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Mead Johnson Nutrition (NYSE:MJN)

Q3 2011 Earnings Call

October 27, 2011 9:30 am ET

Executives

Kathy A. MacDonald - Vice President of Investor Relations

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

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

Analysts

Jason English - Goldman Sachs Group Inc., Research Division

Amit Sharma - BMO Capital Markets U.S.

Alexis Borden

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

Robert Moskow - Crédit Suisse AG, Research Division

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

Operator

Good day, ladies and gentlemen, and welcome to the Mead Johnson Nutrition Third Quarter 2011 Earnings Conference Call. My name is Katie, and I'll be your coordinator for today. [Operator Instructions] I would now like to turn the presentation over to Kathy MacDonald, Vice President of Investor Relations. Please proceed, Kathy.

Kathy A. MacDonald

Thank you, and good morning. Welcome to Mead Johnson's third quarter conference call. With me today are Steve Golsby, our Chief Executive Officer; and Pete Leemputte, our Chief Financial Officer.

Before we get started, 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 provisions 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 for 2010, quarterly reports 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 meadjohnson.com.

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 point in the future, we specifically disclaim any obligation to do so even if our estimates change.

Before we get started, I'd like to personally thank all of you who joined us 2 weeks ago at our investor day event. Since we provided a strategic overview and preliminary third-quarter results, we will try to keep this call brief. I will now turn the call over to Steve.

Stephen W. Golsby

Thank you, Kathy, and good morning, everyone. We've completed another strong quarter, and as you likely read in this morning's press release, our results were in line with the positive expectations shared with you at our investor day event 2 weeks ago, and our EPS came in at the top end of our preliminary estimate. Therefore, I'll keep my comments brief and focus on the key highlights of our strong sales and earnings results.

We delivered double-digit sales growth of 15% on a reported basis in the third quarter or about 11.5% measured in constant dollars. Non-GAAP earnings of $0.78 per share, up 37% from the prior year quarter, came from strong sales growth in emerging markets, favorable foreign exchange impacts and a lower effective tax rate, offset in part by continued investments in demand generation activities and nonrecurring manufacturing inefficiencies. And as mentioned earlier this year, we're starting to see the gross margin impact of higher commodity costs. Pete will address the profit and margin numbers in more detail in a few minutes.

Sales for the Asia/Latin America segment grew by 30% on a reported basis or 25% excluding the impact of foreign exchange. I should highlight that about 3% of sales growth for the segment came as the result of some retailers in Asia purchasing extra inventory in advance of the October transition to our new SAP technology platform. Excluding this factor, which is expected to reverse in the fourth quarter, constant dollar sales in Asia/Latin America grew by 22%.

Our strongest performance continues to be in China and Hong Kong, with growth well above the segment average. While many investors naturally focus on our performance in Greater China, we also have delivered double-digit constant dollar sales growth in the rest of Asia and Latin America in 2011. We've seen success in the execution of our strategies in most of our emerging markets.

In the North America/Europe segment, third quarter sales were 7% lower on a reported basis or down 8% measured in constant dollars. We expected this tough comparison due, in large part, to lapping a competitor's U.S. product recall commencing in September of 2010. Most importantly, our U.S. market share remains above third quarter 2010 and is evidence that consumers value our many products innovations launched over the past year.

There were also some timing factors at work that reduced U.S. sales for the last quarter, including the phase out of one WIC contract in Indiana without the full phase-in on a new Mead Johnson contract for New England states. That should be completed in the fourth quarter.

Importantly, volume continued to be the key driver of sales growth at 7.5% for the company in total and a strong 19% in Asia and Latin America. Higher pricing added 4%, with both developed and emerging market segments seeing the benefit. We will continue to use pricing as well as productivity gains to manage gross margins as we move into 2012.

Turning now to our full year outlook. We've maintained our constant dollar sales growth projection at about 14% versus the prior year, with another 2.5% from foreign exchange. We expect to see annual sales growth slightly above 20% in Asia/Latin America with North America/Europe in the low single digits.

Non-GAAP EPS is expected to be in the range of $2.73 to $2.78, up from the $2.70 to $2.75 range from last quarter. Operating expenses of 39.7% of sales reflect our commitment to continue investing in demand generation activities to support sustainable sales and earnings growth.

I'll now turn the call over to Pete to provide you further highlights and will return to wrap up and take your questions.

Peter G. Leemputte

Thanks, Steve, and good morning, everyone. As a reminder, my comments will focus on non-GAAP figures. I will cover 3 key topics: first, the key drivers of our third quarter EPS improvement; second, those factors which impact fourth quarter and full year EPS; and finally, some brief comments on our balance sheet and free cash flow.

Third quarter non-GAAP earnings of $0.78 per share were $0.21 higher than 2010. About $0.08 of this increase is related to foreign exchange impacts on our balance sheet. Many consumer goods companies operate in their major markets with self-contained local manufacturing and local currency costs, and thus, are not subject to any significant foreign exchange exposure for their balance sheet. We however, spray dry our base infant formulas at centralized facilities. These plants invoice in dollars for products shipped into other markets and have dollar cash and receivable accounts on their local currency books. As a result, they face balance sheet remeasurement gains or losses on these accounts as exchange rates fluctuate.

In the third quarter of last year, we saw a weakening dollar and recognized balance sheet remeasurement losses as a result. And in the third quarter 2011, we have seen the opposite trend, with the dollar strengthening against many currencies leading to balance sheet remeasurement gains. Well, that is one key factor affecting the year-over-year comparison.

A second factor is that we saw a $0.03 EPS hit from pension settlement expense in the third quarter of last year. This is the result of accounting rules which dictate that when lump-sum payments from a defined benefit plan exceed pension expense, a portion of the plan's deferred losses need to be recognized immediately. Given that our plan is frozen, our pension expense is relatively low, so it doesn't take many retirees to generate the settlement expense.

With the first 3 quarters of 2011, however, we have seen lower lump-sum payouts than in 2010 and have not yet hit the threshold to recognize any pension settlement charges. Instead, we anticipate this expense will show up in the fourth quarter. Absent these 2 items, EPS grew by about $0.10 per share or about 17% in the quarter. Strong sales growth and a lower effective tax rate were offset by lower gross margins and a higher level of operating expenses.

This quarter's gross margin of 61.6% was below our earlier expectations by almost a full percentage point. We incurred onetime manufacturing inefficiencies at a plant that supplies Asia. Due to strong demand in these markets, which was further aggravated by our desire to build inventories in advance of the October SAP launch in Asia, we rebalanced global inventories, leading to higher airfreight costs. We're operating at normal capacity now and this factor will not recur.

Higher dairy and agricultural oil costs came through as expected, also driving gross margins down relative to the mid-64% range seen in the first half of the year. As we showed at the investor day event, the largest increase in dairy costs in 2011 has been in the North American market. And further pressure on market margins will be evident in the fourth quarter for the North America/Europe segment.

On a full year basis, we currently expect gross margins to be slightly less than 63%, and below the 63.2% expectation set last quarter. The third quarter manufacturing inefficiencies I just mentioned are the reason for the reduction.

Absent foreign exchange and pension impacts, operating expenses grew by $45 million or $0.16 per share compared to the prior year quarter. Most of this is demand generation spend for marketing, sales force, advertising and promotion, along with research and development. We expect our spending levels in the fourth quarter to grow even further, reducing earnings by as much as $0.08 per share relative to the third quarter. On a full year basis, we anticipate total operating expenses will be consistent with our previous guidance at about 39.7% of sales, of which advertising and promotion spending should run around 14% of sales.

Turning to taxes, our effective tax rate, or ETR, came in about 24% on a non-GAAP basis compared to 31% of last year. Each quarter, we update our full year tax rate and also true up our tax accruals to apply that latest rate estimate to pretax earnings generated year-to-date, not just in the current quarter. We now forecast the 2011 full year rate to be just under 28%, about 100 basis points lower than our June estimate. That is due to a favorable country mix, higher manufacturing and R&D tax incentives, and favorable adjustments to accounting tax provisions as we file our tax returns each September. The drop in the 2011 tax rate increased EPS in the quarter by about $0.03, with $0.02 of that due to the benefit from first-half earnings.

The key assumptions behind our full year earnings guidance of $2.73 to $2.78 per share include 14% constant dollar sales growth plus an additional 2.5% from foreign exchange. Gross margin is slightly below 63%. Operating expenses of about 39.7% and effective tax rate just below 28% are also expected.

Obviously, there are some considerable timing differences in our third-quarter results, but let me quickly highlight some of the factors affecting our fourth quarter. A high-end of our EPS guidance would imply fourth quarter earnings of $0.51 per share. That's a drop in consecutive quarterly earnings of about $0.27 per share. Five factors account for over 90% of the reduction:

First, EPS was boosted by about $0.03 in the third quarter by customer purchases in advance of our October SAP launch. Those shipments will reverse in the fourth quarter, leading to a consecutive earnings decline of a full $0.06.

Second, we anticipate pension settlement expenses of $0.03 to come through in the fourth quarter.

Third, we saw about $0.04 per share from balance sheet remeasurement gains in the third quarter of this year. Those will not repeat. In fact, the dollar has weakened a bit over the last few weeks and we now expect $0.01 or so of balance sheet remeasurement losses in the fourth quarter. Well, those factors reduces consecutive quarterly EPS by about $0.05.

Fourth, we anticipate that operating expenses will grow in the fourth quarter by as much as $0.08 per share.

And fifth, we will see a timing impact from unfavorable fixed cost absorption of about $0.03. Production rates are down slightly in the second half relative to the run rates seen earlier in the year, and are lower than average rates we expect to see moving forward.

There are a number of other factors at work, including higher dairy cost in North America and the unfavorable translation impact from a stronger dollar. Also note that the third quarter results included a benefit from a reduced tax rate on first-half earnings that will not recur. These are partially offset by the recovery from manufacturing inefficiencies seen in the third quarter.

Finally, note that the $0.03 per share increase in our full year earnings guidance reflects the net favorable foreign exchange impacts, the lower tax rate, partly offset by the manufacturing inefficiencies during the third quarter. Operating performance, excluding these items, is largely unchanged from our earlier expectations.

Turning to our balance sheet and cash flow. Cash at the end of September stood at $761 million, of which all but $120 million was held outside the United States. Year-to-date free cash flow, defined as cash provided by operations less capital expenditures, stood at $383 million. We repurchased about 400,000 shares of our stock in the third quarter, bringing our year-to-date buyback to 1.3 million shares, consuming $81.6 million in cash. Adding dividends, we have returned more than 60% of cash flow to shareholders so far this year.

For the full year, capital spending is forecast at about $120 million, down slightly from our earlier estimate of $125 million due to the strengthening of the U.S. dollar. Depreciation and amortization expense will be about $76 million.

With that, help me turn the call back to Steve.

Stephen W. Golsby

Thank you, Pete. Before closing, one last note about our operations. I'm pleased to say that our final wave of SAP implementations that occurred in Asia went smoothly at the beginning of October. All of our markets are now on one technology platform, and I personally want to thank our employees for their hard work and dedication to achieving this significant implementation on schedule. As I summarized during the closing of our investor day event, nothing could be more inspiring for our leaders and employees than driving a successful global company that is winning in the marketplace while making such an important difference to the lives of infants and children.

I'll now turn the call back to the operator and ask that the line be opened for questions.

Question-and-Answer Session

Operator

[Operator Instructions] The first question comes from the line of Diane Geissler from CLSA.

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

Steve, I have a question and really kind of following up from your investor day, in the comments there from the bulk of the growth from China coming from the cities, I think you've been in, or fully -- you sort of fully resourced for more than 12 months. I think you said it was 90% of the growth is coming from that. And I guess, how many cities do you currently consider of the -- I guess, 250 that you're in right now, how many cities do you consider to really be in that comp base?

Stephen W. Golsby

Thank you, Diane. So you got it right. The 90% of our growth in the quarter came from cities in which we have been fully resourced for more than a year, and 10% came from "Step Change" cities that we've entered in the last year. Over the last year, we've entered around 60 to 70 new cities, so 180 to 190 of those 250 cities have been fully operational for more than year.

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

Okay. So I guess my question is, really, I think investors sort of -- obviously, everybody appreciates your growth story. I mean, I don't think that there's anybody out there that questions that, but the question I get from investors is really kind of, how low can it continue? So if you added -- you've got another 50 to 60 cities that will be in your comp base kind of this time next year and then an additional 160 cities over the course of -- how many years until you get to 400 cities?

Stephen W. Golsby

Well, we've said well within the 5-year period, and we've also said that it's likely to be more than 400 cities as the economy of China continues to grow and as urbanization continues to take place. I think as you do your math, if you -- I think there is way too much emphasis put upon the "Step Change" operation into the future and the contribution it's going to make to our growth. Don't forget, as we said before, that Goldman Sachs has estimated that the number children in China born into families with middle-class incomes will triple over the next 20 years. The majority of our growth is coming from cities in which we've been operating for more than a decade. We're growing very fast in Guangzhou, Shanghai, Beijing, Chengdu. The "Step Change" operation complements that core growth, but we're not dependent on it, so we feel very confident in the sustainable performance of our business.

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

Well, I guess my -- the basis of my question is really as you enter those new cities and they become part of your -- kind of your comp base over the next 3 to 5 years, I guess my question is, should we look at China growing at 20%-plus for the foreseeable future based on the performance of once you're in a city, it's fully resourced, kind of people know your product and you have sales force and the kind of pediatric tie-in.

Peter G. Leemputte

I think what's important, Diane, is to recognize -- let's take Guangzhou, which is the first city we entered almost 20 years ago. The economy of that city is growing. The population of that city's growing. The number of children born into middle-class families is growing. And don't forget that we're gaining share. Our brand proposition, our superior science, the recognition of the quality of our products is convincing more new mothers to choose Mead Johnson over other competitors. So we haven't given good specific guidance for the future in terms of sales growth, and certainly not for any one country. But we do feel extremely confident of our ability to continue to generate strong sustainable growth in China. It's all -- it will be our -- together with Hong Kong, it will be our single largest business this year. And clearly, the growth is something that really excites us as we look forward.

Operator

The next question comes from the line of Amit Sharma from BMO Capital Markets.

Amit Sharma - BMO Capital Markets U.S.

Pete, when you look at your pricing throughout the year, is that a little bit higher than what you expected at the beginning of the year?

Peter G. Leemputte

I think, I would say generally in line with our expectations as we move through the year. On a full year basis, our guidance assumes something slightly over 3%. The one market, I think if we're sitting here back in January where we've taken higher pricing that we didn't have original expectations for was in the United States, and that's in response to the very high run-up in dairy costs that we've seen in North America as I pointed out in the investor day. And if you look at our price growth for the North America and Europe segment in the third quarter, you'll start to see -- I think we reported about 2%. You're starting to see the impact of some that come through in our bottom line there. But everything else has been pretty much in line with expectations.

Amit Sharma - BMO Capital Markets U.S.

And as we move forward, especially this quarter and the next quarter where, at least in North America, bulk costs or commodity inflation in dairy is going to hit your income statement, so is there -- is it reasonable to expect that pricing's contribution to sales growth will be higher as we go forward into 2012?

Peter G. Leemputte

I think it could be slightly higher. I would correct one point you made. I mean, we've seen dairy prices peak earlier in the year in Europe and the Oceania markets, which is pretty critical for our Asian business, and have come down since then. So there's probably, if anything, a little bit of pressure relative to the pricing that we're seeing right now that will come off as we move into the first quarter next year. And the story, though, does hold up in North America. And I think if we're seeing 3% for the full year, we will probably try to target something a little bit higher than that. We are still working to try to maintain gross margins on a full year basis at that 63% level, and that will be an important component to being able to do that, as Steve mentioned.

Amit Sharma - BMO Capital Markets U.S.

And just one more. On a broader scale, as you grow into China and in Asia and Latin America, your children nutrition business is going to grow faster, or at least become a bigger part of the portfolio. So I want to see how that changes the margin profile, if you could just put a little bit more color on what -- how is the margin profile of your infant nutrition versus children nutrition, and specifically, in terms of exposure to dairy as well?

Peter G. Leemputte

Right. I think that, first of all, we are seeing excellent growth in the children's nutrition business in Asia and Latin America, but infant formula is growing very, very close to that same rate, so I don't see our mix changing in any significant way for the next couple of years. And remember, if you look at the EBIT margins for Asia and Latin America, they're higher than what you see in North America and Europe. So, well, don't focus just on gross margin, also focus on the operating expenses, which will generally be at a lower level than what you see in North America/Europe.

Amit Sharma - BMO Capital Markets U.S.

And just in terms of dairy exposure, children nutrition, my understanding is that has greater exposure to dairy versus infant, right?

Peter G. Leemputte

Yes.

Amit Sharma - BMO Capital Markets U.S.

Are you able to quantify like what percent of COGS?

Kathy A. MacDonald

Amit -- do you want to take this? Amit, we do try to keep it to one call -- or one question each, so I'll let Pete answer this and then we do need to turn it on to the next person.

Amit Sharma - BMO Capital Markets U.S.

I appreciate it.

Peter G. Leemputte

I mean COGS in total is roughly 25% to 30% of our -- or dairy, excuse me, is 25% to 30% of our cost of goods sold. The milk component in children's nutrition products is probably something closer to 50%, whereas infant formula is at 10%, but we are in front [ph] for doing that.

Operator

Your next question comes the line of Robert Moskow from Crédit Suisse.

Robert Moskow - Crédit Suisse AG, Research Division

We've published a big report on operating leverage ahead of your analyst day. And now that I look at the quarter, it's almost -- optically anyway, it looks like almost too much of a good thing, because you have SG&A down as a percentage of sales by 320 basis points from a year ago. But I was hoping you could kind of tease through here the extent to which that still includes a pretty robust increase in advertising, sales force expansion versus just leveraging G&A expenses versus where you thought a few months ago, Pete. Are you still giving more money to your emerging markets to expand? Or have you told them to kind of ease up a little bit given that the gross margins are a little light?

Peter G. Leemputte

First of all, I think if you're looking at those -- the operating expenses, that must include the balance-sheet-remeasurement foreign exchange gains that I talked about in my prepared remarks. Excluding FX and some other noise that goes through there, our spending in the third quarter was running 1 full point, 100 basis points higher than what we had in the third quarter of last year. We have not cut spending in any market of our emerging markets. And if anything, as we've discussed as we moved through this year, given our very strong top line growth, we've invested more in advertising and promotion and sales force, R&D and marketing. So I think if you're seeing some noise in the quarter, it's probably because of FX, nothing else.

Robert Moskow - Crédit Suisse AG, Research Division

Right. And you think -- in fourth quarter, that noise will be over and you'll -- it'll look measurably different in terms of SG&A as a percentage of sales.

Peter G. Leemputte

Yes. Absent some further sharp change in exchange rates, we will see higher spending in the fourth quarter than we have in the third. I mentioned that would be up roughly as much as $0.08 a share. That's something about $25 million higher than what you would've seen in the third quarter. And you've got to be very careful, Rob, too, here. And we've said this a couple of times. Don't pay to attention to any one quarter because the timing of when we do certain promotional events, et cetera, can vary depending on product launches, et cetera.

Operator

Your next question comes from the line of Jason English from Goldman Sachs.

Jason English - Goldman Sachs Group Inc., Research Division

So a question on pricing. We had a question earlier on pricing, your ability to price. The margins surprised a little bit. Once you got the composition, they surprised to the downside a little bit for me in Asia/Lat Am. And I know Nielsen information is not perfect or precise, but when we look at the Nielsen data out of China, it does show healthy price growth for the category. But for the last 4 months, including the last 2 months, you guys have been lagging the category by nearly 10 percentage points. Are there pricing constraints for your business in China right now?

Stephen W. Golsby

Absolutely not. Be careful with the Nielsen data. It's notoriously inaccurate. The coverage is extremely poor. We're working with Nielsen to try and improve that. We have not taken a price increase in China recently, nor do we intend to. Our mix is a premium mix. We're very comfortable with our price positioning and with the value equation that our brands and products represent. And we are not going to simply exploit the Chinese consumers' tendency to assume that high price equals best science, equals best quality. That is not necessarily the case.

Peter G. Leemputte

And keep in mind, too, we've said we generally -- and there are exceptions, obviously, to this, but we generally look for pricing when we launch product innovation.

Stephen W. Golsby

Well, note -- you can see the margins that we enjoy in our Asia/Latin America segment. And as we told you before, our margins in China are superior to the segment. So I think that we are extremely comfortable with our price positioning, and there are no constraints as we look forward and deliver further innovations to the market.

Peter G. Leemputte

And I would also point out, you started out mentioning that margins are down, that prices are a little bit to the downside. If you look at Asia/Latin America, we're down roughly 300 basis points third quarter this year versus last year. The majority of that is really attributable to the impact of that -- those manufacturing inefficiencies. It shows up in that segment.

Operator

Your next question comes from the line of Tim Ramey from D.A. Davidson.

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

Steve, the guidance on gross margin, I think you both said that it would be below or at about 63% and that the manufacturing inefficiencies were kind of onetime in the 3Q, but in order to get to that $0.63 number, it looks like you have to have a slightly lower gross margin in the 4Q than in the 3Q. Am I doing something wrong there? Or are you expecting gross margins to be a little bit weaker in the fourth quarter?

Peter G. Leemputte

No, you're absolutely right. If you look at what we said, gross margins on a full year basis slightly below 63%. Based on the year-to-date performance, that might imply something around 61% in the fourth quarter, so you're absolutely right. A couple of factors driving that. First is the fact we're going to be facing higher dairy costs in North America in particular. That's the biggest. That's still going through. It has peaked and started to drop a little. It hasn't dropped significantly, but there's the 6-month delay before what you see in spot prices and when it shows up in our COGS. In addition, I mentioned the fact that we're going to have lower production rates. We saw a little bit of that in the third quarter. We're going to see a bigger impact of that in the fourth quarter, and that just gets to the fact that when you look at our global production rates, first half are higher than second half, some of that due to the Abbott recall. But even when we look at it on a normalized basis, we are seeing an impact in gross margins in Q4, which are really timing-driven. We might see some of that rollover into Q1. But on a full year basis next year, it's not going to impact it. And then we get a benefit from favorable mix coming through, and also pricing in the coming year. The bottom line is that we wouldn't want you -- don't draw a conclusion about full year gross margins based on that 61% or so in the first quarter.

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

Okay, that's helpful. I know you don't want to get into 2012 guidance, but the negative operating leverage in the U.S., I mean, should we expect that -- at least that segment operating margin to be perhaps flat to down, given the dairy and the negative operating leverage?

Peter G. Leemputte

I think when we look at next year -- we've said in the past, we're targeting something 63% or more. We believe we're going to be able to achieve that in 2012. We're seeing very healthy gross margins in Asia. We're -- we would expect probably North America/Europe, at least early in the year, to see some additional pressure because of production rates and because of the higher dairy costs. We'll see if dairy comes down, but keep in mind we have seen a decrease in dairy in Asia and Europe, and that will start to show up in our P&L because of the lag effect until the first half of next year.

Operator

Your next question from David Driscoll from Citi Investment Research.

Alexis Borden

Hi, this is Alexis Borden filling in for David this morning. I just have a question about advertising and marketing. Just wondering about the potential of television advertising in the United States. I know you guys do it in limited quantity now, but how is it going? How big do you think it could be?

Stephen W. Golsby

We drive demand in a whole series of ways, both through healthcare professionals and direct to consumers, and TV advertising is a relatively small component of that mix, but we do use it in the United States. We're targeting an important but relatively small constituent group within the total population. And TV advertising is therefore not as cost effective as direct marketing, digital marketing, social media and our world-class direct-mail program. But TV advertising will continue to play a role. During our investor conference, we showed television advertising both for our newborn product and for our Enfagrow products, and we showed the Spanish language version of that to reinforce the fact that the -- that we have many Hispanic marketing efforts that are really helping to drive growth in that important part of the population. But don't expect us to be a mass advertiser on television, but we will continue to use it sort of thoughtfully and selectively.

Operator

At this time, I'm showing we have no further questions. I'd like to hand the call back over to you for closing remarks.

Kathy A. MacDonald

Thank you. I just wanted to say we did try to keep it short as we had promised at the beginning. Again, I want to thank those who came to our investor day. For those who didn't, just a reminder that, that information is on our website, and I thank you and have a good day. Operator?

Operator

Thank you for participation in today's conference call. This concludes the presentation and you may now disconnect. Have a wonderful day.

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