Mondelez 2014 Annual Report Download - page 72

Table of Contents
In 2014, we concluded our Spin-Off transition plans. Historically, we incurred Spin-Off transaction, transition and financing and
related costs (“Spin-Off Costs”) within our operating results. We have recorded Spin-Off Costs of $35 million in 2014, $62 million in
2013 and $1,053 million in 2012 in pre-tax earnings as follows:
Through the end of 2014, we incurred total Spin-Off Costs of approximately $1.2 billion, and we do not expect to incur additional
Spin-Off Costs.
Resolution of Starbucks Arbitration:
On December 13, 2013, an independent arbitrator in our dispute with the Starbucks Coffee Company (“Starbucks”) issued a
decision and Final Award that Kraft Foods Global, Inc. (now Kraft Foods Group), the named party in the proceeding, had proven
that it was entitled to recover and that Starbucks was required to pay $2,764 million in total cash compensation for Starbucks’
unilateral termination of the Starbucks packaged coffee business license and supply agreement. The award included compensation
for 135% of the determined fair market value of the agreement for improper termination as well as prejudgment interest of $521
million and Kraft Foods Group’s attorney’s fees, which the parties agreed would equal $15 million. Starbucks has paid all of the
amount owed pursuant to the ruling. Under the Separation and Distribution Agreement between Kraft Foods Group and us, Kraft
Foods Group directed the recovery awarded in the arbitration proceeding to us. The dispute arose within the Kraft Foods Group
discontinued operation and was directed to Mondelēz International in connection with the Spin-Off recapitalization plans.
Accordingly, the pre-tax gain on the resolution of the Starbucks arbitration of $2.5 billion ($1.6 billion net of tax) was recorded in
earnings from discontinued operations during the fourth quarter of 2013.
Acquisitions, Other Divestitures and Sales of Property:
On November 11, 2014, we announced the pending acquisition of a biscuit operation in Vietnam. The biscuit operation will become
a subsidiary within our Asia Pacific segment. The total consideration to be paid is expected to be up to 12,656 billion Vietnamese
dong ($600 million U.S. dollars as of December 31, 2014). We expect to close the initial phase of the transaction in mid 2015 after
regulatory and other matters are resolved. We deposited $46 million in escrow upon signing the purchase agreement on
November 10, 2014. We expect to pay approximately 9,935 billion Vietnamese dong ($471 million U.S. dollars as of December 31,
2014) and deposit an additional 991 billion Vietnamese dong ($47 million U.S. dollars as of December 31, 2014) in escrow upon
completing the initial phase of the transaction in mid 2015, which we expect to fund from current borrowing capacity. The balance
will be paid upon the satisfaction of final conditions, including the resolution of warranty or other claims and purchase price
adjustments. Legal expenses related to the planned acquisition were $2 million in 2014 and were recorded within selling, general
and administrative expenses.
On February 22, 2013, we acquired the remaining interest in a biscuit operation in Morocco, which is now a wholly-owned
subsidiary within our EEMEA segment. We paid net cash consideration of $119 million, consisting of $155 million purchase price
net of cash acquired of $36 million. Prior to the acquisition, our interest in the operation was accounted for under the equity method.
As a result of obtaining a controlling interest, we consolidated the operation and upon finalizing the valuation of the acquired net
assets, as of December 31, 2013, we had recorded the fair value of acquired assets (including identifiable intangible assets of $48
million), the liabilities assumed and goodwill of $209 million. During the three months ended March 31, 2013, we also recorded a
pre-tax gain of $22 million related to the remeasurement of our previously-held equity interest in the operation to fair value in
accordance with U.S. GAAP and acquisition costs of $7 million in interest and other expense, net and selling, general and
administrative expenses. We recorded integration charges of $4 million in 2014 and $4 million in 2013 within cost of sales and
selling, general and administrative expenses.
In 2013, we completed several divestitures primarily in our EEMEA and Europe segments that generated cash proceeds of $60
million and pre-tax gains of $8 million. The divestitures included a salty snacks business in Turkey, a confectionery business in
South Africa and a chocolate business in Spain.
In 2012, we completed several divestitures within our Europe segment that generated cash proceeds of $200 million and pre-tax
gains of $107 million. The divestitures primarily included a dinners and sauces grocery business in Germany and Belgium and a
canned meat business in Italy.
69
For the Years Ended December 31,
2014
2013
2012
(in millions)
Selling, general and administrative expenses
$
35
$
62
$
444
Interest and other expense, net –
–
609
Spin-Off Costs
$
35
$
62
$
1,053