UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM 8-K
__________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): January 28, 2016 (January 28, 2016)
__________________________
MEAD JOHNSON NUTRITION COMPANY
(Exact Name of Registrant as Specified in Charter)
__________________________
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| | |
Delaware | 001-34251 | 80-0318351 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
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2701 Patriot Blvd., Glenview, Illinois | 60026 |
(Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (847) 832-2420
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
__________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02: Results of Operations and Financial Condition.
On January 28, 2016, Mead Johnson Nutrition Company (the “Company”) announced its financial results for the fourth quarter and full year 2015. A copy of the press release is furnished as Exhibit 99.1 to this report and incorporated herein by reference. As indicated in the press release, the Company 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 fourth quarter and full year 2015. The call will be broadcast over the Internet and can be accessed in the manner set forth in the press release. The Company is furnishing herewith as Exhibit 99.2 a copy of the presentation that it expects to refer to on this conference call.
Item 9.01: Financial Statements and Exhibits.
(d) Exhibits
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99.1 | Press Release of Mead Johnson Nutrition Company, dated January 28, 2016 |
99.2 | Mead Johnson Nutrition Company Presentation, dated January 28, 2016 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| MEAD JOHNSON NUTRITION COMPANY |
| | |
Date: January 28, 2016 | By: | /s/ James E. Shiah |
| | James E. Shiah |
| | Senior Vice President and Corporate Controller |
MEAD JOHNSON NUTRITION DELIVERS EARNINGS PER SHARE ABOVE GUIDANCE
FOR FOURTH QUARTER AND FULL YEAR 2015;
PROVIDES 2016 GUIDANCE
GLENVIEW, Ill., January 28, 2016 - Mead Johnson Nutrition Company (NYSE: MJN) today announced its financial results for the quarter and year ended December 31, 2015.
“I am pleased with the sequential improvements in our underlying business since our last earnings call, despite a challenging operating environment across many of the emerging markets," said Kasper Jakobsen, Chief Executive Officer. "Our two biggest businesses in China and the United States both posted sales above the levels experienced in the third quarter. I am also pleased that our Fuel for Growth initiative and our focus on operating expenses allowed us to deliver earnings per share above expectations within the fourth quarter."
Highlights are as follows:
| |
• | Excluding the impact of intentionally reduced shipments into Venezuela, sales in the fourth quarter of 2015 rose 1% over the third quarter of 2015(1) on a constant dollar(2) basis. |
| |
• | Fourth quarter sales were 6% below the prior year quarter on a constant dollar basis and 12% below the prior year quarter on a reported basis. |
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• | Full year sales were 2% below the prior year on a constant dollar basis and 8% below the prior year on a reported basis. |
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• | Non-GAAP gross margin for the fourth quarter of 63.9% was 200 basis points higher than the prior year quarter, mainly due to lower dairy input costs. Gross margin on a GAAP basis was 62.9%, up from 60.7% in the prior year quarter. |
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• | Non-GAAP EBIT in the fourth quarter was 3% below the prior year quarter on a constant dollar basis. Inclusive of a $25 million provision related to our Fuel for Growth operating expense initiative, on a GAAP basis EBIT was 7% below the prior year quarter. |
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• | Full year 2015 non-GAAP EBIT was in-line with 2014 on a constant dollar basis. On a GAAP basis, EBIT was 5% below the prior year. |
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• | During the fourth quarter, the company repurchased 10.7 million shares of stock under an accelerated share repurchase agreement. As of December 31, 2015, 186.4 million shares were outstanding. |
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• | Based on weighted average shares outstanding of 189.8 million, non-GAAP Earnings Per Share (EPS) for the fourth quarter was $0.78; GAAP EPS was $0.67. |
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• | 2015 full year non-GAAP EPS was $3.44, slightly above the top end of the guidance range. 2015 GAAP EPS was $3.27. |
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• | Full year 2016 constant dollar sales are expected at 0% to 2% compared to 2015. Assuming exchange rates remain at current levels, this will translate to 4% to 6% below prior year on a reported basis. |
(1) Fourth quarter sales were down 1% from the third quarter on a reported basis, and flat on a constant dollar basis, compared to the third quarter. Excluding the impact of sales in Venezuela, fourth quarter sales on a constant dollar basis increased 1% compared to the third quarter.
(2) 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. Non-GAAP or as adjusted 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.”
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• | Full year 2016 non-GAAP EPS is expected in the range of $3.48 to $3.60, excluding expected future costs related to Fuel for Growth and mark-to-market pension adjustments which are not reflected in this guidance. The company expects to incur charges approximating $25 to $30 million associated with the Fuel for Growth program in 2016. Specified Items including charges related to Fuel for Growth are expected to be approximately $0.12 per share. Therefore GAAP EPS is expected to be in the range of $3.36 to $3.48, excluding mark-to-market pension adjustments which cannot be estimated. EPS guidance includes an estimated adverse impact of current exchange rates as of January 2016, which is expected to be approximately $0.40 per share. |
Fourth Quarter 2015
(Dollars in Millions)
(UNAUDITED)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended December 31, | | % Change | | % Change Due to |
Net Sales | 2015 | | % of Total | | 2014 | | % of Total | | Reported | | Constant Dollar | | Volume | | Price/Mix | | Foreign
Exchange |
Asia | $ | 468.0 |
| | 48 | % | | $ | 548.6 |
| | 50 | % | | (15 | )% | | (10 | )% | | (7 | )% | | (3 | )% | | (5 | )% |
Latin America | 169.8 |
| | 18 | % | | 207.8 |
| | 19 | % | | (18 | )% | | (4 | )% | | (9 | )% | | 5 | % | | (14 | )% |
North America/Europe | 329.2 |
| | 34 | % | | 337.8 |
| | 31 | % | | (3 | )% | | — | % | | 1 | % | | (1 | )% | | (3 | )% |
Net Sales | $ | 967.0 |
| | 100 | % | | $ | 1,094.2 |
| | 100 | % | | (12 | )% | | (6 | )% | | (5 | )% | | (1 | )% | | (6 | )% |
| | | | | | | | | | | | | | | | | |
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• | Sales in all segments were adversely impacted by a strengthening dollar, most notably in China, Mexico and Canada. |
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• | In Asia, improvement was seen in Greater China in the fourth quarter of 2015 when compared to the third quarter of 2015 due to the recently launched fully-imported range of products. |
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• | Further, sales in the current quarter were below the prior year quarter mostly due to price-based promotions in Greater China and market share weakness in Malaysia and Thailand. Sales in the Philippines increased compared to the prior year quarter. |
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• | In Latin America sales decreased compared to the prior year quarter primarily due to intentionally reduced shipments into Venezuela prompted by delayed settlement of inventory related U.S. dollar payables. Sales in the remainder of the segment increased on a constant dollar basis as sales of premium infant products increased in Mexico and Colombia and the ability to implement inflation-related price increases in Argentina. The sales impact of these factors was offset by the effect of price-based competition on the volume of Milk Modifier brands in Mexico. |
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• | The North America/Europe segment sales were flat in the fourth quarter of 2015 when compared to a strong 2014, on a constant dollar basis. On a sequential basis, continued momentum in North America children's products and European allergy products resulted in an increase in sales in the fourth quarter of 2015 when compared to the third quarter of 2015. |
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| | | | | | | | | | | | | | | | |
| Three Months Ended December 31, |
Earnings Before Interest and Income Taxes (EBIT) | 2015 | | % of Sales | | 2014 | | % of Sales | | % Change |
Asia | $ | 139.9 |
| | 30 | % | | $ | 195.3 |
| | 36 | % | | (28 | )% |
Latin America | 34.2 |
| | 20 | % | | 46.4 |
| | 22 | % | | (26 | )% |
North America/Europe | 96.9 |
| | 29 | % | | 90.1 |
| | 27 | % | | 8 | % |
Corporate and Other | (75.2 | ) | | | | (122.2 | ) | | | | 38 | % |
EBIT as reported | 195.8 |
| | 20 | % | | 209.6 |
| | 19 | % | | (7 | )% |
Specified Items | 23.8 |
| | | | 42.4 |
| | | | |
Impact of F/X | 25.5 |
| | | | — |
| | | | |
EBIT as adjusted | $ | 245.1 |
| | | | $ | 252.0 |
| | | | (3 | )% |
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• | Non-GAAP EBIT was 3% below the prior year quarter on a constant dollar basis. Gross margin improvements were attributable to favorable dairy costs across all segments but were not sufficient to fully offset the impact of reduced sales and increased brand investments. |
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• | In Asia, operational expenses increased due to investments in growth initiatives, notably the fully-imported product launches in China and the establishment of plastic packaging formats across a number of markets. Inflationary cost increases also impacted EBIT. |
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• | In Latin America, operational expenses were higher on a constant dollar basis due to investments in brand support. Excluding the impact of the Venezuela business, the segment's EBIT margin increased compared to the prior year quarter. |
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• | North America/Europe delivered higher EBIT primarily due to improved gross margins. |
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• | Corporate and Other expenses decreased on a reported basis primarily due to actuarial gains in the current quarter compared to actuarial losses in the prior year quarter and lower provisions for incentive compensation in the current quarter. Provisions related to Fuel for Growth partially offset lower operating expenses. |
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• | On a sequential non-GAAP basis, Corporate and Other expenses were lower mainly as a result of the Fuel for Growth initiative. |
Full Year 2015
(Dollars in Millions)
(UNAUDITED)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | % Change | | % Change Due to |
Net Sales | 2015 | | % of Total | | 2014 | | % of Total | | Reported | | Constant Dollar | | Volume | | Price/Mix | | Foreign
Exchange |
Asia | $ | 2,039.0 |
| | 50% | | $ | 2,278.4 |
| | 52 | % | | (11 | )% | | (8 | )% | | (6 | )% | | (2 | )% | | (3 | )% |
Latin America | 757.1 |
| | 19% | | 867.5 |
| | 20 | % | | (13 | )% | | 3 | % | | (4 | )% | | 7 | % | | (16 | )% |
North America/Europe | 1,275.2 |
| | 31% | | 1,263.4 |
| | 28 | % | | 1 | % | | 4 | % | | 1 | % | | 3 | % | | (3 | )% |
Net Sales | $ | 4,071.3 |
| | 100% | | $ | 4,409.3 |
| | 100 | % | | (8 | )% | | (2 | )% | | (3 | )% | | 1 | % | | (6 | )% |
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• | Sales in all segments were adversely impacted by a strengthening dollar, most notably in China, Mexico and Canada. |
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• | In Asia, increased price-based promotional competition enabled by lower dairy input costs resulted in sales below prior year level. |
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• | Especially China, Thailand and Malaysia experienced weakness with the Philippines and Vietnam performing relatively better. The launch of a fully-imported range of products helped the China business show some improvements towards the end of the year. |
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• | In Latin America, sales increased on a constant dollar basis in almost all markets. The primary driver was better pricing in Colombia and Argentina. Mexico's performance was negatively impacted as a result of price-based promotional competition in the Milk Modifiers category. However, across the region pricing failed to fully offset the adverse impact of foreign exchange. |
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• | Shipments to Venezuela were intentionally reduced in the second half of the year as access to dollars required to settle intercompany payables became more difficult. |
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• | North America/Europe delivered sales growth in virtually all markets on a constant dollar basis. Key drivers included a favorable change in product mix as well as better realized pricing throughout the segment. |
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| | | | | | | | | | | | | | | | |
| Years Ended December 31, |
Earnings Before Interest and Income Taxes (EBIT) | 2015 | | % of Sales | | 2014 | | % of Sales | | % Change |
Asia | $ | 682.0 |
| | 33 | % | | $ | 818.7 |
| | 36 | % | | (17 | )% |
Latin America | 175.2 |
| | 23 | % | | 199.0 |
| | 23 | % | | (12 | )% |
North America/Europe | 361.8 |
| | 28 | % | | 291.0 |
| | 23 | % | | 24 | % |
Corporate and Other | (282.8 | ) | | | | (320.4 | ) | | | | 12 | % |
EBIT as reported | 936.2 |
| | 23 | % | | 988.3 |
| | 22 | % | | (5 | )% |
Specified Items | 44.6 |
| | | | 63.3 |
| | | | |
Impact of F/X | 67.5 |
| | | | — |
| | | | |
EBIT as adjusted | $ | 1,048.3 |
| | | | $ | 1,051.6 |
| | | | — | % |
| |
• | Non-GAAP EBIT was broadly in-line with the prior year on a constant dollar basis. The impact of reduced sales and increased demand-generation spending was offset by reduced dairy costs and lower operating expenses. |
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• | In Asia, operating expenses increased due to higher expenditures on advertising and promotion required to support competitiveness and new product launches. Overall, these factors combined with lower sales negatively impacted profit margins for the segment. |
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• | Latin America EBIT margin was similar to the prior year as sales decreases and investment spending were offset by improved gross margin due to lower dairy input costs. |
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• | North America/Europe EBIT margin strengthened due to increased volumes, improved product mix and lower dairy input costs. |
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• | Corporate and Other expenses decreased in the current year from lower incentive compensation, savings from the Fuel for Growth operating expense initiative, and reduced losses related to the re-measurement of our pension and other post-employment benefit plans. |
Cash Flow Items and Share Repurchases
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• | Cash and cash equivalents increased by $403.7 million since December 31, 2014 and were $1,701.4 million at December 31, 2015. |
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• | Operating cash flow was $899.2 million in the twelve months ended December 31, 2015 compared to $793.4 million in the prior year period. Cash flows increased due to working capital improvements which were substantial enough to more than offset the impact of $90.1 million in contributions to pension plans. 2014 cash outflow related to innovation and the start-up of the manufacturing facility in Singapore did not recur in 2015. |
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• | Investing activities include capital expenditures of $173.7 million for 2015. This included investments in capacity expansion for manufacturing facilities in the U.S. and our European plant to accommodate demand for new products. |
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• | Financing activities include cash outflows of $1,437.0 million for the repurchase of approximately 16.4 million shares of stock under the company's 2013 and 2015 share repurchase authorizations with additional settlement under the accelerated share repurchase agreement expected in 2016. These purchases were funded with long-term debt of $1.5 billion issued in 2015. Long-term debt was approximately $3.0 billion as of December 31, 2015. |
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• | The company's net debt was $1,282.6 million, consisting of debt and cash and cash equivalents. |
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• | Interest expense, net, for 2015 was $65.0 million, an increase from $60.3 million in 2014 due to the incremental interest on the newly issued long-term debt, partially offset by the impact of the interest rate swaps. |
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• | Dividends declared in 2015 were $1.65 per share, a 10% increase over 2014. |
Outlook for 2016
The company announced full year guidance for 2016. It expects full year constant dollar sales to be in a range of 0% to 2% above 2015 and non-GAAP EPS in the range of $3.48 to $3.60 based on current exchange rates.
“As discussed during our Investor Day in October of last year we view 2016 as a year of transition as we invest heavily in reshaping our portfolio in China and boost investment in new channels there. We expect modest, single digit EPS growth as a strengthening dollar will continue to challenge the translation of our results. To help investors better understand our underlying performance we will provide constant dollar profit measures through the year,” said Kasper Jakobsen, Chief Executive Officer. He added, “We expect sales growth to accelerate in the second half of the year reflecting the phasing of growth initiatives and investments. Our Fuel for Growth initiative is a critical element of our strategy to help offset the impact of foreign exchange and protect funding for new brand introductions.”
The company expects to incur charges approximating $25 to $30 million associated with the Fuel for Growth program in 2016. Specified Items including charges related to Fuel for Growth are expected to be approximately $0.12 per share. Therefore GAAP EPS is expected to be in the range of $3.36 to $3.48, excluding mark-to-market pension adjustments which cannot be estimated. EPS guidance includes an estimated adverse impact of current exchange rates as of January 2016, which is expected to be approximately $0.40 per share.
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 fourth quarter and full year 2015. 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 11:30 p.m. U.S. Central Time Sunday, March 13, 2016, by calling 855-859-2056, or outside of North America by calling +1-404-537-3406, passcode: 9288784. 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(3) program, or participation in WIC; (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.
(3) 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 December 31, | | Years Ended December 31, |
| 2015 | | 2014 | | 2015 | | 2014 |
NET SALES | $ | 967.0 |
| | $ | 1,094.2 |
| | $ | 4,071.3 |
| | $ | 4,409.3 |
|
Cost of Products Sold | 358.6 |
| | 430.2 |
| | 1,455.3 |
| | 1,700.6 |
|
GROSS PROFIT | 608.4 |
| | 664.0 |
| | 2,616.0 |
| | 2,708.7 |
|
Operating Expenses: | |
| | |
| | |
| | |
|
Selling, General and Administrative | 211.1 |
| | 263.5 |
| | 890.6 |
| | 978.9 |
|
Advertising and Promotion | 151.1 |
| | 149.5 |
| | 641.8 |
| | 638.7 |
|
Research and Development | 28.5 |
| | 32.6 |
| | 108.4 |
| | 115.1 |
|
Other (Income)/Expenses–net | 21.9 |
| | 8.8 |
| | 39.0 |
| | (12.3 | ) |
EARNINGS BEFORE INTEREST AND INCOME TAXES | 195.8 |
| | 209.6 |
| | 936.2 |
| | 988.3 |
|
| | | | | | | |
Interest Expense—net | 22.5 |
| | 14.3 |
| | 65.0 |
| | 60.3 |
|
EARNINGS BEFORE INCOME TAXES | 173.3 |
| | 195.3 |
| | 871.2 |
| | 928.0 |
|
| | | | | | | |
Provision for Income Taxes | 42.3 |
| | 38.7 |
| | 215.9 |
| | 199.2 |
|
NET EARNINGS | 131.0 |
| | 156.6 |
| | 655.3 |
| | 728.8 |
|
Less Net Earnings/(Loss) Attributable to Noncontrolling Interests | 3.0 |
| | (1.8 | ) | | 1.8 |
| | 9.0 |
|
NET EARNINGS ATTRIBUTABLE TO SHAREHOLDERS | $ | 128.0 |
| | $ | 158.4 |
| | $ | 653.5 |
| | $ | 719.8 |
|
| | | | | | | |
Earnings per Share(a)– Basic | |
| | |
| | | | |
Net Earnings Attributable to Shareholders | $ | 0.67 |
| | $ | 0.78 |
| | $ | 3.28 |
| | $ | 3.55 |
|
Earnings per Share(a)– Diluted | |
| | |
| | | | |
Net Earnings Attributable to Shareholders | $ | 0.67 |
| | $ | 0.78 |
| | $ | 3.27 |
| | $ | 3.54 |
|
| | | | | | | |
Weighted Average Shares–Diluted | 189.8 |
| | 202.9 |
| | 199.4 |
| | 202.7 |
|
Dividends Declared per Share | $ | 0.41 |
| | $ | 0.38 |
| | $ | 1.65 |
| | $ | 1.50 |
|
(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.
When aggregated, EPS for the four quarters of 2015 are not equal to the full year EPS figure due to the variability of quarterly earnings and the timing of share repurchases.
MEAD JOHNSON NUTRITION COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars and shares in millions, except per share data)
(UNAUDITED)
|
| | | | | | | |
| December 31, 2015 | | December 31, 2014 |
ASSETS | | | |
CURRENT ASSETS: | |
| | |
|
Cash and Cash Equivalents | $ | 1,701.4 |
| | $ | 1,297.7 |
|
Receivables—net of allowances of $5.4 and $9.6, respectively | 342.5 |
| | 387.8 |
|
Inventories | 484.9 |
| | 555.5 |
|
Income Taxes Receivable | 13.2 |
| | 7.7 |
|
Prepaid Expenses and Other Assets | 60.4 |
| | 82.6 |
|
Total Current Assets | 2,602.4 |
| | 2,331.3 |
|
Property, Plant, and Equipment—net | 964.0 |
| | 912.7 |
|
Goodwill | 126.0 |
| | 162.7 |
|
Other Intangible Assets—net | 54.9 |
| | 75.4 |
|
Deferred Income Taxes—net of valuation allowance | 118.5 |
| | 150.4 |
|
Other Assets | 132.3 |
| | 131.3 |
|
TOTAL | $ | 3,998.1 |
| | $ | 3,763.8 |
|
LIABILITIES AND EQUITY | |
| | |
|
CURRENT LIABILITIES: | |
| | |
|
Short-term Borrowings | $ | 3.0 |
| | $ | 4.1 |
|
Accounts Payable | 481.5 |
| | 512.3 |
|
Dividends Payable | 77.8 |
| | 76.6 |
|
Accrued Expenses | 213.0 |
| | 203.7 |
|
Accrued Rebates and Returns | 376.8 |
| | 329.1 |
|
Deferred Income—current | 35.5 |
| | 34.3 |
|
Income Taxes Payable | 65.7 |
| | 45.2 |
|
Total Current Liabilities | 1,253.3 |
| | 1,205.3 |
|
Long-Term Debt | 2,981.0 |
| | 1,492.8 |
|
Deferred Income Taxes—noncurrent | 8.7 |
| | 12.0 |
|
Pension and Other Post-employment Liabilities | 132.4 |
| | 211.1 |
|
Other Liabilities - noncurrent | 215.2 |
| | 192.8 |
|
Total Liabilities | 4,590.6 |
| | 3,114.0 |
|
COMMITMENTS AND CONTINGENCIES | | | |
REDEEMABLE NONCONTROLLING INTEREST | — |
| | 66.0 |
|
| | | |
EQUITY | |
| | |
|
Shareholders’ Equity | |
| | |
|
Common Stock, $0.01 par value: 3,000 authorized, 191.4 and 207.2 issued, respectively | 1.9 |
| | 2.1 |
|
Additional Paid-in/(Distributed) Capital | (564.2 | ) | | (641.3 | ) |
Retained Earnings | 640.4 |
| | 1,775.0 |
|
Treasury Stock—at cost | (362.6 | ) | | (362.6 | ) |
Accumulated Other Comprehensive Loss | (347.8 | ) | | (198.9 | ) |
Total Shareholders’ Equity/(Deficit) | (632.3 | ) | | 574.3 |
|
Noncontrolling Interests | 39.8 |
| | 9.5 |
|
Total Equity/(Deficit) | (592.5 | ) | | 583.8 |
|
TOTAL | $ | 3,998.1 |
| | $ | 3,763.8 |
|
MEAD JOHNSON NUTRITION COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
(UNAUDITED)
|
| | | | | | | |
| Years Ended December 31, |
| 2015 | | 2014 |
CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | |
|
Net Earnings | $ | 655.3 |
| | $ | 728.8 |
|
Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities: | |
| | |
|
Depreciation and Amortization | 99.1 |
| | 91.6 |
|
Other | 66.5 |
| | 77.2 |
|
Changes in Assets and Liabilities | 168.4 |
| | (54.0 | ) |
Payments for Settlement of Interest Rate Forward Swaps | — |
| | (45.0 | ) |
Pension and Other Post-employment Benefit Contributions | (90.1 | ) | | (5.2 | ) |
Net Cash Provided by Operating Activities | 899.2 |
| | 793.4 |
|
CASH FLOWS FROM INVESTING ACTIVITIES: | | | |
Payments for Capital Expenditures | (173.7 | ) | | (186.6 | ) |
Proceeds from Sale of Property, Plant and Equipment | 0.5 |
| | 0.2 |
|
Proceeds from/(Investment in) Other Companies | — |
| | 4.0 |
|
Net Cash Used in Investing Activities | (173.2 | ) | | (182.4 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES: | |
| | |
|
Proceeds from Short-term Borrowings | 1,003.0 |
| | 3.2 |
|
Repayments of Short-term Borrowings | (1,002.9 | ) | | (0.6 | ) |
Proceeds from Issuance of Long-term Notes, net of original issue discounts and expenses paid | 1,499.0 |
| | 492.0 |
|
Repayments of Notes Payable | — |
| | (500.0 | ) |
Proceeds from Long-term Revolver Borrowings, net of original issue discount and expenses paid | 446.0 |
| | — |
|
Repayment of Long-term Revolver Borrowings | (446.0 | ) | | — |
|
Payments of Dividends | (326.0 | ) | | (296.6 | ) |
Stock-based-compensation-related Proceeds and Excess Tax Benefits | 25.4 |
| | 46.2 |
|
Stock-based Compensation Tax Withholdings | (11.4 | ) | | (7.9 | ) |
Payments for Repurchase of Common Stock | (1,437.0 | ) | | (54.1 | ) |
Purchase of Redeemable Shares | (24.2 | ) | | — |
|
Purchase of Trading Securities | (16.2 | ) | | — |
|
Sale of Trading Securities | 21.7 |
| | — |
|
Distributions to Noncontrolling Interests | (6.9 | ) | | (7.7 | ) |
Net Cash Used in Financing Activities | (275.5 | ) | | (325.5 | ) |
Effects of Changes in Exchange Rates on Cash and Cash Equivalents | (46.8 | ) | | (38.6 | ) |
NET INCREASE IN CASH AND CASH EQUIVALENTS | 403.7 |
| | 246.9 |
|
CASH AND CASH EQUIVALENTS: | |
| | |
|
Beginning of Period | 1,297.7 |
| | 1,050.8 |
|
End of Period | $ | 1,701.4 |
| | $ | 1,297.7 |
|
MEAD JOHNSON NUTRITION COMPANY
RECONCILIATION OF NON-GAAP TO GAAP RESULTS
(Dollars in millions, except per share data)
(UNAUDITED)
This news release contains non-GAAP financial measures, which may include non-GAAP net sales, gross profit, certain components of operating expenses, EBIT, earnings and earnings per share information. The items included in GAAP measures, but excluded for the purpose of determining the above listed 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 above listed 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 and appear elsewhere in this presentation.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended December 31, 2015 | Three Months Ended December 31, 2014 |
| | | Specified Items (a) | | | | | Specified Items (a) | | |
| As Reported | | Mark-to-Market Pension | | Fuel For Growth | | All Other(b) | | As Adjusted | As Reported | | Mark-to-Market Pension | | All Other(b) | | As Adjusted |
NET SALES | $ | 967.0 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 967.0 |
| $ | 1,094.2 |
| | $ | — |
| | $ | — |
| | $ | 1,094.2 |
|
Cost of Products Sold | 358.6 |
| | 0.4 |
| | (10.3 | ) | | — |
| | 348.7 |
| 430.2 |
| | (13.4 | ) | | — |
| | 416.8 |
|
GROSS PROFIT | 608.4 |
| | (0.4 | ) | | 10.3 |
| | — |
| | 618.3 |
| 664.0 |
| | 13.4 |
| | — |
| | 677.4 |
|
GROSS MARGIN % | 62.9 | % | | (0.1 | )% | | 1.0 | % | | — | % | | 63.9 | % | 60.7 | % | | 1.2 | % | | — | % | | 61.9 | % |
| | | | | | | | | | | | | | | | |
Operating Expenses: | | | | | | | | | | | | | | | | |
Selling, General and Administrative | 211.1 |
| | 1.1 |
| | (0.4 | ) | | (0.1 | ) | | 211.7 |
| 263.5 |
| | (23.1 | ) | | (0.7 | ) | | 239.7 |
|
Advertising and Promotion | 151.1 |
| | — |
| | — |
| | — |
| | 151.1 |
| 149.5 |
| | — |
| | — |
| | 149.5 |
|
Research and Development | 28.5 |
| | 0.2 |
| | — |
| | — |
| | 28.7 |
| 32.6 |
| | (4.0 | ) | | — |
| | 28.6 |
|
Other (Income)/Expenses – net | 21.9 |
| | — |
| | (14.4 | ) | | (0.3 | ) | | 7.2 |
| 8.8 |
| | — |
| | (1.2 | ) | | 7.6 |
|
EARNINGS BEFORE INTEREST AND INCOME TAXES | 195.8 |
| | (1.7 | ) | | 25.1 |
| | 0.4 |
| | 219.6 |
| 209.6 |
| | 40.5 |
| | 1.9 |
| | 252.0 |
|
EBIT as a % of Sales | 20.2 | % | | (0.2 | )% | | 2.6 | % | | — | % | | 22.7 | % | 19.2 | % | | 3.7 | % | | 0.2 | % | | 23.0 | % |
| | | | | | | | | | | | | | | | |
Interest Expense – net | 22.5 |
| | — |
| | — |
| | — |
| | 22.5 |
| 14.3 |
| | — |
| | — |
| | 14.3 |
|
EARNINGS BEFORE INCOME TAXES | 173.3 |
| | (1.7 | ) | | 25.1 |
| | 0.4 |
| | 197.1 |
| 195.3 |
| | 40.5 |
| | 1.9 |
| | 237.7 |
|
| | | | | | | | | | | | | | | | |
Provision for Income Taxes | 42.3 |
| | (0.6 | ) | | 4.8 |
| | (0.2 | ) | | 46.3 |
| 38.7 |
| | 14.3 |
| | 0.3 |
| | 53.3 |
|
Effective Tax Rate | 24.4 | % | | (0.1 | )% | | (0.7 | )% | | (0.1 | )% | | 23.5 | % | 19.8 | % | | 2.7 | % | | (0.1 | )% | | 22.4 | % |
| | | | | | | | | | | | | | | | |
NET EARNINGS | 131.0 |
| | (1.1 | ) | | 20.3 |
| | 0.6 |
| | 150.8 |
| 156.6 |
| | 26.2 |
| | 1.6 |
| | 184.4 |
|
Less Net Earnings/(Loss) Attributable to Noncontrolling Interests | 3.0 |
| | — |
| | — |
| | — |
| | 3.0 |
| (1.8 | ) | | — |
| | — |
| | (1.8 | ) |
NET EARNINGS ATTRIBUTABLE TO SHAREHOLDERS | $ | 128.0 |
| | $ | (1.1 | ) | | $ | 20.3 |
| | $ | 0.6 |
| | $ | 147.8 |
| $ | 158.4 |
| | $ | 26.2 |
| | $ | 1.6 |
| | $ | 186.2 |
|
Earnings per Share– Diluted | | | | | | | | | | | | | | | | |
Net Earnings Attributable to Shareholders | $ | 0.67 |
| | $ | (0.01 | ) | | $ | 0.11 |
| | $ | — |
| | $ | 0.78 |
| $ | 0.78 |
| | $ | 0.13 |
| | $ | 0.01 |
| | $ | 0.92 |
|
|
| | | |
Reconciliation of Reported Quarterly Sequential Sales Growth |
Third Quarter 2015 Sales | $ | 977.5 |
|
Fourth Quarter 2015 Sales | 967.0 |
|
Percentage Change in Reported Sales | (1 | )% |
Less: Impact of Foreign Exchange | (1 | )% |
Less: Impact of Venezuela | (1 | )% |
Percentage Change in Sales in Constant Dollars Excluding the Impact of Venezuela | 1 | % |
Certain figures do not sum due to rounding.
When aggregated, EPS for the four quarters of 2015 are not equal to the full year EPS figure due to the variability of quarterly earnings and the timing of share repurchases.
(a) All Specified Items are included in Corporate and Other.
(b) All Other include legal, settlement and related costs, severance and other expenses, and marketable securities.
MEAD JOHNSON NUTRITION COMPANY
RECONCILIATION OF NON-GAAP TO GAAP RESULTS
(Dollars in millions, except per share data)
(UNAUDITED)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2015 | Year Ended December 31, 2014 |
| | | Specified Items (a) | | | | | Specified Items (a) | | |
| As Reported | | Mark-to-Market Pension | | Investigation Settlement | | Fuel For Growth | | All Other(b) | | As Adjusted | As Reported | | Mark-to-Market and Other Pension | | All Other(b) | | As Adjusted |
NET SALES | $ | 4,071.3 |
| | — |
| | — |
| | — |
| | — |
| | 4,071.3 |
| 4,409.3 |
| | — |
| | — |
| | 4,409.3 |
|
Cost of Products Sold | 1,455.3 |
| | (3.0 | ) | | — |
| | (10.3 | ) | | — |
| | 1,442.0 |
| 1,700.6 |
| | (19.1 | ) | | — |
| | 1,681.5 |
|
GROSS PROFIT | 2,616.0 |
| | 3.0 |
| | — |
| | 10.3 |
| | — |
| | 2,629.3 |
| 2,708.7 |
| | 19.1 |
| | — |
| | 2,727.8 |
|
GROSS MARGIN % | 64.3 | % | | 0.1 | % | | — | % | | 1.0 | % | | — | % | | 64.6 | % | 61.4 | % | | 0.4 | % | | — | % | | 61.9 | % |
| | | | | | | | | | | | | | | | | | |
Operating Expenses: | | | | | | | | | | | | | | | | | | |
Selling, General and Administrative | 890.6 |
| | (4.4 | ) | | — |
| | (0.4 | ) | | (2.0 | ) | | 883.8 |
| 978.9 |
| | (32.2 | ) | | (13.8 | ) | | 932.9 |
|
Advertising and Promotion | 641.8 |
| | — |
| | — |
| | — |
| | — |
| | 641.8 |
| 638.7 |
| | — |
| | — |
| | 638.7 |
|
Research and Development | 108.4 |
| | (0.8 | ) | | — |
| | — |
| | — |
| | 107.6 |
| 115.1 |
| | (5.6 | ) | | — |
| | 109.5 |
|
Other (Income)/Expenses – net | 39.0 |
| | — |
| | (12.0 | ) | | (14.4 | ) | | 2.7 |
| | 15.3 |
| (12.3 | ) | | 5.4 |
| | 2.0 |
| | (4.9 | ) |
EARNINGS BEFORE INTEREST AND INCOME TAXES | 936.2 |
| | 8.2 |
| | 12.0 |
| | 25.1 |
| | (0.7 | ) | | 980.8 |
| 988.3 |
| | 51.5 |
| | 11.8 |
| | 1,051.6 |
|
EBIT as a % of Sales | 23.0 | % | | 0.2 | % | | 0.3 | % | | 2.6 | % | | — | % | | 24.1 | % | 22.4 | % | | 1.2 | % | | 0.2 | % | | 23.8 | % |
| | | | | | | | | | | | | | | | | | |
Interest Expense – net | 65.0 |
| | — |
| | — |
| | — |
| | — |
| | 65.0 |
| 60.3 |
| | — |
| | — |
| | 60.3 |
|
EARNINGS BEFORE INCOME TAXES | 871.2 |
| | 8.2 |
| | 12.0 |
| | 25.1 |
| | (0.7 | ) | | 915.8 |
| 928.0 |
| | 51.5 |
| | 11.8 |
| | 991.3 |
|
| | | | | | | | | | | | | | | | | | |
Provision for Income Taxes | 215.9 |
| | 2.9 |
| | 3.1 |
| | 4.8 |
| | 0.4 |
| | 227.1 |
| 199.2 |
| | 20.0 |
| | 3.7 |
| | 222.9 |
|
Effective Tax Rate | 24.8 | % | | 0.1 | % | | — | % | | (0.2 | )% | | 0.1 | % | | 24.8 | % | 21.5 | % | | 0.9 | % | | 0.1 | % | | 22.5 | % |
| | | | | | | | | | | | | | | | | | |
NET EARNINGS | 655.3 |
| | 5.3 |
| | 8.9 |
| | 20.3 |
| | (1.1 | ) | | 688.7 |
| 728.8 |
| | 31.5 |
| | 8.1 |
| | 768.4 |
|
Less Net Earnings/(Loss) Attributable to Noncontrolling Interests | 1.8 |
| | — |
| | — |
| | — |
| | — |
| | 1.8 |
| 9.0 |
| | — |
| | — |
| | 9.0 |
|
NET EARNINGS ATTRIBUTABLE TO SHAREHOLDERS | $ | 653.5 |
| | $ | 5.3 |
| | $ | 8.9 |
| | $ | 20.3 |
| | $ | (1.1 | ) | | $ | 686.9 |
| $ | 719.8 |
| | $ | 31.5 |
| | $ | 8.1 |
| | $ | 759.4 |
|
Earnings per Share– Diluted | | | | | | | | | | | | | | | | | | |
Net Earnings Attributable to Shareholders | $ | 3.27 |
| | $ | 0.03 |
| | $ | 0.04 |
| | $ | 0.11 |
| | $ | (0.01 | ) | | $ | 3.44 |
| $ | 3.54 |
| | $ | 0.15 |
| | $ | 0.05 |
| | $ | 3.74 |
|
Certain figures do not sum due to rounding.
When aggregated, EPS for the four quarters of 2015 are not equal to the full year EPS figure due to the variability of quarterly earnings and the timing of share repurchases.
(a) All Specified Items are included in Corporate and Other.
(b) Specified Items include legal, settlement and related costs, severance and other expenses, and marketable securities.
# # #
|
| | | | |
Contacts | Investors: | Kathy MacDonald | (847) 832-2182 | kathy.macdonald@mjn.com |
| Media: | Christopher Perille | (847) 832-2178 | chris.perille@mjn.com |
Fourth Quarter and Full Year 2015 Earnings Call Presentation January 28, 2016
Safe Harbor Statement 2 Forward-LookingStatements Certain statements in this presentation 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, market growth and trends, 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 presentation. 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 Women, Infant and Children (WIC) program, or participation in WIC; (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. Factors Affecting Comparability – Non-GAAP Financial Measures This presentation contains non-GAAP financial measures, including non-GAAP net sales, EBIT, earnings, earnings per share information, and effective tax rates. Specified Items are terms included in GAAP measures, but excluded for the purpose of determining non-GAAP net sales, EBIT, earnings and earnings per share. In addition, other items include the tax impact on Specified Items. Non-GAAP net sales, 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 non-GAAP to GAAP disclosure are included in the Appendix. For more information: Kathy MacDonald, Vice President – Investor Relations Mead Johnson Nutrition Company 847-832-2182 kathy.macdonald@mjn.com January 2016
Net Sales Development 3 $ in Millions Q1 Q2 Q3 Q4 2015 Full Year Sales $1,094 $1,032 $978 $967 $4,071 vs. 2014, Constant $ 3% (3%) (4%) (6%) (2%) Foreign Exchange Impact (5%) (4%) (6%) (6%) (6%) vs. 2014, Reported $ (2%) (7%) (10%) (12%) (8%)
Foreign Exchange Impacted Sales by $229MM in 2015 4 $ in Millions, except for per share data Foreign Exchange Impact on: Q1 Q2 Q3 Q4 2015 Full Year Net Sales ($56) (5%) ($43) (4%) ($69) (6%) ($62) (6%) ($229) (6%) EPS ($0.03) ($0.03) ($0.09) ($0.10) ($0.26) 2013 2014 2015 Asia Latin America North America/Europe Favorable U nfavorable FX Impact on EPS
Q4 2015 Full Year Gross Margin Improved by 270 bps in 2015 5 61.9% 63.9% 61.9% 64.6% +200bps +270bps 2014 Dairy Productivity Manufacturing & Other Commodities Foreign Exchange 2015 2014 Dairy Productivity Manufacturing & Other Commodities Foreign Exchange 2015 Non-GAAP
Q4 SG&A Costs Down 6% versus Last Year $ in Millions Non-GAAP vs. 2014 vs. 2014 Actual Constant $ % of Sales Actual Constant $ % of Sales A&P $151 7% 15.6% $642 6% 15.8% SG&A $212 (6%) 21.9% $884 0% 21.7% R&D $29 4% 3.0% $108 2% 2.6% Other Expense $7 * 0.7% $15 * 0.4% Total OpEx $399 2% 41.2% $1,649 4% 40.5% Q4 2015 Full Year 6
Fuel for Growth Starts to Deliver Lower Costs 7(1) Constant Dollar Operating Expenses excluding Salesforce and Distribution.(2) Corporate and Other on a Non-GAAP basis, on a like for like basis. 2014 Full Year 2015 Full Year Constant $ OpEx(1) G&A Marketing R&D Jun 2015 Dec 20151st Half '15 2nd Half '15 Corporate & Other Costs(2) • First signs of Fuel for Growth savings Headcount • 3% Global Reduction from ~7,900 to ~7,700 Corporate Headcount
2015: EBIT Margin Improved 30 bps 8 $ in Millions Non-GAAP Q1 Q2 Q3 Q4 2015 Full Year EBIT $300 $222 $239 $220 $981 vs. 2014, Constant $ 4% (10%) 7% (3%) 0% vs. 2014, Reported $ 1% (13%) (3%) (13%) (7%) EBIT Margin 27.4% 21.5% 24.5% 22.7% 24.1% Change vs. 2014 +80bps -160bps +190bps -30bps +30bps
Asia 9 $ in Millions Change vs. 2014 Change vs. 2014 Actual Constant $ Reported Actual Constant $ Reported Sales $468 (10%) (15%) $2,039 (8%) (11%) EBIT $140 (24%) (28%) $682 (16%) (17%) EBIT Margin 29.9% -570bps 33.4% -250bps 4Q 2015 2015 Full Year
Latin America 10 $ in Millions Change vs. 2014 Change vs. 2014 Actual Constant $ Reported Actual Constant $ Reported Sales $170 (4%) (18%) $757 3% (13%) EBIT $34 15% (26%) $175 18% (12%) EBIT Margin 20.1% -220bps 23.1% +20bps 4Q 2015 2015 Full Year
North America & Europe 11 $ in Millions Change vs. 2014 Change vs. 2014 Actual Constant $ Reported Actual Constant $ Reported Sales $329 0% (3%) $1,275 4% 1% EBIT $97 14% 8% $362 29% 24% EBIT Margin 29.4% +270bps 28.4% +540bps 4Q 2015 2015 Full Year
2015 Financial Results: From EBIT to Net Income 12 $ in Millions, except for per share data Non-GAAP vs. 2014 vs. 2014 Actual Constant $ % of Sales Actual Constant $ % of Sales EBIT $220 (3%) 22.7% $981 0% 24.1% Interest Exp. $22 56% $65 6% Tax $46 (2%) $227 9% ETR 23.5% 24.8% Net Income $148 (10%) $687 (3%) Non-GAAP EPS $0.78 $3.44 Shares - Average 189.8 199.4 Shares – Dec. 31 186.4 186.4 Q4 2015 Full Year
$3.74 $3.70 $3.44 $0.26 $0.48 $0.17 $0.09 $0.26 2014 Full Year Sales Gross Margin OpEx & Other ETR 2015 Constant $ EPS Foreign Exchange 2015 Full Year Q4 2015 Full Year EPS Development 2015 13 $0.92 $0.88 $0.78 $0.78 $0.16 $0.15 $0.03 $0.10 4Q 2014 Sales Gross Margin OpEx & Other 4Q 2015 Constant $ EPS Foreign Exchange 4Q 2015 Non-GAAP
Cash Balance Increased ~$400MM in 2015 14 $1,298 $1,701 $726 $326 $1,437 $1,499 $58 Jan 1, 2015 Free Cash Flows Dividends Share Repurchase Proceeds from New Debt Other December 31, 2015 Growth 31% $ in Millions
Investor Day Full Year Guidance(1)(2) 2016: A Year of Transition (1) Guidance provided in the company’s conference call and press release on Jan 28, 2016; (2) Non-GAAP and GAAP EPS guidance gives consideration to foreign exchange rates as of January 2016. The FX impact on EPS is estimated at 40 cents. (3) GAAP EPS guidance includes $0.12 per diluted share of specified items excluding future unknown mark-to-market pension adjustments. 15 Constant $ 0% to 2% mid single-digit modest growth some accretion Sales EBIT Margin Non-GAAP EPS 24% to 25% $3.48 - $3.60 GAAP EPS(3) $3.36 - $3.48 Reported $ (4%) to (6%)
16 Appendix
Reconciliation of Non-GAAP to GAAP Results 17 This presentation contains non-GAAP financial measures, which may include non-GAAP net sales, gross profit, certain components of operating expenses, EBIT, earnings and earnings per share information. The items included in GAAP measures, but excluded for the purpose of determining the above listed 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 above listed 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 and appear elsewhere in this presentation.
Reconciliation of Non-GAAP to GAAP Results Q4 18 $ in millions, except per share data As Reported Mark‐to‐ Market Pension Fuel For Growth All Other (b) As Adjusted As Reported Mark‐to‐ Market Pension All Other (b) As Adjusted 967.0$ $— $— $— 967.0$ 1,094.2$ $— $— 1,094.2$ 358.6 0.4 (10.3) — 348.7 430.2 (13.4) — 416.8 608.4 (0.4) 10.3 — 618.3 664.0 13.4 — 677.4 62.9% (0.1)% 1.0% —% 63.9% 60.7% 1.2% —% 61.9% Selling, General and Administrative 211.1 1.1 (0.4) (0.1) 211.7 263.5 (23.1) (0.7) 239.7 Advertising and Promotion 151.1 — — — 151.1 149.5 — — 149.5 Research and Development 28.5 0.2 — — 28.7 32.6 (4.0) — 28.6 Other (Income)/Expenses – net 21.9 — (14.4) (0.3) 7.2 8.8 — (1.2) 7.6 195.8 (1.7) 25.1 0.4 219.6 209.6 40.5 1.9 252.0 20.2% (0.2)% 2.6% —% 22.7% 19.2% 3.7% 0.2% 23.0% Interest Expense – net 22.5 — — — 22.5 14.3 — — 14.3 173.3 (1.7) 25.1 0.4 197.1 195.3 40.5 1.9 237.7 Provision for Income Taxes 42.3 (0.6) 4.8 (0.2) 46.3 38.7 14.3 0.3 53.3 24.4% (0.1)% (0.7)% (0.1%) 23.5% 19.8% 2.7% (0.1)% 22.4% 131.0 (1.1) 20.3 0.6 150.8 156.6 26.2 1.6 184.4 Less Net Earnings/(Loss) Attributable to Noncontrolling Interests 3.0 — — — 3.0 (1.8) — — (1.8) 128.0$ (1.1)$ 20.3$ 0.6$ 147.8$ 158.4$ 26.2$ 1.6$ 186.2$ 0.67$ (0.01)$ 0.11$ $ — 0.78$ 0.78$ 0.13$ 0.01$ 0.92$ Certain figures do not sum due to rounding. When aggregated, EPS for the four quarters of 2015 are not equal to the full year EPS figure due to the variability of quarterly earnings and the timing of share repurchases. (a) All Specified Items are included in Corporate and Other. (b) All Other include legal, settlement and related costs, severance and other expenses, and marketable securities. Three Months Ended December 31, 2015 Specified Items (a) Three Months Ended December 31, 2014 Specified Items (a) NET SALES Cost of Products Sold GROSS PROFIT GROSS MARGIN % Operating Expenses: EARNINGS BEFORE INTEREST AND INCOME TAXES Earnings per Share– Diluted Net Earnings Attributable to Shareholders EBIT as a % of Sales EARNINGS BEFORE INCOME TAXES Effective Tax Rate NET EARNINGS NET EARNINGS ATTRIBUTABLE TO SHAREHOLDERS
Reconciliation of Non-GAAP to GAAP Results Full Year 19 $ in millions, except per share data As Reported Mark‐to‐ Market Pension Investigati on Settlement Fuel For Growth All Other (b) As Adjusted As Reported Mark‐to‐ Market and Other Pension All Other (b) As Adjusted 4,071.3$ — — — — 4,071.3$ 4,409.3$ — — 4,409.3$ 1,455.3 (3.0) — (10.3) — 1,442.0 1,700.6 (19.1) — 1,681.5 2,616.0 3.0 — 10.3 — 2,629.3 2,708.7 19.1 — 2,727.8 64.3% 0.1% —% 1.0% —% 64.6% 61.4% 0.4% —% 61.9% Selling, General and Administrative 890.6 (4.4) — (0.4) (2.0) 883.8 978.9 (32.2) (13.8) 932.9 Advertising and Promotion 641.8 — — — — 641.8 638.7 — — 638.7 Research and Development 108.4 (0.8) — — — 107.6 115.1 (5.6) — 109.5 Other (Income)/Expenses – net 39.0 — (12.0) (14.4) 2.7 15.3 (12.3) 5.4 2.0 (4.9) 936.2 8.2 12.0 25.1 (0.7) 980.8 988.3 51.5 11.8 1,051.6 23.0% 0.2% 0.3% 2.6% —% 24.1% 22.4% 1.2% 0.2% 23.8% Interest Expense – net 65.0 — — — — 65.0 60.3 — — 60.3 871.2 8.2 12.0 25.1 (0.7) 915.8 928.0 51.5 11.8 991.3 Provision for Income Taxes 215.9 2.9 3.1 4.8 0.4 227.1 199.2 20.0 3.7 222.9 24.8% 0.1% —% (0.2)% 0.1% 24.8% 21.5% 0.9% 0.1% 22.5% 655.3 5.3 8.9 20.3 (1.1) 688.7 728.8 31.5 8.1 768.4 Less Net Earnings/(Loss) Attributable to Noncontrolling Interests 1.8 — — — — 1.8 9.0 — — 9.0 653.5$ 5.3$ 8.9$ 20.3$ (1.1)$ 686.9$ 719.8$ 31.5$ 8.1$ 759.4$ 3.27$ 0.03$ 0.04$ 0.11$ (0.01)$ 3.44$ 3.54$ 0.15$ 0.05$ 3.74$ Certain figures do not sum due to rounding. When aggregated, EPS for the four quarters of 2015 are not equal to the full year EPS figure due to the variability of quarterly earnings and the timing of share repurchases. (a) All Specified Items are included in Corporate and Other. (b) All Other include legal, settlement and related costs, severance and other expenses, and marketable securities. Year Ended December 31, 2015 Specified Items (a) Specified Items (a) Year Ended December 31, 2014 NET SALES Cost of Products Sold GROSS PROFIT GROSS MARGIN % Operating Expenses: EARNINGS BEFORE INTEREST AND INCOME TAXES Earnings per Share– Diluted Net Earnings Attributable to Shareholders EBIT as a % of Sales EARNINGS BEFORE INCOME TAXES Effective Tax Rate NET EARNINGS NET EARNINGS ATTRIBUTABLE TO SHAREHOLDERS
20 2015 Total Operational Expenses and Net Earnings Non‐GAAP1 $ in millions 2015 2014 Reported Constant Dollar 2015 2014 Reported Constant Dollar Selling, General and Administrative 211.7$ 239.7$ (12%) (6%) 883.8$ 932.9 (5%) —% Advertising and Promotion 151.1 149.5 1% 7% 641.8 638.7 —% 6% Research and Development 28.7 28.6 —% 4% 107.6 109.5 (2%) 2% Other (Income)/Expenses ‐ net 7.2 7.6 (5%) * 15.3 (4.9) (412%) * Total Operating Expenses 398.7 425.4 (6%) 2% 1,648.5 1,676.2 (2%) 4% Earnings Before Interest and Income Taxes 219.6 252.0 (13%) (3%) 980.8 1,051.6 (7%) —% Interest Expense ‐ net 22.5 14.3 57% 56% 65.0 60.3 8% 6% Provision for Income Taxes 46.3 53.3 (13%) (2%) 227.1 222.9 2% 9% Less Net Earnings/(Loss) Attributable to Noncontrolling Interests 3.0 (1.8) (267%) * 1.8 9.0 (80%) * Net Earnings Attributable to Shareholders 147.8$ 186.2$ (21%) (10%) 686.9$ 759.4$ (10%) (3%) 1 See "Reconciliation of Non‐GAAP to GAAP Results Q4" and "Reconciliation of Non‐GAAP to GAAP Results Full Year" for a reconciliation of these Non‐GAAP measures * Percentage not meaningful Years Ended December 31, % Change Three months ended December 31, % Change
Free Cash Flow 21 Price, Volume, Earnings 2015 Cash Provided by Operating Activites 899.2$ Capital Expenditures (173.7) Free Cash Flow 725.5$ 2015 % of Total 2014 % of Total Reported Constant Dollar Volume Price Foreign Exchange Asia $468.0 48% $548.6 50% (15%) (10%) (7%) (3%) (5%) Latin America 169.8 18% 207.8 19% (18%) (4%) (9%) 5% (14%) North America/Europe 329.2 34% 337.8 31% (3%) —% 1% (1%) (3%) Net Sales $967.0 100% $1,094.2 100% (12%) (6%) (5%) (1%) (6%) Three Months Ended December 31, % Change % Change Due to
22 2015 EBIT as reported Reconciliation of Sequential Sales EBIT as reported $ in millions 2015 2014 Reported Constant Dollar 2015 2014 Reported Constant Dollar Asia EBIT 139.9$ 195.3$ (28%) (24%) 682.0$ 818.7$ (17%) (16%) Latin America EBIT 34.2 46.4 (26%) 15% 175.2 199.0 (12%) 18% North America/Europe EBIT 96.9 90.1 8% 14% 361.8 291.0 24% 29% % Change Three months ended December 31, % Change Years Ended December 31, Fourth Quarter 2015 Third Quarter 2015 Reported Constant Dollar Foreign Exchange North America/Europe 329.2$ 316.2$ 4.1% 4.5% (0.4%) China/Hong Kong 287.4 284.1 1.2% 2.1% (0.9%) % Change Due to
Reconciliation of EBIT, quarterly periods 2015 23 EBIT (in millions) 1Q 2Q 3Q GAAP 285.2$ 229.2$ 226.0$ Adjustments: IT and other separation costs - - - Severance and other costs 2.3 - - Legal, settlements and related costs 0.7 (5.7) 1.6 Pension MTM Adjustment - (1.5) 11.4 Administrative penalty (China) 12.0 - - Non-GAAP 300.2$ 222.0$ 239.0$ 2015
This regulatory filing also includes additional resources:
q42015mjnearningscalldeck.pdf
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