Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview of Business and Strategy
Our core business is making and selling chocolate, biscuits and baked snacks, with additional businesses in adjacent, locally relevant categories including gum & candy, cheese & grocery and powdered beverages around the world.
We aim to be the global leader in snacking. Our strategy is to drive long-term growth by focusing on four strategic priorities: accelerating consumer-centric growth, driving operational excellence, creating a winning growth culture and scaling sustainable snacking. We believe the successful implementation of our strategic priorities and leveraging of our attractive global footprint, strong core of iconic global and local brands, marketing, sales, distribution and cost excellence capabilities, and top talent with a growth mindset, will drive consistent top- and bottom-line growth, enabling us to continue to create long-term value for our shareholders.
Recent Developments and Significant Items Affecting Comparability
Macroeconomic environment
We continue to observe significant market and geopolitical uncertainty, fluctuating consumer demand, inflationary pressures, supply constraints, trade and regulatory uncertainty and exchange rate volatility. As a result, we experienced significantly higher operating costs, including higher overall raw material, labor and energy costs that have continued to rise. In particular, we expect to continue to face higher cocoa costs, as the market price for cocoa beans has increased significantly year-over-year and it is likely that prices will remain elevated for some time. Refer to Commodity Trends for additional information.
Our overall outlook for future snacks revenue growth remains strong; however, we anticipate ongoing volatility. We will continue to proactively manage our business in response to the evolving global economic environment, related uncertainty and business risks while also prioritizing and supporting our employees and customers. We continue to take steps to mitigate impacts to our supply chain, operations, technology and assets.
Trade and Regulatory Uncertainty
In many markets, including the United States, certain products or a portion of our products, including significant inputs, are imported from other jurisdictions. As the current geopolitical environment remains unpredictable, we continue to monitor and evaluate the impact of proposed and enacted tariffs, including proposed and enacted retaliatory tariffs or other trade restrictions. We are evaluating the potential impact of these developments as well as our ability to mitigate the impact, as they are expected to adversely impact our revenue and cost of goods sold. If the provisions of certain proposed tariffs for which implementation is currently delayed are ultimately implemented as originally proposed, or if additional tariff actions are implemented, we would expect those adverse impacts on our business operations and financial performance to be significant. For most products and materials imported to the United States from Mexico and Canada, we comply with the terms of the U.S.-Mexico-Canada Agreement ("USMCA") and are therefore not subject to tariffs on most products and materials imported from those jurisdictions. However, the current trade environment continues to evolve rapidly and there can be no assurance that such products and materials will continue to be exempt. The implementation of additional protectionist trade measures, and any further retaliatory actions taken in response, could result in increased costs and pricing pressures, disrupt consumer spending patterns, and impact market stability and consumer confidence, any or all of which could adversely affect our operating results. For additional information, see the risk factors in our Annual Report on Form 10-K for the year ended December 31, 2024, including the risk entitled “ We are subject to risks from changes to the trade policies and tariff and import/export regulations by the U.S. and/or other foreign governments. ”
War in Ukraine
In February 2022, following the Russian military invasion of Ukraine, we stopped production and closed our facilities in Ukraine; since then we have taken steps to protect the safety of our employees and to restore operations at our two manufacturing facilities, which were significantly damaged in March 2022. Refer to Items Affecting Comparability of Financial Results for additional information.
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We have suspended new capital investments and our advertising spending in Russia, but as a food company with more than 2,500 employees in the country, we have not ceased operations because we believe that we play a role in the continuity of the food supply. We continue to evaluate the situation in Ukraine and Russia and our ability to control our operating activities and businesses on an ongoing basis and comply with applicable international sanctions. We continue to consolidate both our Ukrainian and Russian subsidiaries. During the first quarter of 2025, Ukraine generated 0.4% and Russia generated 3.1% of our consolidated net revenue and during the first quarter of 2024, Ukraine generated 0.4% and Russia generated 2.6% of our consolidated net revenue. The profitability of and the assets held by our Russian business continue to remain above historic levels. We cannot predict if the recent strength in our Russian business will continue in the future.
Our operations in Russia are subject to risks, including the temporary or permanent loss of assets due to expropriation or further curtailment of our ability to conduct business operations in Russia. In the event this were to occur, this could lead to the partial or full impairment of our Russian assets or deconsolidation of our Russian operations in future periods, or the termination of and loss of revenue from our business operations, based on actions taken by Russia, other parties or us. For additional information, see the risk factors in our Annual Report on Form 10-K for the year ended December 31, 2024, including the risk entitled “ The war in Ukraine has impacted and could continue to impact our business operations, financial performance and results of operations. ”
Developments in the Middle East
In October 2023, conflict developed in the Middle East between Hamas and Israel, and has expanded to other parts of the region. Throughout 2024 and into 2025, we experienced sales impacts related to this conflict in certain AMEA markets, but this did not have a material impact on our business, results of operations or financial condition. We continue to evaluate the impacts of these developments on our business and we cannot predict if the conflict will have a significant impact in the future.
ERP System Implementation
In July 2024, our Board of Directors approved funding of $1.2 billion for a multi-year systems transformation program to upgrade our global ERP and supply chain systems (the “ERP System Implementation”). ERP System Implementation spending comprises both capital expenditures and operating expenses, of which a majority is expected to relate to operating expenses. The operating expenses associated with the ERP System Implementation represent incremental transformational costs above the normal ongoing level of spending on information technology to support operations. The ERP System Implementation program will be implemented by region in several phases with spending occurring over the next four years, with expected completion by year-end 2028. Refer to Non-GAAP financial measures for additional information.
Extreme Price Growth in Argentina
During December 2023, the Argentinean peso significantly devalued. The peso's devaluation and potential resulting distortion on our non-GAAP Organic Net Revenue, Organic Net Revenue growth and other constant currency growth rate measures resulted in our decision to exclude the impact of pricing increases in excess of 26% year-over-year ("extreme pricing") in Argentina, from these measures beginning in the first quarter of 2024. The benchmark of 26% represents the minimum annual inflation rate for each year over a 3-year period which would result in a cumulative inflation rate in excess of 100%, the level at which an economy is considered hyperinflationary under U.S. GAAP. Throughout the following MD&A discussion, we exclude the impact of extreme pricing in Argentina from the net pricing impact of Organic Net Revenue and Organic Net Revenue growth and its related impact on our other non-GAAP financial constant currency growth measures. Additionally within this MD&A discussion, "currency-related items" reflect the impacts of extreme pricing and year-over-year currency translation rate changes. Refer to Non-GAAP financial measures for additional information.
Currency-related items impacted our non-GAAP financial measures for the three months ended March 31, 2025 as follows:
• Organic Net Revenue: In the first quarter of 2025, unfavorable currency-related items of $342 million (3.7 pp) were driven by unfavorable currency translation rate changes of $365 million (4.0 pp), partially offset by extreme pricing of $23 million (0.3 pp). In Emerging Markets, unfavorable currency-related items of $252 million (6.8 pp) were driven by unfavorable currency translation rate changes of $275 million (7.4 pp),
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partially offset by extreme pricing of $23 million (0.6 pp). In Developed Markets, unfavorable currency-related items of $90 million (1.6 pp) were driven by unfavorable currency translation rate changes.
• Adjusted Operating Income: In the first quarter of 2025, unfavorable currency-related items of $27 million were driven by unfavorable currency translation rate changes of $31 million, partially offset by extreme pricing of $4 million.
• Adjusted EPS: In the first quarter of 2025, unfavorable currency-related items of $0.02 were driven by unfavorable currency translation rate changes, as extreme pricing had an immaterial impact.
Acquisitions and Divestitures
During the fourth quarter of 2024 , we completed the acquisition of Evirth (Shanghai) Industrial Co., Ltd, a leading manufacturer of cakes and pastries in China. Refer to Note 2, Acquisitions and Divestitures , for additional details.
Equity Method Investment Transactions
JDE Peet’s Transactions (Euronext Amsterdam: “JDEP”)
During the first quarter of 2024, we determined there was an other-than-temporary impairment of our investment in JDEP, resulting in an impairment charge of €612 million ($665 million). During the fourth quarter of 2024, we sold our remaining 85.9 million shares to JAB Holdings Company. For additional information, refer to Note 6, Equity Method Investments.
Benefit Plans
During the third quarter of 2024, we entered into an annuity agreement with two third party insurance companies for the Mondelēz Global LLC Retirement Plan (“MDLZ Global Plan”), the pension plan for US salaried employees. The annuity agreement featured a buy-in of the plan assets with an option to elect a future buy-out conversion. The MDLZ Global Plan was terminated on December 31, 2024, and we currently intend to execute the buy-out conversion in the second quarter of 2025. Refer to Note 9, Benefit Plans for additional information.
Taxes
We continue to monitor existing and potential future tax reform around the world. Numerous countries have now enacted the Organization of Economic Cooperation and Development’s model rules on a global minimum tax, effective for 2024. Important details of these minimum tax regimes are still being considered. Based on the guidance available thus far, this legislation did not have a material impact on our condensed consolidated financial statements but we will continue to evaluate it as additional guidance and clarification becomes available.
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Summary of Results
• Net revenues increased 0.2% to $9.3 billion in the first quarter of 2025 as compared to the same period in the prior year. Net revenue growth in the first quarter of 2025 was driven by higher net pricing and incremental net revenue from our acquisition of Evirth, partially offset by unfavorable currency-related items, as the U.S. dollar strengthened relative to most currencies we operate in compared to exchange rates in the prior year, unfavorable volume/mix and lapping prior-year net revenue from a short-term distributor agreement related to the sale of our developed market gum business.
• Organic Net Revenue, a non-GAAP financial measure, increased 3.1% to $9.6 billion in the first quarter of 2025 as compared to the same period in the prior year. During the first quarter Organic Net Revenue grew due to higher net pricing, partially offset by unfavorable volume/mix. Organic Net Revenue is reported on a constant currency basis and excludes revenue from acquisitions and divestitures. Refer to Non-GAAP Financial Measures for the definition of Organic Net Revenue and Consolidated Results of Operations for our reconciliation with net revenues.
• Diluted EPS attributable to Mondelēz International decreased (70.2)% to $0.31 in the first quarter of 2025 as compared to the same period in the prior year. The decrease was driven by an unfavorable year-over-year change in mark-to-market impacts from commodity and foreign currency derivatives, a decrease in Adjusted EPS and costs incurred for the ERP System Implementation program. These unfavorable items were partially offset by lapping a prior-year equity method investment impairment, lapping prior-year costs for the completed Simplify to Grow Program, lower acquisition integration costs and contingent consideration adjustments and lower losses on remeasurement of net monetary position in highly inflationary countries.
• Adjusted EPS, a non-GAAP financial measure, decreased (20.4)% to $0.74 in the first quarter of 2025 as compared to the same period in the prior year. On a constant currency basis, Adjusted EPS decreased (18.3)% to $0.76 in the first quarter of 2025 as compared to the same period in the prior year. The decrease in Adjusted EPS was driven by operating declines, higher interest and other expense and unfavorable currency-related items, partially offset by fewer shares outstanding, lower taxes and the impact from an acquisition. Refer to Non-GAAP Financial Measures for the definition of Adjusted EPS and Consolidated Results of Operations for our reconciliation with diluted EPS.
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Discussion and Analysis of Historical Results
Items Affecting Comparability of Financial Results
The following table includes significant income or (expense) items that affected the comparability of our results of operations and our effective tax rates. Please refer to the notes to the condensed consolidated financial statements indicated below for additional information. Refer to the Consolidated Results of Operations – Net Earnings and Earnings per Share Attributable to Mondelēz International table and the Non-GAAP Financial Measures section for the after-tax per share impacts and definitions of these items.
For the Three Months Ended
March 31,
See Note 2025 2024
(in millions, except percentages)
Simplify to Grow Program Note 13 $ 2 $ (53)
Mark-to-market (losses)/gains from derivatives (1)
Note 8 (673) 1,124
Acquisition-related items
Note 2 8 (43)
Divestiture-related items
Note 2 4 (4)
Incremental costs due to war in Ukraine
— (1)
ERP System Implementation costs (2)
(33) —
Remeasurement of net monetary position Note 1 (7) (8)
Impact from pension participation changes (1)
Note 9 (2) (2)
Initial impacts from enacted tax law changes Note 14 2 2
Loss on equity method investment transactions (3)
Note 6 — (665)
Effective tax rate Note 14 28.3 % 23.6 %
(1) Includes impacts recorded in operating income and interest expense and other, net in the accompanying condensed consolidated statements of earnings.
(2) Refer to Recent Developments and Significant Items Affecting Comparability - ERP System Implementation , for more information.
(3) Loss on equity method investment transactions includes impairments and is recorded outside pre-tax operating results on the condensed consolidated statement of earnings.
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Consolidated Results of Operations
Three Months Ended March 31
For the Three Months Ended
March 31,
2025 2024 $ Change
% Change
(in millions, except per share data)
Net revenues $ 9,313 $ 9,290 $ 23 0.2 %
Operating income 680 2,727 (2,047) (75.1) %
Net earnings attributable to
Mondelēz International
402 1,412 (1,010) (71.5) %
Diluted earnings per share attributable to
Mondelēz International
0.31 1.04 (0.73) (70.2) %
Net Revenues – Net revenues increased $23 million (0.2%) to $9,313 million in the first quarter of 2025, and Organic Net Revenue (1) increased $291 million (3.1%) to $9,556 million. Emerging markets net revenues decreased (0.3)% and emerging markets Organic Net Revenue increased 3.9% (1) . Developed markets net revenues increased 0.6% and developed markets Organic Net Revenue increased 2.6% (1) . The underlying changes in net revenues and Organic Net Revenue are detailed below:
Emerging
Markets Developed
Markets Mondelēz
International
Three Months Ended March 31, 2025
Reported (GAAP) $ 3,723 $ 5,590 $ 9,313
Acquisitions (99) — (99)
Currency-related items
252 90 342
Organic (Non-GAAP) $ 3,876 $ 5,680 $ 9,556
Three Months Ended March 31, 2024
Reported (GAAP) $ 3,733 $ 5,557 $ 9,290
Short-term distributor agreements
(3) (22) (25)
Organic (Non-GAAP) $ 3,730 $ 5,535 $ 9,265
% Change
Reported (GAAP) (0.3) % 0.6 % 0.2 %
Short-term distributor agreements
0.1 0.4 0.3 pp
Acquisitions (2.7) — (1.1)
Currency-related items
6.8 1.6 3.7
Organic (Non-GAAP) 3.9 % 2.6 % 3.1 %
Vol/Mix (3.7)pp (3.3)pp (3.5)pp
Pricing 7.6 5.9 6.6
(1) Please see the Non-GAAP Financial Measures section at the end of this item.
Net revenue increase of 0.2% was driven by our underlying Organic Net Revenue growth of 3.1% and the impact of an acquisition, partially offset by unfavorable currency-related items and lapping prior-year net revenue from a short-term distributor agreement related to the sale of our developed market gum business. Organic Net Revenue growth was driven by higher net pricing, partially offset by unfavorable volume/mix. Higher net pricing was due to the benefit of carryover pricing from 2024 as well as the effects of input cost-driven pricing actions taken during the first three months of 2025. Higher net pricing was reflected in all regions except North America. Unfavorable volume/mix was experienced across all regions, driven by volume declines reflecting pricing elasticity impacts in Europe, AMEA and Latin America as well as biscuit & baked snacks category softness in North America. The November 1, 2024 acquisition of Evirth added incremental net revenues of $99 million (constant currency basis) in the first quarter of 2025. Refer to Note 2, Acquisitions and Divestitures, for additional information. Currency-related items decreased net revenues by $342 million, driven by unfavorable currency translation rate changes, partially offset by extreme pricing in Argentina. Refer to Recent Developments and Significant Items Affecting Comparability for additional information. Unfavorable currency translation rate changes were due to the strength of the U.S. dollar relative to most currencies, primarily the Brazilian real, Mexican peso, euro, Argentinean peso, Egyptian pound, Indian rupee, Canadian dollar, Australian dollar and Turkish lira. The lapping of the prior-year short-term distributor
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agreement related to the sale of our developed market gum business, which ended in the first quarter of 2024, resulted in a year-over-year incremental reduction in net revenue of $25 million.
Operating Income – Operating income decreased $2,047 million (75.1%) to $680 million in the first quarter of 2025. Adjusted Operating Income (1) decreased $335 million (19.6%) to $1,375 million and Adjusted Operating Income on a constant currency basis (1) decreased $308 million (18.0%) to $1,402 million due to the following:
For the Three Months Ended
March 31,
2025 2024 $ Change % Change
(in millions)
Operating Income $ 680 $ 2,727 $ (2,047) (75.1) %
Simplify to Grow Program (2)
(2) 53 (55)
Mark-to-market losses/(gains) from derivatives (3)
669 (1,124) 1,793
Acquisition-related items (4)
(8) 43 (51)
Divestiture-related items (4)
(4) 4 (8)
Operating results from short-term distributor agreements (1)
— (2) 2
Incremental costs due to war in Ukraine (5)
— 1 (1)
ERP System Implementation costs (6)
33 — 33
Remeasurement of net monetary position (7)
7 8 (1)
Adjusted Operating Income (1)
$ 1,375 $ 1,710 $ (335) (19.6) %
Currency-related items
27 — 27
Adjusted Operating Income (constant currency) (1)
$ 1,402 $ 1,710 $ (308) (18.0) %
Key Drivers of Adjusted Operating Income (constant currency) $ Change
Higher net pricing
$ 612
Higher input costs
(850)
Unfavorable volume/mix (215)
Lower selling, general and administrative expenses
132
Impact from acquisitions (4)
10
Lower amortization of intangible assets
2
Lower asset impairment charges
1
Total change in Adjusted Operating Income (constant currency) (1)
$ (308)
(1) Refer to the Non-GAAP Financial Measures section.
(2) Refer to Note 13, Restructuring Program, for additional information.
(3) Refer to Note 8, Financial Instruments , and the Non-GAAP Financial Measures section at the end of this item for additional information on the unrealized gains/losses on commodity and foreign currency derivative contracts economically hedging forecasted transactions.
(4) Refer to Note 2, Acquisitions and Divestitures , for additional information on the November 1, 2024 acquisition of Evirth and divestiture-related costs.
(5) Refer to Recent Developments and Significant Items Affecting Comparability - War in Ukraine , for information on accounting impacts resulting from the war in Ukraine.
(6) Refer to Recent Developments and Significant Items Affecting Comparability - ERP System Implementation , for more information.
(7) Refer to Note 1, Basis of Presentation , for information on our application of highly inflationary accounting for Argentina, Türkiye, Egypt and Nigeria.
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During the first quarter of 2025, we realized higher net pricing, which was more than offset by increased input costs and unfavorable volume/mix. Higher net pricing, which included the carryover impact of pricing actions taken in 2024 as well as the effects of input cost-driven pricing actions taken during the first three months of 2025, was reflected across all regions except North America. The increase in input costs was driven by higher raw material costs, partially offset by lower manufacturing costs driven by productivity. Higher raw material costs were primarily due to higher cocoa, dairy, packaging, energy, nuts and other ingredient costs, as well as unfavorable year-over-year currency exchange transaction costs on imported materials, partially offset by lower sugar, grains and edible oils costs. Overall, unfavorable volume/mix was primarily due to volume declines, reflected across all regions.
Total selling, general and administrative expenses decreased $227 million from the first quarter of 2024, which was net of benefits from a number of factors noted in the table above, including in part, a favorable currency-related impact to expenses, favorable contingent consideration adjustments related to the Clif Bar acquisition and lower acquisition integration costs, lapping prior-year implementation costs for the completed Simplify to Grow Program, lapping prior-year divestiture-related costs and the impact from acquisitions, marginally offset by costs incurred for the ERP System Implementation program. Excluding these factors, selling, general and administrative expenses decreased $132 million from the first quarter of 2024. The decrease was driven primarily by lower advertising and consumer promotion costs and lower overhead costs.
Unfavorable currency-related items, net of extreme pricing in Argentina, decreased operating income by $27 million primarily due to the strength of the U.S. dollar relative to most currencies, including the Mexican peso, Brazilian real, euro, Australian dollar, Egyptian pound, Indian rupee, Chinese yuan and Canadian dollar.
Operating income margin decreased from 29.4% in the first quarter of 2024 to 7.3% in the first quarter of 2025. The decrease in operating income margin was driven primarily by an unfavorable year-over-year change in mark-to-market impacts from commodity and foreign currency derivatives, lower Adjusted Operating Income margin and costs incurred for the ERP System Implementation program, partially offset by lower acquisition integration costs and contingent consideration adjustments and lapping prior-year costs for the completed Simplify to Grow Program. Adjusted Operating Income margin decreased from 18.5% for the first quarter of 2024 to 14.8% for the first quarter of 2025. The decrease was driven primarily by higher raw material costs and unfavorable product mix, partially offset by higher net pricing, lower advertising and consumer promotion costs, lower manufacturing costs driven by productivity and lower overhead costs.
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Net Earnings and Earnings per Share Attributable to Mondelēz International – Net earnings attributable to Mondelēz International of $402 million decreased by $1,010 million (71.5%) in the first quarter of 2025. Diluted EPS attributable to Mondelēz International was $0.31 in the first quarter of 2025, down $0.73 (70.2%) from the first quarter of 2024. Adjusted EPS (1) was $0.74 in the first quarter of 2025, down $0.19 (20.4%) from the first quarter of 2024. Adjusted EPS on a constant currency basis (1) was $0.76 in the first quarter of 2025, down $0.17 (18.3%) from the first quarter of 2024.
For the Three Months Ended
March 31,
2025 2024 $ Change % Change
Diluted EPS attributable to Mondelēz International $ 0.31 $ 1.04 $ (0.73) (70.2) %
Simplify to Grow Program (2)
— 0.03 (0.03)
Mark-to-market losses/(gains) from derivatives (2)
0.41 (0.66) 1.07
Acquisition-related items (2)
— 0.02 (0.02)
ERP System Implementation costs (2)
0.02 — 0.02
Remeasurement of net monetary position (2)
— 0.01 (0.01)
Loss on equity method investment transactions (3)
— 0.49 (0.49)
Adjusted EPS (1)
$ 0.74 $ 0.93 $ (0.19) (20.4) %
Currency-related items
0.02 — 0.02
Adjusted EPS (constant currency) (1)
$ 0.76 $ 0.93 $ (0.17) (18.3) %
Key Drivers of Adjusted EPS (constant currency) $ Change
Decrease in operations
$ (0.17)
Impact from acquisitions (2)
0.01
Change in interest and other expense, net
(0.04)
Change in income taxes (4)
0.01
Change in shares outstanding (5)
0.02
Total change in Adjusted EPS (constant currency) (1)
$ (0.17)
(1) Refer to the Non-GAAP Financial Measures section appearing later in this section. The tax expense/(benefit) of each of the pre-tax items excluded from our U.S. GAAP results was computed based on the facts and tax assumptions associated with each item, and such impacts have also been excluded from Adjusted EPS.
• For the three months ended March 31, 2025, taxes for the: mark-to-market losses from derivatives were $(136) million, acquisition integration costs and contingent consideration adjustments were $5 million and ERP System Implementation program were $(8) million.
• For the three months ended March 31, 2024, taxes for the: Simplify to Grow Program were $(11) million, mark-to-market gains from derivatives were $227 million, acquisition integration costs and contingent consideration adjustments were $(10) million, remeasurement of net monetary position was zero and loss on equity method investment transactions was zero.
(2) See the Operating Income table above and the related footnotes for additional information.
(3) Refer to Note 6, Equity Method Investments , for additional information on gains/losses on equity method investment transactions.
(4) Refer to Note 14, Income Taxes , for additional information on the items affecting income taxes.
(5) Refer to Note 11, Stock Plans , for additional information on our equity compensation programs and share repurchase program and Note 15, Earnings per Share , for earnings per share weighted-average share information.
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Results of Operations by Reportable Segment
Our operations and management structure are organized into four operating segments:
• Latin America
• AMEA
• Europe
• North America
We manage our operations by region to leverage regional operating scale, manage different and changing business environments more effectively and pursue growth opportunities as they arise across our key markets. Our regional management teams have responsibility for the business, product categories and financial results in the regions.
We use segment operating income to evaluate segment performance and allocate resources. We believe it is appropriate to disclose this measure to help investors analyze segment performance and trends. See Note 16, Segment Reporting, for additional information on our segments and Items Affecting Comparability of Financial Results earlier in this section for items affecting our segment operating results.
Our reconciliation of segment net revenues and earnings to consolidated financial statement totals were:
For the Three Months Ended
March 31,
2025 2024
(in millions)
Net revenues:
Latin America $ 1,203 $ 1,319
AMEA 2,016 1,950
Europe 3,550 3,368
North America 2,544 2,653
Net revenues $ 9,313 $ 9,290
Earnings before income taxes:
Segment operating income:
Latin America $ 139 $ 157
AMEA 343 411
Europe 462 591
North America 485 549
Unrealized (losses)/gains on hedging activities
(mark-to-market impacts) (669) 1,124
General corporate expenses (43) (67)
Amortization of intangible assets (37) (38)
Operating income $ 680 $ 2,727
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Latin America
For the Three Months Ended
March 31,
2025 2024 $ Change
% Change
(in millions)
Net revenues $ 1,203 $ 1,319 $ (116) (8.8) %
Segment operating income 139 157 (18) (11.5) %
Three Months Ended March 31:
Net revenues decreased $116 million (8.8%), due to an unfavorable impact of currency-related items (12.7 pp) and unfavorable volume/mix (2.5 pp), partially offset by higher net pricing (6.4 pp). Currency-related items were unfavorable, net of extreme pricing in Argentina, due to currency translation rate changes. Unfavorable currency translation impacts were primarily due to the strength of the U.S. dollar relative to most currencies in the region, including the Brazilian real, Mexican peso and Argentinean peso. Unfavorable volume/mix reflected volume declines due to pricing elasticity impacts, primarily in Mexico and Argentina. Overall, unfavorable volume/mix was driven by declines in refreshment beverages, candy, gum and cheese & grocery, partially offset by gains in chocolate and biscuits & baked snacks. Higher net pricing, net of extreme pricing in Argentina, was driven by input cost-driven pricing actions and reflected across all categories, primarily in Argentina, Brazil and Mexico.
Segment operating income decreased $18 million (11.5%), primarily due to higher raw material costs, unfavorable volume/mix, higher other selling, general and administrative expenses, costs incurred for the ERP System Implementation program and unfavorable currency-related items. These unfavorable items were partially offset by higher pricing, lower manufacturing costs driven by productivity, lower advertising and consumer promotion costs and lower acquisition integration costs.
AMEA
For the Three Months Ended
March 31,
2025 2024 $ Change
% Change
(in millions)
Net revenues $ 2,016 $ 1,950 $ 66 3.4 %
Segment operating income 343 411 (68) (16.5) %
Three Months Ended March 31:
Net revenues increased $66 million (3.4%), due to the impact of an acquisition (5.1 pp) and higher net pricing (4.8 pp), partially offset by unfavorable currency translation rate changes (3.5 pp) and unfavorable volume/mix (3.0 pp). The November 1, 2024 acquisition of Evirth added incremental net revenues of $99 million (constant currency basis) in the first quarter of 2025. Higher net pricing, driven by input cost-driven pricing actions, was reflected across all categories except cheese & grocery. Unfavorable currency translation impacts were due to the strength of the U.S. dollar relative to most currencies in the region, including the Egyptian pound, Indian rupee, and Australian dollar. Unfavorable volume/mix reflected volume declines due to pricing elasticity impacts. Overall, unfavorable volume/mix was driven by declines in chocolate, refreshment beverages and cheese & grocery, partially offset by gains in gum and biscuits & baked snacks.
Segment operating income decreased $68 million (16.5%), primarily due to higher raw material costs, unfavorable volume/mix, higher other selling, general and administrative expenses, unfavorable currency translation rate changes, higher acquisition integration costs and contingent consideration adjustments and costs incurred for the ERP Systems Implementation program. These unfavorable items were partially offset by higher net pricing, lower advertising and consumer promotion costs, lower manufacturing costs driven by productivity and the impact from our Evirth acquisition.
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Europe
For the Three Months Ended
March 31,
2025 2024 $ Change
% Change
(in millions)
Net revenues $ 3,550 $ 3,368 $ 182 5.4 %
Segment operating income 462 591 (129) (21.8) %
Three Months Ended March 31:
Net revenues increased $182 million (5.4%), due to higher net pricing (13.4 pp), partially offset by unfavorable volume/mix (4.5 pp), unfavorable currency translation rate changes (2.7 pp) and lapping the prior-year net revenue from a short-term distributor agreements (0.8 pp). Higher net pricing, driven by input cost-driven pricing actions, was reflected across all categories. Unfavorable volume/mix reflected volume declines due to pricing elasticity impacts. Overall, unfavorable volume/mix was driven by declines in chocolate, candy, gum, refreshment beverages and cheese & grocery, partially offset by a gain in biscuits & baked snacks. Unfavorable currency translation rate changes reflected the strength of the U.S. dollar relative to most currencies across the region, primarily the euro and Turkish lira. The lapping of the prior-year short-term distributor agreement related to the sale of our developed market gum business, which ended in the first quarter of 2024, resulted in a year-over-year incremental reduction in net revenue of $25 million.
Segment operating income decreased $129 million (21.8%), primarily due to higher raw material costs, unfavorable volume/mix, higher other selling, general and administrative expenses and costs incurred for the ERP System Implementation program. These unfavorable items were partially offset by higher net pricing, lower advertising and consumer promotion costs, lapping prior-year costs for the completed Simplify to Grow Program, lower manufacturing costs driven by productivity and lower divestiture-related costs.
North America
For the Three Months Ended
March 31,
2025 2024 $ Change
% Change
(in millions)
Net revenues $ 2,544 $ 2,653 $ (109) (4.1) %
Segment operating income 485 549 (64) (11.7) %
Three Months Ended March 31:
Net revenues decreased $109 million (4.1%), due to unfavorable volume/mix (3.1 pp), unfavorable currency translation rate changes (0.5 pp)and lower net pricing (0.5 pp). Unfavorable volume/mix was driven by declines in biscuits & baked snacks, primarily due to category softness in the U.S., and candy, slightly offset by a gain in chocolate. Unfavorable currency translation rate changes were due to the strength of the U.S. dollar relative to the Canadian dollar. Lower net pricing in biscuits & baked snacks was partially offset by higher net pricing in candy and chocolate.
Segment operating income decreased $64 million (11.7%), primarily due to higher raw material costs, unfavorable volume/mix, lower net pricing and costs incurred for the ERP System Implementation program. These unfavorable items were partially offset by a favorable contingent consideration adjustment related to Clif Bar as well as lower acquisition integration costs, lower advertising and consumer promotion costs, lower other selling, general and administrative expenses and lower manufacturing costs due to productivity.
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Liquidity and Capital Resources
We believe that cash from operations, our revolving credit facilities, short-term borrowings and our authorized long-term financing will continue to provide sufficient liquidity for our working capital needs, planned capital expenditures and future payments of our contractual, tax and benefit plan obligations and payments for acquisitions, share repurchases and quarterly dividends. We expect to continue to utilize our commercial paper program and international credit lines as needed. We continually evaluate long-term debt issuances to meet our short- and longer-term funding requirements. We also use intercompany loans with our international subsidiaries to improve financial flexibility. Overall, we do not expect negative effects to our funding sources that would have a material effect on our liquidity, and we continue to monitor our global operations including the impact of conflicts in Ukraine and the Middle East. To date, we have been successful in generating cash and raising financing as needed. However, if a serious economic or credit market crisis ensues or other adverse developments arise, it could have a material adverse effect on our liquidity, results of operations and financial condition.
Our most significant ongoing short-term cash requirements relate primarily to funding operations (including expenditures for raw materials, labor, manufacturing and distribution, trade and promotions, advertising and marketing, tax liabilities, benefit plan obligations and lease expenses) as well as periodic expenditures for acquisitions, shareholder returns (such as dividend payments and share repurchases), property, plant and equipment and any significant one-time non-operating items.
Long-term cash requirements primarily relate to funding long-term debt repayments (refer to Note 7, Debt and Borrowing Arrangements ), our U.S. tax reform transition tax liability and deferred taxes (refer to Note 16, Income Taxes, in our Annual Report on Form 10-K for the year ended December 31, 2024), our long-term benefit plan obligations (refer to Note 9, Benefit Plans, and Note 11 , Benefit Plans, in our Annual report on Form 10-K for the year ended December 31, 2024) and commodity-related purchase commitments and derivative contracts (refer to Note 8, Financial Instruments ).
We generally fund short- and long-term cash requirements with cash from operating activities as well as cash proceeds from short- and long-term debt financing (refer to Debt below). We generally do not use equity to fund our ongoing obligations.
Cash Flow
We believe our ability to generate substantial cash from operating activities and readily access capital markets and secure financing at competitive rates are key strengths and give us significant flexibility to meet our short- and long-term financial commitments. Our cash flow activity is noted below:
For the Three Months Ended
March 31,
2025
2024
(in millions)
Net cash provided by/(used in):
Operating activities $ 1,092 $ 1,324
Investing activities (251) (446)
Financing activities (704) (1,223)
Net Cash Provided by Operating Activities
The decrease in net cash provided by operating activities was primarily due to lower cash-basis net earnings, combined with higher year-over-year working capital movements.
Net Cash Used in Investing Activities
The reduction in net cash used in investing activities was largely driven by lapping prior year investment contributions. We continue to make capital expenditures primarily to modernize manufacturing facilities, implement new product manufacturing and support productivity initiatives. We expect 2025 capital expenditures to be up to $1.3 billion, including capital expenditures in connection with funding our strategic priorities. We expect to continue to fund these expenditures with cash from operations.
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Net Cash Used in Financing Activities
The decrease in cash used in financing activities was primarily due to higher debt proceeds combined with lower debt repayments, partially offset by higher share repurchases and higher dividends paid in the first three months of 2025 compared to the same prior year period.
Dividends
We paid dividends of $623 million in the first three months of 2025 and $578 million in the first three months of 2024. The first quarter 2025 dividend of $0.470 per share, declared on February 13, 2025 for shareholders of record as of March 31, 2025, was paid on April 14, 2025. The declaration of dividends is subject to the discretion of our Board of Directors and depends on various factors, including our net earnings, financial condition, cash requirements, future prospects and other factors that our Board of Directors deems relevant to its analysis and decision making.
Guarantees
As discussed in Note 10, Commitments and Contingencies , we enter into third-party guarantees primarily to cover the 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 March 31, 2025 and December 31, 2024, we had no material third-party guarantees recorded on our condensed consolidated balance sheets. Guarantees do not have, and we do not expect them to have, a material effect on our liquidity.
Debt
The nature and amount of our long-term and short-term debt and the proportionate amount of each varies as a result of current and expected business requirements, market conditions and other factors. As such, we may issue commercial paper or secure other forms of financing throughout the year to meet our short-term working capital or other financing needs.
At our December 2024 meeting, the Board of Directors approved a new $4 billion long-term financing authorization that replaced the prior long-term financing authorization of $2 billion. As of March 31, 2025, $4 billion of the long-term financing authorization remained available.
Our total debt was $19.5 billion as of March 31, 2025 and $17.7 billion as of December 31, 2024. Our debt-to-capitalization ratio was 0.43 at March 31, 2025 and 0.40 at December 31, 2024. At March 31, 2025, the weighted-average term of our outstanding long-term debt was 7.6 years. Our average daily commercial paper borrowings outstanding were $1.7 billion in the first three months of 2025 and $1.0 billion in the first three months of 2024.
One of our subsidiaries, Mondelez International Holdings Netherlands B.V. (“MIHN”), has outstanding debt. The operations held by MIHN generated approximately 75.3% (or $7.0 billion) of the $9.3 billion of consolidated net revenue for the three months ended March 31, 2025. The operations held by MIHN represented approximately 88.8% (or $22.9 billion) of the $25.8 billion of consolidated net assets as of March 31, 2025.
Refer to Note 7, Debt and Borrowing Arrangements, for additional information on our debt and debt covenants.
Commodity Trends
We regularly monitor worldwide supply, commodity cost and currency trends so we can cost-effectively secure ingredients, packaging and fuel required for production. During the first three months of 2025, the primary drivers of the increase in our aggregate commodity costs were higher cocoa, dairy, packaging, energy, nuts and other ingredient costs, as well as unfavorable year-over-year currency exchange transaction costs on imported materials, partially offset by lower sugar, grains and edible oils costs. While the costs of our principal raw materials fluctuate, generally we believe there will continue to be an adequate supply of the raw materials we use and that they will broadly remain available.
A number of external factors such as the current macroeconomic environment, including global inflation, effects of geopolitical uncertainty, climate and weather conditions, commodity, transportation and labor market conditions, exchange rate volatility and the effects of local and global regulations, including trade policies, governmental agricultural or other programs affect the availability and cost of raw materials and agricultural materials used in our products. In particular, the supply of cocoa is exposed to many of these factors, including climate change and weather events, local regulations in cocoa-producing countries, and global regulations such as the EU Deforestation Regulation (which requires companies to ensure that the products they place on the EU market or export from it are
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not associated with deforestation). These factors could impact the supply of cocoa, which could potentially limit our ability to produce our products and significantly impact profitability.
During the first three months of 2025, price volatility and the higher aggregate cost environment increased due to international supply chain and labor market disruptions and generally higher commodity, transportation and labor costs. We expect these conditions to continue to impact our aggregate commodity costs. In particular, we expect to face elevated cocoa costs in the near- and medium-term due to these factors. It is possible that we may not be able to increase prices sufficiently to fully cover the incremental costs of cocoa prices in this environment and/or our hedging strategies may not protect us from increases in cocoa costs, which could result in a significant impact on our profitability.
We address higher commodity costs and currency impacts primarily through hedging, higher pricing and manufacturing and overhead cost control. We use hedging techniques to limit the impact of fluctuations in the cost of our principal raw materials; however, we may not be able to fully hedge against commodity cost changes, such as dairy, where there is a limited ability to hedge, and our hedging strategies may not protect us from increases in specific raw material costs. Our commodity procurement practices are intended to mitigate price volatility and provide visibility to future costs, but also may potentially limit our ability to benefit from possible future price decreases. Additionally, our costs for major raw materials will not necessarily reflect market price fluctuations because of our forward purchasing and hedging practices. Due to competitive or market conditions, planned trade or promotional incentives, fluctuations in currency exchange rates or other factors, our pricing actions may also lag commodity cost changes temporarily.
Significant Accounting Estimates
We prepare our condensed consolidated financial statements in conformity with U.S. GAAP. The preparation of these financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the periods presented. Actual results could differ from those estimates and assumptions. Our significant accounting policies and estimates are described in Note 1 to our consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations, respectively, in our Annual Report on Form 10-K for the year ended December 31, 2024. Also refer to Note 1, Basis of Presentation , in this report.
Forward-Looking Statements
This report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management, including for future operations, capital expenditures or share repurchases; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; any statements of belief or expectation; and any statements of assumptions underlying any of the foregoing or other future events. Forward-looking statements may include, among others, the words, and variations of words, “will,” “may,” “expect,” “would,” “could,” “might,” “intend,” “plan,” “believe,” “likely,” “estimate,” “anticipate,” “objective,” “predict,” “project,” “drive,” “seek,” “aim,” “target,” “potential,” “commitment,” “outlook,” “continue” or any other similar words.
Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results or outcomes could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, many of which are beyond our control and are amplified by current and potential trade and tariff actions affecting the countries where we operate. Important factors that could cause our actual results or performance to differ materially from those contained in or implied by our forward-looking statements include, but are not limited to, the following:
• weakness in macroeconomic conditions in our markets, including as a result of inflation (and related monetary policy actions by governments in response to inflation) and the instability of certain financial institutions;
• risks from operating globally including geopolitical, trade, tariff and regulatory uncertainties affecting developed and emerging markets;
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• volatility of cocoa and other commodity input costs, our ability to effectively hedge such costs and the availability of commodities;
• geopolitical uncertainty, including the impact of ongoing or new developments in Ukraine and the Middle East, related current and future sanctions imposed by governments and other authorities and related impacts, including on our business operations, employees, reputation, brands, financial condition and results of operations;
• competition and our response to channel shifts and pricing and other competitive pressures;
• pricing actions and customer and consumer responses to such actions;
• promotion and protection of our reputation and brand image;
• weakness in consumer spending and/or changes in consumer preferences and demand and our ability to predict, identify, interpret and meet these changes;
• the outcome and effects on us of legal and tax proceedings and government investigations;
• use of information technology and third party service providers;
• unanticipated disruptions to our business, such as malware incidents, cyberattacks or other security breaches, and supply, commodity, labor and transportation constraints;
• our ability to identify, complete, manage and realize the full extent of the benefits, cost savings, efficiencies and/or synergies presented by strategic acquisitions and other transactions as well as other strategic initiatives, such as our ERP System Implementation program;
• our investments and our ownership interests in those investments;
• the impact of climate change on our supply chain and operations;
• global or regional health pandemics or epidemics;
• consolidation of retail customers and competition with retailer and other economy brands;
• changes in our relationships with customers, suppliers or distributors;
• management of our workforce and shifts in labor availability or labor costs;
• compliance with legal, regulatory, tax and benefit laws and related changes, claims or actions;
• perceived or actual product quality issues or product recalls;
• failure to maintain effective internal control over financial reporting or disclosure controls and procedures;
• our ability to protect our intellectual property and intangible assets;
• tax matters including changes in tax laws and rates, disagreements with taxing authorities and imposition of new taxes;
• changes in currency exchange rates, controls and restrictions;
• volatility of and access to capital or other markets, interest rates, the effectiveness of our cash management programs and our liquidity;
• pension costs;
• significant changes in valuation factors that may adversely affect our impairment testing of goodwill and intangible assets; and
• the risks and uncertainties, as they may be amended from time to time, set forth in our filings with the U.S. Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2024 and subsequent Quarterly Reports on Form 10-Q.
There may be other factors not presently known to us or which we currently consider to be immaterial that could cause our actual results to differ materially from those projected in any forward-looking statements we make. We disclaim and do not undertake any obligation to update or revise any forward-looking statement in this report except as required by applicable law or regulation. In addition, historical, current and forward-looking sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future.
Non-GAAP Financial Measures
We use non-GAAP financial measures internally to make operating and strategic decisions, including the preparation of our annual operating plan, evaluation of business performance and as a factor in determining incentive compensation. We believe that non-GAAP financial measures, when used in connection with results reported in accordance with U.S. GAAP, provide additional information to facilitate comparisons of our historical operating results and to enable a more comprehensive understanding of trends in our underlying operating results. We also believe that presenting these measures allows investors to view our performance using the same measures that management and our Board of Directors use in evaluating our business performance and trends. However, non-GAAP financial measures should be considered in addition to, and not as substitutes for, financial information prepared in accordance with U.S. GAAP. In addition, the company’s non-GAAP financial measures may not be the same as or comparable to similar non-GAAP measures presented by other companies. We have
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provided the reconciliations between the GAAP and non-GAAP financial measures along with a discussion of our underlying GAAP results throughout our Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Form 10-Q.
Our primary non-GAAP financial measures and corresponding metrics, listed below, reflect how we evaluate our current and prior-year operating results. As new events or circumstances arise, these definitions could change. When our definitions change, we provide the updated definitions and present the related non-GAAP historical results on a comparable basis (1) .
• “Organic Net Revenue” is defined as net revenues (the most comparable U.S. GAAP financial measure) excluding, when they occur, the impacts of acquisitions, divestitures (2) , short-term distributor agreements related to the sale of a business (3) and currency-related items (4) . We believe that Organic Net Revenue reflects the underlying growth from the ongoing activities of our business and provides improved comparability of results. Organic Net Revenue growth is presented on a consolidated and segment basis and for the company’s emerging markets and developed markets., and these underlying measures are also reconciled to the most comparable U.S. GAAP financial measures above.
• Our emerging markets include our Latin America region in its entirety; the AMEA region, excluding Australia, New Zealand and Japan; and the following countries from the Europe region: Russia, Ukraine, Türkiye, Kazakhstan, Georgia, Poland, Czech Republic, Slovak Republic, Hungary, Bulgaria, Romania, the Baltics and the East Adriatic countries.
• Our developed markets include the entire North America region, the Europe region excluding the countries included in the emerging markets definition, and Australia, New Zealand and Japan from the AMEA region.
• “Adjusted Operating Income” is defined as operating income (the most comparable U.S. GAAP financial measure) excluding, when they occur, the impacts of the Simplify to Grow Program (5) ; gains or losses (including non-cash impairment charges) on goodwill and intangible assets; divestiture-related items (2) ; acquisition-related items (6) ; operating results from short-term distributor agreements related to the sale of a business (3) ; remeasurement of net monetary position of highly inflationary countries (7) ; mark-to-market impacts from commodity and foreign currency derivative contracts economically hedging forecasted transactions (8) ; impact from resolution of indirect tax matters; 2017 malware incident net recoveries; incremental costs due to the war in Ukraine (9) ; impact from the European Commission legal matter (10) ; the impact from pension participation changes (11) ; and operating costs from the ERP System Implementation program (12) . We also present Adjusted Operating Income margin, which is subject to the same adjustments as Adjusted Operating Income. We also evaluate growth in our Adjusted Operating Income on a constant currency basis (4) . We believe these measures provide improved comparability of underlying operating results.
• “Adjusted EPS” is defined as diluted EPS attributable to Mondelēz International (the most comparable U.S. GAAP financial measure) from continuing operations excluding, when they occur, the impacts of the items listed in the Adjusted Operating Income definition as well as gains or losses on debt extinguishment and related expenses; gains or losses on interest rate swaps no longer designated as accounting cash flow hedges due to changed financing and hedging plans; gains or losses on marketable securities transactions (13) ; initial impacts from enacted tax law changes (14) ; and gains or losses on equity method investment transactions (15) . We also evaluate growth in our Adjusted EPS on a constant currency basis (4) . We believe Adjusted EPS provides improved comparability of underlying operating results.
(1) When items no longer impact our current or future presentation of non-GAAP operating results, we remove these items from our non-GAAP definitions.
(2) Divestiture-related items include operating results from divestitures, divestiture-related costs and gains/(losses) on divestitures. Divestitures include completed sales of businesses, exits of major product lines upon completion of a sale or licensing agreement, the partial or full sales of an equity method investment and changes from equity method investment accounting to accounting for marketable securities. Divestiture-related costs include costs incurred in relation to the preparation and completion of our divestitures (including one-time costs such as severance related to elimination of stranded costs) as well as costs incurred associated with our publicly announced processes to sell businesses. We exclude these items to better facilitate comparisons of our underlying operating performance across periods.
(3) We exclude the operating results from short-term distributor agreements that have been executed in conjunction with the sale of a business. We exclude this item to better facilitate comparisons of our underlying operating performance across periods.
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(4) We evaluate the operating performance of the company and its international subsidiaries on a constant currency basis. The company's non-GAAP measures presented on a constant currency basis exclude the effects of currency translation rate changes and, beginning in the first quarter of 2024, extreme pricing increases in Argentina. We determine constant currency operating results by dividing or multiplying, as appropriate, the current-period local currency operating results by the currency exchange rates used to translate the financial statements in the comparable prior-year period to determine what the current-period U.S. dollar operating results would have been if the currency exchange rate had not changed from the comparable prior-year period.
(5) Simplify to Grow Program reflects restructuring charges incurred under the company’s Simplify to Grow Program to reduce both its supply chain and overhead costs. It comprises charges, such as severance, asset write-downs, and other costs of implementing that program, partially offset by gains on sales of assets disposed of in connection with the program. The company completed its Simplify to Grow Program in the fourth quarter of 2024. Following the completion of the program any adjustments to the liability of previously recorded charges will be reflected here.
(6) Acquisition-related items include acquisition-related costs, acquisition integration costs and contingent consideration adjustments, inventory step-ups and gains from acquisitions. Acquisition-related costs include third-party advisor, investment banking and legal fees, one-time compensation expense related to the buyout of non-vested employee stock ownership plan shares and realized gains or losses from hedging activities associated with acquisition funds. Acquisition integration costs and contingent consideration adjustments include one-time costs related to the integration of acquisitions as well as any adjustments made to contingent compensation liabilities for earn-outs related to acquisitions that do not relate to recurring employee compensation expense. See Note 8, Financial Instruments - Fair Value of Contingent Consideration for additional information. Other acquisition-related items include incremental costs from inventory step-ups associated with acquired companies related to the fair market valuation of the acquired inventory and acquisition gains, when they occur, from the remeasurement of an existing noncontrolling investment to fair value when the company acquires the remaining equity shares of the investee. We exclude these items to better facilitate comparisons of our underlying operating performance across periods.
(7) In connection with our applying highly inflationary accounting (refer to Note 1, Basis of Presentation ) for Argentina, Türkiye, Egypt and Nigeria, we exclude the related remeasurement gains or losses related to remeasuring net monetary assets or liabilities denominated in the local currency to the U.S. dollar during the periods presented and the realized gains and losses from derivatives that mitigate the foreign currency volatility related to the remeasurement of the respective net monetary assets or liabilities during the periods presented.
(8) We exclude unrealized gains and losses (mark-to-market impacts) from commodity and foreign currency derivative contracts economically hedging forecasted transactions from our non-GAAP earnings measures. The mark-to-market impacts of those derivatives are excluded until the related gains or losses are realized. Since we purchase commodity and foreign currency derivative contracts to mitigate price volatility primarily for inventory requirements in future periods, we make this adjustment to remove the volatility of these future inventory purchases on current operating results to facilitate comparisons of our underlying operating performance across periods.
(9) In February 2022, Russia began a military invasion of Ukraine and we stopped our production and closed our facilities in Ukraine for a period of time due to damage incurred to our facilities during the invasion. We began to incur incremental costs directly related to the war including asset impairments, such as property and inventory losses, higher expected allowances for uncollectible accounts receivable and committed compensation. We have isolated and exclude these costs and related impacts as well as subsequent recoveries from our operating results to facilitate evaluation and comparisons of our ongoing results. Incremental costs related to increasing operations in other primarily European facilities are not included with these costs.
(10) In the fourth quarter of 2022, we began to exclude the impact from the European Commission legal matter. 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. We have cooperated with the investigation and reached a negotiated resolution to this matter. We subsequently adjusted our accrual accordingly and fulfilled our payment obligation in August 2024. Due to the unique nature of this matter, we believe it to be infrequent and unusual and therefore exclude it to better facilitate comparisons of our underlying operating performance across periods. Refer to Note 10, Commitments and Contingencies, for additional information.
(11) The impact from pension participation changes represents the charges incurred, primarily gains or losses from pension curtailments or settlements as well as other costs incurred when employee groups are withdrawn from multiemployer pension plans. We exclude these charges from our non-GAAP results because those amounts do not reflect our ongoing pension obligations. See Note 9, Benefit Plans , for additional information on the multiemployer pension plan withdrawal.
(12) In July 2024, our Board of Directors approved funding of $1.2 billion for a multi-year systems transformation program to upgrade our global ERP and supply chain systems (the “ERP System Implementation”), which is comprised of both capital expenditures and operating expenses, of which a majority is expected to be operating expenses. The ERP System Implementation program will be implemented in several phases with spending occurring over the next four years, with expected completion by year-end 2028. The operating expenses associated with the ERP System Implementation represent incremental transformational costs above the normal ongoing level of spending on information technology to support operations. These expenses include third-party consulting fees, direct labor costs associated with the program, accelerated depreciation of our existing SAP financial systems and various other expenses, all associated with the implementation of our information technology upgrades. These operating expenses will be excluded from our non-GAAP financial measures as they are nonrecurring and excluding those costs will better facilitate comparisons of our underlying operating performance across periods.
(13) We exclude mark-to-market unrealized gains or losses associated with our marketable securities as well as realized gains from sales of our marketable securities from our non-GAAP earnings measures. These marketable securities gains or losses are not indicative of underlying operations and are excluded to better facilitate comparisons of our underlying operating performance across periods.
(14) We have excluded the initial impacts from enacted tax law changes. Initial impacts include items such as the remeasurement of deferred tax balances and transition taxes from tax reforms. We exclude initial impacts from enacted tax law changes from our Adjusted EPS as they do not reflect our ongoing tax obligations under the enacted tax law.
(15) We exclude gains and losses on partial or full sales of equity method investments as well as impairments of those investments. In addition, we also exclude from our non-GAAP financial measures any gains or losses realized on economic hedges of sales proceeds from our equity method investment transactions, which have been recorded in Interest and other expense, net . These items are not indicative of underlying operations and are excluded to better facilitate comparisons of our underlying operating performance across periods.
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We believe that the presentation of these non-GAAP financial measures, when considered together with our U.S. GAAP financial measures and the reconciliations to the corresponding U.S. GAAP financial measures, provides a more complete understanding of the factors and trends affecting our business than could be obtained absent these disclosures. Because non-GAAP financial measures vary among companies, the non-GAAP financial measures presented in this report may not be comparable to similarly titled measures used by other companies. Our use of these non-GAAP financial measures is not meant to be considered in isolation or as a substitute for any U.S. GAAP financial measures. A limitation of these non-GAAP financial measures is they exclude items that have an impact on our U.S. GAAP reported results. The best way this limitation can be addressed is by evaluating our non-GAAP financial measures in combination with our U.S. GAAP reported results and carefully evaluating the tables that reconcile U.S. GAAP reported figures to the non-GAAP financial measures in this Form 10-Q, which can be found above under Consolidated Results of Operations .
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.