UNITED STATES
SECURITIES & EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

 

 

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

SECURITIES EXCHANGE ACT OF 1934

 

 

 

 

Date of Report  (Date of earliest event reported):

June 27, 2007

 

 

McCormick & Company, Incorporated

(Exact name of registrant as specified in its charter)

 

 

Registrant’s telephone number, including area code:   (410) 771-7301

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b).

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c).

 

Item 2.02 Results of Operations and Financial Condition.

On June 27, 2007, the Registrant issued a press release and held a conference call with analysts to report on the results of operations for the second quarter of fiscal year 2007, which ended on May 31, 2007.

Furnished with this Form 8-K as Exhibit 99.1 is a copy of the press release labeled “McCormick Reports Second Quarter Results and Improved Outlook for 2007,” which includes an unaudited Consolidated Income Statement for the three months ended May 31, 2007, an unaudited Consolidated Balance Sheet of the Registrant as of May 31, 2007, and an unaudited Consolidated Cash Flow Statement for the three months ended May 31, 2007.

Item 9.01 Financial Statements and Exhibits.

(d)  Exhibits.

The exhibit to this report is listed in Item 2.02 above and in the Exhibit Index that follows the signature line.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	McCORMICK & COMPANY, INCORPORATED
Date: June 27, 2007	By:	/s/ Robert W. Skelton
		Robert W. Skelton
	Senior Vice President, General Counsel & Secretary

 

Exhibit Index

Exhibit Number		Exhibit Description
99.1		Copy of the press release labeled “McCormick Reports Second Quarter Results and Improved Outlook for 2007.”

 

Exhibit 99.1

FOR IMMEDIATE RELEASE

McCORMICK REPORTS  SECOND QUARTER RESULTS AND IMPROVED OUTLOOK FOR 2007

SPARKS, MD, JUNE 27 — McCormick & Company, Incorporated (NYSE:MKC), today reported results for the second quarter ended May 31, 2007 and an improved outlook for the fiscal year.

·                  Increased sales 7%.  Consumer business sales rose 6% and industrial business sales rose 9%.  Achieved earnings per share of $0.31.

·                  On-track to improve gross profit margin by 0.5 percentage points in 2007.

·                  For fiscal year 2007, expects to increase earnings per share 9-11% on a comparable basis.

Robert J. Lawless, Chairman and CEO, commented, “Our sales and earnings for the second quarter exceeded our expectations.  These results were driven in part by increased international sales, the incremental impact of Simply Asia Foods and favorable currency rates.  With a strong first half, we expect to grow earnings per share 9-11% on a comparable basis, an increase from our original projection of 8-10%.   Fiscal year 2007 is shaping up to be another record year for McCormick.”

Sales in the second quarter rose 7%, which was an increase of 5% in local currency.  The sales increases in Europe and the Asia/Pacific region were especially strong this quarter, driven by marketing support for branded consumer products as well as increased sales of industrial products to strategic customers.  In the U.S., sales from the Simply Asia Foods business, which was acquired in June 2006, also added to the sales increase.  During the second quarter, actions taken to eliminate low margin business decreased sales 1%.

Gross profit margin in the second quarter increased 0.4 percentage points, and the Company is on track to achieve a 0.5 percentage point increase for the fiscal year.   Selling, general and administrative expense as a percent of net sales was down 0.4 percentage points.  The Company’s restructuring program is expected to generate $30 million in costs savings during 2007 and is reducing cost of goods sold as well as selling, general and administrative expense.

Earnings per share were $0.31 compared to $0.46 in the second quarter of 2006.  Charges related to the Company’s restructuring program reduced earnings per share $0.04 in the second quarter of 2007 compared to a favorable impact of credits that increased earnings per share $0.14 in the second quarter of 2006.  Excluding these impacts in both periods, earnings per share rose $0.03, a 9% increase driven by higher sales and improved operating income margin.

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On a comparable basis, which excludes the impact of restructuring charges, the Company expects to grow earnings per share 9-11% in 2007.  This is an increase from an initial goal of 8-10%.  Including estimated restructuring charges of $0.18, 2007 earnings per share are projected to be in the range of $1.69-$1.73.  Financial performance ahead of the Company’s goal will provide an opportunity to fund additional growth initiatives in the second half of the year.

Business Segment Results

Consumer Business		Three Months Ended						Six Months Ended
(in thousands)		5/31/07			5/31/06			5/31/07			5/31/06
Net sales		$	372,511		$	350,054		$	747,281		$	694,818
Operating income		48,930			40,110			103,771			64,978
Operating income,excluding restructuring charges		53,142			48,808			113,329			95,013

 

In the second quarter, sales for McCormick’s consumer business rose 6%, which was an increase of 4% in local currency.  Higher volume was due to incremental sales from the Simply Asia Foods business which was acquired in June 2006, and the positive impact of marketing support behind branded products, particularly in Europe.  Favorable price and product mix also increased sales.  Consumer sales in the Americas rose 5% with no impact from foreign exchange rates.  The increase was driven primarily by incremental volume from Simply Asia Foods, and higher sales of the Club House brand in Canada, and of gourmet and Hispanic products in the U.S.  Consumer sales in Europe increased 10%, which was an increase of 1% in local currency.  Increases in the U.K. and France were achieved with marketing support behind branded products and pricing actions.  However, consumer sales in Europe continue to be unfavorably affected by distribution lost to a competitor in The Netherlands and the Company’s decision in 2006 to exit its business in Finland.  These factors reduced sales by 3% in the second quarter.  In the Asia/Pacific region, sales rose 8%, which was an increase of 1% in local currency.  Double-digit sales growth in China was largely offset by the sales performance in Australia.

In the second quarter, consumer business operating income excluding restructuring charges rose to $53.1 million from $48.8 million in 2006.  This was an increase of 9%, driven primarily by higher sales and the positive impact of the Company’s cost savings program.

Industrial Business		Three Months Ended						Six Months Ended
(in thousands)		5/31/07			5/31/06			5/31/07			5/31/06
Net sales		$	314,703		$	289,852		$	592,573		$	554,789
Operating income		17,978			14,588			29,487			14,013
Operating income, excluding restructuring charges		20,978			18,897			34,981			30,363

 

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In the second quarter, sales for McCormick’s industrial business increased 9%, which was an increase of 6% in local currency.  The impact of the Company’s actions to eliminate lower margin customers and products reduced sales in the second quarter by 2%.  Industrial sales in the Americas rose 2% with minimal impact from foreign currency.  The elimination of lower margin customers and products in this part of the industrial business reduced sales 2%.  Sales increases to strategic customers included snack seasonings, condiments and new products for large food manufacturers.  In Europe, industrial sales rose 26%, which was an increase of 16% in local currency, with continued strength in sales of condiments and of seasonings for snack products.  In addition, sales of food service products in the U.K. contributed to the increase.  In this region, the elimination of lower margin customers reduced sales 2%.  Sales in the Asia/Pacific region rose 34%, which was an increase of 27% in local currency, with significant gains in both China and Australia.

In the second quarter, industrial business operating income excluding restructuring charges rose to $21.0 million from $18.9 million in 2006, an increase of 11%.  This increase was due to higher sales and the favorable impact of cost savings.

Non-GAAP Financial Measures

The pro forma information excluding restructuring charges in this press release are not measures that are defined in generally accepted accounting principles (“GAAP”).  Management believes the pro forma information is 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 on-going operations.  Management analyzes the Company’s business performance and trends excluding amounts related to the restructuring.  These measures provide a more consistent view of performance than the closest GAAP equivalent for management and investors.  Management compensates for this by using these measures in combination with the GAAP measures.  The presentation of the non-GAAP measures in this press release are made alongside the most directly comparable GAAP measures.

Pro forma Information

The Company has provided below certain pro forma financial results excluding amounts related to a restructuring program in 2007 and 2006.

(in thousands except per share data)		Three Months Ended						Six Months Ended
		5/31/07			5/31/06			5/31/07			5/31/06
Net income		$	41,425		$	61,644		$	85,653		$	76,033
Impact of restructuring charges (credits)		5,460		*	(18,743		)*	11,081		*	3,954		*
Pro forma net income		$	46,885		$	42,901		$	96,734		$	79,987
Earnings per share - diluted		$	0.31		$	0.46		$	0.64		$	0.56
Impact of restructuring charges (credits)		0.04			(.14		)	0.08			0.03
Pro forma earnings per share — diluted		$	0.35		$	0.32		$	0.72		$	0.59
% increase versus prior period		9.4		%				22.0		%

 

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* The impact of restructuring activity on net income includes:

Restructuring charges included in Cost of good sold		$	(772	)	$	(4,488	)	$	(1,249	)	$	(4,702	)
Restructuring charges		(6,440		)	(8,519		)	(13,803		)	(41,683		)
Tax impact included in income taxes		2,307			5,222			4,816			15,903
Gain/(Loss) on sale of unconsolidated operations		(555		)	26,528			(845		)	26,528
		$	(5,460	)	$	18,743		$	(11,081	)	$	(3,954	)

 

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 and access the accompanying presentation materials.  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, ability to realize expected cost savings and margin improvements, 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 and global economic conditions, including interest and currency rate fluctuations, and inflation rates.  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.

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 manufacturers as well as to retail outlets.

# # #

For information contact:

Corporate Communications:  John McCormick (410-771-7110 or john_mccormick@mccormick.com)

Investor Relations:  Joyce Brooks (410-771-7244 or joyce_brooks@mccormick.com)

6/2007

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Second Quarter Report		McCormick & Company, Incorporated
Consolidated Income Statement (Unaudited)
(In thousands except per-share data)
		Three Months Ended						Six Months Ended
		5/31/2007			5/31/2006			5/31/2007			5/31/2006
Net sales		$	687,214		$	639,906		$	1,339,854		$	1,249,607
Cost of goods sold		415,414			389,342			803,702			759,958
Gross profit		271,800			250,564			536,152			489,649
Gross profit margin		39.6		%	39.2		%	40.0		%	39.2 %
Selling, general and administrative expense		198,452			187,347			389,091			368,975
Restructuring charges		6,440			8,519			13,803			41,683
Operating income		66,908			54,698			133,258			78,991
Interest expense		15,232			12,324			29,085			25,186
Other income, net		(2,227		)	(1,775		)	(4,071		)	(2,923 )
Income from consolidated operations before income taxes		53,903			44,149			108,244			56,728
Income taxes		16,755			13,068			32,744			17,093
Net income from consolidated operations		37,148			31,081			75,500			39,635
Income from unconsolidated operations		5,023			4,765			11,596			12,044
Gain / (Loss) on sale of unconsolidated operations		(555		)	26,528			(845		)	26,528
Minority interest		(191		)	(730		)	(598		)	(2,174 )
Net income		$	41,425		$	61,644		$	85,653		$	76,033
Earnings per common share - basic		$	0.32		$	0.47		$	0.66		$	0.57
Earnings per common share - diluted		$	0.31		$	0.46		$	0.64		$	0.56
Average shares outstanding - basic		130,150			132,182			130,193			132,384
Average shares outstanding - diluted		133,637			135,420			133,837			135,373

 

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Second Quarter Report		McCormick & Company, Incorporated
Consolidated Balance Sheet (Unaudited)
(In thousands)
		5/31/2007			5/31/2006
Assets
Current assets
Cash and cash equivalents		$	40,469		$	74,068
Receivables, net		360,930			327,066
Inventories		427,512			381,863
Prepaid expenses and other current assets		59,470			49,967
Total current assets		888,381			832,964
Property, plant and equipment, net		472,358			456,857
Goodwill and intangible assets, net		1,013,380			883,602
Prepaid allowances		47,007			48,480
Investments and other assets		162,969			141,512
Total assets		$	2,584,095		$	2,363,415
Liabilities and shareholders' equity
Current liabilities
Short-term borrowings and current portion of long-term debt		$	347,039		$	151,256
Trade accounts payable		215,606			174,638
Other accrued liabilities		332,408			377,476
Total current liabilities		895,053			703,370
Long-term debt		415,849			462,957
Other long-term liabilities		264,120			283,676
Total liabilities		1,575,022			1,450,003
Minority interest		4,465			3,359
Shareholders' equity
Common stock		480,918			420,113
Retained earnings		355,392			384,095
Accumulated other comprehensive income		168,298			105,845
Total shareholders' equity		1,004,608			910,053
Total liabilities and shareholders' equity		$	2,584,095		$	2,363,415

 

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Second Quarter Report		McCormick & Company, Incorporated
Consolidated Statement of Cash Flows (Unaudited)
(In thousands)
		Six Months Ended
		5/31/2007			5/31/2006
Cash flows from operating activities
Net income		$	85,653		$	76,033
Adjustments to reconcile net income to net
cash flow from operating activities:
Depreciation and amortization		39,917			39,458
Stock based compensation		13,440			14,753
Loss / (Gain) on sale of unconsolidated operation		845			(26,528		)
Income from unconsolidated operations		(11,596		)	(12,044		)
Changes in operating assets and liabilities		(145,916		)	(22,119		)
Dividends from unconsolidated affiliates		9,674			9,100
Net cash flow from operating activities		(7,983		)	78,653
Cash flows from investing activities
Capital expenditures		(34,806		)	(31,335		)
Acquisitions of businesses		(3,127		)	—
Proceeds from redemption of unconsolidated operation		—			20,000
Proceeds from sale of property, plant and equipment		100			298
Net cash flow used in investing activities		(37,833		)	(11,037		)
Cash flows from financing activities
Short-term borrowings, net		115,129			43,327
Long-term debt borrowings		—			198,558
Long-term debt repayments		(220		)	(195,432		)
Proceeds from exercised stock options		27,886			25,235
Common stock acquired by purchase		(57,536		)	(60,393		)
Dividends paid		(52,136		)	(47,710		)
Net cash flow provided by (used in) financing activities		33,123			(36,415		)
Effect of exchange rate changes on cash and
cash equivalents		4,119			12,604
Increase/(decrease) in cash and cash equivalents		(8,574		)	43,805
Cash and cash equivalents at beginning of period		49,043			30,263
Cash and cash equivalents at end of period		$	40,469		$	74,068