Mead Johnson Nutrition Reports First Quarter 2017 Results
Highlights are as follows:
Kasper Jakobsen, Chief Executive Officer, said “Our first quarter of the
year results were much as expected. Comparisons to last year were
impacted by one-time events in both the base year period and the current
period. While we are addressing challenges across the business, we
importantly remain on track in
(1) Constant dollar figures exclude the impact of changes in foreign currency exchange rates and are reconciled in the tables in the body of this earnings release and in the schedules titled “Reconciliation of non-GAAP to GAAP Results.” Non-GAAP results exclude Specified Items. For a description of Specified Items and a reconciliation of non-GAAP to GAAP, see the schedules titled “Reconciliation of non-GAAP to GAAP Results.”
First Quarter 2017 | |||||||||||||||||||
(Dollars in Millions) | |||||||||||||||||||
(UNAUDITED) | |||||||||||||||||||
Three Months Ended March 31, | % Change | % Change Due to | |||||||||||||||||
% of | % of | Constant | Foreign | ||||||||||||||||
Net Sales | 2017 | Total | 2016 | Total | Reported | Dollar | Volume | Price/Mix | Exchange | ||||||||||
Asia | $434.1 | 49% | $500.6 | 52% | (13)% | (10)% | (10)% | —% | (3)% | ||||||||||
Latin America | 156.2 | 18% | 160.3 | 17% | (3)% | 6% | (5)% | 11% | (9)% | ||||||||||
North America/Europe | 293.2 | 33% | 301.2 | 31% | (3)% | (2)% | (6)% | 4% | (1)% | ||||||||||
Net Sales | $883.5 | 100% | $962.1 | 100% | (8)% | (5)% | (8)% | 3% | (3)% | ||||||||||
Three Months Ended March 31, | % Change |
% Change |
|||||||||||||
Earnings Before Interest and Income Taxes (EBIT) | 2017 |
% of |
2016 |
% of |
Reported |
Constant |
Foreign |
||||||||
Asia | $116.8 | 27% | $169.1 | 34% | (31)% | (27)% | (4)% | ||||||||
Latin America | 39.8 | 26% | 40.8 | 26% | (2)% | 13% | (15)% | ||||||||
North America/Europe | 69.0 | 24% | 82.0 | 27% | (16)% | (15)% | (1)% | ||||||||
Corporate and Other (a) | (70.5) | (141.8) | 50% | ||||||||||||
GAAP EBIT | 155.1 | 18% | 150.1 | 16% | 3% | ||||||||||
Non-GAAP EBIT | $177.8 | $244.3 | (27)% | (22)% | (5)% | ||||||||||
(a) All Specified Items are included in Corporate and Other. |
|||||||||||||||
Cash Flow Items and Liquidity
Outlook
In view of the proposed merger agreement with
Kasper Jakobsen continued, “We expect significant benefits from the proposed merger with Reckitt Benckiser, including benefits from scale, potential geographic expansion, and increased resilience within a diversified group to help strengthen our business. Hence, our 2017 annual earnings guidance is no longer applicable and will not be updated.”
About Mead Johnson
Mead Johnson, a global leader in pediatric nutrition ("Mead Johnson" or the "Company"), 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.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements in this release are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements 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 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 the Company operates; (10) changing consumer preferences; (11) the possibility of changes in the Women, Infants and Children (WIC) program, or participation in WIC; (12) legislative, regulatory or judicial action that may adversely affect the Company’s ability to advertise its products, maintain product margins, or negatively impact the Company’s reputation or result in fines or penalties that decrease earnings; and (13) the ability to develop and market new, innovative products.
In addition, this release contains certain statements with respect to a
transaction involving the Company and
For additional information regarding these and other factors, see the
Company’s filings with the
Additional Information and Where to Find It
This communication may be deemed to be solicitation material in respect
of the transaction. In connection with the transaction, Mead Johnson
will file a proxy statement and other materials with the
Mead Johnson’s investors and security holders will be able to obtain a
free copy of these documents filed with the
Investors: Kathy MacDonald, 312-466-8900, kathy.macdonald@mjn.com; or
Media: Christopher Perille, 312-466-5814, chris.perille@mjn.com
Participants in the Solicitation
Mead Johnson and its officers and directors may be deemed to be
participants in the solicitation of proxies from Mead Johnson
stockholders with respect to the transaction. Information about Mead
Johnson officers and directors and their ownership of Mead Johnson
common shares is set forth in Amendment No. 1 to the Company's Annual
Report on Form 10-K, which was filed with the
MEAD JOHNSON NUTRITION COMPANY | |||||||||
CONSOLIDATED STATEMENTS OF EARNINGS | |||||||||
(Dollars and shares in millions, except per share data) | |||||||||
(UNAUDITED) | |||||||||
Three Months Ended March 31, | |||||||||
2017 | 2016 | ||||||||
NET SALES | $ | 883.5 | $ | 962.1 | |||||
Cost of Products Sold | 330.2 | 347.6 | |||||||
GROSS PROFIT | 553.3 | 614.5 | |||||||
Operating Expenses: | |||||||||
Selling, General and Administrative | 193.7 | 198.9 | |||||||
Advertising and Promotion | 160.3 | 151.8 | |||||||
Research and Development | 21.4 | 25.4 | |||||||
Other (Income)/Expenses—net | 22.8 | 88.3 | |||||||
EARNINGS BEFORE INTEREST AND INCOME TAXES | 155.1 | 150.1 | |||||||
Interest Expense—net | 27.1 | 26.2 | |||||||
EARNINGS BEFORE INCOME TAXES | 128.0 | 123.9 | |||||||
Provision for Income Taxes | 10.4 | 47.2 | |||||||
NET EARNINGS | 117.6 | 76.7 | |||||||
Less Net Earnings/(Loss) Attributable to Noncontrolling Interests | (2.3 | ) | 4.0 | ||||||
NET EARNINGS ATTRIBUTABLE TO SHAREHOLDERS | $ | 119.9 | $ | 72.7 | |||||
Earnings per Share—Basic | |||||||||
Net Earnings Attributable to Shareholders | $ | 0.65 | $ | 0.39 | |||||
Earnings per Share—Diluted | |||||||||
Net Earnings Attributable to Shareholders | $ | 0.65 | $ | 0.39 | |||||
Weighted Average Shares—Diluted | 183.9 | 186.7 | |||||||
Dividends Declared per Share | $ | 0.4125 | $ | 0.4125 |
(a) The numerator for basic and diluted earnings per share is net earnings attributable to shareholders. Net earnings has been reduced by dividends and undistributed earnings attributable to unvested share based incentive plan awards. 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 | ||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||
(Dollars and shares in millions, except per share data) | ||||||||||
(UNAUDITED) | ||||||||||
March 31, 2017 | December 31, 2016 | |||||||||
ASSETS | ||||||||||
CURRENT ASSETS: | ||||||||||
Cash and Cash Equivalents | $ | 1,724.4 | $ | 1,795.4 | ||||||
Restricted Cash | 152.5 | — | ||||||||
Receivables—net of allowances of $4.4 and $4.4, respectively | 355.0 | 369.0 | ||||||||
Inventories - net | 498.5 | 473.5 | ||||||||
Income Taxes Receivable | 26.1 | 8.3 | ||||||||
Prepaid Expenses and Other Assets | 60.8 | 60.4 | ||||||||
Total Current Assets | 2,817.3 | 2,706.6 | ||||||||
Property, Plant and Equipment – net | 963.6 | 948.6 | ||||||||
Goodwill | 113.1 | 108.9 | ||||||||
Other Intangible Assets – net | 43.9 | 46.0 | ||||||||
Deferred Income Taxes – net of valuation allowance | 148.4 | 143.1 | ||||||||
Other Assets | 140.8 | 134.5 | ||||||||
TOTAL | $ | 4,227.1 | $ | 4,087.7 | ||||||
LIABILITIES AND EQUITY | ||||||||||
CURRENT LIABILITIES: | ||||||||||
Short-Term Borrowings | $ | 4.5 | $ | 3.9 | ||||||
Accounts Payable | 536.0 | 515.8 | ||||||||
Dividends Payable | 76.3 | 76.0 | ||||||||
Accrued Expenses | 216.2 | 194.7 | ||||||||
Accrued Rebates and Returns | 415.0 | 417.4 | ||||||||
Deferred Income | 10.9 | 12.4 | ||||||||
Income Taxes Payable | 49.9 | 24.0 | ||||||||
Total Current Liabilities | 1,308.8 | 1,244.2 | ||||||||
Long-Term Debt | 2,973.3 | 2,976.2 | ||||||||
Deferred Income Taxes | 6.0 | 6.2 | ||||||||
Pension and Other Post-employment Liabilities | 99.2 | 104.2 | ||||||||
Other Liabilities | 232.6 | 229.0 | ||||||||
Total Liabilities | 4,619.9 | 4,559.8 | ||||||||
COMMITMENTS AND CONTINGENCIES | ||||||||||
EQUITY | ||||||||||
Shareholders’ Equity | ||||||||||
Common Stock, $0.01 par value: 3,000 authorized, 188.6 and 188.3 issued, respectively | 1.9 | 1.9 | ||||||||
Additional Paid-in/(Distributed) Capital | (499.5 | ) | (514.0 | ) | ||||||
Retained Earnings | 812.4 | 773.4 | ||||||||
Treasury Stock – at cost | (362.6 | ) | (362.6 | ) | ||||||
Accumulated Other Comprehensive Loss | (383.3 | ) | (411.4 | ) | ||||||
Total Shareholders’ Equity/(Deficit) | (431.1 | ) | (512.7 | ) | ||||||
Noncontrolling Interests | 38.3 | 40.6 | ||||||||
Total Equity/(Deficit) | (392.8 | ) | (472.1 | ) | ||||||
TOTAL | $ | 4,227.1 | $ | 4,087.7 |
MEAD JOHNSON NUTRITION COMPANY | ||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||
(Dollars in millions) | ||||||||||
(UNAUDITED) | ||||||||||
Three Months Ended March 31, | ||||||||||
2017 | 2016 | |||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||
Net Earnings | $ | 117.6 | $ | 76.7 | ||||||
Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities: | ||||||||||
Depreciation and Amortization | 25.8 | 24.9 | ||||||||
Impairment of Long-Lived Assets | — | 45.9 | ||||||||
Other Non-Cash Items | (12.6 | ) | 36.0 | |||||||
Changes in Assets and Liabilities | 65.7 | (23.4 | ) | |||||||
Pension and Other Post-employment Benefit Contributions | (0.1 | ) | — | |||||||
Net Cash Provided by Operating Activities | 196.4 | 160.1 | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||
Payments for Capital Expenditures | (48.5 | ) | (55.6 | ) | ||||||
Proceeds from Sale of Property, Plant and Equipment | 0.1 | 0.1 | ||||||||
Net Cash Used in Investing Activities | (48.4 | ) | (55.5 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||
Proceeds from Short-term Borrowings | 0.6 | 0.4 | ||||||||
Repayments of Short-term Borrowings | — | (0.1 | ) | |||||||
Debt Issuance Costs | — | (0.1 | ) | |||||||
Payments of Dividends | (75.9 | ) | (77.4 | ) | ||||||
Stock-based Compensation related Proceeds and Excess Tax Benefits | 5.4 | 3.7 | ||||||||
Stock-based Compensation Tax Withholdings | (4.7 | ) | (3.5 | ) | ||||||
Net Cash Used in Financing Activities | (74.6 | ) | (77.0 | ) | ||||||
Effects of Changes in Exchange Rates on Cash, Cash Equivalents and Restricted Cash | 8.1 | (26.7 | ) | |||||||
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 81.5 | 0.9 | ||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH: | ||||||||||
Beginning of Period | 1,795.4 | 1,701.4 | ||||||||
End of Period | $ | 1,876.9 | $ | 1,702.3 | ||||||
Financial Information
(UNAUDITED)
Reconciliation of Non-GAAP to GAAP Results
This news release contains non-GAAP financial measures, each of which is listed in the tables below. The items included in GAAP measures, but excluded for the purpose of determining the non-GAAP financial measures, include significant income/expenses not indicative of underlying operating results, including the related tax effect and, at times, the impact of foreign exchange. The non-GAAP measures represent an indication of the company’s underlying operating results and are intended to enhance an investor’s overall understanding of the company’s financial performance and ability to compare the company’s performance to that of its peer companies. 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 non-GAAP to GAAP disclosure follow below.
Constant Dollar
Certain measures in this release are presented excluding the impact of
foreign currency exchange (constant dollar). To present this
information, current period results for entities reporting in currencies
other than
Specified Items
Non-GAAP measures presented within this release exclude Specified Items. The company considers Specified Items to be significant income/expense items as not indicative of underlying operating results, including the related tax effect. See the following pages for a description of Specified Items and the related tax effect.
Mead Johnson Nutrition Company | |||||||||||||||
Financial Information (UNAUDITED) | |||||||||||||||
Reconciliation of Non-GAAP to GAAP Results | |||||||||||||||
Constant dollar net sales |
|||||||||||||||
Three Months Ended | |||||||||||||||
March 31, | % Change | ||||||||||||||
Foreign | Constant | ||||||||||||||
Net Sales | 2017 | 2016 | Reported | Exchange | Dollar | ||||||||||
Asia |
$ |
434.1 |
$ |
500.6 |
(13)% | (3)% | (10)% | ||||||||
Latin America | 156.2 | 160.3 | (3)% | (9)% | 6% | ||||||||||
North America/Europe | 293.2 | 301.2 | (3)% | (1)% | (2)% | ||||||||||
Net Sales | 883.5 | 962.1 | (8)% | (3)% | (5)% | ||||||||||
Impact of Foreign Exchange | 28.8 | ||||||||||||||
Constant Dollar Sales |
$ |
912.3 |
Non-GAAP constant dollar gross margin |
|||||||||||||||||||
Three Months Ended March 31, | |||||||||||||||||||
2017 | 2016 | ||||||||||||||||||
Gross | Gross | Gross | Gross | ||||||||||||||||
Profit | Margin | Profit | Margin | Change | |||||||||||||||
GAAP Gross Profit and Gross Margin | $ | 553.3 | 62.6 | % | $ | 614.5 | 63.9 | % |
(1.3)% |
||||||||||
Pension Remeasurement (a) | — |
— |
% |
2.1 | 0.2 | % | |||||||||||||
Non-GAAP Gross Profit and Gross Margin | 553.3 | 62.6 | % | 616.6 | 64.1 | % | (1.5)% | ||||||||||||
Foreign currency impact | 26.8 | 1.0 | % | — | |||||||||||||||
Non-GAAP Constant Dollar Gross Profit and Gross Margin | $ | 580.1 | 63.6 | % | $ | 616.6 | 64.1 | % | (0.5)% |
Constant dollar segment EBIT |
|||||||||||||||||
Three Months Ended March 31, | % Change | ||||||||||||||||
Earnings Before Interest and Income Taxes (EBIT) | 2017 | 2016 | Reported |
Foreign |
Constant |
||||||||||||
Asia | $ | 116.8 | $ | 169.1 | (31)% | (4)% | (27)% | ||||||||||
Latin America | 39.8 | 40.8 | (2)% | (15)% | 13% | ||||||||||||
North America/Europe | 69.0 | 82.0 | (16)% | (1)% | (15)% |
Non-GAAP EBIT and constant dollar EBIT |
||||||||||||||
Three Months Ended March 31, | % Change | |||||||||||||
2017 | 2016 | Reported | ||||||||||||
EBIT | $ | 155.1 | $ | 150.1 | 3 | % | ||||||||
Fuel for Growth (b) | 9.9 | 9.1 | ||||||||||||
Merger (c) | 6.8 | — | ||||||||||||
Real Estate (e) | 6.0 | — | ||||||||||||
Venezuela (d) | — | 78.2 | ||||||||||||
Pension Remeasurement (a) | — | 6.1 | ||||||||||||
All Other (f) | — | 0.8 | ||||||||||||
Non-GAAP EBIT | 177.8 | 244.3 | (27 | )% | ||||||||||
Foreign currency impact | 13.3 | — | ||||||||||||
Non-GAAP Constant Dollar EBIT | $ | 191.1 | $ | 244.3 | (22 | )% |
Non-GAAP diluted EPS |
||||||||||||||
Three Months Ended March 31, | ||||||||||||||
2017 | 2016 | % Change | ||||||||||||
GAAP EPS-Diluted | $ | 0.65 | $ | 0.39 | 67 | % | ||||||||
Fuel for Growth (b) | 0.05 | 0.04 | ||||||||||||
Merger (c) | 0.02 | — | ||||||||||||
Real Estate (e) | 0.02 | — | ||||||||||||
Venezuela (d) | — | 0.42 | ||||||||||||
Pension Remeasurement (a) | — | 0.02 | ||||||||||||
Non-GAAP EPS * | $ | 0.74 | $ | 0.87 | (15 | )% | ||||||||
Foreign currency impact | 0.06 | |||||||||||||
Non-GAAP Constant Dollar EPS-Diluted | $ | 0.80 | $ | 0.87 | (8 | )% | ||||||||
* Figures may not sum due to rounding. |
Consolidated Net Debt |
||||||||
March 31, 2017 | ||||||||
Short-term borrowings | $ | 4.5 | ||||||
Long-Term Debt | 2,973.3 | |||||||
Total Debt | 2,977.8 | |||||||
Less: Cash and cash equivalents | 1,724.4 | |||||||
Net debt | $ | 1,253.4 | ||||||
(a) Pension Remeasurement: When incurred, gains and losses related to the remeasurement of defined benefit pension and post-employment benefit plans are classified as Specified Items and excluded from non-GAAP performance measures. Pension remeasurement reflects changes in the pension assets and liabilities above what was estimated and included in periodic costs. Factors beyond our control such as changes in discount rates, market volatility and mortality assumptions drive the remeasurement amount. The majority of our pension and post-employment plans are frozen, and therefore the benefit provided to such employees is not related to our underlying operations.
(b) Fuel for Growth: The Company approved a plan to implement a business productivity program referred to as “Fuel for Growth,” during the third quarter of 2015, which is anticipated to be implemented over a three-year period. Fuel for Growth is designed to improve operating efficiencies and reduce costs. Fuel for Growth is expected to improve profitability and create additional investments behind brand building and growth initiatives. Fuel for Growth focuses on the optimization of resources within various operating functions and certain third party costs across the business.
(c) Merger: Includes costs incurred by the Company associated with the proposed merger with Reckitt Benckiser.
(d)
(e) Real Estate: Includes costs related to the relocation of an office within the U.S., such as contract termination fees and accelerated amortization on leasehold improvements from the vacated property.
(f) All Other: Primarily includes specified items related to legal, settlement and related costs, severance and other expenses.
View source version on businesswire.com: http://www.businesswire.com/news/home/20170427005825/en/
Source:
Mead Johnson Nutrition Company
Investors:
Kathy
MacDonald, 312-466-8900
kathy.macdonald@mjn.com
or
Media:
Christopher
Perille, 312-466-5814
chris.perille@mjn.com
4/27/2017