SPARKS, Md., Jan. 25, 2018 /PRNewswire/
-- McCormick & Company, Incorporated (NYSE: MKC), a
global leader in flavor, today reported financial results for the
fourth quarter that led to record results for the fiscal year ended
November 30, 2017. The company
provided an outlook for continued growth in 2018.
- For the fourth quarter, sales rose 21% from the year-ago
period. In constant currency, the company grew sales 20%, with
strong results in both the consumer and industrial segments.
Earnings per share increased to $1.32
from $1.24 in the fourth quarter of
2016. Adjusted earnings per share rose 21% to $1.54 from $1.27 in
the year-ago period.
- For fiscal 2017, sales rose 10% from the prior year with
minimal impact from currency. Operating income was $702 million compared to $641 million in fiscal 2016. Adjusted operating
income was $786 million, a 20%
increase from $657 million for fiscal
2016, and a 21% increase in constant currency. Earnings per share
increased to $3.72 from $3.69 in fiscal year 2016, and adjusted earnings
per share rose 13% to $4.26 from
$3.78.
- Cash flow from operations grew 24% to a record $815 million in 2017. In November, an 11%
increase to the quarterly dividend was authorized, marking the 32nd
consecutive year of dividend increases.
- For the 2018 fiscal year, McCormick expects to increase
sales year-on-year by 12% to 14%, which includes a one percentage
point favorable currency impact. The company expects to achieve
earnings per share of $6.89 to
$7.14 in fiscal year 2018, including
the non-recurring net favorable impact of the recent U.S. tax
legislation, compared to $3.72 in
2017. Adjusted earnings per share is expected to be $4.80 to $4.90,
which is an increase of 13% to 15% from $4.26 in 2017 and includes an estimated one
percentage point favorable currency impact.
Chairman, President & CEO's Remarks
Lawrence E. Kurzius, Chairman,
President and CEO, stated, "Our broad global flavor portfolio
continues to drive growth and differentiate McCormick. In
2017, we delivered another year of record financial results with
strong core business performance and the incremental impact of
acquisitions. Our performance reflects the effectiveness of
our strategies and engagement of employees around the world.
"We delivered growth in sales, operating income, and earnings
per share in 2017. We exceeded each of our key
financial targets in 2017. Our sales growth and focus on
profit realization drove excellent financial results across both
our consumer and industrial segments. In addition to our
strong base business and new product growth, the acquisitions of RB
Foods, Giotti and Gourmet Garden contributed to higher sales as
valuable additions to our global portfolio of flavors.
Through our Comprehensive Continuous Improvement (CCI) program, we
are generating fuel for growth. Led by this program, we
achieved $117 million in cost savings
in 2017 and are well on our way to achieving our four-year
$400 million goal of cost savings by
2019. Through the combination of our CCI program and our
strategy to shift our portfolio to more value-added products, we
expanded our adjusted operating margin. We also had a sixth
consecutive year of record cash flow from operations, and in 2017,
increased our quarterly dividend for the 32nd consecutive
year. Along with these accomplishments, we are making
measurable progress toward our 2025 sustainability goals.
During 2017, we were recognized as a DiversityInc Top 50 Company,
and Corporate Knights recently ranked McCormick in their 2018
Global 100 Most Sustainable Corporations Index as No. 1 in the food
products industry for the second consecutive year.
"2017 was a milestone year for McCormick. We are proud of
our performance and our continued growth trajectory heading into
2018. With new ideas, innovation and purpose, we are
proactively adapting to changes in the industry. 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. Our performance across our broad global portfolio
is strong and we strengthened our flavor leadership further with
the addition of the iconic French's and Frank's RedHot brands.
Our enthusiasm for the acquisition of these brands and our
confidence that it will drive significant shareholder value only
strengthened in the fourth quarter. We are well positioned to
capitalize on the opportunities for growth and cost
savings. Our focus on growth by executing against our
strategies, driving profit realization and strengthening our
organization is the foundation of our future. In 2018, we
expect to again exceed our 4% to 6% long-term constant currency
objective for sales growth. We are balancing our resources
and efforts to drive sales with our work to lower costs, and plan
to achieve approximately $100 million
in 2018 cost savings led by our CCI program. With higher
sales and greater productivity, we expect to increase adjusted
earnings per share 13% to 15%. Along with higher profit, we
are working toward another year of strong cash flow.
"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 confident in our continuing
momentum for growth in 2018 to deliver strong financial results and
build value for our shareholders."
Fourth Quarter 2017 Results
McCormick reported a 21% sales increase in the fourth quarter
from the year-ago period, including a 1% favorable impact from
currency. Sales from RB Foods and Giotti, acquired in
August 2017 and December 2016, respectively, added 15% to the
sales increase. The remaining increase was driven by new
products and growth in the base business through brand marketing
support, expanded distribution, and pricing actions taken to offset
material cost inflation. The sales increase was broad-based
between the company's consumer and industrial segments with growth
in each region. In constant currency, the company grew sales
20%.
Gross profit margin increased 80 basis points versus the
year-ago period. This expansion was driven by our shift in
the portfolio to more value-added products and CCI-led cost
savings, partially offset by the RB Food's transaction expenses
related to the acquisition-date fair value adjustment of
inventories. Operating income was $267 million in the fourth quarter compared to
$219 million in the year-ago
period. This increase was due to higher sales and gross
profit margin expansion, offset in part by an increase in brand
marketing, transaction and integration expenses from the
acquisition of RB Foods and special charges. The company
recognized $31 million of transaction
and integration expenses in operating income related to the RB
Foods acquisition in the fourth quarter of 2017. The company
recorded $9 million of special
charges in the fourth quarter of 2017 related to organization and
streamlining actions versus $6
million in 2016. Excluding transaction and integration
expenses as well as special charges adjusted gross profit margin
increased 180 basis points from the year-ago period and adjusted
operating income was $307 million
compared to $225 million. In
constant currency, the company grew adjusted operating income 36%
from the fourth quarter of 2016.
Earnings per share was $1.32 in
the fourth quarter of 2017 compared to $1.24 in the year-ago period. Transaction
and integration expenses and special charges lowered earnings per
share by $0.22 and $0.03 in 2017 and 2016, respectively. The
increase in earnings per share was driven by higher operating
income and a lower income tax rate, partially offset by higher
interest expense and shares outstanding. Excluding the impact
of transaction and integration expenses as well as special charges
included in operating income, adjusted earnings per share increased
21% to $1.54 in the fourth quarter of
2017 compared to $1.27 in the
year-ago period.
Fiscal Year 2017 Results
McCormick reported a 10% sales increase in 2017 compared to 2016
with minimal impact from currency. Incremental sales from
acquisitions, which included RB Foods and Giotti as well as Gourmet
Garden, acquired in April 2016,
contributed 6% to the sales increase. The remaining increase
was driven by new products and growth in the base business through
brand marketing support, expanded distribution, and pricing actions
taken to offset material cost inflation. In constant
currency, the company grew sales 10%.
Gross profit margin increased 10 basis points over the prior
year. This expansion was driven by our shift in the portfolio
to more value-added products and CCI-led cost savings, partially
offset by the RB Food's transaction expenses related to the
acquisition-date fair value adjustment of inventories.
Operating income was $702 million in
2017 compared to $641 million in the
prior year and operating income margin was comparable. In
2017 compared to 2016, the favorable impact of higher sales and
CCI-led cost savings more than offset higher material costs, an
increase in brand marketing and special charges as well as
transaction and integration expenses from the acquisition of RB
Foods. The company recognized $62
million of transaction and integration expenses in operating
income related to the RB Foods acquisition in 2017. The
company recorded $22 million of
special charges in 2017 related to organization and streamlining
actions versus $16 million in 2016.
Excluding transaction and integration expenses as well as
special charges, adjusted gross profit margin increased 50 basis
points from 2016 and adjusted operating income was $786 million compared to $657 million. In constant currency, the
company grew adjusted operating income 21%. The company
expanded adjusted operating margin 140 basis points from the prior
year.
Earnings per share was $3.72 in
2017 compared to $3.69 in the prior
year. Transaction and integration expenses, including
$15 million of other debt costs, as
well as special charges lowered earnings per share by $0.54 and $0.09 in
2017 and 2016, respectively. The increase in earnings per
share was driven by higher operating income partially offset by
higher interest expense and special charges. Excluding the
impact of transaction and integration expenses as well as special
charges included in operating income, adjusted earnings per share
increased 13% to $4.26 in 2017
compared to $3.78 in the prior
year. This increase includes the unfavorable impact of
foreign currency rates.
Net cash provided by operating activities reached a record
$815 million in 2017, a 24% increase
from $658 million in 2016, driven by
working capital improvements. A portion of this cash
was used to pay down debt.
Fiscal Year 2018 Financial Outlook
McCormick is a global leader in flavor - a growing and
advantaged business platform. The company expects continued
global growth in consumer demand for great taste and healthy
eating. McCormick is aligned with consumers' increased
interest in bolder flavors, demand for convenience and focus on
fresh, natural ingredients as well as greater transparency around
the sourcing and quality of food. Through its growth
strategies, the company is well-positioned to meet this increased
consumer demand and drive sales of its broad flavor portfolio
through brand marketing, new products and expanded
distribution.
In 2018, the company expects to grow sales 12% to 14% compared
to 2017, including a one percentage point favorable impact from
currency rates. The company expects to drive sales growth
with the incremental impact of acquisitions completed in 2017, new
products, brand marketing and expanded distribution. Sales
growth is also expected to include the incremental impact of
pricing from 2017 in addition to actions taken in 2018 to offset an
anticipated low-single digit increase in material costs. The
company has plans to achieve at least $100
million of cost savings and intends to use these savings to
improve margins, fund an increase in brand marketing, and as a
further offset to increased material costs.
Operating income in 2018 is expected to grow 32% to 34% from
$702 million of operating income in
2017. Integration expenses from the RB Foods acquisition of
approximately $23 million are
currently projected to impact operating income for 2018.
Special charges of approximately $18
million are currently projected for 2018 that relate to
previously announced organization and streamlining actions.
Excluding the impact of transaction and integration expenses as
well as special charges in 2018 and 2017, the expected growth in
adjusted operating income is 23% to 25% from adjusted operating
income of $786 million in 2017.
This growth includes an estimated one percentage point favorable
impact from currency.
McCormick projects 2018 earnings per share to be in the range of
$6.89 to $7.14 compared to $3.72 of earnings per share in 2017.
Excluding an anticipated favorable per share impact in 2018 of
$2.09 to $2.24, consisting of the estimated net favorable
non-recurring impact of the recent U.S. tax legislation, partially
offset by the estimated effects of integration expenses related to
RB Foods and of special charges, the company projects 2018 adjusted
earnings per share to be in the range of $4.80 to $4.90. This is an increase of 13% to 15%
from adjusted earnings per share of $4.26 in 2017 and includes the estimated
reduction to approximately 24% of our projected underlying
effective tax rate associated with the recent U.S. tax
legislation. The 13% to 15% projected range of growth in 2018
adjusted earnings per share also includes an estimated one
percentage point favorable impact from currency. The impact of
favorable currency is expected to be greater in the first half of
the year than in the second half. For fiscal year 2018, 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
|
|
Twelve months
ended
|
|
|
11/30/2017
|
|
11/30/2016
|
|
11/30/2017
|
|
11/30/2016
|
Net sales
|
|
$
|
978.3
|
|
|
$
|
815.6
|
|
|
$
|
2,970.1
|
|
|
$
|
2,753.2
|
|
Operating
income
|
|
207.3
|
|
|
180.8
|
|
|
508.2
|
|
|
481.6
|
|
Operating income,
excluding special
charges, transaction and
integration
expenses
|
|
235.3
|
|
|
182.8
|
|
|
564.2
|
|
|
490.8
|
|
The company grew consumer segment sales 20% when compared to the
fourth quarter of 2016. In constant currency, sales rose 18%
with increases in each of the company's three regions.
- Consumer sales in the Americas rose 25% from the year ago
period. In constant currency, sales rose 24% with RB Foods
contributing 19% to sales growth. The company also increased sales
driven by pricing, new products and expanded distribution. Growth
was achieved across the branded portfolio including McCormick and
Lawry's spices and seasonings, McCormick recipe mixes and breakfast
products and Gourmet Garden products as well as in private
label.
- Fourth quarter consumer sales in Europe, Middle
East and Africa (EMEA)
increased 9%. In constant currency, sales rose 2% with RB Foods
contributing 1% to sales growth. The base sales growth was led by
Ducros and Vahine branded products driven by pricing and higher
volume.
- Consumer sales in the Asia/Pacific region rose 6% and in constant
currency, sales rose 4% from the year ago period. The sales
growth was led by China and
India.
Consumer segment operating income, excluding transaction and
integration expenses and special charges, rose 29% to $235 million for the fourth quarter of 2017
compared to $183 million in the
year-ago period. In constant currency, it rose 28%. The
favorable impact of higher sales and CCI-led cost savings more than
offset the unfavorable impact of increases in material costs and
brand marketing.
Industrial Segment
(in
millions)
|
|
Three months
ended
|
|
Twelve months
ended
|
|
|
11/30/2017
|
|
11/30/2016
|
|
11/30/2017
|
|
11/30/2016
|
Net sales
|
|
$
|
512.6
|
|
|
$
|
411.4
|
|
|
$
|
1,864.0
|
|
|
$
|
1,658.3
|
|
Operating
income
|
|
59.6
|
|
|
38.3
|
|
|
194.2
|
|
|
159.4
|
|
Operating income,
excluding special
charges, transaction and
integration
expenses
|
|
72.1
|
|
|
42.5
|
|
|
222.1
|
|
|
166.2
|
|
Industrial segment sales increased 25% from the fourth quarter
of 2016. In constant currency, the industrial segment grew
sales 23%, with significant increases in each of the company's
three regions.
- Industrial sales in the Americas increased 25% from the
year-ago period. In constant currency, sales rose 24% with
incremental sales from RB Foods contributing 19% to sales growth.
This growth was led by increased sales of snack seasonings in the
U.S. and Mexico, a double-digit
increase in savory flavor products and continued growth in branded
foodservice.
- In EMEA, industrial sales grew 33% in the fourth quarter. In
constant currency, sales rose 31%, with acquisitions contributing
22% driven primarily by Giotti. 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 13% in the
fourth quarter of 2017 versus the same period in 2016 and in
constant currency, the increase was 11%. The growth was driven by
strong performance in China from
new products and promotional products for quick service
restaurants.
Industrial segment operating income, excluding transaction and
integration expenses and special charges, rose 70% to $72 million for the fourth quarter of 2017
compared to $43 million in the
year-ago period with minimal impact from currency. The
favorable impact of higher sales, product mix, and CCI-led cost
savings more than offset the unfavorable impact of higher material
costs.
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 from
unconsolidated operations, 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.
These financial measures also exclude, for 2018, and the comparison
of our expected results for 2018 to 2017, the net estimated impact
of the effects of the repatriation tax and re-measurement of our
U.S. deferred tax assets and liabilities as a result of the recent
U.S. tax legislation as these items will significantly impact
comparability between years. Adjusted gross profit,
adjusted gross profit margin, 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
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 Americas; 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 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
anticipate incurring additional integration costs in 2018.
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
|
|
Twelve months
ended
|
|
11/30/17
|
|
11/30/16
|
|
11/30/17
|
|
11/30/16
|
Gross
profit
|
$
|
668.2
|
|
|
$
|
540.0
|
|
|
$
|
2,010.2
|
|
|
$
|
1,831.7
|
|
|
|
|
|
|
|
|
|
Impact of special
charges, transaction and
integration expenses included in cost
of
goods sold (1)
|
15.0
|
|
|
0.3
|
|
|
20.9
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
Adjusted gross
profit
|
$
|
683.2
|
|
|
$
|
540.3
|
|
|
$
|
2,031.1
|
|
|
$
|
1,832.0
|
|
|
|
|
|
|
|
|
|
Adjusted gross profit
margin (2)
|
45.8
|
%
|
|
44.0
|
%
|
|
42.0
|
%
|
|
41.5
|
%
|
|
|
|
|
|
|
|
|
Operating
income
|
$
|
266.9
|
|
|
$
|
219.1
|
|
|
$
|
702.4
|
|
|
$
|
641.0
|
|
|
|
|
|
|
|
|
|
Impact of special
charges, transaction and
integration expenses included in cost
of
goods sold (1)
|
15.0
|
|
|
0.3
|
|
|
20.9
|
|
|
0.3
|
|
Impact of other
transaction and integration
expenses (1)
|
16.3
|
|
|
—
|
|
|
40.8
|
|
|
—
|
|
Impact of other
special charges (3)
|
9.2
|
|
|
5.9
|
|
|
22.2
|
|
|
15.7
|
|
|
|
|
|
|
|
|
|
Adjusted operating
income
|
$
|
307.4
|
|
|
$
|
225.3
|
|
|
$
|
786.3
|
|
|
$
|
657.0
|
|
% increase versus
prior period
|
36.4
|
%
|
|
|
|
19.7
|
%
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating
income margin (2)
|
20.6
|
%
|
|
18.4
|
%
|
|
16.3
|
%
|
|
14.9
|
%
|
|
|
|
|
|
|
|
|
Income from
unconsolidated operations
|
$
|
10.3
|
|
|
$
|
11.9
|
|
|
$
|
33.9
|
|
|
$
|
36.1
|
|
Impact of special
charges attributable to non-
controlling interests
(4)
|
—
|
|
|
(1.9)
|
|
|
—
|
|
|
(1.9)
|
|
Adjusted income from
unconsolidated
operations
|
$
|
10.3
|
|
|
$
|
10.0
|
|
|
$
|
33.9
|
|
|
$
|
34.2
|
|
% increase (decrease) versus
prior period
|
3.0
|
%
|
|
|
|
(0.9)
|
%
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
175.7
|
|
|
$
|
157.4
|
|
|
$
|
477.4
|
|
|
$
|
472.3
|
|
Impact of total
transaction and integration
expenses (1)
|
22.4
|
|
|
—
|
|
|
53.5
|
|
|
—
|
|
Impact of total
special charges (3)
|
6.7
|
|
|
5.6
|
|
|
15.8
|
|
|
13.0
|
|
Impact of total
special charges attributable to
non-controlling interests
(4)
|
—
|
|
|
(1.9)
|
|
|
—
|
|
|
(1.9)
|
|
Adjusted net
income
|
$
|
204.8
|
|
|
$
|
161.1
|
|
|
$
|
546.7
|
|
|
$
|
483.4
|
|
% increase
versus prior period
|
27.1
|
%
|
|
|
|
13.1
|
%
|
|
|
|
|
|
|
|
|
|
|
Earnings per share -
diluted
|
$
|
1.32
|
|
|
$
|
1.24
|
|
|
$
|
3.72
|
|
|
$
|
3.69
|
|
Impact of total
transaction and integration
expenses (1)
|
0.17
|
|
|
—
|
|
|
0.42
|
|
|
—
|
|
Impact of total
special charges (3)
|
0.05
|
|
|
0.04
|
|
|
0.12
|
|
|
0.10
|
|
Impact of total
special charges attributable to
non-controlling interests
(4)
|
—
|
|
|
(0.01)
|
|
|
—
|
|
|
(0.01)
|
|
Adjusted earnings per
share - diluted
|
$
|
1.54
|
|
|
$
|
1.27
|
|
|
$
|
4.26
|
|
|
$
|
3.78
|
|
% increase
versus prior period
|
21.3
|
%
|
|
|
|
12.7
|
%
|
|
|
(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 twelve months ended November 30,
2017 (in millions, except per share amounts):
|
|
|
Three months
ended 11/30/17
|
Twelve months
ended 11/30/17
|
|
Transaction and
integration expenses included in cost of goods sold
|
$
|
15.0
|
|
$
|
20.9
|
|
|
Reflected in
transaction and integration expenses
|
16.3
|
|
40.8
|
|
|
Transaction and
integration expenses included in operating income
|
31.3
|
|
61.7
|
|
|
Transaction and
integration expenses included in other debt costs
|
—
|
|
15.4
|
|
|
Total pre-tax
transaction and integration expenses
|
31.3
|
|
77.1
|
|
|
Less: Tax
effect
|
(8.9)
|
|
(23.6)
|
|
|
Total after-tax
transaction and integration expenses
|
$
|
22.4
|
|
$
|
53.5
|
|
|
|
|
|
(2)
|
Adjusted gross profit
margin is calculated as adjusted gross profit as a percentage of
net sales for each period presented. Adjusted operating income
margin is calculated as adjusted operating income as a percentage
of net sales for each period presented.
|
|
|
|
|
(3)
|
Total special charges
of $9.2 million and $22.2 million for the three and twelve months
ended November 30, 2017 are net of taxes of $2.5 million and $6.4
million, respectively. Total special charges of $6.2 million and
$16.0 million for the three and twelve months ended November 30,
2016 are net of taxes of $0.6 million and $3.0 million,
respectively.
|
|
|
|
|
(4)
|
In 2016, represents
the portion of the total special charge of $2.8 million, net of tax
of $0.9 million, for the three and twelve months ended November 30,
2016 associated with our exit of a consolidated joint venture in
South Africa, attributable to our former joint venture
partner.
|
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
November 30, 2017
|
|
|
|
Percentage change
as reported
|
|
Impact of foreign
currency exchange
|
|
Percentage change
on
constant currency
basis
|
Net
sales
|
|
|
|
|
|
|
|
Consumer
segment
|
|
|
|
|
|
|
|
Americas
|
|
|
24.8%
|
|
0.4%
|
|
24.4%
|
EMEA
|
|
|
8.6%
|
|
6.1%
|
|
2.5%
|
Asia/Pacific
|
|
|
6.0%
|
|
2.0%
|
|
4.0%
|
Total consumer
segment
|
|
|
19.9%
|
|
1.6%
|
|
18.3%
|
Industrial
segment
|
|
|
|
|
|
|
|
Americas
|
|
|
24.5%
|
|
0.9%
|
|
23.6%
|
EMEA
|
|
|
32.6%
|
|
1.7%
|
|
30.9%
|
Asia/Pacific
|
|
|
12.8%
|
|
1.7%
|
|
11.1%
|
Total industrial
segment
|
|
|
24.6%
|
|
1.1%
|
|
23.5%
|
Total net
sales
|
|
|
21.5%
|
|
1.5%
|
|
20.0%
|
Adjusted operating
income
|
|
|
|
|
|
|
|
Consumer
segment
|
|
|
28.7%
|
|
1.0%
|
|
27.7%
|
Industrial segment
|
|
|
69.6%
|
|
(0.4)%
|
|
70.0%
|
Total adjusted
operating income
|
|
|
36.4%
|
|
0.8%
|
|
35.6%
|
|
|
|
Twelve months ended
November 30, 2017
|
|
|
|
Percentage change
as reported
|
|
Impact of foreign
currency exchange
|
|
Percentage change
on
constant currency
basis
|
Net
sales
|
|
|
|
|
|
|
|
Consumer
segment
|
|
|
|
|
|
|
|
Americas
|
|
|
11.2%
|
|
0.1%
|
|
11.1%
|
EMEA
|
|
|
(1.6)%
|
|
0.7%
|
|
(2.3)%
|
Asia/Pacific
|
|
|
6.4%
|
|
(2.5)%
|
|
8.9%
|
Total consumer
segment
|
|
|
7.9%
|
|
(0.1)%
|
|
8.0%
|
Industrial
segment
|
|
|
|
|
|
|
|
Americas
|
|
|
10.8%
|
|
(0.4)%
|
|
11.2%
|
EMEA
|
|
|
20.5%
|
|
(6.4)%
|
|
26.9%
|
Asia/Pacific
|
|
|
9.0%
|
|
(1.1)%
|
|
10.1%
|
Total industrial
segment
|
|
|
12.4%
|
|
(1.6)%
|
|
14.0%
|
Total net
sales
|
|
|
9.6%
|
|
(0.7)%
|
|
10.3%
|
Adjusted operating
income
|
|
|
|
|
|
|
|
Consumer
segment
|
|
|
15.0%
|
|
0.1%
|
|
14.9%
|
Industrial segment
|
|
|
33.6%
|
|
(3.5)%
|
|
37.1%
|
Total adjusted
operating income
|
|
|
19.7%
|
|
(0.8)%
|
|
20.5%
|
The following provides a reconciliation of our estimated
earnings per share to adjusted earnings per share for 2018 and
actual results for 2017:
(in millions except
per share data)
|
|
|
Twelve Months
Ended
|
|
|
|
2018
projection
|
|
11/30/17
|
Earnings per share -
diluted
|
|
|
$6.89 to
$7.14
|
|
$
|
3.72
|
|
Impact of special
charges, transaction and integration
expenses, and other debt
costs
|
|
|
0.24
|
|
0.54
|
|
Estimated
non-recurring benefit, net, of recent U.S. tax
legislation
|
|
|
(2.33) to
(2.48)
|
|
—
|
|
Adjusted earnings per
share
|
|
|
$4.80 to
$4.90
|
|
$
|
4.26
|
|
|
|
|
|
|
|
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, brand marketing
support and income tax expense, 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 our CCI
program and global enablement initiative; 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 expected impact of the U.S. tax legislation passed in
December 2017; 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
remaining term of the post-closing transition services
agreement between McCormick and the seller in the first half of
2018; 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 the company's ability to react to certain economic and
industry conditions and ability to borrow or the cost of any such
additional borrowing; the interpretations and assumptions we have
made, and guidance that may be issued, regarding the U.S. tax
legislation enacted in December 2017;
assumptions we have made regarding 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, including 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 $4.8 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)
Fourth Quarter
Report
|
|
McCormick &
Company, Incorporated
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Income Statement
|
|
|
|
|
|
|
|
|
(In millions except
per-share data)
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Twelve months
ended
|
|
|
November 30,
2017
|
|
November 30,
2016
|
|
November 30,
2017
|
|
November 30,
2016
|
Net sales
|
|
$
|
1,490.9
|
|
|
$
|
1,227.0
|
|
|
$
|
4,834.1
|
|
|
$
|
4,411.5
|
|
Cost of goods
sold
|
|
822.7
|
|
|
687.0
|
|
|
2,823.9
|
|
|
2,579.8
|
|
Gross
profit
|
|
668.2
|
|
|
540.0
|
|
|
2,010.2
|
|
|
1,831.7
|
|
Gross profit
margin
|
|
44.8
|
%
|
|
44.0
|
%
|
|
41.6
|
%
|
|
41.5
|
%
|
Selling, general and
administrative expense
|
|
375.8
|
|
|
315.0
|
|
|
1,244.8
|
|
|
1,175.0
|
|
Transaction and
integration expenses
|
|
16.3
|
|
|
—
|
|
|
40.8
|
|
|
—
|
|
Special
charges
|
|
9.2
|
|
|
5.9
|
|
|
22.2
|
|
|
15.7
|
|
Operating
income
|
|
266.9
|
|
|
219.1
|
|
|
702.4
|
|
|
641.0
|
|
Interest
expense
|
|
44.8
|
|
|
14.3
|
|
|
95.7
|
|
|
56.0
|
|
Other debt
costs
|
|
—
|
|
|
—
|
|
|
15.4
|
|
|
—
|
|
Other income,
net
|
|
1.0
|
|
|
2.2
|
|
|
3.5
|
|
|
4.2
|
|
Income from
consolidated operations before income taxes
|
|
223.1
|
|
|
207.0
|
|
|
594.8
|
|
|
589.2
|
|
Income
taxes
|
|
57.7
|
|
|
61.5
|
|
|
151.3
|
|
|
153.0
|
|
Net income from
consolidated operations
|
|
165.4
|
|
|
145.5
|
|
|
443.5
|
|
|
436.2
|
|
Income from
unconsolidated operations
|
|
10.3
|
|
|
11.9
|
|
|
33.9
|
|
|
36.1
|
|
Net income
|
|
$
|
175.7
|
|
|
$
|
157.4
|
|
|
$
|
477.4
|
|
|
$
|
472.3
|
|
|
|
|
|
|
|
|
|
|
Earnings per share -
basic
|
|
$
|
1.34
|
|
|
$
|
1.25
|
|
|
$
|
3.77
|
|
|
$
|
3.73
|
|
|
|
|
|
|
|
|
|
|
Earnings per share -
diluted
|
|
$
|
1.32
|
|
|
$
|
1.24
|
|
|
$
|
3.72
|
|
|
$
|
3.69
|
|
|
|
|
|
|
|
|
|
|
Average shares
outstanding - basic
|
|
131.1
|
|
|
125.8
|
|
|
126.8
|
|
|
126.6
|
|
Average shares
outstanding - diluted
|
|
132.6
|
|
|
127.2
|
|
|
128.4
|
|
|
128.0
|
|
Fourth Quarter
Report
|
McCormick &
Company, Incorporated
|
|
|
|
|
|
Consolidated
Balance Sheet
|
|
|
|
|
(In
millions)
|
|
|
|
|
|
|
November 30,
2017
|
|
November 30,
2016
|
Assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
186.8
|
|
|
$
|
118.4
|
|
Trade accounts
receivable, net
|
|
555.1
|
|
|
465.2
|
|
Inventories
|
|
793.3
|
|
|
756.3
|
|
Prepaid expenses and
other current assets
|
|
81.8
|
|
|
81.9
|
|
Total current
assets
|
|
1,617.0
|
|
|
1,421.8
|
|
Property, plant and
equipment, net
|
|
809.1
|
|
|
669.4
|
|
Goodwill
|
|
4,490.1
|
|
|
1,771.4
|
|
Intangible assets,
net
|
|
3,071.1
|
|
|
424.9
|
|
Investments and other
assets
|
|
398.5
|
|
|
348.4
|
|
Total
assets
|
|
$
|
10,385.8
|
|
|
$
|
4,635.9
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Short-term borrowings
and current portion of long-term debt
|
|
$
|
583.2
|
|
|
$
|
393.2
|
|
Trade accounts
payable
|
|
639.9
|
|
|
450.8
|
|
Other accrued
liabilities
|
|
724.2
|
|
|
578.7
|
|
Total current
liabilities
|
|
1,947.3
|
|
|
1,422.7
|
|
Long-term
debt
|
|
4,443.9
|
|
|
1,054.0
|
|
Deferred
taxes
|
|
1,094.5
|
|
|
79.9
|
|
Other long-term
liabilities
|
|
329.2
|
|
|
441.2
|
|
Total
liabilities
|
|
7,814.9
|
|
|
2,997.8
|
|
Shareholders'
equity
|
|
|
|
|
Common
stock
|
|
1,672.9
|
|
|
1,084.2
|
|
Retained
earnings
|
|
1,166.5
|
|
|
1,056.8
|
|
Accumulated other
comprehensive loss
|
|
(279.5)
|
|
|
(514.4)
|
|
Non-controlling
interests
|
|
11.0
|
|
|
11.5
|
|
Total shareholders'
equity
|
|
2,570.9
|
|
|
1,638.1
|
|
Total liabilities and
shareholders' equity
|
|
$
|
10,385.8
|
|
|
$
|
4,635.9
|
|
Fourth Quarter
Report
|
|
McCormick & Company, Incorporated
|
|
|
|
|
|
Consolidated Cash
Flow Statement
|
|
|
|
|
(In
millions)
|
|
|
|
|
|
|
Twelve Months
Ended
|
|
|
November 30,
2017
|
|
November 30,
2016
|
Operating
activities
|
|
|
|
|
Net income
|
|
$
|
477.4
|
|
|
$
|
472.3
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
|
125.2
|
|
|
108.7
|
|
Stock-based
compensation
|
|
23.9
|
|
|
25.6
|
|
Special charges and
transaction and integration expenses
|
|
19.1
|
|
|
7.2
|
|
Amortization of
inventory fair value adjustment associated with
acquisition of RB Foods
|
|
20.9
|
|
|
—
|
|
Loss on sale of
assets
|
|
1.3
|
|
|
1.5
|
|
Deferred income tax
expense (benefit)
|
|
24.1
|
|
|
(40.0)
|
|
Income from
unconsolidated operations
|
|
(33.9)
|
|
|
(36.1)
|
|
Settlement of
forward-starting interest rate swaps
|
|
(2.9)
|
|
|
—
|
|
Changes in operating
assets and liabilities
|
|
136.6
|
|
|
81.5
|
|
Dividends from
unconsolidated affiliates
|
|
23.6
|
|
|
37.4
|
|
Net cash flow
provided by operating activities
|
|
815.3
|
|
|
658.1
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
Acquisitions of
businesses
|
|
(4,327.4)
|
|
|
(120.6)
|
|
Proceeds from exit of
consolidated joint venture (net of cash paid
of $0.9)
|
|
—
|
|
|
4.2
|
|
Capital
expenditures
|
|
(182.4)
|
|
|
(153.8)
|
|
Proceeds from sale of
property, plant and equipment
|
|
1.1
|
|
|
1.7
|
|
Proceeds from
insurance
|
|
0.4
|
|
|
1.4
|
|
Net cash flow used in
investing activities
|
|
(4,508.3)
|
|
|
(267.1)
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
Short-term
borrowings, net
|
|
(134.6)
|
|
|
251.7
|
|
Long-term debt
borrowings
|
|
3,989.6
|
|
|
6.0
|
|
Payment of debt
issuance costs
|
|
(7.7)
|
|
|
—
|
|
Long-term debt
repayments
|
|
(272.7)
|
|
|
(202.0)
|
|
Proceeds from
exercised stock options
|
|
29.5
|
|
|
36.8
|
|
Taxes withheld and
paid on employee stock awards
|
|
(5.8)
|
|
|
(3.5)
|
|
Payment of contingent
consideration
|
|
(19.7)
|
|
|
—
|
|
Purchase of minority
interest
|
|
(1.2)
|
|
|
—
|
|
Issuance of common
stock non-voting (net of issuance costs of $0.9)
|
|
554.0
|
|
|
—
|
|
Common stock acquired
by purchase
|
|
(137.8)
|
|
|
(242.7)
|
|
Dividends
paid
|
|
(237.6)
|
|
|
(217.8)
|
|
Net cash flow
provided by (used in) financing activities
|
|
3,756.0
|
|
|
(371.5)
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
5.4
|
|
|
(13.7)
|
|
Increase in cash and
cash equivalents
|
|
68.4
|
|
|
5.8
|
|
Cash and cash
equivalents at beginning of period
|
|
118.4
|
|
|
112.6
|
|
|
|
|
|
|
Cash and cash
equivalents at end of period
|
|
$
|
186.8
|
|
|
$
|
118.4
|
|
View original
content:http://www.prnewswire.com/news-releases/mccormick-reports-record-2017-financial-results-and-strong-growth-outlook-for-2018-300588139.html
SOURCE McCormick & Company, Incorporated