Mead Johnson Nutrition (MJN) Peter Kasper Jakobsen on Q4 2015 Results - Earnings Call Transcript

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Mead Johnson Nutrition Co. (NYSE:MJN)

Q4 2015 Earnings Call

January 28, 2016 9:30 am ET

Executives

Kathy Ann MacDonald - Vice President-Investor Relations

Peter Kasper Jakobsen - President, Chief Executive Officer and Director

Michel Cup - Executive Vice President and Chief Financial Officer

Analysts

Alexis N. Borden - Citigroup Global Markets, Inc. (Broker)

Bryan D. Spillane - Bank of America Merrill Lynch

Amit Sharma - BMO Capital Markets (United States)

Kenneth B. Goldman - JPMorgan Securities LLC

John Joseph Baumgartner - Wells Fargo Securities LLC

Michael Lavery - CLSA Americas LLC

Matthew C. Grainger - Morgan Stanley & Co. LLC

Jason English - Goldman Sachs & Co.

Robert Moskow - Credit Suisse Securities (NYSE:USA) LLC (Broker)

Eric Richard Katzman - Deutsche Bank Securities, Inc.

David H. Hayes - Nomura International Plc

Operator

Good day, ladies and gentlemen, and welcome to the Mead Johnson Nutrition Fourth Quarter 2015 Earnings Conference Call. My name is Liz, and I'll be your coordinator for today. All participants are in a listen-only mode. As a reminder, this conference is being recorded for replay purposes.

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

Kathy Ann MacDonald - Vice President-Investor Relations

Thank you, Liz. Good morning, and thank you for joining Mead Johnson's fourth quarter and full year 2015 conference call. With me today are Kasper Jakobsen, our Chief Executive Officer; and Michel Cup, our Chief Financial Officer.

Earlier today, we issued our earnings release and financial reference slides, which are available on our website. 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, commodity cost, currency fluctuations, pricing, taxes, capital spending, depreciation and amortization, new product launches, product quality, other growth initiatives, and market conditions that constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Security Litigation Reform Act of 1995. A more detailed explanation of our forward-looking statements will appear in the materials posted on our website in connection with today's conference call.

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 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.

Today's comments will include discussion of non-GAAP financial measures, a reconciliation of these measures to comparable GAAP measures appears in the morning's earnings release posted on our website. In addition, any forward-looking statements represent our estimates only as of today and should not be relied upon as representing our estimates as 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.

I will now turn the call over to Kasper.

Peter Kasper Jakobsen - President, Chief Executive Officer and Director

Thank you, Kathy, and thank you to all of you for listening to our fourth quarter and full year earnings call this morning. Over the next 35 minutes or so, Michel and myself will summarize our fourth quarter and full year 2015 financial results. We'll also outline our expectations for 2016.

I'll begin by providing an overview focusing on revenue performance, our key strategic initiatives and business drivers and underlying business momentum. I'll then hand over to Michel, who'd give a further analysis of our financial metrics and provide an outlook for key cost drivers. After Michel completes his segment, I will return with a few summary remarks before we give you an opportunity to ask questions.

Except when I note otherwise, I'll be referring to non-GAAP results. A full reconciliation to our GAAP results is available in our 10-Q that was filed alongside our earnings release earlier this morning. Both documents are available on our website.

Let me start with a high level overview of our fourth quarter 2015 results for the global business, before I move on to discuss full year results and then performance of each of our regions. As we exited the year, and I refer now to fourth quarter results specifically, I'm pleased to say we saw a sequential improvement versus the third quarter in our underlying sales performance. Net of withheld shipments to Venezuela, a topic I'll return to later, we saw sequential growth in constant dollar sales of 1%. This represented a modest reversal of the trend we've seen over the previous three quarters, despite sales performance being adversely affected by selective retailer inventory adjustments in Thailand and Malaysia.

Structural changes made to our investment profile in China and the recent launch of our fully-imported line of Enfa products helped us deliver on the promise we made in July. At that time, we said we expected to see sequential improvement in China sales as we exited the year. And in the fourth quarter, our China/Hong Kong business grew 2% sequentially over the third quarter. Our North America/Europe segment also grew sequentially by nearly 5% on a constant dollar basis.

Let me now address our full year results. 2015 was a challenging year for us. We were challenged by a strengthening dollar and the general weakness in many economies throughout Asia and Latin America. GDP growth across Asia and Latin America was lower than prior year, and this affected both consumer and retailer confidence.

Additionally, in China, we saw increased price-based competition and channel shifts that adversely impacted sales growth and required us to boost investment to protect our competitiveness. In Southeast Asia, in particular, we saw a slowing economic growth in Thailand and Malaysia. Combined with some company-specific executional issues, this resulted in lower volumes through the year.

In the Philippines, where GDP growth remained more robust, we saw relatively better performance. And there, we are satisfied with the progress we made through the year. We continued to benefit from lower dairy costs and an improved gross margin as a consequence. This helped partially offset the EBIT and EPS impact of foreign exchange and lower sales.

For full year 2015, constant dollar net sales were 2% below prior year, largely due to our challenges in China and Hong Kong. Gross sales, however, were in line with 2014. This shows continued solid demand for our brands though a challenging trading environment saw us report sales below prior year level.

The impact of a strengthening dollar was significant throughout the year reducing reported sales by about 6%, and earnings per share by $0.26. Where possible, we took price to mitigate the impact of foreign exchange. However, competitors' strategies and abnormally low dairy costs made price increases more difficult than we've seen in recent years.

Price consequently contributed 1 percentage point of growth to the full year. As we progressed through the year, the carryover benefit of price increases taken in 2014 gradually disappeared and price promotional activity became more evident. Against the same quarter of prior year, this increase dynamic adversely affected fourth quarter growth by 1 percentage point. This was largely driven by increased trade promotional activity in China.

Global volume was 3% lower than prior year. Growth in North America and Europe didn't fully offset weaker performance in Asia and Latin America. And the impact of our decision to slow shipments into Venezuela was also significant.

Infant formula product sales for 2015 were in line with prior year on a constant dollar basis. It follows that we were relatively more challenged within our children's category outside of North America. The children's category is more price sensitive and prior to reshaping our competitive stats in the third quarter, we suffered share losses due to competitors' price promotional activity. However, having addressed the price disadvantage as the cohort of infants age that consume our brand, this should help sales of our children's franchise going forward.

We understand recovery of momentum in China and select other emerging markets could take time, and we need to properly fund key growth initiatives. As a consequence, the company's investment in advertising and promotion remained strong in the fourth quarter at 15.6% of sales. This was 190 basis points above prior year's fourth quarter level.

To help fund these investments and offset the impact of foreign exchange, we accelerated the implementation of some of our operating expense reductions. We refer to this initiative as Fuel for Growth. As a direct result of this focus, our operating expenses came in approximately $20 million favorable versus the forecast that underpinned guidance issued in October. This favorability allowed us to offset the impact of unanticipated dollar strength in the final quarter of the year and still delivered earnings per share slightly above the high end of our guidance range.

We delivered $0.78 in non-GAAP earnings per share for the final quarter of 2015. As mentioned, this was slightly better than expected and allowed us to finish 2015 with $3.44 in non-GAAP earnings per share. Even as we grappled with adverse dynamics in many of our markets in 2015, I'm pleased that we avoided any temptation to pull back on investment. We know that continuous innovation is critical to our long-term growth prospects.

Here are some examples of new products we introduced around the world. In the United States, we introduced new and more convenient plastic packaging for our 32-ounce ready-to-feed liquid infant formula building on the success of our 8-ounce launch a couple of years ago. We also responded quickly to competitive activity by introducing a new formulation of infant formula free from genetically modified raw materials.

Across North America, we became the first company to meet newly developed guidelines for premature infant formula. And in China, we introduced a fully imported range of Enfa branded products to complement our locally manufactured range. These fully imported products now account for 35% of our sales within the mainland.

In Southeast Asia, we upgraded our formulations and added increased levels of DHA to our children's products. We also introduced plastics packaging in several countries, and we added ready-to-drink versions to our lineup of Enfa products.

In Latin America, we introduced liquid versions of our key infant formula products, and in Mexico, our Enfagrow Toddler product. For our powder products, we began the introduction of upgraded plastics packaging.

Further, over more than 70 years we've worked diligently to develop clinical evidence in support of our specialty portfolio, predominantly our Nutramigen allergy brand. Educating healthcare professionals about Nutramigen's benefits allowed us to grow constant dollar sales double digits in 2015.

As I complete my comments on overall company performance and before I move to discussing our reporting segments in more detail, I want to mention that, as promised, we executed an accelerated share repurchase program in the most recent quarter. This reflects our commitment to the creation of long-term shareholder value. Michel will revert to this topic later.

Let me now briefly comment on the performance within each of our reporting segments, and I begin with Asia. Sequentially, Asia sales were in line with third quarter with improvements in China offset by lower sales in Thailand and Malaysia.

For fourth quarter, constant dollar sales were 10% below the prior-year quarter and full year sales compared unfavorably to 2014 by 8%. As mentioned, sequentially, we grew sales in China/Hong Kong by 2% from the third quarter of 2015. A more aggressive trading start allowed us to stabilize sales of our locally manufactured product line. Though we've had to increase our investment, we're encouraged that prices to consumers appear to have stabilized in the fourth quarter.

At the same time, demand for our recently introduced fully imported range continued to grow. As mentioned earlier, sales of this product range now accounts for 35% of our sales in Mainland China and a full 22% of our combined China/Hong Kong business. As we expand direct shipments of fully imported products into Mainland China, we expect to see continued cannibalization of our Hong Kong business. Such channel shifts may obscure underlying business progress in the near term, but ultimately should be favorable to the company overall, as we build a stronger, more sustainable portfolio, with greater reach inside Mainland China.

As mentioned at our Investor Day in October, we're committed to make investments in support of our recent introductions. We're advancing digital marketing capabilities, expanding our channel coverage, and strengthening our retail chain relationships through focused investments.

Beyond the early sale success with our imported product range; as a further sign, our strategy is working we are seeing market share gains in baby stores.

As you know, we've also focused on strengthening our presence in business-to-consumer e-commerce. This represents the fastest growing part of the e-commerce market in China. And the segment is growing at approximately five times the rate of the rest of the e-commerce channel.

In a sign of our commitment to strengthening our presence in web and app-based commerce, we recently signed joint business partnership agreement with Jingdong, owner of leading e-commerce like JD.com and Tencent, owner of WeChat, the leading social app in China.

Under these agreements, we agreed to cooperate by sharing data and technology platforms to the mutual benefits of our separate businesses. These agreements recognize the expertise of each party including Mead Johnson China and we are thrilled to partner with such great companies.

While our China business began to show progress, our businesses in Malaysia and Thailand experienced challenges as mentioned earlier. Both economies are going through a challenging time due to political uncertainty and weak commodity prices. As a result, both consumer and business confidence is reduced.

However, despite this backdrop, I want to acknowledge that we have not executed as well as expected in either country for much of 2015. Though we cannot control economic trends, we can and will control our execution, and we're taking steps to improve performance going forward. In the meantime, we continued to manage trade inventory build carefully in the fourth quarter.

In the third quarter, we enhanced our products in Thailand with increased levels of DHA and introduced new packaging, including a plastic tub. Early signs are encouraging with share increasing in the three months following our relaunch. However, it took longer than expected to deplete old inventory in the trade, and consequently we chose to address this more aggressively in the most recent quarter.

Having discussed some areas of relative challenge, let me now point to our relatively stronger performance in the Philippines. The Philippines business has delivered solid growth over the past two years. We've managed to offset foreign exchange impacts with improved pricing. And we've successfully extended our Lactum children's brand into the infant formula category. This move gives us exposure to a growing economy beyond our traditional premium price position.

Turning now to Latin America, the region delivered constant dollar sales growth of 3% for the full year compared to 2014.

Regional currencies weakened substantially through 2015 with large adverse impact on sales growth in Brazil, Argentina, Colombia, Venezuela, and Mexico. As a consequence, reported sales were 13% below prior-year level. For the fourth quarter, excluding Venezuela to where we paused shipments for much of the quarter, sales grew 5% on a constant dollar basis over the same quarter of prior year. Including Venezuela, the region sales for fourth quarter 2015 were 4% lower in constant dollars than the same quarter of 2014. As you can tell, our decision to pause shipments to Venezuela was the significant driver of relatively weaker segment performance.

As stated in previous calls, we are carefully managing risks associated with our intercompany payables within defined parameters. In the near term, this means matching new shipments to Venezuela to hard currency payments received. We are actually working with the Venezuelan government to address this challenge in order that we can once again help provide much needed nutrition to children in that country.

Looking at the overall economy of Latin America, over the past decade, these commodity-driven economies benefited substantially from stronger prices. Since the collapsing commodity prices, Latin America's GDP growth has slowed dramatically.

Countries beyond the obvious example of Brazil that's in recession are grappling with sharp reductions in their growth rates for the first time since 2009. These macroeconomic conditions coupled with the strengthening dollar have resulted in sharp depreciation of local currencies. I'd like to provide a little more detail in today's discussion. And for that purpose, I've grouped the region into three sections. I've excluded Venezuela, which I've discussed separately already.

I'll now discuss Mexico, the Caribbean, and Central America as a distinct area from the Southern Cone area of Brazil and Argentina, and finally touch briefly on the Andean region in which we include Peru, Ecuador and Colombia.

In Mexico, the Caribbean and Central America, the Enfa family of premium products grew strongly in constant dollars both sequentially over the third quarter and in full year 2015, and now represents about two-thirds of sales within the area.

Outside of Mexico, much of our business in this area is conducted in U.S. dollars. This helped partially offset the impact from a decline in the Mexican peso. That said, the Mexican business is our third largest business globally.

And many of you already know, our Mexican portfolio augments our global Enfa branded products with two very strong local brands of Milk Modifiers, Choco Milk and Cal-C-Tose. These two Milk Modifier brands gave us a leading edge or a leading share, sorry, of the large Mexican Milk Modifier market, a large category that's however characterized by strong competition from global and local players.

With limited potential to expand consumer penetration, competition is tough and occasionally price-based. These dynamics, over the last several years, have caused our Milk Modifier brands to grow more slowly than our Enfa-branded infant and children's business.

In 2015, Milk Modifier's net sales declined as we expand trade discounts to protect our competitive position. This impacted the overall Mexico result adversely.

Our performance in the south cone area was adversely impacted by the economic recession and currency weakness in Brazil. In Argentina, price gains more than covered the impact of currency depreciation. And across the area, we continue to grow our infant formula and toddler sales strongly in local currency. However in Brazil, we also sell the Sustagen brand of Milk Modifiers. And in this category, we show consumers move to cheaper competitive offering, and we lost sales as a consequence.

Within the Andean region, we saw Colombia deliver strong double-digit growth for both the latest quarter and the full year. The smaller market of Ecuador also performed well, but these encouraging results were offset by challenging retail conditions in Peru.

To wrap up, the key drivers for the Latin America full year results are – volume, which was lower primarily from our intentional constraint of Venezuela shipments and Mexico Milk Modifier sales reductions; price that was predominantly from the high inflationary markets of Argentina, Colombia and Venezuela; and finally, foreign exchange that negatively impacted the region.

I'll now turn to our performance in North America and Europe. In the full year 2015, the North America/Europe segment delivered 4% constant dollar revenue growth over 2014. Volume grew 1%, with price and product mix contributing 3% to our annual growth rate. In the fourth quarter, this segment's sales were in line with the prior year's quarter. Sequentially, as stated earlier, sales increased 5% over the third quarter. With little to no growth in the category in North America, our volume growth was realized through market share gains and our Enfagrow Children's business continued double-digit growth. Our premium price specialty and solutions offerings also grew double digits.

And our Canadian business continued to execute extremely well and exited the year with record-high market shares. Europe posted its strongest sales and EBIT performance in the last five years though the sales impact was partially offset by our exit from the Russian market early in the year.

Overall, 2015 was another strong year for this segment, a year in which we saw profit margins expand to approach historic levels. In many ways, this was proof that our decision to maintain investment levels through the 2009 to 2012 economic downturn was the right one.

Turning now to our outlook for 2016, our outlook is broadly similar to that provided at our Investor Day in October. We expect constant dollar sales to continue to show gradual improvement sequentially through the coming quarters. But due to tough comparisons from the first half of 2015, we do not expect to report positive revenue growth over same quarter of prior year till the second half of 2016. For this reason, we expect full year 2016 constant dollar sales growth to be modest in the range of 0% to 2%. Based on current exchange rates, we expect currency to reduce sales growth by approximately 600 basis points. As a result, reported sales may decrease by 4% to 6% this year.

We now have a good fix on dairy costs as this item will impact our profit and loss statement through the first seven months or eight months of the year. Based on this, we are comfortable saying that again in 2016, dairy prices would have a favorable impact on our cost of goods.

At our Investor Day event last October, we characterized 2016 as a year of transition. In the context of headwinds from a strengthening dollar, we committed to reduce non-demand-creating operating expenses by $60 million in order to reinvest in select growth initiatives and protect earnings growth. As headwinds from currencies have grown stronger since our October gathering, this initiative has become even more central to our strategy, and I'm pleased to report we're making good progress and remain confident in our ability to deliver on our cost-reduction ambition.

As mentioned in our press release this morning, I believe it is important for us to give you a better picture of the expected evolution in underlying profitability without the polluting effect of currency impact. To this end, let me clarify that we expect to deliver $0.09 to $0.12 constant dollar non-GAAP earnings per share growth. And based on our assumption around foreign exchange, we expect, therefore, non-GAAP earnings per share when expressed in U.S. dollars to be in the range of $3.48 to $3.60. Not included in our estimates for 2016 is any additional benefits that might accrue from a review of efficiency and productivity opportunities within our demand-generating investments. Such a review is currently scheduled for mid-2016.

I must point out that we remain highly focused on further – sorry, we must – we remain highly exposed to the further strengthening of the dollar or selective weakening in foreign currencies. Anticipating that we may continue to see some variability in exchange rates through the year, we've decided to provide you with a reconciliation to growth in non-GAAP constant dollar earnings per share.

I'll now hand the call over to Michel, who will provide some more details on our fourth quarter and full year financials. Michel will also elaborate on our guidance for 2016. And upon the completion of his prepared remarks, I'll return with some summary remarks before we open the lines to questions.

Michel, over to you.

Michel Cup - Executive Vice President and Chief Financial Officer

Thank you, Kasper, and good morning, everyone. Today, I will discuss our fourth quarter and full year 2015 financial results. I will then briefly highlight segment results and conclude with a summary of our 2016 guidance. Unless otherwise noted, my comments will be on the non-GAAP financial results. References to currency impacts or the effects of currency fluctuations generally refer to the impact on the translation of local currency financial statements into U.S. dollars.

Let me start with sales. Kasper addressed constant-dollar sales growth. I will focus more on the foreign exchange impact. As you can see from slide 3, fourth quarter sales on a reported basis were 12% below the prior year quarter. Adverse foreign exchange rates contributed to a decline of 6%, a similar rate to that seen in the third quarter. For the full year, sales on a reported basis were 8% below last year. The adverse foreign exchange impact on sales was 6% or $229 million.

On slide 4, we have summarized the impact of foreign exchange per quarter. The U.S. dollar continued to strengthen in the fourth quarter, and its effect on translation of global currency negatively impact all reporting segments. Over one-third of the negative currency impact in the fourth quarter are from the Mexican peso and the Chinese renminbi.

The balance of the foreign exchange impact was widespread, especially from our large markets like Canada, Malaysia and Thailand. We expect to see additional adverse foreign exchange impact in 2016 based on the continued strengthening of the dollar across a very broad basket of currencies. I'll address this foreign exchange impact in the EPS guidance section as well.

I'll now move on to factors that impacted our gross margin on slide 5. Gross margin was 63.9% in the fourth quarter, up 200 basis points from the same quarter of 2014. Lower dairy costs drove the majority of the improvement. However, this benefit was cut in half by the adverse foreign exchange impacts. Productivity improvements offset other commodity increases and higher manufacturing costs.

In the last earnings call, we highlighted three factors that would result in a sequential gross margin decrease. That's benefit from new prices increases, increased trade investment especially China, and our annual U.S. plant shutdown. These factors came in as expected during the fourth quarter.

On a full-year basis, gross margin was 64.6%, which is 270 basis points improvement versus the prior year mainly due to lower dairy costs which benefited all segments. Supply chain productivity delivered approximately 5% of savings in cost of goods sold, which mitigated other costs as noted previously.

Moving on to operating expenses on slide number 6. Our advertising and promotion spending was 15.6% of sales in the fourth quarter compared to 13.7% in the prior-year quarter. This was an increase of 7% on a constant dollar basis. A&P investment in the fourth quarter includes support for China's fully imported products, TV media for the U.S. Children business, and support for new product launches like the 32-ounce liquid and non-GMO product line that Kasper described earlier. SG&A on a constant dollar basis was 6% or $14 million lower than the fourth quarter of 2014. Savings were a result of lower incentive compensation and a reduction in corporate costs, partly driven by our Fuel for Growth initiatives.

SG&A on a full year basis were flat compared to 2014 on a constant dollar basis. As you can see from slide 7, our cost related to research and development, marketing, and G&A decreased by 3% in 2015 versus 2014 on a constant dollar basis. When comparing the second half year 2015 to the first half year 2015, the corporate support function decreased 8% mainly driven by the Fuel for Growth program.

In the fourth quarter, we made the first wave of employee reductions. Compared to June 2015, we reduced approximately 200 FTEs mainly within the corporate support functions, where we reduced 18% of our head count.

We eliminated some outside services and initiated vendor negotiations for key services. The head count and outside services actions taken to-date have allowed us to secure most of our $60 million Fuel for Growth target for 2016. We are very comfortable to deliver this year's savings.

Turning now to slide 8. On a constant dollar basis, the fourth quarter EBIT was 3% below the prior year quarter, and the full year EBIT was in line with 2014. Including currency impact, EBIT was down 13% in the fourth quarter and down 7% for the full year. The EBIT margin as a percentage of sales for the fourth quarter was slightly lower than the prior year quarter as continued investments were not fully offset by the higher gross margin. EBIT margin as a percentage of sale for the full year increased by 30 basis points.

I will now discuss EBIT for each segment starting with Asia on slide 9. In Q4, Asia delivered EBIT of $140 million, a decrease of 24% on a constant dollar basis. On a reported basis, EBIT was 28% lower mainly due to impact of the Chinese renminbi. EBIT margin at 30% was lower than the fourth quarter 2014 and the third quarter 2015.

As we continue to invest especially in China, these investments included price promotions on the locally manufactured products to protect competitiveness along with A&P support for the fully imported product line introduced earlier this year. As Kasper mentioned, Greater China sales improved sequentially as a result of these investments.

For the full year, the Asia EBIT margin at 33% remains the highest of our three segments. However, the EBIT margin was lower than in 2014 as lower sales and high demand generation investments were not fully offset by the dairy benefit.

Latin America, on slide number 10, delivered EBIT of $34 million in the fourth quarter, an increase of 15% on a constant dollar basis. On a reported basis, EBIT declined 26% as the region continued to have a large negative impact from currencies, most notably the Mexican peso. If we exclude the impact of Venezuela where we intentionally reduced shipments, the segment's reported EBIT dollars for 2015 would have been in line with 2014 for both the fourth quarter and the full year. For the full year, Latin America EBIT margin improved slightly to 23.1%. Lower dairy cost more than offset the impact of the higher investments.

Let me address North America and Europe on slide 11. For the fourth quarter, EBIT was $97 million. An increase of 14% on a constant dollar basis and 8% on a reported basis. In the midst of a tough top line comparison, gross margin continued to be strong. The team managed to maintain operating expense in line with the prior year quarter while increasing A&P by 9% on a constant currency basis. For the full year, the North America/European EBIT margin was 28% benefiting primarily from gross margin.

I will now address our financial results from EBIT to net results on slide number 12. The fourth quarter interest expense increased to approximately $22 million reflecting the issuance of the new $1.5 billion notes to finance the share repurchase programs.

During our October earnings call, we announced a new share repurchase program of $1.5 billion of the company's common stock with $1 billion in the form of an accelerated share repurchase or ASR. The ASR was executed after the close of the business on that same day.

Under the accelerated share repurchase program, 10.7 million shares of stock were delivered in the quarter. Following this portion of the ASR, the average number of shares in the fourth quarter were 189.8 million. As of December 31, 2015, the outstanding shares were 186.4 million.

It is expected that additional shares will be delivered in 2016 under the current ASR program. The ASR program was initially financed by a $1 billion term loan, shortly thereafter refinanced by the issuance of notes, $750 million five-year note at a rate of 3% and $750 million 10-year note at a rate of 4.125%.

Taxes; for 2015, our non-GAAP effective tax rate or ETR was 24.8% compared to 22.5% in 2014. The 2014 rate was unusually low as a result of a $0.05 per share non-recurring tax benefit. Also, the 2015 ETR was also higher as a result of an unfavorable change in geographic earnings mix.

Let me briefly address our EPS on slide 13. Non-GAAP EPS for the fourth quarter was $0.78, a decline of $0.14 versus the prior year quarter. Sales negatively impacted EPS by $0.16 offset by gross margin benefit.

Foreign exchange adversely impacted EPS by $0.10. Full-year non-GAAP EPS was $3.44, slightly above the high end of our guidance. So for the prior year, EPS declined by $0.30. The foreign exchange alone negatively impacting EPS by $0.26. The sales decline impacted EPS by $0.26 as well. Gross margin benefit was offset by additional A&P investments to support our innovation, especially our investments in China.

Specified items; for 2015, specified items were $45 million or $0.17. The largest charge was $25 million. This occurred in the fourth quarter and was related to a restructuring provision for our Fuel for Growth productivity program. This was in line with expectations we highlighted in our third quarter earnings call. Including these specified items, EPS on a non-GAAP basis was $3.27.

Let me finish the 2015 discussion with a high-level overview of the cash flow and balance sheet. Despite the challenging operating environment, we generated strong cash flow, which further strengthened our balance sheet. You can see from slide 14 free cash flow defined as operating cash flow less capital expenditures was $726 million during 2015, up 20% from the prior year.

For 2015, capital expenditures were $174 million, consistent with our long-term goal of about 4% of sales. The most significant capital investment were to expand capacity at our European plant to support demand for the new China fully-imported product line and in the U.S. to support new liquids manufacturing.

Depreciation and amortization expenses was $99 million for the full year.

For the full year 2015, we increased our dividends by 10% to $1.65 per share resulting in a total dividend payment of $326 million. The total payout ratio was close to 50% of our net results. Our cash balance as of December 31 was $1.7 billion, an increase of approximately $400 million compared to December 2014, nearly 90% of our cash is outside the United States. Our net debt position as of December 31 was less than $1.3 billion.

I will now wrap up with a summary of our 2016 guidance on a non-GAAP basis on slide 15. We forecast constant dollar sales in the range of 0% to 2% this year versus 2015, assuming exchange rate remain at the current levels, this would translate into 2016 sales 4% to 6% below the prior year on a reported basis.

Please note that we expect tougher sales comparison in the first half of 2016 versus 2015. This is due in part to more favorable performance seen in China especially in the first quarter of 2015. Constant dollar sales in Q1 2016 are expected to be in line or slightly higher above the Q4 2015 performance.

The company expects a positive trend in the second half of 2016 on a constant dollar basis. We expect higher investments in A&P in the first half of 2016. As a result, we expect growth of non-GAAP EPS towards the second half of 2016. Please note that quarter one 2016 non-GAAP EPS will have a tough comparison.

From an EPS guidance perspective, there are several key factors to consider. We expect that our gross margins will be around 64%, similar to the fourth quarter 2015 level. We entered into dairy contracts at attractive prices to secure more than 80% of our expected 2016 dairy needs. Nearly all of the expected $60 million Fuel for Growth savings will be reinvested in demand-generating activities to enable long-term market share improvement.

The benefit of all share repurchased in 2015 including the ASR program net of interest expense is expected to be an $0.11 benefit per share. EPS guidance includes an annual estimated adverse impact of currency rates as of January 2016, which is expected to be approximately $0.40 per share. Another 1% strengthening of the dollar against all currencies where we operate would lead to a further reduction in EPS of about $0.04 per share on a full year basis just from translation. Taking all of this into account, non-GAAP EPS guidance is expected to be in the range of $3.48 to $3.60 excluding specified items.

On a constant dollar basis, non-GAAP EPS guidance is expected to grow 9% to 12%. This excludes $0.11 from the benefit of the share repurchase program in 2015. The company expects to incur charges of approximately $25 million to $30 million associated with the Fuel for Growth program in 2016. Specified items including charges related to Fuel for Growth are expected to be approximately $0.12 per share. Therefore, GAAP EPS is expected to be in the range of $3.36 to $3.48, excluding future costs related to mark-to-market pension adjustments which are not reflected in the guidance.

This concludes my discussion of our quarter four and full year 2015 financial results. Thanks again for your time this morning. And with that, I will now turn the call back to Kasper.

Peter Kasper Jakobsen - President, Chief Executive Officer and Director

Thank you, Michel. Let me briefly provide some summary remarks before we open the lines to your questions. I'm proud of many of the operational adjustments we made in the second half of 2015 when we were faced with significant change. Likewise, I feel good that our key strategies are paying off. Our multi-year investment in the United States was made because we believed in the potential of that market. Sales and margins have now rebounded and are helping us to overcome challenges abroad. Likewise, our decision to reshape our portfolio in China and focus on new growing sales channels is showing signs of paying off. Faced with macroeconomic challenges, we are making adjustments in other markets too.

Change is inevitable, and in many ways, businesses should be judged by how well they adjust and adapt. And I'm confident that we'll look back at the end of this year, able to acknowledge that we did this quite well.

Through last year, I repeatedly pointed to four important factors that critically influenced company performance. To remind you all, I'm referring to currency movements, dairy cost evolution, our ability to evolve our strategy and portfolio in China, and our momentum in North America, particularly in the United States. All of these four variables remain as relevant in 2016 as they were to our performance in 2015. But I should add pricing to the list. Our ability to offset partially or in full foreign exchange weakness with price increases will be very important. I'd add that I see some encouraging signs that price increases will become easier as we move through the year.

I'll close with the message that we'll continue to provide clear visibility on the impact of foreign exchange as we move through 2016. We'll do so by providing updates on both sales and profit growth net of foreign exchange in addition to our traditional non-GAAP earnings per share numbers. We hope you'll find this informative.

Operators, I'd now like to open the lines to questions. And because our prepared remarks have taken longer than anticipated, we are prepared to go a few minutes over, if the questions merit doing so. Operator, over to you. Thank you.

Question-and-Answer Session

Operator

Ladies and gentlemen, we are ready to open the lines up for your questions. Please stand by for your first question. Your first question comes from David Driscoll with Citi Research.

Alexis N. Borden - Citigroup Global Markets, Inc. (Broker)

Hi, Good morning. This is Alexis Borden in for David.

Peter Kasper Jakobsen - President, Chief Executive Officer and Director

Hi, Alexis.

Alexis N. Borden - Citigroup Global Markets, Inc. (Broker)

So, question on China. Kasper, I appreciate your China comments in your prepared remarks, still I'd like to ask this bigger picture. Is your China strategy working? What evidence can you point us to? And are your China market shares increasing? And I also have a follow-up.

Peter Kasper Jakobsen - President, Chief Executive Officer and Director

Well, I think, I tried to provide some metrics that would, hopefully, support my statement that I believe our strategy is working. I think, we introduced the fully imported line of products into China, so that towards the back half really of the second quarter, and the fact that this product line is now already making up 35% of our sales in the mainland, and 22% of our sales in the combined China/Hong Kong business, I think, it's fairly impressive progress.

I want to remind you also that of the message we gave on our Investor Day that we have confirmed our intention to enter the super high premium category some time in 2016. I'm sure you can understand that for competitive reasons, I'm not prepared to tell you what our planned timing is, but it goes without saying that we obviously have one. So, I feel quite good about that.

We now – if I add the Hong Kong business and our fully imported line together, we've now got more than half of our sales in the China/Hong Kong business coming out of our Netherlands facility, and therefore, meeting consumer desire for imported quality. So, I think, we're managing that transition quite well. I'm satisfied with the progress we are making in baby stores, also, we – through much of last year, we discussed the fact that we were under indexing in baby stores which is one of the faster growing sales channels. But as of late, we've seen some fairly satisfactory improvements to our market shares in this channel. And I'm sure, we'll continue to do so going forward.

Kathy Ann MacDonald - Vice President-Investor Relations

Great. Alexis, just for the time constraints that we have, I'd like to go on to the next analyst. Thank you.

Alexis N. Borden - Citigroup Global Markets, Inc. (Broker)

Sure. No problem.

Kathy Ann MacDonald - Vice President-Investor Relations

Operator?

Operator

Your next question comes from Bryan Spillane, Bank of America.

Bryan D. Spillane - Bank of America Merrill Lynch

Hey. Good morning, everyone.

Peter Kasper Jakobsen - President, Chief Executive Officer and Director

Good morning, Bryan.

Bryan D. Spillane - Bank of America Merrill Lynch

So, just one question. I think in 2015, in certain markets you were able to price to try to take – raise prices in order to try to offset some of the negative effects of foreign exchange. I guess, in 2016, as you look at some of these markets that you've mentioned in terms of where there's currency volatility, does the cost savings that you're generating this year take some of the pressure off or give you more flexibility in not needing necessarily to try to price for – to offset the currency or are you still going to be looking to sort of price in some of these markets where the currencies have moved so dramatically?

Peter Kasper Jakobsen - President, Chief Executive Officer and Director

Bryan, thanks for the question. I think we will definitely look to price in these markets. I think, as you heard us talk about, we were quite some distance off managing to cover the impact of foreign exchange weakness through price in 2015, so that'll be a continued challenge or task for us as we go through 2016.

As I was trying to indicate, I think, the pricing environment will become somewhat more friendly. What we saw in 2015 was that there were still – particularly, I would say, in Asia, there were still governments in Asia that were very resistant to price increases in our sector as they still focused very much on kind of inflationary pressure or perceived inflationary pressure, which I think we all know was really a threat that evaporated some time back in 2014. And they would repeatedly point to the fact that we were seeing significant upside from dairy costs coming down as we discussed price increases.

I think now that dairy prices have stabilized, I believe that as both us and our competitors lap the low-dairy costs, it will become a little bit more straightforward to raise prices. But we obviously have to do that in a responsible manner. And we have to assess that in the context of general price inflation and wage inflation in the markets we operate in.

Bryan D. Spillane - Bank of America Merrill Lynch

Thank you.

Operator

Your next question comes from Amit Sharma with BMO Capital Markets.

Amit Sharma - BMO Capital Markets (United States)

Hi. Good morning, everyone.

Peter Kasper Jakobsen - President, Chief Executive Officer and Director

Good morning, Amit.

Michel Cup - Executive Vice President and Chief Financial Officer

Good morning.

Amit Sharma - BMO Capital Markets (United States)

Kasper, without asking you to speculate on the timing of it, we've heard that there – that the Chinese government is looking at changing the tariff regulation for cross-border trade online? On a wider context, how do you think about it? How you're positioned in the B2C channels, and if there is incremental tax on online, how would that impact your positioning in that channel?

Peter Kasper Jakobsen - President, Chief Executive Officer and Director

Well, I think, there are as it relates to China, I expect that we're going to see regulatory adjustments coming some time in 2016. I don't want to speculate on whether those regulatory adjustments will address all of the imbalances that we are seeing currently in China, but I believe that they will begin to address some of them. At the moment, it's clear that inadvertently the China regulations have created a tilted playing field that is very much tilting in favor of imported products sold through e-commerce.

I don't believe that that was the intention of either the regulators or the China government at large, and I think they will find ways to address that. I also think that they remain concerned about the large number of small brands that have been created in China that really lack the expertise or the resources to guarantee consumer quality, and I think that will be addressed. So, I think you're going to see a whole slew of attempts at least by regulators to get at some of these issues through this year. But since you gave me a free pass on the timing, I'll probably take advantage of that, Amit.

Kathy Ann MacDonald - Vice President-Investor Relations

Good.

Amit Sharma - BMO Capital Markets (United States)

Thank you.

Peter Kasper Jakobsen - President, Chief Executive Officer and Director

Thanks.

Kathy Ann MacDonald - Vice President-Investor Relations

Thank you. Operator, to the next.

Operator

Your next question comes from Ken Goldman with JPMorgan.

Kenneth B. Goldman - JPMorgan Securities LLC

Hi. Thanks for taking the question. Michel, I think, if I'm not wrong, that Mead Johnson locked in a bit more milk supply than usual this early in the year. I know it sometimes goes back and forth and it's hard to tell, but it feels like it's a little more than usual. So, first, correct me if I'm wrong on that.

And, second, if that's correct, is that more of a tactical move just based on where milk costs and prices are, or is it more of a strategic change that you'd like to implement whereby you maybe get a little more visibility there and a little more ability to price in line with where you think your cost (56:55) will be?

Michel Cup - Executive Vice President and Chief Financial Officer

Yes. I think, it is correct. It's a higher level than we used to have. And it's also true that we've taken that position on purpose, given the current benefits that we see. I don't like too much volatility into the P&L, so nobody does that. So, the more you can control, the better that is. And this was one of the actions we have taken.

Kenneth B. Goldman - JPMorgan Securities LLC

Okay. So should I interpret that as – I'm trying to figuring out whether that's more tactical or strategic, and I kind of heard both in there?

Michel Cup - Executive Vice President and Chief Financial Officer

Correct.

Kenneth B. Goldman - JPMorgan Securities LLC

Okay. I'll leave it at that. Thank you.

Operator

Your next question comes from the line of John Baumgartner with Wells Fargo.

John Joseph Baumgartner - Wells Fargo Securities LLC

Thank you. Good morning. Kasper, I wanted to ask about North America. So, you mentioned the margins being close to record levels here. How much of the margin expansion over the past two years is a function of the commodity cost benefits that are more temporary versus maybe something more structural in terms of the cost savings or portfolio mix? Should we think of this high 20s level as kind of a new normal for the business?

Peter Kasper Jakobsen - President, Chief Executive Officer and Director

Yeah. John, I don't think – if I said record levels, I misspoke. I think I said historic levels. So – but it may go back to days before we were a public company. So, you may have imperfect visibility. I guess, what I was trying to indicate was that I believe that these levels of profitability in the North American business are sustainable to put it sort of candidly.

It's not inconsistent with where we have been. And what we see in the North American business is that we get a lot of leverage on both sales and volume growth in that business. So, put another way, our marginal costs are very low in that business, and hence we see big swings in profitability as the sales move up and down. So, I'm quite comfortable. I feel good about where the margins are, and I think we've got other parts of our global portfolio where we are working in difficult trading environments, and then that results in perhaps in margin pressure. So, it's quite rewarding to see that this part of our portfolio has the opposite dynamic playing in its favor.

John Joseph Baumgartner - Wells Fargo Securities LLC

Great. Thank you, Kasper.

Peter Kasper Jakobsen - President, Chief Executive Officer and Director

Thanks, John.

Operator

Your next question comes from the line of Michael Lavery with CLSA.

Michael Lavery - CLSA Americas LLC

Good morning.

Peter Kasper Jakobsen - President, Chief Executive Officer and Director

Good morning, Michael.

Michel Cup - Executive Vice President and Chief Financial Officer

Good morning.

Michael Lavery - CLSA Americas LLC

Could you talk a little bit more about your higher investments in China and how much of that is trade spending or discounting versus A&P investments? And then also just update your timing. You said at the Investor Day you thought you had about three or four more quarters of discounting pressure there. Is that still your view?

Peter Kasper Jakobsen - President, Chief Executive Officer and Director

Our investments in China primarily in the – I would say, in the second half of 2015 were largely focused on changing our trading profile. That means matching both competitors' pricing and also matching their general profile with the retail trade.

As we go forward and we look at 2016, we will obviously invest behind our new growth initiatives view. So, we expected that that will lead to some increase in both of those lines. Both the trade support and the advertising and promotional expense.

Kathy Ann MacDonald - Vice President-Investor Relations

Great. Thank you.

Operator

Your next question comes from the line of Matthew Grainger with Morgan Stanley.

Matthew C. Grainger - Morgan Stanley & Co. LLC

Hi. Good morning. Thanks for the question.

Peter Kasper Jakobsen - President, Chief Executive Officer and Director

Hi, Matt.

Matthew C. Grainger - Morgan Stanley & Co. LLC

Hi. Kasper or Michel, I just wanted to clarify a bit further on the EPS guidance and I joined a bit late, so I may have missed an aspect of the explanation, but you've maintained the expectation of mid-single digit EPS growth despite the FX headwind being significantly higher. So, just curious what the delta was over the past few months that's giving you more confidence in the constant currency outlook or sort of margin flexibility during 2016.

Michel Cup - Executive Vice President and Chief Financial Officer

Yeah. I mean, your understanding is correct. We indicated that investment as a mid-single digit, and that is in line on what we're confirming now. Despite the fact that we will have a higher headwind from currencies. I indicated in the Investors Day that at that point of time, foreign exchange impact would have been around $0.15. Right now, we are looking at, based on current spot rates, we're looking at $0.40 impact from currencies. So, we clearly look into how we can mitigate that to still deliver mid-single digit growth.

On one hand side, like Kasper indicated, we clearly look into pricing because that's an area where we think we need to be very cautious to see what can we do in certain markets, that's one. Two, I highlighted specifically and refer most of the earlier question on dairy benefits, we've secured 80% which is higher than we expected also in quarter three, so that's one of the what we call tactical and strategical initiatives to secure the benefit of wide volatility.

And thirdly, like Kasper also indicated, we are clearly starting further assessment to see what can we do in terms of demand investments. And that will be leaning more towards mid of this year. So, all of these initiatives, we accelerated actually and we took actions to mitigate the higher foreign exchange exposure.

Matthew C. Grainger - Morgan Stanley & Co. LLC

Okay. So, it's more the actions you just mentioned as opposed to further acceleration of Fuel for Growth savings?

Michel Cup - Executive Vice President and Chief Financial Officer

Well, it is. It is a combination, right. I just said, it is the Fuel for Growth savings that's confirmed, significantly confirmed so that wasn't the case yet in full in Investors Day. But secondly, like I said, we're also going further with further assessment in demand investment.

Matthew C. Grainger - Morgan Stanley & Co. LLC

Okay. That's helpful. Thanks, Michel.

Operator

Your next question comes from Jason English with Goldman Sachs.

Jason English - Goldman Sachs & Co.

Hey. Good morning, folks. Thank you for the call.

Peter Kasper Jakobsen - President, Chief Executive Officer and Director

Good morning, Jason.

Michel Cup - Executive Vice President and Chief Financial Officer

Good morning.

Jason English - Goldman Sachs & Co.

Hope all is well. A quick housekeeping question. I think that I heard you say that in the first quarter that the sales on constant currency would be flat to maybe up 2% (1:04:05) versus the fourth quarter of 2015. Can you confirm that I heard that right? And also, just mathematically, as I'm looking at my model, it seems to suggest that sales could be down close to 20% in the first quarter. Is that right? And if so, where – what should we be braced for in terms of pockets of, sort of, outsized weakness in the first quarter?

Michel Cup - Executive Vice President and Chief Financial Officer

Well, I think – let me try and repeat what we said. I said in my prepared remarks that we expect to see sequential quarterly improvement in sales, in constant dollar sales. So, that would translate into sales in the first quarter, I suppose, being at or above the level in the fourth quarter.

Jason English - Goldman Sachs & Co.

And that's with currency?

Michel Cup - Executive Vice President and Chief Financial Officer

No, that was in constant dollars.

Jason English - Goldman Sachs & Co.

Okay. I'll try to get clarification with Kathy offline on that one then, and I'll pass it on for now. Thank you.

Michel Cup - Executive Vice President and Chief Financial Officer

I think, for the full year, we will clearly expect to see adverse currency impact. I think we said, Jason, that we expect about a 600 basis point adverse impact from foreign exchange and we also said that we had based that on, basically, the current exchange rates as of this month. So, that would stand to reason that that 600 basis points in adverse impact would start at the beginning of the year.

Jason English - Goldman Sachs & Co.

Yeah, exactly.

Michel Cup - Executive Vice President and Chief Financial Officer

Okay.

Operator

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

Robert Moskow - Credit Suisse Securities (USA) LLC (Broker)

Hi. This is kind of a follow-up to Matthew's question. I mean, if you do the math, the foreign exchange headwind is significantly more than what you thought in October, and – but you're kind of maintaining, I think, the same guidance you had before and that guidance implies quite a bit of growth in the core business in order to be achievable.

You mentioned pricing and that's probably the tool that you would use in unlocking in dairy, although, I think if you've locked in, I'm not sure how that's a benefit from October. So, Michel, maybe if you could help me just a little bit more. Don't you have to push the pricing lever harder than you thought in October in order to achieve this guidance, or are there other levers I'm not aware of?

Michel Cup - Executive Vice President and Chief Financial Officer

Well, it is indeed in combination of price mix, what we need to look into country mix, but yeah, I mean, it's – price is a component that is higher than we indicated – that we anticipated in quarter three.

Robert Moskow - Credit Suisse Securities (USA) LLC (Broker)

And how is that – is it achievable given the competitive environment or does something have to change in the competitive environment in order for that to happen?

Michel Cup - Executive Vice President and Chief Financial Officer

Look, part of that is driven by certain new innovation rollouts that we're having scheduled. So, we're trying to combine that as much as possible to take price further than initially thought.

Robert Moskow - Credit Suisse Securities (USA) LLC (Broker)

Okay. Thank you.

Operator

Your next question comes from Eric Katzman with Deutsche Bank.

Eric Richard Katzman - Deutsche Bank Securities, Inc.

Hi. Good morning, everybody.

Peter Kasper Jakobsen - President, Chief Executive Officer and Director

Good morning, Eric.

Eric Richard Katzman - Deutsche Bank Securities, Inc.

I guess, let me ask about promotion for a second. Back at our conference in Paris, Kasper, you talked about promotion being kind of the initial signs of being more concerned about it in China. And then, I guess, it broadened out into Latin America and other regions.

So, I guess, it's been a long call, but just so I frame it, did you kind of end the end 2015 with what I think you had dubbed kind of irrational behavior on the part of competition? Was that kind of sequentially flat or did it get worse? And kind of what assumptions are you making around promotion into 2016? And I'll pass it on. Thank you.

Peter Kasper Jakobsen - President, Chief Executive Officer and Director

Yeah, Eric. It's an excellent question, and – but you caught my comments correctly. I indicated that we've seen the environment stabilize. So, there's still – I would not say it has improved, but the environment has stabilized, and I think having now entered the fray, so to speak, in order to protect our competitive position, we saw that pay off in terms of stabilizing and even improving our underlying sales performance in the fourth quarter. So, yeah, I feel the environment, including in China, is now a little bit more stable but it's clearly stable at a much higher level of promotion than, say, where we were a couple of years ago.

Eric Richard Katzman - Deutsche Bank Securities, Inc.

And looking into 2016?

Peter Kasper Jakobsen - President, Chief Executive Officer and Director

We expect that the environment will remain stable in 2016.

Eric Richard Katzman - Deutsche Bank Securities, Inc.

Okay. Thank you.

Operator

Your next question comes from – I'm sorry?

Kathy Ann MacDonald - Vice President-Investor Relations

Operator, sorry. I just want to say we have time for one more call. So, the one that you're about to place in will be the last.

Operator

Your last question comes from David Hayes with Nomura.

David H. Hayes - Nomura International Plc

Good morning, all. Thank you. Just trying to pick up on the compensation benefit shift. You obviously made the point that the margin benefited, I think, particularly back end of the year in terms of the compensation, the variable compensation, I guess, reversing, to some extent, through the year in terms of the accruals that you might have taken beginning of the year.

So, the question is on that, one, can you quantify the impacts of that variable comp dropping out? And then, secondly, I guess, more importantly, as you look into next year – obviously, you talked about it more this year, you talked about it being a transition year, or a transformational year, would you expect that compensation to come back into the numbers, or is the organization effectively not going to pay that variable pay until the performance overall for the group steps up back to the previous levels? Thanks very much.

Michel Cup - Executive Vice President and Chief Financial Officer

Yeah. In this compensation, accruals dropped in the year 2015 given the lower performance, which had an estimated impact of around $30 million. The – if you looked at the numbers for next year, yes, we've put it back to normal parking levels. So, those ones are included in the numbers that we have provided you for guidance.

David H. Hayes - Nomura International Plc

Okay. So, hitting in the guidance, you'd have that $30 million come back in, but that's included in the margin (1:11:13).

Michel Cup - Executive Vice President and Chief Financial Officer

That's included in the numbers, yes.

David H. Hayes - Nomura International Plc

Okay. Perfect. Thanks, Michel.

Kathy Ann MacDonald - Vice President-Investor Relations

Operator, I think this closes our call.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.

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