Mondelez 2014 Annual Report Download - page 95

Table of Contents
As we previously disclosed, on February 1, 2011, we received a subpoena from the SEC in connection with an investigation under
the FCPA, primarily related to a facility in India that we acquired in the Cadbury acquisition. The subpoena primarily requests
information regarding dealings with Indian governmental agencies and officials to obtain approvals related to the operation of that
facility. We are continuing to cooperate with the U.S. and Indian governments in their investigations of these matters, including
through ongoing meetings with the U.S. government to discuss potential conclusion of the U.S. government investigation.
On February 28, 2013, Cadbury India Limited (now known as Mondelez India Foods Limited), a subsidiary of Mondelēz
International, and other parties received a show cause notice from the Indian Department of Central Excise Authority (the “Excise
Authority”). The notice calls upon the parties to demonstrate why the Excise Authority should not collect 2.5 billion Indian rupee
(approximately $40 million U.S. dollars as of December 31, 2014) of unpaid excise tax as well as 2.5 billion Indian rupee
(approximately $40 million U.S. dollars as of December 31, 2014) of penalties and interest related to production at the same Indian
facility. Subsequently, the Excise Authority issued another show cause notice, dated March 3, 2014, on the same issue but
covering the period February to December 2013, thereby adding 1.2 billion Indian rupee (approximately $19 million U.S. dollars as
of December 31, 2014) of unpaid excise taxes as well as 1.2 billion Indian rupee (approximately $19 million U.S. dollars as of
December 31, 2014) of penalties and interest to the amount claimed by the Excise Authority. The latest notice includes an accruing
claim for excise as finished products leave the facility on an ongoing basis. We believe that the decision to claim the excise tax
benefit is valid and we are contesting the show cause notice through the administrative and judicial process.
In April 2013, the staff of the Commodity Futures Trading Commission (“CFTC”) advised us and Kraft Foods Group that it was
investigating activities related to the trading of December 2011 wheat futures contracts that occurred prior to the Spin-Off of Kraft
Foods Group. We are cooperating with the staff in its investigation. In October 2014, the staff advised us that the CFTC intends to
commence a formal action against us and Kraft Foods Group. We continue to try to resolve this matter prior to any formal action
being taken. It is not possible to predict the outcome of this matter; however, based on our Separation and Distribution Agreement
with Kraft Foods Group dated as of September 27, 2012, we expect to predominantly bear any monetary penalties or other
payments that the CFTC may impose.
While we cannot predict with certainty the results of any Legal Matters in which we are currently involved, we do not expect that the
ultimate costs to resolve any of these Legal Matters, individually or in the aggregate, will have a material effect on our financial
results.
Third-Party Guarantees:
We enter into third-party guarantees primarily to cover the long-term obligations of our vendors. As part of these transactions, we
guarantee that third parties will make contractual payments or achieve performance measures. At December 31, 2014, we had no
material third-party guarantees recorded on our consolidated balance sheet.
As part of our 2010 Cadbury acquisition, we became the responsible party for tax matters under the Cadbury Schweppes Plc and
Dr Pepper Snapple Group, Inc. (“DPSG”) Tax Sharing and Indemnification Agreement dated May 1, 2008 (“Tax Indemnity”) for
certain 2007 and 2008 transactions relating to the demerger of Cadbury’s Americas Beverage business. A U.S. federal tax audit of
DPSG for the 2006-2008 tax years was concluded with the IRS in August 2013. As a result, we recorded a favorable impact of
$336 million in selling, general and administrative expenses and $49 million in interest and other expense, net for a total pre-tax
impact of $385 million ($363 million net of tax) in the three months ended September 30, 2013 due to the reversal of the accrued
liability in excess of the amount we paid to DPSG under the Tax Indemnity in the third quarter of 2013.
Leases:
Rental expenses recorded in continuing operations were $399 million in 2014, $386 million in 2013 and $341 million in 2012. As of
December 31, 2014, minimum rental commitments under non-cancelable operating leases in effect at year-end were (in millions):
92
Year ending:
2015
2016
2017
2018
2019
Thereafter
Total
$309
$227
$182
$129
$102
$131
$1,080