McCormick Reports Record Sales and Earnings Per Share for Second Quarter
SPARKS, Md., June 20 /PRNewswire/ -- McCormick & Company, Incorporated (NYSE: MKC), today reported a 17% increase in sales and 9% increase in earnings per share for the second quarter of fiscal 2001.
Sales for the quarter were $567 million, an increase of 17% versus the second quarter of 2000. Excluding foreign exchange and the Ducros business, sales increased 6%. Gross profit margin for the quarter was 39.1%, 4.0 percentage points above last year. This increase resulted from a shift in product mix to higher margin, more value-added products, including the recently acquired Ducros business, as well as cost reduction initiatives. Operating profit margin for this year's quarter reached 8.7% versus 8.4% in 2000.
Earnings per share for the quarter ended May 31 increased to 38 cents from 35 cents in 2000. Results from Ducros for the quarter diluted earnings by 4 cents per share, which was slightly better than expected. In the second quarter, excluding dilution from the Ducros acquisition, earnings per share for 2001 were 42 cents, an increase of 7 cents versus the prior year. This was achieved through 5 cents of higher operating income, 1 cent in reduced interest expense and 1 cent from a lower effective tax rate.
Consumer Business
Sales for McCormick's consumer business rose 36% versus last year's second quarter and increased 7% excluding the impact of Ducros and foreign exchange. In local currency, consumer sales were up 7% in the Americas, 7% in Europe (excluding Ducros) and 9% in Asia. This strong performance was driven by volume and, to a lesser extent, by pricing. Operating income for the consumer business was $26.5 million, 21% ahead of last year's quarter. As a percent of net sales, operating income decreased to 9.7% from 10.8%, primarily a result of the dilutive effect of Ducros.
Industrial Business
Industrial sales increased 2% versus last year's second quarter and 4% excluding foreign exchange. In local currency, industrial sales increased 4% in the Americas, were unchanged in Europe and rose 11% in Asia. The strongest increases were achieved in sales of snack seasonings and sales to restaurant customers. Operating income for the quarter increased to $24.1 million, a 14.8% increase versus last year. As a percent of net sales, operating income increased to 9.9%, which compares to 8.8% in 2000. Margin improvement in the industrial business was particularly strong due to product mix, favorable commodity prices and cost reduction initiatives.
Packaging Business
The packaging business reported third party sales up 9% versus last year's second quarter. Operating profit (including intersegment business) was $5.9 million, a decrease of 6%. As a percent of net sales, operating profit decreased to 10.1% from 11.4% as a result of higher resin costs and unfavorable product mix for the quarter.
Chairman's Comments
Commented Robert J. Lawless, Chairman, President & CEO, "We are extremely pleased with our results for the first half of 2001. Sales increased 16%, tracking well against our 12-14% target range. The consumer business achieved good sales growth this quarter, following a slow start for the year, and sales in our industrial and packaging businesses have improved.
"Gross profit margin continued to improve this quarter and ended the first half at 39.1% compared to a first half result of 35.3% in 2000. We have two key initiatives behind this improvement. First, an improved product mix as we shift our focus and resources toward higher margin, more value-added products. Second, our cost reduction initiatives, including the Beyond 2000 program, are driving costs out of our processes, particularly in the procurement of materials. For 2001, we are well on our way toward our goal of a 40% gross profit margin.
"Before the year began, our expectation for 2001 earnings per share growth was 8-10%, with a relatively even performance in the first half of the year, followed by strong second half results. While our 9% earnings per share increase in the first half is well ahead of this first half projection, our expectation for the year remains 8-10%. In the second half of 2001, foreign exchange, inventory reduction efforts by our retail customers, and some minor dilution from Ducros could impact the third and fourth quarters. Despite these risks, our year-to-date results give us confidence that we will be at the top end of our 8-10% earnings per share growth target.
"McCormick's strategies for growth are delivering positive results. Integration of the Ducros acquisition is proceeding well, and this business is meeting our expectations. The Beyond 2000 program is in full swing, on plan and already contributing to gross profit margin improvements. Continued focus and investment in our branded consumer products and in value-added industrial products are also contributing.
"I congratulate the employees of McCormick on a great quarter. We have created momentum as we begin the second half of our year. The Company is meeting its goals and remains committed to delivering superior financial results and shareholder value. We believe that 2001 will be an excellent year for McCormick and its shareholders."
Forward-Looking Statement
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 and Exchange Act of 1934. Forward-looking statements are based on management's current views and assumptions and involve risks and uncertainties that could be materially affected by external factors such as: actions of competitors, customer relationships, fluctuations in the cost and availability of supply chain resources and foreign economic conditions, including currency rate fluctuations. 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.
About McCormick
McCormick & Co., Inc. is the global leader in the manufacture, marketing and distribution of spices, seasonings and flavors to the entire food industry
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to foodservice and food processing businesses as well as to retail outlets. In addition, the packaging group manufactures and markets specialty plastic bottles and tubes for personal care and other industries.
McCormick & Company, Incorporated
Second Quarter Report
Consolidated Income Statement (Unaudited)
(In thousands except per-share data)
Three Months Ended Six Months Ended
5/31/01 5/31/00 5/31/01 5/31/00
NET SALES
Consumer $273,214 $201,356 $542,751 $404,448
Industrial 244,608 239,258 463,549 456,559
Packaging 49,318 45,110 94,344 87,120
Total Net sales 567,140 485,724 1,100,644 948,127
Cost of goods sold 345,627 315,242 670,636 613,813
Gross profit 221,513 170,482 430,008 334,314
Gross profit margin 39.1% 35.1% 39.1% 35.3%
Selling, general &
administrative expense 171,943 129,108 335,499 256,351
Special charges - 464 - 966
Operating income 49,570 40,910 94,509 76,997
Interest expense 13,784 8,313 28,071 15,719
Other (income)/expense 73 (54) (900) 86
Income before income taxes 35,713 32,651 67,338 61,192
Income taxes 11,821 11,649 22,289 21,838
Net income from
consolidated operations 23,892 21,002 45,049 39,354
Income from
unconsolidated
operations 3,181 3,200 9,260 9,265
Minority interest (437) - (1,087) -
NET INCOME $26,636 $24,202 $53,222 $48,619
EARNINGS PER SHARE -
ASSUMING DILUTION $0.38 $0.35 $0.76 $0.70
EARNINGS PER SHARE - BASIC $0.39 $0.35 $0.78 $0.70
Average shares outstanding
- assuming dilution 70,054 69,605 69,696 69,590
| Average shares outstanding | |
|---|---|
| basic 68,824 68,675 68,669 69,112 | |
| Note: | The Company has reclassified amortization of goodwill from other |
| income to selling, general & administrative expense. All amounts | |
| have been reclassified to conform to the current year presentation. | |
| Goodwill amortization was $6,535 and $2,516 for the six months ended | |
| May 31, 2001 and 2000, respectively, and was $3,255 and $1,261 for the | |
| quarter ended May 31, 2001 and 2000, respectively. | |
Condensed Consolidated Balance Sheet (Unaudited)
(In thousands)
5/31/01 5/31/00
Assets
Receivables $248,641 $175,195
Inventories 285,170 252,033
Prepaid allowances 104,918 124,082
Property, plant and equipment, net 394,659 356,447
Other assets 617,754 287,560
Total assets $1,651,142 $1,195,317
Liabilities and shareholders' equity
Short-term borrowings $303,140 $202,233
Other current liabilities 406,281 324,534
Long-term debt 454,298 235,084
Other liabilities 117,176 99,047
Shareholders' equity 370,247 334,419
Total liabilities and shareholders'
equity $1,651,142 $1,195,317
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SOURCE McCormick & Company, Incorporated
CONTACT: McCormick & Company Corporate Communications, 410-771-7310/