McCormick Reports On First Quarter Results And Latest Financial Outlook
- Sales rose 1% in the first quarter from the year-ago period. In constant currency, the company grew sales 4%, with increases in both the consumer and industrial segments.
McCormick increased gross profit margin to 39.6% from 39.3% in the first quarter of 2016. Operating income was$134 million in the first quarter compared to$129 million in the year-ago period. Adjusted operating income was$138 million , a 5% increase from$131 million in the first quarter of 2016, and an 8% increase in constant currency.- Earnings per share was
$0.74 in the first quarter compared to$0.73 in the year-ago period, with higher operating income offset in part by a higher tax rate and the impact of unfavorable currency on income from unconsolidated operations. Adjusted earnings per share increased to$0.76 from$0.74 . - For the 2017 fiscal year, the company updated its financial outlook to reflect a higher impact from special charges. Excluding this impact, the company reaffirmed its expected constant currency growth rate for sales, adjusted operating income and adjusted earnings per share.
Chairman, President & CEO's Remarks
"Taste continues to rank #1 in deciding what consumers choose to eat. We are aligned with today's move toward more flavorful, healthy food and are confident in our plans to drive growth through brand marketing, innovation across both our consumer and industrial segments, and opportunities to expand distribution. We are balancing our resources and efforts to drive sales with our work to lower costs, and are on-track to achieve approximately
"Around the world,
First Quarter 2017 Results
Operating income was
Earnings per share was
The company continues to generate strong cash flow. Year-to-date net cash provided by operating activities for the first quarter of 2017 was
2017 Financial Outlook
For the 2017 fiscal year,
In 2017,
Operating income in 2017 is expected to grow 9% to 11% from
Business Segment Results |
||||||||
Consumer Segment |
||||||||
(in millions) |
Three months ended |
|||||||
2/28/2017 |
2/29/2016 |
|||||||
Net sales |
$ |
638.6 |
$ |
633.8 |
||||
Operating income |
95.4 |
93.0 |
||||||
Operating income, excluding special |
97.9 |
94.3 |
The company grew consumer segment sales 1% when compared to the first quarter of 2016. In constant currency, sales rose 2%.
- Consumer sales in the
Americas rose 2%, with minimal impact from currency. Incremental sales from the acquisitions of Gourmet Garden and Cajun Injector contributed 3 percentage points to sales growth. In the U.S., growth in the broader food industry was impacted by weak trends this period in many center-of-the-store categories. The company attributed a portion of this weakness, related to its own products, to the impact of timing, including the effect of a late Easter in 2017. - Consumer sales in
Europe ,Middle East andAfrica (EMEA) decreased 7%. In constant currency, sales decreased 5% from the year-ago period mainly due to weak sales in theU.K. where the competitive retail environment has been challenging. - First quarter consumer sales in the
Asia/Pacific region rose 7% and in constant currency, sales rose 13%. Sales of Gourmet Garden added 4 percentage points of the increase in this region. The company achieved strong sales growth inChina which was partially offset by lower sales inIndia that related to the discontinuation of lower margin product lines.
Consumer segment operating income, excluding special charges, rose 4% to
Industrial Segment |
||||||||
(in millions) |
Three months ended |
|||||||
2/28/2017 |
2/29/2016 |
|||||||
Net sales |
$ |
405.1 |
$ |
396.4 |
||||
Operating income |
38.8 |
36.1 |
||||||
Operating income, excluding special |
39.9 |
36.4 |
Industrial segment sales increased 2% from the first quarter of 2016. In constant currency sales rose 6% with increases in each of the company's three regions.
- Industrial sales in the
Americas grew 2% from the year-ago period. In constant currency, the increase was 3%. This was led by double-digit increases in sales of both branded foodservice items and savory flavor products, offset in part by weaker demand from quick service restaurants. - In EMEA, industrial sales were comparable to the year-ago period. In constant currency sales rose 13%, with sales from Giotti contributing 14% to this growth. Industrial sales in this region were unfavorably impacted by the discontinuation of a lower margin business.
- Industrial sales in the
Asia/Pacific region grew 7% in the first quarter and in constant currency, sales rose 10%, mainly inChina .
Industrial segment operating income, excluding special charges, rose 10% to
Non-GAAP Financial Measures
The tables below include financial measures of adjusted operating income, 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. The exclusion of special charges provides additional information that enables enhanced comparisons to prior periods and, accordingly, facilitates the 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 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 |
||||||
2/28/2017 |
2/29/2016 |
||||||
Operating income |
$ |
134.2 |
$ |
129.1 |
|||
Impact of special charges |
3.6 |
1.6 |
|||||
Adjusted operating income |
$ |
137.8 |
$ |
130.7 |
|||
% increase versus prior period |
5.4 |
% |
|||||
Net income |
$ |
93.5 |
$ |
93.4 |
|||
Impact of special charges above (1) |
2.5 |
1.3 |
|||||
Adjusted net income |
$ |
96.0 |
$ |
94.7 |
|||
% increase versus prior period |
1.4 |
% |
|||||
Earnings per share - diluted |
$ |
0.74 |
$ |
0.73 |
|||
Impact of special charges above |
0.02 |
0.01 |
|||||
Adjusted earnings per share - diluted |
$ |
0.76 |
$ |
0.74 |
|||
% increase versus prior period |
2.7 |
% |
(1) Special charges of $3.6 million and $1.6 million for the three months ended February 28, 2017 and February 29, 2016 are net of taxes of $1.1 million and $0.3 million, respectively. |
Because we are a multi-national company, we are subject to variability of our reported U.S. dollar results due to changes in foreign currency exchange rates. Those changes have been volatile over the past several years. The exclusion of the effects of foreign currency exchange, or what we refer to an amounts expressed "on a constant currency basis", is a non-GAAP measure. We believe that this non-GAAP measure provides additional information that enables enhanced comparison to prior periods excluding the translation effects of changes in rates of foreign currency exchange and provides additional insight into the underlying performance of our operations located outside of the U.S. It should be noted that our presentation herein of amounts and percentage changes on a constant currency basis does not exclude the impact of foreign currency transaction gains and losses (that is, the impact of transactions denominated in other than the local currency of any of our subsidiaries in their local currency reported results).
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 February 28, 2017 |
|||||||
Percentage Change |
Impact of Foreign |
Percentage Change |
|||||
Net sales |
|||||||
Consumer segment |
|||||||
Americas |
2.1% |
0.3% |
1.8% |
||||
EMEA |
(7.2)% |
(2.7)% |
(4.5)% |
||||
Asia/Pacific |
7.0% |
(5.8)% |
12.8% |
||||
Total consumer segment |
0.8% |
(1.4)% |
2.2% |
||||
Industrial segment |
|||||||
Americas |
1.9% |
(1.4)% |
3.3% |
||||
EMEA |
0.5% |
(12.2)% |
12.7% |
||||
Asia/Pacific |
6.7% |
(3.2)% |
9.9% |
||||
Total industrial segment |
2.2% |
(3.7)% |
5.9% |
||||
Total net sales |
1.3% |
(2.3)% |
3.6% |
||||
Adjusted operating income |
|||||||
Consumer segment |
3.8% |
(0.8)% |
4.6% |
||||
Industrial segment |
9.6% |
(7.9)% |
17.5% |
||||
Total adjusted operating |
5.4% |
(2.8)% |
8.2% |
To present the percentage change in projected 2017 sales, adjusted operating income and 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 2017 and are compared to the 2016 results, translated into U.S. dollars using the same 2017 budgeted exchange rate, rather than at the average actual exchange rates in effect during fiscal year 2016. 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 2016 or projected shares outstanding for fiscal year 2017, as appropriate.
Fiscal year 2016 actual results and 2017 projections
(in millions except per share data) |
Twelve Months Ended |
|||||||
2017 Projection |
11/30/16 |
|||||||
Operating income |
$ |
641.0 |
||||||
Impact of special charges |
16.0 |
|||||||
Adjusted operating income |
$ |
657.0 |
||||||
Earnings per share - diluted |
$3.98 to $4.06 |
$ |
3.69 |
|||||
Impact of special charges, including special charges |
0.07 |
0.09 |
||||||
Adjusted earnings per share - diluted |
$4.05 to $4.13 |
$ |
3.78 |
|||||
Percentage change in sales |
3% to 5% |
|||||||
Impact of foreign currency exchange rates |
(2)% |
|||||||
Percentage change in sales on constant currency |
5% to 7% |
|||||||
Percentage change in adjusted operating income |
8% to 10% |
|||||||
Impact of foreign currency exchange rates |
(1)% |
|||||||
Percentage change in adjusted operating income on |
9% to 11% |
|||||||
Percentage change in adjusted earnings per share |
7% to 9% |
|||||||
Impact of foreign currency exchange rates |
(2)% |
|||||||
Percentage change in adjusted earnings per share |
9% to 11% |
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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," "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; fundamental changes in tax laws; volatility in our effective tax rate; climate change; 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)
First Quarter Report |
McCormick & Company, |
|||||||
Consolidated Income Statement (Unaudited) |
||||||||
(In millions except per-share data) |
||||||||
Three months ended |
||||||||
February 28, |
February 29, |
|||||||
Net sales |
$ |
1,043.7 |
$ |
1,030.2 |
||||
Cost of goods sold |
630.7 |
625.2 |
||||||
Gross profit |
413.0 |
405.0 |
||||||
Gross profit margin |
39.6 |
% |
39.3 |
% |
||||
Selling, general and administrative expense |
275.2 |
274.3 |
||||||
Special charges |
3.6 |
1.6 |
||||||
Operating income |
134.2 |
129.1 |
||||||
Interest expense |
14.5 |
13.9 |
||||||
Other income, net |
0.1 |
1.1 |
||||||
Income from consolidated operations before income taxes |
119.8 |
116.3 |
||||||
Income taxes |
33.3 |
31.3 |
||||||
Net income from consolidated operations |
86.5 |
85.0 |
||||||
Income from unconsolidated operations |
7.0 |
8.4 |
||||||
Net income |
$ |
93.5 |
$ |
93.4 |
||||
Earnings per share - basic |
$ |
0.75 |
$ |
0.73 |
||||
Earnings per share - diluted |
$ |
0.74 |
$ |
0.73 |
||||
Average shares outstanding - basic |
125.1 |
127.1 |
||||||
Average shares outstanding - diluted |
126.9 |
128.3 |
First Quarter Report |
McCormick & Company, Incorporated |
|||||||
Consolidated Balance Sheet (Unaudited) |
||||||||
(In millions) |
||||||||
February 28, 2017 |
February 29, 2016 |
|||||||
Assets |
||||||||
Cash and cash equivalents |
$ |
125.7 |
$ |
111.8 |
||||
Trade accounts receivable, net |
404.4 |
371.2 |
||||||
Inventories |
767.2 |
702.2 |
||||||
Prepaid expenses and other current assets |
87.8 |
72.9 |
||||||
Total current assets |
1,385.1 |
1,258.1 |
||||||
Property, plant and equipment, net |
682.8 |
609.1 |
||||||
Goodwill |
1,857.6 |
1,764.0 |
||||||
Intangible assets, net |
473.9 |
370.1 |
||||||
Investments and other assets |
351.7 |
363.7 |
||||||
Total assets |
$ |
4,751.1 |
$ |
4,365.0 |
||||
Liabilities |
||||||||
Short-term borrowings and current portion of long-term debt |
$ |
889.6 |
$ |
390.2 |
||||
Trade accounts payable |
448.4 |
336.7 |
||||||
Other accrued liabilities |
400.4 |
363.7 |
||||||
Total current liabilities |
1,738.4 |
1,090.6 |
||||||
Long-term debt |
803.5 |
1,055.0 |
||||||
Other long-term liabilities |
477.6 |
492.5 |
||||||
Total liabilities |
3,019.5 |
2,638.1 |
||||||
Shareholders' equity |
||||||||
Common stock |
1,091.1 |
1,047.6 |
||||||
Retained earnings |
1,073.1 |
1,086.3 |
||||||
Accumulated other comprehensive loss |
(445.0) |
(423.7) |
||||||
Non-controlling interests |
12.4 |
16.7 |
||||||
Total shareholders' equity |
1,731.6 |
1,726.9 |
||||||
Total liabilities and shareholders' equity |
$ |
4,751.1 |
$ |
4,365.0 |
First Quarter Report |
McCormick & Company, Incorporated |
|||||||
Consolidated Cash Flow Statement (Unaudited) |
||||||||
(In millions) |
||||||||
Three Months Ended |
||||||||
February 28, 2017 |
February 29, 2016 |
|||||||
Operating activities |
||||||||
Net income |
$ |
93.5 |
$ |
93.4 |
||||
Adjustments to reconcile net income to net cash provided by |
||||||||
Depreciation and amortization |
28.3 |
26.4 |
||||||
Stock based compensation |
4.1 |
3.0 |
||||||
Income from unconsolidated operations |
(7.0) |
(8.4) |
||||||
Changes in operating assets and liabilities |
(80.2) |
(43.7) |
||||||
Dividends from unconsolidated affiliates |
5.6 |
7.9 |
||||||
Net cash flow provided by operating activities |
44.3 |
78.6 |
||||||
Investing activities |
||||||||
Acquisition of businesses (net of cash acquired) |
(124.0) |
— |
||||||
Capital expenditures |
(29.6) |
(22.4) |
||||||
Proceeds from sale of property, plant and equipment |
0.9 |
0.2 |
||||||
Net cash flow used in investing activities |
(152.7) |
(22.2) |
||||||
Financing activities |
||||||||
Short-term borrowings, net |
247.8 |
250.8 |
||||||
Long-term debt repayments |
(2.5) |
(201.7) |
||||||
Proceeds from exercised stock options |
8.2 |
7.8 |
||||||
Taxes withheld and paid on employee stock awards |
(1.7) |
(0.7) |
||||||
Common stock acquired by purchase |
(82.7) |
(47.8) |
||||||
Dividends paid |
(58.9) |
(54.6) |
||||||
Net cash flow provided by (used in) financing activities |
110.2 |
(46.2) |
||||||
Effect of exchange rate changes on cash and cash equivalents |
5.5 |
(11.0) |
||||||
Increase (decrease) in cash and cash equivalents |
7.3 |
(0.8) |
||||||
Cash and cash equivalents at beginning of period |
118.4 |
112.6 |
||||||
Cash and cash equivalents at end of period |
$ |
125.7 |
$ |
111.8 |
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