Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis contains forward-looking statements. It should be read in conjunction with the other sections of this Annual Report on Form 10-K, including the consolidated financial statements and related notes contained in Item 8, “Forward-Looking Statements” and “Risk Factors” contained in Item 1A.

Description of the Company

We manufacture and market primarily snack food and beverage products, including biscuits (cookies, crackers and salted snacks), chocolate, gum & candy, coffee & powdered beverages and various cheese & grocery products. We have operations in more than 80 countries and sell our products in approximately 165 countries.

Over the last several years, we have been expanding geographically and building our presence in the snacking category. At the same time, we continued to invest in product quality, marketing and innovation behind our iconic brands, while implementing a series of cost saving initiatives. Our goals are to achieve industry-leading revenue growth over time along with the higher expected growth rates of advantaged snack categories; leverage our cost structure through supply chain reinvention, productivity programs, overhead streamlining, volume growth and improved product mix to drive margin gains; and grow earnings per share in the top-tier of our peer group.

Planned Coffee Business Transactions

On May 7, 2014, we announced that we entered into an agreement to combine our wholly owned coffee portfolio (outside of France) with D.E Master Blenders 1753 B.V. (“DEMB”). In conjunction with this transaction, Acorn Holdings B.V. (“AHBV”), owner of DEMB, has also made a binding offer to receive our coffee business in France. The parties have also invited our partners in certain joint ventures to join the new company.

Upon completion of all proposed transactions, we expect to receive cash of approximately €4 billion and a 49 percent equity interest in the new company, to be called Jacobs Douwe Egberts (“JDE”). AHBV will hold a majority share in the proposed combined company and will have a majority of the seats on the board, which will be chaired by current DEMB Chairman Bart Becht. We will have certain minority rights. AHBV is owned by an investor group led by JAB Holding Company s.à r.l.

The transactions (collectively, the “JDE coffee transactions”) remain subject to regulatory approvals and the completion of employee information and consultation requirements. We continue to expect the transactions to be completed in 2015, subject to closing conditions, including regulatory approvals. In December 2014, the European Commission announced its intention to further evaluate the proposed transaction against EU antitrust regulations in order to make a final determination on merger clearance, which we currently expect in the second half of 2015. We and DEMB also continue to undertake consultations with Works Councils and employee representatives as required in connection with the transactions.

In connection with the expected receipt of approximately €4 billion upon closing, we entered into currency exchange forward contracts in the second quarter of 2014 to lock in an expected U.S. dollar value of approximately $5 billion. As of December 31, 2014, the forward contracts were recorded as derivative assets within other current assets and through December 31, 2014, we recognized $628 million of unrealized gains related to the hedges within interest and other expense, net. On February 11, 2015, we monetized the forward contracts and recorded an additional realized gain of $311 million in the first quarter of 2015, for a total realized gain of $939 million. We also entered into new currency exchange forward contracts to continue to lock in an expected U.S. dollar value of approximately $5 billion from the transactions. Based on changes in the euro/U.S. dollar exchange rate, the actual closing date of the planned JDE coffee transactions and the settlement dates of the hedges or other hedges we may put into place, the actual amount of U.S. dollars we receive could change. In addition to the hedges, we have also incurred incremental expenses related to readying our coffee businesses for the planned transactions that totaled $77 million through December 31, 2014 and were recorded within selling, general and administrative expenses of our Europe and EEMEA segments and within our general corporate expenses. For additional information on the JDE coffee transactions, see Note 2, Divestitures and Acquisitions—Planned Coffee Business Transactions.

2014-2018 Restructuring Program

On May 6, 2014, our Board of Directors approved a $3.5 billion restructuring program, comprised of approximately $2.5 billion in cash costs and $1 billion in non-cash costs (the “2014-2018 Restructuring Program”), and up to $2.2 billion of capital expenditures. The primary objective of the 2014-2018 Restructuring Program is to reduce our operating cost structure in both our supply chain and overhead costs. We expect the 2014-2018 Restructuring Program to generate annualized savings of at least $1.5 billion by the program’s completion at the end of 2018. Lower overheads and accelerated supply chain cost reductions are each expected to generate roughly half of the total incremental savings. We expect to incur the majority of the program’s charges in 2015 and 2016 and to complete the program by year-end 2018. In 2014, we recorded restructuring and related implementation charges of $381 million under this program. For additional information on the 2014-2018 Restructuring Program, see Note 6, Restructuring Programs.

S ummary of Results

	•		Net revenues decreased 3.0% to $34.2 billion in 2014 and increased 0.8% to $35.3 billion in 2013. Net revenues in 2014 were significantly affected by unfavorable currency translation as the U.S. dollar strengthened against most currencies in which we operate.

	•		Organic Net Revenue increased 2.4% to $36.0 billion in 2014 and increased 3.9% to $35.9 billion in 2013. Organic Net Revenue is a non-GAAP financial measure we use to evaluate our underlying results (see the definition of Organic Net Revenue and our reconciliation with net revenues within Non-GAAP Financial Measures appearing later in this section).

	•		Diluted EPS attributable to Mondelēz International decreased 41.6% to $1.28 in 2014 and increased 28.1% to $2.19 in 2013. Excluding the results of discontinued operations, our diluted EPS attributable to Mondelēz International from continuing operations decreased 0.8% to $1.28 in 2014 and increased 46.6% to $1.29 in 2013. A number of significant items also affected the comparability of our reported results, as further described in the Discussion and Analysis of Historical Results appearing later in this section and in the notes to the consolidated financial statements.

	•		Adjusted EPS increased 14.3% to $1.76 in 2014 and increased 7.7% to $1.54 in 2013. On a constant currency basis, Adjusted EPS increased 23.4% to $1.90 in 2014 and increased 11.9% to $1.60 in 2013. Adjusted EPS is a non-GAAP financial measure we use to evaluate our underlying results (see the definition of Adjusted EPS and our reconciliation with diluted EPS within Non-GAAP Financial Measures appearing later in this section).

Financial Outlook

We seek to achieve top-tier financial performance. We manage our business to achieve this goal using a number of operating metrics including Organic Net Revenue, Adjusted Operating Income and Adjusted EPS. (Refer to Non-GAAP Financial Measures appearing later in this section for more information on these measures.) Additional metrics that we use or monitor include product quality measures, category growth, market share performance, pricing net of commodity costs, net commodity inflation, volume growth, Power Brand Organic Net Revenue growth, gross and net productivity savings, brand support and related investments, capital spending, cash conversion cycle, free cash flow, return on invested capital and shareholder returns. We also monitor a number of factors and trends that we expect may impact our near- and long-term revenues and profitability objectives:

Long-Term Demographics and Consumer Trends – Snack food consumption is highly correlated to GDP growth, urbanization of the population and rising discretionary income levels associated with a growing middle class particularly in emerging markets. Over the long-term, we expect these trends to continue leading to growth in key consumer behaviors, including increased snacking occasions, greater use of convenience food and migration to more frequent, smaller meals. In the near term, lower GDP growth, high unemployment and weak consumer confidence in Europe and emerging markets has slowed category and our growth.

Demand – We monitor consumer spending and our market share within the food and beverage categories in which we sell our products. Growth in the global categories slowed from approximately 4% in 2013 to 3.6% in 2014. We believe the slowdown in category growth will continue to affect our near-term net revenue growth, but we expect the slowdown, particularly in emerging markets, to be temporary. We expect category growth to return to levels more in line with the expected growth of emerging markets and consumer spending in those markets. We continue to make investments in our brands and build strong routes to market to address the needs of consumers in emerging and developed markets. In doing so, we anticipate stimulating demand in our categories and growing our position in these markets.

Volatility of Global Markets – Our growth strategy depends in part on our ability to expand our operations, particularly in emerging markets. Some of these markets have greater political and economic volatility and vulnerability to infrastructure and labor disruptions as we experienced this past year in markets including Russia, Ukraine, Venezuela and Argentina. Volatility in these markets affects demand for and the costs of our products and requires frequent changes in how we operate our business. There will likely be continued volatility across these and other markets in which we sell. As such, we are focused on aggressively managing our costs currently as we continue to invest in brand building and routes to market.

Competition – We operate in highly competitive markets that include global, regional and local competitors. Our advantaged geographic footprint, operating scale and portfolio of brands have all significantly contributed to building our market-leading positions across most of the product categories in which we sell. To grow and maintain our market positions, we focus on product quality, bringing new products and innovations to market and effectively meeting consumer needs and preferences. We pursue significant growth opportunities such as expanding our global operations and growing our portfolio of Power Brands and innovative products. We continue to optimize our manufacturing and other operations and invest in our brands through ongoing research and development, advertising and marketing consumer promotions.

Pricing – We adjust our product prices based on a number of variables including demand, the competitive environment and changes in our product input costs. Our net revenue growth and profitability may be affected as we adjust prices to address new conditions. In 2014, we generally increased prices in response to higher commodity costs, currency and other market factors. In 2015, we continue to expect higher aggregate commodity and related costs and anticipate adjusting our prices in response to changing market conditions. Price competition or delayed price increases by competitors or customers also affected our net revenues in 2014 and may continue to affect net revenues or market share in the near term until the market adjusts to the changes in input costs and other market conditions. In 2015, we plan to address some of these issues and improve our revenue mix by discontinuing certain low margin, customer-specific product lines, discontinuing certain low-margin licensed products and continuing to simplify our portfolio of SKUs.

Operating Costs – Our operating costs include raw materials, labor, selling, general and administrative expenses, taxes, currency impacts and financing costs. We manage these costs through cost saving and productivity initiatives, sourcing and hedging programs, pricing actions, refinancing and tax planning. We continue to work on various programs to expand our profitability and margins, such as our 2014-2018 Restructuring Program designed to bring about significant reductions in our operating cost structure in both our supply chain and overhead costs.

Currency – As a global company with over 80% of our net revenues generated outside the United States, we are exposed to changes in global economic conditions and currency movements. In 2014, as the U.S. dollar strengthened relative to other currencies in which we operate and as several countries experienced significant declines in or devaluations of their currency, these currency movements had a significant negative effect on our reported results of operations. Our 2014 net revenues were $34.2 billion, down 3.0% from 2013, including a negative 5.1 percentage point impact from currency translation. While we have net investment hedges in the form of local currency denominated debt to offset the translation of certain of our overseas investments, we generally do not hedge against currency translation. We primarily seek to hedge against economic losses on cross-currency transactions. Due to limited markets for hedging currency transactions and other factors, we may not be able to effectively hedge all of our cross-currency transaction risks. During 2014, we recognized $167 million of currency devaluation charges in pretax earnings related to the remeasurement of our net monetary assets in Venezuela. The economy, monetary policies and other business restrictions in Venezuela, as well as in other countries such as Argentina and Russia, have created a challenging business environment in which to operate, and our ability to hedge against currency-related economic losses may be limited. While we work to mitigate our exposure to these currency risks, factors such as continued global market volatility, actions by foreign governments, political uncertainty and other external developments could lead to further unfavorable currency impacts in the future.

Financing Costs – We regularly evaluate our variable and fixed-rate debt. We continue to use lower cost short- and long-term debt to finance our ongoing working capital, capital expenditures and other investments, dividends and share repurchases. In the first quarter of 2014 and fourth quarter of 2013, we retired $5 billion of our long-term U.S. dollar-denominated debt and issued lower-cost long-term euro and U.S. dollar-denominated debt. Our weighted-average interest rate on our total debt as of December 31, 2014 was 4.3%, down from 4.8% as of December 31, 2013 and down from 5.8% as of December 31, 2012.

Discussion and Analysis of Historical Results

Items Affecting Comparability of Financial Results

The following table includes significant income or (expense) items that affected the comparability of our pre-tax results of operations and our effective tax rates. Please refer to the notes to the consolidated financial statements indicated below for more information. Refer also to the Consolidated Results of Operations – Net Earnings and Earnings per Share Attributable to Mondelēz International table for the per share impacts of these items.


		For the Years Ended December 31,
	See Note	2014			2013			2012
		(in millions of U.S. dollars)
Planned coffee business transactions:	Note 2
Incremental costs for readying the businesses		$	(77	)	$	–		$	–
Unrealized gain on currency hedge			628			–			–
2014-2018 Restructuring Program:	Note 6
Restructuring charges			(274	)		–			–
Implementation charges			(107	)		–			–
2012-2014 Restructuring Program:	Note 6
Restructuring charges			(360	)		(267	)		(102	)
Implementation charges			(99	)		(63	)		(8	)
Remeasurement of Venezuelan net monetary assets:	Note 1
March 31, 2013: 4.30 to 6.30 bolivars to U.S. dollar			–			(54	)		–
March 31, 2014: 6.30 to 10.70 bolivars to U.S. dollar			(142	)		–			–
SICAD I remeasurements through December 31, 2014			(25	)		–			–
Loss on debt extinguishment and related expenses	Note 8		(495	)		(612	)		–
Benefit from indemnification resolution	Note 11		–			385			–
Acquisitions, divestitures and sales of property:	Note 2
Gain on Morocco acquisition			–			22			–
Acquisition-related costs			(2	)		(7	)		–
Other acquisition integration costs			(4	)		(4	)		–
Gains on divestitures			–			8			107
Gains on sales of properties			7			68			77
Spin-Off Costs	Note 2		(35	)		(62	)		(1,053	)
Gain on resolution of Starbucks arbitration	Note 2		–			2,522			–
Cadbury Integration Program	Note 7		8			(216	)		(185	)
Effective tax rate	Note 15		13.8%			2.5%			9.5%

Consolidated Results of Operations

The following discussion compares our consolidated results of operations for 2014 with 2013 and 2013 with 2012.

2014 compared with 2013


	For the Years Ended December 31,
	2014		2013		$ change			% change
	(in millions, except per share data)

Net revenues	$	34,244	$	35,299	$	(1,055	)		(3.0)%

Operating income		3,242		3,971		(729	)		(18.4)%

Earnings from continuing operations		2,201		2,332		(131	)		(5.6)%

Net earnings attributable to Mondelēz International		2,184		3,915		(1,731	)		(44.2)%

Diluted earnings per share from continuing operations attributable to Mondelēz International		1.28		1.29		(0.01	)		(0.8)%

Diluted earnings per share attributable to Mondelēz International		1.28		2.19		(0.91	)		(41.6)%

Net Revenues – Net revenues decreased $1,055 million (3.0%) to $34,244 million in 2014, and Organic Net Revenue (1) increased $845 million (2.4%) to $36,036 million. The change in net revenues and Organic Net Revenue are detailed below:


	2014
Change in net revenues (by percentage point)
Higher net pricing		4.5pp
Unfavorable volume/mix		(2.1)pp

Total change in Organic Net Revenue(1)		2.4%
Unfavorable currency		(5.1)pp
Impact of divestitures		(0.2)pp
Impact of accounting calendar change		(0.1)pp
Impact of acquisition		–

Total change in net revenues		(3.0)%

	(1)	Please see the Non-GAAP Financial Measures section at the end of this item.

Organic Net Revenue growth was driven by higher net pricing, partially offset by unfavorable volume/mix. Overall, net pricing was up as we realized the effects of input cost-driven pricing actions implemented over the course of the year. Higher net pricing was reflected primarily in Latin America, EEMEA, Europe and Asia Pacific. Unfavorable volume/mix was driven primarily by Europe, Asia Pacific and Latin America. In addition to price elasticity, the decline was largely due to a slow response by competitors to higher input costs as well as the impact of price-related customer disruptions in Europe. Unfavorable currency impacts decreased net revenues by $1,806 million, due primarily to the devaluation of the Venezuelan bolivar and the strength of the U.S. dollar relative to several currencies, including the Argentinean peso, Russian ruble, Brazilian real and Ukrainian hryvnya, partially offset by the strength of the British pound sterling relative to the U.S. dollar. The impact of divestitures completed in 2013 resulted in a year-over-year decrease in net revenues of $70 million and included a salty snacks business in Turkey, a confectionery business in South Africa and a chocolate business in Spain. The accounting calendar change made in Europe in 2013 resulted in a year-over-year decrease in net revenues of $38 million. The acquisition of a biscuit operation in Morocco on February 22, 2013 added $14 million in incremental net revenues this year for the period prior to the anniversary date of the acquisition.

Operating Income – Operating income decreased $729 million (18.4%) to $3,242 million in 2014, Adjusted Operating Income (1) increased $149 million (3.5%) to $4,416 million and Adjusted Operating Income on a constant currency basis (1) increased $436 million (10.2%) to $4,703 million due to the following:


	Operating
	Income			Change
	(in millions)			(percentage point)
Operating Income for the Year Ended December 31, 2013	$	3,971
Spin-Off Costs		62			1.8pp
2012-2014 Restructuring Program costs		330			8.7pp
Integration Program and other acquisition integration costs		220			5.6pp
Benefit from indemnification resolution		(336	)		(8.7)pp
Remeasurement of net monetary assets in Venezuela		54			1.3pp
Gains on acquisition and divestitures, net		(30	)		(0.7)pp
Operating income from divestitures		(6	)		(0.2)pp
Acquisition-related costs		2			–

Adjusted Operating Income (1) for the Year Ended December 31, 2013	$	4,267

Higher net pricing		1,594			37.4pp
Higher input costs		(971	)		(22.8)pp
Unfavorable volume/mix		(354	)		(8.3)pp
Lower selling, general and administrative expenses		313			7.3pp
Change in unrealized gains / (losses) on hedging activities		(174	)		(4.1)pp
Gains on sale of property in 2013		(68	)		(1.5)pp
VAT-related settlements		84			2.0pp
Gain on sale of property in 2014		7			0.1pp
Impact from acquisition		3			0.1pp
Other, net		2			–

Total change in Adjusted Operating Income (constant currency) (1)		436			10.2%

Unfavorable currency - translation		(287	)		(6.7)pp

Total change in Adjusted Operating Income (1)		149			3.5%

Adjusted Operating Income (1) for the Year Ended December 31, 2014	$	4,416
Spin-Off Costs		(35	)		(0.9)pp
2012-2014 Restructuring Program costs		(459	)		(11.5)pp
2014-2018 Restructuring Program costs		(381	)		(9.6)pp
Integration Program and other acquisition integration costs		4			0.1pp
Remeasurement of net monetary assets in Venezuela		(167	)		(4.2)pp
Intangible asset impairment charges		(57	)		(1.6)pp
Costs associated with the JDE coffee transactions		(77	)		(2.0)pp
Acquisition-related costs		(2	)		–

Operating Income for the Year Ended December 31, 2014	$	3,242			(18.4)%

	(1)	Please see the Non-GAAP Financial Measures section at the end of this item.

During 2014, higher net pricing outpaced increased input costs. Higher net pricing was reflected across all segments. The increase in input costs was driven by higher raw material costs, in part due to higher currency exchange transaction costs on imported materials, partially offset by lower manufacturing costs. Unfavorable volume/mix was driven by Latin America, Asia Pacific and Europe, partially offset by gains in EEMEA and North America.

Total selling, general and administrative expenses decreased $222 million from 2013, due to a number of factors noted in the table above, including in part, a favorable currency impact, lower Integration Program costs, value-added tax (“VAT”)-related settlements in 2014, lower Spin-Off Costs, 2013 business divestitures and a gain on a sale of property in 2014. Items that increased selling, general and administrative expenses included a 2013 benefit received related to the resolution of a Cadbury acquisition indemnification, increased devaluation charges related to our net monetary assets in Venezuela, costs incurred for the 2014-2018 Restructuring Program, costs incurred in 2014 related to the JDE coffee transactions, gains on property sales in 2013 and higher 2012-2014 Restructuring Program costs.

Excluding the factors noted above, selling, general and administrative expenses decreased $313 million from 2013, driven primarily by lower overhead costs and lower advertising and consumer promotion costs. Overhead costs fell as a result of continued cost reduction efforts. Advertising and consumer promotion costs were lower due primarily to savings from consolidating media providers, reductions in non-working media costs and efficiencies gained by shifting spending to lower-cost, digital media outlets, while we increased our spending on our Power Brands and maintained working media spending.

The change in unrealized gains / (losses) decreased operating income by $174 million in 2014. In 2014, the net unrealized losses on primarily commodity hedging activity were $112 million, as compared to net unrealized gains of $62 million in 2013 related to currency and commodity hedging activity. In 2013, we recorded pre-tax gains of $68 million related to sales of properties in India and Europe. In 2014, we recorded a benefit of $84 million related to VAT-related settlements in Latin America. In 2014, we recorded a pre-tax gain of $7 million related to the sale of a property in Europe. The acquisition of a biscuit operation in Morocco on February 22, 2013 added $3 million in incremental operating income in 2014 for the period prior to the anniversary of the acquisition.

Unfavorable currency impacts decreased operating income by $287 million, due primarily to the devaluation of the Venezuelan bolivar in 2013 and 2014 and the strength of the U.S. dollar relative to several currencies, including the Argentinean peso, Brazilian real, Russian ruble and Ukrainian hryvnya, partially offset by the strength of the British pound sterling relative to the U.S. dollar.

Operating income margin decreased from 11.2% in 2013 to 9.5% in 2014. The decrease in operating income margin was driven primarily by costs incurred for the 2014-2018 Restructuring Program, the year-over-year negative impact of the benefit from the resolution of the Cadbury acquisition-related indemnification recorded in 2013, higher costs for the 2012-2014 Restructuring Program, the impact from the devaluation of our net monetary assets in Venezuela and costs incurred related to the JDE coffee transactions, partially offset by lower Integration Program costs. Adjusted Operating Income margin increased from 12.1% in 2013 to 12.9% in 2014. The increase in Adjusted Operating Income margin was driven primarily by lower overhead costs from continued cost reduction efforts and lower advertising and consumer promotion costs due primarily to current year productivity initiatives, partially offset by a decline in gross profit margin due entirely to the unfavorable impact of unrealized gains / (losses) on currency and commodity hedging activities.

Net Earnings and Earnings per Share Attributable to Mondelēz International – Net earnings attributable to Mondelēz International of $2,184 million in 2014 decreased by $1,731 million (44.2%) due primarily to the results of the discontinued operations in the prior year. Diluted EPS from continuing operations attributable to Mondelēz International was $1.28 in 2014, down $0.01 (0.8%) from $1.29 in 2013. Adjusted EPS (1) was $1.76 in 2014, up $0.22 (14.3%) from $1.54 in 2013. Adjusted EPS on a constant currency basis (1) was $1.90 in 2014, up $0.36 (23.4%) from $1.54 in 2013.


	Diluted EPS

Diluted EPS Attributable to Mondelēz International for the Year Ended December 31, 2013	$	2.19
Discontinued operations		0.90

Diluted EPS Attributable to Mondelēz International from Continuing Operations for the Year Ended December 31, 2013	$	1.29
Spin-Off Costs (2)		0.02
2012-2014 Restructuring Program costs (3)		0.14
Integration Program and other acquisition integration costs (4)		0.10
Net benefit from indemnification resolution (5)		(0.20	)
Remeasurement of net monetary assets in Venezuela (6)		0.03
Gains on acquisition and divestitures, net (2)		(0.04	)
Net earnings from divestitures (2)		–
Acquisition-related costs (2)		–
Loss on debt extinguishment and related expenses (7)		0.22
Residual tax benefit impact due to resolution of Starbucks arbitration (2)		(0.02	)

Adjusted EPS (1) for the Year Ended December 31, 2013	$	1.54
Increase in operations		0.25
Change in unrealized gains / (losses) on hedging activities		(0.07	)
Gain on sale of property in 2013 (2)		(0.03	)
VAT-related settlements		0.04
Gain on sale of property in 2014 (2)		–
Lower interest and other expense, net (8)		0.08
Changes in shares outstanding (9)		0.08
Changes in income taxes (10)		0.01

Adjusted EPS (constant currency) (1) for the Year Ended December 31, 2014	$	1.90
Unfavorable currency - translation		(0.14	)

Adjusted EPS (1) for the Year Ended December 31, 2014	$	1.76
Spin-Off Costs (2)		(0.01	)
2012-2014 Restructuring Program costs (3)		(0.21	)
2014-2018 Restructuring Program costs (3)		(0.16	)
Integration Program and other acquisition integration costs (4)		–
Remeasurement of net monetary assets in Venezuela (6)		(0.09	)
Income / (costs) associated with the JDE coffee transactions (2)		0.19
Intangible asset impairment charges (11)		(0.02	)
Loss on debt extinguishment and related expenses (7)		(0.18	)

Diluted EPS Attributable to Mondelēz International for the Year Ended December 31, 2014	$	1.28

	(1)	Please see the Non-GAAP Financial Measures section at the end of this item.

	(2)	Refer to Note 2, Divestitures and Acquisitions, for more information on Spin-Off Costs following the Kraft Foods Group, Inc. divestiture, the resolution of the Starbucks arbitration, an acquisition in our EEMEA segment and other property sales and the Planned Coffee Business Transactions and other divestitures. Note the $628 million unrealized gain on the currency hedges related to the JDE coffee transactions was recorded in interest and other expense, net and is included in the income /(costs) associated with the JDE coffee transactions of $0.19 above.

	(3)	Refer to Note 6, Restructuring Programs, for more information on our 2014-2018 Restructuring Program and our 2012-2014 Restructuring Program.

	(4)	Refer to Note 7, Integration Program and Cost Savings Initiatives, for information on our Cadbury acquisition integration program and Note 2, Divestitures and Acquisitions, for other integration charges associated with our acquisition of a biscuit operation in our EEMEA segment.

	(5)	Refer to Note 11, Commitments and Contingencies, for more information on the benefit related to the resolution of a Cadbury acquisition indemnification in 2013.

	(6)	Refer to Note 1, Summary of Significant Accounting Policies—Currency Translation and Highly Inflationary Accounting, for more information on the remeasurements of net monetary assets in Venezuela in the current and prior-year periods.

	(7)	Refer to Note 8, Debt and Borrowing Arrangements, for more information on our loss on debt extinguishment and related expenses in connection with our debt tender offers in February 2014 and December 2013.

	(8)	Excludes the favorable currency impact on interest expense related to our non-U.S. dollar denominated debt.

	(9)	Refer to Note 12, Stock Plans, and Note 13, Capital Stock, for more information on our equity compensation programs and share repurchase program and Note 16, Earnings Per Share, for earnings per share weighted-average share information.

	(10)	Refer to Note 15, Income Taxes, for more information on the change in our income taxes and effective tax rate.

	(11)	Refer to Note 5, Goodwill and Intangible Assets, for more information on the impairment charges in 2014 recorded related to two trademarks.

2013 compared with 2012


	For the Years Ended December 31,
	2013		2012		$ change		% change
	(in millions, except per share data)

Net revenues	$	35,299	$	35,015	$	284		0.8	%

Operating income		3,971		3,637		334		9.2	%

Earnings from continuing operations		2,332		1,606		726		45.2	%

Net earnings attributable to Mondelēz International		3,915		3,067		848		27.6	%

Diluted earnings per share from continuing operations attributable to Mondelēz International		1.29		0.88		0.41		46.6	%

Diluted earnings per share attributable to Mondelēz International		2.19		1.71		0.48		28.1	%

Net Revenues – Net revenues increased $284 million (0.8%) to $35,299 million in 2013, and Organic Net Revenue (1) increased $1,338 million (3.9%) to $35,938 million. The change in net revenues and Organic Net Revenue are detailed below:


	2013
Change in net revenues (by percentage point)
Favorable volume/mix		3.4pp
Higher net pricing		0.5pp

Total change in Organic Net Revenue (1)		3.9%
Unfavorable currency		(2.4)pp
Impact of divestitures		(1.0)pp
Impact of acquisition		0.2pp
Impact of accounting calendar change		0.1pp

Total change in net revenues		0.8%

	(1)	Please see the Non-GAAP Financial Measures section at the end of this item.

Organic Net Revenue growth was driven by favorable volume/mix and higher net pricing. Favorable volume/mix was driven primarily by higher shipments across all segments except Asia Pacific. Higher net pricing in Latin America, primarily related to Venezuela, Argentina and Brazil, and in North America was partially offset by lower net pricing in Europe, Asia Pacific and EEMEA, primarily due to lower coffee prices. Unfavorable currency decreased net revenues by $837 million, due primarily to the devaluation of the Venezuelan bolivar and the strength of the U.S. dollar relative to most currencies, including the Brazilian real, Argentinean peso, Australian dollar, Indian rupee, Japanese yen and South African rand, partially offset by the strength of the euro relative the U.S. dollar. The impact of divestitures resulted in a year-over-year decrease in net revenues of $345 million. In addition, the acquisition of a biscuit operation in Morocco added $91 million in net revenues and the accounting calendar change in Europe added $37 million in net revenues in 2013.

Operating Income – Operating income increased $334 million (9.2%) to $3,971 million in 2013, Adjusted Operating Income (1) increased $1 million (0.0%) to $4,267 million and Adjusted Operating Income on a constant currency basis (1) increased $147 million (3.4%) to $4,413 million due to the following:


	Operating
	Income			Change
	(in millions)			(percentage point)
Operating Income for the Year Ended December 31, 2012	$	3,637
Spin-Off Costs		444			10.5pp
2012-2014 Restructuring Program costs		110			2.3pp
Integration Program costs		140			3.0pp
Spin-Off pension expense adjustment (2)		68			1.7pp
Intangible asset impairment charge		52			1.5pp
Gains on divestitures, net		(107	)		(2.4)pp
Acquisition-related costs		1			–
Operating income from divestitures		(79	)		(1.7)pp
Adjusted Operating Income (1) for the Year Ended December 31, 2012	$	4,266
Higher net pricing		157			3.7pp
Higher input costs		(333	)		(7.9)pp
Favorable volume/mix		495			11.6pp
Higher selling, general and administrative expenses		(246	)		(5.7)pp
Change in unrealized gains / (losses) on hedging activities		61			1.4pp
Gains on sales of property in 2013		68			1.6pp
Gains on sales of property in 2012		(77	)		(1.8)pp
Impact from acquisition		16			0.4pp
Impact of accounting calendar changes		6			0.1pp

Total change in Adjusted Operating Income (constant currency) (1)		147			3.4%

Unfavorable currency - translation		(146	)		(3.4)pp

Total change in Adjusted Operating Income		1			(0.0)%

Adjusted Operating Income (1) for the Year Ended December 31, 2013	$	4,267
Spin-Off Costs		(62	)		(1.5)pp
2012-2014 Restructuring Program costs		(330	)		(7.7)pp
Integration Program and other integration costs		(220	)		(5.0)pp
Benefit from indemnification resolution		336			9.3pp
Remeasurement of net monetary assets in Venezuela		(54	)		(1.5)pp
Gains on acquisition and divestitures, net		30			0.7pp
Acquisition-related costs		(2	)		(0.1)pp
Operating income from divestitures		6			0.1pp

Operating Income for the Year Ended December 31, 2013	$	3,971			9.2%

	(1)	Please see the Non-GAAP Financial Measures section at the end of this item.

	(2)	Represents the estimated annual benefit plan expense associated with certain benefit plan obligations transferred to Kraft Foods Group, Inc. in the Spin-Off.

Favorable volume/mix was driven primarily by volume gains across all segments except Asia Pacific. Higher net pricing in Latin America and North America was partially offset by lower net pricing in Europe, Asia Pacific and EEMEA, primarily due to lower coffee pricing. During 2013, increased input costs outpaced higher net pricing. The increase in input costs was driven by higher raw material costs, in part due to higher currency exchange transaction costs on imported materials, partially offset by lower manufacturing costs.

Total selling, general and administrative expenses decreased $497 million from 2012, due in part to lower Spin-Off Costs, a benefit from the resolution of the Cadbury acquisition-related indemnification, a favorable currency impact net of the negative impact from the devaluation of our net monetary assets in Venezuela, gains on the sales of properties in 2013 and the impact of businesses divested in 2013 and 2012, which were partially offset by gains on sales of properties in 2012, higher Integration Program costs, higher 2012-2014 Restructuring Program costs and the inclusion of expenses related to the acquired biscuit operations in Morocco.

Excluding the factors noted above, selling, general and administrative expenses increased $246 million from 2012, driven primarily by higher overhead costs in emerging markets, including investments in sales capabilities and route-to-market expansion in emerging markets, the 2012 reversal of reserves carried over from the Cadbury acquisition in 2010 and no longer required, prior-year proceeds from insurance settlements and higher advertising and consumer promotion costs in Asia Pacific, EEMEA and Latin America.

The change in unrealized gains / (losses) added $61 million in operating income for 2013. In 2013, the net unrealized gains were $62 million, as compared to net unrealized gains of $1 million in 2012. In 2013, we recorded pre-tax gains of $68 million related to sales of properties in India and Europe. In 2012, we recorded pre-tax gains of $77 million related to sales of properties in Russia and Turkey. The acquisition of a biscuit operation in Morocco added $16 million in operating income for 2013. Accounting calendar changes that went into effect in Europe in the first quarter of 2013 increased operating income by $6 million.

Unfavorable currency impacts decreased operating income by $146 million, due primarily to the devaluation of the Venezuelan bolivar and the strength of the U.S. dollar relative to most currencies, including the Brazilian real, Argentinean peso, Indian rupee, Japanese yen, South African rand and Russian ruble, partially offset by the strength of the euro relative to the U.S. dollar.

Operating income margin increased from 10.4% in 2012 to 11.2% in 2013. The increase in operating income margin was driven primarily by lower Spin-Off Costs and the benefit from the resolution of the Cadbury acquisition-related indemnification, partially offset by higher costs for the 2012-2014 Restructuring Program, lower Integration Program costs, a negative impact from divestitures and the unfavorable impact from the devaluation of our net monetary assets in Venezuela. Adjusted Operating Income margin decreased from 12.3% in 2012 to 12.1% in 2013. The decrease in Adjusted Operating Income margin was driven primarily by a modest decline in gross margin, due to the timing of price increases to cover rising currency exchange transaction costs on imported raw materials in the second half of the year, partially offset by the benefit of leverage on our selling, general and administrative expenses.

Net Earnings and Earnings per Share Attributable to Mondelēz International – Net earnings attributable to Mondelēz International of $3,915 million increased by $848 million (27.6%) in 2013. Diluted EPS attributable to Mondelēz International was $2.19 in 2013, up $0.48 (28.1%) from 2012. Diluted EPS from continuing operations attributable to Mondelēz International was $1.29 in 2013, up $0.41 (46.6%) from 2012. Adjusted EPS (1) was $1.54 in 2013, up $0.11 (7.7%) from 2012. Adjusted EPS on a constant currency basis (1) was $1.60 in 2013, up $0.17 (11.9%) from 2012.


	Diluted EPS

Diluted EPS Attributable to Mondelēz International for the Year Ended December 31, 2012	$	1.71
Discontinued operations		0.83

Diluted EPS Attributable to Mondelēz International from Continuing Operations for the Year Ended December 31, 2012		0.88
Spin-Off Costs (2)		0.39
2012-2014 Restructuring Program costs (3)		0.04
Integration Program costs (4)		0.08
Spin-Off interest expense adjustment (5)		0.06
Spin-Off pension expense adjustment (6)		0.02
Intangible asset impairment charge (7)		0.02
Gains on divestitures, net (2)		(0.03	)
Net earnings from divestitures (2)		(0.03	)

Adjusted EPS (1) for the Year Ended December 31, 2012		1.43
Increase in operations		0.04
Gains on sales of property in 2013 (2)		0.03
Gains on sales of property in 2012 (2)		(0.03	)
Change in unrealized gains / (losses) on hedging activities		0.03
Lower interest and other expense, net (8)		0.03
Changes in shares outstanding (9)		–
Changes in income taxes (10)		0.07

Adjusted EPS (constant currency) (1) for the Year Ended December 31, 2013		1.60

Unfavorable foreign currency - translation		(0.06	)

Adjusted EPS (1) for the Year Ended December 31, 2013		1.54
Spin-Off Costs (2)		(0.02	)
2012-2014 Restructuring Program costs (3)		(0.14	)
Integration Program and other acquisition integration costs (4)		(0.10	)
Loss on debt extinguishment and related expenses (11)		(0.22	)
Net benefit from indemnification resolution (12)		0.20
Remeasurement of net monetary assets in Venezuela (13)		(0.03)
Gains on acquisition and divestitures, net (2)		0.04
Residual tax benefit impact due to resolution of Starbucks arbitration (2)		0.02
Acquisition-related costs (2)		–
Net earnings from divestitures (2)		–

Diluted EPS Attributable to Mondelēz International from Continuing Operations for the Year Ended December 31, 2013		1.29
Discontinued operations		0.90

Diluted EPS Attributable to Mondelēz International for the Year Ended December 31, 2013	$	2.19

	(1)	Please see the Non-GAAP Financial Measures section at the end of this item.

	(2)	Refer to Note 2, Divestitures and Acquisitions, for more information on Spin-Off Costs following the Kraft Foods Group, Inc. divestiture, the resolution of the Starbucks arbitration, other divestitures, an acquisition in our EEMEA segment and sales of property.

	(3)	Refer to Note 6, Restructuring Programs, for more information on our 2012-2014 Restructuring Program.

	(4)	Refer to Note 7, Integration Program and Cost Savings Initiatives, for information on our Cadbury acquisition integration program and Note 2, Divestitures and Acquisitions, for other integration charges associated with our acquisition of a biscuit operation in our EEMEA segment.

	(5)	Represents interest expense associated with the assumed reduction of $6 billion of our debt on January 1, 2011 from the utilization of funds received from the $6 billion of notes Kraft Foods Group, Inc. issued in 2012 in connection with our Spin-Off capitalization plan. Note that during the year ended December 31, 2012, a portion of the $6 billion of debt was retired. As such, we adjusted interest expense during this period as if this debt had been repaid on January 1, 2012 to ensure consistency of our assumption and related results.

	(6)	Represents the estimated annual benefit plan expense associated with certain benefit plan obligations transferred to Kraft Foods Group, Inc. in the Spin-Off.

	(7)	In 2012, we recorded $52 million of impairment charges related to a trademark on a Japanese chewing gum product within our Asia Pacific segment.

	(8)	Excludes the favorable currency impact on interest expense related to our non-U.S. denominated debt, the change in interest expense included in Spin-Off Costs and the change in interest expense associated with the assumed reduction of $6 billion of our debt on January 1, 2012 from the utilization of funds received from the $6 billion of notes Kraft Foods Group, Inc. issued directly and cash proceeds distributed to us in June 2012 in connection with our Spin-Off capitalization plan.

	(9)	Refer to Note 12, Stock Plans, and Note 13, Capital Stock, for more information on our equity compensation programs and share repurchase program and Note 16, Earnings Per Share, for earnings per share weighted-average share information.

	(10)	Refer to Note 15, Income Taxes, for more information on the change in our income taxes and effective tax rate.

	(11)	Refer to Note 8, Debt and Borrowing Arrangements, for more information on our loss on debt extinguishment and related expenses in connection with our debt tender offer in December 2013.

	(12)	Refer to Note 11, Commitments and Contingencies, for more information on the benefit related to the resolution of a Cadbury acquisition indemnification in 2013.

	(13)	Refer to Note 1, Summary of Significant Accounting Policies—Currency Translation and Highly Inflationary Accounting, for more information on the remeasurement of net monetary assets in Venezuela in 2013.

Results of Operations by Reportable Segment

Our operations and management structure are organized into five reportable operating segments:

	•		Latin America

	•		Asia Pacific

	•		EEMEA

	•		Europe

	•		North America

We manage our operations by region to leverage regional operating scale, manage different and changing business environments more effectively at a local level and pursue growth opportunities as they arise in our key markets. Beginning in 2015, within each region, we also manage by product category. In the historical periods presented and discussed below, we managed our operations within Latin America, Asia Pacific and EEMEA by location and within Europe and North America by location and product category.

We use segment operating income to evaluate segment performance and allocate resources. We believe it is appropriate to disclose this measure to help investors analyze segment performance and trends. See Note 17, Segment Reporting, for additional information on our segments and Items Affecting Comparability of Financial Results earlier in this section for items affecting our segment operating results.

Our segment net revenues and earnings for the following historical periods were:


	For the Years Ended December 31,
	2014			2013			2012
	(in millions)

Net revenues:
Latin America	$	5,153		$	5,382		$	5,396
Asia Pacific		4,605			4,952			5,164
EEMEA		3,638			3,915			3,735
Europe		13,912			14,059			13,817
North America		6,936			6,991			6,903

Net revenues	$	34,244		$	35,299		$	35,015


	For the Years Ended December 31,
	2014			2013			2012
	(in millions)

Earnings from continuing operations before income taxes:
Operating income:
Latin America	$	475		$	570		$	769
Asia Pacific		385			512			657
EEMEA		327			379			506
Europe		1,770			1,699			1,762
North America		922			889			781
Unrealized gains / (losses) on hedging activities		(112	)		62			1
General corporate expenses		(317	)		(287	)		(728	)
Amortization of intangibles		(206	)		(217	)		(217	)
Benefit from indemnification resolution		–			336			–
Gains on acquisition and divestitures, net		–			30			107
Acquisition-related costs		(2	)		(2	)		(1	)

Operating income		3,242			3,971			3,637
Interest and other expense, net		(688	)		(1,579	)		(1,863	)

Earnings from continuing operations before income taxes	$	2,554		$	2,392		$	1,774

Latin America


	For the Years Ended December 31,
	2014		2013		$ change			% change
	(in millions)

Net revenues	$	5,153	$	5,382	$	(229	)		(4.3	)%
Segment operating income		475		570		(95	)		(16.7	)%


	For the Years Ended December 31,
	2013		2012		$ change			% change
	(in millions)

Net revenues	$	5,382	$	5,396	$	(14	)		(0.3	)%
Segment operating income		570		769		(199	)		(25.9	)%

2014 compared with 2013:

Net revenues decreased $229 million (4.3%), due to unfavorable currency (19.4 pp) and unfavorable volume/mix (4.2 pp), partially offset by higher net pricing (19.3 pp). Unfavorable currency impacts were due primarily to the Venezuelan bolivar devaluation and the strength of the U.S. dollar relative to the Argentinean peso and Brazilian real. Unfavorable volume/mix was driven primarily by Mexico, Venezuela and Argentina, partially offset by gains in Brazil and the Western Andean countries. Higher net pricing was reflected primarily in the higher inflationary countries of Venezuela and Argentina, as well as in Brazil and Mexico.

Segment operating income decreased $95 million (16.7%), due primarily to higher raw material costs, unfavorable currency, unfavorable volume/mix, the year-over-year net impact from the remeasurement of net monetary assets in Venezuela, costs incurred for the 2014-2018 Restructuring Program and higher advertising and consumer promotion costs. These unfavorable items were partially offset by higher net pricing, lower manufacturing costs, the absence of Integration Program costs in 2014, lower other selling, general and administrative expenses (including $84 million related primarily to VAT-related settlements) and lower 2012-2014 Restructuring Program costs.

2013 compared with 2012:

Net revenues decreased $14 million (0.3%), due to unfavorable currency (12.6 pp), mostly offset by higher net pricing (11.4 pp) and favorable volume/mix (0.9 pp). Unfavorable currency was due primarily to the Venezuelan bolivar devaluation and the strength of the U.S. dollar relative to the Brazilian real and Argentinean peso, partially offset by the strength of the Mexican peso relative to the U.S. dollar. Higher net pricing was reflected across the entire region except in Mexico. Favorable volume/mix was driven primarily by Brazil, partially offset by volume/mix declines in Argentina and Venezuela.

Segment operating income decreased $199 million (25.9%), due primarily to higher raw material costs, unfavorable currency including the $54 million impact from the devaluation of net monetary assets in Venezuela, higher other selling, general and administrative expenses (including prior-year proceeds from an insurance settlement), higher manufacturing costs, higher 2012-2014 Restructuring Program costs, and higher advertising and consumer promotion costs. These unfavorable items were partially offset by higher net pricing and lower Spin-Off Costs.

Asia Pacific


	For the Years Ended December 31,
	2014		2013		$ change			% change
	(in millions)

Net revenues	$	4,605	$	4,952	$	(347	)		(7.0)%
Segment operating income		385		512		(127	)		(24.8)%


	For the Years Ended December 31,
	2013		2012		$ change			% change
	(in millions)

Net revenues	$	4,952	$	5,164	$	(212	)		(4.1)%
Segment operating income		512		657		(145	)		(22.1)%

2014 compared with 2013:

Net revenues decreased $347 million (7.0%), due to unfavorable volume/mix (5.7 pp) and unfavorable currency (4.2 pp), partially offset by higher net pricing (2.9 pp). Unfavorable volume/mix was driven primarily by China, Australia/New Zealand, Indonesia, Malaysia and the Philippines, partially offset by gains in India. Unfavorable currency impacts were due primarily to the strength of the U.S. dollar relative to the Australian dollar, Indian rupee, Indonesian rupiah and Japanese yen. Higher net pricing was primarily due to India, Indonesia, the Philippines, Australia/New Zealand and China.

Segment operating income decreased $127 million (24.8%), due primarily to higher raw material costs, unfavorable volume/mix, an intangible asset impairment charge related to a biscuit trademark, higher 2012-2014 Restructuring Program costs, 2014-2018 Restructuring Program costs and unfavorable currency. These unfavorable items were partially offset by higher net pricing, lower manufacturing costs, lower advertising and consumer promotion costs, the absence of Integration Program costs in 2014 and lower other selling, general and administrative expenses (including an unfavorable year-over-year impact from the 2013 gain on a sale of property in India).

2013 compared with 2012:

Net revenues decreased $212 million (4.1%), due to unfavorable currency (4.7 pp) and lower net pricing (1.9 pp) partially offset by favorable volume/mix (2.5 pp). Unfavorable currency was due primarily to the strength of the U.S. dollar relative to the Australian dollar, Indian rupee and Japanese yen. Lower net pricing was reflected in the region’s developed markets, partially offset by higher net pricing in the region’s emerging markets, primarily in India, the Philippines and Thailand. Favorable volume/mix was driven by the region’s emerging markets, primarily India, China, the Philippines and Malaysia, as well as in the region’s developed markets of Australia/New Zealand.

Segment operating income decreased $145 million (22.1%), due primarily to higher raw material costs, lower net pricing, unfavorable currency, higher other selling, general and administrative expenses (including investments in sales capabilities and route-to-market expansion, the impacts of a gain on sale of property in India and prior-year proceeds from an insurance settlement) and higher advertising and consumer promotion costs. These unfavorable items were partially offset by lower manufacturing costs, a 2012 asset impairment charge related to a trademark in Japan, lower Spin-Off Costs and favorable volume/mix.

EEMEA


	For the Years Ended December 31,
	2014		2013		$ change			% change
	(in millions)

Net revenues	$	3,638	$	3,915	$	(277	)		(7.1)%
Segment operating income		327		379		(52	)		(13.7)%


	For the Years Ended December 31,
	2013		2012		$ change			% change
	(in millions)

Net revenues	$	3,915	$	3,735	$	180			4.8%
Segment operating income		379		506		(127	)		(25.1)%

2014 compared with 2013:

Net revenues decreased $277 million (7.1%), due to unfavorable currency (13.4 pp) and the impact of divestitures (0.5 pp), partially offset by higher net pricing (5.7 pp), favorable volume/mix (0.8 pp) and the impact of the February 2013 acquisition of a biscuit operation in Morocco (0.3 pp). Unfavorable currency impacts were due to the strength of the U.S. dollar relative to most currencies in the region, primarily the Russian ruble, Ukrainian hryvnya, South African rand and Turkish lira. Divestitures completed in 2013 resulted in a $20 million decline in net revenues. Higher net pricing was reflected across most of the segment, primarily in Russia, Ukraine and Turkey. Favorable volume/mix was driven primarily by Russia, the Gulf Cooperation Council (“GCC”) countries and Turkey. The acquisition of a biscuit operation in Morocco in February 2013 added $14 million in incremental net revenues for 2014 for the period prior to the anniversary date of the acquisition.

Segment operating income decreased $52 million (13.7%), due primarily to higher raw material costs, unfavorable currency, higher 2012-2014 Restructuring Program costs, costs incurred for the 2014-2018 Restructuring Program and costs associated with the JDE coffee transactions. These unfavorable items were partially offset by higher net pricing, lower manufacturing costs, lower Integration Program and other acquisition integration costs, favorable volume/mix, the impact of 2013 divestitures and lower advertising and consumer promotion costs.

2013 compared with 2012:

Net revenues increased $180 million (4.8%), due to favorable volume/mix (11.0 pp) and the impact of the acquisition of a biscuit operation in Morocco (2.5 pp), partially offset by unfavorable currency (4.7 pp), the impact of divestitures in Turkey and South Africa (2.2 pp) and lower net pricing (1.8 pp). Favorable volume/mix was driven primarily by Russia, Ukraine, Egypt, West Africa, Central and East Africa and South Africa. Unfavorable currency was due to the strength of the U.S. dollar relative to most currencies in the region, including the South African rand, Russian ruble and Egyptian pound. Lower net pricing was reflected primarily in Russia and Ukraine, due to lower coffee and chocolate pricing, partially offset by higher net pricing in the GCC countries, South Africa and Egypt.

Segment operating income decreased $127 million (25.1%), due primarily to higher other selling, general and administrative expenses (including investments in sales capabilities and route-to-market expansion and a write-off of a $15 million VAT receivable that is no longer realizable), the 2012 gains on the sales of property in Russia and Turkey, lower net pricing, higher raw material costs, higher Integration Program and Morocco biscuit acquisition integration costs, unfavorable currency, higher advertising and consumer promotion costs, higher 2012-2014 Restructuring Program costs and the impact of divestitures in Turkey and South Africa. These unfavorable items were partially offset by favorable volume/mix, lower manufacturing costs and the impact from the acquisition in Morocco.

Europe


	For the Years Ended December 31,
	2014		2013		$ change			% change
	(in millions)

Net revenues	$	13,912	$	14,059	$	(147	)		(1.0)%
Segment operating income		1,770		1,699		71			4.2%


	For the Years Ended December 31,
	2013		2012		$ change			% change
	(in millions)

Net revenues	$	14,059	$	13,817	$	242			1.8%
Segment operating income		1,699		1,762		(63	)		(3.6)%

2014 compared with 2013:

Net revenues decreased $147 million (1.0%), due to unfavorable volume/mix (2.3 pp), the impact of the prior year’s accounting calendar change (0.2 pp) and the impact of divestitures (0.0 pp), partially offset by higher net pricing (1.3 pp) and favorable currency (0.2 pp). Unfavorable volume/mix was driven by lower shipments across all categories. The decline was due to pricing-related elasticity across the region and certain pricing-related customer disruptions. The accounting calendar change made in 2013 resulted in a year-over-year decrease in net revenues of $38 million. In addition, divestitures completed in 2013 resulted in an $11 million decline in net revenues. Higher net pricing was driven by chocolate and cheese & grocery, partially offset by lower net pricing in all other categories, primarily biscuits and coffee. Favorable currency impacts primarily reflected the strength of the British pound sterling relative to the U.S. dollar, partially offset by the strength of the U.S. dollar against the Swedish krona, the euro and Norwegian krone.

Segment operating income increased $71 million (4.2%), due primarily to lower manufacturing costs, higher net pricing, lower Integration Program costs (including the reversal of a prior-year accrual), lower advertising and consumer promotion costs and lower other selling, general and administrative expenses (net of the unfavorable year-over-year impact from the 2013 gains on the sales of property in the United Kingdom, Norway and Italy, and the benefit from a 2014 gain on a sale of property in the United Kingdom). These favorable items were partially offset by higher raw material costs (primarily higher cocoa costs), costs incurred for the 2014-2018 Restructuring Program, unfavorable volume mix, higher 2012-2014 Restructuring Program costs, costs associated with the JDE coffee transactions, an intangible asset impairment charge related to a candy trademark and the year-over-year impact from last year’s accounting calendar change.

2013 compared with 2012:

Net revenues increased $242 million (1.8%), due to favorable volume/mix (3.2 pp), favorable currency (2.1 pp) and the impact of an accounting calendar change (0.3 pp), partially offset by lower pricing (2.4 pp) and the impact of current and prior-year divestitures (1.4 pp). Favorable volume/mix was driven by higher shipments in chocolate, biscuits and coffee, partially offset by lower shipments in gum & candy and cheese & grocery. Favorable currency primarily reflected the strength of the euro, Swedish krona and Polish zloty relative to the U.S. dollar, partially offset by the strength of the U.S. dollar relative to the British pound sterling. Lower net pricing was driven primarily by lower coffee prices.

Segment operating income decreased $63 million (3.6%), due primarily to lower net pricing, higher 2012-2014 Restructuring Program costs, the impact of current and prior-year divestitures and higher Integration Program costs (partially due to the reversal of $45 million of charges due to the outcome of labor negotiations in April 2012). These unfavorable items were partially offset by favorable volume/mix, lower manufacturing costs, favorable currency, lower other selling, general and administrative expenses (including the impacts of gains on the sales of property in the United Kingdom, Norway and Italy and a $44 million reversal in 2012 of reserves carried over from the Cadbury acquisition in 2010 no longer required), lower advertising and consumer promotion costs, the impact of an accounting calendar change and lower raw material costs (primarily coffee).

North America


	For the Years Ended December 31,
	2014		2013		$ change			% change
	(in millions)

Net revenues	$	6,936	$	6,991	$	(55	)		(0.8)%
Segment operating income		922		889		33			3.7%


	For the Years Ended December 31,
	2013		2012		$ change		% change
	(in millions)

Net revenues	$	6,991	$	6,903	$	88		1.3%
Segment operating income		889		781		108		13.8%

2014 compared with 2013:

Net revenues decreased $55 million (0.8%), due to unfavorable currency (1.0 pp) and the impact of divestitures (0.6 pp), partially offset by favorable volume/mix (0.7 pp) and higher net pricing (0.1 pp). Unfavorable currency impact was due to the strength of the U.S. dollar relative to the Canadian dollar. Divestitures completed in 2013 resulted in a $39 million decline in net revenues. Favorable volume/mix was driven primarily by higher shipments in biscuits, partially offset by lower shipments in gum. Higher net pricing was reflected primarily in biscuits and gum, partially offset by lower net pricing in chocolate.

Segment operating income increased $33 million (3.7%), due primarily to lower raw material costs, lower other selling, general and administrative expenses, favorable volume/mix, lower 2012-2014 Restructuring Program costs, lower advertising and consumer promotion costs and higher net pricing. These favorable items were partially offset by costs incurred for the 2014-2018 Restructuring Program, higher manufacturing costs and the impact of divestitures.

2013 compared with 2012:

Net revenues increased $88 million (1.3%), due to favorable volume/mix (2.5 pp) and higher net pricing (0.4 pp), partially offset by the impact of current and prior-year divestitures (1.0 pp) and unfavorable currency (0.6 pp). Favorable volume/mix was driven primarily by higher shipments in biscuits and candy, partially offset by lower shipments in gum. Higher net pricing was reflected primarily in biscuits and candy, partially offset by lower net pricing in gum.

Segment operating income increased $108 million (13.8%), due primarily to favorable volume/mix, lower pension expenses due to the transfer of certain benefit plan obligations to Kraft Foods Group, Inc. in the Spin-Off, higher net pricing, lower manufacturing costs, lower advertising and consumer promotion costs (including a reversal of some prior-year accruals), lower Spin-Off Costs and lower Integration Program costs. These favorable items were partially offset by higher 2012-2014 Restructuring Program costs, higher raw material costs, and the impact of a current and prior-year divestitures.

Critical Accounting Estimates

We prepare our condensed consolidated financial statements in conformity with U.S. GAAP. The preparation of these financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the periods presented. Actual results could differ from those estimates and assumptions. Note 1, Summary of Significant Accounting Policies, to the consolidated financial statements includes a summary of the significant accounting policies we used to prepare our consolidated financial statements. We have discussed the selection and disclosure of our critical accounting policies and estimates with our Audit Committee. The following is a review of our most significant assumptions and estimates.

Goodwill and Non-Amortizable Intangible Assets:

We test goodwill and non-amortizable intangible assets for impairment on an annual basis in the fourth quarter. We assess goodwill impairment risk throughout the year by performing a qualitative review of entity-specific, industry, market and general economic factors affecting the reporting units with goodwill. Annually, we may perform qualitative testing, or depending on factors such as prior-year test results, current year developments, current risk evaluations and other practical considerations, we may elect to do quantitative testing instead. Quantitative impairment testing consists of a two-step evaluation. The first step compares a reporting unit’s estimated fair value with its carrying value. We estimate a reporting unit’s fair value using a discounted cash flow method which incorporates planned growth rates, market-based discount rates and estimates of residual value. This year, for reporting units in our Europe and North America segments, we used a market-based, weighted-average cost of capital of 6.9% to discount the projected cash flows of those operations. For our Latin America, Asia Pacific and EEMEA reporting units, we used a risk-rated discount rate of 9.9%. Estimating the fair value of individual reporting units requires us to make assumptions and estimates regarding our future plans and industry and economic conditions, and our actual results and conditions may differ over time. If the carrying value of a reporting unit’s net assets exceeds its fair value, we apply the second step to measure the difference between the carrying value and implied fair value of goodwill. If the carrying value of goodwill exceeds its implied fair value, the goodwill is impaired and its carrying value is reduced to the implied fair value of the goodwill.

On January 1, 2014, an organizational change occurred within our North America region from a country and product category structure to a regional product category structure. As a result, our North America region now has two instead of four reporting units. For any reporting units that were reorganized, the goodwill was allocated to the new reporting unit structure based on relative fair values of the related business units.

In 2014, 2013 and 2012, all reporting units passed our annual goodwill impairment testing. If expectations are not met or specific valuation factors outside of our control, such as discount rates, change significantly, then the estimated fair value of a reporting unit or reporting units might decline and lead to a goodwill impairment in the future.

We test non-amortizable intangible assets for impairment by performing a qualitative review and assessing events and circumstances that could affect the fair value or carrying value of the indefinite-lived intangible assets. If significant potential impairment risk exists for a specific asset, we quantitatively test it for impairment by comparing its estimated fair value with its carrying value. Estimated fair value is determined using planned growth rates, market-based discount rates and estimates of royalty rates. If the carrying value of the asset exceeds its estimated fair value, the asset is impaired and its carrying value is reduced to the estimated fair value.

During our 2014 review of non-amortizable intangible assets, we recorded $57 million of impairment charges related to two trademarks. In both cases, the impairments arose due to lower than expected product growth and decisions made in the fourth quarter to redirect support for the products to other regional brands. We recorded a $48 million charge related to a biscuit trademark in our Asia Pacific segment and a $9 million charge related to a candy trademark in our Europe segment. The impairment charges were calculated as the excess of the carrying value over the estimated fair value of the intangible assets on a global basis and were recorded within asset impairment and exit costs. We primarily use a relief of royalty valuation method, which utilizes estimates of future sales, growth rates, royalty rates and discount rates in determining a brand’s global fair value. During our 2014 intangible asset impairment review, we also noted three brands with $341 million of aggregate book value as of December 31, 2014 that each had a fair value in excess of book value of 10% or less. While these intangible assets passed our annual impairment testing and we believe our current plans for each of these brands will allow them to continue to not be impaired, if expectations are not met or specific valuation factors outside of our control, such as discount rates, change significantly, then a brand or brands could become impaired in the future.

Refer also to Note 5, Goodwill and Intangible Assets, for additional information.

Trade and marketing programs:

We promote our products with advertising, marketing, sales incentives and trade promotions. These programs include, but are not limited to, cooperative advertising, in-store displays, consumer promotions, new product introduction fees, discounts, coupons, rebates and volume-based incentives. We expense advertising costs either in the period the advertising first takes place or as incurred. Sales incentive and trade promotion activities are recorded as a reduction to revenues based on amounts estimated due to customers and consumers at the end of a period. We base these estimates principally on historical utilization and redemption rates. For interim reporting purposes, advertising expenses and sales incentives are charged to operations as a percentage of volume, based on estimated volume and estimated program spending. We do not defer costs on our year-end consolidated balance sheet and all marketing costs are recorded as an expense in the year incurred.

Employee Benefit Plans:

We sponsor various employee benefit plans throughout the world. These include primarily pension plans and postretirement healthcare benefits. For accounting purposes, we estimate the pension and post-retirement healthcare benefit obligations utilizing assumptions and estimates for discount rates; expected returns on plan assets; expected compensation increases; employee-related factors such as turnover, retirement age and mortality (during 2014, we applied the new mortality tables in accounting for our U.S. pension plans); and health care cost trends. We review our actuarial assumptions on an annual basis and make modifications to the assumptions based on current rates and trends when appropriate. Our assumptions also reflect our historical experiences and management’s best judgment regarding future expectations. These and other assumptions affect the annual expense and obligations recognized for the underlying plans.

As permitted by U.S. GAAP, we generally amortize the effect of changes in the assumptions over future periods. The cost or benefit of plan changes, such as increasing or decreasing benefits for prior employee service (prior service cost), is deferred and included in expense on a straight-line basis over the average remaining service period of the employees expected to receive benefits.

Since pension and post-retirement liabilities are measured on a discounted basis, the discount rate significantly affects our plan obligations and expenses. The expected return on plan assets assumption affects our pension plan expenses, since many of our pension plans are partially funded. The assumptions for discount rates and expected rates of return and our process for setting these assumptions are described in Note 10, Benefit Plans, to the consolidated financial statements.

While we do not anticipate further changes in the 2015 assumptions for our U.S. and non-U.S. pension and postretirement health care plans, as a sensitivity measure, a fifty-basis point change in our discount rates or the expected rate of return on plan assets would have the following effects, increase / (decrease), on our annual benefit plan costs:


		As of December 31, 2014
		U.S. Plans						Non-U.S. Plans
	Fifty-Basis-Point						Fifty-Basis-Point
		Increase			Decrease			Increase			Decrease
		(in millions)
Effect of change in discount rate on pension costs		$	(13	)	$	14		$	(56	)	$	82
Effect of change in expected rate of return on plan assets on pension costs			(5	)		5			(41	)		41
Effect of change in discount rate on postretirement health care costs			(3	)		3			(1	)		1

Income Taxes:

As a global company, we calculate and provide for income taxes in each tax jurisdiction in which we operate. The provision for income taxes includes the amounts payable or refundable in the current year, the effect of deferred taxes and impacts from uncertain tax positions. Our provision for income taxes is significantly affected by shifts in the geographic mix of our pre-tax earnings across tax jurisdictions, changes in tax laws and regulations, tax planning opportunities available in each tax jurisdiction and the ultimate outcome of various tax audits.

Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement and tax bases of our assets and liabilities and for operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates that will apply to taxable income in the years in which those differences are expected to be recovered or settled. Valuation allowances are established for deferred tax assets when it is more likely than not that a tax benefit will not be realized.

We recognize tax benefits in our financial statements from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by tax authorities based on the technical merits of the position. The amount we recognize is measured as the largest benefit that has a greater than 50 percent likelihood of being realized upon settlement. We evaluate uncertain tax positions on an ongoing basis and adjust the related tax liabilities or assets in light of changing facts and circumstances, such as the progress of a tax audit or expiration of a statute of limitations. We believe the estimates and assumptions used to support our evaluation of uncertain tax positions are reasonable. However, final determination of historical tax liabilities, either by settlement with tax authorities or expiration of statutes of limitations, could be materially different from estimates reflected on our consolidated balance sheet and historical income tax provisions. The outcome of these final determinations could have a material effect on our provision for income taxes, net earnings or cash flows in the period in which the determination is made. We believe our tax positions comply with applicable tax laws and that we have adequately accounted for uncertain tax positions.

No taxes have been provided on undistributed foreign earnings that are planned to be indefinitely reinvested. If future events, such as material changes in long-term investment requirements, necessitate that these earnings be distributed, an additional provision for taxes may apply, which could materially affect our future effective tax rate.

See Note 15, Income Taxes, for additional information on our effective tax rate, current and deferred taxes, valuation allowances and unrecognized tax benefits.

Contingencies:

See Note 11, Commitments and Contingencies, to the consolidated financial statements.

New Accounting Guidance:

See Note 1, Summary of Significant Accounting Policies, to the consolidated financial statements for a discussion of new accounting standards.

Commodity Trends

We regularly monitor worldwide supply, commodity cost and currency trends so we can cost-effectively secure ingredients, packaging and fuel required for production. During 2014, the primary drivers of the increase in our aggregate commodity costs were increased cocoa, dairy, packaging, energy and coffee bean costs and higher currency-related costs on our commodity purchases, partially offset by lower costs for sugar and grains and oils due primarily to hedging.

A number of external factors such as weather conditions, commodity market conditions, currency fluctuations and the effects of governmental agricultural or other programs affect the cost and availability of raw materials and agricultural materials used in our products. We address higher commodity costs and currency impacts primarily through hedging, higher pricing and manufacturing and overhead cost control. We use hedging techniques to limit the impact of fluctuations in the cost of our principal raw materials; however, we may not be able to fully hedge against commodity cost changes, and our hedging strategies may not protect us from increases in specific raw material costs. We generally also price to protect gross profit dollars. Due to competitive or market conditions, planned trade or promotional incentives, or other factors, our pricing actions may lag commodity cost changes temporarily.

We expect price volatility and a slightly higher aggregate cost environment to continue in 2015. While the costs of our principal raw materials fluctuate, we believe there will continue to be an adequate supply of the raw materials we use and that they will generally remain available from numerous sources.

Liquidity and Capital Resources

We believe that cash from operations, our $4.5 billion revolving credit facility and our authorized long-term financing will provide sufficient liquidity for our working capital needs, planned capital expenditures, future contractual obligations, share repurchases and payment of our anticipated quarterly dividends. We expect to maintain investment grade credit ratings on our debt. We continue to utilize our commercial paper program, primarily uncommitted international credit lines and long-term debt issuances for regular funding requirements. We also use intercompany loans with our international subsidiaries to improve financial flexibility. Overall, we do not expect any negative effects to our funding sources that would have a material effect on our liquidity, including the indefinite reinvestment of our earnings outside of the United States. In Venezuela, we consider all undistributed earnings to be indefinitely reinvested and access to cash of $278 million in Venezuela to be limited due to the uncertain economic and political environment. We do not expect this limitation to have a material adverse effect on our liquidity. Refer to Note 1, Summary of Significant Accounting Policies – Currency Translation and Highly Inflationary Accounting, for additional information.

The cash flow activity of the Kraft Foods Group, Inc. discontinued operation, which was divested on October 1, 2012, is included within our consolidated cash flow results for periods prior to October 1, 2012.

Net Cash Provided by Operating Activities:

Operating activities provided net cash of $3,562 million in 2014, $6,410 million in 2013 and $3,923 million in 2012. The decrease in operating cash flows in 2014 relative to 2013 was primarily related to our receipt of $2.6 billion of net cash from the resolution of the Starbucks arbitration in 2013 and higher related income taxes paid in 2014 and lower relative working capital cash improvements than in 2013, as we decreased our cash conversion cycle (a metric that measures working capital efficiency and utilizes days sales outstanding, days inventory on hand and days payables outstanding) by 10 days in 2014 as compared to a 13 day reduction in 2013. These year-over-year decreases were partially offset by lower interest payments in 2014 following the debt refinancing in the first quarter of 2014 and the fourth quarter of 2013. The increase in operating cash flows in 2013 relative to 2012 was primarily related to the receipt of the $2.6 billion from the Starbucks arbitration resolution, lower spending on Spin-Off Costs and the 2012-2014 Restructuring Program, lengthening of days payables outstanding, increased collection of receivables and lower interest payments.

Net Cash Used in Investing Activities:

Net cash used in investing activities was $1,642 million in 2014, $1,483 million in 2013 and $1,687 million in 2012. The increase in net cash used in investing activities in 2014 relates to lower cash inflows in 2014 to offset higher capital expenditures in 2014. In 2013, we received higher cash proceeds from property sales, net proceeds from divestitures and cash from Kraft Foods Group, Inc. in connection with the Spin-Off, partially offset by cash we paid for an acquisition in Morocco. The decrease in net cash used in investing activities in 2013 relative to 2012 related to payments made to Kraft Foods Group, Inc. in 2012 in connection with the Spin-Off, partially offset by cash we paid for the acquisition in Morocco and lower proceeds from divestitures in 2013.

Capital expenditures were $1,642 million in 2014, $1,622 million in 2013 and $1,610 million in 2012. The 2014 capital expenditures were funded from operating activities and were made primarily to modernize manufacturing facilities and support new product and productivity initiatives. We expect 2015 capital expenditures to be up to $1.8 billion, including capital expenditures required for investments in systems and the 2014-2018 Restructuring Program. We expect to continue to fund these expenditures from operations.

Net Cash (Used in) / Provided by Financing Activities:

Net cash used in or provided by financing activities was $2,688 million used in 2014, $6,687 million used in 2013 and $204 million provided in 2012. The decrease in net cash used in financing activities in 2014 relative to 2013 was primarily due to significantly lower long-term debt repayments and lower share repurchases in 2014, offset in part by decreased proceeds from the issuance of long-term debt and other short-term borrowings and higher dividend payments in 2014. The decrease in net cash provided by financing activities in 2013 relative to 2012 was primarily due to lower net proceeds from the issuance of long-term debt, higher re-payment of long-term debt and repurchases of Common Stock, partially offset by lower dividend payments reflecting our new capital structure and dividend rate following the Spin-Off and higher short-term borrowings.

Debt:

From time to time we refinance long-term and short-term debt. The nature and amount of our long-term and short-term debt and the proportionate amount of each varies as a result of current and expected business requirements, market conditions and other factors. Generally, in the first and second quarters of the year, our working capital requirements grow, increasing the need for short-term financing. The third and fourth quarters of the year typically generate higher cash flows. As such, we may issue commercial paper or secure other forms of financing throughout the year to meet short-term working capital needs.

In February 2014, our Board of Directors approved a $5 billion long-term financing authority that remains available as of December 31, 2014.

In the next 12 months, $1,513 million of long-term debt will mature as follows: $1,029 million in March 2015 and €400 million ($484 million as of December 31, 2014) in June 2015. We expect to fund these repayments with cash from operations and the issuance of commercial paper or additional debt.

Our total debt was $16.7 billion at December 31, 2014 and $17.1 billion at December 31, 2013. Our debt-to-capitalization ratio was 0.38 at December 31, 2014 and 0.35 at December 31, 2013. At December 31, 2014, the weighted-average term of our outstanding long-term debt was 7.7 years. Our average daily commercial borrowings were $1.9 billion in 2014, $1.0 billion in 2013 and $1.0 billion in 2012. We expect to continue to comply with our long-term debt covenants. Refer to Note 8, Debt and Borrowing Arrangements, for more information on our debt and debt covenants.

Equity and Dividends

Stock Plans:

See Note 12, Stock Plans, to the consolidated financial statements for more information on our stock plans, grant activity during 2014, 2013 and 2012, and stock award modifications related to the Spin-Off.

Share Repurchases:

See Note 13, Capital Stock, to the consolidated financial statements for more information on our share repurchase and accelerated share repurchase programs.

We intend to continue to use a portion of our cash for share repurchases. Under our current Board of Directors’ authorization to repurchase up to $7.7 billion of our Common Stock through December 31, 2016, we have repurchased $4.6 billion ($1.9 billion in 2014 and $2.7 billion in 2013) of shares, with $3.1 billion of share repurchase capacity remaining. The number of shares that we ultimately repurchase under our share repurchase program may vary depending on numerous factors, including share price and other market conditions, our ongoing capital allocation planning, levels of cash and debt balances, other demands for cash, such as acquisition activity, general economic or business conditions and board and management discretion. Additionally, our share repurchase activity during any particular period may fluctuate. We may accelerate, suspend, delay or discontinue our share repurchase program at any time, without notice.

Dividends:

We paid dividends of $964 million in 2014, $943 million in 2013 and $2,058 million in 2012. Immediately following the Spin-Off of Kraft Foods Group, Inc. on October 1, 2012, our annual dividend rate changed to $0.52 per common share. On August 6, 2013, our Audit Committee, with authorization from our Board of Directors, approved an 8% increase in the quarterly dividend to $0.14 per common share or $0.56 per common share on an annual basis. On August 5, 2014, our Audit Committee, with authorization from our Board of Directors, approved a 7% increase in the quarterly dividend to $0.15 per common share or $0.60 per common share on an annual basis. The declaration of dividends is subject to the discretion of our Board of Directors and depends on various factors, including our net earnings, financial condition, cash requirements, future prospects and other factors that our Board of Directors deems relevant to its analysis and decision making.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

We have no significant off-balance sheet arrangements other than the contractual obligations discussed below.

Guarantees:

As discussed in Note 11, Commitments and Contingencies, we enter into third-party guarantees primarily to cover the long-term obligations of our vendors. As part of these transactions, we guarantee that third parties will make contractual payments or achieve performance measures. At December 31, 2014, we had no material third-party guarantees recorded on our consolidated balance sheet.

In addition, at December 31, 2014, we were contingently liable for $743 million of guarantees related to our own performance. These include letters of credit and guarantees related to the payment of custom duties and taxes.

Guarantees do not have, and we do not expect them to have, a material effect on our liquidity.

Aggregate Contractual Obligations:

The following table summarizes our contractual obligations at December 31, 2014.


	Payments Due
	Total		2015		2016-17		2018-19		2020 and Thereafter
	(in millions)
Debt (1)	$	15,381	$	1,513	$	3,254	$	2,947	$	7,667
Interest expense (2)		6,939		700		1,224		877		4,138
Capital leases		24		17		7		–		–
Operating leases (3)		1,080		309		409		231		131
Purchase obligations: (4)
Inventory and production costs		6,544		3,935		1,664		811		134
Other		1,378		1,051		320		7		–

		7,922		4,986		1,984		818		134

Other long-term liabilities (5)		666		43		126		190		307

Total	$	32,012	$	7,568	$	7,004	$	5,063	$	12,377

	(1)	Amounts include the expected cash payments of our long-term debt excluding capital leases, which are presented separately in the table above. The amounts also exclude $(10) million of net unamortized non-cash bond premiums and discounts and mark-to-market adjustments related to our interest rate swaps recorded in total debt.

	(2)	Amounts represent the expected cash payments of our interest expense on our long-term debt. Interest calculated on our euro and British pound sterling notes were forecasted using currency exchange rates as of December 31, 2014. An insignificant amount of interest expense was excluded from the table for a portion of our other non-U.S. debt obligations due to the complexities involved in forecasting expected interest payments.

	(3)	Operating lease payments represent the minimum rental commitments under non-cancelable operating leases.

	(4)	Purchase obligations for inventory and production costs (such as raw materials, indirect materials and supplies, packaging, co-manufacturing arrangements, storage and distribution) are commitments for projected needs to be utilized in the normal course of business. Other purchase obligations include commitments for marketing, advertising, capital expenditures, information technology and professional services. Arrangements are considered purchase obligations if a contract specifies all significant terms, including fixed or minimum quantities to be purchased, a pricing structure and approximate timing of the transaction. Most arrangements are cancelable without a significant penalty and with short notice (usually 30 days). Any amounts reflected on the consolidated balance sheet as accounts payable and accrued liabilities are excluded from the table above.

	(5)	Other long-term liabilities include estimated future benefit payments for our postretirement health care plans through December 31, 2024 of $203 million. We are unable to reliably estimate the timing of the payments beyond 2024; as such, they are excluded from the above table. There are also another $280 million of various other long-term liabilities that are expected to be paid over the next 5 years. In addition, the following long-term liabilities included on the consolidated balance sheet are excluded from the table above: accrued pension costs, income taxes, insurance accruals and other accruals. We are unable to reliably estimate the timing of the payments (or contributions beyond 2015, in the case of accrued pension costs) for these items. We currently expect to make approximately $529 million in contributions to our pension plans in 2015. We also expect that our net pension cost will increase to approximately $321 million in 2015. The increase is primarily due to lower discount rates offset by favorable beginning of the year asset levels and planned contributions. As of December 31, 2014, our total liability for income taxes, including uncertain tax positions and associated accrued interest and penalties, was $1,041 million. We currently estimate payments of approximately $133 million related to these positions over the next 12 months.

Non-GAAP Financial Measures

We use non-GAAP financial information and believe it is useful to investors as it provides additional information to facilitate comparisons of historical operating results, identify trends in our underlying operating results and provide additional transparency on how we evaluate our business. We use certain non-GAAP financial measures to budget, make operating and strategic decisions and evaluate our performance. We disclose non-GAAP financial measures so that you have the same financial data that we use to assist you in making comparisons to our historical operating results and analyzing our underlying performance.

Our non-GAAP financial measures reflect how we evaluate our current and prior-year operating results. As new events or circumstances arise, these definitions could change over time:

	•		“Organic Net Revenue” is defined as net revenues excluding the impact of acquisitions, divestitures (including businesses under sale agreements and exits of major product lines under a sale or licensing agreement), Integration Program costs, accounting calendar changes and currency rate fluctuations.

	•		“Adjusted Operating Income” is defined as operating income excluding the impact of Spin-Off Costs, pension costs related to obligations transferred in the Spin-Off, the 2012-2014 Restructuring Program, the 2014-2018 Restructuring Program, the Integration Program and other acquisition integration costs, the remeasurement of net monetary assets in Venezuela, the benefit from the Cadbury acquisition-related indemnification resolution, incremental costs associated with the JDE coffee transactions, impairment charges related to goodwill and intangible assets, gains or losses on divestitures or acquisitions, acquisition-related costs and the operating results of divestitures (including businesses under sale agreements and exits of major product lines under a sale or licensing agreement). We also evaluate growth in our Adjusted Operating Income on a constant currency basis.

	•		“Adjusted EPS” is defined as diluted EPS attributable to Mondelēz International from continuing operations excluding the impact of Spin-Off Costs, pension costs related to the obligations transferred in the Spin-Off, the 2012-2014 Restructuring Program, the 2014-2018 Restructuring Program, the Integration Program and other acquisition integration costs, the remeasurement of net monetary assets in Venezuela, the net benefit from the Cadbury acquisition-related indemnification resolution, losses on debt extinguishment and related expenses, the residual tax benefit impact from the resolution of the Starbucks arbitration, hedging gains or losses and incremental costs associated with the JDE coffee transactions, impairment charges related to goodwill and intangible assets, gains or losses on divestitures or acquisitions, acquisition-related costs and net earnings from divestitures (including businesses under sale agreements and exits of major product lines under a sale or licensing agreement), and including an interest expense adjustment related to the Spin-Off transaction. We also evaluate growth in our Adjusted EPS on a constant currency basis.

We believe that the presentation of these non-GAAP financial measures, when considered together with our U.S. GAAP financial measures and the reconciliations to the corresponding U.S. GAAP financial measures, provides you with a more complete understanding of the factors and trends affecting our business than could be obtained absent these disclosures. Because non-GAAP financial measures may vary among other companies, the non-GAAP financial measures presented in this report may not be comparable to similarly titled measures used by other companies. Our use of these non-GAAP financial measures is not meant to be considered in isolation or as a substitute for any U.S. GAAP financial measure. A limitation of these non-GAAP financial measures is they exclude items detailed below that have an impact on our U.S. GAAP reported results. The best way this limitation can be addressed is by evaluating our non-GAAP financial measures in combination with our U.S. GAAP reported results and carefully evaluating the following tables that reconcile U.S. GAAP reported figures to the non-GAAP financial measures in this Form 10-K.

Organic Net Revenue

Applying the definition of “Organic Net Revenue”, the adjustments made to “net revenues” (the most comparable U.S. GAAP financial measure) were to exclude the impact of currency, divestitures, an accounting calendar change in 2013 and acquisitions. We believe that Organic Net Revenue better reflects the underlying growth from the ongoing activities of our business and provides improved comparability of results.


	For the Years Ended
	December 31,
	2014			2013		$ Change			% Change
	(in millions)

Organic Net Revenue	$	36,036		$	35,191	$	845			2.4%
Impact of currency		(1,806	)		–		(1,806	)		(5.1)pp
Impact of divestitures		–			70		(70	)		(0.2)pp
Impact of accounting calendar change		–			38		(38	)		(0.1)pp
Impact of acquisition		14			–		14			–

Net revenues	$	34,244		$	35,299	$	(1,055	)		(3.0)%


	For the Years Ended
	December 31,
	2013			2012		$ Change			% Change
	(in millions)

Organic Net Revenue	$	35,938		$	34,600	$	1,338			3.9%
Impact of currency		(837	)		–		(837	)		(2.4)pp
Impact of divestitures		70			415		(345	)		(1.0)pp
Impact of accounting calendar change (1)		37			–		37			0.1pp
Impact of acquisition		91			–		91			0.2pp

Net revenues	$	35,299		$	35,015	$	284			0.8%

	(1)	Amount measured at prior-year (2012) currency exchange rates.

Adjusted Operating Income

Applying the definition of “Adjusted Operating Income”, the adjustments made to “operating income” (the most comparable U.S. GAAP financial measure) were to exclude Spin-Off Costs, 2012 pension costs related to the obligations transferred in the Spin-Off, 2012-2014 Restructuring Program costs, 2014-2018 Restructuring Program costs, the Integration Program and other acquisition integration costs, the benefit from the Cadbury acquisition-related indemnification resolution, the remeasurement of net monetary assets in Venezuela, impairment charges related to intangible assets, incremental costs associated with the JDE coffee transactions, net gains on an acquisition and divestitures, acquisition-related costs and operating income from divestitures. We also evaluate Adjusted Operating Income on a constant currency basis. We believe these measures provide improved comparability of operating results.


	For the Years Ended
	December 31,
	2014			2013			$ Change			% Change
	(in millions)

Adjusted Operating Income (constant currency)	$	4,703		$	4,267		$	436			10.2%
Impact of unfavorable currency		(287	)		–			(287	)		(6.7)pp

Adjusted Operating Income	$	4,416		$	4,267		$	149			3.5%
Spin-Off Costs		(35	)		(62	)		27			0.9pp
2012-2014 Restructuring Program		(459	)		(330	)		(129	)		(2.8)pp
2014-2018 Restructuring Program		(381	)		–			(381	)		(9.6)pp
Integration Program and other acquisition integration costs		4			(220	)		224			5.7pp
Benefit from indemnification resolution		–			336			(336	)		(8.7)pp
Remeasurement of net monetary assets in Venezuela		(167	)		(54	)		(113	)		(2.9)pp
Intangible asset impairment charges		(57	)		–			(57	)		(1.6)pp
Costs associated with the JDE coffee transactions		(77	)		–			(77	)		(2.0)pp
Gains on acquisition and divestitures, net		–			30			(30	)		(0.7)pp
Acquisition-related costs		(2	)		(2	)		–			–
Operating income from divestitures		–			6			(6	)		(0.2)pp

Operating Income	$	3,242		$	3,971		$	(729	)		(18.4)%


	For the Years Ended
	December 31,
	2013			2012			$ Change			% Change
	(in millions)

Adjusted Operating Income (constant currency)	$	4,413		$	4,266		$	147			3.4%
Impact of unfavorable currency		(146	)		–			(146	)		(3.4)pp

Adjusted Operating Income	$	4,267		$	4,266		$	1			0.0%
Spin-Off Costs		(62	)		(444	)		382			9.0pp
Spin-Off pension expense adjustment		–			(68	)		68			1.7pp
2012-2014 Restructuring Program		(330	)		(110	)		(220	)		(5.4)pp
Integration Program and other acquisition integration costs		(220	)		(140	)		(80	)		(2.0)pp
Benefit from indemnification resolution		336			–			336			9.3pp
Remeasurement of net monetary assets in Venezuela		(54	)		–			(54	)		(1.5)pp
Intangible asset impairment charge		–			(52	)		52			1.5pp
Gains on acquisition and divestitures, net		30			107			(77	)		(1.7)pp
Acquisition-related costs		(2	)		(1	)		(1	)		(0.1)pp
Operating income from divestitures		6			79			(73	)		(1.6)pp

Operating Income	$	3,971		$	3,637		$	334			9.2%

Adjusted EPS

Applying the definition of “Adjusted EPS”, the adjustments made to “diluted EPS attributable to Mondelēz International” (the most comparable U.S. GAAP financial measure) were to exclude Spin-Off Costs, 2012 pension costs related to the obligations transferred in the Spin-Off, 2012-2014 Restructuring Program costs, 2014-2018 Restructuring Program costs, the Integration Program and other acquisition integration costs, the net benefit from the Cadbury acquisition-related indemnification resolution, the residual tax benefit impact from the resolution of the Starbucks arbitration, losses on debt extinguishment and related expenses, the remeasurement of net monetary assets in Venezuela, impairment charges related to intangible assets, hedging gains or losses and incremental costs associated with the JDE coffee transactions, net gains on an acquisition and divestitures, acquisition-related costs and net earnings from divestitures, and including a 2012 interest expense adjustment related to the Spin-Off transaction. We also evaluate Adjusted EPS on a constant currency basis. We believe Adjusted EPS provides improved comparability of operating results.


	For the Years Ended
	December 31,
	2014			2013			$ Change			% Change

Adjusted EPS (constant currency)	$	1.90		$	1.54		$	0.36			23.4%
Impact of unfavorable currency		(0.14	)		–			(0.14	)

Adjusted EPS	$	1.76		$	1.54		$	0.22			14.3%
Spin-Off Costs		(0.01	)		(0.02	)		0.01
2012-2014 Restructuring Program		(0.21	)		(0.14	)		(0.07	)
2014-2018 Restructuring Program		(0.16	)		–			(0.16	)
Integration Program and other acquisition integration costs		–			(0.10	)		0.10
Net benefit from indemnification resolution		–			0.20			(0.20	)
Residual tax benefit associated with Starbucks arbitration resolution		–			0.02			(0.02	)
Loss on debt extinguishment and related expenses		(0.18	)		(0.22	)		0.04
Remeasurement of net monetary assets in Venezuela		(0.09	)		(0.03	)		(0.06	)
Intangible asset impairment charges		(0.02	)		–			(0.02	)
Income / (costs) associated with the JDE coffee transactions		0.19			–			0.19
Gains on acquisition and divestitures, net		–			0.04			(0.04	)
Acquisition-related costs		–			–			–
Net earnings from divestitures		–			–			–

Diluted EPS attributable to Mondelēz International from continuing operations	$	1.28		$	1.29		$	(0.01	)		(0.8)%
Discontinued operations		–			0.90			(0.90	)

Diluted EPS attributable to Mondelēz International	$	1.28		$	2.19		$	(0.91	)		(41.6)%


	For the Years Ended
	December 31,
	2013			2012			$ Change			% Change

Adjusted EPS (constant currency)	$	1.60		$	1.43		$	0.17			11.9%
Impact of unfavorable currency		(0.06	)		–			(0.06	)

Adjusted EPS	$	1.54		$	1.43		$	0.11			7.7%
Spin-Off Costs		(0.02	)		(0.39	)		0.37
Spin-Off pension expense adjustment		–			(0.02	)		0.02
Spin-Off interest expense adjustment		–			(0.06	)		0.06
2012-2014 Restructuring Program		(0.14	)		(0.04	)		(0.10	)
Integration Program and other acquisition integration costs		(0.10	)		(0.08	)		(0.02	)
Net benefit from indemnification resolution		0.20			–			0.20
Residual tax benefit associated with Starbucks arbitration resolution		0.02			–			0.02
Loss on debt extinguishment and related expenses		(0.22	)		–			(0.22	)
Remeasurement of net monetary assets in Venezuela		(0.03	)		–			(0.03	)
Intangible asset impairment charge		–			(0.02	)		0.02
Gains on acquisition and divestitures, net		0.04			0.03			0.01
Acquisition-related costs		–			–			–
Net earnings from divestitures		–			0.03			(0.03	)

Diluted EPS attributable to Mondelēz International from continuing operations	$	1.29		$	0.88		$	0.41			46.6%
Discontinued operations		0.90			0.83			0.07

Diluted EPS attributable to Mondelēz International	$	2.19		$	1.71		$	0.48			28.1%

Previous: Item 6. Selected Financial Data · Next: Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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