10-QPeriod: Q3 FY2014

Mondelez International, Inc. Quarterly Report for Q3 Ended Sep 30, 2014

Filed November 6, 2014For Securities:MDLZ

Summary

Mondelez International, Inc. reported financial results for the third quarter and the first nine months of fiscal year 2014. Net revenues saw a slight decrease compared to the prior year, largely impacted by unfavorable currency translations as the U.S. dollar strengthened. However, organic net revenue demonstrated growth, indicating underlying business strength. Despite a decrease in reported operating income and net earnings, driven by significant restructuring charges, integration costs, and a large loss on debt extinguishment, the company's adjusted performance metrics showed positive trends. Adjusted operating income and adjusted earnings per share (EPS) both increased, especially on a constant currency basis, reflecting successful cost management and operational efficiencies. The company also provided an updated financial outlook for 2014, projecting continued organic net revenue growth and double-digit growth in adjusted EPS.

Financial Highlights

50 data points
Beta

Revenue

$8.34B

37.7% Gross Margin

Net Income

$899.00M

10.8% Net Margin

EPS (Diluted)

$0.53

Total Assets

$69.97B

Free Cash Flow

$376.00M

Financial Statements
Beta
Revenue$8.34B
Cost of Revenue$5.20B
Gross Profit$3.14B
SG&A Expenses$2.05B
Operating Income$853.00M
Interest Expense$188.00M
Net Income$899.00M
EPS (Basic)$0.53
EPS (Diluted)$0.53
Shares Outstanding (Basic)1.69B
Shares Outstanding (Diluted)1.71B

Key Highlights

  • 1Net revenues decreased by 1.6% to $8.3 billion for Q3 2014 and by 1.5% to $25.4 billion for the first nine months of 2014, primarily due to unfavorable currency impacts.
  • 2Organic Net Revenue grew by 2.7% in Q3 2014 and 2.2% for the first nine months of 2014, indicating underlying business growth.
  • 3Diluted EPS decreased to $0.53 for Q3 2014 and $0.98 for the first nine months of 2014, compared to the prior year.
  • 4Adjusted EPS increased by 25.0% to $0.50 for Q3 2014 and by 15.2% to $1.29 for the first nine months of 2014, demonstrating improved operational performance when excluding special items.
  • 5The company announced a new $3.5 billion restructuring program (2014-2018) aimed at reducing operating costs.
  • 6A significant loss on debt extinguishment of $495 million was recognized in the first nine months of 2014 due to tender offers and debt retirements.
  • 7Mondelez provided an updated 2014 outlook, expecting organic net revenue growth of 2% to 2.5% and adjusted EPS growth of approximately 10% on a constant currency basis.

Frequently Asked Questions

The decrease in reported net revenues was primarily driven by unfavorable currency translation effects, as the U.S. dollar strengthened against many of the currencies in which Mondelez International operates.

While reported net earnings and diluted EPS declined, the company's non-GAAP adjusted metrics showed improvement. Adjusted Operating Income and Adjusted EPS both increased, particularly on a constant currency basis, highlighting the effectiveness of cost-saving initiatives and underlying operational performance despite significant restructuring charges and other one-time items.

The 2014-2018 Restructuring Program is a $3.5 billion initiative approved by the board to reduce the company's operating cost structure in both its supply chain and overhead. The primary objectives include achieving annualized savings of at least $1.5 billion by the end of 2018 through initiatives like severance, asset disposals, and manufacturing cost reductions.

Mondelez refinanced a significant portion of its long-term debt in early 2014, issuing $3.0 billion in new notes and retiring $1.6 billion of higher-coupon debt. While this led to a $495 million loss on debt extinguishment in the first nine months of 2014, it reduced the company's weighted-average interest rate on total debt to 4.3% as of September 30, 2014, and is expected to lower future interest expenses.