Mead Johnson Nutrition Company (NYSE: MJN) today announced its
financial results for the quarter and nine months ended
September 30, 2016.
Highlights are as follows:
- Gross sales were 2% below the prior
year quarter on a reported basis and 1% higher on a constant
dollar(1) basis. Net sales were 4% below the prior year quarter on
a reported basis and in-line with the prior year quarter on a
constant dollar basis. Momentum behind new product launches in
China and price increases within each segment offset competitive
challenges.
- Excluding the impact of Venezuela, net
sales were 1% above the prior year quarter on a constant dollar
basis.
- Selling, general and administrative
expenses decreased 12% compared to the prior year quarter as a
result of the company's Fuel for Growth program.
- The company's Fuel for Growth program
is expected to deliver operating expense savings towards the high
end of the previously announced $75 million to $80 million range
for 2016. Total cost savings of approximately $180 million are
expected by 2018.
- Earnings before Interest and Income
Taxes (EBIT) was 1% higher than the prior year quarter. Excluding
Specified Items and the impact of foreign exchange, non-GAAP EBIT
was 9% above the prior year quarter.
- Earnings per Share (EPS) for the
quarter was $0.80. Excluding Specified Items, non-GAAP EPS for the
quarter was $0.87. EPS for the nine months ending
September 30, 2016 was $2.02. Excluding Specified Items,
non-GAAP EPS for the nine months ending September 30, 2016 was
$2.63.
- The company now expects full year net
sales of 6% to 7% below the prior year on a reported basis and 2%
to 3% below the prior year on a constant dollar basis. Sales may be
lower due to market share weaknesses in several markets, notably in
the U.S., as well as continued macroeconomic challenges in several
emerging markets.
- The company now expects 2016 GAAP EPS
to be between $2.80 to $2.87. GAAP EPS guidance may be impacted by
potentially significant future mark-to-market pension adjustments
which cannot be estimated and are classified as a Specified Item.
The company now expects non-GAAP EPS between $3.43 to $3.50.
Specified Items include charges related to Fuel for Growth and our
Venezuela business. This guidance includes an estimated adverse
impact of currency exchange rates, which is now expected to be
approximately $0.30 per share.
Kasper Jakobsen, Chief Executive Officer, said, "We continue to
make progress against our global plan. Most critically, we have
made substantial progress in China. We are operating in a
challenging global environment and it is now clear that our growth
will occur more slowly than we had planned. In this environment, we
have chosen to revise our full year guidance for both top and
bottom line numbers."
(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.”
Third Quarter 2016 (Dollars in Millions)
(UNAUDITED) Three Months Ended September
30, % Change % Change Due to
% of % of Constant
Foreign Net Sales 2016 Total
2015 Total Reported Dollar
Volume Price/Mix Exchange Asia $463.2 49%
$476.8 49% (3)% 0% (4)% 4% (3)% Latin America 160.6 17% 184.5 19%
(13)% 0% (10)% 10% (13)% North America/Europe 313.7 34% 316.2 32%
(1)% 0% (5)% 5% (1)% Net Sales $937.5 100% $977.5 100% (4)% 0% (5)%
5% (4)%
- In Asia, sales were 3% below the prior
year quarter on a reported basis. Sales were negatively impacted by
adverse foreign currency translation, mainly in China. On a
constant dollar basis, sales were in-line with the prior year
quarter. We experienced strong sales growth in China, reflecting
positive momentum from our new product offerings and recovery of
prior quarter customs clearing delays. Continued adverse market
dynamics negatively impacted our results in other Asian markets,
including the Philippines.
- In Latin America, sales were 13% below
the prior year quarter on a reported basis. Sales were negatively
impacted by adverse foreign currency translation, primarily in
Argentina and Mexico. On a constant dollar basis, net sales were
in-line with the prior year quarter. Price increases mainly taken
in 2016 across the segment offset volume losses and suspended
shipments into Venezuela. Excluding the impact of suspended
shipments into Venezuela, constant dollar sales increased by
5%.
- In North America/Europe, sales were 1%
below the prior year quarter on a reported basis and were flat on a
constant dollar basis. Sales in the U.S. were negatively impacted
by continued market share weakness and increased competitive
activities. The company's market share position strengthened during
the quarter in Canada.
Three Months Ended September
30, % Change % Change Due to Earnings
Before Interest and Income Taxes (EBIT) 2016 % of
Sales 2015 % of Sales Reported
Constant Dollar Foreign Exchange Asia $134.6 29 %
$154.2 32 % (13 )% (7 )% (6 )% Latin America 40.1 25 % 38.9 21 % 3
% 30 % (27 )% North America/Europe 107.1 34 % 101.3 32 % 6 % 9 % (3
)% Corporate and Other (a) (53.6 ) (68.4 ) 22 % GAAP EBIT 228.2
24 % 226.0 23 % 1 % 8 % (7 )% Non-GAAP EBIT $244.2
$239.0 2 % 9 % (7 )%
(a) All Specified Items are included in
Corporate and Other.
- EBIT was 1% above the prior year
quarter on a reported basis. Excluding pension remeasurement and
Fuel for Growth related charges, non-GAAP EBIT on a constant dollar
basis was 9% above the prior year quarter. Gross margin was in-line
with the prior year as adverse foreign exchange impacts were offset
by lower dairy costs. Fuel for Growth resulted in $20 million in
lower operating expenses in 2016 compared to the prior year
quarter.
- In Asia, EBIT decreased 13% on a
reported basis and 7% on a constant dollar basis when compared to
the prior year quarter. The decrease in EBIT was primarily due to
investments to increase consumer awareness of Enfinitas.
- In Latin America, EBIT increased 3% on
a reported basis and 30% on a constant dollar basis when compared
to the prior year quarter. Foreign currency had an adverse impact
on EBIT, primarily due to devaluation of the Mexican Peso. EBIT
benefited from lower dairy costs and reduced advertising and
promotion spending when compared to a high level of spending in the
prior year to support product launches.
- In North America/Europe, EBIT increased
6% on a reported basis and 9% on a constant dollar basis when
compared to the prior year quarter. Improved gross margin from
lower dairy costs and reduced operating expenses contributed to the
increase in EBIT.
- Corporate and Other expenses were 22%
lower than the prior year quarter on a reported basis. Excluding
the impact of Specified Items, Corporate and Other expenses were
32% below the prior year due to savings from the company's Fuel for
Growth program.
Nine Months 2016 (Dollars in Millions)
(UNAUDITED) Nine Months Ended September
30, % Change % Change Due to
% of % of Constant
Foreign Net Sales 2016 Total
2015 Total Reported Dollar
Volume Price/Mix Exchange Asia $ 1,420.0 50 %
$ 1,571.0 51 % (10 )% (6 )% (7 )% 1 % (4 )% Latin America 487.4 17
% 587.3 19 % (17 )% (3 )% (12 )% 9 % (14 )% North America/Europe
933.7 33 % 946.0 30 % (1 )% 0 % (2 )% 2 % (1 )% Net
Sales $ 2,841.1 100 % $ 3,104.3 100 % (8 )% (4 )% (6
)% 2 % (4 )%
- In Asia, sales were 10% below the prior
year period on a reported basis. Sales were negatively impacted by
adverse foreign currency translation, most notably in China. Sales
were 6% below the prior year on a constant dollar basis primarily
due to channel shifts in China and the rapid change in consumer
preferences toward imported premium products. In addition,
continued adverse market dynamics negatively impacted our results
in the Philippines.
- In Latin America, sales were 17% below
the prior year period on a reported basis. On a constant dollar
basis, net sales were 3% below the prior year. The segment was
negatively impacted by adverse currency translation, mainly in
Mexico and Argentina. Excluding the impact of reduced shipments to
Venezuela, constant dollar sales increased 6%. Price increases
mainly taken in 2016 in key markets offset a substantial portion of
the adverse foreign exchange impact across the segment.
- In North America/Europe, sales
decreased 1% on a reported basis and were flat on a constant dollar
basis compared to the prior year period. In the U.S., the company
experienced increased competitive activities and category share
weakness, which was partially offset by strong growth and market
share gains in both infant and children's products in Canada.
Nine Months Ended September 30, %
Change % Change Due to Earnings Before Interest and
Income Taxes (EBIT) 2016 % of Sales
2015 % of Sales Reported
Constant Dollar Foreign Exchange Asia $440.7 31 %
$542.1 35 % (19 )% (13 )% (6 )% Latin America 117.1 24 % 141.0 24 %
(17 )% 2 % (19 )% North America/Europe 288.3 31 % 264.9 28 % 9 % 13
% (4 )% Corporate and Other (a) (253.4 ) (207.6 ) (22 )% GAAP EBIT
592.7 21 % 740.4 24 % (20 )% (12 )% (8 )% Non-GAAP
EBIT $718.7 $761.2 (6 )% 2 % (8 )%
(a) All Specified Items are included in
Corporate and Other.
- EBIT declined 20% in 2016 compared to
the prior year period. EBIT in 2016 includes an $81 million charge
related to the Venezuela business, $23 million of pension
remeasurement losses and adverse foreign exchange. Excluding the
impact of Specified Items and the impact of foreign exchange,
non-GAAP EBIT improved 2%. Reduced gross profit was more than
offset by lower operating expenses. Fuel for Growth resulted in a
$67 million reduction in operating expenses.
- In Asia, EBIT decreased 19% on a
reported basis and 13% on a constant dollar basis when compared to
the prior year period. Adverse foreign exchange impacts were driven
mainly by the Chinese Renminbi. EBIT was further impacted by
reduced gross profit from lower sales volumes and investments to
increase consumer awareness of Enfinitas.
- In Latin America, EBIT decreased 17% on
a reported basis and increased 2% on a constant dollar basis when
compared to the prior year period, with the Venezuela business
driving the decline in the segment. Lower gross profit was more
than offset by cost savings initiatives and lower advertising and
promotion spending.
- In North America/Europe, EBIT increased
9% on a reported basis compared to the prior year period. EBIT
increased due to lower dairy costs, reduced advertising and
promotion expenses and savings from Fuel for Growth.
- Corporate and Other expenses were 22%
higher on a reported basis compared to the prior year period
primarily due to the long-lived asset impairment and devaluation
charges related to the Venezuela business and charges associated
with the Fuel for Growth program and pension mark-to-market
adjustments. Excluding the impact of these Specified Items,
Corporate and Other expenses were 32% lower due primarily to cost
reduction savings from Fuel for Growth.
Cash Flow Items and Liquidity
- Cash and cash equivalents were $1,843.2
million at September 30, 2016 compared to $1,701.4 million at
December 31, 2015. The company's net debt was $1,167.0 million
at September 30, 2016, consisting of debt of $3,010.2 million
less cash and cash equivalents. Cash was negatively impacted in the
nine months ended September 30, 2016 by $33.0 million of
foreign currency devaluation, primarily in Venezuela.
- Cash generated from operating
activities was $510.7 million for the nine months ended
September 30, 2016 compared to $608.9 million in the prior
year period. Cash flows from operating activities were negatively
impacted by lower earnings in the current year and increases in
trade and other receivables.
- Cash used in investing activities
included capital expenditures of $110.2 million for the nine months
of 2016. This included investments in capacity expansion for
manufacturing facilities in the U.S. and Europe.
- Cash used in financing activities was
$225.9 million for the nine months ended September 30, 2016
compared to $374.0 million in the prior year period. The prior year
period included the repurchase of $437 million of shares, partially
funded by $322 million of borrowings under the revolver, and cash
used to acquire an incremental 10% of the company's business in
Argentina. Dividend payments were lower in the current year due to
the retirement of shares repurchased primarily under the
Accelerated Repurchase Agreement ("ASR").
- Interest expense, net, for the nine
months ended September 30, 2016 was $78.9 million, an increase from
$42.5 million in the prior year period due to the incremental
interest on the long-term debt issued in November 2015, partially
offset by the impact of related interest rate swaps.
Outlook
The company has revised its net sales outlook and now expects
full year net sales of 6% to 7% below the prior year on a reported
basis and 2% to 3% below the prior year on a constant dollar basis.
Sales may be lower due to market share weaknesses in several
markets, notably in the U.S., as well as continued macroeconomic
challenges in several emerging markets.
The company has revised its 2016 GAAP EPS guidance to $2.80 to
$2.87 due to lower sales. GAAP EPS guidance may be impacted by
potentially significant future mark-to-market pension adjustments
which cannot be estimated and are classified as a Specified Item.
The company now expects non-GAAP EPS between $3.43 to $3.50.
Specified Items include charges related to Fuel for Growth and our
Venezuela business. This guidance includes an estimated adverse
impact of current exchange rates, which is now expected to be
approximately $0.30 per share.
Kasper Jakobsen continued, "Given known headwinds over the next
year, we anticipate only modest improvements to both our underlying
sales and earnings per share in 2017. In this context, continued
strong performance against our expense reduction targets will
support our investment in longer term growth initiatives and
protect our 'best in class' level of profitability. In the longer
term, underlying fundamentals for our core category are still
supportive of our growth ambitions. Hence, we remain committed to
making the necessary investments in our future."
Conference Call Scheduled
Mead Johnson will host a conference call at 8:30 a.m. U.S.
Central Time, during which company executives will review the
financial results for the third quarter and first nine months of
2016. The call will be broadcast with accompanying slides over the
Internet at http://investors.meadjohnson.com. Security
analysts and investors wishing to participate by telephone should
call 877-359-9508, pass code: Mead Johnson. Callers outside of
North America should call +1-224-357-2393 to be connected. A replay
of the conference call will be available through 11:00 p.m. U.S.
Central Time Sunday, December 11, 2016, by calling 855-859-2056, or
outside of North America by calling +1-404-537-3406, passcode:
91365402. The replay will also be available at meadjohnson.com.
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(2); (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. For additional information regarding these and
other factors, see the company’s filings with the United States
Securities and Exchange Commission (the “SEC”), including its most
recent Annual Report on Form 10-K, which filings are available upon
request from the SEC or at www.meadjohnson.com. The company cautions readers
not to place undue reliance on any forward-looking statements,
which speak only as of the date made. The company undertakes no
obligation to publicly update any forward-looking statement,
whether as a result of new information, future events or
otherwise.
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.
(2) The Special Supplemental Nutrition Program for Women,
Infants and Children (WIC) is a federal assistance program of the
Food and Nutrition Services (FNS) of the United States Department
of Agriculture (USDA).
MEAD JOHNSON NUTRITION COMPANY CONSOLIDATED
STATEMENTS OF EARNINGS (Dollars and shares in millions,
except per share data) (UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30, 2016
2015 2016 2015 NET SALES $ 937.5 $
977.5 $ 2,841.1 $ 3,104.3 Cost of Products Sold 333.7 346.8
1,014.5 1,096.7 GROSS PROFIT 603.8 630.7
1,826.6 2,007.6 Operating Expenses: Selling, General and
Administrative 190.0 216.1 595.6 679.5 Advertising and Promotion
162.3 156.1 480.1 490.7 Research and Development 23.1 26.3 74.9
79.9 Other (Income)/Expenses—net 0.2 6.2 83.3
17.1 EARNINGS BEFORE INTEREST AND INCOME TAXES 228.2 226.0
592.7 740.4 Interest Expense—net 26.3 14.8
78.9 42.5 EARNINGS BEFORE INCOME TAXES 201.9 211.2
513.8 697.9 Provision for Income Taxes 53.3 56.6
132.7 173.6 NET EARNINGS 148.6 154.6 381.1
524.3 Less Net Earnings/(Loss) Attributable to Noncontrolling
Interests (0.7 ) (0.6 ) 4.0 (1.2 ) NET EARNINGS ATTRIBUTABLE
TO SHAREHOLDERS $ 149.3 $ 155.2 $ 377.1 $
525.5 Earnings per Share(a)– Basic Net Earnings
Attributable to Shareholders $ 0.80 $ 0.77 $ 2.02
$ 2.59 Earnings per Share(a)– Diluted Net Earnings
Attributable to Shareholders $ 0.80 $ 0.77 $ 2.02
$ 2.59 Weighted Average Shares—Diluted 185.0
201.7 186.3 202.6 Dividends Declared per Share $ 0.4125 $ 0.4125 $
1.2375 $ 1.2375
(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)
September 30, 2016 December 31, 2015
ASSETS CURRENT ASSETS: Cash and Cash Equivalents $ 1,843.2 $
1,701.4 Receivables—net of allowances of $4.9 and $5.4,
respectively 397.2 342.5 Inventories 476.0 484.9 Income Taxes
Receivable 29.2 13.2 Prepaid Expenses and Other Assets 60.1
60.4 Total Current Assets 2,805.7 2,602.4 Property, Plant
and Equipment—net 929.6 964.0 Goodwill 112.8 126.0 Other Intangible
Assets—net 47.2 54.9 Deferred Income Taxes—net of valuation
allowance 131.4 118.5 Other Assets 167.0 132.3 TOTAL
$ 4,193.7 $ 3,998.1
LIABILITIES AND EQUITY
CURRENT LIABILITIES: Short-term Borrowings $ 1.8 $ 3.0 Accounts
Payable 474.8 481.5 Dividends Payable 76.6 77.8 Accrued Expenses
230.9 213.0 Accrued Rebates and Returns 418.3 376.8 Deferred Income
19.0 35.5 Income Taxes Payable 28.6 65.7 Total
Current Liabilities 1,250.0 1,253.3 Long-Term Debt 3,008.4 2,981.0
Deferred Income Taxes 5.6 8.7 Pension and Other Post employment
Liabilities 137.7 132.4 Other Liabilities 230.7 215.2
Total Liabilities 4,632.4 4,590.6 COMMITMENTS AND CONTINGENCIES
EQUITY Shareholders’ Equity Common Stock, $0.01 par value:
3,000 authorized, 189.7 and 191.4 issued, respectively 1.9 1.9
Additional Paid-in/(Distributed) Capital (522.6 ) (564.2 ) Retained
Earnings 782.2 640.4 Treasury Stock—at cost (363.0 ) (362.6 )
Accumulated Other Comprehensive Income/(Loss) (377.0 ) (347.8 )
Total Shareholders’ Equity/(Deficit) (478.5 ) (632.3 )
Noncontrolling Interests 39.8 39.8 Total
Equity/(Deficit) (438.7 ) (592.5 ) TOTAL $ 4,193.7 $ 3,998.1
MEAD JOHNSON NUTRITION COMPANY CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in
millions) (UNAUDITED) Nine Months Ended
September 30, 2016 2015 CASH FLOWS FROM
OPERATING ACTIVITIES: Net Earnings $ 381.1 $ 524.3 Adjustments to
Reconcile Net Earnings to Net Cash Provided by Operating
Activities: Depreciation and Amortization 74.4 73.4 Impairment of
Long-Lived Assets 45.9 — Other 60.8 63.1 Changes in Assets and
Liabilities (34.5 ) 34.7 Pension and Other Post-employment Benefit
Contributions (17.0 ) (86.6 ) Net Cash Provided by Operating
Activities 510.7 608.9 CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for Capital Expenditures (110.2 ) (125.2 ) Proceeds from
Sale of Property, Plant and Equipment 0.2 0.4 Net
Cash Used in Investing Activities (110.0 ) (124.8 ) CASH FLOWS FROM
FINANCING ACTIVITIES: Proceeds from Short-term Borrowings — 1.5
Repayments of Short-term Borrowings (0.8 ) (4.0 ) Debt Issuance
Costs (0.1 ) — Proceeds from Long-term Revolver Borrowings — 322.0
Payments of Dividends (232.3 ) (243.6 ) Stock-based Compensation
related Proceeds and Excess Tax Benefits 15.0 24.0 Stock-based
Compensation Tax Withholdings (4.2 ) (11.3 ) Payments for
Repurchase of Common Stock (0.4 ) (437.0 ) Purchase of
Noncontrolling Interest Redeemable Shares — (24.2 ) Purchase of
Trading Securities — (16.2 ) Sale of Trading Securities — 21.7
Distributions to Noncontrolling Interests (3.1 ) (6.9 ) Net Cash
Used in Financing Activities (225.9 ) (374.0 ) Effects of Changes
in Exchange Rates on Cash and Cash Equivalents (33.0 ) (44.3 ) NET
INCREASE IN CASH AND CASH EQUIVALENTS 141.8 65.8 CASH AND CASH
EQUIVALENTS: Beginning of Period 1,701.4 1,297.7 End
of Period $ 1,843.2 $ 1,363.5
Mead Johnson Nutrition Company 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 United States dollars are translated into
United States dollars at the average exchange rates in effect
during the corresponding period of the prior fiscal year, rather
than the actual average exchange rates in effect during the current
fiscal year. The company believes that these constant dollar
measures provide useful information to investors because they
provide transparency to underlying performance by excluding the
effect that foreign currency exchange rate fluctuations have on
period-to-period comparability given volatility in foreign currency
exchange markets. The primary currencies which impact the company
are: the Argentine peso, the Chinese renminbi, the Hong Kong
dollar, the Mexican peso and the Philippine peso.
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
company's Quarterly Report on Form 10-Q for the period ended
September 30, 2016 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 gross sales
Three Months Ended September 30, %
Change Foreign Constant
Gross Sales 2016 2015 Reported
Exchange Dollar Total gross sales $ 1,289.5 $ 1,320.7
(2)% (3)% 1%
Constant dollar net sales
Three Months Ended September 30, %
Change Constant
Dollar Foreign Constant Impact of
Excluding Net Sales 2016 2015
Reported Exchange Dollar Venezuela
Venezuela Asia $ 463.2 $ 476.8 (3)% (3)%
0%
Latin America 160.6 184.5 (13)% (13)%
0%
(5)% 5% North America/Europe 313.7 316.2 (1)% (1)%
0%
Net Sales 937.5 $ 977.5 (4)% (4)%
0%
(1)% 1% Impact of Foreign Exchange 38.2 Constant Dollar
Sales $ 975.7
Nine Months Ended
September 30, % Change
Constant Dollar Foreign Constant
Impact of Excluding Net Sales 2016
2015 Reported Exchange Dollar
Venezuela Venezuela Asia $ 1,420.0 $ 1,571.0 (10)%
(4)% (6)% Latin America 487.4 587.3 (17)% (14)% (3)% (9)% 6% North
America/Europe 933.7 946.0 (1)% (1)%
0%
Net Sales 2,841.1 $ 3,104.3 (8)% (4)% (4)% (2)% (2)% Impact of
Foreign Exchange 147.9 Constant Dollar Sales $ 2,989.0
Non-GAAP constant dollar gross
margin
Three Months Ended September 30, Nine
Months Ended September 30, 2016 2015
2016 2015
Gross Gross Gross Gross
Gross Gross Gross Gross
Profit Margin Profit Margin
Change Profit Margin Profit
Margin Change GAAP Gross Profit and Gross Margin $
603.8 64.4 % $ 630.7 64.5 % (0.1)% $ 1,826.6 64.3 % $ 2,007.6 64.7
% (0.4)% Pension Remeasurement (a) 1.4 0.2 % 3.9 0.4 % 8.0 0.3 %
3.4 0.1 % Foreign currency impact 39.5 1.5 % — 129.1
1.1 % — Non-GAAP Constant Dollar Gross Profit and
Gross Margin $ 644.7 66.1 % $ 634.6 64.9 % 1.2% $ 1,963.7 65.7 % $
2,011.0 64.8 % 0.9%
Non-GAAP constant dollar selling, general
and administrative expenses
Three Months Ended September 30, Nine
Months Ended September 30, 2016 2015
% Change 2016 2015 %
Change GAAP SG&A $ 190.0 $ 216.1 (12 )% $ 595.6 $ 679.5 (12
)% Pension Remeasurement (a) (2.4 ) (6.3 ) (13.1 ) (5.5 ) Venezuela
(d) (2.0 ) — (2.0 ) — All Other (e) (1.6 ) (0.6 ) (1.6 ) (1.9 )
Foreign currency impact 6.9 — 29.3 —
Non-GAAP Constant Dollar SG&A $ 190.9 $ 209.2 (9 )% $ 608.2 $
672.1 (10 )%
Constant dollar segment EBIT
Three Months Ended September 30, %
Change Foreign Constant
Earnings Before Interest and Income Taxes (EBIT) 2016
2015 Reported Exchange Dollar Asia $
134.6 $ 154.2 (13)% (6)% (7)% Latin America 40.1 38.9 3% (27)% 30%
North America/Europe 107.1 101.3 6% (3)% 9%
Nine
Months Ended September 30, % Change
Foreign Constant Earnings Before Interest
and Income Taxes (EBIT) 2016 2015 Reported
Exchange Dollar Asia $ 440.7 $ 542.1 (19)% (6)% (13)%
Latin America 117.1 141.0 (17)% (19)% 2% North America/Europe 288.3
264.9 9% (4)% 13%
Non-GAAP Corporate and Other
EBIT
Three Months Ended September 30,
Corporate and Other 2016 2015 %
Change EBIT $ (53.6 ) $ (68.4 ) 22% Pension Remeasurement (a)
4.2 11.4 Fuel for Growth (b) 7.3 — Venezuela (d) 2.8 — All Other
(e) 1.7 1.6 Non-GAAP EBIT $ (37.6 ) $ (55.4 ) 32%
Nine Months Ended September 30,
Corporate and Other 2016 2015
% Change EBIT $ (253.4 ) $ (207.6 ) (22)% Pension
Remeasurement (a) 23.4 9.9 Investigation Accrual (c) — 12.0 Fuel
for Growth (b) 18.4 — Venezuela (d) 81.2 — All Other (e) 3.0
(1.1 ) Non-GAAP EBIT $ (127.4 ) $ (186.8 ) 32%
Non-GAAP EBIT and constant dollar
EBIT
Three Months Ended September 30,
Nine Months Ended September 30, 2016
2015 % Change 2016 2015
% Change EBIT $ 228.2 $ 226.0 1 % $ 592.7 $ 740.4 (20
)% Pension Remeasurement (a) 4.2 11.4 23.4 9.9 Investigation
Accrual (c) — — — 12.0 Fuel for Growth (b) 7.3 — 18.4 — Venezuela
(d) 2.8 — 81.2 — All Other (e) 1.7 1.6 3.0
(1.1 ) Non-GAAP EBIT 244.2 239.0 2 % 718.7 761.2 (6 )% Foreign
currency impact 15.6 — 56.6 — Non-GAAP
Constant Dollar EBIT $ 259.8 $ 239.0 9 % $ 775.3 $ 761.2 2 %
Non-GAAP diluted EPS
Three Months Ended September 30,
Nine Months Ended September 30, 2016
2015 % Change 2016 2015
% Change GAAP EPS-Diluted $ 0.80 $ 0.77 4 % $ 2.02 $
2.59 (22 )% Pension Remeasurement (a) 0.01 0.04 0.08 0.03
Investigation Accrual (c) — — — 0.03 Fuel for Growth (b) 0.03 —
0.08 — Venezuela (d) 0.02 — 0.44 — All Other (e) 0.01 (0.01
) 0.01 — Non-GAAP EPS $ 0.87 $ 0.80 9 % $ 2.63 $ 2.65
(1 )%
Consolidated Net Debt
September 30, 2016 December 31,
2015 Short-term borrowings $ 1.8 $ 3.0 Long-Term Debt 3,008.4
2,981.0 Total Debt 3,010.2 2,984.0 Less: Cash and cash equivalents
1,843.2 1,701.4 Net debt $ 1,167.0 $ 1,282.6
Non-GAAP Guidance
High End Low End
Reported Sales (6 )% (7 )% Less impact of Foreign Currency (4 )% (4
)% Constant Dollar Sales (2 )% (3 )% GAAP Earnings per Share
$ 2.87 $ 2.80 Less Specified Items
(0.63
)
(0.63
)
Non-GAAP Earnings per Share $ 3.50 $ 3.43
(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) Investigation Accrual: An accrual made in connection with
the SEC settlement disclosed by the company in July 2015.
(d) Venezuela: Foreign exchange losses, long-lived asset
impairments and other asset write-offs in Venezuela.
(e) All Other: Primarily includes restructuring costs in 2016
and a marketable securities gain in 2015.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161027005803/en/
Mead Johnson NutritionInvestors:Kathy MacDonald,
847-832-2182kathy.macdonald@mjn.comorMedia:Christopher
Perille, 847-832-2178chris.perille@mjn.com
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