Mondelēz International Reports Q3 2022 Results

Mondelēz International, Inc. and SubsidiariesReconciliation of GAAP and Non-GAAP Financial Measures(Unaudited)

The company reports its financial results in accordance with accounting principles generally accepted in the United States(“U.S. GAAP”). However, management believes that also presenting certain non-GAAP financial measures provides additionalinformation to facilitate the comparison of the company’s historical operating results and trends in its underlying operatingresults, and provides additional transparency on how the company evaluates its business. Management uses these non-GAAPfinancial measures in making financial, operating and planning decisions and in evaluating the company’s performance. Thecompany also believes that presenting these measures allows investors to view its performance using the same measures thatthe company uses in evaluating its financial and business performance and trends.

The company considers quantitative and qualitative factors in assessing whether to adjust for the impact of items that may besignificant or that could affect an understanding of its ongoing financial and business performance and trends. The adjustmentsgenerally fall within the following categories: acquisition & divestiture activities, gains and losses on intangible asset sales andnon-cash impairments, major program restructuring activities, constant currency and related adjustments, major programfinancing and hedging activities and other major items affecting comparability of operating results. See below for a descriptionof adjustments to the company’s U.S. GAAP financial measures included herein.

Non-GAAP information should be considered as supplemental in nature and is not meant to be considered in isolation or as asubstitute for the related financial information prepared in accordance with U.S. GAAP. In addition, the company’s non-GAAPfinancial measures may not be the same as or comparable to similar non-GAAP measures presented by other companies.

DEFINITIONS OF THE COMPANY’S NON-GAAP FINANCIAL MEASURES

The company’s non-GAAP financial measures and corresponding metrics reflect how the company evaluates its operatingresults currently and provide improved comparability of operating results. As new events or circumstances arise, thesedefinitions could change. When these definitions change, the company provides the updated definitions and presents the relatednon-GAAP historical results on a comparable basis. When items no longer impact the company’s current or future presentationof non-GAAP operating results, the company removes these items from its non-GAAP definitions. In the first quarter of 2022,the company added to the non-GAAP definitions the exclusion of incremental costs due to the war in Ukraine, in the secondquarter of 2022, the company added to the non-GAAP definitions the exclusion of costs incurred associated with our publicly-announced processes to sell businesses, and in the third quarter of 2022, the company added to the non-GAAP definitions theexclusion of inventory step-up charges associated with acquisitions.

• “Organic Net Revenue” is defined as net revenues excluding the impacts of acquisitions, divestitures and currencyrate fluctuations. The company also evaluates Organic Net Revenue growth from emerging markets and developedmarkets.

• “Adjusted Gross Profit” is defined as gross profit excluding the impacts of the Simplify to Grow Program;acquisition integration costs; the operating results of divestitures; mark-to-market impacts from commodity, forecastedcurrency and equity method investment transaction derivative contracts; inventory step-up charges: and incrementalcosts due to the war in Ukraine. The company also presents “Adjusted Gross Profit margin,” which is subject to thesame adjustments as Adjusted Gross Profit. The company also evaluates growth in the company’s Adjusted GrossProfit on a constant currency basis.

• “Adjusted Operating Income” and “Adjusted Segment Operating Income” are defined as operating income (orsegment operating income) excluding the impacts of the items listed in the Adjusted Gross Profit definition as well asgains or losses (including non-cash impairment charges) on goodwill and intangible assets; divestiture or acquisitiongains or losses, divestiture-related costs, acquisition-related costs, and acquisition integration costs and contingentconsideration adjustments; remeasurement of net monetary position; impacts from resolution of tax matters; impactfrom pension participation changes; and costs associated with the JDE Peet's transaction. The company also presents“Adjusted Operating Income margin” and “Adjusted Segment Operating Income margin,” which are subject to thesame adjustments as Adjusted Operating Income and Adjusted Segment Operating Income. The company alsoevaluates growth in the company’s Adjusted Operating Income and Adjusted Segment Operating Income on a constantcurrency basis.

• “Adjusted EPS” is defined as diluted EPS attributable to Mondelēz International from continuing operationsexcluding the impacts of the items listed in the Adjusted Operating Income definition, as well as losses on debtextinguishment and related expenses; gains or losses on interest rate swaps no longer designated as accounting cashflow hedges due to changed financing and hedging plans; net earnings from divestitures; and initial impacts fromenacted tax law changes; and gains or losses on equity method investment transactions. Similarly, within Adjusted

EPS, the company’s equity method investment net earnings exclude its proportionate share of its investees’ significantoperating and non-operating items. The tax impact of each of the items excluded from the company’s U.S GAAPresults was computed based on the facts and tax assumptions associated with each item, and such impacts have alsobeen excluded from Adjusted EPS. The company also evaluates growth in the company’s Adjusted EPS on a constantcurrency basis.

• “Free Cash Flow” is defined as net cash provided by operating activities less capital expenditures. Free Cash Flow isthe company’s primary measure used to monitor its cash flow performance.

See the attached schedules for supplemental financial data and corresponding reconciliations of the non-GAAP financialmeasures referred to above to the most comparable U.S. GAAP financial measures for the three and nine months endedSeptember 30, 2022 and September 30, 2021. See Items Impacting Comparability of Operating Results below for moreinformation about the items referenced in these definitions that specifically impacted the company’s results.

SEGMENT OPERATING INCOME

The company uses segment operating income to evaluate segment performance and allocate resources. The company believes itis appropriate to disclose this measure to help investors analyze segment performance and trends. Segment operating incomeexcludes unrealized gains and losses on hedging activities (which are a component of cost of sales), general corporate expenses(which are a component of selling, general and administrative expenses), amortization of intangibles, gains and losses ondivestitures and acquisition-related costs (which are a component of selling, general and administrative expenses) in all periodspresented. The company excludes these items from segment operating income in order to provide better transparency of itssegment operating results. Furthermore, the company centrally manages benefit plan non-service income and interest and otherexpense, net. Accordingly, the company does not present these items by segment because they are excluded from the segmentprofitability measure that management reviews.

ITEMS IMPACTING COMPARABILITY OF OPERATING RESULTS

The following information is provided to give qualitative and quantitative information related to items impacting comparabilityof operating results. The company identifies these based on how management views the company’s business; makes financial,operating and planning decisions; and evaluates the company’s ongoing performance. In addition, the company discloses theimpact of changes in currency exchange rates on the company’s financial results in order to reflect results on a constantcurrency basis.

Divestitures, Divestiture-related costs and Gains/(losses) on divestitures

Divestitures include completed sales of businesses, exits of major product lines upon completion of a sale or licensingagreement and the partial or full sale of an equity method investment such as KDP or JDE Peet's (discussed separately belowunder the gains and losses on equity method investment transactions section). As the company records its share of KDP andJDE Peet’s ongoing earnings on a one-quarter lag basis, any KDP or JDE Peet’s ownership reductions are reflected asdivestitures within the company's non-GAAP results the following quarter. Divestiture-related costs, which includes costs forthe company's divestitures as defined above, also includes costs incurred associated with the company's publicly-announcedprocesses to sell businesses.

• The company's non-GAAP results include the impacts from 2021 partial sales of its equity method investment in KDPand the May 8, 2022 partial sale of its equity investment in JDE Peet's as if the sales occurred at the beginning of allperiods presented. See the section on gains/losses on equity method investment transactions below for moreinformation.

• On July 7, 2022, the company completed the sale of a business in Argentina including several local gum and candybrands and a manufacturing facility. In addition, the company's Kraft Heinz Company license agreement to produceand sell Kraft mayonnaise in Latin America countries, predominately Mexico, expired on September 1,2022. Thedivestitures of these businesses resulted in a year-over-year reduction in net revenues of $10 million in the threemonths and $6 million in the nine months ended September 30, 2022. In addition, the company incurred divestiture-related costs of $1 million in the three months and $3 million in the nine months ended September 30, 2022.

• In May 2022, the company announced its intention to divest the company's developed market gum and global Hallsbusinesses. In the third quarter of 2022, we formally began to seek potential buyers for these businesses. In addition,the company incurred divestiture-related costs of $5 million in the three months and $9 million in the nine monthsended September 30, 2022.

• On November 1, 2021, the company completed the sale of MaxFoods Pty Ltd, an Australian packaged seafoodbusiness that it had acquired as part of its acquisition of Gourmet Food Holdings Pty Ltd ("Gourmet Food"). The salesprice was $57 million Australian dollars ($41 million), net of cash divested with the business, and the company

recorded an immaterial loss on the transaction. The divestiture of this business resulted in a year-over-year decline innet revenues of $16 million in the three months and $30 million in the nine months ended September 30, 2022.

Acquisitions, Acquisition-related costs and Acquisition integration costs and contingent consideration adjustments

Acquisition-related costs, which includes transaction costs such as third party advisor, investment banking and legal fees, alsoincludes one-time compensation expense related to the buyout of non-vested employee stock ownership plan shares.Acquisition integration costs and contingent consideration adjustments include one-time costs related to the integration ofacquisitions as well as any adjustments made to the fair market value of contingent compensation liabilities that have beenpreviously booked for earn-outs related to acquisitions that do not relate to employee compensation expense. The companyexcludes these items to better facilitate comparisons of our underlying operating performance across periods.

On November 1, 2022, the company acquired Grupo Bimbo's confectionery business, Ricolino, located primarily in Mexico.The company incurred acquisition-related costs of $1 million in the nine months ended September 30, 2022. The company alsoincurred acquisition integration costs of $7 million in the three and nine months ended September 30, 2022.

On August 1, 2022, the company acquired 100% of the equity of Clif Bar & Company (“Clif Bar”), a leading U.S. maker ofnutritious energy bars with organic ingredients. The acquisition expands our global snacks bar business and complements ourrefrigerated snacking and performance nutrition bar portfolios. The acquisition added incremental net revenues of $157 millionduring the three and nine months ended September 30,2022, and an operating loss of $33 million during the three and ninemonths ended September 30, 2022. The operating loss includes acquisition integration costs and contingent considerationadjustments of $16 million and an inventory step-up charge of $20 million incurred during the three and nine months endedSeptember 30, 2022. The company also incurred acquisition-related costs of $292 million in the three months and $296 millionin the nine months ended September 30, 2022. These acquisition-related costs are primarily related to the buyout of the non-vested employee stock ownership plan shares.

On January 3, 2022, the company acquired Chipita Global S.A. (“Chipita”), a leading croissants and baked snacks company inthe Central and Eastern European markets. The acquisition of Chipita offers a strategic complement to the company's existingportfolio and advances its strategy to become the global leader in broader snacking. The acquisition added incremental netrevenues of $158 million during the three months and $490 million during the nine months ended September 30, 2022, andoperating income of $25 million during the three months and $39 million during the nine months ended September 30, 2022.The company incurred acquisition-related costs of $21 million in the nine months ended September 30, 2022, and $6 million inthe nine months ended September 30, 2021. The company also incurred acquisition integration costs of $14 million in the threemonths and $85 million in the nine months ended September 30, 2022, and $6 million in the three and nine months endedSeptember 30, 2021.

On April 1, 2021, the company acquired Gourmet Food Holdings Pty Ltd, a leading Australian food company in the premiumbiscuit and cracker category. The acquisition added incremental net revenues of $14 million and operating income of $1 millionduring the nine months ended September 30, 2022. The company incurred acquisition integration costs of $1 million in thethree and nine months ended September 30, 2022. The company also incurred acquisition-related costs of $7 million in the ninemonths ended September 30, 2021.

On March 25, 2021, the company acquired a majority interest in Lion/Gemstone Topco Ltd ("Grenade"), a performancenutrition leader in the United Kingdom. The acquisition of Grenade expands the company's position into the premium nutritionsegment. The acquisition added incremental net revenues of $21 million and operating income of $2 million during the ninemonths ended September 30, 2022. The company incurred acquisition-related costs of $2 million in the nine months endedSeptember 30, 2021.

On January 4, 2021, the company acquired the remaining 93% of equity of Hu Master Holdings, a category leader in premiumchocolate in the United States, which provides a strategic complement to the company's snacking portfolio in North Americathrough growth opportunities in chocolate and other offerings in the well-being segment. The initial cash consideration paidwas $229 million, net of cash received, and the company may be required to pay additional contingent consideration. Theestimated fair value of the contingent consideration obligation at the acquisition date was $132 million and was determinedusing a Monte Carlo simulation based on forecasted future results. During the third quarter of 2021, the company recorded a$70 million reduction to the liability due to changes in the expected pace of growth. During the third quarter of 2022, thecompany recorded an additional $7 million reduction to the liability due to further changes to forecasted future results. As aresult of acquiring the remaining equity interest, the company consolidated the operation and recorded a pre-tax gain of $9million ($7 million after-tax) related to stepping up the company's previously-held $8 million (7%) investment to fair value.The company incurred acquisition-related costs of $9 million in the three and nine months ended September 30, 2021.

On April 1, 2020, the company acquired a majority interest in Give & Go, a North American leader in fully-finished sweetbaked goods and owner of the famous two-bite® brand of brownies and the Create-A-Treat® brand, known for cookie andgingerbread house decorating kits. The acquisition of Give & Go provides access to the in-store bakery channel and expands thecompany's position in broader snacking. The company incurred acquisition integrations costs of $1 million in the nine monthsended September 30, 2022, and $3 million in the nine months ended September 30, 2021.

Simplify to Grow Program

The primary objective of the Simplify to Grow Program is to reduce the company’s operating cost structure in both its supplychain and overhead costs. The program covers severance as well as asset disposals and other manufacturing and procurement-related one-time costs.

Restructuring costs

The company recorded a $10 million gain due to the sale of assets included in the restructuring program as well as restructuringcharges of $3 million in the three months and restructuring charges of $8 million in the nine months ended September 30, 2022.The company recorded restructuring charges of $62 million in the three months and $250 million in the nine months endedSeptember 30, 2021. This activity was recorded within asset impairment and exit costs and benefit plan non-service income.These charges were for severance and related costs, non-cash asset write-downs (including accelerated depreciation and assetimpairments) and other adjustments, including any gains on sale of restructuring program assets.

Implementation costs

Implementation costs primarily relate to reorganizing the company’s operations and facilities in connection with its supplychain reinvention program and other identified productivity and cost saving initiatives. The costs include incremental expensesrelated to the closure of facilities, costs to terminate certain contracts and the simplification of the company’s informationsystems. The company recorded implementation costs of $23 million in the three months and $62 million in the nine monthsended September 30, 2022 and $65 million in the three months and $132 million in the nine months ended September 30, 2021.

Intangible asset impairment charges

During the company's 2022 annual testing of indefinite-life intangible assets, the company recorded a $23 million intangibleasset impairment charge in the third quarter of 2022 related to one brand. The impairment arose due to lower than expectedgrowth and profitability in a local biscuit brand in AMEA.

During the first quarter of 2022, the company recorded a $78 million intangible asset impairment charge in AMEA due to lowerthan expected growth and profitability of a local biscuit brand sold in select markets in AMEA and Europe.

During the second quarter of 2021, the company recorded a $32 million intangible asset impairment charge in North Americarelated to a small biscuit brand, primarily due to lower than expected sales growth.

Mark-to-market impacts from commodity and currency derivative contracts

The company excludes unrealized gains and losses (mark-to-market impacts) from outstanding commodity and forecastedcurrency and equity method investment transaction derivative contracts from its non-GAAP earnings measures. The mark-to-market impacts of commodity and forecasted currency transaction derivatives are excluded until such time that the relatedexposures impact the company's operating results. Since the company purchases commodity and forecasted currencytransaction contracts to mitigate price volatility primarily for inventory requirements in future periods, the company makes thisadjustment to remove the volatility of these future inventory purchases on current operating results to facilitate comparisons ofits underlying operating performance across periods. The company excludes equity method investment derivative contractsettlements as they represent protection of value for future divestitures. The company recorded net unrealized losses oncommodity, forecasted currency and equity method transaction derivatives of $120 million in the three months and $220million in the nine months ended September 30, 2022, and recorded net unrealized gains of $134 million in the three monthsand $268 million in the nine months ended September 30, 2021.

Remeasurement of net monetary position

During the first quarter of 2022, primarily based on data published by the Türkiye Statistical Institute that indicated thatTürkiye's three-year cumulative inflation rate exceeded 100%, the company concluded that Türkiye became a highlyinflationary economy for accounting purposes. As of April 1, 2022, the company began to apply highly inflationary accountingfor its subsidiaries operating in Türkiye and changed their functional currency from the Turkish lira to the U.S. dollar. Withinselling, general and administrative expenses, we recorded a remeasurement gain of $1 million during the three and nine monthsended September 30, 2022 related to the revaluation of the Turkish lira denominated net monetary position over these periods.

During the second quarter of 2018, primarily based on published estimates which indicated that Argentina's three-yearcumulative inflation rate exceeded 100%, the company concluded that Argentina became a highly inflationary economy for

accounting purposes. As of July 1, 2018, the company began to apply highly inflationary accounting for its Argentineansubsidiaries and changed their functional currency from the Argentinean peso to the U.S. dollar. Within selling, general andadministrative expenses, the company recorded remeasurement losses of $12 million in the three months and $27 million in thenine months ended September 30, 2022 and $2 million in the three months and $10 million in the nine months ended September30, 2021 related to the revaluation of the Argentinean peso denominated net monetary position over these periods.

Impact from pension participation changes

The impact from pension participation changes represent the charges incurred when employee groups are withdrawn frommultiemployer pension plans and other changes in employee group pension plan participation. The company excludes thesecharges from its non-GAAP results because those amounts do not reflect the company’s ongoing pension obligations.

During the second quarter of 2021, the company made a decision to freeze its Defined Benefit Pension Scheme in the UnitedKingdom. As a result, the company recognized a curtailment credit of $3 million in the three months and $17 million in the ninemonths ended September 30, 2021 recorded within benefit plan non-service income. In addition, the company incurredincentive payment charges and other expenses related to this decision of $2 million in the three months and $47 million in thenine months ended September 30, 2021 included in operating income.

On July 11, 2019, the company received an undiscounted withdrawal liability assessment related to the company's completewithdrawal from the Bakery and Confectionery Union and Industry International Pension Fund totaling $526 million andrequiring pro-rata monthly payments over 20 years. The company began making monthly payments during the third quarter of2019. In connection with the discounted long-term liability, the company recorded accreted interest of $3 million in the threemonths and $8 million in the nine months ended September 30, 2022 and $2 million in the three months and $8 million in thenine months ended September 30, 2021 within interest and other expense, net. As of September 30, 2022, the remainingdiscounted withdrawal liability was $348 million, with $15 million recorded in other current liabilities and $333 millionrecorded in long-term other liabilities.

Incremental costs due to the war in Ukraine

In February 2022, Russia began a military invasion of Ukraine and the company closed its operations and facilities in Ukraine.In March 2022, the company's two Ukrainian manufacturing facilities in Trostyanets and Vyshhorod were significantlydamaged. During the first quarter of 2022, the company evaluated and impaired these and other assets. The company recorded$143 million of total expenses ($145 million after-tax) incurred as a direct result of the war, including $75 million recorded inasset impairment and exit costs, $44 million in cost of sales and $24 million in selling, general and administrative expenses.The company reversed approximately $7 million in the three months and $22 million in the nine months ended September 30,2022 of previously recorded charges primarily as a result of higher than expected collection of trade receivables and inventoryrecoveries.

Loss on debt extinguishment and related expenses

On March 18, 2022, the company completed a tender offer and redeemed long-term U.S. dollar denominated notes totaling$987 million. The company recorded a $129 million loss on debt extinguishment and related expenses within interest and otherexpense, net, consisting of $38 million paid in excess of carrying value of the debt and from recognizing unamortized discountsand deferred financing costs in earnings and $91 million in unamortized forward starting swap losses in earnings at the time ofthe debt extinguishment.

On March 31, 2021, the company completed an early redemption of euro (€1,200 million) and U.S. dollar ($992 million)denominated notes. The company recorded a $137 million loss on debt extinguishment and related expenses within interest andother expense, net, consisting of $110 million paid in excess of carrying value of the debt and from recognizing unamortizeddiscounts and deferred financing costs in earnings and $27 million foreign currency derivative loss related to the redemptionpayment at the time of the debt extinguishment.

Initial impacts from enacted tax law changes

The company excludes initial impacts from enacted tax law changes from its non-GAAP financial measures as they do notreflect its ongoing tax obligations under the enacted tax law changes. Initial impacts include items such as the remeasurementof deferred tax balances and the transition tax from the 2017 U.S. tax reform. Previously, the company only excluded the initialimpacts from more material tax reforms, specifically the impacts of the 2019 Swiss tax reform and 2017 U.S. tax reform. Tofacilitate comparisons of its underlying operating results, the company has recast all historical non-GAAP earnings measures toexclude the initial impacts from enacted tax law changes.

The company recorded net tax expense from the increase of its deferred tax liabilities resulting from enacted tax legislation of$13 million in the three months and $22 million in the nine months ended September 30, 2022. The company recorded a net

tax benefit of $4 million from a decrease of its deferred tax liabilities resulting from enacted tax legislation in the three monthsand a net tax expense from the increase of its deferred tax liabilities resulting from enacted tax legislation (mainly in the UnitedKingdom) of $95 million in the nine months ended September 30, 2021.

Gains and losses on equity method investment transactions

JDE Peet’s transaction

On May 8, 2022, the company sold approximately 18.6 million of our JDE Peet’s shares back to JDE Peet’s, which reduced ourownership interest by approximately 3% to 19.8%. The company received €500 million ($529 million) of proceeds andrecorded a loss of €8 million ($8 million) on this sale during the second quarter of 2022.

Keurig Dr Pepper transactions

On August 2, 2021, the company sold approximately 14.7 million shares of KDP, which reduced its ownership interest by 1% to5.3% of the total outstanding shares. The company received $500 million of proceeds and recorded a pre-tax gain of $248million (or $189 million after-tax) during the third quarter of 2021.

On June 7, 2021, the company participated in a secondary offering of KDP shares and sold approximately 28 million shares,which reduced its ownership interest by 2% to 6.4% of the total outstanding shares. The company received $997 million ofproceeds and recorded a pre-tax gain of $520 million (or $392 million after-tax) during the second quarter of 2021.

The company considers these ownership reductions partial divestitures of its equity method investment in KDP. Therefore, thecompany has removed the equity method investment net earnings related to the divested portion from its non-GAAP financialresults for Adjusted EPS for all historical periods presented to facilitate comparison of results. The company's U.S. GAAPresults, which include its equity method investment net earnings from KDP, did not change from what was previously reported.

Equity method investee items

Within Adjusted EPS, the company’s equity method investment net earnings exclude its proportionate share of its equitymethod investees’ significant operating and non-operating items, such as acquisition and divestiture-related costs, restructuringprogram costs and initial impacts from enacted tax law changes.

Constant currency

Management evaluates the operating performance of the company and its international subsidiaries on a constant currencybasis. The company determines its constant currency operating results by dividing or multiplying, as appropriate, the currentperiod local currency operating results by the currency exchange rates used to translate the company’s financial statements inthe comparable prior-year period to determine what the current-period U.S. dollar operating results would have been if thecurrency exchange rate had not changed from the comparable prior-year period.

MDLZ Earnings Release Content 2022 Q3