| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
| Virginia | 52-2284372 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| 60015 | |
| (Address of principal executive offices) | (Zip Code) | |
Large accelerated filer | Accelerated filer | |||
Non-accelerated filer | Smaller reporting company | |||
| (Do not check if a smaller reporting company) | Emerging growth company | |||
Financial Statements (Unaudited) Statements Net revenues Cost of sales Gross profit Selling, general and administrative expenses Asset impairment and exit costs Loss on divestiture Amortization of intangibles Operating income Interest and other expense, net Earnings before income taxes Provision for income taxes Gain on equity method investment exchange Equity method investment net earnings Net earnings Noncontrolling interest earnings Net earnings attributable to Mondelēz International Per share data: Basic earnings per share attributable to Diluted earnings per share attributable to Dividends declared Net earnings Other comprehensive earnings/(losses), net of tax: Currency translation adjustment Pension and other benefit plans Derivative cash flow hedges Total other comprehensive earnings/(losses) Comprehensive earnings less: Comprehensive earnings/(losses) attributable to noncontrolling interests Comprehensive earnings attributable to ASSETS Cash and cash equivalents Trade receivables (net of allowances of $47 at June 30, 2017 Other receivables (net of allowances of $99 at June 30, 2017 Inventories, net Other current assets Total current assets Property, plant and equipment, net Goodwill Intangible assets, net Prepaid pension assets Deferred income taxes Equity method investments Other assets TOTAL ASSETS LIABILITIES Short-term borrowings Current portion of long-term debt Accounts payable Accrued marketing Accrued employment costs Other current liabilities Total current liabilities Long-term debt Deferred income taxes Accrued pension costs Accrued postretirement health care costs Other liabilities TOTAL LIABILITIES Commitments and Contingencies (Note 11) EQUITY Common Stock, no par value (5,000,000,000 shares authorized and Additionalpaid-in capital Retained earnings Accumulated other comprehensive losses Treasury stock, at cost (485,738,865 shares at June 30, 2017 and Total Mondelēz International Shareholders’ Equity Noncontrolling interest TOTAL EQUITY TOTAL LIABILITIES AND EQUITY Balances at January 1, 2016 Comprehensive earnings/(losses): Net earnings Other comprehensive earnings/(losses), net of income taxes Exercise of stock options and issuance of other stock awards Common Stock repurchased Cash dividends declared ($0.72 per share) Dividends paid on noncontrolling interest and other activities Balances at December 31, 2016 Comprehensive earnings/(losses): Net earnings Other comprehensive earnings/(losses), net of income taxes Exercise of stock options and issuance of other stock awards Common Stock repurchased Cash dividends declared ($0.38 per share) Dividends paid on noncontrolling interest and other activities Balances at June 30, 2017 CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES Net earnings Adjustments to reconcile net earnings to operating cash flows: Depreciation and amortization Stock-based compensation expense Deferred income tax provision/(benefit) Asset impairments and accelerated depreciation Loss on early extinguishment of debt Gain on equity method investment exchange Loss on divestiture Equity method investment net earnings Distributions from equity method investments Othernon-cash items, net Change in assets and liabilities, net of acquisitions and divestitures: Receivables, net Inventories, net Accounts payable Other current assets Other current liabilities Change in pension and postretirement assets and liabilities, net Net cash provided by operating activities CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES Capital expenditures Proceeds from divestiture, net of disbursements Proceeds from sale of property, plant and equipment and other assets Net cash used in investing activities CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES Issuances of commercial paper, maturities greater than 90 days Repayments of commercial paper, maturities greater than 90 days Net issuances of other short-term borrowings Long-term debt proceeds Long-term debt repaid Repurchase of Common Stock Dividends paid Other Net cash (used in)/provided by financing activities Effect of exchange rate changes on cash and cash equivalents Cash and cash equivalents: Decrease Balance at beginning of period Balance at end of period 2017. Currency Translation and Highly Inflationary Accounting: 2018. accordance with U.S. GAAP and our inventory policies. We generally do not have any unbilled receivables at the end of a period. Deferred revenues are not material and primarily include customer advance payments typically collected a few days before product delivery, at which time deferred revenues are reclassified and recorded as net revenues. We generally do not receive noncash consideration for the sale of goods nor do we grant payment financing terms greater than one year. condensed consolidated statements of cash flows. statements upon adoption. standards in any of the historical periods presented. Refer to the immaterial. We recorded a pre-tax gain of $247 million Australian dollars ($187 million as of July 4, 2017) on the sale. During the third and fourth quarters of 2017, we also recorded divestiture-related costs of $2 million and a foreign currency hedge loss of $3 million. In the fourth quarter of 2017, we recorded a final $3 million inventory-related working capital adjustment, increasing the pre-tax gain to $190 million in 2017. Note 3. Inventories Raw materials Finished product Inventory reserves Inventories, net Land and land improvements Buildings and building improvements Machinery and equipment Construction in progress Accumulated depreciation Property, plant and equipment, net Latin America AMEA Europe North America Corporate Totalnon-cash asset write-downs Latin America AMEA Europe North America Goodwill was: Non-amortizable intangible assets Amortizable intangible assets Accumulated amortization Intangible assets, net rates). Balance at January 1, 2017 Currency Divestiture Acquisition Asset impairment Other Balance at June 30, 2017 Restructuring Costs: Liability balance, January 1, 2017 Charges Cash spent Non-cash settlements/adjustments Currency Liability balance, June 30, 2017 Costs: For the Three Months Ended Restructuring Costs Implementation Costs Total For the Six Months Ended Restructuring Costs Implementation Costs Total For the Three Months Ended Restructuring Costs Implementation Costs Total For the Six Months Ended Restructuring Costs Implementation Costs Total Total Project 2014-2017(3) Restructuring Costs Implementation Costs Total Commercial paper Bank loans Total short-term borrowings year. terminated this credit facility. earnings at the time of the debt extinguishment. Cash costs related to tendering the debt are included in long-term debt repayments in the condensed consolidated statement of cash flows for the six months ended June 30, 2018. 7, 2025. On March We recorded approximately $4 million of discounts and deferred financing costs, which will be amortized into interest expense over the life of the notes. 2016. Derivatives designated as Currency exchange contracts Commodity contracts Interest rate contracts Derivatives not designated as Currency exchange contracts Commodity contracts Interest rate contracts Total fair value Currency exchange contracts Commodity contracts Interest rate contracts Total derivatives Currency exchange contracts Commodity contracts Interest rate contracts Total derivatives Currency exchange contracts: Intercompany loans and forecasted interest payments Forecasted transactions Commodity contracts Interest rate contracts Net investment hedge – euro notes Net investment hedge – pound sterling notes Net investment hedge – Swiss franc notes Accumulated (loss)/gain at January 1 Transfer of realized (gains)/losses in fair value to earnings Unrealized gain/(loss) in fair value Accumulated (loss)/gain at June 30 Currency exchange contracts – forecasted transactions Commodity contracts Interest rate contracts Total Currency exchange contracts – forecasted transactions Commodity contracts Interest rate contracts Total was changed. Derivatives Borrowings Location of in Earnings Currency exchange contracts: Intercompany loans and Forecasted transactions Forecasted transactions Forecasted transactions Commodity contracts Total the current portion of long-term debt as this debt will mature during the third quarter of 2018. Euro notes Pound sterling notes Swiss franc notes Service cost Interest cost Expected return on plan assets Amortization: Net loss from experience differences Prior service cost/(credit) Settlement losses/(gains) and other expenses Net periodic pension cost Service cost Interest cost Expected return on plan assets Amortization: Net loss from experience differences Prior service cost/(credit) Settlement losses/(gains) and other expenses Net periodic pension cost Service cost Interest cost Amortization: Net loss from experience differences Prior service credit(1) Net periodic postretirement health care costs Service cost Interest cost Amortization of net gains Net periodic postemployment costs Balance at January 1, 2017 Annual grant to eligible employees Additional options issued Total options granted Options exercised(1) Options cancelled Balance at June 30, 2017 Balance at January 1, 2017 Annual grant to eligible employees: Performance share units Deferred stock units Additional shares granted(1) Total shares granted Vested(2) Forfeited(2) Balance at June 30, 2017 position. Currency Translation Adjustments: Balance at beginning of period Currency translation adjustments Reclassification to earnings related to: Equity method investment exchange Tax benefit/(expense) Other comprehensive earnings/(losses) Less: (gain)/loss attributable to noncontrolling interests Balance at end of period Pension and Other Benefit Plans: Balance at beginning of period Net actuarial (loss)/gain arising during period Tax benefit/(expense) on net actuarial loss Losses/(gains) reclassified into net earnings: Amortization of experience losses and prior service costs(1) Settlement losses and other expenses(1) Tax benefit on reclassifications (2) Currency impact Other comprehensive (losses)/earnings Balance at end of period Derivative Cash Flow Hedges: Balance at beginning of period Net derivative gains/(losses) Tax benefit on net derivative gain/(loss) Losses/(gains) reclassified into net earnings: Currency exchange contracts – forecasted transactions(3) Commodity contracts(3) Interest rate contracts(4) Tax benefit on reclassifications (2) Currency impact Other comprehensive earnings/(losses) Balance at end of period Accumulated other comprehensive income attributable to Mondelēz International: Balance at beginning of period Total other comprehensive earnings/(losses) Less: loss/(gain) attributable to noncontrolling interests Other comprehensive earnings/(losses) attributable to Mondelēz International Balance at end of period of 2017. Net earnings Noncontrolling interest (earnings) Net earnings attributable to Mondelēz International Weighted-average shares for basic EPS Plus incremental shares from assumed conversions of stock options and long-term incentive plan shares Weighted-average shares for diluted EPS Basic earnings per share attributable to Mondelēz International Diluted earnings per share attributable to Mondelēz International We manage our operations by region to leverage regional operating scale, manage different and changing business environments more effectively and pursue growth opportunities as they arise in our key markets. Our regional management teams have responsibility for the business, product categories and financial results in the regions. Net revenues: Latin America AMEA Europe North America Net revenues Earnings before income taxes: Operating income: Latin America AMEA Europe North America Unrealized (losses)/gains on hedging activities(mark-to-market impacts) General corporate expenses Amortization of intangibles Loss on divestiture Operating income Interest and other expense, net Earnings before income taxes Biscuits Chocolate Gum & Candy Beverages Cheese & Grocery Total net revenues Biscuits Chocolate Gum & Candy Beverages Cheese & Grocery Total net revenues Biscuits Chocolate Gum & Candy Beverages Cheese & Grocery Total net revenues Biscuits Chocolate Gum & Candy Beverages Cheese & Grocery Total net revenues system security. 2017 as part of the recovery effort. The recovery from the incident was largely resolved by December 31, 2017 and we continued efforts to strengthen our security measures and further mitigate cybersecurity risks. Gain on equity method investment exchange 2014-2018 Restructuring Program: Restructuring charges Implementation charges Loss related to interest rate swaps Loss on debt extinguishment Intangible asset impairment charges Divestiture-related costs Loss on divestiture Gain on sale of intangible asset Divestiture-related costs Gains on sales of property Mark-to-market (losses)/gains from derivatives Benefit from the settlement of a Cadbury tax matter(1) Malware incident incremental expenses Effective tax rate 2017. Net revenues Operating income Net earnings attributable to Mondelēz International Diluted earnings per share attributable to Mondelēz International Change in net revenues (by percentage point) Total change in net revenues Add back the following items affecting comparability: Impact of acquisition Higher net pricing Operating Income for the Three Months Ended June 30, 2016 2014-2018 Restructuring Program costs(2) Intangible asset impairment charge(3) Acquisition integration costs(4) Mark-to-market gains from derivatives(5) Divestiture-related costs(6) Operating income from divestitures(6) Gain on sale of intangible asset(7) Other/rounding Adjusted Operating Income(1) for the Higher net pricing Higher input costs Unfavorable volume/mix Lower selling, general and administrative expenses Gains on sales of property(8) Property insurance recovery Impact from acquisition(8) Other Total change in Adjusted Operating Income (constant currency)(1) Unfavorable currency – translation Total change in Adjusted Operating Income(1) Adjusted Operating Income(1) for 2014-2018 Restructuring Program costs(2) Intangible asset impairment charge(3) Mark-to-market losses from derivatives(5) Malware incident incremental expenses Divestiture-related costs(6) Operating income from divestitures(6) Loss on divestiture(6) Other/rounding Operating Income for the Three Months Ended June 30, 2017 efforts. Favorable volume/mix was driven by North America and Europe, which was partially offset by unfavorable volume/mix in AMEA and Latin America. impact. Excluding Acquisitions, overhead leverage. Diluted EPS Attributable to Mondelēz International for the 2014-2018 Restructuring Program costs (2) Intangible asset impairment charge(2) Acquisition integration costs(2) Mark-to-market gains from derivatives(2) Divestiture-related costs(2) Net earnings from divestitures(2) Gain on sale of intangible asset(2) Adjusted EPS(1) for the Three Months Ended June 30, 2016 Increase in operations Decrease in equity method investment net earnings Gains on sales of property(2) Property insurance recovery Impact from acquisition (2) Lower interest and other expense, net(3) Changes in shares outstanding(4) Changes in income taxes (5) Adjusted EPS (constant currency) (1) for the Three Months Ended June 30, 2017 Unfavorable currency – translation Adjusted EPS(1) for the Three Months Ended June 30, 2017 2014-2018 Restructuring Program costs (2) Intangible asset impairment charge(2) Mark-to-market losses from derivatives(2) Malware incident incremental expenses Divestiture-related costs(2) Net earnings from divestitures(2) Loss on divestiture(2) Loss on debt extinguishment(6) Equity method investee acquisition-related and other adjustments (7) Diluted EPS Attributable to Mondelēz International for the Net revenues Operating income Net earnings attributable to Mondelēz International Diluted earnings per share attributable to Mondelēz International Operating Income for the Six Months Ended June 30, 2016 2014-2018 Restructuring Program costs(2) Intangible asset impairment charges(3) Acquisition integration costs(4) Mark-to-market losses from derivatives(5) Divestiture-related costs(6) Operating income from divestitures(6) Gain on sale of intangible asset(7) Other/rounding Adjusted Operating Income(1) for the Higher net pricing Higher input costs Unfavorable volume/mix Lower selling, general and administrative expenses Gains on sales of property(8) Property insurance recovery Impact from acquisitions(8) Other Total change in Adjusted Operating Income (constant currency)(1) Unfavorable currency – translation Total change in Adjusted Operating Income(1) Adjusted Operating Income(1) for the 2014-2018 Restructuring Program costs(2) Intangible asset impairment charge(3) Acquisition integration costs(4) Mark-to-market losses from derivatives(5) Malware incident incremental expenses Divestiture-related costs(6) Operating income from divestitures(6) Loss on divestiture(6) Benefit from the settlement of a Cadbury tax matter(9) Operating Income for the Six Months Ended June 30, 2017 Diluted EPS Attributable to Mondelēz International for the 2014-2018 Restructuring Program costs (2) Intangible asset impairment charges(2) Acquisition integration costs(2) Mark-to-market losses from derivatives(2) Divestiture-related costs(2) Net earnings from divestitures(2) Gain on sale of intangible asset(2) Loss related to interest rate swaps(3) Gain on equity method investment exchange (4) Adjusted EPS(1) for the Six Months Ended June 30, 2016 Increase in operations Decrease in equity method investment earnings Gains on sales of property(2) Property insurance recovery Impact of acquisition(2) Lower interest and other expense, net(5) Changes in shares outstanding(6) Changes in income taxes(7) Adjusted EPS (constant currency) (1) for the Six Months Ended June 30, 2017 Unfavorable currency – translation Adjusted EPS(1) for the Six Months Ended June 30, 2017 2014-2018 Restructuring Program costs (2) Intangible asset impairment charges(2) Acquisition integration costs(2) Mark-to-market losses from derivatives(2) Malware incident incremental expenses Divestiture-related costs(2) Net earnings from divestitures(2) Loss on debt extinguishment(8) Benefit from the settlement of a Cadbury tax Matter(2) Equity method investee acquisition-related and other adjustments (9) Diluted EPS Attributable to Mondelēz International for the Net revenues: Latin America AMEA Europe North America Net revenues Earnings before income taxes: Operating income: Latin America AMEA Europe North America Unrealized (losses)/gains on hedging activities(mark-to-market impacts) General corporate expenses Amortization of intangibles Loss on divestiture Operating income Interest and other expense, net Earnings before income taxes Net revenues Segment operating income Net revenues Segment operating income Nigerian naira. France, resulted in a year-over-year decline in net revenues of $44 million for the second quarter of 2018. Lower net pricing was driven by biscuits, chocolate, gum and refreshment beverages, partially offset by higher net pricing in cheese & grocery and candy. Net revenues Segment operating income Net revenues Segment operating income Net revenues Segment operating income Net revenues Segment operating income Net revenues Segment operating income Net revenues Segment operating income cheese & grocery, candy and refreshment beverages. The June 7, 2018 acquisition of a U.S. premium biscuit company, Tate’s Bake Shop, added net revenues of $7 million in the second quarter of 2018. administrative expenses. liquidity. 2018 than in the first six months of 2017. repurchases and dividends paid. 2017. nuts. 2018. 2020. 2019. transformation initiatives not yielding the anticipated benefits; changes in the assumptions on which the restructuring program is based; protection of our reputation and brand image; management of our workforce; consolidation of retail customers and competition with retailer and other economy brands; changes in our relationships with suppliers or customers; legal, regulatory, tax or benefit law changes, claims or actions; Net Revenue Impact of currency Impact of acquisition Impact of divestitures Organic Net Revenue Net Revenue Impact of currency Impact of acquisition Impact of divestitures Organic Net Revenue Net Revenue Impact of currency Impact of acquisition Impact of divestitures Organic Net Revenue Net Revenue Impact of currency Impact of acquisition Impact of divestitures Organic Net Revenue Operating Income 2014-2018 Restructuring Program costs(1) Divestiture-related costs(2) Intangible asset impairment charges(3) Acquisition integration costs(4) Operating income from divestitures(2) Loss on divestiture(2) Mark-to-market losses/(gains) from derivatives (5) Malware incident incremental expenses Gain on sale of intangible assets(6) Other/rounding Adjusted Operating Income Impact of unfavorable currency Adjusted Operating Income (constant currency) Operating Income 2014-2018 Restructuring Program costs(1) Divestiture-related costs(2) Intangible asset impairment charges(3) Acquisition integration costs(4) Operating income from divestitures(2) Loss on divestiture(2) Mark-to-market losses from derivatives(5) Malware incident incremental expenses Gain on sale of intangible assets(6) Benefit from the settlement of a Cadbury tax matter(7) Other/rounding Adjusted Operating Income Impact of unfavorable currency Adjusted Operating Income (constant currency) Diluted EPS attributable to Mondelēz International 2014-2018 Restructuring Program costs(2) Divestiture-related costs(2) Intangible asset impairment charge(2) Net earnings from divestitures(2) Loss on divestiture(2) Mark-to-market losses from derivatives(2) Malware incident incremental expenses Loss related to interest rate swaps(3) Loss on debt extinguishment(4) Equity method investee acquisition-related and Adjusted EPS Impact of unfavorable currency Adjusted EPS (constant currency) Diluted EPS attributable to Mondelēz International 2014-2018 Restructuring Program costs(2) Divestiture-related costs(2) Intangible asset impairment charges(2) Acquisition integration costs(2) Net earnings from divestitures(2) Loss on divestiture(2) Mark-to-market losses from derivatives(2) Malware incident incremental expenses Loss related to interest rate swaps(3) Loss on debt extinguishment(4) Benefit from the settlement of a Cadbury tax matter (2) Gain on equity method investment exchange(6) Equity method investee acquisition-related and Adjusted EPS Impact of unfavorable currency Adjusted EPS (constant currency) 2018. Period April1-30, 2017 May1-31, 2017 June1-30, 2017 For the Quarter Ended Page No. PART I - Page No.FINANCIAL INFORMATION PART I - FINANCIAL INFORMATION Item 1. 1 2 3 4 5 6Item 2. 28Item 3. 53Item 4. 54PART II -OTHER INFORMATION PART II - OTHER INFORMATIONItem 1. 55Item 1A. 55Item 2. 55Item 6. 5657Statements. For the Three Months Ended
June 30, For the Six Months Ended
June 30, 2017 2016 2017 2016 $ 5,986 $ 6,302 $ 12,400 $ 12,757 3,662 3,786 7,551 7,706 2,324 2,516 4,849 5,051 1,449 1,668 2,924 3,283 187 166 353 320 3 – 3 – 44 44 88 88 641 638 1,481 1,360 124 151 243 395 517 487 1,238 965 (84 ) (118 ) (238 ) (167 ) – – – 43 67 102 133 187 500 471 1,133 1,028 (2 ) (7 ) (5 ) (10 ) $ 498 $ 464 $ 1,128 $ 1,018
Mondelēz International $ 0.33 $ 0.30 $ 0.74 $ 0.65
Mondelēz International $ 0.32 $ 0.29 $ 0.73 $ 0.64 $ 0.19 $ 0.17 $ 0.38 $ 0.34 For the Three Months Ended
June 30, For the Six Months Ended
June 30, 2018 2017 2018 2017 Net revenues $ 6,112 $ 5,986 $ 12,877 $ 12,400 Cost of sales 3,572 3,672 7,488 7,568 Gross profit 2,540 2,314 5,389 4,832 Selling, general and administrative expenses 1,904 1,455 3,431 2,938 Asset impairment and exit costs 111 176 165 342 Loss on divestiture — 3 — 3 Amortization of intangibles 44 44 88 88 Operating income 481 636 1,705 1,461 Benefit plan non-service income (15 ) (5 ) (28 ) (20 ) Interest and other expense, net 248 124 328 243 Earnings before income taxes 248 517 1,405 1,238 Provision for income taxes (14 ) (84 ) (321 ) (238 ) Equity method investment net earnings 91 67 185 133 Net earnings 325 500 1,269 1,133 Noncontrolling interest earnings (2 ) (2 ) (8 ) (5 ) $ 323 $ 498 $ 1,261 $ 1,128 Per share data: $ 0.22 $ 0.33 $ 0.85 $ 0.74 $ 0.22 $ 0.32 $ 0.84 $ 0.73 Dividends declared $ 0.22 $ 0.19 $ 0.44 $ 0.38 For the Three Months Ended
June 30, For the Six Months Ended
June 30, 2017 2016 2017 2016 $ 500 $ 471 $ 1,133 $ 1,028 380 (528 ) 923 103 (33 ) 110 (32 ) 104 12 17 30 10 359 (401 ) 921 217 859 70 2,054 1,245 14 (7 ) 21 9
Mondelēz International $ 845 $ 77 $ 2,033 $ 1,236 For the Three Months Ended
June 30, For the Six Months Ended
June 30, 2018 2017 2018 2017 Net earnings $ 325 $ 500 $ 1,269 $ 1,133 Other comprehensive earnings/(losses), net of tax: Currency translation adjustment (874 ) 380 (667 ) 923 Pension and other benefit plans 168 (33 ) 162 (32 ) Derivative cash flow hedges 26 12 (20 ) 30 Total other comprehensive earnings/(losses) (680 ) 359 (525 ) 921 Comprehensive earnings/(losses) (355 ) 859 744 2,054 less: Comprehensive earnings/(losses) attributable to noncontrolling interests (10 ) 14 11 21 $ (345 ) $ 845 $ 733 $ 2,033 June 30, December 31, 2017 2016 $ 1,397 $ 1,741
and $58 at December 31, 2016) 2,395 2,611
and $93 at December 31, 2016) 913 859 2,710 2,469 778 800 8,193 8,480 8,444 8,229 20,915 20,276 18,514 18,101 144 159 347 358 5,853 5,585 347 350 $ 62,757 $ 61,538 $ 4,813 $ 2,531 742 1,451 5,012 5,318 1,574 1,745 603 736 2,819 2,636 15,563 14,417 13,226 13,217 4,587 4,721 1,708 2,014 393 382 1,488 1,572 36,965 36,323
1,996,537,778 shares issued at June 30, 2017 and December 31, 2016) – – 31,860 31,847 21,648 21,149 (10,217 ) (11,122 )
468,172,237 shares at December 31, 2016) (17,571 ) (16,713 ) 25,720 25,161 72 54 25,792 25,215 $ 62,757 $ 61,538 June 30,
2018 December 31,
2017ASSETS Cash and cash equivalents $ 1,246 $ 761 2,416 2,691 818 835 Inventories, net 2,683 2,557 Other current assets 1,039 676 Total current assets 8,202 7,520 Property, plant and equipment, net 8,384 8,677 Goodwill 21,002 21,085 Intangible assets, net 18,362 18,639 Prepaid pension assets 169 158 Deferred income taxes 259 319 Equity method investments 6,223 6,345 Other assets 373 366 TOTAL ASSETS $ 62,974 $ 63,109 LIABILITIES Short-term borrowings $ 4,074 $ 3,517 Current portion of long-term debt 780 1,163 Accounts payable 5,248 5,705 Accrued marketing 1,587 1,728 Accrued employment costs 614 721 Other current liabilities 2,529 2,959 Total current liabilities 14,832 15,793 Long-term debt 14,857 12,972 Deferred income taxes 3,395 3,376 Accrued pension costs 1,389 1,669 Accrued postretirement health care costs 395 419 Other liabilities 2,819 2,689 TOTAL LIABILITIES 37,687 36,918 Commitments and Contingencies (Note 12) EQUITY — — Additional paid-in capital 31,913 31,915 Retained earnings 23,305 22,749 Accumulated other comprehensive losses (10,526 ) (9,998 ) (19,489 ) (18,555 ) Total Mondelēz International Shareholders’ Equity 25,203 26,111 Noncontrolling interest 84 80 TOTAL EQUITY 25,287 26,191 TOTAL LIABILITIES AND EQUITY $ 62,974 $ 63,109 Mondelēz International Shareholders’ Equity Common
Stock Additional
Paid-in
Capital Retained
Earnings Accumulated
Other
Comprehensive
Earnings/
(Losses) Treasury
Stock Noncontrolling
Interest* Total
Equity $ – $ 31,760 $ 20,700 $ (9,986 ) $ (14,462 ) $ 88 $ 28,100 – – 1,659 – – 10 1,669 – – – (1,136 ) – (17 ) (1,153 ) – 87 (94 ) – 350 – 343 – – – – (2,601 ) – (2,601 ) – – (1,116 ) – – – (1,116 ) – – – – – (27 ) (27 ) $ – $ 31,847 $ 21,149 $ (11,122 ) $ (16,713 ) $ 54 $ 25,215 – – 1,128 – – 5 1,133 – – – 905 – 16 921 – 13 (48 ) – 251 – 216 – – – – (1,109 ) – (1,109 ) – – (581 ) – – – (581 ) – – – – – (3 ) (3 ) $ – $ 31,860 $ 21,648 $ (10,217 ) $ (17,571 ) $ 72 $ 25,792 Mondelēz International Shareholders’ Equity Balances at January 1, 2017 $ — $ 31,847 $ 21,149 $ (11,122 ) $ (16,713 ) $ 54 $ 25,215 Comprehensive earnings/(losses): Net earnings — — 2,922 — — 14 2,936 Other comprehensive earnings/(losses), net of income taxes — — — 1,124 — 28 1,152 Exercise of stock options and issuance of other stock awards — 68 (83 ) — 360 — 345 Common Stock repurchased — — — — (2,202 ) — (2,202 ) Cash dividends declared ($0.82 per share) — — (1,239 ) — — — (1,239 ) Dividends paid on noncontrolling interest and other activities — — — — — (16 ) (16 ) Balances at December 31, 2017 $ — $ 31,915 $ 22,749 $ (9,998 ) $ (18,555 ) $ 80 $ 26,191 Comprehensive earnings/(losses): Net earnings — — 1,261 — — 8 1,269 Other comprehensive earnings/(losses), net of income taxes — — — (528 ) — 3 (525 ) Exercise of stock options and issuance of other stock awards — (2 ) (60 ) — 216 — 154 Common Stock repurchased — — — — (1,150 ) — (1,150 ) Cash dividends declared ($0.44 per share) — — (651 ) — — — (651 ) Dividends paid on noncontrolling interest and other activities — — 6 — — (7 ) (1 ) Balances at June 30, 2018 $ — $ 31,913 $ 23,305 $ (10,526 ) $ (19,489 ) $ 84 $ 25,287 * Noncontrolling interest as of June 30, 20162017 was $84$72 million, as compared to $88$54 million as of January 1, 2016.2017. The change of $(4)$18 million during the six months ended June 30, 20162017 was due to $(13) million of dividends paid, $(1)$16 million of other comprehensive earnings, net of taxes, offset by $10and $5 million of net earnings.earnings offset by $(3) million of dividends paid. For the Six Months Ended June 30, 2017 2016 $ 1,133 $ 1,028 395 408 77 72 – (86 ) 168 142 11 – – (43 ) 3 – (133 ) (187 ) 132 58 (29 ) 126 153 (27 ) (181 ) (63 ) (430 ) (319 ) (88 ) 23 (646 ) (457 ) (303 ) (338 ) 262 337 (488 ) (604 ) 169 – 33 99 (286 ) (505 ) 1,150 491 (1,141 ) (68 ) 2,230 2,008 350 1,149 (1,469 ) (1,757 ) (1,069 ) (1,312 ) (581 ) (537 ) 154 54 (376 ) 28 56 25 (344 ) (115 ) 1,741 1,870 $ 1,397 $ 1,755 For the Six Months Ended
June 30, 2018 2017 CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES Net earnings $ 1,269 $ 1,133 Adjustments to reconcile net earnings to operating cash flows: Depreciation and amortization 407 395 Stock-based compensation expense 67 77 U.S. tax reform transition tax 86 — Deferred income tax provision (46 ) — Asset impairments and accelerated depreciation 43 168 Loss on early extinguishment of debt 140 11 Loss on divestiture — 3 Equity method investment net earnings (185 ) (133 ) Distributions from equity method investments 151 132 Other non-cash items, net 366 (29 ) Change in assets and liabilities, net of acquisitions and divestitures: Receivables, net 112 153 Inventories, net (240 ) (181 ) Accounts payable (325 ) (430 ) Other current assets (41 ) (88 ) Other current liabilities (481 ) (646 ) Change in pension and postretirement assets and liabilities, net (141 ) (303 ) Net cash provided by operating activities 1,182 262 CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES Capital expenditures (532 ) (488 ) Acquisition, net of cash received (528 ) — Proceeds from divestiture, net of disbursements — 169 Proceeds from sale of property, plant and equipment and other assets 19 33 Net cash used in investing activities (1,041 ) (286 ) CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES Issuances of commercial paper, maturities greater than 90 days 1,315 1,150 Repayments of commercial paper, maturities greater than 90 days (1,020 ) (1,141 ) Net issuances of other short-term borrowings 298 2,230 Long-term debt proceeds 2,948 350 Long-term debt repaid (1,442 ) (1,469 ) Repurchase of Common Stock (1,177 ) (1,069 ) Dividends paid (657 ) (581 ) Other 124 154 Net cash provided by/(used in) financing activities 389 (376 ) Effect of exchange rate changes on cash and cash equivalents (45 ) 56 Cash and cash equivalents: Increase/(decrease) 485 (344 ) Balance at beginning of period 761 1,741 Balance at end of period $ 1,246 $ 1,397 2016.changed to the cost method of accounting forfully impaired our investment in our Venezuelan operations. As such, for all periods presented, we have excluded the results of operations, financial position and cash flows of our Venezuelan subsidiaries from our condensed consolidated financial statements.Segment Change:On October 1, 2016, We account for investments over which we integrated our Eastern Europe, Middle East,exercise significant influence under the equity method of accounting. Investments over which we do not have significant influence or control are not material and Africa (“EEMEA”) operating segment into our Europe and Asia Pacific operating segments to further leverage and optimizeare carried at cost as there is no readily determinable fair value for the operating scale built within the Europe and Asia Pacific regions. Russia, Ukraine, Turkey, Belarus, Georgia and Kazakhstan were combined within our Europe region, while the remaining Middle East and African countries were combined within our Asia Pacific region to form a new Asia, Middle East and Africa (“AMEA”) operating segment. We have reflected the segment change as if it had occurred in all periods presented.As of October 1, 2016, our operations and management structure were organized into four reportable operating segments:Latin Americaequity interests.AMEAEuropeNorth AmericaSee Note 15,Segment Reporting, for additional information on our segments.2017,2018, none of our consolidated subsidiaries were subject to highly inflationary accounting.Argentina. We continue As discussed below, beginning on July 1, 2018, we expect to closely monitor inflation and the potential for the economy to becomeapply highly inflationary accounting for accounting purposes. As ofour operations in Argentina.2017,2018, primarily based on published estimates which indicate that Argentina's three-year cumulative inflation rate has exceeded 100%, we concluded that Argentina has become a highly inflationary economy. Beginning July 1, 2018, we expect to apply highly inflationary accounting for our Argentinian subsidiaries. We will change the functional currency from the Argentinian economy was not designatedpeso to the U.S. dollar. Local currency monetary assets and liabilities will be remeasured into U.S. dollars using exchange rates as highly inflationary. At this time, we continue to record currency translationof the latest balance sheet date, with remeasurement adjustments within equity and realized exchangeother transaction gains and losses on transactionsrecognized in net earnings. Our Argentinian operations contributed $159$267 million, or 2.7% of consolidated net revenues in the three months and $301 million, or 2.4%2.1% of consolidated net revenues in the six months ended June 30, 2017,2018. Based on a review of our Argentinian peso-denominated monetary assets and liabilities, our Argentinian operations had aan immaterial net monetary liability position as of June 30, 2017.Ukraine. In the second quarter of 2017, based on projected inflation data published by the National Bank of Ukraine, Ukraine’s three-year cumulative inflation rate dropped below 100% and it is projected to stay below 100% in late 2017. As such, Ukraine is no longer designated highly inflationary and we continue to record currency translation adjustmentswithin equity and realized exchange gains and losses on transactions in earnings. Our Ukraine operations contributed $15 million, or 0.3%, of consolidated net revenues in the three months and $30 million, or 0.2% of consolidated net revenues in the six months ended June 30, 2017, and our Ukraine net monetary assets as of June 30, 2017 were not material.165160 countries and have operations in over 80 countries, we monitor economic and currency-related risks and seek to take protective measures in response to these exposures. Some of the countries in which we do business have recently experienced periods of significant economic uncertainty. These includeuncertainty and exchange rate volatility, including Brazil, China, Mexico, Russia, United Kingdom (Brexit), Ukraine, Turkey, Egypt, Nigeria, and South Africa most of which have had exchange rate volatility.and Pakistan. We continue to monitor operations, currencies and net monetary exposures in these countries. At this time, we do not anticipate athat these countries are at risk of becoming highly inflationary countries.operating resultscustomers, which generally occurs upon delivery or shipment of the products. A small percentage of our net revenues relates to the licensing of our intellectual property, predominantly brand and trade names, and we record these revenues when earned within the period of the license term. We account for product shipping, handling and insurance as fulfillment activities with revenues for these activities recorded within net revenue and costs recorded within cost of sales. Any taxes collected on behalf of government authorities are excluded from changing to highly inflationary accountingnet revenues.these countries.anon-recourse factoring arrangement with a major global bank for a maximum combined capacity of $1.0 billion. Under the program,arrangements in which we may sell eligible short-term trade receivables primarily to the bankbanks in exchange for cash. We may then continue to collect the receivables sold, acting solely as a collecting agent on behalf of the bank. The outstanding principal amount of receivables under this arrangement amounted to $594 million as of June 30, 2017 and $644 million as of December 31, 2016. The incremental cost of factoring receivables under this arrangement was recorded in net revenue and was approximately $2 million in the three months and $3 million in the six months ended June 30, 2017 and was $1 million in the three months and $2 million in the six months ended June 30, 2016. During our contract negotiations with customers, we also work with our customers to achieve earlier collection of receivables.banks. The outstanding principal amount of receivables under these arrangements amounted to $38$719 million as of June 30, 20172018 and $101$843 million as of December 31, 2016.2017. The incremental cost of these arrangementsfactoring receivables under this arrangement was recordednot material for all periods presented. The proceeds from the sales of receivables are included in net revenue and was less than $1 millioncash from operating activities in the three months and $1 million in the six months ended June 30, 2017 and was $2 million in the three months and $3 million in the six months ended June 30, 2016.May 2017,June 2018, the Financial Accounting Standards Board (“FASB”("FASB") issued an Accounting Standards Update (“ASU”("ASU") that requires entities to clarify when changes to the terms or conditions of arecord share-based payment award must be accountedtransactions for as modifications. The ASU is applied prospectively to awards that are modified on or after the adoption date. The ASU is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. We are currently assessing the impact on our consolidated financial statementsacquiring goods and do not anticipate a material impact to our consolidated financial statements.In March 2017, the FASB issued an ASU to amend the amortization period for certain purchased callable debt securities heldservices from non-employees at a premium, shortening the period to the earliest call date instead of the maturity date. The standard does not impact securities held at a discount as the discount continues to be amortized to maturity. The ASU is applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earningsfair value as of the beginning of the period of adoption.adoption date. The ASU is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. We are currently assessing the impact on our consolidated financial statements and do not anticipate a material impact to our consolidated financial statements.March 2017,February 2018, the FASB issued an ASU that permits entities to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost. The standard requires employerselect a reclassification from accumulated other comprehensive income to disaggregate the service cost componentretained earnings for stranded tax effects resulting from the other components2017 enactment of net benefit cost and disclose the amount and location where the net benefit cost is recorded in the income statement or capitalized in assets. The standard is to be applied on a retrospective basis for the change in presentation in the income statement and prospectively for the change in presentation on the balance sheet.U.S. tax reform legislation. The ASU is effective for fiscal years beginning after December 15, 2017,2018, with early adoption permitted. We are currently assessing the impact on our consolidated financial statements.JanuaryAugust 2017, the FASB issued an ASU that clarifiesto better align hedge accounting with an entity’s risk management activities and improve disclosures surrounding hedging. For cash flow and net investment hedges as of the definition of a business with the objective of adding guidance to assist companies with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The definition of a business may affect many areas of accounting including acquisitions, disposals, goodwill and consolidation. The ASU is applied on a prospective basis and is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. We continue to assessdate, the ASU based on any pending or new transactions that may arise priorrequires a modified retrospective transition approach. Presentation and disclosure requirements related to the January 1, 2018 adoption date. At this time, we do not anticipate early adopting nor a material impact on our consolidated financial statements.In November 2016, the FASB issued an ASU that requires the change in restricted cash or cash equivalents to be included with other changes in cash and cash equivalents in the statement of cash flows.are required prospectively. The ASU is effective for fiscal years beginning after December 15, 2017,2018, with early adoption permitted. We anticipate adopting thisearly adopted the standard at the same time as the cash flow statement classification changes described below go into effect on January 1, 2018. We continue to assess the impact on our consolidated statement of cash flows.In October 2016, the FASB issued an ASU that requires the recognition of tax consequences of intercompany asset transfers other than inventory when the transfer occurs and removes the exception to postpone recognition until the asset has been sold to an outside party. The standard is to be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings. The ASU is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. We anticipate adopting on January 1, 2018 and do not expect the ASU to have athere was no material impact onto our consolidated financial statements.In August 2016, the FASB issued an ASUstatements upon adoption. Refer to provide guidance on eight specific cash flow classification issues and reduce diversity in practice in how some cash receipts and cash payments are presented and classified in the statementNote 9, due diligencedata collection and assessevaluation of our leasing arrangements, practical expedients, accounting policy elections and implementing our lease accounting system. We completed the impactinitial design of changes to our business processes to meet the new standard across our operationslease accounting and on our consolidated financial statements, which will consist primarily of recording leasedisclosure requirements. At this time, we are unable to reasonably estimate the expected increase in assets and liabilities on our balance sheet for our operating leases.This ASU is not expectedWe adopted this standard on January 1, 2018 and there was no material impact to have a significant impact on our consolidated financial statements.early 2017, the FASB issued several ASUs that clarified principal versus agent (gross versus net) revenue presentation considerations, confirmed the accounting for certain prepaid stored-value products and clarified the guidance for identifying performance obligations within a contract, the accounting for licenses and partial sales of nonfinancial assets. The FASB also issued two ASUs providing technical corrections, narrow scope exceptions and practical expedients to clarify and improve the implementation of the new revenue recognition guidance. The revenue guidance is effective for annual reporting periods beginning after December 15, 2017, with early adoption permitted as of the original effective date (annual reporting periods beginning after December 15, 2016). The ASU may be applied retrospectively to historical periods presented or as a cumulative-effect adjustment as of the date of adoption.2017. We plan to adoptadopted the new standard on January 1, 2018 on a full retrospective basis. We arefinalizing reviews and working on implementing the process, policy and disclosure changes that will go into effect on January 1, 2018. At this time, we do not expect aThere was no material financial impact from adopting the new revenue standards.In connection withOn January 1, 2018, we adopted an ASU that changed the October 1, 2016 segment change described above, see Notes 5,Goodwillpresentation of net periodic pension and Intangible Assets; 6,2014-2018 Restructuring Program;and 15,Segment Reporting for informationpostretirement costs on related changes made to prior-period segment goodwill, net revenues and earnings aligned with the new segment structure. We also reclassified certain amounts previously reported within our condensed consolidated statements of cash flows, condensed consolidated statementsearnings. As a result of comprehensive earningsthis adoption, we disaggregated the components of our net periodic pension and postretirement benefit costs and moved components other than service costs to a new line item, benefit plan non-service income, located below operating income. Prior-period cost of sales, selling, general and administrative expenses and asset impairment and exit costs as well as segment operating income results were updated to reflect the reclassification. All components of net periodic pension and postretirement benefit costs are summarized in Note 12,Reclassifications from Accumulated Other Comprehensive Income, to be consistent with the current-year presentation.10, Benefit Plans.JDE Coffee Business Transactions:July 2, 2015,June 7, 2018, we acquired a U.S. premium biscuit company, Tate’s Bake Shop, within our North America segment and extended our premium biscuit offerings. We paid $528 million, net of cash received, and we expect to finalize the purchase price paid later this year once final working capital adjustments are confirmed. We accounted for the transaction as a business combination. We are working to complete the valuation work and have recorded a preliminary purchase price allocation of $40 million to definite-lived intangible assets, $170 million to indefinite-lived intangible assets, $337 million to goodwill, $14 million to property, plant and equipment, $5 million to inventory, $9 million to accounts receivable, $6 million to current liabilities and $41 million to deferred tax liabilities.transactions to combine our wholly owned coffee businesses with those of D.E Master Blenders 1753 B.V. (“DEMB”) to create a new company, Jacobs Douwe Egberts (“JDE”). Following the exchangesale of a portionconfectionery business in Japan. We received cash proceeds of ¥2.8 billion ($24 million as of December 28, 2017) and recorded an immaterial pre-tax loss on the divestiture within our AMEA segment.investment in JDE for an interest in Keurig Green Mountain, Inc. (“Keurig”) in March 2016, we held a 26.5% equity interest in JDE. (See discussion underKeurig Transactionbelow.) The remaining 73.5% equity interest in JDE was held by a subsidiarymethod investments and received cash proceeds of Acorn Holdings B.V. (“AHBV,” owner of DEMB prior to July 2, 2015). Following the transactions discussed underJDE Stock-Based Compensation Arrangementsbelow, as of June 30, 2017, we hold a 26.5% voting interest, a 26.4% ownership interest and a 26.2% profit and dividend sharing interest in JDE.$65 million. We recorded $19a pre-tax gain of $40 million within the gain on equity method investment transactions and $15 million of JDE equity earnings for three monthstax expense.$38 million forwe each granted the six months ended June 30,other various licenses to use certain trademarks in connection with particular product categories in specified jurisdictions. On August 17, 2017, and $45 million for the three months and $92 million for the six months ended June 30, 2016. We also recorded $49 million of cash dividends received during the first quarter of 2017.JDE Stock-Based Compensation Arrangements:On June 30, 2016, we entered into two agreements with AHBVKHC to terminate the licenses of certain KHC-owned brands used in our grocery business within our Europe region and its affiliates to establish a new stock-based compensation arrangement tiedtransfer to KHC inventory and certain other assets. On August 17, 2017, the issuancefirst transaction closed and we received cash proceeds of JDE equity compensation awards to JDE employees. This arrangement replaced a temporary equity compensation program tied to the issuance of AHBV equity compensation to JDE employees. New Class C, D and E JDE shares were authorized and issued for investments made by, and vested stock-based compensation awards granted to, JDE employees. Under these arrangements, share ownership dilution from the JDE Class C, D and E shareholders is limited to 2%. We retained our 26.5% voting rights and have a slightly lower portion of JDE’s profits and dividends than our shareholder ownership interest as certain employee shareholders receive a slightly larger share. Upon execution of the agreements and the creation of the Class C, D and E JDE shares, as a percentage of the total JDE issued shares, our Class B shares decreased from 26.5% to 26.4% and AHBV’s Class A shares decreased from 73.5% to 73.22%, while the Class C, D and E shares, held by AHBV and its affiliates until the JDE employee awards vest, comprised 0.38% of JDE’s shares. Additional Class C shares are available to be issued when planned long-term incentive plan (“JDE LTIP”) awards vest, generally over the next five years. When the JDE Class C shares are issued in connection with the vested JDE LTIP awards, the Class A and B relative ownership interests will decrease. Based on estimated achievement and forfeiture assumptions, we do not expect our JDE ownership interest to decrease below 26.27%.Keurig Transaction:On March 3, 2016, a subsidiary of AHBV completed a $13.9 billion acquisition of all of the outstanding common stock of Keurig through a merger transaction. On March 7, 2016, we exchanged with a subsidiary of AHBV a portion of our equity interest in JDE with a carrying value of€1.7 billion (approximately $2.0 billion€9 million ($11 million as of March 7, 2016) for an interest in Keurig with a fair valueAugust 17, 2017) and on October 23, 2017, the second transaction closed and we received cash proceeds of $2.0 billion based on the merger consideration per share for Keurig. We recorded the difference between the fair value€2 million ($3 million as of Keurig and our basis in JDE shares as a $43 millionOctober 23, 2017). The gain on the equity method investment exchange in March 2016. Immediately following the exchange, our ownership interest in JDEboth transactions combined was 26.5% and our interest in Keurig was 24.2%. Both AHBV and we hold our investments in Keurig through a combination of equity and interests in a shareholder loan, withpro-rata ownership of each. Our initial $2.0 billion investment in Keurig includes a $1.6 billion Keurig equity interest and a $0.4 billion shareholder loan receivable, which are reported on a combined basis within equity method investments on our condensed consolidated balance sheet as of June 30, 2017. The shareholder loan has a 5.5% interest rate and is payable at the end of a seven-year term on February 27, 2023. We recorded Keurig equity earnings, shareholder loan interest and dividends of $15 million, $6 million and $2 million during the three months and $29 million, $12 million and $6 million during the six months ended June 30, 2017. In 2016, we recorded Keurig equity earnings, shareholder loan interest and dividends of $21 million, $6 million and no dividends during the three months and $29 million, $8 million and $2 million during the four months ended June 30, 2016.Other Divestitures and Acquisitions: and we expect to make a final working capital adjustment next quarter.. We divested approximately $25$27 million of current assets, approximately $135 million ofnon-current assets and approximately $5$4 million of current liabilities based on the July 4, 2017 exchange rate.net cash of approximately€157 €157 million ($169 million as of April 28, 2017) at the transaction date, for proceeds, net of cash indivested with the businesses which transferred to the buyer. Sales price adjustments related to employee-related liabilities and working capital transferred at closing will be settled in the remainder of 2017. The sale was subject to E.U. and local regulatory approvals, completion of employee consultation requirements and additional steps to prepare the assets for transfer. During the fourth quarter of 2016, the buyer obtained anti-trust clearance in all markets where it was required and we received the Works Council approval.businesses. On April 28, 2017, we divested $44 million of current assets, $155 million ofnon-current assets, $8 million of current liabilities and $22 million ofnon-current liabilities based on the April 28, 2017euro-to-U.S. dollar exchange rate. We recorded a $3 million loss on the sale duringDuring the three months ended June 30, 2017.March 31, 2018, we reversed $3 million of accrued expenses no longer required. We also incurred divestiture-related costs of $3 million in the three months and $21 million in the six months ended June 30, 2017, and $842017. We recorded a $3 million forloss on the sale during the three and six months ended June 30, 2016. These2017. Divestiture-related costs were recorded within cost of sales and selling, general and administrative expenses ofprimarily within our Europe segment. In prior periods, we recorded a $5 million impairment charge in May 2016 for a candy trademark to reduce the overall net assets to the estimated net sales proceeds after transaction costs. On March 31, 2016, we recorded a $14 million impairment charge for another gum & candy trademark as a portion of its carrying value would not be recoverable based on future cash flows expected under a planned license agreement with the buyer.On November 2, 2016, we purchased from Burton’s Biscuit Company certain intangibles, which include the license to manufacture, market and sell Cadbury-branded biscuits in additional key markets around the world, including in the U.K., France, Ireland, North America and Saudi Arabia. The transaction was accounted for as a business combination. Total cash paid for the acquired assets was £199 million ($245 million as of November 2, 2016). We have recorded a preliminary purchase price allocation of $72 million to definite-lived intangible assets, $155 million to goodwill, $14 million to property, plant and equipment and $4 million to inventory, reflecting a November 2, 2016 exchange rate.On May 2, 2016, we completed the sale of certain local biscuit brands in Finland as part of our strategic decisions to exit select small and local brands and shift investment towards our Power Brands. The sales price was€14 million ($16 million as of May 2, 2016) and we divested $8 million of indefinite-lived intangible assets and less than $1 million of other assets. We received cash proceeds of€12 million ($14 million as of May 2, 2016) upon closing and another€2 million ($2 million as of October 31, 2016) following the completion of post-closing requirements. The additional $2 million of consideration increased thepre-tax gain of $6 million recorded in the second quarter of 2016 to a total 2016pre-tax gain of $8 million.Sales of Property:In the second quarter of 2016, we sold property within our North America segment and from our centrally held corporate assets. The North America sale generated cash proceeds of $40 million and apre-tax gain of $33 million. The corporate aircraft sale generated cash proceeds of $20 million and apre-tax gain of $6 million. The gains were recorded within selling, general and administrative expenses and cash proceeds were recorded in cash flows from other investing activities in the six months ended June 30, 2016. As of June 30, As of December 31, 2017 2016 (in millions) $ 757 $ 722 2,087 1,865 2,844 2,587 (134 ) (118 ) $ 2,710 $ 2,469 As of June 30,
2018 As of December 31,
2017 (in millions) Raw materials $ 726 $ 711 Finished product 2,070 1,975 2,796 2,686 Inventory reserves (113 ) (129 ) Inventories, net $ 2,683 $ 2,557 As of June 30, As of December 31, 2017 2016 (in millions) $ 484 $ 471 2,946 2,801 10,920 10,302 1,027 1,113 15,377 14,687 (6,933 ) (6,458 ) $ 8,444 $ 8,229 As of June 30,
2018 As of December 31,
2017 (in millions) Land and land improvements $ 439 $ 458 Buildings and building improvements 2,950 2,979 Machinery and equipment 10,947 11,195 Construction in progress 984 1,048 15,320 15,680 Accumulated depreciation (6,936 ) (7,003 ) Property, plant and equipment, net $ 8,384 $ 8,677 For the six months ended June 30, 2016, capital expenditures of $604 million excluded $222 million of accrued capital expenditures remaining unpaid at June 30, 2016 and included payment for $322 million of capital expenditures that were accrued and unpaid at December 31, 2015. asset property, plant and equipment write-downs (including accelerated depreciation and asset impairments) of $47 million in the three months and $118 million in the six months ended June 30, 2017 and $61 million in the three months and $113 million in the six months ended June 30, 2016 (see Note 6,2014-2018 Restructuring Program). These charges were recorded in the condensed consolidated statements of earnings within asset impairment and exit costs and inwithin the segment results as follows: For the Three Months Ended For the Six Months Ended June 30, June 30, 2017 2016 2017 2016 (in millions) $ 6 $ 8 $ 12 $ 13 30 12 42 21 4 17 42 38 7 22 22 39 – 2 – 2 $ 47 $ 61 $ 118 $ 113 For the Three Months Ended
June 30, For the Six Months Ended
June 30, 2018 2017 2018 2017 (in millions) Latin America $ 6 $ 6 $ 14 $ 12 AMEA 4 30 8 42 Europe 1 4 6 42 North America 2 7 8 22 $ 13 $ 47 $ 36 $ 118 reflects our current segment structure for both periods presented: As of June 30, As of December 31, 2017 2016 (in millions) $ 925 $ 897 3,413 3,324 7,667 7,170 8,910 8,885 $ 20,915 $ 20,276 As of June 30,
2018 As of December 31,
2017 (in millions) Latin America $ 821 $ 901 AMEA 3,289 3,371 Europe 7,655 7,880 North America 9,237 8,933 Goodwill $ 21,002 $ 21,085 As of June 30, As of December 31, 2017 2016 (in millions) $ 17,465 $ 17,004 2,389 2,315 19,854 19,319 (1,340 ) (1,218 ) $ 18,514 $ 18,101 As of June 30,
2018 As of December 31,
2017 (in millions) Non-amortizable intangible assets $ 17,463 $ 17,671 Amortizable intangible assets 2,363 2,386 19,826 20,057 Accumulated amortization (1,464 ) (1,418 ) Intangible assets, net $ 18,362 $ 18,639 agreements. At June 30, 2017, the weighted-average life of our amortizable intangible assets was 13.6 years.20172018 and June 30, 2016.2017. For the next five years, we currently estimate annual amortization expense of approximately $175 million for the next fourthree years and approximately $85 million in yearyears four and five reflecting(reflecting June 30, 20172018 exchange rates. Goodwill Intangible
Assets, at cost (in millions) $ 20,276 $ 19,319 651 634 (23 ) (62 ) 12 – – (38 ) (1 ) 1 $ 20,915 $ 19,854 Goodwill (in millions) Balance at January 1, 2018 $ 21,085 $ 20,057 Currency/other (420 ) (441 ) Acquisition 337 210 Balance at June 30, 2018 $ 21,002 $ 19,826 •Divestiture – During the second quarter of 2017, we divested several manufacturing facilities primarily in France and as a result of the divestiture, $23 million of goodwill and $62 million of amortizable andnon-amortizable intangible assets. See Note 2,Divestitures and Acquisitions, for additional information.•Acquisition – During the second quarter of 2017, we recorded a $12 million adjustment to goodwill in connection with our preliminary purchase price allocation for the Burton’s Biscuit Company purchase completed in the fourth quarter of 2016. See Note 2,Divestitures and Acquisitions, for additional information.Asset impairment – During the second quarter of 2017,2018, in connection with the acquisition of Tate's Bake Shop, we recorded a $38preliminary purchase price allocation of $337 million to goodwill and $210 million to intangible asset impairment charge resulting from a category declineassets. See Note 2, Divestitures and lower than expected product growth related to a gum trademark in our North America segment.Acquisitions, for additional information.20162017 annual testing ofnon-amortizable intangible assets, we recorded $98$70 million of impairment charges in the fourththird quarter of 20162017 related to five trademarks recorded across all regions. We also noted nineDuring that annual review, we identified thirteen brands, including the five impaired trademarks, with $630$938 million of aggregate book value as of December 31, 2016June 30, 2018 that each had a fair value in excess of book value of 10% or less. We believe our current plans for each of these brands will allow them to continue to not be impaired, but if the product line 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.$2.9$3.6 billion related to the 2014-2018 Restructuring Program. We expect to incur the full $4.1 billion of program charges by year-end 2018.year-end 2018.$148$112 million in the threesecond quarter of 2018 and $148 millionin the second quarter of 2017 and $164 millionin the first six months of 2018 and $305 million in the first six months ended June 30,of 2017 and $154 million in the three months and $293 million in the six months ended June 30, 2016 within asset impairment and exit costs.costs or benefit plan non-service income. The 2014-2018 Restructuring Program liability activity for the six months ended June 30, 20172018 was: Severance
and related
costs Asset
Write-downs Total (in millions) $ 464 $ – $ 464 184 121 305 (162 ) – (162 ) (5 ) (121 ) (126 ) 19 – 19 $ 500 $ – $ 500 Total (in millions) Liability balance, January 1, 2018 $ 464 $ — $ 464 Charges 125 39 164 Cash spent (161 ) — (161 ) Non-cash settlements/adjustments — (39 ) (39 ) Currency (24 ) — (24 ) Liability balance, June 30, 2018 $ 404 $ — $ 404 $78$82 million in the threesecond quarter of 2018 and $78 millionin the second quarter of 2017 and $161 millionin the first six months of 2018 and $162 million in the first six months ended June 30,of 2017 and $86 million in the three months and $160 million in the six months ended June 30, 2016 in cash severance and related costs. We also recognizednon-cash pension settlement losses (See Note 9,Benefit Plans),non-cash asset write-downs (including accelerated depreciation and asset impairments) and othernon-cash adjustments totaling $54$14 million in the threesecond quarter of 2018 and $54 millionin the second quarter of 2017 and $39 million in the first six months of 2018 and $126 million in the first six months ended June 30, 2017 and $72 million in the three months and $124 million in the six months ended June 30, 2016.of 2017. At June 30, 2017, $4352018, $323 million of our net restructuring liability was recorded within other current liabilities and $65$81 million was recorded within other long-term liabilities.$63$70 million in the threesecond quarter of 2018 and $63 millionin the second quarter of 2017 and $132 millionin the first six months of 2018 and $117 million in the first six months ended June 30, 2017 and $74 million in the three months and $172 million in the six months ended June 30, 2016.of 2017. We recorded these costs within cost of sales and general corporate expense within selling, general and administrative expenses.Costs in Operating Income:20172018 and June 30, 2016,2017, and since inception of the 2014-2018 Restructuring Program, we recorded the following restructuring and implementation costs within segment operating income by segment (as revised to reflect our current segment structure) as follows: Latin North America AMEA Europe America (1) Corporate (2) Total (in millions)
June 30, 2017 $ 8 $ 48 $ 50 $ 33 $ 9 $ 148 10 10 19 13 11 63 $ 18 $ 58 $ 69 $ 46 $ 20 $ 211
June 30, 2017 $ 31 $ 73 $ 119 $ 72 $ 10 $ 305 20 20 31 25 21 117 $ 51 $ 93 $ 150 $ 97 $ 31 $ 422
June 30, 2016 $ 32 $ 34 $ 45 $ 36 $ 7 $ 154 12 10 3 35 14 74 $ 44 $ 44 $ 48 $ 71 $ 21 $ 228
June 30, 2016 $ 44 $ 63 $ 112 $ 68 $ 6 $ 293 19 18 33 72 30 172 $ 63 $ 81 $ 145 $ 140 $ 36 $ 465 $ 369 $ 382 $ 768 $ 425 $ 60 $ 2,004 128 104 235 221 199 887 $ 497 $ 486 $ 1,003 $ 646 $ 259 $ 2,891 AMEA Europe Total (in millions) For the Three Months Ended June 30, 2018 Restructuring Costs $ 12 $ 17 $ 63 $ 14 $ 6 $ 112 Implementation Costs 15 8 13 21 13 70 Total $ 27 $ 25 $ 76 $ 35 $ 19 $ 182 For the Three Months Ended June 30, 2017 Restructuring Costs $ 8 $ 48 $ 50 $ 26 $ 16 $ 148 Implementation Costs 10 10 19 13 11 63 Total $ 18 $ 58 $ 69 $ 39 $ 27 $ 211 For the Six Months Ended
June 30, 2018 Restructuring Costs $ 36 $ 23 $ 70 $ 26 $ 9 $ 164 Implementation Costs 30 20 29 38 15 132 Total $ 66 $ 43 $ 99 $ 64 $ 24 $ 296 For the Six Months Ended
June 30, 2017 Restructuring Costs $ 31 $ 73 $ 119 $ 65 $ 17 $ 305 Implementation Costs 20 20 31 25 21 117 Total $ 51 $ 93 $ 150 $ 90 $ 38 $ 422 Restructuring Costs $ 466 $ 471 $ 909 $ 445 $ 107 $ 2,398 Implementation Costs 182 149 301 291 236 1,159 Total $ 648 $ 620 $ 1,210 $ 736 $ 343 $ 3,557 (1) During 20172018 and 2016,2017, our North America region implementation costs included incremental costs that we incurred related tore-negotiating renegotiating collective bargaining agreements that expired at the end ofin February 2016 for eight U.S. facilities and related to executing business continuity plans for the North America business.(2) Includes adjustmentDuring the first quarter of 2018, in connection with adopting a new pension cost classification accounting standard, we reclassified certain of our benefit plan component costs other than service costs out of operating income into a new line, benefit plan non-service income, on our condensed consolidated statements of earnings. As such, we have recast our historical operating income, segment operating income and restructuring and implementation costs by segment to reflect this reclassification, which had no impact to earnings before income taxes or net earnings. The benefit plan non-service income amounts no longer recorded in segment operating income are included within the Corporate column in the table above. The Corporate column also includes minor adjustments for rounding.(3) Includes all charges recorded since program inception on May 6, 2014 through June 30, 2017.2018.7.8. Debt and Borrowing Arrangements As of June 30, 2017 As of December 31, 2016 Amount Weighted- Amount Weighted- Outstanding Average Rate Outstanding Average Rate (in millions) (in millions) $ 4,219 1.2% $ 2,371 1.0% 594 6.9% 160 10.6% $ 4,813 $ 2,531 As of June 30, 2018 As of December 31, 2017 (in millions) (in millions) Commercial paper $ 3,900 2.4 % $ 3,410 1.7 % Bank loans 174 13.4 % 107 11.5 % Total short-term borrowings $ 4,074 $ 3,517 2017,2018, commercial paper issued and outstanding had between 32 and 89172 days remaining to maturity. Commercial paper borrowings increased sinceyear-end year end primarily as a result of issuances to finance the payment of long-term debt maturities, dividend payments and share repurchases during the quarter.$2.2$1.8 billion at June 30, 20172018 and $1.8$2.0 billion at December 31, 2016.2017. Borrowings on these lines were $594$174 million at June 30, 20172018 and $160$107 million at December 31, 2016. Short-term bank loans2017.cash and cash equivalents increased at the end of the second quarterconditions as scheduled cash sweeps, which normally transfer cash between accountsour existing $4.5 billion multi-year credit facility discussed below. On April 17, 2018, we borrowed $714 million on this facility to fund obligations, did not occur. As a result, temporary bank overdrafts resulted in the accounts scheduleddebt tender described below and availability under the facility was reduced to be fundedmatch the borrowed amount. On May 7, 2018, we repaid the $714 million from the net proceeds received from the May 2018 $2.5 billion long-term debt issuance and were recorded within short-term bank loans and funded in early July.Borrowing Arrangements:March 1, 2017,February 28, 2018, to supplement our commercial paper program, we entered into a $1.5 billion revolving credit agreement for a364-day senior unsecured credit facility that is scheduled to expire on February 28, 2018.27, 2019. The agreement replaces our previous credit agreement that matured on February 28, 2018 and includes the same terms and conditions as our existing $4.5 billion multi-year credit facility discussed below. As of June 30, 2017,2018, no amounts were drawn on the facility.2017,2018, we complied with this covenant as our shareholders’ equity, as defined by the covenant, was $35.9$35.7 billion. The revolving credit facility agreement also contains customary representations, covenants and events of default. There are no credit rating triggers, provisions or other financial covenants that could require us to post collateral as security. As of June 30, 2017,2018, no amounts were drawn on the facility.12, 2017,17, 2018, we discharged $488completed a cash tender offer and retired $570 million of the long-term U.S. dollar debt consisting of:U.S. dollar-denominated debt. notes due in February 2040paid $504 million, representing principal as well as pastfinanced the repurchase of the notes, including the payment of accrued interest and future interest accrualsother costs incurred, from February 2017 through the August 2017 maturity date.$2.0 billion revolving credit agreement entered into on April 2, 2018. We recorded an $11 milliona loss on debt extinguishment of $140 million within interest and other expense, net related to the amount we paid to retire the debt in excess of its carrying value and a $5 million reductionfrom recognizing unamortized discounts, deferred financing and other cash costs in accrued interest.30, 2017,fr.175 million of our 0.000% Swiss franc-denominated notes matured. The notes and accrued interest to date were paid with net proceeds from thefr.350 million Swiss franc-denominated notes issued on March 13, 2017.On March 13, 2017,2, 2018, we launched an offering offr.350 C$600 million of Swiss franc-denominated3.250% Canadian-dollar denominated notes or $349 million in U.S. dollars as ofthat mature on March 31, 2017, consisting of:•fr.225 million (or $224 million) of 0.050% fixed rate notes that mature on March 30, 2020•fr.125 million (or $125 million) of 0.617% fixed rate notes that mature on September 30, 202430, 2017,7, 2018, we received net proceeds offr.349C$595 million (or $349$461 million) that wereof proceeds, net of discounts and underwriting fees, to be used for general corporate purposes.January 26, 2017,€750February 1, 2018, $478 million of our 1.125% euro-denominated6.125% U.S. dollar notes matured. The notes and accrued interest to date were paid with the issuance of commercial paper and cash on hand.2.1%2.4% as of June 30, 2018, 2.1% as of December 31, 2017 and 2.2% as of December 31, 2016, down from 3.7% as of December 31, 2015.20172018 and December 31, 20162017 reflects current market interest rates and approximates the amounts we have recorded on our condensed consolidated balance sheets. The fair value of our long-term debt was determined using quoted prices in active markets (Level 1 valuation data) for the publicly traded debt obligations. At June 30, 2018, the aggregate fair value of our total debt was $20,089 million and its carrying value was $19,711 million. At December 31, 2017, the aggregate fair value of our total debt was $19,477$18,354 million and its carrying value was $18,781$17,652 million. At December 31, 2016, the aggregate fair value of our total debt was $17,882 million and its carrying value was $17,199 million.within our resultsconsisted of: For the Three Months Ended
June 30, For the Six Months Ended
June 30, 2018 2017 2018 2017 (in millions) Interest expense, debt $ 115 $ 103 $ 217 $ 206 Loss on debt extinguishment 140 11 140 11 Loss/(gain) related to interest rate swaps 5 — (9 ) — Other (income)/expense, net (12 ) 10 (20 ) 26 Interest and other expense, net $ 248 $ 124 $ 328 $ 243 8.9. Financial Instruments As of June 30, 2017 As of December 31, 2016 Asset Liability Asset Liability Derivatives Derivatives Derivatives Derivatives (in millions)
accounting hedges: $ 2 $ 1 $ 19 $ 8 1 9 17 22 22 246 108 19 $ 25 $ 256 $ 144 $ 49
accounting hedges: $ 51 $ 49 $ 29 $ 43 57 234 112 167 22 15 27 19 $ 130 $ 298 $ 168 $ 229 $ 155 $ 554 $ 312 $ 278 As of June 30, 2018 As of December 31, 2017 (in millions) Interest rate contracts $ 20 $ 403 $ 15 $ 509 Net investment hedge contracts 385 — — — $ 405 $ 403 $ 15 $ 509 Currency exchange contracts $ 111 $ 53 $ 65 $ 76 Commodity contracts 217 122 84 229 Interest rate contracts 7 5 15 11 $ 335 $ 180 $ 164 $ 316 Total fair value $ 740 $ 583 $ 179 $ 825 and fair value hedges and derivativesnet investment hedge contracts. Derivatives not designated as accounting hedges include our economic hedges.Non-U.S. dollar denominated debt, designated as a hedge of our net investments innon-U.S. operations, is not reflected in the table above, but is included in long-term debt summarized in Note 7,8, Debt and Borrowing Arrangements.Arrangements. We record derivative assets and liabilities on a gross basis on our condensed consolidated balance sheets. The fair value of our asset derivatives is recorded within other current assets and the fair value of our liability derivatives is recorded within other current liabilities. As of June 30, 2017 Quoted Prices in Active Markets Significant Significant Total for Identical Other Observable Unobservable Fair Value of Net Assets Inputs Inputs Asset/(Liability) (Level 1) (Level 2) (Level 3) (in millions) $ 3 $ – $ 3 $ – (185 ) (175 ) (10 ) – (217 ) – (217 ) – $ (399 ) $ (175 ) $ (224 ) $ – As of December 31, 2016 Quoted Prices in Active Markets Significant Significant Total for Identical Other Observable Unobservable Fair Value of Net Assets Inputs Inputs Asset/(Liability) (Level 1) (Level 2) (Level 3) (in millions) $ (3 ) $ – $ (3 ) $ – (60 ) (86 ) 26 – 97 – 97 – $ 34 $ (86 ) $ 120 $ – As of June 30, 2018 (in millions) Currency exchange contracts $ 58 $ — $ 58 $ — Commodity contracts 95 65 30 — Interest rate contracts (381 ) — (381 ) — Net investment hedge contracts 385 — 385 — Total derivatives $ 157 $ 65 $ 92 $ — As of December 31, 2017 (in millions) Currency exchange contracts $ (11 ) $ — $ (11 ) $ — Commodity contracts (145 ) (138 ) (7 ) — Interest rate contracts (490 ) — (490 ) — Total derivatives $ (646 ) $ (138 ) $ (508 ) $ — Our exchange-traded derivatives are generally subject to master netting arrangements that permit net settlement of transactions with the same counterparty when certain criteria are met, such as in the event of default. We also are required to maintain cash margin accounts in connection with funding the settlement of our open positions, and the margin requirements generally fluctuate daily based on market conditions. WeIn connection with our exchange-traded derivatives, we have recorded margin deposits related to our exchange-traded derivativesrequirements of $270$25 million as of June 30, 20172018 within accounts payable and $133margin deposits of $171 million as of December 31, 20162017 within other current assets. Based on our net asset or liability positions with individual counterparties, in the event of default and immediate net settlement of all of our open positions, for derivatives we have in a net asset position, our counterparties would owe us a total of $95 million as of June 30, 2017 and $48 million as of December 31, 2016. As of June 30, 2017, we have no derivatives in a net liability position, and as of December 31, 2016 we would have owed $2 million for derivatives we have in a net liability position.commodity and currency exchange OTC derivativesderivative contracts do not have a legal right ofset-off. In connection with our OTC derivatives that could benet-settled in the event of default, assuming all parties were to fail to comply with the terms of the agreements, for derivatives we have in a net liability position, we would owe $257 million as of June 30, 2017 and $40 million as of December 31, 2016, and for derivatives we have in a net asset position, our counterparties would owe us a total of $30 million as of June 30, 2017 and $162 million as of December 31, 2016. We manage the credit risk in connection with these and all our derivatives by entering into transactions with counterparties with investment grade credit ratings, limiting the amount of exposure with each counterparty and monitoring the financial condition of our counterparties.derivativehedging instruments were: Notional Amount As of June 30, As of December 31, 2017 2016 (in millions) $ 2,992 $ 3,343 1,432 1,452 1,174 837 6,480 6,365 3,844 4,012 442 419 1,723 1,447 Notional Amount As of June 30, 2018 As of December 31, 2017 (in millions) Currency exchange contracts: Intercompany loans and forecasted interest payments $ 3,378 $ 7,089 Forecasted transactions 2,355 2,213 Commodity contracts 580 1,204 Interest rate contracts 9,117 6,532 Net investment hedge contracts 7,114 — Net investment hedge debt: Euro notes 3,581 3,679 British pound sterling notes 448 459 Swiss franc notes 1,413 1,694 Canadian dollar notes 457 — For the Three Months Ended
June 30, For the Six Months Ended
June 30, 2017 2016 2017 2016 (in millions) $ (103 ) $ (53 ) $ (121 ) $ (45 ) (4 ) 8 3 66 16 9 27 (57 ) $ (91 ) $ (36 ) $ (91 ) $ (36 ) After-tax gains/(losses) reclassified from accumulated other comprehensive earnings/(losses) into net earnings were: For the Three Months Ended
June 30, For the Six Months Ended
June 30, 2017 2016 2017 2016 (in millions) $ 1 $ (2 ) $ 1 $ 3 3 (6 ) (4 ) (9 ) – – – (60 ) $ 4 $ (8 ) $ (3 ) $ (66 ) After-tax gains/(losses) recognized in other comprehensive earnings/(losses) were: For the Three Months Ended
June 30, For the Six Months Ended
June 30, 2017 2016 2017 2016 (in millions) $ (14 ) $ 2 $ (26 ) $ (10 ) 6 14 6 9 24 (7 ) 47 (56 ) $ 16 $ 9 $ 27 $ (57 ) Cash flow hedge ineffectiveness was not material for all periods presented.Within For the Three Months Ended
June 30, For the Six Months Ended
June 30, 2018 2017 2018 2017 (in millions) Accumulated (loss)/gain at beginning of period $ (159 ) $ (103 ) $ (113 ) $ (121 ) 5 (4 ) (9 ) 3 Unrealized gain/(loss) in fair value 21 16 (11 ) 27 Accumulated (loss)/gain at end of period $ (133 ) $ (91 ) $ (133 ) $ (91 ) For the Three Months Ended
June 30, For the Six Months Ended
June 30, 2018 2017 2018 2017 (in millions) $ — $ 1 $ — $ 1 Commodity contracts $ — $ 3 $ — $ (4 ) Interest rate contracts (5 ) — 9 — Total $ (5 ) $ 4 $ 9 $ (3 ) For the Three Months Ended
June 30, For the Six Months Ended
June 30, 2018 2017 2018 2017 (in millions) $ — $ (14 ) $ — $ (26 ) Commodity contracts — 6 — 6 Interest rate contracts 21 24 (11 ) 47 Total $ 21 $ 16 $ (11 ) $ 27 we recordedpre-tax losses of $97 million in the first quarter of 2016 related to amounts excluded from effectiveness testing. This amount relates tocertain forward-starting interest rate swaps no longer designated as cash flow hedges due to changes in financing plans. Due to lower overall costs and our decision to hedge a greater portionfor which the planned timing of our net investments in operations that use currencies other than the U.S. dollar as their functional currencies, we changed our plans to issue U.S. dollar-denominatedrelated forecasted debt and instead issued euro and Swiss franc-denominated notes in the first quarter of 2016. Amounts excluded from effectiveness testing were not material for all periods presented. andafter-tax (i) gains or losses reclassified from accumulated other comprehensive earnings/(losses) into earnings, (ii) gains or losses on ineffectiveness and (iii) gains or losses on amounts excluded from effectiveness testing in:cost of sales for commodity contracts;losses of $20 million (net of taxes) for commodity cash flow hedges, unrealized gains of $1 million (net of taxes) for currency cash flow hedges and unrealized losses ofless than $1 million (net of taxes) for interest rate cash flow hedges to earnings during the next 12 months.2017, we hedged transactions2018, our longest dated cash flow hedges were interest rate swaps that hedge forecasted to impact cash flowsinterest rate payments over the following periods:commodity transactions for periods not exceeding the next 6 months;interest rate transactions for periods not exceeding the next 65 years and 4 months; andmonths.currency exchange transactions for periods not exceeding the next 6 months. For the Three Months Ended
June 30, For the Six Months Ended
June 30, 2017 2016 2017 2016 (in millions) $ 1 $ 4 $ (2 ) $ 9 (1 ) (4 ) 2 (9 ) Fair value hedge ineffectiveness For the Three Months Ended
June 30, For the Six Months Ended
June 30, 2018 2017 2018 2017 (in millions) Borrowings $ — $ 1 $ 1 $ (2 ) Derivatives — (1 ) (1 ) 2 Total $ — $ — $ — $ — amounts excluded from effectiveness testing were not material for all periods presented.Economic Hedges:Pre-tax gains/(losses)is recorded in net earnings for economic hedges were: For the Three Months Ended
June 30, For the Six Months Ended
June 30,
Gain/(Loss)
Recognized 2017 2016 2017 2016 (in millions)
forecasted interest payments $ 3 $ 6 $ 5 $ 11 Interest and other expense, net 18 (46 ) 2 (77 ) Cost of sales 1 – (2 ) 8 Interest and other expense, net 2 8 2 12 Selling, general and administrative expenses (97 ) 31 (160 ) (13 ) Cost of sales $ (73 ) $ (1 ) $ (153 ) $ (59 ) As of June 30, 2018 As of December 31, 2017 (in millions) Notional value of borrowings (and related derivatives) $ (279 ) $ (801 ) Cumulative fair value hedging adjustments (1 ) — Carrying amount of borrowings $ (280 ) $ (801 ) Swiss franc-denominatedCanadian dollar-denominated debt were recorded within the cumulative translation adjustment section of other comprehensive income and were: For the Three Months Ended
June 30, For the Six Months Ended
June 30, Location of
Gain/(Loss)
Recognized in AOCI 2017 2016 2017 2016 (in millions) $ (168 ) $ 82 $ (196 ) $ (72 ) Currency (10 ) 63 (15 ) 86 Translation (49 ) 14 (64 ) (29 ) Adjustment For the Three Months Ended
June 30, For the Six Months Ended
June 30, 2018 2017 2018 2017 (in millions) Euro notes $ 151 $ (168 ) $ 76 $ (196 ) British pound sterling notes 21 (10 ) 8 (15 ) Swiss franc notes 42 (49 ) 16 (64 ) Canadian notes 6 — 4 — For the Three Months Ended June 30, For the Six Months Ended
June 30, 2018 2017 2018 2017 (in millions) Currency exchange contracts: $ 7 $ 3 $ 14 $ 5 Interest and other expense, net Forecasted transactions 72 18 65 2 Cost of sales Forecasted transactions — 1 (5 ) (2 ) Interest and other expense, net Forecasted transactions (1 ) 2 (4 ) 2 Selling, general and administrative expenses Commodity contracts (48 ) (97 ) 101 (160 ) Cost of sales Total $ 30 $ (73 ) $ 171 $ (153 ) 9.10. Benefit Plans U.S. Plans Non-U.S. Plans For the Three Months Ended
June 30, For the Three Months Ended
June 30, 2017 2016 2017 2016 (in millions) $ 10 $ 14 $ 38 $ 39 16 15 49 62 (25 ) (24 ) (108 ) (111 ) 9 9 40 31 – 1 – (1 ) 18 12 1 (1 ) $ 28 $ 27 $ 20 $ 19 U.S. Plans Non-U.S. Plans For the Six Months Ended
June 30, For the Six Months Ended
June 30, 2017 2016 2017 2016 (in millions) $ 22 $ 27 $ 77 $ 77 31 31 97 122 (50 ) (48 ) (212 ) (221 ) 17 18 81 62 1 1 (1 ) (2 ) 21 16 2 (1 ) $ 42 $ 45 $ 44 $ 37 U.S. Plans Non-U.S. Plans For the Three Months Ended
June 30, For the Three Months Ended
June 30, 2018 2017 2018 2017 (in millions) Service cost $ 10 $ 10 $ 37 $ 38 Interest cost 15 16 50 49 Expected return on plan assets (22 ) (25 ) (114 ) (108 ) Amortization: Net loss from experience differences 9 9 42 40 Prior service cost/(benefit) — — (1 ) — Settlement losses and other expenses 8 18 — 1 Net periodic pension cost $ 20 $ 28 $ 14 $ 20 U.S. Plans Non-U.S. Plans For the Six Months Ended
June 30, For the Six Months Ended
June 30, 2018 2017 2018 2017 (in millions) Service cost $ 22 $ 22 $ 75 $ 77 Interest cost 30 31 102 97 Expected return on plan assets (44 ) (50 ) (231 ) (212 ) Amortization: Net loss from experience differences 20 17 84 81 Prior service cost/(benefit) 1 1 (1 ) (1 ) Settlement losses and other expenses 15 21 — 2 Net periodic pension cost $ 44 $ 42 $ 29 $ 44 losses/(gains)losses and other expenses are losses of $3 million for the three and six months ended June 30, 2018 and $11 million for the three and six months ended June 30, 2017, and $9 million for the three and six months ended June 30, 2016, that are related to our 2014-2018 Restructuring Program and are recorded within asset impairment and exit costs on our condensed consolidated statements of earnings.2017,2018, we contributed $9$5 million to our U.S. pension plans and $369$199 million to ournon-U.S. pension plans. Thenon-U.S. amount included anon-recurring $250plans, including $137 million contribution made in connection with a new funding agreement for a Company planto plans in the U.K.United Kingdom and Ireland. We make contributions to our pension plans in accordance with local funding arrangements and statutory minimum funding requirements. Discretionary contributions are made to the extent that they are tax deductible and do not generate an excise tax liability.2017,2018, over the remainder of 2018, we plan to make further contributions of approximately $4$34 million to our U.S. plans and approximately $86$102 million to ournon-U.S. plans during the remainder of 2017. plans. Our actual contributions may be different due to many factors, including changes in tax and other benefit laws, significant differences between expected and actual pension asset performance or interest rates.costsbenefit consisted of the following: For the Three Months Ended
June 30, For the Six Months Ended
June 30, 2017 2016 2017 2016 (in millions) $ 2 $ 3 $ 4 $ 6 3 5 7 10 4 1 7 3 (10 ) (1 ) (20 ) (3 ) $ (1 ) $ 8 $ (2 ) $ 16 For the Three Months Ended
June 30, For the Six Months Ended
June 30, 2018 2017 2018 2017 (in millions) Service cost $ 1 $ 2 $ 3 $ 4 Interest cost 3 3 7 7 Amortization: Net loss from experience differences 3 4 7 7 (9 ) (10 ) (19 ) (20 ) Net periodic postretirement health care benefit $ (2 ) $ (1 ) $ (2 ) $ (2 ) (1) ForAmortization of prior service credit included gains of $8 million for the three months ended June 30, 2018 and June 30, 2017 and $16 million for the six months ended June 30, 2017, amortization of prior service credit includes an $8 million2018 and $16 million gain respectively,June 30, 2017 related to a change in the eligibility requirement and a change in benefits to Medicare-eligible participants.costscost consisted of the following: For the Three Months Ended
June 30, For the Six Months Ended
June 30, 2017 2016 2017 2016 (in millions) $ 2 $ 1 $ 3 $ 3 1 2 2 3 (1 ) – (2 ) – $ 2 $ 3 $ 3 $ 6 For the Three Months Ended
June 30, For the Six Months Ended
June 30, 2018 2017 2018 2017 (in millions) Service cost $ 1 $ 2 $ 3 $ 3 Interest cost 1 1 2 2 Amortization of net gains — (1 ) (1 ) (2 ) Net periodic postemployment cost $ 2 $ 2 $ 4 $ 3 10.11. Stock Plans Shares Subject
to Option Weighted-
Average
Exercise or
Grant Price
Per Share Average
Remaining
Contractual
Term Aggregate
Intrinsic
Value 53,601,612 $ 28.02 6 years $ 874 million 6,012,140 43.20 26,600 44.30 6,038,740 43.20 (6,099,149 ) 27.38 $ 109 million (1,270,978 ) 38.80 52,270,225 29.59 6 years $ 711 million Balance at January 1, 2018 48,434,655 $29.92 5 years $ 626 million Annual grant to eligible employees 5,666,530 43.51 Additional options issued 82,720 40.82 Total options granted 5,749,250 43.47 (4,541,932 ) 25.60 $ 81 million Options canceled (541,994 ) 38.39 Balance at June 30, 2018 49,099,979 31.81 6 years $ 478 million (1) Cash received from options exercised was $113$31 million in the three months and $170$116 million in the six months ended June 30, 2017.2018. The actual tax benefit realized and recorded in the provision for income taxes for the tax deductions from the option exercises totaled $10$1 million in the three months and $18$9 million in the six months ended June 30, 2017.2018. Weighted-Average Weighted-Average Number Fair Value Aggregate of Shares Grant Date Per Share Fair Value 7,593,627 $ 24.29 Feb. 16, 2017 1,087,010 43.20 845,550 43.20 304,961 Various 40.39 2,237,521 42.82 $ 96 million (2,443,709 ) 43.01 $ 105 million (569,922 ) 39.59 6,817,517 22.38 Grant Date Balance at January 1, 2018 7,669,705 $39.74 Annual grant to eligible employees: Feb 22, 2018 Performance share units 1,048,770 51.23 Deferred stock units 788,310 43.51 306,426 Various 40.97 Total shares granted 2,143,506 46.92 $ 101 million (2,162,663 ) 38.33 $ 83 million (352,565 ) 40.10 Balance at June 30, 2018 7,297,983 42.25 (1) Includes performance share units and deferred stock units. (2) Includes performance share units, deferred stock units and historically granted restricted stock. The actual tax benefit realized and recorded in the provision for income taxes for the tax deductions from the shares vested totaled less than $1 million in the three months and $7$4 million forin the six months ended June 30, 2017.2018.(3) The grant date fair value of performance share units is determined based on the Monte Carlo simulation model for the market-based total shareholder return component and the closing market price of the Company’s stock on the grant date for performance-based components. The Monte Carlo simulation model incorporates the probability of achieving the total shareholder return market condition. Compensation expense is recognized using the grant date fair values regardless of whether the market condition is achieved, so long as the requisite service has been provided. During$7.7a total of $13.7 billion of our Common Stock through December 31, 2016.2018. On July 29, 2015,January 31, 2018, our Finance Committee, with authorization delegated from our Board of Directors, approved an increase of $6.0 billion in the share repurchase program, raising the authorization to $13.7$19.7 billion of Common Stock repurchases, and extended the program through December 31, 2018.2020. Repurchases under the program are determined by management and are wholly discretionary. Prior to January 1, 2017,2018, we had repurchased $10.8$13.0 billion of Common Stock pursuant to this authorization. During the six months ended June 30, 2017,2018, we repurchased approximately 2527.6 million shares of Common Stock at an average cost of $44.61$41.65 per share, or an aggregate cost of approximately $1,109 million,$1.2 billion, all of which was paid during the period except for approximately $40 million settled in July 2017.period. All share repurchases were funded through available cash and commercial paper issuances. As of June 30, 2017,2018, we have $1.7$5.5 billion in remaining share repurchase capacity.11.12. Commitments and Contingencies5855 million as of June 30, 2017)2018) of unpaid excise tax and an equivalent amount of penalties, as well as interest, related to production at the same Indian facility. We contested these demands for unpaid excise taxes, penalties and interest. On March 27, 2015, after several hearings, the Commissioner of the Excise Authority issued an order denying the excise exemption that we claimed for the Indian facility and confirming the Excise Authority’s demands for total taxes and penalties in the amount of 5.8 billion Indian rupees ($9085 million as of June 30, 2017)2018). We have appealed this order. In addition, the Excise Authority issued additional show cause notices in February 2015, and December 2015 and October 2017 on the same issue but covering the periods January to October 2014, and November 2014 to September 2015 and October 2015 to June 2017, respectively. These notices added a total of 2.44.9 billion Indian rupees ($3772 million as of June 30, 2017)2018) of unpaid excise taxes as well as penalties to be determined up to an amount equivalent to that claimed by the Excise Authority plus interest. With the implementation of the new Goods and interest.Services Tax in India in July 2017, we will not receive any further show cause notices for additional amounts on this issue. We believe that the decision to claim the excise tax benefit is valid and we are continuing to contest the show cause notices through the administrative and judicial process.In2013, the staff of1, 2015, the U.S. Commodity Futures Trading Commission (“CFTC”("CFTC") advised us and Kraft Foods Group that it was investigating activities related to the trading of December 2011 wheat futures contracts that occurred prior to theSpin-Off of Kraft Foods Group. We cooperated with the staff in its investigation. On April 1, 2015, the CFTC filed a complaint against Kraft Foods Group and Mondelēz Global LLC (“Mondelēz Global”) in the U.S. District Court for the Northern District of Illinois, Eastern Division (the “CFTC action”). following its investigation of activities related to the trading of December 2011 wheat futures contracts that occurred prior to the spin-off of Kraft Foods Group. The complaint alleges that Kraft Foods Group and Mondelēz Global (1) manipulated or attempted to manipulate the wheat markets during the fall of 2011; (2) violated position limit levels for wheat futures and (3) engaged innon-competitive trades by trading both sides ofexchange-for-physical Chicago Board of Trade wheat contracts. The CFTC seeks civil monetary penalties of either triple the monetary gain for each violation of the Commodity Exchange Act (the “Act”) or $1 million for each violation of Section 6(c)(1), 6(c)(3) or 9(a)(2) of the Act and $140,000 for each additional violation of the Act, plus post-judgment interest; an order of permanent injunction prohibiting Kraft Foods Group and Mondelēz Global from violating specified provisions of the Act; disgorgement of profits; and costs and fees. In December 2015, the court denied Mondelēz Global and Kraft Foods Group’s motion to dismiss the CFTC’s claims of market manipulation and attempted manipulation, and the parties are now in discovery. Additionally, several class action complaints were filed against Kraft Foods Group and Mondelēz Global in the U.S. District Court for the Northern District of Illinois by investors in wheat futures and options on behalf of themselves and others similarly situated. The complaints make similar allegations as those made in the CFTC action and seek class action certification; an unspecified amount for damages, interest and unjust enrichment; costs and fees; and injunctive, declaratory and other unspecified relief. In June 2015, these suits were consolidated in the Northern District of Illinois. In June 2016, the court denied Mondelēz Global and Kraft Foods Group’s motion to dismiss, and the parties are now in discovery. It is not possible to predict the outcome of these matters; however, based on our Separation and Distribution Agreement with Kraft Foods Group dated as of September 27, 2012, we expect to bear any monetary penalties or other payments in connection with the CFTC action.Whilecannot predict with certainty the results of any Legal Matters in which we are currently involved, we do not expectbelieve that the ultimate costs to resolve anyoutcome of these Legal Matters,proceedings, individually orand in the aggregate, will havenot materially harm our financial position, results of operations or cash flows. However, legal proceedings and government investigations are subject to inherent uncertainties, and unfavorable rulings or other events could occur. Unfavorable resolutions could involve substantial monetary damages. In addition, in matters for which conduct remedies are sought, unfavorable resolutions could include an injunction or other order prohibiting us from selling one or more products at all or in particular ways, precluding particular business practices or requiring other remedies. An unfavorable outcome might result in a material effectadverse impact on our business, results of operations or financial results.2017,2018, we had no material third-party guarantees recorded on our condensed consolidated balance sheet.During We recorded a total of $4 million of income over the first quarterthird and fourth quarters of 2017 in connection with the Brazilian Supreme Court (the “Court”) ruled against the Brazilian tax authorities in a case related to the computationbank guarantee releases.12.13. Reclassifications from Accumulated Other Comprehensive Income$67$45 million in the threesecond quarter of 2018 and $41 millionin the second quarter of 2017 and $72 millionin the first six months of 2018 and $110$83 million in the first six months ended June 30, 2017 and $38 million in the three months and $178 million in the six months ended June 30, 2016. For the Three Months Ended
June 30, For the Six Months Ended
June 30, 2017 2016 2017 2016 (in millions) $ (8,375 ) $ (7,388 ) $ (8,914 ) $ (8,006 ) 252 (436 ) 764 38 – – – 57 128 (92 ) 159 8 380 (528 ) 923 103 (12 ) 14 (16 ) 1 (8,007 ) (7,902 ) (8,007 ) (7,902 ) $ (2,086 ) $ (1,940 ) $ (2,087 ) $ (1,934 ) 16 24 9 24 (2 ) (9 ) – (9 ) 42 34 83 63 15 11 18 15 (12 ) (15 ) (21 ) (24 ) (92 ) 65 (121 ) 35 (33 ) 110 (32 ) 104 (2,119 ) (1,830 ) (2,119 ) (1,830 ) $ (103 ) $ (53 ) $ (121 ) $ (46 ) 22 6 29 (83 ) (1 ) 3 4 27 (1 ) 2 – (4 ) (2 ) 10 6 15 – – – 96 (1 ) (4 ) (3 ) (40 ) (5 ) – (6 ) (1 ) 12 17 30 10 (91 ) (36 ) (91 ) (36 ) $ (10,564 ) $ (9,381 ) $ (11,122 ) $ (9,986 ) 359 (401 ) 921 217 (12 ) 14 (16 ) 1 347 (387 ) 905 218 $ (10,217 ) $ (9,768 ) $ (10,217 ) $ (9,768 ) For the Three Months Ended
June 30, For the Six Months Ended
June 30, 2018 2017 2018 2017 (in millions) Currency Translation Adjustments: Balance at beginning of period $ (7,549 ) $ (8,375 ) $ (7,741 ) $ (8,914 ) Currency translation adjustments (718 ) 252 (558 ) 764 Tax (expense)/benefit (156 ) 128 (109 ) 159 Other comprehensive earnings/(losses) (874 ) 380 (667 ) 923 12 (12 ) (3 ) (16 ) Balance at end of period (8,411 ) (8,007 ) (8,411 ) (8,007 ) Pension and Other Benefit Plans: Balance at beginning of period $ (2,150 ) $ (2,086 ) $ (2,144 ) $ (2,087 ) Net actuarial gain/(loss) arising during period 38 16 45 9 Tax (expense)/benefit on net actuarial gain/(loss) (9 ) (2 ) (9 ) — Losses/(gains) reclassified into net earnings: 44 42 91 83 8 15 15 18 (12 ) (12 ) (25 ) (21 ) Currency impact 99 (92 ) 45 (121 ) Other comprehensive earnings/(losses) 168 (33 ) 162 (32 ) Balance at end of period (1,982 ) (2,119 ) (1,982 ) (2,119 ) Derivative Cash Flow Hedges: Balance at beginning of period $ (159 ) $ (103 ) $ (113 ) $ (121 ) Net derivative gains/(losses) 17 22 (12 ) 29 Tax (expense)/benefit on net derivative gain/(loss) (4 ) (1 ) (4 ) 4 Losses/(gains) reclassified into net earnings: — (1 ) — — — (2 ) — 6 7 — (11 ) — (2 ) (1 ) 2 (3 ) Currency impact 8 (5 ) 5 (6 ) Other comprehensive earnings/(losses) 26 12 (20 ) 30 Balance at end of period (133 ) (91 ) (133 ) (91 ) Balance at beginning of period $ (9,858 ) $ (10,564 ) $ (9,998 ) $ (11,122 ) Total other comprehensive earnings/(losses) (680 ) 359 (525 ) 921 12 (12 ) (3 ) (16 ) (668 ) 347 (528 ) 905 Balance at end of period $ (10,526 ) $ (10,217 ) $ (10,526 ) $ (10,217 ) (1) 9,10, Benefit Plans.(2) Taxes reclassified to earnings are recorded within the provision for income taxes. (3) These reclassified gains or losses are recorded within cost of sales. (4) These reclassified gains or losses are recorded within interest and other expense, net. 13.14. Income Taxesisour estimated annual effective tax rate for 2017, excluding discrete tax impacts, was 25.8%, reflecting favorable impacts from the mix ofpre-tax income in variousnon-U.S. tax jurisdictions, partially offset by an increase in domestic earnings as compared to the prior year.earnings. Our 2017 second quarter effective tax rate of 16.2% was favorably impacted by net tax benefits offrom $47 million fromof discreteone-time events. The discrete net tax benefits primarily consisted of a $46 million benefit from the release of uncertain tax positions due to expirations of statutes of limitations and audit settlements in several jurisdictions. Our effective tax rate for the six months ended June 30, 2017 of 19.2% was favorably impacted by net tax benefits of $83 million from discreteone-time events. The discrete net tax benefits primarily consisted of a $62 million benefit from the release of uncertain tax positions due to expirations of statutes of limitations and audit settlements in various jurisdictions and a $16 million benefit relatedrelating to the U.S. domestic production activities deduction.As14.15. Earnings Perper Share For the Three Months Ended
June 30, For the Six Months Ended
June 30, 2017 2016 2017 2016 (in millions, except per share data) $ 500 $ 471 $ 1,133 $ 1,028 (2 ) (7 ) (5 ) (10 ) $ 498 $ 464 $ 1,128 $ 1,018 1,519 1,557 1,524 1,563 20 19 20 18 1,539 1,576 1,544 1,581 $ 0.33 $ 0.30 $ 0.74 $ 0.65 $ 0.32 $ 0.29 $ 0.73 $ 0.64 For the Three Months Ended
June 30, For the Six Months Ended
June 30, 2018 2017 2018 2017 (in millions, except per share data) Net earnings $ 325 $ 500 $ 1,269 $ 1,133 Noncontrolling interest (earnings) (2 ) (2 ) (8 ) (5 ) Net earnings attributable to Mondelēz International $ 323 $ 498 $ 1,261 $ 1,128 Weighted-average shares for basic EPS 1,475 1,519 1,482 1,524 13 20 14 20 Weighted-average shares for diluted EPS 1,488 1,539 1,496 1,544 $ 0.22 $ 0.33 $ 0.85 $ 0.74 $ 0.22 $ 0.32 $ 0.84 $ 0.73 forin the threesecond quarter of 2017 and 11.2 millionin the first six months of 2018 and 7.7 million forin the first six months ended June 30, 2017 and 6.5 million for the three months and 10.2 million for the six months ended June 30, 2016.of 2017.15.16. Segment ReportingOur operations and management structure are organized into four reportable operating segments:Latin AmericaAMEAEuropeNorth AmericaOn October 1, 2016, we integrated our EEMEA operating segment into our Europe and Asia Pacific operating segments to further leverage and optimize the operating scale built within the Europe and Asia Pacific regions. Russia, Ukraine, Turkey, Belarus, Georgia and Kazakhstan were combined within our Europe operating segment, while the remaining Middle East and African countries were combined within our Asia Pacific region to form the AMEA operating segment. We have reflected the segment change as if it had occurred in all periods presented., and amortization of intangibles, gains and losslosses on divestituredivestitures and acquisition-related costs (which are a component of selling, general and administrative expenses) in all periods presented. We exclude these items from segment operating income in order to provide better transparency of our segment operating results. Furthermore, we centrally manage benefit plan non-service income and interest and other expense, net. Accordingly, we do not present these items by segment because they are excluded from the segment profitability measure that management reviews.revised to reflect our new segment structure, were: For the Three Months Ended For the Six Months Ended June 30, June 30, 2017 2016 2017 2016 (in millions) $ 848 $ 843 $ 1,758 $ 1,660 1,394 1,446 2,885 2,961 2,171 2,293 4,536 4,741 1,573 1,720 3,221 3,395 $ 5,986 $ 6,302 $ 12,400 $ 12,757 $ 103 $ 32 $ 214 $ 99 162 149 343 339 339 256 748 608 214 295 506 566 (46 ) 17 (97 ) (37 ) (84 ) (67 ) (142 ) (127 ) (44 ) (44 ) (88 ) (88 ) (3 ) – (3 ) – 641 638 1,481 1,360 (124 ) (151 ) (243 ) (395 ) $ 517 $ 487 $ 1,238 $ 965 For the Three Months Ended
June 30, For the Six Months Ended
June 30, 2018 2017 2018 2017 (in millions) Net revenues: Latin America $ 774 $ 848 $ 1,665 $ 1,758 AMEA 1,360 1,394 2,902 2,885 Europe 2,303 2,171 5,009 4,536 North America 1,675 1,573 3,301 3,221 Net revenues $ 6,112 $ 5,986 $ 12,877 $ 12,400 Earnings before income taxes: Operating income: Latin America $ 92 $ 102 $ 218 $ 213 AMEA 177 161 405 342 Europe 367 321 864 714 North America (95 ) 225 180 517 Unrealized gains/(losses) on hedging activities
(mark-to-market impacts)88 (46 ) 294 (97 ) General corporate expenses (91 ) (80 ) (155 ) (137 ) Amortization of intangibles (44 ) (44 ) (88 ) (88 ) Loss on divestiture — (3 ) — (3 ) Acquisition-related costs (13 ) — (13 ) — Operating income 481 636 1,705 1,461 15 5 28 20 Interest and other expense, net (248 ) (124 ) (328 ) (243 ) Earnings before income taxes $ 248 $ 517 $ 1,405 $ 1,238 (1) During the first quarter of 2018, in connection with adopting a new pension cost classification accounting standard, we reclassified certain of our benefit plan component costs other than service costs out of operating income into a new line item, benefit plan non-service income, on our condensed consolidated statements of earnings. As such, we have recast our historical operating income and segment operating income to reflect this reclassification, which had no impact to earnings before income taxes or net earnings. 6,7, 2014-2018 Restructuring Program, and Note 11,12, Commitments and Contingencies. Also see Note 7,8, Debt and Borrowing Arrangements, and Note 8,9, Financial Instruments, for more information on our interest and other expense, net for each period.revised to reflect our new segment structure, were: For the Three Months Ended June 30, 2017 Latin
America AMEA Europe North
America Total (in millions) $ 200 $ 355 $ 718 $ 1,301 $ 2,574 194 425 946 50 1,615 241 238 204 222 905 129 189 24 – 342 84 187 279 – 550 $ 848 $ 1,394 $ 2,171 $ 1,573 $ 5,986 For the Three Months Ended June 30, 2016 Latin
America AMEA Europe North
America Total (in millions) $ 196 $ 356 $ 719 $ 1,398 $ 2,669 179 392 981 43 1,595 250 250 254 279 1,033 138 229 39 – 406 80 219 300 – 599 $ 843 $ 1,446 $ 2,293 $ 1,720 $ 6,302 For the Six Months Ended June 30, 2017 Latin
America AMEA Europe North
America Total (in millions) $ 370 $ 754 $ 1,369 $ 2,634 $ 5,127 453 940 2,169 120 3,682 454 467 397 467 1,785 322 362 65 – 749 159 362 536 – 1,057 $ 1,758 $ 2,885 $ 4,536 $ 3,221 $ 12,400 For the Six Months Ended June 30, 2016 Latin
America AMEA Europe North
America Total (in millions) $ 360 $ 763 $ 1,362 $ 2,759 $ 5,244 377 885 2,244 88 3,594 466 506 470 548 1,990 302 406 87 – 795 155 401 578 – 1,134 $ 1,660 $ 2,961 $ 4,741 $ 3,395 $ 12,757 For the Three Months Ended June 30, 2018 AMEA Europe Total (in millions) Biscuits $ 192 $ 387 $ 810 $ 1,403 $ 2,792 Chocolate 161 440 1,003 46 1,650 Gum & Candy 224 236 200 226 886 Beverages 116 173 19 — 308 Cheese & Grocery 81 124 271 — 476 Total net revenues $ 774 $ 1,360 $ 2,303 $ 1,675 $ 6,112 AMEA Europe Total (in millions) Biscuits $ 200 $ 356 $ 734 $ 1,301 $ 2,591 Chocolate 194 424 930 50 1,598 Gum & Candy 241 238 204 222 905 Beverages 129 189 24 — 342 Cheese & Grocery 84 187 279 — 550 Total net revenues $ 848 $ 1,394 $ 2,171 $ 1,573 $ 5,986 For the Six Months Ended June 30, 2018 AMEA Europe Total (in millions) Biscuits $ 375 $ 829 $ 1,605 $ 2,736 $ 5,545 Chocolate 404 1,013 2,426 103 3,946 Gum & Candy 448 471 386 462 1,767 Beverages 277 345 47 — 669 Cheese & Grocery 161 244 545 — 950 Total net revenues $ 1,665 $ 2,902 $ 5,009 $ 3,301 $ 12,877 AMEA Europe Total (in millions) Biscuits $ 370 $ 756 $ 1,399 $ 2,634 $ 5,159 Chocolate 453 938 2,139 120 3,650 Gum & Candy 454 467 397 467 1,785 Beverages 322 362 65 — 749 Cheese & Grocery 159 362 536 — 1,057 Total net revenues $ 1,758 $ 2,885 $ 4,536 $ 3,221 $ 12,400 (1) During the first quarter of 2018, we realigned some of our products across product categories and as such, we reclassified the product category net revenues on a basis consistent with the 2018 presentation. 165160 countries.LeveragingTo fuel investments in our Power Brands and our innovation platforms, we plan to innovate boldly and connect with our consumers wherever they are, including new markets around the world, using both traditionalglobal and digital channels. As consumer consumption patterns change to more accessible, frequent andbetter-for-you snacking, we are enhancing the goodness of many of our brands (including providing simpler and wholesome ingredient-focused snacks), expanding the well-being offerings in our portfolio and inspiring consumers to snack mindfully by providing clear and simple nutrition information. As shopping expands further online, we are also working to grow oure-commerce platform andon-line presence with consumers. To fuel these investments,reach, we have been working to optimize our cost structure. These efforts consist ofinclude reinventing our supply chain including addingoperations and upgrading to more efficient production lines, while reducing the complexity of our product offerings, ingredients and number of suppliers. We also continue to aggressively manage ourmanaging overhead costs. We have embraced and embeddedzero-based budgeting practices across the organization to identify potential areas of cost reductions and capture and sustain savings within our ongoing operating budgets. Through these actions, we’re leveraging our brands, platforms and capabilities to drive long-term value and return on investment for our shareholders.Windows-based applications and our sales, distribution and financial networks across our business. Duringnetworks. In the last four days of the second quarter and earlyduring the third quarter of 2017, we executed business continuity and contingency plans to contain the impact, and minimize the damages from the malware and restore our systems. This allowed ussystems environment. To date, we have not found, nor do we expect to service customer needs and continue sales and production at a reduced capacity while progressing recovery activities. Based on the nature of the malware and its impact to our technology, we did not expect nor to date have we foundfind, any instances of Company or personal data released externally. Although we believe weWe have now largely contained the disruptionalso restored our main operating systems and restored a majority ofprocesses and enhanced our affected systems, we anticipate additional work during the second half of 2017 as we continue to recover and further enhance the security of our systems.estimateestimated that the malware incident had a negative impact of 2.3% on our net revenue growth and 2.4% on our Organic Net Revenue growth. We also incurred incremental expenses of $7.1$7 million as a result of the incident. We expect to be able to recognizerecognized the majority of delayed second quarter shipments in our third quarter 2017 results, although we permanently lost some revenue. On a 2017 full-year basis, we estimated the loss of revenue had a negative impact of 0.4% on our net revenue and Organic Net Revenue growth. We continue to address the recovery of our systems in a couple of key markets and are also assessing longer-term investments that we will make to strengthen our IT environment against potential future disruptions. We expect to incur the majority ofincurred total incremental expenses related to the malware incident and recovery processof $84 million predominantly during the second half of 2017.decreased 5.0%increased 2.1% to $6.0$6.1 billion in the second quarter of 20172018 and decreased 2.8%increased 3.8% to $12.4$12.9 billion in the first six months of 2018 as compared to the same periodperiods in the prior year. During the second quarter and first six months of 2017,2018, net revenue growthrevenues grew due to favorable volume/mix and higher net pricing. Favorable volume/mix was adverselyin part due to the lapping of last year's malware incident. Net revenues also were positively affected by delayed shipments stemming from the malware incident and unfavorablefavorable currency translation as the U.S. dollar strengthenedweakened against mostseveral currencies in which we operate compared to exchange rates in the prior year. Net revenue growth was partially offset by the impact of several prior-year business divestitures, which reduced revenues in 2018 as compared to the prior year.•Organic Net Revenue, anon-GAAP financial measure on a constant currency basis, decreased 2.7% to $6.0 billion in the second quarter of 2017 and decreased 1.0% to $12.4 billion in the first six months of 2017 as compared to the same period in the prior year after recasting all periods to exclude the operating results from divestitures and an acquisition. (Refer toNon-GAAP Financial Measures appearing later in this section and Note 2,Divestitures and Acquisitions,for additional information). We use Organic Net Revenue as it provides improved year-over-year comparability of our underlying results (see the definition of Organic Net Revenue and our reconciliation with net revenues withinNon-GAAP Financial Measures appearing later in this section).•Diluted EPS attributable to Mondelēz International increased 10.3% to $0.32 in the second quarter of 2017 and increased 14.1% to $0.73 in the first six months of 2017 as compared to the same period in the prior year. A number of significant items affected the comparability of our reported results, as further described in theDiscussion and Analysis of Historical Results appearing later in this section and in the notes to the condensed consolidated financial statements.•Adjusted EPS, anon-GAAP financial measure, increased 11.6% to $0.48 in the second quarter of 2017 and increased 9.8% to $1.01 in the first six months of 2017 as compared to the same period in the prior year after recasting all periods to exclude the operating results from divestitures and historicalmark-to-market impacts. On a constant currency basis, Adjusted EPS increased 18.6% to $0.51 in the second quarter of 2017 and increased 13.0% to $1.04 in the first six months of 2017. We use Adjusted EPS as it provides improved year-over-year comparability of our underlying results (see the definition of Adjusted EPS and our reconciliation with diluted EPS withinNon-GAAP Financial Measures appearing later in this section).2016. Weak category growth2017.markets continue. As noted above,volatility. During the malware incident resulted in a significant unfavorable impact to our second quarter 2017 revenueof 2018, primarily based on published estimates which indicate that Argentina's three-year cumulative inflation rate has exceeded 100%, we concluded that Argentina has become a highly inflationary economy. Beginning July 1, 2018, we expect to be partially mitigatedapply highly inflationary accounting for our Argentinian subsidiaries. Our Argentinian operations contributed $267 million, or 2.1% of consolidated net revenues in the third quarter whensix months ended June 30, 2018. Based on a review of our Argentinian peso-denominated monetary assets and liabilities, our Argentinian operations had an immaterial net monetary liability position as of June 30, 2018. Having a net monetary liability position may mitigate our risk of unfavorable impacts from any further currency devaluations, however, the majoritymix of sales fromassets and liabilities or other factors could change, so it is difficult to predict the endoverall impact of the second quarter are shipped.highly inflationary accounting on net earnings. We also expect to incur the majority of incremental expenses related to the incident and recovery process during the second half of 2017. We continue to monitor the U.K. planned exit from the E.U.European Union (Brexit) and its impact on our results as well as currencies at risk of potential highly inflationary accounting, such asdevaluation.Argentinian pesosecond quarter of 2018, we implemented two aspects of our second revised last, best and final offer made to the BCTGM, resulting in our withdrawing from the Fund with respect to the employees covered by the 7 of the 8 collective bargaining agreements. We estimated a partial withdrawal liability of $567 million and within our North America segment, we recorded a discounted liability and charge of $408 million, $305 million net of tax, which represents our best estimate of the partial withdrawal liability absent an assessment from the Fund. We may receive an assessment in 2018 or later, and the Ukrainian hryvnia. In Brazil, we are monitoringultimate withdrawal liability may change from the currently estimated amount. We will record any future adjustments in the period during which the liability is confirmed or as new information becomes available. We expect to pay the liability in installments over a pendingperiod of 20 years from the assessment date.matter thatreform. While the 2017 U.S. tax reform reduced the U.S. corporate tax rate and included some beneficial provisions, other provisions could have an adverse effect on our results. Specifically, new provisions that cause U.S. allocated expenses (e.g. interest and general administrative expenses) to be taxed and impose a significant favorabletax on U.S. cross-border payments could adversely impact our effective tax rate. We continue to evaluate the impacts as additional guidance on implementing the legislation becomes available.we are not yet able to reasonably estimate the timing or amount at this time. In connection with collective bargaining agreements covering eight U.S. facilities that expiredKeurig Dr Pepper’s ongoing results on February 29, 2016, we continue to work toward reaching an agreement with the union and have made plans to ensure business continuity during thea quarter lag basis.re-negotiations.For more information on these items, refer to ourDiscussion and Analysis of Historical Results andCommodity Trends appearing later in this section, as well as Note 1,Basis of Presentation – Currency Translation and Highly Inflationary Accounting, Note 6, Equity Method Investments, Note 6,7, 2014-2018 Restructuring Program, Note 9, Financial Instruments, Note 10, Benefit Plansand Note 11,Commitments and Contingencies – Tax Matters14, Income Taxes.pre-tax results of operations and our effective tax rates. Please refer to the notes to the condensed consolidated financial statements indicated below for more information. Refer also to theConsolidated Results of Operations– Net Earnings and Earnings per Share Attributable to MondelēMondelēz International table for theafter-tax per share impacts of these items. For the Three Months Ended For the Six Months Ended June 30, June 30, See Note 2017 2016 2017 2016 (in millions, except percentages) Note 2 $ – $ – $ – $ 43 Note 6 (148 ) (154 ) (305 ) (293 ) (63 ) (74 ) (117 ) (172 ) Note 7 & 8 – – – (97 ) Note 7 (11 ) – (11 ) – Note 5 (38 ) (12 ) (38 ) (26 ) Note 2 (3 ) – (3 ) – – 6 – 6 (9 ) (84 ) (28 ) (84 ) – 39 – 39 Note 15 (46 ) 17 (97 ) (37 ) Note 11 – – 58 – (7 ) – (7 ) – Note 13 16.2 % 24.2 % 19.2 % 17.3 % For the Three Months Ended
June 30, For the Six Months Ended
June 30, See Note 2018 2017 2018 2017 (in millions, except percentages) 2014-2018 Restructuring Program: Note 7 Restructuring charges $ (112 ) $ (148 ) $ (164 ) $ (305 ) Implementation charges (70 ) (63 ) (132 ) (117 ) (Loss)/gain related to interest rate swaps Note 8 & 9 (5 ) — 9 — Loss on debt extinguishment Note 8 (140 ) (11 ) (140 ) (11 ) — (38 ) — (38 ) (10 ) — (14 ) — Acquisition and divestiture-related costs Note 2 Acquisition-related costs (13 ) — (13 ) — Loss on divestiture — (3 ) — (3 ) Divestiture-related costs — (9 ) 3 (28 ) Note 9 88 (46 ) 294 (97 ) Impact from resolution of tax matters Note 12 (15 ) — (15 ) 58 Impact from pension participation changes Note 10 (408 ) — (408 ) — Malware incident incremental expenses — (7 ) — (7 ) Note 14 (2 ) — 87 — Effective tax rate Note 14 5.6 % 16.2 % 22.8 % 19.2 % (1) Refer to our Annual Report on Form 10-K for the year ended December 31, 2017 for more information on prior-year intangible asset impairment charges. (2) (3) 11,Commitments and Contingencies – Tax Matters14, Income Taxes, for more information. The $58 million benefit frominformation on the settlementimpact of a CadburyU.S. tax matter in the first quarter of 2017 includes $46 million recorded within selling, general and administrative expenses and $12 million within interest and other expense, net.reform.20172018 and 2016. For the Three Months Ended June 30, 2017 2016 $ change % change (in millions, except per share data) $ 5,986 $ 6,302 $ (316 ) (5.0)% 641 638 3 0.5% 498 464 34 7.3% 0.32 0.29 0.03 10.3% For the Three Months Ended
June 30, 2018 2017 $ change % change (in millions, except per share data) Net revenues $ 6,112 $ 5,986 $ 126 2.1 % Operating income 481 636 (155 ) (24.4 )% 323 498 (175 ) (35.1 )% 0.22 0.32 (0.10 ) (31.3 )% decreased $316increased $126 million (5.0%(2.1%) to $5,986$6,112 million in the second quarter of 2017,2018, and Organic Net Revenue(1) decreased $169 increased $203 million (2.7%(3.5%) to $6,011$6,079 million. Power Brands net revenues decreased 3.0%increased 5.2%, including an unfavorablea favorable currency impact, and Power Brands Organic Net Revenue decreased 1.8%increased 4.7%. Emerging markets net revenues decreased 1.5%increased 0.2%, including an unfavorable currency impact, and emerging markets Organic Net Revenue decreased 0.3%increased 4.7%. The underlying changes in net revenues and Organic Net Revenue are detailed below: 20172018 2.1 (5.0)% UnfavorableFavorable currency(0.4 2.0)pp (0.1 )pp Impact of divestitures 1.9 0.5pp Impact of acquisition(0.2)pp 3.5 (2.7)%Favorable volume/mix 2.1 pp Unfavorable volume/mix(3.8)pp 1.4 pp 1.1pp (1) declineincrease of 5.0%2.1% was driven by our underlying Organic Net Revenue declinegrowth of 2.7%3.5%, unfavorablefavorable currency and the impact of divestitures,an acquisition, partially offset by the impact of an acquisition.divestitures. Our underlying Organic Net Revenue declinegrowth was driven by unfavorablefavorable volume/mix primarily due to delayed shipments as a result of the June 27, 2017 malware incident which we estimate had a negative impacts of 2.3% on our net revenue growth and 2.4% on our Organic Net Revenue growth, partially offset by higher net pricing. Unfavorable year-over-year currency impacts decreased net revenues by $124 million, due primarily toFavorable volume/mix included the strength of the U.S. dollar relative to several currencies, including the British pound sterling, euro, Egyptian pound and Argentinian peso,benefit from lapping last year's malware incident, partially offset by the strengthunfavorable impacts from the Brazil trucking strike and the shift of several currencies, includingEaster-related shipments into the Brazilian real, Russian ruble and South African rand, relative to the U.S. dollar. The impact of divestitures resulted in a year-over-year decline in net revenues of $39 million for the secondfirst quarter of 2017. The November 2, 2016 acquisition of a business and license to manufacture, market and sell Cadbury-branded biscuits in additional key markets added $16 million (constant currency basis) of incremental net revenues for the second quarter of 2017. Unfavorable2018. Favorable volume/mix was reflected across all segments.in North America and Europe, partially offset by unfavorable volume/mix in Latin America and AMEA. Net pricing was up, which includes the benefit of carryover pricing from the second half of 2016 and the first quarter of 2017 as well as the effects of input cost-driven pricing actions taken during the second quarter of 2017.2018. Higher net pricing was reflected in all segments exceptLatin America, AMEA and North America.Operating Income– Operating incomeAmerica, partially offset by lower net pricing in Europe. Favorable currency impacts increased $3net revenues by $26 million, (0.5%)due primarily to $641the strength of several currencies relative to the U.S. dollar, including the euro, British pound sterling and Chinese yuan, partially offset by the strength of the U.S. dollar relative to several other currencies, including the Argentinian peso, Brazilian real and Russian ruble. The June 7, 2018 acquisition of a U.S. premium biscuit company, Tate’s Bake Shop, added net revenues of $7 million in the second quarter of 2018. The impact of divestitures that occurred in 2017 resulted in a year-over-year decline in net revenues of $110 million. Refer to Note 2, $12$112 million (1.3%(12.4%) to $933$1,018 million and Adjusted Operating Income on a constant currency basis(1) increased $72$102 million (7.8%(11.3%) to $993$1,008 million due to the following: Operating
Income % Change (in millions) $ 638 228 12 3 (17 ) 84 (22 ) (6 ) 1
Three Months Ended June 30, 2016 $ 921 65 (17 ) (123 ) 154 (39 ) 27 5 – 72 7.8% (60 ) 12 1.3%
the Three Months Ended June 30, 2017 $ 933 (211 ) (38 ) (46 ) (7 ) (4 ) 18 (3 ) (1 ) $ 641 0.5% % Change (in millions) Operating Income for the Three Months Ended June 30, 2017 $ 636 199 Intangible asset impairment charges 38 46 Malware incident incremental expenses 7 4 (28 ) 3 Other/rounding 1 $ 906 Higher net pricing 84 Higher input costs (18 ) Favorable volume/mix 43 Lower selling, general and administrative expenses 19 Property insurance recovery (27 ) 1 102 11.3 % Favorable currency translation 10 112 12.4 % $ 1,018 (179 ) 88 (2 ) (13 ) (408 ) (11 ) (10 ) Other/rounding (2 ) Operating Income for the Three Months Ended June 30, 2018 $ 481 (24.4 )% (1) (2) 6,7, 2014-2018 Restructuring Program, for more information.(3) (4) , and Note 5,Goodwill and Intangible Assets, for more information on prior-year divestitures and the impairment charges recorded in 2017 and 2016 related to trademarks.June 7, 2018 acquisition of Tate's Bake Shop.(4)(5) Refer to our Annual Report on Form10-K for the year ended December 31, 2016,2017 for more information on the acquisition of a biscuit business in Vietnam.(5)(6) 8,Financial Instruments10, Benefit Plans, Note 15,Segment Reporting, andNon-GAAP Financial Measures appearing later in this section for more information on the unrealized gains/losses on commodity and forecasted currency transaction derivatives.information.(6)(7) 2,Divestitures12, Commitments and AcquisitionsContingencies – Tax Matters, for more information on the 2017 sales of a confectionery business in France and a grocery business in Australia and New Zealand. Note that we completed the sale of most of our grocery business in Australia and New Zealand on July 4, 2017 and we have also removed the historical operating results of the business for all periods presented. Refer to our Annual Report on Form10-Kinformation. for the year ended December 31, 2016 for more information on the 2016 sale of a confectionery business in Costa Rica.(7)Refer to Note 2,Divestitures and Acquisitions, for more information on the 2016 intangible asset sale in Finland.(8)Refer to Note 2,Divestitures and Acquisitions, for more information on the 2016 purchase of a license to manufacture, market and sell Cadbury-branded biscuits in additional key markets and other property sales in 2016.unfavorable volume/mix, primarily due to the delayed shipments resulting from the malware incident, was reflected across all segments. Weof 2018, we realized higher net pricing, aswhich was partially offset by increased input costs increased.costs. Higher net pricing, which included the carryover impact of pricing actions taken in 2017 as well as the second halfeffects of 2016input cost-driven pricing actions taken during 2018, was driven by Latin America, AMEA and the first quarter of 2017, was reflectedNorth America, partially offset by lower net pricing in all segments, except North America.Europe. The increase in input costs was driven by higher raw material costs, which wereprimarily higher dairy, packaging, energy and oils costs, partially offset by lower manufacturing costs due to productivity gains.decreased $219increased $449 million from the second quarter of 2016,2017, due to a number of factors noted in the table above, including in part, lower divestiture-related costs associated with the sale ofimpact from pension participation changes, a confectionery business in France, aprior-year property insurance recovery, in AMEAacquisition-related costs, the impact from the resolution of a tax matter, CEO transition remuneration and lower implementation costs incurred for the 2014-2018 Restructuring Program. The decreases were partially offset by the gains on sales of property in 2016, an unfavorable currency impact and incremental expenses caused by the malware incident.thethese factors, noted above, selling, general and administrative expenses decreased $154$19 million from the second quarter of 2016.2017. The decrease was driven primarily by lower advertising and consumer promotion costs and lower overhead costs due to continued cost reduction efforts in both areas.Unfavorablecosts.impacts decreasedchanges increased operating income by $60$10 million due primarily to the strength of several currencies relative to the U.S. dollar, including the euro, British pound sterling and Chinese yuan, partially offset by the strength of the U.S. dollar relative to several currencies, including the Egyptian pound, British pound sterlingArgentinian peso, Brazilian real and euro,Russian ruble. Diluted EPS $ 0.32 0.10 Intangible asset impairment charges 0.02 0.03 Malware incident incremental expenses — — (0.01 ) — 0.01 0.01 $ 0.48 Increase in operations 0.06 Property insurance recovery (0.01 ) Increase in equity method investment net earnings 0.01 — (0.01 ) 0.02 $ 0.55 Favorable currency translation 0.01 $ 0.56 (0.09 ) 0.05 — (0.01 ) (0.20 ) — (0.01 ) — (0.07 ) — (0.01 ) $ 0.22 (1) (2) (3) (4) Includes our proportionate share of unusual or infrequent items, such as acquisition and divestiture-related costs, restructuring program costs and discrete U.S. tax reform impacts recorded by our JDE and Keurig equity method investees. (5) Excludes the currency impact on interest expense related to our non-U.S. dollar-denominated debt which is included in currency translation. (6) (7) (8) (9) For the Six Months Ended
June 30, 2018 2017 $ change % change (in millions, except per share data) Net revenues $ 12,877 $ 12,400 $ 477 3.8 % Operating income 1,705 1,461 244 16.7 % 1,261 1,128 133 11.8 % 0.84 0.73 0.11 15.1 % 2018 Change in net revenues (by percentage point) Total change in net revenues 3.8 % Add back the following items affecting comparability: Favorable currency (2.9 )pp Impact of acquisition (0.1 )pp Impact of divestitures 2.1 pp 2.9 % Favorable volume/mix 1.9 pp Higher net pricing 1.0 pp (1) real, Russian rublereal. The June 7, 2018 acquisition of a U.S. premium biscuit company, Tate’s Bake Shop, added net revenues of $7 million in the first six months of 2018. The impact of divestitures that occurred in 2017 resulted in a year-over-year decline in net revenues of $246 million. Refer to Note 2, Divestitures and South African rand. % Change (in millions) Operating Income for the Six Months Ended June 30, 2017 $ 1,461 410 Intangible asset impairment charges 38 97 Malware incident incremental expenses 7 1 23 (55 ) 3 (46 ) $ 1,939 Higher net pricing 126 Higher input costs (87 ) Favorable volume/mix 58 Lower selling, general and administrative expenses 39 VAT-related settlement 21 Property insurance recovery (27 ) 3 133 6.9 % Favorable currency translation 79 212 10.9 % $ 2,151 (293 ) 294 (3 ) (13 ) 3 (408 ) (11 ) (14 ) Other/rounding (1 ) Operating Income for the Six Months Ended June 30, 2018 $ 1,705 16.7 % (1) (2) (3) (4) Refer to our Annual Report on Form 10-K for the year ended December 31, 2017 for more information on the acquisition of a biscuit business in Vietnam. (5) (6) (7) 10.1%11.8% in the second quarterfirst six months of 20162017 to 10.7%13.2% in the second quarterfirst six months of 2017.2018. The increase in operating income margin was driven primarily by the year-over-year favorable change in mark-to-market gains/(losses) from currency and commodity hedging activities, lower 2014-2018 Restructuring Program costs, an increase in our Adjusted Operating Income margin, the absence of intangible asset impairment charges and lower divestiture-related costs, associated with the sale of a confectionery business in France, partially offset by the year-over-year unfavorableimpact from pension participation changes, a prior-year impact from the resolution of a tax matter and the impact of unrealized gains/(losses) on currency and commodity hedging activities and higher intangible asset impairment charges.prior-year divestitures. Adjusted Operating Income margin increased from 14.9%16.0% in the second quarterfirst six months of 20162017 to 15.8%16.7% in the second quarterfirst six months of 2017.2018. The increase in Adjusted Operating Income margin was driven primarily by lower advertising and consumer promotion costs and lower overheads from continued cost reduction efforts in both areas.MondelēMondelēz International– Net earnings attributable to Mondelēz International of $498$1,261 million increased by $34$133 million (7.3%(11.8%) in the second quarterfirst six months of 2017.2018. Diluted EPS attributable to Mondelēz International was $0.32$0.84 in the second quarterfirst six months of 2017,2018, up $0.03 (10.3%$0.11 (15.1%) from the second quarterfirst six months of 2016.2017. Adjusted EPS(1) was $0.48$1.17 in the second quarterfirst six months of 2017,2018, up $0.05 (11.6%$0.17 (17.0%) from the second quarterfirst six months of 2016.2017. Adjusted EPS on a constant currency basis(1) was $0.51$1.12 in the second quarterfirst six months of 2017,2018, up $0.08 (18.6%$0.12 (12.0%) from the second quarterfirst six months of 2016. Diluted EPS
Three Months Ended June 30, 2016 $ 0.29 0.11 – – – 0.04 (0.01 ) – $ 0.43 0.05 (0.01 ) (0.02 ) 0.01 – 0.02 0.01 0.02 $ 0.51 (0.03 ) $ 0.48 (0.10 ) (0.02 ) (0.03 ) – – 0.01 – (0.01 ) (0.01 )
Three Months Ended June 30, 2017 $ 0.32 Diluted EPS $ 0.73 0.21 Intangible asset impairment charges 0.02 0.06 Malware incident incremental expenses — — 0.01 (0.03 ) — (0.04 ) 0.01 0.03 $ 1.00 Increase in operations 0.06 VAT-related settlements 0.01 Property insurance recovery (0.01 ) Increase in equity method investment net earnings 0.02 0.02 (0.01 ) 0.03 $ 1.12 Favorable currency translation 0.05 $ 1.17 (0.15 ) 0.17 — (0.01 ) — (0.20 ) — (0.01 ) 0.01 (0.07 ) (0.06 ) (0.01 ) $ 0.84 (1) (2) (3) Excludes the favorable currency impact on interest expense related to ournon-U.S. dollar-denominated debt which is included in currency translation.(4)Refer to Note 10,Stock Plans8, Debt and Borrowing Arrangements, for more information on our equity compensation programs and share repurchase program and Note 14,Earnings Per Share, for earnings per share weighted-average share information.(5)Refer to Note 10,Stock Plans, for more information on an $11 million earnings impact (in the provision for income taxes) in the second quarter of 2017 from adopting the new stock-based compensation accounting standard and Note 13,Income Taxes, for more information on the change in our income taxes and effective tax rate.(6)Refer to Note 7,Debt and Borrowing Arrangements, for more information on our losslosses on debt extinguishment and related expenses in connection with our debt discharge.extinguishment.(7)(4) Includes our proportionate share of unusual or infrequent items, such as acquisition and divestiture-related costs, and restructuring program costs and discrete U.S. tax reform impacts recorded by our JDE and Keurig equity method investees.Six Months Ended June 30: For the Six Months Ended June 30, 2017 2016 $ change % change (in millions, except per share data) $ 12,400 $ 12,757 $ (357 ) (2.8)% 1,481 1,360 121 8.9% 1,128 1,018 110 10.8% 0.73 0.64 0.09 14.1% Net Revenues– Net revenues decreased $357 million (2.8%) to $12,400 million in the first six months of 2017, and Organic Net Revenue(1) decreased $123 million (1.0%) to $12,389 million. Power Brands net revenues decreased 0.6%, including an unfavorable currency impact, and Power Brands Organic Net Revenue increased 0.4%. Emerging markets net revenues increased 1.4%, including an unfavorable currency impact, and emerging markets Organic Net Revenue increased 1.6%. The underlying changes in net revenues and Organic Net Revenue are detailed below:2017Change in net revenues (by percentage point)Total change in net revenues(2.8)% Add back the following items affecting comparability:Unfavorable currency1.8pp Impact of divestitures0.3pp Impact of acquisitions(0.3)pp Total change in Organic Net Revenue(1)(1.0)% Unfavorable volume/mix(2.1)pp Higher net pricing1.1pp (1)Please see theNon-GAAP Financial Measures section at the end of this item.Net revenue decline of 2.8% was driven by unfavorable currency, our underlying Organic Net Revenue decline of 1.0% and the impact of divestitures, partially offset by the impact of an acquisition. Unfavorable year-over-year currency impacts decreased net revenues by $216 million, due primarily to the strength of the U.S. dollar relative to several currencies, including the British pound sterling, euro, Egyptian pound, Argentinian peso, Nigerian naira, Chinese yuan, Mexican peso and Turkish lira, partially offset by the strength of several currencies, including the Brazilian real, Russian ruble, South African rand and Australian dollar, relative to the U.S. dollar. Our underlying Organic Net Revenue decline was driven by unfavorable volume/mix, partially offset by higher net pricing. Unfavorable volume/mix, primarily due to delayed shipments caused by the malware incident, was reflected in all segments except Europe. Net pricing was up, which includes the benefit of carryover pricing from the second half of 2016 and the first quarter of 2017 as well as the effects of input cost-driven pricing actions taken during the second quarter of 2017. Higher net pricing was reflected in Latin America and AMEA, partially offset by lower net pricing in North America and Europe. The impact of divestitures resulted in a year-over-year decline in net revenues of $48 million for the first six months of 2017. The November 2, 2016 acquisition of a business and license to manufacture, market and sell Cadbury-branded biscuits in additional key markets added $30 million (constant currency basis) of incremental net revenues for the first six months of 2017.Operating Income– Operating income increased $121 million (8.9%) to $1,481 million in the first six months of 2017, Adjusted Operating Income(1) increased $66 million (3.4%) to $1,988 million and Adjusted Operating Income on a constant currency basis(1) increased $139 million (7.2%) to $2,061 million due to the following: Operating Income % Change (in millions) $ 1,360 465 26 6 37 84 (49 ) (6 ) (1 )
Six Months Ended June 30, 2016 $ 1,922 141 (48 ) (155 ) 208 (39 ) 27 6 (1 ) 139 7.2% (73 ) 66 3.4%
Six Months Ended June 30, 2017 $ 1,988 (422 ) (38 ) (1 ) (97 ) (7 ) (23 ) 38 (3 ) 46 $ 1,481 8.9% (1)Refer to theNon-GAAP Financial Measures section at the end of this item.(2)Refer to Note 6,2014-2018 Restructuring Program, for more information.(3)Refer to Note 2,Divestitures and Acquisitions, and Note 5,Goodwill and Intangible Assets, for more information on the impairment charges recorded in 2017 and 2016 related to trademarks.(4)Refer to our Annual Report on Form10-K for the year ended December 31, 2016, for more information on the acquisition of a biscuit business in Vietnam.(5)Refer to Note 8,Financial Instruments, Note 15,Segment Reporting, andNon-GAAP Financial Measures appearing later in this section for more information on the unrealized losses on commodity and forecasted currency transaction derivatives.(6)Refer to Note 2,Divestitures and Acquisitions, for more information on the 2017 sales of a confectionery business in France and a grocery business in Australia and New Zealand. Note that we completed the sale of most of our grocery business in Australia and New Zealand on July 4, 2017 and we have also removed the historical operating results of the business for all periods presented. Refer to our Annual Report on Form10-K for the year ended December 31, 2016 for more information on the 2016 sale of a confectionery business in Costa Rica.(7)Refer to Note 2,Divestitures and Acquisitions, for more information on the 2016 intangible asset sale in Finland.(8)Refer to Note 2,Divestitures and Acquisitions, for more information on the 2016 purchase of a license to manufacture, market and sell Cadbury-branded biscuits in additional key markets and other property sales in 2016.(9)Refer to Note 11,Commitments and Contingencies, for more information on the benefit from the settlement of a Cadbury tax matter.During the first six months of 2017, unfavorable volume/mix, in part due to the delayed shipments resulting from the malware incident, was driven by North America, Latin America and AMEA, which was partially offset by favorable volume/mix in Europe. We realized higher net pricing while input costs increased modestly. Higher net pricing, which included the carryover impact of pricing actions taken in the second half of 2016 and the first quarter of 2017, was driven by Latin America and AMEA, partially offset by lower net pricing in North America and Europe. The increase in input costs was driven by higher raw material costs, which were partially offset by lower manufacturing costs due to productivity.Total selling, general and administrative expenses decreased $359 million from the first six months of 2016, due to a number of factors noted in the table above, including in part, lower divestiture-related costs associated with the sale of a confectionery business in France, the benefit from the settlement of a Cadbury tax matter, lower implementation costs incurred for the 2014-2018 Restructuring Program, a property insurance recovery in AMEA and a favorable currency impact. The decreases were partially offset by the gains on sales of property in 2016 and incremental expenses incurred due to the malware incident.Excluding the factors noted above, selling, general and administrative expenses decreased $208 million from the first six months of 2016. The decrease was driven primarily by lower overhead costs and lower advertising and consumer promotion costs due to continued cost reduction efforts in both areas.Unfavorable currency impacts decreased operating income by $73 million, due primarily to the strength of the U.S. dollar relative to several currencies, including the Egyptian pound, British pound sterling and euro, partially offset by the strength of several currencies relative to the U.S. dollar, including the Brazilian real, Russian ruble, Australian dollar and South African rand.Operating income margin increased from 10.7% in the first six months of 2016 to 11.9% in the first six months of 2017. The increase in operating income margin was driven primarily by an increase in our Adjusted Operating Income margin, lower divestiture-related costs associated with the sale of a confectionery business in France, the benefit from the settlement of a Cadbury tax matter and lower costs incurred for the 2014-2018 Restructuring Program, partially offset by the year-over-year unfavorable impact of unrealized gains/(losses) on currency and commodity hedging activities and higher intangible asset impairment charges. Adjusted Operating Income margin increased from 15.4% in the first six months of 2016 to 16.3% in the first six months of 2017. The increase in Adjusted Operating Income margin was driven primarily by lower overheads and lower advertising and consumer promotion costs due to continued cost reduction efforts in both areas.Net Earnings and Earnings per Share Attributable to Mondelēz International– Net earnings attributable to Mondelēz International of $1,128 million increased by $110 million (10.8%) in the first six months of 2017. Diluted EPS attributable to Mondelēz International was $0.73 in the first six months of 2017, up $0.09 (14.1%) from the first six months of 2016. Adjusted EPS(1) was $1.01 in the first six months of 2017, up $0.09 (9.8%) from the first six months of 2016. Adjusted EPS on a constant currency basis(1) was $1.04 in the first six months of 2017, up $0.12 (13.0%) from the first six months of 2016. Diluted EPS
Six Months Ended June 30, 2016 $ 0.64 0.22 0.01 0.01 0.02 0.04 (0.03 ) – 0.04 (0.03 ) $ 0.92 0.09 (0.01 ) (0.02 ) 0.01 – 0.03 0.02 – $ 1.04 (0.03 ) $ 1.01 (0.21 ) (0.02 ) – (0.06 ) – (0.01 ) 0.02 (0.01 ) 0.04 (0.03 )
Six Months Ended June 30, 2017 $ 0.73 (1)Refer to theNon-GAAP Financial Measures section at the end of this item.(2)See theOperating Income table above and the related footnotes for more information.(3)Refer to Note 8,Financial Instruments, for more information on our interest rate swaps, which we no longer designated as cash flow hedges during the first quarter of 2016 due to changes in financing and hedging plans.(4)Refer to Note 2,Divestitures and Acquisitions – Keurig Transaction, for more information on the 2016 acquisition of an interest in Keurig.(5) Excludes the favorable currency impact on interest expense related to ournon-U.S. dollar-denominated debt which is included in currency translation.(6) 10,14, Income Taxes, for more information on the items affecting income taxes.(7) 14,15, Earnings Perper Share, for earnings per share weighted-average share information.(7)(8) 10,Stock Plans9, Financial Instruments, for more information on a $25 million earnings impact (in the provision for income taxes) in the first half of 2017 from adopting the new stock-based compensation accounting standard andour interest rate swaps that we no longer designate as cash flow hedges.(9) 13,14, Income Taxes, for more information on the change in our income taxes and effectiveimpact of the U.S. tax rate.reform.(8)Refer to Note 7,Debt and Borrowing Arrangements, for more information on our loss on debt extinguishment and related expenses in connection with our debt discharge.(9)Includes our proportionate share of unusual or infrequent items, such as acquisition and divestiture-related costs and restructuring program costs, recorded by our JDE and Keurig equity method investees.On October 1, 2016, we integrated our EEMEA operating segment into our Europe and Asia Pacific operating segments to further leverage and optimize the operating scale built within the Europe and Asia Pacific regions. Russia, Ukraine, Turkey, Belarus, Georgia and Kazakhstan were combined within our Europe operating segment, while the remaining Middle East and African countries were combined within our Asia Pacific region to form a new AMEA operating segment. We have reflected the segment change as if it had occurred in all periods presented.15,16, Segment Reporting,for additional information on our segments andItems Affecting Comparability of Financial Results earlier in this section for items affecting our segment operating results.revised to reflect our new segment structure in all periods, were: For the Three Months Ended For the Six Months Ended June 30, June 30, 2017 2016 2017 2016 (in millions) $ 848 $ 843 $ 1,758 $ 1,660 1,394 1,446 2,885 2,961 2,171 2,293 4,536 4,741 1,573 1,720 3,221 3,395 $ 5,986 $ 6,302 $ 12,400 $ 12,757 $ 103 $ 32 $ 214 $ 99 162 149 343 339 339 256 748 608 214 295 506 566 (46 ) 17 (97 ) (37 ) (84 ) (67 ) (142 ) (127 ) (44 ) (44 ) (88 ) (88 ) (3 ) – (3 ) – 641 638 1,481 1,360 (124 ) (151 ) (243 ) (395 ) $ 517 $ 487 $ 1,238 $ 965 For the Three Months Ended
June 30, For the Six Months Ended
June 30, 2018 2017 2018 2017 (in millions) Net revenues: Latin America $ 774 $ 848 $ 1,665 $ 1,758 AMEA 1,360 1,394 2,902 2,885 Europe 2,303 2,171 5,009 4,536 North America 1,675 1,573 3,301 3,221 Net revenues $ 6,112 $ 5,986 $ 12,877 $ 12,400 Earnings before income taxes: Operating income: Latin America $ 92 $ 102 $ 218 $ 213 AMEA 177 161 405 342 Europe 367 321 864 714 North America (95 ) 225 180 517 Unrealized gains/(losses) on hedging activities
(mark-to-market impacts)88 (46 ) 294 (97 ) General corporate expenses (91 ) (80 ) (155 ) (137 ) Amortization of intangibles (44 ) (44 ) (88 ) (88 ) Loss on divestiture — (3 ) — (3 ) Acquisition-related costs (13 ) — (13 ) — Operating income 481 636 1,705 1,461 15 5 28 20 Interest and other expense, net (248 ) (124 ) (328 ) (243 ) Earnings before income taxes $ 248 $ 517 $ 1,405 $ 1,238 (1) During the first quarter of 2018, in connection with adopting a new pension cost classification accounting standard, we reclassified certain of our benefit plan component costs other than service costs out of operating income into a new line item, benefit plan non-service income, on our condensed consolidated statements of earnings. As such, we have recast our historical operating income and segment operating income to reflect this reclassification, which had no impact to earnings before income taxes or net earnings. For the Three Months Ended June 30, 2017 2016 $ change % change (in millions) $ 848 $ 843 $ 5 0.6% 103 32 71 221.9% For the Six Months Ended June 30, 2017 2016 $ change % change (in millions) $ 1,758 $ 1,660 $ 98 5.9% 214 99 115 116.2% For the Three Months Ended
June 30, 2018 2017 $ change % change (in millions) Net revenues $ 774 $ 848 $ (74 ) (8.7 )% Segment operating income 92 102 (10 ) (9.8 )% For the Six Months Ended
June 30, 2018 2017 $ change % change (in millions) Net revenues $ 1,665 $ 1,758 $ (93 ) (5.3 )% Segment operating income 218 213 5 2.3 % increased $5decreased $74 million (0.6%(8.7%), due to higher net pricing (7.5unfavorable currency (12.5 pp) and favorable currency (1.3unfavorable volume/mix (2.3 pp), partially offset by higher net pricing (6.1 pp). Unfavorable currency impacts were due primarily to the strength of the U.S. dollar relative to the Argentinean peso, Brazilian real and Mexican peso. Unfavorable volume/mix was largely due to the negative impact of the Brazil trucking strike, partially offset by lapping last year's malware incident. Unfavorable volume/mix was driven by declines in all categories except biscuits. Higher net pricing was reflected across all categories, driven primarily by Argentina, Mexico and Brazil.(8.0unfavorable currency and higher costs incurred for the 2014-2018 Restructuring Program. These unfavorable items were partially offset by higher net pricing, lower manufacturing costs and lower advertising and consumer promotion costs.a divestiture (0.2 pp).the Brazil trucking strike, partially offset by lapping last year's malware incident. Unfavorable volume/mix was driven by declines in all categories except biscuits. Higher net pricing was reflected across all categories, driven primarily by Argentina, Brazil and Mexico. For the Three Months Ended
June 30, 2018 2017 $ change % change (in millions) Net revenues $ 1,360 $ 1,394 $ (34 ) (2.4 )% Segment operating income 177 161 16 9.9 % For the Six Months Ended
June 30, 2018 2017 $ change % change (in millions) Net revenues $ 2,902 $ 2,885 $ 17 0.6 % Segment operating income 405 342 63 18.4 % primarilyincluding the Brazilian real,Chinese yuan, South African rand and Australian dollar, partially offset by the strength of the U.S. dollar relative to several currencies in the Argentineanregion, including the Indian rupee, Philippine peso and Mexican peso. Unfavorable volume/mix, which occurred across most of the region, was largely due to the impact of pricing-related elasticity and delayed shipments caused by the malware incident. Unfavorable volume/mix was driven by declines in all categories except candy. On December 1, 2016, we sold a small confectionery business in Costa Rica.$71$16 million (221.9%(9.9%), primarily due to higher net pricing, lower costs incurred for the 2014-2018 Restructuring Program, lower manufacturing costs, lower advertising and consumer promotion costs and favorable currency. These favorable items were partially offset by higher raw material costs, higher other selling, general and administrative expenses (including the lapping of a prior-year property insurance recovery), unfavorable volume/mix and the impact of divestitures.lower other selling, general and administrative expenses and favorable currency. These favorable items were partially offset by higher raw material costs, the impact of divestitures, higher other selling, general and administrative expenses (including the lapping of a prior-year property insurance recovery) and unfavorable volume/mix.Six For the Three Months Ended
June 30, 2018 2017 $ change % change (in millions) Net revenues $ 2,303 $ 2,171 $ 132 6.1 % Segment operating income 367 321 46 14.3 % For the Six Months Ended
June 30, 2018 2017 $ change % change (in millions) Net revenues $ 5,009 $ 4,536 $ 473 10.4 % Segment operating income 864 714 150 21.0 % $98$132 million (5.9%(6.1%), due to higher net pricing (6.9favorable currency (5.5 pp) and favorable currency (4.6volume/mix (3.5 pp), partially offset by unfavorable volume/mix (5.3 pp) and the impact of a divestiture (0.3divestitures (2.2 pp). Higher and lower net pricing was reflected across all categories driven primarily by Argentina, Brazil and Mexico.(0.7 pp). Favorable currency impacts were due primarily toreflected the strength of several currencies in the region relative to the U.S. dollar, primarily the Brazilian real,euro, British pound sterling, Polish zloty and Czech koruna. Favorable volume/mix included the benefit from lapping last year's malware incident partially offset by the strengthshift of Easter-related shipments into the U.S. dollar relative to the Argentinean peso and Mexican peso. Unfavorable volume/mix, which occurred across mostfirst quarter of the region, was largely due to the impact of pricing-related elasticity and delayed shipments caused by the malware incident. Unfavorable2018. Favorable volume/mix was driven by chocolate, biscuits and candy, partially offset by declines in all categories except chocolate. On December 1, 2016, we soldcheese & grocery, gum and refreshment beverages. The impact of divestitures, primarily due to the sale of a small confectionery business in Costa Rica.$115$46 million (116.2%(14.3%), primarily due to higher net pricing, lower advertising and consumer promotion costs,favorable volume/mix, lower manufacturing costs lower other selling, general and administrative expenses, favorable currency, and lower costs incurred for the 2014-2018 Restructuring Program.currency. These favorable items were partially offset by higher raw material costs and unfavorable volume/mix.AMEA For the Three Months Ended June 30, 2017 2016 $ change % change (in millions) $ 1,394 $ 1,446 $ (52) (3.6)% 162 149 13 8.7% For the Six Months Ended June 30, 2017 2016 $ change % change (in millions) $ 2,885 $ 2,961 $ (76) (2.6)% 343 339 4 1.2% Three Months Ended June 30:Net revenues decreased $52 million (3.6%), due to unfavorable currency (3.2 pp) and unfavorable volume/mix (2.5 pp), partially offset by higherlower net pricing, (1.8 pp) and the favorable impact of businesses divested (0.3 pp). Unfavorable currency impacts were due primarily to the strength of the U.S. dollar relative to several currencies in the region, including the Egyptian pound, Nigerian naira and Chinese yuan, partially offset by the strength of several other currencies in the region, including the South African rand and Indian rupee, relative to the U.S. dollar. Unfavorable volume/mix was driven by declines in refreshment beverages, cheese & grocery, gum and candy, partially offset by gains in chocolate and biscuits. The unfavorable volume/mix also reflected the impact from the trade implementation of the new Goods and Services Tax (“GST”) in India and delayed shipments due to the malware incident. Higher net pricing was reflected across all categories except cheese & grocery and candy. Businesses divested primarily includes the favorable Organic Net Revenue growth related to the grocery & cheese business in Australia and New Zealand that was divested on July 4, 2017.Segment operating income increased $13 million (8.7%), primarily due to lower other selling, general and administrative expenses (including a property insurance recovery), higher net pricing and lower advertising and consumer promotion costs. These favorable items were partially offset by unfavorable currency, higher raw material costs, higher costs incurred for the 2014-2018 Restructuring Program and unfavorable volume/mix.Six Months Ended June 30:Net revenues decreased $76 million (2.6%), due to unfavorable currency (3.2 pp) and unfavorable volume/mix (1.8 pp), partially offset by higher net pricing (2.3 pp) and the favorable impact of businesses divested (0.1 pp). Unfavorable currency impacts were due primarily to the strength of the U.S. dollar relative to several currencies in the region, including the Egyptian pound, Nigerian naira and Chinese yuan, partially offset by the strength of several other currencies in the region, including the South African rand, Australian dollar and Indian rupee, relative to the U.S. dollar. Unfavorable volume/mix was driven by declines in cheese & grocery, refreshment beverages, gum and candy, partially offset by gains in chocolate and biscuits. The unfavorable volume/mix also reflected the impact from the trade implementation of the new GST in India and delayed shipments due to the malware incident. Higher net pricing was reflected across all categories except cheese & grocery. Businesses divested primarily includes the favorable Organic Net Revenue growth related to the grocery & cheese business in Australia and New Zealand that was divested on July 4, 2017.Segment operating income increased $4 million (1.2%), primarily due to lower other selling, general and administrative expenses (including a property insurance recovery), higher net pricing, lower manufacturing costs and lower acquisition integration costs. These favorable items were partially offset by higher raw material costs, unfavorable currency, unfavorable volume/mix,divestitures, higher costs incurred for the 2014-2018 Restructuring Program and higher advertising and consumer promotion costs.Europe For the Three Months Ended June 30, 2017 2016 $ change % change (in millions) $ 2,171 $ 2,293 $ (122) (5.3)% 339 256 83 32.4% For the Six Months Ended June 30, 2017 2016 $ change % change (in millions) $ 4,536 $ 4,741 $ (205) (4.3)% 748 608 140 23.0% Threedecreased $122increased $473 million (5.3%(10.4%), due to unfavorablefavorable currency (3.7 pp), the impact of divestitures (1.6(9.7 pp) and unfavorablefavorable volume/mix (0.8(4.6 pp), partially offset by the impact of an acquisition (0.7divestitures (3.1 pp) and higherlower net pricing (0.1(0.8 pp). UnfavorableFavorable currency impacts reflected the strength of the U.S. dollar against mostseveral currencies in the region, primarily the British pound sterling and euro, partially offset by the strength of the Russian ruble relative to the U.S. dollar.dollar, primarily the euro, British pound sterling, Polish zloty and Czech koruna. Favorable volume/mix included the benefit from lapping last year's malware incident. Favorable volume/mix was driven by chocolate, biscuits and candy, partially offset by declines in cheese & grocery, gum and refreshment beverages. The impact of divestitures, was primarily due to the sale of a confectionery business in France. Unfavorable volume/mix, caused by delayed shipments due to the malware incident, was driven by gum, candy, cheese & grocery and refreshment beverages, partially offset by gainsFrance, resulted in chocolate and biscuits. The acquisition of a business and license to manufacture, market and sell Cadbury-branded biscuitsyear-over-year decline in November 2016 added net revenues of $16$121 million (constant currency basis). Higherfor the first six months of 2018. Lower net pricing was driven by chocolate, candy and refreshment beverages, mostly offset by lower net pricing in biscuits and cheese & grocery.Segment operating income increased $83 million (32.4%), primarily due to lower divestiture-related costs, lower manufacturing costs, lower advertising and consumer promotion costs, lower other selling, general and administrative expenses and a prior-year second quarter intangible asset impairment charge. These favorable items were partially offset by higher raw material costs, unfavorable currency, higher costs incurred for the 2014-2018 Restructuring Program, unfavorable volume/mix, the impact of divestitures and a prior-year second quarter gain on the sale of an intangible asset.Six Months Ended June 30:Net revenues decreased $205 million (4.3%), due to unfavorable currency (4.3 pp), the impact of divestitures (0.8 pp) and lower net pricing (0.1 pp), partially offset by the impact of an acquisition (0.6 pp) and favorable volume/mix (0.3 pp). Unfavorable currency impacts reflected the strength of the U.S. dollar against most currencies in the region, primarily the British pound sterling, euro and Turkish lira, partially offset by the strength of the Russian ruble relative to the U.S. dollar. The impact of divestitures was primarily due to the sale of a confectionery business in France. Lower net pricing was driven by biscuits and cheese & grocery, mostly offset by higher net pricing in chocolate, candy, refreshment beverages and gum. The acquisition of a business and license to manufacture, market and sell Cadbury-branded biscuits in November 2016 added net revenues of $30 million (constant currency basis). Favorable volume/mix, including the negative impact of delayed shipments in the second quarter due to the malware incident, was driven by chocolate and biscuits, partially offset by declines in gum, cheese & grocery, refreshment beverages and candy.Segment operating income increased $140 million (23.0%), primarily due to lower manufacturing costs, lower divestiture-related costs, the benefit from the settlement of a Cadbury tax matter, lower other selling, general and administrative expenses, lower advertising and consumer promotion costs and prior-year intangible asset impairment charges. These favorable items were partially offset by higher raw material costs, unfavorable currency, the impact of divestitures, lower net pricing and higher costs incurred for the 2014-2018 Restructuring Program.North America For the Three Months Ended June 30, 2017 2016 $ change % change (in millions) $ 1,573 $ 1,720 $ (147 ) (8.5 )% 214 295 (81 ) (27.5 )% For the Six Months Ended June 30, 2017 2016 $ change % change (in millions) $ 3,221 $ 3,395 $ (174 ) (5.1 )% 506 566 (60 ) (10.6 )% Three Months Ended June 30:Net revenues decreased $147 million (8.5%), due to unfavorable volume/mix (6.6 pp), lower net pricing (1.5 pp) and unfavorable currency (0.4 pp). Unfavorable volume/mix, primarily caused by delayed shipments due to the malware incident, was driven by declines in biscuits, gum and candy, partially offset by a gain in chocolate. Lower net pricing was reflected in biscuits and chocolate, partially offset by higher net pricing in gum. Unfavorable currency impact was due to the strength of the U.S. dollar relative to the Canadian dollar.decreased $81increased $150 million (27.5%(21.0%), primarily due to unfavorablefavorable volume/mix, higher intangible asset impairment charges, lower net pricing, higher other selling, general and administrative expenses (including the prior year’s gain on sale of property) and higher raw material costs. These unfavorable items were partially offset byfavorable currency, lower manufacturing costs, lower costs incurred for the 2014-2018 Restructuring Program and lower advertisingdivestiture-related costs. These favorable items were partially offset by lapping the prior-year benefit from the settlement of a Cadbury tax matter, higher raw material costs, lower net pricing, the impact of divestitures and consumer promotion costs.Sixhigher other selling, general and administrative expenses. For the Three Months Ended
June 30, 2018 2017 $ change % change (in millions) Net revenues $ 1,675 $ 1,573 $ 102 6.5 % Segment operating income (95 ) 225 (320 ) (142.2 )% For the Six Months Ended
June 30, 2018 2017 $ change % change (in millions) Net revenues $ 3,301 $ 3,221 $ 80 2.5 % Segment operating income 180 517 (337 ) (65.2 )% decreased $174increased $102 million (5.1%(6.5%), due to unfavorablefavorable volume/mix (4.0(5.1 pp), lowerhigher net pricing (1.0(0.6 pp), favorable currency (0.4 pp) and unfavorable currency (0.1the impact of an acquisition (0.4 pp). UnfavorableFavorable volume/mix primarily causedincluded the benefit from lapping last year's malware incident partially offset by delayedthe shift of Easter-related shipments due tointo the malware incident,first quarter of 2018. Favorable volume/mix was driven by declinesgains in biscuits gum and candy, partially offset by a gaindeclines in gum and chocolate. LowerHigher net pricing was reflected in biscuits gum and chocolate,gum, partially offset by higherlower net pricing in candy. Unfavorablecandy and chocolate. Favorable currency impact was due to the strength of the U.S.Canadian dollar relative to the CanadianU.S. dollar.$60$320 million (10.6%(142.2%), primarily due to unfavorable volume/mix, lower net pricing, higher intangible asset impairment chargesthe impact from pension participation changes and higher raw materialmanufacturing costs. These unfavorable items were partially offset by favorable volume/mix, the lapping of prior-year intangible asset impairment charges, higher net pricing, lower raw material costs and lower advertising and consumer promotion costs.advertisingother selling, general and consumer promotion costs.regularour funding requirements. We also use intercompany loans with our international subsidiaries to improve financial flexibility. Earnings outside of the U.S. are considered indefinitely reinvested and no material tax liability has been accrued as of June 30, 2017. 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 U.S.2017 and $337 million in the first six months of 2016.2017. The decreaseincrease in net cash provided by operating activities was due primarily to higher tax payments in 2017, partially offset by highernet earnings, and improvements in our cash conversion cycle. In the second quarter of 2017, we continued to improve our cash conversion cycle to negative 21 days from negative 4 daysimproved working capital trends as well as lower pension contributions in the second quarterfirst six months of 2016.2017 and $505 million in the first six months of 2016.2017. The decreaseincrease in net cash used in investing activities primarily relates to net$528 million paid to acquire the Tate's Bake Shop business in the second quarter of 2018, the absence of proceeds from divestitures received from a divestiture of $169 millionin the prior year and lowerhigher capital expenditures of $532 million in the first six months of 2018 compared to $488 million forin the first six months ended June 30, 2017 compared to $604 million for the six months ended June 30, 2016.of 2017. We continue to make capital expenditures primarily to modernize manufacturing facilities and support new product and productivity initiatives. We expect 20172018 capital expenditures to be up to $1.1$1.0 billion, including capital expenditures in connection with our 2014-2018 Restructuring Program. We expect to continue to fund these expenditures from operations.in/Provided byin) Financing Activities:2017 and2017. The increase in net cash provided by financing activities was $28 million in the first six months of 2016. The increase in net cash used in financing activities relative to the comparable prior-year period was primarily due to higher net payments of long-term and lower netdebt issuances of short-term debt,partially offset by lowerhigher share repurchases.7,8, Debt and Borrowing Arrangements, for details of our debt activity during the first six months of 2017.2018. 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. Due to seasonality, 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 quarterssecond half of the year typically generategenerates 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.74.3 percent74.4% (or $9.2$9.6 billion) of the $12.4$12.9 billion of consolidated net revenue in the six months ended June 30, 2017.2018. The operations held by MIHN represented approximately 87.7 percent79.1% (or $22.6$20.0 billion) of the $25.8$25.3 billion of net assets as of June 30, 20172018 and 81.7 percent75.5% (or $20.6$19.8 billion) of the $25.2$26.2 billion of net assets as of December 31, 2016.$5$5.0 billion long-term financing authority to replace the prior authority. As of June 30, 2017,2018, we had $4.7$1.7 billion of long-term financing authority remaining.$739approximately $780 million of long-term debt will mature as follows:fr.250 £76 million Swiss franc notes ($261100 million as of June 30, 2017)2018) in JanuaryJuly 2018, $280 million in August 2018 and $478$400 million in February 2018.2019. We expect to fund these repayments with a combination of cash from operations and the issuance of commercial paper or long-term debt.$18.8$19.7 billion at June 30, 20172018 and $17.2$17.7 billion at December 31, 2016.2017. Ourdebt-to-capitalization ratio was 0.420.44 at June 30, 20172018 and 0.410.40 at December 31, 2016.2017. At June 30, 2017,2018, the weighted-average term of our outstanding long-term debt was 6.76.1 years. Our average daily commercial paper borrowings outstanding were $4.6 billion in the first six months of 2018 and $4.2 billion in the first six months ended 2017 and $2.0 billion in the first six months ended 2016.of 2017. We had commercial paper$4.2totaling $3.9 billion as of June 30, 20172018 and $2.4$3.4 billion as of December 31, 2016.2017. We expect to continue to use commercial paper to finance various short-term financing needs. We continue to comply with our debt covenants. Refer to Note 7,8, Debt and Borrowing Arrangements, for more information on our debt and debt covenants.ended June 30, 2017,of 2018, the primary drivers of the increase in our aggregate commodity costs were higher commodity market pricing and currency-relatedincreased costs onfor dairy, cocoa, sugar, packaging, energy, grains & oils grains and other raw materials, partially offset by lower costs for nutscocoa, sugar and energy.commodity price volatility and a slightly higher aggregate cost environment to continue in 2017. Given that2018. While the costs of our keyprincipal raw materials fluctuate, significantly over time, we periodically enter into hedging instruments to ensure reliability of supplies and to lock in costs. As such, our actual commodity costs could vary from commodity spot market pricing over the hedged period. 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.7,8, Debt and Borrowing Arrangements, for information on debt transactions during 2018, Note 10, Benefit Plans, for information on the first six months of 2017.long-term multiemployer pension plan partial withdrawal liability and Note 14, Income Taxes, for updates on the U.S. tax reform transition liability. There were no other material changes to ouroff-balance sheet arrangements and aggregate contractual obligations disclosed in our Annual Report on Form10-K for the year ended December 31, 2016.2017. We also do not expect a material change in the effect of these arrangementsto have sufficient cash from operating activities and obligations onaccess to capital markets to fund our liquidity.obligations. See Note 11,12, Commitments and Contingencies, for a discussion of guarantees.10,11, Stock Plans, for more information on our stock plans, grant activity and share repurchase program for the six months ended June 30, 2017.July 29, 2015,January 31, 2018, our Finance Committee, with authorization delegated from our Board of Directors, approved an increase of $6.0 billion in the share repurchase program, raising the authorization to $13.7$19.7 billion of Common Stock repurchases, and extended the program through December 31, 2018.$11,965 millionshares at an aggregate cost of shares$14.2 billion, at a weighted-average cost of $39.08 per share, through June 30, 2018 ($1,109 million1.2 billion in the first six months of 2018, $2.2 billion in 2017, $2,601 million$2.6 billion in 2016, $3,623 million$3.6 billion in 2015, $1,892 million$1.9 billion in 2014 and $2,740$2.7 billion in 2013) through June 30, 2017.. 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.2017 and $537 million in the first six months of 2016.2017. On August 2, 2017,July 25, 2018, the Finance Committee, with authorization delegated from our Board of Directors, approveddeclared a 16%quarterly cash dividend of $0.26 per share of Class A Common Stock, an increase in the quarterly dividend to $0.22 per common share or $0.88of 18 percent, which would be $1.04 per common share on an annualized basis. This dividend is payable on October 12, 2018, to shareholders of record as of September 28, 2018. 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.make a determination as to whether 2017 distributions arebe characterized as dividends a return of basis, or both under U.S. federal income tax rulesrules. The final determination will be made after the 2017 calendaryear-end. This determination will be2018 year–end and reflected on an IRS Form1099-DIV 1099–DIV issued in early 2018.2016.2017. Our significant accounting estimates are described inManagement’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form10-K for the year ended December 31, 2016.2017. See Note 1,Basis of Presentation, for a discussion of the impact of new accounting standards. There were no changes in our accounting policies in the current period that had a material impact on our financial statements.11,12, Commitments and Contingencies, and Part II, Item 1.Legal Proceedings, for a discussion of contingencies.” “potential,” “objective,” “project,” “outlook” and similar expressions are intended to identify our forward-looking statements, including but not limited to statements about: our future performance, including our future revenue growth margins and earnings per share;margins; price volatility and pricing actions; the cost environment and measures to address increased costs; our tax rate, tax positions, tax proceedings and estimates of the United Kingdom’simpact of U.S. tax reform on our results; the U.K.'s planned exit from the European Union and its impact on our results; the costs of, timing of expenditures under and completion of our restructuring program; category growth; consumer snacking behaviors; commodity prices and supply; investments; innovation; political and economic conditions and volatility; currency exchange rates, controls and restrictions; the application of highly inflationary accounting for our operationsArgentinian subsidiaries and the potential impacts from changing to highly inflationary accounting in Ukraine;other countries; overhead costs; the gain on the conversion of our JDE ownership interest;investment in Keurig into an investment in Keurig Dr Pepper and our investment and governance rights in Keurig Dr Pepper; matters related to the acquisition of a U.S. premium biscuit company; the outcome and effects on us of legal matters;proceedings and government investigations; the estimated value of intangible assets; amortization expense for intangible assets; impairment of intangible assets and our projections of operating results and other factors that may affect our impairment testing; our accounting estimates and judgments and the impact of new accounting pronouncements; pension expenses, contributions and assumptions; our tax rate and tax positions; the potential impact of amounts previously paid and accrued for ICMS tax in Brazil; remediation effortsliability related to our partial withdrawal from the Bakery and Confectionery Union and Industry International Pension Fund and timing of receipt of the financial and otherassessment from the Fund; the impacts of the malware incident; our liquidity, funding sources and uses of funding, including our use of commercial paper; reinvestment of earnings; our risk management program, including the use of financial instruments and the impacts and effectiveness of our hedging activities; working capital; capital expenditures and funding; share repurchases; dividends; the characterization of 2018 distributions as dividends; long-term value and return on investment for our shareholders; and our contractual obligations.strategic transactions; our ability to innovate and differentiate our products; strategic transactions; significant changes in valuation factors that may adversely affect our impairment testing of goodwill and intangible assets; perceived or actual product quality issues or product recalls; failure to maintain effective internal control over financial reporting; volatility of and access to capital or other markets; pension costs; use of information technology and third party service providers; our ability to protect our intellectual property and intangible assets; a shift in ourpre-tax income among jurisdictions, including the United States; and tax law changes.assets. We disclaim and do not undertake any obligation to update or revise any forward-looking statement in this report except as required by applicable law or regulation.• , our historical global coffee business(3), our historical Venezuelan operations, accounting calendar changes and currency rate fluctuations(4)(3). We also evaluate Organic Net Revenue growth from emerging markets and our Power Brands.• Our Power Brands include some of our largest global and regional brands such asOreo,Chips Ahoy!, Ritz, TUC/Club Social andbelVita biscuits;Cadbury Dairy Milk, Milka andLacta chocolate;Tridentgum;Halls candy; andTang powdered beverages.•2012-2014 Restructuring Program(5); the 2014-2018 Restructuring Program(5)(4); Venezuela remeasurement and deconsolidation losses and historical operating results; gains or losses (includingnon-cash impairment charges) on goodwill and intangible assets; divestiture(2) or acquisition gains or losses and related divestiture (2), acquisition and integration and acquisition costs; the JDE coffee business transactionscosts (3)(2) gain and net incremental costs;; the operating results of divestitures(2); our historical global coffee business operating results(3);mark-to-market impacts from commodity and forecasted currency transaction derivative contracts(5); impact from resolution of tax matters (6); equity method investment earnings historically reported within operating incomeCEO transition remuneration (7); the benefitimpact from the settlement of a Cadbury tax matterpension participation changes (8); and incremental expenses related to the 2017 malware incident. We also present “Adjusted Operating Income margin,” which is subject to the same adjustments as Adjusted Operating Income. We also evaluate growth in our Adjusted Operating Income on a constant currency basis(4)(3).• 2012-2014 Restructuring Program(5);items listed in the 2014-2018 Restructuring Program(5); Venezuela remeasurement and deconsolidation losses and historical operating results;Adjusted Operating Income definition as well as losses on debt extinguishment and related expenses; gains or losses (includingnon-cash impairment charges) on goodwill and intangible assets; divestiture(2) or acquisition gains or losses and related integration and acquisition costs; the JDE coffee business transactions(3) gain, transaction hedging gains or losses and net incremental costs; gain on the equity method investment exchange;transactions; net earnings from divestitures(2);mark-to-market impacts from commodity and forecasted currency transaction derivative contracts(6); gains or losses on interest rate swaps no longer designated as accounting cash flow hedges due to changed financing and hedging plans; the benefit from the settlement of a Cadburyplans and U.S. tax matterreform discrete impacts (8)(9) and incremental expenses related to the malware incident.. Similarly, within Adjusted EPS, our equity method investment net earnings exclude our proportionate share of our investees’ unusual or infrequent items(9)(10), such as acquisition and divestiture-related costs and restructuring program costs.. We also evaluate growth in our Adjusted EPS on a constant currency basis(4)(3).(1) When items no longer impact our current or future presentation ofnon-GAAP operating results, we remove these items from ournon-GAAP definitions. ForDuring the firstsecond quarter of 2017,2018, we added to thenon-GAAP definitions the exclusion of the benefitimpact from the settlement of a Cadbury tax matter –pension participation changes - see footnote (8) below. In the second quarter of 2017, we added the exclusion of incremental expenses related to the malware incident.(2) that we completed2, Divestitures and Acquisitions, for information on divestitures and acquisitions impacting the sale of mostcomparability of our grocery business in Australia and New Zealand on July 4, 2017 and we have also removed the historical operating results of the business from our Organic Net Revenue and adjusted results for all periods presented.results.(3)We continue to have an ongoing interest in the legacy coffee business we deconsolidated in 2015 as part of the JDE coffee business transactions. For historical periods prior to the July 15, 2015 coffee business deconsolidation, we have reclassified any net revenue or operating income from the historical coffee business and include them where the coffee equity method investment earnings are presented within Adjusted EPS. As such, Organic Net Revenue and Adjusted Operating Income in all periods do not include the results of our legacy coffee businesses which are shown within Adjusted EPS only.(4)(3)Constant currency operating results are calculated by dividing or multiplying, as appropriate, the current-period local currency operating results by the currency exchange rates used to translate the financial statements in the comparable prior-year period to determine what the current-period U.S. dollar operating results would have been if the currency exchange rate had not changed from the comparable prior-year period. (5)(4) Non-GAAP adjustments related to the 2014-2018 Restructuring Program reflect costs incurred that relate to the objectives of our program to transform our supply chain network and organizational structure. Costs that do not meet the program objectives are not reflected in thenon-GAAP adjustments. Refer to our Annual Report on Form10-K for the year ended December 31, 2016 for more information on the 2012-2014 Restructuring Program.(6)(5) During the third quarter of 2016, we began to exclude unrealized gains and losses (mark-to-market (mark-to-market impacts) from outstanding commodity and forecasted currency transaction derivatives from ournon-GAAP earnings measures until such time that the related exposures impact our operating results. Since we purchase commodity and forecasted currency transaction contracts to mitigate price volatility primarily for inventory requirements in future periods, we made this adjustment to remove the volatility of these future inventory purchases on current operating results to facilitate comparisons of our underlying operating performance across periods. We also discontinued designating commodity and forecasted currency transaction derivatives for hedge accounting treatment. To facilitate comparisons of our underlying operating results, we have recast all historicalnon-GAAP earnings measures to exclude themark-to-market impacts.(7)(6) Historically, we have recorded income from equity method investments within our operating income as these investments operated as extensions of our base business. Beginning in the third quarter of 2015, we began to record the earnings from our equity method investments inafter-tax equity method investment earnings outside of operating income following the deconsolidation of our coffee business. Refer toSee Note 1,Summary of Significant Accounting Policies, in12, Commitments and Contingencies – Tax Matters, and our Annual Report on Form10-K for the year ended December 31, 20162017 for moreadditional information.(8)(7) DuringOn November 20, 2017, Dirk Van de Put succeeded Irene Rosenfeld as CEO of Mondelēz International in advance of her retirement at the first quarterend of March 2018. In order to incent Mr. Van de Put to join us, we provided him compensation with a total combined target value of $42.5 million to make him whole for incentive awards he forfeited or grants that were not made to him when he left his former employer. The compensation we granted took the form of cash, deferred stock units, performance share units and stock options. In connection with Irene Rosenfeld’s retirement, we made her outstanding grants of performance share units for the 2016-2018 and 2017-2019 performance cycles eligible for continued vesting and approved a $0.5 million salary for her service as Chairman from January through March 2018. We refer to these elements of Mr. Van de Put’s and Ms. Rosenfeld’s compensation arrangements together as “CEO transition remuneration.” We are excluding amounts we expense as CEO transition remuneration from our non-GAAP results because those amounts are not part of our regular compensation program and are incremental to amounts we would have incurred as ongoing CEO compensation. As a result, in 2017, we recorded a $58 million gain onexcluded amounts expensed for the settlementcash payment to Mr. Van de Put and partial vesting of apre-acquisition Cadbury tax matter further disclosed in Note 11,Commitmentshis equity grants. In 2018, we excluded amounts paid for Ms. Rosenfeld’s service as Chairman and Contingencies – Tax Matters.partial vesting of Mr. Van de Put’s and Ms. Rosenfeld’s equity grants.(8) (9) (10) We have excluded our proportionate share of our equity method investees’ unusual or infrequent items such as acquisition and divestiture related costs, restructuring program costs and discrete U.S. tax reform impacts, in order to provide investors with a comparable view of our performance across periods. Although we have shareholder rights and board representation commensurate with our ownership interests in our equity method investees and review the underlying operating results and unusual or infrequent items with them each reporting period, we do not have direct control over their operations or resulting revenue and expenses. Our use of equity method investment net earnings on an adjusted basis is not intended to imply that we have any such control. Our GAAP “diluted EPS attributable to Mondelēz International from continuing operations” includes all of the investees’ unusual and infrequent items. For the Three Months Ended June 30, 2017 For the Three Months Ended June 30, 2016 Emerging Developed Emerging Developed Markets Markets Total Markets Markets Total (in millions) (in millions) $ 2,304 $ 3,682 $ 5,986 $ 2,339 $ 3,963 $ 6,302 26 98 124 – – – – (16 ) (16 ) – – – – (83 ) (83 ) (2 ) (120 ) (122 ) $ 2,330 $ 3,681 $ 6,011 $ 2,337 $ 3,843 $ 6,180 For the Three Months Ended June 30, 2017 For the Three Months Ended June 30, 2016 (1) Power Non-Power Power Non-Power Brands Brands Total Brands Brands Total (in millions) (in millions) $ 4,295 $ 1,691 $ 5,986 $ 4,426 $ 1,876 $ 6,302 69 55 124 – – – (16 ) – (16 ) – – – – (83 ) (83 ) – (122 ) (122 ) $ 4,348 $ 1,663 $ 6,011 $ 4,426 $ 1,754 $ 6,180 For the Six Months Ended June 30, 2017 For the Six Months Ended June 30, 2016 Emerging Developed Emerging Developed Markets Markets Total Markets Markets Total (in millions) (in millions) $ 4,706 $ 7,694 $ 12,400 $ 4,642 $ 8,115 $ 12,757 8 208 216 – – – – (30 ) (30 ) – – – – (197 ) (197 ) (4 ) (241 ) (245 ) $ 4,714 $ 7,675 $ 12,389 $ 4,638 $ 7,874 $ 12,512 For the Six Months Ended June 30, 2017 For the Six Months Ended June 30, 2016 (1) Power Non-Power Power Non-Power Brands Brands Total Brands Brands Total (in millions) (in millions) $ 9,013 $ 3,387 $ 12,400 $ 9,070 $ 3,687 $ 12,757 125 91 216 – – – (30 ) – (30 ) – – – – (197 ) (197 ) – (245 ) (245 ) $ 9,108 $ 3,281 $ 12,389 $ 9,070 $ 3,442 �� $ 12,512 For the Three Months Ended June 30, 2018 For the Three Months Ended June 30, 2017 Total Total (in millions) (in millions) Net Revenue $ 2,309 $ 3,803 $ 6,112 $ 2,304 $ 3,682 $ 5,986 Impact of currency 104 (130 ) (26 ) — — — Impact of acquisition — (7 ) (7 ) — — — Impact of divestitures — — — — (110 ) (110 ) Organic Net Revenue $ 2,413 $ 3,666 $ 6,079 $ 2,304 $ 3,572 $ 5,876 For the Three Months Ended June 30, 2018 Total Total (in millions) (in millions) Net Revenue $ 4,548 $ 1,564 $ 6,112 $ 4,323 $ 1,663 $ 5,986 Impact of currency (22 ) (4 ) (26 ) — — — Impact of acquisition — (7 ) (7 ) — — — Impact of divestitures — — — — (110 ) (110 ) Organic Net Revenue $ 4,526 $ 1,553 $ 6,079 $ 4,323 $ 1,553 $ 5,876 For the Six Months Ended June 30, 2018 For the Six Months Ended June 30, 2017 Total Total (in millions) (in millions) Net Revenue $ 4,893 $ 7,984 $ 12,877 $ 4,706 $ 7,694 $ 12,400 Impact of currency 55 (418 ) (363 ) — — — Impact of acquisition — (7 ) (7 ) — — — Impact of divestitures — — — — (246 ) (246 ) Organic Net Revenue $ 4,948 $ 7,559 $ 12,507 $ 4,706 $ 7,448 $ 12,154 For the Six Months Ended June 30, 2018 Total Total (in millions) (in millions) Net Revenue $ 9,685 $ 3,192 $ 12,877 $ 9,070 $ 3,330 $ 12,400 Impact of currency (278 ) (85 ) (363 ) — — — Impact of acquisition — (7 ) (7 ) — — — Impact of divestitures — — — — (246 ) (246 ) Organic Net Revenue $ 9,407 $ 3,100 $ 12,507 $ 9,070 $ 3,084 $ 12,154 (1) Each year we reevaluate our Power Brands and confirm the brands in which we will continue to make disproportionate investments. As such, we may make changes in our planned investments in primarily regional Power Brands following our annual review cycles. For 2017,2018, we made limited changes to our list of regional Power Brands and as such, we reclassified 20162017 Power Brand net revenues on a basis consistent with the current list of Power Brands.divestiture-related costs incurred for the sale of a confectionery business in France and the sale of a grocery business in Australia;intangible asset impairment charges, related to intangible assets; othermark-to-market impacts from commodity and forecasted currency transaction derivative contracts; malware incident incremental expenses, acquisition integration costs; acquisition-related costs; divestiture-related costs; the operating results of divestitures; loss on divestiture;mark-to-market impacts the impact from commodity and forecasted currency transaction derivative contracts; incremental expenses related topension participation changes; the malware incident; gain on sale of intangible assets and the benefitimpact from the settlementresolution of a Cadbury tax matter.matters; and CEO transition remuneration. We also present “Adjusted Operating Income margin,” which is subject to the same adjustments as Adjusted Operating Income, and evaluate Adjusted Operating Income on a constant currency basis. We believe these measures provide improved comparability of underlying operating results. For the Three Months Ended
June 30, 2017 2016 $ Change % Change (in millions) $ 641 $ 638 $ 3 0.5% 211 228 (17 ) 4 84 (80 ) 38 12 26 – 3 (3 ) (18 ) (22 ) 4 3 – 3 46 (17 ) 63 7 – 7 – (6 ) 6 1 1 – $ 933 $ 921 $ 12 1.3% 60 – 60 $ 993 $ 921 $ 72 7.8% For the Six Months Ended
June 30, 2017 2016 $ Change % Change (in millions) $ 1,481 $ 1,360 $ 121 8.9% 422 465 (43 ) 23 84 (61 ) 38 26 12 1 6 (5 ) (38 ) (49 ) 11 3 – 3 97 37 60 7 – 7 – (6 ) 6 (46 ) – (46 ) – (1 ) 1 $ 1,988 $ 1,922 $ 66 3.4% 73 – 73 $ 2,061 $ 1,922 $ 139 7.2% For the Three Months Ended
June 30, 2018 2017 $ Change % Change (in millions) Operating Income $ 481 $ 636 $ (155 ) (24.4 )% 179 199 (20 ) Intangible asset impairment charges — 38 (38 ) (88 ) 46 (134 ) Malware incident incremental expenses — 7 (7 ) 2 — 2 13 — 13 — 4 (4 ) — (28 ) 28 — 3 (3 ) 408 — 408 11 — 11 10 — 10 Other/rounding 2 1 1 Adjusted Operating Income $ 1,018 $ 906 $ 112 12.4 % Impact of favorable currency (10 ) — (10 ) Adjusted Operating Income (constant currency) $ 1,008 $ 906 $ 102 11.3 % For the Six Months Ended
June 30, 2018 2017 $ Change % Change (in millions) Operating Income $ 1,705 $ 1,461 $ 244 16.7 % 293 410 (117 ) Intangible asset impairment charges — 38 (38 ) (294 ) 97 (391 ) Malware incident incremental expenses — 7 (7 ) 3 1 2 13 — 13 (3 ) 23 (26 ) — (55 ) 55 — 3 (3 ) 408 — 408 11 (46 ) 57 14 — 14 Other/rounding 1 — 1 Adjusted Operating Income $ 2,151 $ 1,939 $ 212 10.9 % Impact of favorable currency (79 ) — (79 ) Adjusted Operating Income (constant currency) $ 2,072 $ 1,939 $ 133 6.9 % (1) 6,7, 2014-2018 Restructuring Program,, for more information.(2) 2,Divestitures and Acquisitions, for more information on the 2017 sales of a confectionery business in France and a grocery business in Australia and New Zealand. Note that we completed the sale of most of our grocery business in Australia and New Zealand on July 4, 2017 and we have also removed the historical operating results of the business for all periods presented. Refer to our Annual Report on Form9, 10-K for the year ended December 31, 2016 for more information on the 2016 sale of a confectionery business in Costa Rica.(3)Refer to Note 2,Divestitures and Acquisitions, for more information on the impairment charges recorded in 2017 and 2016 related to trademarks.(4)Refer to our Annual Report on Form10-K for the year ended December 31, 2016, for more information on the acquisition of a biscuit business in Vietnam.(5)Refer to Note 8,Financial Instruments, Note 15,16, Segment Reporting, andNon-GAAP Financial Measures appearing earlier in this section for more information on these unrealized losses/gains on commodity and forecasted currency transaction derivatives.(6)(3) Refer to our Annual Report on Form 10-K for the year ended December 31, 2017 for information on the acquisition of a biscuit business in Vietnam. (4) 2016 intangible asset sale in Finland.June 7, 2018 acquisition of Tate's Bake Shop.(7)(5) Refer to Note 11, 10, Benefit Plans, for more information.(6) , for more information oninformation.(7) benefit from the settlement of a Cadbury tax matter.Non-GAAP Financial Measures definition and related table notes.2014-2018 Restructuring Program costs; divestiture-related costs incurred for the saleimpacts of a confectionery businessthe items listed in France and the sale of a grocery business in Australia; impairment charges related to intangible assets; acquisition integration costs; net earnings from divestiture; loss on divestiture;mark-to-market impacts from commodity and forecasted currency transaction derivative contracts; incremental expenses related to the malware incident; lossesAdjusted Operating Income tables above as well as gain on interest rate swaps no longer designated as accounting cash flow hedges due to changed financing and hedging plans; lossesswaps; loss on debt extinguishment and related expenses; the benefit from the settlement of a CadburyU.S. tax matter; gain on the equity method investment exchange;reform discrete impacts; and our proportionate share of unusual or infrequent items recorded by our JDE and Keurig equity method investees. We also evaluate Adjusted EPS on a constant currency basis. We believe Adjusted EPS provides improved comparability of underlying operating results. For the Three Months Ended June 30, 2017 2016 $ Change % Change $ 0.32 $ 0.29 $ 0.03 10.3% 0.10 0.11 (0.01 ) – 0.04 (0.04 ) 0.02 – 0.02 (0.01 ) (0.01 ) – – – – 0.03 – 0.03 – – – – – – 0.01 – 0.01
other adjustments(5) 0.01 – 0.01 $ 0.48 $ 0.43 $ 0.05 11.6% 0.03 – 0.03 $ 0.51 $ 0.43 $ 0.08 18.6% For the Six Months Ended June 30, 2017 2016 $ Change % Change $ 0.73 $ 0.64 $ 0.09 14.1% 0.21 0.22 (0.01 ) 0.01 0.04 (0.03 ) 0.02 0.01 0.01 – 0.01 (0.01 ) (0.02 ) (0.03 ) 0.01 – – – 0.06 0.02 0.04 – – – – 0.04 (0.04 ) 0.01 – 0.01 (0.04 ) – (0.04 ) – (0.03 ) 0.03
other adjustments(5) 0.03 – 0.03 $ 1.01 $ 0.92 $ 0.09 9.8% 0.03 – 0.03 $ 1.04 $ 0.92 $ 0.12 13.0% For the Three Months Ended
June 30, 2018 2017 $ Change % Change Diluted EPS attributable to Mondelēz International $ 0.22 $ 0.32 $ (0.10 ) (31.3 )% 0.09 0.10 (0.01 ) Intangible asset impairment charges — 0.02 (0.02 ) (0.05 ) 0.03 (0.08 ) Malware incident incremental expenses — — — — — — 0.01 — 0.01 — — — — (0.01 ) 0.01 — — — 0.20 — 0.20 — — — 0.01 — 0.01 0.07 0.01 0.06 0.01 0.01 — Adjusted EPS $ 0.56 $ 0.48 $ 0.08 16.7 % Impact of favorable currency (0.01 ) — (0.01 ) Adjusted EPS (constant currency) $ 0.55 $ 0.48 $ 0.07 14.6 % For the Six Months Ended
June 30, 2018 2017 $ Change % Change Diluted EPS attributable to Mondelēz International $ 0.84 $ 0.73 $ 0.11 15.1 % 0.15 0.21 (0.06 ) Intangible asset impairment charges — 0.02 (0.02 ) (0.17 ) 0.06 (0.23 ) Malware incident incremental expenses — — — — — — 0.01 — 0.01 — 0.01 (0.01 ) — (0.03 ) 0.03 — — — 0.20 — 0.20 — (0.04 ) 0.04 0.01 — 0.01 (0.01 ) — (0.01 ) 0.07 0.01 0.06 0.06 — 0.06 0.01 0.03 (0.02 ) Adjusted EPS $ 1.17 $ 1.00 $ 0.17 17.0 % Impact of favorable currency (0.05 ) — (0.05 ) Adjusted EPS (constant currency) $ 1.12 $ 1.00 $ 0.12 12.0 % (1) The tax expense/(benefit) of each of thepre-tax items excluded from our GAAP results was computed based on the facts and tax assumptions associated with each item, and such impacts have also been excluded from Adjusted EPS. on thefor the: 2014-2018 Restructuring Program costs were $(58) million, taxes on intangible asset impairment charges were $(14) million, taxes onmark-to-market losses from derivatives were $0 million, net earnings from divestitures were $8 million, loss on debt extinguishment were $(4) million taxes included in net earnings from divestitures were $4 million, taxes on divestiture-related costs were $(2) million, taxes on loss on divestiture were $4 million and taxes on equity method investee adjustments were $(2) million.threesix months ended June 30, 2016,2018, taxes on thefor the: 2014-2018 Restructuring Program costs were $(58)$(77) million, taxes on divestiture-related costs were $(20) million, taxes onmark-to-market gains from derivatives were $8$39 million, taxes included in net earningsacquisition-related costs were $(3) million, impact from divestiturespension participation changes were $4$(103) million, CEO transition remuneration were $(3) million, gain related to interest rate swaps were $2 million, loss on debt extinguishment were $(35) million, U.S. tax reform were $87 million and taxes on intangible asset impairment chargesequity method investee adjustments were $(3) million.on thefor the: 2014-2018 Restructuring Program costs were $(106) million, taxes on intangible asset impairment charges were $(14) million, taxes included inmark-to-market losses from derivatives were $(3) million, divestiture-related costs were $(5) million, net earnings from divestitures were $9$15 million, taxes on equity method investee adjustmentsbenefits from resolution of tax matters were $(6)$0 million, taxes on loss on debt extinguishment were $(4) million taxes on divestiture-related costs were $(5) million, taxes on loss on divestiture were $4 million and taxes onmark-to-market losses from derivatives were $3 million.For the six months ended June 30, 2016, taxes on the 2014-2018 Restructuring Program costs were $(117) million, taxes on loss related to interest rate swaps were $(35) million, taxes on divestiture-related costs were $(20) million, taxes included in net earnings from divestitures were $10 million, taxes on intangible asset impairment charges were $(8) million, taxes on the gain on equity method investment exchangeinvestee adjustments were $2 million and taxes onmark-to-market losses from derivatives were $(2)$(6) million.(2) (3) Financial InstrumentsDebt and Borrowing Arrangements, for more information on our interest rate swaps, which we no longer designate as cash flow hedges during the first quarter of 2016 due to changes in financing and hedging plans.losses on debt extinguishment.(4)Refer to Note 7, Debt and Borrowing Arrangements, for more information on our loss on debt extinguishment and related expenses in connection with our debt discharge.(5)(4)Includes our proportionate share of unusual or infrequent items, such as acquisition and divestiture-related costs, and restructuring program costs and discrete U.S. tax reform impacts recorded by our JDE and Keurig equity method investees.(6)(5) 2,Divestitures and Acquisitions – Keurig Transaction9, Financial Instruments, for information on our interest rate swaps that we no longer designate as cash flow hedges.(6) 2016 acquisitionimpact of an interest in Keurig.U.S. tax reform.8,9, Financial Instruments.2017.2018. For additional information on highly inflationary country currencies and the impact of currency policies Brexit and recent currency volatility on our financial condition and results of operations, also see Note 1,Basis of Presentation – Currency Translation and Highly Inflationary Accounting.), Euro Interbank Offered Rate (“EURIBOR”) and commercial paper rates. We periodically use interest rate swaps and forward interest rate contracts to achieve a desired proportion of variable versus fixed rate debt based on current and projected market conditions. Our weighted-average interest rate on total debt was 2.1%2.4% as of June 30, 20172018 and 2.2%2.1% as of December 31, 2016.2017. For more information on our 20172018 debt activity, see Note 7,8, Debt and Borrowing Arrangements.There were no significant changes in the types of derivative instruments we use to hedge our exposures betweenDecember 31, 2016 and June 30, 2017. 8,9, Financial Instruments, for more information on our 20172018 derivative activity. For additional information on our hedging strategies, policies and practices on an ongoing basis, also refer to our Annual Report on Form10-K for the year ended December 31, 2016.2017.2017.2018. Based on this evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective as of June 30, 2017.2017. During the quarter ended June 30, 2017, due to the malware incident, we supplemented or temporarily replaced some of our normal control procedures in order to maintain our existing IT and financial controls over financial reporting. Additionally, we2018. We continued to work with outsourced partners to further simplify and standardize processes and focus on scalable, transactional processes across all regions. We migrated some of our human resource processes, including compensation administration, for a number of countries in AMEA and Europe to our shared service centers in Manila, Philippines and the U.K. Additionally, we continued to transition some of our transactional data processing as well as financial and local tax reportingcontract management services for a number of countries across all regions to three outsourced partners. Pursuant to our service agreements, the controls previously established around these accounting functions will be maintained by our outsourced partners or by us, and they are subject to management’s internal control testing. There were no other changes in our internal control over financial reporting during the quarter ended June 30, 2017,2018, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.11,12, Commitments and Contingencies, to the condensed consolidated financial statements in this report.2016.2017.20172018 was: Issuer Purchases of Equity Securities Total Number of Total Shares Purchased Approximate Dollar Value Number Average as Part of Publicly of Shares That May Yet of Shares Price Paid Announced Plans Be Purchased Under the Purchased(1) per Share (1) or Programs(2) Plans or Programs(2) 4,410,982 $ 44.44 4,394,421 $ 2,177,744,713 4,885,344 45.34 4,857,898 1,957,484,340 4,871,543 45.69 4,864,003 1,735,234,924
June 30, 2017 14,167,869 45.18 14,116,322 Issuer Purchases of Equity Securities Period April 1-30, 2018 6,596,691 $ 41.71 6,593,639 $ 5,868,678,298 May 1-31, 2018 8,533,684 39.33 8,530,900 5,533,143,948 June 1-30, 2018 1,001,438 39.66 995,100 5,493,684,034 For the Quarter Ended June 30, 2018 16,131,813 40.32 16,119,639 (1) The total number of shares purchased (and the average price paid per share) reflects: (i) shares purchased pursuant to the repurchase program described in (2) below; and (ii) shares tendered to us by employees who used shares to exercise options and to pay the related taxes for grants of restricted and deferred stock that vested, totaling 16,5613,052 shares, 27,4462,784 shares and 7,5406,338 shares for the fiscal months of April, May and June 2017,2018, respectively.(2) $13.7$19.7 billion of our Common Stock through December 31, 2018.2020. Specifically, on March 12, 2013, our Board of Directors authorized the repurchase of up to the lesser of 40 million shares or $1.2 billion of our Common Stock through March 12, 2016. On August 6, 2013, our Audit Committee, with authorization delegated from our Board of Directors, increased the repurchase program capacity to $6.0 billion of Common Stock repurchases and extended the expiration date to December 31, 2016. On December 3, 2013, our Board of Directors approved an increase of $1.7 billion to the program related to a new accelerated share repurchase program, which concluded in May 2014. On July 29, 2015, our Finance Committee, with authorization delegated from our Board of Directors, approved a $6.0 billion increase that raised the repurchase program capacity to $13.7 billion and extended the program through December 31, 2018. On January 31, 2018, our Finance Committee, with authorization delegated from our Board of Directors, approved an increase of $6.0 billion in the share repurchase program, raising the authorization to $19.7 billion of Common Stock repurchases, and extended the program through December 31, 2020. See related information in Note 10,11, Stock Plans.+ Indicates a management contract or compensatory plan or arrangement. MONDELĒZ INTERNATIONAL, INC. By: /s/ BRIAN T. GLADDEN Brian T. Gladden Executive Vice President and Chief Financial Officer August 2, 2017July 25, 201857