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, 2023 2022 2023 2022 Net revenues $ 9,029 $ 7,763 $ 26,702 $ 22,801 Cost of sales 5,535 5,150 16,408 14,564 Gross profit 3,494 2,613 10,294 8,237 Selling, general and administrative expenses 2,019 1,884 5,743 5,253 Asset impairment and exit costs 58 18 128 188 Amortization of intangible assets 38 32 114 96 Operating income 1,379 679 4,309 2,700 Benefit plan non-service income ( 19 ) ( 30 ) ( 60 ) ( 93 ) Interest and other expense, net 66 71 258 337 Loss/(gain) on marketable securities 1 — ( 606 ) — Earnings before income taxes 1,331 638 4,717 2,456 Income tax provision ( 354 ) ( 184 ) ( 1,280 ) ( 595 ) Gain/(loss) on equity method investment transactions 1 ( 6 ) 465 ( 19 ) Equity method investment net earnings 10 85 116 300 Net earnings 988 533 4,018 2,142 less: Noncontrolling interest earnings ( 4 ) ( 1 ) ( 9 ) ( 8 ) Net earnings attributable to Mondelēz International $ 984 $ 532 $ 4,009 $ 2,134 Per share data: Basic earnings per share attributable to Mondelēz International $ 0.72 $ 0.39 $ 2.94 $ 1.55 Diluted earnings per share attributable to Mondelēz International $ 0.72 $ 0.39 $ 2.92 $ 1.54 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, 2023 2022 2023 2022 Net earnings $ 988 $ 533 $ 4,018 $ 2,142 Other comprehensive earnings/(losses), net of tax: Currency translation adjustment ( 570 ) ( 667 ) ( 273 ) ( 1,016 ) Pension and other benefit plans 32 57 4 317 Derivative cash flow hedges 10 5 ( 28 ) 65 Total other comprehensive earnings/(losses) ( 528 ) ( 605 ) ( 297 ) ( 634 ) Comprehensive earnings/(losses) 460 ( 72 ) 3,721 1,508 less: Comprehensive earnings/(losses) attributable to noncontrolling interests ( 2 ) ( 11 ) ( 3 ) ( 19 ) Comprehensive earnings/(losses) attributable to Mondelēz International $ 462 $ ( 61 ) $ 3,724 $ 1,527 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, 2023 December 31, 2022 ASSETS Cash and cash equivalents $ 1,610 $ 1,923 Trade receivables (net of allowances of $ 63 at September 30, 2023 and $ 45 at December 31, 2022) 3,498 3,088 Other receivables (net of allowances of $ 52 at September 30, 2023 and $ 59 at December 31, 2022) 793 819 Inventories, net 3,808 3,381 Other current assets 1,806 880 Total current assets 11,515 10,091 Property, plant and equipment, net 9,142 9,020 Operating lease right-of-use assets 608 660 Goodwill 23,307 23,450 Intangible assets, net 19,475 19,710 Prepaid pension assets 1,106 1,016 Deferred income taxes 483 473 Equity method investments 3,051 4,879 Other assets 2,173 1,862 TOTAL ASSETS $ 70,860 $ 71,161 LIABILITIES Short-term borrowings $ 1,221 $ 2,299 Current portion of long-term debt 2,354 383 Accounts payable 7,658 7,562 Accrued marketing 2,704 2,370 Accrued employment costs 1,043 949 Other current liabilities 3,956 3,168 Total current liabilities 18,936 16,731 Long-term debt 16,411 20,251 Long-term operating lease liabilities 466 514 Deferred income taxes 3,444 3,437 Accrued pension costs 352 403 Accrued postretirement health care costs 212 217 Other liabilities 2,479 2,688 TOTAL LIABILITIES 42,300 44,241 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, 2023 and December 31, 2022) — — Additional paid-in capital 32,181 32,143 Retained earnings 33,866 31,481 Accumulated other comprehensive losses ( 11,232 ) ( 10,947 ) Treasury stock, at cost ( 635,672,022 shares at September 30, 2023 and 630,646,687 shares at December 31, 2022) ( 26,280 ) ( 25,794 ) Total Mondelēz International Shareholders’ Equity 28,535 26,883 Noncontrolling interest 25 37 TOTAL EQUITY 28,560 26,920 TOTAL LIABILITIES AND EQUITY $ 70,860 $ 71,161 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, 2023 Balances at July 1, 2023 $ — $ 32,148 $ 33,458 $ ( 10,710 ) $ ( 26,249 ) $ 32 $ 28,679 Comprehensive earnings/(losses): Net earnings — — 984 — — 4 988 Other comprehensive earnings/(losses), net of income taxes — — — ( 522 ) — ( 6 ) ( 528 ) Exercise of stock options and issuance of other stock awards — 33 4 — 26 — 63 Common Stock repurchased — — ( 57 ) — ( 57 ) Cash dividends declared ($ 0.425 per share) — — ( 580 ) — — — ( 580 ) Dividends paid on noncontrolling interest and other activities — — — — — ( 5 ) ( 5 ) Balances at September 30, 2023 $ — $ 32,181 $ 33,866 $ ( 11,232 ) $ ( 26,280 ) $ 25 $ 28,560 Nine Months Ended September 30, 2023 Balances at January 1, 2023 $ — $ 32,143 $ 31,481 $ ( 10,947 ) $ ( 25,794 ) $ 37 $ 26,920 Comprehensive earnings/(losses): Net earnings — — 4,009 — — 9 4,018 Other comprehensive earnings/(losses), net of income taxes — — — ( 285 ) — ( 12 ) ( 297 ) Exercise of stock options and issuance of other stock awards — 38 ( 5 ) — 176 — 209 Common Stock repurchased — — — — ( 662 ) — ( 662 ) Cash dividends declared ($ 1.195 per share) — — ( 1,633 ) — — — ( 1,633 ) Dividends paid on noncontrolling interest and other activities — — 14 — — ( 9 ) 5 Balances at September 30, 2023 $ — $ 32,181 $ 33,866 $ ( 11,232 ) $ ( 26,280 ) $ 25 $ 28,560 Three Months Ended September 30, 2022 Balances at July 1, 2022 $ — $ 32,086 $ 31,431 $ ( 10,638 ) $ ( 25,368 ) $ 42 $ 27,553 Comprehensive earnings/(losses): Net earnings — — 532 — — 1 533 Other comprehensive earnings/(losses), net of income taxes — — — ( 593 ) — ( 12 ) ( 605 ) Exercise of stock options and issuance of other stock awards — 30 ( 2 ) — 25 — 53 Common Stock repurchased — — — — ( 338 ) — ( 338 ) Cash dividends declared ($ 0.385 per share) — — ( 524 ) — — — ( 524 ) Dividends paid on noncontrolling interest and other activities — — — — — ( 2 ) ( 2 ) Balances at September 30, 2022 $ — $ 32,116 $ 31,437 $ ( 11,231 ) $ ( 25,681 ) $ 29 $ 26,670 Nine Months Ended September 30, 2022 Balances at January 1, 2022 $ — $ 32,097 $ 30,806 $ ( 10,624 ) $ ( 24,010 ) $ 54 $ 28,323 Comprehensive earnings/(losses): Net earnings — — 2,134 — — 8 2,142 Other comprehensive earnings/(losses), net of income taxes — — — ( 607 ) — ( 27 ) ( 634 ) Exercise of stock options and issuance of other stock awards — 19 ( 13 ) — 172 — 178 Common Stock repurchased — — — — ( 1,843 ) — ( 1,843 ) Cash dividends declared ($ 1.085 per share) — — ( 1,493 ) — — — ( 1,493 ) Dividends paid on noncontrolling interest and other activities — — 3 — — ( 6 ) ( 3 ) Balances at September 30, 2022 $ — $ 32,116 $ 31,437 $ ( 11,231 ) $ ( 25,681 ) $ 29 $ 26,670 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, 2023 2022 CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES Net earnings $ 4,018 $ 2,142 Adjustments to reconcile net earnings to operating cash flows: Depreciation and amortization 902 819 Stock-based compensation expense 109 88 Deferred income tax provision 9 41 Asset impairments and accelerated depreciation 95 178 Loss on early extinguishment of debt 1 38 (Gain)/loss on equity method investment transactions ( 465 ) 19 Equity method investment net earnings ( 116 ) ( 300 ) Distributions from equity method investments 136 169 Unrealized (gain)/loss on derivative contracts ( 259 ) 220 Gain on marketable securities ( 593 ) — Other non-cash items, net 53 32 Change in assets and liabilities, net of acquisitions and divestitures: Receivables, net ( 687 ) ( 625 ) Inventories, net ( 484 ) ( 745 ) Accounts payable 18 332 Other current assets ( 108 ) ( 143 ) Other current liabilities 641 413 Change in pension and postretirement assets and liabilities, net ( 120 ) ( 162 ) Net cash provided by operating activities 3,150 2,516 CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES Capital expenditures ( 780 ) ( 621 ) Acquisitions, net of cash received 19 ( 3,978 ) Proceeds from divestitures including equity method and marketable security investments 2,727 604 (Payments)/proceeds from investments and derivative settlements ( 180 ) 585 Net cash provided by/(used in) investing activities 1,786 ( 3,410 ) CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES Issuances of commercial paper, maturities greater than 90 days 67 — Repayments of commercial paper, maturities greater than 90 days ( 67 ) — Net (repayments)/issuances of short-term borrowings ( 1,070 ) 1,370 Long-term debt proceeds 189 4,490 Long-term debt repayments ( 2,087 ) ( 3,005 ) Repurchases of Common Stock ( 659 ) ( 1,838 ) Dividends paid ( 1,581 ) ( 1,457 ) Other 134 143 Net cash used in financing activities ( 5,074 ) ( 297 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 133 ) ( 167 ) Cash, cash equivalents and restricted cash: Decrease ( 271 ) ( 1,358 ) Balance at beginning of period 1,948 3,553 Balance at end of period $ 1,677 $ 2,195 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, 2022. 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 with readily determinable fair values for which we do not have the ability to exercise significant influence are measured at fair value. 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 related assets. We recorded $ 143 million of total expenses ($ 145 million after-tax) incurred as a direct result of the war. We reversed $ 22 million during the remainder of 2022 of previously recorded charges primarily as a result of higher than expected collection of trade receivables and inventory recoveries. We continue to make targeted repairs on both our plants and have partially reopened and restarted limited production in both plants. We also continue to support our Ukraine employees, including paying salaries to those not yet able to return to work until full production returns. 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. 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. Highly Inflationary Accounting Within our consolidated entities, Argentina and Türkiye (Turkey) are accounted for as highly inflationary economies. Argentina and Türkiye represent 1.6 % and 0.5 % of our consolidated net revenues with remeasurement losses of $ 20 million and $ 2 million for the three months ended September 30, 2023, respectively, and 1.6 % and 0.8 % of our consolidated net revenues with remeasurement losses of $ 41 million and $ 19 million for the nine months ended September 30, 2023. Given the continued volatility of these currencies, impacts to our financial statements in future periods could be significantly different from historical levels. 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 within other current assets of $ 67 million as of September 30, 2023 and $ 25 million as of December 31, 2022. Total cash, cash equivalents and restricted cash was $ 1,677 million as of September 30, 2023 and $ 1,948 million as of December 31, 2022. 6 Table of Contents Allowances for Credit Losses 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, 2023 $ ( 45 ) $ ( 59 ) $ ( 14 ) Current period (provision)/recovery for expected credit losses ( 22 ) 3 1 Write-offs charged against the allowance 6 — — Currency ( 2 ) 4 ( 1 ) Balance at September 30, 2023 $ ( 63 ) $ ( 52 ) $ ( 14 ) Transfers of Financial Assets The outstanding principal amount of receivables under our uncommitted revolving non-recourse accounts receivable factoring arrangements amounted to $ 755 million as of September 30, 2023 and $ 516 million as of December 31, 2022. 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 $ 86 million in operating lease and $ 101 million in finance lease right-of-use assets obtained in exchange for lease obligations during the nine months ended September 30, 2023 and $ 206 million in operating lease and $ 135 million in finance lease right-of-use assets obtained in exchange for lease obligations during the nine months ended September 30, 2022. Supply Chain Financing As part of our continued efforts to improve our working capital efficiency, we have worked with our suppliers over the past several years to optimize our terms and conditions, which include the extension of payment terms. Our current payment terms with a majority of our suppliers are from 30 to 180 days, which we deem to be commercially reasonable. We also facilitate voluntary supply chain financing (“SCF”) programs through several participating financial institutions. Under these programs, our suppliers, at their sole discretion, determine invoices that they want to sell to participating financial institutions. Our suppliers’ voluntary inclusion of invoices in SCF programs has no bearing on our payment terms or amounts due. Our responsibility is limited to making payments based upon the agreed-upon contractual terms. No guarantees are provided by the Company or any of our subsidiaries under the SCF programs and we have no economic interest in the suppliers’ decision to participate in the SCF programs. Amounts due to our suppliers that elected to participate in the SCF program are included in accounts payable in our consolidated balance sheet. We have been informed by the participating financial institutions that our outstanding accounts payable related to suppliers that participate in the SCF programs was $ 2.3 billion and $ 2.4 billion, respectively, as of September 30, 2023 and December 31, 2022. 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 adopted this standard in the first quarter of 2023 and it did not have an impact on our consolidated financial statements. In September 2022, the FASB issued an ASU which enhances the transparency of supplier finance programs by requiring additional disclosure about the key terms of these programs and a roll-forward of the related obligations to understand the effects of these programs on working capital, liquidity and cash flows. The ASU is effective for fiscal years beginning after December 15, 2022, except for the roll-forward requirement, which is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. We adopted, with the exception of the roll-forward requirement, this standard in the first quarter of 2023 and it did not have a material impact on our consolidated financial statements and related disclosures. 7 Table of Contents Note 2. Acquisitions and Divestitures Acquisitions Ricolino On November 1, 2022, we acquired 100 % of the equity of Grupo Bimbo's confectionery business, Ricolino, located primarily in Mexico. The acquisition of Ricolino builds on our continued prioritization of fast-growing snacking segments in key geographies. The cash consideration paid for Ricolino totaled $ 26 billion Mexican pesos ($ 1.3 billion), net of cash received. We are working to complete the valuation of assets acquired and liabilities assumed and have recorded a preliminary purchase price allocation of: (in millions) Cash $ 22 Receivables 86 Inventory 70 Other current assets 3 Property, plant and equipment 144 Operating leases right of use assets 23 Definite-life intangible assets 218 Indefinite-life intangible assets 339 Goodwill 717 Other assets 3 Assets acquired $ 1,625 Current liabilities 182 Deferred tax liability 76 Operating lease liabilities 23 Other liabilities 14 Total purchase price $ 1,330 Less: cash received ( 22 ) Net Cash Paid $ 1,308 Within identifiable intangible assets, we allocated $ 339 million to trade names, which have an indefinite life. The fair value for the Ricolino, Dulces Vero, LaCorona and Coronado trade names were determined using the Relief from Royalty method, a form of the income approach, at the acquisition date. The fair value measurement of indefinite-life 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 estimates of future sales, discount and royalty 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 in Mexico. None of the goodwill recognized is expected to be deductible for income tax purposes. All of the goodwill was assigned to the Latin America operating segment. Ricolino added incremental net revenues of $ 180 million during the three months and $ 506 million during the nine months ended September 30, 2023, and operating income of $ 15 million during the three months and $ 31 million during the nine months ended September 30, 2023. We incurred acquisition integration costs of $ 14 million during the three months and $ 30 million during the nine months ended September 30, 2023. We also incurred during the three and nine months ended September 30, 2022, acquisition integration costs of $ 7 million in preparation for the acquisition. We incurred $ 1 million of acquisition-related costs during the nine months ended September 30, 2022. Clif Bar On August 1, 2022, we acquired 100 % of the equity of Clif Bar & Company (“Clif Bar”), a leading U.S. maker of 8 Table of Contents nutritious energy bars with organic ingredients. The acquisition expands our global snack bar business and complements our refrigerated snacking and performance nutrition bar portfolios. The total cash payment of $ 2.9 billion includes purchase price consideration of $ 2.6 billion, net of cash received, and one-time compensation expense of $ 0.3 billion related to the buyout of the non-vested employee stock ownership plan ("ESOP") shares. This compensation expense is considered an acquisition-related cost. 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. The estimated fair value of the contingent consideration obligation at the acquisition date was $ 440 million determined using a Monte Carlo simulation. Significant assumptions used in assessing the fair value of the liability include financial projections for net revenue, gross profit, and earnings before interest, tax, depreciation and amortization ("EBITDA"), as well as discount and volatility rates. We have completed the valuation of assets acquired and liabilities assumed and have recorded a purchase price allocation of: (in millions) Cash $ 99 Receivables 76 Inventory 123 Other current assets 9 Property, plant and equipment 186 Operating lease right-of-use assets 22 Deferred tax assets 107 Definite-life intangible assets 200 Indefinite-life intangible assets 1,450 Goodwill 988 Other assets 11 Assets acquired $ 3,271 Current liabilities 159 Contingent consideration 440 Other liabilities 15 Total purchase price $ 2,657 Less: cash received ( 99 ) Net Cash Paid $ 2,558 Within identifiable intangible assets, we allocated $ 1,450 million to trade names, which have an indefinite life. The fair value for the Clif and Luna trade names, were determined using the Relief from Royalty method, a form of the income approach, at the acquisition date. The fair value measurement 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 revenue, discount and royalty rates. We expect to generate a meaningful cash tax benefit over time from the amortization of acquisition-related intangibles. 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 the U.S. and other key markets. All of the goodwill was assigned to the North America operating segment. Tax deductible goodwill is expected to be $ 1.4 billion and will be amortized. Through the one-year anniversary of the acquisition, Clif Bar added incremental net revenues of $ 71 million during the three months and $ 529 million during the nine months ended September 30, 2023, and operating income of $ 11 million during the three months and $ 81 million during the nine months ended September 30, 2023. We also incurred acquisition integration costs of $ 37 million during the three months and $ 92 million during the nine months ended September 30, 2023. These acquisition integration costs include an increase to the contingent consideration liability due to changes to underlying assumptions. Refer to Note 9, Financial Instruments for additional information. During the three and nine months ended September 30, 2022, we incurred acquisition integration costs of $ 16 million and an inventory step-up charge of $ 20 million. We also incurred acquisition-related costs of $ 292 million 9 Table of Contents during the three months and $ 296 million during the nine months ended September 30, 2022. These acquisition-related costs are primarily related to the buyout of the non-vested ESOP shares. Chipita On January 3, 2022, we acquired 100 % of the equity of 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). We have recorded a purchase price allocation of net tangible and intangible assets acquired and liabilities assumed as follows: (in millions) Cash $ 52 Receivables 102 Inventory 60 Other current assets 3 Property, plant and equipment 379 Finance lease right-of-use assets 8 Definite-life intangible assets 48 Indefinite-life intangible assets 686 Goodwill 795 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 operating segment. We incurred acquisition integration costs of $ 5 million during the three months and $ 15 million during the nine months ended September 30, 2023. We incurred acquisition integration costs of $ 14 million during the three months and $ 85 million during the nine months ended September 30, 2022. We incurred acquisition-related costs of $ 21 million during the nine months ended September 30, 2022. 10 Table of Contents Divestitures Developed Market Gum - Held for Sale On December 16, 2022, we entered into an agreement to sell our developed market gum business in North America and Europe for $ 1.4 billion. In connection with these agreements, we concluded that the disposal group met the held for sale criteria as of December 31, 2022. The disposal group is included as part of the North America and Europe operating segments. We incurred divestiture-related costs of $ 14 million in the three months ended September 30, 2023 and $ 66 million in the nine months ended September 30, 2023. Total assets and liabilities held for sale are comprised of the following: As of September 30, 2023 As of December 31, 2022 (in millions) Assets held for sale Other receivables, net of allowances $ 2 $ — Inventories, net 83 79 Current assets held for sale (1) 85 79 Property, plant and equipment, net 164 159 Operating lease right-of-use assets 1 — Goodwill 290 292 Intangible assets, net 697 671 Deferred income taxes 8 — Noncurrent assets held for sale (2) 1,160 1,122 Total assets held for sale $ 1,245 $ 1,201 Liabilities held for sale Accrued employment costs $ — $ 4 Other current liabilities 1 — Current liabilities held for sale (3) 1 4 Long-term operating lease liabilities 1 — Deferred income taxes — 15 Noncurrent liabilities held for sale (4) 1 15 Total liabilities held for sale $ 2 $ 19 (1) Reported in Other current assets on the condensed consolidated balance sheets. (2) Reported in Other assets on the condensed consolidated balance sheets. (3) Reported in Other current liabilities on the condensed consolidated balance sheets. (4) Reported in Other liabilities on the condensed consolidated balance sheets. On October 1, 2023, we completed the sale of our developed market gum business in the United States, Canada, and Europe to Perfetti Van Melle Group, excluding the Portugal business which we retained pending regulatory approval. We completed the sale of the Portugal business to Perfetti Van Melle Group on October 23, 2023. We received net cash proceeds of $ 1.4 billion, subject to certain closing adjustments, that can be utilized for general corporate purposes, including the support of our commercial paper program. 11 Table of Contents Note 3. Inventories Inventories consisted of the following: As of September 30, 2023 As of December 31, 2022 (in millions) Raw materials $ 1,027 $ 1,031 Finished product 2,924 2,501 3,951 3,532 Inventory reserves ( 143 ) ( 151 ) Inventories, net $ 3,808 $ 3,381 Note 4. Property, Plant and Equipment Property, plant and equipment consisted of the following: As of September 30, 2023 As of December 31, 2022 (in millions) Land and land improvements $ 370 $ 378 Buildings and building improvements 3,313 3,250 Machinery and equipment 12,100 11,724 Construction in progress 990 879 16,773 16,231 Accumulated depreciation ( 7,631 ) ( 7,211 ) Property, plant and equipment, net $ 9,142 $ 9,020 For the nine months ended September 30, 2023, capital expenditures of $ 780 million excluded $ 321 million of accrued capital expenditures remaining unpaid at September 30, 2023 and included payment for the $ 324 million of capital expenditures that were accrued and unpaid at December 31, 2022. For the nine months ended September 30, 2022, capital expenditures of $ 621 million excluded $ 255 million of accrued capital expenditures remaining unpaid at September 30, 2022 and included payment for the $ 249 million of capital expenditures that were accrued and unpaid at December 31, 2021. 12 Table of Contents Note 5. Goodwill and Intangible Assets Goodwill Changes in goodwill consisted of (in millions): Latin America AMEA Europe North America Total January 1, 2022 $ 674 $ 3,365 $ 7,830 $ 10,109 $ 21,978 Currency 41 ( 233 ) ( 550 ) ( 15 ) ( 757 ) Acquisitions (1) 714 — 795 1,020 2,529 Held for Sale (1) — — ( 66 ) ( 226 ) ( 292 ) Divestitures ( 8 ) — — — ( 8 ) Balance at December 31, 2022 $ 1,421 $ 3,132 $ 8,009 $ 10,888 $ 23,450 Currency 136 ( 134 ) ( 117 ) 2 ( 113 ) Acquisitions (1) (2) 3 — — ( 33 ) ( 30 ) Balance at September 30, 2023 $ 1,560 $ 2,998 $ 7,892 $ 10,857 $ 23,307 (1) Refer to Note 2, Acquisitions and Divestitures for more information. (2) Relates to purchase price allocation adjustments for Ricolino and Clif Bar during 2023. Intangible Assets Intangible assets consisted of the following (in millions): As of September 30, 2023 As of December 31, 2022 Gross carrying amount Accumulated amortization Net carrying amount Gross carrying amount Accumulated amortization Net carrying amount Definite-life intangible assets $ 3,259 $ ( 2,071 ) $ 1,188 $ 3,354 $ ( 2,057 ) $ 1,297 Indefinite-life intangible assets (1) (2) 18,287 — 18,287 18,413 — 18,413 Total $ 21,546 $ ( 2,071 ) $ 19,475 $ 21,767 $ ( 2,057 ) $ 19,710 (1) In 2022, we recorded $ 101 million of intangible asset impairment charges related to two biscuit brands in the AMEA segment, of which $ 78 million was recorded in the first quarter and $ 23 million was recorded in the third quarter. (2) In 2023, we recorded $ 26 million of intangible asset impairment charges related to a chocolate brand in the North America segment for $ 20 million and a biscuit brand in the Europe segment for $ 6 million in the third quarter. Indefinite-life intangible assets consist principally of brand names purchased through our acquisitions of Nabisco Holdings Corp., the global LU biscuit business of Groupe Danone S.A., Cadbury Limited and Clif Bar. Definite-life intangible assets consist primarily of trademarks, customer-related intangibles, process technology, licenses and non-compete agreements. Amortization expense for intangible assets was $ 38 million for the three months and $ 114 million for the nine months ended September 30, 2023 and $ 32 million for the three months and $ 96 million for the nine months ended September 30, 2022. For the next five years, we currently estimate annual amortization expense of approximately $ 145 million in 2023-2025, approximately $ 95 million in 2026 and approximately $ 90 million in 2027 (reflecting September 30, 2023 exchange rates). During the third quarter of 2023, we performed our annual impairment assessment test for goodwill and indefinite-life intangible assets as of July 1, 2023. Our 2023 annual testing of goodwill resulted in no impairments as each reporting unit had fair value in excess of carrying value. As part of our goodwill quantitative assessment, we compare a reporting unit's estimated fair value to its carrying value. If the carrying value of the reporting unit exceeds the fair value, we would record an impairment for the difference. We estimate a reporting unit's fair value using a discounted cash flow method that incorporates discount rates, planned growth rates, and estimates of residual value. For our Europe and North America reporting units, we used a market-based weighted average cost of capital of 7.1 % to discount projected cash flows of those operations. For our Latin America and AMEA reporting units, we used a risk-rated discount rate of 10.1 % to discount projected cash flows from those operations. Estimating the fair value of individual reporting units requires us to make assumptions and estimates regarding our future plans, industry conditions and economic conditions based on available information. Given the uncertainty of the global macroeconomic environment, those estimates could be 13 Table of Contents 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 our control, such as discount rates, changes significantly, then the estimated fair values of a reporting unit might decline and lead to a goodwill impairment in the future. Our 2023 annual testing of indefinite-life intangible assets resulted in an impairment of $ 26 million related to a chocolate brand in the North America segment and a biscuit brand in the Europe segment. The impairments were driven by changes in projections as a result of current and expected operating environment. The impairment charges were calculated as the excess of the carrying value over the estimated fair value of the intangible assets on a global basis and were recorded within asset impairment and exit costs. We use several accepted valuation methods, including Relief from Royalty, excess earnings and excess margin. The valuation methods utilize estimates of future sales, earnings growth rates, royalty rates and discount rates to determine the fair value of each intangible asset. We identified thirteen brands that each had a fair value in excess of book value of 10% or less. The aggregate book value of the thirteen brands was $ 3.5 billion as of September 30, 2023, of which $ 1.8 billion is related to five recently acquired brands. We believe our current plans for each of these brands will allow them to not be impaired, but if plans to grow brand earnings and expand margin are not met or specific valuation factors outside of our control, such as discount rates, change then a brand or brands could become impaired in the future. Note 6. Investments Marketable Securities Our reduction in ownership in Keurig Dr Pepper Inc. (Nasdaq: "KDP") during the first quarter of 2023, to below 5 % of the outstanding shares, resulted in a change of accounting for our KDP investment, from equity method investment accounting to accounting for equity interests with readily determinable fair values ("marketable securities") as we no longer have significant influence. These marketable securities were measured at fair value based on quoted prices in active markets for identical assets (Level 1). On July 13, 2023, we sold 23 million shares, the remainder of our shares of KDP. We received proceeds of approximately $ 704 million. On June 8, 2023, we sold 23 million shares of KDP, which reduced our ownership by 1.6 percentage points, from 3.2 % to 1.6 % of the total outstanding shares. We received proceeds of approximately $ 708 million. On March 2, 2023, we sold 30 million shares of KDP, which reduced our ownership interest by 2.1 percentage points, from 5.3 % to 3.2 % of the total outstanding shares. We received proceeds of approximately $ 1.0 billion and recorded a pre-tax gain on equity method transactions of $ 493 million ($ 366 million after-tax) during the first quarter of 2023. Pre-tax gains and losses for marketable securities are summarized below (in millions): Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023 (in millions) Loss/(gain) on marketable securities sold during the period $ — $ ( 593 ) Dividend income and other 1 ( 13 ) Total loss/(gain) on marketable securities $ 1 $ ( 606 ) In the table above, loss/(gain) on marketable securities sold during the period reflects the difference between the sale proceeds and the carrying value of the equity securities at the beginning of the period or the date of the change of accounting for our investment in KDP, if later. Equity Method Investments Our equity method investments include, but are not limited to, our ownership interests in JDE Peet's (Euronext Amsterdam: "JDEP"), 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, 2023, we owned 17.7 %, 50.0 % and 49.0 %, respectively, of these companies' 14 Table of Contents outstanding shares. Our investments accounted for under the equity method of accounting totaled $ 3.1 billion as of September 30, 2023 and $ 4.9 billion as of December 31, 2022. The investment balance as of December 31, 2022 is inclusive of our investment in KDP. We recorded equity earnings of $ 10 million and cash dividends of $ 34 million in the three months ended September 30, 2023, and equity earnings of $ 85 million and cash dividends of $ 48 million in the three months ended September 30, 2022. We recorded equity earnings of $ 116 million and cash dividends of $ 136 million in the nine months ended September 30, 2023 and equity earnings of $ 300 million and cash dividends of $ 169 million in the nine months ended September 30, 2022. Based on the quoted closing prices as of September 30, 2023, the fair value of our publicly traded investment in JDEP was $ 2.4 billion, and there was no other than temporary impairment identified. JDEP Transactions On March 30, 2023, we issued options to sell shares of JDEP in tranches equivalent to approximately 7.7 million shares. These options were exercisable at their maturities which were between July 3, 2023 and September 29, 2023, with strike prices ranging from € 26.10 to € 28.71 per share. During the three months ended September 30, 2023, options were exercised on 2.2 million shares, which reduced our ownership by 0.4 percentage point, from 18.1 % to 17.7 % of the total outstanding shares. We received cash proceeds of € 57 million ($ 62 million) and recorded a loss of € 3 million ($ 4 million) for these sales during the three months ended September 30, 2023. We continue to have board representation with two directors on JDEP's Board of Directors and have retained certain additional governance rights. As we continue to have significant influence, we continue to account for our investment in JDEP under the equity method. On April 3, 2023, we sold approximately 7.7 million shares of JDEP, which reduced our ownership interest by 1.6 percentage points, from 19.7 % to 18.1 % of the total outstanding shares. We received cash proceeds of € 198 million ($ 217 million) and recorded a loss of € 18 million ($ 19 million) on this sale during the second quarter of 2023. On May 8, 2022, we sold approximately 18.6 million of our JDEP shares back to JDEP, which reduced our ownership interest by approximately 3 percentage points. We received cash proceeds of € 500 million ($ 529 million) and recorded a loss of € 8 million ($ 8 million) on this sale during the second quarter of 2022. In 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 JDEP’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 JDEP's shares, this would represent approximately 8.5 million shares or approximately 10 % of our equity interest in JDEP as of September 30, 2023. Refer to Note 9, Financial Instruments , for further details on this transaction. 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, and on July 25, 2023, our Board of Directors approved a further extension of the restructuring program through December 31, 2024. 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 $ 5.2 billion related to the Simplify to Grow Program. We expect to incur the remainder of the program charges by year-end 2024. 15 Table of Contents Restructuring Costs The Simplify to Grow Program liability activity for the nine months ended September 30, 2023 was: Severance and related costs Asset Write-downs and Other (1) Total (in millions) Liability balance, January 1, 2023 $ 164 $ — $ 164 Charges (2) 33 15 48 Cash spent (3) ( 47 ) — ( 47 ) Non-cash settlements/adjustments (4) 1 ( 15 ) ( 14 ) Currency — — — Liability balance, September 30, 2023 (5) $ 151 $ — $ 151 (1) Includes gains as a result of assets sold which are included in the restructuring program. (2) We recorded restructuring charges of $ 16 million in the three months ended September 30, 2023 and a gain of $ 10 million due to the sale of assets included in the restructuring program as well as restructuring charges of $ 3 million in the three months ended September 30, 2022. We recorded restructuring charges of $ 48 million in the nine months ended September 30, 2023 and $ 8 million in the nine months ended September 30, 2022 within asset impairment and exit costs and benefit plan non-service income. (3) We spent $ 12 million in the three months ended September 30, 2023 and $ 12 million in the three months ended September 30, 2022 and spent $ 47 million in the nine months ended September 30, 2023 and $ 45 million in the nine months ended September 30, 2022 in cash severance and related costs. (4) We recognized non-cash asset write-downs (including accelerated depreciation and asset impairments) and other non-cash adjustments, including any gains on sale of restructuring program assets, which totaled a charge of $ 8 million in the three months ended September 30, 2023 and a gain of $ 10 million in the three months ended September 30, 2022 and recognized a charge of $ 14 million in the nine months ended September 30, 2023 and a gain of $ 1 million in the nine months ended September 30, 2022. (5) At September 30, 2023, $ 111 million of our net restructuring liability was recorded within other current liabilities and $ 40 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 $ 4 million in the three months ended September 30, 2023 and $ 23 million in the three months ended September 30, 2022, and we recorded implementation costs of $ 13 million in the nine months ended September 30, 2023 and $ 62 million in the nine months ended September 30, 2022. We recorded these costs within cost of sales and general corporate expense within selling, general and administrative expenses. 16 Table of Contents Restructuring and Implementation Costs During the three and nine months ended September 30, 2023 and September 30, 2022, 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, 2023 Restructuring Costs $ ( 1 ) $ 5 $ — $ 11 $ 1 $ 16 Implementation Costs 1 ( 1 ) 1 1 2 4 Total $ — $ 4 $ 1 $ 12 $ 3 $ 20 For the Three Months Ended September 30, 2022 Restructuring Costs $ ( 2 ) $ 1 $ 3 $ ( 8 ) $ ( 1 ) $ ( 7 ) Implementation Costs 1 — 5 8 9 23 Total $ ( 1 ) $ 1 $ 8 $ — $ 8 $ 16 For the Nine Months Ended September 30, 2023 Restructuring Costs $ ( 2 ) $ 7 $ 27 $ 16 $ — $ 48 Implementation Costs — ( 1 ) 3 4 7 13 Total $ ( 2 ) $ 6 $ 30 $ 20 $ 7 $ 61 For the Nine Months Ended September 30, 2022 Restructuring Costs $ ( 5 ) $ 3 $ 5 $ 4 $ 1 $ 8 Implementation Costs 5 4 18 24 11 62 Total $ — $ 7 $ 23 $ 28 $ 12 $ 70 Total Project (Inception to Date) Restructuring Costs $ 546 $ 561 $ 1,190 $ 673 $ 150 $ 3,120 Implementation Costs 303 244 572 594 375 2,088 Total $ 849 $ 805 $ 1,762 $ 1,267 $ 525 $ 5,208 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, 2023 As of December 31, 2022 Amount Outstanding Weighted- Average Rate Amount Outstanding Weighted- Average Rate (in millions, except percentages) Commercial paper $ 1,142 5.5 % $ 2,209 4.7 % Bank loans 79 16.9 % 90 9.1 % Total short-term borrowings $ 1,221 $ 2,299 17 Table of Contents Our uncommitted credit lines and committed credit lines available as of September 30, 2023 and December 31, 2022 include: As of September 30, 2023 As of December 31, 2022 Facility Amount Borrowed Amount Facility Amount Borrowed Amount (in millions) Uncommitted credit facilities $ 1,352 $ 79 $ 1,335 $ 90 Credit facilities: February 22, 2023 (1) — — 2,500 — March 11, 2023 (1) — — 2,000 — December 29, 2023 (1) (2) 2,000 — — — February 21, 2024 (1) 1,500 — — — July 29, 2025 (1) (3) — — 2,000 2,000 October 18, 2025 (4) 189 189 — — February 23, 2027 (1) 4,500 — 4,500 — (1) We maintain senior unsecured revolving credit facilities for general corporate purposes, including working capital needs, and to support our commercial paper program. The revolving credit agreements include 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 September 30, 2023, we complied with this covenant as our shareholders' equity, as defined by the covenant, was $ 39.8 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 October 18, 2023, we terminated the credit facility due to expire on December 29, 2023. (3) 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. Amounts borrowed and repaid under the facility may not be reborrowed. On July 29, 2022, we drew down $ 2.0 billion in term loans, due July 29, 2025, bearing interest at a variable annual rate based on SOFR plus an applicable margin. We repaid $ 1.0 billion on March 3, 2023, $ 0.3 billion on April 3, 2023, and $ 0.7 billion on May 3, 2023 in term loans. (4) On April 18, 2023, we entered into a credit facility secured by pledged deposits. Under this agreement, we may draw up to a total of $ 0.2 billion in loans from the facility. On April 25, 2023, we drew down $ 0.2 billion bearing a variable rate based on SOFR plus an applicable margin. Long-Term Debt As of September 30, 2023, the Company reclassified the net carrying value of debt of $ 2.0 billion due within one year from long-term debt to current portion of long-term debt. Fair Value of Our Debt The fair value of our short-term borrowings reflects current market interest rates and approximates the amounts we have recorded on our consolidated balance sheets. The fair value of our term loans was determined using quoted prices for similar instruments in markets that are not active (Level 2 valuation data) 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, 2023 As of December 31, 2022 (in millions) Fair Value $ 17,159 $ 20,217 Carrying Value $ 19,986 $ 22,933 18 Table of Contents 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, 2023 2022 2023 2022 (in millions) Interest expense, debt $ 134 $ 114 $ 432 $ 294 Loss on debt extinguishment and related expenses — — 1 129 Other income, net ( 68 ) ( 43 ) ( 175 ) ( 86 ) Interest and other expense, net $ 66 $ 71 $ 258 $ 337 Other income, net includes amounts excluded from hedge effectiveness related to our net investment hedge derivative contracts. Refer to Note 9, Financial Instruments . 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, 2023 As of December 31, 2022 Asset Derivatives Liability Derivatives Asset Derivatives Liability Derivatives (in millions) Derivatives designated as accounting hedges: Interest rate contracts $ 140 $ 33 $ 132 $ 35 Net investment hedge derivative contracts (1) 238 166 265 241 $ 378 $ 199 $ 397 $ 276 Derivatives not designated as accounting hedges: Currency exchange contracts $ 224 $ 93 $ 185 $ 103 Commodity contracts 1,035 874 200 247 Interest rate contracts 10 6 8 — Equity method investment contracts (2) — — — 3 $ 1,269 $ 973 $ 393 $ 353 Total fair value $ 1,647 $ 1,172 $ 790 $ 629 (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, Investments . 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. 19 Table of Contents The fair values (asset/(liability)) of our derivative instruments were determined using: As of September 30, 2023 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 $ 131 $ — $ 131 $ — Commodity contracts 161 ( 41 ) 202 — Interest rate contracts 111 — 111 — Net investment hedge contracts 72 — 72 — Total derivatives $ 475 $ ( 41 ) $ 516 $ — As of December 31, 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 $ 82 $ — $ 82 $ — Commodity contracts ( 47 ) ( 35 ) ( 12 ) — Interest rate contracts 105 — 105 — Net investment hedge contracts 24 — 24 — Equity method investment contracts ( 3 ) — ( 3 ) — Total derivatives $ 161 $ ( 35 ) $ 196 $ — 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. 20 Table of Contents Derivative Volume The notional values of our hedging instruments were: Notional Amount As of September 30, 2023 As of December 31, 2022 (in millions) Currency exchange contracts: Intercompany loans and forecasted interest payments $ 2,645 $ 2,085 Forecasted transactions 5,776 5,470 Commodity contracts (1) 12,767 7,777 Interest rate contracts 3,384 4,147 Net investment hedges: Net investment hedge derivative contracts 7,630 7,319 Non-U.S. dollar debt designated as net investment hedges: Euro notes 3,368 3,410 Swiss franc notes 645 638 Canadian dollar notes 442 443 (1) Prior year notional value has been revised. Cash Flow Hedges Cash flow hedge activity, net of taxes, is recorded within accumulated other comprehensive earnings/(losses). Refer to Note 13, Reclassifications from Accumulated Other Comprehensive Income for further information on current period activity. Based on current market conditions, we would expect to transfer gains of $ 58 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, 2023, our longest dated cash flow hedges were interest rate swaps that hedge forecasted interest rate payments over the next 2 years, 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, 2023 was $ 7.6 billion. Net investment hedge derivative contract impacts on other comprehensive earnings and net earnings were: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2023 2022 2023 2022 (in millions) After-tax gain on NIH contracts (1) $ 72 $ 440 $ 89 $ 788 (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, 2023 2022 2023 2022 (in millions) Amounts excluded from the assessment of hedge effectiveness (1) $ 38 $ 32 $ 110 $ 84 (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. 21 Table of Contents Non-U.S. dollar debt designated as net investment hedges After-tax gains/(losses) related to hedges of net investments in international operations 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, 2023 2022 2023 2022 (in millions) Euro notes $ 82 $ 165 $ 32 $ 381 British pound sterling notes — 20 — 47 Swiss franc notes 11 23 ( 5 ) 50 Canadian notes 9 24 1 31 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 2023 2022 2023 2022 (in millions) Currency exchange contracts: Intercompany loans and forecasted interest payments $ — $ ( 1 ) $ 47 $ ( 5 ) Interest and other expense, net Forecasted transactions 15 ( 9 ) 44 98 Cost of sales Forecasted transactions — 8 13 ( 23 ) Interest and other expense, net Forecasted transactions ( 3 ) ( 5 ) ( 9 ) ( 2 ) Selling, general and administrative expenses Commodity contracts 72 ( 31 ) 176 166 Cost of sales Equity method investment contracts 4 ( 3 ) 7 ( 3 ) Gain/(loss) on equity method investment transactions Total $ 88 $ ( 41 ) $ 278 $ 231 22 Table of Contents Fair Value of Contingent Consideration The following is a summary of our contingent consideration liability activity: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2023 2022 2023 2022 (in millions) Liability at beginning of period $ 567 $ 173 $ 642 $ 159 Contingent consideration arising from acquisitions — 440 — 440 Changes in fair value 35 — 50 16 Payments — — ( 90 ) — Currency — — — ( 2 ) Liability at end of period $ 602 $ 613 $ 602 $ 613 Contingent consideration was recorded at fair value in the condensed consolidated balance sheets as follows: As of September 30, 2023 Total Fair Value of Liability Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (in millions) Clif Bar (1) $ 494 $ — $ — $ 494 Other (2) 108 — — 108 Total contingent consideration $ 602 $ — $ — $ 602 As of December 31, 2022 Total Fair Value of Liability Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (in millions) Clif Bar (1) $ 452 $ — $ — $ 452 Other (2) 190 — — 190 Total contingent consideration $ 642 $ — $ — $ 642 (1) In connection with the Clif Bar acquisition, we entered into a contingent consideration arrangement that may require us to pay additional consideration to the sellers for achieving certain net revenue, gross profit and EBITDA targets in 2025 and 2026 that exceed our base financial projections for the business implied in the upfront purchase price. The other contingent consideration liabilities are recorded at fair value within long-term liabilities. The estimated fair value of the contingent consideration obligation at the acquisition date was determined using a Monte Carlo simulation and recorded in other liabilities. Significant assumptions used in assessing the fair value of the liability include financial projections for net revenue, gross profit, and EBITDA, as well as discount and volatility rates. Fair value adjustments are primarily recorded in selling, general and administrative expenses in the condensed consolidated statement of earnings. Refer to Note 2, Acquisitions and Divestitures for additional information. (2) The other contingent consideration liabilities are recorded at fair value, with $ 108 million and $ 102 million classified as other current liabilities at September 30, 2023 and December 31, 2022, respectively, and $ 88 million classified as long-term liabilities at December 31, 2022. The fair value of this contingent consideration was determined using a Monte Carlo valuation model based on Level 3 inputs, including management's latest estimate of forecasted future results. Other key assumptions included discount rate and volatility. Fair value adjustments are recorded in selling, general and administrative expenses in the condensed consolidated statement of earnings. Refer to Note 2, Acquisitions and Divestitures for additional information. 23 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, 2023 2022 2023 2022 (in millions) Service cost $ — $ 1 $ 13 $ 22 Interest cost 16 13 76 47 Expected return on plan assets ( 24 ) ( 21 ) ( 101 ) ( 92 ) Amortization: Net loss from experience differences — 1 10 14 Prior service cost — 1 — — Settlement losses and other expenses 5 5 — — Net periodic pension (benefit) $ ( 3 ) $ — $ ( 2 ) $ ( 9 ) U.S. Plans Non-U.S. Plans For the Nine Months Ended September 30, For the Nine Months Ended September 30, 2023 2022 2023 2022 (in millions) Service cost $ 2 $ 4 $ 40 $ 77 Interest cost 48 36 228 135 Expected return on plan assets ( 73 ) ( 57 ) ( 303 ) ( 279 ) Amortization: Net loss from experience differences — 6 31 48 Prior service cost/(benefit) 1 1 — ( 1 ) Settlement losses and other expenses 13 12 — — Net periodic pension (benefit)/cost $ ( 9 ) $ 2 $ ( 4 ) $ ( 20 ) Employer Contributions During the nine months ended September 30, 2023, we contributed $ 3 million to our U.S. pension plans and $ 90 million to our non-U.S. pension plans. 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, 2023, we plan to make further contributions of approximately $ 3 million to our U.S. plans and $ 29 million to our non-U.S. plans for the remainder of 2023. Our actual contributions may be different due to many factors, including changes in tax and other benefit laws, significant differences between expected and actual pension asset performance or interest rates. Multiemployer Pension Plans On July 11, 2019, we received an undiscounted withdrawal liability assessment 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 $ 3 million and $ 8 million for the three and nine months ended September 30, 2023 and $ 3 million and $ 8 million for the three and nine months ended September 30, 2022, within interest and other expense, net. As of September 30, 2023, the remaining discounted withdrawal liability was $ 332 million, with $ 15 million recorded in other current liabilities and $ 317 million recorded in long-term other liabilities. Postretirement and Postemployment Benefit Plans The net periodic postretirement (benefit)/cost was $( 2 ) million and $( 4 ) million for the three and nine months ended 24 Table of Contents September 30, 2023 and $ 3 million and $ 9 million for the three and nine months ended September 30, 2022. The net periodic postemployment cost was $ 2 million and $ 3 million for the three and nine months ended September 30, 2023 and $ 1 million and $ 2 million for the three and nine months ended September 30, 2022. 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, 2023 20,490,250 $ 46.31 5 years $ 417 million Annual grant to eligible employees 2,452,110 65.36 Additional options issued 7,230 69.95 Total options granted 2,459,340 65.37 Options exercised (1) ( 3,457,739 ) 39.47 $ 110 million Options canceled ( 270,017 ) 57.52 Balance at September 30, 2023 19,221,834 49.82 5 years $ 376 million (1) Cash received from options exercised was $ 29 million in the three months and $ 134 million in the nine months ended September 30, 2023. 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 $ 19 million in the nine months ended September 30, 2023. Performance Share Units and Other Stock-Based Awards Our performance share unit (PSU), deferred stock unit (DSU) and other stock-based activity is reflected below: Number of Shares Grant Date Weighted-Average Fair Value Per Share (4) Weighted-Average Aggregate Fair Value (3) Balance at January 1, 2023 4,451,674 $ 60.12 Annual grant to eligible employees: Mar 2, 2023 Performance share units 895,410 68.59 Deferred stock units 578,570 65.36 Additional shares granted (1) 728,381 Various 65.73 Total shares granted 2,202,361 66.79 $ 147 million Vested (2) (3) ( 1,658,391 ) 62.71 $ 104 million Forfeited (2) ( 247,953 ) 62.58 Balance at September 30, 2023 4,747,691 62.18 (1) Includes PSUs and DSUs. (2) Includes PSUs, DSUs and other stock-based awards. (3) The actual tax benefit realized and recorded in the provision for income taxes for the tax deductions from the shares vested totaled zero in the three months and $ 2 million in the nine months ended September 30, 2023. (4) The grant date fair value of PSUs 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 2020, our Board of Directors authorized the repurchase of a total of $ 23.7 billion of our Common Stock and extended the program through December 31, 2023. Prior to January 1, 2023, we had repurchased approximately $ 22.0 billion of Common Stock pursuant to this authorization. Our Board of Directors approved a new program authorizing the repurchase of up to $ 6.0 billion of our Common Stock through December 31, 2025. This authorization, effective January 1, 2023, replaced our previous share repurchase program. Repurchases under the program are determined by management and are wholly discretionary. 25 Table of Contents During the nine months ended September 30, 2023, we repurchased approximately 9.6 million shares of Common Stock at an average cost of $ 68.55 per share, or an aggregate cost of approximately $ 659 million, all of which was paid during the period. All share repurchases were funded through available cash and commercial paper issuances. As of September 30, 2023, we have approximately $ 5.3 billion in remaining share repurchase capacity. Note 12. Commitments and Contingencies Legal Proceedings We routinely are involved in various pending or threatened legal proceedings, claims, disputes, regulatory matters and governmental inquiries, 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 legal matters 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 legal proceedings and regulatory and governmental matters, individually and in the aggregate, will not materially harm our financial position, results of operations or cash flows. However, legal proceedings and regulatory and governmental matters are subject to inherent uncertainties, and unfavorable rulings or other events could occur. Unfavorable resolutions could involve substantial fines, civil or criminal penalties, and other expenditures. 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 equitable remedies. An unfavorable outcome might result in a material adverse impact on our business, results of operations or financial position. On April 1, 2015, the U.S. Commodity Futures Trading Commission ("CFTC") filed a complaint against Kraft Foods Group and Mondelēz Global LLC (“Mondelēz Global”) in the U.S. District Court for the Northern District of Illinois (the "District Court") 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 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. 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 Mondelēz Global in the District Court by investors who copied and expanded upon the CFTC allegations in a series of private claims for monetary damages as well as injunctive, declaratory, and other unspecified relief. In June 2015, these suits were consolidated 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. In November 2022, the District Court adjourned the trial date it had previously set for November 30, 2022 and ordered the parties to brief Kraft’s motions to decertify the class and for summary judgment, which has been completed. 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. As previously disclosed, 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 allegedly restricting cross-border trade within the European Economic Area. On January 28, 2021, the European Commission announced it had taken the next procedural step in its investigation and opened formal proceedings. We have been cooperating with the investigation and discussions with the European Commission are progressing in an effort to reach a negotiated, proportionate resolution in this matter. As of September 30, 2023 and December 31, 2022, we have accrued (in accordance with U.S. GAAP) a liability of € 300 million ($ 317 million as of September 30, 2023) within other current liabilities in the consolidated balance sheet as an estimate of the possible cost to resolve this matter. It is not possible to predict if our ongoing discussions will result in a negotiated resolution, or result in a negotiated resolution in a higher amount, or when we will have clarity on the ultimate outcome of these discussions. If our discussions do not result in a negotiated resolution, we expect that the European Commission will pursue proceedings against the Company, including the imposition of a fine, and we would defend against any allegations made in such proceedings. There is a possibility that the final liability could be materially higher than the amount accrued. However, due to the inherent uncertainty of the discussions and possible outcomes, any possible loss or range of loss different from the amount accrued is not reasonably estimable at this time. 26 Table of Contents Third-Party Guarantees We enter into third-party guarantees primarily to cover long-term obligations of our vendors. As part of these transactions, we guarantee that third parties will make contractual payments or achieve performance measures. As of September 30, 2023 and December 31, 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. 27 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)/gains of $ 35 million in the third quarter of 2023 and $ 103 million in the third quarter of 2022 and $( 6 ) million in the first nine months of 2023 and $ 143 million in the first nine months of 2022. For the Three Months Ended September 30, For the Nine Months Ended September 30, 2023 2022 2023 2022 (in millions) Currency Translation Adjustments: Balance at beginning of period $ ( 9,505 ) $ ( 9,431 ) $ ( 9,808 ) $ ( 9,097 ) Currency translation adjustments ( 582 ) ( 607 ) ( 270 ) ( 940 ) Tax (expense)/benefit 12 ( 60 ) ( 3 ) ( 76 ) Other comprehensive earnings/(losses) ( 570 ) ( 667 ) ( 273 ) ( 1,016 ) Less: other comprehensive (earnings)/loss attributable to noncontrolling interests 6 12 12 27 Balance at end of period ( 10,069 ) ( 10,086 ) ( 10,069 ) ( 10,086 ) Pension and Other Benefit Plans: Balance at beginning of period $ ( 1,133 ) $ ( 1,119 ) $ ( 1,105 ) $ ( 1,379 ) Net actuarial gain/(loss) arising during period ( 20 ) ( 36 ) ( 19 ) 116 Tax (expense)/benefit on net actuarial gain/(loss) 3 4 3 ( 23 ) Losses/(gains) reclassified into net earnings: Amortization of experience losses and prior service costs (1) 7 16 20 52 Settlement losses and other expenses (1) 5 5 13 12 Tax expense/(benefit) on reclassifications (3) ( 2 ) ( 2 ) ( 8 ) ( 14 ) Currency impact 39 70 ( 5 ) 174 Other comprehensive earnings/(losses) 32 57 4 317 Balance at end of period ( 1,101 ) ( 1,062 ) ( 1,101 ) ( 1,062 ) Derivative Cash Flow Hedges: Balance at beginning of period $ ( 72 ) $ ( 88 ) $ ( 34 ) $ ( 148 ) Net derivative gains/(losses) 56 121 ( 10 ) 245 Tax (expense)/benefit on net derivative gain/(loss) — — 1 — Losses/(gains) reclassified into net earnings: Currency exchange contracts (2) — 1 — 6 Interest rate contracts (2) ( 43 ) ( 121 ) ( 20 ) ( 174 ) Tax expense/(benefit) on reclassifications (3) ( 2 ) ( 2 ) 1 ( 25 ) Currency impact ( 1 ) 6 — 13 Other comprehensive earnings/(losses) 10 5 ( 28 ) 65 Balance at end of period ( 62 ) ( 83 ) ( 62 ) ( 83 ) Accumulated other comprehensive income attributable to Mondelēz International: Balance at beginning of period $ ( 10,710 ) $ ( 10,638 ) $ ( 10,947 ) $ ( 10,624 ) Total other comprehensive earnings/(losses) ( 528 ) ( 605 ) ( 297 ) ( 634 ) Less: other comprehensive (earnings)/loss attributable to noncontrolling interests 6 12 12 27 Other comprehensive earnings/(losses) attributable to Mondelēz International ( 522 ) ( 593 ) ( 285 ) ( 607 ) Balance at end of period $ ( 11,232 ) $ ( 11,231 ) $ ( 11,232 ) $ ( 11,231 ) (1) These reclassified losses are included in net periodic benefit costs disclosed in Note 10, Benefit Plans . (2) These reclassified gains or losses are recorded within interest and other expense, net. (3) Taxes reclassified to earnings are recorded within the provision for income taxes. 28 Table of Contents Note 14. Income Taxes As of the third quarter of 2023, our estimated annual effective tax rate, which excludes discrete tax impacts, was 25.9 %. This rate reflected the impact of unfavorable foreign provisions under U.S. tax laws as well as both favorable and unfavorable impacts from the mix of pre-tax income in various non-U.S. jurisdictions. Our 2023 third quarter effective tax rate was 26.6 % and includes those same impacts. Our effective tax rate for the nine months ended September 30, 2023 of 27.1 % was high due to a $ 127 million net tax expense incurred in connection with the KDP share sale during the first quarter (the earnings were reported separately on our statement of earnings and thus not included in earnings before income taxes). Excluding this impact, our effective tax rate for the nine months ended September 30, 2023 was 24.4 %. The 24.4 % rate included a $ 151 million net tax expense related to pre-tax gains and losses on KDP marketable securities ($ 201 million net tax expense in Q1 and $ 50 million net tax benefit in Q2). As of the third quarter of 2022, our estimated annual effective tax rate, which excluded discrete tax impacts, was 24.0 %. 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 were 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 considered the impact of the establishment of a valuation allowance related to a deferred tax asset arising from the anticipated 2022 Ukraine loss as well as the expense related to the buyout of the Clif Bar ESOP that was recorded to third quarter earnings before income taxes with no associated income tax benefit, as any tax impacts are included in the tax purchase price. Our 2022 third quarter effective tax rate of 28.8 % was high due to the Clif Bar ESOP expense. Excluding this impact, our third quarter effective tax rate of 19.9 % was favorably impacted by discrete net tax benefits of $ 28 million. The discrete net tax benefit primarily consisted of 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, partially offset by a $ 13 million expense from U.S. state tax law changes. Our effective tax rate for the nine months ended September 30, 2022 of 24.2 % considered the unfavorable impacts of the Ukraine loss and the Clif Bar ESOP expense as well as favorable discrete net tax benefits of $ 92 million. The discrete net tax benefit primarily consisted of a $ 75 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 $ 43 million net benefit from the Chipita acquisition, partially offset by $ 22 million expense from tax law changes in various jurisdictions. 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, 2023 2022 2023 2022 (in millions, except per share data) Net earnings $ 988 $ 533 $ 4,018 $ 2,142 less: Noncontrolling interest earnings ( 4 ) ( 1 ) ( 9 ) ( 8 ) Net earnings attributable to Mondelēz International $ 984 $ 532 $ 4,009 $ 2,134 Weighted-average shares for basic EPS 1,363 1,372 1,364 1,381 Plus incremental shares from assumed conversions of stock options and long-term incentive plan shares 7 7 8 8 Weighted-average shares for diluted EPS 1,370 1,379 1,372 1,389 Basic earnings per share attributable to Mondelēz International $ 0.72 $ 0.39 $ 2.94 $ 1.55 Diluted earnings per share attributable to Mondelēz International $ 0.72 $ 0.39 $ 2.92 $ 1.54 We exclude antidilutive Mondelēz International stock options and long-term incentive plan shares from our calculation of weighted-average shares for diluted EPS. We excluded antidilutive stock options and performance share units of 2.5 million for the three months ended September 30, 2023 and 3.3 million for the three months ended September 30, 2022 and 2.8 million for the nine months ended September 30, 2023 and 2.9 million for the nine months ended September 30, 2022. 29 Table of Contents Note 16. Segment Reporting We manufacture and market primarily snack food products, including chocolate, biscuits and baked snacks, as well as gum & candy, cheese & grocery and powdered beverages. 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. 30 Table of Contents Our segment net revenues and earnings were: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2023 2022 2023 2022 (in millions) Net revenues: Latin America $ 1,305 $ 913 $ 3,744 $ 2,615 AMEA 1,791 1,704 5,339 5,106 Europe 3,086 2,649 9,319 8,210 North America 2,847 2,497 8,300 6,870 Net revenues $ 9,029 $ 7,763 $ 26,702 $ 22,801 Earnings before income taxes: Operating income: Latin America $ 156 $ 112 $ 429 $ 305 AMEA 302 257 869 740 Europe 494 413 1,450 1,170 North America 532 465 1,678 1,337 Unrealized gains/(losses) on hedging activities (mark-to-market impacts) 19 ( 186 ) 239 ( 268 ) General corporate expenses ( 86 ) ( 58 ) ( 242 ) ( 170 ) Amortization of intangible assets ( 38 ) ( 32 ) ( 114 ) ( 96 ) Acquisition-related costs — ( 292 ) — ( 318 ) Operating income 1,379 679 4,309 2,700 Benefit plan non-service income 19 30 60 93 Interest and other expense, net ( 66 ) ( 71 ) ( 258 ) ( 337 ) (Loss)/gain on marketable securities ( 1 ) — 606 — Earnings before income taxes $ 1,331 $ 638 $ 4,717 $ 2,456 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. 31 Table of Contents Net revenues by product category were: For the Three Months Ended September 30, 2023 Latin America AMEA Europe North America Total (in millions) Biscuits & Baked Snacks $ 313 $ 642 $ 1,120 $ 2,409 $ 4,484 Chocolate 347 701 1,428 83 2,559 Gum & Candy 408 233 199 355 1,195 Beverages 112 118 29 — 259 Cheese & Grocery 125 97 310 — 532 Total net revenues $ 1,305 $ 1,791 $ 3,086 $ 2,847 $ 9,029 For the Three Months Ended September 30, 2022 Latin America AMEA Europe North America Total (in millions) Biscuits & Baked Snacks $ 272 $ 655 $ 892 $ 2,166 $ 3,985 Chocolate 240 640 1,290 62 2,232 Gum & Candy 202 204 172 269 847 Beverages 111 119 25 — 255 Cheese & Grocery 88 86 270 — 444 Total net revenues $ 913 $ 1,704 $ 2,649 $ 2,497 $ 7,763 For the Nine Months Ended September 30, 2023 Latin America AMEA Europe North America Total (in millions) Biscuits $ 898 $ 1,881 $ 3,311 $ 7,105 $ 13,195 Chocolate 1,031 2,011 4,339 223 7,604 Gum & Candy 1,124 674 652 972 3,422 Beverages 335 476 88 — 899 Cheese & Grocery 356 297 929 — 1,582 Total net revenues $ 3,744 $ 5,339 $ 9,319 $ 8,300 $ 26,702 For the Nine Months Ended September 30, 2022 Latin America AMEA Europe North America Total (in millions) Biscuits $ 751 $ 1,880 $ 2,844 $ 5,866 $ 11,341 Chocolate 731 1,882 3,942 199 6,754 Gum & Candy 567 608 494 805 2,474 Beverages 305 460 81 — 846 Cheese & Grocery 261 276 849 — 1,386 Total net revenues $ 2,615 $ 5,106 $ 8,210 $ 6,870 $ 22,801 32 Table of Contents