What is the primary reason for this 8-K filing?

This 8-K filing is to inform investors about a $385 million pre-tax income that Mondelez International will recognize in the third quarter of 2013. This income is a result of a concluded U.S. federal tax audit concerning the 2006-2008 tax years, which is related to tax liabilities assumed from the 2010 Cadbury acquisition.

How will this $385 million income impact Mondelez's reported earnings?

The company has explicitly stated that this $385 million income will be excluded from its non-GAAP financial measures, "Adjusted Operating Income" and "Adjusted EPS." This means that while it will be reflected in GAAP net income, it will not be considered part of the company's ongoing operational performance metrics.

What is the nature of the tax liability and the agreement with Dr Pepper Snapple Group?

The tax liability stems from a Tax Sharing and Indemnification Agreement dated May 1, 2008, between Cadbury Schweppes Plc and Dr Pepper Snapple Group, Inc. (DPSG). Mondelez, having acquired Cadbury, is responsible for certain tax matters related to the 2007 and 2008 demerger of Cadbury's Americas Beverage business. The recent tax audit concluded that the previously accrued liability by Mondelez exceeded the amount they are required to pay to DPSG, leading to the income recognition.

MDLZ 8-K SEC Disclosure

Summary

Mondelez International, Inc. (MDLZ) filed an 8-K on August 2, 2013, to disclose a significant tax-related event stemming from the 2010 Cadbury acquisition. A U.S. federal tax audit concerning the 2006-2008 tax years related to the demerger of Cadbury's Americas Beverage business has concluded. As a result of this audit, Mondelez will recognize a pre-tax income of $385 million in the third quarter of 2013. This income arises from the reversal of an accrued liability that exceeded the actual amount Mondelez is required to pay to Dr Pepper Snapple Group, Inc. (DPSG) under a Tax Indemnity agreement. Importantly, the company has stated that this income will be excluded from its non-GAAP financial measures, specifically "Adjusted Operating Income" and "Adjusted EPS," providing clarity on how this one-time event will be treated in ongoing operational performance reporting.

Key Highlights

1Mondelez will report $385 million in pre-tax income in Q3 2013 due to a concluded U.S. federal tax audit.
2The income is related to tax matters from the 2010 Cadbury acquisition and a 2008 Tax Indemnity agreement.
3The income results from the reversal of an over-accrued liability related to the demerger of Cadbury's Americas Beverage business.
4Mondelez will pay DPSG an amount less than the previously accrued liability.
5This $385 million income will be excluded from Mondelez's non-GAAP "Adjusted Operating Income" and "Adjusted EPS" measures.
6The audit covered DPSG's 2006-2008 tax years.

Mondelez International, Inc. 8-K Report, Corporate Update (Aug 2, 2013)

Summary

Key Highlights

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