MJN Mead Johnson Nutrition Company (delisted)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K/A

(Amendment No. 1)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2016

Commission File Number 001-34251

MEAD JOHNSON NUTRITION COMPANY

(Exact Name of Registrant as Specified in Its Charter)

225 North Canal Street
25th Floor
Chicago, Illinois 60606
(Address of Principal Executive Offices and Zip Code)

Registrant’s Telephone Number, Including Area Code: (312) 466-5800

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  x   No  o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes  o   No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x   No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  x   No  o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o   No  x

The aggregate market value of the shares of common stock held by non-affiliates of the registrant, computed by reference to the closing price as reported on the New York Stock Exchange, as of June 30, 2016, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $16.7 billion.

As of March 6, 2017, there were 183,565,047 shares of common stock outstanding.

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Explanatory Note

This Amendment No. 1 on Form 10-K/A (the “Amendment”) amends the Annual Report on Form 10-K of Mead Johnson Nutrition Company, a Delaware corporation (“the Company,” “MJN,” “Mead Johnson,” “we” or “us”), for the fiscal year ended December 31, 2016, originally filed with the Securities and Exchange Commission (“SEC”) on February 27, 2017 (the “Original Filing”). This Amendment is being filed to amend Part III of the Original Filing to include the information required by and not included in Part III of the Original Filing because the Company no longer intends to file a definitive proxy statement for an annual meeting of shareholders within 120 days of the end of its fiscal year ended December 31, 2016.  Part IV of the Original Filing is being amended solely to add as exhibits certain new certifications in accordance with Rule 13a-14(a) promulgated by the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Because no financial statements have been included in this Amendment and this Amendment does not contain or amend any disclosure with respect to Items 307 and 308 of Regulation S-K, paragraphs 3, 4 and 5 of the certifications have been omitted.

Except as described above, no other changes have been made to the Original Filing. The Original Filing continues to speak as of the date of the Original Filing, and the Company has not updated the disclosures contained therein to reflect any events which occurred at a date subsequent to the filing of the Original Filing other than as expressly indicated in this Amendment. Accordingly, this Amendment should be read in conjunction with the Original Filing and the Company’s other filings made with the SEC on or subsequent to February 27, 2017.

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MEAD JOHNSON NUTRITION COMPANY

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Board Meetings

During 2016, the Board held seven meetings and concluded each of its regular meetings in executive session without management present. In addition, our independent directors met separately as a group in 2016.

During 2016, all of our directors attended 75% or more of the aggregate number of meetings of the Board and Board committees on which they served. All directors are expected to attend our annual meetings of stockholders. All 13 of our directors attended the annual meeting of stockholders in May 2016.

Committees of the Board of Directors

The standing committees of the Board are the Audit Committee, the Compensation and Management Development Committee, the Nominating and Corporate Governance Committee, the Nutrition Science and Technology Committee and the Risk Management and Compliance Committee.  The members of each committee are appointed by the Board and serve until their successors are elected and qualified, unless they are earlier removed or resign.

The Board has determined that all members of the Audit Committee, the Compensation and Management Development Committee and the Nominating and Corporate Governance Committee are independent within the meaning of applicable SEC rules and the listing standards of the NYSE applicable to members of each such committee. In the case of the Compensation and Management Development Committee, this determination included an assessment by the Board that no member of the committee has a relationship which is material to such director’s ability to be independent from management in connection with the duties of a compensation committee member.  Each committee is governed by a written charter that is available on our website at www.meadjohnson.com under the caption “Company - Corporate Governance - Committee Charters.”

The table below indicates the current composition of each committee, the audit committee members determined by the Board to be “audit committee financial experts” and the number of meetings held by each committee in 2016:

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) requires our executive officers and directors and persons who own more than 10% of our common stock to file initial reports of ownership and changes in ownership with the SEC. Based solely on our review of the reports that have been filed by or on behalf of such persons in this regard and written representations from them that no other reports were required, we believe that all persons filed the reports required by Section 16(a) of the Exchange Act on a timely basis during or with respect to 2016.

Corporate Governance Guidelines

The Board has adopted Corporate Governance Guidelines that delineate its operation and that of its committees. From time to time, our Board may revise the Corporate Governance Guidelines in response to changing regulatory requirements, evolving corporate governance best practices and the concerns of our stockholders and other constituents. The Corporate Governance Guidelines are

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available on our website at www.meadjohnson.com under the caption “Company - Corporate Governance - Guidelines - Corporate Governance Guidelines.” The Corporate Governance Guidelines address, among other matters, the Board’s composition and structure, the Board’s responsibilities, the Board’s retirement policy, the Board’s meeting procedures, the Board’s involvement with senior management, the Board’s role in leadership development and general committee matters.

Code of Ethics

We have established Standards of Business Conduct and Ethics (the “SBCE”), a Code of Ethics for Senior Financial Officers, and a Code of Conduct and Ethics for Directors (collectively, the “Codes”). These Codes establish the standards of ethical conduct applicable to all of our directors, officers, employees, consultants and contractors, and communicate our commitment to the highest standards of ethical behavior in all of our business activities as well as compliance with all applicable laws and regulations.

The SBCE addresses, among other things, competing fairly in the global marketplace, compliance with anti-bribery and other laws, conflicts of interest, keeping accurate records, protecting company assets, confidentiality, and corporate opportunity requirements and the process for reporting violations of the SBCE, employee misconduct, conflicts of interest or other violations of company policies and procedures. The Code of Ethics for Senior Financial Officers applies to the Company’s chief executive officer, chief financial officer, the financial and operations controllers, the treasurer, the head of internal audit and heads of major business units and others performing similar functions and supplements the SBCE. The Code of Conduct and Ethics for Directors applies to the Company’s non-employee directors.

The Codes are publicly available on our website at www.meadjohnson.com, under the caption “Company - Corporate Governance - Conduct.” The Company will furnish a copy of the Codes to any person, without charge, upon written request directed to the Corporate Secretary at our principal executive offices at 225 North Canal Street, 25th Floor, Chicago, Illinois 60606. Any amendment or waiver to the Codes with respect to our chief executive officer, chief financial officer, controller or persons performing similar functions will be disclosed as required by applicable law and will be posted promptly on our website.

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·       Michel Cup - our Executive Vice President and Chief Financial Officer;

·       Charles M. Urbain - our Executive Vice President and Chief Operating Officer;

·       Patrick M. Sheller - our Senior Vice President, General Counsel and Secretary; and

·       Ian E. Ormesher - our Senior Vice President, Global Human Resources.

Our Business Environment, Challenges and Achievements

As a global leader in pediatric nutrition, we are committed to being the world’s leading nutrition company for infants and children and to helping nourish the world’s children for the best start in life. Throughout 2016, we continued to face soft economic conditions in many of our key markets as well as continued exposure to adverse foreign currency exchange rates.  These circumstances negatively impacted our results. The financial results, however, do not tell the full story of our progress.

In late 2015, the Company initiated a business productivity program referred to as “Fuel for Growth,” which is expected to deliver operating efficiencies and reduce costs. During 2016, the program delivered savings of approximately $90 million and total cost savings to date are $110 million, with approximately $180 million expected by the end of 2018. Fuel for Growth is expected to create additional investments in brand building and growth initiatives, and in the long term is expected to improve profitability.

With a portion of the Fuel for Growth savings we made select strategic investments in 2016 to reshape our product portfolio and channel mix in key markets, most notably in China.

It was in this context that the CMDC made 2016 compensation decisions balancing effective program design with rewards that offer a strong pay for performance linkage with both upside potential and downside risk. The CMDC believes that the compensation decisions are commensurate with the effort expected and the results achieved.

For 2016, compensation awarded to our executive officers strongly reflects our actual company results as follows:

·                   No Salary increases were delivered to Named Executive Officers.

·                   Short-term incentive awards were strongly tied to our operating results for the performance period and also reflect individual performance. Actual aggregate annual incentive awards delivered were paid at approximately 82% of target.

·                   Long-term incentive compensation consisted of restricted stock units, stock options and performance shares. Performance shares provide no actual value unless threshold target levels of performance are achieved. 2014 performance shares earned over a cumulative performance period from 2014 through 2016 represented approximately 63% of the target award value.

For more information on our Pay for Performance philosophy, see “Pay for Performance,” below.

During 2016, the CMDC chose to deliver a special long-term incentive award with the purpose of aligning executives with the long-term performance objectives of our business transformation as detailed above. In order to reinforce the underlying goal of driving stockholder value creation through improved business performance, the CMDC chose to deliver the special grant in the form of stock options.

Executive Summary

·                                           The foundation of our executive compensation program is a philosophy that focuses on pay-for-performance, stockholder value creation and competitive pay. Our executive compensation program is highly performance oriented and is designed to establish competitive pay levels and to recognize Company and individual performance.

·                                           Approximately 80% of total target compensation is structured in the form of variable or “at risk” compensation. As such, our executives have a significant portion of their potential compensation based primarily on the annual and long-term financial success of our Company and the creation of a sustainable return for our stockholders.

·                                           In 2016, the Company’s performance fell short of target levels for certain of its key corporate performance goals.  Consequently, the Company’s cash incentive awards were below targeted payout levels.  Additionally, the portion of the Company’s performance share awards attributable to 2016 performance paid out below targeted levels.

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·                                           The fact that cash incentive awards and performance share awards were adversely impacted underscores the Company’s philosophy that a significant amount of executive compensation should remain “at risk” and directly tied to performance and the realization of stockholder value.

Executive Compensation Philosophy

We base our executive compensation philosophy on three core elements: (1) pay for performance, (2) stockholder value creation and (3) competitive pay. Each of these elements is further described below.

Pay for Performance

We structure our executive compensation program to align the interests of our executive officers with the interests of our stockholders. We believe that an executive’s compensation should be tied directly to helping us achieve our mission, execute our strategy and deliver value to our stockholders. We also believe that a significant amount of compensation should be variable and earned over the long-term. Therefore, a significant part of each executive’s pay depends on both Company performance and individual performance measured against financial and operational objectives. We believe this approach serves to focus the efforts of our executives on the attainment of sustained growth and profitability.

As Company or individual performance fluctuates above or below targeted levels, our executives’ pay will fluctuate above or below target compensation levels. This compensation strategy helps ensure that the Company remains focused on annual operating excellence while simultaneously emphasizing sustainable long-term enterprise value.

Stockholder Value Creation

Our compensation plans are designed to motivate executives to increase the value we deliver to our stockholders. While managing risk, we believe that investing for the growth and profitability of our brands and business is critical to the long-term success of our Company.  As such, a substantial portion of executive compensation is delivered in the form of equity awards, the value of which parallels value delivered to our stockholders.

Competitive Pay

We believe that a competitive executive compensation program is an important tool to help attract and retain talented leaders. By providing compensation that is competitive with our peer companies, we retain the talent we need and enhance our ability to recruit new talent as we continue to build and lead our business over the long term. In addition to paying competitively versus our peers, our executive compensation program is designed to pay executives equitably relative to one another based on the work they perform, the capabilities and experience they possess and the performance they demonstrate. Our executive compensation program is also designed to promote a nondiscriminatory work environment that enables us to leverage the diversity of thought that comes with a diverse global workforce, to motivate executives to deliver high performance with integrity, and to continue to focus on good corporate governance by implementing compensation best practices and corporate policies.

Compensation Practices

Below we summarize both executive compensation practices that we have implemented to drive performance and executive compensation practices that we avoid because we do not believe they serve the long-term interests of our stockholders.

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2016 Stockholder Advisory Vote on Executive Compensation

The CMDC reviewed the results of the 2016 stockholder advisory vote on our executive compensation and believes that having 94.2% of the votes cast for approval of our executive compensation confirms that the actions and policy decisions reflected in last year’s proxy statement were appropriate. After considering this approval, the CMDC concluded that no additional actions should be taken beyond those that were part of the normal recurring activity described in this CD&A.

Executive Compensation Program Design

Role of the CMDC

The CMDC is responsible for reviewing the executive compensation strategy and philosophy for our organization. The CMDC reviews and approves individual compensation packages for our most senior executives.  The CMDC reviewed and approved both the Named Executive Officers’ 2016 annual incentive award performance goals and payouts (as described under “Annual Incentive Awards,” below) as well as their 2016 long-term incentive award goals and payouts (as described under “Long-Term Incentive Awards,” below).  In the case of compensation for individuals below our most senior executives, the CMDC delegated authority to members of management to make determinations in accordance with guidelines established by the CMDC.

Interaction between the CMDC and Our Executive Officers

Our Chief Executive Officer and Chief Financial Officer recommend to the CMDC the performance targets to be used for our annual and long-term incentive awards, subject to CMDC review and approval. In addition, the senior executive officer responsible for human resources works with the CMDC, its independent compensation consultant and senior management to: (i) provide the CMDC with the appropriate information to make its decisions; (ii) propose recommendations for CMDC consideration and action; and (iii) communicate CMDC decisions to senior management for implementation.  When determining compensation for the Named Executive Officers (other than the Chief Executive Officer), the CMDC considered individual performance as assessed by the Chief Executive Officer. The performance of the Chief Executive Officer was assessed directly by the Board in executive session with no members of management present.

Role of the Independent Compensation Consultant

The CMDC retains Aon Hewitt as its independent compensation consultant, reporting directly to the CMDC.  See “Compensation Governance and Oversight - Independent Compensation Consultant,” below, for a discussion of Aon Hewitt’s independence.  The CMDC instructs Aon Hewitt to give it advice, independent of management, and to provide such advice for the benefit of the Company and its stockholders.  In 2016, Aon Hewitt specifically assisted the CMDC by:

·                   Participating in the design and development of our 2016 executive compensation program;

·                   Providing competitive compensation benchmarking and market data analysis, identifying the public companies comprising our peer group, and recommending updates and revisions to our executive compensation and benefit plans;

·                   Assessing the alignment of our executive compensation program with the interests of our stockholders and our pay-for-performance philosophy; and

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·                   Providing compensation recommendations for our Named Executive Officers.

Principal Components of Our 2016 Executive Compensation Program

There are three principal components to our executive compensation program: base salary, annual incentive awards and long-term incentive awards.  The following charts show our target mix of these three compensation components for (i) our CEO and (ii) our other Named Executive Officers, on an aggregate basis:

Target Compensation Mix

We believe that our target mix supports our executive compensation philosophy by emphasizing incentive compensation to ensure that a sufficient portion of compensation remains “at risk” and tied to performance goals. Our CEO has a higher percentage of “at risk” compensation than our other named executive officers because the CMDC believes that the CEO, the individual with the greatest overall responsibility for Company performance and most direct impact on overall corporate results, should have both a larger incentive opportunity and a correlating higher percentage of total compensation “at risk.”

Establishing the 2016 Compensation Framework of Named Executive Officers

All elements of executive compensation are reviewed both separately and in the aggregate to ensure that the amount and types of compensation are appropriately competitive and that the program design encourages the creation of long-term stockholder value. For 2016, the CMDC established a target pay structure for our Named Executive Officers, taking into account competitive market data, scope of responsibility and experience.  The CMDC applied judgment and discretion in setting individual pay levels within this structure for each of our Named Executive Officers, taking into account not only competitive market data but also factors such as Company, business unit and individual performance, scope of responsibility, critical needs and skill sets, unique qualifications, experience, leadership potential and succession planning.  The CMDC determined individual payouts of annual cash incentive awards after considering (1) Company performance measured against annual corporate performance goals and (2) individual performance.  Because the Company continued to experience a period of slower growth in 2016, the CMDC also considered the retention value of base pay and incentive awards for individual executives.

Competitive Benchmarking

We believe it is critical to pay for executives at a competitive level relative to our peer group in order to attract and retain the talent we need to deliver high performance. While competitive, size-adjusted positional benchmark data was prepared consistent with past years’ practice, this benchmark data was less meaningful in determining individual pay decisions in 2016 compared to other factors such as company, business unit and individual performance, scope of responsibility, critical needs and skills, leadership potential and succession planning. These factors are reviewed annually to ensure ongoing competitiveness of our executive compensation structure (i.e. our salary structure, our annual target bonus levels and our long-term incentive award guidelines).

Based on Aon Hewitt’s analysis and recommendation, the CMDC used the following peer group of companies for competitive benchmarking of our 2016 executive compensation program:

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We believe this peer group of 23 companies was appropriate given the nature of our industry. The companies were chosen for a variety of reasons, including: comparability in size in terms of revenue and market capitalization; global business footprint; and strategic characteristics specific to the food and beverage and consumer products industries. We also considered whether a peer group company competed directly with us for executive talent. We annually review the composition of our peer group and make changes when appropriate. As a result of the 2016 analysis, we replaced Energizer Holdings, Inc. with Edgewell Personal Care Company (following Energizer’s 2015 spin off from its former parent company, the newly named Edgewell Personal Care Company) and removed Keurig Green Mountain, Inc. (following its 2016 acquisition).

2016 Corporate Performance Goals

In establishing annual corporate performance goals, the CMDC strives to ensure that targets are sufficiently ambitious to create maximum stockholder value, while also offering an opportunity to provide meaningful payouts to our executives.  In 2016, the CMDC used the following measures with relative weightings to determine the level of achievement of various awards.

*                  The 2016 Corporate Performance Goals are consistent with performance measures used in previous years to ensure continued focus on top-line growth and profitability. The CMDC believes that this continuity was critical during 2016 which was anticipated to be a year of transition for the business.  Further, the stability of our metrics was important to anchor and focus organizational objectives.

**           As defined in our Annual Report on Form 10-K for fiscal year 2016.

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Individual Performance

All of our employees, including our Named Executive Officers, participate in the Company’s performance management process. The performance management process measures individual performance over the course of the previous year against pre-set performance / achievement metrics.  Individual performance factors and other achievements are taken into account by the CMDC when determining annual incentive payments and long-term incentive award levels for each Named Executive Officer.

2016 Executive Pay Decisions

Set forth below is a description of the specific pay decisions that were made in 2016 with respect to our Named Executive Officers.

Base Salaries

Base salaries for our Named Executive Officers are reviewed annually.  Base salary target ranges are established using the 50th percentile of our compensation peer group as an initial point of reference. Specific salary levels are based on factors such as individual performance, unique qualifications and experience. Salary increases, if any, are based on individual performance, individual salary position relative to market data, and our overall salary increase budget in a given year. Management reviews results of surveys that forecast what other companies’ salary increase budgets will be and sets the annual salary increase budgets based upon such forecasts, along with consideration of business performance and economic conditions. In addition, salary adjustments may be granted based on significant job changes, sustained performance in a role and/or the determination that an executive’s base salary is significantly below the benchmark based on the peer group analysis.

Given the Company’s continued focus in 2016 on organizational and cost efficiency, the 2016 base salaries for our Named Executive Officers were not adjusted above prior year levels.  The base salaries for the Named Executive Officers for 2016 were as follows:

Annual Incentive Awards

Our annual incentive awards are cash awards designed to reward executives for achieving corporate goals, regional market goals (as applicable) and individual performance goals.  Annual incentive awards are made to our executives under the Senior Executive Performance Incentive Plan (the “Executive Performance Incentive Plan”) and are targeted at the median of the compensation peer group. Each executive’s target annual incentive award is a percentage of the executive’s base salary as determined by job level and benchmarking data.

For 2016, each Named Executive Officer’s annual incentive award was subject, in part, to the 2016 Corporate Performance Goals described under “— 2016 Corporate Performance Goals ,” above.  For Messrs. Jakobsen, Cup, Urbain, Sheller and Ormesher, attainment of the 2016 incentive awards was weighted 100% on 2016 Corporate Performance Goals.

The 2016 Corporate Performance Goals and comparative Company performance with respect to each such goal were as follows:

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These measures represent four diverse, independently assessed metrics intended to focus on multiple growth and other financial objectives.  Each measure is designed to be challenging to attain. Scales are developed for each performance goal to measure performance between a threshold and maximum level permitting Named Executive Officers to earn between 0% to 200% of their annual incentive targets based on actual results achieved. Target achievement for each performance metric results in a 100% earning factor for such weighted metric, interpolated for achievement between threshold, target and maximum results. Finally, as in previous years, the CMDC applied an umbrella threshold for payout under the corporate performance goal portion of the plan relative to the weighted average performance across the four goals shown above.

Overall payout opportunity for each Named Executive Officer under the corporate performance goal portion of the plan was determined in accordance with the total payout percentage shown above.  Separately, the CMDC considered a number of factors in evaluating individual performance, including specific individual achievements, execution of specific objectives under the Company’s Fuel for Growth program and the Company’s actual performance against corporate goals.  The specific activities considered by the CMDC were:  (1) For Mr. Jakobsen, the demonstration of strong leadership of the Company’s strategic reshape though a challenging transitional period.  Mr. Jakobsen was also responsible for developing a new vision for our China and Hong Kong businesses and for driving the Company’s cost reductions program to enable significant investment in initiatives that will underpin future growth.  (2) For Mr. Cup, who drove a range of standardization and analytical programs. Optimizing the Company’s Finance and IM organizations and provided strong leadership of the Company’s Fuel for Growth program and other important value creating initiatives, including treasury and share repurchase programs.  (3)  For Mr. Urbain, his focus and achievements on specific market turnarounds and capability building initiatives, including his commitment and relocation to South Asia.  (4) For Mr. Sheller, his continued role in the execution of the Fuel for Growth program and his leadership of legal support for key Company product launch initiatives and the Company’s shareholder engagement program.  (5) For Mr. Ormesher, his leadership of employee engagement and retention strategies, focus on productivity and service in his function, under the “One HR” banner and the execution of company-wide leadership development programs.

After considering these factors, the CMDC approved performance incentive awards under the plan for Messrs. Jakobsen, Cup, Urbain, Sheller and Ormesher at disclosed in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table below.

Long-Term Incentive Awards

Long-term incentive awards are made to our executives under our stockholder-approved Long Term Incentive Plan (the “LTIP”). Our 2016 long-term incentive awards are equity-based awards designed to tie executive interests to the interests of stockholders. The ultimate value of long-term incentive awards is determined by stock price, which provides a direct link to the creation of stockholder value. In addition, our long-term incentive award program is designed to reward individual performance, as the amount of long-term incentive awards granted can vary based on the CMDC’s assessments of individual performance and future potential. We use three long-term incentive award vehicles, each of which serves a different purpose.

·                   Performance share awards to reward the achievement of financial objectives which align with our global growth strategy;

·                   Stock option awards to reward the creation of stockholder value and growth; and

·                   Restricted stock unit awards to enhance the retention component of our program.

We typically make grants of long-term incentive awards in late February or early March of each year, following the release of the prior year’s financial results. We believe that consistent timing of equity award grants reflects good corporate governance that reduces the risk in selecting a grant date with a preferential stock price. For additional details regarding our policy for granting long-term incentive awards, see “Compensation Governance and Oversight - Equity Grant Practices.”

The following chart shows the 2016 target mix of the annual long-term incentive awards for each of the Named Executive Officers:

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*                  Represents our standard equity vehicle mix excluding the 2016 supplemental grant of stock options made to our Named Executive Officers and other select individuals. The purpose of this award is described in the section titled “Supplemental Stock Option Awards,” below.

We believe that the mix of annual long-term incentive awards shown above provides an appropriate balance between linking the compensation of our executives directly to Company performance, the creation of growth in stockholder value and enhancing the retention aspect of our executive compensation program.

The target number of performance shares, stock options, and restricted stock units granted to each executive for the annual award is determined based on a review of competitive market data, a subjective assessment of individual performance and future performance expectations. These target values are reviewed and approved annually. Once the target value of the annual long-term incentive award is determined, the number of performance shares, stock options and restricted stock units is calculated based on the mix of long-term incentive awards approved by the CMDC (illustrated above) and the closing stock price on the date of grant.

Annual Performance Share Awards

In 2016, 40% of each Named Executive Officer’s and other senior executives’ annual long-term incentive awards were granted in the form of performance share awards. Each executive’s performance share award is denominated as a target number of performance shares (the “Executive’s Target Shares”) for a three-year performance cycle (a “Performance Cycle”). Each Performance Cycle is comprised of three discrete annual performance periods (each, a “Performance Period”). One-third of an Executive’s Target Shares is targeted to be earned during each Performance Period in the Performance Cycle.

Corporate financial goals applicable to a Performance Period must be achieved if the executive is to earn the portion of the Executive’s Target Shares applicable to that Performance Period.  Unlike the annual incentive awards, payment of the performance shares is not subject to an individual performance component.  After the completion of each Performance Period, the CMDC assesses and certifies the corporate financial performance results and calculates the number of shares to be allocated to each executive with regard to such Performance Period. At approximately the same time, the CMDC establishes new corporate financial goals for the next Performance Period in the Performance Cycle. Share amounts that are earned for a completed Performance Period are fixed for the remaining duration of the Performance Cycle but are not distributed until the end of the Performance Cycle, at which time all of the shares earned by an executive for the Performance Cycle vest and are paid out to the executive.

The financial goals and payout scale applicable to the 2016 Performance Period were set to be identical to the 2016 Corporate Performance Goals in order to underscore continued focus on top-line growth and profitability.  However, any three-year Performance Cycle that includes the 2016 Performance Period (i.e. the 2014 - 2016 Performance Cycle, the 2015 - 2017 Performance Cycle and the 2016 - 2018 Performance Cycle) incorporates three distinct years of performance factors to create a unique, multi-year performance target.  Because the ultimate payout applicable to any three-year Performance Cycle is determined by a composite of distinct annual Performance Periods, the CMDC believes that three-year Performance Cycles reflect long term performance results.

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Performance Results Under Our Outstanding Performance Share Awards

The following table illustrates our performance share awards for each of the 2014-2016, 2015-2017 and 2016-2018 Performance Cycles. The 2014 and 2015 Performance Periods were previously completed and awards for these periods are fixed.

2014 - 2016 Performance Share Award Results

As noted above, each long-term Performance Cycle is comprised of three discrete annual Performance Periods.  We believe that maintaining discrete, annual Performance Periods for our performance share awards allows us to set more ambitious objectives than would be considered for a single three-year performance period.  This approach allows us to focus on attainment of specific annual objectives while maintaining alignment with long-term strategic objectives. Furthermore, our use of four different performance measures for each annual Performance Period provides a multi-dimensional view of performance, often with varying levels of achievement and resulting payouts.

As described in the chart below, achievement against the Company’s 2016 Corporate Performance Goals resulted in performance share payout at 74.4% of target for the 2016 Performance Period. The following displays the level of achievement for the 2014 - 2016 Performance Share Awards, representing a blend of each of the 2014, 2015 and 2016 performance periods.

Three-year Average % Payout: 62.6%

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Annual Stock Option Awards

Stock options provide for the right of an executive to purchase shares of Company stock in the future based on a fixed price established on the date of grant. As such, we believe stock options are inherently performance-based as the option has value to the executive only in the case that the stock price increases over time. If the stock price does not increase above the grant price, the executive will realize no value from the award. More details on the practices of granting stock options can be found below under “Compensation Governance and Oversight - Equity Grant Practices.”

In 2016, 40% of each Named Executive Officer’s and other senior executives’ annual long-term incentive awards were granted in the form of stock options. The annual stock option awards granted in 2016 will vest 33.3% each year on the first, second and third anniversaries of the grant date.

Supplemental Stock Option Awards

In 2016, each of the Named Executive Officers and other select individuals received a supplemental stock option award designed to retain key talent through a time of critical transition for the business. The CMDC viewed this award as a means to align key talent with the Company’s Fuel for Growth objectives and to further encourage the creation of long-term stockholder value and growth. The CMDC chose stock options as the vehicle for this supplemental equity award because the CMDC recognized stock options as having a direct link to the creation of stockholder value.  If the stock price does not increase above the grant price, no value will be realized. These awards vest 25% each year on the first, second, third and fourth anniversaries of the grant date.  The supplemental stock options granted to the CEO reflects 22% of his overall 2016 equity award. The supplemental stock options granted to the other Named Executive Officers reflects approximately 27% of their overall 2016 equity awards.

Annual Restricted Stock Unit Awards

Restricted stock units generally provide for the right of an executive to receive shares of Company stock upon the attainment of continuous employment through the vesting schedule. If the executive does not meet the employment conditions specified in the award agreement, the executive will forfeit the award.

In 2016, 20% of each Named Executive Officer’s and other senior executives’ annual long-term incentive awards were granted in the form of restricted stock units. Restricted stock units are awarded not only to help support the creation of stockholder value but also to enhance the retention of our executives. Generally, annual awards granted to our Named Executive Officers vest in full on the fourth anniversary of the grant date.

The CMDC periodically grants additional “off-cycle” awards to key employees, including Named Executive Officers, in connection with recruitment, promotions, succession planning, significant accomplishments or achievements, or focused retention efforts.

Individual Compensation Arrangements

Generally, we have no employment contracts with our executives, unless required by local law or practice. We had no employment contracts for our Named Executive Officers in 2016.

Other Elements of 2016 Compensation

In addition to the components set forth above, our senior executives, including each of the Named Executive Officers, are entitled to participate in qualified and non-qualified retirement and savings plans, severance and change in control severance plans, other general employee benefits and limited perquisite opportunities.

Post-Employment Benefits

We offer certain plans that provide compensation and benefits to employees, including the Named Executive Officers, upon their retirement or if their employment is otherwise terminated. These plans are periodically reviewed by the CMDC to ensure that they are consistent with current competitive practice. The plans offered are common within our peer group and enhance our ability to attract and retain key talent.

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Retirement Benefits

Qualified and Non-Qualified Retirement Plans:     During 2016, certain Named Executive Officers participated in our defined benefit plans for U.S. employees, which provide income for employees following retirement. These plans were closed to new participants in 2009 and participants do not accrue additional service credits under the defined benefit formulas. The Retirement Income Plan is a tax-qualified plan, as defined under Internal Revenue Service (“IRS”) regulations, and the Benefit Equalization Plan—Retirement Plan is a non-qualified plan that provides pension benefits above those allowed under the pay limits for tax-qualified plans. The Summary Compensation Table reflects any increase in 2016 in the actuarial value of these benefits under each of these plans. Accrued benefits for participating Named Executive Officers, determined as of December 31, 2016, are provided in the Pension Benefits Table.

Qualified and Non-Qualified Savings Plans:     During 2016, certain Named Executive Officers participated in our savings plans for U.S. employees, which allow employees to defer a portion of their base salary and bonus and to receive matching contributions from us to supplement their income in retirement. The Retirement Savings Plan is a tax-qualified 401(k) plan, as defined under IRS regulations, and the Benefit Equalization Plan—Savings Plan is a non-qualified deferred compensation plan that allows employees to defer a portion of their base salary and bonus and to receive matching contributions from us in excess of the contributions allowed under the Retirement Savings Plan. The savings plans are designed to allow employees to accumulate savings for retirement on a tax-advantaged basis. All of our U.S. employees are eligible to participate in the qualified plan, and employees whose pay or benefits exceeds the IRS qualified plan limits are eligible for the non-qualified plan. The Summary Compensation Table reflects our contributions to these plans during 2016. The Non-Qualified Deferred Compensation table provides more detail on the Benefits Equalization Plan—Savings Plan.

Severance Benefits

Severance Plan:     The Second Amended and Restated Mead Johnson & Company, LLC Senior Executive Severance Plan (the “Executive Severance Plan”) provides the basis for establishing a competitive level of severance protection for certain senior executives to help us attract and retain key talent necessary to run our Company. Severance payments are based on the executive’s position in the Company and may be adjusted as determined by the CMDC in certain situations. Treatment of outstanding equity awards in the event of a qualifying termination are governed by the terms of the applicable equity award agreement. Both the key terms of the Executive Severance Plan and the value of severance benefits to be paid to our Named Executive Officers under the Executive Severance Plan (assuming an effective termination date of December 31, 2016) are described below under “—Potential Payments Upon Termination or Change in Control.”

Change in Control Severance Plan:     The Third Amended and Restated Mead Johnson & Company, LLC Executive Change in Control Severance Plan (the “Executive Change in Control Plan”) enables management to evaluate and support potential transactions that might be beneficial to stockholders even though the result would be a change in control of our Company. The plan contains a “double-trigger,” which means that benefits are only triggered upon a covered executive’s involuntary termination of employment with us other than for cause or by the covered executive’s termination of employment for good reason, in either case during the two-year period following the date of a change in control. Severance payments are based on the executive’s position in the Company. Treatment of outstanding equity awards in the event of a qualifying termination upon a change in control are governed by the terms of the applicable equity award agreement. The Executive Change in Control Plan does not provide excise tax gross-ups. Both the key terms of the Executive Change in Control Plan and the value of severance benefits to be paid to our Named Executive Officers under the Executive Change in Control Plan (assuming an effective termination date of December 31, 2016) are described below under “—Potential Payments Upon Termination or Change in Control.”

General Employee Benefits

We maintain medical and dental insurance, accidental death insurance and disability insurance for all of our employees. The Named Executive Officers are eligible to participate in the same welfare benefit plans as our other employees and are covered by the same vacation, leave of absence and similar policies.

Limited Perquisites

We maintain an expatriate program that provides certain benefits to our employees who accept expatriate assignments. Our executive officers, including the Named Executive Officers, are entitled to the same benefits under the Company’s expatriate program as other Company employees. Under the Company’s expatriate program, such benefits include providing gross-ups on taxable foreign assignment assistance and making tax equalization payments on behalf of (or to) expatriate employees who, as a result of their expatriate assignment, incur tax liabilities in excess of what they would have incurred had they not accepted the expatriate assignment. In 2016, Mr. Urbain incurred no excess tax liabilities related to income earned during his expatriate assignment in Singapore (the “Urbain

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Singapore Expatriate Assignment”). In future years, the Company may pay excess tax liabilities for Mr. Urbain under this program based on potential additional foreign tax liability on certain other income earned by Mr. Urbain during the Urbain Singapore Expatriate Assignment, as well as on income earned by Mr. Urbain during his former expatriate assignment in Thailand (the “Urbain Thailand Expatriate Assignment”). Under our expatriate program, the Company paid such excess tax liabilities, as reported for Mr. Urbain, below, in the “All Other Compensation” column of the Summary Compensation Table. The Company will, to the extent possible, claim any foreign tax credit refunds available during future years based on income earned by Mr. Urbain during the Urbain Singapore Expatriate Assignment and the Urbain Thailand Expatriate Assignment. Foreign tax credit refunds have been applied and will be applied (during future years) to offset any excess tax liabilities to the Company.

Except for the benefits provided under the Company’s expatriate program, perquisites, if any, for individual Named Executive Officers in 2016 were less than $10,000.

Tax Implications of Executive Compensation Program

It is our intention that amounts payable under the Executive Performance Incentive Plan, gains from stock option awards and long-term performance share awards will be fully deductible “performance-based” compensation under Section 162(m) of the Code.   All such payments and awards are specifically approved by the 162(m) Subcommittee of the CMDC, as applicable.

However, in order to maintain a market competitive executive compensation program, we reserve the right to make awards that are not treated as “performance-based” compensation under Section 162(m) of the Code and, as such, may not be fully deductible under Section 162(m) of the Code. More specifically, compensation attributable to the vesting and settlement of restricted stock unit awards is not “performance-based” under Section 162(m) of the Code.

Compensation Governance and Oversight

Risk Considerations

The CMDC considers, in establishing and reviewing our compensation program, whether the program or any of its features could encourage unnecessary or excessive risk taking. The factors considered by the CMDC include:

·                   the general design philosophy of our compensation policies and practices, as such policies and practices relate to or affect risk taking by employees on our behalf, and the manner of their implementation;

·                   our risk assessment and incentive considerations in structuring our compensation policies and practices or in awarding and paying compensation;

·                   how our compensation policies and practices relate to the realization of risks resulting from the actions of employees in both the short term and the long term;

·                   our policies regarding adjustments to our compensation plans and practices to address changes in our risk profile; and

·                   whether any material adjustments need to be made to our compensation policies and practices as a result of any changes in our risk profile.

The CMDC reviews management’s assessment of the risks associated with the Company’s compensation practices and policies for employees, including a consideration of the balance between risk-taking and risk-mitigating factors.  The CMDC believes that the Company has mitigated unnecessary risk considering both the design of the compensation plans and the controls placed upon them because (i) payments under all of our management compensation plans are capped, (ii) the multiple performance goals relate directly to the business plan approved by the Board and (iii) there is an appropriate balance between our annual operating achievements and longer-term value creation, with a particular emphasis on longer-term value creation. Following a review of this assessment, the CMDC determined that any risks arising from the Company’s compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.  This evaluation is completed annually by the CMDC.

Stock Ownership and Retention Guidelines for Executive Officers

To further promote sustained stockholder return and to ensure the Company’s executives remain focused on both short- and long-term objectives, the Company has established stock ownership and retention guidelines for our executive officers. Our guidelines require that our CEO hold shares of our common stock with a value of five times his base salary and that other senior executives,

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including each of our Named Executive Officers, hold shares of our common stock with a value of three times their base salary. Until these stock ownership retention amounts are attained, the executive should not sell any shares acquired following any option exercises or vesting of stock awards (except to satisfy tax withholding requirements).

Executive officers are required to accumulate and hold the minimum number of shares to meet their respective stock ownership level within five years of assuming their position. For purposes of this requirement, “shares” include shares of our common stock that are owned by the executive officer, unvested time-based RSUs, performance shares earned for the annual performance periods of our open performance cycles, and the value of shares held in the company 401(k) savings plan. The CMDC reviews the stock ownership and retention levels of our executive officers on an annual basis, and in February 2017, determined that, all of our executive officers, including the Named Executive Officers, were found to have either satisfied these requirements or were on track to satisfy these requirements ahead of their allowed time frame.

Equity Grant Practices

The following describes our practices regarding equity grants to our employees.

Approval of Awards

Awards granted to our Chief Executive Officer, executive officers and other senior executives and employees are approved by the CMDC. The CMDC has provided a limited delegation of authority to the Chief Executive Officer and the senior executive officer responsible for human resources to make grants of equity to employees who are not executive officers at times other than the annual grant within certain limits. These grants are used primarily in the case of new hires or promotions.

Grant Effective Date—Annual Awards and All Other Awards

For regularly scheduled annual awards, the grant effective date is the date on which the CMDC meets to grant annual awards. For awards granted to current employees at any other time during the year, the grant effective date is generally the first business day of the month following the approval date, except that if the approval date falls on the first business day of a given month, the grant effective date is the approval date. For awards granted to new hires, the grant effective date is the first business day of the month following the employee’s hire date, except that if the employee’s hire date falls on the first business day of a given month, the grant effective date is the employee’s hire date. In no case whatsoever will the grant effective date precede the approval date of a given award.

Grant Price and Fair Market Value

The stock option exercise price of all stock option awards is the fair market value of our common stock as of the date of grant, which for this purpose is the closing price of our common stock on the New York Stock Exchange on the date of grant.

Clawback Provisions

We have a policy providing for the adjustment or recovery of compensation in certain circumstances. If the Board, upon recommendation by the CMDC, determines that, as a result of a restatement of our financial statements or an act of malfeasance of office, an executive has received more compensation than would have been paid absent the action(s) or the incorrect financial statements, the Board, in its discretion, shall take such action as it deems necessary or appropriate to address the events that gave rise to the restatement or improper action and to prevent its recurrence. In certain cases, such action may include, to the extent permitted by applicable law: (i) requiring partial or full reimbursement of any bonus or other incentive compensation paid to the executive, (ii) causing the partial or full cancellation of restricted stock units or deferred stock awards and outstanding stock options, (iii) adjusting the future compensation of such executive and (iv) dismissing or taking legal action against the executive, in each case as the Board, upon recommendation by the CMDC, determines to be in our best interests and that of our stockholders.

Independent Compensation Consultant

The CMDC retains Aon Hewitt as its independent compensation consultant. Aon Hewitt reports directly to the CMDC, and the CMDC directly oversees the fees paid for these services provided by Aon Hewitt.

Aon Hewitt has developed safeguards to promote the independence of its executive compensation consulting advice. These independence policies include: (i) strong confidentiality requirements, a code of conduct and a strict policy against investing in client organizations; (ii) management of multiservice client relationships by separate account executives; (iii) clearly defined engagements with compensation committees that are separate from any other services provided; (iv) formal segregation of executive compensation services into a separate business unit; (v) no incentives for cross-selling of services and no compensation rewards based on other results;

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(vi) no offers of more favorable terms for companies that retain Aon Hewitt for additional services; and (vii) consulting work limited to boards, compensation committees and companies, with no representation of individual executives in any capacity.

The CMDC has determined that the work of Aon Hewitt does not raise any conflict of interest and engaged Aon Hewitt without the recommendation of management. In making this assessment, the CMDC considered, among other factors, Aon Hewitt’s provision of other services to the Company, the level of fees received by Aon Hewitt from the Company as a percentage of Aon Hewitt’s total revenues, Aon Hewitt’s policies and procedures designed to prevent conflicts of interest, and whether the individual Aon Hewitt advisers to the CMDC own any Company stock or have any business or personal relationships with members of the CMDC or our executive officers.

As Aon Hewitt is a leading, global human resources consultancy, the Company also retains Aon Hewitt both in certain ongoing roles and on an as-needed basis. In 2016, Aon Hewitt attended four meetings and received $101,287 in fees for its work done on behalf of the CMDC, $15,296 in fees for its work performed on behalf of the Nominating and Governance Committee and an additional $1,044,077 for general compensation consulting, employee benefit program and actuarial services done on behalf of the Company at the request of management. The CMDC was advised in 2016 of the work that Aon Hewitt does for the Company but did not specifically approve these other services.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None of our executive officers serves, or in the past year has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers who serve, or in the past year has served, on our Board or Compensation and Management Development Committee.

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Summary Compensation Table - 2016, 2015 and 2014

The following table and notes present information concerning total compensation earned by each of our Named Executive Officers for service in 2016, 2015 and 2014, with the exception of (1) Mr. Cup and Mr. Sheller whose total compensation is shown for 2016 and 2015 only and (2) Mr. Ormesher whose total compensation is shown for 2016 only. Mr. Cup and Mr. Sheller were first determined to be Named Executive Officers in 2015.  Mr. Ormesher was first determined to be a Named Executive Officer in 2016.

(1)                                   Mr. Cup commenced employment with the Company as its Executive Vice President and Chief Financial Officer on September 1, 2015. The 2015 amount reported in the “Salary” column, above, represents Mr. Cup’s annual base salary prorated for the number of months he was employed with the Company in 2015.

(2)                                   As part of his recruitment package, Mr. Cup received a transition cash payment of $650,000, which payment is subject to repayment if Mr. Cup voluntarily resigns or is terminated for cause within his first 24 months of employment.

(3)                                   As part of his recruitment package, Mr. Sheller received a transition cash payment of $265,000 in lieu of the annual incentive opportunity forfeited when Mr. Sheller left his prior employer.

(4)                                   The amounts shown in the Stock Awards and Option Awards columns represent the grant date fair value of stock options, restricted stock units and performance shares determined in accordance with FASB ASC Topic 718. The assumptions made in the valuation reflected in these columns are set forth in the following notes to the Company’s Consolidated Financial Statements:

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For performance share awards granted during 2016, the Company assumed that these awards would pay out at the targeted number of shares, and the grant date fair values set forth in the Stock Awards column for each Named Executive Officer reflects this assumption. Assuming maximum performance is achieved, the grant date value of the performance share awards would be as follows:

(5)                                   These amounts were earned under the Executive Performance Incentive Plan, which is discussed in the Compensation Discussion and Analysis under “— Annual Incentive Awards .”

(6)                                   The amounts shown in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column are attributable to the aggregate change during 2016 in the actuarial present value of each Named Executive Officer’s accumulated pension benefit; the present value of the accumulated pension benefits is reported below in the “Pension Benefits” table. During 2016, the actuarial present value of accumulated pension benefit increased for Mr. Jakobsen and Mr. Urbain. Mr. Cup, Mr. Sheller and Mr. Ormesher each joined the Company after the Retirement Income Plan was closed to new participants in 2009 and therefore do not participate in this pension plan.

(7)                                   Amounts shown in the All Other Compensation column for 2016 are comprised of the following:

(a)            Includes overseas relocation and assignment expenses to Singapore including Housing & Utilities ($28,877), Cost of Living Allowance ($6,570), Destination Assistance ($2,365), Relocation Allowance ($12,000), Car - consistent with local policy ($11,088) and tax preparation services ($1,250). Amounts paid in foreign currency have been converted at a weighted average exchange rate of 1.37 Singapore dollars to 1.0 U.S. dollar.

(b)           Includes Company contributions to the qualified and non-qualified savings plans.

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