McCormick Announces Second Quarter Financial Results and Reaffirms 2009 Profit Outlook
- Sales rose 7% in local currency. Unfavorable foreign currency exchange rates reduced sales 8%.
-
Earnings per share of
$0.38 were reported. On a comparable basis, excluding restructuring charges and credits, earnings per share rose 8%. - The Company reaffirmed its projected 2009 earnings per share.
In the second quarter of 2009, sales declined 1%, but in local currency
rose 7%. This increase in local currency was led by a 19% increase in
consumer business sales in the Americas, which included 13% of
additional sales from the Lawry’s acquisition. In this region, product
innovation and marketing activity also led to higher sales of dry
seasoning mixes, grilling items and a number of other products,
including Easter-related spices and seasonings. In local currency, the
Company grew industrial sales in the Americas this quarter with an
increase of 6% of which Lawry’s added 2%. Sales this quarter in the
A more favorable sales mix enhanced by the acquisition of strong brands
continues to increase profits. The Company is also improving
profitability with savings from its Comprehensive Continuous Improvement
(CCI) program and other actions taken to reduce costs. As a result,
gross profit margin of 39.9% was achieved in the second quarter of 2009
compared to 39.0% in the second quarter of 2008. Operating income of
For the second quarter, earnings per share were
Through the first half of 2009,
“We are effectively navigating through a difficult global economic environment. We were able to manage an unexpected bankruptcy cost this quarter, along with further volatility in raw material costs and foreign currency exchange rates, and still deliver our targeted profit growth.
“McCormick employees are effectively managing through these challenges and have remained focused on sales growth, cost containment and meeting objectives. Our business fundamentals are sound and we are well-positioned for further increases in sales and profit.”
Based on strong profit performance in the first half and a positive
outlook for the second half, the Company reaffirmed its 2009 earnings
per share projection of
Business Segment Results
Consumer Business |
||||||||||
(in millions) |
Three Months Ended |
Six Months Ended |
||||||||
5/31/09 |
5/31/08 |
5/31/09 |
5/31/08 |
|||||||
Net sales |
$435.1 |
$417.5 |
$855.7 |
$827.9 | ||||||
Operating income |
65.1 |
60.5 |
139.1 |
124.9 | ||||||
Operating income, excluding restructuring charges |
71.7 |
55.8 |
145.9 |
122.7 | ||||||
For the second quarter, consumer business sales rose 4% when compared to
2008, and in local currency grew 12%. The Company increased volume and
mix 8%, due in large part to sales in the Americas, including the impact
of Lawry’s, which was acquired in
- Consumer sales in the Americas rose 16% and in local currency grew 19%. Previous price increases added 4% to sales and volume and product mix added 15%, including an increase of 13% from Lawry’s. Sales of branded dry seasoning mixes grew at a double-digit pace this quarter as a result of revitalization efforts which included higher marketing support, new packaging, and a reformulation of many items with more natural ingredients. In addition, sales of branded spices and seasonings grew with increases in grilling products and items related to the Easter holiday.
- Consumer sales in EMEA declined 21% and 3% in local currency. The difficult economy led to a reduction of 7% in volume and product mix this quarter with particular weakness in the U.K. This was offset in part by pricing actions taken late in 2008 to offset higher costs.
-
Second quarter consumer sales in the
Asia/Pacific region declined 6%, but rose 8% in local currency driven by volume and product mix increases in both primary markets,China andAustralia .
For the second quarter, operating income, excluding restructuring charges, rose 28%. This increase was driven by higher sales and cost reductions as well as a favorable business mix. A portion of the favorable business mix is due to the integration of the Lawry’s business which is nearly complete and has been accomplished with few incremental costs.
Industrial Business |
||||||||||
(in millions) |
Three Months Ended |
Six Months Ended |
||||||||
5/31/09 |
5/31/08 |
5/31/09 |
5/31/08 |
|||||||
Net sales |
$322.2 |
$346.6 |
$620.1 |
$660.2 | ||||||
Operating income |
17.4 |
20.0 |
33.3 |
33.0 | ||||||
Operating income, excluding restructuring charges |
17.7 |
21.6 |
33.8 |
36.0 | ||||||
Industrial business sales declined 7% in the second quarter, but grew 3% in local currency when compared to 2008. This growth was due largely to pricing actions which reflected increased costs of certain commodities adding 6% to sales. This was offset in part by a reduction in volume and product mix which reduced sales by 3%.
- Industrial sales in the Americas rose 1% and in local currency grew 6%. This increase was driven by pricing actions which added 6%. Sales this quarter also benefited from the Lawry’s acquisition which added 2%. In addition, the Company grew sales of snack seasonings and sales to quick service restaurants with several new seasoning products. Sales of bulk spices and other food ingredients were lower this quarter.
- In EMEA, industrial sales declined 28% and were down 3% in local currency. This compares to a strong increase of 9% in local currency for the first quarter. In the second quarter, pricing added 7% to sales. Volume and product mix decreased by 10% as a result of lower sales to U.K. food service customers. This was largely due to the bankruptcy of a primary food service distributor in the U.K., as well as a general slow-down in away-from-home eating.
-
Strong demand by quick service restaurant customers in the
Asia/Pacific region in the first quarter was followed by weaker sales in the second quarter. Sales were down 15% and 6% in local currency, with a decline in volume and product mix. InChina , weaker sales to quick service restaurants were due in part to customer-driven changes in promotional emphasis and timing.
Operating income for the industrial business, excluding restructuring
charges, was
Non-GAAP Financial Measures
The non-GAAP information in this press release is not a measure that is defined in generally accepted accounting principles (“GAAP”). The non-GAAP information in this press release excludes restructuring charges and credits, as well as unusual items recorded in fiscal year 2008. The unusual items were for amounts related to the Lawry’s acquisition, including the gain on the sale of Season-All, and a non-cash impairment charge related to the value of the Silvo brand. Management believes the non-GAAP information is important for purposes of comparison to prior periods and development of future projections and earnings growth prospects. This information is also used by management to measure the profitability of our on-going operations and analyze the Company’s business performance and trends. Management believes the non-GAAP measure provides a more consistent basis for assessing the Company’s performance than the closest GAAP equivalent. Management therefore uses the non-GAAP information alongside the most directly comparable GAAP measures in this press release.
Reconciliation of GAAP to non-GAAP Financial Measures
The Company has provided below certain non-GAAP financial results excluding amounts related to a restructuring program in 2009 and 2008, as well as unusual items recorded in the third and fourth quarters of 2008.
(in millions except per share data) |
Three Months Ended |
Six Months Ended |
||||||||||||||
5/31/09 |
5/31/08 |
5/31/09 |
5/31/08 |
|||||||||||||
Operating income |
$ |
82.5 |
$ | 80.5 |
$ |
172.4 |
$ | 157.9 | ||||||||
Impact of restructuring charges (credits) |
6.9 |
(3.1 | ) |
7.3 |
.8 | |||||||||||
Adjusted operating income |
$ |
89.4 |
$ | 77.4 |
$ |
179.7 |
$ | 158.7 | ||||||||
% increase versus prior period |
15.5 |
% |
13.2 |
% |
||||||||||||
Net income |
$ |
50.7 |
$ | 53.3 |
$ |
108.4 |
$ | 104.8 | ||||||||
Impact of restructuring charges (credits) |
4.7 |
* |
(2.1) |
* |
5.0 |
* |
.5 |
* |
||||||||
Adjusted net income |
$ |
55.4 |
$ | 51.2 |
$ |
113.4 |
$ | 105.3 | ||||||||
Earnings per share - diluted |
$ |
0.38 |
$ | 0.41 |
$ |
0.82 |
$ | 0.80 | ||||||||
Impact of restructuring charges (credits) |
0.04 |
(0.02 | ) |
.04 |
– | |||||||||||
Adjusted earnings per share – diluted |
$ |
0.42 |
$ | 0.39 |
$ |
0.86 |
$ | 0.80 | ||||||||
% increase versus prior period |
7.7 |
% |
7.5 |
% |
||||||||||||
* The impact of restructuring activity on net income includes: | ||||||||||||||||
Restructuring charges included in cost of good sold |
$ |
(.1 |
) |
$ | (1.5 | ) |
$ |
– |
$ | (1.7 | ) | |||||
Restructuring credits (charges) |
(6.8 |
) |
4.6 |
(7.3 |
) |
.9 | ||||||||||
Tax impact included in income taxes |
2.2 |
(1.0 | ) |
2.3 |
.3 | |||||||||||
$ |
(4.7 |
) |
$ | 2.1 |
$ |
(5.0 |
) |
$ | ( .5 | ) | ||||||
Twelve Months Ended |
||||||||||||||||
11/30/08 |
||||||||||||||||
Earnings per share – diluted | $ | 1.94 | ||||||||||||||
Impact of restructuring charges | .09 | |||||||||||||||
Impact of impairment charge | .15 | |||||||||||||||
Net gain related to Lawry’s acquisition | (.04 | ) | ||||||||||||||
Adjusted earnings per share – diluted | $ | 2.14 | ||||||||||||||
Live Webcast
As previously announced, McCormick will hold a conference call with
analysts today at
Forward-looking Information
Certain information contained in this release, including expected trends
in net sales and earnings performance, are “forward-looking statements”
within the meaning of Section 21E of the Securities Exchange Act of
1934. 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 external factors such as damage to our reputation or brand
name, business interruptions due to natural disasters or similar
unexpected events, actions of competitors, customer relationships and
financial condition, the ability to achieve expected cost savings and
margin improvements, the successful acquisition and integration of new
businesses, fluctuations in the cost and availability of raw and
packaging materials, and global economic conditions generally which
would include the availability of financing, interest and inflation
rates as well as foreign currency fluctuations and other risks described
in the Company’s filings with the
About McCormick
Second Quarter Report |
McCormick & Company, Incorporated |
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Consolidated Income Statement (Unaudited) | ||||||||||||||||
(In millions except per-share data) | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
|
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May 31, 2009 | May 31, 2008 | May 31, 2009 | May 31, 2008 | |||||||||||||
Net sales | $ | 757.3 | $ | 764.1 | $ | 1,475.8 | $ | 1,488.1 | ||||||||
Cost of goods sold | 455.1 | 466.2 | 889.3 | 904.4 | ||||||||||||
Gross profit | 302.2 | 297.9 | 586.5 | 583.7 | ||||||||||||
Gross profit margin | 39.9 | % | 39.0 | % | 39.7 | % | 39.2 | % | ||||||||
Selling, general and administrative expense | 212.9 | 222.0 | 406.8 | 426.7 | ||||||||||||
Restructuring charges/(credits) | 6.8 | (4.6 | ) | 7.3 | (0.9 | ) | ||||||||||
Operating income | 82.5 |
80.5 |
172.4 | 157.9 | ||||||||||||
Interest expense | 13.0 | 12.7 | 27.5 | 27.5 | ||||||||||||
Other income, net | (1.2 | ) | (3.0 | ) | (1.7 | ) | (6.4 | ) | ||||||||
Income from consolidated operations before income taxes | 70.7 | 70.8 | 146.6 | 136.8 | ||||||||||||
Income taxes | 23.8 | 21.8 | 45.2 | 41.7 | ||||||||||||
Net income from consolidated operations | 46.9 | 49.0 | 101.4 | 95.1 | ||||||||||||
Income from unconsolidated operations | 3.8 | 4.3 | 7.0 | 9.7 | ||||||||||||
Net income | $ | 50.7 | $ | 53.3 | $ | 108.4 | $ | 104.8 | ||||||||
Earnings per common share - basic | $ | 0.39 | $ | 0.41 | $ | 0.83 | $ | 0.82 | ||||||||
Earnings per common share - diluted | $ | 0.38 | $ | 0.41 | $ | 0.82 | $ | 0.80 | ||||||||
Average shares outstanding - basic | 130.6 | 128.7 | 130.4 | 128.3 | ||||||||||||
Average shares outstanding - diluted | 131.8 | 131.5 | 131.8 | 131.3 | ||||||||||||
Second Quarter Report | McCormick & Company, Incorporated | |||||
Consolidated Balance Sheet (Unaudited) | ||||||
(In millions) | ||||||
May 31, 2009 | May 31, 2008 | |||||
Assets | ||||||
Current assets | ||||||
Cash and cash equivalents | $ | 12.9 | $ | 47.3 | ||
Receivables, net | 316.8 | 380.5 | ||||
Inventories | 450.0 | 459.6 | ||||
Prepaid expenses and other current assets | 105.8 | 95.4 | ||||
Total current assets | 885.5 | 982.8 | ||||
Property, plant and equipment, net | 473.0 | 489.4 | ||||
Goodwill, net | 1,300.9 | 965.3 | ||||
Intangible assets, net | 374.6 | 228.0 | ||||
Prepaid allowances | 37.7 | 44.0 | ||||
Investments and other assets | 164.4 | 190.9 | ||||
Total assets | $ | 3,236.1 | $ | 2,900.4 | ||
Liabilities and shareholders' equity | ||||||
Current liabilities | ||||||
Short-term borrowings and current portion of long-term debt | $ | 321.0 | $ | 136.3 | ||
Trade accounts payable | 239.6 | 260.2 | ||||
Other accrued liabilities | 296.1 | 360.2 | ||||
Total current liabilities | 856.7 | 756.7 | ||||
Long-term debt | 885.4 | 626.9 | ||||
Other long-term liabilities | 234.6 | 282.3 | ||||
Total liabilities | 1,976.7 | 1,665.9 | ||||
Shareholders' equity | ||||||
Common stock | 598.2 | 538.6 | ||||
Retained earnings | 499.5 | 380.5 | ||||
Accumulated other comprehensive income | 161.7 | 315.4 | ||||
Total shareholders' equity | 1,259.4 | 1,234.5 | ||||
Total liabilities and shareholders' equity | $ | 3,236.1 | $ | 2,900.4 | ||
Second Quarter Report | McCormick & Company, Incorporated | |||||||
Consolidated Statement of Cash Flows (Unaudited) | ||||||||
(In millions) | ||||||||
Six Months Ended | ||||||||
May 31, 2009 | May 31, 2008 | |||||||
Cash flows from operating activities | ||||||||
Net income | $ | 108.4 | $ | 104.8 | ||||
Adjustments to reconcile net income to net cash flow from operating activities: |
||||||||
Depreciation and amortization | 47.1 | 44.1 | ||||||
Stock based compensation | 7.8 | 11.9 | ||||||
Income from unconsolidated operations | (7.0 | ) | (9.7 | ) | ||||
Changes in operating assets and liabilities | (68.7 | ) | (69.6 | ) | ||||
Dividends from unconsolidated affiliates | 9.1 | 11.2 | ||||||
Net cash flow from operating activities | 96.7 | 92.7 | ||||||
Cash flows from investing activities | ||||||||
Capital expenditures | (36.6 | ) | (40.2 | ) | ||||
Acquisitions of businesses | - | (77.8 | ) | |||||
Proceeds from sale of property, plant and equipment | 0.4 | 14.8 | ||||||
Net cash flow used in investing activities | (36.2 | ) | (103.2 | ) | ||||
Cash flows from financing activities | ||||||||
Short-term borrowings, net | 17.2 | (61.0 | ) | |||||
Long-term debt borrowings | - | 253.2 | ||||||
Long-term debt repayments | (50.1 | ) | (150.2 | ) | ||||
Proceeds from exercised stock options | 7.2 | 18.7 | ||||||
Dividends paid | (62.6 | ) | (56.5 | ) | ||||
Net cash flow (used)/provided by financing activities | (88.3 | ) | 4.2 | |||||
Effect of exchange rate changes on cash and cash equivalents |
1.8 | 7.7 | ||||||
Increase/(decrease) in cash and cash equivalents | (26.0 | ) | 1.4 | |||||
Cash and cash equivalents at beginning of period | 38.9 | 45.9 | ||||||
Cash and cash equivalents at end of period | $ | 12.9 | $ | 47.3 | ||||
Source:
McCormick & Company, Incorporated
Corporate
Communications:
John McCormick, 410-771-7110
john_mccormick@mccormick.com
or
Investor
Relations:
Joyce Brooks, 410-771-7244
joyce_brooks@mccormick.com