10-QPeriod: Q3 FY2012

Mondelez International, Inc. Quarterly Report for Q3 Ended Sep 30, 2012

Filed November 8, 2012For Securities:MDLZ

Summary

Mondelez International, Inc. (formerly Kraft Foods Inc.) reported its first quarterly results as a standalone global snacks company following the spin-off of its North American grocery business, Kraft Foods Group, Inc., on October 1, 2012. For the third quarter of 2012, the company saw a slight decrease in net revenues to $12.9 billion, primarily impacted by unfavorable foreign currency. However, on an organic basis (excluding currency impacts and other factors), net revenues increased by 2.1%. Diluted Earnings Per Share (EPS) decreased significantly to $0.36 from $0.52 in the prior year, heavily influenced by substantial one-time Spin-Off costs totaling $683 million. Despite the reported decline in EPS, the company highlighted a 10.3% increase in Operating EPS (a non-GAAP measure excluding significant one-time costs) to $0.64, indicating underlying operational strength. The nine-month results also showed a dip in reported net revenues and EPS, but organic net revenues grew by 3.9% and operating EPS increased by 9.3%. The company incurred significant costs related to the spin-off, restructuring programs, and integration efforts, which impacted reported profitability. Management remains focused on driving organic growth through pricing and volume, while managing costs and streamlining operations. Investors should note the substantial one-time costs and the shift in business focus post-spin-off when evaluating the company's performance.

Financial Highlights

49 data points
Beta

Revenue

$8.33B

37.5% Gross Margin

Net Income

$657.00M

7.9% Net Margin

EPS (Diluted)

$0.37

Total Assets

$97.78B

Cash & Equivalents

$3.87B

Free Cash Flow

$478.00M

Financial Statements
Beta
Revenue$8.33B
Cost of Revenue$5.21B
Gross Profit$3.12B
SG&A Expenses$2.21B
Operating Income$838.00M
Net Income$657.00M
EPS (Basic)$0.37
EPS (Diluted)$0.37
Shares Outstanding (Basic)1.78B
Shares Outstanding (Diluted)1.79B

Key Highlights

  • 1Completion of the spin-off of the North American grocery business, resulting in the renaming to Mondelēz International, Inc. and a strategic focus on global snacks.
  • 2Third quarter 2012 net revenues decreased 2.4% to $12.9 billion, while organic net revenues (excluding currency and other impacts) increased 2.1%.
  • 3Diluted EPS decreased 30.8% to $0.36 in Q3 2012, largely due to $683 million in Spin-Off costs recorded in the period.
  • 4Operating EPS (a non-GAAP measure excluding special items) increased 10.3% to $0.64 in Q3 2012, demonstrating underlying operational improvement.
  • 5Nine-month 2012 net revenues decreased 1.0% to $39.3 billion, with organic net revenues growing 3.9%.
  • 6Nine-month 2012 diluted EPS decreased 7.9% to $1.40, while operating EPS increased 9.3% to $1.88.
  • 7The company is undergoing a significant 2012-2014 Restructuring Program with total expected costs of $1.5 billion, impacting current period results.

Frequently Asked Questions

The most significant event is the completion of the spin-off of Kraft Foods Group, Inc. (the North American grocery business) on October 1, 2012. This resulted in the company changing its name to Mondelēz International, Inc. and focusing solely on its global snacks business. The spin-off incurred substantial one-time costs, referred to as Spin-Off Costs, which significantly impacted reported net earnings and EPS.

Net revenues decreased by 2.4% to $12.9 billion in the third quarter of 2012 compared to the prior year. This decline was primarily attributed to unfavorable foreign currency fluctuations. However, on an organic basis (excluding currency impacts and other factors), net revenues actually increased by 2.1%, driven by higher net pricing and favorable volume/mix, indicating underlying sales growth for the core snack business.

Reported Diluted EPS reflects all costs, including significant one-time items like Spin-Off Costs, restructuring charges, and integration costs. Operating EPS is a non-GAAP measure that excludes these significant one-time items to provide a clearer view of the company's ongoing operational performance. For the third quarter of 2012, reported Diluted EPS was $0.36, while Operating EPS was $0.64, showing a substantial increase when excluding the impact of spin-off related expenses.

Mondelez has approved a $1.5 billion 2012-2014 Restructuring Program, primarily for severance, asset disposals, and manufacturing optimization. Of this, approximately $925 million is attributable to Mondelēz International. This program incurred $57 million in restructuring charges and $12 million in implementation costs in the third quarter of 2012, impacting reported operating income and net earnings.