Mead Johnson Reports Strong First Quarter Earnings; Delivers 11 Percent Constant Dollar Sales Growth; And Increases 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 schedule titled “Supplemental Financial Information” included in this release.
“We achieved record sales and earnings in the quarter,” said Chief Executive Officer Kasper Jakobsen. “Sales growth was strong across all segments, including within our two largest markets. With innovations launched last year and increased investment in demand creation, we continued to see market share gains in all three segments. We invested appropriately to support future growth, while delivering 16 percent growth in earnings per share on a non-GAAP basis.”
First Quarter Results
Sales for the first quarter of 2014 were $1,113.3 million, up seven percent from $1,037.9 million a year ago. Sales increased seven percent from volume and four percent from price, partially offset by a four percent decline from foreign exchange. Gross margin for the first quarter of 2014 was 63.6 percent, up from 62.9 percent in the first quarter of the prior year. The gross margin improvement was due to pricing and productivity gains, somewhat offset by higher dairy costs. Advertising and promotion investments grew in line with sales growth. Operating expenses were higher mainly due to the impact of a 2013 pension MTM actuarial gain not repeated in 2014. Earnings before interest and income taxes (“EBIT”) totaled $291.2 million, up from $273.5 million in the prior-year quarter.
The company’s effective tax rate (“ETR”) was 25.5 percent in the first quarter, compared to 26.7 percent in the prior-year quarter. The ETR improvement was primarily attributed to a change in the geographic earnings mix.
Net earnings attributable to shareholders totaled $202.4 million, or $1.00 per diluted share, in the first quarter of 2014, compared to $188.0 million, or $0.92 per diluted share, in the prior-year quarter.
On a non-GAAP basis, which excludes Specified Items, net earnings attributable to shareholders totaled $206.1 million, or $1.02 per diluted share, for the first quarter of 2014, compared to $179.9 million, or $0.88 per diluted share, for the same quarter a year ago.
First Quarter Segment Results
The
The
The
Corporate and Other expenses increased mainly due to legal costs and the impact of a 2013 pension MTM actuarial gain not repeated in 2014.
(2)
Outlook for 2014
“We now anticipate constant dollar sales growth of approximately eight percent for the full year 2014, up from seven percent in our prior guidance, on expected stronger revenue momentum,” Mr. Jakobsen said. “We are planning for higher demand-generating investments throughout the remainder of the year, despite foreign exchange pressure on our earnings.” With the New Pension Accounting changes and stronger underlying business performance, the company has raised guidance and expects full-year non-GAAP EPS to be in the range of $3.60 to $3.72 per diluted share.
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, | |||||||||
2014 |
2013(a) |
||||||||
NET SALES | $ | 1,113.3 | $ | 1,037.9 | |||||
Cost of Products Sold | 405.7 | 385.0 | |||||||
GROSS PROFIT | 707.6 | 652.9 | |||||||
Expenses: | |||||||||
Selling, General and Administrative | 232.9 | 207.1 | |||||||
Advertising and Promotion | 155.7 | 144.5 | |||||||
Research and Development | 27.1 | 22.5 | |||||||
Other Expenses – net | 0.7 | 5.3 | |||||||
EARNINGS BEFORE INTEREST AND INCOME TAXES | 291.2 | 273.5 | |||||||
Interest Expense – net | 12.4 | 14.2 | |||||||
EARNINGS BEFORE INCOME TAXES | 278.8 | 259.3 | |||||||
Provision for Income Taxes | 71.0 | 69.3 | |||||||
NET EARNINGS | 207.8 | 190.0 | |||||||
Less Net Earnings/(Loss) Attributable to Noncontrolling Interests | 5.4 | 2.0 | |||||||
NET EARNINGS ATTRIBUTABLE TO SHAREHOLDERS | $ | 202.4 | $ | 188.0 | |||||
Earnings per Share*– Basic | |||||||||
Net Earnings Attributable to Shareholders | $ | 1.00 | $ | 0.93 | |||||
Earnings per Share*– Diluted | |||||||||
Net Earnings Attributable to Shareholders | $ | 1.00 | $ | 0.92 | |||||
Weighted-average Shares – Diluted | 202.4 | 203.2 | |||||||
Dividends Declared per Share | $ | 0.38 | $ | 0.34 |
(a) | See the company's Form 10-Q for the first quarter of 2014 for details regarding the impact of the New Pension Accounting. | |||
*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) | ||||||||||
March 31, 2014 | December 31, 2013 (a) | |||||||||
CURRENT ASSETS: | ||||||||||
Cash and Cash Equivalents | $ | 1,090.0 | $ | 1,050.8 | ||||||
Receivables – net of allowances of $11.5 and $6.5, respectively | 397.2 | 384.4 | ||||||||
Inventories | 570.9 | 534.8 | ||||||||
Deferred Income Taxes – net of valuation allowance | 90.3 | 75.3 | ||||||||
Income Taxes Receivable | 21.9 | 15.9 | ||||||||
Prepaid Expenses and Other Assets | 68.1 | 56.9 | ||||||||
Total Current Assets | 2,238.4 | 2,118.1 | ||||||||
Property, Plant, and Equipment – net | 872.3 | 867.5 | ||||||||
Goodwill | 176.0 | 196.8 | ||||||||
Other Intangible Assets – net | 85.7 | 97.5 | ||||||||
Deferred Income Taxes – net of valuation allowance | 31.4 | 37.0 | ||||||||
Other Assets | 137.4 | 157.2 | ||||||||
TOTAL | $ | 3,541.2 | $ | 3,474.1 | ||||||
LIABILITIES AND EQUITY | ||||||||||
CURRENT LIABILITIES: | ||||||||||
Short-term Borrowings | $ | 1.5 | $ | 2.0 | ||||||
Accounts Payable | 549.5 | 566.8 | ||||||||
Dividends Payable | 76.5 | 69.3 | ||||||||
Current Portion of Long-Term Debt | 503.9 | 505.6 | ||||||||
Accrued Expenses | 215.5 | 220.0 | ||||||||
Accrued Rebates and Returns | 332.1 | 314.9 | ||||||||
Deferred Income – current | 22.1 | 46.6 | ||||||||
Income Taxes – payable and deferred | 79.8 | 56.1 | ||||||||
Total Current Liabilities | 1,780.9 | 1,781.3 | ||||||||
Long-Term Debt | 1,008.7 | 1,009.1 | ||||||||
Deferred Income Taxes – noncurrent | 13.2 | 15.3 | ||||||||
Pension and Other Post-employment Liabilities | 162.2 | 161.8 | ||||||||
Other Liabilities | 163.7 | 156.4 | ||||||||
Total Liabilities |
3,128.7 | 3,123.9 | ||||||||
COMMITMENTS AND CONTINGENCIES | ||||||||||
REDEEMABLE NONCONTROLLING INTEREST | 53.2 | 49.7 | ||||||||
EQUITY | ||||||||||
Shareholders’ Equity | ||||||||||
Common Stock, $0.01 par value: 3,000 authorized, 207.3 and 206.8 issued, respectively | 2.1 | 2.1 | ||||||||
Additional Paid-in/(Distributed) Capital | (702.6 | ) | (721.5 | ) | ||||||
Retained Earnings | 1,549.9 | 1,432.3 | ||||||||
Treasury Stock – at cost | (382.1 | ) | (351.9 | ) | ||||||
Accumulated Other Comprehensive Loss | (121.4 | ) | (69.2 | ) | ||||||
Total Shareholders’ Equity | 345.9 | 291.8 | ||||||||
Noncontrolling Interests | 13.4 | 8.7 | ||||||||
Total Equity | 359.3 | 300.5 | ||||||||
TOTAL | $ | 3,541.2 | $ | 3,474.1 |
(a) | See the company's Form 10-Q for the first quarter of 2014 for details regarding the impact of the New Pension Accounting. | |||
MEAD JOHNSON NUTRITION COMPANY | ||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||
(Dollars in millions) | ||||||||||
(UNAUDITED) | ||||||||||
Three Months Ended March 31, | ||||||||||
2014 | 2013(a) | |||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||
Net Earnings | $ | 207.8 | $ | 190.0 | ||||||
Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities: | ||||||||||
Depreciation and Amortization | 22.0 | 20.1 | ||||||||
Other | 26.7 | 25.1 | ||||||||
Changes in Assets and Liabilities | (57.5 | ) | (24.7 | ) | ||||||
Pension and Other Post-employment Benefits Contributions | (1.4 | ) | (2.6 | ) | ||||||
Net Cash Provided by Operating Activities | 197.6 | 207.9 | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
||||||||
Payments for Capital Expenditures | (63.1 | ) | (77.5 | ) | ||||||
Proceeds from Sale of Property, Plant and Equipment | 0.4 | 0.8 | ||||||||
Proceeds in/(Investment in) Other Companies | 4.0 | (0.7 | ) | |||||||
Net Cash Used in Investing Activities | (58.7 | ) | (77.4 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||
Proceeds from Short-term Borrowings | 0.1 | 3.1 | ||||||||
Repayments of Short-term Borrowings | (0.3 | ) | (61.0 | ) | ||||||
Repayments of Notes Payable | — | (8.4 | ) | |||||||
Payments of Dividends | (68.8 | ) | (60.9 | ) | ||||||
Stock-based-compensation-related Proceeds and Excess Tax Benefits | 11.6 | 5.2 | ||||||||
Purchases of Treasury Stock | (30.2 | ) | (32.1 | ) | ||||||
Net Cash Used in Financing Activities | (87.6 | ) | (154.1 | ) | ||||||
Effects of Changes in Exchange Rates on Cash and Cash Equivalents | (12.1 | ) | (1.3 | ) | ||||||
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS | 39.2 | (24.9 | ) | |||||||
CASH AND CASH EQUIVALENTS: | ||||||||||
Beginning of Period | 1,050.8 | 1,042.1 | ||||||||
End of Period | $ | 1,090.0 | $ | 1,017.2 |
(a) | See the company's Form 10-Q for the first quarter of 2014 for details regarding the impact of the New Pension Accounting. | |||
SUPPLEMENTAL FINANCIAL INFORMATION | |||||||||||||||||||||||||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||||||||||||||||||||
(UNAUDITED) | |||||||||||||||||||||||||||||||||||||||
Three Months Ended March 31, | % Change | % Change Due to | |||||||||||||||||||||||||||||||||||||
% of | % of | Constant | Foreign | ||||||||||||||||||||||||||||||||||||
Net Sales | 2014 | Total | 2013 | Total | Reported | Dollar | Volume | Price/Mix | Exchange | ||||||||||||||||||||||||||||||
Asia | $ | 592.7 | 53 | % | $ | 554.2 | 54 | % | 7 | % | 9 | % | 6 | % | 3 | % | (2 | )% | |||||||||||||||||||||
Latin America | 212.4 | 19 | % | 201.1 | 19 | % | 6 | % | 21 | % | 10 | % | 11 | % | (15 | )% | |||||||||||||||||||||||
North America/Europe | 308.2 | 28 | % | 282.6 | 27 | % | 9 | % | 9 | % | 7 | % | 2 | % | — | % | |||||||||||||||||||||||
Net Sales | $ | 1,113.3 | 100 | % | $ | 1,037.9 | 100 | % | 7 | % | 11 | % | 7 | % | 4 | % | (4 | )% | |||||||||||||||||||||
EBIT | EBIT | ||||||||||||||||||||||||||||||||||||||
Earnings Before Interest and | % of | % of | |||||||||||||||||||||||||||||||||||||
Income Taxes (EBIT) | 2014 | Sales |
2013(a) |
Sales | % Change | ||||||||||||||||||||||||||||||||||
Asia | $ | 241.3 | 41 | % | $ | 221.6 | 40 | % | 9 | % | |||||||||||||||||||||||||||||
Latin America | 46.6 | 22 | % | 47.0 | 23 | % | (1 | )% | |||||||||||||||||||||||||||||||
North America/Europe | 66.1 | 21 | % | 52.9 | 19 | % | 25 | % | |||||||||||||||||||||||||||||||
Corporate and Other | (62.8 | ) | (48.0 | ) | 31 | % | |||||||||||||||||||||||||||||||||
EBIT | $ | 291.2 | 26 | % | $ | 273.5 | 26 | % | 6 | % |
(a) | See the company's Form 10-Q for the first quarter of 2014 for details regarding the impact of the New Pension Accounting. | |||
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, 2014 | Three Months Ended March 31, 2013 | |||||||||||||||||||||||||||||||||||||||||
Specified Items (1) | Specified Items (1) | |||||||||||||||||||||||||||||||||||||||||
Legal, | Legal, | |||||||||||||||||||||||||||||||||||||||||
Settlement | Settlement | |||||||||||||||||||||||||||||||||||||||||
Mark-to- | and | Severance | Mark-to- | and | Severance | |||||||||||||||||||||||||||||||||||||
Market | Related | and Other | Market | Related | and Other | |||||||||||||||||||||||||||||||||||||
GAAP | Pension | Costs | Costs | Non-GAAP |
GAAP (2) |
Pension | Costs | Costs |
Non-GAAP (2) |
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NET SALES | $ | 1,113.3 | $ | 1,113.3 | $ | 1,037.9 | $ | 1,037.9 | ||||||||||||||||||||||||||||||||||
Cost of Products Sold | 405.7 | — | — | — | 405.7 | 385.0 | 5.2 | — | — | 390.2 | ||||||||||||||||||||||||||||||||
GROSS PROFIT | 707.6 | — | — | — | 707.6 | 652.9 | (5.2 | ) | — | — | 647.7 | |||||||||||||||||||||||||||||||
GROSS MARGIN % | 63.6 | % | 63.6 | % | 62.9 | % | 62.4 | % | ||||||||||||||||||||||||||||||||||
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Expenses: | ||||||||||||||||||||||||||||||||||||||||||
Selling, General and Administrative | 232.9 | — | (5.7 | ) | (0.1 | ) | 227.1 | 207.1 | 8.5 | — | (1.4 | ) | 214.2 | |||||||||||||||||||||||||||||
Advertising and Promotion | 155.7 | — | — | — | 155.7 | 144.5 | — | — | — | 144.5 | ||||||||||||||||||||||||||||||||
Research and Development | 27.1 | — | — | — | 27.1 | 22.5 | 1.5 | — | — | 24.0 | ||||||||||||||||||||||||||||||||
Other Expenses – net | 0.7 | — | — | — | 0.7 | 5.3 | — | (0.2 | ) | — | 5.1 | |||||||||||||||||||||||||||||||
EARNINGS BEFORE INTEREST AND INCOME TAXES | 291.2 | — | 5.7 | 0.1 | 297.0 | 273.5 | (15.2 | ) | 0.2 | 1.4 | 259.9 | |||||||||||||||||||||||||||||||
EBIT as a % of Sales | 26 | % | 27 | % | 26 | % | 25 | % | ||||||||||||||||||||||||||||||||||
Interest Expense – net | 12.4 | — | — | — | 12.4 | 14.2 | — | — | — | 14.2 | ||||||||||||||||||||||||||||||||
EARNINGS BEFORE INCOME TAXES | 278.8 | — | 5.7 | 0.1 | 284.6 | 259.3 | (15.2 | ) | 0.2 | 1.4 | 245.7 | |||||||||||||||||||||||||||||||
Provision for Income Taxes | 71.0 | — | 2.1 | — | 73.1 | 69.3 | (5.6 | ) | — | 0.1 | 63.8 | |||||||||||||||||||||||||||||||
Effective Tax Rate | 25.5 | % | 25.7 | % | 26.7 | % | 26.0 | % | ||||||||||||||||||||||||||||||||||
NET EARNINGS | 207.8 | — | 3.6 | 0.1 | 211.5 | 190.0 | (9.6 | ) | 0.2 | 1.3 | 181.9 | |||||||||||||||||||||||||||||||
Less Net Earnings Attributable to Noncontrolling Interests | 5.4 | — | — | — | 5.4 | 2.0 | — | — | — | 2.0 | ||||||||||||||||||||||||||||||||
NET EARNINGS ATTRIBUTABLE TO SHAREHOLDERS | $ | 202.4 | $ | — | $ | 3.6 | $ | 0.1 | $ | 206.1 | $ | 188.0 | $ | (9.6 | ) | $ | 0.2 | $ | 1.3 | $ | 179.9 | |||||||||||||||||||||
Earnings per Share– Diluted | ||||||||||||||||||||||||||||||||||||||||||
Net Earnings Attributable to Shareholders | $ | 1.00 | $ | — | $ | 0.02 | $ | — | $ | 1.02 | $ | 0.92 | $ | (0.05 | ) | $ | — | $ | 0.01 | $ | 0.88 |
(1) |
All Specified Items are included in Corporate and Other. |
|
(2) |
See the company's Form 10-Q for the first quarter of 2014 for details regarding the impact of the New Pension Accounting. |
|
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
4/24/2014