What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-02-05 compared with 2020-02-07 · 574 added, 411 removed, 735 unchanged (57% of the section changed)

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Overview of Business and Strategy

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 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 around the world.

We aim to be the global leader in snacking.

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accelerating consumer-centric growth, driving operational excellence and creating a winning growth culture.

We believe the successful implementation of our strategic priorities and the leveraging of 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.

We believe the successful implementation of our strategic priorities and leveraging of 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.

For more detailed information on our business and strategy, refer to Item 1, Business.

Recent Developments and Significant Items Affecting Comparability

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 2020, we experienced a significant increase in demand and revenue growth in certain markets 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 second half of the year, 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 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 approximately $28 million to date.

We have been supporting local and global organizations that are responding to food instability and providing emergency relief.

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 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 2020 net revenue and net earnings in U.S.

dollars 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 second half 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 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 2020, we generated $4.0 billion of cash from operations, or $3.1 billion after capital expenditures.

Also, as of December 31, 2020, we had $3.6 billion of cash and cash equivalents on hand.

• During 2020, we also received cash of €350 million ($394 million) from our participation in the JDE Peet's public share offerings and $2,094 million from our participation in the KDP secondary offering and subsequent KDP share sales (see additional information below and in Note 7, Equity Method Investments ).

• As a precautionary measure, in March, we also suspended our share repurchase program, which was reinstated during our fourth quarter.

• 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 reverses when the payments come due.

Some of these payments were made in the fourth quarter of 2020;

the remainder will come due in 2021 and 2022.

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 funding our next long-term debt maturities of approximately $1.5 billion in October 2021 and approximately $0.3 billion in December 2021 and after paying approximately $0.8 billion of maturing debt 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 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 also issued additional long-term debt several times in 2020 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 and Note 9, Debt and Borrowing Arrangements ).

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 of 2020 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 $144 million of impairment charges in 2020.

While we did not identify impairment triggers for other brands, there continues to be significant uncertainty due to the 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 6, 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 moderated in the second half 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 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 July 9, 2018, Keurig Green Mountain, Inc.

("Keurig") closed on its definitive merger agreement with Dr Pepper Snapple Group, Inc., and formed Keurig Dr Pepper Inc.

"KDP"), a publicly traded company.

Following the close of the transaction, our 24.2% investment in Keurig together with our shareholder loan receivable became a 13.8% investment in KDP.

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

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

During 2019, we recognized a $23 million pre-tax gain related to the impact of a KDP acquisition that decreased our ownership interest from 13.8% to 13.6%.

On March 4, 2020, we participated in a secondary offering of KDP shares and sold approximately 6.8 million shares, which reduced our ownership interest by 0.5% to 13.1% of the total outstanding shares.

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

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 in the aggregate 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).

On November 17, 2020, we sold approximately 40.0 million shares, which reduced our ownership interest by 2.8% to 8.4%.

We received $1,132 million of proceeds and recorded a pre-tax gain of $459 million (or $350 million after tax) during the fourth quarter of 2020.

The cash taxes associated with the KDP share sales were paid in 2020.

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 of 2020, 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 preliminary pre-tax gain of $121 million during the second quarter of 2020.

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.

During the fourth quarter of 2020, we reduced our tax expense by $11 million to $250 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.

For additional information, refer to Note 7, Equity Method Investments , and Note 16, Income Taxes .

Swiss and U.S.

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The net impact was a benefit of $767 million, which consisted of a $769 million reduction in deferred tax expense from an allowed step-up of intangible assets for tax purposes 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 are effective starting January 1, 2020.

We will continue to monitor Swiss tax reform for any additional interpretative guidance that could result in changes to the amounts we have recorded.

The ongoing impacts of these Swiss tax reform law changes became effective January 1, 2020.

On December 22, 2017, the United States enacted tax reform legislation ("U.S.

tax reform") that included a broad range of business tax provisions, including but not limited to a reduction in the U.S.

federal tax rate from 35% to 21%, as well as provisions that limit or eliminate various deductions or credits.

The legislation causes certain U.S.

allocated expenses (e.g.

interest and general administrative expenses) to be taxed and imposes a tax on U.S.

cross-border payments.

Furthermore, the legislation included a one-time transition tax on accumulated foreign earnings and profits.

While clarifying guidance was issued by the U.S.

Treasury Department and Internal Revenue Service ("IRS") during 2018 and 2019, we continue to evaluate the impacts as additional guidance on implementing the legislation becomes available.

The impact of adopting the new provisions was a discrete net tax expense of $5 million in 2019 and $19 million in 2018 and a discrete net tax benefit of $44 million in 2017.

Refer to Note 16, Income Taxes , for more information on our annual effective tax rates and Swiss and U.S.

tax reform") that included a broad range of business tax provisions and a one-time transition tax on accumulated foreign earnings and profits.

See Note 16, Income Taxes , for more information on our annual effective tax rates and Swiss and U.S.

Multiemployer Pension Plan Withdrawal

In the United States, we contribute to multiemployer pension plans based on obligations arising from our collective

bargaining agreements.

The most individually significant multiemployer plan we participated in prior to the second quarter of 2018 was the Bakery and Confectionery Union and Industry International Pension Fund (the "Fund").

Our obligation to contribute to the Fund arose with respect to 8 collective bargaining agreements covering most of our employees represented by the Bakery, Confectionery, Tobacco and Grain Millers Union ("BCTGM").

All of those collective bargaining agreements expired in 2016 and we continued to contribute to the Fund through 2018.

In 2018, we executed a complete withdrawal from the Fund and recorded a $429 million estimated withdrawal liability.

On July 11, 2019, we received an undiscounted withdrawal liability assessment from the Fund totaling $526 million requiring pro-rata monthly payments over 20 years and we recorded a $35 million final adjustment to reduce our withdrawal liability as of June 30, 2019.

In 2018, we executed a complete withdrawal from the Bakery and Confectionery Union and Industry International Pension Fund (the "Fund") and recorded a $429 million estimated withdrawal liability.

On July 11, 2019, we received an undiscounted withdrawal liability assessment from the Fund totaling $526 million requiring pro-rata monthly payments over 20 years.

We began making monthly payments during the third quarter of 2019.

Within selling, general and administrative expenses, we recorded a $35 million ($26 million net of tax) adjustment related to the discounted withdrawal liability.

Within interest and other expense, net, we recorded accreted interest on the long-term liability of $11 million in 2020, $12 million in 2019 and $6 million in 2018.

As of December 31, 2020, the remaining discounted withdrawal liability was $375 million, with $14 million recorded in other current liabilities and $361 million recorded in long-term other liabilities.

Adoption of New Lease Accounting Standard

As further described in Note 1, Summary of Significant Accounting Policies , we adopted the new lease accounting standard on January 1, 2019.

The impact of adopting the standard included the initial recognition as of January 1, 2019, of $710 million of lease-related assets and $730 million of lease-related liabilities on our consolidated balance sheet.

The transition method we elected for adoption required a cumulative effect adjustment to retained earnings as of January 1, 2019, which was not material.

For additional information on leases, refer to Note 5, Leases .

Keurig Dr Pepper Transaction

On July 9, 2018, Keurig Green Mountain, Inc.

("Keurig") closed on its definitive merger agreement with Dr Pepper Snapple Group, Inc., and formed Keurig Dr Pepper Inc.

"KDP"), a publicly traded company.

Following the close of the transaction, our 24.2% investment in Keurig together with our shareholder loan receivable became a 13.8% investment in KDP.

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

Also, during the first quarter of 2019, we recognized a $23 million pre-tax gain related to the impact of a KDP acquisition that decreased our ownership interest from 13.8% to 13.6%.

Refer to Note 7, Equity Method Investments , for additional information on KDP and the transaction.

Malware Incident

On June 27, 2017, a global malware incident impacted our business.

The malware affected a significant portion of our global sales, distribution and financial networks.

Following the incident, we executed business continuity and contingency plans to contain the impact, minimize damages and restore our systems environment.

We also restored our main operating systems and processes and enhanced our system security.

To date, we have not found, nor do we expect to find, any instances of Company or personal data released externally.

During 2017, we estimated the malware incident had a negative impact of 0.4% on our net revenue and Organic Net Revenue growth as we recognized the majority of delayed second quarter shipments in our third quarter 2017 results and we also permanently lost some revenue.

We incurred total incremental expenses of $84 million predominantly during the second half of 2017 as part of the recovery effort.

The recovery from the incident was largely resolved by the end of 2017 and we continued efforts to strengthen our security measures and enhance general information technology, business process and disclosure controls.

Summary of Results

Net revenues were approximately $25.9 billion in both 2019 and 2018 , a decrease of 0.3% in 2019 and an increase of 0.2% in 2018 .

In 2019, net revenues declined due to the impact of unfavorable currency translation and the impact of the divestiture of most of our cheese business in the Middle East and Africa.

Net revenues were positively affected by higher net pricing and favorable volume/mix, as well as the acquisitions of a majority interest in Perfect Snacks in 2019 and a U.S.

premium biscuit company, Tate's Bake Shop, in 2018.

In 2018, net revenues grew due to higher net pricing and favorable volume/mix.

Net revenues were also positively affected by the acquisition of Tate's Bake Shop.

Net revenue growth was negatively affected by the impact of unfavorable currency translation and the impact of several business divestitures that occurred in 2017 which reduced net revenues in 2018 as compared to the prior year.

• Net revenues were approximately $26.6 billion in 2020 and $25.9 billion in 2019, an increase of 2.8% in 2020 and a decrease of 0.3% in 2019.

In 2020, net revenues were significantly impacted by the COVID-19 outbreak and response.

In developed markets, particularly North America, demand for our products, primarily biscuits and chocolate, 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 second half of the year 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.

– Net revenue increased in 2020, driven by higher net pricing, favorable volume/mix and incremental net revenues from our acquisitions of Give & Go in 2020 and Perfect Snacks in 2019.

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.

– Net revenue decreased in 2019, driven by the impact of unfavorable currency translation and the impact of the divestiture of most of our cheese business in the Middle East and Africa.

Net revenues were positively affected by higher net pricing and favorable volume/mix, as well as our acquisitions of Perfect Snacks in 2019 and Tate's Bake Shop in 2018.

• Organic Net Revenue increased 3.7% to $26.8 billion in 2020 and increased 4.1% to $26.9 billion in 2019.

In both 2019 and 2018, Organic Net Revenue increased as a result of higher net pricing and favorable volume/mix.

Organic Net Revenue is on a constant currency basis and excludes revenue from divestitures and acquisitions.

While Organic Net Revenue in 2020 was impacted by the COVID-19 outbreak and response described above, Organic Net Revenue increased in both 2020 and 2019 due to higher net pricing and favorable volume/mix.

Organic Net Revenue is on a constant currency basis and excludes revenue from acquisitions and divestitures.

We use Organic Net 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 increased 16.2% to $2.65 in 2019 and increased 23.2% to $2.28 in 2018 .

Diluted EPS increased in 2019 primarily driven by the benefit from Swiss tax reform, lapping the prior-year impact from pension participation changes, operating gains, lower Simplify to Grow program costs, lapping the prior-year loss on debt extinguishment, fewer shares outstanding, a gain on divestiture, an increase in equity method investment earnings, lower interest expense and a benefit from current-year pension participation changes, partially offset by lapping the prior-year gain on equity method investment transactions, unfavorable currency translation, a loss related to interest rate swaps, the expense from the resolution of tax matters in 2019 and an unfavorable year-over-year change in mark-to-market impacts from currency and commodity derivatives.

Diluted EPS increased in 2018 primarily driven by the after-tax gain on the KDP transaction, a favorable year-over-year change in mark-to-market impacts from currency and commodity derivatives, operating gains, lower costs incurred for the Simplify to Grow Program, fewer shares outstanding, lower taxes and increased equity method investment earnings, partially offset by the impact from pension participation changes, lapping the benefit from the resolution of tax matters and lapping a prior-year net gain on divestitures.

• Diluted EPS attributable to Mondelēz International decreased 8.2% to $2.47 in 2020 and increased 20.6% to $2.69 in 2019.

– Diluted EPS decreased in 2020 primarily driven by lapping the prior-year benefit from Swiss tax reform, costs associated with the JDE Peet's transaction, loss on debt extinguishment, higher intangible asset impairment charges, unfavorable year-over-year mark-to-market impacts from currency and commodity derivatives, lapping a prior-year gain on divestiture, lapping the prior-year benefit from pension participation changes and the unfavorable impact on net earnings from divestitures.

These factors were partially offset by gains on equity method investment transactions, higher Adjusted EPS, favorable change from the resolution of tax matters (a benefit in 2020 as compared to an expense in 2019), lower Simplify to Grow program costs and lower losses related to interest rate swaps.

– Diluted EPS increased in 2019 primarily driven by the benefit from Swiss tax reform, lapping the prior-year impact from pension participation changes, operating gains, lower Simplify to Grow program costs, an increase in equity method investment earnings, lapping the prior-year loss on debt extinguishment, fewer shares outstanding, a gain on divestiture, lower interest expense and a benefit from current-year pension participation changes, partially offset by lapping the prior-year gain on equity method investment transactions, unfavorable currency translation, a loss related to interest rate swaps, the expense from the resolution of tax matters in 2019 and an unfavorable year-over-year change in mark-to-market impacts from currency and commodity derivatives.

See our Discussion and Analysis of Historical Results appearing later in this section for further details.

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On a constant currency basis, Adjusted EPS increased 6.5% to $2.62 in 2020 and increased 11.0% to $2.62 in 2019.

For 2019, operating gains, fewer shares outstanding, increased equity method investment earnings, lower interest expense and lower taxes drove the Adjusted EPS growth.

For 2018, operating gains, fewer shares outstanding, lower taxes, increased equity method investment earnings and lower interest expense drove the Adjusted EPS growth.

– For 2020, operating gains, an increase in benefit plan non-service income and fewer shares outstanding, partially offset by unfavorable currency translation and a decrease in equity method investment earnings drove the Adjusted EPS growth.

– For 2019, operating gains, increased equity method investment earnings, fewer shares outstanding, lower interest expense and lower taxes, partially offset by unfavorable currency translation drove the Adjusted EPS growth.

Adjusted EPS and Adjusted EPS on a constant currency basis are non-GAAP financial measures.

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In addition to monitoring our key operating metrics, we monitor a number of developments and trends that could impact our revenue and profitability objectives.

Long-Term Demographics and Consumer Trends – Snack food consumption is highly correlated to GDP growth, urbanization of populations and rising discretionary income levels associated with a growing middle class, particularly in emerging markets.

Snacking behavior is on the rise around the world according to the first annual “State of Snacking” report, commissioned by Mondelēz International and issued in November 2019, which summarizes the findings from interviews with thousands of consumers across 12 countries.

A majority of adults, and an even higher percentage of Millennial consumers, indicated they prefer to eat small bites throughout the day as opposed to larger meals.

The report concludes that consumer needs are evolving in response to busy modern lifestyles, the desire for community connections and a more holistic sense of well-being.

Also, the way consumers snack and buy snacks around the world is diverse, with consumers purchasing snacks across evolving retail and digital landscapes.

We expect these trends to continue and, in order to position ourselves for long-term growth, we are investing in our well-being and other snack offerings, product and marketing innovation and new routes to market including e-commerce.

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 economic conditions globally 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 our 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.

Demand – We monitor consumer spending and our market share within the food and beverage categories in which we sell our products.

Over the last three years, we have been seeing improvements in regional economic growth, consumer confidence and growth in our categories.

However, geopolitical and economic uncertainties from time to time may continue to affect economic growth, consumer confidence and category growth.

As part of our new strategic plan, we seek to drive category growth by offering snack innovations, leveraging our local and consumer-focused commercial approach, making investments in our brand and snacks portfolio, building strong routes to market in both emerging and developed markets and improving our position across multiple channels.

While gum and candy category growth was down due to less on-the-go consumption, the overall snack category continued to grow in 2020, in part due to increased consumer demand for snacks purchases for in-home consumption during the COVID-19 outbreak.

As part of our strategic plan, we seek to drive category growth by leveraging our local and consumer-focused commercial approach, making investments in our brand and snacks portfolio, building strong routes to market in both emerging and developed markets and improving our availability across multiple channels.

We believe these actions will help drive demand in our categories and strengthen our positions across markets.

Our recent research underscores the growth of snacking worldwide and how behavior, sentiment and routines surrounding food are being reshaped by COVID-19.

Snacking, which was already increasing among consumers, has accelerated further in 2020 as consumers spend more time at home, according to the second annual State of Snacking report, commissioned by Mondelēz International and issued in November 2020.

The report was conducted in conjunction with consumer poll specialist The Harris Poll and summarizes the findings from interviews with thousands of consumers across 12 countries.

The report shows that consumers see snacking as an important source of comfort, connection and community, especially during the past year.

For many, snacking offers moments of satisfaction and peace, with a majority of respondents noting it has helped distract them from a challenging year.

Volatility of Global Markets – Our growth strategy depends in part on our ability to expand our operations, including in emerging markets.

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Volatility in these markets affects demand for and the costs of our products and requires frequent changes in how we operate our business.

See below for a discussion of Brexit as well as Argentina, which was designated a highly inflationary economy in 2018.

As further discussed in COVID-19 above and in Item 7A, Quantitative and Qualitative Disclosures about Market Risk, volatility in global consumer, commodity, currency and capital markets increased significantly during 2020 and is expected to continue until the COVID-19 outbreak is largely resolved.

See also below for a discussion of Brexit as well as Argentina, which was designated a highly inflationary economy in 2018.

In addition, the imposition of increased or new tariffs, quotas, trade barriers or similar restrictions on our sales or key commodities and potential changes in U.S.

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To help mitigate adverse effects of ongoing volatility across markets, we aim to protect profitability through the management of costs (including hedging) and pricing as well as targeted investments in our brands and new routes to market.

Coronavirus – We have been monitoring the outbreak of a new coronavirus that originated in China.

We believe it could have a negative impact on our results in the short term and we are taking steps to protect our employees, consumers and business.

Competition – We operate in highly competitive markets that include global, regional and local competitors.

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To grow and maintain our market positions, we focus on meeting consumer needs and preferences through a local-first commercial focus, new digital and other sales and marketing initiatives, product innovation and high standards of product quality.

also continue to optimize our manufacturing and other operations and invest in our brands through ongoing research and development, advertising, marketing and consumer promotions.

We also continue to optimize our manufacturing and other operations and invest in our brands through ongoing research and development, advertising, marketing and consumer promotions.

Pricing – Our net revenue growth and profitability may be affected as we adjust prices to address new conditions.

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To remain competitive on our operating structure, we continue to work on programs to expand our profitability, such as our Simplify to Grow Program, which is designed to bring about significant reductions in our operating cost structure in both our supply chain and overhead costs.

Multiemployer pension plan – In 2018, we executed a complete withdrawal from the Fund and recorded a $429 million estimated withdrawal liability.

On July 11, 2019, we received an undiscounted withdrawal liability assessment from the Fund totaling $526 million and we recorded a $35 million final adjustment to reduce our withdrawal liability at that time.

During the third quarter of 2019, we began making monthly pro-rata payments on the 20-year obligation.

As of December 31, 2019, the remaining discounted withdrawal liability was $391 million .

Taxes – During the third quarter of 2019, Swiss Federal and Zurich Cantonal tax events drove our recognition of a $767 million Swiss tax reform net benefit to our results of operations.

The future tax rate impacts of the Swiss tax reform law changes became effective on January 1, 2020 and are not expected to have a material impact on our overall results of operations.

We will continue to monitor Swiss tax reform for any additional interpretative guidance that could result in changes to the amounts we have recorded.

Taxes – We continue to monitor existing and potential future tax reform.

During the third quarter of 2019, we recorded the impact of Swiss tax reform and we will 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.

tax reform or related interpretations could change and have an adverse effect on us that could be material.

corporate tax rate and included some beneficial provisions, other provisions have, and will continue to have, an adverse effect on our results.

Currency – As a global company with 73.2% of our net revenues generated outside the United States, we are continually exposed to changes in global economic conditions and currency movements.

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As currency movements can make comparison of year-over-year operating performance challenging, we isolate the impact of currency and also report growth on a constant currency basis, holding prior-year currency exchange rates constant, so that prior-year and current-year results can be compared on a consistent basis.

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

Parliament approved Withdrawal Agreement.

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

The deadline for extending the transition period ends on June 30, 2020.

If the transition period is not extended, on December 31, 2020, the United Kingdom will either exit the European Union without a trade deal or will begin a new trade relationship with the European Union.

During the transition period, we continue to take 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 2019, we generated 8.6% of our 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.

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, shipping delays because of the need for customs inspections and procedures and shortages of certain 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 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 have taken measures to increase our resources in customer service & logistics together with increasing our inventory levels of imported raw materials, packaging and finished goods in the United Kingdom to help us manage through the Brexit transition and the inherent risks.

Resulting impacts and market volatility can vary significantly depending on the final terms of the U.K.’s exit from the European Union.

Brexit – On December 24, 2020, the European Union and the United Kingdom reached an agreement on a new trade arrangement that became effective on January 1, 2021.

Main trade provisions include the continuation of no tariffs or quotas on trade between the U.K.

so long as we meet prescribed trade terms.

We will also need to meet product and labeling standards for both the U.K.

and we have already begun to introduce these changes gradually.

may also set its own trade policies with countries such as the United States, Australia and New Zealand that currently do not have free trade agreements with the E.U.

Cross-border trade between the U.K.

will be subject to new customs regulations, documentation and reviews.

To date, we have not experienced significant delays at U.K.-E.U.

border crossings, however, we anticipate increased shipping costs and near-term delays because of the need for ongoing customs inspections and related procedures.

Our supply chain in this market relies on imports of raw and packaging materials as well as finished goods.

Volatility in foreign currencies and other markets may also arise as the U.K.

work though the new trade arrangements.

Once the new rules are formalized, there could be other near- or long-term negative impacts.

We have been taking protective measures to limit disruptions to our supply chain and sales to limit potential negative impacts on our results of operations, financial condition and cash flows.

We continue to increase our resources in customer service & logistics as well as in our factories and on our customs support teams.

We are adapting our systems and processes for new and increased customs transactions.

We continue to enhance resilience plans to aid in dealing with anticipated border delays.

We are working to address new regulatory requirements such as packaging changes.

Also, we continue to closely monitor and manage our inventory levels of imported raw materials, packaging and finished goods in the U.K.

Any disagreements on trade terms or supply chain or distribution delays or other disruptions could negatively affect our U.K.

In 2020, we generated 9.0% of our net revenues in the U.K.

Argentina – as further discussed in Note 1, Summary of Significant Accounting Policies – Currency Translation and Highly Inflationary Accounting, on July 1, 2018, we began to apply highly inflationary accounting for our Argentinean subsidiaries.

As a result, we recorded a remeasurement gain of $4 million in 2019 and a remeasurement loss of $11 million in 2018 within selling, general and administrative expenses related to the revaluation of the Argentinean peso denominated net monetary position over these periods.

As a result, we recorded a remeasurement loss of $9 million in 2020, a remeasurement gain of $4 million in 2019 and a remeasurement loss of $11 million in 2018 within selling, general and administrative expenses related to the revaluation of the Argentinean peso denominated net monetary position over these periods.

The mix of monetary assets and liabilities and the exchange rate to convert Argentinean pesos to U.S.

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We continue to use low-cost, short- and long-term debt to finance our ongoing working capital, capital expenditures and other investments, dividends and share repurchases.

Our weighted-average interest rate on our total debt as of December 31, 2019 was 2.2% , down from 2.3% as of December 31, 2018 and up from 2.1% as of December 31, 2017 , primarily reflecting changes in our interest rates on commercial paper borrowings over these periods.

We continued to secure low-cost short and long-term debt during 2020.

We continue to use interest rate swaps and other financial instruments to manage our exposure to interest rate and cash flow variability, protect the value of our existing currency assets and liabilities and protect the value of our debt.

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Refer to Note 9, Debt and Borrowing Arrangements , and Note 10, Financial Instruments , for additional information on our debt and derivative activity.

Cybersecurity Risks – In 2017, the malware incident impacted our operating systems and results.

We continue to devote focused resources to network security, backup and disaster recovery, enhanced training and other security measures to protect our systems and data.

Cybersecurity Risks – We continue to devote focused resources to network security, backup and disaster recovery, enhanced training and other security measures to protect our systems and data.

We also focus on enhancing the monitoring and detection of threats in our environment, including but not limited to the manufacturing environment and operational technologies, as well as adjusting information security controls based on updated threats.

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For the Years Ended December 31,

See Note 2020 2019 2018

(in millions, except percentages)

Simplify to Grow Program

Simplify to Grow Program Note 8

Restructuring Charges $ (156) $ (176) $ (316)

Implementation Charges (207) (272) (315)

Intangible asset impairment charges

Mark-to-market gains/(losses) from derivatives (1)

Malware incident incremental expenses

Acquisition and divestiture-related costs

Intangible asset impairment charges Note 6 (144) (57) (68)

Mark-to-market gains from derivatives (1)

Note 10 19 90 142

Acquisition and divestiture-related costs Note 2

Acquisition integration costs (4) — (3)

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Divestiture-related costs (4) (6) 1

Net gain on divestitures

Net gain on divestiture — 44 —

Costs associated with JDE Peet's transaction Note 7 (48) — —

Remeasurement of net monetary position (9) 4 (11)

Impact from pension participation changes (1)

Note 11 (11) 29 (429)

Impact from resolution of tax matters (1)

Note 14 48 (85) 11

CEO transition remuneration (2)

(Loss)/gain related to interest rate swaps

Loss on debt extinguishment

Swiss tax reform net impacts

tax reform discrete net tax impacts

Net (loss)/gain on equity method

(Loss)/gain related to interest rate swaps Note 9 & 10 (103) (111) 10

Loss on debt extinguishment Note 9 (185) — (140)

Swiss tax reform net impacts Note 16 — 767 —

tax reform discrete net tax impacts Note 16 — (5) (19)

Gain/(loss) on equity method

investment transactions (3)

Equity method investee acquisition-related

and other (charges)/benefits (4)

Effective tax rate

Note 7 989 (2) 778

Equity method investee items (4)

Effective tax rate Note 16 36.2 % 0.1 % 27.2 %

(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.

The net gain/(loss) on equity method investment transactions is recorded outside pre-tax operating results on the consolidated statement of earnings.

Amount for 2018 primarily relates to a deferred tax benefit Keurig recorded as a result of U.S.

(3) Gain/(loss) on equity method investment transactions is recorded outside pre-tax operating results on the 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.

Consolidated Results of Operations

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For the Years Ended

2020 2019 $ change % change

(in millions, except per share data)

Net revenues $ 26,581 $ 25,868 $ 713 2.8 %

Operating income 3,853 3,843 10 0.3 %

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Mondelēz International

3,555 3,929 (374) (9.5) %

Diluted earnings per share attributable to

Mondelēz International

Net Revenues – Net revenues decreased $70 million ( 0.3% ) to $25,868 million in 2019 , and Organic Net Revenue (1) increased $1,067 million ( 4.1% ) to $26,879 million .

Emerging markets net revenues increased 0.2% , including an unfavorable currency impact, and emerging markets Organic Net Revenue increased 7.7% .

2.47 2.69 (0.22) (8.2) %

Net Revenues – Net revenues increased $713 million (2.8%) to $26,581 million in 2020, and Organic Net Revenue increased $960 million (3.7%) to $26,773 million.

Developed markets net revenue increased 8.0% and developed markets Organic Net Revenue increased 4.5%.

Emerging markets net revenues decreased 6.0%, including an unfavorable currency impact, and emerging markets Organic Net Revenue increased 2.3%.

The underlying changes in net revenues and Organic Net Revenue are detailed below:

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Add back the following items affecting comparability:

Unfavorable currency

Impact of divestiture

Impact of acquisitions

Unfavorable currency 2.4 pp

Impact of divestiture 0.2 pp

Impact of acquisitions (1.7) pp

Total change in Organic Net Revenue (1)

Higher net pricing

Favorable volume/mix

Higher net pricing 1.9 pp

Favorable volume/mix 1.8 pp

(1) Please see the Non-GAAP Financial Measures section at the end of this item.

Net revenue decrease of 0.3% was driven by unfavorable currency and the impact of a divestiture, partially offset by our underlying Organic Net Revenue growth of 4.1% and the impact of acquisitions.

Unfavorable currency impacts decreased net revenues by $1,154 million, due primarily to the strength of the U.S.

dollar relative to most currencies, including the Argentinean peso, euro, Brazilian real, British pound sterling, Australian dollar, Chinese yuan, Indian rupee, Turkish lira and South African rand.

The impact of the divestiture of most of our cheese business in the Middle East and Africa on May 28, 2019 resulted in a year-over-year decline in net revenues of $71 million.

Our underlying Organic Net Revenue growth was driven by higher net pricing and favorable volume/mix.

Net pricing was up, which includes the benefit of carryover pricing from 2018 as well as the effects of input cost-driven pricing actions taken during 2019.

Higher net pricing was reflected in Latin America, North America and AMEA as net pricing in Europe was flat.

Favorable volume/mix was reflected in Europe and AMEA, partially offset by unfavorable volume/mix in Latin America and North America.

The July 16, 2019 acquisition of a majority interest in Perfect Snacks added net revenues of $53 million and the June 7, 2018 acquisition of Tate’s Bake Shop added incremental net revenues of $35 million in 2019.

Refer to Note 2, Divestitures and Acquisitions , for more information.

Operating Income – Operating income increased $531 million ( 16.0% ) to $3,843 million in 2019, Adjusted Operating Income (1) decreased $38 million ( 0.9% ) to $4,264 million and Adjusted Operating Income on a constant currency basis (1) increased $189 million ( 4.4% ) to $4,491 million due to the following:

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 in the first half of the year subsided in the second half of the year, 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.

Net revenue increase of 2.8% was driven by our underlying Organic Net Revenue growth of 3.7% and the impact of acquisitions, mostly offset by unfavorable currency and the impact of a prior-year divestiture.

Organic Net Revenue growth was driven by higher net pricing and favorable volume/mix.

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 2020.

Favorable volume/mix in North America and Europe, partially offset by unfavorable volume/mix in Latin America and AMEA, included strong volume gains tempered by unfavorable mix reflecting shifts in consumer purchases in response to the COVID-19 outbreak.

The April 1, 2020 acquisition of Give & Go added incremental net revenues of $390 million and the July 16, 2019 acquisition of a majority interest in Perfect Snacks added incremental net revenues of $55 million in 2020.

Unfavorable currency impacts decreased net revenues by $637

million, due primarily to the strength of the U.S.

dollar relative to most currencies, including the Brazilian real, Argentinean peso, Russian ruble, Mexican peso, Indian rupee, South African rand and Turkish lira, partially offset by the strength of several currencies relative to the U.S.

dollar, including the euro, Philippine peso, British pound sterling, Egyptian pound and Swedish krona.

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 more information.

Operating Income – Operating income increased $10 million (0.3%) to $3,853 million in 2020, Adjusted Operating Income increased $137 million (3.2%) to $4,401 million and Adjusted Operating Income on a constant currency basis increased $196 million (4.6%) to $4,460 million due to the following:

Income Change

(in millions)

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Mark-to-market gains from derivatives (4)

Acquisition integration costs (5)

Acquisition-related costs (5)

Divestiture-related costs (5)

Operating income from divestitures (6)

Operating income from divestiture (5)

Net gain on divestiture (5)

Remeasurement of net monetary position (6)

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CEO transition remuneration (1)

Swiss tax reform impact (9)

Adjusted Operating Income (1) for the Year Ended December 31, 2019

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Mark-to-market gains from derivatives (4)

Acquisition integration costs (5)

Acquisition-related costs (5)

Divestiture-related costs (5)

Operating income from divestiture (6)

Net gain on divestiture (6)

Costs associated with JDE Peet's transaction (10)

Remeasurement of net monetary position (6)

Impact from pension participation changes (8)

Impact from resolution of tax matters (8)

CEO transition remuneration (1)

Swiss tax reform impact (10)

Operating Income for the Year Ended December 31, 2020

$ 3,853 0.3 %

(1) Refer to the Non-GAAP Financial Measures section at the end of this item.

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(4) Refer to Note 10, Financial Instruments , Note 18, 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.

Refer to our Annual Report on Form 10-K for the year ended December 31, 2018 for more information on the acquisition of a biscuit business in Vietnam.

(6) Refer to Note 2, Divestitures and Acquisitions , for more information on the July 16, 2019 acquisition of a majority interest in Perfect Snacks, the May 28, 2019 divestiture of most of our cheese business in the Middle East and Africa and the June 7, 2018 acquisition of Tate's Bake Shop.

(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, Summary of Significant Accounting Policies – Currency Translation and Highly Inflationary Accounting , for information on our application of highly inflationary accounting for Argentina.

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(9) Refer to Note 16, Income Taxes , for more information on Swiss tax reform.

During 2019, we realized higher net pricing, which was partially offset by increased input costs.

Higher net pricing, which included the carryover impact of pricing actions taken in 2018 as well as the effects of input cost-driven pricing actions taken during 2019, was reflected in Latin America, North America and AMEA as net pricing in Europe was flat.

The increase in input costs was driven by higher raw material costs, partially offset by lower manufacturing costs due to productivity efforts.

Higher raw material costs were in part due to higher currency exchange transaction costs on imported materials, as well as higher packaging, energy, dairy, grains, cocoa and oils costs, partially offset by lower costs for sugar and nuts.

Favorable volume/mix was driven by Europe and AMEA, which was partially offset by unfavorable volume/mix in Latin America and North America.

Total selling, general and administrative expenses decreased $339 million from 2018, due to a number of factors noted in the table above, including in part, the lapping of the prior-year impact from pension participation changes, favorable currency impact, the benefit from current-year pension participation changes, favorable change in remeasurement on net monetary position in Argentina (remeasurement gain in 2019 as compared to a remeasurement loss in 2018), the lapping of a prior-year expense from the resolution of a tax matter, lower CEO transition remuneration and lower acquisition-related costs.

These decreases were partially offset by the expenses from the resolution of tax matters in 2019, higher implementation costs incurred for the Simplify to Grow program, the impact of acquisitions, the lapping of a benefit from a prior-year value-added tax (“VAT”) related settlement, a VAT cost settlement in 2019 and higher divestiture-related costs.

(10) Refer to Note 7, Equity Method Investments , for more information on the JDE Peet's transaction.

During 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 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, sugar, energy, packaging, nuts, grains and other ingredients costs, partially offset by lower costs for oils.

Total selling, general and administrative expenses decreased $38 million from 2019, due to a number of factors noted in the table above, including in part, a favorable currency impact related to expenses, favorable change from the resolution of tax matters (a benefit in 2020 as compared to an expense in 2019), lower implementation costs incurred for the Simplify to Grow Program, lapping prior-year value-added tax (“VAT”) related settlements, lapping prior-year CEO transition remuneration and lapping the prior-year divestiture.

These decreases were partially offset by the impact of acquisitions, costs associated with the JDE Peet's transaction, lapping the benefit from prior-year pension participation changes, unfavorable change in remeasurement of net monetary position in Argentina (remeasurement loss in 2020 as compared to a remeasurement gain in 2019) and higher acquisition-related costs.

Excluding these factors, selling, general and administrative expenses increased $77 million from 2019.

The increase was driven primarily by higher overheads reflecting route-to-market investments and higher advertising and consumer promotion costs.

We recorded an expense of $11 million from a VAT-related settlement in Latin America in 2019 and a benefit of $21 million from a VAT-related settlement in Latin America in 2018.

The increase was driven primarily by higher advertising and consumer promotion costs, partially offset by lower overhead spending net of incremental COVID-19 related costs.

We recorded an expense of $11 million from a VAT-related settlement in Latin America in 2019.

Unfavorable currency changes decreased operating income by $59 million due primarily to the strength of the U.S.

dollar relative to most currencies, including the euro, Argentinean peso, British pound sterling, Brazilian real, Australian dollar, Chinese yuan and Indian rupee.

Operating income margin increased from 12.8% in 2018 to 14.9% in 2019.

The increase in operating income margin was driven primarily by the lapping of the prior-year impact from pension participation changes, lower Simplify to Grow Program costs, a gain on divestiture, the benefit from current-year pension participation changes, the lapping of a prior-year expense from the resolution of a tax matter and lower CEO transition remuneration, partially offset by the expenses from the resolution of tax matters in 2019 and the year-over-year unfavorable change in mark-to-market gains/(losses) from currency and commodity hedging activities.

Adjusted Operating Income margin decreased from 16.7% in 2018 to 16.5% in 2019.

The decrease in Adjusted Operating Income margin was driven primarily by higher raw material costs, mostly offset by higher pricing and lower manufacturing costs.

Net Earnings and Earnings per Share Attributable to Mondelēz International – Net earnings attributable to Mondelēz International of $3,870 million increased by $489 million ( 14.5% ) in 2019.

Diluted EPS attributable to Mondelēz International was $2.65 in 2019, up $0.37 ( 16.2% ) from 2018.

dollar relative to most currencies, including the Brazilian real, Russian ruble, Indian rupee, Swiss franc, South African rand and Turkish Lira, partially offset by the strength of several currencies relative to the U.S.

dollar, including the euro, Egyptian pound, Philippine peso, British pound sterling and Swedish krona.

Operating income margin decreased from 14.9% in 2019 to 14.5% in 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, costs associated with the JDE Peet's transaction, lapping the prior-year gain on a divestiture and lapping the benefit from prior-year pension participation changes, partially offset by the favorable impact from the resolution of tax matters and lower costs for the Simplify to Grow Program.

Adjusted Operating Income margin increased from 16.5% in 2019 to 16.6% in 2020.

The increase in Adjusted Operating Income margin was driven primarily by higher pricing, lower manufacturing costs reflecting productivity net of incremental COVD-19 costs, and selling, general and administrative cost leverage, mostly offset by higher raw material costs.

Net Earnings and Earnings per Share Attributable to Mondelēz International – Net earnings attributable to Mondelēz International of $3,555 million decreased by $374 million (9.5%) in 2020.

Diluted EPS attributable to Mondelēz International was $2.47 in 2020, down $0.22 (8.2%) from 2019.

Adjusted EPS was $2.59 in 2020, up $0.13 (5.3%) from 2019.

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Mark-to-market gains from derivatives (2)

Acquisition integration costs (2)

Acquisition-related costs (2)

Divestiture-related costs (2)

Net earnings from divestitures (2) (3)

Remeasurement of net monetary position (2)

Net gain on divestiture (2)

Impact from pension participation changes (2)

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CEO transition remuneration (2)

Net gain related to interest rate swaps (3)

Loss on debt extinguishment (4)

tax reform discrete net tax expense (5)

Gain on equity method investment transaction (6)

Equity method investee acquisition-related and other charges/(benefits) (7)

Loss related to interest rate swaps (4)

Swiss tax reform net impacts (5)

Loss on equity method investment transaction (6)

Equity method investee items (7)

Adjusted EPS (1) for the Year Ended December 31, 2019

Increase in operations

Increase in equity method investment net earnings

Decrease in equity method investment net earnings (0.01)

VAT-related settlements

Changes in interest and other expense, net (8)

Changes in income taxes (9)

Impact from acquisitions (2)

Changes in benefit plan non-service income

Changes in shares outstanding (8)

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Mark-to-market gains from derivatives (2)

Divestiture-related costs (2)

Net earnings from divestiture (2)

Net gain on divestiture (2)

Acquisition-related costs (2)

Net earnings from divestitures (2) (3)

Costs associated with JDE Peet's transaction (2)

Remeasurement of net monetary position (2)

Impact from pension participation changes (2)

Impact from resolution of tax matters (2)

CEO transition remuneration (2)

Loss related to interest rate swaps (4)

Swiss tax reform net impacts (5)

tax reform discrete net tax expense (5)

Net loss on equity method investment transactions (6)

Equity method investee acquisition-related and other (charges)/benefits (7)

Loss on debt extinguishment (9)

Gain on equity method investment transactions (6)

Equity method investee items (7)

Diluted EPS Attributable to Mondelēz International for the Year Ended December 31, 2020

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(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, 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 10, Financial Instruments , for information on interest rate swaps no longer designated as cash flow hedges.

Refer to Note 9, Debt and Borrowing Arrangements , for more information on losses on debt extinguishment.

Refer to Note 16, Income Taxes , for more information on the impacts of U.S.

and Swiss tax reform.

Refer to Note 7, Equity Method Investments , for more information on the gain and net loss on equity method investment transactions.

Includes our proportionate share of unusual or infrequent items, such as acquisition and divestiture-related costs, restructuring program costs and discrete U.S.

tax reform impacts recorded by our JDE and Keurig equity method investees.

Excludes the currency impact on interest expense related to our non-U.S.

dollar-denominated debt which is included in currency translation.

Refer to Note 16, Income Taxes , for more information on the items affecting income taxes.

(5) Refer to Note 16, Income Taxes , for more information on the impacts of Swiss and U.S.

(6) Refer to Note 7, Equity Method Investments, for more information on gains and losses 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) Refer to Note 12, Stock Plans , for more information on our equity compensation programs and share repurchase program and Note 17, Earnings per Share , for earnings per share weighted-average share information.

(9) Refer to Note 9, Debt and Borrowing Arrangements , for more information on losses on debt extinguishment.

2019 compared with 2018

For the Years Ended

2019 2018 $ change % change

(in millions, except per share data)

Net revenues $ 25,868 $ 25,938 $ (70) (0.3) %

Operating income 3,843 3,312 531 16.0 %

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Mondelēz International 2.69 2.23 0.46 20.6 %

Net Revenues – Net revenues increased $42 million ( 0.2% ) to $25,938 million in 2018 , and Organic Net Revenue (1) increased $609 million ( 2.4% ) to $26,103 million .

Emerging markets net revenues decreased 0.5%, including an unfavorable currency impact, and emerging markets Organic Net Revenue increased 5.9%.

Net Revenues – Net revenues decreased $70 million (0.3%) to $25,868 million in 2019, and Organic Net Revenue increased $1,067 million (4.1%) to $26,879 million.

Emerging markets net revenues increased 0.2%, including an unfavorable currency impact, and emerging markets Organic Net Revenue increased 7.7%.

The underlying changes in net revenues and Organic Net Revenue are detailed below:

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Add back the following items affecting comparability:

Unfavorable currency

Impact of acquisition

Impact of divestitures

Unfavorable currency 4.5 pp

Impact of divestiture 0.3 pp

Impact of acquisitions (0.4) pp

Total change in Organic Net Revenue (1)

Higher net pricing

Favorable volume/mix

Higher net pricing 2.2 pp

Favorable volume/mix 1.9 pp

(1) Please see the Non-GAAP Financial Measures section at the end of this item.

Net revenue increase of 0.2% was driven by our underlying Organic Net Revenue growth of 2.4% and the impact of an acquisition, mostly offset by unfavorable currency and the impact of divestitures.

Net revenue decrease of 0.3% was driven by unfavorable currency and the impact of a divestiture, partially offset by our underlying Organic Net Revenue growth of 4.1% and the impact of acquisitions.

Unfavorable currency impacts decreased net revenues by $1,154 million, due primarily to the strength of the U.S.

dollar relative to most currencies, including the Argentinean peso, euro, Brazilian real, British pound sterling, Australian dollar, Chinese yuan, Indian rupee, Turkish lira and South African rand.

The impact of the divestiture of most of our cheese business in the Middle East and Africa on May 28, 2019 resulted in a year-over-year decline in net revenues of $71 million.

Our underlying Organic Net Revenue growth was driven by higher net pricing and favorable volume/mix.

Net pricing was up, which includes the benefit of carryover pricing from 2018 as well as the effects of input cost-driven pricing actions taken during 2019.

Higher net pricing was reflected in Latin America, AMEA and North America, partially offset by lower net pricing in Europe.

Higher net pricing was reflected in Latin America, North America and AMEA as net pricing in Europe was flat.

Favorable volume/mix was reflected in Europe and AMEA, partially offset by unfavorable volume/mix in Latin America and North America.

The June 7, 2018 acquisition of a U.S.

premium biscuit company, Tate’s Bake Shop, added net revenues of $52 million in 2018.

Unfavorable currency impacts decreased net revenues by $343 million, due primarily to the strength of the U.S.

dollar relative to several other currencies, including the Argentinean peso, Brazilian real, Russian ruble, Indian rupee and Turkish lira, partially offset by the strength of several currencies relative to the U.S.

dollar, including the euro, British pound sterling and Chinese yuan.

Businesses divested in 2019 and 2017 resulted in a decline in net revenues of $276 million.

Refer to Note 2, Divestitures and Acquisitions , for more information.

Operating Income – Operating income decreased $150 million (4.3%) to $3,312 million in 2018, Adjusted Operating Income (1) increased $214 million (5.2%) to $4,302 million and Adjusted Operating Income on a constant currency basis (1) increased $269 million (6.6%) to $4,357 million due to the following:

Refer to Note 2, Acquisitions and Divestitures , for more information.

Operating Income – Operating income increased $531 million (16.0%) to $3,843 million in 2019.

Adjusted Operating Income decreased $38 million (0.9%) to $4,264 million and Adjusted Operating Income on a constant currency basis increased $189 million (4.4%) to $4,491 million due to the following:

Income Change

(in millions)

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Intangible asset impairment charges (3)

Mark-to-market losses from derivatives (4)

Malware incident incremental expenses

Mark-to-market gains from derivatives (4)

Acquisition integration costs (5)

Acquisition-related costs (6)

Divestiture-related costs (6)

Operating income from divestitures (6)

Net gain on divestitures (6)

Operating income from divestiture (6)

Remeasurement of net monetary position (7)

Impact from pension participation changes (8)

Impact from resolution of tax matters (9)

CEO transition remuneration (1)

Other/rounding

Adjusted Operating Income (1) for the Year Ended December 31, 2018

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Higher selling, general and administrative expenses

VAT-related settlement in 2018

Property insurance recovery in 2017

VAT-related settlement (32)

Impact from acquisition (6)

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Mark-to-market gains from derivatives (4)

Acquisition integration costs (5)

Acquisition-related costs (6)

Divestiture-related costs (6)

Operating income from divestitures (6)

Operating income from divestiture (6)

Net gain on divestiture (6)

Remeasurement of net monetary position (7)

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CEO transition remuneration (1)

Swiss tax reform impact (10)

Operating Income for the Year Ended December 31, 2019

$ 3,843 16.0 %

(1) Refer to the Non-GAAP Financial Measures section at the end of this item.

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(5) Refer to our Annual Report on Form 10-K for the year ended December 31, 2018 for more information on the acquisition of a biscuit business in Vietnam.

Refer to Note 2, Divestitures and Acquisitions , for more information on the June 7, 2018 acquisition of Tate's Bake Shop and 2019 and 2017 divestitures.

Refer to Note 14, Commitments and Contingencies – Tax Matters , for more information.

(6) Refer to Note 2, Acquisitions and Divestitures , for more information on the July 16, 2019 acquisition of a majority interest in Perfect Snacks, the May 28, 2019 divestiture of most of our cheese business in the Middle East and Africa and the June 7, 2018 acquisition of Tate's Bake Shop.

(7) Refer to Note 1, Summary of Significant Accounting Policies – Currency Translation and Highly Inflationary Accounting , for information on our application of highly inflationary accounting for Argentina.

(8) Refer to Note 11, Benefit Plans , for more information.

(9) Refer to Note 14, Commitments and Contingencies – Tax Matters , for more information.

(10) Refer to Note 16, Income Taxes , for more information on Swiss tax reform.

During 2019, we realized higher net pricing, which was partially offset by increased input costs.

Higher net pricing, which included the carryover impact of pricing actions taken in 2017 as well as the effects of input cost-driven pricing actions taken during 2018, was reflected across all regions except Europe.

The increase in input costs was driven by higher raw material costs, mostly offset by lower manufacturing costs due to productivity efforts.

Higher raw material costs were primarily due to higher currency exchange transaction costs on imported materials, as well as higher packaging, dairy and energy, partially offset primarily by lower cocoa costs.

Favorable volume/mix was driven by Europe and AMEA, which was partially offset by unfavorable volume/mix in North America and Latin America.

Total selling, general and administrative expenses increased $537 million from 2017, due to a number of factors noted in the table above, including in part, the impact from pension participation changes, lapping of prior-year benefits from the resolution of tax matters, lapping of a prior-year property insurance recovery, acquisition-related costs, remeasurement of net monetary position in Argentina, the impact of an acquisition and higher CEO transition remuneration.

The increases were partially offset by favorable currency impact, lower implementation costs incurred for the Simplify to Grow Program, lower divestiture-related costs, the lapping of prior-year malware incident incremental costs, a VAT related settlement in 2018, the impact of divestitures and the net benefit from the resolution of tax matters in 2018.

The increase in input costs was driven by higher raw material costs, partially offset by lower manufacturing costs due to productivity efforts.

Favorable volume/mix was driven by Europe and AMEA, which was partially offset by unfavorable volume/mix in Latin America and North America.

Total selling, general and administrative expenses decreased $339 million from 2018, due to a number of factors noted in the table above, including in part, the lapping of the prior-year impact from pension participation changes, favorable currency impact, the benefit from current-year pension participation changes, favorable change in remeasurement of net monetary position in Argentina (remeasurement gain in 2019 as compared to a remeasurement loss in 2018), the lapping of a prior-year expense from the resolution of a tax matter, lower CEO transition remuneration and lower acquisition-related costs.

These decreases were partially offset by the expenses from the resolution of tax matters in 2019, higher implementation costs incurred for the Simplify to Grow program, the impact of acquisitions, the lapping of a benefit from a prior-year VAT-related settlement, a VAT cost settlement in 2019 and higher divestiture-related costs.

Excluding these factors, selling, general and administrative expenses increased $173 million from 2018.

The increase was driven by the year-over year net unfavorable change in miscellaneous other income and expense items within selling, general and administrative expenses and higher overhead costs, which more than offset lower advertising and consumer promotion costs.

We recorded a benefit of $21 million from a VAT-related settlement in Latin America in 2018.

We recorded a benefit of $27 million from an insurance recovery in AMEA in 2017.

The increase was driven primarily by higher overheads reflecting route-to-market investments and higher advertising and consumer promotion costs.

We recorded an expense of $11 million from a VAT-related settlement in Latin America in 2019 and a benefit of $21 million from a VAT-related settlement in Latin America in 2018.

Unfavorable currency changes decreased operating income by $227 million due primarily to the strength of the U.S.

dollar relative to several currencies, including the Brazilian real, Argentinean peso, Russian ruble and Turkish lira, partially offset by the strength of several currencies relative to the U.S.

dollar, including the euro and British pound sterling.

Operating income margin decreased from 13.4% in 2017 to 12.8% in 2018.

The decrease in operating income margin was driven by the impact from pension participation changes, the lapping of prior-year benefits from the resolution of tax matters, the lapping of a prior-year gain on divestiture and higher CEO transition remuneration.

These unfavorable items were partially offset by the year-over-year favorable change in mark-to-market gains/(losses) from currency and commodity hedging activities, lower Simplify to Grow Program costs, an increase in our Adjusted Operating Income margin, the lapping of prior-year malware incident incremental costs, lower divestiture-related costs and lower intangible asset impairment charges.

Adjusted Operating Income margin increased from 16.0% in 2017 to 16.7% in 2018.

The increase in Adjusted Operating Income margin was driven primarily by higher net pricing, lower manufacturing costs due to continued cost reduction efforts and lower advertising and consumer promotion costs, partially offset by higher raw material costs.

dollar relative to most currencies, including the euro, Argentinean peso, British pound sterling, Brazilian real, Australian dollar, Chinese yuan and Indian rupee.

Operating income margin increased from 12.8% in 2018 to 14.9% in 2019.

Adjusted Operating Income margin decreased from 16.7% in 2018 to 16.5% in 2019.

The decrease in Adjusted Operating Income margin was driven primarily by higher raw material costs, mostly offset by higher pricing and lower manufacturing costs.

Net Earnings and Earnings per Share Attributable to Mondelēz International – Net earnings attributable to Mondelēz International of $3,929 million increased by $612 million (18.5%) in 2019.

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Intangible asset impairment charges (2)

Mark-to-market losses from derivatives (2)

Malware incident incremental expenses

Acquisition integration costs (2)

Divestiture-related costs (2)

Mark-to-market gains from derivatives (2)

Acquisition-related costs (2)

Net earnings from divestitures (2) (3)

Net gain on divestitures (2)

Remeasurement of net monetary position (2)

Impact from pension participation changes (2)

Impact from resolution of tax matters (2)

CEO transition remuneration (2)

tax reform discrete net tax benefit (3)

Gain related to interest rate swaps (4)

Loss on debt extinguishment (5)

tax reform discrete net tax expense (6)

Gain on equity method investment transaction (7)

Equity method investee acquisition-related and other charges/(benefits) (5)

Equity method investee items (8)

Adjusted EPS (1) for the Year Ended December 31, 2018

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Increase in equity method investment net earnings

VAT-related settlements in 2018

Property insurance recovery in 2017

Impact from acquisition (2)

VAT-related settlements (0.01)

Changes in interest and other expense, net (9)

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Mark-to-market gains from derivatives (2)

Acquisition integration costs (2)

Acquisition-related costs (2)

Divestiture-related costs (2)

Net earnings from divestitures (2) (3)

Remeasurement of net monetary position (2)

Net gain on divestiture (2)

Impact from pension participation changes (2)

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CEO transition remuneration (2)

Net gain related to interest rate swaps (9)

Loss on debt extinguishment (10)

tax reform discrete net tax expense (3)

Gain on equity method investment transaction (4)

Equity method investee acquisition-related and other (charges)/benefits (5)

Loss related to interest rate swaps (4)

Swiss tax reform net impacts (6)

Loss on equity method investment transactions (7)

Equity method investee items (8)

Diluted EPS Attributable to Mondelēz International for the Year Ended December 31, 2019

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(2) See the Operating Income table above and the related footnotes for more information.

Refer to Note 16, Income Taxes , for more information on the impact of the U.S.

Refer to Note 7, Equity Method Investments , for more information on the KDP transaction in 2018 and the 2017 sale of an interest in one of our equity method investments.

Includes our proportionate share of unusual or infrequent items, such as acquisition and divestiture-related costs, restructuring program costs and discrete U.S.

tax reform impacts recorded by our JDE and Keurig equity method investees.

(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.

(4) Refer to Note 10, Financial Instruments , for information on interest rate swaps no longer designated as cash flow hedges.

(5) Refer to Note 9, Debt and Borrowing Arrangements , for more information on losses on debt extinguishment.

(6) Refer to Note 16, Income Taxes , for more information on the impacts of U.S.

and Swiss tax reform.

(7) Refer to Note 7, Equity Method Investments, for more information on gains and losses on equity method investment transactions.

(8) 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.

(9) Excludes the currency impact on interest expense related to our non-U.S.

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(11) Refer to Note 12, Stock Plans , for more information on our equity compensation programs and share repurchase program and Note 17, Earnings per Share , for earnings per share weighted-average share information.

Refer to Note 10, Financial Instruments , for information on interest rate swaps no longer designated as cash flow hedges.

(10) Refer to Note 9, Debt and Borrowing Arrangements , for more information on losses on debt extinguishment.

Results of Operations by Operating Segment

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For the Years Ended December 31,

2020 2019 2018

(in millions)

1 unchanged sentence

Latin America

$ 2,477 $ 3,018 $ 3,202

5,740 5,770 5,729

10,207 9,972 10,122

North America

8,157 7,108 6,885

Net revenues $ 26,581 $ 25,868 $ 25,938

For the Years Ended December 31,

2020 2019 2018

(in millions)

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Latin America $ 189 $ 341 $ 410

AMEA 821 691 702

Europe 1,775 1,732 1,734

North America 1,587 1,451 849

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General corporate expenses (326) (330) (335)

Amortization of intangibles

Net gains on divestitures

Amortization of intangible assets (194) (174) (176)

Net gain on divestiture — 44 —

Acquisition-related costs (15) (3) (13)

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For the Years Ended

2020 2019 $ change % change

(in millions)

Net revenues $ 2,477 $ 3,018 $ (541) (17.9) %

Segment operating income 189 341 (152) (44.6) %

For the Years Ended

2019 2018 $ change % change

(in millions)

Net revenues $ 3,018 $ 3,202 $ (184) (5.7) %

Segment operating income 341 410 (69) (16.8) %

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Unfavorable currency impacts were due primarily to the strength of the U.S.

dollar relative to most currencies in the region including the Argentinean peso and Brazilian real.

Unfavorable volume/mix was due to the impact of pricing-related elasticity, and was driven by declines in refreshment beverages, candy, cheese & grocery and chocolate, partially offset by gains in biscuits and gum.

dollar relative to most currencies in the region including the Brazilian real, Argentinean 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 and candy, partially offset by gains in cheese & grocery, chocolate, refreshment beverages and biscuits.

Higher net pricing was reflected across all categories, driven primarily by Argentina, Brazil and Mexico.

Segment operating income decreased $69 million ( 16.8% ), primarily due to higher raw material costs, unfavorable currency, unfavorable volume/mix, the lapping of the 2018 benefit from the resolution of a Brazilian indirect tax matter of $26 million, higher manufacturing costs and higher other selling, general and administrative expenses (including lapping the benefit from a VAT-related settlement in 2018 and the expense of a VAT-related settlement in 2019).

These unfavorable items were partially offset by higher net pricing, lower costs incurred for the Simplify to Grow Program, favorable change in remeasurement on net monetary position in Argentina (remeasurement gain in 2019 as compared to a remeasurement loss in 2018) and lower advertising and consumer promotion costs.

Segment operating income decreased $152 million (44.6%), 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 an unfavorable change in remeasurement of net monetary position in Argentina (remeasurement loss in 2020 as compared to a remeasurement gain in 2019).

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 higher benefits from the resolution of a tax matters.

2019 compared with 2018:

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Unfavorable currency impacts were due primarily to the strength of the U.S.

dollar relative to most currencies in the region including the Argentinean peso, Brazilian real and Mexican peso.

Unfavorable volume/mix was due primarily to the impact of pricing-related elasticity, as well as in part due to the negative impact of the Brazil trucking strike that occurred in the second quarter.

Unfavorable volume/mix was driven by declines in all categories except biscuits.

Higher net pricing was reflected across all categories, driven primarily by Argentina, Mexico and Brazil.

Segment operating income decreased $154 million ( 27.3% ), primarily due to lapping last year's benefit from the resolution of a Brazilian indirect tax matter of $153 million, higher raw material costs, unfavorable currency, higher other selling, general and administrative expenses (net of the benefit from a VAT-related settlement in 2018), unfavorable volume/mix and a loss from the remeasurement of the net monetary position in Argentina.

These unfavorable items were partially offset by higher net pricing, lower manufacturing costs, the 2018 benefit from the resolution of a Brazilian tax matter of $26 million, lower advertising and consumer promotion costs, lower costs incurred for the Simplify to Grow Program and the lapping of the 2017 intangible asset impairment charges.

dollar relative to most currencies in the region including the Argentinean peso and Brazilian real.

Higher net pricing was reflected across all categories, driven primarily by Argentina, Brazil and Mexico.

Segment operating income decreased $69 million (16.8%), primarily due to higher raw material costs, unfavorable currency, unfavorable volume/mix, the lapping of the 2018 benefit from the resolution of a Brazilian indirect tax matter of $26 million, higher manufacturing costs and higher other selling, general and administrative expenses (including lapping the benefit from a VAT-related settlement in 2018 and the expense of a VAT-related settlement in 2019).

These unfavorable items were partially offset by higher net pricing, lower costs incurred for the Simplify to Grow Program, favorable change in remeasurement of net monetary position in Argentina (remeasurement gain in 2019 as compared to a remeasurement loss in 2018) and lower advertising and consumer promotion costs.

For the Years Ended

2020 2019 $ change % change

(in millions)

Net revenues $ 5,740 $ 5,770 $ (30) (0.5) %

Segment operating income 821 691 130 18.8 %

For the Years Ended

2019 2018 $ change % change

(in millions)

Net revenues $ 5,770 $ 5,729 $ 41 0.7 %

Segment operating income 691 702 (11) (1.6) %

2020 compared with 2019:

Net revenues decreased $30 million (0.5%), due to unfavorable currency (1.3 pp), the impact of a divestiture (0.9 pp) and unfavorable volume/mix (0.6 pp), partially offset by higher net pricing (2.3 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 Pakistan rupee, partially offset by the strength of several currencies relative to the U.S.

dollar, including the Philippine peso, Egyptian pound, Japanese yen and Chinese yuan.

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, chocolate, candy and refreshment beverages, partially offset by gains in biscuits and cheese & grocery.

Higher net pricing was driven by chocolate, biscuits, refreshment beverages and cheese & grocery, partially offset by lower net pricing in candy and gum.

Segment operating income increased $130 million (18.8%), primarily due to higher net pricing, lapping prior-year expenses from the resolution of tax matters in India totaling $87 million, lower manufacturing costs (net of incremental COVID-19 related costs), lower other selling, general and administrative expenses, lower intangible asset impairment charges and lower costs incurred for the Simplify to Grow Program.

These favorable items were partially offset by higher raw material costs, unfavorable volume/mix, unfavorable currency and the impact of the prior-year divestiture.

2019 compared with 2018:

Net revenues increased $41 million (0.7%), due to favorable volume/mix (3.6 pp) and higher net pricing (1.7 pp), mostly offset by unfavorable currency (3.3 pp) and the impact of a divestiture (1.3 pp).

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These unfavorable items were partially offset by lower manufacturing costs, higher net pricing, lower costs incurred for the Simplify to Grow Program and favorable volume/mix.

2018 compared with 2017 :

Net revenues decreased $10 million ( 0.2% ), due to the impact of divestitures (2.6 pp) and unfavorable currency (1.3 pp), partially offset by favorable volume/mix (2.2 pp) and higher net pricing (1.5 pp).

The impact of divestitures related to most of our cheese business in the Middle East and Africa on May 28, 2019, the grocery & cheese business in Australia and New Zealand that was divested on July 4, 2017 and the confectionery business in Japan that was divested on December 28, 2017, and resulted in a year-over-year decline in net revenues of $139 million for 2018.

Unfavorable currency impacts were due primarily to the strength of the U.S.

dollar relative to several currencies in the region, including the Indian rupee, Australian dollar and Philippine peso, partially offset by the strength of several currencies in the region relative to the U.S.

dollar, including the Chinese yuan and Japanese yen.

Favorable volume/mix was driven by gains in chocolate and biscuits, including the shift of volume into the first quarter of 2018 due to the timing of Chinese New Year, partially offset by declines in refreshment beverages, cheese & grocery, gum and candy.

Higher net pricing was reflected across all categories except gum and candy.

Segment operating income increased $188 million ( 36.6% ), primarily due to higher net pricing, lower costs incurred for the Simplify to Grow Program, lower manufacturing costs, lower intangible asset impairment charges, lower advertising and consumer promotion costs and favorable volume/mix.

These favorable items were partially offset by higher raw material costs, the impact of divestitures, unfavorable currency and higher other selling, general and administrative expenses (net of prior-year property insurance recovery).

For the Years Ended

2020 2019 $ change % change

(in millions)

Net revenues $ 10,207 $ 9,972 $ 235 2.4 %

Segment operating income 1,775 1,732 43 2.5 %

For the Years Ended

2019 2018 $ change % change

(in millions)

Net revenues $ 9,972 $ 10,122 $ (150) (1.5) %

Segment operating income 1,732 1,734 (2) (0.1) %

2020 compared with 2019:

Net revenues increased $235 million (2.4%), due to favorable volume/mix (2.8 pp), partially offset by lower net pricing (0.3 pp) and unfavorable currency (0.1 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 candy and gum.

Lower net pricing was driven by biscuits and chocolate, partially offset by higher net pricing in cheese & grocery, candy, gum and refreshment beverages.

Unfavorable currency impacts reflected the strength of the U.S.

dollar relative to several currencies in the region, including the Russian ruble, Turkish lira, Norwegian krone and Ukrainian hryvnya mostly offset by the strength of several currencies in the region relative to the U.S.

dollar, primarily the euro, British pound sterling, Swedish krona and Swiss franc.

Segment operating income increased $43 million (2.5%), primarily due to favorable volume/mix, lower costs incurred for the Simplify to Grow Program and lower advertising and consumer promotion costs.

These favorable items were partially offset by higher raw material costs, lower net pricing, higher intangible asset impairment charges, higher other selling, general and administrative expenses and unfavorable currency.

2019 compared with 2018:

Net revenues decreased $150 million (1.5%), due to unfavorable currency (5.2 pp), partially offset by favorable volume/mix (3.7 pp), as net pricing was flat.

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These unfavorable items were mostly offset by favorable volume/mix, lower manufacturing costs and lower intangible asset impairment charges.

2018 compared with 2017 :

Net revenues increased $328 million ( 3.3% ), due to favorable volume/mix (3.1 pp) and favorable currency (2.3 pp), partially offset by the impact of divestitures (1.5 pp) and lower net pricing (0.6 pp).

Favorable volume/mix was driven by chocolate, biscuits and candy, partially offset by declines in cheese & grocery, gum and refreshment beverages.

Favorable currency impacts reflected the strength of several currencies relative to the U.S.

dollar, primarily the euro, British pound sterling, Polish zloty and Czech koruna, partially offset by the strength of the U.S.

dollar relative to several currencies, primarily the Russian ruble and Turkish lira.

The impact of divestitures, due to the sale of a confectionery business in France and the termination of certain Kraft Heinz Company-owned grocery brand licenses, resulted in a year-over-year decline in net revenues of $137 million for 2018.

Lower net pricing was driven by chocolate and biscuits, partially offset by higher net pricing in cheese & grocery, candy and gum.

Segment operating income increased $124 million ( 7.7% ), primarily due to favorable volume/mix, lower manufacturing costs, lower costs incurred for the Simplify to Grow Program, favorable currency, lower raw material costs, lower divestiture-related costs and the lapping of prior-year malware incident incremental costs.

These favorable items were partially offset by higher advertising and consumer promotion costs, higher other selling, general and administrative expenses, lower net pricing, lapping the prior-year benefit from the settlement of a Cadbury tax matter, higher intangible asset impairment charges and the impact from divestitures.

North America

For the Years Ended

2020 2019 $ change % change

(in millions)

Net revenues $ 8,157 $ 7,108 $ 1,049 14.8 %

Segment operating income 1,587 1,451 136 9.4 %

For the Years Ended

2019 2018 $ change % change

(in millions)

Net revenues $ 7,108 $ 6,885 $ 223 3.2 %

Segment operating income 1,451 849 602 70.9 %

2020 compared with 2019:

Net revenues increased $1,049 million (14.8%), due to favorable volume/mix (6.3 pp), the impact of acquisitions (6.3 pp) and higher net pricing (2.3 pp), partially offset by unfavorable currency (0.1 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, partially offset by declines in gum, chocolate and candy.

The April 1, 2020 acquisition of Give & Go added incremental net revenues of $390 million and the July 16, 2019 acquisition of a majority interest in Perfect Snacks added net revenues of $55 million in 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 $136 million (9.4%), primarily due to favorable volume/mix, higher net pricing and the impact of acquisitions.

These favorable items were partially offset by higher advertising and consumer promotion costs, intangible asset impairment charges, higher other selling, general and administrative expenses (including incremental COVID-19 related costs), higher raw material costs, lapping the benefit from prior-year pension participation changes and higher costs incurred for the Simplify to Grow Program.

2019 compared with 2018:

Net revenues increased $223 million (3.2%), due to higher net pricing (2.3 pp) and the impact of acquisitions (1.3 pp), partially offset by unfavorable currency (0.3 pp) and unfavorable volume/mix (0.1 pp).

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These favorable items were partially offset by higher raw material costs, higher other selling, general and administrative expenses and unfavorable volume/mix.

2018 compared with 2017 :

Net revenues increased $88 million ( 1.3% ), due to higher net pricing (1.1 pp) and the impact of an acquisition (0.8 pp), partially offset by unfavorable volume/mix (0.5 pp) and unfavorable currency (0.1 pp).

Higher net pricing was reflected in biscuits and gum, partially offset by lower net pricing in chocolate and candy.

The June 7, 2018 acquisition of a U.S.

premium biscuit company, Tate’s Bake Shop, added net revenues of $52 million in 2018.

Unfavorable volume/mix, which was net of the benefit from lapping last year's negative impact from the 2017 malware incident, reflected declines in gum and chocolate, partially offset by gains in biscuits and candy.

Unfavorable currency impact was due to the strength of the U.S.

dollar relative to the Canadian dollar.

Segment operating income decreased $295 million ( 25.8% ), primarily due to the impact from pension participation changes, higher manufacturing costs, unfavorable volume/mix, higher raw material costs and higher other selling, general and administrative expenses.

These unfavorable items were partially offset by lower advertising and consumer promotion costs, higher net pricing, the lapping of prior-year malware incident incremental costs, lower costs incurred for the Simplify to Grow Program, lower intangible asset impairment charges and the impact from the acquisition of Tate's Bake Shop.

Critical Accounting Estimates

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The following is a review of our most significant assumptions and estimates.

Goodwill and Non-Amortizable Intangible Assets :

We test goodwill and non-amortizable intangible assets for impairment on an annual basis on July 1.

Goodwill and Indefinite-Life Intangible Assets :

We test goodwill and indefinite-life intangible assets for impairment on an annual basis on July 1.

We assess goodwill impairment risk throughout the year by performing a qualitative review of entity-specific, industry, market and general economic factors affecting our goodwill reporting units.

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

Estimating the fair value of individual reporting units requires us to make assumptions and estimates regarding our future plans and industry and economic conditions, and our actual results and conditions may differ over time.

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

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

If the carrying value of a reporting unit’s net assets exceeds its fair value, we would recognize an impairment charge for the amount by which the carrying value exceeds the reporting unit fair value.

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

Annually, we assess non-amortizable intangible assets for impairment by performing a qualitative review and assessing events and circumstances that could affect the fair value or carrying value of the indefinite-lived intangible assets.

Annually, we assess indefinite-life intangible assets for impairment by performing a qualitative review and assessing events and circumstances that could affect the fair value or carrying value of these assets.

If significant potential impairment risk exists for a specific asset, we quantitatively test it for impairment by comparing its estimated fair value with its carrying value.

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If the carrying value of the asset exceeds its estimated fair value, the asset is impaired and its carrying value is reduced to the estimated fair value.

During our 2019 annual testing of non-amortizable intangible assets, we recorded $57 million of impairment charges in the third quarter of 2019 related to nine brands.

The impairments arose due to lower than expected brand earnings growth.

We recorded charges related to gum, chocolate, biscuits and candy brands of $39 million in Europe, $15 million in AMEA and $3 million in Latin America.

During 2020, we recorded $144 million of intangible asset impairment charges related to eight brands.

We recorded charges related to gum, chocolate, biscuits and candy brands of $83 million in North America, $53 million in Europe, $5 million in AMEA and $3 million in Latin America.

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

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

We also identified fourteen brands, including the nine impaired brands, with $635 million of aggregate book value as of December 31, 2019 that each had a fair value in excess of book value of 10% or less.

We believe our current plans for each of these brands will allow them to not be impaired, but if the brand earnings expectations are not met or specific valuation factors outside of our control, such as discount rates, change significantly, then a brand or brands could become impaired in the future.

We also identified nine brands, including the eight impaired brands, with $753 million of aggregate book value as of December 31, 2020 that each had a fair value in excess of book value of 10% or less.

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

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

In 2019, we recorded charges related to gum, chocolate, biscuits and candy brands of $39 million in Europe, $15 million in AMEA and $3 million in Latin America.

In 2018, we recorded charges related to gum, chocolate, biscuits and candy brands of $45 million in Europe, $14 million in North America and $9 million in AMEA.

In 2017, we recorded charges related to candy and gum brands of $52 million in AMEA, $11 million in Europe, $5 million in Latin America and $2 million in North America.

Refer to Note 6, Goodwill and Intangible Assets , for additional information.

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As of December 31, 2020

Fifty-Basis-Point

Plans Non-U.S.

Fifty-Basis-Point Fifty-Basis-Point

Increase Decrease Increase Decrease

(in millions)

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In 2017, the only individually significant multiemployer plan we contributed to was the Bakery and Confectionery Union and Industry International Pension Fund.

Our obligation to contribute to the Fund arose with respect to 8 collective bargaining agreements covering most of our employees represented by the BCTGM.

All of those collective bargaining agreements expired in 2016.

In 2018, we executed a complete withdrawal from the Fund and recorded a $429 million estimated withdrawal liability.

began making monthly payments during the third quarter of 2019.

withdrawal liability as of June 30, 2019.

We began making monthly payments during the third quarter of 2019.

As of December 31, 2020, the remaining discounted withdrawal liability was $375 million.

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The outcome of these final determinations could have a material effect on our provision for income taxes, net earnings or cash flows in the period in which the determination is made.

As a result of Swiss and U.S.

tax reform and the related SEC guidance, we finalized our accounting for the legislation based on guidance issued prior to 2019 year end.

See Note 16, Income Taxes , for further discussion of the amounts recorded related to Swiss and U.S.

See Note 16, Income Taxes , for further discussion of the impacts from Swiss and U.S.

tax reform in our financial statements, as well as additional information on our effective tax rate, current and deferred taxes, valuation allowances and unrecognized tax benefits.

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Liquidity and Capital Resources

We believe that cash from operations, our revolving credit facilities, short-term borrowings and our authorized long-term financing will provide sufficient liquidity for our working capital needs, planned capital expenditures and future payments of our U.S.

tax reform transition tax liability, contractual and benefit plan obligations, share repurchases and quarterly dividends.

We continue to utilize our commercial paper program, international credit lines and long-term debt issuances for our funding requirements.

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 pandemic, 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 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 Note 9, Debt and Borrowing Arrangements , for additional details.

In connection with COVID-19 and 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 reverses when the payments come due.

Some of these payments were made in the fourth quarter of 2020;

the remainder will come due in 2021 and 2022.

The benefits associated with the deferral of these payments were not material.

We expect to continue to utilize our commercial paper program and international credit lines as needed, 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.

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:

Operating activities provided net cash of $3,964 million in 2020, $3,965 million in 2019 and $3,948 million in 2018.

Net cash provided by operating activities was largely flat in 2020 relative to 2019 as higher cash tax payments in 2020 (primarily related to sales of KDP and JDE Peet's shares and the resolution of several indirect tax matters under a tax amnesty program in India) and the payment of costs associated with the JDE Peet's transaction in 2020 were largely offset by working capital improvements.

The increase in net cash provided by operating activities in 2019 relative to 2018 was due primarily to higher earnings, increased distributions from equity method investments and lower pension contributions, partially offset by increased working capital requirements including higher tax payments.

Cash flows from operating activities were higher in 2018 than 2017 primarily due to higher cash flow from working capital, higher net earnings as well as lower pension contributions.

Net Cash Used in Investing Activities:

Net cash used in investing activities was $960 million in 2019 , $1,224 million in 2018 and $301 million in 2017 .

Net Cash Provided by/Used in Investing Activities:

Net cash provided by investing activities was $500 million in 2020, compared to net cash used in investing activities of $960 million in 2019 and $1,224 million in 2018.

The increase in net cash provided by investing activities in 2020 relative to 2019 was primarily due 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.

The decrease in net cash used in investing activities in 2019 relative to 2018 was primarily due to less cash expended for acquisitions in 2019 than in 2018, lower capital expenditures and the 2019 cash proceeds from the divestiture of primarily our cheese business in the Middle East and Africa, partially offset by lower cash received as a result of the settlement and replacement of several net investment hedge derivative contracts and cash paid to settle our forward-starting interest rate swaps.

The increase in net cash used in investing activities in 2018 relative to 2017 was primarily due to cash received in 2017 from proceeds from divestitures, cash expenditures in 2018 for an acquisition and higher capital expenditures in 2018, partially offset by cash received as a result of the settlement and replacement of several net investment hedge derivative contracts.

Capital expenditures were $863 million in 2020, $925 million in 2019 and $1,095 million in 2018.

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We expect 2021 capital expenditures to be up to $1.0 billion, including capital expenditures in connection with our Simplify to Grow Program.

We expect to continue to fund these expenditures from operations.

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 $2,215 million in 2020, $2,787 million in 2019 and $2,329 million in 2018.

The decrease in net cash used in financing activities in 2020 relative to 2019 was primarily due to higher net debt issuances and lower share repurchases, partially offset by higher dividends paid and lower proceeds from stock option exercises in 2020.

The increase in net cash used in financing activities in 2019 relative to 2018 was primarily due to lower net debt issuances and higher dividends paid in 2019, partially offset by lower share repurchases.

The decrease in net cash used in financing activities in 2018 relative to 2017 was primarily due to higher net debt issuances and lower share repurchases partially offset by higher dividends paid.

From time to time we refinance long-term and short-term debt.

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The operations held by MIHN generated approximately 71.8% (or $19.1 billion) of the $26.6 billion of consolidated net revenue during fiscal year 2020 and represented approximately 76.2% (or $21.1 billion) of the $27.7 billion of net assets as of December 31, 2020.

On February 7, 2019, our Board of Directors approved a new $5.0 billion long-term financing authority to replace the prior $5.0 billion authority.

During December 2020, our Board of Directors approved a new $6.0 billion long-term financing authority to replace the prior $8.0 billion authority.

As of December 31, 2020, we had $6.0 billion of long-term financing authority remaining.

In the next 12 months, we expect approximately $1.5 billion of long-term debt will mature as follows:

$427 million in February 2020, $233 million in March 2020, $750 million in May 2020 and $140 million in October 2020.

We expect to fund these repayments with a combination of cash from operations, short-term debt, including issuance of commercial paper and long-term debt.

In January 2021, we repaid approximately $0.8 billion of maturing debt.

In the next 12 months, we expect to repay approximately $1.8 billion of maturing long-term debt including:

$1.5 billion in October 2021 and $0.3 billion in December 2021.

We expect to fund these repayments with cash on hand, as well as short-term and long-term debt.

Our total debt was $20.0 billion at December 31, 2020 and $18.4 billion at December 31, 2019.

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Our average daily commercial borrowings were $2.3 billion in 2020, $4.1 billion in 2019 and $4.5 billion in 2018.

We had $2.6 billion of commercial paper borrowings outstanding at December 31, 2019 and $3.1 billion outstanding as of December 31, 2018 .

We expect to continue to use commercial paper to finance various short-term financing needs.

We continue to comply with our debt covenants.

We had no commercial paper borrowings outstanding at December 31, 2020 and $2.6 billion outstanding as of December 31, 2019.

We expect to continue to use cash or commercial paper to finance various short-term financing needs.

As of December 31, 2020, we continued to be in compliance with our debt covenants.

Refer to Note 9, Debt and Borrowing Arrangements , for more information on our debt and debt covenants.

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We regularly monitor worldwide supply, commodity cost and currency trends so we can cost-effectively secure ingredients, packaging and fuel required for production.

During 2019 , 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 packaging, energy, dairy, grains, cocoa and oils, partially offset by lower costs for sugar and nuts.

During 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, sugar, energy, packaging, nuts, grains and other ingredients costs, partially offset by lower costs for oils.

A number of external factors such as 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.

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The following table summarizes our contractual obligations at December 31, 2020.

2025 and Thereafter

Total 2021 2022-23 2024-25 2026 and Thereafter

(in millions)

$ 19,855 $ 2,669 $ 4,434 $ 3,081 $ 9,671

Interest expense (2)

4,194 427 705 556 2,506

Finance leases (3)

276 81 122 51 22

Operating leases 757 203 262 123 169

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Inventory and production costs 6,612 3,750 2,314 473 75

Other 1,188 853 248 87 —

32,882 7,983 8,085 4,371 12,443

tax reform transition liability (5)

936 95 247 497 97

Multiemployer pension plan

withdrawal liability (6)

489 26 53 53 357

Other long-term liabilities (7)

208 33 33 34 108

Total $ 34,515 $ 8,137 $ 8,418 $ 4,955 $ 13,005

(1) Amounts include the expected cash payments of our long-term debt, including the current portion and excluding finance leases, which are presented separately in the table above.

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As of December 31, 2020, the amount outstanding was $0.9 billion.

The amounts and timing of our tax payments may change as a result of additional guidance issued.

See Note 16, Income Taxes , for additional information on U.S.

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Share Repurchases:

See Note 13, Capital Stock , to the consolidated financial statements for more information on our share repurchase program.

Between 2013 and 2017, our Board of Directors authorized the repurchase of a total of $13.7 billion of our Common Stock through December 31, 2018.

On January 31, 2018, our Finance Committee, with authorization delegated from our Board of Directors, approved an increase of $6.0 billion in the share repurchase program, raising the authorization to $19.7 billion of Common Stock repurchases, and extended the program through December 31, 2020.

Through December 31, 2019 , we repurchased approximately $16.5 billion of shares ( $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), at a weighted-average cost of $39.65 per share.

See Note 13, Capital Stock , to the consolidated financial statements and Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Issuer Purchases of Equity Securities, for more information on our share repurchase program.

As of December 31, 2020, our Board of Director has authorized share repurchases up to $23.7 billion through December 31, 2023.

Under this program, we have repurchased approximately $17.9 billion of shares through December 31, 2020 ($1.4 billion in 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), at a weighted-average cost of $40.57 per share.

The number of shares that we ultimately repurchase under our share repurchase program may vary depending on 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.

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On July 28, 2020, the Finance Committee, with authorization delegated from our Board of Directors, declared a quarterly cash dividend of $0.315 per share of Class A Common Stock, an increase of 11 percent, which would be $1.26 per common share on an annualized basis.

On July 25, 2018, the Finance Committee, with authorization delegated from our Board of Directors, declared a quarterly cash dividend of $0.26 per share of Class A Common Stock, an increase of 18 percent, which would be $1.04 per common share on an annualized basis.

On August 2, 2017, the Finance Committee, with authorization delegated from our Board of Directors, approved a 16% increase in the quarterly dividend to $0.22 per common share or $0.88 per common share on an annualized basis.

In 2019, our quarterly cash dividend increased from $0.26 to $0.285 per share of Class A Common Stock, an increase of 10 percent, and in 2018, our quarterly cash dividend increased from $0.22 to $0.26 per share of Class A Common Stock, an increase of 18 percent.

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.

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Swiss tax reform impacts (10) ;

and incremental expenses related to the 2017 malware incident.

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.

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• “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;

gain on equity method investment transactions;

gains or losses on equity method investment transactions;

net earnings from divestitures (2) ;

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and Swiss tax reform impacts (10) .

Similarly, within Adjusted EPS, our equity method investment net earnings exclude our proportionate share of our investees’ unusual or infrequent items (11) .

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 2019, we added to the non-GAAP definitions the exclusion of the impact from Swiss tax reform as described in footnote (10) below.

During 2018, we added to the non-GAAP definitions the exclusion of:

remeasurement gains or losses related to remeasuring net monetary assets or liabilities in Argentina (see footnote (5) below) and the impact from pension participation changes (see footnote (9) below).

Divestitures include completed sales of businesses and exits of major product lines upon completion of a sale or licensing agreement.

See Note 2, Divestitures and Acquisitions , for information on divestitures and acquisitions impacting the comparability of our results.

During 2020, we added to the non-GAAP definitions the exclusion of costs associated with the JDE Peet's transaction.

Refer to Note 7, Equity Method Investments , and Note 16, 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 7, 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.

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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.

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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 16, Income Taxes , for more information on our current year estimated annual effective tax rate and U.S.

and Swiss tax reform.

(11) We have excluded our proportionate share of our equity method investees’ unusual or infrequent items such as acquisition and divestiture related costs, restructuring program costs and discrete U.S.

Refer to Note 16, Income Taxes , for more information on our current year estimated annual effective tax rate and Swiss and U.S.

(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 unusual or infrequent items with them each reporting period, we do not have direct control over their operations or resulting revenue and expenses.

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’ unusual and infrequent items.

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.

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We also evaluate our Organic Net Revenue growth from emerging markets, and these underlying measures are also reconciled to U.S.

For the Year Ended December 31, 2019

For the Year Ended December 31, 2018

(in millions)

For the Year Ended December 31, 2020 For the Year Ended December 31, 2019

Markets Developed

Markets Total Emerging

Markets Developed

Markets Total

(in millions) (in millions)

Net Revenue $ 9,097 $ 17,484 $ 26,581 $ 9,675 $ 16,193 $ 25,868

Impact of currency 749 (112) 637 — — —

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Organic Net Revenue $ 9,846 $ 16,927 $ 26,773 $ 9,620 $ 16,193 $ 25,813

For the Year Ended December 31, 2018

For the Year Ended December 31, 2017

(in millions)

For the Year Ended December 31, 2019 For the Year Ended December 31, 2018

Markets Developed

Markets Total Emerging

Markets Developed

Markets Total

(in millions) (in millions)

Net Revenue $ 9,675 $ 16,193 $ 25,868 $ 9,659 $ 16,279 $ 25,938

Impact of currency 651 503 1,154 — — —

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mark-to-market impacts from commodity and forecasted currency transaction derivative contracts;

malware incident incremental expenses, acquisition integration costs;

acquisition integration costs;

acquisition and divestiture-related costs;

operating income from divestitures;

net gains from divestitures;

operating income from divestiture;

net gain from divestiture;

costs associated with the JDE Peet's transaction;

the remeasurement of net monetary position;

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For the Years Ended

2020 2019 $ Change % Change

(in millions)

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Net gain on divestiture (5)

Costs associated with JDE Peet's transaction (6)

Remeasurement of net monetary position (7)

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Impact from resolution of tax matters (9)

(20) 85 (105)

CEO transition remuneration (10)

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For the Years Ended

2019 2018 $ Change % Change

(in millions)

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Simplify to Grow Program (1)

442 626 (184)

Intangible asset impairment charges (2)

Mark-to-market (gains)/losses from derivatives (3)

Malware incident incremental expenses

Mark-to-market gains from derivatives (3)

(91) (141) 50

Acquisition integration costs (4)

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Divestiture-related costs (5)

Operating income from divestitures (5)

Net gain on divestitures (5)

Operating income from divestiture (5)

Net gain on divestiture (5)

Remeasurement of net monetary position (7)

Impact from pension participation changes (8)

(35) 423 (458)

Impact from resolution of tax matters (9)

CEO transition remuneration (10)

Other/rounding

Swiss tax reform impact (11)

Adjusted Operating Income $ 4,264 $ 4,302 $ (38) (0.9) %

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(3) Refer to Note 10, Financial Instruments , Note 18, 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.

Refer to Note 2, Divestitures and Acquisitions , for more information on the acquisition of a biscuit business in Vietnam.

Refer to Note 2, Divestitures and Acquisitions , for more information on prior-year divestitures, intangible asset sales and the June 7, 2018 acquisition of Tate's Bake Shop.

(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 and the June 7, 2018 acquisition of Tate's Bake Shop.

Refer to our Annual Report on Form 10-K for the year ended December 31, 2018 for more information on the acquisition of a biscuit business in Vietnam.

(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, the May 28, 2019 divestiture of most of our cheese business in the Middle East and Africa and the June 7, 2018 acquisition of Tate's Bake Shop.

(6) Refer to Note 7, Equity Method Investments , for more information on the JDE Peet's transaction.

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loss on debt extinguishment;

Swiss tax reform net impacts;

tax reform discrete net tax impact;

net gains/(losses) on equity method investment transactions;

and our proportionate share of unusual or infrequent items recorded by our JDE and Keurig equity method investees.

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.

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For the Years Ended

2020 2019 $ Change % Change

Diluted EPS attributable to Mondelēz International $ 2.47 $ 2.69 $ (0.22) (8.2) %

Simplify to Grow Program (2)

0.20 0.24 (0.04)

Intangible asset impairment charges (2)

0.08 0.03 0.05

Mark-to-market gains from derivatives (2)

(0.01) (0.05) 0.04

Acquisition-related costs (2)

Divestiture-related costs (2)

Net earnings from divestiture (2)

Net earnings from divestitures (2)

(0.02) (0.05) 0.03

Net gain on divestiture (2)

— (0.03) 0.03

Costs associated with JDE Peet's transaction (2)

Remeasurement of net monetary position (2)

Impact from pension participation changes (2)

0.01 (0.02) 0.03

Impact from resolution of tax matters (2)

(0.02) 0.05 (0.07)

CEO transition remuneration (2)

Net loss/(gain) related to interest rate swaps (3)

— 0.01 (0.01)

Loss related to interest rate swaps (3)

0.05 0.08 (0.03)

Loss on debt extinguishment (4)

Swiss tax reform net impacts (2)

tax reform discrete net tax expense (5)

Net loss/(gain) on equity method

— (0.53) 0.53

(Gain)/loss on equity method

investment transactions (6)

Equity method investee acquisition-related

and other charges/(benefits) (7)

(0.55) 0.01 (0.56)

Equity method investee items (7)

0.06 0.03 0.03

Adjusted EPS $ 2.59 $ 2.46 $ 0.13 5.3 %

Unfavorable currency translation 0.03 — 0.03

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For the Years Ended

2019 2018 $ Change % Change

Diluted EPS attributable to Mondelēz International $ 2.69 $ 2.23 $ 0.46 20.6 %

Simplify to Grow Program (2)

0.24 0.32 (0.08)

Intangible asset impairment charges (2)

Mark-to-market (gains)/losses from derivatives (2)

Malware incident incremental expenses

Acquisition integration costs (2)

Mark-to-market gains from derivatives (2)

(0.05) (0.09) 0.04

Acquisition-related costs (2)

Divestiture-related costs (2)

— 0.01 (0.01)

Net earnings from divestitures (2)

Net gain on divestitures (2)

(0.05) (0.04) (0.01)

Net gain on divestiture (2)

(0.03) — (0.03)

Remeasurement of net monetary position (2)

— 0.01 (0.01)

Impact from pension participation changes (2)

(0.02) 0.22 (0.24)

Impact from resolution of tax matters (2)

0.05 (0.01) 0.06

CEO transition remuneration (2)

Net gain related to interest rate swaps (3)

Net loss/(gain) related to interest rate swaps (3)

0.08 (0.01) 0.09

Loss on debt extinguishment (4)

tax reform discrete net tax expense/(benefit) (5)

Gains on equity method investment transactions (6)

Equity method investee acquisition-related

and other charges/(benefits) (7)

— 0.07 (0.07)

Swiss tax reform net impacts (2)

(0.53) — (0.53)

tax reform discrete net tax expense (5)

— 0.01 (0.01)

Loss/(gain) on equity method investment

transactions (6)

0.01 (0.39) 0.40

Equity method investee items (7)

0.03 (0.01) 0.04

Adjusted EPS $ 2.46 $ 2.36 $ 0.10 4.2 %

Unfavorable currency translation 0.16 — 0.16

2 unchanged sentences

• 2020 taxes for the:

Simplify to Grow Program were $(103) million, intangible asset impairment charges were $(14) million, mark-to-market gains from derivatives were $19 million, divestiture-related costs were zero, net earnings from divestiture were zero, net gain on divestiture were $3 million, impact from pension participation changes were $8 million, impact from resolution of tax matters were $(21) million, CEO transition remuneration were zero, net loss related to interest rate swaps were zero, Swiss tax reform were $(769) million, net loss on equity method investment transactions were $6 million and equity method investee and other charges/benefits were $(12) million.

Simplify to Grow Program were $(81) million, intangible asset impairment charges were $(33) million, mark-to-market gains from derivatives were $8 million, acquisition-related costs were zero, net earnings from divestitures were $5 million, costs associated with the JDE Peet's transaction were $250 million, loss on remeasurement of net monetary position were zero, impact from pension participation changes were $(2) million, impact from resolution of tax matters were $16 million, net loss related to interest rate swaps were $(24) million, loss on debt extinguishment were $(46) million, gains on equity method investment transactions were $202 million and equity method investee items were $(10) million.

• 2019 taxes for the:

Simplify to Grow Program were $(156) million, intangible asset impairment charges were $(16) million, mark-to-market gains from derivatives were $10 million, acquisition-related costs were $(3) million, net earnings from divestiture were zero, impact from pension participation changes were $(108) million, impact from resolution of tax matters were $(6) million, CEO transition remuneration were $(5) million, net gain related to interest rate swaps were $2 million, loss on debt extinguishment were $(35) million, U.S.

tax reform were $19 million, gain on equity method investment transaction were $192 million and equity method investee and other charges/benefits were $16 million.

Simplify to Grow Program were $(103) million, intangible asset impairment charges were $(14) million, mark-to-market gains from derivatives were $19 million, net earnings from divestitures were $7 million, net gain on divestiture were $3 million, impact from pension participation changes were $8 million, impact from resolution of tax matters were $(21) million, CEO transition remuneration were zero, net loss related to interest rate swaps were zero, Swiss tax reform were $(769) million, net loss on equity method investment transactions were $6 million and equity method investee items were $(9) million.

• 2018 taxes for the:

Simplify to Grow Program were $(190) million, intangible asset impairment charges were $(30) million, mark-to-market losses from derivatives were $(6) million, malware incident incremental costs were $(27) million, divestiture-related costs were $8 million, net earnings from divestitures were $16 million, net gain on divestitures were $7 million, impact from resolution of tax matters were $75 million, CEO transition remuneration were $(5) million, U.S.

tax reform were $(44) million, gain on equity method investment transactions were $15 million and equity method investee and other charges/benefits were $(10) million.

Simplify to Grow Program were $(156) million, intangible asset impairment charges were $(16) million, mark-to-market gains from derivatives were $10 million, acquisition-related costs were $(3) million, net earnings from divestitures were $9 million, impact from pension participation changes were $(108) million, impact from resolution of tax matters were $(6) million, CEO transition remuneration were $(5) million, net gain related to interest rate swaps were $2 million, loss on debt extinguishment were $(35) million, U.S.

tax reform were $19 million, gain on equity method investment transaction were $192 million and equity method investee items were $15 million.

(2) See the Adjusted Operating Income table above and the related footnotes for more information.

2 unchanged sentences

(5) Refer to Note 16, Income Taxes , for more information on the impact of U.S.

Refer to Note 7, Equity Method Investments , for more information on the KDP transaction in 2018, the 2017 sale of an interest in one of our equity method investments and the 2016 acquisition of an interest in Keurig.

Includes our proportionate share of unusual or infrequent items, such as acquisition and divestiture-related costs, restructuring program costs and discrete U.S.

tax reform impacts recorded by our JDE and Keurig equity method investees.

(6) Refer to Note 7, Equity Method Investments, for more information on gains and losses on equity method investment transactions.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis