Mondelez 2012 Annual Report Download - page 33

Table of Contents
Operating Income – Operating income increased $1,002 million (40.1%) to $3,498 million in 2011, and Adjusted Operating Income
increased $654 million (18.7%) to $4,156 million, and Adjusted Operating Income (on a constant currency basis) increased
$495 million (14.1%) to $3,997 million due to the following:
Higher pricing outpaced increased input costs during 2011. The increase in input costs was driven by significantly higher raw
material costs, as well as higher manufacturing costs. Favorable volume/mix was driven by a strong contribution from Developing
Markets, partially offset by an unfavorable impact in North America. Total selling, general and administrative expenses increased
$242 million from 2010, including the detriments from an unfavorable impact of foreign currency on expenses, the incremental
expenses associated with our Cadbury acquisition and 2011 accounting calendar changes, partially offset by lower Integration
Program costs and lower expenses related to divested businesses. Excluding these factors, selling, general and administrative
expenses increased $71 million from 2010, driven primarily by higher advertising and consumer promotion costs in Developing
Markets. Favorable foreign currency increased operating income by $159 million, due primarily to the strength of most foreign
currencies relative to U.S. dollar, primarily the euro, Australian dollar and Brazilian real. The Cadbury acquisition, due to the
incremental January 2011 operating results, increased operating income by $83 million. The change in unrealized gains/losses on
hedging activities decreased operating income by $74 million, as we recognized losses of $36 million in 2011, versus gains of $38
million in 2010. Accounting calendar changes (including the 53 week of shipments in 2011 and excluding the effects of foreign
currency) added $66 million in operating income, as we realized operating income from accounting calendar changes of $89 million
in 2011, versus $23 million in 2010. During 2011, we reversed $5 million in restructuring program charges recorded in prior years,
versus a reversal of $29 million in restructuring program charges recorded in prior years during 2010. We recorded asset
impairment charges of $55 million in 2010 related to intangible assets in China and the Netherlands and on a biscuit plant and
related property, plant and equipment in France.
As a result of the net effect of these drivers, operating income margin increased, from 7.9% in 2010 to 9.8% in 2011. The margin
increase was due primarily to overhead leverage, lower acquisition-related costs and lower Integration Program costs, which more
than offset a decline in gross profit margin, driven primarily by the impact of the higher revenue base on the margin calculation.
30
Operating
Income
Change
(in millions)
(percentage point)
Operating Income for the Year Ended December 31, 2010
$
2,496
Integration Program costs
646
23.4pp
Acquisition
-
related costs
–
Cadbury
273
13.4pp
Spin
-
Off pension expense adjustment
91
5.0pp
Operating income from divested businesses
(4
)
(0.2)pp
Adjusted Operating Income for the Year Ended December 31, 2010
$
3,502
Higher net pricing
1,715
48.9pp
Higher input costs
(1,562
)
(44.6)pp
Favorable volume/mix
293
8.4pp
Higher selling, general and administrative expenses
(71
)
(2.0)pp
Incremental operating income from the Cadbury acquisition
83
2.4pp
Change in unrealized gains/losses on hedging activities
(74
)
(2.1)pp
Impact from accounting calendar changes
66
1.8pp
Lower net asset impairment and exit costs
31
0.9pp
Other, net
14
0.4pp
Total change in Adjusted Operating Income (constant currency)
495
14.1%
Favorable foreign currency
159
4.6pp
Total change in Adjusted Operating Income
654
18.7%
Adjusted Operating Income for the Year Ended December 31, 2011
$
4,156
Integration Program costs
(521
)
(14.8)pp
Spin-Off pension expense adjustment
(91
)
(3.5)pp
Spin-Off Costs
(46
)
(1.9)pp
Operating Income for the Year Ended December 31, 2011
$
3,498
40.1%
(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 obligations as of January 1, 2012.
(3)
Impact of acquisition reflects the incremental January 2011 operating results
from our Cadbury acquisition.
(1) (1)
(2)
(1)
(3)
(1)
(1)
(2)
rd