HUNT
VALLEY, Md., Oct. 6, 2022
/PRNewswire/ -- McCormick & Company, Incorporated (NYSE:MKC), a
global leader in flavor, today reported financial results for the
third quarter ended August 31, 2022
and reaffirmed its financial outlook for fiscal year 2022.
- Sales increased 3% in the third quarter from the year-ago
period. In constant currency, sales increased 6% driven by growth
in both the Consumer and Flavor Solutions segments. Both
comparisons include a 1% unfavorable impact from the divestiture of
the Company's Kitchen Basics business.
- Operating income was $235
million in the third quarter compared to $265 million in the year-ago period. Adjusted
operating income was $239 million
compared to $272 million in the third
quarter of 2021.
- Earnings per share was $0.82
in the third quarter as compared to $0.79 in the year-ago period. Adjusted earnings
per share was $0.69 as compared to
$0.80 in the year-ago period.
- For fiscal year 2022, McCormick reaffirmed its sales,
operating income, and earnings per share outlook.
Chairman and CEO's Remarks
Lawrence E. Kurzius, Chairman and
CEO, stated, "Our record third quarter sales performance reflects
the strength of our broad global portfolio and the effective
execution of our strategies against the backdrop of a volatile
operating environment. Our 6% constant currency sales growth was
led by continued momentum in our Flavor Solutions segment across
all three regions. The performance of our Consumer segment reflects
strong underlying growth tempered by the impacts of divesting our
Kitchen Basics business, exiting a low margin business in
India, and exiting our Consumer
business in Russia. We continue to
actively respond to changes in consumer behavior that are a result
of broad pressure on the cost of living from inflation. We are
confident our brand marketing investments, innovation and category
management initiatives will continue to drive growth.
"During the third quarter, supply chain challenges continued,
and recovery of certain constrained materials has taken
longer than expected. We continued to incur elevated costs to meet
high demand in some parts of our business, while in other parts of
our business, where demand has moderated, we are experiencing lower
operating leverage. Across the supply chain, we remain focused on
managing inventory levels and eliminating inefficiencies, though
the normalization of our supply chain costs is taking longer than
expected, pressuring gross margin. Over the coming months, we will
be aggressively eliminating supply chain inefficiencies.
Importantly, as we had expected in the third quarter, we began to
recover the cost inflation that had been outpacing our pricing
actions and other levers. We expect this will continue into next
year as we plan to fully offset inflation over time.
"We remain confident that the strength of our business model and
the value of our products and capabilities position us well for the
long-term and will allow us to successfully navigate this dynamic
global environment. We continue to capitalize on the long-term
consumer trends that have accelerated since the beginning of the
pandemic, including the sustained shift to cooking more at home,
increased digital engagement, clean and flavorful eating, and
trusted brands. Our alignment with these trends, in combination
with the breadth and reach of our portfolio and our strategic
investments provide a strong foundation for sustainable growth.
McCormick's long-term performance, including through the pandemic
and other periods of volatility, has been industry-leading. The
long-term fundamentals that have driven our historical performance
remain strong and our experienced leaders are executing on our
proven strategies while adapting to challenges accordingly.
"I want to recognize McCormick employees around the world as
they drive our momentum and success. With our vision to stand
together for flavor and our relentless focus on growth,
performance, and people, we are confident we will drive future
sustainable growth and build long-term value for our
shareholders."
Third Quarter 2022 Results
McCormick reported a 3% sales increase in the third quarter from
the year-ago period. In constant currency, sales grew 6%,
reflecting 10% growth from pricing actions partially offset by a 1%
decline from the Kitchen Basics divestiture, a 1% decline
attributable to the exits of a low margin business in India and the Consumer business in
Russia, and a 2% decline in all
other volume and product mix.
Third quarter sales grew at a constant currency three-year
compounded annual growth rate (CAGR) of 7% for the total Company
off of a pre-pandemic baseline of 2019. The three-year constant
currency CAGR's for the Consumer segment and the Flavor Solutions
segment were 6% and 8%, respectively, showing sustained momentum in
the business in both segments.
Higher cost inflation and other supply chain costs, partially
offset by pricing actions and cost savings led by the Company's
Comprehensive Continuous Improvement (CCI) program, resulted in a
decline in gross profit margin of 320 basis points. Operating
income was $235 million in the third
quarter of 2022 compared to $265
million in the third quarter of 2021. This decline was
driven by gross margin compression, primarily in the Company's
Flavor Solutions segment. Selling, general and administrative
expenses were comparable to the third quarter of last year with
higher distribution costs and brand marketing investments offset by
lower employee benefit expenses. Excluding special charges, as well
as transaction and integration expenses, adjusted operating income
was $239 million compared to
$272 million in the year-ago
period.
Earnings per share was $0.82 in
the third quarter of 2022 compared to $0.79 in the third quarter of 2021. The net
favorable impact of the gain on the sale of the Kitchen Basics
business and special charges increased earnings per share by
$0.13 in the third quarter of 2022.
Special charges and transaction and integration expenses lowered
earnings per share by $0.01 in the
third quarter of 2021. Excluding these impacts, adjusted earnings
per share was $0.69 in the third
quarter of 2022 compared to $0.80 in
the year-ago period. This decrease was driven by lower adjusted
operating income.
Year-to-date net cash provided by operating activities was
$250 million compared to $373 million through the third quarter of 2021.
The decrease was primarily due to lower net income and higher
inventory levels.
Fiscal Year 2022 Financial Outlook
For fiscal year 2022, McCormick reaffirmed its financial outlook
which was previously issued with the Company's preliminary third
quarter 2022 results on September 7,
2022.
The Company continues to expect foreign currency rates in 2022
to unfavorably impact net sales by 3% and unfavorably impact
adjusted operating income and adjusted earnings per share by
2%.
McCormick expects 2022 sales to range from comparable to 2021 to
an increase of 2%, which in constant currency is sales growth of 3%
to 5%. These comparisons include an unfavorable impact from the
divestiture of the Company's Kitchen Basics business. McCormick
expects sales growth to be driven by pricing actions, which, in
conjunction with cost savings, are expected to offset inflationary
pressures over time. McCormick also plans to drive continued growth
through the strength of its brands, as well as brand marketing, new
products, category management, and differentiated customer
engagement.
Operating income in 2022 is expected to decline 10% to 8% from
$1.02 billion in 2021. The Company
expects approximately $46 million of
special charges in 2022 that relate to previously approved
organization and streamlining actions as well as integration
expenses related to the FONA acquisition of approximately
$2 million in 2022. Excluding the
impact of special charges and transaction and integration expenses
in 2022 and 2021, the Company projects adjusted operating income to
decline 13% to 11%, or 11% to 9% in constant currency.
McCormick projects earnings per share to be in the range of
$2.64 to $2.69, compared to $2.80 in 2021. The Company expects the net
favorable impact of the gain on the sale of the Kitchen Basics
business, special charges and transaction and integration expenses
to increase earnings per share by approximately $0.01 in 2022. Excluding these impacts, the
Company projects 2022 adjusted earnings per share to be in the
range of $2.63 to $2.68 as compared to adjusted earnings per share
of $3.05 in 2021. This projection
includes a $0.02 unfavorable impact
from the divestiture of the Kitchen Basics business.
Business Segment Results
Consumer
Segment
|
(in
millions)
|
|
Three months
ended
|
|
Nine months
ended
|
|
|
8/31/2022
|
|
8/31/2021
|
|
8/31/2022
|
|
8/31/2021
|
Net sales
|
|
$
927.9
|
|
$
921.9
|
|
$ 2,720.1
|
|
$ 2,813.9
|
Operating income,
excluding special
charges, transaction and integration
expenses
|
|
183.7
|
|
187.8
|
|
475.5
|
|
554.5
|
Consumer segment sales increased 1% from the third quarter of
2021 and in constant currency increased 4%. Both comparisons
included a 1% unfavorable impact from the Kitchen Basics
divestiture. Growth was driven by the Americas and Asia/Pacific regions with pricing actions
increasing sales in all three regions.
- Consumer sales in the Americas increased 3% from the third
quarter of 2021 with minimal impact from currency. The increase was
driven by pricing actions partially offset by lower volume and
product mix, including a 1% decline from the Kitchen Basics
divestiture. In constant currency, third quarter sales have grown
at a 6% CAGR over the last three years.
- Consumer sales in Europe,
Middle East and Africa (EMEA) declined 13% compared to the
year-ago period. In constant currency, sales decreased 1% with
lower volume and product mix partially offset by pricing actions.
The sales decline includes a 3% unfavorable impact from lower sales
in Russia. Third quarter sales
have grown, in constant currency, at a 3% CAGR over the last three
years.
- Consumer sales in the Asia/Pacific region grew 5% compared to the
year-ago period. In constant currency, sales grew 10% attributable
to higher volume and product mix as well as pricing actions. The
exit of a lower margin business in India tempered third quarter growth by 7%. In
constant currency, third quarter sales have grown at a 4% CAGR over
the last three years.
Consumer segment operating income, excluding transaction and
integration expenses, as well as special charges, decreased 2% in
third quarter of 2022 compared to the year-ago period. In constant
currency, operating income declined 1%. Higher cost inflation and
brand marketing investments as well as the impact of lower volume
and operating leverage, was almost fully offset by pricing actions
and CCI-led cost savings.
Flavor Solutions
Segment
|
(in
millions)
|
|
Three months
ended
|
|
Nine months
ended
|
|
|
8/31/2022
|
|
8/31/2021
|
|
8/31/2022
|
|
8/31/2021
|
Net sales
|
|
$
667.7
|
|
$
627.5
|
|
$ 1,934.7
|
|
$ 1,773.7
|
Operating income,
excluding special
charges, transaction and integration
expenses
|
|
54.9
|
|
84.5
|
|
164.0
|
|
238.3
|
Flavor Solutions segment sales increased 6% from the third
quarter of 2021. In constant currency, the outstanding sales growth
of 10% was driven by all three regions. Pricing actions increased
sales in each region.
- In the Americas, Flavor Solutions sales rose 9% compared to the
third quarter of 2021. In constant currency, sales increased 10%
driven by continued high demand from packaged food and beverage
companies as well as higher sales to branded foodservice customers.
Third quarter sales have grown, in constant currency, at an 8% CAGR
over the last three years.
- The EMEA region's Flavor Solutions sales declined 1% compared
to the third quarter of 2021. In constant currency, sales increased
11% with strong growth to quick service restaurant, branded
foodservice, and packaged food and beverage company customers.
Lower sales in Russia tempered
growth by 1%. In constant currency, third quarter sales have grown
at a 9% CAGR over the last three years.
- The Asia/Pacific region's
Flavor Solutions sales increased 5% compared to the third quarter
of 2021. In constant currency, sales increased 11%. This increase
was driven by higher sales to quick service restaurants, partially
impacted by the timing of customers' promotional activities. Third
quarter sales have grown, in constant currency, at a 6% CAGR over
the last three years.
Flavor Solutions segment operating income, excluding transaction
and integration expenses, as well as special charges, was 35% lower
in the third quarter of 2022 compared to the year-ago period. In
constant currency, Flavor Solutions operating income declined 34%
driven by higher cost inflation, elevated costs to meet high
demand, unfavorable product mix and spending related to supply
chain investments. These impacts were partially offset by higher
sales, pricing actions, and CCI-led cost savings.
Non-GAAP Financial Measures
The tables below include financial measures of adjusted gross
profit, adjusted gross profit margin, adjusted operating income,
adjusted operating income margin, adjusted income tax expense,
adjusted income tax rate, adjusted net income and adjusted diluted
earnings per share. These represent non-GAAP financial measures
which are prepared as a complement to our financial results
prepared in accordance with United
States generally accepted accounting principles. These
financial measures exclude the impact, as applicable, of the
following:
Special charges – In our consolidated income statement, we
include a separate line item captioned "Special charges" in
arriving at our consolidated operating income. Special charges
consist of expenses and income associated with certain actions
undertaken by the Company to reduce fixed costs, simplify or
improve processes, and improve our competitiveness and are of such
significance in terms of both up-front costs and
organizational/structural impact to require advance approval by our
Management Committee. Upon presentation of any such proposed action
(generally including details with respect to estimated costs, which
typically 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
savings) 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. Special charges for the nine
months ended August 31, 2022 include
a $13.6 million gain associated with
the sale of the Kohinoor brand name. We exited our Kohinoor rice
product line in India in the
fourth quarter of fiscal 2021.
Transaction and integration expenses associated with the Cholula
and FONA acquisitions – We exclude certain costs associated with
our acquisitions of Cholula and FONA in November and December 2020, respectively, and their subsequent
integration into the Company. Such costs, which we refer to as
"Transaction and integration expenses", include transaction costs
associated with each acquisition, as well as integration costs
following the respective acquisition, including the impact of the
acquisition date fair value adjustment for inventories, together
with the impact of discrete tax items, if any, directly related to
each acquisition.
Income from sale of unconsolidated operations – We exclude the
gain realized upon our sale of an unconsolidated operation in
March 2021. The sale of our 26%
interest in Eastern Condiments Private Ltd resulted in a gain of
$13.4 million, net of tax of
$5.7 million. The gain is included in
Income from unconsolidated operations in our consolidated income
statement for the nine months ended August
31, 2021.
Gain on sale of Kitchen Basics - We exclude the gain realized
upon our sale of our Kitchen Basics business in August 2022. The pre-tax gain associated with the
sale was $49.6 million for the three
and nine months ended August 31,
2022.
We believe that these non-GAAP financial measures are important.
The exclusion of the items noted above provides additional
information that enables enhanced comparisons to prior periods and,
accordingly, facilitates the development of future projections and
earnings growth prospects. This information is also used by
management to measure the profitability of our ongoing operations
and analyze our business performance and trends.
These non-GAAP financial measures may be considered in addition
to results prepared in accordance with GAAP, but they should not be
considered a substitute for, or superior to, GAAP results. In
addition, these non-GAAP financial measures may not be comparable
to similarly titled measures of other companies because other
companies may not calculate them in the same manner that we do. We
intend to continue to provide these non-GAAP financial measures as
part of our future earnings discussions and, therefore, the
inclusion of these non-GAAP financial measures will provide
consistency in our financial reporting. A reconciliation of these
non-GAAP financial measures to the related GAAP financial measures
is provided below:
(in millions except per
share data)
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
8/31/2022
|
|
8/31/2021
|
|
8/31/2022
|
|
8/31/2021
|
Gross profit
|
$
566.7
|
|
$ 599.6
|
|
$
1,650.1
|
|
$
1,791.7
|
Impact of transaction
and integration expenses
included in cost of goods sold (1)
|
—
|
|
—
|
|
—
|
|
6.3
|
Adjusted gross
profit
|
$
566.7
|
|
$ 599.6
|
|
$
1,650.1
|
|
$
1,798.0
|
Adjusted gross profit
margin (3)
|
35.5 %
|
|
38.7 %
|
|
35.4 %
|
|
39.2 %
|
|
|
|
|
|
|
|
|
Operating
income
|
$
235.2
|
|
$ 265.2
|
|
$
599.3
|
|
$
738.9
|
Impact of transaction
and integration expenses
included in cost of goods sold (1)
|
—
|
|
—
|
|
—
|
|
6.3
|
Impact of other
transaction and integration expenses (1)
|
—
|
|
1.3
|
|
2.2
|
|
27.0
|
Impact of special
charges (2)
|
3.4
|
|
5.8
|
|
38.0
|
|
20.6
|
Adjusted operating
income
|
$
238.6
|
|
$ 272.3
|
|
$
639.5
|
|
$
792.8
|
% decrease versus
year-ago period
|
(12.4) %
|
|
|
|
(19.3) %
|
|
|
Adjusted operating
income margin (4)
|
15.0 %
|
|
17.6 %
|
|
13.7 %
|
|
17.3 %
|
|
|
|
|
|
|
|
|
Income tax
expense
|
$
59.3
|
|
$
31.5
|
|
$
115.4
|
|
$
135.5
|
Impact of transaction
and integration expenses (1)
|
—
|
|
1.2
|
|
0.6
|
|
(3.1)
|
Impact of special
charges (2)
|
0.7
|
|
1.4
|
|
10.7
|
|
4.9
|
Impact of sale of
Kitchen Basics
|
(11.6)
|
|
—
|
|
(11.6)
|
|
—
|
Adjusted income tax
expense
|
$
48.4
|
|
$
34.1
|
|
$
115.1
|
|
$
137.3
|
Adjusted income tax
rate (5)
|
21.2 %
|
|
14.1 %
|
|
20.0 %
|
|
19.6 %
|
|
|
|
|
|
|
|
|
Net income
|
$
222.9
|
|
$ 212.4
|
|
$
496.3
|
|
$
557.9
|
Impact of transaction
and integration expenses (1)
|
—
|
|
0.1
|
|
1.6
|
|
36.4
|
Impact of special
charges (2)
|
2.7
|
|
4.4
|
|
27.3
|
|
15.7
|
Impact of after-tax
gain on sale of Kitchen Basics
|
(38.0)
|
|
—
|
|
(38.0)
|
|
—
|
Impact of after-tax
gain on sale of unconsolidated
operation
|
—
|
|
—
|
|
—
|
|
(13.4)
|
Adjusted net
income
|
$
187.6
|
|
$ 216.9
|
|
$
487.2
|
|
$
596.6
|
% decrease versus
year-ago period
|
(13.5) %
|
|
|
|
(18.3) %
|
|
|
|
|
|
|
|
|
|
|
Earnings per share -
diluted
|
$
0.82
|
|
$
0.79
|
|
$
1.83
|
|
$
2.07
|
Impact of transaction
and integration expenses (1)
|
—
|
|
—
|
|
0.01
|
|
0.14
|
Impact of special
charges (2)
|
0.01
|
|
0.01
|
|
0.10
|
|
0.05
|
Impact of after-tax
gain on sale of Kitchen Basics
|
(0.14)
|
|
—
|
|
(0.14)
|
|
—
|
Impact of after-tax
gain on sale of unconsolidated
operation
|
—
|
|
—
|
|
—
|
|
(0.05)
|
Adjusted earnings per
share - diluted
|
$
0.69
|
|
$
0.80
|
|
$
1.80
|
|
$
2.21
|
% decrease versus
year-ago period
|
(13.8) %
|
|
|
|
(18.6) %
|
|
|
(1)
|
Transaction and
integration expenses include transaction and integration expenses
associated with our acquisitions of Cholula and FONA. These
expenses include the effect of the fair value adjustment to
acquired inventories on cost of goods sold and the impact of a
discrete deferred state income tax expense item, directly related
to our December 2020 acquisition of FONA. This discrete tax item
had a favorable impact of $1.0 million for the three months ended
August 31, 2021 and a net unfavorable impact of $10.4 million or
$0.04 per diluted share for the nine months ended August 31,
2021.
|
|
|
|
(2)
|
Special charges for the
nine months ended August 31, 2022 include a $10.0 million non-cash
intangible asset impairment charge associated with our exit of our
business operations in Russia. We exited our Kohinoor rice product
line in India in the fourth quarter of fiscal 2021. Special charges
for the nine months ended August 31, 2022 include a $13.6 million
gain associated with the sale of the Kohinoor brand
name.
|
|
|
|
(3)
|
Adjusted gross profit
margin is calculated as adjusted gross profit as a percentage of
net sales for each period presented.
|
|
|
|
(4)
|
Adjusted operating
income margin is calculated as adjusted operating income as a
percentage of net sales for each period presented.
|
|
|
|
(5)
|
Adjusted income tax
rate is calculated as adjusted income tax expense as a percentage
of income from consolidated operations before income taxes
excluding transaction and integration expenses and special charges,
and for 2022, the gain on a sale of a business, of $228.5 million
and $575.1 million for the three and nine months ended August 31,
2022, respectively, $241.9 million and $701.5 million for the three
and nine months ended August 31, 2021, 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 as
well as compounded annual growth rates (CAGR) expressed on a
constant currency basis are presented excluding the impact of
foreign currency exchange. To present this information for
historical periods, current period results for entities reporting
in currencies other than the U.S. dollar are translated into U.S.
dollars at the average exchange rates in effect during the
corresponding period of the comparative 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 comparative year.
Rates of constant currency growth (decline) follow:
|
|
|
Three Months Ended
August 31, 2022
|
|
|
|
Percentage Change
as Reported
|
|
Impact of Foreign
Currency Exchange
|
|
Percentage Change
on Constant Currency
Basis
|
Net
sales
|
|
|
|
|
|
|
|
Consumer
Segment
|
|
|
|
|
|
|
|
Americas
|
|
|
2.8 %
|
|
(0.3) %
|
|
3.1 %
|
EMEA
|
|
|
(12.7) %
|
|
(12.1) %
|
|
(0.6) %
|
Asia/Pacific
|
|
|
5.4 %
|
|
(4.7) %
|
|
10.1 %
|
Total Consumer
segment
|
|
|
0.7 %
|
|
(2.7) %
|
|
3.4 %
|
Flavor Solutions
Segment
|
|
|
|
|
|
|
|
Americas
|
|
|
9.2 %
|
|
(0.4) %
|
|
9.6 %
|
EMEA
|
|
|
(1.3) %
|
|
(12.5) %
|
|
11.2 %
|
Asia/Pacific
|
|
|
4.8 %
|
|
(6.3) %
|
|
11.1 %
|
Total Flavor Solutions
segment
|
|
|
6.4 %
|
|
(3.7) %
|
|
10.1 %
|
Total net
sales
|
|
|
3.0 %
|
|
(3.1) %
|
|
6.1 %
|
Adjusted operating
income
|
|
|
|
|
|
|
|
Consumer
segment
|
|
|
(2.2) %
|
|
(1.0) %
|
|
(1.2) %
|
Flavor
Solutions segment
|
|
|
(35.0) %
|
|
(1.3) %
|
|
(33.7) %
|
Total adjusted
operating income
|
|
|
(12.4) %
|
|
(1.1) %
|
|
(11.3) %
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
August 31, 2022
|
|
|
|
Percentage Change
as Reported
|
|
Impact of Foreign
Currency Exchange
|
|
Percentage Change
on Constant Currency
Basis
|
Net
sales
|
|
|
|
|
|
|
|
Consumer
Segment
|
|
|
|
|
|
|
|
Americas
|
|
|
0.2 %
|
|
(0.1) %
|
|
0.3 %
|
EMEA
|
|
|
(15.1) %
|
|
(7.7) %
|
|
(7.4) %
|
Asia/Pacific
|
|
|
(5.1) %
|
|
(0.8) %
|
|
(4.3) %
|
Total Consumer
segment
|
|
|
(3.3) %
|
|
(1.6) %
|
|
(1.7) %
|
Flavor Solutions
Segment
|
|
|
|
|
|
|
|
Americas
|
|
|
10.9 %
|
|
(0.2) %
|
|
11.1 %
|
EMEA
|
|
|
8.1 %
|
|
(9.6) %
|
|
17.7 %
|
Asia/Pacific
|
|
|
(0.2) %
|
|
(3.5) %
|
|
3.3 %
|
Total Flavor Solutions
segment
|
|
|
9.1 %
|
|
(2.5) %
|
|
11.6 %
|
Total net
sales
|
|
|
1.5 %
|
|
(2.0) %
|
|
3.5 %
|
Adjusted operating
income
|
|
|
|
|
|
|
|
Consumer
segment
|
|
|
(14.2) %
|
|
(0.7) %
|
|
(13.5) %
|
Flavor
Solutions segment
|
|
|
(31.2) %
|
|
(2.8) %
|
|
(28.4) %
|
Total adjusted
operating income
|
|
|
(19.3) %
|
|
(1.3) %
|
|
(18.0) %
|
|
|
|
Three Months Ended
August 31, 2022
|
|
|
|
Percentage Change
as Reported
|
|
Impact of Foreign
Currency Exchange
|
|
Percentage Change
on Constant Currency
Basis
|
3 Year CAGR - Net
sales
|
|
|
|
|
|
|
|
Consumer
Segment
|
|
|
|
|
|
|
|
Americas
|
|
|
6.4 %
|
|
— %
|
|
6.4 %
|
EMEA
|
|
|
0.3 %
|
|
(2.4) %
|
|
2.7 %
|
Asia/Pacific
|
|
|
5.0 %
|
|
0.8 %
|
|
4.2 %
|
Total Consumer
segment
|
|
|
5.3 %
|
|
(0.2) %
|
|
5.5 %
|
Flavor Solutions
Segment
|
|
|
|
|
|
|
|
Americas
|
|
|
7.9 %
|
|
— %
|
|
7.9 %
|
EMEA
|
|
|
7.8 %
|
|
(1.1) %
|
|
8.9 %
|
Asia/Pacific
|
|
|
6.0 %
|
|
(0.3) %
|
|
6.3 %
|
Total Flavor Solutions
segment
|
|
|
7.7 %
|
|
(0.3) %
|
|
8.0 %
|
Total 3 Year CAGR -
Net sales
|
|
|
6.3 %
|
|
(0.2) %
|
|
6.5 %
|
To present "constant currency" information for the fiscal year
2022 projection, projected sales and adjusted operating income for
entities reporting in currencies other than the U.S. dollar are
translated into U.S. dollars at the company's budgeted exchange
rates for 2022 and are compared to the 2021 results, translated
into U.S. dollars using the same 2022 budgeted exchange rates,
rather than at the average actual exchange rates in effect during
fiscal year 2021. To estimate the percentage change in adjusted
earnings per share on a constant currency basis, a similar
calculation is performed to arrive at adjusted net income divided
by historical shares outstanding for fiscal year 2021 or projected
shares outstanding for fiscal year 2022, as appropriate.
|
Projection for the Year
Ending November 30, 2022
|
Percentage change in
net sales
|
0% to 2%
|
Impact of unfavorable
foreign currency exchange
|
3 %
|
Percentage change in
net sales in constant currency
|
3% to 5%
|
|
|
Percentage change in
adjusted operating income
|
(13)% to
(11)%
|
Impact of unfavorable
foreign currency exchange
|
2 %
|
Percentage change in
adjusted operating income in constant currency
|
(11)% to
(9)%
|
The following provides a reconciliation of our estimated
earnings per share to adjusted earnings per share for 2022 and
actual results for 2021:
|
Twelve Months
Ended
|
|
2022
Projection
|
|
11/30/21
|
Earnings per share -
diluted
|
$2.64 to
$2.69
|
|
$
2.80
|
Impact of transaction
and integration expenses
|
0.01
|
|
0.14
|
Impact of special
charges
|
0.12
|
|
0.16
|
Impact of after-tax
gain on sale of Kitchen Basics
|
(0.14)
|
|
—
|
Impact of sale of
unconsolidated operation
|
—
|
|
(0.05)
|
Adjusted earnings per
share - diluted
|
$2.63 to
$2.68
|
|
$
3.05
|
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 margin, earnings, cost savings, transaction and
integration expenses, special charges, acquisitions, brand
marketing support, volume and product mix, income tax expense and
the impact of foreign currency rates are "forward-looking
statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended. These statements may be
identified by the use of words such as "may," "will," "expect,"
"should," "anticipate," "intend," "believe" and "plan." These
statements may relate to: the impact of the COVID-19 pandemic on
our business, suppliers, consumers, customers, and employees;
disruptions or inefficiencies in the supply chain, including any
impact of COVID-19; the expected results of operations of
businesses acquired by the company, including the acquisitions of
Cholula and FONA; the expected impact of the inflationary cost
environment, including commodity, packaging materials and
transportation costs on our business; the expected impact of
pricing actions on the company's results of operations and gross
margins; the impact of price elasticity on our sales volume and
mix; the expected impact of factors affecting our supply chain,
including transportation capacity, labor shortages, and
absenteeism; the expected impact of productivity improvements,
including those associated with our Comprehensive Continuous
Improvement (CCI) program and global enablement initiative; the
impact of the Russia-Ukraine conflict, including the potential for
broader economic disruption; expected working capital improvements;
expectations regarding growth potential in various geographies and
markets, including the impact from customer, channel, category, and
e-commerce expansion; expected trends in net sales and earnings
performance and other financial measures; the expected timing and
costs of implementing our business transformation initiative, which
includes the implementation of a global enterprise resource
planning (ERP) system; the expected impact of accounting
pronouncements; the expectations of pension and postretirement plan
contributions and anticipated charges associated with those plans;
the holding period and market risks associated with financial
instruments; the impact of foreign exchange fluctuations; the
adequacy of internally generated funds and existing sources of
liquidity, such as the availability of bank financing; the
anticipated sufficiency of future cash flows to enable the payments
of interest and repayment of short- and long-term debt, working
capital needs, planned capital expenditures, as well as quarterly
dividends and the ability to obtain additional short- and long-term
financing or issue additional debt securities; and expectations
regarding purchasing shares of McCormick's common stock under the
existing repurchase authorization.
These and other forward-looking statements are based on
management's current views and assumptions and involve risks and
uncertainties that could significantly affect expected results.
Results may be materially affected by factors such as: the
company's ability to drive revenue growth; the company's ability to
increase pricing to offset, or partially offset, inflationary
pressures on the cost of our products; damage to the company's
reputation or brand name; loss of brand relevance; increased
private label use; the company's ability to drive productivity
improvements, including those related to our CCI program; product
quality, labeling, or safety concerns; negative publicity about our
products; actions by, and the financial condition of, competitors
and customers; the longevity of mutually beneficial relationships
with our large customers; the ability to identify, interpret and
react to changes in consumer preference and demand; business
interruptions due to natural disasters, unexpected events or public
health crises, including COVID-19; issues affecting the company's
supply chain and procurement of raw materials, including
fluctuations in the cost and availability of raw and packaging
materials; labor shortage, turnover and labor cost increases; the
impact of the Russia-Ukraine conflict, including the potential for
broader economic disruption; government regulation, and changes in
legal and regulatory requirements and enforcement practices; the
lack of successful acquisition and integration of new businesses;
global economic and financial conditions generally, availability of
financing, interest and inflation rates, and the imposition of
tariffs, quotas, trade barriers and other similar restrictions;
foreign currency fluctuations; the effects of increased level of
debt service following the Cholula and FONA acquisitions as well as
the effects that such increased debt service may have on the
company's ability to borrow or the cost of any such additional
borrowing, our credit rating, and our ability to react to certain
economic and industry conditions; risks associated with the
phase-out of LIBOR; impairments of indefinite-lived intangible
assets; assumptions we have made regarding the investment return on
retirement plan assets, and the costs associated with pension
obligations; the stability of credit and capital markets; risks
associated with the company's information technology systems,
including the threat of data breaches and cyber-attacks; the
company's inability to successfully implement our business
transformation initiative; fundamental changes in tax laws;
including interpretations and assumptions we have made, and
guidance that may be issued, and volatility in our effective tax
rate; climate change; Environmental, Social and Governance (ESG)
matters; infringement of intellectual property rights, and those of
customers; litigation, legal and administrative proceedings; the
company's inability to achieve expected and/or needed cost savings
or margin improvements; negative employee relations; and other
risks described in the company's filings with the Securities and
Exchange Commission.
Actual results could differ materially from those projected in
the forward-looking statements. The company undertakes no
obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events
or otherwise, except as may be required by law.
About McCormick
McCormick & Company, Incorporated is a global leader in
flavor. With over $6 billion in
annual sales across 170 countries and territories, we manufacture,
market and distribute spices, seasoning mixes, condiments and other
flavorful products to the entire food industry including e-commerce
channels, grocery, food manufacturers and foodservice businesses.
Our most popular brands with trademark registrations include
McCormick, French's, Frank's RedHot, Stubb's, OLD BAY, Lawry's,
Zatarain's, Ducros, Vahiné, Cholula, Schwartz, Kamis, DaQiao, Club
House, Aeroplane and Gourmet Garden. Every day, no matter where or
what you eat or drink, you can enjoy food flavored by
McCormick.
Founded in 1889 and headquartered in Hunt Valley, Maryland USA, McCormick is guided
by our principles and committed to our Purpose – To Stand Together
for the Future of Flavor. McCormick envisions A World United by
Flavor where healthy, sustainable and delicious go hand in hand. To
learn more, visit www.mccormickcorporation.com or follow McCormick
& Company on Twitter, Instagram and LinkedIn.
For information contact:
Investor Relations:
Kasey Jenkins -
kasey_jenkins@mccormick.com
Corporate Communications:
Lori Robinson -
lori_robinson@mccormick.com
(Financial tables follow)
Third Quarter
Report
|
|
McCormick &
Company, Incorporated
|
|
|
|
|
|
|
|
|
|
Consolidated Income
Statement (Unaudited)
|
|
|
|
|
|
|
|
|
(In millions except
per-share data)
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Nine months
ended
|
|
|
August 31,
2022
|
|
August 31,
2021
|
|
August 31,
2022
|
|
August 31,
2021
|
Net sales
|
|
$
1,595.6
|
|
$
1,549.4
|
|
$
4,654.8
|
|
$
4,587.6
|
Cost of goods
sold
|
|
1,028.9
|
|
949.8
|
|
3,004.7
|
|
2,795.9
|
Gross profit
|
|
566.7
|
|
599.6
|
|
1,650.1
|
|
1,791.7
|
Gross profit
margin
|
|
35.5 %
|
|
38.7 %
|
|
35.4 %
|
|
39.1 %
|
Selling, general and
administrative expense
|
|
328.1
|
|
327.3
|
|
1,010.6
|
|
1,005.2
|
Transaction and
integration expenses
|
|
—
|
|
1.3
|
|
2.2
|
|
27.0
|
Special
charges
|
|
3.4
|
|
5.8
|
|
38.0
|
|
20.6
|
Operating
income
|
|
235.2
|
|
265.2
|
|
599.3
|
|
738.9
|
Interest
expense
|
|
37.9
|
|
33.9
|
|
104.7
|
|
103.3
|
Other income,
net
|
|
77.4
|
|
3.5
|
|
89.9
|
|
12.0
|
Income from
consolidated operations
before income taxes
|
|
274.7
|
|
234.8
|
|
584.5
|
|
647.6
|
Income tax
expense
|
|
59.3
|
|
31.5
|
|
115.4
|
|
135.5
|
Net income from
consolidated operations
|
|
215.4
|
|
203.3
|
|
469.1
|
|
512.1
|
Income from
unconsolidated operations
|
|
7.5
|
|
9.1
|
|
27.2
|
|
45.8
|
Net income
|
|
$
222.9
|
|
$
212.4
|
|
$
496.3
|
|
$
557.9
|
|
|
|
|
|
|
|
|
|
Earnings per share -
basic
|
|
$
0.83
|
|
$
0.79
|
|
$
1.85
|
|
$
2.09
|
|
|
|
|
|
|
|
|
|
Earnings per share -
diluted
|
|
$
0.82
|
|
$
0.79
|
|
$
1.83
|
|
$
2.07
|
|
|
|
|
|
|
|
|
|
Average shares
outstanding - basic
|
|
268.3
|
|
267.4
|
|
268.1
|
|
$
267.2
|
Average shares
outstanding - diluted
|
|
270.2
|
|
270.0
|
|
270.4
|
|
270.0
|
Third Quarter
Report
|
McCormick &
Company, Incorporated
|
|
|
|
|
|
Consolidated Balance
Sheet (Unaudited)
|
|
|
|
|
(In
millions)
|
|
|
|
|
|
|
August 31,
2022
|
|
November 30,
2021
|
Assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
343.9
|
|
$
351.7
|
Trade accounts
receivable, net
|
|
565.8
|
|
549.5
|
Inventories
|
|
1,379.5
|
|
1,182.3
|
Prepaid expenses and
other current assets
|
|
123.6
|
|
112.3
|
Total current
assets
|
|
2,412.8
|
|
2,195.8
|
Property, plant and
equipment, net
|
|
1,139.1
|
|
1,140.3
|
Goodwill
|
|
5,209.7
|
|
5,335.8
|
Intangible assets,
net
|
|
3,396.6
|
|
3,452.5
|
Investments and other
assets
|
|
782.8
|
|
781.4
|
Total
assets
|
|
$
12,941.0
|
|
$
12,905.8
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Short-term borrowings
and current portion of long-term debt
|
|
$
1,457.0
|
|
$
1,309.4
|
Trade accounts
payable
|
|
1,143.5
|
|
1,064.2
|
Other accrued
liabilities
|
|
539.9
|
|
850.2
|
Total current
liabilities
|
|
3,140.4
|
|
3,223.8
|
Long-term
debt
|
|
3,904.8
|
|
3,973.3
|
Deferred
taxes
|
|
816.3
|
|
792.3
|
Other long-term
liabilities
|
|
472.8
|
|
490.9
|
Total
liabilities
|
|
8,334.3
|
|
8,480.3
|
Shareholders'
equity
|
|
|
|
|
Common stock
|
|
2,130.9
|
|
2,055.1
|
Retained
earnings
|
|
3,048.4
|
|
2,782.4
|
Accumulated other
comprehensive loss
|
|
(590.0)
|
|
(426.5)
|
Total McCormick
shareholders' equity
|
|
4,589.3
|
|
4,411.0
|
Non-controlling
interests
|
|
17.4
|
|
14.5
|
Total shareholders'
equity
|
|
4,606.7
|
|
4,425.5
|
Total liabilities and
shareholders' equity
|
|
$
12,941.0
|
|
$
12,905.8
|
Third Quarter
Report
|
|
McCormick & Company, Incorporated
|
|
|
|
|
|
Consolidated Cash
Flow Statement (Unaudited)
|
|
|
|
|
(In
millions)
|
|
|
|
|
|
|
Nine Months
Ended
|
|
|
August 31,
2022
|
|
August 31,
2021
|
Operating
activities
|
|
|
|
|
Net income
|
|
$
496.3
|
|
$
557.9
|
Adjustments to
reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
Depreciation and
amortization
|
|
148.2
|
|
139.1
|
Stock-based
compensation
|
|
49.1
|
|
54.2
|
Gain on sale of
intangible asset
|
|
(13.6)
|
|
—
|
Gain on sale of a
business
|
|
(49.6)
|
|
—
|
Amortization of
inventory fair value adjustments associated
with acquisitions
|
|
—
|
|
6.3
|
Asset impairment
charge
|
|
10.0
|
|
6.5
|
Income from
unconsolidated operations
|
|
(27.2)
|
|
(45.8)
|
Changes in operating
assets and liabilities (net of businesses
acquired and disposed)
|
|
|
|
|
Trade accounts
receivable
|
|
(43.6)
|
|
1.3
|
Inventories
|
|
(238.5)
|
|
(156.5)
|
Trade accounts
payable
|
|
100.8
|
|
(16.7)
|
Other assets and
liabilities
|
|
(209.6)
|
|
(195.2)
|
Dividends from
unconsolidated affiliates
|
|
27.8
|
|
21.8
|
Net cash flow provided
by operating activities
|
|
250.1
|
|
372.9
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
Acquisition of
businesses (net of cash acquired)
|
|
—
|
|
(706.4)
|
Proceeds from sale of a
business
|
|
95.2
|
|
—
|
Proceeds from sale of
unconsolidated operations
|
|
—
|
|
65.4
|
Proceeds from sale of
intangible asset
|
|
13.6
|
|
—
|
Capital expenditures
(including software)
|
|
(166.8)
|
|
(189.9)
|
Other investing
activities
|
|
2.5
|
|
0.3
|
Net cash flow used in
investing activities
|
|
(55.5)
|
|
(830.6)
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
Short-term borrowings,
net
|
|
898.1
|
|
(118.9)
|
Long-term debt
borrowings
|
|
—
|
|
1,001.5
|
Payment of debt
issuance costs
|
|
—
|
|
(1.9)
|
Long-term debt
repayments
|
|
(768.7)
|
|
(255.3)
|
Proceeds from exercised
stock options
|
|
39.9
|
|
10.5
|
Taxes withheld and paid
on employee stock awards
|
|
(19.4)
|
|
(13.3)
|
Common stock acquired
by purchase
|
|
(26.1)
|
|
(3.2)
|
Dividends
paid
|
|
(297.5)
|
|
(272.4)
|
Net cash flow (used
in) provided by financing activities
|
|
(173.7)
|
|
347.0
|
|
|
|
|
|
Effect of exchange rate
changes on cash and cash equivalents
|
|
(28.7)
|
|
(0.3)
|
Decrease in cash and
cash equivalents
|
|
(7.8)
|
|
(111.0)
|
Cash and cash
equivalents at beginning of period
|
|
351.7
|
|
423.6
|
|
|
|
|
|
Cash and cash
equivalents at end of period
|
|
$
343.9
|
|
$
312.6
|
View original
content:https://www.prnewswire.com/news-releases/mccormick-reports-third-quarter-performance-and-reaffirms-2022-outlook-301642471.html
SOURCE McCormick & Company, Incorporated