Mead Johnson Reports Solid First Quarter Earnings; Delivers Five Percent Constant Dollar Sales Growth; and Reaffirms Annual Guidance
(1) For the definition of Specified Items and a reconciliation of GAAP and non-GAAP results, see “Non-GAAP Financial Measures” on the scheduled titled “Supplemental Financial Information,” included in this release.
“We are pleased with our solid sales and earnings growth during the
first quarter,” said Chief Executive Officer Stephen W. Golsby. “Sales
growth was strong and broad-based across
*WIC =
First Quarter Results
Sales for the first quarter of 2013 totaled $1,037.9 million, up five percent from $986.6 million a year ago. Sales benefited six percent from price, offset by a one percent decline in volume. Earnings before interest and income taxes (“EBIT”) totaled $249.1 million, up from $248.8 million in the prior-year quarter. Higher demand-generation investments and pension settlement expense offset the benefit of higher sales.
Net earnings attributable to shareholders totaled $172.5 million, or $0.85 per diluted share, in the first quarter of 2013, compared to $164.2 million, or $0.80 per diluted share, in the prior-year quarter. The effective tax rate (“ETR”) was 25.7 percent in the first quarter, compared to 27.5 percent a year ago. The decrease in the ETR was primarily attributable to management's assertion that certain current-year foreign earnings and profits are permanently invested abroad.
On a non-GAAP basis, which excludes Specified Items, net earnings attributable to shareholders totaled $174.0 million, or $0.85 per diluted share, for the first quarter of 2013, compared to $167.4 million, or $0.82 per diluted share, for the same quarter a year ago.
First Quarter Segment Results
The
The
Corporate and Other expenses increased primarily from higher operating expenses and pension settlement expense, which is reported in Other Expenses in the consolidated statement of earnings.
Outlook for 2013
“While still cautious about
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 March 31, | |||||||
2013 | 2012 | ||||||
NET SALES | $ | 1,037.9 | $ | 986.6 | |||
Cost of Products Sold | 390.9 | 373.5 | |||||
GROSS PROFIT | 647.0 | 613.1 | |||||
Expenses: | |||||||
Selling, General and Administrative | 217.0 | 210.4 | |||||
Advertising and Promotion | 144.5 | 125.8 | |||||
Research and Development | 24.2 | 22.5 | |||||
Other Expenses | 12.2 | 5.6 | |||||
EARNINGS BEFORE INTEREST AND INCOME TAXES | 249.1 | 248.8 | |||||
Interest Expense | 14.2 | 14.5 | |||||
EARNINGS BEFORE INCOME TAXES | 234.9 | 234.3 | |||||
Provision for Income Taxes | 60.4 | 64.5 | |||||
NET EARNINGS | 174.5 | 169.8 | |||||
Less Net Earnings Attributable to Noncontrolling Interests | 2.0 | 5.6 | |||||
NET EARNINGS ATTRIBUTABLE TO SHAREHOLDERS | $ | 172.5 | $ | 164.2 | |||
Earnings per Share—Basic | |||||||
Net Earnings Attributable to Shareholders | $ | 0.85 | $ | 0.80 | |||
Earnings per Share—Diluted | |||||||
Net Earnings Attributable to Shareholders | $ | 0.85 | $ | 0.80 | |||
Dividends Declared per Share | $ | 0.34 | $ | 0.30 |
MEAD JOHNSON NUTRITION COMPANY | ||||||||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||||||
(Dollars in millions) | ||||||||
(UNAUDITED) | ||||||||
March 31, | ||||||||
2013 | 2012 | |||||||
NET EARNINGS | $ | 174.5 | $ | 169.8 | ||||
OTHER COMPREHENSIVE INCOME/(LOSS) | ||||||||
Foreign Currency Translation Adjustments | ||||||||
Translation Adjustments | (34.7 | ) | 22.9 | |||||
Tax Benefit/(Expense) | 3.2 | (6.4 | ) | |||||
Deferred Gains/(Losses) on Derivatives Qualifying as Hedges | ||||||||
Deferred (Losses) on Derivatives Qualifying as Hedges for the Period | (4.4 | ) | (6.4 | ) | ||||
Reclassification Adjustment for (Gains)/Losses Included in Net Earnings | 3.0 | (1.0 | ) | |||||
Tax Benefit | 0.5 | 2.2 | ||||||
Pension and Other Postretirement Benefits | ||||||||
Deferred Gains/(Losses) on Pension and Other Postretirement Benefits | 1.0 | (0.1 | ) | |||||
Reclassification Adjustment for (Gains)/Losses Included in Net Earnings | 8.9 | 1.8 | ||||||
Tax Benefit/(Expense) | (3.5 | ) | 0.8 | |||||
OTHER COMPREHENSIVE INCOME/(LOSS) | (26.0 | ) | 13.8 | |||||
COMPREHENSIVE INCOME | 148.5 | 183.6 | ||||||
Less Comprehensive Income Attributable to Noncontrolling Interests | (3.2 | ) | 5.6 | |||||
COMPREHENSIVE INCOME ATTRIBUTABLE TO SHAREHOLDERS | $ | 151.7 | $ | 178.0 |
MEAD JOHNSON NUTRITION COMPANY | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
(Dollars and shares in millions, except per share data) | ||||||||
(UNAUDITED) | ||||||||
March 31, 2013 | December 31, 2012 | |||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and Cash Equivalents | $ | 1,017.2 | $ | 1,042.1 | ||||
Receivables – net of allowances of $6.8 and $7.6, respectively | 413.4 | 364.6 | ||||||
Inventories | 444.0 | 435.9 | ||||||
Deferred Income Taxes – net of valuation allowance | 83.8 | 86.4 | ||||||
Income Taxes Receivable | 31.2 | 26.0 | ||||||
Prepaid Expenses and Other Assets | 66.3 | 60.0 | ||||||
Total Current Assets | 2,055.9 | 2,015.0 | ||||||
Property, Plant, and Equipment – net | 716.8 | 689.9 | ||||||
Goodwill | 228.2 | 270.6 | ||||||
Other Intangible Assets – net | 122.6 | 129.9 | ||||||
Deferred Income Taxes – net of valuation allowance | 21.7 | 24.5 | ||||||
Other Assets | 130.3 | 128.3 | ||||||
TOTAL | $ | 3,275.5 | $ | 3,258.2 | ||||
LIABILITIES AND EQUITY/(DEFICIT) | ||||||||
CURRENT LIABILITIES: | ||||||||
Short-term Borrowings | $ | 103.1 | $ | 161.0 | ||||
Accounts Payable | 511.7 | 508.5 | ||||||
Dividends Payable | 69.4 | 61.3 | ||||||
Note Payable | 19.1 | 26.0 | ||||||
Accrued Expenses | 201.5 | 220.4 | ||||||
Accrued Rebates and Returns | 319.6 | 314.8 | ||||||
Deferred Income – current | 28.3 | 36.1 | ||||||
Income Taxes – payable and deferred | 64.2 | 41.8 | ||||||
Total Current Liabilities | 1,316.9 | 1,369.9 | ||||||
Long-Term Debt | 1,521.1 | 1,523.2 | ||||||
Deferred Income Taxes – noncurrent | 17.3 | 15.9 | ||||||
Pension, Postretirement and Postemployment Liabilities | 186.2 | 188.8 | ||||||
Other Liabilities | 106.0 | 95.1 | ||||||
Total Liabilities | 3,147.5 | 3,192.9 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
REDEEMABLE NONCONTROLLING INTEREST | 39.3 | 36.3 | ||||||
EQUITY/(DEFICIT) | ||||||||
Shareholders’ Equity | ||||||||
Common Stock, $0.01 par value: 3,000 authorized, 206.4 and 206.0 issued, respectively | 2.1 | 2.1 | ||||||
Additional Paid-in/(Distributed) Capital | (661.3 | ) | (676.6 | ) | ||||
Retained Earnings | 1,218.6 | 1,124.8 | ||||||
Treasury Stock – at cost | (276.7 | ) | (244.6 | ) | ||||
Accumulated Other Comprehensive Loss | (207.8 | ) | (187.0 | ) | ||||
Total Shareholders’ Equity/(Deficit) | 74.9 | 18.7 | ||||||
Noncontrolling Interests | 13.8 | 10.3 | ||||||
Total Equity/(Deficit) | 88.7 | 29.0 | ||||||
TOTAL | $ | 3,275.5 | $ | 3,258.2 |
MEAD JOHNSON NUTRITION COMPANY | ||||||||||||||||||||||||||||||||
CONSOLIDATED STATEMENTS OF EQUITY/(DEFICIT) AND REDEEMABLE NONCONTROLLING INTEREST | ||||||||||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||
(UNAUDITED) | ||||||||||||||||||||||||||||||||
Additional | Accumulated | Redeemable | ||||||||||||||||||||||||||||||
Paid-in | Other | Non- | Total | Non- | ||||||||||||||||||||||||||||
Common | (Distributed) | Retained | Treasury | Comprehensive | controlling | Equity/ | controlling | |||||||||||||||||||||||||
Stock | Capital | Earnings | Stock | Income (Loss) | Interests | (Deficit) | Interest | |||||||||||||||||||||||||
Balance as of January 1, 2013 | $ | 2.1 | $ | (676.6 | ) | $ | 1,124.8 | $ | (244.6 | ) | $ | (187.0 | ) | $ | 10.3 | $ | 29.0 | $ | 36.3 | |||||||||||||
Stock-based Compensation Awards | 15.3 | (9.1 | ) | 6.2 | ||||||||||||||||||||||||||||
Treasury Stock Acquired | (23.0 | ) | (23.0 | ) | ||||||||||||||||||||||||||||
Distributions to Noncontrolling Interests | — | — | ||||||||||||||||||||||||||||||
Cash Dividends Declared | (69.0 | ) | (69.0 | ) | ||||||||||||||||||||||||||||
Net Earnings | 172.5 | 1.7 | 174.2 | 0.3 | ||||||||||||||||||||||||||||
Redeemable Noncontrolling Interest Accretion | (9.7 | ) | (9.7 | ) | 9.7 | |||||||||||||||||||||||||||
Other Comprehensive Income (Loss) | (20.8 | ) | 1.8 | (19.0 | ) | (7.0 | ) | |||||||||||||||||||||||||
Balance as of March 31, 2013 | $ | 2.1 | $ | (661.3 | ) | $ | 1,218.6 | $ | (276.7 | ) | $ | (207.8 | ) | $ | 13.8 | $ | 88.7 | $ | 39.3 | |||||||||||||
Balance as of January 1, 2012 | $ | 2.1 | $ | (728.4 | ) | $ | 770.0 | $ | (89.7 | ) | $ | (133.1 | ) | $ | 11.1 | $ | (168.0 | ) | $ | — | ||||||||||||
Stock-based Compensation Awards | 17.8 | (13.6 | ) | 4.2 | ||||||||||||||||||||||||||||
Treasury Stock Acquired | (17.2 | ) | (17.2 | ) | ||||||||||||||||||||||||||||
Acquisition | 30.2 | |||||||||||||||||||||||||||||||
Distributions to Noncontrolling Interests | — | — | ||||||||||||||||||||||||||||||
Cash Dividends Declared | (61.3 | ) | (61.3 | ) | ||||||||||||||||||||||||||||
Net Earnings | 164.2 | 5.5 | 169.7 | 0.1 | ||||||||||||||||||||||||||||
Other Comprehensive Income (Loss) | 13.8 | — | 13.8 | |||||||||||||||||||||||||||||
Balance as of March 31, 2012 | $ | 2.1 | $ | (710.6 | ) | $ | 872.9 | $ | (120.5 | ) | $ | (119.3 | ) | $ | 16.6 | $ | (58.8 | ) | $ | 30.3 |
MEAD JOHNSON NUTRITION COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(Dollars in millions) | ||||||||
(UNAUDITED) | ||||||||
March 31, | ||||||||
2013 | 2012 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net Earnings | $ | 174.5 | $ | 169.8 | ||||
Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities: | ||||||||
Depreciation and Amortization | 20.1 | 18.5 | ||||||
Other | 30.3 | 28.0 | ||||||
Changes in Assets and Liabilities | (14.4 | ) | (196.0 | ) | ||||
Pension and Other Postretirement Benefits Contributions | (2.6 | ) | (0.9 | ) | ||||
Net Cash Provided by Operating Activities | 207.9 | 19.4 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Payments for Capital Expenditures | (77.5 | ) | (30.4 | ) | ||||
Proceeds from Sale of Property, Plant and Equipment | 0.8 | 0.5 | ||||||
Investment in Other Companies | (0.7 | ) | — | |||||
Acquisition | — | (106.1 | ) | |||||
Net Cash Used in Investing Activities | (77.4 | ) | (136.0 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from Short-term Borrowings | 3.1 | 30.0 | ||||||
Repayments of Short-term Borrowings | (61.0 | ) | (30.0 | ) | ||||
Repayments of Notes Payable | (8.4 | ) | — | |||||
Payments of Dividends | (60.9 | ) | (53.0 | ) | ||||
Stock-based-compensation-related Proceeds and Excess Tax Benefits | 5.2 | 11.5 | ||||||
Purchases of Treasury Stock | (32.1 | ) | (29.6 | ) | ||||
Net Cash Used in Financing Activities | (154.1 | ) | (71.1 | ) | ||||
Effects of Changes in Exchange Rates on Cash and Cash Equivalents | (1.3 | ) | 8.1 | |||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | (24.9 | ) | (179.6 | ) | ||||
CASH AND CASH EQUIVALENTS: | ||||||||
Beginning of Period | 1,042.1 | 840.3 | ||||||
End of Period | $ | 1,017.2 | $ | 660.7 |
MEAD JOHNSON NUTRITION COMPANY | ||||||||||||||||||||
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 North America to Latin America. This change did not impact Europe or Asia and did not have a material impact on the assets of North America or Latin America. Segment information, for all periods presented, has been revised to be consistent with the new basis of presentation. See our fourth quarter 2012 Earnings Release for the revised results. |
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Three Months Ended March 31, |
% Change Due to |
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Net Sales | 2013 | 2012 | % Change | Volume | Price |
Foreign |
||||||||||||||
Asia/Latin America | $ | 755.3 | $ | 707.3 | 7 | % | 1 | % | 6 | % | — | % | ||||||||
North America/Europe | 282.6 | 279.3 | 1 | % | (4 | )% | 5 | % | — | % | ||||||||||
Net Sales | $ | 1,037.9 | $ | 986.6 | 5 | % | (1 | )% | 6 | % | — | % | ||||||||
Earnings Before Interest and Income Taxes | ||||||||||||||||||||
Asia/Latin America | $ | 268.4 | $ | 280.9 | (4 | )% | ||||||||||||||
North America/Europe | 51.3 | 31.8 | 61 | % | ||||||||||||||||
Corporate and Other | (70.6 | ) | (63.9 | ) | (10 | )% | ||||||||||||||
EBIT | $ | 249.1 | $ | 248.8 | — | % | ||||||||||||||
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 March 31, | ||||||||||||||||||||||||||||||
Earnings Before Interest | Net Earnings Attributable | Earnings per Common | ||||||||||||||||||||||||||||
and Income Taxes | to Shareholders | Share - Diluted | ||||||||||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||||||||||
GAAP Results | $ | 249.1 | $ | 248.8 | $ | 172.5 | $ | 164.2 | $ | 0.85 | $ | 0.80 | ||||||||||||||||||
Specified Items: (1) | ||||||||||||||||||||||||||||||
IT and other separation costs (2) | — | 1.7 | ||||||||||||||||||||||||||||
Severance and other costs (3) | 1.4 | 1.0 | ||||||||||||||||||||||||||||
Legal, settlements and related costs (2,3) | 0.2 | 1.5 | ||||||||||||||||||||||||||||
Specified Items before income taxes | 1.6 | 4.2 | 1.6 | 4.2 | — | 0.02 | ||||||||||||||||||||||||
Income tax impact on items above | (0.1 | ) | (1.0 | ) | — | — | ||||||||||||||||||||||||
Non-GAAP Results | $ | 250.7 | $ | 253.0 | $ | 174.0 | $ | 167.4 | $ | 0.85 | $ | 0.82 | ||||||||||||||||||
(1) All Specified Items are included in the Corporate and Other segment |
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(2) Included in Selling, General and Administrative expenses |
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(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
4/25/2013