Mead Johnson Nutrition Reports Third Quarter Constant Dollar Sales Growth of 16 Percent; Raises Full-Year Guidance
“We delivered record EPS driven by double-digit sales growth while
continuing near record level demand-generation investments,” said Chief
Executive Officer Kasper Jakobsen. “Sales growth was strong in all
regions, with share gains in most markets. Strong double-digit growth
was driven by higher volumes, most notably in
(1) For the definition of Specified Items and a
reconciliation of GAAP and non-GAAP results, see “Non-GAAP Financial
Measures” on the schedule titled “Supplemental Financial Information,”
included in this release.
(2) WIC=
Third Quarter Results
Sales for the third quarter of 2013 totaled $1,046.8 million, up 14
percent from $921.3 million in the prior-year quarter. Sales benefited
12 percent from volume and four percent from price, reduced by two
percent from foreign exchange. Gross margin for the third quarter of
2013 was 65.1 percent, up 390 basis points from 61.2 percent in the
third quarter of 2012. The improvement was in both the
Earnings before interest and income taxes (“EBIT”) totaled $238.7
million compared to $183.2 million in the prior-year quarter. The EBIT
improvement was primarily driven by higher sales and improved gross
margin offset in part by continued investments in advertising and
promotion, along with the administrative penalty assessed in
The effective tax rate (“ETR”) was 29.4 percent in the third quarter,
compared to 16.3 percent a year ago. The ETR increase was primarily due
to the prior year change in management's assertion regarding certain
foreign earnings and profits that are permanently invested abroad,
favorable U.S. return-to-provision adjustments recorded in the prior
year and the administrative penalty related to the
Net earnings attributable to shareholders totaled $161.6 million, or $0.79 per diluted share, in the third quarter of 2013, compared to $140.3 million, or $0.69 per diluted share, in the prior-year quarter.
On a non-GAAP basis, which excludes Specified Items, net earnings attributable to shareholders totaled $184.7 million, or $0.91 per diluted share, for the third quarter of 2013, compared to $144.8 million, or $0.71 per diluted share, for the same quarter a year ago.
Third Quarter Segment Results
The
The
Corporate and Other expenses increased primarily due to the administrative penalty assessed by the NDRC in connection with its antitrust review, of which $26.0 million was recorded in the third quarter.
Nine-Month Results
Sales for the nine months ended
Higher sales and improved gross margin supported higher demand-generation investments. EBIT for the first nine months of 2013 totaled $719.4 million, up eight percent from $680.3 million in the same period of the prior year.
The ETR for the first nine months of 2013 was 26.8 percent versus 24.0
percent a year ago. The ETR increase was primarily due to the prior year
change in management's assertion regarding certain foreign earnings and
profits that are permanently invested abroad, favorable U.S.
return-to-provision adjustments recorded in the prior year and the
administrative penalty related to the
Net earnings attributable to shareholders for the first nine months of 2013 totaled $496.3 million, or $2.44 per diluted share, compared to $470.3 million, or $2.29 per diluted share, for the same period last year.
On a non-GAAP basis, which excludes Specified Items, net earnings attributable to shareholders totaled $529.7 million, or $2.60 per diluted share, in the first nine months of 2013, up 10 percent from $483.4 million, or $2.36 per diluted share, in the first nine months of 2012.
Nine-Month Segment Results
Sales in the
The
Corporate and Other expenses showed an increase primarily due to the $33.4 million administrative penalty assessed by the NDRC in connection with its antitrust review, higher pension settlement expense and transaction losses related to foreign exchange.
Additional Information
The company has initiated an internal investigation of, and is
voluntarily complying with a
Outlook for 2013
“Based on our strong performance, we now anticipate reported sales growth between seven percent and eight percent for the full year,” Mr. Jakobsen said. “Constant dollar sales growth from our core operations, excluding businesses exited in late 2012, is expected to be in the range of nine percent and 10 percent. We continue to invest in demand generation where we see opportunities to accelerate growth. The company has raised guidance and now expects full-year non-GAAP EPS to be in the range of $3.30 to $3.37.”
Conference Call Scheduled
Mead Johnson will host a conference call at
Forward-Looking Statements
Certain statements in this news release are forward-looking as defined
in the Private Securities Litigation Reform Act of 1995. These
forward-looking statements may be identified by the fact they use words
such as “should,” “expect,” “anticipate,” “estimate,” “target,” “may,”
“project,” “guidance,” “intend,” “plan,” “believe” and other words and
terms of similar meaning and expression. Such statements are likely to
relate to, among other things, a discussion of goals, plans and
projections regarding financial position, results of operations, cash
flows, market position, product development, product approvals, sales
efforts, expenses, capital expenditures, performance or results of
current and anticipated products and the outcome of contingencies such
as legal proceedings and financial results. Forward-looking statements
can also be identified by the fact that they do not relate strictly to
historical or current facts. Such forward-looking statements are based
on current expectations that involve inherent risks, uncertainties and
assumptions that may cause actual results to differ materially from
expectations as of the date of this news release. These risks include,
but are not limited to: (1) the ability to sustain brand strength,
particularly the Enfa family of brands; (2) the effect on the company’s
reputation of real or perceived quality issues; (3) the effect of
regulatory restrictions related to the company's products; (4) the
adverse effect of commodity costs; (5) increased competition from
branded, private label, store and economy-branded products; (6) the
effect of an economic downturn on consumers’ purchasing behavior and
customers’ ability to pay for product; (7) inventory reductions by
customers; (8) the adverse effect of changes in foreign currency
exchange rates; (9) the effect of changes in economic, political and
social conditions in the markets where we operate; (10) changing
consumer preferences; (11) the possibility of changes in the WIC
program, or participation in WIC; (12) legislative, regulatory or
judicial action that may adversely affect the company’s ability to
advertise its products or maintain product margins; and (13) the ability
to develop and market new, innovative products. For additional
information regarding these and other factors, see the company’s filings
with the
About Mead Johnson
Mead Johnson, a global leader in pediatric nutrition, develops, manufactures, markets and distributes more than 70 products in over 50 markets worldwide. The company's mission is to nourish the world’s children for the best start in life. The Mead Johnson name has been associated with science-based pediatric nutrition products for over 100 years. The company’s “Enfa” family of brands, including Enfamil® infant formula, is the world's leading brand franchise in pediatric nutrition. For more information, go to www.meadjohnson.com.
MEAD JOHNSON NUTRITION COMPANY | |||||||||||||||||
CONSOLIDATED STATEMENTS OF EARNINGS | |||||||||||||||||
(Dollars and shares in millions, except per share data) | |||||||||||||||||
(UNAUDITED) | |||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
NET SALES | $ | 1,046.8 | $ | 921.3 | $ | 3,140.0 | $ | 2,920.2 | |||||||||
Cost of Products Sold | 365.5 | 357.5 | 1,140.8 | 1,103.3 | |||||||||||||
GROSS PROFIT | 681.3 | 563.8 | 1,999.2 | 1,816.9 | |||||||||||||
Expenses: | |||||||||||||||||
Selling, General and Administrative | 222.6 | 210.7 | 666.8 | 642.2 | |||||||||||||
Advertising and Promotion | 163.8 | 138.8 | 475.9 | 413.3 | |||||||||||||
Research and Development | 24.8 | 21.5 | 74.5 | 67.6 | |||||||||||||
Other Expenses/(Income) – net | 31.4 | 9.6 | 62.6 | 13.5 | |||||||||||||
EARNINGS BEFORE INTEREST AND INCOME TAXES | 238.7 | 183.2 | 719.4 | 680.3 | |||||||||||||
Interest Expense – net | 12.3 | 16.9 | 38.9 | 49.0 | |||||||||||||
EARNINGS BEFORE INCOME TAXES | 226.4 | 166.3 | 680.5 | 631.3 | |||||||||||||
Provision for Income Taxes | 66.4 | 27.1 | 182.4 | 151.2 | |||||||||||||
NET EARNINGS | 160.0 | 139.2 | 498.1 | 480.1 | |||||||||||||
Less Net Earnings/(Loss) Attributable to Noncontrolling Interests | (1.6 | ) | (1.1 | ) | 1.8 | 9.8 | |||||||||||
NET EARNINGS ATTRIBUTABLE TO SHAREHOLDERS | $ | 161.6 | $ | 140.3 | $ | 496.3 | $ | 470.3 | |||||||||
Earnings per Share*– Basic | |||||||||||||||||
Net Earnings Attributable to Shareholders | $ | 0.80 | $ | 0.69 | $ | 2.45 | $ | 2.30 | |||||||||
Earnings per Share*– Diluted | |||||||||||||||||
Net Earnings Attributable to Shareholders | $ | 0.79 | $ | 0.69 | $ | 2.44 | $ | 2.29 | |||||||||
Weighted-average Shares – Diluted | 202.8 | 204.3 | 203.1 | 204.5 | |||||||||||||
Dividends Declared per Share | $ | 0.34 | $ | 0.30 | $ | 1.02 | $ | 0.90 | |||||||||
*The numerator for basic and diluted earnings per share is net earnings attributable to shareholders reduced by dividends and undistributed earnings attributable to unvested shares. The denominator for basic earnings per share is the weighted-average shares outstanding during the period. The denominator for diluted earnings per share is the weighted-average shares outstanding adjusted for the effect of dilutive stock options and performance share awards.
MEAD JOHNSON NUTRITION COMPANY | ||||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||||
(Dollars and shares in millions, except per share data) | ||||||||||
(UNAUDITED) | ||||||||||
September 30, 2013 | December 31, 2012 | |||||||||
ASSETS | ||||||||||
CURRENT ASSETS: | ||||||||||
Cash and Cash Equivalents | $ | 985.2 | $ | 1,042.1 | ||||||
Receivables – net of allowances of $5.9 and $7.6, respectively | 405.3 | 364.6 | ||||||||
Inventories | 499.6 | 435.9 | ||||||||
Deferred Income Taxes – net of valuation allowance | 86.2 | 86.4 | ||||||||
Income Taxes Receivable | 41.3 | 26.0 | ||||||||
Prepaid Expenses and Other Assets | 63.1 | 60.0 | ||||||||
Total Current Assets | 2,080.7 | 2,015.0 | ||||||||
Property, Plant, and Equipment – net | 785.1 | 689.9 | ||||||||
Goodwill | 209.3 | 270.6 | ||||||||
Other Intangible Assets – net | 106.8 | 129.9 | ||||||||
Deferred Income Taxes – net of valuation allowance | 38.2 | 24.5 | ||||||||
Other Assets | 135.6 | 128.3 | ||||||||
TOTAL | $ | 3,355.7 | $ | 3,258.2 | ||||||
LIABILITIES AND EQUITY |
||||||||||
CURRENT LIABILITIES: | ||||||||||
Short-term Borrowings | $ | 2.6 | $ | 161.0 | ||||||
Accounts Payable | 509.6 | 508.5 | ||||||||
Dividends Payable | 69.3 | 61.3 | ||||||||
Note Payable | — | 26.0 | ||||||||
Accrued Expenses | 226.7 | 220.4 | ||||||||
Accrued Rebates and Returns | 317.6 | 314.8 | ||||||||
Deferred Income – current | 23.6 | 36.1 | ||||||||
Income Taxes – payable and deferred | 81.0 | 41.8 | ||||||||
Total Current Liabilities | 1,230.4 | 1,369.9 | ||||||||
Long-Term Debt | 1,516.8 | 1,523.2 | ||||||||
Deferred Income Taxes – noncurrent | 16.0 | 15.9 | ||||||||
Pension, Postretirement and Postemployment Liabilities | 184.4 | 188.8 | ||||||||
Other Liabilities | 141.9 | 95.1 | ||||||||
Total Liabilities | 3,089.5 | 3,192.9 | ||||||||
COMMITMENTS AND CONTINGENCIES | ||||||||||
REDEEMABLE NONCONTROLLING INTEREST | 46.1 | 36.3 | ||||||||
EQUITY | ||||||||||
Shareholders’ Equity | ||||||||||
Common Stock, $0.01 par value: 3,000 authorized, 206.7 and 206.0 issued, respectively | 2.1 | 2.1 | ||||||||
Additional Paid-in/(Distributed) Capital | (630.7 | ) | (676.6 | ) | ||||||
Retained Earnings | 1,392.6 | 1,124.8 | ||||||||
Treasury Stock – at cost | (339.1 | ) | (244.6 | ) | ||||||
Accumulated Other Comprehensive Loss | (214.7 | ) | (187.0 | ) | ||||||
Total Shareholders’ Equity | 210.2 | 18.7 | ||||||||
Noncontrolling Interests | 9.9 | 10.3 | ||||||||
Total Equity | 220.1 | 29.0 | ||||||||
TOTAL | $ | 3,355.7 | $ | 3,258.2 |
MEAD JOHNSON NUTRITION COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||
(Dollars in millions) | ||||||||||
(UNAUDITED) | ||||||||||
Nine Months Ended September 30, | ||||||||||
2013 | 2012 | |||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||
Net Earnings | $ | 498.1 | $ | 480.1 | ||||||
Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities: | ||||||||||
Depreciation and Amortization | 62.1 | 56.7 | ||||||||
Other | 36.9 | 23.5 | ||||||||
Changes in Assets and Liabilities | 1.0 | (95.3 | ) | |||||||
Pension and Other Postretirement Benefits Contributions | (6.1 | ) | (24.9 | ) | ||||||
Net Cash Provided by Operating Activities | 592.0 | 440.1 | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||
Payments for Capital Expenditures | (177.3 | ) | (85.7 | ) | ||||||
Proceeds from Sale of Property, Plant and Equipment | 2.0 | 1.2 | ||||||||
Proceeds from Sale of Intangible Assets | — | 5.5 | ||||||||
Investment in Other Companies | (2.7 | ) | (3.3 | ) | ||||||
Acquisition | — | (106.1 | ) | |||||||
Net Cash Used in Investing Activities | (178.0 | ) | (188.4 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||
Proceeds from Short-term Borrowings | 6.8 | 385.2 | ||||||||
Repayments of Short-term Borrowings | (165.0 | ) | (230.0 | ) | ||||||
Repayments of Notes Payable | (27.6 | ) | (26.8 | ) | ||||||
Payments of Dividends | (198.9 | ) | (175.6 | ) | ||||||
Stock-based-compensation-related Proceeds and Excess Tax Benefits | 19.8 | 21.0 | ||||||||
Purchases of Treasury Stock | (92.5 | ) | (108.3 | ) | ||||||
Distributions to Noncontrolling Interests | (4.9 | ) | (2.2 | ) | ||||||
Net Cash Used in Financing Activities | (462.3 | ) | (136.7 | ) | ||||||
Effects of Changes in Exchange Rates on Cash and Cash Equivalents | (8.6 | ) | 3.1 | |||||||
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS | (56.9 | ) | 118.1 | |||||||
CASH AND CASH EQUIVALENTS: | ||||||||||
Beginning of Period | 1,042.1 | 840.3 | ||||||||
End of Period | $ | 985.2 | $ | 958.4 | ||||||
SUPPLEMENTAL FINANCIAL
INFORMATION
(Dollars in millions)
(UNAUDITED)
During the fourth quarter of 2012, the company implemented a change in
its organizational structure involving the transfer of its Puerto Rican
operations from
Three Months Ended September 30, | % Change | % Change Due to | ||||||||||||||||||||||||||||||
Net Sales | 2013 |
% of |
2012 |
% of |
Reported |
Constant |
Volume | Price/Mix |
Foreign Exchange |
|||||||||||||||||||||||
Asia/Latin America | $ | 768.0 | 73 | % | $ | 646.7 | 70 | % | 19 | % | 21 | % | 17 | % | 4 | % | (2 | )% | ||||||||||||||
North America/Europe | 278.8 | 27 | % | 274.6 | 30 | % | 2 | % | 2 | % | — | % | 2 | % | — | % | ||||||||||||||||
Net Sales | $ | 1,046.8 | 100 | % | $ | 921.3 | 100 | % | 14 | % | 16 | % | 12 | % | 4 | % | (2 | )% | ||||||||||||||
Earnings Before Interest |
EBIT |
EBIT |
||||||||||||||||||||||||||||||
Asia/Latin America | $ | 262.0 | 34 | % | $ | 193.1 | 30 | % | 36 | % | ||||||||||||||||||||||
North America/Europe | 63.0 | 23 | % | 53.2 | 19 | % | 18 | % | ||||||||||||||||||||||||
Corporate and Other | (86.3 | ) |
|
|
(63.1 | ) |
|
|
(37 | )% | ||||||||||||||||||||||
EBIT | $ | 238.7 | 23 | % | $ | 183.2 | 20 | % | 30 | % |
Nine Months Ended September 30, | % Change | % Change Due to | ||||||||||||||||||||||||||||||
Net Sales | 2013 |
% of |
2012 |
% of |
Reported |
Constant |
Volume | Price/Mix |
Foreign Exchange |
|||||||||||||||||||||||
Asia/Latin America | $ | 2,280.7 | 73 | % | $ | 2,056.0 | 70 | % | 11 | % | 12 | % | 8 | % | 4 | % | (1 | )% | ||||||||||||||
North America/Europe | 859.3 | 27 | % | 864.2 | 30 | % | (1 | )% | (1 | )% | (4 | )% | 3 | % | — | % | ||||||||||||||||
Net Sales | $ | 3,140.0 | 100 | % | $ | 2,920.2 | 100 | % | 8 | % | 8 | % | 4 | % | 4 | % | — | % | ||||||||||||||
Earnings Before Interest |
EBIT |
EBIT |
||||||||||||||||||||||||||||||
Asia/Latin America | $ | 770.0 | 34 | % | $ | 713.9 | 35 | % | 8 | % | ||||||||||||||||||||||
North America/Europe | 187.7 | 22 | % | 157.2 | 18 | % | 19 | % | ||||||||||||||||||||||||
Corporate and Other | (238.3 | ) |
|
|
(190.8 | ) |
|
|
(25 | )% | ||||||||||||||||||||||
EBIT | $ | 719.4 | 23 | % | $ | 680.3 | 23 | % | 6 | % | ||||||||||||||||||||||
Non-GAAP Financial Measures
This news release contains non-GAAP financial measures, including non-GAAP EBIT, earnings and earnings per share information. Specified Items, listed in the table below, are items included in GAAP measures, but excluded for the purpose of determining non-GAAP EBIT, earnings and earnings per share. Non-GAAP EBIT, earnings and earnings per share information adjusted for these items is an indication of the company's underlying operating results and intended to enhance an investor's overall understanding of the company's financial performance. In addition, this information is among the primary indicators the company uses as a basis for evaluating company performance, setting incentive compensation targets, and planning and forecasting of future periods. This information is not intended to be considered in isolation or as a substitute for financial measures prepared in accordance with GAAP. Tables that reconcile GAAP to non-GAAP disclosure follow:
MEAD JOHNSON NUTRITION COMPANY | ||||||||||||||||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP RESULTS | ||||||||||||||||||||||||||||||||||
(Dollars in millions, except per share data) | ||||||||||||||||||||||||||||||||||
(UNAUDITED) | ||||||||||||||||||||||||||||||||||
Three Months Ended September 30, | ||||||||||||||||||||||||||||||||||
Earnings Before Interest | Net Earnings Attributable | Earnings per Common | ||||||||||||||||||||||||||||||||
and Income Taxes | to Shareholders | Share - Diluted | ||||||||||||||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||||||||||||||
GAAP Results | $ | 238.7 | $ | 183.2 | $ | 161.6 | $ | 140.3 | $ | 0.79 | $ | 0.69 | ||||||||||||||||||||||
Specified Items: (1) | ||||||||||||||||||||||||||||||||||
IT and other separation costs (2) | — | 4.9 | ||||||||||||||||||||||||||||||||
Gain on sale of certain non-core intangible assets (3) | — | (5.5 | ) | |||||||||||||||||||||||||||||||
Severance and other costs (3) | 0.1 | 8.1 | ||||||||||||||||||||||||||||||||
Legal, settlements and related costs (2,3) | 27.1 | 0.2 | ||||||||||||||||||||||||||||||||
Specified Items | 27.2 | 7.7 | 27.2 | 7.7 | 0.13 | 0.04 | ||||||||||||||||||||||||||||
Income tax impact on items above | (0.4 | ) | (3.2 | ) | — | (0.02 | ) | |||||||||||||||||||||||||||
Specified Items attributable to noncontrolling interest | (3.7 | ) | — | $ | (0.01 | ) | $ | — | ||||||||||||||||||||||||||
Non-GAAP Results | $ | 265.9 | $ | 190.9 | $ | 184.7 | $ | 144.8 | $ | 0.91 | $ | 0.71 | ||||||||||||||||||||||
Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
Earnings Before Interest | Net Earnings Attributable | Earnings per Common | ||||||||||||||||||||||||||||||||
and Income Taxes | to Shareholders | Share - Diluted | ||||||||||||||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||||||||||||||
GAAP Results | $ | 719.4 | $ | 680.3 | $ | 496.3 | $ | 470.3 | $ | 2.44 | $ | 2.29 | ||||||||||||||||||||||
Specified Items: (1) | ||||||||||||||||||||||||||||||||||
IT and other separation costs (2) | — | 12.0 | ||||||||||||||||||||||||||||||||
Gain on sale of certain non-core intangible assets (3) | — | (5.5 | ) | |||||||||||||||||||||||||||||||
Severance and other costs (3) | 2.1 | 9.6 | ||||||||||||||||||||||||||||||||
Legal, settlements and related costs (2,3) | 34.7 | 3.1 | ||||||||||||||||||||||||||||||||
Specified Items before income taxes | 36.8 | 19.2 | 36.8 | 19.2 | 0.18 | 0.09 | ||||||||||||||||||||||||||||
Income tax impact on items above | 0.3 | (6.1 | ) | — | (0.02 | ) | ||||||||||||||||||||||||||||
Specified Items attributable to noncontrolling interest | (3.7 | ) | — | (0.02 | ) | — | ||||||||||||||||||||||||||||
Non-GAAP Results | $ | 756.2 | $ | 699.5 | $ | 529.7 | $ | 483.4 | $ | 2.60 | $ | 2.36 | ||||||||||||||||||||||
(1) All Specified Items are included in the
Corporate and Other segment
(2) Included
in Selling, General and Administrative expenses
(3)
Included in Other Expenses-net
Source:
Mead Johnson Nutrition Company
Investors:
Kathy
MacDonald, (847) 832-2182
kathy.macdonald@mjn.com
or
Media:
Christopher
Perille, (847) 832-2178
chris.perille@mjn.com
10/24/2013