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 June 30, For the Six Months Ended June 30, 2022 2021 2022 2021 Net revenues $ 7,274 $ 6,642 $ 15,038 $ 13,880 Cost of sales 4,633 4,011 9,414 8,283 Gross profit 2,641 2,631 5,624 5,597 Selling, general and administrative expenses 1,676 1,593 3,369 3,157 Asset impairment and exit costs 6 134 170 224 Gain on acquisition — — — ( 9 ) Amortization of intangible assets 32 32 64 70 Operating income 927 872 2,021 2,155 Benefit plan non-service income ( 30 ) ( 54 ) ( 63 ) ( 98 ) Interest and other expense, net 98 58 266 276 Earnings before income taxes 859 868 1,818 1,977 Income tax provision ( 201 ) ( 398 ) ( 411 ) ( 610 ) (Loss)/gain on equity method investment transactions ( 8 ) 502 ( 13 ) 495 Equity method investment net earnings 98 107 215 185 Net earnings 748 1,079 1,609 2,047 Noncontrolling interest earnings ( 1 ) ( 1 ) ( 7 ) ( 8 ) Net earnings attributable to Mondelēz International $ 747 $ 1,078 $ 1,602 $ 2,039 Per share data: Basic earnings per share attributable to Mondelēz International $ 0.54 $ 0.77 $ 1.16 $ 1.45 Diluted earnings per share attributable to Mondelēz International $ 0.54 $ 0.76 $ 1.15 $ 1.44 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 June 30, For the Six Months Ended June 30, 2022 2021 2022 2021 Net earnings $ 748 $ 1,079 $ 1,609 $ 2,047 Other comprehensive earnings/(losses), net of tax: Currency translation adjustment ( 399 ) 157 ( 349 ) 21 Pension and other benefit plans 167 2 260 71 Derivative cash flow hedges 8 17 60 19 Total other comprehensive earnings/(losses) ( 224 ) 176 ( 29 ) 111 Comprehensive earnings/(losses) 524 1,255 1,580 2,158 less: Comprehensive earnings/(losses) attributable to noncontrolling interests ( 10 ) 3 ( 8 ) 1 Comprehensive earnings/(losses) attributable to Mondelēz International $ 534 $ 1,252 $ 1,588 $ 2,157 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) June 30, 2022 December 31, 2021 ASSETS Cash and cash equivalents $ 1,924 $ 3,546 Trade receivables (net of allowances of $ 45 at June 30, 2022 and $ 37 at December 31, 2021) 2,467 2,337 Other receivables (net of allowances of $ 48 at June 30, 2022 and $ 49 at December 31, 2021) 715 851 Inventories, net 3,038 2,708 Other current assets 1,066 900 Total current assets 9,210 10,342 Property, plant and equipment, net 8,753 8,658 Operating lease right of use assets 626 613 Goodwill 22,103 21,978 Intangible assets, net 18,339 18,291 Prepaid pension assets 1,141 1,009 Deferred income taxes 551 541 Equity method investments 4,655 5,289 Other assets 636 371 TOTAL ASSETS $ 66,014 $ 67,092 LIABILITIES Short-term borrowings $ 605 $ 216 Current portion of long-term debt 746 1,746 Accounts payable 6,787 6,730 Accrued marketing 2,151 2,097 Accrued employment costs 729 822 Other current liabilities 2,560 2,397 Total current liabilities 13,578 14,008 Long-term debt 17,861 17,550 Long-term operating lease liabilities 489 459 Deferred income taxes 3,580 3,444 Accrued pension costs 591 681 Accrued postretirement health care costs 299 301 Other liabilities 2,063 2,326 TOTAL LIABILITIES 38,461 38,769 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 June 30, 2022 and December 31, 2021) — — Additional paid-in capital 32,086 32,097 Retained earnings 31,431 30,806 Accumulated other comprehensive losses ( 10,638 ) ( 10,624 ) Treasury stock, at cost ( 624,240,103 shares at June 30, 2022 and 604,907,239 shares at December 31, 2021) ( 25,368 ) ( 24,010 ) Total Mondelēz International Shareholders’ Equity 27,511 28,269 Noncontrolling interest 42 54 TOTAL EQUITY 27,553 28,323 TOTAL LIABILITIES AND EQUITY $ 66,014 $ 67,092 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 June 30, 2022 Balances at April 1, 2022 $ — $ 32,053 $ 31,163 $ ( 10,425 ) $ ( 24,630 ) $ 55 $ 28,216 Comprehensive earnings/(losses): Net earnings — — 747 — — 1 748 Other comprehensive earnings/(losses), net of income taxes — — — ( 213 ) — ( 11 ) ( 224 ) Exercise of stock options and issuance of other stock awards — 33 — — 32 — 65 Common Stock repurchased — — — — ( 770 ) — ( 770 ) Cash dividends declared ($ 0.350 per share) — — ( 482 ) — — — ( 482 ) Dividends paid on noncontrolling interest and other activities — — 3 — — ( 3 ) — Balances at June 30, 2022 $ — $ 32,086 $ 31,431 $ ( 10,638 ) $ ( 25,368 ) $ 42 $ 27,553 Six Months Ended June 30, 2022 Balances at January 1, 2022 $ — $ 32,097 $ 30,806 $ ( 10,624 ) $ ( 24,010 ) $ 54 $ 28,323 Comprehensive earnings/(losses): Net earnings — — 1,602 — — 7 1,609 Other comprehensive earnings/(losses), net of income taxes — — — ( 14 ) — ( 15 ) ( 29 ) Exercise of stock options and issuance of other stock awards — ( 11 ) ( 11 ) — 147 — 125 Common Stock repurchased — — — — ( 1,505 ) — ( 1,505 ) Cash dividends declared ($ 0.700 per share) — — ( 969 ) — — — ( 969 ) Dividends paid on noncontrolling interest and other activities — — 3 — — ( 4 ) ( 1 ) Balances at June 30, 2022 $ — $ 32,086 $ 31,431 $ ( 10,638 ) $ ( 25,368 ) $ 42 $ 27,553 Three Months Ended June 30, 2021 Balances at April 1, 2021 $ — $ 32,009 $ 28,903 $ ( 10,746 ) $ ( 23,091 ) $ 74 $ 27,149 Comprehensive earnings/(losses): Net earnings — — 1,078 — — 1 1,079 Other comprehensive earnings/(losses), net of income taxes — — — 174 — 2 176 Exercise of stock options and issuance of other stock awards — 33 ( 3 ) — 77 — 107 Common Stock repurchased — — — — ( 451 ) — ( 451 ) Cash dividends declared ($ 0.315 per share) — — ( 444 ) — — — ( 444 ) Dividends paid on noncontrolling interest and other activities — — 4 — — — 4 Balances at June 30, 2021 $ — $ 32,042 $ 29,538 $ ( 10,572 ) $ ( 23,465 ) $ 77 $ 27,620 Six Months Ended June 30, 2021 Balances at January 1, 2021 $ — $ 32,070 $ 28,402 $ ( 10,690 ) $ ( 22,204 ) $ 76 $ 27,654 Comprehensive earnings/(losses): Net earnings — — 2,039 — — 8 2,047 Other comprehensive earnings/(losses), net of income taxes — — — 118 — ( 7 ) 111 Exercise of stock options and issuance of other stock awards — ( 28 ) ( 18 ) — 207 — 161 Common Stock repurchased — — — — ( 1,468 ) — ( 1,468 ) Cash dividends declared ($ 0.630 per share) — — ( 889 ) — — — ( 889 ) Dividends paid on noncontrolling interest and other activities — — 4 — — — 4 Balances at June 30, 2021 $ — $ 32,042 $ 29,538 $ ( 10,572 ) $ ( 23,465 ) $ 77 $ 27,620 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 Six Months Ended June 30, 2022 2021 CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES Net earnings $ 1,609 $ 2,047 Adjustments to reconcile net earnings to operating cash flows: Depreciation and amortization 548 564 Stock-based compensation expense 56 63 Deferred income tax (benefit)/provision ( 32 ) 92 Asset impairments and accelerated depreciation 163 152 Loss on early extinguishment of debt 38 110 Gain on acquisition — ( 9 ) Loss/(gain) on equity method investment transactions 13 ( 495 ) Equity method investment net earnings ( 215 ) ( 185 ) Distributions from equity method investments 121 94 Other non-cash items, net 150 ( 5 ) Change in assets and liabilities, net of acquisitions and divestitures: Receivables, net ( 227 ) 42 Inventories, net ( 366 ) ( 289 ) Accounts payable 183 182 Other current assets ( 142 ) ( 190 ) Other current liabilities 179 ( 231 ) Change in pension and postretirement assets and liabilities, net ( 111 ) ( 150 ) Net cash provided by operating activities 1,967 1,792 CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES Capital expenditures ( 385 ) ( 410 ) Acquisitions, net of cash received ( 1,402 ) ( 833 ) Proceeds from divestitures including equity method investments 595 998 Proceeds from sale of property, plant and equipment and other 193 25 Net cash used in investing activities ( 999 ) ( 220 ) CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES Net issuances/(repayments) of other short-term borrowings 219 37 Long-term debt proceeds 1,991 2,378 Long-term debt repayments ( 2,329 ) ( 3,376 ) Repurchases of Common Stock ( 1,506 ) ( 1,498 ) Dividends paid ( 977 ) ( 896 ) Other 86 127 Net cash used in financing activities ( 2,516 ) ( 3,228 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 70 ) ( 25 ) Cash, cash equivalents and restricted cash: (Decrease)/Increase ( 1,618 ) ( 1,681 ) Balance at beginning of period 3,553 3,650 Balance at end of period $ 1,935 $ 1,969 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, 2021. 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. War in Ukraine In February 2022, Russia began a military invasion of Ukraine and we closed our operations and facilities in Ukraine. In March 2022, our two Ukrainian manufacturing facilities in Trostyanets and Vyshhorod were significantly damaged. During the first quarter of 2022, we evaluated and impaired these and other assets. We recorded $ 143 million of total expenses ($ 145 million after-tax) incurred as a direct result of the war, including $ 75 million recorded in asset impairment and exit costs , $ 44 million in cost of sales and $ 24 million in selling, general and administrative expenses. We recorded $ 75 million of property, plant and equipment impairments, $ 33 million of estimated inventory write-offs, $ 19 million of increased estimated allowances for trade receivables and $ 16 million in accrued expenses. During the second quarter of 2022, we reversed approximately $ 15 million of previously recorded charges as a result of higher than expected collection of trade receivables and inventory recoveries. We continue to consolidate both our Ukrainian and Russian subsidiaries and continue to evaluate our ability to control our operating activities and businesses on an ongoing basis. In connection with these findings and impacts, we have made estimates and assumptions based on information available to us. We base our estimates on historical experience, expectations of future impacts and other assumptions that we believe are reasonable. Given the uncertainty of the ongoing effects of the war in Ukraine, and its impact on the global economic environment, our estimates could be significantly different than future performance. 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 currency 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. Local currency monetary assets and liabilities are remeasured into U.S. dollars using exchange rates as of the latest balance sheet date, with remeasurement gains and losses recognized in net earnings. Türkiye. During the first quarter of 2022, primarily based on data published by the Türkiye Statistical Institute that indicated that Türkiye's three-year cumulative inflation rate exceeded 100%, we concluded that Türkiye became a highly inflationary economy for accounting purposes. As of April 1, 2022, we began to apply highly inflationary accounting for our subsidiaries operating in Türkiye and change their functional currency from the Turkish lira to the U.S. dollar. Our operations in Türkiye contributed $ 46 million or 0.6 % of our condensed consolidated net revenues in the three months and $ 90 million or 0.6 % of our condensed consolidated net revenues in the six months ended June 30, 2022. As of June 30, 2022, our operations in Türkiye had $ 11 million of Turkish lira denominated net 6 Table of Contents monetary liabilities. Within selling, general and administrative expenses, we recorded a remeasurement loss of less than $ 1 million during the three months ended June 30, 2022 related to the revaluation of the Turkish lira denominated net monetary position during the quarter. 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. Our operations in Argentina contributed $ 138 million or 1.9 % of consolidated net revenues in the three months and $ 268 million or 1.8 % of our condensed consolidated net revenues in the six months ended June 30, 2022. As of June 30, 2022, our Argentinean operations had $ 28 million of Argentinean peso denominated net monetary assets. Within selling, general and administrative expenses, we recorded a remeasurement loss of $ 10 million during the three months and $ 15 million during the six months ended June 30, 2022 as well as a remeasurement loss of $ 3 million during the three months and $ 8 million during the six months ended June 30, 2021 related to the revaluation of the Argentinean peso denominated net monetary position over these periods. 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 developments in Ukraine and Russia as well as in 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 and compounded by the ongoing war in Ukraine and the impact of general economic conditions, including inflation, most countries in which we do business experienced periods of significant economic uncertainty as well as exchange rate volatility. At this time, within our consolidated entities, Argentina and Türkiye are highly inflationary economies as noted above, and we continue to monitor currency volatility and associated risks, such as increased risk of highly inflationary economies and related accounting. 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 $ 11 million as of June 30, 2022 and $ 7 million as of December 31, 2021. Total cash, cash equivalents and restricted cash was $ 1,935 million as of June 30, 2022 and $ 3,553 million as of December 31, 2021. 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, 2022 $ ( 37 ) $ ( 49 ) $ ( 10 ) Current period provision for expected credit losses ( 10 ) ( 4 ) ( 5 ) Write-offs charged against the allowance 1 3 — Currency 1 2 ( 1 ) Balance at June 30, 2022 $ ( 45 ) $ ( 48 ) $ ( 16 ) 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 7 Table of Contents 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 $ 700 million as of June 30, 2022 and $ 761 million as of December 31, 2021. The incremental cost of factoring receivables under this arrangement was not material for all periods presented. The proceeds from the sales of receivables are included in cash from operating activities in the condensed consolidated statements of cash flows. Non-Cash Lease Transactions: We recorded $ 125 million in operating lease and $ 76 million in finance lease right-of-use assets obtained in exchange for lease obligations during the six months ended June 30, 2022 and $ 115 million in operating lease and $ 44 million in finance lease right-of-use assets obtained in exchange for lease obligations during the six months ended June 30, 2021. New Accounting Pronouncements: In October 2021, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) which requires companies to recognize and measure customer contract assets and contract liabilities acquired in a business combination as if the acquiring company originated the related revenue contracts. Prior to adopting this ASU, acquired contract assets and liabilities were measured at fair value. This ASU is effective for fiscal years beginning after December 15, 2022 and early adoption is permitted. We are evaluating the timing and effects of adopting this ASU and currently we do not expect this ASU to have a material impact on our consolidated financial statements. In March 2020 and subsequently in January 2021, the FASB issued an 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 expect to adopt this standard in the fourth quarter of 2022. Based on our evaluation of our contracts to date, we do not expect this ASU to have a material impact on our consolidated financial statements. Note 2. Acquisitions and Divestitures On June 20, 2022, we announced an agreement to acquire Clif Bar & Company (“Clif Bar”), a leading U.S. maker of nutritious energy bars with organic ingredients for a purchase price of approximately $ 2.9 billion, subject to closing purchase price adjustments. The acquisition of Clif Bar includes a contingent consideration arrangement that may require us to pay additional consideration to the sellers for achieving certain revenue and earnings targets in 2025 and 2026 that exceed our base financial projections for the business implied in the upfront purchase price. The possible payments range from zero to a maximum total of $ 2.4 billion, with higher payouts requiring the achievement of targets that generate rates of returns in excess of the base financial projections. In connection with this acquisition, we expect to generate a meaningful cash tax benefit over time from the amortization of acquisition-related intangibles. The transaction, which will be funded through a combination of debt and cash on hand, is subject to relevant antitrust approvals and closing conditions and is expected to close in the third quarter of 2022. During the second quarter of 2022, we incurred $ 4 million of acquisition-related costs. On April 24, 2022, we entered into an agreement with Grupo Bimbo to acquire Ricolino, its confectionery business located primarily in Mexico for a purchase price of approximately $ 1.3 billion, subject to closing purchase price adjustments. The transaction, which will be funded through a combination of debt and cash on hand, is subject to relevant antitrust approvals and closing conditions and is expected to close late in the third quarter or early in the fourth quarter of 2022. During the second quarter of 2022, we incurred $ 1 million of acquisition-related costs. On January 3, 2022, we acquired Chipita Global S.A. (“Chipita”), a leading croissants and baked snacks company in the Central and Eastern European markets. The acquisition of Chipita offers a strategic complement to our existing portfolio and advances our strategy to become the global leader in broader snacking. The cash consideration paid for Chipita totaled € 1.2 billion ($ 1.4 billion), net of cash received, plus the assumption of Chipita’s debt of € 0.4 billion ($ 0.4 billion) for a total purchase price of € 1.7 billion ($ 1.8 billion). 8 Table of Contents We are working to complete the valuation and have recorded a preliminary purchase price allocation of: (in millions) Cash $ 52 Receivables 102 Inventory 60 Other current assets 3 Property, plant and equipment 383 Finance leases right of use assets 8 Definite life intangible assets 48 Indefinite life intangible assets 686 Goodwill 791 Other assets 77 Assets acquired $ 2,210 Current liabilities 133 Deferred tax liability 158 Finance lease liabilities 8 Other liabilities 21 Total purchase price $ 1,890 Less: long-term debt ( 436 ) Less: cash received ( 52 ) Net Cash Paid $ 1,402 Within identifiable intangible assets, we allocated $ 686 million to trade names, which have an indefinite-life. The fair value for the 7 Days trade name, which is the primary asset acquired, was determined using the multi-period excess earnings method under the income approach at the acquisition date. The fair value measurements of intangible assets are based on significant unobservable inputs, and thus represent Leve l 3 inputs. Significant assumptions used in assessing the fair values of intangible assets include forecasted future cash flows and discount rates. Goodwill was determined as the excess of the purchase price over the fair value of the net assets acquired and 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. All of the goodwill was assigned to the Europe segment. Chipita added incremental net revenues of $ 180 million during the three months and $ 332 million during t he six months ended June 30, 2022, and operating income of $ 10 million during the three months and $ 14 million during the six months ended June 30, 2022. We incurred acquisition-related costs of $ 21 million during the six months ended June 30, 2022 and $ 6 million during the three months and six months ended June 30, 2021. We incurred integration costs of $ 36 million during the three months and $ 71 million during the six months ended June 30, 2022. On November 1, 2021, we completed the sale of MaxFoods Pty Ltd, an Australian packaged seafood business that we had acquired as part of our acquisition of Gourmet Food Holdings Pty Ltd (“Gourmet Food”). The sales price was $ 57 million Australian dollars ($ 41 million), net of cash divested with the business, and we recorded an immaterial loss on the transaction. On April 1, 2021, we acquired 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 have recorded a purchase price allocation of net tangible and intangible assets acquired and liabilities assumed of $ 41 million to indefinite-lived intangible assets, $ 80 million to definite-lived intangible assets, $ 164 million to goodwill, $ 19 million to property, plant and equipment, $ 18 million to inventory, $ 25 million to accounts receivable, $ 12 million to other assets, $ 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. Through the one-year anniversary of the acquisition, Gourmet Food added incremental net revenues of $ 14 million, and operating income of $ 1 million during the six months ended June 30, 2022. We incurred acquisition-related costs of $ 6 million during the three months and $ 7 million during the six months ended June 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 segment. We have recorded a 9 Table of Contents purchase price allocation of net tangible and intangible assets acquired and liabilities assumed 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. Through the one-year anniversary of the acquisition, Grenade added incremental net revenues of $ 21 million, and operating income of $ 2 million during the six months ended June 30, 2022. We incurred acquisition-related costs of $ 2 million during the six months ended June 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. 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 have recorded a purchase price allocation of net tangible and intangible assets acquired and liabilities assumed of $ 123 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. We incurred acquisition-related costs of $ 5 million during the three months and $ 9 million during the six months ended June 30, 2021. Note 3. Inventories Inventories consisted of the following: As of June 30, 2022 As of December 31, 2021 (in millions) Raw materials $ 1,028 $ 770 Finished product 2,156 2,054 3,184 2,824 Inventory reserves ( 146 ) ( 116 ) Inventories, net $ 3,038 $ 2,708 Note 4. Property, Plant and Equipment Property, plant and equipment consisted of the following: As of June 30, 2022 As of December 31, 2021 (in millions) Land and land improvements $ 381 $ 379 Buildings and building improvements 3,235 3,139 Machinery and equipment 11,746 11,842 Construction in progress 728 732 16,090 16,092 Accumulated depreciation ( 7,337 ) ( 7,434 ) Property, plant and equipment, net $ 8,753 $ 8,658 For the six months ended June 30, 2022, capital expenditures of $ 385 million excluded $ 239 million of accrued capital expenditures remaining unpaid at June 30, 2022 and included payment for $ 249 million of capital expenditures that were accrued and unpaid at December 31, 2021. For the six months ended June 30, 2021, capital expenditures of $ 410 million excluded $ 236 million of accrued capital expenditures remaining unpaid at June 30, 2021 and included payment for $ 275 million of capital expenditures that were accrued and unpaid at December 31, 2020. 10 Table of Contents 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 June 30, For the Six Months Ended June 30, 2022 2021 2022 2021 (in millions) Latin America $ ( 1 ) $ — $ ( 1 ) $ — AMEA — — — ( 16 ) Europe 3 3 3 4 North America 3 62 4 117 Total $ 5 $ 65 $ 6 $ 105 Note 5. Goodwill and Intangible Assets Goodwill by segment was: As of June 30, 2022 As of December 31, 2021 (in millions) Latin America $ 698 $ 674 AMEA 3,213 3,365 Europe 8,060 7,830 North America 10,132 10,109 Goodwill $ 22,103 $ 21,978 Intangible assets consisted of the following: As of June 30, 2022 As of December 31, 2021 (in millions) Indefinite-life intangible assets $ 17,392 $ 17,299 Definite-life intangible assets 2,950 2,991 20,342 20,290 Accumulated amortization ( 2,003 ) ( 1,999 ) Intangible assets, net $ 18,339 $ 18,291 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 $ 64 million for the six months ended June 30, 2022 and $ 32 million for the three months and $ 70 million for the six months ended June 30, 2021. For the next five years, we currently estimate annual amortization expense of approximately $ 125 million in 2022-2024, approximately $ 105 million in 2025 and approximately $ 65 million in 2026 (reflecting June 30, 2022 exchange rates). 11 Table of Contents Changes in goodwill and intangible assets consisted of: Goodwill Intangible Assets, at cost (in millions) Balance at January 1, 2022 $ 21,978 $ 20,290 Currency ( 666 ) ( 604 ) Acquisitions 791 734 Asset impairments — ( 78 ) Balance at June 30, 2022 $ 22,103 $ 20,342 Changes to goodwill and intangibles were: • Acquisitions - In connection with our acquisition of Chipita, we recorded a preliminary purchase price allocation of $ 791 million to goodwill and $ 734 million to intangible assets. See Note 2, Acquisitions and Divestitures , for additional information. • Asset impairment - As further described below, during the first quarter of 2022, we recorded a $ 78 million intangible asset impairment in AMEA due to lower than expected growth and profitability of a local biscuit brand sold in select markets in AMEA and Europe. During the second quarter of 2022, we evaluated our goodwill and intangible asset impairment risk through an assessment of potential triggering events, including qualitative and quantitative of the overall global economic environment and impacts from the war in Ukraine. Based on the results of our assessment, we concluded there were no impairment indicators for goodwill and intangible assets. During the first quarter of 2022, we recorded a $ 78 million impairment charge within asset impairment and exit costs based on the excess carrying value over the estimated fair value of a biscuit brand. 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. We use several accepted valuation methods in our indefinite-life impairment testing, 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. During our 2021 annual indefinite-life intangible asset testing in the third quarter of 2021, we identified eight brands, including the one brand impaired during the first quarter of 2022, that each had a fair value in excess of book value of 10% or less. The aggregate book value of the eight brands was $ 987 million as of June 30, 2022. We continue to monitor our brand performance, particularly in light of the significant global economic uncertainties and related impacts to our business. If a brand's earnings expectations, including the timing of the expected recovery from the war and the pandemic, are not met or specific valuation factors outside of our control, such as discount rates, change significantly, then a brand or brands could become impaired in the future. Note 6. Equity Method Investments Equity method investments consist of our investments in entities in which we maintain an equity ownership interest and apply the equity method of accounting due to our ability to exert significant influence over decisions relating to their operating and financial affairs. Revenue and expenses of our equity method investees are not consolidated into our financial statements; rather, our proportionate share of the earnings of each investee is reflected as equity method investment net earnings . The carrying values of our equity method investments are also impacted by our proportionate share of items impacting the investee's accumulated other comprehensive income or losses and other items, such as our share of investee dividends. Our equity method investments include, but are not limited to, our ownership interests in JDE Peet's (Euronext Amsterdam: "JDEP"), Keurig Dr Pepper Inc. (Nasdaq: "KDP"), Dong Suh Foods Corporation and Dong Suh Oil & Fats Co. Ltd. Our ownership interests may change over time due to investee stock-based compensation arrangements, share issuances or other equity-related transactions. As of June 30, 2022, we owned 19.8 %, 5.3 %, 50.0 % and 49.0 %, respectively, of these companies' outstanding shares. 12 Table of Contents Our investments accounted for under the equity method of accounting totaled $ 4.7 billion as of June 30, 2022 and $ 5.3 billion as of December 31, 2021. We recorded equity earnings of $ 98 million and cash dividends of $ 14 million in the second quarter of 2022 and equity earnings of $ 107 million and cash dividends of $ 20 million in the second quarter of 2021. We recorded equity earnings of $ 215 million and cash dividends of $ 121 million in the first six months of 2022 and equity earnings of $ 185 million and cash dividends of $ 94 million in the first six months of 2021. Based on the quoted closing prices as of June 30, 2022, the combined fair value of our publicly-traded investments in JDEP and KDP wa s $ 5.4 billion , and for each investment, its fair value exceeded its carrying value. JDE Peet’s Transactions: On May 8, 2022, we sold approximately 18.6 million of our JDE Peet’s shares back to JDE Peet’s, which reduced our ownership interest by approximately 3 %. We received € 500 million ($ 529 million) of proceeds and recorded a loss of € 8 million ($ 8 million) on this sale during the second quarter of 2022. As we will continue to have significant influence, we will continue to account for our investment in JDE Peet's 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 will continue to have board representation with two directors on the JDE Peet's Board of Directors and we retained certain additional governance rights. On September 20, 2021, we issued € 300 million exchangeable bonds, which are redeemable at maturity in September 2024 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 approximately 9 % of our equity interest in JDE Peet's as of June 30, 2022. Refer to Note 9, Financial Instruments , for further details on this transaction. Keurig Dr Pepper Transactions: 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. As we will continue to have significant influence, we will 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 will continue to have board representation with one director on the KDP Board of Directors and we retained certain additional governance rights. 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. 13 Table of Contents Restructuring Costs : The Simplify to Grow Program liability activity for the six months ended June 30, 2022 was: Severance and related costs Asset Write-downs Total (in millions) Liability balance, January 1, 2022 $ 211 $ — $ 211 Charges 8 7 15 Cash spent ( 33 ) ( 33 ) Non-cash settlements/adjustments ( 2 ) ( 7 ) ( 9 ) Currency ( 10 ) — ( 10 ) Liability balance, June 30, 2022 $ 174 $ — $ 174 • We recorded restructuring charges of $ 4 million in the second quarter of 2022 and $ 100 million in the second quarter of 2021 and $ 15 million in the first six months of 2022 and $ 188 million in the first six months of 2021 within asset impairment and exit costs and benefit plan non-service income. • We spent $ 16 million in the second quarter of 2022 and $ 30 million in the second quarter of 2021 and $ 33 million in the first six months of 2022 and $ 64 million in the first six months of 2021 in cash severance and related costs. • We recognized non-cash asset write-downs (including accelerated depreciation and asset impairments), and other adjustments, including any gains on sale of restructuring program assets, which totaled $ 7 million in the second quarter of 2022 and $ 76 million in the second quarter of 2021 and $ 9 million in the first six months of 2022 and $ 116 million in the first six months of 2021. • At June 30, 2022, $ 119 million of our net restructuring liability was recorded within other current liabilities and $ 55 million was recorded within other long-term liabilities. Implementation Costs: Implementation costs are directly attributable to restructuring activities; however, they do not qualify for special accounting treatment as exit or disposal activities. We believe the disclosure of implementation costs provides readers of our financial statements with more information on the total costs of our Simplify to Grow Program. Implementation costs primarily relate to reorganizing our operations and facilities in connection with our supply chain reinvention program and other identified productivity and cost saving initiatives. The costs include incremental expenses related to the closure of facilities, costs to terminate certain contracts and the simplification of our information systems. Within our continuing results of operations, we recorded implementation costs of $ 19 million in the second quarter of 2022 and $ 33 million in the second quarter of 2021 and $ 39 million in the first six months of 2022 and $ 67 million in the first six months of 2021. We recorded these costs within cost of sales and general corporate expense within selling, general and administrative expenses. 14 Table of Contents Restructuring and Implementation Costs: During the three and six months ended June 30, 2022 and June 30, 2021, 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 June 30, 2022 Restructuring Costs $ ( 2 ) $ — $ — $ 4 $ 2 $ 4 Implementation Costs 3 3 8 9 ( 4 ) 19 Total $ 1 $ 3 $ 8 $ 13 $ ( 2 ) $ 23 For the Three Months Ended June 30, 2021 Restructuring Costs $ — $ 2 $ ( 1 ) $ 92 $ 7 $ 100 Implementation Costs 4 3 11 17 ( 2 ) 33 Total $ 4 $ 5 $ 10 $ 109 $ 5 $ 133 For the Six Months Ended June 30, 2022 Restructuring Costs $ ( 3 ) $ 2 $ 2 $ 12 $ 2 $ 15 Implementation Costs 4 4 13 16 2 39 Total $ 1 $ 6 $ 15 $ 28 $ 4 $ 54 For the Six Months Ended June 30, 2021 Restructuring Costs $ 3 $ ( 19 ) $ 5 $ 193 $ 6 $ 188 Implementation Costs 7 5 21 27 7 67 Total $ 10 $ ( 14 ) $ 26 $ 220 $ 13 $ 255 Total Project (Inception to Date) Restructuring Costs $ 551 $ 543 $ 1,149 $ 657 $ 151 $ 3,051 Implementation Costs 300 243 557 569 358 2,027 Total $ 851 $ 786 $ 1,706 $ 1,226 $ 509 $ 5,078 Note 8. Debt and Borrowing Arrangements Short-Term Borrowings: Our short-term borrowings and related weighted-average interest rates consisted of: As of June 30, 2022 As of December 31, 2021 Amount Outstanding Weighted- Average Rate Amount Outstanding Weighted- Average Rate (in millions, except percentages) Commercial paper $ 535 1.9 % $ 192 0.2 % Bank loans 70 7.0 % 24 8.6 % Total short-term borrowings $ 605 $ 216 15 Table of Contents Our uncommitted credit lines and committed credit lines available as of June 30, 2022 and December 31, 2021 include: As of June 30, 2022 As of December 31, 2021 Facility Amount Borrowed Amount Facility Amount Borrowed Amount (in millions) Uncommitted credit facilities $ 1,326 $ 70 $ 1,367 $ 24 Credit facility expiry (1) : November 30, 2022 (2) 2,000 — — — February 23, 2022 — — 2,500 — February 22, 2023 2,500 — — — February 27, 2024 — — 4,500 — February 23, 2027 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 $ 25.0 billion, excluding accumulated other comprehensive earnings/(losses), the cumulative effects of any changes in accounting principles and earnings/(losses) recognized in connection with the ongoing application of any mark-to-market accounting for pensions and other retirement plans. At June 30, 2022, we complied with this covenant as our shareholders' equity, as defined by the covenant, was $ 38.1 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. (2) On March 31, 2022, we entered into a supplemental term loan credit facility that can be utilized for general corporate purposes, including acquisitions. Under this agreement we may draw up to a total of $ 2.0 billion in term loans from the facility. The maturity dates of any loans drawn under this facility will be three years after the funding date of the applicable loan(s). On July 11, 2022, we entered into a supplemental term loan credit facility that can be utilized for general corporate purposes, including acquisitions. Under this agreement we may draw up to a total of $ 2.0 billion in term loans from the facility. The maturity dates of any loans drawn under this facility will be eighteen months after the funding date of the applicable loan(s). Long-Term Debt: Tender Offers: On March 18, 2022, we completed a tender offer in cash and redeemed long term U.S. dollar denominated notes for the following amounts (in millions): Interest Rate Redemption Date Maturity Date Amount Redeemed USD Equivalent 3.625 % March 2022 February 2026 $ 130 $ 130 4.125 % March 2022 May 2028 $ 211 $ 211 2.750 % March 2022 April 2030 $ 500 $ 500 6.500 % March 2022 November 2031 $ 17 $ 17 7.000 % March 2022 August 2037 $ 10 $ 10 6.875 % March 2022 February 2038 $ 21 $ 21 6.875 % March 2022 January 2039 $ 8 $ 8 6.500 % March 2022 February 2040 $ 36 $ 36 4.625 % March 2022 May 2048 $ 54 $ 54 We recorded a $ 129 million loss on debt extinguishment and related expenses within interest and other expense, net, consisting of $ 38 million paid in excess of carrying value of the debt and from recognizing unamortized discounts and deferred financing costs in earnings and $ 91 million from recognizing unamortized forward starting swap losses in earnings at the time of the debt extinguishment. The cash payments related to the debt extinguishment were classified as cash outflows from financing activities in the consolidated statement of cash flows. 16 Table of Contents Redemptions: On March 18, 2022, we completed a redemption of long term U.S. dollar denominated notes for the following amounts (in millions): Interest Rate Redemption Date Maturity Date Amount Redeemed USD Equivalent 0.625 % March 2022 July 2022 $ 1,000 $ 1,000 Debt Repayments On January 3, 2022, we closed on our acquisition of Chipita and assumed and entirely paid down € 0.4 billion ($ 0.4 billion) of Chipita's debt during the six months ended June 30, 2022. Issuances: During the six months ended June 30, 2022, we issued the following notes (in millions): Issuance Date Interest Rate Maturity Date Gross Proceeds (1) Gross Proceeds USD Equivalent March 2022 2.125 % March 2024 $ 500 $ 500 March 2022 2.625 % March 2027 $ 750 $ 750 March 2022 3.000 % March 2032 $ 750 $ 750 (1) Represents gross proceeds from the issuance of notes excluding debt issuance costs, discounts and premiums. Fair Value of Our Debt: The fair value of our short-term borrowings at June 30, 2022 and December 31, 2021 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 June 30, 2022 As of December 31, 2021 (in millions) Fair Value $ 17,018 $ 20,249 Carrying Value $ 19,212 $ 19,512 Interest and Other Expense, net: Interest and other expense, net consisted of: For the Three Months Ended June 30, For the Six Months Ended June 30, 2022 2021 2022 2021 (in millions) Interest expense, debt $ 89 $ 90 $ 180 $ 188 Loss on debt extinguishment and related expenses — — 129 137 Other expense/(income), net 9 ( 32 ) ( 43 ) ( 49 ) Interest and other expense, net $ 98 $ 58 $ 266 $ 276 Other income includes amounts excluded from hedge effectiveness related to our net investment hedge derivative contracts and early settlement of forecasted currency derivative transactions due to changes in related future cash flows. Refer to Note 9, Financial Instruments . 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 June 30, 2022 As of December 31, 2021 Asset Derivatives Liability Derivatives Asset Derivatives Liability Derivatives (in millions) Derivatives designated as accounting hedges: Currency exchange contracts $ 3 $ 7 $ — $ — Interest rate contracts 126 — 27 17 Net investment hedge derivative contracts (1) 387 21 117 45 $ 516 $ 28 $ 144 $ 62 Derivatives not designated as accounting hedges: Currency exchange contracts $ 221 $ 150 $ 156 $ 40 Commodity contracts 306 145 387 137 Equity method investment contracts (2) — 3 — 3 $ 527 $ 298 $ 543 $ 180 Total fair value $ 1,043 $ 326 $ 687 $ 242 (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 6, Equity Method Investments . 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 June 30, 2022 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 $ 67 $ — $ 67 $ — Commodity contracts 161 109 52 — Interest rate contracts 126 — 126 — Net investment hedge contracts 366 — 366 — Equity method investment contracts ( 3 ) — ( 3 ) — Total derivatives $ 717 $ 109 $ 608 $ — 18 Table of Contents As of December 31, 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 $ 116 $ — $ 116 $ — Commodity contracts 251 161 90 — Interest rate contracts 10 — 10 — Net investment hedge contracts 71 — 71 — Equity method investment contracts ( 3 ) — ( 3 ) — Total derivatives $ 445 $ 161 $ 284 $ — 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 June 30, 2022 As of December 31, 2021 (in millions) Currency exchange contracts: Intercompany loans and forecasted interest payments $ 2,270 $ 1,891 Forecasted transactions 6,245 4,831 Commodity contracts 11,131 9,694 Interest rate contracts 1,850 1,850 Net investment hedges: Net investment hedge derivative contracts 7,090 3,915 Non-U.S. dollar debt designated as net investment hedges Euro notes 3,339 3,622 British pound sterling notes 321 356 Swiss franc notes 775 811 Canadian dollar notes 466 475 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 June 30, For the Six Months Ended June 30, 2022 2021 2022 2021 (in millions) Accumulated (loss)/gain at beginning of period $ ( 96 ) $ ( 159 ) $ ( 148 ) $ ( 161 ) Transfer of realized losses/(gains) in fair value to earnings ( 96 ) 4 ( 71 ) 9 Unrealized (loss)/gain in fair value 104 13 131 10 Accumulated (loss)/gain at end of period $ ( 88 ) $ ( 142 ) $ ( 88 ) $ ( 142 ) After-tax gains/(losses) reclassified from accumulated other comprehensive earnings/(losses) to net earnings were: For the Three Months Ended June 30, For the Six Months Ended June 30, 2022 2021 2022 2021 (in millions) Currency exchange contracts – forecasted transactions $ ( 2 ) $ — $ ( 4 ) $ — Interest rate contracts 98 ( 4 ) 75 ( 9 ) Total $ 96 $ ( 4 ) $ 71 $ ( 9 ) After-tax gains/(losses) recognized in other comprehensive earnings/(losses) were: For the Three Months Ended June 30, For the Six Months Ended June 30, 2022 2021 2022 2021 (in millions) Currency exchange contracts – forecasted transactions $ 2 $ 7 $ 4 $ 6 Interest rate contracts 102 6 127 4 Total $ 104 $ 13 $ 131 $ 10 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 $ 10 million (net of taxes) for interest rate cash flow hedges to earnings during the next 12 months. Cash Flow Hedge Coverage: As of June 30, 2022, our longest dated cash flow hedges were interest rate swaps that hedge forecasted interest rate payments over the next 4 years, 2 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 June 30, 2022 was $ 7.1 billion. 20 Table of Contents Net investment hedge derivative contract impacts on other comprehensive earnings and net earnings were: For the Three Months Ended June 30, For the Six Months Ended June 30, 2022 2021 2022 2021 (in millions) After-tax gain/(loss) on NIH contracts (1) $ 307 $ ( 36 ) $ 348 $ 23 (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 June 30, For the Six Months Ended June 30, 2022 2021 2022 2021 (in millions) Amounts excluded from the assessment of hedge effectiveness (1) $ 30 $ 19 $ 52 $ 40 (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 June 30, For the Six Months Ended June 30, 2022 2021 2022 2021 (in millions) Euro notes $ 142 $ ( 31 ) $ 216 $ 92 British pound sterling notes 19 ( 1 ) 27 ( 3 ) Swiss franc notes 21 ( 17 ) 27 39 Canadian notes 11 ( 5 ) 7 ( 9 ) Economic Hedges: Pre-tax gains/(losses) recorded in net earnings for economic hedges were: For the Three Months Ended June 30, For the Six Months Ended June 30, Location of Gain/(Loss) Recognized in Earnings 2022 2021 2022 2021 (in millions) Currency exchange contracts: Intercompany loans and forecasted interest payments $ 7 $ 2 $ ( 4 ) $ 72 Interest and other expense, net Forecasted transactions 114 ( 38 ) 107 12 Cost of sales Forecasted transactions ( 52 ) 14 ( 31 ) ( 2 ) Interest and other expense, net Forecasted transactions 1 ( 1 ) 3 1 Selling, general and administrative expenses Commodity contracts ( 40 ) 117 197 211 Cost of sales Equity method investment contracts — — — — Gain on equity method investment transactions Total $ 30 $ 94 $ 272 $ 294 In the first quarter of 2022, we had early settlements of forecasted currency exchange contracts comprised of $ 74 million in cost of sales, $ 5 million in selling, general and administrative expenses and $ 20 million in interest and other expense, net. 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 June 30, For the Three Months Ended June 30, 2022 2021 2022 2021 (in millions) Service cost $ 2 $ 2 $ 16 $ 35 Interest cost 12 10 47 30 Expected return on plan assets ( 18 ) ( 18 ) ( 94 ) ( 107 ) Amortization: Net loss from experience differences 2 5 15 33 Prior service cost/(benefit) — — — ( 1 ) Curtailment credit (1) — — — ( 14 ) Settlement losses and other expenses 4 6 — — Net periodic pension cost/(benefit) $ 2 $ 5 $ ( 16 ) $ ( 24 ) U.S. Plans Non-U.S. Plans For the Six Months Ended June 30, For the Six Months Ended June 30, 2022 2021 2022 2021 (in millions) Service cost $ 3 $ 4 $ 55 $ 70 Interest cost 23 20 88 59 Expected return on plan assets ( 36 ) ( 36 ) ( 186 ) ( 213 ) Amortization: Net loss from experience differences 5 9 33 66 Prior service cost/(benefit) — — ( 1 ) ( 3 ) Curtailment credit (1) — — — ( 14 ) Settlement losses and other expenses 7 9 — — Net periodic pension cost/(benefit) $ 2 $ 6 $ ( 11 ) $ ( 35 ) (1) 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 a curtailment credit of $( 14 million) for the three and six months ended June 30, 2021 recorded within benefit plan non-service income. We also incurred incentive payment charges and other expenses related to this decision of $ 44 million for the three months ended June 30, 2021 and $ 45 million for the six months ended June 30, 2021 included in operating income. Employer Contributions: During the six months ended June 30, 2022, we contributed $ 1 million to our U.S. pension plans and $ 102 million to our non-U.S. pension plans, including $ 41 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 June 30, 2022, over the remainder of 2022, we plan to make further contributions of approximately $ 2 million to our U.S. plans and approximately $ 83 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 $ 5 million in the three and six months ended June 30, 2022 and $ 3 million and $ 6 million in the three months and six months ended June 30, 2021 within interest and other expense, net. As of June 30, 2022, the remaining discounted withdrawal liability was $ 352 million, with $ 15 million recorded in other current liabilities and $ 337 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 June 30, For the Six Months Ended June 30, 2022 2021 2022 2021 (in millions) Service cost $ — $ 1 $ 1 $ 2 Interest cost 2 2 4 4 Amortization: Net loss from experience differences — — — 1 Prior service credit 1 — 1 — Net periodic postretirement health care cost/(benefit) $ 3 $ 3 $ 6 $ 7 Postemployment Benefit Plans Net periodic postemployment cost consisted of the following: For the Three Months Ended June 30, For the Six Months Ended June 30, 2022 2021 2022 2021 (in millions) Service cost $ 1 $ 2 $ 2 $ 3 Interest cost — — 1 1 Amortization of net gains ( 1 ) — ( 2 ) ( 1 ) Net periodic postemployment cost $ — $ 2 $ 1 $ 3 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, 2022 23,503,759 $ 42.65 5 years $ 556 million Annual grant to eligible employees 2,180,540 64.65 Additional options issued 33,250 66.99 Total options granted 2,213,790 64.69 Options exercised (1) ( 3,097,734 ) 35.75 $ 94 million Options canceled ( 279,021 ) 55.03 Balance at June 30, 2022 22,340,794 45.63 5 years $ 373 million (1) Cash received from options exercised was $ 31 million in the three months and $ 101 million in the six months ended June 30, 2022. The actual tax benefit realized and recorded in the provision for income taxes for the tax deductions from the option exercises totaled $ 4 million in the three months and $ 14 million in the six months ended June 30, 2022. 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, 2022 4,668,046 $ 57.04 Annual grant to eligible employees: Feb 24, 2022 Performance share units 806,590 61.87 Deferred stock units 505,090 64.65 Additional shares granted (1) 702,037 Various 60.28 Total shares granted 2,013,717 62.01 $ 125 million Vested (2) ( 1,710,015 ) 55.31 $ 95 million Forfeited ( 273,663 ) 61.01 Balance at June 30, 2022 4,698,085 59.57 (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 $( 1 ) million in the three months and $ 4 million in the six months ended June 30, 2022. (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, 2022, we had repurchased approximately $ 20.0 billion of Common Stock pursuant to this authorization. During the six months ended June 30, 2022, we repurchased approximately 23 million shares of Common Stock at an average cost of $ 64.39 per share, or an aggregate cost of approximately $ 1.5 billion, all of which was paid during the period except for approximately $ 15 million settled in July 2022. All share repurchases were funded through available cash and commercial paper issuances. As of June 30, 2022, we have approximately $ 2.2 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 alleged 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 sought 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 May 13, 2022, 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 and did not include an admission by Mondelēz Global. Several class action complaints also 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 United States District Court for the Northern District of Illinois as case number 15-cv-2937, Harry Ploss et al. v. Kraft Foods Group, Inc. and Mondelēz Global LLC . 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 class action. Although the CFTC action and the class action complaints involve the same alleged conduct, the resolution of the CFTC matter may not be dispositive as to the outcome of the class action. In November 2019, the European Commission informed us that it 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 took the next procedural step in its investigation and opened formal proceedings. We are cooperating with the investigation and are engaging 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 June 30, 2022, 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 $( 82 ) million in the second quarter of 2022 and $ 25 million in the second quarter of 2021 and $( 40 ) million in the first six months of 2022 and $ 59 million in the first six months of 2021. For the Three Months Ended June 30, For the Six Months Ended June 30, 2022 2021 2022 2021 (in millions) Currency Translation Adjustments: Balance at beginning of period $ ( 9,043 ) $ ( 8,782 ) $ ( 9,097 ) $ ( 8,655 ) Currency translation adjustments ( 339 ) 165 ( 333 ) 31 Tax (expense)/benefit ( 60 ) ( 8 ) ( 16 ) ( 10 ) Other comprehensive earnings/(losses) ( 399 ) 157 ( 349 ) 21 Less: other comprehensive (earnings)/loss attributable to noncontrolling interests 11 ( 2 ) 15 7 Balance at end of period ( 9,431 ) ( 8,627 ) ( 9,431 ) ( 8,627 ) Pension and Other Benefit Plans: Balance at beginning of period $ ( 1,286 ) $ ( 1,805 ) $ ( 1,379 ) $ ( 1,874 ) Net actuarial gain/(loss) arising during period 108 ( 1 ) 152 ( 2 ) Tax (expense)/benefit on net actuarial gain/(loss) ( 27 ) — ( 27 ) — Losses/(gains) reclassified into net earnings: Amortization of experience losses and prior service costs (2) 16 37 36 72 Settlement losses and other expenses (2) 4 6 7 9 Curtailment credit (2) — ( 14 ) — ( 14 ) Tax expense/(benefit) on reclassifications (3) ( 6 ) ( 8 ) ( 12 ) ( 17 ) Currency impact 72 ( 18 ) 104 23 Other comprehensive earnings/(losses) 167 2 260 71 Balance at end of period ( 1,119 ) ( 1,803 ) ( 1,119 ) ( 1,803 ) Derivative Cash Flow Hedges: Balance at beginning of period $ ( 96 ) $ ( 159 ) $ ( 148 ) $ ( 161 ) Net derivative gains/(losses) 98 16 124 9 Tax (expense)/benefit on net derivative gain/(loss) 1 ( 2 ) — ( 1 ) Losses/(gains) reclassified into net earnings: Currency exchange contracts (4) 3 — 5 — Interest rate contracts (2)(4) ( 99 ) 5 ( 53 ) 11 Tax expense/(benefit) on reclassifications (3) — ( 1 ) ( 23 ) ( 2 ) Currency impact 5 ( 1 ) 7 2 Other comprehensive earnings/(losses) 8 17 60 19 Balance at end of period ( 88 ) ( 142 ) ( 88 ) ( 142 ) Accumulated other comprehensive income attributable to Mondelēz International: Balance at beginning of period $ ( 10,425 ) $ ( 10,746 ) $ ( 10,624 ) $ ( 10,690 ) Total other comprehensive earnings/(losses) ( 224 ) 176 ( 29 ) 111 Less: other comprehensive (earnings)/loss attributable to noncontrolling interests 11 ( 2 ) 15 7 Other comprehensive earnings/(losses) attributable to Mondelēz International ( 213 ) 174 ( 14 ) 118 Balance at end of period $ ( 10,638 ) $ ( 10,572 ) $ ( 10,638 ) $ ( 10,572 ) (1) These reclassified losses are included in net periodic benefit costs disclosed in Note 10, Benefit Plans . (2) These amounts include equity method investment transactions recorded within gain on equity method investment transactions. (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. 26 Table of Contents Note 14. Income Taxes As of the second quarter of 2022, our estimated annual effective tax rate, which excludes discrete tax impacts, was 24.4 %. This rate reflected the impact of unfavorable foreign provisions under U.S. tax laws and our tax related to earnings from equity method investments (the earnings are reported separately on our statement of earnings and thus not included in earnings before income taxes), partially offset by favorable impacts from the mix of pre-tax income in various non-U.S. jurisdictions. The estimated annual effective tax rate also considers the impact of the establishment of a valuation allowance related to a deferred tax asset arising from the anticipated 2022 Ukraine loss. Our 2022 second quarter effective tax rate of 23.4 % was favorably impacted by discrete net tax benefits of $ 2 million. The discrete net tax benefit primarily consisted of a 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 an expense from tax law changes in various jurisdictions. Our effective tax rate for the six months ended June 30, 2022 of 22.6 % was favorably impacted by discrete net tax benefits of $ 64 million primarily driven by the Chipita acquisition. As of the second quarter of 2021, our estimated annual effective tax rate, which excluded discrete tax impacts, was 23.7 %. 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 second quarter effective tax rate of 45.9 % was unusually high due to a $ 128 million tax expense incurred in connection with the KDP share sale that occurred during the second 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 second quarter effective tax rate was 31.1 %, reflecting a discrete net tax expense of $ 81 million. The discrete net tax expense primarily consisted of a $ 95 million net tax expense from the increase of our deferred tax liabilities resulting from tax legislation enacted during the second quarter (mainly in the United Kingdom), partially offset by a $ 11 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 six months ended June 30, 2021 of 30.9 % was also unusually high due to the $ 128 million net tax expense incurred in connection with the KDP share sale. Excluding this impact, our effective tax rate for the six months ended June 30, 2021 was 24.5 %, which was unfavorably impacted by discrete net tax expense of $ 15 million, primarily driven by $ 99 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 $ 43 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. Note 15. Earnings per Share Basic and diluted earnings per share (“EPS”) were calculated as follows: For the Three Months Ended June 30, For the Six Months Ended June 30, 2022 2021 2022 2021 (in millions, except per share data) Net earnings $ 748 $ 1,079 $ 1,609 $ 2,047 Noncontrolling interest earnings ( 1 ) ( 1 ) ( 7 ) ( 8 ) Net earnings attributable to Mondelēz International $ 747 $ 1,078 $ 1,602 $ 2,039 Weighted-average shares for basic EPS 1,382 1,407 1,385 1,410 Plus incremental shares from assumed conversions of stock options and long-term incentive plan shares 7 9 8 9 Weighted-average shares for diluted EPS 1,389 1,416 1,393 1,419 Basic earnings per share attributable to Mondelēz International $ 0.54 $ 0.77 $ 1.16 $ 1.45 Diluted earnings per share attributable to Mondelēz International $ 0.54 $ 0.76 $ 1.15 $ 1.44 27 Table of Contents 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 3.4 million in the second quarter of 2022 and 3.4 million in the second quarter of 2021 and 2.7 million in the first six months of 2022 and 3.6 million in the first six months of 2021. Note 16. Segment Reporting We manufacture and market primarily snack food products, including biscuits, 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. 28 Table of Contents Our segment net revenues and earnings were: For the Three Months Ended June 30, For the Six Months Ended June 30, 2022 2021 2022 2021 (in millions) Net revenues: Latin America $ 876 $ 669 $ 1,702 $ 1,338 AMEA 1,535 1,452 3,402 3,197 Europe 2,626 2,474 5,561 5,321 North America 2,237 2,047 4,373 4,024 Net revenues $ 7,274 $ 6,642 $ 15,038 $ 13,880 Earnings before income taxes: Operating income: Latin America $ 90 $ 54 $ 193 $ 130 AMEA 211 213 483 575 Europe 380 413 757 970 North America 454 299 872 569 Unrealized (losses)/gains on hedging activities (mark-to-market impacts) ( 109 ) 20 ( 82 ) 138 General corporate expenses ( 62 ) ( 78 ) ( 112 ) ( 142 ) Amortization of intangible assets ( 32 ) ( 32 ) ( 64 ) ( 70 ) Gain on acquisition — — — 9 Acquisition-related costs ( 5 ) ( 17 ) ( 26 ) ( 24 ) Operating income 927 872 2,021 2,155 Benefit plan non-service income 30 54 63 98 Interest and other expense, net ( 98 ) ( 58 ) ( 266 ) ( 276 ) Earnings before income taxes $ 859 $ 868 $ 1,818 $ 1,977 Items impacting our segment operating results are discussed in Note 1, Basis of Presentation , Note 2, Acquisitions and Divestitures, Note 3, Inventories , 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. 29 Table of Contents Net revenues by product category were: For the Three Months Ended June 30, 2022 Latin America AMEA Europe North America Total (in millions) Biscuits $ 255 $ 568 $ 1,001 $ 1,901 $ 3,725 Chocolate 243 536 1,140 60 1,979 Gum & Candy 193 201 170 276 840 Beverages 92 144 24 — 260 Cheese & Grocery 93 86 291 — 470 Total net revenues $ 876 $ 1,535 $ 2,626 $ 2,237 $ 7,274 Three Months Ended June 30, 2021 (1) Latin America AMEA Europe North America Total (in millions) Biscuits $ 197 $ 509 $ 849 $ 1,778 $ 3,333 Chocolate 181 475 1,137 54 1,847 Gum & Candy 129 215 154 215 713 Beverages 82 146 27 — 255 Cheese & Grocery 80 107 307 — 494 Total net revenues $ 669 $ 1,452 $ 2,474 $ 2,047 $ 6,642 For the Six Months Ended June 30, 2022 Latin America AMEA Europe North America Total (in millions) Biscuits $ 479 $ 1,225 $ 1,952 $ 3,700 $ 7,356 Chocolate 491 1,242 2,652 137 4,522 Gum & Candy 365 404 322 536 1,627 Beverages 194 341 56 — 591 Cheese & Grocery 173 190 579 — 942 Total net revenues $ 1,702 $ 3,402 $ 5,561 $ 4,373 $ 15,038 Six Months Ended June 30, 2021 (1) Latin America AMEA Europe North America Total (in millions) Biscuits $ 374 $ 1,092 $ 1,659 $ 3,514 $ 6,639 Chocolate 373 1,145 2,681 117 4,316 Gum & Candy 260 409 302 393 1,364 Beverages 176 326 60 — 562 Cheese & Grocery 155 225 619 — 999 Total net revenues $ 1,338 $ 3,197 $ 5,321 $ 4,024 $ 13,880 (1) Our snack product categories include biscuits, chocolate and gum & candy. During the first quarter of 2022, we realigned some of our products between our biscuits and chocolate categories; as such, we reclassified the product category net revenues on a basis consistent with the 2022 presentation. 30 Table of Contents