HUNT VALLEY, Md., Sept. 30, 2021 /PRNewswire/
-- McCormick & Company, Incorporated (NYSE: MKC), a
global leader in flavor, today reported financial results for the
third quarter ended August 31,
2021.
- Sales rose 8% in the third quarter from the year-ago period. In
constant currency, the Company grew sales 5%.
- Operating income was $265 million
in the third quarter compared to $273
million in the year-ago period. Adjusted operating income
was $272 million compared to
$273 million in the third quarter of
2020.
- Earnings per share was $0.79 in
the third quarter as compared to $0.76 in the year-ago period. Adjusted earnings
per share rose 5% to $0.80 from
$0.76 in the year-ago period.
- For fiscal year 2021, McCormick updated its sales outlook to
expected growth of 12% to 13%, or 9% to 10% in constant
currency.
Chairman, President & CEO's Remarks
Lawrence E. Kurzius, Chairman,
President and CEO, stated, "Our third quarter results continue to
demonstrate the strength and breadth of McCormick's offering. We
grew sales 8% in the third quarter and, notably, on a two-year
basis, grew sales 17%, which reflects our robust growth momentum in
both segments and strong contributions from our Cholula and FONA
acquisitions. Our Consumer segment results reflect the sustained
shift to consumer at-home consumption, higher than pre-pandemic
levels, as well as lapping the year-ago elevated demand in the
lockdown days of the pandemic. In our Flavor Solutions segment,
growth was driven equally from packaged food and beverage
companies as well as our restaurant and other foodservice
customers, many of which were lapping the curtailment in
away-from-home dining in the year-ago period.
We are currently operating in a dynamic cost environment and
like the rest of the industry, experiencing cost pressures. While
the profit driven by our strong third quarter sales growth was
tempered by higher inflation and industry-wide logistics
challenges, we expect to manage through this inflationary
environment as we have successfully done in the past, including
through pricing, and fully offset cost pressures over time.
Importantly, our strong growth trajectory supports our confidence
in our long-term financial algorithm to drive continuous value
creation through top line growth and margin expansion. Remarkably,
year-to-date versus 2019, we have driven sales, adjusted operating
income and adjusted earnings per share growth of nearly 20% across
all three metrics. The combination of our broad and advantaged
portfolio, the execution of our strategies to capitalize on
accelerating consumer trends and the engagement of our employees
have positioned us well to continue to drive differentiated
growth.
"We are capitalizing on the sustained shift to cooking more at
home, increased digital engagement, clean and flavorful eating, and
trusted brands, which we are confident will persist beyond the
pandemic. The strategic investments we have made, including in our
supply chain resiliency and brand marketing, provide a foundation
for long-term, sustainable growth while enhancing our agility and
our relevance with our consumers and customers. As we enter the
fourth quarter, we are narrowing our full year sales outlook to the
high-end of our previous range and, recognizing there remains a
degree of uncertainty in the cost environment, we are lowering our
adjusted operating income outlook. We are confident in our robust
sales growth momentum and our ability to successfully navigate
through the transitory broad-based supply chain challenges the
world is currently experiencing. We have a strong foundation and
remain focused on the long-term goals, strategies and values that
have made us so successful.
"I want to recognize McCormick employees around the world as the
collective power of our people drives our momentum and our success.
With our vision to stand together for flavor and our relentless
focus on growth, performance, and people, we are confident our
strategies will enable us to become even better positioned to drive
future growth and build long-term value for our shareholders."
Third Quarter 2021 Results
McCormick reported an 8% sales increase in the third quarter
from the year-ago period, including a 3% favorable impact from
currency. Sales from Cholula and FONA, acquired in November 2020 and December
2020, respectively, added 4% to the sales increase. Flavor
Solutions segment sales increased 21%, or 17% in constant currency,
driven by incremental sales from acquisitions, growth with packaged
food and beverage companies as well as higher sales of
away-from-home products. Consumer segment sales grew 1%, including
a 2% favorable impact from currency, on top of 15% growth in the
third quarter of 2020. Despite the difficult year-over-year
comparison, Consumer segment sales reflect the sustained shift to
consumers cooking more at home, fueled by the Company's brand
marketing, strong digital engagement, new products, and acquisition
growth.
Gross profit margin declined 260 basis points versus the
year-ago period driven by higher cost inflation and unfavorable
product mix, partially offset by cost savings led by the Company's
Comprehensive Continuous Improvement (CCI) program. Operating
income was $265 million in the third
quarter of 2021 compared to $273
million in the year-ago period. This decline included
$1 million of transaction and
integration expenses related to the acquisitions of Cholula and
FONA as well as $6 million of special
charges. Excluding transaction and integration expenses as well as
special charges, adjusted operating income of $272 million in the third quarter was comparable
to $273 million in the year-ago
period. In constant currency, adjusted operating income declined
3%. The favorable impact of higher sales and CCI-led cost savings
was more than offset by gross margin compression and higher brand
marketing investments.
Earnings per share was $0.79 in
the third quarter of 2021 compared to $0.76 in the third quarter of 2020. Transaction
and integration expenses and special charges lowered earnings per
share by $0.01 in the third quarter
of 2021. Excluding this impact, adjusted earnings per share was
$0.80 in the third quarter of 2021
compared to $0.76 in the year-ago
period. This 5% increase in adjusted earnings per share was driven
by higher sales and a lower adjusted income tax rate, partially
offset by higher cost inflation.
Year-to-date net cash provided by operating activities was
$373 million compared to $627 million through the third quarter of 2020.
The decrease was primarily due to the higher use of cash associated
with working capital, including the impact of higher inventory
levels to support increased demand and mitigate supply and service
issues, and the payment of transaction and integration
costs.
Fiscal Year 2021 Financial Outlook
McCormick is capitalizing on the sustained shift to cooking more
at home and the growing consumer interests in clean and flavorful
eating, increased digital engagement, trusted brands and
purpose-minded practices. These long-term trends have accelerated
during the COVID-19 pandemic and are expected to persist beyond the
pandemic. The Company expects the shift in consumer behavior to
cooking and eating more at home to be sustained at higher than
pre-pandemic levels, as well as a gradual recovery in the demand
from restaurant and other foodservice customers which have been
impacted by the curtailment of away-from-home dining. McCormick is
well positioned for continued growth through the combination of its
alignment with these consumer trends, the breadth and reach of its
flavor portfolio and its effective growth strategies.
The Company reaffirms the three-percentage point favorable
impact from currency rates on sales and the two-percentage point
favorable impact from currency on adjusted operating income and
adjusted earnings per share.
In 2021, the Company now expects to grow sales by 12% to 13%
compared to 2020, which in constant currency is 9% to 10% and
includes the incremental impact of the Cholula and FONA
acquisitions. This is at the high-end of the Company's previous
projection of 11% to 13%, or 8% to 10% in constant currency.
McCormick expects to drive organic sales growth in both its
Consumer and Flavor Solutions segments in 2021 driven by brand
marketing, new products, category management and differentiated
customer engagement. The Company's expected sales growth also
includes the impact of pricing actions taken to partially offset an
anticipated mid-single digit increase in costs.
Operating income in 2021 is expected to grow by 2% to 4% from
$1.0 billion in 2020. The Company
anticipates transaction and integration expenses related to the
Cholula and FONA acquisitions of approximately $38 million in 2021. In addition, McCormick
currently expects approximately $26
million of special charges in 2021 that relate to previously
announced organization and streamlining actions. Excluding the
impact of transaction and integration expenses as well as special
charges in 2021 and 2020, adjusted operating income is expected to
grow by 6% to 8%, which in constant currency is 4% to 6%. This
compares to the Company's previous projection of 10% to 12%, or 8%
to 10% in constant currency and primarily reflects higher inflation
and industry-wide logistics challenges. While the Company continues
to project a mid-single digit increase in inflation, the rate is
higher than previously anticipated due to recent acceleration. The
expected adjusted operating income growth range includes strong
base business growth and acquisition contribution partially offset
by a 4% impact from incremental 2021 business transformation and
first-half volume driven COVID-19 related expenses.
McCormick increased its projected 2021 earnings per share to be
in the range of $2.80 to $2.85, compared to $2.78 of earnings per share in 2020. The Company
expects the net impact of the transaction and integration expenses,
including an unfavorable income tax expense impact from a discrete
item related to the acquisition of FONA, as well as special charges
and the gain on the sale of the Company's minority stake in Eastern
Condiments Private Ltd to lower earnings per share by $0.17 in 2021. Excluding these impacts, the
Company projects 2021 adjusted earnings per share to be in the
range of $2.97 to $3.02, as compared to previously reported
guidance of $3.00 to $3.05. The decline is driven by the updated
adjusted operating income outlook, partially offset by an expected
mid-single digit increase in income from unconsolidated operations
and a reduction of the Company's 2021 projected adjusted effective
tax rate to approximately 21%. The Company's updated adjusted
earnings per share outlook represents an expected increase of 5% to
7%, including a favorable impact from currency, as compared to
$2.83 of adjusted earnings per share
in 2020. This reflects strong base business growth and acquisition
contribution, partially offset by a 4% impact from incremental 2021
business transformation and COVID-19 related expenses and a 1%
headwind from an anticipated increase in the projected adjusted
effective tax rate.
Business Segment Results
Consumer Segment
(in
millions)
|
|
Three months
ended
|
|
Nine months
ended
|
|
|
8/31/2021
|
|
8/31/2020
|
|
8/31/2021
|
|
8/31/2020
|
Net sales
|
|
$
|
921.9
|
|
|
$
|
910.9
|
|
|
$
|
2,813.9
|
|
|
$
|
2,573.0
|
|
Operating income,
excluding special
charges, transaction and integration
expenses
|
|
187.8
|
|
|
209.0
|
|
|
554.5
|
|
|
560.2
|
|
Consumer segment sales increased 1% from the third quarter of
2020, which includes a 3% increase from the Cholula acquisition. In
constant currency, sales declined 1%, due to lapping the
substantially high demand for McCormick products in the year-ago
period driven by consumers eating and cooking more at home during
the lockdown days of the pandemic.
- Consumer sales in the Americas was comparable to the third
quarter of 2020, including a 3% increase from the Cholula
acquisition. In constant currency, sales decreased 1% due to
lapping the substantially high demand in the year-ago period
despite the sustained shift to consumer at-home consumption
remaining higher than pre-pandemic levels.
- Consumer sales in Europe,
Middle East and Africa (EMEA) declined 6% compared to the
year-ago period, including a 5% favorable impact from currency. In
constant currency, sales declined 11% due to the exceptionally high
demand in the year-ago period.
- Consumer sales in the Asia/Pacific region increased 20% compared to
the year-ago period. In constant currency, sales increased 11%
driven by the products related to away-from-home consumption in
McCormick's portfolio, mainly due to the recovery compared to the
year-ago period. Partially offsetting this increase were declines
of cooking at-home products across the region versus elevated
demand in the year-ago period.
Consumer segment operating income, excluding transaction and
integration expenses, as well as special charges, decreased 10% to
$188 million for the third quarter of
2021 compared to $209 million in the
year-ago period. In constant currency, Consumer operating income
decreased 12%. The decline was driven by higher cost inflation,
partially offset by CCI-led cost savings.
Flavor Solutions Segment
(in
millions)
|
|
Three months
ended
|
|
Nine months
ended
|
|
|
8/31/2021
|
|
8/31/2020
|
|
8/31/2021
|
|
8/31/2020
|
Net sales
|
|
$
|
627.5
|
|
|
$
|
519.4
|
|
|
$
|
1,773.7
|
|
|
$
|
1,470.4
|
|
Operating income,
excluding special
charges, transaction and integration
expenses
|
|
84.5
|
|
|
64.1
|
|
|
238.3
|
|
|
168.4
|
|
Flavor Solutions segment sales increased 21% in the third
quarter. In constant currency, sales increased 17%, with the FONA
and Cholula acquisitions contributing 8% to that increase. Higher
sales to our packaged food and beverage customers and our
restaurant and other foodservice customers contributed equally to
the increase.
- In the Americas, Flavor Solutions sales rose 21% compared to
the third quarter of 2020, with the FONA and Cholula acquisitions
contributing 12% to that increase. In constant currency, sales
increased 19% from the year-ago period driven by higher sales to
branded foodservice customers coupled with continued growth with
packaged food and beverage companies.
- The EMEA region's Flavor Solutions sales increased 28% compared
to the third quarter of 2020, and in constant currency grew 19%.
Higher sales to quick service restaurants and branded foodservice
customers combined with strong growth with packaged food companies
drove the increase.
- The Asia/Pacific region's
Flavor Solutions sales grew 8% compared to the third quarter of
2020. In constant currency, sales increased 1%. This increase was
driven by quick service restaurants, partially impacted by the
timing of customers' promotional activities.
Flavor Solutions segment operating income, excluding transaction
and integration expenses, as well as special charges, increased 32%
to $85 million for the third quarter
of 2021 compared to $64 million in
the year-ago period. In constant currency, Flavor Solutions
operating income increased 27%. Higher sales, favorable product mix
and CCI-led cost savings more than offset higher cost inflation.
Additionally, the leverage of fixed costs resulting from higher
sales had a favorable impact on the Flavor Solutions segment's
operating income margin.
Non-GAAP Financial Measures
The tables below include financial measures of adjusted gross
profit, adjusted gross profit margin, adjusted operating income,
adjusted operating income margin, adjusted income tax expense,
adjusted income tax rate, adjusted net income and adjusted diluted
earnings per share. These represent non-GAAP financial measures
which are prepared as a complement to our financial results
prepared in accordance with United
States generally accepted accounting principles. These
financial measures exclude the impact, as applicable, of the
following:
Special charges - In our consolidated income statement, we
include a separate line item captioned "Special charges" in
arriving at our consolidated operating income. Special charges
consist of expenses associated with certain actions undertaken by
the company to reduce fixed costs, simplify or improve processes,
and improve our competitiveness and are of such significance in
terms of both up-front costs and organizational/structural impact
to require advance approval by our Management Committee. Upon
presentation of any such proposed action (including details with
respect to estimated costs, expected benefits and expected timing)
to the Management Committee and the Committee's advance approval,
expenses associated with the approved action are classified as
special charges upon recognition and monitored on an on-going basis
through completion.
Transaction and integration expenses associated with the Cholula
and FONA acquisitions – We exclude certain costs associated with
our acquisitions of Cholula and FONA in November and December 2020, respectively, and their subsequent
integration into the Company. Such costs, which we refer to as
"Transaction and integration expenses", include transaction costs
associated with the acquisition, as well as integration costs
following the acquisition, including the impact of any acquisition
date fair value adjustment for inventory, together with the impact
of discrete tax items, if any, directly related to each
acquisition.
Income from sale of unconsolidated operations – We exclude the
gain realized with our sale of an unconsolidated operation in
March 2021 that occurred during the
second quarter of fiscal 2021. The sale of our 26% interest in
Eastern Condiments Private Ltd resulted in a gain of $13.4 million, net of tax of $5.7 million. The gain is included in Income from
unconsolidated operations in our consolidated income statement.
We believe that these non-GAAP financial measures are important.
The exclusion of the items noted above provides additional
information that enables enhanced comparisons to prior periods and,
accordingly, facilitates the development of future projections and
earnings growth prospects. This information is also used by
management to measure the profitability of our ongoing operations
and analyze our business performance and trends.
These non-GAAP financial measures may be considered in addition
to results prepared in accordance with GAAP, but they should not be
considered a substitute for, or superior to, GAAP results. In
addition, these non-GAAP financial measures may not be comparable
to similarly titled measures of other companies because other
companies may not calculate them in the same manner that we do. We
intend to continue to provide these non-GAAP financial measures as
part of our future earnings discussions and, therefore, the
inclusion of these non-GAAP financial measures will provide
consistency in our financial reporting. A reconciliation of these
non-GAAP financial measures to the related GAAP financial measures
is provided below:
(in millions except
per share data)
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
8/31/2021
|
|
8/31/2020
|
|
8/31/2021
|
|
8/31/2020
|
Gross
profit
|
$
|
599.6
|
|
|
$
|
590.3
|
|
|
$
|
1,791.7
|
|
|
$
|
1,639.7
|
|
Impact of transaction
and integration expenses
included in cost of goods sold (1)
|
—
|
|
|
—
|
|
|
6.3
|
|
|
—
|
|
Adjusted gross
profit
|
$
|
599.6
|
|
|
$
|
590.3
|
|
|
$
|
1,798.0
|
|
|
$
|
1,639.7
|
|
Adjusted gross profit
margin (2)
|
38.7
|
%
|
|
41.3
|
%
|
|
39.2
|
%
|
|
40.6
|
%
|
|
|
|
|
|
|
|
|
Operating
income
|
$
|
265.2
|
|
|
$
|
273.0
|
|
|
$
|
738.9
|
|
|
$
|
724.6
|
|
Impact of transaction
and integration expenses
included in cost of goods sold (1)
|
—
|
|
|
—
|
|
|
6.3
|
|
|
—
|
|
Impact of other
transaction and integration
expenses (1)
|
1.3
|
|
|
—
|
|
|
27.0
|
|
|
—
|
|
Impact of special
charges
|
5.8
|
|
|
0.1
|
|
|
20.6
|
|
|
4.0
|
|
Adjusted operating
income
|
$
|
272.3
|
|
|
$
|
273.1
|
|
|
$
|
792.8
|
|
|
$
|
728.6
|
|
% (decrease) increase
versus year-ago period
|
(0.3)
|
%
|
|
|
|
8.8
|
%
|
|
|
Adjusted operating
income margin (3)
|
17.6
|
%
|
|
19.1
|
%
|
|
17.3
|
%
|
|
18.0
|
%
|
|
|
|
|
|
|
|
|
Income tax
expense
|
$
|
31.5
|
|
|
$
|
46.9
|
|
|
$
|
135.5
|
|
|
$
|
117.4
|
|
Impact of transaction and
integration expenses (1)
|
1.2
|
|
|
—
|
|
|
(3.1)
|
|
|
—
|
|
Impact of special
charges
|
1.4
|
|
|
—
|
|
|
4.9
|
|
|
1.2
|
|
Adjusted income tax
expense
|
$
|
34.1
|
|
|
$
|
46.9
|
|
|
$
|
137.3
|
|
|
$
|
118.6
|
|
Adjusted income tax
rate (4)
|
14.1
|
%
|
|
19.3
|
%
|
|
19.6
|
%
|
|
18.6
|
%
|
|
|
|
|
|
|
|
|
Net income
|
$
|
212.4
|
|
|
$
|
206.1
|
|
|
$
|
557.9
|
|
|
$
|
546.7
|
|
Impact of transaction and
integration expenses (1)
|
0.1
|
|
|
—
|
|
|
36.4
|
|
|
—
|
|
Impact of special
charges
|
4.4
|
|
|
0.1
|
|
|
15.7
|
|
|
2.8
|
|
Impact of after-tax
gain on sale of
unconsolidated operation
|
—
|
|
|
—
|
|
|
(13.4)
|
|
|
—
|
|
Adjusted net
income
|
$
|
216.9
|
|
|
$
|
206.2
|
|
|
$
|
596.6
|
|
|
$
|
549.5
|
|
% increase versus
year-ago period
|
5.2
|
%
|
|
|
|
8.6
|
%
|
|
|
|
|
|
|
|
|
|
|
Earnings per share -
diluted
|
$
|
0.79
|
|
|
$
|
0.76
|
|
|
$
|
2.07
|
|
|
$
|
2.03
|
|
Impact of transaction and
integration expenses (1)
|
—
|
|
|
—
|
|
|
0.14
|
|
|
—
|
|
Impact of special
charges
|
0.01
|
|
|
—
|
|
|
0.05
|
|
|
0.01
|
|
Impact of after-tax
gain on sale of
unconsolidated operation
|
—
|
|
|
—
|
|
|
(0.05)
|
|
|
$
|
—
|
|
Adjusted earnings per
share - diluted
|
$
|
0.80
|
|
|
$
|
0.76
|
|
|
$
|
2.21
|
|
|
$
|
2.04
|
|
% increase versus
year-ago period
|
5.3
|
%
|
|
|
|
8.3
|
%
|
|
|
|
|
(1)
|
Transaction and
integration expenses include transaction and integration expenses
associated with our acquisitions of Cholula and FONA. These
expenses include transaction expenses, integration expenses,
including the effect of the fair value adjustment of acquired
inventory on cost of goods sold and the unfavorable impact of a
discrete deferred state income tax expense item, directly related
to our December 2020 acquisition of FONA. This discrete tax item
had a favorable impact of $1.0 million in the three months ended
August 31, 2021 and a net unfavorable impact of $10.4 million or
$0.04 per diluted share for the nine months ended August 31,
2021.
|
|
|
|
(2)
|
Adjusted gross profit
margin is calculated as adjusted gross profit as a percentage of
net sales for each period presented.
|
|
|
|
(3)
|
Adjusted operating
income margin is calculated as adjusted operating income as a
percentage of net sales for each period presented.
|
|
|
|
(4)
|
Adjusted income tax
rate is calculated as adjusted income tax expense as a percentage
of income from consolidated operations before income taxes
excluding transaction and integration expenses and special charges
of $241.9 million and $701.5 million for the three and nine months
ended August 31, 2021, respectively, and $243.5 million and $637.9
million for the three and nine months ended August 31, 2020,
respectively.
|
Because we are a multi-national company, we are subject to
variability of our reported U.S. dollar results due to changes in
foreign currency exchange rates. Those changes have been volatile
over the past several years. The exclusion of the effects of
foreign currency exchange, or what we refer to as amounts expressed
"on a constant currency basis", is a non-GAAP measure. We believe
that this non-GAAP measure provides additional information that
enables enhanced comparison to prior periods excluding the
translation effects of changes in rates of foreign currency
exchange and provides additional insight into the underlying
performance of our operations located outside of the U.S. It should
be noted that our presentation herein of amounts and percentage
changes on a constant currency basis does not exclude the impact of
foreign currency transaction gains and losses (that is, the impact
of transactions denominated in other than the local currency of any
of our subsidiaries in their local currency reported results).
Percentage changes in sales and adjusted operating income
expressed on a constant currency basis are presented
excluding the impact of foreign currency exchange. To present this
information for historical periods, current period results for
entities reporting in currencies other than the U.S. dollar are
translated into U.S. dollars at the average exchange rates in
effect during the corresponding period of the prior fiscal year,
rather than at the actual average exchange rates in effect during
the current fiscal year. As a result, the foreign currency impact
is equal to the current year results in local currencies multiplied
by the change in the average foreign currency exchange rate between
the current fiscal period and the corresponding period of the prior
fiscal year. Rates of constant currency growth (decline)
follow:
|
|
|
Three Months Ended
August 31, 2021
|
|
|
|
Percentage Change
as Reported
|
|
Impact of Foreign
Currency Exchange
|
|
Percentage Change
on
Constant Currency
Basis
|
Net
sales
|
|
|
|
|
|
|
|
Consumer
segment
|
|
|
|
|
|
|
|
Americas
|
|
|
0.2%
|
|
0.8%
|
|
(0.6)%
|
EMEA
|
|
|
(6.0)%
|
|
4.6%
|
|
(10.6)%
|
Asia/Pacific
|
|
|
20.2%
|
|
9.6%
|
|
10.6%
|
Total Consumer
segment
|
|
|
1.2%
|
|
2.4%
|
|
(1.2)%
|
Flavor Solutions
segment
|
|
|
|
|
|
|
|
Americas
|
|
|
20.8%
|
|
2.2%
|
|
18.6%
|
EMEA
|
|
|
28.1%
|
|
8.7%
|
|
19.4%
|
Asia/Pacific
|
|
|
8.4%
|
|
7.6%
|
|
0.8%
|
Total Flavor
Solutions segment
|
|
|
20.8%
|
|
4.2%
|
|
16.6%
|
Total net
sales
|
|
|
8.3%
|
|
3.0%
|
|
5.3%
|
Adjusted operating
income
|
|
|
|
|
|
|
|
Consumer
segment
|
|
|
(10.1)%
|
|
1.5%
|
|
(11.6)%
|
Flavor
Solutions segment
|
|
|
31.8%
|
|
5.2%
|
|
26.6%
|
Total adjusted
operating income
|
|
|
(0.3)%
|
|
2.4%
|
|
(2.7)%
|
|
|
|
|
|
|
|
Nine Months Ended
August 31, 2021
|
|
|
|
Percentage Change
as Reported
|
|
Impact of Foreign
Currency Exchange
|
|
Percentage Change
on
Constant Currency
Basis
|
Net
sales
|
|
|
|
|
|
|
|
Consumer
segment
|
|
|
|
|
|
|
|
Americas
|
|
|
5.1%
|
|
0.7%
|
|
4.4%
|
EMEA
|
|
|
10.0%
|
|
6.9%
|
|
3.1%
|
Asia/Pacific
|
|
|
36.8%
|
|
9.9%
|
|
26.9%
|
Total Consumer
segment
|
|
|
9.4%
|
|
2.8%
|
|
6.6%
|
Flavor Solutions
segment
|
|
|
|
|
|
|
|
Americas
|
|
|
17.7%
|
|
1.3%
|
|
16.4%
|
EMEA
|
|
|
30.7%
|
|
7.1%
|
|
23.6%
|
Asia/Pacific
|
|
|
22.0%
|
|
9.4%
|
|
12.6%
|
Total Flavor
Solutions segment
|
|
|
20.6%
|
|
3.3%
|
|
17.3%
|
Total net
sales
|
|
|
13.5%
|
|
3.0%
|
|
10.5%
|
Adjusted operating
income
|
|
|
|
|
|
|
|
Consumer
segment
|
|
|
(1.0)%
|
|
2.4%
|
|
(3.4)%
|
Flavor
Solutions segment
|
|
|
41.5%
|
|
3.4%
|
|
38.1%
|
Total adjusted
operating income
|
|
|
8.8%
|
|
2.6%
|
|
6.2%
|
To present "constant currency" information for the fiscal year
2021 projection, projected sales and adjusted operating income for
entities reporting in currencies other than the U.S. dollar are
translated into U.S. dollars at the company's budgeted exchange
rates for 2021 and are compared to the 2020 results, translated
into U.S. dollars using the same 2021 budgeted exchange rates,
rather than at the average actual exchange rates in effect during
fiscal year 2020. To estimate the percentage change in adjusted
earnings per share on a constant currency basis, a similar
calculation is performed to arrive at adjusted net income divided
by historical shares outstanding for fiscal year 2020 or projected
shares outstanding for fiscal year 2021, as appropriate.
|
Projection for the
Year Ending November 30, 2021
|
Percentage change in
net sales
|
12% to 13%
|
Impact of favorable
foreign currency exchange
|
3%
|
Percentage change in
net sales in constant currency
|
9% to 10%
|
|
|
Percentage change in
adjusted operating income
|
6% to 8%
|
Impact of favorable
foreign currency exchange
|
2%
|
Percentage change in
adjusted operating income in constant currency
|
4% to 6%
|
|
|
Percentage change in
adjusted earnings per share — diluted
|
5% to 7%
|
Impact of favorable
foreign currency exchange
|
2%
|
Percentage change
in adjusted earnings per share in constant currency —
diluted
|
3% to 5%
|
The following provides a reconciliation of our estimated
earnings per share to adjusted earnings per share for 2021 and
actual results for 2020:
|
Twelve Months
Ended
|
|
2021
Projection
|
|
11/30/20
|
Earnings per share -
diluted
|
$2.80 to
$2.85
|
|
$
|
2.78
|
|
Impact of transaction
and integration expenses
|
0.15
|
|
0.04
|
|
Impact of special
charges
|
0.07
|
|
0.01
|
|
Impact of sale of
unconsolidated investment
|
(0.05)
|
|
—
|
|
Adjusted earnings per
share
|
$2.97 to
$3.02
|
|
$
|
2.83
|
|
|
|
|
|
|
|
|
Live Webcast
As previously announced, McCormick will hold a conference call
with analysts today at 8:00 a.m. ET.
The conference call will be webcast live via the McCormick website.
Go to ir.mccormick.com and follow directions to listen to the call
and access the accompanying presentation materials. At this same
location, a replay of the call will be available following the live
call. Past press releases and additional information can be found
at this address.
Forward-Looking Information
Certain information contained in this release, including
statements concerning expected performance, such as those relating
to net sales, gross margins, earnings, cost savings, transaction
and integration expenses, special charges, acquisitions, brand
marketing support, volume and product mix, income tax expense and
the impact of foreign currency rates are "forward-looking
statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended. These statements may be
identified by the use of words such as "may," "will," "expect,"
"should," "anticipate," "intend," "believe" and "plan." These
statements may relate to: the impact of COVID-19 on our business,
suppliers, consumers, customers, and employees; disruptions or
inefficiencies in the supply chain, including any impact of
COVID-19; the expected results of operations of businesses acquired
by the company, including the acquisitions of Cholula and FONA; the
expected impact of the inflationary cost environment, including
commodities, packaging materials and transportation costs on our
business; the expected impact of pricing actions on the company's
results of operations and gross margins; the expected impact of
factors affecting our supply chain, including transportation
capacity, labor shortages and absenteeism; the expected impact of
productivity improvements, including those associated with our
Comprehensive Continuous Improvement ("CCI") program and global
enablement initiative; expected working capital improvements;
expectations regarding growth potential in various geographies and
markets, including the impact from customer, channel, category, and
e-commerce expansion; expected trends in net sales and earnings
performance and other financial measures; the expected timing and
costs of implementing our business transformation initiative, which
includes the implementation of a global enterprise resource
planning ("ERP") system; the expected impact of accounting
pronouncements; the expectations of pension and postretirement plan
contributions and anticipated charges associated with those plans;
the holding period and market risks associated with financial
instruments; the impact of foreign exchange fluctuations; the
adequacy of internally generated funds and existing sources of
liquidity, such as the availability of bank financing; the
anticipated sufficiency of future cash flows to enable the payments
of interest and repayment of short- and long-term debt as well as
quarterly dividends and the ability to issue additional debt or
equity securities; and expectations regarding purchasing shares of
McCormick's common stock under the existing repurchase
authorization.
These and other forward-looking statements are based on
management's current views and assumptions and involve risks and
uncertainties that could significantly affect expected results.
Results may be materially affected by factors such as: the
company's ability to drive revenue growth; the company's ability to
increase pricing to offset, or partially offset, inflationary
pressures on the cost of our products; damage to the company's
reputation or brand name; loss of brand relevance; increased
private label use; product quality, labeling, or safety concerns;
negative publicity about our products; actions by, and the
financial condition of, competitors and customers; the longevity of
mutually beneficial relationships with our large customers; the
ability to identify, interpret and react to changes in consumer
preferences and demand; business interruptions due to natural
disasters, unexpected events or public health crises, including
COVID-19; issues affecting the company's supply chain and raw
materials, including fluctuations in the cost and availability of
raw and packaging materials; government regulation, and changes in
legal and regulatory requirements and enforcement practices; the
lack of successful acquisition and integration of new businesses,
including the acquisitions of Cholula and FONA; global economic and
financial conditions generally, including the impact of the exit of
the United Kingdom from the
European Union, availability of financing, interest and inflation
rates, and the imposition of tariffs, quotas, trade barriers and
other similar restrictions; foreign currency fluctuations; the
effects of increased level of debt service following the Cholula
and FONA acquisitions as well as the effects that such increased
debt service may have on the company's ability to borrow or the
cost of any such additional borrowing, our credit rating, and our
ability to react to certain economic and industry conditions; risks
associated with the phase-out of LIBOR; impairments of
indefinite-lived intangible assets; assumptions we have made
regarding the investment return on retirement plan assets, and the
costs associated with pension obligations; the stability of credit
and capital markets; risks associated with the company's
information technology systems, including the threat of data
breaches and cyber-attacks; the company's inability to successfully
implement our business transformation initiative; fundamental
changes in tax laws; including interpretations and assumptions we
have made, and guidance that may be issued, volatility in our
effective tax rate; climate change; infringement of intellectual
property rights, and those of customers; litigation, legal and
administrative proceedings; the company's inability to achieve
expected and/or needed cost savings or margin improvements;
negative employee relations; and other risks described in the
company's filings with the Securities and Exchange Commission.
Actual results could differ materially from those projected in
the forward-looking statements. The company undertakes no
obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events
or otherwise, except as may be required by law.
About McCormick
McCormick & Company, Incorporated is a global leader in
flavor. As a Fortune 500 company with over $5 billion in annual sales across 160 countries
and territories, we manufacture, market and distribute spices,
seasoning mixes, condiments and other flavorful products to the
entire food industry including e-commerce channels, grocery, food
manufacturers and foodservice businesses. Our most popular brands
include McCormick, French's, Frank's RedHot, Stubb's, OLD BAY,
Lawry's, Zatarain's, Ducros, Vahiné, Cholula, Schwartz, Kamis,
DaQiao, Club House, Aeroplane and Gourmet Garden. Every day, no
matter where or what you eat or drink, you can enjoy food flavored
by McCormick.
Founded in 1889 and headquartered in Hunt Valley, Maryland USA, McCormick is guided
by our principles and committed to our Purpose – To Stand Together
for the Future of Flavor. McCormick envisions A World United by
Flavor where healthy, sustainable and delicious go hand in hand. To
learn more, visit www.mccormickcorporation.com or follow McCormick
& Company on Twitter, Instagram and LinkedIn.
For information contact:
Investor Relations:
Kasey Jenkins -
kasey_jenkins@mccormick.com
Corporate Communications:
Lori Robinson -
lori_robinson@mccormick.com
(Financial tables follow)
Third Quarter
Report
|
|
McCormick &
Company, Incorporated
|
|
|
|
|
|
|
|
|
|
Consolidated
Income Statement (Unaudited)
|
|
|
|
|
|
|
|
|
(In millions except
per-share data)
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Nine months
ended
|
|
|
August 31,
2021
|
|
August 31,
2020
|
|
August 31,
2021
|
|
August 31,
2020
|
Net sales
|
|
$
|
1,549.4
|
|
|
$
|
1,430.3
|
|
|
$
|
4,587.6
|
|
|
$
|
4,043.4
|
|
Cost of goods
sold
|
|
949.8
|
|
|
840.0
|
|
|
2,795.9
|
|
|
2,403.7
|
|
Gross
profit
|
|
599.6
|
|
|
590.3
|
|
|
1,791.7
|
|
|
1,639.7
|
|
Gross profit
margin
|
|
38.7
|
%
|
|
41.3
|
%
|
|
39.1
|
%
|
|
40.6
|
%
|
Selling, general and
administrative expense
|
|
327.3
|
|
|
317.2
|
|
|
1,005.2
|
|
|
911.1
|
|
Transaction and
integration expenses
|
|
1.3
|
|
|
—
|
|
|
27.0
|
|
|
—
|
|
Special
charges
|
|
5.8
|
|
|
0.1
|
|
|
20.6
|
|
|
4.0
|
|
Operating
income
|
|
265.2
|
|
|
273.0
|
|
|
738.9
|
|
|
724.6
|
|
Interest
expense
|
|
33.9
|
|
|
33.5
|
|
|
103.3
|
|
|
103.2
|
|
Other income,
net
|
|
3.5
|
|
|
3.9
|
|
|
12.0
|
|
|
12.5
|
|
Income from
consolidated operations before income taxes
|
|
234.8
|
|
|
243.4
|
|
|
647.6
|
|
|
633.9
|
|
Income tax
expense
|
|
31.5
|
|
|
46.9
|
|
|
135.5
|
|
|
117.4
|
|
Net income from
consolidated operations
|
|
203.3
|
|
|
196.5
|
|
|
512.1
|
|
|
516.5
|
|
Income from
unconsolidated operations
|
|
9.1
|
|
|
9.6
|
|
|
45.8
|
|
|
30.2
|
|
Net income
|
|
$
|
212.4
|
|
|
$
|
206.1
|
|
|
$
|
557.9
|
|
|
$
|
546.7
|
|
|
|
|
|
|
|
|
|
|
Earnings per share -
basic
|
|
$
|
0.79
|
|
|
$
|
0.77
|
|
|
$
|
2.09
|
|
|
$
|
2.05
|
|
|
|
|
|
|
|
|
|
|
Earnings per share -
diluted
|
|
$
|
0.79
|
|
|
$
|
0.76
|
|
|
$
|
2.07
|
|
|
$
|
2.03
|
|
|
|
|
|
|
|
|
|
|
Average shares
outstanding - basic
|
|
267.4
|
|
|
266.7
|
|
|
267.2
|
|
|
$
|
266.3
|
|
Average shares
outstanding - diluted
|
|
270.0
|
|
|
269.6
|
|
|
270.0
|
|
|
269.0
|
|
|
|
Third Quarter
Report
|
McCormick &
Company, Incorporated
|
|
|
|
|
|
Consolidated
Balance Sheet (Unaudited)
|
|
|
|
|
(In
millions)
|
|
|
|
|
|
|
August 31,
2021
|
|
November 30,
2020
|
Assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
312.6
|
|
|
$
|
423.6
|
|
Trade accounts
receivable, net
|
|
541.0
|
|
|
528.5
|
|
Inventories
|
|
1,202.4
|
|
|
1,032.6
|
|
Prepaid expenses and
other current assets
|
|
104.9
|
|
|
98.9
|
|
Total current
assets
|
|
2,160.9
|
|
|
2,083.6
|
|
Property, plant and
equipment, net
|
|
1,113.5
|
|
|
1,028.4
|
|
Goodwill
|
|
5,379.5
|
|
|
4,986.3
|
|
Intangible assets,
net
|
|
3,478.3
|
|
|
3,239.4
|
|
Investments and other
assets
|
|
752.2
|
|
|
752.0
|
|
Total
assets
|
|
$
|
12,884.4
|
|
|
$
|
12,089.7
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Short-term borrowings
and current portion of long-term debt
|
|
$
|
1,535.9
|
|
|
$
|
1,150.6
|
|
Trade accounts
payable
|
|
1,023.1
|
|
|
1,032.3
|
|
Other accrued
liabilities
|
|
602.3
|
|
|
863.6
|
|
Total current
liabilities
|
|
3,161.3
|
|
|
3,046.5
|
|
Long-term
debt
|
|
3,985.0
|
|
|
3,753.8
|
|
Deferred
taxes
|
|
752.6
|
|
|
727.2
|
|
Other long-term
liabilities
|
|
582.4
|
|
|
622.2
|
|
Total
liabilities
|
|
8,481.3
|
|
|
8,149.7
|
|
Shareholders'
equity
|
|
|
|
|
Common
stock
|
|
2,042.1
|
|
|
1,981.3
|
|
Retained
earnings
|
|
2,780.0
|
|
|
2,415.6
|
|
Accumulated other
comprehensive loss
|
|
(435.6)
|
|
|
(470.8)
|
|
Total McCormick
shareholders' equity
|
|
4,386.5
|
|
|
3,926.1
|
|
Non-controlling
interests
|
|
16.6
|
|
|
13.9
|
|
Total shareholders'
equity
|
|
4,403.1
|
|
|
3,940.0
|
|
Total liabilities and
shareholders' equity
|
|
$
|
12,884.4
|
|
|
$
|
12,089.7
|
|
|
|
|
|
Third Quarter
Report
|
|
McCormick & Company, Incorporated
|
|
|
|
|
|
Consolidated Cash
Flow Statement (Unaudited)
|
|
|
|
|
(In
millions)
|
|
|
|
|
|
|
Nine Months
Ended
|
|
|
August 31,
2021
|
|
August 31,
2020
|
Operating
activities
|
|
|
|
|
Net income
|
|
$
|
557.9
|
|
|
$
|
546.7
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
|
139.1
|
|
|
123.9
|
|
Stock-based
compensation
|
|
54.2
|
|
|
37.8
|
|
Amortization of
inventory fair value adjustments associated with
acquisitions
|
|
6.3
|
|
|
—
|
|
Fixed asset impairment
charge
|
|
6.5
|
|
|
—
|
|
Income from
unconsolidated operations
|
|
(45.8)
|
|
|
(30.2)
|
|
Changes in operating
assets and liabilities (net of businesses acquired)
|
|
|
|
|
Trade accounts
receivable
|
|
1.3
|
|
|
18.4
|
|
Inventories
|
|
(156.5)
|
|
|
(129.4)
|
|
Trade accounts
payable
|
|
(16.7)
|
|
|
47.4
|
|
Other assets and
liabilities
|
|
(195.2)
|
|
|
(11.3)
|
|
Dividends from
unconsolidated affiliates
|
|
21.8
|
|
|
23.4
|
|
Net cash flow provided
by operating activities
|
|
372.9
|
|
|
626.7
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
Acquisition of
businesses (net of cash acquired)
|
|
(706.4)
|
|
|
—
|
|
Proceeds from sale of
unconsolidated operations
|
|
65.4
|
|
|
—
|
|
Capital expenditures
(including software)
|
|
(189.9)
|
|
|
(145.6)
|
|
Other investing
activities
|
|
0.3
|
|
|
2.3
|
|
Net cash flow used in
investing activities
|
|
(830.6)
|
|
|
(143.3)
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
Short-term
borrowings, net
|
|
(118.9)
|
|
|
(432.0)
|
|
Long-term debt
borrowings
|
|
1,001.5
|
|
|
506.4
|
|
Payment of debt
issuance costs
|
|
(1.9)
|
|
|
(1.1)
|
|
Long-term debt
repayments
|
|
(255.3)
|
|
|
(256.0)
|
|
Proceeds from
exercised stock options
|
|
10.5
|
|
|
54.1
|
|
Taxes withheld and
paid on employee stock awards
|
|
(13.3)
|
|
|
(10.7)
|
|
Common stock acquired
by purchase
|
|
(3.2)
|
|
|
(46.0)
|
|
Dividends
paid
|
|
(272.4)
|
|
|
(247.4)
|
|
Net cash flow provided
by (used in) financing activities
|
|
347.0
|
|
|
(432.7)
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
(0.3)
|
|
|
14.9
|
|
(Decrease) increase
in cash and cash equivalents
|
|
(111.0)
|
|
|
65.6
|
|
Cash and cash
equivalents at beginning of period
|
|
423.6
|
|
|
155.4
|
|
|
|
|
|
|
Cash and cash
equivalents at end of period
|
|
$
|
312.6
|
|
|
$
|
221.0
|
|
View original
content:https://www.prnewswire.com/news-releases/mccormick-reports-strong-third-quarter-sales-growth-and-updates-2021-financial-outlook-301388706.html
SOURCE McCormick & Company, Incorporated