8-K: Mondelz International Recasts Historical Non-GAAP Financials Following Divestitures

Mondelz International is adjusting its historical non-GAAP financial results to reflect the sale of JDE Peets shares and its developed market gum business.

Summary

• Mondelz International is providing supplemental non-GAAP financial information related to the retrospective impact of two key transactions.
• These transactions include the sale of JDE Peets (JDEP) shares during the quarter ended September 30, 2023, and the sale of their developed market gum business on October 1, 2023.
• The sale of JDEP shares resulted in a reduction of ownership from 18.1% to 17.7%, with cash proceeds of $57 million and a loss of $3 million recorded in the third quarter of 2023.
• The developed market gum business sale to Perfetti Van Melle Group generated net cash proceeds of $1.4 billion.
• These transactions are treated as divestitures for non-GAAP reporting purposes, leading to a recasting of historical non-GAAP financial results.
• The recasting affects Organic Net Revenue, Adjusted Gross Profit, Adjusted Operating Income, and Adjusted EPS for all historical periods presented.
• The company's U.S. GAAP results remain unchanged from prior presentations.

Sentiment

Score: 7

Explanation: The sentiment is neutral to slightly positive. While there is a loss from the JDE Peets sale, the $1.4 billion from the gum business sale is a positive. The recasting of financials is a necessary step for transparency, but it doesn't inherently indicate a positive or negative outlook.

Positives

• The sale of the developed market gum business generated $1.4 billion in net cash proceeds, which can be used for general corporate purposes.
• The recasting of non-GAAP financials provides additional transparency and facilitates comparisons of historical operating results.
• Mondelz International retains significant influence in JDEP with board representation and governance rights.

Negatives

• The sale of JDEP shares resulted in a $3 million loss for Mondelz International.
• The recasting of financials may cause confusion for investors who are used to the previous reporting.

Risks

• The recasting of historical financials may make it difficult to compare current results with past performance.
• The company's future performance may be impacted by the loss of revenue from the divested gum business.
• The company may face challenges in integrating the cash proceeds from the divestitures into its operations.

Future Outlook

The company will continue to reflect the partial sale of its equity method investment in JDEP and the sale of its developed market gum business as divestitures in its non-GAAP financial results. The company will use the net cash proceeds from the sale of the gum business for general corporate purposes, including the support of its commercial paper program.

Management Comments

• Mondelz International believes that non-GAAP financial information is useful to investors as it provides additional information to facilitate comparisons of historical operating results, identify trends in underlying operating results, and provide additional insight and transparency on how they evaluate their business.

Industry Context

This announcement reflects a trend of companies streamlining their portfolios by divesting non-core assets to focus on higher-growth areas. The sale of the gum business aligns with Mondelz's strategy to concentrate on its core snacking categories. The adjustment of non-GAAP financials is a common practice to provide a clearer picture of ongoing operations after significant transactions.

Comparison to Industry Standards

• Many large consumer goods companies, such as Nestle and Unilever, also use non-GAAP measures to present their financial performance, especially after acquisitions or divestitures.
• The practice of recasting historical financials after significant divestitures is standard in the industry to ensure comparability.
• The divestiture of the gum business is similar to other moves by large food companies to focus on core brands and higher-growth categories, such as Nestle's sale of its US confectionery business to Ferrero.
• The use of constant currency adjustments is also a common practice among multinational companies to provide a clearer view of underlying performance, similar to how companies like Coca-Cola and PepsiCo report their results.

Stakeholder Impact

• Shareholders will have a clearer view of the company's financial performance after the divestitures.
• Employees in the divested gum business may experience changes in their employment.
• Customers of the gum business will now be served by Perfetti Van Melle Group.
• Suppliers to the gum business will now have a new business relationship with Perfetti Van Melle Group.

Next Steps

• Mondelz International will continue to report its non-GAAP financial results using the recast figures.
• The company will utilize the cash proceeds from the gum business sale for general corporate purposes.

Key Dates

Keywords

Mondelz International, Non-GAAP Financials, Divestiture, JDE Peets, Gum Business, Financial Results, Adjusted EPS, Organic Net Revenue, Adjusted Gross Profit, Adjusted Operating Income