SPARKS, Md., Sept. 28, 2017 /PRNewswire/
-- McCormick & Company, Incorporated (NYSE: MKC), a
global leader in flavor, today reported financial results for the
third quarter ended August 31, 2017
and provided its latest financial outlook for fiscal year 2017.
- Sales rose 9% in the third quarter from the year-ago period.
In constant currency, the company grew sales 8%, with strong
results in both the consumer and industrial segments.
- Operating income was $169
million in the third quarter compared to $168 million in the year-ago period. Adjusted
operating income was $204 million, an
18% increase from $172 million in the
third quarter of 2016, and a 19% increase in constant currency.
- Earnings per share was $0.85
in the third quarter compared to $1.00 in the year-ago period with the decrease
driven by transaction and integration expenses from the Reckitt
Benckiser Foods (RB Foods) acquisition. Adjusted earnings per share
rose 9% to $1.12 from $1.03 in the year ago period.
- For the 2017 fiscal year, McCormick updated its financial
outlook to reflect both its base business and the acquisition of RB
Foods. McCormick expects to increase sales year-on-year by 9% to
10%, which is a constant currency projected growth rate of 10% to
11%. The company expects to achieve earnings per share of
$3.69 to $3.73 in fiscal year of
2017, compared to $3.69 in 2016.
Adjusted earnings per share is expected to be $4.20 to $4.24, which is an increase of 11% to
12% from $3.78 in 2016.
Chairman, President & CEO's Remarks
Lawrence E. Kurzius, Chairman,
President and CEO, stated, "Our strong third quarter financial
results continue our growth momentum and reflect the effectiveness
of our strategies and engagement of our employees around the
world. We are driving both sales growth and significant
productivity improvements resulting in adjusted operating margin
expansion. Both our consumer and industrial segments
contributed to our constant currency sales growth of 8%. Our
consumer segment delivered base and new product sales growth from
the year ago period, led by the Americas. Our industrial
business delivered excellent sales growth across all regions driven
by new products, expanded distribution, and customer
intimacy. In addition to our strong base business and new
product growth, the acquisitions of RB Foods and Giotti contributed
to higher sales as valuable additions to our global portfolio of
flavors. Through the third quarter, we have grown year to
date sales 6% in constant currency.
"McCormick is a global leader in flavor - a growing and
advantaged business platform. The RB Foods acquisition is an
exciting milestone for McCormick which strengthens our flavor
leadership with the addition of the iconic French's and Frank's
RedHot brands to our portfolio. We are continuing to
capitalize on the global and growing consumer interest in healthy,
flavorful eating, the source and quality of ingredients, and
sustainable and socially responsible practices. We are
aligned with the increased demand for great taste and healthy
eating and are confident in our plans to drive growth through new
products across both of our segments, through strong brand
marketing programs and additional opportunities to expand
distribution. We are balancing our resources and efforts to
drive sales with our work to lower costs, and are on-track to
achieve at least $105 million of cost
savings in 2017 led by our Comprehensive Continuous Improvement
(CCI) program.
"I want to recognize McCormick employees around the world for
their efforts and engagement. With our vision to bring the
joy of flavor to life and our steadfast focus on growth,
performance, and people, we are well-positioned to deliver
excellent financial results in 2017 and build value for our
shareholders."
Third Quarter 2017 Results
McCormick reported a 9% sales increase in the third quarter from
the year-ago period, including a 1% favorable impact from currency.
Consumer segment sales grew by 5% with minimal impact from
currency. The consumer segment sales increase was primarily
driven by solid U.S. base business and new product growth in the
Americas and the incremental impact of RB Foods, acquired in
August 2017. These sales increases
for the consumer segment were offset in part by the impact of a
challenging retail environment in the U.K. Industrial segment sales
grew by 14%, with minimal impact from currency. Industrial sales
growth was driven by increased sales across all regions, including
the incremental impact of the acquisitions of Giotti, acquired in
December 2016 and RB Foods.
Across both segments, acquisitions contributed 4% to the
sales growth in the third quarter of 2017. In constant
currency, the company grew sales 8%.
Operating income was $169 million
in the third quarter compared to $168
million in the year-ago period. This increase was due
to higher sales, a shift in the portfolio to more value added
products, CCI-led cost savings and favorable selling, general and
administrative costs, offset in part by an increase in transaction
and integration expenses from the acquisition of RB Foods.
The company recognized $30 million of
transaction and integration expenses in operating income related to
the RB Foods acquisition in the third quarter of 2017. The
company recorded $5 million of
special charges in the third quarter of 2017 related to
organization and streamlining actions versus $4 million in 2016. Excluding transaction
and integration expenses as well as special charges adjusted
operating income was $204 million
compared to $172 million of adjusted
operating income in the year-ago period. In constant
currency, the company grew adjusted operating income 19%.
Earnings per share was $0.85 in
the third quarter of 2017 compared to $1.00 in the year-ago period. Transaction and
integration expenses, including $15
million of other debt costs, as well as special charges
lowered earnings per share by $0.27
and $0.03 in 2017 and 2016,
respectively. The decrease in earnings per share was driven
by the RB Foods' transaction and integration expenses.
Excluding the impact of transaction and integration expenses as
well as special charges, adjusted earnings per share was
$1.12 in the third quarter of 2017
compared to $1.03 in the year-ago
period. The increase in adjusted earnings per share was
driven primarily by higher operating income.
The company continues to generate strong cash flow.
Year-to-date net cash provided by operating activities
through the third quarter of 2017 was $303
million compared to $322
million for the first three quarters of
2016. The decrease was mainly due to the timing of income tax
payments and incentive compensation payments related to 2016's
financial performance as well as payments related to the RB Foods'
transaction expenses.
2017 Financial Outlook
For the 2017 fiscal year, McCormick updated its financial
outlook to reflect its year-to-date performance and growth
momentum, the acquisition of RB Foods and a lower impact from
unfavorable foreign currency on earnings per share.
In 2017, McCormick expects to grow sales 9% to 10% compared to
2016. Excluding the impact of unfavorable currency rates, the
projected growth is 10% to 11%. The company expects to drive
sales growth with new products, brand marketing, expanded
distribution and the incremental sales impact of
acquisitions. Sales growth is also expected to be driven by
pricing actions that are intended to offset an anticipated
mid-single digit increase in material costs. The company has
plans to achieve at least $105
million of CCI and intends to use these savings to improve
margins, fund a high-single digit increase in brand marketing, and
as a further offset to increased material costs.
Operating income in 2017 is expected to grow 10% to 11% from
$641 million of operating income in
2016. Transaction and integration expenses from the RB Foods
acquisition of approximately $62
million are currently projected to impact operating income
for 2017. Special charges of approximately $22 million are currently projected for 2017 that
related to previously announced organization and streamlining
actions. Excluding the impact of transaction and integration
expenses as well as special charges in 2017 and 2016, the expected
growth in adjusted operating income is 20% to 21% from adjusted
operating income of $657 million in
2016. Excluding the estimated impact of unfavorable currency
rates, the expected year on year increase in adjusted operating
income is 21% to 22%.
McCormick projects 2017 earnings per share to be in the range of
$3.69 to $3.73 compared to
$3.69 of earnings per share in
2016. Excluding an estimated $0.51 impact of transaction and integration
expenses, including other debt costs, from RB Foods as well as
special charges in 2017, the company's adjusted earnings per share
is projected to be in the range of $4.20 to
$4.24. This is an increase of 11% to 12% from adjusted
earnings per share of $3.78 in
2016. This range of growth includes an estimated unfavorable
impact of 1 percentage point from currency rates. For fiscal
year 2017, the company projects another year of strong cash flow,
with plans to return a significant portion to McCormick's
shareholders through dividends and to pay down debt.
Business Segment Results
Consumer Segment
(in
millions)
|
|
Three months
ended
|
|
Nine months
ended
|
|
|
8/31/2017
|
|
8/31/2016
|
|
8/31/2017
|
|
8/31/2016
|
Net sales
|
|
$
|
696.8
|
|
|
$
|
662.0
|
|
|
$
|
1,991.8
|
|
|
$
|
1,937.6
|
|
Operating
income
|
|
117.2
|
|
|
124.9
|
|
|
300.9
|
|
|
300.8
|
|
Operating income,
excluding special
charges, transaction and
integration
expenses
|
|
139.7
|
|
|
127.3
|
|
|
328.9
|
|
|
308.0
|
|
The company grew consumer segment sales 5% when compared to the
third quarter of 2016 with minimal impact from currency.
- Consumer sales in the Americas rose 7% with minimal impact from
currency and RB Foods contributing 3% to sales growth. The company
also increased sales driven by pricing, new products and expanded
distribution. Growth was achieved across the portfolio including
McCormick and Lawry's brand spices and seasonings, Grill Mates,
Gourmet Garden and Stubb's products as well as McCormick brand
recipe mixes. Partially offsetting the growth was sales weakness in
Zatarain's products.
- Consumer sales in Europe,
Middle East and Africa (EMEA) increased 1%. In constant
currency, sales decreased 2% from the year-ago period mainly due to
weak sales in the U.K. where the retail environment has been
challenging.
- Third quarter consumer sales in the Asia/Pacific region rose 2% and in constant
currency, sales rose 3%. The sales growth was led by China and India.
Consumer segment operating income, excluding transaction and
integration expenses and special charges, rose 10% to $140 million for the third quarter of 2017
compared to $127 million in the
year-ago period. In constant currency, adjusted operating
income rose 9%. The favorable impact of higher sales, CCI-led
cost savings and favorable selling, general and administrative
costs more than offset the unfavorable impact of increases in
material costs and brand marketing.
Industrial Segment
(in
millions)
|
|
Three months
ended
|
|
Nine months
ended
|
|
|
8/31/2017
|
|
8/31/2016
|
|
8/31/2017
|
|
8/31/2016
|
Net sales
|
|
$
|
488.4
|
|
|
$
|
429.0
|
|
|
$
|
1,351.4
|
|
|
$
|
1,246.9
|
|
Operating
income
|
|
51.5
|
|
|
42.9
|
|
|
134.6
|
|
|
121.1
|
|
Operating income,
excluding special
charges, transaction and
integration
expenses
|
|
64.1
|
|
|
44.8
|
|
|
150.0
|
|
|
123.7
|
|
Industrial segment sales increased 14% from the third quarter of
2016 with minimal impact from currency and increases in each of the
company's three regions.
- Industrial sales in the Americas drove broad based growth of
10% from the year-ago period with minimal impact from currency.
This was led by continued growth momentum in branded foodservice in
addition to sales growth with packaged food companies and quick
service restaurants. Incremental sales from RB Foods contributed 4%
to sales growth.
- In EMEA, industrial sales grew 27% in the third quarter. In
constant currency, sales rose 31%, with sales from Giotti
contributing 25% to this growth. Sales to both quick service
restaurants and packaged food companies increased during the
period. Industrial sales in this region were unfavorably impacted
by the discontinuation of a lower margin business.
- Industrial sales in the Asia/Pacific region increased 16% in the third
quarter of 2017 versus the same period in 2016 and in constant
currency, the increase was 17%. The growth was driven by new
products and promotional activities of quick service
restaurants.
Industrial segment operating income, excluding transaction and
integration expenses and special charges, rose 43% to $64 million for the third quarter of 2017
compared to $45 million in the
year-ago period. In constant currency, adjusted operating
income rose 44%. The favorable impact of higher sales,
product mix, CCI-led cost savings and favorable selling, general
and administrative costs, more than offset the unfavorable impact
of increases in material costs and brand marketing.
Non-GAAP Financial Measures
The tables below include financial measures of adjusted
operating income, adjusted net income and adjusted diluted earnings
per share, each excluding the impact of special charges for each of
the periods presented. These financial measures also exclude
the impact of items associated with our acquisition of RB Foods on
August 17, 2017 (in particular, the
amortization of the acquisition-date fair value adjustment of
inventories that is included in cost of goods sold, transaction and
integration expenses, and other debt costs) as these items
significantly impact comparability between years. Adjusted
operating income, adjusted net income and adjusted diluted earnings
per share 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.
In our consolidated income statement, we include the
amortization of the acquisition-date inventory fair value
adjustment within cost of goods sold as acquired inventory is
sold. In our consolidated income statement, we include a
separate line items captioned "Special charges" and "Transaction
and integration expenses" in arriving at our consolidated operating
income. In our consolidated income statement, we include a
separate line item captioned "Other debt costs" in arriving at our
consolidated net 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, comprised of our
Chairman, President and Chief Executive Officer; Executive Vice
President and Chief Financial Officer; President Global Industrial
Segment and McCormick International; President Global Consumer
Segment and North America; Senior
Vice President, Human Relations; and Senior Vice President,
Strategy and Global Enablement. Upon presentation of any such
proposed action (including details with respect to estimated costs,
which generally consist principally of employee severance and
related benefits, together with ancillary costs associated with the
action that may include a non-cash component or a component which
relates to inventory adjustments that are included in cost of goods
sold; impacted employees or operations; expected timing; and
expected benefits) 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 consists of expenses
associated with the acquisition or integration of the RB Foods
business. These costs are anticipated to be incurred through
fiscal 2018 and primarily consist of amortization of the
acquisition-date fair value adjustment of inventories that is
included in cost of goods sold; outside advisory, service and
consulting costs; employee-related costs; and other costs related
to the acquisition, including the costs related to the Bridge
financing commitment that is included in other debt costs.
We believe that these non-GAAP financial measures are important.
The exclusion of special charges, the impact of the
acquisition date-inventory fair value adjustment on cost of goods
sold, transaction and integration expenses, and other debt costs
provide 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 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
|
|
8/31/2017
|
|
8/31/2016
|
|
8/31/2017
|
|
8/31/2016
|
Operating
income
|
$
|
168.7
|
|
|
$
|
167.8
|
|
|
$
|
435.5
|
|
|
$
|
421.9
|
|
Impact of transaction
and integration expenses (1)
|
30.4
|
|
|
—
|
|
|
30.4
|
|
|
—
|
|
Impact of special
charges (2)
|
4.7
|
|
|
4.3
|
|
|
13.0
|
|
|
9.8
|
|
Adjusted operating
income
|
$
|
203.8
|
|
|
$
|
172.1
|
|
|
$
|
478.9
|
|
|
$
|
431.7
|
|
% increase versus
prior period
|
18.4
|
%
|
|
|
|
10.9
|
%
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
108.2
|
|
|
$
|
127.7
|
|
|
$
|
301.7
|
|
|
$
|
314.9
|
|
Impact of transaction
and integration expenses (1)
|
31.1
|
|
|
—
|
|
|
31.1
|
|
|
—
|
|
Impact of special
charges (2)
|
3.2
|
|
|
3.4
|
|
|
9.1
|
|
|
7.4
|
|
Adjusted net
income
|
$
|
142.5
|
|
|
$
|
131.1
|
|
|
$
|
341.9
|
|
|
$
|
322.3
|
|
% increase versus
prior period
|
8.7
|
%
|
|
|
|
6.1
|
%
|
|
|
|
|
|
|
|
|
|
|
Earnings per share -
diluted
|
$
|
0.85
|
|
|
$
|
1.00
|
|
|
$
|
2.37
|
|
|
$
|
2.46
|
|
Impact of transaction
and integration expenses (1)
|
0.24
|
|
|
—
|
|
|
0.24
|
|
|
—
|
|
Impact of special
charges (2)
|
0.03
|
|
|
0.03
|
|
|
0.08
|
|
|
0.05
|
|
Adjusted earnings per
share - diluted
|
$
|
1.12
|
|
|
$
|
1.03
|
|
|
$
|
2.69
|
|
|
$
|
2.51
|
|
% increase versus
prior period
|
8.7
|
%
|
|
|
|
7.2
|
%
|
|
|
(1)
|
The following
reconciles the transaction and integration expenses related to the
acquisition of RB Foods that are recorded in our consolidated
income statement for the three and nine months ended August 31,
2017 (in millions, except per share amounts):
|
|
Transaction and
integration expenses included in cost of goods sold
|
$
|
5.9
|
|
|
Reflected in
transaction and integration expenses
|
24.5
|
|
|
Transaction and
integration expenses included in operating income
|
30.4
|
|
|
Transaction and
integration expenses included in other debt costs
|
15.4
|
|
|
Total pre-tax
transaction and integration expenses
|
45.8
|
|
|
Less: Tax
effect
|
(14.7)
|
|
|
Total after-tax
transaction and integration expenses
|
$
|
31.1
|
|
|
Impact of total
after-tax transaction and integration expenses on diluted earnings
per share
|
|
|
For the three months
ended August 31, 2017
|
$
|
0.24
|
|
|
For the nine months
ended August 31, 2017
|
$
|
0.24
|
|
|
|
|
(2)
|
Total special charges
of $4.7 million and $13.0 million for the three and nine months
ended August 31, 2017 are net of taxes of $1.5 million and $3.9
million, respectively. Total special charges of $4.3 million and
$9.8 million for the three and nine months ended August 31, 2016
are net of taxes of $0.9 million and $2.4 million,
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 in "constant currency" 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. Constant currency growth rates follow:
|
|
|
Three Months Ended
August 31, 2017
|
|
|
|
Percentage Change as
Reported
|
|
Impact of Foreign
Currency Exchange
|
|
Percentage Change on
Constant Currency Basis
|
Net
sales
|
|
|
|
|
|
|
|
Consumer
segment
|
|
|
|
|
|
|
|
Americas
|
|
|
7.0%
|
|
0.1%
|
|
6.9%
|
EMEA
|
|
|
1.3%
|
|
3.6%
|
|
(2.3)%
|
Asia/Pacific
|
|
|
2.5%
|
|
(0.5)%
|
|
3.0%
|
Total consumer
segment
|
|
|
5.3%
|
|
0.7%
|
|
4.6%
|
Industrial
segment
|
|
|
|
|
|
|
|
Americas
|
|
|
9.9%
|
|
0.3%
|
|
9.6%
|
EMEA
|
|
|
26.6%
|
|
(4.2)%
|
|
30.8%
|
Asia/Pacific
|
|
|
16.4%
|
|
(0.2)%
|
|
16.6%
|
Total industrial
segment
|
|
|
13.8%
|
|
(0.6)%
|
|
14.4%
|
Total net
sales
|
|
|
8.6%
|
|
0.2%
|
|
8.4%
|
Adjusted operating
income
|
|
|
|
|
|
|
|
Consumer
segment
|
|
|
9.7%
|
|
0.3%
|
|
9.4%
|
Industrial segment
|
|
|
43.1%
|
|
(1.2)%
|
|
44.3%
|
Total adjusted
operating income
|
|
|
18.4%
|
|
(0.1)%
|
|
18.5%
|
|
|
|
|
|
Nine Months Ended
August 31, 2017
|
|
|
|
Percentage Change as
Reported
|
|
Impact of Foreign
Currency Exchange
|
|
Percentage Change on
Constant Currency Basis
|
Net
sales
|
|
|
|
|
|
|
|
Consumer
segment
|
|
|
|
|
|
|
|
Americas
|
|
|
4.8%
|
|
—%
|
|
4.8%
|
EMEA
|
|
|
(5.3)%
|
|
(1.3)%
|
|
(4.0)%
|
Asia/Pacific
|
|
|
6.6%
|
|
(3.8)%
|
|
10.4%
|
Total consumer
segment
|
|
|
2.8%
|
|
(0.8)%
|
|
3.6%
|
Industrial
segment
|
|
|
|
|
|
|
|
Americas
|
|
|
6.2%
|
|
(0.8)%
|
|
7.0%
|
EMEA
|
|
|
16.7%
|
|
(8.9)%
|
|
25.6%
|
Asia/Pacific
|
|
|
7.7%
|
|
(2.1)%
|
|
9.8%
|
Total industrial
segment
|
|
|
8.4%
|
|
(2.5)%
|
|
10.9%
|
Total net
sales
|
|
|
5.0%
|
|
(1.5)%
|
|
6.5%
|
Adjusted operating
income
|
|
|
|
|
|
|
|
Consumer
segment
|
|
|
6.8%
|
|
(0.5)%
|
|
7.3%
|
Industrial segment
|
|
|
21.3%
|
|
(4.6)%
|
|
25.9%
|
Total adjusted
operating income
|
|
|
10.9%
|
|
(1.7)%
|
|
12.6%
|
To present the percentage change in projected 2017 sales,
adjusted operating income and adjusted earnings per share on a
constant currency basis, 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 rate for 2017 and are compared to the 2016 results,
translated into U.S. dollars using the same 2017 budgeted exchange
rate, rather than at the average actual exchange rates in effect
during fiscal year 2016. This calculation is performed to
arrive at adjusted net income divided by historical shares
outstanding for fiscal year 2016 or projected shares outstanding
for fiscal year 2017, as appropriate.
Fiscal year 2016 actual results and 2017 projections
(in millions except
per share data)
|
|
|
Twelve Months
Ended
|
|
|
|
2017
Projection
|
|
11/30/16
|
Operating
income
|
|
|
|
|
$
|
641.0
|
|
Impact of special
charges
|
|
|
|
|
16.0
|
|
Adjusted operating
income
|
|
|
|
|
$
|
657.0
|
|
|
|
|
|
|
|
Earnings per share -
diluted
|
|
|
$3.69 to
$3.73
|
|
$
|
3.69
|
|
Impact of special
charges, including special charges
attributable to non-controlling
interests,
transaction and integration
expenses
|
|
|
0.43
|
|
0.09
|
|
Impact of other debt
costs
|
|
|
0.08
|
|
—
|
|
Adjusted earnings per
share - diluted
|
|
|
$4.20 to
$4.24
|
|
$
|
3.78
|
|
|
|
|
|
|
|
Percentage change in
sales
|
|
|
9% to 10%
|
|
|
Impact of foreign
currency exchange rates
|
|
|
(1)%
|
|
|
Percentage change in
sales on constant currency basis
|
|
|
10% to 11%
|
|
|
|
|
|
|
|
|
Percentage change in
adjusted operating income
|
|
|
20% to 21%
|
|
|
Impact of foreign
currency exchange rates
|
|
|
(1)%
|
|
|
Percentage change in
adjusted operating income on constant currency basis
|
|
|
21% to 22%
|
|
|
|
|
|
|
|
|
Percentage change in
adjusted earnings per share
|
|
|
11% to 12%
|
|
|
Impact of foreign
currency exchange rates
|
|
|
(1)%
|
|
|
Percentage change in
adjusted earnings per share on constant currency basis
|
|
|
12% to 13%
|
|
|
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, earnings, cost savings, acquisitions and brand
marketing support, are "forward-looking statements" within the
meaning of Section 21E of the Securities Exchange Act of 1934.
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
expected results of operations of businesses acquired by the
company, including the acquisition of RB Foods, the expected impact
of raw material costs and pricing actions on the company's results
of operations and gross margins, the expected impact of
productivity improvements, including those associated with
comprehensive continuous improvement and McCormick global
enablement, the 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 expectations of
pension and postretirement plan contributions and anticipated
charges associated with such 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: 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; business
interruptions due to natural disasters or unexpected events;
actions by, and the financial condition of, competitors and
customers; the company's inability to achieve expected and/or
needed cost savings or margin improvements; negative employee
relations; the lack of successful acquisition and integration of
new businesses, including the acquisition of RB Foods; difficulties
or delays in the successful transition of RB Foods from the
information technology systems of the seller to those of McCormick
as well as risks associated with the integration and transition of
the operations, systems and personnel of the RB Foods, within the
term of the six-month post-closing transition services
agreement between McCormick and the seller; 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; global economic
and financial conditions generally, including the availability of
financing, and interest and inflation rates; the effects of
increased level of debt service following the RB Foods acquisition
as well as the effects that such increased debt service may have on
reacting to certain economic and industry conditions and our
ability to borrow or the cost of any such additional borrowing; the
investment return on retirement plan assets, and the costs
associated with pension obligations; foreign currency fluctuations;
the stability of credit and capital markets; risks associated with
the company's information technology systems, the threat of data
breaches and cyber attacks; fundamental changes in tax laws;
volatility in our effective tax rate; climate change; infringement
of intellectual property rights, and those of customers;
litigation, legal and administrative proceedings; 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. With $4.4 billion in
annual sales, the company manufactures, markets and distributes
spices, seasoning mixes, condiments and other flavorful products to
the entire food industry – retail outlets, food manufacturers and
foodservice businesses. Every day, no matter where or what
you eat, you can enjoy food flavored by McCormick. McCormick
Brings the Joy of Flavor to Life™.
For more information, visit www.mccormickcorporation.com.
For information contact:
Investor Relations:
Kasey Jenkins (410) 771-7140 or
kasey_jenkins@mccormick.com
Corporate Communications:
Lori Robinson (410) 527-6004 or
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,
2017
|
|
August 31,
2016
|
|
August 31,
2017
|
|
August 31,
2016
|
Net sales
|
|
$
|
1,185.2
|
|
|
$
|
1,091.0
|
|
|
$
|
3,343.2
|
|
|
$
|
3,184.5
|
|
Cost of goods
sold
|
|
700.8
|
|
|
637.1
|
|
|
2,001.2
|
|
|
1,892.8
|
|
Gross
profit
|
|
484.4
|
|
|
453.9
|
|
|
1,342.0
|
|
|
1,291.7
|
|
Gross profit
margin
|
|
40.9
|
%
|
|
41.6
|
%
|
|
40.1
|
%
|
|
40.6
|
%
|
Selling, general and
administrative expense
|
|
286.5
|
|
|
281.8
|
|
|
869.0
|
|
|
860.0
|
|
Transaction and
integration expenses
|
|
24.5
|
|
|
—
|
|
|
24.5
|
|
|
—
|
|
Special
charges
|
|
4.7
|
|
|
4.3
|
|
|
13.0
|
|
|
9.8
|
|
Operating
income
|
|
168.7
|
|
|
167.8
|
|
|
435.5
|
|
|
421.9
|
|
Interest
expense
|
|
21.5
|
|
|
14.1
|
|
|
50.9
|
|
|
41.7
|
|
Other debt
costs
|
|
15.4
|
|
|
—
|
|
|
15.4
|
|
|
—
|
|
Other income,
net
|
|
1.2
|
|
|
0.2
|
|
|
2.5
|
|
|
2.0
|
|
Income from
consolidated operations before income taxes
|
|
133.0
|
|
|
153.9
|
|
|
371.7
|
|
|
382.2
|
|
Income
taxes
|
|
33.0
|
|
|
34.3
|
|
|
93.6
|
|
|
91.5
|
|
Net income from
consolidated operations
|
|
100.0
|
|
|
119.6
|
|
|
278.1
|
|
|
290.7
|
|
Income from
unconsolidated operations
|
|
8.2
|
|
|
8.1
|
|
|
23.6
|
|
|
24.2
|
|
Net income
|
|
$
|
108.2
|
|
|
$
|
127.7
|
|
|
$
|
301.7
|
|
|
$
|
314.9
|
|
|
|
|
|
|
|
|
|
|
Earnings per share -
basic
|
|
$
|
0.86
|
|
|
$
|
1.01
|
|
|
$
|
2.40
|
|
|
$
|
2.48
|
|
|
|
|
|
|
|
|
|
|
Earnings per share -
diluted
|
|
$
|
0.85
|
|
|
$
|
1.00
|
|
|
$
|
2.37
|
|
|
$
|
2.46
|
|
|
|
|
|
|
|
|
|
|
Average shares
outstanding - basic
|
|
126.3
|
|
|
126.4
|
|
|
125.5
|
|
|
126.8
|
|
Average shares
outstanding - diluted
|
|
127.8
|
|
|
127.9
|
|
|
127.2
|
|
|
128.2
|
|
Third Quarter
Report
|
McCormick &
Company, Incorporated
|
|
|
|
|
|
Consolidated
Balance Sheet (Unaudited)
|
|
|
|
|
(In
millions)
|
|
|
|
|
|
|
August 31,
2017
|
|
August 31,
2016
|
Assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
166.1
|
|
|
$
|
134.2
|
|
Trade accounts
receivable, net
|
|
556.2
|
|
|
445.3
|
|
Inventories
|
|
835.8
|
|
|
760.3
|
|
Prepaid expenses and
other current assets
|
|
84.5
|
|
|
80.4
|
|
Total current
assets
|
|
1,642.6
|
|
|
1,420.2
|
|
Property, plant and
equipment, net
|
|
765.4
|
|
|
641.1
|
|
Goodwill
|
|
4,503.3
|
|
|
1,813.3
|
|
Intangible assets,
net
|
|
3,091.5
|
|
|
433.6
|
|
Investments and other
assets
|
|
378.9
|
|
|
370.1
|
|
Total
assets
|
|
$
|
10,381.7
|
|
|
$
|
4,678.3
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Short-term borrowings
and current portion of long-term debt
|
|
$
|
674.7
|
|
|
$
|
559.9
|
|
Trade accounts
payable
|
|
516.9
|
|
|
361.0
|
|
Other accrued
liabilities
|
|
542.6
|
|
|
419.5
|
|
Total current
liabilities
|
|
1,734.2
|
|
|
1,340.4
|
|
Long-term
debt
|
|
4,702.3
|
|
|
1,056.7
|
|
Deferred
taxes
|
|
1,106.3
|
|
|
122.7
|
|
Other long-term
liabilities
|
|
305.6
|
|
|
383.9
|
|
Total
liabilities
|
|
7,848.4
|
|
|
2,903.7
|
|
Shareholders'
equity
|
|
|
|
|
Common
stock
|
|
1,663.6
|
|
|
1,082.9
|
|
Retained
earnings
|
|
1,123.9
|
|
|
1,074.7
|
|
Accumulated other
comprehensive loss
|
|
(265.9)
|
|
|
(400.2)
|
|
Non-controlling
interests
|
|
11.7
|
|
|
17.2
|
|
Total shareholders'
equity
|
|
2,533.3
|
|
|
1,774.6
|
|
Total liabilities and
shareholders' equity
|
|
$
|
10,381.7
|
|
|
$
|
4,678.3
|
|
Third Quarter
Report
|
|
McCormick & Company, Incorporated
|
|
|
|
|
|
Consolidated Cash
Flow Statement (Unaudited)
|
|
|
|
|
(In
millions)
|
|
|
|
|
|
|
Nine Months
Ended
|
|
|
August 31,
2017
|
|
August 31,
2016
|
Operating
activities
|
|
|
|
|
Net income
|
|
$
|
301.7
|
|
|
$
|
314.9
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
|
89.6
|
|
|
82.3
|
|
Stock based
compensation
|
|
18.4
|
|
|
19.8
|
|
Income from
unconsolidated operations
|
|
(23.6)
|
|
|
(24.2)
|
|
Changes in operating
assets and liabilities
|
|
(98.5)
|
|
|
(93.4)
|
|
Settlement of
forward-starting interest rate swaps
|
|
(2.9)
|
|
|
—
|
|
Dividends from
unconsolidated affiliates
|
|
18.3
|
|
|
23.0
|
|
Net cash flow
provided by operating activities
|
|
303.0
|
|
|
322.4
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
Acquisition of
businesses (net of cash acquired)
|
|
(4,327.4)
|
|
|
(116.2)
|
|
Capital
expenditures
|
|
(108.4)
|
|
|
(87.9)
|
|
Proceeds from
corporate life insurance
|
|
—
|
|
|
1.4
|
|
Proceeds from sale of
property, plant and equipment
|
|
0.7
|
|
|
0.9
|
|
Net cash flow used in
investing activities
|
|
(4,435.1)
|
|
|
(201.8)
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
Short-term
borrowings, net
|
|
(43.3)
|
|
|
419.9
|
|
Long-term debt
borrowings
|
|
3,977.6
|
|
|
—
|
|
Payment of debt
issuance costs
|
|
(6.1)
|
|
|
—
|
|
Long-term debt
repayments
|
|
(3.9)
|
|
|
(202.0)
|
|
Proceeds from
exercised stock options
|
|
26.5
|
|
|
35.9
|
|
Taxes withheld and
paid on employee stock awards
|
|
(5.4)
|
|
|
(3.5)
|
|
Payment of contingent
consideration
|
|
(19.7)
|
|
|
—
|
|
Purchase of minority
interest
|
|
(1.2)
|
|
|
—
|
|
Issuance of common
stock non-voting
|
|
554.9
|
|
|
—
|
|
Payment of costs
related to issuance of common stock non-voting
|
|
(0.9)
|
|
|
—
|
|
Common stock acquired
by purchase
|
|
(135.8)
|
|
|
(178.9)
|
|
Dividends
paid
|
|
(176.0)
|
|
|
(163.6)
|
|
Net cash flow
provided by (used in) financing activities
|
|
4,166.7
|
|
|
(92.2)
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
13.1
|
|
|
(6.8)
|
|
Increase in cash and
cash equivalents
|
|
47.7
|
|
|
21.6
|
|
Cash and cash
equivalents at beginning of period
|
|
118.4
|
|
|
112.6
|
|
|
|
|
|
|
Cash and cash
equivalents at end of period
|
|
$
|
166.1
|
|
|
$
|
134.2
|
|
View original
content:http://www.prnewswire.com/news-releases/mccormick-reports-strong-sales-and-profit-growth-in-third-quarter-and-updates-2017-financial-outlook-300527121.html
SOURCE McCormick & Company, Incorporated