Attached files

file filename
8-K - 8-K - Mondelez International, Inc.d32628d8k.htm
EX-99.2 - EX-99.2 - Mondelez International, Inc.d32628dex992.htm

Exhibit 99.1

Mondelēz International, Inc.

Unaudited Pro Forma Consolidated Financial Information

Divestiture of Mondelēz International Coffee Business

On July 2, 2015 (the “closing date”), Mondelēz International, Inc. completed transactions to combine our wholly owned coffee businesses (including our coffee portfolio in France) with those of D.E Master Blenders 1753 B.V. (“DEMB”) to create a new company, Jacobs Douwe Egberts (“JDE”).

Upon closing, the consideration we received for our coffee businesses was €3.8 billion ($4.2 billion U.S. dollars as of July 2, 2015) and a 43.5 percent equity interest in JDE. Acorn Holdings B.V. (“AHBV”), owner of DEMB, holds a 56.5% share in JDE. The cash and equity consideration we received was adjusted from previous estimates to reflect our retaining our interest in a Korea-based joint venture, Dongsuh Foods Corporation (“DSF”). During the second quarter of 2015, we also completed the sale of our interest in a Japanese coffee joint venture, Ajinomoto General Foods, Inc. (“AGF”). In lieu of contributing our interest in the AGF joint venture to JDE, we contributed the net cash proceeds from the sale, and the transaction did not change the consideration received for our global coffee businesses.

The total amount of cash and equity consideration we expect to receive is subject to further adjustment based on the final valuation, net assets and shares in our businesses contributed to JDE and final sales price adjustments. We expect to finalize the sales price and related adjustments by the end of the second quarter of 2016. As a result, the final amount of consideration we receive and the gain we recognize on the divestiture may change materially until we conclude these matters.

Following the transactions, Mondelēz International is an even more focused snacking company, with approximately 85% of net revenues derived from biscuits, chocolate, gum and candy. By retaining a significant stake in JDE, we will also continue to have a significant contribution from the coffee category. We plan to reflect our divested historical coffee results and future equity earnings from JDE in results from continuing operations as the coffee category continues to be a significant part of our strategy and net earnings.

Based on the size of our global coffee divestiture relative to our consolidated results, we have reflected the divestiture in the unaudited pro forma consolidated financial information and reflected the receipt of consideration, including the 43.5% equity interest in JDE, as of the pro forma consolidated balance sheet date of March 31, 2015.

Unaudited Pro Forma Consolidated Financial Information

The following unaudited pro forma consolidated financial statements reflect adjustments to our historical financial results related to the divestiture of our global coffee business:

 

    the unaudited pro forma consolidated statements of earnings for the three months ended March 31, 2015 and the year ended December 31, 2014 give effect to the divestiture as if it occurred on January 1, 2014, the beginning of the earliest period presented; and

 

    the unaudited pro forma consolidated balance sheet gives effect to the divestiture as if it occurred as of March 31, 2015, our latest balance sheet date provided in our public filings.

The unaudited pro forma consolidated statements of earnings (i) are presented based on information currently available, (ii) are intended for informational purposes only, (iii) are not necessarily indicative of and do not purport to represent what our operating results would have been had the divestiture occurred as described or what our future operating results will be after giving effect to these events, and (iv) do not reflect all actions that may be undertaken by management after the divestiture of our coffee business.

The unaudited pro forma consolidated financial statements and the accompanying notes should be read together with (i) the audited consolidated financial statements and accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2014, and (ii) the unaudited interim consolidated financial statements and accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2015.

 

1


Mondelēz International, Inc.

Unaudited Pro Forma Consolidated Statement of Earnings

For the Three Months Ended March 31, 2015

(in millions, except per share data)

 

     As Reported
Mondelēz
International(1)
    Divestiture
of Coffee
Business (d)
    Pro Forma
Adjustments
    Notes    Pro Forma
Mondelēz
International(1)
 

Net revenues

   $ 7,762     $ (752   $ —           $ 7,010   

Cost of sales

     4,821       (460     (1   (a)      4,360   
  

 

 

   

 

 

   

 

 

      

 

 

 

Gross profit

  2,941     (292   1      2,650   

Selling, general and administrative expenses

  1,924     (162   (27 (a), (c)   1,735   

Asset impairment and exit costs

  160      —        —        160   

Amortization of intangibles

  46     —        —        46   
  

 

 

   

 

 

   

 

 

      

 

 

 

Operating income

  811     (130   28      709   

Interest and other expense, net

  386     —        551    (b)   937   
  

 

 

   

 

 

   

 

 

      

 

 

 

Earnings before income taxes

  425     (130   (523   (228

Provision for income taxes

  113     (17   (228 (a), (b), (c)   (132

Income from equity method investments

  —        —        113    (d)   113   
  

 

 

   

 

 

   

 

 

      

 

 

 

Net earnings

  312     (113   (182   17   

Noncontrolling interest

  (12   —        —        (12
  

 

 

   

 

 

   

 

 

      

 

 

 

Net earnings attributable to Mondelēz International

$ 324    $ (113 $ (182 $ 29   
  

 

 

   

 

 

   

 

 

      

 

 

 

Earnings per share:

Basic

$ 0.20   $ (0.07 $ (0.11 $ 0.02   

Diluted

$ 0.19   $ (0.07 $ (0.11 $ 0.02   

Weighted-average shares:

Basic

  1,648      1,648   

Diluted

  1,665      1,665   

 

(1)  During the three months ended March 31, 2015, in our reported Mondelēz International results, we also incurred significant charges, including a pre-tax $713 million ($452 million after-tax) loss on debt extinguishment and related expenses and pre-tax charges of $224 million ($175 million after-tax) related to our 2014-2018 Restructuring Program. These amounts have not been removed to normalize the results above because they are not directly related to the global coffee divestiture. However, these items did reduce our as reported and pro forma Mondelēz International results above. Refer to our Quarterly Report on Form 10-Q for additional information on items affecting our results for the three months ended March 31, 2015.

See accompanying notes to the unaudited pro forma consolidated financial statements.

 

2


Mondelēz International, Inc.

Unaudited Pro Forma Consolidated Statement of Earnings

For the Year Ended December 31, 2014

(in millions, except per share data)

 

     As Reported
Mondelēz
International(1)
     Divestiture
of Coffee
Business (d)
    Pro Forma
Adjustments
    Notes    Pro Forma
Mondelēz
International(1)
 

Net revenues

   $ 34,244      $ (3,776   $ —           $ 30,468   

Cost of sales

     21,647        (2,321     —             19,326   
  

 

 

    

 

 

   

 

 

      

 

 

 

Gross profit

  12,597     (1,455   —        11,142   

Selling, general and administrative expenses

  8,457     (809   (69 (a), (c)   7,579   

Asset impairment and exit costs

  692      —        —        692   

Amortization of intangibles

  206     —        —        206   
  

 

 

    

 

 

   

 

 

      

 

 

 

Operating income

  3,242     (646   69      2,665   

Interest and other expense, net

  688     —        628   (b)   1,316   
  

 

 

    

 

 

   

 

 

      

 

 

 

Earnings before income taxes

  2,554     (646   (559   1,349   

Provision for income taxes

  353     (74   (219 (a), (b)   60   

Income from equity method investments

  —        —        572    (d)   572   
  

 

 

    

 

 

   

 

 

      

 

 

 

Net earnings

  2,201     (572   232      1,861   

Noncontrolling interest

  17      —        —        17   
  

 

 

    

 

 

   

 

 

      

 

 

 

Net earnings attributable to Mondelēz International

$ 2,184    $ (572 $ 232    $ 1,844   
  

 

 

    

 

 

   

 

 

      

 

 

 

Earnings per share:

Basic

$ 1.29   $ (0.34 $ 0.14    $ 1.09   

Diluted

$ 1.28   $ (0.33 $ 0.14    $ 1.08   

Weighted-average shares:

Basic

  1,691      1,691   

Diluted

  1,709      1,709   

 

(1) During the year ended December 31, 2014, in our reported Mondelēz International results, we also incurred significant charges, including pre-tax charges totaling $840 million ($632 million after-tax) related to our 2014-2018 Restructuring Program and 2012-2014 Restructuring Program, a pre-tax $495 million ($307 million after-tax) loss on debt extinguishment and related expenses and a pre-tax charge of $167 million ($151 million after-tax) related to the remeasurement of our Venezuelan net monetary assets in 2014. These amounts have not been removed to normalize the results above because they are not directly related to the global coffee divestiture. However, these items did reduce our as reported and pro forma Mondelēz International results above. Refer to our Annual Report on Form 10-K for additional information on items affecting our results for the year ended December 31, 2014.

See accompanying notes to the unaudited pro forma consolidated financial statements.

 

3


Mondelēz International, Inc.

Unaudited Pro Forma Consolidated Balance Sheet

As of March 31, 2015

(in millions)

 

     As Reported
Mondelēz
International
    Divestiture
of Coffee
Business (d)
    Pro Forma
Adjustments
    Notes    Pro Forma
Mondelēz
International
 

ASSETS

           

Cash and cash equivalents

   $ 1,835     $ (208   $ 4,207      (c), (d)    $ 5,834   

Trade receivables

     4,061        (499     —             3,562   

Other receivables

     852       (20     488      (d)      1,320   

Inventories, net

     3,421       (530     —             2,891   

Deferred income taxes

     557       (13     —             544   

Other current assets

     1,138       (84     (95   (c)      959   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total current assets

  11,864     (1,354   4,600      15,110   

Property, plant and equipment, net

  9,261     (716   —        8,545   

Goodwill

  22,356     (1,600   (65 (c)   20,691   

Intangible assets, net

  19,434     —        —        19,434   

Prepaid pension assets

  51      —        —        51   

Other assets

  1,240     (100   4,183    (d)   5,323   
  

 

 

   

 

 

   

 

 

      

 

 

 

TOTAL ASSETS

$ 64,206    $ (3,770 $ 8,718    $ 69,154   
  

 

 

   

 

 

   

 

 

      

 

 

 

LIABILITIES

Short-term borrowings

$ 3,688   $ —      $ —      $ 3,688   

Current portion of long-term debt

  2,195     —        —        2,195   

Accounts payable

  5,199     (302   —        4,897   

Accrued marketing

  1,872     (283   —        1,589   

Accrued employment costs

  803     (42   —        761   

Other current liabilities

  2,709     (101   509    (c), (d)   3,117   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total current liabilities

  16,466     (728   509      16,247   

Long-term debt

  12,822     —        —        12,822   

Deferred income taxes

  5,373     (66   (53 (c), (d)   5,254   

Accrued pension costs

  2,406     (166   14    (d)   2,254   

Accrued postretirement health care costs

  524     —        —        524   

Other liabilities

  2,003     (5   —        1,998   
  

 

 

   

 

 

   

 

 

      

 

 

 

TOTAL LIABILITIES

  39,594      (965   470      39,099   

EQUITY

Common stock, no par value

  —        —        —        —     

Additional paid-in capital

  31,645     —        —        31,645   

Retained earnings

  14,582      —        5,193    (c), (d)   19,775   

Accumulated other comprehensive losses

  (9,208 )   —        250    (c), (d)   (8,958

Treasury stock, at cost

  (12,473   —        —        (12,473
  

 

 

   

 

 

   

 

 

      

 

 

 

Mondelēz International Shareholders’ Equity

  24,546      —        5,443      29,989   

Noncontrolling interest

  66      —        —        66   
  

 

 

   

 

 

   

 

 

      

 

 

 

TOTAL EQUITY

  24,612      —        5,443      30,055   
  

 

 

   

 

 

   

 

 

      

 

 

 

TOTAL LIABILITIES AND EQUITY

$ 64,206    $ (965 )  $ 5,913    $ 69,154   
  

 

 

   

 

 

   

 

 

      

 

 

 

See accompanying notes to the unaudited pro forma consolidated financial statements.

 

4


NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

The unaudited pro forma consolidated financial statements as of March 31, 2015 and for the three months ended March 31, 2015 and the fiscal year ended December 31, 2014 include the following pro forma adjustments:

 

  (a) Adjustment reflects the removal of incremental costs incurred related to readying our global coffee business for the divestiture. For the three months ended March 31, 2015, the pre-tax charges were $28 million and the related tax benefit was $11 million. For the year ended December 31, 2014, the pre-tax charges were $77 million and the related tax benefit was $31 million.

 

  (b) Adjustment reflects the removal of gains we recognized on currency exchange contracts we secured to lock in an expected euro/U.S. dollar exchange rate related to the expected gross €4 billion receipt of cash proceeds from the divestiture. For the three months ended March 31, 2015, the pre-tax gains were $551 million and the related tax expense was $207 million. For the year ended December 31, 2014, the pre-tax gains were $628 million and the related tax expense was $250 million.

 

  (c) Adjustment reflects the sale of our 50% interest in AGF, a Japanese coffee joint venture, on April 23, 2015. In lieu of contributing our interest in AGF to JDE, we contributed the net cash proceeds from the sale (reflected in adjustment (d)). AGF contributed equity earnings (net of tax) of less than $1 million during the three months ended March 31, 2015 and $8 million during the year ended December 31, 2014, which were removed from the unaudited pro forma consolidated statements of earnings to arrive at pro forma Mondelēz International results (excluding coffee). Additionally, we removed a $32 million deferred tax charge related to the pending AGF sale that we incurred in the three months ended March 31, 2015. Since as of the March 31, 2015 balance sheet date, the sale had not yet closed, we also removed our held for sale investment in AGF from other current assets, goodwill and cumulative translation adjustments from accumulated other comprehensive losses and reflected the $9 million net after-tax loss on the sale as an adjustment to retained earnings.

 

  (d) Adjustment reflects the divestiture of our global coffee businesses and the consideration we received on the closing date, including €3.8 billion ($4.1 billion using a March 31, 2015 currency spot rate) and a 43.5% equity interest in JDE at an estimated value of €3.9 billion ($4.2 billion as of March 31, 2015) based on the estimated fair value of the equity interest as of May 7, 2014 when the divestiture was announced and as adjusted based on our retaining the 50% equity interest in DSF, our Korea-based coffee joint venture. In connection with the closing, we also recorded a receivable for $275 million related to an expected payment from JDE for tax formation costs that we expect to receive a year following the closing. Additionally, we recorded $213 million of receivables and $76 million of cash received related to the reimbursement of costs we expect to incur or have incurred related to separating our coffee businesses, including severance costs.

We are currently in the process of determining the fair value of our investment in JDE as of the closing date. We expect to have a preliminary valuation completed in the third quarter of 2015. The sale proceeds are also subject to further adjustments, including finalization of working capital, net debt and other sale adjustments. We expect to finalize the sales price and related adjustments by the end of the second quarter of 2016. As a result, the final amount of consideration we receive and the gain we recognize on the divestiture may change materially until we conclude these matters.

We have computed an estimated pre-tax gain of $5.5 billion ($5.2 billion after-tax gain) based on the cash and estimated fair value of the equity interest in JDE we received on the closing date, less our coffee business net assets estimated as of March 31, 2015, $164 million of net cash proceeds related to the sale of our Japanese coffee joint venture (described in (c) above), related accumulated other comprehensive losses as of March 31, 2015 and direct transaction costs incurred on the closing date. As we update the valuation of our investment in JDE and the net assets actually divested as of the closing date, the resulting gain on sale could change materially from the pro forma information presented here as of March 31, 2015.

We also reflected $115 million of estimated one-time after-tax charges related to pension curtailment and other employee costs and incremental transaction-related costs that we expect to incur in connection with the coffee divestiture.

Adjustment also reflects the inclusion of our historical coffee business net earnings within continuing results of operations in the pro forma consolidated statements of earnings as our historical coffee business results reflect an estimate equivalent to our expected share of JDE’s equity earnings based on our 43.5% equity ownership of the combined DEMB and our global coffee net earnings. Note the actual amount of JDE equity earnings we record following the closing date could vary significantly from the estimate based on our historical coffee results. Based on how the divestiture of our coffee business and concurrent investment in JDE was structured, resulting in an exchange of similarly sized coffee interests, we believe this estimate is reasonable and necessary to reflect the impact of the transactions completed on the closing date.

 

5