SPARKS, Md., June 28, 2018 /PRNewswire/
-- McCormick & Company, Incorporated (NYSE:MKC), a
global leader in flavor, today reported financial results for the
second quarter ended May 31, 2018 and
reaffirmed its latest financial outlook for fiscal year 2018.
- Sales rose 19% in the second quarter from the year-ago
period. In constant currency, the company grew sales 16%, with
strong results in both the consumer and flavor solutions
segments.
- Operating income was $192
million in the second quarter compared to $133 million in the year-ago period. Adjusted
operating income was $208 million, a
51% increase from $137 million in the
second quarter of 2017, and a 48% increase in constant
currency.
- Earnings per share was $0.93
in the second quarter as compared to $0.79 in the year-ago period. Adjusted earnings
per share rose 24% to $1.02 from
$0.82 in the year-ago
period.
- McCormick reaffirmed its 2018 sales, operating income and
earnings per share guidance.
Chairman, President & CEO's Remarks
Lawrence E. Kurzius, Chairman,
President and CEO, stated, "McCormick's strong second quarter and
year to date results reflect the successful execution of our
strategies. We delivered double-digit sales, adjusted operating
income and adjusted earnings per share growth as well as
significant operating margin expansion.
"Both our consumer and flavor solutions segments contributed to
our constant currency sales growth of 16%. Growth in both
segments was led by incremental sales from the Frank's and French's
portfolio. Consumer segment sales growth was also driven by
both Americas and Asia/Pacific
base business and new products, with particular strength in
China. Our additional flavor solutions segment growth
was driven by increased base business and new product sales in
flavors as well as broad-based branded foodservice growth in the
Americas region. Across both of our segments, the solid
growth from our core business and the performance of Frank's and
French's were in line with our plans and we are pleased with our
momentum entering the second half of the year.
"McCormick is a global leader in flavor with a broad and
advantaged global portfolio which continues to grow and position us
to fully meet the demand for flavor around the world. All
over the world, people desire great tasting foods and drinks with
rich, authentic flavor. And we deliver flavor across all
markets and through all channels. We are focused on growth,
delivering against our objectives, strengthening our organization
and building the McCormick of the future. Through the
execution of our strategies, we are becoming even better positioned
to drive future growth and are confident in our continued
success. We are balancing our resources and efforts to drive
sales with our work to lower costs 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 confident in our continuing
momentum for growth in 2018 to deliver strong financial results and
build value for our shareholders."
Second Quarter 2018 Results
McCormick reported a 19% sales increase in the second quarter
from the year-ago period, including a 3% favorable impact from
currency. Sales from the acquired Frank's and French's brands
added 13% to the sales increase. Consumer segment sales grew
by 20% including a 4% favorable impact from currency and 14% from
the incremental impact of Frank's and French's. The remaining
increase was primarily driven by the Americas and Asia/Pacific regions. Flavor solutions
segment sales grew by 18%, including a 3% favorable impact from
currency and 12% from the incremental impact Frank's and
French's. The remaining sales increase was driven primarily
by the Americas region. In constant currency, the company
grew sales 16%.
Gross profit margin increased 340 basis points versus the
year-ago period. This expansion was driven by CCI-led cost
savings and our shift in the portfolio to more value added
products, including the impact of Frank's and French's
portfolios. Operating income was $192
million in the second quarter compared to $133 million in the year-ago period. This
increase was due to higher sales and gross margin expansion, offset
in part by an increase in distribution expense, brand marketing and
special charges as well as transaction and integration expenses
from the RB Foods acquisition. The company recognized $8 million of transaction and integration
expenses in operating income related to the RB Foods acquisition in
the second quarter of 2018. The company recorded $8 million of special charges in the second
quarter of 2018 versus $5 million in
2017. Excluding transaction and integration expenses as well
as special charges, adjusted operating income was $208 million compared to $137 million in the year-ago period. In
constant currency, the company grew adjusted operating income
48%.
Earnings per share was $0.93 in
the second quarter of 2018 compared to $0.79 in the year-ago period. Transaction and
integration expenses as well as special charges decreased earnings
per share by $0.09 in
2018. Special charges lowered earnings per share by
$0.03 in 2017. Excluding these
impacts, adjusted earnings per share was $1.02 in the second quarter of 2018 compared to
$0.82 in the year-ago period.
The increase in adjusted earnings per share was driven primarily by
higher adjusted operating income partially offset by higher
interest expense and shares outstanding. This increase in
adjusted earnings per share also includes the favorable impact of
foreign currency rates.
The company continues to generate strong cash flow.
Year-to-date net cash provided by operating activities
through the second quarter of 2018 was $235
million compared to $177
million through the second quarter of 2017. The
increase was mainly due to net income growth. A portion of
this cash was used to make prepayments on our recent acquisition
debt.
2018 Financial Outlook
McCormick reaffirmed its 2018 sales, operating income and
earnings per share guidance.
In 2018, the company expects to grow sales 13% to 15% compared
to 2017, including two percentage points 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. The
company has plans to achieve at least $105
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 costs.
The company reaffirmed its expectation to grow operating income
in 2018 by 32% to 34% from $702
million of operating income in 2017. Transaction and
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. 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
$6.85 to $6.95 compared to $3.72 of earnings per share in 2017.
Excluding an anticipated favorable per share impact in 2018 of
$2.00, consisting of the estimated
net favorable non-recurring impact of the U.S. Tax Act, partially
offset by the estimated effects of transaction and integration
expenses related to RB Foods and of special charges, the company
projects 2018 adjusted earnings per share to be in the range of
$4.85 to $4.95. This is an increase of 14% to 16% from
adjusted earnings per share of $4.26
in 2017 and 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
|
|
Six months
ended
|
|
|
5/31/2018
|
|
5/31/2017
|
|
5/31/2018
|
|
5/31/2017
|
Net sales
|
|
$
|
785.4
|
|
$
|
656.4
|
|
$
|
1,542.8
|
|
$
|
1,295.0
|
Operating income,
excluding special
charges, transaction and
integration
expenses
|
|
131.1
|
|
91.3
|
|
263.3
|
|
189.2
|
|
|
|
|
|
|
|
|
|
|
|
|
The company grew consumer segment sales 20% when compared to the
second quarter of 2017. In constant currency sales rose 16%
with increases in each of the company's three regions.
- Consumer sales in the Americas rose 23% compared to the second
quarter of 2017. In constant currency, the increase was 22% with
Frank's and French's contributing 20% to sales growth. The
remaining increase was driven by the incremental impact of pricing
actions taken in 2017 as well as in 2018 and favorable volume and
mix.
- Consumer sales in Europe,
Middle East and Africa (EMEA) increased 14%. In constant
currency, sales increased 2% from the year-ago period driven by
Frank's and French's. The remaining sales growth was flat with
volume growth led by France offset
by trade promotional activities.
- Second quarter consumer sales in the Asia/Pacific region rose 15% and in constant
currency, sales rose 7%. The sales growth was led by China.
Consumer segment operating income rose 44% to $131 million for the second quarter of 2018
compared to $91 million in the
year-ago period. In constant currency, operating income rose
40%. The favorable impact of higher sales, including
favorable mix, and CCI-led cost savings more than offset the
unfavorable impact of increases in brand marketing and freight
costs.
Flavor Solutions Segment
(in
millions)
|
|
Three months
ended
|
|
Six months
ended
|
|
|
5/31/2018
|
|
5/31/2017
|
|
5/31/2018
|
|
5/31/2017
|
Net sales
|
|
$
|
541.9
|
|
$
|
457.9
|
|
$
|
1,021.6
|
|
$
|
863.0
|
Operating income,
excluding special
charges, transaction and
integration
expenses
|
|
76.8
|
|
46.0
|
|
139.2
|
|
85.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flavor solutions segment sales increased 18% from the second
quarter of 2017. In constant currency, the flavor solutions
segment grew sales by 15% driven by the Americas and EMEA
regions.
- Flavor solutions sales in the Americas grew 23% from the
year-ago period. In constant currency, the growth was 22% with
sales from the Frank's and French's brands contributing 17%. The
remaining 5% growth was led by the increased sales of flavors as
well as branded foodservice. Sales in this region were strong
despite the exit of lower margin business, lower pricing and the
impact from a global realignment of a major customer's sales to our
EMEA region.
- Second quarter flavor solutions sales in EMEA rose 12% and in
constant currency, rose 3%. The Frank's and French's brands
contributed 1% to sales growth. The remaining growth included the
impact from a global realignment of a major customer's sales from
the Americas partially offset by lower pricing.
- Flavor solutions sales in the Asia/Pacific region increased 5% in the second
quarter of 2018 versus the same period in 2017 but in constant
currency, sales decreased 2%. The decline was driven by the exit of
lower margin business and lower pricing.
Flavor solutions segment operating income rose 67% to
$77 million for the second quarter of
2018 compared to $46 million in the
year-ago period. In constant currency, operating income rose
64%. The favorable impact of higher sales, product mix and
CCI-led cost savings drove the increase.
Non-GAAP Financial Measures
The tables below include financial measures of adjusted
operating income, adjusted operating income margin, adjusted income
taxes, 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 as these items
significantly impact comparability between years. These
financial measures also exclude, for 2018, and the comparison of
our results for 2018 to 2017, the net estimated impact of the
effects of the one-time transition tax and re-measurement of our
U.S. deferred tax assets and liabilities as a result of the U.S.
Tax Act passed in December 2017 as
these items will significantly impact comparability between
years. Adjusted operating income, adjusted operating income
margin, adjusted income taxes, 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 separate line
items captioned "Special charges" and "Transaction and integration
expenses" 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, comprised of our Chairman, President and
Chief Executive Officer; Executive Vice President and Chief
Financial Officer; President Flavor Solutions 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 consist 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 was included in other debt costs in
2017. We incurred these costs in 2017 and will incur
additional integration costs in 2018.
Income taxes associated with the enactment of the U.S. Tax Act
in December 2017 consists of a net
income tax benefit of $297.9 million
recognized during the first quarter of 2018, which includes the
estimated impact of the tax benefit from revaluation of net U.S.
deferred tax liabilities based on the new lower corporate income
tax rate and the tax expense associated with the one-time
transition tax on previously unremitted earnings of non-U.S.
subsidiaries.
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, other debt costs and
the net income tax benefit associated with enactment of the U.S.
Tax Act 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
|
|
Six Months
Ended
|
|
5/31/2018
|
|
5/31/2017
|
|
5/31/2018
|
|
5/31/2017
|
Operating
income
|
$
|
191.7
|
|
$
|
132.6
|
|
$
|
375.4
|
|
$
|
266.8
|
Impact of transaction
and integration expenses
|
7.8
|
|
—
|
|
16.5
|
|
—
|
Impact of special
charges
|
8.4
|
|
4.7
|
|
10.6
|
|
8.3
|
Adjusted operating
income
|
$
|
207.9
|
|
$
|
137.3
|
|
$
|
402.5
|
|
$
|
275.1
|
% increase versus
year-ago period
|
51.4%
|
|
|
|
46.3%
|
|
|
Adjusted operating
income margin (1)
|
15.6%
|
|
12.3%
|
|
15.7%
|
|
12.7%
|
|
|
|
|
|
|
|
|
Income tax expense
(benefit)
|
$
|
33.1
|
|
$
|
27.3
|
|
$
|
(238.0)
|
|
$
|
60.6
|
Non-recurring
benefit, net, of the U.S. Tax Act (2)
|
—
|
|
—
|
|
297.9
|
|
—
|
Impact of transaction
and integration expenses
|
1.7
|
|
—
|
|
3.5
|
|
—
|
Impact of special
charges
|
1.9
|
|
1.3
|
|
2.5
|
|
2.4
|
Adjusted income
taxes
|
$
|
36.7
|
|
$
|
28.6
|
|
$
|
65.9
|
|
$
|
63.0
|
|
|
|
|
|
|
|
|
Net income
|
$
|
123.3
|
|
$
|
100.0
|
|
$
|
545.9
|
|
$
|
193.5
|
Impact of transaction
and integration expenses
|
6.1
|
|
—
|
|
13.0
|
|
—
|
Impact of special
charges
|
6.5
|
|
3.4
|
|
8.1
|
|
5.9
|
Non-recurring
benefit, net, of the U.S. Tax Act (2)
|
—
|
|
—
|
|
(297.9)
|
|
—
|
Adjusted net
income
|
$
|
135.9
|
|
$
|
103.4
|
|
$
|
269.1
|
|
$
|
199.4
|
% increase versus
year-ago period
|
31.4%
|
|
|
|
35.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share -
diluted
|
$
|
0.93
|
|
$
|
0.79
|
|
$
|
4.11
|
|
$
|
1.53
|
Impact of transaction
and integration expenses
|
0.04
|
|
—
|
|
0.10
|
|
—
|
Impact of special
charges
|
0.05
|
|
0.03
|
|
0.06
|
|
0.04
|
Non-recurring
benefit, net, of the U.S. Tax Act (2)
|
—
|
|
—
|
|
(2.24)
|
|
—
|
Adjusted earnings per
share - diluted
|
$
|
1.02
|
|
$
|
0.82
|
|
$
|
2.03
|
|
$
|
1.57
|
% increase versus
year-ago period
|
24.4%
|
|
|
|
29.3%
|
|
|
|
|
(1)
|
Adjusted operating
income margin is calculated as adjusted operating income as a
percentage of net sales for each
period presented.
|
|
|
|
(2)
|
The non-recurring
income tax benefit, net, associated with enactment of the U.S. Tax
Act of $297.9 million is based upon estimates and judgments that we
believe to be reasonable. That benefit is provisional and may
change during the measurement period as a result of among other
things, changes in interpretations and assumptions we have made,
guidance that may be issued and other actions we may take as a
result of the U.S. Tax Act different from that presently
assumed.
|
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
May 31, 2018
|
|
|
|
Percentage Change
as Reported
|
|
Impact of Foreign
Currency Exchange
|
|
Percentage Change
on Constant Currency
Basis
|
Net
sales
|
|
|
|
|
|
|
|
Consumer
segment
|
|
|
|
|
|
|
|
Americas
|
|
|
22.6%
|
|
0.4%
|
|
22.2%
|
EMEA
|
|
|
13.7%
|
|
12.2%
|
|
1.5%
|
Asia/Pacific
|
|
|
14.7%
|
|
7.7%
|
|
7.0%
|
Total consumer
segment
|
|
|
19.7%
|
|
3.8%
|
|
15.9%
|
Flavor solutions
segment
|
|
|
|
|
|
|
|
Americas
|
|
|
22.7%
|
|
0.7%
|
|
22.0%
|
EMEA
|
|
|
11.7%
|
|
9.0%
|
|
2.7%
|
Asia/Pacific
|
|
|
4.9%
|
|
6.6%
|
|
(1.7)%
|
Total flavor
solutions segment
|
|
|
18.3%
|
|
3.1%
|
|
15.2%
|
Total net
sales
|
|
|
19.1%
|
|
3.5%
|
|
15.6%
|
Adjusted operating
income
|
|
|
|
|
|
|
|
Consumer
segment
|
|
|
43.6%
|
|
4.0%
|
|
39.6%
|
Flavor
solutions segment
|
|
|
67.0%
|
|
3.2%
|
|
63.8%
|
Total adjusted
operating
income
|
|
|
51.4%
|
|
3.7%
|
|
47.7%
|
|
|
|
Six Months Ended May
31, 2018
|
|
|
|
Percentage Change
as Reported
|
|
Impact of Foreign
Currency Exchange
|
|
Percentage Change
on Constant Currency
Basis
|
Net
sales
|
|
|
|
|
|
|
|
Consumer
segment
|
|
|
|
|
|
|
|
Americas
|
|
|
22.4%
|
|
0.4%
|
|
22.0%
|
EMEA
|
|
|
13.9%
|
|
12.6%
|
|
1.3%
|
Asia/Pacific
|
|
|
13.2%
|
|
6.7%
|
|
6.5%
|
Total consumer
segment
|
|
|
19.1%
|
|
3.9%
|
|
15.2%
|
Flavor solutions
segment
|
|
|
|
|
|
|
|
Americas
|
|
|
20.9%
|
|
1.0%
|
|
19.9%
|
EMEA
|
|
|
16.1%
|
|
9.4%
|
|
6.7%
|
Asia/Pacific
|
|
|
7.7%
|
|
6.6%
|
|
1.1%
|
Total flavor
solutions segment
|
|
|
18.4%
|
|
3.4%
|
|
15.0%
|
Total net
sales
|
|
|
18.8%
|
|
3.7%
|
|
15.1%
|
Adjusted operating
income
|
|
|
|
|
|
|
|
Consumer
segment
|
|
|
39.2%
|
|
3.5%
|
|
35.7%
|
Flavor
solutions segment
|
|
|
62.0%
|
|
3.5%
|
|
58.5%
|
Total adjusted
operating
income
|
|
|
46.3%
|
|
3.5%
|
|
42.8%
|
To present the percentage change in projected 2018 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 2018 and are compared to the 2017 results,
translated into U.S. dollars using the same 2018 budgeted exchange
rate, rather than at the average actual exchange rates in effect
during fiscal year 2017. This calculation is performed to
arrive at adjusted net income divided by historical shares
outstanding for fiscal year 2017 or projected shares outstanding
for fiscal year 2018, as appropriate.
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
|
|
|
$6.85 to
$6.95
|
|
$
|
3.72
|
Impact of special
charges, transaction and
integration expenses, and other debt
costs
|
|
|
0.24
|
|
0.54
|
Estimated
non-recurring benefit, net, of U.S. Tax Act
|
|
|
(2.24)
|
|
—
|
Adjusted earnings per
share - diluted
|
|
|
$4.85 to
$4.95
|
|
$
|
4.26
|
|
|
|
|
|
|
Percentage change in
sales
|
|
|
13% to 15%
|
|
|
Impact of foreign
currency exchange rates
|
|
|
2%
|
|
|
Percentage change in
sales on constant currency basis
|
|
|
11% to 13%
|
|
|
|
|
|
|
|
|
Percentage change in
adjusted operating income
|
|
|
23% to 25%
|
|
|
Impact of foreign
currency exchange rates
|
|
|
1%
|
|
|
Percentage change in
adjusted operating income on
constant currency basis
|
|
|
22% to 24%
|
|
|
|
|
|
|
|
|
Percentage change in
adjusted earnings per share
|
|
|
14% to 16%
|
|
|
Impact of foreign
currency exchange rates
|
|
|
1%
|
|
|
Percentage change in
adjusted earnings per share
on constant currency basis
|
|
|
13% to 15%
|
|
|
|
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, acquisitions,
brand marketing support, transaction and integration expenses,
special charges, 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. 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 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 Act; 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; issues
affecting the company's supply chain and raw materials, including
fluctuations in the cost and availability of raw and packaging
materials and freight; 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 Act
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)
|
Second Quarter
Report
|
|
McCormick &
Company, Incorporated
|
|
|
|
|
|
|
|
|
|
Consolidated
Income Statement (Unaudited)
|
|
|
|
|
|
|
|
|
(In millions except
per-share data)
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Six months
ended
|
|
|
May 31,
2018
|
|
May 31,
2017
|
|
May 31,
2018
|
|
May 31,
2017
|
Net sales
|
|
$
|
1,327.3
|
|
$
|
1,114.3
|
|
$
|
2,564.4
|
|
$
|
2,158.0
|
Cost of goods
sold
|
|
752.1
|
|
669.7
|
|
1,469.2
|
|
1,300.4
|
Gross
profit
|
|
575.2
|
|
444.6
|
|
1,095.2
|
|
857.6
|
Gross profit
margin
|
|
43.3%
|
|
39.9%
|
|
42.7%
|
|
39.7%
|
Selling, general and
administrative expense
|
|
367.3
|
|
307.3
|
|
692.7
|
|
582.5
|
Transaction and
integration expenses
|
|
7.8
|
|
—
|
|
16.5
|
|
—
|
Special
charges
|
|
8.4
|
|
4.7
|
|
10.6
|
|
8.3
|
Operating
income
|
|
191.7
|
|
132.6
|
|
375.4
|
|
266.8
|
Interest
expense
|
|
44.2
|
|
14.9
|
|
86.0
|
|
29.4
|
Other income,
net
|
|
1.5
|
|
1.2
|
|
3.0
|
|
1.3
|
Income from
consolidated operations before
income taxes
|
|
149.0
|
|
118.9
|
|
292.4
|
|
238.7
|
Income tax expense
(benefit)
|
|
33.1
|
|
27.3
|
|
(238.0)
|
|
60.6
|
Net income from
consolidated operations
|
|
115.9
|
|
91.6
|
|
530.4
|
|
178.1
|
Income from
unconsolidated operations
|
|
7.4
|
|
8.4
|
|
15.5
|
|
15.4
|
Net income
|
|
$
|
123.3
|
|
$
|
100.0
|
|
$
|
545.9
|
|
$
|
193.5
|
|
|
|
|
|
|
|
|
|
Earnings per share -
basic
|
|
$
|
0.94
|
|
$
|
0.80
|
|
$
|
4.16
|
|
$
|
1.55
|
|
|
|
|
|
|
|
|
|
Earnings per share -
diluted
|
|
$
|
0.93
|
|
$
|
0.79
|
|
$
|
4.11
|
|
$
|
1.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shares
outstanding - basic
|
|
131.4
|
|
124.7
|
|
131.3
|
|
125.0
|
Average shares
outstanding - diluted
|
|
132.9
|
|
126.4
|
|
132.9
|
|
126.7
|
Second Quarter
Report
|
McCormick &
Company, Incorporated
|
|
|
|
|
|
Consolidated
Balance Sheet (Unaudited)
|
|
|
|
|
(In
millions)
|
|
|
|
|
|
|
May 31,
2018
|
|
May 31,
2017
|
Assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
202.6
|
|
$
|
130.0
|
Trade accounts
receivable, net
|
|
473.9
|
|
429.7
|
Inventories
|
|
797.6
|
|
779.8
|
Prepaid expenses and
other current assets
|
|
90.1
|
|
86.4
|
Total current
assets
|
|
1,564.2
|
|
1,425.9
|
Property, plant and
equipment, net
|
|
947.7
|
|
703.8
|
Goodwill
|
|
4,577.2
|
|
1,894.8
|
Intangible assets,
net
|
|
2,893.1
|
|
489.0
|
Investments and other
assets
|
|
401.6
|
|
358.6
|
Total
assets
|
|
$
|
10,383.8
|
|
$
|
4,872.1
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Short-term borrowings
and current portion of long-term debt
|
|
$
|
699.0
|
|
$
|
906.8
|
Trade accounts
payable
|
|
624.1
|
|
453.1
|
Other accrued
liabilities
|
|
523.6
|
|
441.5
|
Total current
liabilities
|
|
1,846.7
|
|
1,801.4
|
Long-term
debt
|
|
4,456.2
|
|
804.3
|
Deferred
taxes
|
|
659.9
|
|
126.4
|
Other long-term
liabilities
|
|
380.7
|
|
330.6
|
Total
liabilities
|
|
7,343.5
|
|
3,062.7
|
Shareholders'
equity
|
|
|
|
|
Common
stock
|
|
1,705.3
|
|
1,103.2
|
Retained
earnings
|
|
1,631.6
|
|
1,074.2
|
Accumulated other
comprehensive loss
|
|
(308.4)
|
|
(379.3)
|
Non-controlling
interests
|
|
11.8
|
|
11.3
|
Total shareholders'
equity
|
|
3,040.3
|
|
1,809.4
|
Total liabilities and
shareholders' equity
|
|
$
|
10,383.8
|
|
$
|
4,872.1
|
Second Quarter
Report
|
|
McCormick & Company, Incorporated
|
|
|
|
|
|
Consolidated Cash
Flow Statement (Unaudited)
|
|
|
|
|
(In
millions)
|
|
|
|
|
|
|
Six Months
Ended
|
|
|
May 31,
2018
|
|
May 31,
2017
|
Operating
activities
|
|
|
|
|
Net income
|
|
$
|
545.9
|
|
$
|
193.5
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
74.1
|
|
58.1
|
Stock based
compensation
|
|
16.1
|
|
14.4
|
Non-cash net income
tax benefit (related to enactment of the U.S. Tax Act)
|
|
(297.9)
|
|
—
|
Fixed asset
impairment charge
|
|
3.0
|
|
—
|
Income from
unconsolidated operations
|
|
(15.5)
|
|
(15.4)
|
Changes in operating
assets and liabilities
|
|
(103.4)
|
|
(85.1)
|
Dividends from
unconsolidated affiliates
|
|
12.6
|
|
11.7
|
Net cash flow
provided by operating activities
|
|
234.9
|
|
177.2
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
Acquisition of
businesses (net of cash acquired)
|
|
(4.2)
|
|
(124.0)
|
Capital
expenditures
|
|
(59.9)
|
|
(66.2)
|
Other investing
activities
|
|
0.9
|
|
0.4
|
Net cash flow used in
investing activities
|
|
(63.2)
|
|
(189.8)
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
Short-term
borrowings, net
|
|
367.8
|
|
264.0
|
Long-term debt
borrowings
|
|
13.5
|
|
—
|
Long-term debt
repayments
|
|
(389.2)
|
|
(3.6)
|
Proceeds from
exercised stock options
|
|
21.6
|
|
24.0
|
Taxes withheld and
paid on employee stock awards
|
|
(6.7)
|
|
(5.4)
|
Purchase of minority
interest
|
|
—
|
|
(1.2)
|
Common stock acquired
by purchase
|
|
(32.1)
|
|
(135.8)
|
Dividends
paid
|
|
(136.5)
|
|
(117.4)
|
Net cash flow (used
in) provided by financing activities
|
|
(161.6)
|
|
24.6
|
|
|
|
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
5.7
|
|
(0.4)
|
Increase in cash and
cash equivalents
|
|
15.8
|
|
11.6
|
Cash and cash
equivalents at beginning of period
|
|
186.8
|
|
118.4
|
|
|
|
|
|
Cash and cash
equivalents at end of period
|
|
$
|
202.6
|
|
$
|
130.0
|
View original
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SOURCE McCormick & Company, Incorporated