Mead Johnson Reports Strong First Quarter Earnings; Delivers 11 Percent Constant Dollar Sales Growth; And Increases Annual

  Mead Johnson Reports Strong First Quarter Earnings; Delivers 11 Percent
  Constant Dollar Sales Growth; And Increases Annual Guidance

Business Wire

GLENVIEW, Ill. -- April 24, 2014

Mead Johnson Nutrition Company (NYSE: MJN) today announced its financial
results for the quarter ended March 31, 2014.

  *First quarter sales of $1,113.3 million increased seven percent from
    $1,037.9 million in the prior-year quarter. Sales were up 11 percent on a
    constant dollar basis.
  *Sales for the Asia and North America/Europe segments each grew nine
    percent, while the Latin America segment grew 21 percent, all on a
    constant dollar basis. Venezuela and Argentina price increases, which
    helped mitigate the unfavorable impact of weaker local currencies,
    contributed 10 percent to the segment's growth and two percent to overall
    company growth.
  *In the first quarter of 2014, MJN adopted mark-to-market accounting
    (“MTM”) for all of its defined benefit pension and other post-employment
    benefit plans (“New Pension Accounting”). As such, all results and prior
    year comparisons have been recast. See the company's Form 10-Q for the
    first quarter of 2014 for details regarding the impact of this change.
  *Following the New Pension Accounting change, GAAP net earnings of $1.00
    per diluted share for the first quarter of 2014 were up from $0.92 per
    diluted share a year ago. Earnings increased from higher sales volume and
    pricing, along with a favorable tax rate, offset in part by the impact of
    a stronger dollar, higher demand-generation investments and the impact of
    a 2013 pension MTM actuarial gain.
  *Non-GAAP ^(1) net earnings of $1.02 per diluted share for the first
    quarter of 2014 increased from $0.88 per diluted share in 2013.
  *For full-year 2014, GAAP net earnings are now expected to be between $3.54
    and $3.66 per diluted share compared to the previously reported range of
    $3.44 to $3.56 per diluted share. Possible future quarterly and annual
    pension MTM actuarial gains or losses are not reflected in the current
    GAAP guidance because they cannot be estimated with certainty. Non-GAAP
    net earnings in 2014 are now expected to be between $3.60 and $3.72 per
    diluted share compared to the previously reported range of $3.50 to $3.62
    per diluted share. Of the expected $0.10 increase in earnings per share,
    approximately two-thirds is attributed to the New Pension Accounting with
    the remainder the result of stronger anticipated operational performance.
    To provide a better view of underlying operational performance, pension
    MTM actuarial gains or losses will be treated as a Specified Item.^(1)

^(1) For the definition of Specified Items and a reconciliation of GAAP and
non-GAAP results, see “Non-GAAP Financial Measures” on the schedule titled
“Supplemental Financial Information” included in this release.

“We achieved record sales and earnings in the quarter,” said Chief Executive
Officer Kasper Jakobsen. “Sales growth was strong across all segments,
including within our two largest markets. With innovations launched last year
and increased investment in demand creation, we continued to see market share
gains in all three segments. We invested appropriately to support future
growth, while delivering 16 percent growth in earnings per share on a non-GAAP
basis.”

First Quarter Results

Sales for the first quarter of 2014 were $1,113.3 million, up seven percent
from $1,037.9 million a year ago. Sales increased seven percent from volume
and four percent from price, partially offset by a four percent decline from
foreign exchange. Gross margin for the first quarter of 2014 was 63.6 percent,
up from 62.9 percent in the first quarter of the prior year. The gross margin
improvement was due to pricing and productivity gains, somewhat offset by
higher dairy costs. Advertising and promotion investments grew in line with
sales growth. Operating expenses were higher mainly due to the impact of a
2013 pension MTM actuarial gain not repeated in 2014. Earnings before interest
and income taxes (“EBIT”) totaled $291.2 million, up from $273.5 million in
the prior-year quarter.

The company’s effective tax rate (“ETR”) was 25.5 percent in the first
quarter, compared to 26.7 percent in the prior-year quarter. The ETR
improvement was primarily attributed to a change in the geographic earnings
mix.

Net earnings attributable to shareholders totaled $202.4 million, or $1.00 per
diluted share, in the first quarter of 2014, compared to $188.0 million, or
$0.92 per diluted share, in the prior-year quarter.

On a non-GAAP basis, which excludes Specified Items, net earnings attributable
to shareholders totaled $206.1 million, or $1.02 per diluted share, for the
first quarter of 2014, compared to $179.9 million, or $0.88 per diluted share,
for the same quarter a year ago.

First Quarter Segment Results

The Asia segment reported sales of $592.7 million for the first quarter of
2014, up seven percent from $554.2 million in the prior-year quarter. Sales
increased six percent from volume and three percent from price, reduced by two
percent from foreign exchange. Volume growth was driven by category growth and
market share gains. Several Asian markets, including China, saw a continued
benefit from competitors' supply disruptions that occurred in 2013. EBIT for
the Asia segment totaled $241.3 million in the first quarter of 2014, up from
$221.6 million for the same quarter a year ago. The increase in EBIT was
mainly driven by higher sales.

The Latin America segment reported sales of $212.4 million for the first
quarter of 2014, up six percent from $201.1 million in the same period of the
prior year. Sales increased 11 percent from price and 10 percent from volume
offset by a 15 percent foreign exchange decline. Price increases in Venezuela
and Argentina substantially mitigated the unfavorable sales impact from weaker
local currencies in both markets. Volume growth was driven by share gains
across most markets and continued category growth. Operating expenses were up
due to a receivable allowance for a pharmacy distributor in Mexico and a
Venezuelan balance sheet remeasurement loss. Effective February 28, 2014, the
company adopted the Venezuelan government-supported rate, commonly referred to
as SICAD I. EBIT for the Latin America segment totaled $46.6 million in the
first quarter of 2014, from $47.0 million for the same quarter a year ago.

The North America/Europe segment reported sales of $308.2 million for the
first quarter of 2014, up nine percent from $282.6 million in the first
quarter of 2013. Sales increased seven percent from volume and two percent
from price. Volume growth was primarily in the U.S. driven by an expanding
children's nutrition business, non-WIC ^ (2) market share gains and retailer
inventory adjustments. Gross margin improved from pricing, manufacturing
efficiencies and timing of WIC accruals. Higher demand-generation spending
helped to drive growth in children's nutrition products. EBIT for the North
America/Europe segment totaled $66.1 million in the first quarter of 2014, up
25 percent from $52.9 million in the first quarter a year ago.

Corporate and Other expenses increased mainly due to legal costs and the
impact of a 2013 pension MTM actuarial gain not repeated in 2014.

^(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).

Outlook for 2014

“We now anticipate constant dollar sales growth of approximately eight percent
for the full year 2014, up from seven percent in our prior guidance, on
expected stronger revenue momentum,” Mr. Jakobsen said. “We are planning for
higher demand-generating investments throughout the remainder of the year,
despite foreign exchange pressure on our earnings.” With the New Pension
Accounting changes and stronger underlying business performance, the company
has raised guidance and expects full-year non-GAAP EPS to be in the range of
$3.60 to $3.72 per diluted share.

Conference Call Scheduled

Mead Johnson will host a conference call at 8:30 a.m. CDT today, during which
company executives will review first quarter financial results and respond to
questions from analysts and investors. The call will be broadcast over the
Internet at http://investors.meadjohnson.com. Security analysts and investors
wishing to participate by telephone should call (866) 383-8009, pass code:
Mead Johnson.Callers outside of North America should call +1-617-597-5342 to
be connected. A replay of the conference call will be available through
midnight CDT Thursday, May 1, 2014, by calling (888) 286-8010 or outside of
North America +1-617-801-6888, pass code: 73051739. The replay will also be
available at http://investors.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; (12)
legislative, regulatory or judicial action that may adversely affect the
company’s ability to advertise its products or maintain product margins; 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.


MEAD JOHNSON NUTRITION COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars and shares in millions, except per share data)
(UNAUDITED)

                                                Three Months Ended March 31,
                                                  2014             2013^(a)
NET SALES                                         $  1,113.3         $ 1,037.9
Cost of Products Sold                             405.7             385.0
GROSS PROFIT                                      707.6              652.9
Expenses:
Selling, General and Administrative               232.9              207.1
Advertising and Promotion                         155.7              144.5
Research and Development                          27.1               22.5
Other Expenses – net                              0.7               5.3
EARNINGS BEFORE INTEREST AND INCOME TAXES         291.2              273.5
                                                                     
Interest Expense – net                            12.4              14.2
EARNINGS BEFORE INCOME TAXES                      278.8              259.3
                                                                     
Provision for Income Taxes                        71.0              69.3
NET EARNINGS                                      207.8              190.0
Less Net Earnings/(Loss) Attributable to          5.4               2.0
Noncontrolling Interests
NET EARNINGS ATTRIBUTABLE TO SHAREHOLDERS         $  202.4          $ 188.0
                                                                     
                                                                     
                                                                     
Earnings per Share*– Basic
Net Earnings Attributable to Shareholders         $  1.00           $ 0.93
Earnings per Share*– Diluted
Net Earnings Attributable to Shareholders         $  1.00           $ 0.92
                                                                     
Weighted-average Shares – Diluted                 202.4              203.2
Dividends Declared per Share                      $  0.38            $ 0.34

  ^(a)  See the company's Form 10-Q for the first quarter of 2014 for
           details regarding the impact of the New Pension Accounting.
           

*The numerator for basic and diluted earnings per share is net earnings
attributable to shareholders reduced by dividends and undistributed earnings
attributable to unvested shares. 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
CONSOLIDATED BALANCE SHEETS
(Dollars and shares in millions, except per share data)
(UNAUDITED)

                                        March 31, 2014   December 31, 2013
                                                             ^(a)
CURRENT ASSETS:
Cash and Cash Equivalents                 $  1,090.0         $   1,050.8
Receivables – net of allowances of        397.2              384.4
$11.5 and $6.5, respectively
Inventories                               570.9              534.8
Deferred Income Taxes – net of            90.3               75.3
valuation allowance
Income Taxes Receivable                   21.9               15.9
Prepaid Expenses and Other Assets         68.1              56.9          
Total Current Assets                      2,238.4            2,118.1
Property, Plant, and Equipment – net      872.3              867.5
Goodwill                                  176.0              196.8
Other Intangible Assets – net             85.7               97.5
Deferred Income Taxes – net of            31.4               37.0
valuation allowance
Other Assets                              137.4             157.2         
TOTAL                                     $  3,541.2        $   3,474.1   
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term Borrowings                     $  1.5             $   2.0
Accounts Payable                          549.5              566.8
Dividends Payable                         76.5               69.3
Current Portion of Long-Term Debt         503.9              505.6
Accrued Expenses                          215.5              220.0
Accrued Rebates and Returns               332.1              314.9
Deferred Income – current                 22.1               46.6
Income Taxes – payable and deferred       79.8              56.1          
Total Current Liabilities                 1,780.9            1,781.3
Long-Term Debt                            1,008.7            1,009.1
Deferred Income Taxes – noncurrent        13.2               15.3
Pension and Other Post-employment         162.2              161.8
Liabilities
Other Liabilities                         163.7             156.4         
Total Liabilities                         3,128.7            3,123.9
COMMITMENTS AND CONTINGENCIES
                                                                           
REDEEMABLE NONCONTROLLING INTEREST        53.2               49.7
                                                                           
EQUITY
Shareholders’ Equity
Common Stock, $0.01 par value: 3,000
authorized, 207.3 and 206.8 issued,       2.1                2.1
respectively
Additional Paid-in/(Distributed)          (702.6      )      (721.5        )
Capital
Retained Earnings                         1,549.9            1,432.3
Treasury Stock – at cost                  (382.1      )      (351.9        )
Accumulated Other Comprehensive Loss      (121.4      )      (69.2         )
Total Shareholders’ Equity                345.9              291.8
Noncontrolling Interests                  13.4              8.7           
Total Equity                              359.3             300.5         
TOTAL                                     $  3,541.2        $   3,474.1   

  ^(a)  See the company's Form 10-Q for the first quarter of 2014 for
           details regarding the impact of the New Pension Accounting.
           

MEAD JOHNSON NUTRITION COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
(UNAUDITED)

                                                Three Months Ended March 31,
                                                  2014           2013^(a)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings                                      $  207.8         $ 190.0
Adjustments to Reconcile Net Earnings to Net
Cash Provided by Operating Activities:
Depreciation and Amortization                     22.0             20.1
Other                                             26.7             25.1
Changes in Assets and Liabilities                 (57.5      )     (24.7     )
Pension and Other Post-employment Benefits        (1.4       )     (2.6      )
Contributions
Net Cash Provided by Operating Activities         197.6            207.9
CASH FLOWS FROM INVESTING ACTIVITIES:                             
Payments for Capital Expenditures                 (63.1      )     (77.5     )
Proceeds from Sale of Property, Plant and         0.4              0.8
Equipment
Proceeds in/(Investment in) Other Companies       4.0             (0.7      )
Net Cash Used in Investing Activities             (58.7      )     (77.4     )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Short-term Borrowings               0.1              3.1
Repayments of Short-term Borrowings               (0.3       )     (61.0     )
Repayments of Notes Payable                       —                (8.4      )
Payments of Dividends                             (68.8      )     (60.9     )
Stock-based-compensation-related Proceeds and     11.6             5.2
Excess Tax Benefits
Purchases of Treasury Stock                       (30.2      )     (32.1     )
Net Cash Used in Financing Activities             (87.6      )     (154.1    )
Effects of Changes in Exchange Rates on Cash      (12.1      )     (1.3      )
and Cash Equivalents
NET INCREASE/(DECREASE) IN CASH AND CASH          39.2             (24.9     )
EQUIVALENTS
CASH AND CASH EQUIVALENTS:
Beginning of Period                               1,050.8         1,042.1   
End of Period                                     $  1,090.0      $ 1,017.2 

  ^(a)  See the company's Form 10-Q for the first quarter of 2014 for
           details regarding the impact of the New Pension Accounting.
           

SUPPLEMENTAL FINANCIAL INFORMATION
(Dollars in millions)
(UNAUDITED)

                 Three Months Ended March 31,                        % Change                % Change Due to
                                 % of                    % of                 Constant                          Foreign
Net Sales          2014            Total     2013              Total     Reported     Dollar       Volume     Price/Mix     Exchange
Asia               $ 592.7         53  %     $ 554.2           54  %     7    %       9    %       6   %      3     %       (2    )%
Latin America      212.4           19  %     201.1             19  %     6    %       21   %       10  %      11    %       (15   )%
North              308.2          28  %     282.6            27  %     9    %       9    %       7   %      2     %       —     %
America/Europe
Net Sales          $ 1,113.3      100 %     $ 1,037.9        100 %     7    %       11   %       7   %      4     %       (4    )%
                                                                                                                                  
                                                                                                                                  
                                   EBIT                        EBIT
Earnings
Before                             % of                        % of
Interest and
Income Taxes       2014            Sales     2013^(a)          Sales     % Change
(EBIT)
Asia               $ 241.3         41  %     $ 221.6           40  %     9    %
Latin America      46.6            22  %     47.0              23  %     (1   )%
North              66.1            21  %     52.9              19  %     25   %
America/Europe
Corporate and      (62.8     )               (48.0     )                31   %
Other
EBIT               $ 291.2        26  %     $ 273.5          26  %     6    %

  ^(a)  See the company's Form 10-Q for the first quarter of 2014 for
           details regarding the impact of the New Pension Accounting.
           

                         Non-GAAP Financial Measures

This news release contains non-GAAP financial measures, including non-GAAP
EBIT, earnings and earnings per share information. Specified Items, listed in
the table below, are items included in GAAP measures, but excluded for the
purpose of determining non-GAAP EBIT, earnings and earnings per share.
Non-GAAP 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 GAAP to non-GAAP disclosure follow:


MEAD JOHNSON NUTRITION COMPANY
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(Dollars in millions, except per share data)
(UNAUDITED)

                 Three Months Ended March 31, 2014                               Three Months Ended March 31, 2013
                                Specified Items ^(1)                                            Specified Items ^(1)               
                                           Legal,                                                           Legal,     
                                            Settlement                                                         Settlement
                                 Mark-to-   and          Severance                                 Mark-to-    and          Severance
                                 Market     Related      and Other                                 Market      Related      and Other
                   GAAP          Pension    Costs        Costs       Non-GAAP        GAAP ^(2)     Pension     Costs        Costs       Non-GAAP
                                                                                                                                        ^(2)
NET SALES          $ 1,113.3                                         $ 1,113.3       $ 1,037.9                                          $ 1,037.9
Cost of            405.7        —         —           —          405.7          385.0        5.2        —           —          390.2     
Products Sold
GROSS PROFIT       707.6         —          —            —           707.6           652.9         (5.2    )   —            —           647.7
GROSS MARGIN %     63.6      %                                       63.6      %     62.9      %                                        62.4      %
                                                                     
Expenses:
Selling,
General and        232.9         —          (5.7     )   (0.1    )   227.1           207.1         8.5         —            (1.4    )   214.2
Administrative
Advertising        155.7         —          —            —           155.7           144.5         —           —            —           144.5
and Promotion
Research and       27.1          —          —            —           27.1            22.5          1.5         —            —           24.0
Development
Other Expenses     0.7          —         —           —          0.7            5.3          —          (0.2    )    —          5.1       
– net
EARNINGS
BEFORE             291.2         —          5.7          0.1         297.0           273.5         (15.2   )   0.2          1.4         259.9
INTEREST AND
INCOME TAXES
EBIT as a % of     26        %                                       27        %     26        %                                        25        %
Sales
                                                                                                                                                  
Interest           12.4         —         —           —          12.4           14.2         —          —           —          14.2      
Expense – net
EARNINGS
BEFORE INCOME      278.8         —          5.7          0.1         284.6           259.3         (15.2   )   0.2          1.4         245.7
TAXES
                                                                                                                                                  
Provision for      71.0         —         2.1         —          73.1           69.3         (5.6    )   —           0.1        63.8      
Income Taxes
Effective Tax      25.5      %                                       25.7      %     26.7      %                                        26.0      %
Rate
                                                                                                                                                  
NET EARNINGS       207.8         —          3.6          0.1         211.5           190.0         (9.6    )   0.2          1.3         181.9
Less Net
Earnings
Attributable       5.4          —         —           —          5.4            2.0          —          —           —          2.0       
to
Noncontrolling
Interests
NET EARNINGS
ATTRIBUTABLE       $ 202.4      $  —      $  3.6      $  0.1     $ 206.1        $ 188.0      $ (9.6  )   $  0.2      $  1.3     $ 179.9   
TO
SHAREHOLDERS
Earnings per
Share– Diluted
Net Earnings
Attributable       $ 1.00       $  —      $  0.02     $  —       $ 1.02         $ 0.92       $ (0.05 )   $  —        $  0.01    $ 0.88    
to
Shareholders

^(1)  All Specified Items are included in Corporate and Other.
^(2)   See the company's Form 10-Q for the first quarter of 2014 for details
       regarding the impact of the New Pension Accounting.
       

Contact:

Mead Johnson Nutrition Company
Investors:
Kathy MacDonald, (847) 832-2182
kathy.macdonald@mjn.com
or
Media:
Christopher Perille, (847) 832-2178
chris.perille@mjn.com
 
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