McCormick Reports Strong Financial Results for Second Quarter 2012 and Reaffirms 2012 Outlook
- Grew second quarter net sales 11% with contributions from acquisitions, pricing actions and increased volume and product mix.
-
Reported earnings per share of
$0.60 for the second quarter, a 9% increase from the year-ago period. -
Generated cash flow from operations of
$144 million through the first half of fiscal year 2012. -
Reaffirmed projected 2012 earnings per share of
$3.01 to $3.06 .
“Across all of our businesses, we continue to face volatile material costs. As reflected in our gross profit margin, which was comparable with the second quarter of 2011, our pricing actions and cost savings from our Comprehensive Continuous Improvement (CCI) program are effectively offsetting the impact of higher material costs. CCI is also helping to fuel our growth and through the first half of 2012, we increased our brand marketing support by 15%. This increase, along with product innovation and other initiatives to grow sales, have created momentum as we head into the second half of 2012.”
McCormick’s second quarter sales rose 11%, and in local currency the
increase was 13% when compared to the year-ago period. In local
currency, acquisitions completed in 2011 added about half of this
increase, while pricing actions taken in response to higher material
costs and volume and product mix also contributed to the increase.
Operating income rose 11% to
Second quarter earnings per share rose to
Through the first half of 2012, the Company generated cash flow from
operations of
For fiscal year 2012, the Company reaffirmed its projected sales growth
of 9% to 11% in local currency, which includes an estimated 4%
contribution from acquisitions completed in 2011. Unfavorable foreign
currency exchange rates are expected to have a 2% unfavorable impact. In
addition, the Company reaffirmed its outlook for operating income growth
of 9% to 11%, which includes approximately
The Company expects the growth rate in earnings per share to be greater
in the fourth quarter of 2012 than in the third quarter of 2012 due in
part to a projected further decline in income from unconsolidated
operations for the third quarter of 2012. In addition, the 2011 results
were affected by transaction costs related to the completion of
acquisitions, which lowered earnings per share in the fourth quarter of
2011 by
Business Segment Results
Consumer Business |
|||||||||||||||
(in millions) |
Three Months Ended |
Six Months Ended |
|||||||||||||
5/31/12 |
5/31/11 |
5/31/12 |
5/31/11 |
||||||||||||
Net sales |
$568.8 |
|
$499.0 |
$1,102.9 |
|
$953.1 |
|||||||||
Operating income |
88.6 |
77.0 |
170.0 |
163.9 |
Consumer business sales grew 14% when compared to the second quarter of 2011. In local currency, sales grew 15% with acquisitions completed in 2011 accounting for two thirds of the increase. The remaining third was due to pricing actions, taken primarily in 2011 to offset the impact of higher material costs, as well as favorable volume and product mix.
-
Consumer sales in the
Americas rose 6%, and in local currency, grew 7%. The increase was driven by pricing actions, as well as a 1% increase that resulted from the Company’s 2011 acquisition of Kitchen Basics, a leading brand of liquid stock. Volume and product mix was comparable to the year-ago period, even with higher pricing. This was achieved, in part, through effective brand marketing support and new product introductions. -
In the
Europe ,Middle East andAfrica (EMEA) region, consumer sales grew 27%, and in local currency increased 32%. A large portion of the increase resulted from McCormick’s 2011 acquisition of Kamis, aPoland -based leading brand of spices, seasonings and mustards. The base business grew 5% this period, led by higher volume and product mix inFrance and theU.K. , as well as some smaller markets in the EMEA region. -
Consumer sales in the
Asia/Pacific region rose 66%, and in local currency grew 64%. McCormick’s 2011 acquisition of Kohinoor, based inIndia , added the majority of this increase. Excluding this impact, the Company grew its base business 5%, which was driven primarily by pricing actions. TheAsia/Pacific region tends to have more quarter to quarter variability from holiday seasons and customer purchase patterns as demonstrated by the 13% sales increase in the first half of 2012, also measured in local currency, excluding the impact of acquisitions.
For the second quarter, operating income for the consumer business rose
15% to
Industrial Business |
||||||||||||||
(in millions) |
Three Months Ended |
Six Months Ended |
||||||||||||
5/31/12 |
5/31/11 |
5/31/12 |
5/31/11 |
|||||||||||
Net sales |
|
$415.2 |
|
$384.7 |
|
$787.8 |
|
$713.4 |
||||||
Operating income |
32.7 |
32.3 |
63.9 |
56.0 |
Industrial business sales grew 8% when compared to the second quarter of 2011. In local currency, sales grew 10% of which pricing actions, taken in response to increased material costs, contributed 6% and higher volume and product mix added 4%.
-
Industrial sales in the
Americas grew 9%, and in local currency grew 10% of which 7% came from pricing actions. Increased volume and product mix contributed 3%, largely driven by product innovation and growing demand for customized seasoning blends in the U.S.,Canada andMexico . - In EMEA, industrial sales rose 6%, and in local currency grew 12%. This growth was led by increased demand from quick service restaurants in this region which has been particularly strong in recent quarters. Higher prices contributed 3% to sales growth in this region.
-
In the
Asia/Pacific region, industrial sales rose 3%, and in local currency increased 1%. The impact of pricing actions was offset by a moderate decline in volume and product mix in the second quarter. As with the consumer business, industrial business sales in theAsia/Pacific region tend to have more variability quarter to quarter as demonstrated by the 10% sales increase for the first half of the year, measured in local currency.
For the second quarter, operating income for the industrial business was
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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,” “believe” and “plan.” These statements may relate to: the expected results of operations of businesses acquired by us, the expected impact of raw material costs and our pricing actions on our results of operations and gross margins, the expected productivity and working capital improvements, expected trends in net sales and earnings performance and other financial measures, the expectations of pension and postretirement plan contributions, 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, our ability to issue additional debt or equity securities and our expectations regarding purchasing shares of our common stock under the existing authorizations.
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 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, changes in regulatory requirements, and global
economic conditions generally which would include the availability of
financing, interest, inflation rates and investment return on retirement
plan assets, as well as foreign currency fluctuations, risks associated
with our information technology systems, the threat of data breaches or
cyber attacks, 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
Every day, no matter where or what you eat, you can enjoy food flavored
by
To learn more please visit us at www.mccormickcorporation.com.
Second Quarter Report |
McCormick & Company, Incorporated |
|||||||||||||||
Consolidated Income Statement (Unaudited) | ||||||||||||||||
(In millions except per-share data) | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
May 31, 2012 | May 31, 2011 | May 31, 2012 | May 31, 2011 | |||||||||||||
Net sales | $ | 984.0 | $ | 883.7 | $ | 1,890.7 | $ | 1,666.5 | ||||||||
Cost of goods sold | 595.6 | 533.0 | 1,147.0 | 987.6 | ||||||||||||
Gross profit | 388.4 | 350.7 | 743.7 | 678.9 | ||||||||||||
Gross profit margin | 39.5 | % | 39.7 | % | 39.3 | % | 40.7 | % | ||||||||
Selling, general and administrative expense | 267.1 | 241.4 | 509.8 | 459.0 | ||||||||||||
Operating income | 121.3 | 109.3 | 233.9 | 219.9 | ||||||||||||
Interest expense | 13.9 | 12.3 | 27.4 | 24.5 | ||||||||||||
Other (expense) income, net | (0.1 | ) | 0.9 | 0.7 | 1.4 | |||||||||||
Income from consolidated operations before income taxes | 107.3 | 97.9 | 207.2 | 196.8 | ||||||||||||
Income taxes | 30.8 | 30.4 | 60.8 | 60.4 | ||||||||||||
Net income from consolidated operations | 76.5 | 67.5 | 146.4 | 136.4 | ||||||||||||
Income from unconsolidated operations | 3.9 | 6.1 | 8.5 | 14.0 | ||||||||||||
Net income | $ | 80.4 | $ | 73.6 | $ | 154.9 | $ | 150.4 | ||||||||
Earnings per common share - basic | $ | 0.61 | $ | 0.56 | $ | 1.17 | $ | 1.13 | ||||||||
Earnings per common share - diluted | $ | 0.60 | $ | 0.55 | $ | 1.15 | $ | 1.12 | ||||||||
Average shares outstanding - basic | 132.6 | 132.4 | 132.8 | 132.7 | ||||||||||||
Average shares outstanding - diluted | 134.1 | 134.1 | 134.3 | 134.3 | ||||||||||||
Second Quarter Report | McCormick & Company, Incorporated | |||||||
Consolidated Balance Sheet (Unaudited) | ||||||||
(In millions) | ||||||||
May 31, 2012 | May 31, 2011 | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 61.4 | $ | 47.9 | ||||
Trade accounts receivable, net | 378.0 | 342.6 | ||||||
Inventories | 611.0 | 577.3 | ||||||
Prepaid expenses and other current assets | 116.8 | 111.8 | ||||||
Total current assets | 1,167.2 | 1,079.6 | ||||||
Property, plant and equipment, net | 507.5 | 494.8 | ||||||
Goodwill, net | 1,651.8 | 1,480.3 | ||||||
Intangible assets, net | 341.1 | 234.7 | ||||||
Investments and other assets | 298.1 | 300.0 | ||||||
Total assets | $ | 3,965.7 | $ | 3,589.4 | ||||
Liabilities and shareholders' equity | ||||||||
Current liabilities | ||||||||
Short-term borrowings and current portion of long-term debt | $ | 244.4 | $ | 208.5 | ||||
Trade accounts payable | 321.9 | 301.8 | ||||||
Other accrued liabilities | 334.0 | 336.2 | ||||||
Total current liabilities | 900.3 | 846.5 | ||||||
Long-term debt | 1,027.7 | 781.2 | ||||||
Other long-term liabilities | 398.8 | 319.6 | ||||||
Total liabilities | 2,326.8 | 1,947.3 | ||||||
Shareholders' equity | ||||||||
Common stock | 862.7 | 787.8 | ||||||
Retained earnings | 885.9 | 732.7 | ||||||
Accumulated other comprehensive (loss) income | (127.3 | ) | 112.4 | |||||
Non-controlling interests | 17.6 | 9.2 | ||||||
Total shareholders' equity | 1,638.9 | 1,642.1 | ||||||
Total liabilities and shareholders' equity | $ | 3,965.7 | $ | 3,589.4 | ||||
Second Quarter Report | McCormick & Company, Incorporated | ||||||||
Consolidated Statement of Cash Flows (Unaudited) | |||||||||
(In millions) | |||||||||
Six Months Ended | |||||||||
May 31, 2012 | May 31, 2011 | ||||||||
Cash flows from operating activities | |||||||||
Net income | $ | 154.9 | $ | 150.4 | |||||
Adjustments to reconcile net income to net | |||||||||
cash flow from operating activities: | |||||||||
Depreciation and amortization | 50.6 | 48.5 | |||||||
Stock based compensation | 8.7 | 7.6 | |||||||
Income from unconsolidated operations | (8.5 | ) | (14.0 | ) | |||||
Changes in operating assets and liabilities | (72.6 | ) | (166.7 | ) | |||||
Dividends from unconsolidated affiliates | 11.3 | 10.5 | |||||||
Net cash flow provided by operating activities | 144.4 | 36.3 | |||||||
Cash flows from investing activities | |||||||||
Capital expenditures | (35.2 | ) | (33.4 | ) | |||||
Proceeds from sale of property, plant and equipment | 0.3 | 0.3 | |||||||
Net cash flow used in investing activities | (34.9 | ) | (33.1 | ) | |||||
Cash flows from financing activities | |||||||||
Short-term borrowings, net | 25.3 | 107.9 | |||||||
Long-term debt borrowings | - | 2.1 | |||||||
Long-term debt repayments | (4.2 | ) | - | ||||||
Proceeds from exercised stock options | 29.6 | 31.1 | |||||||
Common stock acquired by purchase | (68.6 | ) | (89.2 | ) | |||||
Dividends paid | (82.4 | ) | (74.3 | ) | |||||
Net cash flow used in financing activities | (100.3 | ) | (22.4 | ) | |||||
Effect of exchange rate changes on cash and | |||||||||
cash equivalents | (1.7 | ) | 16.3 | ||||||
Increase (decrease) in cash and cash equivalents | 7.5 | (2.9 | ) | ||||||
Cash and cash equivalents at beginning of period | 53.9 | 50.8 | |||||||
Cash and cash equivalents at end of period | $ | 61.4 | $ | 47.9 | |||||
Source:
McCormick & Company, Incorporated
Investor Relations:
Joyce
Brooks, 410-771-7244
joyce_brooks@mccormick.com
or
Corporate
Communications:
Lori Robinson, 410-527-6004
lori_robinson@mccormick.com