mix reflecting shifts in consumer purchases in response to the COVID-19 outbreak. Higher net pricing in all regions except Europe was due to the benefit of carryover pricing from 2019 as well as the effects of input cost-driven pricing actions taken during the first nine months of 2020. The April 1, 2020 acquisition of Give & Go added incremental net revenues of $216 million and the July 16, 2019 acquisition of a majority interest in Perfect Snacks added incremental net revenues of $55 million in the first nine months of 2020. Unfavorable currency impacts decreased net revenues by $624 million, due primarily to the strength of the U.S. dollar relative to most currencies, including the Brazilian real, Argentinian peso, Russian ruble, Mexican peso, Indian rupee, South African rand and Australian dollar, partially offset by the strength of several currencies relative to the U.S. dollar, including the Philippine peso, Egyptian pound and euro. The impact of the May 28, 2019 divestiture of most of our cheese business in the Middle East and Africa resulted in a year-over-year decline in net revenues of $55 million. Refer to Note 2, Acquisitions and Divestitures, for additional information. 44 Table of Contents Operating Income – Operating income decreased $233 million (7.9%) to $2,704 million in the first nine months of 2020. Adjusted Operating Income (1) increased $50 million (1.6%) to $3,213 million and Adjusted Operating Income on a constant currency basis (1) increased $136 million (4.3%) to $3,299 million due to the following: Operating Income % Change (in millions) Operating Income for the Nine Months Ended September 30, 2019 $ 2,937 Simplify to Grow Program (2) 304 Intangible asset impairment charges (3) 57 Mark-to-market gains from derivatives (4) (69) Acquisition-related costs (5) 2 Divestiture-related costs (5) 6 Operating income from divestiture (5) (9) Net gain on divestiture (5) (44) Remeasurement of net monetary position (6) 2 Impact from pension participation changes (7) (35) CEO transition remuneration (1) 9 Swiss tax reform impact 2 Other/rounding 1 Adjusted Operating Income (1) for the Nine Months Ended September 30, 2019 $ 3,163 Higher net pricing 368 Higher input costs (274) Favorable volume/mix 119 Higher selling, general and administrative expenses (94) Impact from acquisitions (5) 7 Prior-year VAT-related settlements 11 Other (1) Total change in Adjusted Operating Income (constant currency) (1) 136 4.3 % Unfavorable currency translation (86) Total change in Adjusted Operating Income (1) 50 1.6 % Adjusted Operating Income (1) for the Nine Months Ended September 30, 2020 $ 3,213 Simplify to Grow Program (2) (248) Intangible asset impairment charges (3) (144) Mark-to-market losses from derivatives (4) (42) Acquisition integration costs (5) (2) Acquisition-related costs (5) (15) Divestiture-related costs (5) (4) Costs associated with JDE Peet's transaction (8) (48) Remeasurement of net monetary position (6) (7) Other/rounding 1 Operating Income for the Nine Months Ended September 30, 2020 $ 2,704 (7.9) % (1) Refer to the Non-GAAP Financial Measures section at the end of this item. (2) Refer to Note 7, Restructuring Program, for more information. (3) Refer to Note 5, Goodwill and Intangible Assets , for more information. (4) Refer to Note 9, Financial Instruments , Note 16, Segment Reporting , and Non-GAAP Financial Measures section at the end of this item for more information on the unrealized gains/losses on commodity and forecasted currency transaction derivatives. 45 Table of Contents (5) Refer to Note 2, Acquisitions and Divestitures , for more information on the April 1, 2020 acquisition of a significant majority interest in Give & Go, the July 16, 2019 acquisition of a majority interest in Perfect Snacks and the May 28, 2019 divestiture of most of our cheese business in the Middle East and Africa. (6) Refer to Note 1, Basis of Presentation – Currency Translation and Highly Inflationary Accounting , for information on our application of highly inflationary accounting for Argentina. (7) Refer to Note 10, Benefit Plans , for more information. (8) Refer to Note 6, Equity Method Investments , for more information on the JDE Peet's transaction. During the first nine months of 2020, we realized higher net pricing and favorable volume/mix, which was largely offset by increased input costs. Higher net pricing, which included the carryover impact of pricing actions taken in 2019 as well as the effects of input cost-driven pricing actions taken during the first nine months of 2020, was reflected in all regions except Europe. Favorable volume/mix was driven by North America and Europe, which was partially offset by unfavorable volume/mix in Latin America and AMEA. The increase in input costs was driven by higher raw material costs, partially offset by lower manufacturing costs driven by productivity net of incremental COVID-19 related costs. Higher raw material costs were in part due to higher currency exchange transaction costs on imported materials, as well as higher cocoa, dairy, energy, nuts, oils, packaging, sugar and other ingredients costs, partially offset by lower costs for grains. Total selling, general and administrative expenses increased $88 million from the first nine months of 2019, due to a number of factors noted in the table above, including in part, the impact of acquisitions, costs associated with the JDE Peet's transaction, lapping the benefit from prior-year pension participation changes, higher acquisition-related costs and higher remeasurement loss of net monetary position, which were more than offset by a favorable currency impact related to expenses, lower implementation costs incurred for the Simplify to Grow Program, lapping prior-year VAT-related settlements, lapping prior-year CEO transition remuneration and lapping the prior-year divestiture. Excluding these factors, selling, general and administrative expenses increased $94 million from the first nine months of 2019. The increase was driven primarily by higher overheads reflecting route-to-market investments as well as incremental COVID-19 related costs and higher advertising and consumer promotion costs. We recorded an expense of $11 million from VAT-related settlements in Latin America in the first nine months of 2019. Unfavorable currency changes decreased operating income by $86 million due primarily to the strength of the U.S. dollar relative to most currencies, including the Brazilian real, Russian ruble, Argentinian peso, Indian rupee, Australian dollar and South African rand, partially offset by the strength of several currencies relative to the U.S. dollar, including the Egyptian pound, Philippine peso and euro. Operating income margin decreased from 15.5% in the first nine months of 2019 to 14.0% in the first nine months of 2020. The decrease in operating income margin was driven primarily by the year-over-year unfavorable change in mark-to-market gains/(losses) from currency and commodity hedging activities, higher intangible asset impairment charges, lapping the prior-year gain on a divestiture, costs associated with the JDE Peet's transaction, lapping the benefit from prior-year pension participation changes and higher acquisition-related costs, partially offset by lower costs for the Simplify to Grow Program. Adjusted Operating Income margin for the first nine months of 2020 was flat to the first nine months of 2019 at 16.7%. Adjusted Operating Income margin was unchanged as higher pricing, lower manufacturing costs reflecting productivity net of incremental COVD-19 costs, and selling, general and administrative cost leverage was offset by higher raw material costs. 46 Table of Contents Net Earnings and Earnings per Share Attributable to Mondelēz International – Net earnings attributable to Mondelēz International of $2,399 million decreased by $797 million (24.9%) in the first nine months of 2020. Diluted EPS attributable to Mondelēz International was $1.66 in the first nine months of 2020, down $0.53 (24.2%) from the first nine months of 2019. Adjusted EPS (1) was $1.92 in the first nine months of 2020, up $0.05 (2.7%) from the first nine months of 2019. Adjusted EPS on a constant currency basis (1) was $1.98 in the first nine months of 2020, up $0.11 (5.9%) from the first nine months of 2019. Diluted EPS Diluted EPS Attributable to Mondelēz International for the Nine Months Ended September 30, 2019 $ 2.19 Simplify to Grow Program (2) 0.17 Intangible asset impairment charges (2) 0.03 Mark-to-market gains from derivatives (2) (0.04) Divestiture-related costs (2) 0.01 Net earnings from divestiture (2) (3) (0.03) Net gain on divestitures (2) (0.03) Impact from pension participation changes (2) (0.02) CEO transition remuneration (2) 0.01 Loss related to interest rate swaps (4) 0.08 Swiss tax reform net impacts (5) (0.53) Net loss on equity method investment transaction (6) 0.01 Equity method investee items (7) 0.02 Adjusted EPS (1) for the Nine Months Ended September 30, 2019 $ 1.87 Increase in operations 0.06 Decrease in equity method investment net earnings (0.01) VAT-related settlements 0.01 Changes in benefit plan non-service income 0.03 Changes in interest and other expense, net (8) 0.01 Changes in income taxes (9) (0.01) Changes in shares outstanding (10) 0.02 Adjusted EPS (constant currency) (1) for the Nine Months Ended September 30, 2020 $ 1.98 Unfavorable currency translation (0.06) Adjusted EPS (1) for the Nine Months Ended September 30, 2020 $ 1.92 Simplify to Grow Program (2) (0.14) Intangible asset impairment charges (2) (0.08) Mark-to-market losses from derivatives (2) (0.03) Acquisition-related costs (2) (0.01) Net earnings from divestiture (2) (3) 0.01 Costs associated with JDE Peet's transaction (2) (0.21) Impact from pension participation changes (2) (0.01) Loss related to interest rate swaps (4) (0.05) Gain on equity method investment transactions (6) 0.31 Equity method investee items (7) (0.05) Diluted EPS Attributable to Mondelēz International for the Nine Months Ended September 30, 2020 $ 1.66 (1) Refer to the Non-GAAP Financial Measures section appearing later in this section. (2) See the Operating Income table above and the related footnotes for more information. Within earnings per share, taxes related to the JDE Peet's transaction are included in costs associated with the JDE Peet's transaction. (3) Divestitures include completed sales of businesses, partial or full sales of equity method investments and exits of major product lines upon completion of a sale or licensing agreement. As we record our share of KDP and JDE Peet’s ongoing earnings on a one-quarter lag basis, 47 Table of Contents we reflected the impact of prior-quarter sales of KDP and JDE Peet’s shares within divested results as if the sales occurred at the beginning of all periods presented. (4) Refer to Note 9, Financial Instruments, for information on our interest swaps that we no longer designate as cash flow hedges. (5) Refer to Note 14, Income Taxes, and our Annual Report on Form 10-K for the year ended December 31, 2019 for more information on Swiss tax reform. (6) Refer to Note 6, Equity Method Investments, for more information on the gain/(loss) on equity method investment transactions. (7) Includes our proportionate share of significant operating and non-operating items recorded by our JDE Peet's and KDP equity method investees, such as acquisition and divestiture-related costs and restructuring program costs. (8) Excludes the currency impact on interest expense related to our non-U.S. dollar-denominated debt, which is included in currency translation. (9) Refer to Note 14, Income Taxes , for more information on the items affecting income taxes. (10) Refer to Note 11, Stock Plans , for more information on our equity compensation programs and share repurchase program and Note 15, Earnings per Share , for earnings per share weighted-average share information. 48 Table of Contents Results of Operations by Reportable Segment Our operations and management structure are organized into four operating segments: • Latin America • AMEA • Europe • North America 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. 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. See Note 16, Segment Reporting, for additional information on our segments and Items Affecting Comparability of Financial Results earlier in this section for items affecting our segment operating results. 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 49 Table of Contents Latin America For the Three Months Ended September 30, 2020 2019 $ change % change (in millions) Net revenues $ 610 $ 736 $ (126) (17.1) % Segment operating income 77 84 (7) (8.3) % For the Nine Months Ended September 30, 2020 2019 $ change % change (in millions) Net revenues $ 1,847 $ 2,273 $ (426) (18.7) % Segment operating income 149 250 (101) (40.4) % Three Months Ended September 30: Net revenues decreased $126 million (17.1%), due to unfavorable currency (20.2 pp) and unfavorable volume/mix (5.1 pp), partially offset by higher net pricing (8.2 pp). Unfavorable currency impacts were due primarily to the strength of the U.S. dollar relative to most currencies in the region including the Brazilian real, Argentinian peso and Mexican peso. Unfavorable volume/mix was due to the negative volume impact from the COVID-19 outbreak as well as the impact of pricing-related elasticity, partially offset by the benefit from trade inventory restocking to return inventory levels closer to pre-COVID-19 rates. Unfavorable volume/mix was driven by declines in gum, candy and biscuits, partially offset by gains in refreshment beverages, chocolate and cheese & grocery. Higher net pricing was reflected across all categories, driven primarily by Argentina, Brazil and Mexico. Segment operating income decreased $7 million (8.3%), primarily due to higher raw material costs, unfavorable volume/mix and unfavorable currency. These unfavorable items were partially offset by higher net pricing, lower manufacturing costs (net of incremental COVID-19 related costs), lower other selling, general administrative expenses and lower costs incurred for the Simplify to Grow Program. Nine Months Ended September 30: Net revenues decreased $426 million (18.7%), due to unfavorable currency (18.5 pp) and unfavorable volume/mix (8.3 pp), partially offset by higher net pricing (8.1 pp). Unfavorable currency impacts were due primarily to the strength of the U.S. dollar relative to most currencies in the region including the Brazilian real, Argentinian peso and Mexican peso. Unfavorable volume/mix was due to the negative volume impact from the COVID-19 outbreak as well as the impact of pricing-related elasticity. Unfavorable volume/mix was driven by declines in gum, candy and biscuits, partially offset by gains in cheese & grocery, refreshment beverages and chocolate. Higher net pricing was reflected across all categories, driven primarily by Argentina, Brazil and Mexico. Segment operating income decreased $101 million (40.4%), primarily due to higher raw material costs, unfavorable volume/mix, unfavorable currency, higher other selling, general and administrative expenses (net of lapping the expense of VAT-related settlements in 2019) and a higher remeasurement loss of net monetary position. These unfavorable items were partially offset by higher net pricing, lower manufacturing costs (net of incremental COVID-19 related costs), lower costs incurred for the Simplify to Grow Program and lower advertising and consumer promotion costs. 50 Table of Contents AMEA For the Three Months Ended September 30, 2020 2019 $ change % change (in millions) Net revenues $ 1,470 $ 1,419 $ 51 3.6 % Segment operating income 210 188 22 11.7 % For the Nine Months Ended September 30, 2020 2019 $ change % change (in millions) Net revenues $ 4,209 $ 4,312 $ (103) (2.4) % Segment operating income 615 635 (20) (3.1) % Three Months Ended September 30: Net revenues increased $51 million (3.6%), due to higher net pricing (2.4 pp) and favorable volume/mix (1.8 pp), partially offset by unfavorable currency (0.6 pp). Higher net pricing was reflected across all categories. Favorable volume/mix reflected overall volume gains as the negative impact from COVID-19 related lockdowns impacting our traditional trade markets subsided during the quarter. Volume/mix also reflected a benefit from trade inventory restocking to return inventory levels closer to pre-COVID-19 rates. Favorable volume/mix was driven by gains in biscuits, cheese & grocery, chocolate and refreshment beverages partially offset by declines in gum and candy. Unfavorable currency impacts were due to the strength of the U.S. dollar relative to several currencies in the region, including the Indian rupee and South African rand, partially offset by the strength of several currencies relative to the U.S. dollar, including the Australian dollar, Chinese yuan and Philippine peso. Segment operating income increased $22 million (11.7%), primarily due to higher net pricing, lower manufacturing costs (net of incremental COVID-19 related costs), lapping prior-year intangible asset impairment charges, favorable volume/mix and lower other selling, general and administrative expenses. These favorable items were partially offset by higher raw material costs, higher Simplify to Grow program costs and higher divestiture-related costs. Nine Months Ended September 30: Net revenues decreased $103 million (2.4%), due to unfavorable currency (2.3 pp), the impact of a divestiture (1.3 pp) and unfavorable volume/mix (0.5 pp), partially offset by higher net pricing (1.7 pp). Unfavorable currency impacts were due to the strength of the U.S. dollar relative to several currencies in the region, including the Indian rupee, South African rand, Australian dollar and Chinese yuan, partially offset by the strength of several currencies relative to the U.S. dollar, including the Egyptian pound and Philippine peso. The May 28, 2019 divestiture of most of our cheese business in the Middle East and Africa resulted in a year-over-year decline in net revenues of $55 million. Unfavorable volume/mix was due to unfavorable product mix as overall higher volume was tempered by the negative volume impact from COVID-19 related lockdowns impacting our traditional trade markets. Unfavorable volume/mix was driven by declines in gum, candy, chocolate and refreshment beverages, partially offset by gains in biscuits and cheese & grocery. Higher net pricing was driven by refreshment beverages, biscuits, chocolate and cheese & grocery, partially offset by lower net pricing in gum and candy. Segment operating income decreased $20 million (3.1%), primarily due to higher raw material costs, unfavorable volume/mix, unfavorable currency, higher costs incurred for the Simplify to Grow Program and the impact of the prior-year divestiture. These unfavorable items were partially offset by higher net pricing, lower manufacturing costs (net of incremental COVID-19 related costs), lower other selling, general and administrative expenses and lower intangible asset impairment charges. 51 Table of Contents Europe For the Three Months Ended September 30, 2020 2019 $ change % change (in millions) Net revenues $ 2,526 $ 2,377 $ 149 6.3 % Segment operating income 432 331 101 30.5 % For the Nine Months Ended September 30, 2020 2019 $ change % change (in millions) Net revenues $ 7,248 $ 7,175 $ 73 1.0 % Segment operating income 1,201 1,239 (38) (3.1) % Three Months Ended September 30: Net revenues increased $149 million (6.3%), due to favorable volume/mix (3.6 pp) and favorable currency (2.9 pp), partially offset by lower net pricing (0.2 pp). Favorable volume/mix was due to overall higher volume, which was tempered by the net negative volume impact from the COVID-19 outbreak, as overall increased food purchases for in-home consumption and the benefit from trade inventory restocking to return inventory levels closer to pre-COVID-19 rates were partially offset by a negative volume impact on our world travel retail and foodservice businesses due to lockdowns and other restrictions. Favorable volume/mix was driven by gains in chocolate, biscuits and cheese & grocery, partially offset by declines in candy, gum and refreshment beverages. Favorable currency impacts reflected the strength of several currencies in the region relative to the U.S. dollar, primarily the euro and British pound sterling, partially offset by the strength of the U.S. dollar relative to several currencies, including the Russian ruble and Turkish lira. Lower net pricing was driven by biscuits, partially offset by higher net pricing in chocolate, refreshment beverages, cheese & grocery, gum and candy. Segment operating income increased $101 million (30.5%), primarily due to lower costs incurred for the Simplify to Grow Program, lower intangible asset impairment charges, favorable volume/mix, favorable currency and lower advertising and consumer promotion costs. These favorable items were partially offset by higher raw material costs, higher other selling, general and administrative expenses and lower net pricing. Nine Months Ended September 30: Net revenues increased $73 million (1.0%), due to favorable volume/mix (2.5 pp), partially offset by unfavorable currency (1.3 pp) and lower net pricing (0.2 pp). Favorable volume/mix due to overall higher volume was tempered by the net impact from the COVID-19 outbreak, as overall increased food purchases for in-home consumption were partially offset by a negative volume impact on our world travel retail and foodservice businesses due to lockdowns and other restrictions. Favorable volume/mix was driven by gains in chocolate, cheese & grocery, biscuits and refreshment beverages, partially offset by declines in gum and candy. Unfavorable currency impacts reflected the strength of the U.S. dollar relative to most currencies in the region, including the Russian ruble, Turkish lira and Norwegian krone, partially offset by the strength of several currencies in the region relative to the U.S. dollar, primarily the euro and Swiss franc. Lower net pricing was driven by biscuits and chocolate, partially offset by higher net pricing in cheese & grocery, candy, gum and refreshment beverages. Segment operating income decreased $38 million (3.1%), primarily due to higher raw material costs, higher other selling, general and administrative expenses, unfavorable currency, higher manufacturing costs driven by incremental COVID-19 related costs, higher intangible asset impairment charges and lower net pricing. These unfavorable items were partially offset by favorable volume/mix, lower Simplify to Grow Program costs and lower advertising and consumer promotion costs. 52 Table of Contents North America For the Three Months Ended September 30, 2020 2019 $ change % change (in millions) Net revenues $ 2,059 $ 1,823 $ 236 12.9 % Segment operating income 387 370 17 4.6 % For the Nine Months Ended September 30, 2020 2019 $ change % change (in millions) Net revenues $ 5,979 $ 5,195 $ 784 15.1 % Segment operating income 1,192 1,096 96 8.8 % Three Months Ended September 30: Net revenues increased $236 million (12.9%), due to favorable volume/mix (4.2 pp), the impact of acquisitions (6.8 pp) and higher net pricing (2.1 pp), partially offset by unfavorable currency (0.2 pp). Favorable volume/mix, in part due to the positive volume impact from COVID-19 as consumers increased their food purchases for in-home consumption as well as the benefit from trade inventory restocking to return inventory levels closer to pre-COVID-19 rates, was driven by gains in biscuits, partially offset by declines in gum, chocolate and candy. The April 1, 2020 acquisition of Give & Go added incremental net revenues of $125 million in the third quarter of 2020. Higher net pricing was reflected across all categories except gum. Unfavorable currency impact was due to the strength of the U.S. dollar relative to the Canadian dollar. Segment operating income increased $17 million (4.6%), primarily due to favorable volume/mix, higher net pricing and the impact of acquisitions. These favorable items were partially offset by intangible asset impairment charges, higher advertising and consumer promotion costs, higher other selling, general and administrative expenses, higher Simplify to Grow Program costs and higher raw material costs. Nine Months Ended September 30: Net revenues increased $784 million (15.1%), due to favorable volume/mix (7.8 pp), the impact of acquisitions (5.2 pp) and higher net pricing (2.3 pp), partially offset by unfavorable currency (0.2 pp). Favorable volume/mix, in part due to the positive volume impact from COVID-19 as consumers increased their food purchases for in-home consumption, was driven by gains in biscuits and candy, partially offset by declines in gum and chocolate. The April 1, 2020 acquisition of Give & Go added incremental net revenues of $216 million and the July 16, 2019 acquisition of a majority interest in Perfect Snacks added net revenues of $55 million in the first nine months of 2020. Higher net pricing was driven by biscuits, chocolate and candy, partially offset by lower net pricing in gum. Unfavorable currency impact was due to the strength of the U.S. dollar relative to the Canadian dollar. Segment operating income increased $96 million (8.8%), primarily due to favorable volume/mix, higher net pricing and the impact of acquisitions. These favorable items were partially offset by intangible asset impairment charges, higher advertising and consumer promotion costs, higher other selling, general and administrative expenses (including incremental COVID-19 related costs), lapping the benefit from prior-year pension participation changes, higher raw material costs, higher manufacturing costs driven by incremental COVID-19 related costs and higher Simplify to Grow Program costs. 53 Table of Contents Liquidity and Capital Resources We believe that cash from operations, our revolving credit facilities, short-term borrowings and our authorized long-term financing will continue to provide sufficient liquidity for our working capital needs, planned capital expenditures and future payments of our contractual, tax and benefit plan obligations and payments for acquisitions, share repurchases and quarterly dividends. In light of the current uncertainty in the global markets related to the COVID-19 outbreak, however, an economic or credit crisis could occur and impair credit availability and our ability to raise capital when needed. A disruption in the financial markets could also impair our banking and other business partners, on whom we rely for access to capital and as counterparties for a number of our derivative contracts. Any of these and other developments could materially harm our access to capital or financial condition. As a precautionary measure and to preserve financial flexibility, we temporarily increased our credit facility borrowing capacity in the first nine months of 2020. In the third quarter of 2020, we completed the retirement of this incremental short-term borrowing capacity and have returned our credit facility available capacity to pre-COVID-19 levels. Refer to Recent Developments and Significant Items Affecting Comparability and Note 8, Debt and Borrowing Arrangements , for additional details. We also continue to utilize our commercial paper program and international credit lines, and we secured and continue to evaluate long-term debt issuances to meet our short- and longer-term funding requirements. We also use intercompany loans with our international subsidiaries to improve financial flexibility. In connection with various legislatively authorized tax payment deferral mechanisms available for income tax, indirect tax (such as value-added tax) and payroll tax in a number of jurisdictions, we were able to defer certain of these tax payments, which provided a cash benefit that will reverse when the cash tax payments become due. Overall, we do not expect any negative effects to our funding sources that would have a material effect on our liquidity; however, if a serious economic or credit market crisis ensues, it could have a material adverse effect on our liquidity, results of operations and financial condition. Net Cash Provided by Operating Activities: Net cash provided by operating activities was $2,315 million in the first nine months of 2020 and $1,882 million in the first nine months of 2019. The increase in net cash provided by operating activities was due primarily to lower cash tax payments and lower working capital requirements, partially offset by payments of interest rate swap cash settlements and payments for several indirect tax matters that were resolved during the fourth quarter of 2019 under a tax amnesty program in India. Net Cash Used in Investing Activities: Net cash used in investing activities was $357 million in the first nine months of 2020 and $735 million in the first nine months of 2019. The decrease in net cash used in investing activities was due primarily to cash received from the sale of shares in the JDE Peet's and KDP offerings and lower capital expenditures, partially offset by cash paid to acquire a majority interest in Give & Go. We continue to make capital expenditures primarily to modernize manufacturing facilities and support new product and productivity initiatives. During the first quarter of 2020 and due to the ongoing COVID-19 pandemic, we reduced our expected 2020 capital expenditures from up to $0.9 billion to up to $0.8 billion, including capital expenditures in connection with our Simplify to Grow Program. We expect to continue to fund these expenditures with cash from operations. Net Cash Used in Financing Activities: Net cash used in financing activities was $495 million in the first nine months of 2020 and $686 million in the first nine months of 2019. The decrease in cash used in financing activities was primarily due to lower share repurchases and higher net debt issuances, partially offset by higher dividends paid. Debt: From time to time we refinance long-term and short-term debt. Refer to Note 8, Debt and Borrowing Arrangements , for details of our debt activity during the first nine months of 2020. The nature and amount of our long-term and short-term debt and the proportionate amount of each varies as a result of current and expected business requirements, market conditions and other factors. Due to seasonality, in the first and second quarters of the year, our working capital requirements grow, increasing the need for short-term financing. The second half of the year typically generates higher cash flows. As such, we may issue commercial paper or secure other forms of financing throughout the year to meet short-term working capital needs. One of our subsidiaries, Mondelez International Holdings Netherlands B.V. (“MIHN”), has outstanding debt. The operations held by MIHN generated approximately 71.0% (or $13.7 billion) of the $19.3 billion of consolidated net revenue in the nine months ended September 30, 2020. The operations held by MIHN represented approximately 81.1% (or $21.9 billion) of the $27.0 billion of net assets as of September 30, 2020 and 87.2% (or $23.9 billion) of the $27.3 billion of net assets as of December 31, 2019. 54 Table of Contents During February 2020, our Board of Directors approved a new $8.0 billion long-term financing authority to replace the prior $5.0 billion authority. As of September 30, 2020, we had $2.0 billion of long-term financing authority remaining. In the next 12 months, we expect $796 million of long-term debt to mature in January 2021. We expect to fund this repayment with a combination of cash on hand and short-term borrowings, including issuance of commercial paper. Our total debt was $20.1 billion at September 30, 2020 and $18.4 billion at December 31, 2019. Our debt-to-capitalization ratio was 0.43 at September 30, 2020 and 0.40 at December 31, 2019. At September 30, 2020, the weighted-average term of our outstanding long-term debt was 6.6 years. Our average daily commercial paper borrowings outstanding were $3.0 billion in the first nine months of 2020 and $4.2 billion in the first nine months of 2019. We had commercial paper outstanding totaling $0.1 billion as of September 30, 2020 and $2.6 billion as of December 31, 2019. We expect to continue to use commercial paper to finance various short-term financing needs. We continue to comply with our debt covenants. Refer to Note 8, Debt and Borrowing Arrangements . Commodity Trends We regularly monitor worldwide supply, commodity cost and currency trends so we can cost-effectively secure ingredients, packaging and fuel required for production. During the first nine months of 2020, the primary drivers of the increase in our aggregate commodity costs were higher currency exchange transaction costs on imported materials, as well as increased costs for cocoa, dairy, energy, nuts, oils, packaging, sugar and other ingredients, partially offset by lower costs for grains. A number of external factors such as the current COVID-19 global pandemic, weather conditions, commodity market conditions, currency fluctuations and the effects of governmental agricultural or other programs affect the cost and availability of raw materials and agricultural materials used in our products. We address higher commodity costs and currency impacts primarily through hedging, higher pricing and manufacturing and overhead cost control. We use hedging techniques to limit the impact of fluctuations in the cost of our principal raw materials; however, we may not be able to fully hedge against commodity cost changes, such as dairy, where there is a limited ability to hedge, and our hedging strategies may not protect us from increases in specific raw material costs. Due to competitive or market conditions, planned trade or promotional incentives, fluctuations in currency exchange rates or other factors, our pricing actions may also lag commodity cost changes temporarily. We expect price volatility and a higher aggregate cost environment to continue in the remainder of 2020. While the costs of our principal raw materials fluctuate, we believe there will continue to be an adequate supply of the raw materials we use and that they will generally remain available from numerous sources. Off-Balance Sheet Arrangements and Aggregate Contractual Obligations See Note 8, Debt and Borrowing Arrangements , for information on debt transactions during 2020.There were no other material developments or changes to our off-balance sheet arrangements and aggregate contractual obligations disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019. Equity and Dividends Stock Plans and Share Repurchases: See Note 11, Stock Plans , for more information on our stock plans, grant activity and share repurchase program for the nine months ended September 30, 2020. 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. We repurchased shares at an aggregate cost of $17.2 billion, at a weighted-average cost of $40.09 per share, through September 30, 2020 ($0.7 billion in the first nine months of 2020, $1.5 billion in 2019, $2.0 billion in 2018, $2.2 billion in 2017, $2.6 billion in 2016, $3.6 billion in 2015, $1.9 billion in 2014 and $2.7 billion in 2013). The number of shares that we ultimately repurchase under our share repurchase program may vary depending on 55 Table of Contents numerous factors, including share price and other market conditions, our ongoing capital allocation planning, levels of cash and debt balances, other demands for cash, such as acquisition activity, general economic or business conditions and Board and management discretion. Additionally, our share repurchase activity during any particular period may fluctuate. We may accelerate, suspend, delay or discontinue our share repurchase program at any time, without notice. Dividends: We paid dividends of $1,227 million in the first nine months of 2020 and $1,131 million in the first nine months of 2019. The third quarter 2020 dividend of $0.315 per share, declared on July 28, 2020 for shareholders of record as of September 30, 2020, was paid on October 14, 2020. The declaration of dividends is subject to the discretion of our Board of Directors and depends on various factors, including our net earnings, financial condition, cash requirements, future prospects and other factors that our Board of Directors deems relevant to its analysis and decision making. We anticipate that the 2020 distributions will be characterized as dividends under U.S. federal income tax rules. The final determination will be made on an IRS Form 1099–DIV issued in early 2021. Significant Accounting Estimates We prepare our condensed consolidated financial statements in conformity with U.S. GAAP. The preparation of these financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the periods presented. Actual results could differ from those estimates and assumptions. Our significant accounting policies are described in Note 1 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2019. Our significant accounting estimates are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2019. See Note 1, Basis of Presentation , for a discussion of the impact of new accounting standards. New Accounting Guidance: See Note 1, Basis of Presentation , for a discussion of new accounting standards. Contingencies: See Note 12, Commitments and Contingencies , and Part II, Item 1. Legal Proceedings, for a discussion of contingencies. Forward-Looking Statements This report contains a number of forward-looking statements. Words, and variations of words, such as “will,” “may,” “expect,” “would,” “could,” “might,” “intend,” “plan,” “believe,” “likely,” “estimate,” “anticipate,” “objective,” “predict,” “project,” “position,” “seek,” “aim,” “potential,” “outlook” and similar expressions are intended to identify our forward-looking statements, including but not limited to statements about: the impact of the COVID-19 outbreak on consumer demand, costs, product mix, the availability of our products, our strategic initiatives, our and our partners’ global supply chains, operations and routes to market, and our financial results; our future performance, including our future revenue and earnings growth; our strategy to accelerate consumer-centric growth, drive operational excellence and create a winning growth culture; volatility in global consumer, commodity, currency and capital markets; price volatility and pricing actions; the cost environment and measures to address increased costs; our ability to meet demand for our products; our tax rate, tax positions, tax proceedings and the impact of U.S. and Swiss tax reform on our results; the United Kingdom’s withdrawal from the European Union and its impact on our business and results, including the consequences of any trade or other cross-border operating agreements, or failure to reach agreements, following the United Kingdom’s withdrawal from the European Union; the costs of, timing of expenditures under and completion of our restructuring program; commodity prices and supply; our investments including in JDE Peet's and KDP; political, business and economic conditions and volatility; currency exchange rates, controls and restrictions and the effect of currency translation on our results of operations; the application of highly inflationary accounting for our Argentinian subsidiaries and the potential for and impacts from currency devaluation in other countries; the outcome and effects on us of legal proceedings and government investigations; the estimated value of goodwill and intangible assets; amortization expense for intangible assets; impairment of goodwill and intangible assets and our projections of operating results and other factors that may affect our impairment testing; our accounting estimates and judgments and the impact of new accounting 56 Table of Contents pronouncements; pension expenses, contributions and assumptions; our liquidity, funding sources and uses of funding, including debt issuances and our use of commercial paper; our capital structure and liquidity, credit availability and our ability to raise capital, and the impact of market disruptions on us, our counterparties and our business partners; the planned phase out of London Interbank Offered Rates; our risk management program, including the use of financial instruments and the impacts and effectiveness of our hedging activities; working capital; capital expenditures and funding; funding of debt maturities; share repurchases; dividends; long-term value for our shareholders; the characterization of 2020 distributions as dividends; compliance with our debt covenants; and our contractual and other obligations. These forward-looking statements involve risks and uncertainties, many of which are beyond our control, and many of these risks and uncertainties are currently amplified by and may continue to be amplified by the COVID-19 outbreak. Important factors that could cause actual results to differ materially from those described in our forward-looking statements include, but are not limited to, uncertainty about the magnitude, duration, geographic reach, impact on the global economy and related current and potential travel restrictions of the COVID-19 outbreak; the current, and uncertain future, impact of the COVID-19 outbreak on our business, growth, reputation, prospects, financial condition, operating results (including components of our financial results), cash flows and liquidity; risks from operating globally including in emerging markets; changes in currency exchange rates, controls and restrictions; continued volatility of commodity and other input costs; weakness in economic conditions; weakness in consumer spending; pricing actions; tax matters including changes in tax rates and laws, disagreements with taxing authorities and imposition of new taxes; use of information technology and third party service providers; unanticipated disruptions to our business, such as the malware incident, cyberattacks or other security breaches; global or regional health pandemics or epidemics, including COVID-19; competition; protection of our reputation and brand image; our ability to innovate and differentiate our products; the restructuring program and our other transformation initiatives not yielding the anticipated benefits; changes in the assumptions on which the restructuring program is based; management of our workforce; consolidation of retail customers and competition with retailer and other economy brands; changes in our relationships with suppliers or customers; legal, regulatory, tax or benefit law changes, claims or actions; the impact of climate change on our supply chain and operations; strategic transactions; significant changes in valuation factors that may adversely affect our impairment testing of goodwill and intangible assets; perceived or actual product quality issues or product recalls; failure to maintain effective internal control over financial reporting; volatility of and access to capital or other markets; pension costs; the expected discontinuance of London Interbank Offered Rates and transition to any other interest rate benchmark; and our ability to protect our intellectual property and intangible assets. We disclaim and do not undertake any obligation to update or revise any forward-looking statement in this report except as required by applicable law or regulation. Non-GAAP Financial Measures We use non-GAAP financial information and believe it is useful to investors as it provides additional information to facilitate comparisons of historical operating results, identify trends in our underlying operating results and provide additional insight and transparency on how we evaluate our business. We use non-GAAP financial measures to budget, make operating and strategic decisions and evaluate our performance. We have detailed the non-GAAP adjustments that we make in our non-GAAP definitions below. The adjustments generally fall within the following categories: acquisition & divestiture activities, gains and losses on intangible asset sales and non-cash impairments, major program restructuring activities, constant currency and related adjustments, major program financing and hedging activities and other major items affecting comparability of operating results. We believe the non-GAAP measures should always be considered along with the related U.S. GAAP financial measures. We have provided the reconciliations between the GAAP and non-GAAP financial measures below, and we also discuss our underlying GAAP results throughout our Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Form 10-Q. Our primary non-GAAP financial measures are listed below and reflect how we evaluate our current and prior-year operating results. As new events or circumstances arise, these definitions could change. When our definitions change, we provide the updated definitions and present the related non-GAAP historical results on a comparable basis (1) . 57 Table of Contents • “Organic Net Revenue” is defined as net revenues excluding the impacts of acquisitions, divestitures (2) and currency rate fluctuations (3) . We also evaluate Organic Net Revenue growth from emerging markets and developed markets. Our emerging markets include our Latin America region in its entirety; the AMEA region, excluding Australia, New Zealand and Japan; and the following countries from the Europe region: Russia, Ukraine, Turkey, Kazakhstan, Georgia, Poland, Czech Republic, Slovak Republic, Hungary, Bulgaria, Romania, the Baltics and the East Adriatic countries. Our developed markets include the entire North America region, the Europe region excluding the countries included in the emerging markets definition, and Australia, New Zealand and Japan from the AMEA region. • “Adjusted Operating Income” is defined as operating income excluding the impacts of the Simplify to Grow Program (4) ; gains or losses (including non-cash impairment charges) on goodwill and intangible assets; divestiture (2) or acquisition gains or losses and related divestiture (2) , acquisition and integration costs (2) ; the operating results of divestitures (2) ; remeasurement of net monetary position (5) ; mark-to-market impacts from commodity and forecasted currency transaction derivative contracts (6) ; impact from resolution of tax matters (7) ; CEO transition remuneration (8) ; impact from pension participation changes (9) ; Swiss tax reform impacts (10) ; and costs associated with the JDE Peet's transaction (1) . We also present “Adjusted Operating Income margin,” which is subject to the same adjustments as Adjusted Operating Income. We also evaluate growth in our Adjusted Operating Income on a constant currency basis (3) . • “Adjusted EPS” is defined as diluted EPS attributable to Mondelēz International from continuing operations excluding the impacts of the items listed in the Adjusted Operating Income definition as well as losses on debt extinguishment and related expenses; gains or losses on equity method investment transactions; net earnings from divestitures (2) ; gains or losses on interest rate swaps no longer designated as accounting cash flow hedges due to changed financing and hedging plans; and U.S. and Swiss tax reform impacts (10) . Similarly, within Adjusted EPS, our equity method investment net earnings exclude our proportionate share of our investees’ significant operating and non-operating items (11) . We also evaluate growth in our Adjusted EPS on a constant currency basis (3) . (1) When items no longer impact our current or future presentation of non-GAAP operating results, we remove these items from our non-GAAP definitions. During the second quarter of 2020, we added to the non-GAAP definitions the exclusion of costs associated with the JDE Peet's transaction. Refer to Note 6, Equity Method Investments , and Note 14, Income Taxes , for more information on the JDE Peet's transaction. (2) Divestitures include completed sales of businesses (including the partial or full sale of an equity method investment) and exits of major product lines upon completion of a sale or licensing agreement. As we record our share of KDP and JDE Peet’s ongoing earnings on a one-quarter lag basis, any KDP or JDE Peet’s ownership reductions are reflected as divestitures within our non-GAAP results the following quarter. See Note 2, Acquisitions and Divestitures, and Note 6, Equity Method Investments, for information on acquisitions and divestitures impacting the comparability of our results. (3) Constant currency operating results are calculated by dividing or multiplying, as appropriate, the current-period local currency operating results by the currency exchange rates used to translate the financial statements in the comparable prior-year period to determine what the current-period U.S. dollar operating results would have been if the currency exchange rate had not changed from the comparable prior-year period. (4) Non-GAAP adjustments related to the Simplify to Grow Program reflect costs incurred that relate to the objectives of our program to transform our supply chain network and organizational structure. Costs that do not meet the program objectives are not reflected in the non-GAAP adjustments. (5) During the third quarter of 2018, as we began to apply highly inflationary accounting for Argentina (refer to Note 1, Basis of Presentation ), we excluded the remeasurement gains or losses related to remeasuring net monetary assets or liabilities in Argentina during the period to be consistent with our prior accounting for these remeasurement gains/losses for Venezuela when it was subject to highly inflationary accounting prior to 2016. (6) During the third quarter of 2016, we began to exclude unrealized gains and losses (mark-to-market impacts) from outstanding commodity and forecasted currency transaction derivatives from our non-GAAP earnings measures until such time that the related exposures impact our operating results. Since we purchase commodity and forecasted currency transaction contracts to mitigate price volatility primarily for inventory requirements in future periods, we made this adjustment to remove the volatility of these future inventory purchases on current operating results to facilitate comparisons of our underlying operating performance across periods. We also discontinued designating commodity and forecasted currency transaction derivatives for hedge accounting treatment. To facilitate comparisons of our underlying operating results, we have recast all historical non-GAAP earnings measures to exclude the mark-to-market impacts. (7) See Note 12, Commitments and Contingencies – Tax Matters, and our Annual Report on Form 10-K for the year ended December 31, 2018 for additional information. (8) On November 20, 2017, Dirk Van de Put succeeded Irene Rosenfeld as CEO of Mondelēz International in advance of her retirement at the end of March 2018. In order to incent Mr. Van de Put to join us, we provided him compensation with a total combined target value of $42.5 million to make him whole for incentive awards he forfeited or grants that were not made to him when he left his former employer. The compensation we granted took the form of cash, deferred stock units, performance share units and stock options. In connection with Irene Rosenfeld’s retirement, we made her outstanding grants of performance share units for the 2016-2018 and 2017-2019 performance cycles eligible for continued vesting and approved a $0.5 million salary for her service as Chairman from January through March 2018. We refer to these elements of Mr. Van de Put’s and Ms. Rosenfeld’s compensation arrangements together as “CEO transition remuneration.” We are excluding amounts we expense as CEO transition remuneration from our non-GAAP results because those amounts are not part of our regular compensation program and 58 Table of Contents are incremental to amounts we would have incurred as ongoing CEO compensation. As a result, in 2017, we excluded amounts expensed for the cash payment to Mr. Van de Put and partial vesting of his equity grants. In 2018, we excluded amounts paid for Ms. Rosenfeld’s service as Chairman and partial vesting of Mr. Van de Put’s and Ms. Rosenfeld’s equity grants. In 2019, we excluded amounts related to the partial vesting of Mr. Van de Put’s equity grants. During the first quarter of 2020, Mr. Van de Put's equity grants became fully vested. (9) The impact from pension participation changes represents the charges incurred when employee groups are withdrawn from multiemployer pension plans and other changes in employee group pension plan participation. We exclude these charges from our non-GAAP results because those amounts do not reflect our ongoing pension obligations. See Note 10, Benefit Plans , for more information on the multiemployer pension plan withdrawal. (10) We exclude the impact of the 2019 Swiss tax reform and 2017 U.S. tax reform. During the third quarter of 2019, Swiss Federal and Zurich Cantonal tax events drove our recognition of a Swiss tax reform net benefit to our results of operations. On December 22, 2017, the United States enacted tax reform legislation that included a broad range of business tax provisions. We exclude these tax reform impacts from our Adjusted EPS as they do not reflect our ongoing tax obligations under the new tax reforms. Refer to Note 14, Income Taxes , for information on Swiss tax reform and our Annual Report on Form 10-K for the year ended December 31, 2019 for more information on the impact of Swiss and U.S. tax reform. (11) We have excluded our proportionate share of our equity method investees’ significant operating and non-operating items such as acquisition and divestiture related costs, restructuring program costs and discrete U.S. tax reform impacts, in order to provide investors with a comparable view of our performance across periods. Although we have shareholder rights and board representation commensurate with our ownership interests in our equity method investees and review the underlying operating results and significant operating and non-operating items each reporting period, we do not have direct control over their operations or resulting revenue and expenses. Our use of equity method investment net earnings on an adjusted basis is not intended to imply that we have any such control. Our GAAP “diluted EPS attributable to Mondelēz International from continuing operations” includes all of the investees’ significant operating and non-operating items. We believe that the presentation of these non-GAAP financial measures, when considered together with our U.S. GAAP financial measures and the reconciliations to the corresponding U.S. GAAP financial measures, provides you with a more complete understanding of the factors and trends affecting our business than could be obtained absent these disclosures. Because non-GAAP financial measures vary among companies, the non-GAAP financial measures presented in this report may not be comparable to similarly titled measures used by other companies. Our use of these non-GAAP financial measures is not meant to be considered in isolation or as a substitute for any U.S. GAAP financial measure. A limitation of these non-GAAP financial measures is they exclude items detailed below that have an impact on our U.S. GAAP reported results. The best way this limitation can be addressed is by evaluating our non-GAAP financial measures in combination with our U.S. GAAP reported results and carefully evaluating the following tables that reconcile U.S. GAAP reported figures to the non-GAAP financial measures in this Form 10-Q. 59 Table of Contents Organic Net Revenue: Applying the definition of “Organic Net Revenue,” the adjustments made to “net revenues” (the most comparable U.S. GAAP financial measure) were to exclude the impact of currency, acquisitions and a divestiture. We believe that Organic Net Revenue reflects the underlying growth from the ongoing activities of our business and provides improved comparability of results. We also evaluate our Organic Net Revenue growth from emerging markets and developed markets, and these underlying measures are also reconciled to U.S. GAAP below. For the Three Months Ended September 30, 2020 For the Three Months Ended September 30, 2019 Emerging Markets Developed Markets Total Emerging Markets Developed Markets Total (in millions) (in millions) Net Revenue $ 2,289 $ 4,376 $ 6,665 $ 2,363 $ 3,992 $ 6,355 Impact of currency 200 (108) 92 — — — Impact of acquisition — (125) (125) — — — Organic Net Revenue $ 2,489 $ 4,143 $ 6,632 $ 2,363 $ 3,992 $ 6,355 For the Nine Months Ended September 30, 2020 For the Nine Months Ended September 30, 2019 Emerging Markets Developed Markets Total Emerging Markets Developed Markets Total (in millions) (in millions) Net Revenue $ 6,623 $ 12,660 $ 19,283 $ 7,137 $ 11,818 $ 18,955 Impact of currency 582 42 624 — — — Impact of acquisitions — (271) (271) — — — Impact of divestiture — — — (55) — (55) Organic Net Revenue $ 7,205 $ 12,431 $ 19,636 $ 7,082 $ 11,818 $ 18,900 60 Table of Contents Adjusted Operating Income: Applying the definition of “Adjusted Operating Income,” the adjustments made to “operating income” (the most comparable U.S. GAAP financial measure) were to exclude Simplify to Grow Program; intangible asset impairment charges; mark-to-market impacts from commodity and forecasted currency transaction derivative contracts; acquisition integration costs; acquisition and divestiture-related costs; operating income from a divestiture; net gain on a divestiture; costs associated with the JDE Peet's transaction; the remeasurement of net monetary position; impact from pension participation changes; CEO transition remuneration and Swiss tax reform impact. We also evaluate Adjusted Operating Income on a constant currency basis. We believe these measures provide improved comparability of underlying operating results. For the Three Months Ended September 30, 2020 2019 $ Change % Change (in millions) Operating Income $ 1,135 $ 876 $ 259 29.6 % Simplify to Grow Program (1) 114 151 (37) Intangible asset impairment charges (2) 54 57 (3) Mark-to-market gains from derivatives (3) (145) (20) (125) Acquisition-related costs (4) — 1 (1) Divestiture-related costs (4) 6 (4) 10 Net gain on divestiture (4) — (3) 3 Remeasurement of net monetary position (5) 2 1 1 CEO transition remuneration (6) — 3 (3) Swiss tax reform impact (7) — 2 (2) Other/rounding (1) 1 (2) Adjusted Operating Income $ 1,165 $ 1,065 $ 100 9.4 % Unfavorable currency translation 12 — 12 Adjusted Operating Income (constant currency) $ 1,177 $ 1,065 $ 112 10.5 % For the Nine Months Ended September 30, 2020 2019 $ Change % Change (in millions) Operating Income $ 2,704 $ 2,937 $ (233) (7.9) % Simplify to Grow Program (1) 248 304 (56) Intangible asset impairment charges (2) 144 57 87 Mark-to-market losses/(gains) from derivatives (3) 42 (69) 111 Acquisition integration costs (4) 2 — 2 Acquisition-related costs (4) 15 2 13 Divestiture-related costs (4) 4 6 (2) Operating income from divestiture (4) — (9) 9 Net gain on divestiture (4) — (44) 44 Costs associated with JDE Peet's transaction (8) 48 — 48 Remeasurement of net monetary position (5) 7 2 5 Impact from pension participation changes (9) — (35) 35 CEO transition remuneration (6) — 9 (9) Swiss tax reform impact (7) — 2 (2) Other/rounding (1) 1 (2) Adjusted Operating Income $ 3,213 $ 3,163 $ 50 1.6 % Unfavorable currency translation 86 — 86 Adjusted Operating Income (constant currency) $ 3,299 $ 3,163 $ 136 4.3 % 61 Table of Contents (1) Refer to Note 7, Restructuring Program, for more information. (2) Refer to Note 5, Goodwill and Intangible Assets , for more information. (3) Refer to Note 9, Financial Instruments , Note 16, Segment Reporting , and Non-GAAP Financial Measures section for more information on the unrealized gains/losses on commodity and forecasted currency transaction derivatives. (4) Refer to Note 2, Acquisitions and Divestitures , for more information on the April 1, 2020 acquisition of a significant majority interest in Give & Go, the July 16, 2019 acquisition of a majority interest in Perfect Snacks and the May 28, 2019 divestiture of most of our cheese business in the Middle East and Africa. (5) Refer to Note 1, Basis of Presentation – Currency Translation and Highly Inflationary Accounting , for information on our application of highly inflationary accounting for Argentina. (6) Refer to the Non-GAAP Financial Measures definitions and related table notes. (7) Refer to Note 14, Income Taxes , for more information on Swiss tax reform. (8) Refer to Note 6, Equity Method Investments , for more information on the JDE Peet's transaction. (9) Refer to Note 10, Benefit Plans , for more information.. 62 Table of Contents Adjusted EPS: Applying the definition of “Adjusted EPS,” (1) the adjustments made to “diluted EPS attributable to Mondelēz International” (the most comparable U.S. GAAP financial measure) were to exclude the impacts of the items listed in the Adjusted Operating Income tables above as well as a loss related to interest rate swaps; Swiss tax reform net impacts; gains or losses on equity method investment transactions; and our proportionate share of significant operating and non-operating items recorded by our JDE Peet's and KDP equity method investees. We also evaluate Adjusted EPS on a constant currency basis. We believe Adjusted EPS provides improved comparability of underlying operating results. For the Three Months Ended September 30, 2020 2019 $ Change % Change Diluted EPS attributable to Mondelēz International $ 0.78 $ 0.98 $ (0.20) (20.4) % Simplify to Grow Program (2) 0.06 0.08 (0.02) Intangible asset impairment charges (2) 0.03 0.03 — Mark-to-market gains from derivatives (2) (0.08) (0.01) (0.07) Loss related to interest rate swaps (3) — 0.08 (0.08) Swiss tax reform net impacts (4) — (0.53) 0.53 Gain on equity method investment transactions (5) (0.19) — (0.19) Equity method investee items (6) 0.03 0.01 0.02 Adjusted EPS $ 0.63 $ 0.64 $ (0.01) (1.6) % Unfavorable currency translation 0.01 — 0.01 Adjusted EPS (constant currency) $ 0.64 $ 0.64 $ — — % For the Nine Months Ended September 30, 2020 2019 $ Change % Change Diluted EPS attributable to Mondelēz International $ 1.66 $ 2.19 $ (0.53) (24.2) % Simplify to Grow Program (2) 0.14 0.17 (0.03) Intangible asset impairment charges (2) 0.08 0.03 0.05 Mark-to-market losses/(gains) from derivatives (2) 0.03 (0.04) 0.07 Acquisition-related costs (2) 0.01 — 0.01 Divestiture-related costs (2) — 0.01 (0.01) Net earnings from divestiture (2) (0.01) (0.03) 0.02 Net gain on divestiture (2) — (0.03) 0.03 Costs associated with JDE Peet's transaction (2) 0.21 — 0.21 Impact from pension participation changes (2) 0.01 (0.02) 0.03 CEO transition remuneration (2) — 0.01 (0.01) Loss related to interest rate swaps (3) 0.05 0.08 (0.03) Swiss tax reform net impacts (4) — (0.53) 0.53 (Gain)/loss on equity method investment transactions (5) (0.31) 0.01 (0.32) Equity method investee items (6) 0.05 0.02 0.03 Adjusted EPS $ 1.92 $ 1.87 $ 0.05 2.7 % Unfavorable currency translation 0.06 — 0.06 Adjusted EPS (constant currency) $ 1.98 $ 1.87 $ 0.11 5.9 % (1) The tax expense/(benefit) of each of the pre-tax items excluded from our GAAP results was computed based on the facts and tax assumptions associated with each item, and such impacts have also been excluded from Adjusted EPS. • For the three months ended September 30, 2020, taxes for the: Simplify to Grow Program were $(22) million, intangible asset impairment charges were $(12) million, mark-to-market losses from derivatives were $27 million, gain on equity method investment transactions were $77 million and equity method investee items were $(3) million. 63 Table of Contents • For the three months ended September 30, 2019, taxes for the: Simplify to Grow Program were $(29) million, intangible asset impairment charges were $(14) million, mark-to-market gains from derivatives were $8 million, loss related to interest rate swaps were zero, Swiss tax reform were $(769) million and equity method investee items were $(2) million. • For the nine months ended September 30, 2020, taxes for the: Simplify to Grow Program were $(55) million, intangible asset impairment charges were $(33) million, mark-to-market losses from derivatives were $(5) million, acquisition-related costs were zero, net earnings from divestiture were zero, costs associated with the JDE Peet's transaction were $261 million, impact from pension participation changes were $(2) million, loss related to interest rate swaps were $(24) million, gain on equity method investment transactions were $94 million and equity method investee items were $(11) million. • For the nine months ended September 30, 2019, taxes for the: Simplify to Grow Program were $(67) million, intangible asset impairment charges were $(14) million, mark-to-market gains from derivatives were $14 million, divestiture-related costs were zero, net earnings from divestiture were $1 million, net gain on divestiture were $2 million, impact from pension participation changes were $9 million, CEO transition remuneration were zero, loss related to interest rate swaps were zero, Swiss tax reform were $(769) million, net loss on equity method investment transaction were $7 million and equity method investee items were $(9) million. (2) See the Adjusted Operating Income table above and the related footnotes for more information. (3) Refer to Note 9, Financial Instruments , for information on our interest rate swaps that we no longer designate as cash flow hedges. (4) Refer to Note 14, Income Taxes , for more information on Swiss tax reform. (5) Refer to Note 6, Equity Method Investments, for more information on the gains and losses on equity method investment transactions. (6) Includes our proportionate share of significant operating and non-operating items recorded by our JDE Peet's and KDP equity method investees, such as acquisition and divestiture-related costs and restructuring program costs. 64 Table of Contents