Mondelez 2012 Annual Report Download - page 30

Table of Contents
Operating Income – Operating income increased $139 million (4.0%) to $3,637 million in 2012, Adjusted Operating Income
increased $138 million (3.4%) to $4,235 million, and Adjusted Operating Income (on a constant currency basis) increased $291
million (7.1%) to $4,388 million due to the following:
Higher net pricing, including the impact of pricing actions taken in the prior year, outpaced increased input costs during 2012. The
increase in input costs was driven by higher raw material costs, partially offset by lower manufacturing costs. Favorable volume/mix
was driven by strong contributions from Developing Markets and Europe, partially offset by an unfavorable impact in North America.
Total selling, general and administrative expenses decreased $206 million from 2011, including the benefits from a favorable impact
of foreign currency on expenses, lower Integration Program costs (including the reversal of previously accrued Integration Program
charges primarily related to planned and announced position eliminations that did not occur), higher expenses in the prior year
related to accounting calendar changes, divested businesses and a gain on the sale of a property in Russia, which were partially
offset by the Spin-Off Costs and 2012-2014 Restructuring Program costs incurred in 2012. Excluding these factors, selling, general
and administrative expenses increased $293 million from 2011, driven primarily by higher advertising and consumer promotion
costs in each of the geographic units, partially offset by the reversal of reserves not required carried over from the Cadbury
acquisition in 2010. Unfavorable foreign currency decreased operating income by $153 million, due primarily to the strength of the
U.S. dollar relative to most foreign currencies, primarily the euro, Brazilian real, Argentinean peso and Indian rupee, partially offset
by the impact of adjustments in the prior year related to the highly inflationary Venezuelan economy. Accounting calendar changes
made in 2011 (including the 53 week of shipments in 2011) decreased operating income by $93 million. In 2012, we divested
property located in Russia and recorded a pre-tax gain of $55 million. During 2012, we recorded $52 million related to a trademark
impairment in Japan. The change in unrealized gains / (losses) on hedging activities increased operating income by $37 million, as
we recognized gains of $1 million in 2012, versus losses of $36 million in 2011.
As a result of the net effect of these drivers, operating income margin increased, from 9.8% in 2011 to 10.4% in 2012. The margin
increase was due primarily to higher gross margin, reflecting the impact of pricing actions net of increased input costs and the
favorable change in unrealized gains on hedging activities and overhead leverage, partially offset by the impact of higher
advertising and consumer promotion costs. The favorable impacts from lower Integration Program costs and the realized net gain
on divestitures were offset by the unfavorable impacts of higher Spin-Off Costs and the 2012-2014 Restructuring Program costs.
27
Operating
Income
Change
(in millions)
(percentage point)
Operating Income for the Year Ended December 31, 2011
$
3,498
Integration Program costs
521
14.7pp
Spin
-
Off pension expense adjustment
91
2.7pp
Spin
-
Off Costs
46
1.4pp
Operating income from divested businesses
(59
)
(1.5)pp
Adjusted Operating Income for the Year Ended December 31, 2011
$
4,097
Higher net pricing
1,132
28.4pp
Higher input costs
(598
)
(15.0)pp
Favorable volume/mix
114
2.8pp
Higher selling, general and administrative expenses
(293
)
(7.2)pp
Impact of accounting calendar changes
(93
)
(2.5)pp
Gain on sale of property
55
1.3pp
Intangible asset impairment charge
(52
)
(1.3)pp
Change in unrealized gains/losses on hedging activities
37
0.9pp
Other, net
(11
)
(0.3)pp
Total change in Adjusted Operating Income (constant currency)
291
7.1%
Unfavorable foreign currency
(153
)
(3.7)pp
Total change in Adjusted Operating Income
138
3.4%
Adjusted Operating Income for the Year Ended December 31, 2012
$
4,235
Spin-Off Costs
(444
)
(12.3)pp
Integration Program costs
(140
)
(3.4)pp
2012-2014 Restructuring Program costs
(110
)
(3.0)pp
Spin-Off pension expense adjustment
(68
)
(1.9)pp
Acquisition-related costs
(1
)
(0.1)pp
Gains on divestitures, net
107
2.6pp
Operating income from divested businesses
58
1.4pp
Operating Income for the Year Ended December 31, 2012
$
3,637
4.0%
(1)
Please see the
Non
-
GAAP Financial Measures
section at the end of this item.
(2) Represents the estimated annual benefit plan expense associated with certain benefit plan obligations transferred to Kraft Foods Group in the Spin-Off. The estimate of
$91 million was based on market conditions and benefit plan assumptions as of January 1, 2012. For the year ended December 31, 2012, a prorated estimate of $68
million was reflected for the nine months prior to the Spin
-
Off and transfer of the benefit plan obligations to Kraft Foods Group.
(1)
(1)
(2)
(1)
(1)
(1)
(2)
rd