Mondelez International, Inc. 10-Q

Item 1. Financial Statements Mondelēz International, Inc. and Subsidiaries Condensed Consolidated Statements of Earnings (in millions of U.S. dollars, except per share data) (Unaudited) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2021 2020 2021 2020 Net revenues $ 7,182 $ 6,665 $ 21,062 $ 19,283 Cost of sales 4,358 3,873 12,641 11,709 Gross profit 2,824 2,792 8,421 7,574 Selling, general and administrative expenses 1,436 1,484 4,593 4,474 Asset impairment and exit costs 62 123 286 253 Gain on acquisition — — ( 9 ) — Amortization of intangible assets 32 50 102 143 Operating income 1,294 1,135 3,449 2,704 Benefit plan non-service income ( 37 ) ( 38 ) ( 135 ) ( 102 ) Interest and other expense, net 82 89 358 364 Earnings before income taxes 1,249 1,084 3,226 2,442 Income tax provision ( 342 ) ( 391 ) ( 952 ) ( 880 ) Gain on equity method investment transactions 250 345 745 537 Equity method investment net earnings 105 84 290 311 Net earnings 1,262 1,122 3,309 2,410 Noncontrolling interest earnings ( 4 ) ( 3 ) ( 12 ) ( 11 ) Net earnings attributable to Mondelēz International $ 1,258 $ 1,119 $ 3,297 $ 2,399 Per share data: Basic earnings per share attributable to Mondelēz International $ 0.90 $ 0.78 $ 2.34 $ 1.68 Diluted earnings per share attributable to Mondelēz International $ 0.89 $ 0.78 $ 2.33 $ 1.66 See accompanying notes to the condensed consolidated financial statements. 1 Table of Contents Mondelēz International, Inc. and Subsidiaries Condensed Consolidated Statements of Comprehensive Earnings (in millions of U.S. dollars) (Unaudited) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2021 2020 2021 2020 Net earnings $ 1,262 $ 1,122 $ 3,309 $ 2,410 Other comprehensive earnings/(losses), net of tax: Currency translation adjustment ( 397 ) 213 ( 376 ) ( 1,077 ) Pension and other benefit plans 67 ( 37 ) 138 28 Derivative cash flow hedges ( 7 ) ( 4 ) 12 55 Total other comprehensive earnings/(losses) ( 337 ) 172 ( 226 ) ( 994 ) Comprehensive earnings/(losses) 925 1,294 3,083 1,416 less: Comprehensive earnings/(losses) attributable to noncontrolling interests ( 1 ) 11 — 18 Comprehensive earnings/(losses) attributable to Mondelēz International $ 926 $ 1,283 $ 3,083 $ 1,398 See accompanying notes to the condensed consolidated financial statements. 2 Table of Contents Mondelēz International, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (in millions of U.S. dollars, except share data) (Unaudited) September 30, 2021 December 31, 2020 ASSETS Cash and cash equivalents $ 3,401 $ 3,619 Trade receivables (net of allowances of $ 39 at September 30, 2021 and $ 42 at December 31, 2020) 2,673 2,297 Other receivables (net of allowances of $ 53 at September 30, 2021 and $ 42 at December 31, 2020) 656 657 Inventories, net 2,922 2,647 Other current assets 803 759 Total current assets 10,455 9,979 Property, plant and equipment, net 8,668 9,026 Operating lease right of use assets 636 638 Goodwill 22,029 21,895 Intangible assets, net 18,413 18,482 Prepaid pension assets 838 672 Deferred income taxes 633 790 Equity method investments 5,269 6,036 Other assets 376 292 TOTAL ASSETS $ 67,317 $ 67,810 LIABILITIES Short-term borrowings $ 234 $ 29 Current portion of long-term debt 2,061 2,741 Accounts payable 6,484 6,209 Accrued marketing 2,012 2,130 Accrued employment costs 788 834 Other current liabilities 2,680 3,216 Total current liabilities 14,259 15,159 Long-term debt 17,692 17,276 Long-term operating lease liabilities 476 470 Deferred income taxes 3,388 3,346 Accrued pension costs 1,059 1,257 Accrued postretirement health care costs 341 346 Other liabilities 2,348 2,302 TOTAL LIABILITIES 39,563 40,156 Commitments and Contingencies (Note 12) EQUITY Common Stock, no par value ( 5,000,000,000 shares authorized and 1,996,537,778 shares issued at September 30, 2021 and December 31, 2020) — — Additional paid-in capital 32,066 32,070 Retained earnings 30,305 28,402 Accumulated other comprehensive losses ( 10,904 ) ( 10,690 ) Treasury stock, at cost ( 601,655,289 shares at September 30, 2021 and 577,363,557 shares at December 31, 2020) ( 23,769 ) ( 22,204 ) Total Mondelēz International Shareholders’ Equity 27,698 27,578 Noncontrolling interest 56 76 TOTAL EQUITY 27,754 27,654 TOTAL LIABILITIES AND EQUITY $ 67,317 $ 67,810 See accompanying notes to the condensed consolidated financial statements. 3 Table of Contents Mondelēz International, Inc. and Subsidiaries Condensed Consolidated Statements of Equity (in millions of U.S. dollars, except per share data) (Unaudited) Mondelēz International Shareholders’ Equity Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Earnings/ (Losses) Treasury Stock Non-controlling Interest Total Equity Three Months Ended September 30, 2021 Balances at July 1, 2021 $ — $ 32,042 $ 29,538 $ ( 10,572 ) $ ( 23,465 ) $ 77 $ 27,620 Comprehensive earnings/(losses): Net earnings — — 1,258 — — 4 1,262 Other comprehensive earnings/(losses), net of income taxes — — — ( 332 ) — ( 5 ) ( 337 ) Exercise of stock options and issuance of other stock awards — 24 ( 3 ) — 22 — 43 Common Stock repurchased — — — — ( 326 ) — ( 326 ) Cash dividends declared ($ 0.350 per share) — — ( 489 ) — — — ( 489 ) Dividends paid on noncontrolling interest and other activities — — 1 — — ( 20 ) ( 19 ) Balances at September 30, 2021 $ — $ 32,066 $ 30,305 $ ( 10,904 ) $ ( 23,769 ) $ 56 $ 27,754 Nine Months Ended September 30, 2021 Balances at January 1, 2021 $ — $ 32,070 $ 28,402 $ ( 10,690 ) $ ( 22,204 ) $ 76 $ 27,654 Comprehensive earnings/(losses): Net earnings — — 3,297 — — 12 3,309 Other comprehensive earnings/(losses), net of income taxes — — — ( 214 ) — ( 12 ) ( 226 ) Exercise of stock options and issuance of other stock awards — ( 4 ) ( 21 ) — 229 — 204 Common Stock repurchased — — — — ( 1,794 ) — ( 1,794 ) Cash dividends declared ($ 0.980 per share) — — ( 1,378 ) — — — ( 1,378 ) Dividends paid on noncontrolling interest and other activities — — 5 — — ( 20 ) ( 15 ) Balances at September 30, 2021 $ — $ 32,066 $ 30,305 $ ( 10,904 ) $ ( 23,769 ) $ 56 $ 27,754 Three Months Ended September 30, 2020 Balances at July 1, 2020 $ — $ 32,022 $ 27,040 $ ( 11,419 ) $ ( 21,625 ) $ 79 $ 26,097 Comprehensive earnings/(losses): Net earnings — — 1,119 — — 3 1,122 Other comprehensive earnings/(losses), net of income taxes — — — 164 — 8 172 Exercise of stock options and issuance of other stock awards — 32 ( 7 ) — 67 — 92 Cash dividends declared ($ 0.315 per share) — — ( 452 ) — — — ( 452 ) Dividends paid on noncontrolling interest and other activities — — 2 — — ( 5 ) ( 3 ) Balances at September 30, 2020 $ — $ 32,054 $ 27,702 $ ( 11,255 ) $ ( 21,558 ) $ 85 $ 27,028 Nine Months Ended September 30, 2020 Balances at January 1, 2020 $ — $ 32,019 $ 26,615 $ ( 10,254 ) $ ( 21,139 ) $ 76 $ 27,317 Comprehensive earnings/(losses): Net earnings — — 2,399 — — 11 2,410 Other comprehensive earnings/(losses), net of income taxes — — — ( 1,001 ) — 7 ( 994 ) Exercise of stock options and issuance of other stock awards — 35 ( 48 ) — 282 — 269 Common Stock repurchased — — — — ( 701 ) — ( 701 ) Cash dividends declared ($ 0.885 per share) — — ( 1,269 ) — — — ( 1,269 ) Dividends paid on noncontrolling interest and other activities — — 5 — — ( 9 ) ( 4 ) Balances at September 30, 2020 $ — $ 32,054 $ 27,702 $ ( 11,255 ) $ ( 21,558 ) $ 85 $ 27,028 See accompanying notes to the condensed consolidated financial statements. 4 Table of Contents Mondelēz International, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (in millions of U.S. dollars) (Unaudited) For the Nine Months Ended September 30, 2021 2020 CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES Net earnings $ 3,309 $ 2,410 Adjustments to reconcile net earnings to operating cash flows: Depreciation and amortization 837 813 Stock-based compensation expense 88 97 Deferred income tax provision/(benefit) 159 ( 103 ) Asset impairments and accelerated depreciation 203 141 Loss on early extinguishment of debt 110 — Gain on acquisition ( 9 ) — Gain on equity method investment transactions ( 745 ) ( 537 ) Equity method investment net earnings ( 290 ) ( 311 ) Distributions from equity method investments 158 220 Other non-cash items, net ( 52 ) 225 Change in current assets and current liabilities, net of acquisitions: Receivables, net ( 417 ) ( 259 ) Inventories, net ( 342 ) ( 314 ) Accounts payable 420 129 Other current assets ( 259 ) ( 64 ) Other current liabilities ( 231 ) 44 Change in pension and postretirement assets and liabilities, net ( 219 ) ( 176 ) Net cash provided by operating activities 2,720 2,315 CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES Capital expenditures ( 639 ) ( 630 ) Acquisitions, net of cash received ( 833 ) ( 1,142 ) Proceeds from divestitures including equity method investments 1,498 1,357 Other 80 58 Net cash provided by/(used in) investing activities 106 ( 357 ) CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES Issuances of commercial paper, maturities greater than 90 days — 677 Repayments of commercial paper, maturities greater than 90 days — ( 1,119 ) Net issuances of other short-term borrowings 207 ( 2,001 ) Long-term debt proceeds 5,921 5,987 Long-term debt repaid ( 5,898 ) ( 2,196 ) Repurchase of Common Stock ( 1,824 ) ( 720 ) Dividends paid ( 1,337 ) ( 1,227 ) Other ( 40 ) 104 Net cash used in financing activities ( 2,971 ) ( 495 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 97 ) ( 1 ) Cash, cash equivalents and restricted cash: (Decrease)/Increase ( 242 ) 1,462 Balance at beginning of period 3,650 1,328 Balance at end of period $ 3,408 $ 2,790 See accompanying notes to the condensed consolidated financial statements. 5 Table of Contents Mondelēz International, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited) Note 1. Basis of Presentation Our interim condensed consolidated financial statements are unaudited. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted. It is management’s opinion that these financial statements include all normal and recurring adjustments necessary for a fair presentation of our results of operations, financial position and cash flows. Results of operations for any interim period are not necessarily indicative of future or annual results. For a complete set of consolidated financial statements and related notes, refer to our Annual Report on Form 10-K for the year ended December 31, 2020. Principles of Consolidation: The condensed consolidated financial statements include Mondelēz International, Inc. as well as our wholly owned and majority owned subsidiaries, except our Venezuelan subsidiaries that were deconsolidated in 2015. All intercompany transactions are eliminated. The noncontrolling interest represents the noncontrolling investors' interests in the results of subsidiaries that we control and consolidate. We account for investments over which we exercise significant influence under the equity method of accounting. Investments over which we do not have significant influence or control are not material and as there are no readily determinable fair values for the equity interests, these investments are carried at cost with changes in the investment recognized to the extent cash is received. Currency Translation and Highly Inflationary Accounting : We translate the results of operations of our subsidiaries from multiple currencies using average exchange rates during each period and translate balance sheet accounts using exchange rates at the end of each period. We record currency translation adjustments as a component of equity (except for highly inflationary currencies) and realized exchange gains and losses on transactions in earnings. Highly inflationary accounting is triggered when a country’s three-year cumulative inflation rate exceeds 100%. It requires the remeasurement of financial statements of subsidiaries in the country from the functional currency of the subsidiary to our U.S. dollar reporting currency, with currency remeasurement gains or losses recorded in earnings. As discussed below, beginning on July 1, 2018, we began to apply highly inflationary accounting for our operations in Argentina. Argentina. During the second quarter of 2018, primarily based on published estimates that indicated that Argentina's three-year cumulative inflation rate exceeded 100%, we concluded that Argentina became a highly inflationary economy for accounting purposes. As of July 1, 2018, we began to apply highly inflationary accounting for our Argentinean subsidiaries and changed their functional currency from the Argentinean peso to the U.S. dollar. On July 1, 2018, both monetary and non-monetary assets and liabilities denominated in Argentinean pesos were remeasured into U.S. dollars using the exchange rate as of the balance sheet date, with remeasurement and other transaction gains and losses recorded in net earnings. As of September 30, 2021, our Argentinean operations had $ 1 million of Argentinean peso denominated net monetary liabilities. Our Argentinean operations contributed $ 111 million, or 1.5 % of consolidated net revenues in the three months and $ 296 million, or 1.4 % of consolidated net revenues in the nine months ended September 30, 2021. Within selling, general and administrative expenses, we recorded a remeasurement loss of $ 2 million during the three months and $ 10 million during the nine months ended September 30, 2021 as well as a remeasurement loss of $ 2 million during the three months and $ 7 million during the nine months ended September 30, 2020 related to the revaluation of the Argentinean peso denominated net monetary position over these periods. Brexit . Following the separation of the United Kingdom from the European Union ("Brexit") in 2020, a new trade arrangement was reached between the U.K. and E.U. that began on January 1, 2021. The main trade provisions include the continuation of no tariffs or quotas on trade between the U.K. and E.U. subject to prescribed trade terms, including but not limited to meeting product and labeling standards for both the U.K. and E.U. Cross-border trade between the U.K. and E.U. is also subject to new customs regulations, documentation and reviews. To comply with the new requirements, we increased resources in customer service and logistics, in our factories, and on our customs support teams. We adapted our processes and systems for the new and increased number of customs transactions. We continue to closely monitor and manage our inventory levels of imported raw materials, packaging and finished goods in the U.K. We have made investments in resources, systems and processes to meet the new 6 Table of Contents ongoing requirements and we work to mitigate disruptions to our local supply chain and distribution, including those related to the recent transportation labor shortage in the U.K., to reduce the impact on our input and distribution costs. Despite our efforts to control costs, we have seen inflationary cost pressures rise in our U.K. business this year, as we have also experienced in other markets. If the U.K.’s separation from, or new trade arrangements with, the E.U. negatively impact the U.K. economy or result in disagreements on trade terms, delays affecting our supply chain or distribution, disruptions to sales or collections, or further increases in inflationary cost pressures, the impact to our results of operations, financial condition and cash flows could be material. In the nine months ended September 30, 2021, we generated 9.1 % of our consolidated net revenues in the U.K. Other Countries. Since we sell our products in over 150 countries and have operations in approximately 80 countries, we monitor economic and currency-related risks and seek to take protective measures in response to potential exposures. We continue to monitor the ongoing COVID-19 global pandemic and related impacts to our business operations, currencies and net monetary exposures. Since the global onset of COVID-19 in early 2020, most countries in which we do business experienced periods of significant economic uncertainty as well as exchange rate volatility. At this time, except for Argentina which is accounted for as a highly inflationary economy, we do not anticipate any other countries in which we operate to be at risk of becoming highly inflationary countries. Cash, Cash Equivalents and Restricted Cash: Cash and cash equivalents include demand deposits with banks and all highly liquid investments with original maturities of three months or less. We also have restricted cash that is recorded within other current assets of $ 7 million as of September 30, 2021 and $ 31 million as of December 31, 2020. Total cash, cash equivalents and restricted cash was $ 3,408 million as of September 30, 2021 and $ 3,650 million as of December 31, 2020. Allowances for Credit Losses: The allowances for credit losses are recorded against our receivables. They are developed at a country and region level based on historical collection experiences, current economic condition of specific customers and the forecasted economic condition of countries using various factors such as bond default rates and consumption indexes. We write off receivables once it is determined that the receivables are no longer collectible and as allowed by local laws. Changes in allowances for credit losses consisted of: Allowance for Trade Receivables Allowance for Other Current Receivables Allowance for Long-Term Receivables (in millions) Balance at January 1, 2021 $ ( 42 ) $ ( 42 ) $ ( 12 ) Current period provision for expected credit losses ( 3 ) ( 13 ) — Write-offs charged against the allowance 3 1 2 Currency 3 1 1 Balance at September 30, 2021 $ ( 39 ) $ ( 53 ) $ ( 9 ) Transfers of Financial Assets: We account for transfers of financial assets, such as uncommitted revolving non-recourse accounts receivable factoring arrangements, when we have surrendered control over the related assets. Determining whether control has transferred requires an evaluation of relevant legal considerations, an assessment of the nature and extent of our continuing involvement with the assets transferred and any other relevant considerations. We use receivable factoring arrangements periodically when circumstances are favorable to manage liquidity. We have non-recourse factoring arrangements in which we sell eligible trade receivables primarily to banks in exchange for cash. We may then continue to collect the receivables sold, acting solely as a collecting agent on behalf of the banks. The outstanding principal amount of receivables under these arrangements amounted to $ 819 million as of September 30, 2021 and $ 760 million as of December 31, 2020. The incremental cost of factoring receivables under this arrangement was not material for all periods presented. The proceeds from the sales of receivables are included in cash from operating activities in the condensed consolidated statements of cash flows. 7 Table of Contents Non-Cash Lease Transactions: We recorded $ 159 million in operating lease and $ 59 million in finance lease right-of-use assets obtained in exchange for lease obligations during the nine months ended September 30, 2021 and $ 187 million in operating lease and $ 129 million in finance lease right-of-use assets obtained in exchange for lease obligations during the nine months ended September 30, 2020. New Accounting Pronouncements: In March 2020 and subsequently in January 2021, the Financial Accounting Standards Board ("FASB") issued an Accounting Standards Update ("ASU") to provide optional accounting guidance for a limited period of time to ease the potential burden in accounting for reference rate reform. The guidance provides optional expedients and exceptions to existing accounting requirements for contract modifications and hedge accounting related to transitioning from discontinued reference rates, such as LIBOR, to alternative reference rates, if certain criteria are met. The new accounting requirements can be applied as of the beginning of the interim period including March 12, 2020, or any date thereafter, through December 31, 2022. We are currently evaluating our contracts and the optional expedients provided by the new standard. Note 2. Acquisitions and Divestitures On May 26, 2021, we announced an agreement to acquire Chipita S.A., a leading croissants and baked snacks company in the Central and Eastern European markets. We expect the acquisition to close in the first half of 2022 after all regulatory and acquisition-related reviews are completed. We expect purchase consideration of approximately € 1.7 billion ($ 2.0 billion). We incurred acquisition-related costs of $ 6 million in the nine months ended September 30, 2021. We incurred acquisition integration costs of $ 6 million in the three and nine months ended September 30, 2021, as these expenses were incurred in preparation of the acquisition closing in the first half of 2022. On April 1, 2021, we acquired Gourmet Food Holdings Pty Ltd ("Gourmet Food"), a leading Australian food company in the premium biscuit and cracker category, for closing cash consideration of approximately $ 450 million Australian dollars ($ 343 million), net of cash received. We are working to complete the valuation and have recorded a preliminary purchase price allocation of $ 41 million to indefinite-lived intangible assets, $ 80 million to definite-lived intangible assets, $ 176 million to goodwill, $ 19 million to property, plant and equipment, $ 18 million to inventory, $ 25 million to accounts receivable, $ 5 million to operating right of use assets, $ 3 million to other current assets, $ 19 million to current liabilities and $ 5 million to long-term operating lease liabilities. The acquisition added incremental net revenues of $ 32 million in the three months and $ 59 million in the nine months ended September 30, 2021, and operating income of $ 4 million in the three months and $ 7 million in the nine months ended September 30, 2021. We incurred acquisition-related costs of $ 7 million in the nine months ended September 30, 2021. On March 25, 2021, we acquired a majority interest in Lion/Gemstone Topco Ltd ("Grenade"), a performance nutrition leader in the United Kingdom, for closing cash consideration of £ 188 million ($ 261 million), net of cash received. The acquisition of Grenade expands our position into the premium nutrition market. We are working to complete the valuation and have recorded a preliminary purchase price allocation of $ 82 million to indefinite-lived intangible assets, $ 28 million to definite-lived intangible assets, $ 181 million to goodwill, $ 1 million to property, plant and equipment, $ 11 million to inventory, $ 18 million to accounts receivable, $ 25 million to current liabilities, $ 20 million to deferred tax liabilities and $ 15 million to long-term other liabilities. The acquisition added incremental net revenues of $ 22 million in the three months and $ 45 million in the nine months ended September 30, 2021, and operating income of $ 2 million in the three months and $ 4 million in the nine months ended September 30, 2021. We incurred acquisition-related costs of $ 2 million in the nine months ended September 30, 2021. On January 4, 2021, we acquired the remaining 93 % of equity of Hu Master Holdings ("Hu"), a category leader in premium chocolate in the United States, which provides a strategic complement to our snacking portfolio in North America through growth opportunities in chocolate and other categories in the well-being category. The initial cash consideration paid was $ 229 million, net of cash received, and the Company may be required to pay additional contingent consideration. The estimated fair value of the contingent consideration obligation at the acquisition date was $ 132 million and was determined using a Monte Carlo simulation based on forecasted future results. During the third quarter, based on latest estimates, we recorded a $ 70 million reduction to the liability as recent economic and market conditions related to COVID-19 and supply chain challenges in the U.S. have impacted the pace of growth. This reduction was recorded in selling, general and administrative expenses. As a result of acquiring the remaining equity interest, we consolidated the operations prospectively from the date of acquisition and recorded a pre-tax gain of $ 9 million ($ 7 million after-tax) related to stepping up our previously-held $ 8 million ( 7 %) investment to fair value. We are working to complete the valuation and have recorded a preliminary purchase price allocation of $ 123 8 Table of Contents million to indefinite-lived intangible assets, $ 51 million to definite-lived intangible assets, $ 202 million to goodwill, $ 1 million to property, plant and equipment, $ 2 million to inventory, $ 4 million to accounts receivable, $ 5 million to current liabilities and $ 132 million to long-term other liabilities. The acquisition added incremental net revenues of $ 11 million in the three months and $ 27 million in the nine months ended September 30, 2021, and operating income (inclusive of the adjustment to the contingent consideration liability) of $ 63 million in the three months and $ 50 million in the nine months ended September 30, 2021. We incurred acquisition-related costs of $ 9 million in the nine months ended September 30, 2021. On April 1, 2020, we acquired a majority interest in Give & Go, a North American leader in fully-finished sweet baked goods and owner of the famous two-bite ® brand of brownies and the Create-A-Treat ® brand, known for cookie and gingerbread house decorating kits. The acquisition of Give & Go provides access to the in-store bakery channel and expands our position in broader snacking. The purchase consideration for Give & Go totaled $ 1,136 million, net of cash received. We have recorded a purchase price allocation of net tangible and intangible assets acquired and liabilities assumed as follows: (in millions) Receivables $ 29 Inventory 38 Other current assets 6 Property, plant and equipment 136 Operating right of use assets 61 Definite-life intangible assets 511 Indefinite-life intangible assets 42 Goodwill 531 Assets acquired $ 1,354 Current liabilities 42 Deferred tax liabilities 92 Long-term operating lease liabilities 56 Long-term debt 6 Long-term other liabilities 19 Total purchase price $ 1,139 Less: cash received 3 Net Cash Paid $ 1,136 Within definite-life intangible assets, we allocated $ 416 million to customer relationships which have an estimated useful life of 17 years. Goodwill arises principally as a result of expansion opportunities and synergies across both new and legacy product categories. None of the goodwill recognized is expected to be deductible for income tax purposes. The fair value for customer relationships at the acquisition date was determined using the multi-period excess earnings method under the income approach. The fair value measurements of intangible assets are based on significant unobservable inputs, and thus represent Level 3 inputs. Significant assumptions used in assessing the fair values of intangible assets include discounted future cash flows, customer attrition rates and discount rates. Through the one-year anniversary of the acquisition, Give & Go added incremental net revenues of $ 106 million and operating income of $ 6 million in 2021. We incurred acquisition-related costs of $ 15 million in the nine months ended September 30, 2020. We incurred acquisition integration costs of $ 3 million in the nine months ended September 30, 2021. 9 Table of Contents Note 3. Inventories Inventories consisted of the following: As of September 30, 2021 As of December 31, 2020 (in millions) Raw materials $ 822 $ 718 Finished product 2,226 2,059 3,048 2,777 Inventory reserves ( 126 ) ( 130 ) Inventories, net $ 2,922 $ 2,647 Note 4. Property, Plant and Equipment Property, plant and equipment consisted of the following: As of September 30, 2021 As of December 31, 2020 (in millions) Land and land improvements $ 407 $ 422 Buildings and building improvements 3,213 3,252 Machinery and equipment 12,104 12,053 Construction in progress 629 628 16,353 16,355 Accumulated depreciation ( 7,685 ) ( 7,329 ) Property, plant and equipment, net $ 8,668 $ 9,026 For the nine months ended September 30, 2021, capital expenditures of $ 639 million excluded $ 237 million of accrued capital expenditures remaining unpaid at September 30, 2021 and included payment for $ 275 million of capital expenditures that were accrued and unpaid at December 31, 2020. For the nine months ended September 30, 2020, capital expenditures of $ 630 million excluded $ 203 million of accrued capital expenditures remaining unpaid at September 30, 2020 and included payment for $ 334 million of capital expenditures that were accrued and unpaid at December 31, 2019. In connection with our restructuring program, we recorded non-cash property, plant and equipment write-downs (including accelerated depreciation and asset impairments) and losses/(gains) on disposal in the condensed consolidated statements of earnings within asset impairment and exit costs and within the segment results as follows (refer to Note 7, Restructuring Program ). For the Three Months Ended September 30, For the Nine Months Ended September 30, 2021 2020 2021 2020 (in millions) Latin America $ — $ ( 13 ) $ — $ ( 13 ) AMEA — — ( 16 ) 4 Europe 3 1 7 3 North America 48 ( 1 ) 165 1 Total $ 51 $ ( 13 ) $ 156 $ ( 5 ) 10 Table of Contents Note 5. Goodwill and Intangible Assets Goodwill by segment was: As of September 30, 2021 As of December 31, 2020 (in millions) Latin America $ 681 $ 706 AMEA 3,368 3,250 Europe 7,874 8,038 North America 10,106 9,901 Goodwill $ 22,029 $ 21,895 Intangible assets consisted of the following: As of September 30, 2021 As of December 31, 2020 (in millions) Indefinite-life intangible assets $ 17,379 $ 17,492 Definite-life intangible assets 3,018 2,907 20,397 20,399 Accumulated amortization ( 1,984 ) ( 1,917 ) Intangible assets, net $ 18,413 $ 18,482 Indefinite-life intangible assets consist principally of brand names purchased through our acquisitions of Nabisco Holdings Corp., the Spanish and Portuguese operations of United Biscuits, the global LU biscuit business of Groupe Danone S.A. and Cadbury Limited. Definite-life intangible assets consist primarily of brands, customer-related intangibles, process technology, licenses and non-compete agreements. Amortization expense for intangible assets was $ 32 million for the three months and $ 102 million for the nine months ended September 30, 2021 and $ 50 million for the three months and $ 143 million for the nine months ended September 30, 2020. For the next five years, we currently estimate annual amortization expense of approximately $ 135 million in 2021, approximately $ 130 million in 2022-2024 and approximately $ 105 million in 2025 (reflecting September 30, 2021 exchange rates). Changes in goodwill and intangible assets consisted of: Goodwill Intangible Assets, at cost (in millions) Balance at January 1, 2021 $ 21,895 $ 20,399 Currency ( 425 ) ( 375 ) Acquisitions 559 405 Asset impairments — ( 32 ) Balance at September 30, 2021 $ 22,029 $ 20,397 Changes to goodwill and intangibles were: • Acquisitions - In connection with our acquisitions of Gourmet Food, Grenade and the remaining interest in Hu during the first nine months of 2021, we recorded preliminary purchase price allocations totaling $ 559 million of goodwill and $ 405 million of intangible assets. See Note 2, Acquisitions and Divestitures , for additional information. • Asset impairments - As further described below, during the second quarter of 2021, we recorded $ 32 million of intangible asset impairments resulting primarily from lower than expected sales growth for one brand across our North America segment. 11 Table of Contents We evaluate our goodwill and intangible asset impairment risk quarterly using qualitative analysis. In light of the ongoing COVID-19 global pandemic, we performed further quantitative analysis over indefinite-life intangible assets and recorded approximately $ 32 million of intangible asset charges in the second quarter of 2021 and $ 90 million in the second quarter of 2020. During the third quarter of 2021, we performed our annual impairment assessment test for goodwill and indefinite-life intangible assets as of July 1, 2021. Our 2021 annual testing of goodwill resulted in no impairments as each reporting unit had sufficient fair value in excess of its carrying value. As part of our goodwill quantitative annual impairment testing, we compare a reporting unit's estimated fair value with its carrying value. If the carrying value of a reporting unit's net assets exceeds its fair value, we would record an impairment based on the difference between the carrying value and fair value of the reporting unit. We estimate a reporting unit's fair value using a discounted cash flow method that incorporates planned growth rates, market-based discount rates and estimates of residual value. This year, for our Europe and North America reporting units, we used a market based, weighted-average cost of capital of 6.4 % to discount the projected cash flows of those operations. For our Latin America and AMEA reporting units, we used a risk-rated discount rate of 9.4 %. 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 continued impact of COVID-19, those estimates could be significantly different than future performance. While all reporting units passed our annual impairment testing, if planned business performance expectations are not met or specific valuation factors outside of our control, such as discount rates, change significantly, then the estimated fair values of a reporting unit or reporting units might decline and lead to a goodwill impairment in the future. During our 2021 annual testing of indefinite-life intangible assets, there were no impairments noted. We identified eight brands that each had a fair value in excess of book value of 10% or less. The aggregate book value of the eight brands was $ 1,156 million as of September 30, 2021. During our annual testing, 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 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 a brand's earnings expectations, including the timing of the expected recovery from the COVID-19 pandemic impacts, 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. During our prior-year testing, we recorded approximately $ 54 million of impairment charges in the third quarter of 2020 related to three gum and chocolate bran ds. In 2020, the ongoing impact of the pandemic resulted in greater declines in the sales and earnings for certain brands, particularly our gum brands. We incorporated the latest results, projections and expected recovery for these brands in our annual 2020 impairment testing. 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. Note 6. Equity Method Investments Equity method investments consist of our investments in entities in which we maintain an equity ownership interest and apply the equity method of accounting due to our ability to exert significant influence over decisions relating to their operating and financial affairs. Revenue and expenses of our equity method investees are not consolidated into our financial statements; rather, our proportionate share of the earnings of each investee is reflected as equity method investment net earnings . The carrying values of our equity method investments are also impacted by our proportionate share of items impacting the investee's accumulated other comprehensive income or losses and other items, such as our share of investee dividends. Our equity method investments include, but are not limited to, our ownership interests in JDE Peet's (Euronext Amsterdam: "JDEP"), Keurig Dr Pepper Inc. (Nasdaq: "KDP"), Dong Suh Foods Corporation and Dong Suh Oil & Fats Co. Ltd. Our ownership interests may change over time due to investee stock-based compensation arrangements, share issuances or other equity-related transactions. As of September 30, 2021, we owned 22.8 %, 5.3 %, 50.0 % and 49.0 %, respectively, of these companies' outstanding shares. Our investments accounted for under the equity method of accounting totaled $ 5,269 million as of September 30, 2021 and $ 6,036 million as of December 31, 2020. We recorded equity earnings of $ 105 million and cash dividends of $ 64 million in the third quarter of 2021 and equity earnings of $ 84 million and cash dividends of $ 27 million in the 12 Table of Contents third quarter of 2020. We recorded equity earnings of $ 290 million and cash dividends of $ 158 million in the first nine months of 2021 and equity earnings of $ 311 million and cash dividends of $ 220 million in the first nine months of 2020 . Based on the quoted closing prices as of September 30, 2021, the combined fair value of our publicly-traded investments in JDEP and KDP wa s $ 6.0 billion , and for each investment, its fair value exceeded its carrying value. Keurig Dr Pepper Transactions: On August 2, 2021, we sold approximately 14.7 million shares of KDP, which reduced our ownership interest by 1 % of the total outstanding shares. We received $ 500 million of proceeds and recorded a pre-tax gain of $ 248 million (or $ 189 million after-tax) during the third quarter of 2021. As we continue to have significant influence, we continue to account for our investment in KDP under the equity method, resulting in recognizing our share of their earnings within our earnings and our share of their dividends within our cash flows. We continue to have board representation with one director on the KDP Board of Directors and we retained certain additional governance rights. On June 7, 2021, we participated in a secondary offering of KDP shares and sold approximately 28 million shares, which reduced our ownership interest by 2 % of the total outstanding shares. We received $ 997 million of proceeds and recorded a pre-tax gain of $ 520 million (or $ 392 million after-tax) during the second quarter of 2021. On September 9, 2020, we sold approximately 12.5 million shares of KDP, which reduced our ownership interest by 0.9 % of the total outstanding shares. We received $ 363 million of proceeds and recorded a pre-tax gain of $ 154 million (or $ 119 million after-tax) during the third quarter of 2020. On August 3, 2020, we sold approximately 14.1 million shares of KDP, which reduced our ownership interest by 1.0 % of the total outstanding shares. We received $ 414 million of proceeds and recorded a pre-tax gain of $ 181 million (or $ 139 million after-tax) during the third quarter of 2020. On 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 % 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. JDE Peet’s Transaction: On May 19, 2020, JDE Peet’s B.V. (renamed JDE Peet’s N.V. immediately prior to Settlement (as defined below), “JDE Peet’s”) announced its intention to launch an offering of its ordinary shares (the “offering”) and to apply for admission to listing and trading of all of its ordinary shares on Euronext Amsterdam, a regulated market operated by Euronext Amsterdam N.V. (the “admission”). On May 26, 2020, JDE Peet’s published a prospectus in connection with the offering and the admission. On May 29, 2020, JDE Peet’s announced the final pricing terms of the offering, and JDE Peet’s and the selling shareholders, including us, agreed to sell at a price of € 31.50 per ordinary share a total of approximately 82.1 million ordinary shares, including ordinary shares subject to an over-allotment option. The ordinary shares were listed and first traded on May 29, 2020, and payment for, and delivery of, the ordinary shares sold in the offering (excluding ordinary shares subject to the over-allotment option) took place on June 2, 2020 (“Settlement”). Prior to Settlement, we exchanged our 26.4 % ownership interest in Jacobs Douwe Egberts ("JDE") for a 26.5 % equity interest in JDE Peet’s. We did not invest new capital in connection with the transaction and the exchange was accounted for as a change in interest transaction. Upon Settlement, we sold approximately 9.7 million of our ordinary shares in JDE Peet’s in the offering for gross proceeds of € 304 million ($ 343 million). We subsequently sold approximately 1.4 million additional shares and received gross proceeds of € 46 million ($ 51 million) upon exercise of the over-allotment option. Following Settlement and the exercise of the over-allotment option, we held a 22.9 % equity interest in JDE Peet’s. During the second quarter of 2020, we recorded a preliminary gain of $ 121 million, net of $ 33 million released from accumulated other comprehensive losses, and $ 48 million of transaction costs. During the third quarter of 2020, we increased our preliminary gain by $ 10 million to $ 131 million. On September 20, 2021, we issued € 300 million exchangeable bonds, which are redeemable at maturity at their principal amount in cash or, at our option, through the delivery of an equivalent number of JDE Peet’s ordinary shares based on an initial exchange price of € 35.40 and, as the case may be, an additional amount in cash. If all bonds were redeemed in exchange for JDE Peet's shares, this would represent approximately 8.5 million shares or 13 Table of Contents approximately 7 % of our equity interest in JDE Peet's. Refer to Note 8, Debt and Borrowing Arrangements, for further details on this transaction. As was the case in our ownership interest in JDE, we have significant influence with respect to JDE Peet’s, and we continue to account for our investment in JDE Peet’s under the equity method, resulting in recognizing our share of JDE Peet’s earnings within our earnings and our share of JDE Peet’s dividends within our cash flows. In the second quarter of 2020, in connection with this transaction, we changed our accounting principle to reflect our share of JDE’s historical and JDE Peet’s ongoing earnings on a one-quarter lag basis, although we continue to record dividends when cash is received. We determined a lag was preferable as it enables us to continue to report our quarterly and annual results on a timely basis, while recording our share of JDE Peet’s ongoing results after JDE Peet’s has publicly reported its results. This change in accounting principle was applied retrospectively to all periods. Note 7. Restructuring Program On May 6, 2014, our Board of Directors approved a $ 3.5 billion 2014-2018 restructuring program and up to $ 2.2 billion of capital expenditures. On August 31, 2016, our Board of Directors approved a $ 600 million reallocation between restructuring program cash costs and capital expenditures so the $ 5.7 billion program consisted of approximately $ 4.1 billion of restructuring program charges ($ 3.1 billion cash costs and $ 1.0 billion non-cash costs) and up to $ 1.6 billion of capital expenditures. On September 6, 2018, our Board of Directors approved an extension of the restructuring program through 2022, an increase of $ 1.3 billion in the program charges and an increase of $ 700 million in capital expenditures. On October 21, 2021, our Board of Directors approved an extension of the restructuring program through 2023. The total $ 7.7 billion program now consists of $ 5.4 billion of program charges ($ 4.1 billion of cash costs and $ 1.3 billion of non-cash costs) and total capital expenditures of $ 2.3 billion to be incurred over the life of the program. The current restructuring program, as increased and extended by these actions, is now called the Simplify to Grow Program. The primary objective of the Simplify to Grow Program is to reduce our operating cost structure in both our supply chain and overhead costs. The program covers severance as well as asset disposals and other manufacturing and procurement-related one-time costs. Since inception, we have incurred total restructuring and implementation charges of $ 5.1 billion related to the Simplify to Grow Program. We expect to incur the remainder of the program charges by year-end 2023. Restructuring Costs : The Simplify to Grow Program liability activity for the nine months ended September 30, 2021 was: Severance and related costs Asset Write-downs Total (in millions) Liability balance, January 1, 2021 $ 304 $ — $ 304 Charges 84 166 250 Cash spent ( 129 ) — ( 129 ) Non-cash settlements/adjustments ( 4 ) ( 166 ) ( 170 ) Currency ( 10 ) — ( 10 ) Liability balance, September 30, 2021 $ 245 $ — $ 245 • We recorded restructuring charges of $ 62 million in the third quarter of 2021 and $ 68 million in the third quarter of 2020 and $ 250 million in the first nine months of 2021 and $ 111 million in the first nine months of 2020 within asset impairment and exit costs and benefit plan non-service income. • We spent $ 65 million in the third quarter of 2021 and $ 44 million in the third quarter of 2020 and $ 129 million in the first nine months of 2021 and $ 113 million in the first nine months of 2020 in cash severance and related costs. • We also recognized non-cash asset write-downs (including accelerated depreciation and asset impairments), including any gains on sale of restructuring program assets, non-cash pension settlement losses and other adjustments, which totaled $ 54 million in the third quarter of 2021 and a gain of $ 13 million in the third quarter of 2020 and $ 170 million in the first nine months of 2021 and $ 1 million in the first nine months of 2020. • At September 30, 2021, $ 198 million of our net restructuring liability was recorded within other current liabilities and $ 47 million was recorded within other long-term liabilities. 14 Table of Contents Implementation Costs: Implementation costs are directly attributable to restructuring activities; however, they do not qualify for special accounting treatment as exit or disposal activities. We believe the disclosure of implementation costs provides readers of our financial statements with more information on the total costs of our Simplify to Grow Program. Implementation costs primarily relate to reorganizing our operations and facilities in connection with our supply chain reinvention program and other identified productivity and cost saving initiatives. The costs include incremental expenses related to the closure of facilities, costs to terminate certain contracts and the simplification of our information systems. Within our continuing results of operations, we recorded implementation costs of $ 65 million in the third quarter of 2021 and $ 46 million in the third quarter of 2020 and $ 132 million in the first nine months of 2021 and $ 141 million in the first nine months of 2020. We recorded these costs within cost of sales and general corporate expense within selling, general and administrative expenses. Restructuring and Implementation Costs: During the three and nine months ended September 30, 2021 and September 30, 2020, and since inception of the Simplify to Grow Program, we recorded the following restructuring and implementation costs within segment operating income and earnings before income taxes: Latin America AMEA Europe North America Corporate Total (in millions) For the Three Months Ended September 30, 2021 Restructuring Costs $ 1 $ 1 $ 2 $ 57 $ 1 $ 62 Implementation Costs — 2 6 51 6 65 Total $ 1 $ 3 $ 8 $ 108 $ 7 $ 127 For the Three Months Ended September 30, 2020 Restructuring Costs $ 1 $ 21 $ 40 $ 3 $ 3 $ 68 Implementation Costs 4 6 15 15 6 46 Total $ 5 $ 27 $ 55 $ 18 $ 9 $ 114 For the Nine Months Ended September 30, 2021 Restructuring Costs $ 4 $ ( 18 ) $ 7 $ 250 $ 7 $ 250 Implementation Costs 7 7 27 78 13 132 Total $ 11 $ ( 11 ) $ 34 $ 328 $ 20 $ 382 For the Nine Months Ended September 30, 2020 Restructuring Costs $ 19 $ 25 $ 52 $ 3 $ 12 $ 111 Implementation Costs 12 12 40 36 41 141 Total $ 31 $ 37 $ 92 $ 39 $ 53 $ 252 Total Project (Inception to Date) Restructuring Costs $ 551 $ 540 $ 1,150 $ 742 $ 149 $ 3,132 Implementation Costs 294 236 538 534 351 1,953 Total $ 845 $ 776 $ 1,688 $ 1,276 $ 500 $ 5,085 15 Table of Contents Note 8. Debt and Borrowing Arrangements Short-Term Borrowings: Our short-term borrowings and related weighted-average interest rates consisted of: As of September 30, 2021 As of December 31, 2020 Amount Outstanding Weighted- Average Rate Amount Outstanding Weighted- Average Rate (in millions, except percentages) Commercial paper $ 184 0.1 % $ — — % Bank loans 50 8.6 % 29 4.8 % Total short-term borrowings $ 234 $ 29 Our uncommitted credit lines and committed credit lines available as of September 30, 2021 and December 31, 2020 include: As of September 30, 2021 As of December 31, 2020 Facility Amount Borrowed Amount Facility Amount Borrowed Amount (in millions) Uncommitted credit facilities $ 1,463 $ 50 $ 1,487 $ 29 Credit facility expiry (1) : February 24, 2021 — — 1,500 — February 23, 2022 2,500 — — — February 27, 2024 4,500 — 4,500 — (1) We maintain a multi-year senior unsecured revolving credit facility for general corporate purposes, including working capital needs, and to support our commercial paper program. The revolving credit agreement includes a covenant that we maintain a minimum shareholders' equity of at least $ 24.6 billion, excluding accumulated other comprehensive earnings/(losses), the cumulative effects of any changes in accounting principles and earnings/(losses) recognized in connection with the ongoing application of any mark-to-market accounting for pensions and other retirement plans. At September 30, 2021, we complied with this covenant as our shareholders' equity, as defined by the covenant, was $ 38.6 billion. The revolving credit facility also contains customary representations, covenants and events of default. There are no credit rating triggers, provisions or other financial covenants that could require us to post collateral as security. Long-Term Debt: Redemptions: During the nine months ended September 30, 2021, we completed early redemptions of euro and U.S. dollar denominated notes for the following amounts (in millions): Interest Rate Redemption Date Maturity Date Amount Redeemed USD Equivalent 2.000 % September 2021 October 2021 $ 1,500 $ 1,500 3M LIBOR + 0.700 % September 2021 October 2022 $ 500 $ 500 3M LIBOR + 0.800 % September 2021 October 2024 $ 500 $ 500 1.000 % March 2021 March 2022 € 500 $ 587 1.625 % March 2021 January 2023 € 700 $ 821 2.125 % March 2021 April 2023 $ 500 $ 500 4.000 % March 2021 February 2024 $ 492 $ 492 We recorded $ 137 million of extinguishment loss and debt-related expenses within interest and other expense, net related to $ 110 million paid in excess of carrying value of the debt and recognizing unamortized discounts and deferred financing in earnings and $ 27 million foreign currency derivative loss related to the redemption payment at the time of the debt extinguishment. The cash payments related to the redemption were classified as cash outflows from financing activities in the consolidated statement of cash flows. 16 Table of Contents Repayments: During the nine months ended September 30, 2021, we repaid the following note (in millions): Interest Rate Maturity Date Amount USD Equivalent 2.375 % January 2021 € 679 $ 827 Issuances: During the nine months ended September 30, 2021, we issued the following notes (in millions): Issuance Date Interest Rate Maturity Date Gross Proceeds (1) Gross Proceeds USD Equivalent September 2021 (2) 0.750 % September 2024 $ 500 $ 500 September 2021 (2) 1.250 % September 2026 $ 350 $ 350 September 2021 (2)(3) 0.000 % September 2024 € 300 $ 352 September 2021 (2)(4) 0.250 % September 2029 € 650 $ 769 September 2021 (2)(4) 0.625 % September 2032 € 650 $ 769 September 2021 (2)(4) 1.250 % September 2041 € 700 $ 828 March 2021 0.250 % March 2028 € 750 $ 896 March 2021 0.750 % March 2033 € 600 $ 717 March 2021 1.375 % March 2041 € 650 $ 777 (1) Represents gross proceeds from the issuance of notes excluding debt issuance costs, discounts and premiums. (2) Issued by Mondelez International Holdings Netherlands B.V. ("MIHN"), a wholly owned Dutch subsidiary of Mondelez International, Inc. (3) Issuance of exchangeable bonds that were issued at 102 % of their principal amount and are redeemable for cash or existing ordinary shares of JDE Peet's at our option (see Note 6, Equity Method Investments ). Bondholders have an option to redeem bonds before maturity subject to exchange periods. We have identified our option to settle in either cash or existing ordinary shares of JDE Peet's as an embedded derivative that is bifurcated and accounted for separately from the bond. See Note 9, Financial Instruments . (4) Issuance of green bonds where we have committed to allocate an amount equal to the € 1.97 billion total net proceeds from the offering over time to eligible projects that align with our sustainability priorities in the areas of building a thriving ingredient supply chain and reducing our environmental impact. Fair Value of Our Debt: The fair value of our short-term borrowings at September 30, 2021 and December 31, 2020 reflects current market interest rates and approximates the amounts we have recorded on our consolidated balance sheets. The fair value of our long-term debt was determined using quoted prices in active markets (Level 1 valuation data) for the publicly traded debt obligations. As of September 30, 2021 As of December 31, 2020 (in millions) Fair Value $ 20,795 $ 21,568 Carrying Value $ 19,987 $ 20,046 Interest and Other Expense, net: Interest and other expense, net consisted of: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2021 2020 2021 2020 (in millions) Interest expense, debt $ 87 $ 104 $ 275 $ 322 Loss on debt extinguishment and related expenses — — 137 Loss related to interest rate swaps — — — 103 Other (income)/expense, net ( 5 ) ( 15 ) ( 54 ) ( 61 ) Interest and other expense, net $ 82 $ 89 $ 358 $ 364 Other income includes amounts excluded from hedge effectiveness related to our net investment hedge derivative contracts that totaled $ 19 million and $ 58 million in the three and nine months ended September 30, 2021 and $ 28 million and $ 92 million for the three and nine months ended September 30, 2020. 17 Table of Contents Note 9. Financial Instruments Fair Value of Derivative Instruments: Derivative instruments were recorded at fair value in the condensed consolidated balance sheets as follows: As of September 30, 2021 As of December 31, 2020 Asset Derivatives Liability Derivatives Asset Derivatives Liability Derivatives (in millions) Derivatives designated as accounting hedges: Interest rate contracts $ 9 $ 29 $ 12 $ 340 Net investment hedge derivative contracts (1) 111 37 114 129 $ 120 $ 66 $ 126 $ 469 Derivatives not designated as accounting hedges: Currency exchange contracts $ 108 $ 51 $ 134 $ 119 Commodity contracts 452 164 205 128 Equity method investment contracts (2) — 3 — — $ 560 $ 218 $ 339 $ 247 Total fair value $ 680 $ 284 $ 465 $ 716 (1) Net investment hedge derivative contracts consist of cross-currency interest rate swaps, forward contracts and options. We also designate some of our non-U.S. dollar denominated debt to hedge a portion of our net investments in our non-U.S. operations. This debt is not reflected in the table above, but is included in long-term debt discussed in Note 8, Debt and Borrowing Arrangements . Both net investment hedge derivative contracts and non-U.S. dollar denominated debt acting as net investment hedges are also disclosed in the Derivative Volume table and the Hedges of Net Investments in International Operations section appearing later in this footnote. (2) Equity method investment contracts consist of the bifurcated embedded derivative option that was a component of the September 20, 2021 € 300 million exchangeable bonds issuance. Refer to Note 8, Debt and Borrowing Arrangements . Derivatives designated as accounting hedges include cash flow and net investment hedge derivative contracts. Our currency exchange, commodity derivative and equity method investment contracts are economic hedges that are not designated as accounting hedges. We record derivative assets and liabilities on a gross basis on our condensed consolidated balance sheets. The fair value of our asset derivatives is recorded within other current assets and other assets and the fair value of our liability derivatives is recorded within other current liabilities and other liabilities. The fair values (asset/(liability)) of our derivative instruments were determined using: As of September 30, 2021 Total Fair Value of Net Asset/(Liability) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (in millions) Currency exchange contracts $ 57 $ — $ 57 $ — Commodity contracts 288 171 117 — Interest rate contracts ( 20 ) — ( 20 ) — Net investment hedge contracts 74 — 74 — Equity method investment contracts ( 3 ) — ( 3 ) — Total derivatives $ 396 $ 171 $ 225 $ — 18 Table of Contents As of December 31, 2020 Total Fair Value of Net Asset/(Liability) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (in millions) Currency exchange contracts $ 15 $ — $ 15 $ — Commodity contracts 77 46 31 — Interest rate contracts ( 328 ) — ( 328 ) — Net investment hedge contracts ( 15 ) — ( 15 ) — Total derivatives $ ( 251 ) $ 46 $ ( 297 ) $ — Level 1 financial assets and liabilities consist of exchange-traded commodity futures and listed options. The fair value of these instruments is determined based on quoted market prices on commodity exchanges. Level 2 financial assets and liabilities consist primarily of over-the-counter (“OTC”) currency exchange forwards, options and swaps; commodity forwards and options; net investment hedge contracts; and interest rate swaps. Our currency exchange contracts are valued using an income approach based on observable market forward rates less the contract rate multiplied by the notional amount. Commodity derivatives are valued using an income approach based on the observable market commodity index prices less the contract rate multiplied by the notional amount or based on pricing models that rely on market observable inputs such as commodity prices. Our bifurcated exchange options are valued, as derivative instrument liabilities, using the Black-Scholes option pricing model. This model requires assumptions related to the market price of the underlying note and associated credit spread combined with the share of price, expected dividend yield, and expected volatility of the JDE Peet’s shares over the life of the option. Our calculation of the fair value of interest rate swaps is derived from a discounted cash flow analysis based on the terms of the contract and the observable market interest rate curve. Our calculation of the fair value of financial instruments takes into consideration the risk of nonperformance, including counterparty credit risk. Our OTC derivative transactions are governed by International Swap Dealers Association agreements and other standard industry contracts. Under these agreements, we do not post nor require collateral from our counterparties. The majority of our derivative contracts do not have a legal right of set-off. We manage the credit risk in connection with these and all our derivatives by entering into transactions with counterparties with investment grade credit ratings, limiting the amount of exposure with each counterparty and monitoring the financial condition of our counterparties. Derivative Volume: The notional values of our hedging instruments were: Notional Amount As of September 30, 2021 As of December 31, 2020 (in millions) Currency exchange contracts: Intercompany loans and forecasted interest payments $ 1,185 $ 2,184 Forecasted transactions 4,022 4,169 Commodity contracts 8,573 7,947 Interest rate contracts 1,850 3,500 Net investment hedges: Net investment hedge derivative contracts 3,914 4,551 Non-U.S. dollar debt designated as net investment hedges Euro notes 3,688 3,744 British pound sterling notes 355 360 Swiss franc notes 1,116 1,175 Canadian dollar notes 473 472 19 Table of Contents Cash Flow Hedges: Cash flow hedge activity, net of taxes, within accumulated other comprehensive earnings/(losses) included: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2021 2020 2021 2020 (in millions) Accumulated (loss)/gain at beginning of period $ ( 142 ) $ ( 154 ) $ ( 161 ) $ ( 213 ) Transfer of realized losses/(gains) in fair value to earnings ( 52 ) 65 ( 139 ) 153 Unrealized (loss)/gain in fair value 45 ( 69 ) 151 ( 98 ) Accumulated (loss)/gain at end of period $ ( 149 ) $ ( 158 ) $ ( 149 ) $ ( 158 ) After-tax gains/(losses) reclassified from accumulated other comprehensive earnings/(losses) to net earnings were: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2021 2020 2021 2020 (in millions) Interest rate contracts $ 52 $ ( 65 ) $ 139 $ ( 153 ) Within interest and other expense, net, due to changes in forecasted debt, we recognized losses related to forward-starting interest rate swaps of $ 79 million ($ 103 million pre-tax) in the first quarter of 2020 and in the nine months ended September 30, 2020. After-tax gains/(losses) recognized in other comprehensive earnings/(losses) were: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2021 2020 2021 2020 (in millions) Currency exchange contracts – forecasted transactions $ ( 6 ) $ — $ — $ ( 1 ) Interest rate contracts 51 ( 69 ) 151 ( 97 ) Total $ 45 $ ( 69 ) $ 151 $ ( 98 ) Cash flow hedge ineffectiveness was not material for all periods presented. We record pre-tax (i) gains or losses reclassified from accumulated other comprehensive earnings/(losses) into earnings, (ii) gains or losses on ineffectiveness and (iii) gains or losses on amounts excluded from effectiveness testing in interest and other expense, net for interest rate contracts. Based on current market conditions, we would expect to transfer losses of $ 35 million (net of taxes) for interest rate cash flow hedges to earnings during the next 12 months. Cash Flow Hedge Coverage: As of September 30, 2021, our longest dated cash flow hedges were interest rate swaps that hedge forecasted interest rate payments over the next 4 years and 11 months. Hedges of Net Investments in International Operations: Net investment hedge ("NIH") derivative contracts: We enter into cross-currency interest rate swaps, forwards and options to hedge certain investments in our non-U.S. operations against movements in exchange rates. The aggregate notional value as of September 30, 2021 was $ 3.9 billion. 20 Table of Contents The impacts of the net investment hedge derivative contracts on other comprehensive earnings and net earnings were as follows: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2021 2020 2021 2020 (in millions) After-tax gain/(loss) on NIH contracts (1) $ 50 $ ( 223 ) $ 73 $ ( 6 ) (1) Amounts recorded for unsettled and settled NIH derivative contracts are recorded in the cumulative translation adjustment within other comprehensive earnings. The cash flows from the settled contracts are reported within other investing activities in the condensed consolidated statement of cash flows. For the Three Months Ended September 30, For the Nine Months Ended September 30, 2021 2020 2021 2020 (in millions) Amounts excluded from the assessment of hedge effectiveness (1) $ 19 $ 28 $ 58 $ 92 (1) We elected to record changes in the fair value of amounts excluded from the assessment of effectiveness in net earnings within interest and other expense, net. Non-U.S. dollar debt designated as net investment hedges: After-tax gains/(losses) related to hedges of net investments in international operations in the form of euro, British pound sterling, Swiss franc and Canadian dollar-denominated debt were recorded within the cumulative translation adjustment section of other comprehensive income and were: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2021 2020 2021 2020 (in millions) Euro notes $ 67 $ ( 122 ) $ 160 $ ( 135 ) British pound sterling notes 7 ( 10 ) 4 7 Swiss franc notes 6 ( 27 ) 45 ( 47 ) Canadian notes 9 ( 6 ) ( 1 ) 9 Economic Hedges: Pre-tax gains/(losses) recorded in net earnings for economic hedges were: For the Three Months Ended September 30, For the Nine Months Ended September 30, Location of Gain/(Loss) Recognized in Earnings 2021 2020 2021 2020 (in millions) Currency exchange contracts: Intercompany loans and forecasted interest payments $ ( 5 ) $ 7 $ 67 $ ( 73 ) Interest and other expense, net Forecasted transactions 29 28 41 50 Cost of sales Forecasted transactions — 6 ( 2 ) ( 3 ) Interest and other expense, net Forecasted transactions ( 1 ) ( 1 ) — ( 2 ) Selling, general and administrative expenses Commodity contracts 151 136 362 ( 47 ) Cost of sales Equity method investment contracts 2 — 2 — Gain on equity method investment transactions Total $ 176 $ 176 $ 470 $ ( 75 ) 21 Table of Contents Note 10. Benefit Plans Pension Plans Components of Net Periodic Pension Cost: Net periodic pension cost/(benefit) consisted of the following: U.S. Plans Non-U.S. Plans For the Three Months Ended September 30, For the Three Months Ended September 30, 2021 2020 2021 2020 (in millions) Service cost $ 1 $ 1 $ 29 $ 30 Interest cost 10 12 39 37 Expected return on plan assets ( 18 ) ( 19 ) ( 106 ) ( 100 ) Amortization: Net loss from experience differences 4 5 32 29 Prior service cost/(benefit) — 1 ( 2 ) ( 2 ) Curtailment credit (1) — — ( 3 ) — Settlement losses and other expenses 5 3 — — Net periodic pension cost/(benefit) $ 2 $ 3 $ ( 11 ) $ ( 6 ) U.S. Plans Non-U.S. Plans For the Nine Months Ended September 30, For the Nine Months Ended September 30, 2021 2020 2021 2020 (in millions) Service cost $ 5 $ 4 $ 99 $ 89 Interest cost 30 38 98 110 Expected return on plan assets ( 54 ) ( 58 ) ( 319 ) ( 295 ) Amortization: Net loss from experience differences 13 13 98 86 Prior service cost/(benefit) — 1 ( 5 ) ( 5 ) Curtailment credit (1) — — ( 17 ) — Settlement losses and other expenses 14 15 — 2 Net periodic pension cost/(benefit) $ 8 $ 13 $ ( 46 ) $ ( 13 ) (1) During the third quarter of 2021, we terminated our Defined Benefit Pension Scheme in Nigeria. During the second quarter of 2021, we made a decision to freeze our Defined Benefit Pension Scheme in the United Kingdom. As a result, we recognized curtailment credits of $( 3 million) for the three months and $( 17 million) for the nine months ended September 30, 2021 recorded within benefit plan non-service income. In connection with the United Kingdom plan freeze, we also incurred incentive payment charges and other expenses of $ 2 million for the three months and $ 47 million for the nine months ended September 30, 2021 included in operating income. Employer Contributions: During the nine months ended September 30, 2021, we contributed $ 7 million to our U.S. pension plans and $ 173 million to our non-U.S. pension plans, including $ 88 million to plans in the United Kingdom and Ireland. We make contributions to our pension plans in accordance with local funding arrangements and statutory minimum funding requirements. Discretionary contributions are made to the extent that they are tax deductible and do not generate an excise tax liability. As of September 30, 2021, over the remainder of 2021, we plan to make further contributions of approximately $ 1 million to our U.S. plans and approximately $ 55 million to our non-U.S. plans. Our actual contributions may be different due to many factors, including changes in tax and other benefit laws, significant differences between expected and actual pension asset performance or interest rates. 22 Table of Contents Multiemployer Pension Plans: On July 11, 2019, we received an undiscounted withdrawal liability assessment related to our complete withdrawal from the Bakery and Confectionery Union and Industry International Pension Fund totaling $ 526 million requiring pro-rata monthly payments over 20 years. We began making monthly payments during the third quarter of 2019. In connection with the discounted long-term liability, we recorded accreted interest of $ 2 million and $ 8 million in the three and nine months ended September 30, 2021 and $ 3 million and $ 9 million in the three and nine months ended September 30, 2020 within interest and other expense, net. As of September 30, 2021, the remaining discounted withdrawal liability was $ 364 million, with $ 14 million recorded in other current liabilities and $ 350 million recorded in long-term other liabilities. Postretirement Benefit Plans Net periodic postretirement health care cost/(benefit) consisted of the following: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2021 2020 2021 2020 (in millions) Service cost $ 1 $ 1 $ 3 $ 4 Interest cost 2 3 6 9 Amortization: Net loss from experience differences 1 1 2 5 Prior service credit — ( 8 ) — ( 23 ) Net periodic postretirement health care cost/(benefit) $ 4 $ ( 3 ) $ 11 $ ( 5 ) Postemployment Benefit Plans Net periodic postemployment cost consisted of the following: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2021 2020 2021 2020 (in millions) Service cost $ 2 $ 1 $ 5 $ 4 Interest cost 1 1 2 3 Amortization of net gains ( 2 ) ( 1 ) ( 3 ) ( 3 ) Net periodic postemployment cost $ 1 $ 1 $ 4 $ 4 Note 11. Stock Plans Stock Options: Stock option activity is reflected below: Shares Subject to Option Weighted- Average Exercise or Grant Price Per Share Average Remaining Contractual Term Aggregate Intrinsic Value Balance at January 1, 2021 27,751,894 $ 39.51 5 years $ 527 million Annual grant to eligible employees 2,412,710 56.13 Additional options issued 154,400 58.17 Total options granted 2,567,110 56.25 Options exercised (1) ( 4,880,357 ) 34.41 $ 124 million Options canceled ( 461,521 ) 48.89 Balance at September 30, 2021 24,977,126 42.06 5 years $ 405 million (1) Cash received from options exercised was $ 21 million in the three months and $ 161 million in the nine months ended September 30, 2021. The actual tax benefit realized and recorded in the provision for income taxes for the tax deductions from the option exercises totaled $ 2 million in the three months and $ 16 million in the nine months ended September 30, 2021. 23 Table of Contents Performance Share Units and Other Stock-Based Awards: Our performance share unit, deferred stock unit and historically granted restricted stock activity is reflected below: Number of Shares Grant Date Weighted-Average Fair Value Per Share (3) Weighted-Average Aggregate Fair Value (3) Balance at January 1, 2021 4,896,990 $ 53.80 Annual grant to eligible employees: Feb 18, 2021 Performance share units 903,250 59.35 Deferred stock units 550,090 56.13 Additional shares granted (1) 1,144,950 Various 53.68 Total shares granted 2,598,290 56.17 $ 146 million Vested (2) ( 2,372,833 ) 49.75 $ 118 million Forfeited ( 304,382 ) 57.32 Balance at September 30, 2021 4,818,065 56.85 (1) Includes performance share units and deferred stock units. (2) The actual tax benefit/(expense) realized and recorded in the provision for income taxes for the tax deductions from the shares vested totaled less than $ 1 million in the three months and $ 6 million in the nine months ended September 30, 2021. (3) The grant date fair value of performance share units is determined based on the Monte Carlo simulation model for the market-based total shareholder return component and the closing market price of the Company’s stock on the grant date for performance-based components. The Monte Carlo simulation model incorporates the probability of achieving the total shareholder return market condition. Compensation expense is recognized using the grant date fair values regardless of whether the market condition is achieved, so long as the requisite service has been provided. Share Repurchase Program: Between 2013 and 2017, our Board of Directors authorized the repurchase of a total of $ 13.7 billion of our Common Stock through December 31, 2018. On January 31, 2018, our Finance Committee, with authorization delegated from our Board of Directors, approved an increase of $ 6.0 billion in the share repurchase program, raising the authorization to $ 19.7 billion of Common Stock repurchases, and extended the program through December 31, 2020. On December 2, 2020, our Board of Directors approved an increase of $ 4.0 billion in the share repurchase program, raising the authorization to $ 23.7 billion of Common Stock repurchases, and extended the program through December 31, 2023. Repurchases under the program are determined by management and are wholly discretionary. Prior to January 1, 2021, we had repurchased approximately $ 18.0 billion of Common Stock pursuant to this authorization. During the nine months ended September 30, 2021, we repurchased approximately 31 million shares of Common Stock at an average cost of $ 58.72 per share, or an aggregate cost of approximately $ 1.8 billion, all of which was paid during the period. All share repurchases were funded through available cash and commercial paper issuances. As of September 30, 2021, we have approximately $ 4.0 billion in remaining share repurchase capacity. Note 12. Commitments and Contingencies Legal Proceedings: We routinely are involved in legal proceedings, claims, disputes, regulatory matters and governmental inspections or investigations arising in the ordinary course of or incidental to our business, including those noted below in this section. We record provisions in the consolidated financial statements for pending litigation when we determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. For matters we have not provided for that are reasonably possible to result in an unfavorable outcome, management is unable to estimate the possible loss or range of loss or such amounts have been determined to be immaterial. At present we believe that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm our financial position, results of operations or cash flows. However, legal proceedings and government investigations are subject to inherent uncertainties, and unfavorable rulings or other events could occur. Unfavorable resolutions could involve substantial monetary damages. In addition, in matters for which conduct remedies are sought, unfavorable resolutions could include an injunction or other order prohibiting us from selling one or more products at all or in particular ways, precluding particular business practices or requiring other remedies. An unfavorable outcome might result in a material adverse impact on our business, results of operations or financial position. 24 Table of Contents On April 1, 2015 , the U.S. Commodity Futures Trading Commission ("CFTC") filed a complaint against Kraft Foods Group and Mondelēz Global LLC (“Mondelēz Global”) in the U.S. District Court for the Northern District of Illinois (the "District Court"), Eastern Division (the “CFTC action”) following its investigation of activities related to the trading of December 2011 wheat futures contracts that occurred prior to the spin-off of Kraft Foods Group. The complaint alleges that Kraft Foods Group and Mondelēz Global (1) manipulated or attempted to manipulate the wheat markets during the fall of 2011; (2) violated position limit levels for wheat futures and (3) engaged in non-competitive trades by trading both sides of exchange-for-physical Chicago Board of Trade wheat contracts. The CFTC seeks civil monetary penalties of either triple the monetary gain for each violation of the Commodity Exchange Act (the “Act”) or $ 1 million for each violation of Section 6(c)(1), 6(c)(3) or 9(a)(2) of the Act and $ 140,000 for each additional violation of the Act, plus post-judgment interest; an order of permanent injunction prohibiting Kraft Foods Group and Mondelēz Global from violating specified provisions of the Act; disgorgement of profits; and costs and fees. On August 15, 2019, the District Court approved a settlement agreement between the CFTC and Mondelēz Global. The terms of the settlement, which are available in the District Court’s docket, had an immaterial impact on our financial position, results of operations and cash flows. On October 23, 2019, following a ruling by the United States Court of Appeals for the Seventh Circuit regarding Mondelēz Global's allegations that the CFTC and its Commissioners violated certain terms of the settlement agreement and the CFTC's argument that the Commissioners were not bound by the terms of the settlement agreement, the District Court vacated the settlement agreement and reinstated all pending motions that the District Court had previously mooted as a result of the settlement. The parties have reached a new agreement in principle to resolve the CFTC action and have submitted the settlement to the District Court for approval. The District Court cancelled a scheduled conference on June 4, 2020 to discuss the proposed settlement agreement but indicated that it would rule on pending motions in due course . Additionally, several class action complaints were filed against Kraft Foods Group and Mondelēz Global in the District Court by investors in wheat futures and options on behalf of themselves and others similarly situated. The complaints make similar allegations as those made in the CFTC action, and the plaintiffs are seeking monetary damages, interest and unjust enrichment; costs and fees; and injunctive, declaratory and other unspecified relief. In June 2015, these suits were consolidated in the District Court. On January 3, 2020, the District Court granted plaintiffs' request to certify a class. It is not possible to predict the outcome of these matters; however, based on our Separation and Distribution Agreement with Kraft Foods Group dated as of September 27, 2012, we expect to bear any monetary penalties or other payments in connection with the CFTC action and the class action. Although the CFTC action and the class action complaints involve the same alleged conduct, a resolution or decision with respect to one of the matters may not be dispositive as to the outcome of the other matter. In November 2019, the European Commission informed us that it has initiated an investigation into our alleged infringement of European Union competition law through certain practices restricting cross-border trade within the European Economic Area. On January 28, 2021, the European Commission announced it has taken the next procedural step in its investigation and opened formal proceedings. We are cooperating with the investigation and expect to continue to engage with the European Commission as its investigation proceeds. It is not possible to predict how long the investigation will take or the ultimate outcome of this matter. Third-Party Guarantees: We enter into third-party guarantees primarily to cover long-term obligations of our vendors. As part of these transactions, we guarantee that third parties will make contractual payments or achieve performance measures. At September 30, 2021, we had no material third-party guarantees recorded on our condensed consolidated balance sheet. Tax Matters: We are a party to various tax matter proceedings incidental to our business. These proceedings are subject to inherent uncertainties, and unfavorable outcomes could subject us to additional tax liabilities and could materially adversely impact our business, results of operations or financial position. 25 Table of Contents Note 13. Reclassifications from Accumulated Other Comprehensive Income The following table summarizes the changes in accumulated balances of each component of accumulated other comprehensive earnings/(losses) attributable to Mondelēz International. Amounts reclassified from accumulated other comprehensive earnings/(losses) to net earnings (net of tax) were net losses of $( 26 ) million in the third quarter of 2021 and $ 86 million in the third quarter of 2020 and $( 63 ) million in the first nine months of 2021 and $ 252 million in the first nine months of 2020. For the Three Months Ended September 30, For the Nine Months Ended September 30, 2021 2020 2021 2020 (in millions) Currency Translation Adjustments: Balance at beginning of period $ ( 8,627 ) $ ( 9,609 ) $ ( 8,655 ) $ ( 8,320 ) Currency translation adjustments ( 407 ) 184 ( 376 ) ( 1,071 ) Reclassification to earnings related to: Equity method investment transactions (1) — — — 29 Tax (expense)/benefit 10 29 — ( 35 ) Other comprehensive earnings/(losses) ( 397 ) 213 ( 376 ) ( 1,077 ) Less: other comprehensive (earnings)/loss attributable to noncontrolling interests 5 ( 8 ) 12 ( 7 ) Balance at end of period ( 9,019 ) ( 9,404 ) ( 9,019 ) ( 9,404 ) Pension and Other Benefit Plans: Balance at beginning of period $ ( 1,803 ) $ ( 1,656 ) $ ( 1,874 ) $ ( 1,721 ) Net actuarial gain/(loss) arising during period 3 2 1 ( 22 ) Tax (expense)/benefit on net actuarial gain/(loss) ( 1 ) — ( 1 ) ( 1 ) Losses/(gains) reclassified into net earnings: Amortization of experience losses and prior service costs (2) 33 25 105 74 Settlement losses and other expenses (1) 5 3 14 18 Curtailment credit (2) ( 3 ) — ( 17 ) — Tax expense/(benefit) on reclassifications (3) ( 9 ) ( 7 ) ( 26 ) ( 22 ) Currency impact 39 ( 60 ) 62 ( 19 ) Other comprehensive earnings/(losses) 67 ( 37 ) 138 28 Balance at end of period ( 1,736 ) ( 1,693 ) ( 1,736 ) ( 1,693 ) Derivative Cash Flow Hedges: Balance at beginning of period $ ( 142 ) $ ( 154 ) $ ( 161 ) $ ( 213 ) Net derivative gains/(losses) 42 ( 67 ) 148 ( 123 ) Tax (expense)/benefit on net derivative gain/(loss) 1 1 — 27 Losses/(gains) reclassified into net earnings: Interest rate contracts (1)(4) ( 52 ) 66 ( 137 ) 179 Tax expense/(benefit) on reclassifications (3) — ( 1 ) ( 2 ) ( 26 ) Currency impact 2 ( 3 ) 3 ( 2 ) Other comprehensive earnings/(losses) ( 7 ) ( 4 ) 12 55 Balance at end of period ( 149 ) ( 158 ) ( 149 ) ( 158 ) Accumulated other comprehensive income attributable to Mondelēz International: Balance at beginning of period $ ( 10,572 ) $ ( 11,419 ) $ ( 10,690 ) $ ( 10,254 ) Total other comprehensive earnings/(losses) ( 337 ) 172 ( 226 ) ( 994 ) Less: other comprehensive (earnings)/loss attributable to noncontrolling interests 5 ( 8 ) 12 ( 7 ) Other comprehensive earnings/(losses) attributable to Mondelēz International ( 332 ) 164 ( 214 ) ( 1,001 ) Balance at end of period $ ( 10,904 ) $ ( 11,255 ) $ ( 10,904 ) $ ( 11,255 ) (1) These amounts include equity method investment transactions recorded within gain on equity method investment transactions. (2) These reclassified losses are included in net periodic benefit costs disclosed in Note 10, Benefit Plans . (3) Taxes reclassified to earnings are recorded within the provision for income taxes. (4) These reclassified gains or losses are recorded within interest and other expense, net. Note 14. Income Taxes As of the third quarter of 2021, our estimated annual effective tax rate, which excludes discrete tax impacts, was 23.0 %. This rate reflected the impact of unfavorable foreign provisions under U.S. tax laws and our tax related to earnings from equity method investments (the earnings are reported separately on our statement of earnings and thus not included in earnings before income taxes), partially offset by favorable impacts from the mix of pre-tax income in various non-U.S. jurisdictions. Our 2021 third quarter effective tax rate of 27.4 % was high due to a $ 59 million tax expense incurred in connection with the KDP share sale that occurred during the third quarter (the related gain is reported separately in our statement of earnings and thus not included in earnings before income taxes). Excluding this impact, our third quarter effective tax rate was 22.7 %, including a discrete net tax expense of $ 11 million primarily driven by the change in liabilities for uncertain tax positions in several jurisdictions. Our effective tax rate for the nine months ended September 30, 2021 of 29.5 % was also high due to the $ 187 million net tax expense incurred in connection with the KDP share sales during the second and third quarters. Excluding this impact, our effective tax rate for the nine months ended September 30, 2021 was 23.7 %, which was unfavorably impacted by discrete net tax expense of $ 26 million, primarily driven by $ 95 million net tax expense from the increase of our deferred tax liabilities resulting from enacted tax legislation (mainly in the United Kingdom) partially offset by a $ 45 million net benefit from the release of liabilities for uncertain tax positions due to expirations of statutes of limitations and audit settlements in several jurisdictions and a $ 27 million benefit from a U.S. amended tax return filed to reflect new guidance from the U.S. Treasury Department. As of the third quarter of 2020, our estimated annual effective tax rate, which excluded discrete tax impacts, was 27.3 %. This rate reflected the impact of unfavorable foreign provisions under U.S. tax laws and our tax related to earnings from equity method investments (the earnings are reported separately on our statement of earnings and thus not included in earnings before income taxes), partially offset by favorable impacts from the mix of pre-tax income in various non-U.S. jurisdictions. Our 2020 third quarter effective tax rate of 36.1 % was high due to a $ 77 million tax expense incurred in connection with two KDP share sales that occurred during the third quarter (the related gains are reported separately in our statement of earnings and thus not included in earnings before income taxes). Excluding this impact, our third quarter effective tax rate was 29.0 %, reflecting a discrete net tax expense of $ 22 million. The discrete net tax expense primarily consisted of a $ 30 million net expense from the increase of our U.K. deferred tax liabilities resulting from tax legislation enacted during the third quarter that increased the corporate income tax rate in the United Kingdom, partially offset by a $ 7 million net benefit from the release of liabilities for uncertain tax positions due to expirations of statutes of limitations and audit settlements in several jurisdictions. Our effective tax rate for the nine months ended September 30, 2020 of 36.0 % was also high due to the $ 355 million net tax expense incurred in connection with the JDE Peet's transaction and three KDP share sales ( one in the first quarter and two in the third quarter) that occurred during 2020. Excluding these impacts, our effective tax rate for the nine months ended September 30, 2020 was 21.5 %, which was favorably impacted by discrete net tax benefits of $ 96 million, primarily driven by the $ 70 million net benefit from the release of the China valuation allowance and a $ 31 million net benefit from the release of liabilities for uncertain tax positions due to expirations of statutes of limitations and audit settlements in several jurisdictions. 26 Table of Contents Note 15. Earnings per Share Basic and diluted earnings per share (“EPS”) were calculated as follows: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2021 2020 2021 2020 (in millions, except per share data) Net earnings $ 1,262 $ 1,122 $ 3,309 $ 2,410 Noncontrolling interest earnings ( 4 ) ( 3 ) ( 12 ) ( 11 ) Net earnings attributable to Mondelēz International $ 1,258 $ 1,119 $ 3,297 $ 2,399 Weighted-average shares for basic EPS 1,399 1,432 1,406 1,432 Plus incremental shares from assumed conversions of stock options and long-term incentive plan shares 9 10 9 10 Weighted-average shares for diluted EPS 1,408 1,442 1,415 1,442 Basic earnings per share attributable to Mondelēz International $ 0.90 $ 0.78 $ 2.34 $ 1.68 Diluted earnings per share attributable to Mondelēz International $ 0.89 $ 0.78 $ 2.33 $ 1.66 We exclude antidilutive Mondelēz International stock options from our calculation of weighted-average shares for diluted EPS. We excluded antidilutive stock options and performance share units of 2.7 million in the third quarter of 2021 and 2.8 million in the third quarter of 2020 and 3.0 million in the first nine months of 2021 and 3.6 million in the first nine months of 2020. Note 16. Segment Reporting We manufacture and market primarily snack food products, including biscuits (cookies, crackers and salted snacks), chocolate, gum & candy and various cheese & grocery products, as well as powdered beverage products. We manage our global business and report operating results through geographic units. We manage our operations by region to leverage regional operating scale, manage different and changing business environments more effectively and pursue growth opportunities as they arise across our key markets. Our regional management teams have responsibility for the business, product categories and financial results in the regions. Our operations and management structure are organized into four operating segments: • Latin America • AMEA • Europe • North America We use segment operating income to evaluate segment performance and allocate resources. We believe it is appropriate to disclose this measure to help investors analyze segment performance and trends. Segment operating income excludes unrealized gains and losses on hedging activities (which are a component of cost of sales), general corporate expenses (which are a component of selling, general and administrative expenses), amortization of intangibles, gains and losses on divestitures and acquisition-related costs (which are a component of selling, general and administrative expenses) in all periods presented. We exclude these items from segment operating income in order to provide better transparency of our segment operating results. Furthermore, we centrally manage benefit plan non-service income and interest and other expense, net. Accordingly, we do not present these items by segment because they are excluded from the segment profitability measure that management reviews. 27 Table of Contents Our segment net revenues and earnings were: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2021 2020 2021 2020 (in millions) Net revenues: Latin America $ 751 $ 610 $ 2,089 $ 1,847 AMEA 1,629 1,470 4,826 4,209 Europe 2,714 2,526 8,035 7,248 North America 2,088 2,059 6,112 5,979 Net revenues $ 7,182 $ 6,665 $ 21,062 $ 19,283 Earnings before income taxes: Operating income: Latin America $ 91 $ 77 $ 221 $ 149 AMEA 267 210 842 615 Europe 508 432 1,478 1,201 North America 363 387 932 1,192 Unrealized gains/(losses) on hedging activities (mark-to-market impacts) 132 145 270 ( 42 ) General corporate expenses ( 35 ) ( 66 ) ( 177 ) ( 253 ) Amortization of intangible assets ( 32 ) ( 50 ) ( 102 ) ( 143 ) Gain on acquisition — — 9 — Acquisition-related costs — — ( 24 ) ( 15 ) Operating income 1,294 1,135 3,449 2,704 Benefit plan non-service income 37 38 135 102 Interest and other expense, net ( 82 ) ( 89 ) ( 358 ) ( 364 ) Earnings before income taxes $ 1,249 $ 1,084 $ 3,226 $ 2,442 Items impacting our segment operating results are discussed in Note 1, Basis of Presentation , Note 2, Acquisitions and Divestitures, Note 4, Property, Plant and Equipment, Note 5, Goodwill and Intangible Assets, and Note 7, Restructuring Program . Also see Note 8, Debt and Borrowing Arrangements , and Note 9, Financial Instruments, for more information on our interest and other expense, net for each period. 28 Table of Contents Net revenues by product category were: For the Three Months Ended September 30, 2021 Latin America AMEA Europe North America Total (in millions) Biscuits $ 218 $ 585 $ 853 $ 1,785 $ 3,441 Chocolate 208 623 1,377 68 2,276 Gum & Candy 157 205 157 235 754 Beverages 89 112 27 — 228 Cheese & Grocery 79 104 300 — 483 Total net revenues $ 751 $ 1,629 $ 2,714 $ 2,088 $ 7,182 For the Three Months Ended September 30, 2020 Latin America AMEA Europe North America Total (in millions) Biscuits $ 172 $ 550 $ 803 $ 1,768 $ 3,293 Chocolate 151 533 1,255 61 2,000 Gum & Candy 103 173 153 230 659 Beverages 102 109 23 — 234 Cheese & Grocery 82 105 292 — 479 Total net revenues $ 610 $ 1,470 $ 2,526 $ 2,059 $ 6,665 For the Nine Months Ended September 30, 2021 Latin America AMEA Europe North America Total (in millions) Biscuits $ 592 $ 1,677 $ 2,498 $ 5,299 $ 10,066 Chocolate 581 1,768 4,072 185 6,606 Gum & Candy 417 614 459 628 2,118 Beverages 265 438 87 — 790 Cheese & Grocery 234 329 919 — 1,482 Total net revenues $ 2,089 $ 4,826 $ 8,035 $ 6,112 $ 21,062 For the Nine Months Ended September 30, 2020 Latin America AMEA Europe North America Total (in millions) Biscuits $ 500 $ 1,516 $ 2,243 $ 5,170 $ 9,429 Chocolate 464 1,437 3,619 156 5,676 Gum & Candy 350 511 461 653 1,975 Beverages 294 437 68 — 799 Cheese & Grocery 239 308 857 — 1,404 Total net revenues $ 1,847 $ 4,209 $ 7,248 $ 5,979 $ 19,283 29 Table of Contents