SEC Filing | Mondelēz International, Inc.

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mdlz-20210331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


			☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021


			☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-16483

Mondelēz International, Inc.

(Exact name of registrant as specified in its charter)


Virginia		52-2284372
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

905 West Fulton Market, Suite 200
Chicago,	Illinois	60607
(Address of principal executive offices)		(Zip Code)

(Registrant’s telephone number, including area code) (847) 943-4000

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Tile of each class

Trading
Symbol(s)

Name of each exchange on which registered

Class A Common Stock, no par value

MDLZ

The Nasdaq Global Select Market

1.625% Notes due 2027

MDLZ27

The Nasdaq Stock Market LLC

0.250% Notes due 2028

MDLZ28

The Nasdaq Stock Market LLC

0.750% Notes due 2033

MDLZ33

The Nasdaq Stock Market LLC

2.375% Notes due 2035

MDLZ35

The Nasdaq Stock Market LLC

4.500% Notes due 2035

MDLZ35A

The Nasdaq Stock Market LLC

1.375% Notes due 2041

MDLZ41

The Nasdaq Stock Market LLC

3.875% Notes due 2045

MDLZ45

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

At April 23, 2021, there were 1,404,711,224 shares of the registrant’s Class A Common Stock outstanding.

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Mondelēz International, Inc.

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		Page No.
PART I -	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Statements of Earnings for the Three Months Ended March 31 , 202 1 and 20 20	1

	Condensed Consolidated Statements of Comprehensive Earnings for the Three Months Ended March 31 , 202 1 and 20 20	2

	Condensed Consolidated Balance Sheets at March 31 , 202 1 and December 31, 20 20	3

	Condensed Consolidated Statements of Equity for the Three Months Ended March 31 , 202 1 and 20 20	4

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31 , 202 1 and 20 20	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	52

Item 4.	Controls and Procedures	53

PART II -	OTHER INFORMATION

Item 1.	Legal Proceedings	54

Item 1A.	Risk Factors	54

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54

Item 6.	Exhibits	55

Signature		56

In this report, for all periods presented, “we,” “us,” “our,” “the Company” and “Mondelēz International” refer to Mondelēz International, Inc. and subsidiaries. References to “Common Stock” refer to our Class A Common Stock.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Mondelēz International, Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings

(in millions of U.S. dollars, except per share data)

(Unaudited)


	For the Three Months Ended March 31,
	2021		2020
Net revenues	$	7,238	$	6,707
Cost of sales	4,272		4,256
Gross profit	2,966		2,451
Selling, general and administrative expenses	1,564		1,537
Asset impairment and exit costs	90		15
Gain on acquisition	(9)		—
Amortization of intangibles	38		43
Operating income	1,283		856
Benefit plan non-service income	(44)		(33)
Interest and other expense, net	218		190
Earnings before income taxes	1,109		699
Income tax provision	(212)		(148)
(Loss)/gain on equity method investment transactions	(7)		71
Equity method investment net earnings	78		121
Net earnings	968		743
Noncontrolling interest earnings	(7)		(7)
Net earnings attributable to Mondelēz International	$	961	$	736
Per share data:
Basic earnings per share attributable to Mondelēz International	$	0.68	$	0.51
Diluted earnings per share attributable to Mondelēz International	$	0.68	$	0.51

See accompanying notes to the condensed consolidated financial statements.

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Mondelēz International, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Earnings

(in millions of U.S. dollars)

(Unaudited)


	For the Three Months Ended March 31,
	2021		2020
Net earnings	$	968	$	743
Other comprehensive earnings/(losses), net of tax:
Currency translation adjustment	(136)		(1,371)
Pension and other benefit plans	69		60
Derivative cash flow hedges	2		58
Total other comprehensive earnings/(losses)	(65)		(1,253)
Comprehensive earnings/(losses)	903		(510)
less: Comprehensive earnings/(losses) attributable to noncontrolling interests	(2)		2
Comprehensive earnings/(losses) attributable to Mondelēz International	$	905	$	(512)

See accompanying notes to the condensed consolidated financial statements.

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Mondelēz International, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in millions of U.S. dollars, except share data)

(Unaudited)


	March 31, 2021		December 31, 2020
ASSETS
Cash and cash equivalents	$	2,028	$	3,619
Trade receivables (net of allowances of $40 at March 31, 2021 and $42 at December 31, 2020)	2,655		2,297
Other receivables (net of allowances of $41 at March 31, 2021 and $42 at December 31, 2020)	660		657
Inventories, net	2,635		2,647
Other current assets	865		759
Total current assets	8,843		9,979
Property, plant and equipment, net	8,766		9,026
Operating lease right of use assets	609		638
Goodwill	21,945		21,895
Intangible assets, net	18,527		18,482
Prepaid pension assets	742		672
Deferred income taxes	725		790
Equity method investments	5,916		6,036
Other assets	276		292
TOTAL ASSETS	$	66,349	$	67,810
LIABILITIES
Short-term borrowings	$	674	$	29
Current portion of long-term debt	1,895		2,741
Accounts payable	6,372		6,209
Accrued marketing	2,136		2,130
Accrued employment costs	670		834
Other current liabilities	2,803		3,216
Total current liabilities	14,550		15,159
Long-term debt	16,961		17,276
Long-term operating lease liabilities	447		470
Deferred income taxes	3,353		3,346
Accrued pension costs	1,161		1,257
Accrued postretirement health care costs	345		346
Other liabilities	2,383		2,302
TOTAL LIABILITIES	39,200		40,156
Commitments and Contingencies (Note 12)
EQUITY
Common Stock, no par value (5,000,000,000 shares authorized and 1,996,537,778 shares issued at March 31, 2021 and December 31, 2020)	—		—
Additional paid-in capital	32,009		32,070
Retained earnings	28,903		28,402
Accumulated other comprehensive losses	(10,746)		(10,690)
Treasury stock, at cost (591,880,718 shares at March 31, 2021 and 577,363,557 shares at December 31, 2020)	(23,091)		(22,204)
Total Mondelēz International Shareholders’ Equity	27,075		27,578
Noncontrolling interest	74		76
TOTAL EQUITY	27,149		27,654
TOTAL LIABILITIES AND EQUITY	$	66,349	$	67,810

See accompanying notes to the condensed consolidated financial statements.

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Mondelēz International, Inc. and Subsidiaries

Condensed Consolidated Statements of Equity

(in millions of U.S. dollars, except per share data)

(Unaudited)


	Mondelēz International Shareholders’ Equity
	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Earnings/ (Losses)		Treasury Stock		Non-controlling Interest		Total Equity
Three Months Ended March 31, 2021
Balances at January 1, 2021	$	—	$	32,070	$	28,402	$	(10,690)	$	(22,204)	$	76	$	27,654
Comprehensive earnings/(losses):
Net earnings	—		—		961		—		—		7		968
Other comprehensive earnings/(losses), net of income taxes	—		—		—		(56)		—		(9)		(65)
Exercise of stock options and issuance of other stock awards	—		(61)		(15)		—		130		—		54
Common Stock repurchased	—		—		—		—		(1,017)		—		(1,017)
Cash dividends declared ($0.315 per share)	—		—		(445)		—		—		—		(445)
Dividends paid on noncontrolling interest and other activities	—		—		—		—		—		—		—
Balances at March 31, 2021	$	—	$	32,009	$	28,903	$	(10,746)	$	(23,091)	$	74	$	27,149










Three Months Ended March 31, 2020
Balances at January 1, 2020	$	—	$	32,019	$	26,615	$	(10,254)	$	(21,139)	$	76	$	27,317
Comprehensive earnings/(losses):
Net earnings	—		—		736		—		—		7		743
Other comprehensive earnings/(losses), net of income taxes	—		—		—		(1,248)		—		(5)		(1,253)
Exercise of stock options and issuance of other stock awards	—		(29)		(38)		—		188		—		121
Common Stock repurchased	—		—		—		—		(701)		—		(701)
Cash dividends declared ($0.285 per share)	—		—		(408)		—		—		—		(408)
Dividends paid on noncontrolling interest and other activities	—		—		1		—		—		—		1
Balances at March 31, 2020	$	—	$	31,990	$	26,906	$	(11,502)	$	(21,652)	$	78	$	25,820

See accompanying notes to the condensed consolidated financial statements.

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Mondelēz International, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in millions of U.S. dollars)

(Unaudited)


	For the Three Months Ended March 31,
	2021		2020
CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES
Net earnings	$	968	$	743
Adjustments to reconcile net earnings to operating cash flows:
Depreciation and amortization	284		256
Stock-based compensation expense	25		28

Deferred income tax provision/(benefit)	34		(26)
Asset impairments and accelerated depreciation	43		—
Loss on early extinguishment of debt	110		—
Gain on acquisition	(9)		—
Loss/(gain) on equity method investment transactions	7		(71)
Equity method investment net earnings	(78)		(121)
Distributions from equity method investments	74		165
Other non-cash items, net	(23)		126
Change in assets and liabilities, net of acquisitions:
Receivables, net	(494)		(610)
Inventories, net	(37)		(48)
Accounts payable	283		206
Other current assets	(140)		(217)
Other current liabilities	(55)		(71)
Change in pension and postretirement assets and liabilities, net	(77)		(76)
Net cash provided by operating activities	915		284
CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES
Capital expenditures	(216)		(214)
Acquisitions, net of cash received	(490)		—
Proceeds from divestitures including equity method investments	—		185
Other	16		(26)
Net cash used in investing activities	(690)		(55)
CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES
Issuances of commercial paper, maturities greater than 90 days	—		157
Repayments of commercial paper, maturities greater than 90 days	—		(497)
Net issuances of other short-term borrowings	647		2,477
Long-term debt proceeds	2,373		—
Long-term debt repaid	(3,353)		(670)
Repurchase of Common Stock	(1,046)		(720)
Dividends paid	(453)		(409)
Other	51		117
Net cash (used in)/provided by financing activities	(1,781)		455
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(35)		(60)
Cash, cash equivalents and restricted cash:
(Decrease)/Increase	(1,591)		624
Balance at beginning of period	3,650		1,328
Balance at end of period	$	2,059	$	1,952

See accompanying notes to the condensed consolidated financial statements.

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Mondelēz International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1. Basis of Presentation

Our interim condensed consolidated financial statements are unaudited. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted. It is management’s opinion that these financial statements include all normal and recurring adjustments necessary for a fair presentation of our results of operations, financial position and cash flows. Results of operations for any interim period are not necessarily indicative of future or annual results. For a complete set of consolidated financial statements and related notes, refer to our Annual Report on Form 10-K for the year ended December 31, 2020.

Principles of Consolidation:

The condensed consolidated financial statements include Mondelēz International, Inc. as well as our wholly owned and majority owned subsidiaries, except our Venezuelan subsidiaries that were deconsolidated in 2015. All intercompany transactions are eliminated. The noncontrolling interest represents the noncontrolling investors' interests in the results of subsidiaries that we control and consolidate. We account for investments over which we exercise significant influence under the equity method of accounting. Investments over which we do not have significant influence or control are not material and as there are no readily determinable fair values for the equity interests, these investments are carried at cost with changes in the investment recognized to the extent cash is received.

Currency Translation and Highly Inflationary Accounting:

We translate the results of operations of our subsidiaries from multiple currencies using average exchange rates during each period and translate balance sheet accounts using exchange rates at the end of each period. We record currency translation adjustments as a component of equity (except for highly inflationary currencies) and realized exchange gains and losses on transactions in earnings.

Highly inflationary accounting is triggered when a country’s three-year cumulative inflation rate exceeds 100%. It requires the remeasurement of financial statements of subsidiaries in the country from the functional currency of the subsidiary to our U.S. dollar reporting currency, with currency remeasurement gains or losses recorded in earnings. As discussed below, beginning on July 1, 2018, we began to apply highly inflationary accounting for our operations in Argentina.

Argentina. During the second quarter of 2018, primarily based on published estimates that indicated that Argentina's three-year cumulative inflation rate exceeded 100%, we concluded that Argentina became a highly inflationary economy for accounting purposes. As of July 1, 2018, we began to apply highly inflationary accounting for our Argentinean subsidiaries and changed their functional currency from the Argentinean peso to the U.S. dollar. On July 1, 2018, both monetary and non-monetary assets and liabilities denominated in Argentinean pesos were remeasured into U.S. dollars using the exchange rate as of the balance sheet date, with remeasurement and other transaction gains and losses recorded in net earnings. As of March 31, 2021, our Argentinean operations had $5 million of Argentinean peso denominated net monetary assets. Our Argentinean operations contributed $89 million, or 1.2% of consolidated net revenues in the three months ended March 31, 2021. Within selling, general and administrative expenses, we recorded a remeasurement loss of $5 million during the three months ended March 31, 2021 as well as a remeasurement loss of $2 million during the three months ended March 31, 2020 related to the revaluation of the Argentinean peso denominated net monetary position over these periods.

Brexit. Following the separation of the United Kingdom from the European Union ("Brexit") in 2020, a new trade arrangement was reached between the U.K. and E.U. that began on January 1, 2021. The main trade provisions include the continuation of no tariffs or quotas on trade between the U.K. and E.U. subject to prescribed trade terms. We also need to meet product and labeling standards for both the U.K. and E.U. Cross-border trade between the U.K. and E.U. is now subject to new customs regulations, documentation and reviews. To comply with the new requirements, we increased resources in customer service and logistics, in our factories, and on our customs support teams. We adapted our processes and systems for the new and increased number of customs transactions. We continue to closely monitor and manage our inventory levels of imported raw materials, packaging and finished goods in the U.K. If the U.K.’s separation from, or new trade arrangements with, the E.U. negatively impact the U.K. economy or result in disagreements on trade terms, delays affecting our supply chain or distribution, or disruptions

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to sales or collections, the impact to our results of operations, financial condition and cash flows could be material. In the three months ended March 31, 2021, we generated 9.9% of our consolidated net revenues in the U.K.

Other Countries. Since we sell our products in over 150 countries and have operations in approximately 80 countries, we monitor economic and currency-related risks and seek to take protective measures in response to potential exposures. We continue to monitor the ongoing COVID-19 global pandemic and related impacts to our business operations, currencies and net monetary exposures. Since the global onset of COVID-19 in early 2020, most countries in which we do business experienced periods of significant economic uncertainty as well as exchange rate volatility. At this time, except for Argentina which is accounted for as a highly inflationary economy, we do not anticipate any other countries in which we operate to be at risk of becoming highly inflationary countries.

Cash, Cash Equivalents and Restricted Cash:

Cash and cash equivalents include demand deposits with banks and all highly liquid investments with original maturities of three months or less. We also have restricted cash that is recorded within other current assets of $31 million as of March 31, 2021 and $31 million as of December 31, 2020. Total cash, cash equivalents and restricted cash was $2,059 million as of March 31, 2021 and $3,650 million as of December 31, 2020.

Allowances for Credit Losses:

The allowances for credit losses are recorded against our receivables. They are developed at a country and region level based on historical collection experiences, current economic condition of specific customers and the forecasted economic condition of countries using various factors such as bond default rates and consumption indexes. We write off receivables once it is determined that the receivables are no longer collectible and as allowed by local laws.

Changes in allowances for credit losses consisted of:


	Allowance for Trade Receivables		Allowance for Other Current Receivables		Allowance for Long-Term Receivables
	(in millions)
Balance at January 1, 2021	$	(42)	$	(42)	$	(12)
Current period provision for expected credit losses	(2)		—		—
Write-offs charged against the allowance	1		1		—

Currency	3		—		1
Balance at March 31, 2021	$	(40)	$	(41)	$	(11)

Transfers of Financial Assets:

We account for transfers of financial assets, such as uncommitted revolving non-recourse accounts receivable factoring arrangements, when we have surrendered control over the related assets. Determining whether control has transferred requires an evaluation of relevant legal considerations, an assessment of the nature and extent of our continuing involvement with the assets transferred and any other relevant considerations. We use receivable factoring arrangements periodically when circumstances are favorable to manage liquidity. We have non-recourse factoring arrangements in which we sell eligible trade receivables primarily to banks in exchange for cash. We may then continue to collect the receivables sold, acting solely as a collecting agent on behalf of the banks. The outstanding principal amount of receivables under these arrangements amounted to $905 million as of March 31, 2021 and $760 million as of December 31, 2020. The incremental cost of factoring receivables under this arrangement was not material for all periods presented. The proceeds from the sales of receivables are included in cash from operating activities in the condensed consolidated statements of cash flows.

Non-Cash Lease Transactions:

We recorded $29 million in operating lease and $30 million in finance lease right-of-use assets obtained in exchange for lease obligations during the three months ended March 31, 2021 and $89 million in operating lease and $25 million in finance lease right-of-use assets obtained in exchange for lease obligations during the three months ended March 31, 2020.

New Accounting Pronouncements:

In December 2019, the Financial Accounting Standards Board ("FASB") issued an Accounting Standards Update ("ASU") that removes certain exceptions in accounting for income taxes, improves consistency in application and

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clarifies existing guidance. This ASU is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. On January 1, 2021, we adopted this ASU and it did not have a material impact on our consolidated financial statements.

Reclassifications:

Certain amounts previously reported have been reclassified to conform to current-year presentation. During the second quarter of 2020, in connection with the JDE Peet's (as defined below) transaction (refer to Note 6, Equity Method Investments), we changed our accounting principle to reflect our share of Jacobs Douwe Egberts ("JDE") historical results and JDE Peet's ongoing results on a one-quarter lag basis while we continue to record dividends when cash is received. This change was applied retrospectively to all periods presented.

Note 2. Acquisitions and Divestitures

On April 1, 2021, we acquired Gourmet Food Holdings Pty Ltd, a leading Australian food company in the premium biscuit and cracker category, for closing cash consideration of approximately $458 million Australian dollars ($348 million). We incurred acquisition-related costs of $1 million during the three months ended March 31, 2021.

On March 25, 2021, we acquired a majority interest in Lion/Gemstone Topco Ltd ("Grenade"), a performance nutrition leader in the United Kingdom, for closing cash consideration of £188 million ($260 million), net of cash received. The acquisition of Grenade expands our position into the premium nutrition market. We are working to complete the valuation and have recorded a preliminary purchase price allocation of $81 million to indefinite-lived intangible assets, $24 million to definite-lived intangible assets, $180 million to goodwill, $1 million to property, plant and equipment, $11 million to inventory, $18 million to accounts receivable, $1 million to other current assets, $25 million to current liabilities, $20 million to deferred tax liabilities and $11 million to long-term other liabilities. We incurred acquisition-related costs of $2 million during the three months ended March 31, 2021.

On January 4, 2021, we acquired the remaining 93% of equity of Hu Master Holdings, a category leader in premium chocolate in the United States, which provides a strategic complement to our snacking portfolio in North America through growth opportunities in chocolate and other categories in the well-being category. The initial cash consideration paid was $229 million, net of cash received, and the Company may be required to pay additional cash consideration. The estimated fair value of the contingent consideration obligation at the acquisition date was $132 million and was determined using a Monte Carlo simulation based on forecasted future results. We are unable to provide a range of amounts that could be paid as contingent consideration as it is based primarily on revenue and gross margin of the business for the twelve months ended December 31, 2022 and there is not a minimum or maximum payout. As a result of acquiring the remaining equity interest, we consolidated the operations prospectively from the date of acquisition and recorded a pre-tax gain of $9 million ($7 million after-tax) related to stepping up our previously-held $8 million (7%) investment to fair value. We are working to complete the valuation and have recorded a preliminary purchase price allocation of $123 million to indefinite-lived intangible assets, $51 million to definite-lived intangible assets, $202 million to goodwill, $1 million to property, plant and equipment, $2 million to inventory, $4 million to accounts receivable, $5 million to current liabilities and $132 million to long-term other liabilities. During the three months ended March 31, 2021, the acquisition added incremental net revenues of $8 million and an operating loss of $6 million. We incurred acquisition-related costs of $4 million during the three months ended March 31, 2021.

On April 1, 2020, we acquired a majority interest in Give & Go, a North American leader in fully-finished sweet baked goods and owner of the famous two-bite® brand of brownies and the Create-A-Treat® brand, known for cookie and gingerbread house decorating kits. The acquisition of Give & Go provides access to the in-store bakery channel and expands our position in broader snacking. The purchase consideration for Give & Go totaled $1,136 million, net of cash received. We have recorded a preliminary purchase price allocation of net tangible and intangible assets acquired and liabilities assumed as follows:

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	(in millions)
Receivables	$	29
Inventory	38
Other current assets	6
Property, plant and equipment	136
Operating right of use assets	61
Definite-life intangible assets	511
Indefinite-life intangible assets	42
Goodwill	531
Assets acquired	$	1,354
Current liabilities	42
Deferred tax liabilities	92
Long-term operating lease liabilities	56
Long-term debt	6
Long-term other liabilities	19
Total purchase price	$	1,139
Less: cash received	3
Net Cash Paid	$	1,136

Within definite-life intangible assets, we allocated $416 million to customer relationships which have an estimated useful life of 17 years. Goodwill arises principally as a result of expansion opportunities and synergies across both new and legacy product categories. None of the goodwill recognized is expected to be deductible for income tax purposes.

The fair value for customer relationships at the acquisition date was determined using the multi-period excess earnings method under the income approach. The fair value measurements of intangible assets are based on significant unobservable inputs, and thus represent Level 3 inputs. Significant assumptions used in assessing the fair values of intangible assets include discounted future cash flows, customer attrition rates and discount rates. The acquisition added incremental net revenues of $106 million and operating income of $6 million in the three months ended March 31, 2021. During the first quarter of 2020, we incurred $5 million of acquisition-related costs.

Note 3. Inventories

Inventories consisted of the following:


	As of March 31, 2021		As of December 31, 2020
	(in millions)
Raw materials	$	766	$	718
Finished product	1,990		2,059
	2,756		2,777
Inventory reserves	(121)		(130)
Inventories, net	$	2,635	$	2,647

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Note 4. Property, Plant and Equipment

Property, plant and equipment consisted of the following:


	As of March 31, 2021		As of December 31, 2020
	(in millions)
Land and land improvements	$	411	$	422
Buildings and building improvements	3,196		3,252
Machinery and equipment	11,889		12,053
Construction in progress	616		628
	16,112		16,355
Accumulated depreciation	(7,346)		(7,329)
Property, plant and equipment, net	$	8,766	$	9,026

For the three months ended March 31, 2021, capital expenditures of $216 million excluded $230 million of accrued capital expenditures remaining unpaid at March 31, 2021 and included payment for a portion of the $275 million of capital expenditures that were accrued and unpaid at December 31, 2020. For the three months ended March 31, 2020, capital expenditures of $214 million excluded $259 million of accrued capital expenditures remaining unpaid at March 31, 2020 and included payment for a portion of the $334 million of capital expenditures that were accrued and unpaid at December 31, 2019.

In connection with our restructuring program, we recorded non-cash property, plant and equipment write-downs (including accelerated depreciation and asset impairments) and losses/(gains) on disposal in the condensed consolidated statements of earnings within asset impairment and exit costs and within the segment results as follows (refer to Note 7, Restructuring Program).


	For the Three Months Ended March 31,
	2021		2020
	(in millions)
Latin America	$	—	$	—
AMEA	(16)		(1)
Europe	2		1
North America	54		1
Total	$	40	$	1

Note 5. Goodwill and Intangible Assets

Goodwill by segment was:


	As of March 31, 2021		As of December 31, 2020
	(in millions)
Latin America	$	673	$	706
AMEA	3,229		3,250
Europe	7,929		8,038
North America	10,114		9,901
Goodwill	$	21,945	$	21,895

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Intangible assets consisted of the following:


	As of March 31, 2021		As of December 31, 2020
	(in millions)
Indefinite-life intangible assets	$	17,505	$	17,492
Definite-life intangible assets	2,956		2,907
	20,461		20,399
Accumulated amortization	(1,934)		(1,917)
Intangible assets, net	$	18,527	$	18,482

Indefinite-life intangible assets consist principally of brand names purchased through our acquisitions of Nabisco Holdings Corp., the Spanish and Portuguese operations of United Biscuits, the global LU biscuit business of Groupe Danone S.A. and Cadbury Limited. Definite-life intangible assets consist primarily of brands, customer-related intangibles, process technology, licenses and non-compete agreements.

Amortization expense for intangible assets was $38 million for the three months ended March 31, 2021 and $43 million for the three months ended March 31, 2020. For the next five years, we currently estimate annual amortization expense of approximately $130 million in 2021, approximately $120 million in 2022-2024 and approximately $105 million in 2025 (reflecting March 31, 2021 exchange rates).

Changes in goodwill and intangible assets consisted of:


	Goodwill		Intangible Assets, at cost
	(in millions)
Balance at January 1, 2021	$	21,895	$	20,399
Currency	(332)		(217)

Acquisitions	382		279

Balance at March 31, 2021	$	21,945	$	20,461

In connection with our acquisitions of Grenade and the remaining interest in Hu Master Holdings during the first quarter of 2021, we recorded a preliminary purchase price allocation of $382 million to goodwill and $279 million to intangible assets. See Note 2, Acquisitions and Divestitures, for additional information.

During the first quarters of 2021 and 2020, we evaluated our goodwill and intangible asset impairment risk through an assessment of potential triggering events. In light of the ongoing COVID-19 global pandemic, we considered qualitative and quantitative information in our assessment over indefinite-life intangible assets. Based on the financial performance of our goodwill reporting units and intangible assets and review of other significant fair value assumptions, we concluded that no impairment indicators were present that would require a full impairment assessment. We will continue to monitor the potential for asset impairment risk over coming quarters.

In 2020, we recorded $144 million of intangible asset impairment charges related to eight brands. The ongoing impact of the COVID-19 pandemic resulted in greater declines in the sales and earnings for certain brands, particularly our gum brands. During our annual impairment testing as of July 1, 2020, we identified nine brands, including the eight impaired brands, that each had a fair value in excess of book value of 10% or less. The aggregate book value of the nine brands was $738 million as of March 31, 2021. We continue to monitor our brand performance, particularly in light of the significant uncertainty due to the COVID-19 pandemic and related impacts to our business. If the brand earnings expectations, including the timing of the expected recovery from the COVID-19 pandemic impacts, 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.

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Note 6. Equity Method Investments

Equity method investments consist of our investments in entities in which we maintain an equity ownership interest and apply the equity method of accounting due to our ability to exert significant influence over decisions relating to their operating and financial affairs. Revenue and expenses of our equity method investees are not consolidated into our financial statements; rather, our proportionate share of the earnings of each investee is reflected as equity method investment net earnings. The carrying values of our equity method investments are also impacted by our proportionate share of items impacting the investee's accumulated other comprehensive income or losses and other items, such as our share of investee dividends.

Our equity method investments include, but are not limited to, our ownership interests in JDE Peet's (Euronext Amsterdam: "JDEP"), Keurig Dr Pepper Inc. (NASDAQ: "KDP"), Dong Suh Foods Corporation and Dong Suh Oil & Fats Co. Ltd. As of March 31, 2021, we owned 22.8%, 8.3%, 50.0% and 49.0%, respectively, of these companies' outstanding shares.

Our investments accounted for under the equity method of accounting totaled $5,916 million as of March 31, 2021 and $6,036 million as of December 31, 2020. We recorded equity earnings and cash dividends of $78 million and $74 million in the first quarter of 2021 and equity earnings and cash dividends of $121 million and $165 million in the first quarter of 2020.

Based on the quoted closing prices as of March 31, 2021, the combined fair value of our publicly-traded investments in JDEP and KDP was $8.3 billion, and for each investment, its fair value exceeded its carrying value.

Keurig Dr Pepper Transactions:

On March 4, 2020, we participated in a secondary offering of KDP shares and sold approximately 6.8 million shares, which reduced our ownership interest by 0.5% of the total outstanding shares. We received $185 million of proceeds and recorded a pre-tax gain of $71 million (or $54 million after-tax) during the first quarter of 2020.

We hold two director positions on the KDP board as well as additional governance rights. As we continue to have significant influence, we continue to account for our investment in KDP under the equity method, resulting in recognizing our share of their earnings within our earnings and our share of their dividends within our cash flows.

JDE Peet’s Transaction:

On May 19, 2020, JDE Peet’s B.V. (renamed JDE Peet’s N.V. immediately prior to Settlement (as defined below), “JDE Peet’s”) announced its intention to launch an offering of its ordinary shares (the “offering”) and to apply for admission to listing and trading of all of its ordinary shares on Euronext Amsterdam, a regulated market operated by Euronext Amsterdam N.V. (the “admission”). On May 26, 2020, JDE Peet’s published a prospectus in connection with the offering and the admission. On May 29, 2020, JDE Peet’s announced the final pricing terms of the offering, and JDE Peet’s and the selling shareholders, including us, agreed to sell at a price of €31.50 per ordinary share a total of approximately 82.1 million ordinary shares, including ordinary shares subject to an over-allotment option. The ordinary shares were listed and first traded on May 29, 2020, and payment for, and delivery of, the ordinary shares sold in the offering (excluding ordinary shares subject to the over-allotment option) took place on June 2, 2020 (“Settlement”).

Prior to Settlement, we exchanged our 26.4% ownership interest in JDE for a 26.5% equity interest in JDE Peet’s. We did not invest new capital in connection with the transaction and the exchange was accounted for as a change in interest transaction. Upon Settlement, we sold approximately 9.7 million of our ordinary shares in JDE Peet’s in the offering for gross proceeds of €304 million ($343 million). We subsequently sold approximately 1.4 million additional shares and received gross proceeds of €46 million ($51 million) upon exercise of the over-allotment option. Following Settlement and the exercise of the over-allotment option, we held a 22.9% equity interest in JDE Peet’s.

As was the case in our ownership interest in JDE, we have significant influence with respect to JDE Peet’s, and we will continue to account for our investment in JDE Peet’s under the equity method, resulting in recognizing our share of JDE Peet’s earnings within our earnings and our share of JDE Peet’s dividends within our cash flows. In the second quarter of 2020, in connection with this transaction, we changed our accounting principle to reflect our share of JDE’s historical and JDE Peet’s ongoing earnings on a one-quarter lag basis, although we continue to record dividends when cash is received. We determined a lag was preferable as it enables us to continue to report our quarterly and annual results on a timely basis, while recording our share of JDE Peet’s ongoing results after JDE

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Peet’s has publicly reported its results. This change in accounting principle was applied retrospectively to all periods.

The following tables show the primary line items on the condensed consolidated statements of earnings and comprehensive earnings and the condensed consolidated balance sheet that changed as a result of the lag. The condensed consolidated statements of cash flow and equity were also updated to reflect these changes.


	For the Three Months Ended March 31, 2020
	As Reported		As Recast
	(in millions, except per share data)
Statements of Earnings
Equity method investment net earnings	$	138	$	121
Net earnings	760		743
Net earnings attributable to Mondelēz International	753		736
Earnings per share attributable to Mondelēz International:
Basic EPS	$	0.53	$	0.51
Diluted EPS	$	0.52	$	0.51

Statements of Other Comprehensive Earnings
Currency translation adjustment	$	(1,511)	$	(1,371)
Pension and other benefit plans	79		60
Derivative cash flow hedges	60		58
Total other comprehensive earnings/(losses)	(1,372)		(1,253)
Comprehensive earnings/(losses) attributable to Mondelēz International	(614)		(512)

Note 7. Restructuring Program

On May 6, 2014, our Board of Directors approved a $3.5 billion 2014-2018 restructuring program and up to $2.2 billion of capital expenditures. On August 31, 2016, our Board of Directors approved a $600 million reallocation between restructuring program cash costs and capital expenditures so the $5.7 billion program consisted of approximately $4.1 billion of restructuring program charges ($3.1 billion cash costs and $1.0 billion non-cash costs) and up to $1.6 billion of capital expenditures. On September 6, 2018, our Board of Directors approved an extension of the restructuring program through 2022, an increase of $1.3 billion in the program charges and an increase of $700 million in capital expenditures. The total $7.7 billion program now consists of $5.4 billion of program charges ($4.1 billion of cash costs and $1.3 billion of non-cash costs) and total capital expenditures of $2.3 billion to be incurred over the life of the program. The current restructuring program, as increased and extended by these actions, is now called the Simplify to Grow Program.

The primary objective of the Simplify to Grow Program is to reduce our operating cost structure in both our supply chain and overhead costs. The program covers severance as well as asset disposals and other manufacturing and procurement-related one-time costs. Since inception, we have incurred total restructuring and implementation charges of $4.8 billion related to the Simplify to Grow Program. We expect to incur the remainder of the program charges by year-end 2022.

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Restructuring Costs:

The Simplify to Grow Program liability activity for the three months ended March 31, 2021 was:


	Severance and related costs		Asset Write-downs		Total
	(in millions)
Liability balance, January 1, 2021	$	304	$	—	$	304
Charges	47		41		88
Cash spent	(34)		—		(34)
Non-cash settlements/adjustments	1		(41)		(40)
Currency	(10)		—		(10)
Liability balance, March 31, 2021	$	308	$	—	$	308

•We recorded restructuring charges of $88 million in the first quarter of 2021 and $15 million in the first quarter of 2020 within asset impairment and exit costs and benefit plan non-service income.

•We spent $34 million in the first quarter of 2021 and $37 million in the first quarter of 2020 in cash severance and related costs.

•We recognized non-cash asset write-downs (including accelerated depreciation and asset impairments) and other adjustments, including any gains on sale of restructuring program assets, which totaled $40 million in the first quarter of 2021 and $3 million in the first quarter of 2020.

•At March 31, 2021, $261 million of our net restructuring liability was recorded within other current liabilities and $47 million was recorded within other long-term liabilities.

Implementation Costs:

Implementation costs are directly attributable to restructuring activities; however, they do not qualify for special accounting treatment as exit or disposal activities. We believe the disclosure of implementation costs provides readers of our financial statements with more information on the total costs of our Simplify to Grow Program. Implementation costs primarily relate to reorganizing our operations and facilities in connection with our supply chain reinvention program and other identified productivity and cost saving initiatives. The costs include incremental expenses related to the closure of facilities, costs to terminate certain contracts and the simplification of our information systems. Within our continuing results of operations, we recorded implementation costs of $34 million in the first quarter of 2021 and $43 million in the first quarter of 2020. We recorded these costs within cost of sales and general corporate expense within selling, general and administrative expenses.

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Restructuring and Implementation Costs:

During the three months ended March 31, 2021 and March 31, 2020, and since inception of the Simplify to Grow Program, we recorded the following restructuring and implementation costs within segment operating income and earnings before income taxes:


	Latin America		AMEA		Europe		North America		Corporate		Total
	(in millions)
For the Three Months Ended March 31, 2021
Restructuring Costs	$	3	$	(21)	$	6	$	101	$	(1)	$	88
Implementation Costs	3		2		10		10		9