10-QPeriod: Q2 FY2013

Mondelez International, Inc. Quarterly Report for Q2 Ended Jun 30, 2013

Filed August 8, 2013For Securities:MDLZ

Summary

Mondelez International, Inc. reported net revenues of $8.595 billion for the second quarter of 2013, a slight increase of 0.8% year-over-year, with organic net revenues growing by 3.8%. This growth was driven by favorable volume/mix and higher net pricing, despite headwinds from unfavorable foreign currency and divestitures. Operating income saw a decline of 7.7% to $865 million, impacted by increased input costs, higher selling, general, and administrative expenses, and restructuring and integration costs, partially offset by favorable volume/mix and lower Spin-Off costs. Net earnings attributable to Mondelēz International significantly decreased by 40.1% to $616 million in the quarter, leading to diluted EPS of $0.34, down from $0.58 in the prior year. However, adjusted EPS, which excludes certain one-time and non-recurring items, showed a modest increase of 2.8% to $0.37, indicating underlying operational improvements. The company also announced an increase in its quarterly dividend and a significant expansion of its stock repurchase program, signaling confidence in its financial position and commitment to returning capital to shareholders.

Financial Highlights

51 data points
Beta

Revenue

$8.60B

37.6% Gross Margin

Net Income

$601.00M

7.0% Net Margin

EPS (Diluted)

$0.33

Total Assets

$71.82B

Cash & Equivalents

$2.48B

Free Cash Flow

$470.00M

Financial Statements
Beta
Revenue$8.60B
Cost of Revenue$5.36B
Gross Profit$3.23B
SG&A Expenses$2.27B
Operating Income$865.00M
Net Income$601.00M
EPS (Basic)$0.34
EPS (Diluted)$0.33
Shares Outstanding (Basic)1.79B
Shares Outstanding (Diluted)1.80B

Key Highlights

  • 1Net revenues grew 0.8% to $8.595 billion in Q2 2013, with organic net revenues up 3.8%.
  • 2Operating income decreased 7.7% to $865 million, impacted by higher costs and restructuring charges.
  • 3Net earnings attributable to Mondelēz International decreased 40.1% to $616 million.
  • 4Diluted EPS decreased 41.4% to $0.34, but adjusted EPS (a non-GAAP measure) increased 2.8% to $0.37.
  • 5The company completed two divestitures within its EEMEA segment and acquired a biscuit operation in Morocco.
  • 6The 2012-2014 Restructuring Program and Cadbury Integration Program continue to incur significant costs.
  • 7Announced an increased quarterly dividend and expanded stock repurchase program by $4.8 billion to $6.0 billion.

Frequently Asked Questions

The decline in net earnings and EPS is primarily due to a combination of factors including higher input costs, increased selling, general, and administrative expenses, and significant restructuring and integration costs related to the 2012-2014 Restructuring Program and the Cadbury Integration Program. These items, along with some one-time costs associated with the Kraft Foods Group spin-off (Spin-Off Costs), impacted profitability. While reported net earnings and EPS decreased significantly, the company highlights that adjusted EPS, which excludes these items, showed a modest increase, suggesting underlying operational resilience.

Mondelēz International's debt level stood at $18.1 billion as of June 30, 2013, with a debt-to-capitalization ratio of 0.37. The company maintains a $4.5 billion revolving credit facility and has amended covenants to reflect its new capital structure. Recent maturities of $1 billion and $750 million in notes were paid with cash on hand and commercial paper. The company expects to fund upcoming debt maturities through cash from operations, commercial paper, or debt issuance. The expanded stock repurchase program and increased dividend demonstrate management's confidence in its liquidity and capital position.

Unfavorable foreign currency movements had a notable impact on Mondelēz International's results. Net revenues were negatively affected by $163 million in the second quarter and $360 million in the first six months due to the devaluation of the Venezuelan bolivar and the strength of the U.S. dollar against various other currencies. Operating income was also impacted, with unfavorable currency movements contributing to the decline. The company uses derivative instruments to manage foreign currency exchange rate risks.

Mondelēz International is continuing with its 2012-2014 Restructuring Program, with approximately $925 million of costs retained after the spin-off. The Cadbury Integration Program is also ongoing, aiming for $750 million in annual cost savings by the end of 2013, with approximately $1.4 billion of the expected $1.5 billion total integration charges incurred. These programs resulted in significant charges reported within operating income during the period, impacting profitability. The company expects to incur further costs related to these initiatives.