Mondelēz International announces Q4 and FY 2022 results (2023)

Highlights of the whole year

• Net sales for the full year increased +9.7%, driven by organic net sales¹Growth of +12.3% on an underlying volume/mix of +2.7%. In the fourth quarter, net sales increased by +13.5%, driven by organic net sales¹Growth of +15.4% with underlying volume/mix of +1.6%
• Diluted earnings per share were $1.96, down 35.5%; Adjusted earnings per share¹was $2.95, up 11.9% on a constant currency basis
• Cash provided by operations was $3.9 billion, down $0.2 billion from a year ago; Free cash flow¹was $3.0 billion, down $0.2 billion from a year earlier
• Return of capital to shareholders was $4.0 billion; elevatedDividendper share by 10%
• Announced an agreement with Perfetti Van Melle to acquire our chewing gum business in developed markets in the US, Canada and Europe. The deal is expected to close in Q4 2023

CHICAGO, 31. Januar 2023 (GLOBE NEWSWIRE) – Mondelēz International, Inc. (Nasdaq: MDLZ) today released its results for the fourth quarter of 2022.

"Our 2022 results demonstrate the strength and diversification of our portfolio as we delivered broad-based growth across geographies, categories and brands. We delivered strong gross profit growth in dollars, driven by double-digit revenue growth, shared by both price and volume, enabling robust cash flow generation and a significant return of capital to shareholders. These results have been underscored by continued strength in emerging and developed markets, as well as solid contributions from our recently acquired businesses," said Dirk van de Put, Chairman and Chief Executive Officer. “We have made significant progress on our strategy to accelerate growth and focus our portfolio on the attractive, resilient chocolate, biscuit and baked snack categories while continuing to invest in our brands and capabilities. We have also continued to deliver strong market execution amid difficult operating conditions and sustained macroeconomic volatility."

net sales

Operating Income and Diluted EPS

year-round comment

• net incomeup 9.7 percent, driven by organic net sales growth of 12.3 percent and additional sales from the company's acquisitions, primarily Chipita, Clif Bar and Ricolino, partially offset by unfavorable currencies. Price and volume drove organic net sales growth.
• gross profitincreased $58 million and gross profit margin decreased 330 basis points to 35.9 percent, primarily due to an unfavorable year-over-year change in the mark-to-market impact of derivatives and a decrease in adjusted gross profit¹Edge. Adjusted gross profit increased $1,362 million at constant currency, while adjusted gross profit margin decreased 120 basis points to 37.5 percent due to higher raw material and transportation costs and an unfavorable mix, partially offset by pricing.
• operating resultdeclined $1,119 million and operating income margin was 11.2 percent, down 500 basis points, primarily due to the unfavorable year-over-year change in the mark-to-market impact of derivatives and the impact of the attributable to the European Commission³, higher acquisition-related costs, lower adjusted operating income¹Margin and higher acquisition integration costs and contingent consideration adjustments partially offset by lower restructuring costs. Adjusted operating income increased $583 million in constant currency while adjusted operating income margin decreased 60 basis points to 16.0 percent, with input cost inflation and unfavorable mix partially offset by pricing and SG&A leverage.
• Diluted EPSwas $1.96, down 35.5 percent, primarily due to the overlap of net gains on equity method transactions in the prior year, unfavorable year-over-year mark-to-market impact of currency and commodity derivatives, the impact of the litigation of the European Commission and higher acquisition-related costs, additional costs related to the war in Ukraine, higher acquisition integration costs and contingent consideration adjustments, and higher impairments of intangible assets partially offset by an increase in adjusted earnings per share, lower costs for the Simplify to Grow" and lower negative effects from the entry into force of changes in tax law.
• Adjusted earnings per sharewas $2.95, an increase of 11.9 percent on a constant currency basis, driven by strong operating income and fewer shares outstanding, partially offset by higher interest expense and lower income from investments accounted for using the equity method.
• Capital leases: The company returned $4.0 billion to shareholders in the form of cash dividends and share repurchases.

Fourth Quarter Commentary

• net incomeincreased 13.5 percent, driven by organic net sales growth of 15.4 percent and additional sales from the company's acquisitions of Chipita, Clif Bar and Ricolino, partially offset by unfavorable currencies. Price and volume drove organic net sales growth.
• gross profitincreased $242 million and gross profit margin declined 160 basis points to 35.4 percent, primarily due to a decrease in adjusted gross profit¹Margin and unfavorable change in mark-to-market impact of derivatives compared to prior year, partially offset by lower restructuring charges. Adjusted gross profit increased $473 million at constant currency while adjusted gross profit margin decreased 120 basis points to 36.0 percent due to higher raw material and transportation costs and an unfavorable mix, partially offset by pricing.
• operating resultdecreased $370 million and operating income margin was 9.6 percent, down 610 basis points, primarily due to the impact of the European Commission case, higher restructuring costs, unfavorable changes in the mark-to-market impact of derivatives compared to the Prior year, higher acquisition integration costs and contingent consideration adjustments, lower adjusted operating income¹Margin and higher acquisition-related costs partially offset by lower divestment-related costs. Adjusted operating income increased $201 million in constant currency while adjusted operating income margin decreased 30 basis points to 15.0 percent, with input cost inflation and unfavorable mix partially offset by pricing and SG&A leverage.
• Diluted EPSwas $0.42, down 40.8 percent, primarily due to the impact of the European Commission case, unfavorable year-over-year mark-to-market impact of currency and commodity derivatives, lower restructuring charges, higher acquisition integration costs and contingent consideration adjustments, partially offset by an increase in adjusted EPS and recoveries from malware incidents in 2017, net.
• Adjusted earnings per sharewas $0.73, up 9.9 percent on a constant currency basis, driven by strong operating income and fewer shares outstanding, partially offset by higher taxes, higher interest expense and lower income from investments accounted for using the equity method.
• Capital return and extension of share buyback program: The company returned $0.7 billion to shareholders in the form of cash dividends and share repurchases. The Board of Directors also approved a new program authorizing the repurchase of up to $6.0 billion of our Class A common stock through December 31, 2025. This share buyback program approval supersedes our existing approval.

Outlook 2023

Mondelēz International provides its outlook on a non-GAAP basis because the company cannot predict certain elements included in its reported GAAP results, including the impact of foreign exchange rates. See the “Outlook” section in the discussion of non-GAAP financial measures below for more details.

For 2023, the company expects organic net sales growth of 5 to 7 percent, high single-digit adjusted EPS growth on a constant currency basis and free cash flow in excess of $3.3 billion. The company estimates that currency translation would reduce net sales growth by about 1 percent in 2023⁴with a negative impact of $0.04 on adjusted EPS⁴.

The outlook is provided against a backdrop of above average volatility as a result of COVID-19 and geopolitical uncertainty.

telephone conference

Mondelēz International will host an investor conference call with accompanying slides at 5:00 p.m. to review the results. ET today. A listen-only webcast will be provided atwww.mondelezinternational.com. An archive of the webcast will be available on the company's website.

About Mondelez International

Mondelēz International, Inc. (Nasdaq: MDLZ) allows people in over 150 countries around the world to snack directly. With net sales of approximately $31 billion in 2022, MDLZ is leading the future of snacking with iconic global and local brands such as:Oreo,Ritz, LU, ClifBarandTates Bake ShopCookies and baked snacks as wellCadbury dairy milk,MilkaandTobleroneChocolate. Mondelēz International is a proud member of the Standard and Poor's 500, Nasdaq 100 and Dow Jones Sustainability Index. Visitwww.mondelezinternational.comor follow the company on Twitter athttps://www.twitter.com/MDLZ.

Endnotizen

1. Organic net sales, adjusted gross profit (and adjusted gross profit margin), adjusted operating income (and adjusted operating profit margin), adjusted earnings per share, free cash flow and presentation of amounts in constant exchange rates are non-GAAP financial measures. For more information, see the discussion of non-GAAP financial measures at the end of this press release.
2. Earnings Attributable to Mondelēz International.
3. For more information, see the discussion of "Reconciliation of GAAP and Non-GAAP Financial Measures - Elements Affecting Comparability of Operating Results" at the end of this press release.
4. Currency estimate based on published rates from XE.com on January 24, 2023.

Additional Definitions
Emerging markets encompass the entire Latin America region; the Asia, Middle East and Africa region excluding Australia, New Zealand and Japan; and the following countries from the Europe region: Russia, Ukraine, Türkiye, Kazakhstan, Georgia, Poland, Czech Republic, Slovak Republic, Hungary, Bulgaria, Romania, the Baltic States and the Eastern Adriatic Countries.

Developed markets include the entire North America region, the Europe region excluding countries included in the emerging markets definition, and Australia, New Zealand and Japan from the Asia, Middle East and Africa region.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, are "forward-looking statements" within the meaning of federal and state securities laws, including any forward-looking statements of profits, revenues or other financial items; any statements regarding management's plans, strategies and objectives, including future operations, capital expenditures or share repurchases; statements about proposed new products, services or developments; statements about future economic conditions or performance; any expression of belief or expectation; and any statements of assumptions underlying the foregoing or other future events. Forward-looking statements may include, but are not limited to, the words and variations of words such as "will", "may", "expect", "would", "could", "might", "intend", "plan", "believe", "likely". ', 'estimate', 'anticipate', 'target', 'predict', 'project', 'drive', 'aim', 'aim', 'aim', 'potential', 'commitment'. ', 'outlook', 'further' or other similar words.

Although we believe that the expectations expressed in our forward-looking statements are reasonable, actual outcomes or results may differ materially from those projected or implied in our forward-looking statements. Our future financial condition and results of operations and any forward-looking statements are subject to change and involve inherent risks and uncertainties, many of which are beyond our control. Important factors that could cause our actual results or performance to differ materially from those contained in or implied by our forward-looking statements include the following:

• weakness in macroeconomic conditions in our markets, including as a result of inflation (and related monetary policy actions by governments in response to inflation), volatility of commodities and other input costs and availability of commodities;
• geopolitical uncertainty, including the impact of ongoing or new developments in the war in Ukraine, related current and future sanctions imposed by governments and other authorities and related impacts, including on our operations, our employees, our reputation, our brands , our financial condition and results of operations;
• global or regional public health pandemics or epidemics, including COVID-19;
• competition and our response to channel shifts and pricing and other competitive pressures;
• price promotions;
• promoting and protecting our reputation and brand image;
• weak consumer spending and/or changes in consumer preferences and demand and our ability to predict, identify, interpret and manage those changes;
• risks of doing business around the world, including in emerging markets, such as political, economic and regulatory risks;
• the outcome and impact of legal and tax proceedings and regulatory investigations on us, including the European Commission case;
• use of information technology and third parties;
• unforeseen disruptions to our business, such as B. Malware incidents, cyber-attacks or other security breaches, and delivery, commodity, labor and transportation restrictions;
• our ability to identify, complete, manage and realize the full extent of the benefits, cost savings or synergies of strategic transactions, including our recently completed acquisitions of Ricolino, Clif Bar, Chipita, Gourmet Food, Grenade and Hu and the expected completion of our proposed ones divestment of our chewing gum business in developed markets in the United States, Canada and Europe;
• our investments and our ownership interests in those investments, including JDE Peet's and KDP;
• the restructuring program and our other transformation initiatives are not delivering the expected benefits;
• changes in the assumptions on which the restructuring program is based;
• the impact of climate change on our supply chain and operations;
• consolidation of retail customers and competition from retail and other economy brands;
• changes in our relationships with customers, suppliers or dealers;
• managing our workforce and shifts in labor availability or labor costs;
• Compliance with legal, regulatory, tax and benefit laws and related changes, claims or actions;
• perceived or actual product quality issues or product recalls;
• failure to maintain effective internal control over financial reporting or disclosure controls and procedures;
• our ability to protect our intellectual property and intangible assets;
• tax matters, including changes in tax laws and tax rates, disagreements with tax authorities and the levying of new taxes;
• changes in exchange rates, controls and restrictions;
• volatility of and access to capital or other markets, the effectiveness of our cash management programs and our liquidity;
• pension costs;
• significant changes in valuation factors that may affect our impairment testing of goodwill and intangible assets; and
• the risks and uncertainties, which may change from time to time, and which are inherent in our U.S. Securities and Exchange Commission, including our most recently filed annual report on Form 10-K and subsequent quarterly reports on Form 10-Q.

There may be other factors, not currently known to us or which we currently consider immaterial, that could cause our actual results to differ materially from those projected in our forward-looking statements. We disclaim and undertake no obligation to update or revise any forward-looking statements contained in this press release, except as required by applicable law or regulation. In addition, historical, current and forward-looking sustainability statements may be based on standards for measuring progress that are still evolving, internal controls and processes that are evolving, and assumptions that may change in the future.

Mondelēz International, Inc. and its affiliates
Reconciliation of GAAP and non-GAAP financial measures
(unaudited)

The Company reports its financial results in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). However, management believes that the presentation of certain non-GAAP financial measures provides additional information to facilitate comparison of the Company's historical operating results and trends in its underlying operating results and to provide additional transparency into how the Company conducts its business rated. Management uses these non-GAAP financial measures to make financial, operating and planning decisions and to evaluate the company's performance. The Company also believes that the presentation of these metrics allows investors to see its performance against the same metrics that the Company uses to evaluate its financial and business performance and trends.

The company considers quantitative and qualitative factors in evaluating whether to adjust for the impact of items that may be material or could affect an understanding of its ongoing financial and business performance and trends. The adjustments generally fall into the following categories: acquisition and divestment activities, gains and losses on sale of intangible assets and non-cash impairments, major program restructuring activities, currency-neutral and related adjustments, significant program financing and hedging activities, and other significant items affecting the Comparability of affecting operating results. Below is a description of the restatements to the Company's US GAAP financial measures contained herein.

Non-GAAP information should be considered supplemental and is not intended to be used in isolation or as a substitute for related financial information prepared in accordance with US GAAP. In addition, the company's non-GAAP financial measures may not be the same or comparable to similar non-GAAP measures of other companies.

DEFINITIONS OF THE COMPANY'S NON-GAAP FINANCIAL MEASURES
The company's non-GAAP financial measures and related measures reflect how the company currently evaluates its operating results and provide improved comparability of operating results. As new events or circumstances arise, these definitions may change. When these definitions change, the Company provides the updated definitions and presents the related non-GAAP historical results on a comparable basis. When items no longer affect the Company's current or future presentation of non-GAAP results of operations, the Company removes those items from its non-GAAP definitions. In the first quarter of 2022, the Company added the exclusion of incremental costs related to the war in Ukraine to its Non-GAAP definitions. In the second quarter of 2022, the Company added the exclusion of costs incurred in connection with our publicly announced processes to sell businesses to its Non-GAAP definitions. In the third quarter of 2022, the Company added the exclusion of acquisition-related inventory increase fees to its non-GAAP definitions. In the fourth quarter of 2022, the Company added the exclusion of the impact of the European Commission case to its non-GAAP definitions.

• "Organic Net Sales"is defined as net sales excluding the impact of acquisitions, divestitures and exchange rate fluctuations. The company also assesses organic net sales growth in emerging and developed markets.
• “Adjusted Gross Profit”is defined as gross profit excluding the impact of the Simplify to Grow program; Acquisition costs for the integration; the operating results of divestitures; mark-to-market impact of commodity, forecast currency and equity investment transaction derivative contracts; Inventory Increase Fees: Net Recoveries from Malware Incidents in 2017; and additional costs due to the war in Ukraine. The company also presents "adjusted gross profit margin," which is subject to the same adjustments as adjusted gross profit. The company also assesses the company's adjusted gross profit growth on a constant currency basis.
• "Adjusted Operating Income"and“Adjusted Operating Segment Result”is defined as operating income (or segment operating income) excluding the impact of items included in the definition of adjusted gross profit and gains or losses (including non-cash impairments) on goodwill and intangible assets; disposal or acquisition gains or losses, disposal-related costs, acquisition-related costs and acquisition integration costs and contingent consideration adjustments; revaluation of the net money position; implications of resolving tax matters; the case of the European Commission; impact of pension participation changes; and costs related to the JDE Peet transaction. The Company also reports "Adjusted Operating Income Margin" and "Adjusted Segment Operating Income Margin," which are subject to the same adjustments as adjusted operating income and adjusted segment operating income. The company also assesses the growth of the company's adjusted operating income and adjusted segment operating income on a constant currency basis.
• “Adjusted Earnings Per Share”is defined as diluted earnings per share from continuing operations attributable to Mondelēz International excluding the impact of the items included in the definition of adjusted operating income and losses from the servicing of debt and related expenses; Gains or losses on interest rate swaps that are no longer designated as accounting cash flow hedges due to changes in funding and hedging plans; net proceeds from disposals; first effects of tax law changes that have come into force; and gains or losses on equity method transactions. Similarly, the Company's equity method net earnings within adjusted earnings per share exclude its proportionate share of the significant operating and non-operating items of its investee companies. The tax impact of each of the excluded items from the Company's US GAAP results has been calculated based on the facts and tax assumptions associated with each item and such impact has also been excluded from the adjusted earnings per share. The company also assesses the company's adjusted earnings per share growth on a constant currency basis.
• "Free Cash Flow"is defined as net cash provided by operating activities less capital expenditures. Free cash flow is the company's primary metric for monitoring its cash flow performance.

See the attached attachments for supplemental financial information and related reconciliations of the above non-GAAP financial measures to the most comparable US GAAP financial measures for the three and twelve months ended December 31, 2022 and December 31, 2021. See items that Affecting Comparability of Operating Results See below for more information about the items mentioned in these definitions that specifically affected the Company's results.

SEGMENT OPERATING RESULT
The Company uses segment operating income to evaluate segment performance and allocate resources. The company believes it is appropriate to disclose this metric to assist investors in analyzing segment performance and trends. Segment operating income excludes unrealized gains and losses on hedging activities (which are a component of cost of sales), general corporate expenses (which are a component of selling, general and administrative expenses), amortization of intangible assets, and gains and losses on divestments and acquisitions -related costs (which form part of selling, general and administrative expenses) in all periods presented. The Company excludes these items from segment operating income to provide better transparency of its segment operating results. In addition, the company centrally manages non-service income and interest and other expenses, net. Accordingly, the Company does not present these items by segment because they are excluded from the segment profitability measure that management reviews.

ITEMS THAT AFFECT THE COMPARABILITY OF OPERATING RESULTS
The following information is provided to provide qualitative and quantitative information relating to items affecting the comparability of operating results. The company identifies these based on how management views the company's business; makes financial, operational and planning decisions; and evaluates the ongoing performance of the company. In addition, the Company discloses the effects of changes in foreign exchange rates on the Company's financial results to reflect results on a constant currency basis.

Divestments, costs associated with disposals and gains/(losses) on disposals
Disposals include completed sales of businesses, exits from major product lines following completion of a sale or license agreement, and the sale of some or all of an equity method investment such as KDP or JDE Peet's (separated below under equity method gains and losses Method of accounting for investments explained). transaction area). Because the Company recognizes its share of the ongoing earnings of KDP and JDE Peet with a one-fourth lag, any ownership reductions in KDP or JDE Peet are reflected as disposals in the Company's non-GAAP results in the following quarter. Divestment-related costs, which include costs related to the Company's disposals as defined above, also include costs incurred in connection with the Company's publicly announced processes to sell businesses.

• The Company's non-GAAP results include the effects of selling a portion of its equity interest in KDP in 2021 and selling a portion of its interest in JDE Peet's on May 8, 2022, as if the sales had occurred at the beginning of all periods presented. See the section below on gains/losses on investments accounted for using the equity method for more information.
• On July 7, 2022, the Company completed the sale of a business in Argentina that included several local chewing gum and confectionery brands and a manufacturing facility. Additionally, on September 1, 2022, the Kraft Heinz Company's license agreement to manufacture and sell Kraft mayonnaise in Latin American countries, primarily Mexico, expired. Disposals of these businesses resulted in a year-over-year decrease in net income of $21 million for the twelve months ended December 31, 2022. In addition, the Company incurred $3 million in disposal-related costs for the twelve months ended December 31, 2022 -Dollar.
• In 2022, the company announced its intention to divest the company's gum for developed markets and worldwideThe hallCompany and in Q4, 2022, the Company announced an agreement to sell its developed markets chewing gum business, with expected closing in Q4, 2023, subject to appropriate antitrust approvals and closing conditions. In addition, the Company incurred divestment-related costs of $6 million for the three months and $15 million for the twelve months ended December 31, 2022.
• On November 1, 2021, the Company completed the sale of MaxFoods Pty Ltd, an Australian packaged seafood company, acquired as part of its acquisition of Gourmet Food Holdings Pty Ltd ("Gourmet Food"). The sale price was AUD 57 million (US$ 41 million), net of cash disposed of with the deal, and the company recorded an immaterial loss on the transaction. The divestiture of this business resulted in a year-over-year decrease in net income of $5 million for the three months and $35 million for the twelve months ended December 31, 2022.

Acquisitions, acquisition-related costs and acquisition integration costs and contingent consideration adjustments
Acquisition-related costs, which include transaction costs such as third-party consultants, investment banking and legal fees, also include one-time compensation expenses related to the purchase of unvested employee stock ownership plans and realized gains or losses on related hedging activities with acquisition funds. Acquisition integration costs and contingent consideration adjustments include one-time costs related to the integration of acquisitions and any fair value adjustments to contingent consideration liabilities previously recognized for acquisition-related earn-outs that are not related to acquisition-related personnel expenses. The Company excludes these items to facilitate comparisons of its underlying operating performance over time.

On November 1, 2022, the company acquired the primarily Mexico-based confectionery business Ricolino from Grupo Bimbo. The acquisition of Ricolino builds on our continued prioritization of fast-growing snacking segments in key geographies. The acquisition resulted in additional net sales of $105 million for the three months and twelve months ended December 31, 2022 and operating income of $1 million for the three months and twelve months ended December 31, 2022. In addition, the Company Acquisition integration costs of $4 million for the three months and $11 million for the twelve months ended December 31, 2022 and inventory enhancement fee of $5 million for the three and twelve months ended December 31, 2022. Associated costs , which resulted in revenue of $64 million for the twelve months ended December 31, 2022 as realized gains related to hedging contracts related to acquisition funds more than offset other acquisition transaction costs.

On August 1, 2022, the Company acquired 100% interest in Clif Bar & Company ("Clif Bar"), a leading U.S. manufacturer of nutritious energy bars using organic ingredients. The acquisition expands our global snack bar business and complements our portfolio of chilled snack and performance bars. The acquisition resulted in incremental net income of $204 million for the three months and $361 million for the twelve months ended December 31, 2022 and operating income of $10 million for the three months and $13 million dollars for the twelve months ended December 31, 2022. In addition, for the twelve months ended December 31, 2022, the Company incurred inventory increase costs of $20 million and acquisition integration costs and contingent consideration adjustments of $14 million in the three months and $30 million in the twelve months ended December 31, 2022 These acquisition integration costs include an increase in the contingent purchase price liability due to changes in underlying assumptions. The Company also incurred acquisition-related costs of $296 million for the twelve months ended December 31, 2022, primarily related to the purchase of the unvested shares of the employee stock option plan.

On January 3, 2022, the company Chipita Global S.A. (“Chipita”), a leading croissant and baked snacks company in the Central and Eastern European markets. The acquisition of Chipita provides a strategic addition to the company's existing portfolio and advances its strategy to become the world's leading snack food company. The acquisition resulted in incremental net revenue of $161 million for the three months and $651 million for the twelve months ended December 31, 2022, as well as an operating loss of $3 million for the three months and an operating income of 36 million US$ for the twelve months ended December 31, 2022. The Company incurred acquisition-related costs of US$1 million for the three months and US$22 million for the twelve months ended December 31, 2022 and US$6 million US$ for the twelve months ended December 31, 2021. The Company also incurred acquisition integration costs of US$5 million for the three months and US$90 million for the twelve months ended December 31, 2022 and US$11 million in for the three months and $17 million for the twelve months ended December 31, 2021.

On April 1, 2021, the Company acquired Gourmet Food Holdings Pty Ltd, a leading Australian food company in the premium biscuit and cracker category. The acquisition resulted in additional net sales of $14 million and operating income of $1 million for the twelve months ended December 31, 2022. The Company incurred $1 million in acquisition integration costs for the twelve months ended December 31, 2022. related charges of $1 million for the three months and $8 million for the twelve months ended December 31, 2021.

On March 25, 2021, the Company acquired a controlling interest in Lion/Gemstone Topco Ltd (“Grenade”), a leading UK performance nutrition company. The acquisition of Grenade expands the company's position in the premium nutrition segment. The acquisition resulted in additional net sales of $21 million and operating income of $2 million for the twelve months ended December 31, 2022. The Company incurred acquisition-related costs of $2 million for the twelve months ended December 31, 2021.

On January 4, 2021, the Company acquired the remaining 93% equity of Hu Master Holdings, a premium chocolate industry leader in the United States, which strategically complements the Company's North American snacking portfolio with growth opportunities in chocolate and chocolate-related businesses Offers in the wellbeing segment. The initial cash consideration paid was $229 million, net of cash received, and the Company may have to pay additional contingent consideration. The estimated fair value of the contingent consideration obligation at the acquisition date was $132 million and was determined using a Monte Carlo simulation based on projected future results. In the third quarter of 2021, the Company recorded a $70 million reduction in liability due to changes in the expected pace of growth. In the third quarter of 2022, the Company recorded an additional $7 million reduction in liability as a result of additional changes in projected future results. As a result of acquiring the remaining equity interest, the Company consolidated operations and recorded a pre-tax income of $9 million ($7 million after tax) related to the increase in the Company's previously held $8 million investment. Dollars (7%) on fairness value. The Company incurred acquisition-related costs of $9 million for the twelve months ended December 31, 2021.

On April 1, 2020, the company acquired a controlling interest in Give & Go, a North American leader in ready-made sweet bakery products and owner of the famoustwo-bite^®brand of brownies and theCreate a treat^®Brand known for cookie and gingerbread house decoration sets. The takeover of Give & Go provides access to the bakery channel and further expands the company's position in the snacking sector. The Company incurred acquisition integration costs and contingent consideration adjustments of $25 million for the three months and $26 million for the twelve months ended December 31, 2022, primarily related to an increase in the contingent consideration liability due to changes of projected future results. The Company also incurred acquisition integration costs of $3 million for the three months and $6 million for the twelve months ended December 31, 2021.

Simplify-to-Grow-Programm
The primary goal of the Simplify to Grow program is to reduce the company's operating cost structure in both its supply chain and overhead. The program includes severance payments, as well as asset disposals and other one-off costs related to manufacturing and procurement.

restructuring costs
The Company recorded $28 million in restructuring charges for the three months and $36 million for the twelve months ended December 31, 2022. The Company recorded a net credit within restructuring charges of $96 million due to Gains on the sale of assets, primarily real estate, included in the restructuring program for the three months ended December 31, 2021 and recognized restructuring charges of $154 million for the twelve months ended December 31, 2021. These costs related to severance and related costs, non-cash depreciation of assets (including accelerated depreciation and impairment of assets) and other adjustments, including any gains on sale of assets of the restructuring program.

implementation costs
Implementation costs relate primarily to the reorganization of the company's operations and facilities associated with its supply chain reinvention program and other identified productivity and cost savings initiatives. The costs include additional costs related to the closure of facilities, costs for terminating certain contracts and simplifying the company's information systems. The company recorded implementation costs of $25 million for the three months and $87 million for the twelve months ended December 31, 2022 and $35 million for the three months and $167 million for the twelve months ended December 31, 2021.

Impairment losses on intangible assets
During the Company's 2022 annual review of indefinite-lived intangible assets, the Company recorded a US$23 million impairment of intangible assets in AMEA in the third quarter of 2022 related to a cookie brand.

During the first quarter of 2022, the Company recorded an impairment of intangible assets of $78 million in AMEA related to a local brand of biscuits sold in select markets in AMEA and Europe.

In the second quarter of 2021, the Company recorded a $32 million impairment of intangible assets in North America related to a cookie brand.

Mark-to-Market Effects of Commodity and FX Derivative Contracts
The Company excludes unrealized gains and losses (mark-to-market impact) on outstanding commodity and forecast currency and equity investment transaction derivative contracts from its non-GAAP earnings measures. The mark-to-market effects of commodity and forecast currency transaction derivatives are excluded to the point where the associated risks impact the Company's results of operations. Because the Company purchases commodity and forecast foreign exchange transaction contracts to mitigate price volatility primarily for future period inventory needs, the Company makes this adjustment to eliminate the volatility of these future inventory purchases on current operating results in order to make comparisons of its underlying operating performance across periods to ease . The company excludes the settlement of derivative contracts for investments under the equity method because they provide a protection against future disposals. The Company recorded net unrealized losses on derivative transactions by commodities, forecast currencies and the equity method of $98 million for the three months and $318 million for the twelve months ended December 31, 2022 and recorded net unrealized gains of 9 million and $277 million for the three months ended December 31, 2021.

Revaluation of the net money position

The Company translates the operating results of its subsidiaries from multiple currencies using average exchange rates during each period and translates balance sheet accounts using the exchange rates at the end of each period. The entity accounts for currency translation adjustments as a component of equity (excluding hyperinflationary currencies) and realized foreign exchange gains and losses on revenue transactions.

Hyperinflationary accounting is triggered when a country's three-year cumulative inflation rate exceeds 100%. It requires the revaluation of the financial statements of subsidiaries in the country from the subsidiary's functional currency to our US dollar reporting currency, with currency revaluation gains or losses recognized in profit or loss. At this time, Argentina and Türkiye are reported within the Company's consolidated entities as highly inflationary economies. For Argentina, the Company recorded revaluation losses of US$12 million for the three months and US$39 million for the twelve months ended December 31, 2022 and US$3 million for the three months and US$13 million in the twelve months ended 31 December 2021 in connection with the revaluation of the Argentine peso net cash position for those periods. For Türkiye, the Company recorded revaluation losses of US$2 million for the three months and US$1 million for the twelve months ended December 31, 2022 related to the revaluation of the Turkish Lira denominated net cash position during these periods. The Company reclassified these costs to selling, general and administrative expenses for Argentina and Türkiye.

Impact of Pension Participation Changes
The impact of changes in pension participation represents the cost of exiting groups of employees from multi-employer pension plans and other changes in the participation of groups of employees in pension plans. The Company excludes these charges from its non-GAAP results because these amounts do not reflect the Company's current pension obligations.

In the second quarter of 2021, the company made the decision to freeze its defined benefit plan in the UK. As a result, for the twelve months ended December 31, 2021, the Company recognized a $17 million curtailment credit, which was recorded in non-service benefit plan income. In addition, the Company incurred incentive payments and other expenses related to this decision of $1 million for the three months and $48 million for the twelve months ended December 31, 2021, which are included in operating income.

On July 11, 2019, the Company received an undiscounted redemption liability assessment related to the Company's financial statements
Exit from the Bakery and Confectionery Union and Industry International Pension Fund totaling $526 million and prorated monthly payments over 20 years. The company started making monthly payments in the third quarter of 2019. In connection with the discounted long-term liability, the Company recorded accrued interest of $3 million for the three months and $11 million for the twelve months ended December 31, 2022 and $3 million for the three months and $11 million for the twelve months ended December 31, 2021 within interest and other expense, net. As of December 31, 2022, the remaining discounted exit liability was $344 million, with $15 million recorded in other current liabilities and $329 million in other non-current liabilities.

Additional costs due to the war in Ukraine
In February 2022, Russia launched a military invasion of Ukraine and the company closed its operations and facilities in Ukraine. In March 2022, the company's two Ukrainian manufacturing plants in Trostyanets and Vyshhorod suffered significant damage. During the first quarter of 2022, the Company assessed and impaired these and other assets. The company recorded total expenses of $143 million ($145 million after tax) incurred as a direct result of the war, including $75 million for asset impairment and exit costs, $44 million for cost of sales and $24 million in sales, general and administration expenses. During the remainder of 2022, the Company reversed approximately $22 million of previously recognized charges primarily due to higher than expected trade receivables recovery and inventory recoveries.

Case of the European Commission
In November 2019, the European Commission informed the company that it had opened an investigation into the company's alleged violation of European Union competition law through certain practices allegedly restricting cross-border trade within the European Economic Area. On January 28, 2021, the European Commission announced that it had taken the next procedural step in its investigation and opened a formal procedure. The company has cooperated in the investigation and is currently in talks with the European Commission to reach an appropriate negotiated solution to the matter. As of December 31, 2022, the Company recorded a provision under US GAAP of €300 million (US$318 million) as an estimate of the potential costs of resolving this matter. There is a possibility that the ultimate liability could be materially greater than the amount accrued. Due to the inherent uncertainty of the discussions and possible outcomes, it is not possible at this time to reasonably estimate any potential loss or range of losses other than the amount accrued. Due to the uniqueness of this matter, the Company believes it is rare and unusual and therefore excludes it to facilitate comparisons of the Company's underlying operating performance over time.

Loss due to debt settlement and related costs
On March 18, 2022, the Company completed a tender offer and redeemed a total of $987 million of long-term US dollar-denominated debt obligations. The Company recorded a loss of $129 million on debt extinguishment and related expenses within interest and other expense, net, comprised of $38 million paid over the carrying amount of the debt and from the Recognition of unamortized rebates and deferred financing charges in revenue and $91 million of unamortized forward starting swap revenue losses at the time of debt repayment.

On March 31, 2021, the Company completed an early redemption of Euro (€1,200 million) and US Dollar (US$992 million) denominated Notes. The Company recorded a loss of $137 million on debt service and related expenses within interest and other expense, net, comprised of $110 million paid in excess of the carrying amount of the debt and the recognition of unamortized Rebates and deferred financing charges in earnings and a $27 million foreign currency derivative loss related to the repayment at the time of debt repayment.

First effects of tax law changes that have come into force
The Company excludes the initial impact of enacted tax law changes from its non-GAAP financial measures because they do not reflect its ongoing tax obligations under the enacted tax law changes. Initial impacts include items such as the revaluation of deferred tax balances and the transitional tax from the 2017 US tax reform. Previously, the Company has only excluded the initial impact of more substantive tax reforms, specifically the impact of the 2019 Swiss tax reform and the 2017 US tax reform To facilitate comparison of its underlying operating results, the Company restated all non-GAAP historical earnings measures to exclude the initial impact of enacted tax law changes.

The Company recorded a net tax benefit from the decrease in its deferred tax liability due to the enactment of $5 million for the three months and a net tax expense from the increase in its deferred tax liability of $17 million for the twelve months ended December 31, 2018 December , 2022. The Company recorded a net tax expense from an increase in its deferred tax liability due to enacted tax legislation of $5 million for the three months and $100 million (primarily in the UK) for the twelve months ended December 31, 2022. December 2021.

Gains and losses on equity method transactions
Transaction von JDE Peet
On May 8, 2022, the Company sold approximately 18.6 million of our JDE Peet's shares back to JDE Peet's, reducing our ownership interest by approximately 3% to 19.8%. The company received proceeds of 500 million euros (US$529 million) from this sale and recorded a loss of 8 million euros (US$8 million) in the second quarter of 2022.

The Keurig Dr Pepper Transaction
On August 2, 2021, the Company sold approximately 14.7 million shares of KDP, reducing its ownership by 1% to 5.3% of the total outstanding shares. The company received $500 million in revenue and reported profit before tax of $248 million (or $189 million after tax) for the third quarter of 2021.

On June 7, 2021, the Company participated in a secondary offering of KDP shares and sold approximately 28 million shares, reducing its ownership by 2% to 6.4% of the total outstanding shares. The Company received revenue of $997 million and reported pre-tax income of $520 million (or $392 million after tax) for the second quarter of 2021.

The Company considers these reductions in ownership interests to be partial disposals of its equity method interest in KDP. As a result, the Company has eliminated the net income from the equity method investment related to the divested portion from its non-GAAP financial results for adjusted earnings per share for all historical periods presented to facilitate comparison of results. The Company's US GAAP results, which include net income from KDP's investment accounted for using the equity method, are unchanged from previously reported information.

Investment items according to the equity method
Within adjusted earnings per share, the company's net equity method earnings exclude its proportionate share of the significant operating and non-operating items of its equity method investments, such as:

constant currency
Management evaluates the operational performance of the company and its international subsidiaries on a constant currency basis. The Company calculates its operating results on a constant currency basis by dividing or multiplying the current period's local currency operating results by the exchange rates used to translate the Company's financial statements for the comparable period of the prior year, where appropriate, to determine how much the US Dollar is for the current period current period is. Dollar operating income would have been if exchange rates had not changed from the comparable prior year period.

OUTLOOK
The company's outlook for 2023 organic net sales growth, adjusted EPS growth on a constant currency basis and free cash flow are non-GAAP financial measures that exclude or otherwise adjust items that affect the comparability of financial results, such as: . B. the impact of changes in exchange rates, restructuring activities, acquisitions and divestitures. The Company is unable to reconcile its forecast organic net sales growth with its forecast reported net sales growth for full year 2023 due to the Company's inability to predict the impact of potential acquisitions or divestitures during this period as well as the impact of currency translation due to the unpredictability of future ones Exchange rate changes, which could be material given that a significant portion of the Company's operations are outside the U.S To forecast the market valuation impact of commodity and forecast foreign exchange transaction derivative contracts and the impact of potential acquisitions or divestitures and the impact of currency translation due to the unforeseen probability of future changes in exchange rates, which could be material given that a significant portion of the Company's operations are conducted outside the United States. The Company is unable to reconcile its projected free cash flow to its projected net cash flow from operations for full year 2023 due to the Company's inability to estimate the timing and amount of capital expenditures incurred during this period affect cash flow. Therefore, due to the uncertainty and variability in the nature and amount of future adjustments, which could be material, the Company is unable to provide a reconciliation of these measures without undue effort.