McCormick Reports Fourth Quarter Financial Results And Provides Financial Outlook For 2016
- In the fourth quarter of 2015, the company grew sales 8% in constant currency. Including the impact of unfavorable foreign currency, sales rose 2% from the year-ago period. Earnings per share was
$1.16 , and excluding special charges, adjusted earnings per share was$1.18 .
- For fiscal year 2015, the company grew sales 6% in constant currency and earnings per share was
$3.11 . Excluding special charges, adjusted earnings per share rose to$3.48 from adjusted earnings per share of$3.37 in 2014. Cash flow from operations grew 17% to a record$590 million in 2015 and the company returned$351 million to its shareholders through dividends and share repurchases.
- Led by its Comprehensive Continuous Improvement (CCI) program,
McCormick delivered a record$98 million in cost savings in 2015. The company expects to generate cost savings of at least$95 million in 2016.
- In fiscal year 2016,
McCormick expects to grow sales 4% to 6% in constant currency. Including the impact of unfavorable foreign currency, sales are expected to grow 0% to 2%. Excluding the impact of unfavorable foreign currency, as well as special charges, adjusted earnings per share is expected to grow 9% to 11% from adjusted earnings per share of$3.48 in 2015.
"In fiscal year 2015, we grew sales 6% in constant currency through product innovation, brand building, expanded distribution and three strategic acquisitions. Since 2009, we have been fueling our growth with cost savings from our CCI program and, in 2015, we delivered a record
"We are proud of our performance this year and have good momentum heading into 2016. As I transition into the role of Executive Chairman, I look forward to continuing the work to drive success and build value for
"In 2016, we expect to grow earnings per share in line with our long-term 9% to 11% objective, excluding the impact of currency and the impact of special charges in both 2016 and 2015. Our plans to grow sales in 2016 include new products, increased brand marketing, further distribution expansion and pricing actions to offset higher material costs. Together with an incremental benefit from acquisitions completed in 2015, we anticipate 4% to 6% sales growth in constant currency. We have set a target for at least
Fourth Quarter 2015 Results
Fourth quarter sales rose 2% from the year-ago period. In constant currency, the company grew sales 8%. Consumer segment sales increased 6% in constant currency, with similar contributions from both acquisitions and higher volume and product mix for the base business. The higher volume and product mix was driven by product innovation, expanded distribution and an 11% increase in brand marketing. The company grew industrial segment sales 11% in constant currency, with a double-digit increase in each of its three regions. Sales from acquisitions added 2% to sales growth. The increase in the base business was driven by product innovation, as well as support for the international expansion of industrial customers, particularly in emerging markets.
Operating income was
Fiscal Year 2015 Results
For the fiscal year ended
Operating income was
2016 Financial Outlook
In 2016, the company expects to grow sales 4% to 6% in constant currency, driven by base business increases, new products, pricing and acquisitions completed in 2015 that should add 1% to 2% of sales growth. Including the estimated impact of unfavorable currency rates, projected sales growth is 0% to 2%. Pricing actions are expected to offset a low-single digit increase in raw and packaging material costs. The company plans to achieve at least
Business Segment Results
Consumer Segment
(in millions) |
Three months ended |
Twelve months ended |
||||||||||||||
11/30/2015 |
11/30/2014 |
11/30/2015 |
11/30/2014 |
|||||||||||||
Net sales |
$ |
784.6 |
$ |
773.3 |
$ |
2,635.2 |
$ |
2,625.5 |
||||||||
Operating income |
166.0 |
169.3 |
403.3 |
470.6 |
||||||||||||
Operating income, excluding special |
169.2 |
172.0 |
456.1 |
474.3 |
For the fourth quarter of 2015, consumer segment sales rose 1% when compared to the fourth quarter of 2014. In constant currency, the consumer segment grew sales 6% from the year-ago period as a result of acquisitions, higher volume and product mix and pricing actions taken to offset the impact of higher material costs.
- Consumer sales in the
Americas rose 1%. In constant currency, the increase was 3%, with 2% added by higher volume and product mix. Sales from Stubb's, acquired toward the end of the third quarter, also contributed to sales growth in the fourth quarter. The higher volume and product mix this period was led by U.S. sales growth of spices and seasonings, including Grill Mates and Lawry's products, gourmet items and Hispanic products.
- Fourth quarter consumer sales in EMEA rose 5%. In constant currency, the increase was 18%, with 11% added by sales from the acquisition of Drogheria & Alimentari in mid-2015. Volume and product mix grew 7%, with particular strength from new distribution in
Poland and inFrance from new products and brand marketing.
- Consumer sales in the
Asia/Pacific region declined 6%. In constant currency, sales increased 1% as sales growth inAustralia andChina was offset by lower sales in India. In the third quarter of 2015, the company announced a decision to discontinue some lower margin product lines in India.
Consumer segment operating income, excluding special charges, was
Industrial Segment
(in millions) |
Three months ended |
Twelve months ended |
|||||||||||||||
11/30/2015 |
11/30/2014 |
11/30/2015 |
11/30/2014 |
||||||||||||||
Net sales |
$ |
417.3 |
$ |
400.3 |
$ |
1,661.1 |
$ |
1,617.7 |
|||||||||
Operating income |
46.2 |
30.1 |
145.1 |
132.4 |
|||||||||||||
Operating income, excluding special |
46.0 |
30.3 |
157.8 |
133.9 |
For the fourth quarter of 2015, industrial segment sales rose 4% when compared to the fourth quarter of 2014. In constant currency, the industrial segment grew sales 11% from the year-ago period as a result of higher volume and product mix, an acquisition and pricing actions taken to offset the impact of higher material costs.
- Industrial sales in the
Americas rose 6%. In constant currency, the increase was 10%, with 4% added by sales from the acquisition of Brand Aromatics early in the second quarter of 2015. Higher volume and product mix added 5% to sales growth this period, with higher sales in U.S. of branded food service products and customized flavor solutions, and increased sales in Mexico.
- Fourth quarter industrial sales in EMEA rose 1%. In constant currency, the increase was 14%. This significant increase was driven by sales to both quick service restaurants and food manufacturers that are expanding in this region.
- Industrial sales in the
Asia/Pacific region were comparable to the year ago period. In constant currency, the increase was 11% due to higher volume and product mix. InChina , there was a further recovery in demand from quick service restaurants, and inAustralia , the sales growth included new products for quick service restaurants in this region.
Industrial segment operating income, excluding special charges, was
Non-GAAP Financial Measures
The tables below include financial measures of adjusted operating income, adjusted income from unconsolidated operations, adjusted net income and adjusted diluted earnings per share, each excluding the impact of special charges for the periods presented. These represent non-GAAP financial measures which are prepared as a complement to our financial results prepared in accordance with
We believe that these non-GAAP financial measures are 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 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 it should not be considered a substitute for, or superior to, GAAP results. In addition, these non-GAAP financial measures may not be comparable to similarly titled measures of other companies because other companies may not calculate them in the same manner that we do. We intend to continue to provide these non-GAAP financial measures as part of our future earnings discussions and, therefore, the inclusion of these non-GAAP financial measures will provide consistency in our financial reporting. A reconciliation of these non-GAAP financial measures to the related GAAP financial measures is provided below:
(in millions except per share data) |
Three Months Ended |
Twelve Months Ended |
|||||||||||||
11/30/15 |
11/30/14 |
11/30/15 |
11/30/14 |
||||||||||||
Operating income |
$ |
212.2 |
$ |
199.4 |
$ |
548.4 |
$ |
603.0 |
|||||||
Impact of special charges included in cost of |
0.6 |
— |
4.0 |
— |
|||||||||||
Impact of other special charges (including |
2.4 |
2.9 |
61.5 |
5.2 |
|||||||||||
Total special charges |
3.0 |
2.9 |
65.5 |
5.2 |
|||||||||||
Adjusted operating income |
$ |
215.2 |
$ |
202.3 |
$ |
613.9 |
$ |
608.2 |
|||||||
% increase (decrease) versus prior period |
6.4 |
% |
0.9 |
% |
|||||||||||
Income from unconsolidated operations |
$ |
9.7 |
$ |
9.3 |
$ |
36.7 |
$ |
29.4 |
|||||||
Impact of special charges attributable to non- |
(0.1) |
— |
(2.0) |
— |
|||||||||||
Adjusted income from unconsolidated operations |
$ |
9.6 |
$ |
9.3 |
$ |
34.7 |
$ |
29.4 |
|||||||
3.2 |
% |
18.0 |
% |
||||||||||||
Net income |
$ |
149.2 |
$ |
148.0 |
$ |
401.6 |
$ |
437.9 |
|||||||
Impact of special charges above (2) |
3.1 |
2.1 |
49.9 |
3.7 |
|||||||||||
Impact of total special charges attributable to |
(0.1) |
— |
(2.0) |
— |
|||||||||||
Adjusted net income |
$ |
152.2 |
$ |
150.1 |
$ |
449.5 |
$ |
441.6 |
|||||||
% increase versus prior period |
1.4 |
% |
1.8 |
% |
|||||||||||
Earnings per share - diluted |
$ |
1.16 |
$ |
1.14 |
$ |
3.11 |
$ |
3.34 |
|||||||
Impact of special charges above |
0.02 |
0.02 |
0.38 |
0.03 |
|||||||||||
Impact of total special charges attributable to |
— |
— |
(0.01) |
— |
|||||||||||
Adjusted earnings per share - diluted |
$ |
1.18 |
$ |
1.16 |
$ |
3.48 |
$ |
3.37 |
|||||||
% increase versus prior period |
1.7 |
% |
3.3 |
% |
|||||||||||
(1) Represents the portion of the Kohinoor total special charge of $1.1 million and $14.2 million for the three and twelve months ended November 30, 2015, respectively, attributable to Kohinoor's 15% minority stakeholder. |
|||||||||||||||
(2) Total special charges of $3.0 million and $65.5 million for the three and twelve months ended November 30, 2015 and $2.9 million and $5.2 million for the three and twelve months ended November 30, 2014 are net of taxes of ($0.1) million, $15.6 million, $0.8 million and $1.5 million, respectively. |
Percentage changes in sales and adjusted operating income expressed in "constant currency" are presented excluding the impact of foreign currency exchange. To present this information for historical periods, current period results for entities reporting in currencies other than the U.S. dollar are translated into U.S. dollars at the average exchange rates in effect during the corresponding period of the prior fiscal year, rather than at the actual average exchange rates in effect during the current fiscal year. As a result, the foreign currency impact is equal to the current year results in local currencies multiplied by the change in the average foreign currency exchange rate between the current fiscal period and the corresponding period of the prior fiscal year. Constant currency growth rates follow:
Three Months Ended November 30, 2015 |
|||||||
Percentage Change |
Impact of Foreign |
Percentage Change |
|||||
Net sales |
|||||||
Consumer segment |
|||||||
Americas |
1.4% |
(1.6)% |
3.0% |
||||
EMEA |
5.4% |
(13.0)% |
18.4% |
||||
Asia/Pacific |
(5.8)% |
(7.0)% |
1.2% |
||||
Total consumer segment |
1.5% |
(4.5)% |
6.0% |
||||
Industrial segment |
|||||||
Americas |
5.9% |
(4.5)% |
10.4% |
||||
EMEA |
1.5% |
(12.8)% |
14.3% |
||||
Asia/Pacific |
(0.3)% |
(10.8)% |
10.5% |
||||
Total industrial segment |
4.2% |
(7.0)% |
11.2% |
||||
Total net sales |
2.4% |
(5.3)% |
7.7% |
||||
Adjusted operating income |
|||||||
Consumer segment |
(1.6)% |
(2.7)% |
1.1% |
||||
Industrial segment |
51.8% |
(10.2)% |
62.0% |
||||
Total adjusted operating |
6.4% |
(3.8)% |
10.2% |
Twelve Months Ended November 30, 2015 |
|||||||
Percentage Change |
Impact of Foreign |
Percentage Change |
|||||
Net sales |
|||||||
Consumer segment |
|||||||
Americas |
1.8% |
(1.4)% |
3.2% |
||||
EMEA |
(5.0)% |
(15.3)% |
10.3% |
||||
Asia/Pacific |
2.6% |
(4.0)% |
6.6% |
||||
Total consumer segment |
0.4% |
(4.9)% |
5.3% |
||||
Industrial segment |
|||||||
Americas |
3.2% |
(3.2)% |
6.4% |
||||
EMEA |
0.8% |
(11.8)% |
12.6% |
||||
Asia/Pacific |
2.9% |
(7.3)% |
10.2% |
||||
Total industrial segment |
2.7% |
(5.5)% |
8.2% |
||||
Total net sales |
1.3% |
(5.1)% |
6.4% |
||||
Adjusted operating income |
|||||||
Consumer segment |
(3.8)% |
(3.4)% |
(0.4)% |
||||
Industrial segment |
17.8% |
(6.7)% |
24.5% |
||||
Total adjusted operating |
0.9% |
(4.2)% |
5.1% |
To present the percentage change in projected 2016 adjusted earnings per share on a constant currency basis, projected sales and adjusted operating income for entities reporting in currencies other than the U.S. dollar are translated into U.S. dollars at the company's budgeted exchange rate for 2016 and are compared to the 2015 results, translated into U.S. dollars using the same 2016 budgeted exchange rate, rather than at the average actual exchange rates in effect during fiscal year 2015. This calculation is performed to arrive at adjusted net income (however, no adjustment is made for the company's share of income in unconsolidated operations that are denominated in currencies other than the U.S. dollar) divided by historical shares outstanding for fiscal year 2015 or projected shares outstanding for fiscal year 2016, as appropriate.
(in millions except per share data) |
|||||
2016 Projection |
|||||
Earnings per share |
$3.62 to $3.69 |
||||
Impact of special charges |
0.03 |
||||
Adjusted earnings per share |
$3.65 to $3.72 |
||||
Fiscal year 2016 Projection |
|||||
Percentage change in adjusted earnings per share |
5% to 7% |
||||
Impact of foreign currency exchange rates |
(4)% |
||||
Percentage change in adjusted earnings per share |
9% to 11% |
Live Webcast
As previously announced,
Forward-looking Information
Certain information contained in this release, including statements concerning expected performance such as those relating to net sales, earnings, cost savings, acquisitions and brand marketing support, are "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934. These statements may be identified by the use of words such as "may," "will," "expect," "should," "anticipate," "intend," "believe" and "plan." These statements may relate to: the expected results of operations of businesses acquired by the company, the expected impact of raw material costs and pricing actions on the company's results of operations and gross margins, the expected productivity and working capital improvements, expectations regarding growth potential in various geographies and markets, expected trends in net sales and earnings performance and other financial measures, the expectations of pension and postretirement plan contributions and anticipated charges associated with such plans, the holding period and market risks associated with financial instruments, the impact of foreign exchange fluctuations, the adequacy of internally generated funds and existing sources of liquidity, such as the availability of bank financing, the ability to issue additional debt or equity securities and expectations regarding purchasing shares of
These and other forward-looking statements are based on management's current views and assumptions and involve risks and uncertainties that could significantly affect expected results. Results may be materially affected by factors such as: damage to the company's reputation or brand name; loss of brand relevance; increased private label use; product quality, labeling, or safety concerns; negative publicity about our products; business interruptions due to natural disasters or unexpected events; actions by, and the financial condition of, competitors and customers; the company's inability to achieve expected and/or needed cost savings or margin improvements; negative employee relations; the lack of successful acquisition and integration of new businesses; issues affecting the company's supply chain and raw materials, including fluctuations in the cost and availability of raw and packaging materials; government regulation, and changes in legal and regulatory requirements and enforcement practices; global economic and financial conditions generally, including the availability of financing, and interest and inflation rates; the investment return on retirement plan assets, and the costs associated with pension obligations; foreign currency fluctuations; the stability of credit and capital markets; risks associated with the company's information technology systems, the threat of data breaches and cyber attacks; volatility in the effective tax rate; impact of climate change on raw materials; infringement of intellectual property rights, and those of customers; litigation, legal and administrative proceedings; and other risks described in the company's filings with the
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 &
For more information, visit www.mccormickcorporation.com.
For information contact:
Investor Relations:
Corporate Communications:
(Financial tables follow)
Fourth Quarter Report |
McCormick & Company, Incorporated |
|||||||||||||||
Consolidated Income Statement |
||||||||||||||||
(In millions except per-share data) |
||||||||||||||||
Three months ended |
Twelve months ended |
|||||||||||||||
November 30, |
November 30, |
November 30, |
November 30, |
|||||||||||||
Net sales |
$ |
1,201.9 |
$ |
1,173.6 |
$ |
4,296.3 |
$ |
4,243.2 |
||||||||
Cost of goods sold |
680.2 |
667.5 |
2,559.0 |
2,513.0 |
||||||||||||
Gross profit |
521.7 |
506.1 |
1,737.3 |
1,730.2 |
||||||||||||
Gross profit margin |
43.4 |
% |
43.1 |
% |
40.4 |
% |
40.8 |
% |
||||||||
Selling, general and administrative expense |
307.1 |
303.8 |
1,127.4 |
1,122.0 |
||||||||||||
Special charges |
2.4 |
2.9 |
61.5 |
5.2 |
||||||||||||
Operating income |
212.2 |
199.4 |
548.4 |
603.0 |
||||||||||||
Interest expense |
13.8 |
12.4 |
53.3 |
49.7 |
||||||||||||
Other income, net |
0.5 |
0.3 |
1.1 |
1.1 |
||||||||||||
Income from consolidated operations before income taxes |
198.9 |
187.3 |
496.2 |
554.4 |
||||||||||||
Income taxes |
59.4 |
48.6 |
131.3 |
145.9 |
||||||||||||
Net income from consolidated operations |
139.5 |
138.7 |
364.9 |
408.5 |
||||||||||||
Income from unconsolidated operations |
9.7 |
9.3 |
36.7 |
29.4 |
||||||||||||
Net income |
$ |
149.2 |
$ |
148.0 |
$ |
401.6 |
$ |
437.9 |
||||||||
Earnings per share - basic |
$ |
1.17 |
$ |
1.15 |
$ |
3.14 |
$ |
3.37 |
||||||||
Earnings per share - diluted |
$ |
1.16 |
$ |
1.14 |
$ |
3.11 |
$ |
3.34 |
||||||||
Average shares outstanding - basic |
127.8 |
128.8 |
128.0 |
129.9 |
||||||||||||
Average shares outstanding - diluted |
129.0 |
129.8 |
129.2 |
131.0 |
Fourth Quarter Report |
McCormick & Company, Incorporated |
|||||||
Consolidated Balance Sheet |
||||||||
(In millions) |
||||||||
November 30, |
November 30, |
|||||||
Assets |
||||||||
Cash and cash equivalents |
$ |
112.6 |
$ |
77.3 |
||||
Trade accounts receivable, net |
455.2 |
493.6 |
||||||
Inventories |
710.8 |
713.8 |
||||||
Prepaid expenses and other current assets |
127.9 |
131.5 |
||||||
Total current assets |
1,406.5 |
1,416.2 |
||||||
Property, plant and equipment, net |
618.4 |
602.7 |
||||||
Goodwill |
1,759.3 |
1,722.2 |
||||||
Intangible assets, net |
372.1 |
330.8 |
||||||
Investments and other assets |
351.5 |
342.4 |
||||||
Total assets |
$ |
4,507.8 |
$ |
4,414.3 |
||||
Liabilities |
||||||||
Short-term borrowings and current portion of long-term debt |
$ |
343.0 |
$ |
270.8 |
||||
Trade accounts payable |
411.9 |
372.1 |
||||||
Other accrued liabilities |
485.3 |
479.1 |
||||||
Total current liabilities |
1,240.2 |
1,122.0 |
||||||
Long-term debt |
1,052.7 |
1,014.1 |
||||||
Other long-term liabilities |
528.0 |
468.8 |
||||||
Total liabilities |
2,820.9 |
2,604.9 |
||||||
Shareholders' equity |
||||||||
Common stock |
1,039.6 |
995.6 |
||||||
Retained earnings |
1,036.7 |
982.6 |
||||||
Accumulated other comprehensive loss |
(406.1) |
(186.0) |
||||||
Non-controlling interests |
16.7 |
17.2 |
||||||
Total shareholders' equity |
1,686.9 |
1,809.4 |
||||||
Total liabilities and shareholders' equity |
$ |
4,507.8 |
$ |
4,414.3 |
Fourth Quarter Report |
McCormick & Company, Incorporated |
|||||||
Consolidated Cash Flow Statement |
||||||||
(In millions) |
||||||||
Twelve Months Ended |
||||||||
November 30, |
November 30, |
|||||||
Operating activities |
||||||||
Net income |
$ |
401.6 |
$ |
437.9 |
||||
Adjustments to reconcile net income to net cash provided by |
||||||||
Depreciation and amortization |
105.9 |
102.7 |
||||||
Stock based compensation |
18.7 |
18.2 |
||||||
Brand name impairment included in special charges |
9.6 |
— |
||||||
Special charges |
22.8 |
5.2 |
||||||
Loss on sale of assets |
0.6 |
1.3 |
||||||
Deferred income taxes |
1.0 |
6.1 |
||||||
Income from unconsolidated operations |
(36.7) |
(29.4) |
||||||
Changes in operating assets and liabilities |
35.6 |
(54.2) |
||||||
Dividends from unconsolidated affiliates |
30.9 |
15.8 |
||||||
Net cash flow provided by operating activities |
590.0 |
503.6 |
||||||
Investing activities |
||||||||
Acquisition of business |
(210.9) |
— |
||||||
Capital expenditures |
(128.4) |
(132.7) |
||||||
Proceeds from sale of property, plant and equipment |
0.4 |
1.1 |
||||||
Net cash flow used in investing activities |
(338.9) |
(131.6) |
||||||
Financing activities |
||||||||
Short-term borrowings, net |
(127.4) |
57.7 |
||||||
Long-term debt borrowings |
247.0 |
— |
||||||
Long-term debt repayments |
(1.6) |
(1.6) |
||||||
Proceeds from exercised stock options |
33.1 |
31.7 |
||||||
Common stock acquired by purchase |
(145.8) |
(244.3) |
||||||
Dividends paid |
(204.9) |
(192.4) |
||||||
Net cash flow used in financing activities |
(199.6) |
(348.9) |
||||||
Effect of exchange rate changes on cash and cash equivalents |
(16.2) |
(8.8) |
||||||
Increase in cash and cash equivalents |
35.3 |
14.3 |
||||||
Cash and cash equivalents at beginning of period |
77.3 |
63.0 |
||||||
Cash and cash equivalents at end of period |
$ |
112.6 |
$ |
77.3 |
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