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Mead Johnson Delivers Strong Earnings; Second Quarter Constant Dollar Sales Up 11 Percent

On a non-GAAP basis, which excludes specified items, the net earnings attributable to shareholders totaled $171.2 million, or $0.83 per diluted share, compared with $148.7 million, or $0.72 per diluted share, a 15 percent increase from the same quarter a year ago.

Second Quarter Segment Results

The Asia/Latin America segment delivered net sales of $695.2 million for the second quarter of 2012, up 14 percent from $611.6 million in 2011. Sales benefited 9 percent from price, 7 percent from volume, reduced by 2 percent from foreign exchange. The segment benefited from the first full quarter of sales following the March 2012 acquisition of an 80 percent equity interest in Argentina’s leading infant formula and children’s nutrition business. EBIT totaled $237.5 million, up 13 percent compared with $209.8 million for the year-ago quarter. EBIT increased from sales growth partially offset by higher demand-generation investment spending.

The North America/Europe segment reported net sales of $317.1 million for the second quarter of 2012, down 1 percent from $320.4 million in 2011. Sales benefited 5 percent from price, offset by a 5 percent decline in volume and a 1 percent reduction from foreign exchange. The volume decrease reflected lower U.S. market share, as well as lower category consumption and births. The U.S. market share was lower in comparison to the prior year when we benefited from a competitor’s recall and due to the current year impact of the unfounded media reports in December 2011 of alleged product contamination. EBIT for the segment totaled $74.6 million, down 14 percent compared with $86.4 million for the year-ago quarter. The decline in EBIT was primarily due to higher commodity costs and unfavorable manufacturing variances attributed to lower production volumes in the U.S.

Corporate and Other expenses decreased from lower IT and separation costs, the elimination of duplicate shared service costs during the SAP implementation completed in late 2011, foreign currency balance sheet re-measurement gains and lower performance-based compensation accruals. These factors were partially offset by the recognition of pension settlement expense. Similar pension settlement expense was recognized in the fourth quarter of the prior year.

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