HUNT VALLEY, Md., July 1, 2021 /PRNewswire/
-- McCormick & Company, Incorporated (NYSE:MKC), a
global leader in flavor, today reported financial results for the
second quarter ended May 31,
2021.
- Sales rose 11% in the second quarter from the year-ago period.
In constant currency, the Company grew sales 8%.
- Operating income was $237 million
in the second quarter compared to $257
million in the year-ago period. Adjusted operating income
was $258 million compared to
$260 million in the second quarter of
2020.
- Earnings per share was $0.68 in
the second quarter as compared to $0.73 in the year-ago period. Adjusted earnings
per share was $0.69 compared to
$0.74 in the year-ago period
reflecting a higher adjusted income tax rate versus the second
quarter of 2020.
- For fiscal year 2021, McCormick increased its sales outlook to
expected growth of 11% to 13%, or 8% to 10% in constant currency,
and also raised its operating profit and earnings per share growth
outlook.
Chairman, President & CEO's Remarks
Lawrence E. Kurzius, Chairman,
President and CEO, stated, "The combination of McCormick's broad
and advantaged portfolio, the acceleration of consumer trends which
our strategies capitalize on and our two recent acquisitions, as
well as the effective execution of our strategies and engagement of
our employees have positioned us well to drive differentiated
growth, even when lapping challenging year-over-year comparisons.
We grew sales 11% in the second quarter and, notably, on a two-year
basis, sales and adjusted operating income grew 20%, which reflects
our robust growth momentum.
"Our second quarter results were strong compared to our
exceptional 2020 second quarter performance. Last year, our
Consumer segment demand was driven by a surge of consumers cooking
more at home at the onset of the pandemic, while our Flavor
Solutions demand was impacted by the substantial decline in
away-from-home consumption. Our results reflect cycling these
comparisons as well as a sustained shift to consumer at-home
consumption higher than pre-pandemic levels and the strong recovery
of demand from away-from-home customers. Taken together, these
impacts continue to demonstrate the strength and diversity of our
offering and we are confident our balanced and diverse portfolio
will continue to differentiate McCormick and sustainably position
us for long-term growth.
"Our focus on long-term sustainable growth and propelling our
business forward is the foundation of our future. We are
capitalizing on accelerating consumer trends, particularly the
sustained shift to cooking more at home, increased digital
engagement, clean and flavorful eating, and trusted brands, which
we are confident will continue to persist even beyond the pandemic.
The investments we have made, including in our supply chain
resiliency and brand marketing, provide a foundation for growth
while enhancing our agility and our relevance with our consumers
and customers. With our strong year-to-date results and robust
operating momentum, we are entering the second half of our year
well positioned to deliver another year of differentiated growth in
2021. Our fundamentals, momentum and growth outlook are stronger
than ever.
"I want to recognize McCormick employees around the world as the
collective power of our people drives our momentum and our success.
With our vision to stand together for flavor and our relentless
focus on growth, performance and people, we are confident our
strategies will enable us to become even better positioned to drive
future growth and build long-term value for our shareholders."
Second Quarter 2021 Results
McCormick reported an 11% sales increase in the second quarter
from the year-ago period, including a 3% favorable impact from
currency. Sales from Cholula and FONA, acquired in November 2020 and December
2020, respectively, added 5% to the sales increase. Flavor
Solutions segment sales increased 39%, or 34% in constant currency,
driven by higher sales of away-from-home products, incremental
sales from acquisitions, as well as growth with packaged food and
beverage companies. Consumer segment sales declined 2%, including a
3% favorable impact from currency against a strong comparison of
26% growth in the second quarter of 2020. Despite the difficult
year-over-year comparison, Consumer segment sales reflect the
sustained shift to consumers cooking more at home, fueled by the
Company's brand marketing, strong digital engagement and new
products, as well as acquisition growth.
Gross profit margin declined 190 basis points versus the
year-ago period driven by unfavorable product mix and higher cost
inflation, partially offset by cost savings led by the Company's
Comprehensive Continuous Improvement (CCI) program. Operating
income was $237 million in the second
quarter of 2021 compared to $257
million in the year-ago period. This decline included
$7 million of transaction expenses
related to the acquisitions of Cholula and FONA as well as
$14 million of special charges versus
$3 million in the second quarter of
last year. Excluding transaction and integration expenses as well
as special charges, adjusted operating income declined 1% to
$258 million in the second quarter
compared to $260 million in the
year-ago period, or a 4% decline in constant currency. The
favorable impact of higher sales and CCI-led cost savings was more
than offset by gross margin compression and higher planned brand
marketing investments.
Earnings per share was $0.68 in
the second quarter of 2021 compared to $0.73 in the second quarter of 2020. The net
impact of the gain on the sale of the Company's minority stake in
Eastern Condiments Private Ltd (Eastern), transaction and
integration expenses, and special charges lowered earnings per
share by $0.01 in the second quarter
of 2021. Special charges lowered earnings per share by $0.01 in the second quarter of 2020. Excluding
these impacts, adjusted earnings per share was $0.69 in the second quarter of 2021 compared to
$0.74 in the year-ago period. This 7%
decrease in adjusted earnings per share was driven primarily by a
higher adjusted income tax rate.
Year-to-date net cash provided by operating activities was
$229 million compared to $356 million through the second quarter of 2020.
The decrease was primarily due to the timing associated with
working capital payments, including transaction and integration
expenses.
Fiscal Year 2021 Financial Outlook
McCormick is capitalizing on the sustained shift to cooking more
at home and the growing consumer interests in clean and flavorful
eating, increased digital engagement, trusted brands and
purpose-minded practices. These long-term trends have accelerated
during the COVID-19 pandemic and are expected to persist beyond the
pandemic. The Company expects the shift in consumer demand to
at-home consumption to be sustained at higher than pre-pandemic
levels, as well as a gradual recovery in the demand from restaurant
and other foodservice customers which have been impacted by the
curtailment of away-from-home dining. McCormick is well positioned
for continued growth through the combination of its alignment with
these consumer trends, the breadth and reach of its flavor
portfolio and its effective growth strategies.
For the fiscal year 2021, McCormick increased its financial
outlook for sales, adjusted operating income and adjusted earnings
per share based on the Company's strong year-to-date performance
and robust operating momentum. The Company now expects a
three-percentage point favorable impact from currency rates on
sales and reaffirms the two-percentage point favorable impact from
currency on adjusted operating income and adjusted earnings per
share.
In 2021, the Company expects to grow sales by 11% to 13%
compared to 2020, which in constant currency is 8% to 10% and
includes the incremental impact of the Cholula and FONA
acquisitions. This is an increase from the Company's previous
projection of 8% to 10%, or 6% to 8% in constant currency.
McCormick expects to drive organic sales growth in both its
Consumer and Flavor Solutions segments in 2021 driven by brand
marketing, new products, category management and differentiated
customer engagement. Sales growth is also expected to include the
impact of pricing actions taken to partially offset an anticipated
mid-single digit increase in costs, previously estimated to be a
low-single digit increase.
Operating income in 2021 is expected to grow by 6% to 8% from
$1.0 billion in 2020. The Company
anticipates transaction and integration expenses related to the
Cholula and FONA acquisitions of approximately $42 million in 2021. In addition, McCormick
currently expects approximately $21
million of special charges in 2021 that relate to previously
announced organization and streamlining actions. Excluding the
impact of transaction and integration expenses as well as special
charges in 2021 and 2020, adjusted operating income is expected to
grow by 10% to 12%, which in constant currency is 8% to 10%. This
is an increase from the Company's previous projection of 9% to 11%,
or 7% to 9% in constant currency. This expected growth range
includes strong base business growth and acquisition contribution
partially offset by a 4% impact from incremental 2021 business
transformation and first-half volume driven COVID-19 expenses.
McCormick increased its projected 2021 earnings per share to be
in the range of $2.83 to $2.88, compared to $2.78 of earnings per share in 2020. The Company
expects the net impact of the transaction and integration expenses,
including an unfavorable income tax expense impact from a discrete
item related to the acquisition of FONA, as well as special charges
and the gain on the sale of the Company's minority stake in Eastern
to lower earnings per share by $0.17
in 2021. Excluding these impacts, the Company projects 2021
adjusted earnings per share to be in the range of $3.00 to $3.05.
This is an increase from previously reported guidance of
$2.97 to $3.02, and, as compared to $2.83 of adjusted earnings per share in 2020,
represents an expected increase of 6% to 8%, which includes a
favorable impact from currency. This reflects strong base business
growth and acquisition contribution, partially offset by a 4%
impact from incremental 2021 business transformation and COVID-19
expenses and a 4% headwind from an anticipated increase in the
projected adjusted effective tax rate to approximately 23%.
For fiscal year 2021, 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
|
|
|
5/31/2021
|
|
5/31/2020
|
|
5/31/2021
|
|
5/31/2020
|
Net sales
|
|
$
|
945.2
|
|
|
$
|
962.6
|
|
|
$
|
1,892.0
|
|
|
$
|
1,662.1
|
|
Operating income,
excluding special
charges, transaction and
integration
expenses
|
|
176.8
|
|
|
231.6
|
|
|
366.7
|
|
|
351.2
|
|
The Consumer segment sales declined 2% from the second quarter
of 2020, which includes a 2% increase from the Cholula acquisition.
In constant currency, sales declined 5%, due to the exceptionally
high demand for McCormick products in the year-ago period driven by
the surge of consumers cooking more at home at the onset of the
COVID-19 pandemic.
- Consumer sales in the Americas decreased 6% compared to the
second quarter of 2020, including a 3% increase from the Cholula
acquisition. In constant currency, sales decreased 7% due to
lapping the surge in demand in the year-ago period.
- Consumer sales in Europe,
Middle East and Africa (EMEA) rose 4% compared to the year-ago
period, including an 8% favorable impact from currency. In constant
currency, sales declined 4% due to the exceptionally high demand in
the year-ago period.
- Consumer sales in the Asia/Pacific region increased 26% compared to
the year-ago period. In constant currency, sales increased 15%
driven by the products related to away-from-home consumption in
McCormick's portfolio, mainly due to the recovery from the extended
lockdown in China's Hubei province in the year-ago period.
Partially offsetting this increase were declines of cooking at-home
products across the region due to elevated demand in the year-ago
period.
Consumer segment operating income, excluding transaction and
integration expenses, as well as special charges, decreased 24% to
$177 million for the second quarter
of 2021 compared to $232 million in
the year-ago period. In constant currency, Consumer operating
income decreased 26%. The decline was driven by lower sales, higher
cost inflation and a 16% increase in brand marketing, partially
offset by favorable product mix and CCI-led cost savings.
Additionally, the Consumer segment's operating income margin had a
significant unfavorable impact from the deleveraging of fixed costs
resulting from lower sales.
Flavor Solutions Segment
(in
millions)
|
|
Three months
ended
|
|
Six months
ended
|
|
|
5/31/2021
|
|
5/31/2020
|
|
5/31/2021
|
|
5/31/2020
|
Net sales
|
|
$
|
611.5
|
|
|
$
|
438.5
|
|
|
$
|
1,146.2
|
|
|
$
|
951.0
|
|
Operating income,
excluding special
charges, transaction and
integration
expenses
|
|
81.2
|
|
|
28.7
|
|
|
153.8
|
|
|
104.3
|
|
Flavor Solutions segment sales increased 39% in the second
quarter, with the FONA and Cholula acquisitions contributing 9% to
that increase. In constant currency, sales increased 35% driven
primarily by higher sales to our restaurant and other foodservice
customers as away-from-home dining was significantly curtailed in
the year-ago period.
- In the Americas, Flavor Solutions sales rose 32% compared to
the second quarter of 2020, with the FONA and Cholula acquisitions
contributing 13% to that increase. In constant currency, sales
increased 30% from the year-ago period driven by higher sales to
branded foodservice customers as well as continued growth with
packaged food and beverage companies.
- The EMEA region's Flavor Solutions sales increased 78% compared
to the second quarter of 2020, and in constant currency grew 65%.
Higher sales to quick service restaurants and branded foodservice
customers combined with strong growth with packaged food companies
drove the increase.
- The Asia/Pacific region's
Flavor Solutions sales grew 36% compared to the second quarter of
2020. In constant currency, sales increased 23%. This increase was
led by growth with quick service restaurants in addition to
recovery from COVID-19 related lockdowns in the year-ago
period.
Flavor solutions segment operating income, excluding transaction
and integration expenses, as well as special charges, increased
183% to $81 million for the second
quarter of 2021 compared to $29
million in the year-ago period. In constant currency, Flavor
Solutions operating income increased 175%. Higher sales, favorable
product mix and CCI-led cost savings more than offset higher cost
inflation. Additionally, the leverage of fixed costs resulting from
higher sales also had a significant favorable impact on Flavor
Solutions segment's operating income margin.
Non-GAAP Financial Measures
The tables below include financial measures of adjusted gross
profit, adjusted gross profit margin, adjusted operating income,
adjusted operating income margin, adjusted income tax expense,
adjusted income tax rate, adjusted net income and adjusted diluted
earnings per share. These represent non-GAAP financial measures
which are prepared as a complement to our financial results
prepared in accordance with United
States generally accepted accounting principles. These
financial measures exclude the impact, as applicable, of the
following:
Special charges - In our consolidated income statement, we
include a separate line item captioned "Special charges" in
arriving at our consolidated operating income. Special charges
consist of expenses associated with certain actions undertaken by
the company to reduce fixed costs, simplify or improve processes,
and improve our competitiveness and are of such significance in
terms of both up-front costs and organizational/structural impact
to require advance approval by our Management Committee. Upon
presentation of any such proposed action (including details with
respect to estimated costs, expected benefits and expected timing)
to the Management Committee and the Committee's advance approval,
expenses associated with the approved action are classified as
special charges upon recognition and monitored on an on-going basis
through completion.
Transaction and integration expenses associated with the Cholula
and FONA acquisitions – We exclude certain costs associated with
our acquisitions of Cholula and FONA in November and December 2020, respectively, and their subsequent
integration into the Company. Such costs, which we refer to as
"Transaction and integration expenses", include transaction costs
associated with the acquisition, as well as integration costs
following the acquisition, including the impact of any acquisition
date fair value adjustment for inventory, together with the impact
of discrete tax items, if any, directly related to each
acquisition.
Income from sale of unconsolidated operations – We exclude the
gain realized with our sale of an unconsolidated operation in
March 2021 that occurred during the
second quarter of fiscal 2021. The sale of our 26% interest in
Eastern Condiments Private Ltd resulted in a gain of $13.4 million, net of tax of $5.7 million. The gain is included in Income from
unconsolidated operations in our consolidated income statement.
We believe that these non-GAAP financial measures are important.
The exclusion of the items noted above provides additional
information that enables enhanced comparisons to prior periods and,
accordingly, facilitates the development of future projections and
earnings growth prospects. This information is also used by
management to measure the profitability of our ongoing operations
and analyze our business performance and trends.
These non-GAAP financial measures may be considered in addition
to results prepared in accordance with GAAP, but they should not be
considered a substitute for, or superior to, GAAP results. In
addition, these non-GAAP financial measures may not be comparable
to similarly titled measures of other companies because other
companies may not calculate them in the same manner that we do. We
intend to continue to provide these non-GAAP financial measures as
part of our future earnings discussions and, therefore, the
inclusion of these non-GAAP financial measures will provide
consistency in our financial reporting. A reconciliation of these
non-GAAP financial measures to the related GAAP financial measures
is provided below:
(in millions except
per share data)
|
Three Months
Ended
|
|
Six Months
Ended
|
|
5/31/2021
|
|
5/31/2020
|
|
5/31/2021
|
|
5/31/2020
|
Gross
profit
|
$
|
614.6
|
|
|
$
|
579.5
|
|
|
$
|
1,192.1
|
|
|
$
|
1,049.4
|
|
Impact of transaction
and integration expenses included in cost of goods sold
(1)
|
—
|
|
|
—
|
|
|
6.3
|
|
|
—
|
|
Adjusted gross
profit
|
$
|
614.6
|
|
|
$
|
579.5
|
|
|
$
|
1,198.4
|
|
|
$
|
1,049.4
|
|
Adjusted gross profit
margin (2)
|
39.5
|
%
|
|
41.4
|
%
|
|
39.4
|
%
|
|
40.2
|
%
|
|
|
|
|
|
|
|
|
Operating
income
|
$
|
237.4
|
|
|
$
|
257.4
|
|
|
$
|
473.7
|
|
|
$
|
451.6
|
|
Impact of transaction
and integration expenses included in cost of goods sold
(1)
|
—
|
|
|
—
|
|
|
6.3
|
|
|
—
|
|
Impact of other
transaction and integration expenses (1)
|
6.9
|
|
|
—
|
|
|
25.7
|
|
|
—
|
|
Impact of special
charges
|
13.7
|
|
|
2.9
|
|
|
14.8
|
|
|
3.9
|
|
Adjusted operating
income
|
$
|
258.0
|
|
|
$
|
260.3
|
|
|
$
|
520.5
|
|
|
$
|
455.5
|
|
% increase versus
year-ago period
|
(0.9)
|
%
|
|
|
|
14.3
|
%
|
|
|
Adjusted operating
income margin (3)
|
16.6
|
%
|
|
18.6
|
%
|
|
17.1
|
%
|
|
17.4
|
%
|
|
|
|
|
|
|
|
|
Income tax
expense
|
$
|
45.4
|
|
|
$
|
40.4
|
|
|
$
|
104.0
|
|
|
$
|
70.5
|
|
Impact of transaction
and integration expenses (1)
|
1.6
|
|
|
—
|
|
|
(4.3)
|
|
|
—
|
|
Impact of special
charges
|
3.2
|
|
|
0.9
|
|
|
3.5
|
|
|
1.2
|
|
Adjusted income tax
expense
|
$
|
50.2
|
|
|
$
|
41.3
|
|
|
$
|
103.2
|
|
|
$
|
71.7
|
|
Adjusted income tax
rate (4)
|
22.2
|
%
|
|
18.0
|
%
|
|
22.5
|
%
|
|
18.2
|
%
|
|
|
|
|
|
|
|
|
Net income
|
$
|
183.7
|
|
|
$
|
195.9
|
|
|
$
|
345.5
|
|
|
$
|
340.6
|
|
Impact of transaction
and integration expenses (1)
|
5.3
|
|
|
—
|
|
|
36.3
|
|
|
—
|
|
Impact of special
charges
|
10.5
|
|
|
2.0
|
|
|
11.3
|
|
|
2.7
|
|
Impact of after-tax
gain on sale of unconsolidated operations
|
(13.4)
|
|
|
—
|
|
|
(13.4)
|
|
|
—
|
|
Adjusted net
income
|
$
|
186.1
|
|
|
$
|
197.9
|
|
|
$
|
379.7
|
|
|
$
|
343.3
|
|
% (decrease) increase
versus year-ago period
|
(6.0)
|
%
|
|
|
|
10.6
|
%
|
|
|
|
|
|
|
|
|
|
|
Earnings per share -
diluted
|
$
|
0.68
|
|
|
$
|
0.73
|
|
|
$
|
1.28
|
|
|
$
|
1.27
|
|
Impact of transaction
and integration expenses (1)
|
0.02
|
|
|
—
|
|
|
0.14
|
|
|
—
|
|
Impact of special
charges
|
0.04
|
|
|
0.01
|
|
|
0.04
|
|
|
0.01
|
|
Impact of after-tax
gain on sale of unconsolidated operations
|
(0.05)
|
|
|
—
|
|
|
(0.05)
|
|
|
$
|
—
|
|
Adjusted earnings per
share - diluted
|
$
|
0.69
|
|
|
$
|
0.74
|
|
|
$
|
1.41
|
|
|
$
|
1.28
|
|
% (decrease) increase
versus year-ago period
|
(6.8)
|
%
|
|
|
|
10.2
|
%
|
|
|
|
|
(1)
|
Transaction and
integration expenses include transaction and integration expenses
associated with our acquisitions of Cholula and FONA. These
expenses include transaction expenses, integration expenses,
including the effect of the fair value adjustment of acquired
inventory on cost of goods sold and the unfavorable impact of a
discrete item related to deferred State income tax expense, during
the first quarter of 2021, directly related to our December 2020
acquisition of FONA, of $11.4 million or $0.04 per diluted share
for the six months ended May 31, 2021.
|
|
|
|
(2)
|
Adjusted gross profit
margin is calculated as adjusted gross profit as a percentage of
net sales for each period presented.
|
|
|
|
(3)
|
Adjusted operating
income margin is calculated as adjusted operating income as a
percentage of net sales for each period presented.
|
|
|
|
(4)
|
Adjusted income tax
rate is calculated as adjusted income tax expense as a percentage
of income from consolidated operations before income taxes
excluding transaction and integration expenses and special charges
of $226.3 million and $459.6 million for the three and six months
ended May 31, 2021, respectively, and $229.0 million and $394.4
million for the three and six months ended May 31, 2020,
respectively.
|
Because we are a multi-national company, we are subject to
variability of our reported U.S. dollar results due to changes in
foreign currency exchange rates. Those changes have been volatile
over the past several years. The exclusion of the effects of
foreign currency exchange, or what we refer to as amounts expressed
"on a constant currency basis", is a non-GAAP measure. We believe
that this non-GAAP measure provides additional information that
enables enhanced comparison to prior periods excluding the
translation effects of changes in rates of foreign currency
exchange and provides additional insight into the underlying
performance of our operations located outside of the U.S. It should
be noted that our presentation herein of amounts and percentage
changes on a constant currency basis does not exclude the impact of
foreign currency transaction gains and losses (that is, the impact
of transactions denominated in other than the local currency of any
of our subsidiaries in their local currency reported results).
Percentage changes in sales and adjusted operating income
expressed on a constant currency basis are presented excluding the
impact of foreign currency exchange. To present this information
for historical periods, current period results for entities
reporting in currencies other than the U.S. dollar are translated
into U.S. dollars at the average exchange rates in effect during
the corresponding period of the prior fiscal year, rather than at
the actual average exchange rates in effect during the current
fiscal year. As a result, the foreign currency impact is equal to
the current year results in local currencies multiplied by the
change in the average foreign currency exchange rate between the
current fiscal period and the corresponding period of the prior
fiscal year. Rates of constant currency growth (decline)
follow:
|
|
|
Three Months Ended
May 31, 2021
|
|
|
|
Percentage Change
as Reported
|
|
Impact of Foreign
Currency Exchange
|
|
Percentage Change
on
Constant Currency
Basis
|
Net
sales
|
|
|
|
|
|
|
|
Consumer
Segment
|
|
|
|
|
|
|
|
Americas
|
|
|
(6.4)%
|
|
0.8%
|
|
(7.2)%
|
EMEA
|
|
|
3.6%
|
|
7.8%
|
|
(4.2)%
|
Asia/Pacific
|
|
|
25.5%
|
|
10.5%
|
|
15.0%
|
Total Consumer
segment
|
|
|
(1.8)%
|
|
2.9%
|
|
(4.7)%
|
Flavor Solutions
segment
|
|
|
|
|
|
|
|
Americas
|
|
|
31.6%
|
|
1.9%
|
|
29.7%
|
EMEA
|
|
|
77.7%
|
|
13.0%
|
|
64.7%
|
Asia/Pacific
|
|
|
35.5%
|
|
12.9%
|
|
22.6%
|
Total Flavor Solutions
segment
|
|
|
39.5%
|
|
4.9%
|
|
34.6%
|
Total net
sales
|
|
|
11.1%
|
|
3.5%
|
|
7.6%
|
Adjusted operating
income
|
|
|
|
|
|
|
|
Consumer
segment
|
|
|
(23.7)%
|
|
2.0%
|
|
(25.7)%
|
Flavor
Solutions segment
|
|
|
182.9%
|
|
7.9%
|
|
175.0%
|
Total adjusted
operating income
|
|
|
(0.9)%
|
|
2.7%
|
|
(3.6)%
|
|
|
|
|
|
Six Months Ended May
31, 2021
|
|
|
|
Percentage Change
as Reported
|
|
Impact of Foreign
Currency Exchange
|
|
Percentage Change
on
Constant Currency
Basis
|
Net
sales
|
|
|
|
|
|
|
|
Consumer
Segment
|
|
|
|
|
|
|
|
Americas
|
|
|
7.9%
|
|
0.6%
|
|
7.3%
|
EMEA
|
|
|
17.8%
|
|
8.0%
|
|
9.8%
|
Asia/Pacific
|
|
|
45.8%
|
|
10.1%
|
|
35.7%
|
Total Consumer
segment
|
|
|
13.8%
|
|
3.1%
|
|
10.7%
|
Flavor Solutions
segment
|
|
|
|
|
|
|
|
Americas
|
|
|
16.1%
|
|
0.8%
|
|
15.3%
|
EMEA
|
|
|
32.3%
|
|
6.0%
|
|
26.3%
|
Asia/Pacific
|
|
|
30.5%
|
|
10.5%
|
|
20.0%
|
Total Flavor Solutions
segment
|
|
|
20.5%
|
|
2.7%
|
|
17.8%
|
Total net
sales
|
|
|
16.3%
|
|
2.9%
|
|
13.4%
|
Adjusted operating
income
|
|
|
|
|
|
|
|
Consumer
segment
|
|
|
4.4%
|
|
2.9%
|
|
1.5%
|
Flavor
Solutions segment
|
|
|
47.5%
|
|
2.3%
|
|
45.2%
|
Total adjusted
operating income
|
|
|
14.3%
|
|
2.8%
|
|
11.5%
|
To present "constant currency" information for the fiscal year
2021 projection, projected sales and adjusted operating income for
entities reporting in currencies other than the U.S. dollar are
translated into U.S. dollars at the company's budgeted exchange
rates for 2021 and are compared to the 2020 results, translated
into U.S. dollars using the same 2021 budgeted exchange rates,
rather than at the average actual exchange rates in effect during
fiscal year 2020. To estimate the percentage change in adjusted
earnings per share on a constant currency basis, a similar
calculation is performed to arrive at adjusted net income divided
by historical shares outstanding for fiscal year 2020 or projected
shares outstanding for fiscal year 2021, as appropriate.
|
Projection for the
Year Ending November 30, 2021
|
Percentage change in
net sales
|
11% to 13%
|
Impact of favorable
foreign currency exchange
|
3%
|
Percentage change in
net sales in constant currency
|
8% to 10%
|
|
|
|
|
Percentage change in
adjusted operating income
|
10% to 12%
|
Impact of favorable
foreign currency exchange
|
2%
|
Percentage change in
adjusted operating income in constant currency
|
8% to 10%
|
|
|
|
|
Percentage change in
adjusted earnings per share — diluted
|
6% to 8%
|
Impact of favorable
foreign currency exchange
|
2%
|
Percentage change in
adjusted earnings per share in constant currency —
diluted
|
4% to 6%
|
The following provides a reconciliation of our estimated
earnings per share to adjusted earnings per share for 2021 and
actual results for 2020:
|
Twelve Months
Ended
|
|
2021
Projection
|
|
11/30/20
|
Earnings per share –
diluted
|
$2.83 to
$2.88
|
|
$
|
2.78
|
|
Impact of transaction
and integration expenses
|
0.16
|
|
0.04
|
|
Impact of special
charges
|
0.06
|
|
0.01
|
|
Impact of
unconsolidated investment
|
(0.05)
|
|
—
|
|
Adjusted earnings per
share
|
$3.00 to
$3.05
|
|
$
|
2.83
|
|
|
|
|
|
|
|
|
Live Webcast
As previously announced, McCormick will hold a conference call
with analysts today at 8:00 a.m. ET.
The conference call will be webcast live via the McCormick website.
Go to ir.mccormick.com and follow directions to listen to the
call and access the accompanying presentation materials. At this
same location, a replay of the call will be available following the
live call. Past press releases and additional information can be
found at this address.
Forward-looking Information
Certain information contained in this release, including
statements concerning expected performance, such as those relating
to net sales, gross margins, earnings, cost savings, transaction
and integration expenses, special charges, acquisitions, brand
marketing support, volume and product mix, income tax expense and
the impact of foreign currency rates are "forward-looking
statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended. These statements may be
identified by the use of words such as "may," "will," "expect,"
"should," "anticipate," "intend," "believe" and "plan." These
statements may relate to: the impact of COVID-19 on our business,
suppliers, consumers, customers, and employees; disruptions or
inefficiencies in the supply chain, including any impact of
COVID-19; the expected results of operations of businesses acquired
by the company, including the acquisitions of Cholula and FONA; the
expected impact of 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 Comprehensive Continuous Improvement ("CCI") program and
global enablement initiative; expected working capital
improvements; expectations regarding growth potential in various
geographies and markets, including the impact from customer,
channel, category, and e-commerce expansion; expected trends in net
sales and earnings performance and other financial measures; the
expected timing and costs of implementing our business
transformation initiative, which includes the implementation of a
global enterprise resource planning ("ERP") system; the expected
impact of accounting pronouncements; the expectations of pension
and postretirement plan contributions and anticipated charges
associated with those plans; the holding period and market risks
associated with financial instruments; the impact of foreign
exchange fluctuations; the adequacy of internally generated funds
and existing sources of liquidity, such as the availability of bank
financing; the anticipated sufficiency of future cash flows to
enable the payments of interest and repayment of short- and
long-term debt as well as quarterly dividends and the ability to
issue additional debt or equity securities; and expectations
regarding purchasing shares of McCormick's common stock under the
existing repurchase authorization.
These and other forward-looking statements are based on
management's current views and assumptions and involve risks and
uncertainties that could significantly affect expected results.
Results may be materially affected by factors such as: the
company's ability to drive revenue growth; damage to the company's
reputation or brand name; loss of brand relevance; increased
private label use; product quality, labeling, or safety concerns;
negative publicity about our products; actions by, and the
financial condition of, competitors and customers; the longevity of
mutually beneficial relationships with our large customers; the
ability to identify, interpret and react to changes in consumer
preferences and demand; business interruptions due to natural
disasters, unexpected events or public health crises, including
COVID-19; issues affecting the company's supply chain and raw
materials, including fluctuations in the cost and availability of
raw and packaging materials; government regulation, and
changes in legal and regulatory requirements and enforcement
practices; the lack of successful acquisition and integration of
new businesses, including the acquisitions of Cholula and FONA;
global economic and financial conditions generally, including the
impact of the exit of the United
Kingdom from the European Union, availability of financing,
interest and inflation rates, and the imposition of tariffs,
quotas, trade barriers and other similar restrictions; foreign
currency fluctuations; the effects of increased level of debt
service following the Cholula and FONA acquisitions as well as the
effects that such increased debt service may have on the company's
ability to borrow or the cost of any such additional borrowing, our
credit rating, and our ability to react to certain economic and
industry conditions; impairments of indefinite-lived intangible
assets; assumptions we have made regarding the investment return on
retirement plan assets, and the costs associated with pension
obligations; the stability of credit and capital markets; risks
associated with the company's information technology systems,
including the threat of data breaches and cyber-attacks; the
company's inability to successfully implement our business
transformation initiative; fundamental changes in tax laws;
including interpretations and assumptions we have made, and
guidance that may be issued, volatility in our effective tax rate;
climate change; infringement of intellectual property rights, and
those of customers; litigation, legal and administrative
proceedings; the company's inability to achieve expected and/or
needed cost savings or margin improvements; negative employee
relations; and other risks described in the company's filings with
the Securities and Exchange Commission.
Actual results could differ materially from those projected in
the forward-looking statements. The company undertakes no
obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events
or otherwise, except as may be required by law.
About McCormick
McCormick & Company, Incorporated is a global leader in
flavor. As a Fortune 500 company with over $5 billion in annual sales across 160 countries
and territories, we manufacture, market and distribute spices,
seasoning mixes, condiments and other flavorful products to the
entire food industry including e-commerce channels, grocery, food
manufacturers and foodservice businesses. Our most popular brands
include McCormick, French's, Frank's RedHot, Stubb's, OLD BAY,
Lawry's, Zatarain's, Ducros, Vahiné, Cholula, Schwartz, Kamis,
DaQiao, Club House, Aeroplane and Gourmet Garden. Every day, no
matter where or what you eat or drink, you can enjoy food flavored
by McCormick.
Founded in 1889 and headquartered in Hunt Valley, Maryland USA, McCormick is guided
by our principles and committed to our Purpose – To Stand Together
for the Future of Flavor. McCormick envisions A World United by
Flavor where healthy, sustainable and delicious go hand in hand. To
learn more, visit www.mccormickcorporation.com or follow
McCormick & Company on Twitter, Instagram and LinkedIn.
For information contact:
Investor Relations:
Kasey Jenkins (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,
2021
|
|
May 31,
2020
|
|
May 31,
2021
|
|
May 31,
2020
|
Net sales
|
|
$
|
1,556.7
|
|
|
$
|
1,401.1
|
|
|
$
|
3,038.2
|
|
|
$
|
2,613.1
|
|
Cost of goods
sold
|
|
942.1
|
|
|
821.6
|
|
|
1,846.1
|
|
|
1,563.7
|
|
Gross
profit
|
|
614.6
|
|
|
579.5
|
|
|
1,192.1
|
|
|
1,049.4
|
|
Gross profit
margin
|
|
39.5
|
%
|
|
41.4
|
%
|
|
39.2
|
%
|
|
40.2
|
%
|
Selling, general and
administrative expense
|
|
356.6
|
|
|
319.2
|
|
|
677.9
|
|
|
593.9
|
|
Transaction and
integration expenses
|
|
6.9
|
|
|
—
|
|
|
25.7
|
|
|
—
|
|
Special
charges
|
|
13.7
|
|
|
2.9
|
|
|
14.8
|
|
|
3.9
|
|
Operating
income
|
|
237.4
|
|
|
257.4
|
|
|
473.7
|
|
|
451.6
|
|
Interest
expense
|
|
35.6
|
|
|
34.4
|
|
|
69.4
|
|
|
69.7
|
|
Other income,
net
|
|
3.9
|
|
|
3.1
|
|
|
8.5
|
|
|
8.6
|
|
Income from
consolidated operations before income taxes
|
|
205.7
|
|
|
226.1
|
|
|
412.8
|
|
|
390.5
|
|
Income tax
expense
|
|
45.4
|
|
|
40.4
|
|
|
104.0
|
|
|
70.5
|
|
Net income from
consolidated operations
|
|
160.3
|
|
|
185.7
|
|
|
308.8
|
|
|
320.0
|
|
Income from
unconsolidated operations (including, for 2021, after-tax gain of
$13.4 on sale of unconsolidated operation)
|
|
23.4
|
|
|
10.2
|
|
|
36.7
|
|
|
20.6
|
|
Net income
|
|
$
|
183.7
|
|
|
$
|
195.9
|
|
|
$
|
345.5
|
|
|
$
|
340.6
|
|
|
|
|
|
|
|
|
|
|
Earnings per share -
basic
|
|
$
|
0.69
|
|
|
$
|
0.74
|
|
|
$
|
1.29
|
|
|
$
|
1.28
|
|
|
|
|
|
|
|
|
|
|
Earnings per share -
diluted
|
|
$
|
0.68
|
|
|
$
|
0.73
|
|
|
$
|
1.28
|
|
|
$
|
1.27
|
|
|
|
|
|
|
|
|
|
|
Average shares
outstanding - basic
|
|
267.3
|
|
|
266.2
|
|
|
267.2
|
|
|
$
|
266.1
|
|
Average shares
outstanding - diluted
|
|
270.0
|
|
|
268.5
|
|
|
270.0
|
|
|
268.7
|
|
Second Quarter
Report
|
McCormick &
Company, Incorporated
|
|
|
|
|
|
Consolidated
Balance Sheet (Unaudited)
|
|
|
|
|
(In
millions)
|
|
|
|
|
|
|
May 31,
2021
|
|
November 30,
2020
|
Assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
291.8
|
|
|
$
|
423.6
|
|
Trade accounts
receivable, net
|
|
500.4
|
|
|
528.5
|
|
Inventories
|
|
1,147.8
|
|
|
1,032.6
|
|
Prepaid expenses and
other current assets
|
|
112.6
|
|
|
98.9
|
|
Total current
assets
|
|
2,052.6
|
|
|
2,083.6
|
|
Property, plant and
equipment, net
|
|
1,112.8
|
|
|
1,028.4
|
|
Goodwill
|
|
5,428.8
|
|
|
4,986.3
|
|
Intangible assets,
net
|
|
3,494.5
|
|
|
3,239.4
|
|
Investments and other
assets
|
|
721.8
|
|
|
752.0
|
|
Total
assets
|
|
$
|
12,810.5
|
|
|
$
|
12,089.7
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Short-term borrowings
and current portion of long-term debt
|
|
$
|
725.0
|
|
|
$
|
1,150.6
|
|
Trade accounts
payable
|
|
1,040.5
|
|
|
1,032.3
|
|
Other accrued
liabilities
|
|
615.7
|
|
|
863.6
|
|
Total current
liabilities
|
|
2,381.2
|
|
|
3,046.5
|
|
Long-term
debt
|
|
4,735.9
|
|
|
3,753.8
|
|
Deferred
taxes
|
|
742.8
|
|
|
727.2
|
|
Other long-term
liabilities
|
|
609.8
|
|
|
622.2
|
|
Total
liabilities
|
|
8,469.7
|
|
|
8,149.7
|
|
Shareholders'
equity
|
|
|
|
|
Common
stock
|
|
2,027.1
|
|
|
1,981.3
|
|
Retained
earnings
|
|
2,660.5
|
|
|
2,415.6
|
|
Accumulated other
comprehensive loss
|
|
(362.3)
|
|
|
(470.8)
|
|
Total McCormick
shareholders' equity
|
|
4,325.3
|
|
|
3,926.1
|
|
Non-controlling
interests
|
|
15.5
|
|
|
13.9
|
|
Total shareholders'
equity
|
|
4,340.8
|
|
|
3,940.0
|
|
Total liabilities and
shareholders' equity
|
|
$
|
12,810.5
|
|
|
$
|
12,089.7
|
|
Second Quarter
Report
|
|
McCormick & Company, Incorporated
|
|
|
|
|
|
Consolidated Cash
Flow Statement (Unaudited)
|
|
|
|
|
(In
millions)
|
|
|
|
|
|
|
Six Months
Ended
|
|
|
May 31,
2021
|
|
May 31,
2020
|
Operating
activities
|
|
|
|
|
Net income
|
|
$
|
345.5
|
|
|
$
|
340.6
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
|
91.9
|
|
|
81.5
|
|
Stock-based
compensation
|
|
42.6
|
|
|
27.1
|
|
Amortization of
inventory fair value adjustments associated with
acquisitions
|
|
6.3
|
|
|
—
|
|
Fixed asset impairment
charge
|
|
6.5
|
|
|
—
|
|
Income from
unconsolidated operations
|
|
(36.7)
|
|
|
(20.6)
|
|
Changes in operating
assets and liabilities
|
|
(247.4)
|
|
|
(89.2)
|
|
Dividends from
unconsolidated affiliates
|
|
20.0
|
|
|
16.1
|
|
Net cash flow provided
by operating activities
|
|
228.7
|
|
|
355.5
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
Acquisition of
businesses (net of cash acquired)
|
|
(706.4)
|
|
|
—
|
|
Proceeds from sale of
unconsolidated operations
|
|
65.4
|
|
|
—
|
|
Capital expenditures
(including software)
|
|
(112.8)
|
|
|
(87.1)
|
|
Other investing
activities
|
|
0.2
|
|
|
1.9
|
|
Net cash flow used in
investing activities
|
|
(753.6)
|
|
|
(85.2)
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
Short-term
borrowings, net
|
|
(429.4)
|
|
|
(514.5)
|
|
Long-term debt
borrowings
|
|
1,001.5
|
|
|
495.0
|
|
Payment of debt
issuance costs
|
|
(1.9)
|
|
|
(1.1)
|
|
Long-term debt
repayments
|
|
(3.5)
|
|
|
(41.7)
|
|
Proceeds from
exercised stock options
|
|
6.2
|
|
|
26.7
|
|
Taxes withheld and
paid on employee stock awards
|
|
(13.0)
|
|
|
(9.2)
|
|
Common stock acquired
by purchase
|
|
(0.4)
|
|
|
(20.8)
|
|
Dividends
paid
|
|
(181.6)
|
|
|
(164.9)
|
|
Net cash flow provided
by (used in) financing activities
|
|
377.9
|
|
|
(230.5)
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
15.2
|
|
|
(10.2)
|
|
(Decrease) increase
in cash and cash equivalents
|
|
(131.8)
|
|
|
29.6
|
|
Cash and cash
equivalents at beginning of period
|
|
423.6
|
|
|
155.4
|
|
|
|
|
|
|
Cash and cash
equivalents at end of period
|
|
$
|
291.8
|
|
|
$
|
185.0
|
|
View original
content:https://www.prnewswire.com/news-releases/mccormick-reports-strong-second-quarter-sales-growth-and-increases-2021-financial-outlook-301324164.html
SOURCE McCormick & Company, Incorporated