McCormick Reports Third Quarter Increase in Sales and Profits
SPARKS, Md., Sept. 28 /PRNewswire-FirstCall/ -- McCormick & Company, Incorporated (NYSE: MKC), today reported increased sales and earnings per share for the third quarter ended August 31, 2005.
Sales for the quarter were $623 million, a 1.5% increase from the third quarter of 2004. Sales from the Silvo business acquired in 2004 and favorable foreign exchange rates were offset in part by lower sales to industrial customers.
Earnings per share for the third quarter were $0.35 compared to earnings per share of $0.33 reported in the third quarter of 2004. Higher operating income from the sales increase as well as higher margins added $0.02 to earnings per share. The negative effects of higher interest rates and an increase in the effective tax rate were offset by higher income from the Company's joint venture in Mexico and lower shares outstanding.
Through the first three quarters of 2005, the Company funded $141 million of share repurchases and $65 million of dividends with net cash from operations and increased borrowings. Year-to-date, dividend payments increased 12% compared to 2004 and share repurchases rose 30%. During this period, the Company has maintained capital expenditures at the same level as 2004.
Chairman's Comments
Robert J. Lawless, Chairman, President & CEO, commented, "During the third quarter, we achieved higher profits with increased sales and income from our consumer business, the benefit of our cost savings program and improved income from joint ventures. As expected, sales to industrial customers were weak this quarter. We were also affected by higher interest rates and an increase in our tax rate. Based on our outlook for the fourth quarter, we continue to expect 2005 fiscal year earnings per share of $1.58 to $1.62.
"During 2005, the Company has been challenged by a high cost inventory of vanilla beans, weakness in industrial sales, an accounting adjustment and the effects of hurricane Katrina. Together, these factors have interrupted a period of strong sales and profit growth that began in 1999. As announced early in September, a review of our industrial business is underway as well as certain actions to improve the efficiency of our entire supply chain. With these actions, we are confident that long term, our sales growth, margin improvement and strong cash flow will once again lead to excellent financial results and increased value for McCormick shareholders."
Business Segment Results
Consumer Business
(in thousands) Three Months Ended Nine Months Ended
8/31/05 8/31/04 8/31/05 8/31/04
Net sales $315,549 $303,239 $961,399 $899,630
Operating income 58,869 56,776 167,184 151,390
For the third quarter, sales for McCormick's consumer business rose 4% versus the prior year. This follows a 12% sales increase in the third quarter of 2004. In 2005, higher volume, price and product mix increased sales 3%, due largely to the acquisition of Silvo in November 2004. Favorable foreign exchange rates added 1%. In the Americas, sales increased 3% due primarily to favorable pricing and product mix, as well as to favorable foreign exchange rates that added 1%. Consumer sales in Europe rose 8% for the quarter, including an unfavorable 1% from foreign exchange rates. Silvo increased sales in Europe 11%, while difficult market conditions, primarily in France, had a negative effect. In the third quarter, sales declined slightly in the Asia/Pacific region.
Operating income increased 4%, in line with the higher sales. This follows an increase in operating income of 25% during the third quarter of 2004.
Industrial Business
(in thousands) Three Months Ended Nine Months Ended
8/31/05 8/31/04 8/31/05 8/31/04
Net sales $307,182 $310,305 $893,527 $882,439
Operating income 30,969 31,207 74,831 85,478
For the third quarter of 2005, sales for McCormick's industrial business decreased 1% when compared to 2004. This followed a 9% sales increase in the third quarter of 2004. In the third quarter of 2005, lower vanilla prices reduced sales 3% and favorable foreign exchange added 1%. During this period, the Company experienced volatility in demand with certain customers as well as pricing pressure due to competitive activity. These factors affected industrial sales in the Americas which declined 1%, despite a 1% increase from favorable foreign exchange rates. In Europe, sales decreased 8%, with a 1% negative impact from foreign exchange rates. In addition to volatility and competitive pressure, sales in this region were also affected by the elimination of certain lower margin products. Sales in the Asia/Pacific region rose 15% driven by increases in both China and Australia. In this region, 4% was added by favorable foreign exchange rates during the quarter.
With lower sales, industrial business operating income declined 1% compared to the prior year.
Live Webcast
As previously announced, McCormick will hold a conference call with the analysts today at 10:00 a.m. EDT. The conference call will be web cast live via the McCormick corporate web site. Go to ir.mccormick.com and follow directions to listen to the call. 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 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 be materially affected by external factors such as: actions of competitors, customer relationships, market acceptance of new products, actual amount and timing of special charge items, removal and disposal costs, final negotiations of third-party contracts, the impact of the stock market conditions on its share repurchase program, fluctuations in the cost and availability of supply chain resources, global economic conditions, including interest and currency rate fluctuations, and inflation rates. 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 & Company, Incorporated is the global leader in the manufacture, marketing and distribution of spices, seasonings and flavors to the entire food industry - to foodservice and food processing businesses as well as to retail outlets.
Third Quarter Report McCormick & Company, Incorporated
Consolidated Income Statement
(In thousands except per-share data)
Three Months Ended Nine Months Ended
8/31/2005 8/31/2004 8/31/2005 8/31/2004
Net sales $622,731 $613,544 $1,854,926 $1,782,069
Cost of goods sold 379,394 374,385 1,142,075 1,089,298
Gross profit 243,337 239,159 712,851 692,771
Gross profit margin 39.1% 39.0% 38.4% 38.9%
Selling, general &
administrative expense 164,437 164,963 504,211 493,848
Special charges /
(credits) - 195 630 (6,184)
Operating income 78,900 74,001 208,010 205,107
Interest expense 12,536 10,558 35,562 29,826
Other income, net (487) (532) (444) (1,216)
Income from consolidated
operations before income
taxes 66,851 63,975 172,892 176,497
Income taxes 22,603 19,769 56,536 54,538
Net income from consolidated
operations 44,248 44,206 116,356 121,959
Income from
unconsolidated
operations 4,571 3,222 13,829 8,309
Minority interest (849) (1,232) (3,386) (3,113)
Net income $47,970 $46,196 $126,799 $127,155
Earnings per common share -
basic $0.36 $0.34 $0.94 $0.93
Earnings per common share -
diluted $0.35 $0.33 $0.91 $0.90
Average shares outstanding -
basic 133,956 136,961 134,828 137,341
Average shares outstanding -
diluted 137,382 141,687 138,842 141,984
Third Quarter Report McCormick & Company, Incorporated
Consolidated Balance Sheet
(In thousands)
8/31/2005 8/31/2004
Assets
Current assets
Cash and cash equivalents $46,117 $25,909
Receivables, net 321,735 325,675
Inventories 357,251 377,187
Prepaid expenses and other current
assets 49,528 45,728
Total current assets 774,631 774,499
Property, plant and equipment, net 469,578 454,756
Goodwill and intangible assets, net 826,870 725,940
Prepaid allowances 55,113 70,589
Investments and other assets 145,450 132,114
Total assets $2,271,642 $2,157,898
Liabilities and shareholders' equity
Current liabilities
Short-term borrowings and current
portion of long-term debt $427,045 $167,766
Trade accounts payable 170,034 161,172
Other accrued liabilities 300,865 289,522
Total current liabilities 897,944 618,460
Long-term debt 268,942 496,274
Other long-term liabilities 245,933 211,512
Total liabilities 1,412,819 1,326,246
Minority interest 29,828 26,006
Shareholders' equity
Common stock 383,733 320,041
Retained earnings 383,476 449,192
Accumulated other comprehensive
income 61,786 36,413
Total shareholders' equity 828,995 805,646
Total liabilities and
shareholders' equity $2,271,642 $2,157,898
Third Quarter Report McCormick & Company, Incorporated
Consolidated Statement of Cash Flows
(Unaudited)
(In thousands)
Nine Months Ended
8/31/2005 8/31/2004
Cash flows from operating activities
Net income $126,799 $127,155
Adjustments to reconcile net
income to net cash flow from
operating activities:
Depreciation and amortization 54,220 53,427
Income from unconsolidated
operations (13,829) (8,309)
Changes in operating assets and
liabilities (43,869) (50,526)
Dividends from unconsolidated
affiliates 10,544 2,400
Net cash flow from operating
activities 133,865 124,147
Cash flows from investing activities
Capital expenditures (45,831) (45,132)
Proceeds from sale of property,
plant and equipment 636 1,971
Net cash flow from investing
activities (45,195) (43,161)
Cash flows from financing activities
Short-term borrowings, net 59,914 10,328
Long-term debt borrowings - 50,088
Long-term debt repayments (2,610) (16,394)
Proceeds from exercised stock
options 41,056 38,447
Common stock acquired by purchase (141,280) (108,438)
Dividends paid (64,821) (57,755)
Net cash flow from financing
activities (107,741) (83,724)
Effect of exchange rate changes on
cash and cash equivalents (5,147) 3,506
Increase/(decrease) in cash and cash
equivalents (24,218) 768
Cash and cash equivalents at
beginning of period 70,335 25,141
Cash and cash equivalents at end of
period $46,117 $25,909
SOURCE McCormick & Company, Incorporated
CONTACT:
Corporate Communications:
Mac Barrett
410-771-7310
mac_barrett@mccormick.com
Investor Relations:
Joyce Brooks
410-771-7244
joyce_brooks@mccormick.com
both of McCormick & Company,
Incorporated