Mead Johnson Nutrition Company (MJN)

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Mead Johnson Nutrition (MJN)

Q4 2012 Earnings Call

January 31, 2013 9:30 am ET


Kathy Ann MacDonald - Vice President of Investor Relations

Stephen W. Golsby - Chief Executive Officer, President and Director

Peter Kasper Jakobsen - Chief Operating Officer, Executive Vice President and Director

Peter G. Leemputte - Chief Financial Officer and Executive Vice President


Matthew C. Grainger - Morgan Stanley, Research Division

Edward Aaron - RBC Capital Markets, LLC, Research Division

John J. Baumgartner - Wells Fargo Securities, LLC, Research Division

Kenneth Goldman - JP Morgan Chase & Co, Research Division

Jon Andersen - William Blair & Company L.L.C., Research Division

Timothy S. Ramey - D.A. Davidson & Co., Research Division

Jason English - Goldman Sachs Group Inc., Research Division

Eric R. Katzman - Deutsche Bank AG, Research Division

Amit Sharma - BMO Capital Markets U.S.

David Driscoll - Citigroup Inc, Research Division

Diane Geissler - Credit Agricole Securities (USA) Inc., Research Division



Good day, ladies and gentlemen, and welcome to the Mead Johnson Nutrition Fourth Quarter and Full Year 2012 Earnings Conference Call. My name is Karissa, and I will be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to Kathy MacDonald, Vice President, Investor Relations. Please proceed, Kathy.

Kathy Ann MacDonald

Thank you, and good morning. Welcome to Mead Johnson's fourth quarter conference call. With me today are Steve Golsby, our Chief Executive Officer; Kasper Jakobsen, our Chief Operating Officer and designated CEO-elect; and Pete Leemputte, our Chief Financial Officer.

As we start, let me remind everyone that our comments will include forward-looking statements about our future results, including statements about our financial prospects and projections, new product launches and market conditions, that constitute forward-looking statements for purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995.

Keep in mind that our actual results may differ materially from expectations as of today due to various factors, including those listed in our annual report on Form 10-K, quarterly report on Form 10-Q and current reports on Form 8-K, in each case, as filed with or furnished to the Securities and Exchange Commission and our earnings release issued this morning, all of which are available upon request or on our website at

In addition, any forward-looking statements represent our estimates only as of today and should not be relied upon as representing our estimates as of any subsequent date.

While we may elect to update forward-looking statements at some time in the future, we specifically disclaim any obligation to do so, even if our estimates change.

Given that you are in the midst of the earnings reporting season, we will be respectful of your time, and I will now turn the call over to Steve.

Stephen W. Golsby

Thank you, Kathy, and good morning, everyone. As you've likely read in our press release, we delivered strong and improved performance in the fourth quarter in both operating segments and, for the full year, delivered at the top end of our projected sales range while exceeding our EPS guidance.

Fourth quarter sales grew by 7% on a constant dollar basis, with 5% from organic growth and 2% from our Argentine acquisition. The Asia/Latin America segment delivered growth of 9%, while successfully completing the reduction of distributor inventory in China.

The North America/Europe segment returned to positive growth of 4% as we continue to gain profitable non-WIC market share. Fourth quarter non-GAAP earnings of $0.72 per share were up $0.20 from 2011, and put us above the top end of our guidance as we recognize one additional penny from prior year's tax adjustments.

Our fourth quarter results brought full year non-GAAP earnings to $3.08 per share, an increase of 10% from 2011.

Let me highlight some of our key achievements for the full year. Firstly, on an annual basis, we delivered 7% constant dollar sales growth, while overcoming significant challenges in our 2 largest markets. Our Asia/Latin America segment, which delivered 12% growth, excluding foreign exchange, now accounts for 70% of our global sales, up from 67% in 2011.

While we fully acknowledge the first half challenge we faced in China, we made excellent progress in recovering market share in the second half, with further gains in the fourth quarter. And importantly, distributor inventories were restored to normal levels by year end.

In 2012, China/Hong Kong sales grew by 5% on a constant dollar basis and reached almost $1.2 billion, double the level of sales from 2009, the year of our IPO.

The other markets of the Asia/Latin America segment contributed organic growth of 12%, which was further enhanced by our acquisition in Argentina. We grew market share across these businesses, which now accounts for 40% of our total sales.

Latin America delivered the strongest growth among our regions and we are on track to achieve $1 billion in sales by 2015.

We completed our Argentine acquisition in March, the transition has been smooth and we are very pleased with the progress, including the fourth quarter launch of premium Bebe Plus with our clinically supported science.

Turning to the North America/Europe segment, constant dollar sales were 3% lower than 2011 as a result of lower birth and consumption and the impact of the misleading media event late in 2011. However, the impact of that media event is now behind us. And by the end of 2012, our non-WIC market share had completely recovered and indeed, stand slightly above the level seen before the event.

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