01—Abstract
Summary
Summary of the 10-K filed February 28, 2011. Cited figures are marked; the original filing is the authoritative source.
Mondelez International, Inc. (formerly Kraft Foods Inc.) reported strong top-line growth in 2010, driven significantly by the acquisition of Cadbury.
Net revenues increased by a substantial 27.0% to $49.2 billiona. The company also completed the strategic divestiture of its North American frozen pizza business to Nestlé for $3.7 billion, which resulted in a significant gain on discontinued operations. This strategic repositioning, alongside continued brand strength and global reach, positions the company for sustained growth.
Financially, the company navigated increased input costs, notably for cocoa, sugar, dairy, and coffee, which were partially offset by lower grain costs. These cost pressures, combined with integration expenses related to the Cadbury acquisition, impacted operating margins.
However, the company generated substantial cash flow from operations and continued to manage its debt levels effectively. The outlook for 2011 indicated expectations for continued organic net revenue and Operating EPS growth, demonstrating management's confidence in the company's strategic direction and ability to execute in a dynamic market.
02—Key points
Key Highlights
- Net revenues surged by 27.0% to $49.2 billion in 2010, largely due to the significant acquisition of Cadbury.
- The company divested its North American frozen pizza business to Nestlé for $3.7 billion, resulting in a $1.596 billion gain on discontinued operations.
- Diluted Earnings Per Share (EPS) attributable to Kraft Foods increased by 17.7% to $2.39 in 2010.
- Operating income increased by 9.3% to $5.666 billion, though operating margin decreased from 13.4% to 11.5% due to higher input costs and integration expenses.
- Commodity costs increased by approximately $1.0 billion in 2010 compared to 2009, primarily due to higher cocoa, sugar, dairy, and coffee prices.
- The company's total debt increased to $28.7 billion, with a debt-to-capitalization ratio of 0.44, primarily reflecting financing for the Cadbury acquisition.
- Kraft Foods continues to invest in research and development, with R&D expenses totaling $583 million in 2010.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, Mondelez International, Inc. kept $0.13.
- Revenue$31.49B100.0%
- Cost of revenue−$19.62B62.3%
- Gross profit$11.87B37.7%
- Operating costs−$9.38B29.8%
- Operating income$2.50B7.9%
- Interest, other & tax$1.62B5.1%
- Net income$4.11B13.1%
Where FY2010 revenue went
$31.49B- Cost of revenue: $19.62B, 62% of revenue
- SG&A: $9.14B, 29% of revenue
- Operating income: $2.50B, 7.9% of revenue
- R&D: $404.0M, 1.3% of revenue
Kept 7.9% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 28, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $31.49B$38.75B | −18.7% |
| Cost of Revenue | $19.62B$24.82B | −21.0% |
| Gross Profit | $11.87B$13.94B | −14.8% |
| R&D Expenses | $404.00M$466.00M | −13.3% |
| SG&A Expenses | $9.14B$8.78B | +4.1% |
| Operating Income | $2.50B$5.18B | −51.8% |
| Interest Expense | $1.54B$1.26B | +22.2% |
| Net Income | $4.11B$3.02B | +36.2% |
| EPS (Basic) | $2.40$2.04 | +17.6% |
| EPS (Diluted) | $2.39$2.03 | +17.7% |
| Shares Outstanding (Basic) | 1.72B1.48B | +16.0% |
| Shares Outstanding (Diluted) | 1.72B1.49B | +15.7% |
05—Questions
Frequently Asked Questions
What were the main drivers of revenue growth in 2010?
The primary driver of revenue growth in 2010 was the acquisition of Cadbury, which contributed significantly to net revenues. Organic net revenue growth was also a contributing factor, driven by higher net pricing and favorable volume/mix across various segments.
How did the Cadbury acquisition impact the company's financial performance?
The Cadbury acquisition significantly boosted net revenues and expanded the company's global snack portfolio. However, it also led to increased acquisition-related costs, integration program costs, and higher debt levels, which impacted operating income and margins.
What was the impact of commodity costs on profitability?
Rising commodity costs, particularly for cocoa, sugar, dairy, and coffee, increased the cost of sales. While the company implemented higher pricing to offset some of these costs, the net impact contributed to a decrease in operating margin.
What was the significance of the frozen pizza business divestiture?
The divestiture of the North American frozen pizza business to Nestlé for $3.7 billion allowed the company to focus on its core snack powerhouse strategy. The sale generated a substantial gain on discontinued operations, improving the overall net earnings for the year.
How is the company managing its debt levels after the Cadbury acquisition?
The company financed a significant portion of the Cadbury acquisition through debt issuance. While total debt increased substantially, the company reported a manageable debt-to-capitalization ratio and expected to continue meeting its debt covenants, supported by its strong operating cash flow.
06—Continue