Mead Johnson Reports 17 Percent Sales Growth in 2011 and Delivers Non-GAAP EPS Growth of 15 Percent; Provides Initial 2012 Guidance
“We delivered $0.52 in non-GAAP earnings in the fourth quarter of 2011,
largely in line with our earlier expectations,” said Chief Executive
Officer Stephen W. Golsby. “On a full year basis, sales grew at a record
rate of 17 percent with non-GAAP EPS up 15 percent. We achieved
exceptional double-digit sales growth in
Fourth Quarter Results
Net sales for the fourth quarter of 2011 totaled $911.3 million, up 13 percent from $803.7 million a year ago. Sales benefited 11 percent from volume, 3 percent from price, offset by a 1 percent reduction from foreign exchange. Earnings before interest and income taxes (EBIT) for the fourth quarter totaled $146.1 million, largely flat compared to $146.6 million a year earlier. EBIT remained constant versus prior year primarily due to higher sales offset by increased demand-generation investments, higher commodity and manufacturing costs, and the timing for recognizing pension settlement expense and tax accruals.
Net earnings attributable to shareholders totaled $85.6 million, or $0.42 per diluted share, compared with $99.6 million, or $0.48 per diluted share for the prior-year quarter.
The effective tax rate (ETR) for the quarter was 32.5 percent versus 24.6 percent a year ago. The increase in the effective tax rate was primarily attributable to changes in geographic earnings mix and year-end accruals to bring the full-year ETR to 28.1 percent in 2011 versus 27.8 percent in 2010.
On a non-GAAP basis, which excludes specified items, net earnings attributable to shareholders totaled $106.5 million, or $0.52 per diluted share, for the fourth quarter of 2011, compared with $116.5 million, or $0.57 per diluted share, for the same quarter a year ago.
Fourth Quarter Segment Results
The
The
Corporate and Other expense increased primarily due to higher centralized marketing and R&D expense, and pension settlement costs incurred in the fourth quarter of 2011 partially offset by lower unallocated shared service overlap costs. Similar pension settlement expenses had been realized in the third quarter of 2010.
Full-Year 2011 Results
For the year ended
On a non-GAAP basis, which excludes the above-mentioned specified items, net earnings attributable to shareholders totaled $573.1 million, or $2.79 per diluted share, in 2011, compared with $498.2 million, or $2.42 per diluted share, in 2010.
Outlook for 2012
“We look forward to further success in 2012 and to a year of solid sales and earnings growth,” Mr. Golsby said. “We are initiating 2012 non-GAAP EPS guidance in the range of $3.00 to $3.10, up from $2.79 per share in 2011.”
Key assumptions underlying non-GAAP guidance include a net sales increase of 7 percent to 9 percent, excluding the effect of foreign exchange; higher raw material and packaging costs, offset by pricing and continued productivity gains; lower General and Administrative expenses with some savings reinvested to increase investments in demand-generation activities; and an effective tax rate between 27.5 percent and 28.5 percent.
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
statements, which are identified by words such as “expects,” “intends”
and “believes,” involve certain 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 adverse effect of commodity
costs; (4) increased competition from branded, private label, store and
economy-branded products; (5) the effect of an economic downturn on
consumers’ purchasing behavior and customers’ ability to pay for
product; (6) inventory reductions by customers; (7) the adverse effect
of changes in foreign currency exchange rates; (8) the effect of changes
in economic, political and social conditions in the markets where we
operate; (9) legislative, regulatory or judicial action that may
adversely affect the company’s ability to advertise its products or
maintain product margins; (10) the possibility of changes in the Women,
Infant and Children (WIC) program, or increases in levels of
participation in WIC; and (11) the ability to develop and market new,
innovative products. For additional information on these and other
factors, see the risk factors identified in the company’s periodic
reports, including the annual report on Form 10-K for 2010, quarterly
reports on Form 10-Q and current reports on Form 8-K, filed with, or
furnished to, 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 meadjohnson.com.
MEAD JOHNSON NUTRITION COMPANY | ||||||||||||||
CONSOLIDATED STATEMENTS OF EARNINGS | ||||||||||||||
(Dollars and shares in millions, except per share data) | ||||||||||||||
(UNAUDITED) | ||||||||||||||
Three Months Ended |
Year Ended |
|||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||
NET SALES | $ | 911.3 | $ | 803.7 | $ | 3,677.0 | $ | 3,141.6 | ||||||
COST OF PRODUCTS SOLD | 354.9 | 302.8 | 1,362.3 | 1,149.6 | ||||||||||
GROSS PROFIT | 556.4 | 500.9 | 2,314.7 | 1,992.0 | ||||||||||
EXPENSES: | ||||||||||||||
SELLING, GENERAL AND ADMINISTRATIVE | 237.3 | 218.5 | 926.8 | 762.7 | ||||||||||
ADVERTISING AND PROMOTION | 128.7 | 112.0 | 501.7 | 438.7 | ||||||||||
RESEARCH AND DEVELOPMENT | 28.1 | 20.2 | 92.5 | 78.5 | ||||||||||
OTHER EXPENSES/(INCOME)—NET | 16.2 | 3.6 | 19.6 | 29.2 | ||||||||||
EARNINGS BEFORE INTEREST AND INCOME TAXES | 146.1 | 146.6 | 774.1 | 682.9 | ||||||||||
INTEREST EXPENSE—NET | 13.8 | 12.9 | 52.2 | 48.6 | ||||||||||
EARNINGS BEFORE INCOME TAXES | 132.3 | 133.7 | 721.9 | 634.3 | ||||||||||
PROVISION FOR INCOME TAXES | 43.0 | 32.9 | 202.9 | 176.1 | ||||||||||
NET EARNINGS | 89.3 | 100.8 | 519.0 | 458.2 | ||||||||||
Less Net Earnings attributable to noncontrolling interests | 3.7 | 1.2 | 10.5 | 5.5 | ||||||||||
NET EARNINGS ATTRIBUTABLE TO SHAREHOLDERS | $ | 85.6 | $ | 99.6 | $ | 508.5 | $ | 452.7 | ||||||
Earnings per Share – Basic | ||||||||||||||
Net Earnings attributable to shareholders | $ | 0.42 | $ | 0.49 | $ | 2.48 | $ | 2.20 | ||||||
Earnings per Share – Diluted | ||||||||||||||
Net Earnings attributable to shareholders | $ | 0.42 | $ | 0.48 | $ | 2.47 | $ | 2.20 | ||||||
Weighted Average Shares | 203.8 | 204.7 | 204.3 | 204.7 | ||||||||||
Dividends declared per Share | $ | 0.26 | $ | 0.225 | $ | 1.04 | $ | 0.90 | ||||||
MEAD JOHNSON NUTRITION COMPANY | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
DECEMBER 31, 2011 AND 2010 | ||||||||
(Dollars and shares in millions, except per share data) | ||||||||
(UNAUDITED) | ||||||||
December 31, | ||||||||
2011 | 2010 | |||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and Cash Equivalents | $ | 840.3 | $ | 595.6 | ||||
Receivables—net of allowances of $6.3 and $8.3, respectively | 352.6 | 352.0 | ||||||
Inventories (1) | 534.9 | 356.7 | ||||||
Deferred Income Taxes—net of valuation allowance | 118.5 | 97.9 | ||||||
Income Taxes Receivable | 3.3 | 15.6 | ||||||
Prepaid Expenses and Other Assets | 40.1 | 31.2 | ||||||
Total Current Assets | 1,889.7 | 1,449.0 | ||||||
Property, Plant, and Equipment—net | 576.1 | 550.5 | ||||||
Goodwill | 117.5 | 117.5 | ||||||
Other Intangible Assets—net | 91.6 | 80.3 | ||||||
Deferred Income Taxes—net of valuation allowance | 16.5 | 13.4 | ||||||
Other Assets | 75.4 | 82.4 | ||||||
TOTAL | $ | 2,766.8 | $ | 2,293.1 | ||||
LIABILITIES AND EQUITY (DEFICIT) | ||||||||
CURRENT LIABILITIES: | ||||||||
Short-Term Borrowings | $ | - | $ | 1.2 | ||||
Accounts Payable (1) | 488.1 | 365.8 | ||||||
Dividends Payable | 53.3 | 46.3 | ||||||
Accrued Expenses | 229.0 | 208.7 | ||||||
Accrued Rebates and Returns | 300.1 | 278.9 | ||||||
Deferred Income—current | 47.0 | 37.0 | ||||||
Income Taxes—payable and deferred | 82.6 | 38.2 | ||||||
Total Current Liabilities | 1,200.1 | 976.1 | ||||||
Long-Term Debt | 1,531.9 | 1,532.5 | ||||||
Deferred Income Taxes—noncurrent | 5.2 | 42.6 | ||||||
Pension, Post Retirement and Post Employment Liabilities (2) | 157.2 | 71.7 | ||||||
Other Liabilities | 40.4 | 28.5 | ||||||
Total Liabilities | 2,934.8 | 2,651.4 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
EQUITY (DEFICIT) | ||||||||
Shareholders’ Equity | ||||||||
Common Stock, $0.01 par value: 4,200 authorized, 205.1 and 204.8 issued, respectively | 2.1 | 2.0 | ||||||
Additional Paid-in (Distributed) Capital | (728.4 | ) | (775.6 | ) | ||||
Retained Earnings | 770.0 | 474.0 | ||||||
Treasury Stock—at cost | (89.7 | ) | (3.2 | ) | ||||
Accumulated Other Comprehensive Income (Loss) | (133.1 | ) | (64.6 | ) | ||||
Total Shareholders’ Equity (Deficit) | (179.1 | ) | (367.4 | ) | ||||
Noncontrolling Interests | 11.1 | 9.1 | ||||||
Total Equity (Deficit) | (168.0 | ) | (358.3 | ) | ||||
TOTAL | $ | 2,766.8 | $ | 2,293.1 | ||||
(1)For the year ended December 31, 2011, inventories and related payables included $77 million due to a higher level of advanced purchases for select dairy inputs. |
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(2)Pension-related liabilities grew by $85.5 million, largely due to a lower discount rate at year-end 2011 versus 2010, along with modified actuarial assumptions. |
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MEAD JOHNSON NUTRITION COMPANY | |||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
YEARS ENDED DECEMBER 31, 2011 AND 2010 | |||||||||
(Dollars in millions) | |||||||||
(UNAUDITED) | |||||||||
December 31, | |||||||||
2011 | 2010 | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||
Net Earnings | $ | 519.0 | $ | 458.2 | |||||
Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities: | |||||||||
Depreciation and Amortization | 75.3 | 64.7 | |||||||
Stock-Based Compensation Expense | 39.9 | 19.7 | |||||||
Deferred Income Tax | (33.3 | ) | 19.2 | ||||||
Exchange Loss from Devaluation | — | 8.5 | |||||||
Other | 2.3 | 6.9 | |||||||
Change in Assets and Liabilities: | |||||||||
Receivables | (7.9 | ) | (34.8 | ) | |||||
Inventories | (183.3 | ) | (40.4 | ) | |||||
Accounts Payable | 114.7 | 78.6 | |||||||
Accrued Expenses, Rebates and Returns | 50.0 | 21.2 | |||||||
Income Taxes Payable | 53.2 | (69.5 | ) | ||||||
Other Assets and Liabilities | 12.6 | 37.4 | |||||||
Pension and Other Post Retirement Benefits Contributions | (9.7 | ) | (55.5 | ) | |||||
Net Cash Provided by Operating Activities | 632.8 | 514.2 | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||
Payments for Capital Expenditures | (109.5 | ) | (172.4 | ) | |||||
Proceeds from Sale of Property, Plant and Equipment | 1.6 | 3.3 | |||||||
Investment in Other Companies | (4.7 | ) | (5.5 | ) | |||||
Net Cash Used in Investing Activities | (112.6 | ) | (174.6 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||
Proceeds from Short-term Borrowings | 72.0 | 134.7 | |||||||
Repayments of Short-term Borrowings | (73.2 | ) | (253.5 | ) | |||||
Payment for Capital Lease Termination | — | (47.0 | ) | ||||||
Payments of Dividends | (205.7 | ) | (179.6 | ) | |||||
Proceeds from Stock Option Exercises | 4.5 | 2.1 | |||||||
Purchases of Treasury Stock | (87.7 | ) | (2.0 | ) | |||||
Proceeds from Termination of Interest Rate Swaps | 23.5 | 15.6 | |||||||
Promissory Note from BMS | — | 30.0 | |||||||
Distributions to Noncontrolling Interests | (8.6 | ) | (6.7 | ) | |||||
Net Cash Used in Financing Activities | (275.2 | ) | (306.4 | ) | |||||
Effects of Changes in Exchange Rates on Cash and Cash Equivalents | (0.3 | ) | 1.3 | ||||||
NET INCREASE IN CASH AND CASH EQUIVALENTS | 244.7 | 34.5 | |||||||
CASH AND CASH EQUIVALENTS: | |||||||||
Beginning of Year | 595.6 | 561.1 | |||||||
End of Year | $ | 840.3 | $ | 595.6 | |||||
MEAD JOHNSON NUTRITION COMPANY | ||||||||||||||||||||||
SUPPLEMENTAL FINANCIAL INFORMATION | ||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||
(UNAUDITED) | ||||||||||||||||||||||
% Change Due to | ||||||||||||||||||||||
Three Months Ended December 31, | Foreign | |||||||||||||||||||||
2011 | 2010 | % Change | Volume | Price | Exchange | |||||||||||||||||
Net Sales | ||||||||||||||||||||||
Asia/Latin America | $ | 598.6 | $ | 509.7 | 17 | % | 14 | % | 4 | % | -1 | % | ||||||||||
North America/Europe | 312.7 | 294.0 | 6 | % | 4 | % | 3 | % | -1 | % | ||||||||||||
Total | $ | 911.3 | $ | 803.7 | 13 | % | 11 | % | 3 | % | -1 | % | ||||||||||
Earnings Before Interest and Income Taxes | ||||||||||||||||||||||
Asia/Latin America | $ | 177.9 | $ | 154.1 | 15 | % | ||||||||||||||||
North America/Europe | 65.9 | 85.0 | -22 | % | ||||||||||||||||||
Corporate and Other | (97.7 | ) | (92.5 | ) | 6 | % | ||||||||||||||||
Total | $ | 146.1 | $ | 146.6 | 0 | % | ||||||||||||||||
MEAD JOHNSON NUTRITION COMPANY | ||||||||||||||||||||||
SUPPLEMENTAL FINANCIAL INFORMATION | ||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||
(UNAUDITED) | ||||||||||||||||||||||
% Change Due to | ||||||||||||||||||||||
Twelve Months Ended December 31, | Foreign | |||||||||||||||||||||
2011 | 2010 | % Change | Volume | Price | Exchange | |||||||||||||||||
Net Sales | ||||||||||||||||||||||
Asia/Latin America | $ | 2,423.2 | $ | 1,927.1 | 26 | % | 17 | % | 5 | % | 4 | % | ||||||||||
North America/Europe | 1,253.8 | 1,214.5 | 3 | % | 2 | % | 1 | % | 0 | % | ||||||||||||
Total | $ | 3,677.0 | $ | 3,141.6 | 17 | % | 11 | % | 3 | % | 3 | % | ||||||||||
Earnings Before Interest and Income Taxes | ||||||||||||||||||||||
Asia/Latin America | $ | 802.9 | $ | 646.1 | 24 | % | ||||||||||||||||
North America/Europe | 317.1 | 357.7 | -11 | % | ||||||||||||||||||
Corporate and Other | (345.9 | ) | (320.9 | ) | 8 | % | ||||||||||||||||
Total | $ | 774.1 | $ | 682.9 | 13 | % | ||||||||||||||||
Non-GAAP Financial Measures
This news release contains non-GAAP financial measures, including non-GAAP EBIT, earnings and earnings per share information. The items included in GAAP measures, but excluded for the purpose of determining non-GAAP EBIT, earnings and earnings per share, are IT separation and other costs (Specified Items). In addition, other items include the tax impact on Specified Items. 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 | ||||||||||||||||||||||
FOR THE THREE MONTHS ENDED DECEMBER 31, 2011 and 2010 | ||||||||||||||||||||||
(Dollars in millions, except per share data) | ||||||||||||||||||||||
(UNAUDITED) | ||||||||||||||||||||||
Earnings Before Interest | Net Earnings Attributable | Earnings per Common | ||||||||||||||||||||
and Income Taxes | to Shareholders | Share - Diluted | ||||||||||||||||||||
2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |||||||||||||||||
GAAP results | $ | 146.1 | $ | 146.6 | $ | 85.6 | $ | 99.6 | $ | 0.42 | $ | 0.48 | ||||||||||
Specified Items:(1) | ||||||||||||||||||||||
IT and other separation costs(2) | 13.5 | 23.2 | ||||||||||||||||||||
Severance and other costs(2,3) | 11.4 | 0.3 | ||||||||||||||||||||
Legal, settlements and related costs(2,3) | 3.2 | 4.6 | ||||||||||||||||||||
Specified Items before income taxes | 28.1 | 28.1 | 28.1 | 28.1 | 0.14 | 0.14 | ||||||||||||||||
Income tax impact on items above | (7.2 | ) | (10.3 | ) | (0.04 | ) | (0.05 | ) | ||||||||||||||
Write-off of deferred tax asset related to BMS stock options | (0.9 | ) |
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Non-GAAP results | $ | 174.2 | $ | 174.7 | $ | 106.5 | $ | 116.5 | 0.52 | $ | 0.57 | |||||||||||
(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/(Income)-net |
MEAD JOHNSON NUTRITION COMPANY | ||||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP RESULTS | ||||||||||||||||||||||
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2011 and 2010 | ||||||||||||||||||||||
(Dollars in millions, except per share data) | ||||||||||||||||||||||
(UNAUDITED) | ||||||||||||||||||||||
Earnings Before Interest | Net Earnings Attributable | Earnings per Common | ||||||||||||||||||||
and Income Taxes | to Shareholders | Share - Diluted | ||||||||||||||||||||
2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |||||||||||||||||
GAAP results | $ | 774.1 | $ | 682.9 | $ | 508.5 | $ | 452.7 | $ | 2.47 | $ | 2.20 | ||||||||||
Specified Items:(1) | ||||||||||||||||||||||
IT and other separation costs(2) | 74.7 | 57.1 | ||||||||||||||||||||
Severance and other costs(2,3) | 11.6 | 5.1 | ||||||||||||||||||||
Legal, settlements and related costs(2,3) | 7.6 | 9.2 | ||||||||||||||||||||
Specified Items before income taxes | 93.9 | 71.4 | 93.9 | 71.4 | 0.46 | 0.35 | ||||||||||||||||
Income tax impact on items above | (29.3 | ) | (25.0 | ) | (0.14 | ) | (0.14 | ) | ||||||||||||||
Write-off of deferred tax asset related to BMS stock options | (0.9 | ) | 0.01 | |||||||||||||||||||
Non-GAAP results | $ | 868.0 | $ | 754.3 | $ | 573.1 | $ | 498.2 | $ | 2.79 | $ | 2.42 | ||||||||||
(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/(Income)-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
1/26/2012