Mead Johnson Nutrition Reports Full Year Constant Dollar Sales Growth of 9 Percent; Delivers Non-GAAP EPS Growth of 10 Percent; Provides 2014 Guidance
(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.
“We are pleased with our strong 2013 performance as we achieved sales
growth at the top end of our guidance range and earnings that exceeded
expectations,” said Chief Executive Officer Kasper Jakobsen. “Sales
growth was strong in both
(2)
Fourth Quarter Results
Sales for the fourth quarter of 2013 totaled $1,060.7 million, up eight percent from $981.1 million in the prior-year quarter. Sales benefited six percent from volume and five percent from price, reduced by three percent from foreign exchange. Gross margin for the fourth quarter of 2013 was 63.0 percent, up 190 basis points from the fourth quarter of the prior year. The gross margin improvement was primarily driven by price increases and productivity, which more than offset higher dairy costs. The increase in sales and gross profit was partially offset by record levels of advertising and promotion spend and higher pension settlement expense. Earnings before interest and income taxes (“EBIT”) for the fourth quarter of 2013 totaled $205.2 million compared to $189.7 million in the prior-year quarter.
The company's effective tax rate (“ETR”) was 18.9 percent in the fourth quarter, compared to 23.8 percent a year ago. The low fourth quarter 2013 ETR includes a non-recurring benefit related to the decision to permanently invest certain prior years' foreign earnings and profits abroad.
Net earnings attributable to shareholders totaled $153.2 million, or $0.75 per diluted share, in the fourth quarter of 2013, compared to $134.2 million, or $0.66 per diluted share, in the prior-year quarter.
On a non-GAAP basis, excluding Specified Items, net earnings attributable to shareholders totaled $157.9 million, or $0.78 per diluted share, for the fourth quarter of 2013, compared to $146.7 million, or $0.72 per diluted share, for the same quarter a year ago.
Fourth Quarter Segment Results
In the fourth quarter of 2013, the company expanded the number of
reportable segments to three as it separated the
The
The
The
Corporate and Other expenses increased primarily due to higher pension settlement expense and legal costs.
Full-Year Results
Sales totaled $4,200.7 million, for the year ended
ETR for 2013 was 25.1 percent versus 23.9 percent a year ago. The
increase was primarily attributed to favorable adjustments in 2012
associated with prior years' tax filings and the administrative penalty
related to the
Net earnings attributable to shareholders for 2013 totaled $649.5 million, or $3.19 per diluted share, compared to $604.5 million, or $2.95 per diluted share, for 2012.
On a non-GAAP basis, excluding Specified Items, net earnings attributable to shareholders totaled $687.6 million, or $3.38 per diluted share in 2013, up nine percent from $630.1 million, or $3.08 per diluted share in 2012.
Full-Year Segment Results
The
The
The
Corporate and Other expenses increased primarily due to the $33.4
million
Outlook for 2014
“We anticipate constant dollar sales growth of about seven percent for the full year 2014,” Mr. Jakobsen said. “Margins will be impacted by higher dairy costs and increased foreign exchange volatility. However, we will continue to invest in demand-generating activities at a level consistent with our growth ambitions. We expect full-year non-GAAP EPS to be in the range of $3.50 to $3.62.” The company estimates Specified Items at $0.06 per diluted share. As a result full-year GAAP EPS is expected to be in the range of $3.44 to $3.56.
The company is planning to adopt mark-to-market pension accounting (MTM) during the first quarter of 2014. The non-GAAP and GAAP EPS guidance does not reflect this change in accounting methodology. The periodic MTM adjustment will be reflected as a Specified Item and therefore excluded from the calculation of non-GAAP earnings. As a result, we expect the change in accounting to have a positive impact on 2014 non-GAAP earnings. This will not, however, reflect a change in the underlying business performance.
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 December 31, | Years Ended December 31, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
NET SALES | $ | 1,060.7 | $ | 981.1 | $ | 4,200.7 | $ | 3,901.3 | |||||||
Cost of Products Sold | 392.0 | 382.0 | 1,532.8 | 1,485.3 | |||||||||||
GROSS PROFIT | 668.7 | 599.1 | 2,667.9 | 2,416.0 | |||||||||||
Expenses: | |||||||||||||||
Selling, General and Administrative | 251.2 | 235.6 | 918.0 | 877.8 | |||||||||||
Advertising and Promotion | 169.2 | 139.5 | 645.1 | 552.8 | |||||||||||
Research and Development | 27.9 | 27.8 | 102.4 | 95.4 | |||||||||||
Other Expenses – net | 15.2 | 6.5 | 77.8 | 20.0 | |||||||||||
EARNINGS BEFORE INTEREST AND INCOME TAXES | 205.2 | 189.7 | 924.6 | 870.0 | |||||||||||
Interest Expense – net | 11.7 | 16.0 | 50.6 | 65.0 | |||||||||||
EARNINGS BEFORE INCOME TAXES | 193.5 | 173.7 | 874.0 | 805.0 | |||||||||||
Provision for Income Taxes | 36.7 | 41.4 | 219.1 | 192.6 | |||||||||||
NET EARNINGS | 156.8 | 132.3 | 654.9 | 612.4 | |||||||||||
Less Net Earnings/(Loss) Attributable to Noncontrolling Interests | 3.6 | (1.9 | ) | 5.4 | 7.9 | ||||||||||
NET EARNINGS ATTRIBUTABLE TO SHAREHOLDERS | $ | 153.2 | $ | 134.2 | $ | 649.5 | $ | 604.5 | |||||||
Earnings per Share*– Basic | |||||||||||||||
Net Earnings Attributable to Shareholders | $ | 0.76 | $ | 0.66 | $ | 3.20 | $ | 2.96 | |||||||
Earnings per Share*– Diluted | |||||||||||||||
Net Earnings Attributable to Shareholders | $ | 0.75 | $ | 0.66 | $ | 3.19 | $ | 2.95 | |||||||
Weighted-average Shares – Diluted | 202.7 | 203.6 | 203.1 | 204.3 | |||||||||||
Dividends Declared per Share | $ | 0.34 | $ | 0.30 | $ | 1.36 | $ | 1.20 |
*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) | ||||||||
December 31, | ||||||||
ASSETS | 2013 | 2012 | ||||||
CURRENT ASSETS: | ||||||||
Cash and Cash Equivalents | $ | 1,050.8 | $ | 1,042.1 | ||||
Receivables – net of allowances of $6.5 and $7.6, respectively | 384.4 | 364.6 | ||||||
Inventories | 534.8 | 435.9 | ||||||
Deferred Income Taxes – net of valuation allowance | 75.3 | 86.4 | ||||||
Income Taxes Receivable | 15.9 | 26.0 | ||||||
Prepaid Expenses and Other Assets | 56.9 | 60.0 | ||||||
Total Current Assets | 2,118.1 | 2,015.0 | ||||||
Property, Plant, and Equipment – net | 867.5 | 689.9 | ||||||
Goodwill | 196.8 | 270.6 | ||||||
Other Intangible Assets – net | 97.5 | 129.9 | ||||||
Deferred Income Taxes – net of valuation allowance | 37.0 | 24.5 | ||||||
Other Assets | 157.2 | 128.3 | ||||||
TOTAL | $ | 3,474.1 | $ | 3,258.2 | ||||
LIABILITIES AND EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Short-term Borrowings | $ | 2.0 | $ | 161.0 | ||||
Accounts Payable | 566.8 | 508.5 | ||||||
Dividends Payable | 69.3 | 61.3 | ||||||
Current Portion of Long-Term Debt | 505.6 | — | ||||||
Note Payable | — | 26.0 | ||||||
Accrued Expenses | 220.0 | 220.4 | ||||||
Accrued Rebates and Returns | 314.9 | 314.8 | ||||||
Deferred Income – current | 46.6 | 36.1 | ||||||
Income Taxes – payable and deferred | 56.1 | 41.8 | ||||||
Total Current Liabilities | 1,781.3 | 1,369.9 | ||||||
Long-Term Debt | 1,009.1 | 1,523.2 | ||||||
Deferred Income Taxes – noncurrent | 15.3 | 15.9 | ||||||
Pension, Post Retirement and Post Employment Liabilities | 161.8 | 188.8 | ||||||
Other Liabilities | 156.4 | 95.1 | ||||||
Total Liabilities | 3,123.9 | 3,192.9 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
REDEEMABLE NONCONTROLLING INTEREST | 49.7 | 36.3 | ||||||
EQUITY | ||||||||
Shareholders’ Equity | ||||||||
Common Stock, $0.01 par value: 3,000 authorized, 206.8 and 206.0 issued, respectively | 2.1 | 2.1 | ||||||
Additional Paid-in/(Distributed) Capital | (625.3 | ) | (676.6 | ) | ||||
Retained Earnings | 1,470.4 | 1,124.8 | ||||||
Treasury Stock – at cost | (351.9 | ) | (244.6 | ) | ||||
Accumulated Other Comprehensive Loss | (203.5 | ) | (187.0 | ) | ||||
Total Shareholders’ Equity | 291.8 | 18.7 | ||||||
Noncontrolling Interests | 8.7 | 10.3 | ||||||
Total Equity | 300.5 | 29.0 | ||||||
TOTAL | $ | 3,474.1 | $ | 3,258.2 |
MEAD JOHNSON NUTRITION COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(Dollars in millions) | ||||||||
(UNAUDITED) | ||||||||
Years Ended December 31, | ||||||||
2013 | 2012 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net Earnings | $ | 654.9 | $ | 612.4 | ||||
Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities: | ||||||||
Depreciation and Amortization | 83.1 | 76.9 | ||||||
Stock-Based Compensation Expense | 32.6 | 32.2 | ||||||
Deferred Income Tax | 7.0 | 17.1 | ||||||
Gain on Sale of Intangible Assets | — | (6.5 | ) | |||||
Exchange Loss from Devaluation | 2.2 | — | ||||||
Pension and Other Post Retirement Benefit Plan Expense | 43.1 | 27.9 | ||||||
Other | 2.8 | 1.8 | ||||||
Changes in Assets and Liabilities | ||||||||
Receivables | (37.7 | ) | (8.5 | ) | ||||
Inventories | (108.2 | ) | 109.8 | |||||
Accounts Payable | 56.0 | (30.9 | ) | |||||
Accrued Expenses, Rebates and Returns | 14.8 | (6.3 | ) | |||||
Income Taxes Payable | 27.0 | (62.2 | ) | |||||
Other Assets and Liabilities | 48.4 | (42.7 | ) | |||||
Pension and Other Post Retirement Benefits Contributions | (19.4 | ) | (28.3 | ) | ||||
Net Cash Provided by Operating Activities | 806.6 | 692.7 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Payments for Capital Expenditures | (240.4 | ) | (124.4 | ) | ||||
Proceeds from Sale of Property, Plant and Equipment | 2.6 | 1.5 | ||||||
Proceeds from Sale of Intangible Assets | — | 6.5 | ||||||
Investment in Other Companies | (2.7 | ) | (6.3 | ) | ||||
Payment for Acquisition | — | (106.1 | ) | |||||
Net Cash Used in Investing Activities | (240.5 | ) | (228.8 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from Short-term Borrowings | 6.9 | 391.2 | ||||||
Repayments of Short-term Borrowings | (165.4 | ) | (230.2 | ) | ||||
Repayments of Notes Payable | (27.6 | ) | (52.6 | ) | ||||
Payments of Dividends | (267.7 | ) | (236.7 | ) | ||||
Stock-based-compensation-related Proceeds and Excess Tax Benefits | 23.6 | 23.3 | ||||||
Purchases of Treasury Stock | (106.0 | ) | (154.9 | ) | ||||
Distributions to Noncontrolling Interests | (9.5 | ) | (7.6 | ) | ||||
Net Cash Used in Financing Activities | (545.7 | ) | (267.5 | ) | ||||
Effects of Changes in Exchange Rates on Cash and Cash Equivalents | (11.7 | ) | 5.4 | |||||
NET INCREASE IN CASH AND CASH EQUIVALENTS | 8.7 | 201.8 | ||||||
CASH AND CASH EQUIVALENTS: | ||||||||
Beginning of Period | 1,042.1 | 840.3 | ||||||
End of Period | $ | 1,050.8 | $ | 1,042.1 |
MEAD JOHNSON NUTRITION COMPANY |
SUPPLEMENTAL FINANCIAL INFORMATION |
(Dollars in millions) |
(UNAUDITED) |
MJN operates in four geographic operating segments:
Three Months Ended December 31, | % Change | % Change Due to | |||||||||||||||||||||||||
% of | % of | Constant | Foreign | ||||||||||||||||||||||||
Net Sales | 2013 | Total | 2012 | Total | Reported | Dollar | Volume | Price/Mix | Exchange | ||||||||||||||||||
Asia | $ | 544.2 | 51% | $ | 457.4 | 47% | 19 | % | 20 | % | 16 | % | 4 | % | (1 | )% | |||||||||||
Latin America | 215.8 | 20% | 206.1 | 21% | 5 | % | 16 | % | 6 | % | 10 | % | (11 | )% | |||||||||||||
North America/Europe | 300.7 | 29% | 317.6 | 32% | (5 | )% | (5 | )% | (8 | )% | 3 | % | — | % | |||||||||||||
Net Sales | $ | 1,060.7 | 100% | $ | 981.1 | 100% | 8 | % | 11 | % | 6 | % | 5 | % | (3 | )% | |||||||||||
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|
EBIT | EBIT | |||||||||||||||||||||||||
Earnings Before Interest |
% of | % of | |||||||||||||||||||||||||
and Income Taxes (EBIT) |
Sales | Sales | |||||||||||||||||||||||||
Asia | $ | 182.9 | 34% | $ | 134.1 | 29% | 36 | % | |||||||||||||||||||
Latin America | 50.1 | 23% | 53.3 | 26% | (6 | )% | |||||||||||||||||||||
North America/Europe | 60.8 | 20% | 88.9 | 28% | (32 | )% | |||||||||||||||||||||
Corporate and Other | (88.6 | ) | (86.6 | ) | (2 | )% | |||||||||||||||||||||
EBIT | $ | 205.2 | 19% | $ | 189.7 | 19% | 8 | % |
Years Ended December 31, | % Change | % Change Due to | ||||||||||||||||||||||||||
% of | % of | Constant | Foreign | |||||||||||||||||||||||||
Net Sales | 2013 | Total | 2012 | Total | Reported | Dollar | Volume | Price/Mix | Exchange | |||||||||||||||||||
Asia | $ | 2,179.3 | 52% | $ | 1,967.0 | 51% | 11 | % | 10 | % | 8 | % | 2 | % | 1 | % | ||||||||||||
Latin America | 861.4 | 20% | 752.5 | 19% | 14 | % | 22 | % | 11 | % | (a) | 11 | % | (8 | )% | |||||||||||||
North America/Europe | 1,160.0 | 28% | 1,181.8 | 30% | (2 | )% | (2 | )% | (5 | )% | 3 | % | — | % | ||||||||||||||
Net Sales | $ | 4,200.7 | 100% | $ | 3,901.3 | 100% | 8 | % | 9 | % | 5 | % | 4 | % | (1 | )% | ||||||||||||
(a) Argentine acquisition represented 2% of Latin America net sales increase. The impact of the acquisition was not material to sales growth for total MJN. | ||||||||||||||||||||||||||||
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|
EBIT | EBIT | ||||||||||||||||||||||||||
Earnings Before Interest |
% of | % of | ||||||||||||||||||||||||||
and Income Taxes (EBIT) |
Sales | Sales | ||||||||||||||||||||||||||
Asia | $ | 795.8 | 37% | $ | 725.3 | 37% | 10 | % | ||||||||||||||||||||
Latin America | 207.2 | 24% | 176.0 | 23% | 18 | % | ||||||||||||||||||||||
North America/Europe | 248.5 | 21% | 246.1 | 21% | 1 | % | ||||||||||||||||||||||
Corporate and Other | (326.9 | ) | (277.4 | ) | (18 | )% | ||||||||||||||||||||||
EBIT | $ | 924.6 | 22% | $ | 870.0 | 22% | 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 December 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 | $ | 205.2 | $ | 189.7 | $ | 153.2 | $ | 134.2 | $ | 0.75 | $ | 0.66 | |||||||||||||||||||
Specified Items: (1) | |||||||||||||||||||||||||||||||
IT and other separation costs (2) | — | 7.9 | |||||||||||||||||||||||||||||
Gain on sale of certain non-core intangible assets (3) | — | (1.0 | ) | ||||||||||||||||||||||||||||
Severance and other costs (3) | 0.5 | 11.5 | |||||||||||||||||||||||||||||
Legal, settlements and related costs (2,3) | 7.9 | (0.3 | ) | ||||||||||||||||||||||||||||
Specified Items | 8.4 | 18.1 | 8.4 | 18.1 | 0.04 | 0.09 | |||||||||||||||||||||||||
Income tax impact on items above | (3.6 | ) | (5.6 | ) | (0.01 | ) | (0.03 | ) | |||||||||||||||||||||||
Specified Items attributable to noncontrolling interest | (0.1 | ) | — | $ | — | $ | — | ||||||||||||||||||||||||
Non-GAAP Results | $ | 213.6 | $ | 207.8 | $ | 157.9 | $ | 146.7 | $ | 0.78 | $ | 0.72 |
Years Ended December 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 | $ | 924.6 | $ | 870.0 | $ | 649.5 | $ | 604.5 | $ | 3.19 | $ | 2.95 | |||||||||||||||||||
Specified Items: (1) | |||||||||||||||||||||||||||||||
IT and other separation costs (2) | — | 19.9 | |||||||||||||||||||||||||||||
Gain on sale of certain non-core intangible assets (3) | — | (6.5 | ) | ||||||||||||||||||||||||||||
Severance and other costs (3) | 2.6 | 21.1 | |||||||||||||||||||||||||||||
Administrative penalty (China)(3) | 33.4 | — | |||||||||||||||||||||||||||||
Legal, settlements and related costs (2,3) | 9.2 | 2.8 | |||||||||||||||||||||||||||||
Specified Items before income taxes | 45.2 | 37.3 | 45.2 | 37.3 | 0.22 | 0.18 | |||||||||||||||||||||||||
Income tax impact on items above | (3.3 | ) | (11.7 | ) | (0.01 | ) | (0.05 | ) | |||||||||||||||||||||||
Specified Items attributable to noncontrolling interest | (3.8 | ) | — | (0.02 | ) | — | |||||||||||||||||||||||||
Non-GAAP Results | $ | 969.8 | $ | 907.3 | $ | 687.6 | $ | 630.1 | $ | 3.38 | $ | 3.08 |
(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
1/31/2014