10-QPeriod: Q1 FY2003

Mondelez International, Inc. Quarterly Report for Q1 Ended Mar 31, 2003

Filed May 14, 2003For Securities:MDLZ

Summary

Mondelez International, Inc. (MDLZ) reported its first quarter 2003 financial results, showing robust year-over-year growth in net earnings and earnings per share. Net revenues increased by 3.0% to $7.36 billion, driven by a combination of higher pricing, favorable currency movements, and modest volume growth. The company demonstrated strong operating leverage, with operating income rising 14.1% and net earnings increasing 22.4% to $848 million, benefiting from the absence of significant one-time charges incurred in the prior year's comparable period and effective cost management. Despite a slight increase in total debt, the company maintained a stable debt-to-equity ratio. However, recent credit rating downgrades, stemming from an unrelated legal judgment against its parent company, Altria Group, Inc., have led to increased borrowing costs. The company's liquidity remains adequate, supported by operating cash flows and existing credit facilities, although it has begun to draw more heavily on these facilities following the loss of commercial paper market access. Management believes current resources are sufficient to meet ongoing obligations and planned dividends.

Key Highlights

  • 1Net revenues increased 3.0% to $7.36 billion, driven by higher pricing and favorable currency movements.
  • 2Net earnings surged 22.4% to $848 million, or $0.49 per diluted share, compared to $693 million in the prior year.
  • 3Operating income grew 14.1% to $1.49 billion, aided by the absence of prior year separation and integration charges.
  • 4The company's debt-to-equity ratio remained stable at 0.56.
  • 5Credit rating downgrades following Altria's legal issues have increased borrowing costs.
  • 6The company is now relying more heavily on its revolving credit facilities due to the loss of commercial paper market access.
  • 7International operations, particularly in Europe, Middle East, and Africa, showed strong revenue growth, primarily driven by favorable currency impacts.

Frequently Asked Questions

The substantial increase in net earnings was primarily driven by the absence of significant one-time separation and integration charges recorded in the first quarter of 2002, coupled with an increase in operating companies income due to higher pricing, favorable currency movements, and productivity savings. Lower interest expenses also contributed to the improved net earnings.

The credit rating downgrades, which were a result of a large judgment against Altria Group, Inc. and not directly related to Mondelez International's operations, have led to increased borrowing costs for the company. Consequently, Mondelez has lost access to the commercial paper market and has begun drawing on its revolving credit facilities, incurring higher interest expenses on these borrowings.

Management believes that the company's cash from operations and existing credit facilities provide sufficient liquidity to meet its working capital needs, planned capital expenditures, and anticipated dividend payments. Despite increased reliance on credit lines, overall liquidity is considered adequate.

In April 2003, the company completed the acquisition of a biscuits business in Egypt. During the first quarter of 2002, it acquired a biscuits business in Australia and divested several small North American food businesses. The operating results of these acquisitions and divestitures were not material to the consolidated financial position or results of operations in the periods presented.