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Mead Johnson Nutrition Reports Third Quarter Earnings; Year To Date Constant Dollar Sales Up 7 Percent

Mead Johnson Nutrition Company (NYSE: MJN) announced today its financial results for the third quarter ended September 30, 2012.
  • Net sales of $921.3 million in the quarter were down one percent versus the third quarter of 2011. Excluding the unfavorable impact of foreign exchange, sales increased one percent.
  • GAAP net earnings were $0.69 per diluted share for the third quarter of 2012 compared to $0.70 per diluted share in 2011.
  • Non-GAAP (1) net earnings were $0.71 per diluted share for the third quarter of 2012 compared to $0.78 per diluted share a year earlier.
  • Constant dollar sales for the Asia/Latin America segment grew three percent in the quarter. Sales growth for the segment was reduced by eight percent from planned distributor inventory reductions in China, as well as the difficult comparison to the prior year period when customers in Asia made higher purchases in advance of our SAP launch. Excluding China/Hong Kong, the rest of the Asia/Latin America segment delivered double-digit growth.
  • For the North America/Europe segment, both regions contributed to a four percent constant dollar sales decline. The decline in Europe was due to a challenging comparison with higher sales in the prior year after the transition to a new distributor model and weak current year economic conditions. Sales in North America were down from lower market share, attributed to the impact of the unfounded media reports in December 2011 alleging product contamination, and market contraction.
  • Notwithstanding lower sales, demand-generation investments increased as compared to the prior year, which reduced current year earnings by $0.04 per diluted share.
  • Earnings in the third quarter of 2012 included a $0.02 loss per diluted share from foreign currency re-measurement on U.S. dollar denominated balances held by our foreign subsidiaries. In contrast, earnings in the third quarter of 2011 benefited from a $0.05 gain per diluted share from the foreign currency re-measurement .
  • Earnings in the third quarter of 2012 also included a benefit of $0.06 per diluted share from adjustments to prior years’ tax accruals.
  • Full-year GAAP EPS guidance, which includes specified items estimated at $0.11 per diluted share, is expected to be in the range of $2.91 to $2.96, previously estimated at $2.95 to $3.05. Full-year non-GAAP EPS is expected to be in the range of $3.02 to $3.07, previously estimated at $3.04 to $3.14. (1) See “Non-GAAP Financial Measures” and the reconciliation of GAAP and non-GAAP results included in this release.

“We are pleased with the strong growth we delivered in most of our emerging markets during the third quarter,” said Chief Executive Officer Stephen W. Golsby. “As detailed in our July earnings call, however, we entered the third quarter with lower market share as well as distributors carrying higher inventories in China. While the sales impact from these factors dampened growth for the Asia/Latin America segment, we are seeing good progress in both share recovery and inventory reductions in China, with further improvement expected in the fourth quarter. Importantly, sales growth for the Asia/Latin America segment excluding China/Hong Kong was at a strong double-digit rate. In the North America/Europe segment, while we still see category contraction in the U.S. due to lower births and reduced consumption, we continue to recover market share following the unfounded media reports in December 2011 of alleged product contamination. Despite the temporary challenges we face in China, we are encouraged by recent trends, have full confidence in our strategies, and continue to invest strongly in the business.”

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