Equity Method Investments

3 Months Ended

Mar. 31, 2019

Equity Method Investments and Joint Ventures [Abstract]

Note 7. Equity Method Investments

Our investments accounted for under the equity method of accounting totaled $7,004 million as of March 31, 2019 and $7,123 million as of December 31, 2018. Our largest investments are in Jacobs Douwe Egberts (“JDE”) and Keurig Dr Pepper Inc. (NYSE: "KDP”).

JDE:

As of March 31, 2019, we held a 26.5% voting interest, a 26.4% ownership interest and a 26.2% profit and dividend sharing interest in JDE. We recorded JDE equity earnings of $50 million in the first quarter of 2019 and $46 million in the first quarter of 2018. We also recorded $73 million of cash dividends received during the first quarter of 2019 and $73 million of cash dividends received during the first quarter of 2018.

Keurig Dr Pepper Transaction:

On July 9, 2018, Keurig Green Mountain, Inc. ("Keurig") closed on its definitive merger agreement with Dr Pepper Snapple Group, Inc., and formed Keurig Dr Pepper Inc. (NYSE: "KDP"), a publicly traded company. Following the close of the transaction, our 24.2% investment in Keurig together with our shareholder loan receivable became a 13.8% investment in KDP. During 2018, we recorded a pre-tax gain of $778 million reported as a gain on equity method transaction and $192 million of deferred tax expense reported in the provision for income taxes (or $586 million after-tax gain) related to the change in our ownership interest.

We hold two director positions on the KDP board as well as additional governance rights. As we continue to have significant influence, we continue to account for our investment in KDP under the equity method, resulting in recognizing our share of their earnings within our earnings and our share of their dividends within our cash flows.

In connection with this transaction, we changed our accounting principle to reflect our share of Keurig's historical and KDP's ongoing earnings on a one-quarter lag basis while we continue to record dividends when cash is received. We determined a lag was preferable as it enables us to continue to report our quarterly and annual results on a timely basis and to record our share of KDP’s ongoing results once KDP has publicly reported its results. This change in accounting principle was applied retrospectively to all periods. While our operating income did not change, equity method investment net earnings, net earnings and earnings per share have been adjusted to reflect the lag across all reported periods.

The following tables show the primary line items on the condensed consolidated statements of earnings and comprehensive earnings that changed as a result of the lag. The condensed consolidated statements of cash flow and equity were also updated to reflect these changes.



	For the Three Months Ended March 31, 2018
	As Reported			As Adjusted
	(in millions)
Statements of Earnings
Provision for income taxes	$	(307	)	$	(337	)
Equity method investment net earnings	94			232
Net earnings	944			1,052
Net earnings attributable to Mondelēz International	938			1,046
Earnings per share attributable to Mondelēz International:
Basic EPS	$	0.63		$	0.70
Diluted EPS	$	0.62		$	0.70

Statements of Other Comprehensive Earnings
Currency translation adjustment	$	207		$	210
Total other comprehensive earnings/(losses)	155			158
Comprehensive earnings attributable to Mondelēz International	1,078			1,189

As of March 31, 2019, we held a 13.6% ownership interest in KDP. Our ownership interest in KDP may change over time due to stock-based compensation arrangements and other transactions by KDP. During the first quarter, we recognized a $23 million pre-tax gain related to the impact of a KDP acquisition that decreased our ownership interest from 13.8% to 13.6%. As of March 31, 2019, based on KDP's closing stock price, the fair value of our ownership interest in KDP was $5.4 billion, which exceeded the carrying value of our KDP investment.

We recorded equity earnings and cash dividends of $37 million and $29 million in the first three months of 2019 and equity earnings, shareholder loan interest and cash dividends of $154 million, $6 million and $3 million in the first three months of 2018.