Mead Johnson Reports Strong Sales Growth in Asia and Latin America for First Quarter of 2009; Initial 2009 Guidance Anticipates Record Year
(1)Mead Johnson, formerly a wholly owned subsidiary of Bristol-Myers Squibb Company, completed its initial public offering (IPO) in February 2009. Adjusted non-GAAP (non-GAAP) results for 2008 and 2009 have been adjusted for the factors affecting comparability due to the IPO. (See “Factors Affecting Comparability – Adjusted Non-GAAP Financial Measures” and the detailed reconciliation of GAAP and non-GAAP results included in this release.) |
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“We are pleased to report very solid results for the first quarter of
2009,” said
First Quarter GAAP Results
Net sales for the first quarter of 2009 totaled $693.0 million, down
from $703.3 million in the year-ago first quarter. Sales in the 2008
first quarter include revenue from operations that were not transferred
to
First Quarter GAAP Segment Results
The
The
First Quarter Non-GAAP Results
Specified IPO costs and other items affect the comparability of the company’s financial results between 2008 and 2009. Therefore, the company believes that using non-GAAP financial measures adjusted for the impact of the IPO and other items provide a better indication of the company’s underlying operating results and enhance an investor’s ability to understand the company’s financial performance.
For the first quarter of 2009, non-GAAP net sales were down slightly to
$693.0 million from $696.0 million a year earlier. Sales benefited from
higher pricing by 8 percent, which was offset by the effect of currency,
which reduced sales by 7 percent, and volume, which was down 1 percent.
Significant volume growth was reported in international markets,
particularly in
Non-GAAP gross margin for the first quarter of 2009 was unchanged
compared with the year-ago quarter. The benefits from higher prices and
ongoing productivity improvements completely offset the adverse effect
of changes in geographic and product mix and lower fixed-cost absorption
due to the increase in manufacturing capacity to support future growth.
The increase in operating expenses in the first quarter of 2009 was
primarily due to higher investment spending to build the sales force in
Non-GAAP earnings attributable to MJN and EPS in 2009 benefited from a
lower ETR compared with 2008. The non-GAAP ETR in the first quarter of
2009 was 32.3 percent versus 36.3 percent for the year-ago first
quarter. The lower rate was achieved by permanently reinvesting earnings
from certain international subsidiaries outside
First Quarter Non-GAAP Segment Results
The
The
The
The
Outlook for 2009
The company expects to report non-GAAP EPS in the range of $1.90 to $2.05 for 2009. Key assumptions underlying this non-GAAP estimate include: net sales increase in the range of 5 percent to 7 percent, excluding the effect of foreign exchange; modest leverage from higher sales reflected in EBIT margins; an effective tax rate between 30 percent and 33 percent, and 204.5 million basic and diluted shares outstanding. The non-GAAP earnings guidance excludes specified IPO and other costs and the related effect on the tax rate, which total approximately $.08 per share. Therefore, the GAAP estimate for 2009 is $1.82 to $1.97 per diluted share.
Conference Call Scheduled
The company 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 and uncertainties 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 price increases; (4) increased competition from branded, private label, store and economy-branded products; (5) the effect of an economic downturn on consumers’ purchasing behavior; (6) the adverse effect of changes in foreign currency exchange rates; (7) the possibility of changes in the Women, Infant and Children (WIC) program, or increases in levels of participation in WIC; and (8) 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 Annual Report on Form 10-K for 2008, available upon request or at meadjohnson.com.
About
MEAD JOHNSON NUTRITION COMPANY | ||||||||
PRELIMINARY STATEMENTS OF EARNINGS | ||||||||
THREE MONTHS ENDED MARCH 31, 2009 AND 2008 | ||||||||
(Dollars and Shares in millions, except Per Share Data) | ||||||||
(UNAUDITED) | ||||||||
Three Months Ended |
||||||||
2009 | 2008 | |||||||
NET SALES | $ | 693.0 | $ | 703.3 | ||||
COST OF PRODUCTS SOLD | 247.6 | 251.8 | ||||||
GROSS PROFIT | 445.4 | 451.5 | ||||||
MARKETING, SELLING AND ADMINISTRATIVE | 163.4 | 138.9 | ||||||
ADVERTISING AND PRODUCT PROMOTION | 75.9 | 84.2 | ||||||
RESEARCH AND DEVELOPMENT | 15.3 | 16.3 | ||||||
OTHER EXPENSES—NET | 2.0 | 2.9 | ||||||
EARNINGS BEFORE INTEREST AND INCOME TAXES | 188.8 | 209.2 | ||||||
INTEREST EXPENSE—NET | 28.0 | — | ||||||
EARNINGS BEFORE INCOME TAXES | 160.8 | 209.2 | ||||||
PROVISION FOR INCOME TAXES | (54.2 | ) | (76.7 | ) | ||||
NET EARNINGS | 106.6 | 132.5 | ||||||
Less Net Earnings Attributable to Noncontrolling Interest | (3.1 | ) | (1.9 | ) | ||||
NET EARNINGS ATTRIBUTABLE TO MEAD JOHNSON NUTRITION COMPANY | $ | 103.5 | $ | 130.6 | ||||
Earnings per Common Share – Basic | ||||||||
Net Earnings attributable to Mead Johnson Nutrition Company common shareholders | $ | 0.55 | $ | 0.77 | ||||
Earnings per Common Share – Diluted | ||||||||
Net Earnings attributable to Mead Johnson Nutrition Company common shareholders | $ | 0.55 | $ | 0.77 | ||||
Weighted Average Common Shares Outstanding | ||||||||
Basic | 188.8 | 170.0 | ||||||
Diluted | 188.8 | 170.0 | ||||||
MEAD JOHNSON NUTRITION COMPANY | ||||||
SELECTED FINANCIAL STATEMENT INFORMATION | ||||||
(Dollars in millions) | ||||||
(UNAUDITED) | ||||||
March 31, | December 31, | |||||
2009 | 2008 | |||||
Cash and Cash Equivalents | $ | 358.7 | $ | — | ||
Receivables—net of allowances of $7.0 and $7.0, respectively | 264.9 | 262.7 | ||||
Inventories | 321.2 | 354.3 | ||||
Accounts Payable | 181.3 | 198.5 | ||||
Related Party Debt and Lease | 1,807.0 | 2,000.0 | ||||
Three Months Ended March 31, | ||||||
2009 | 2008 | |||||
Depreciation and Amortization | $ | 13.9 | $ | 12.3 | ||
Capital Expenditures | 8.7 | 10.9 | ||||
Factors Affecting Comparability – Adjusted Non-GAAP Financial Measures
This news release contains adjusted non-GAAP (non-GAAP) financial measures, including non-GAAP net sales, earnings and earnings per share information, adjusted for factors that affect comparability due to the impact of the company’s IPO. The items included in GAAP measures, but excluded for the purpose of determining non-GAAP net sales, EBIT, earnings and earnings per share, are the impact of operating model adjustments and specified IPO and other costs. In addition, other adjusted items include interest expense due to changes in the capital structure, the ETR due to the impact of specified IPO and other costs on the tax rate, and the number of shares outstanding to reflect the increase in shares due to the IPO. Non-GAAP net sales, EBIT, earnings and earnings per share information adjusting 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.
The tables that reconcile GAAP to non-GAAP disclosure and the accompanying footnotes follow:
MEAD JOHNSON NUTRITION COMPANY | ||||||||||||||||||||
ADJUSTED NON-GAAP 2009 OPERATING RESULTS | ||||||||||||||||||||
THREE MONTHS ENDED MARCH 31, 2009 |
||||||||||||||||||||
($ in millions) | ||||||||||||||||||||
2009 | 2008 | % Change Due to | ||||||||||||||||||
Adjusted | Adjusted | Foreign | ||||||||||||||||||
Non-GAAP | Non-GAAP | % Change | Volume | Price | Exchange | |||||||||||||||
Net Sales |
||||||||||||||||||||
Asia / Latin America | 389.8 | 344.0 | 13 | % | 8 | % | 15 | % | -10 | % | ||||||||||
North America / Europe | 303.2 | 352.0 | -14 | % | -12 | % | 2 | % | -4 | % | ||||||||||
Total | $ | 693.0 | $ | 696.0 | 0 | % | -1 | % | 8 | % | -7 | % | ||||||||
Earnings Before Interest and Income Taxes |
||||||||||||||||||||
Asia / Latin America | 148.7 | 130.6 | 14 | % | ||||||||||||||||
North America / Europe | 101.2 | 121.8 | -17 | % | ||||||||||||||||
Corporate and Other | (46.3 | ) | (45.1 | ) | 3 | % | ||||||||||||||
Total | $ | 203.6 | $ | 207.3 | -2 | % | ||||||||||||||
Earnings Before Interest and Income Taxes | $ | 203.6 | $ | 207.3 | -2 | % | ||||||||||||||
Net Earnings Attributable to MJN | $ | 115.8 | $ | 113.5 | 2 | % | ||||||||||||||
Earnings Per Common Share - Diluted: | ||||||||||||||||||||
Weighted Average Common Shares Outstanding - Diluted | 204.5 | 204.5 | ||||||||||||||||||
Net Earnings Attributable to MJN Shareholders | $ | 0.57 | $ | 0.56 | ||||||||||||||||
MEAD JOHNSON NUTRITION COMPANY |
||||||||||||
RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP 2009 RESULTS OF OPERATIONS |
||||||||||||
THREE MONTHS ENDED MARCH 31, 2009 |
||||||||||||
(Amounts in millions, except per share data) | ||||||||||||
GAAP |
Specified |
Adjusted |
||||||||||
Net Sales | $ | 693.0 | $ | 693.0 | ||||||||
Cost of Products Sold | 247.6 | 247.6 | ||||||||||
Gross Profit | 445.4 | 445.4 | ||||||||||
Marketing, Selling and Administrative | 163.4 | (17.2 | ) | 146.2 | ||||||||
Advertising and Product Promotion | 75.9 | 75.9 | ||||||||||
Research and Development | 15.3 | 15.3 | ||||||||||
Other Expenses - net | 2.0 | 2.4 | 4.4 | |||||||||
Earnings Before Interest and Income Taxes | $ | 188.8 | $ | 14.8 | $ | 203.6 | ||||||
Interest Expense | (28.0 | ) | (28.0 | ) | ||||||||
Provision for Income Taxes | (54.2 | ) | $ | (2.5 | ) | (56.7 | ) | |||||
Net Earnings | $ | 106.6 | $ | 118.9 | ||||||||
Less Net Earnings Attributable to Noncontrolling Interest |
(3.1 | ) | (3.1 | ) | ||||||||
Net Earnings Attributable to MJN | $ | 103.5 | $ | 115.8 | ||||||||
Earnings Per Common Share - Basic: (5) | ||||||||||||
Weighted Average Common Shares Outstanding - Basic | 188.8 | 204.5 | ||||||||||
Net Earnings Attributable to MJN Shareholders | $ | 0.55 | $ | 0.57 | ||||||||
Earnings Per Common Share - Diluted: (5) | ||||||||||||
Weighted Average Common Shares Outstanding - Diluted | 188.8 | 204.5 | ||||||||||
Net Earnings Attributable to MJN Shareholders | $ | 0.55 | $ | 0.57 | ||||||||
MEAD JOHNSON NUTRITION COMPANY | |||||||||||||||||||||
RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP 2008 RESULTS OF OPERATIONS | |||||||||||||||||||||
THREE MONTHS ENDED MARCH 31, 2008 |
|||||||||||||||||||||
(Amounts in millions, except per share data) | |||||||||||||||||||||
GAAP |
Operating |
Specified |
Interest |
Tax (4) |
Adjusted |
||||||||||||||||
Net Sales | $ | 703.3 | (7.3 | ) | $ | 696.0 | |||||||||||||||
Cost of Products Sold | 251.8 | (3.2 | ) | 248.6 | |||||||||||||||||
Gross Profit | 451.5 | (4.1 | ) | 447.4 | |||||||||||||||||
Marketing, Selling and Administrative | 138.9 | (1.7 | ) | 137.2 | |||||||||||||||||
Advertising and Product Promotion | 84.2 | 0.1 | 84.3 | ||||||||||||||||||
Research and Development | 16.3 | 16.3 | |||||||||||||||||||
Other Expenses - net | 2.9 | (0.6 | ) | 2.3 | |||||||||||||||||
Earnings Before Interest and Income Taxes | $ | 209.2 | $ | (1.9 | ) | $ | 207.3 | ||||||||||||||
Interest Expense | $ | (26.0 | ) | (26.0 | ) | ||||||||||||||||
Provision for Income Taxes | (76.7 | ) | $ | 10.8 | (65.9 | ) | |||||||||||||||
Net Earnings | $ | 132.5 | $ | 115.4 | |||||||||||||||||
Less Net Earnings Attributable to Noncontrolling Interest |
(1.9 | ) | (1.9 | ) | |||||||||||||||||
Net Earnings Attributable to MJN | $ | 130.6 | $ | 113.5 | |||||||||||||||||
Earnings Per Common Share - Basic: (5) | |||||||||||||||||||||
Weighted Average Common Shares Outstanding - Basic | 170.0 | 204.5 | |||||||||||||||||||
Net Earnings Attributable to MJN Shareholders | $ | 0.77 | $ | 0.56 | |||||||||||||||||
Earnings Per Common Share - Diluted: (5) | |||||||||||||||||||||
Weighted Average Common Shares Outstanding - Diluted | 170.0 | 204.5 | |||||||||||||||||||
Net Earnings Attributable to MJN Shareholders | $ | 0.77 | $ | 0.56 | |||||||||||||||||
MEAD JOHNSON NUTRITION COMPANY | |||||||||||||||||||||||
RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP 2009 SEGMENT REPORTING | |||||||||||||||||||||||
THREE MONTHS ENDED MARCH 31, 2009 |
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($ in millions) | |||||||||||||||||||||||
Net Sales | Earnings Before Interest and Income Taxes | ||||||||||||||||||||||
GAAP |
Operating |
Adjusted |
GAAP |
Operating |
Specified |
Adjusted |
|||||||||||||||||
Asia / Latin America | 389.8 | - | 389.8 | 148.7 | - |
- |
148.7 | ||||||||||||||||
North America / Europe | 303.2 | - | 303.2 | 101.2 | - |
- |
101.2 | ||||||||||||||||
Corporate and Other | (61.1 | ) | - | 14.8 | (46.3 | ) | |||||||||||||||||
Total | $ | 693.0 | $ | - | $ | 693.0 | $ | 188.8 | $ | - | $ | 14.8 | $ | 203.6 | |||||||||
MEAD JOHNSON NUTRITION COMPANY | |||||||||||||||||||||||
RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP 2008 SEGMENT REPORTING | |||||||||||||||||||||||
THREE MONTHS ENDED MARCH 31, 2008 |
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($ in millions) | |||||||||||||||||||||||
Net Sales | Earnings Before Interest and Income Taxes | ||||||||||||||||||||||
GAAP |
Operating |
Adjusted |
GAAP |
Operating |
Specified |
Adjusted |
|||||||||||||||||
Asia / Latin America | 349.2 | (5.2) | 344.0 | 131.5 | (0.9) | - | 130.6 | ||||||||||||||||
North America / Europe | 354.1 | (2.1) | 352.0 | 122.8 | (1.0) | - | 121.8 | ||||||||||||||||
Corporate and Other | (45.1 | ) | (45.1 | ) | |||||||||||||||||||
Total | $ | 703.3 | $ | (7.3) | $ | 696.0 | $ | 209.2 | $ | (1.9) | $ | - | $ | 207.3 | |||||||||
|
MEAD JOHNSON NUTRITION COMPANY | |||||||||||||||||||||||
RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP 2008 RESULTS OF OPERATIONS | |||||||||||||||||||||||
TWELVE MONTHS ENDED DECEMBER 31, 2008 |
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(Amounts in millions, except per share data) | |||||||||||||||||||||||
GAAP |
Operating |
Specified IPO |
Interest |
Tax (4) |
Adjusted Non- |
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Net Sales | $ | 2,882.4 | (35.9 | ) | $ | 2,846.5 | |||||||||||||||||
Cost of Products Sold | 1,079.8 | (15.5 | ) | 1,064.3 | |||||||||||||||||||
Gross Profit | 1,802.6 | (20.4 | ) | 1,782.2 | |||||||||||||||||||
Marketing, Selling and Administrative | 651.7 | (7.7 | ) | (41.8 | ) | 602.2 | |||||||||||||||||
Advertising and Product Promotion | 369.3 | (5.2 | ) | 364.1 | |||||||||||||||||||
Research and Development | 72.8 | (0.1 | ) | 72.7 | |||||||||||||||||||
Other Expenses - net | 13.1 | (1.5 | ) | (3.0 | ) | 8.6 | |||||||||||||||||
Earnings Before Interest and Income Taxes | $ | 695.7 | $ | (5.9 | ) | $ | 44.8 | $ | 734.6 | ||||||||||||||
Interest Expense | (43.3 | ) | $ | (60.5 | ) | (103.8 | ) | ||||||||||||||||
Provision for Income Taxes | (251.4 | ) | $ | 17.0 | (234.4 | ) | |||||||||||||||||
Net Earnings | 401.0 | 396.4 | |||||||||||||||||||||
Less Net Earnings Attributable to Noncontrolling Interest |
(7.1 | ) | (7.1 | ) | |||||||||||||||||||
Net Earnings Attributable to MJN | $ | 393.9 | $ | 389.3 | |||||||||||||||||||
Earnings Per Common Share - Basic: (5) | |||||||||||||||||||||||
Weighted Average Common Shares Outstanding - Basic | 170.0 | 204.5 | |||||||||||||||||||||
Net Earnings Attributable to MJN Shareholders | $ | 2.32 | $ | 1.90 | |||||||||||||||||||
Earnings Per Common Share - Diluted: (5) | |||||||||||||||||||||||
Weighted Average Common Shares Outstanding - Diluted | 170.0 | 204.5 | |||||||||||||||||||||
Net Earnings Attributable to MJN Shareholders | $ | 2.32 | $ | 1.90 | |||||||||||||||||||
Notes to Tables Reconciling GAAP and Non-GAAP Results
(1) Operating Model Adjustments for 2008
In
(2) Specified IPO and Other Costs
The company incurred costs in connection with its IPO, including costs related to legal, accounting, systems implementation and consulting services. Results for the first quarter of 2009 include specified costs of $17.2 million related to the IPO and $7.6 million related to severance, offset by a $10.0 million patent settlement. There were no such costs in the first quarter of 2008.
(3) Interest Expense
On
(4) Effective Tax Rate
The company’s effective tax rate (ETR) for the first quarters of 2009 and 2008 was 33.7 percent and 36.7 percent, respectively. Adjusting for the non-deductibility of certain IPO costs, the non-GAAP ETR for the first quarters of 2009 and 2008 was 32.3 percent and 36.3 percent, respectively.
(5) Shares Outstanding
Prior to
Source:
Mead Johnson Nutrition Company
Investors: Kathryn Chieger,
812-429-7358
kathryn.chieger@mjn.com
or
Media:
Pete Paradossi, 812-429-7413
pete.paradossi@mjn.com
4/28/2009