Mondelez 2013 Annual Report Download - page 35

Table of Contents
Operating Income - Operating income increased $334 million (9.2%) to $3,971 million in 2013, Adjusted Operating Income
(1)
decreased $1 million (0.0%) to $4,213 million and Adjusted Operating Income (on a constant currency basis)
(1)
increased $199
million (4.7%) to $4,413 million due to the following:
Favorable volume/mix was driven primarily by volume gains across all segments except for Asia Pacific. During 2013, increased
input costs outpaced higher net pricing. The increase in input costs was driven by higher raw material costs, in part due to higher
foreign exchange transaction costs on imported materials, partially offset by lower manufacturing costs. Higher net pricing in Latin
America and North America was partially offset by lower net pricing in Europe, Asia Pacific and EEMEA, primarily due to lower
coffee pricing. Total selling, general and administrative expenses decreased $497 million from 2012, due in part to lower Spin-Off
Costs, a benefit from the resolution of the Cadbury acquisition-related indemnification, a favorable foreign currency impact net of
the negative impact from the devaluation of our net monetary assets in Venezuela, gains on the sales of properties in 2013 and the
impact of businesses divested in 2013 and 2012, which were partially offset by gains on sales of properties in 2012, higher
Integration Program costs, higher 2012-2014 Restructuring Program costs and the inclusion of expenses related to the acquired
biscuit operations in Morocco. Excluding these factors, selling, general and administrative expenses increased $246 million from
2012, driven primarily by higher overhead costs in emerging markets, including investments in sales capabilities and route-to-
market expansion in emerging markets, the 2012 reversal of reserves carried over from the Cadbury acquisition in 2010 and no
longer required, prior-year proceeds from insurance settlements and higher advertising and consumer promotion costs in Asia
Pacific, EEMEA and Latin America. In 2013, we divested properties in Europe and India and recorded pre-tax gains of $68 million.
In 2012, we divested properties in Russia and Turkey and recorded pre-tax gains of $77 million. The change in unrealized gains/
(losses) added $61 million in operating income for 2013. Within asset impairment and exit costs, we also recorded in 2012 an asset
impairment charge of $52 million related to a trademark in Japan. The acquisition of a biscuit operation in Morocco added $16
million in operating income for 2013. Accounting calendar changes that went into effect in Europe in the first quarter of 2013
increased operating income by $6 million. Unfavorable foreign currency decreased operating income by $200 million, due primarily
Operating
Income
Change
(in millions)
(percentage point)
Operating Income for the Year Ended December 31, 2012
$
3,637
Spin-Off Costs
444
10.6pp
Integration Program costs
140
3.0pp
2012-2014 Restructuring Program costs
110
2.3pp
Spin-Off pension expense adjustment
(2)
68
1.7pp
Acquisition-related costs
1
–
Net gain on divestitures
(107
)
(2.5)pp
Operating income from divestitures
(79
)
(1.7)pp
Adjusted Operating Income for the Year Ended December 31, 2012
(1)
$
4,214
Favorable volume/mix
495
11.6pp
Higher net pricing
157
3.7pp
Higher input costs
(333
)
(7.9)pp
Higher selling, general and administrative expenses
(246
)
(5.7)pp
Gains on sales of property in 2013
68
1.6pp
Gains on sales of property in 2012
(77
)
(1.8)pp
Change in unrealized gains/losses on hedging activities
61
1.4pp
Intangible asset impairment charge in 2012
52
1.3pp
Impact from acquisition
16
0.4pp
Impact of accounting calendar changes
6
0.1pp
Total change in Adjusted Operating Income (constant currency)
(1)
199
4.7%
Unfavorable foreign currency
-
translation
(146
)
(3.4)pp
Unfavorable foreign currency
-
Venezuela net monetary assets
(54
)
(1.3)pp
Total change in Adjusted Operating Income
(1)
0.0%
Adjusted Operating Income for the Year Ended December 31, 2013
(1)
$
4,213
Benefit from indemnification resolution
336
9.3pp
Integration Program and other integration costs
(220
)
(5.0)pp
Spin-Off Costs
(62
)
(1.5)pp
2012-2014 Restructuring Program costs
(330
)
(7.8)pp
Net gain on acquisition and divestitures
30
0.7pp
Operating income from divestitures
6
0.1pp
Acquisition-related costs
(2
)
–
Operating Income for the Year Ended December 31, 2013
$
3,971
9.2%
(1)
Please see the
Non
-
GAAP Financial Measures
section at the end of this item.
(2)
Represents the estimated annual benefit plan expense associated with certain benefit plan obligations transferred to Kraft Foods Group in the Spin
-
Off.