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 30, 2005

 

McCormick & Company, Incorporated

(Exact name of registrant as specified in its charter)

 

Maryland

 

0-748

 

52-0408290

(State or other jurisdiction
of incorporation)

 

(Commission
File Number)

 

(IRS Employer
Identification No.)

 

 

 

 

 

18 Loveton Circle

 

 

Sparks, Maryland

 

21152

(Address of principal executive offices)

 

(Zip Code)

 

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 30, 2005, the Registrant issued a press release to report on the results of operations for the second quarter of fiscal year 2005, which ended on May 31, 2005.

 

Furnished with this Form 8-K as Exhibit 99.1 is a copy of the press release labeled “McCormick Reports Second Quarter Results and Projects Strong Second Half For Fiscal Year,” which includes an unaudited Consolidated Income Statement for the three and six month periods ended May 31, 2005 and May 31, 2004, and an unaudited Consolidated Balance Sheet of the Registrant as of May 31, 2005 and May 31, 2004, and an unaudited Consolidated Statement of Cash Flows for the six months ended May 31, 2005 and May 31, 2004.

 

 

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 30, 2005

By:

/s/ Robert W. Skelton

 

 

Robert W. Skelton

 

Senior Vice President, General Counsel & Secretary

 

2



 

FOR IMMEDIATE RELEASE

 

McCORMICK REPORTS  SECOND QUARTER RESULTS AND PROJECTS STRONG

SECOND HALF FOR FISCAL YEAR

 

SPARKS, MD, JUNE 30 - - - McCormick & Company, Incorporated (NYSE:MKC), today reported record sales and earnings per share for the second quarter ended May 31, 2005 and projected strong profit growth in the second half of the fiscal year.  Earnings per share for the year are projected to be $1.66-$1.70.  Since the prior guidance of $1.70-$1.74, foreign exchange rates have become less favorable and the Company has moderated its outlook for industrial business growth.

 

                  Second quarter sales increased 5% to $629 million, and earnings per share were 31¢.

 

                  Earnings per share in the second half are projected to grow 16%-20%.

 

                  The Board of Directors approved a new program to repurchase $400 million of outstanding shares.

 

Sales for the quarter rose 5% to $629 million compared to the second quarter of 2004. New products, effective marketing programs and incremental sales from the Silvo business acquired in 2004 drove an increase of 3%.  Favorable foreign exchange rates added 2%.

 

Earnings per share for the second quarter were 31¢ compared to earnings per share of 30¢ reported in the second quarter of 2004.  Higher operating income added 1¢ to earnings per share and was the net result of an increase in sales, lower gross profit margin, and the effect of income related to the settlement of a class action lawsuit that was recorded in the second quarter of 2004.  Higher cost vanilla beans continued to have an impact on gross profit margin in the second quarter.  Gross profit margin was also affected by additional operational accounting adjustments related to the condiment operation in the U.K.  Earnings per share this period were  impacted by higher income from the Company’s joint venture in Mexico and lower shares outstanding.  These positive factors were offset by higher interest rates and a higher tax rate.

 

During the quarter, the Company funded $75 million of share repurchases and $22 million of dividends with net cash from operations and increased borrowings.  Dividend payments increased 12% compared to the second quarter of 2004, and share repurchases rose 11%.

 

3



 

Chairman’s Comments

 

Robert J. Lawless, Chairman, President & CEO, commented, “In the second quarter, we achieved higher sales, a positive product mix and cost reductions that more than offset the adverse effect of high cost vanilla beans and operational accounting adjustments.  As we look to the second half of our fiscal year, we expect strong sales growth, robust margin improvement and a 16%-20% increase in earnings per share.  Based on a less favorable foreign exchange outlook and a moderation in projected growth for our industrial business, however, we have lowered our earnings per share guidance for the full year to $1.66-$1.70.  For the third quarter, we are projecting earnings per share of 36¢-37¢, an increase of 9%-12% compared to a 33¢ result in 2004.

 

“Second quarter sales were positively impacted by successful new products, effective marketing programs, favorable foreign exchange rates and the acquisition of Silvo.  Earnings were further increased as we reduced costs across our organization.  Our consumer business results in the Americas were particularly strong, and we were pleased to achieve higher sales in our European consumer business despite difficult market conditions.  Sales and profits in our industrial business were affected by lower vanilla prices, some delay in the launch of new products by our customers and the additional operational accounting adjustments in our U.K. condiment operation.  These challenges offset strong sales and underlying margin improvement for the first six months of 2005 and  led to a 1¢ decline in earnings per share when compared to 2004.

 

“For the second half, we are projecting significantly improved financial performance. We expect to grow sales about 4% based on our new product activity, marketing programs and the addition of Silvo.  Consumer business sales are projected to grow at a faster pace than industrial business sales during this period.  While the industrial business will continue to have strong sales in products such as snack seasonings, other new products in our pipeline have not yet been launched by our customers.    During the second half, we will reduce costs and benefit from a positive product mix, increasing gross profit margin an estimated 0.5 percentage points for the full fiscal year.  With a focused effort by employees throughout McCormick, we are on track to achieve our cost savings goal of $25 million. Together, the benefits of higher sales and margin improvement are projected to increase earnings per share 16%-20% in the second half.

 

“With the cash generated during the first half of 2005, we repurchased shares and are nearing completion of the $300 million authorization approved in September 2003.  Earlier this week, McCormick’s Board of Directors approved a new repurchase program to buy back up to $400 million of outstanding stock.  This program is expected to be completed by the end of 2007 in the absence of significant acquisition activity.

 

“In the first half of this fiscal year we faced a number of challenges.  As we begin the second half, many of these challenges are behind us.  We are confident that higher sales, improved margins and the benefit of our strong cash flow will deliver strong financial results and increased value for McCormick shareholders.”

 

4



 

Business Segment Results

 

Consumer Business

(in thousands)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

5/31/05

 

5/31/04

 

5/31/05

 

5/31/04

 

Net sales

 

$

323,796

 

$

297,338

 

$

645,851

 

$

596,392

 

Operating income

 

54,124

 

45,616

 

108,315

 

94,614

 

 

For the second quarter, sales for McCormick’s consumer business rose 9% when compared to 2004.  Higher volume added 5% to sales, including an increase from the acquisition of Silvo.  Favorable price and product mix added 2%, and favorable foreign exchange rates also added 2%.  In the Americas, sales increased 5% with higher pricing, new product sales and effective marketing programs.  Consumer sales in Europe increased 18% for the quarter, with 12% due to the acquisition of Silvo in November 2004 and 5% due to favorable foreign exchange.  Sales from new products and marketing programs overcame difficult market conditions, primarily in France.  In the Asia/Pacific region, sales declined 1%, despite favorable foreign exchange rates that added 3%.

 

Higher sales and a favorable product mix drove a 19% increase in operating income, more than offsetting impacts from lower vanilla margins and the operational accounting adjustments.  This follows an increase in operating income of 25% during the second quarter of 2004.

 

Industrial Business

(in thousands)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

5/31/05

 

5/31/04

 

5/31/05

 

5/31/04

 

Net sales

 

$

304,775

 

$

298,826

 

$

586,344

 

$

572,134

 

Operating income

 

27,698

 

28,913

 

43,863

 

54,271

 

 

For the second quarter of 2005, sales for McCormick’s industrial business increased 2% when compared to 2004, due primarily to favorable foreign exchange rates.  In the Americas, industrial sales rose 2%, with 1% added by favorable foreign exchange rates.  The Company continued to gain new snack seasoning sales as well as increased sales to food service distributors.  As in the first quarter, these increases were partially offset by lower vanilla prices.  Industrial sales in Europe increased 1% for the quarter, with foreign exchange contributing 4%. Steps to eliminate certain lower margin products began in 2004 and continue to have an impact on sales in 2005. In the Asia/Pacific region, industrial sales rose 4% led by higher sales to quick service restaurants, other food processors and food service distributors.  In this region, 2% was added by favorable foreign exchange during the quarter.

 

Industrial business operating income was $28 million, a 4% decrease compared to the prior year.  The impact of lower vanilla prices and the operational accounting adjustments were offset in part by cost reductions and a positive product mix.

 

Live Webcast

 

As previously announced, McCormick will hold a conference call with the analysts today at 10:00 a.m. ET.  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

 

5



 

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.

 

# # #

 

For information contact:

 

Corporate Communications:  Mac Barrett (410-771-7310 or mac_barrett@mccormick.com)

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

6/2005

 

6


 

Exhibit 99.1

 

Second Quarter Report

 

McCormick & Company, Incorporated

 

Consolidated Income Statement

(In thousands except per-share data)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

5/31/2005

 

5/31/2004

 

5/31/2005

 

5/31/2004

 

Net sales

 

$

628,571

 

$

596,164

 

$

1,232,195

 

$

1,168,526

 

Cost of goods sold

 

387,225

 

364,238

 

762,680

 

714,913

 

Gross profit

 

241,346

 

231,926

 

469,515

 

453,613

 

Gross profit margin

 

38.4

%

38.9

%

38.1

%

38.8

%

Selling, general & administrative expense

 

170,864

 

168,652

 

339,775

 

328,885

 

Special charges / (credits)

 

(670

)

(6,448

)

630

 

(6,379

)

Operating income

 

71,152

 

69,722

 

129,110

 

131,107

 

Interest expense

 

11,942

 

9,695

 

23,026

 

19,267

 

Other (income) / expense, net

 

97

 

(536

)

43

 

(684

)

Income from consolidated operations before income taxes

 

59,113

 

60,563

 

106,041

 

112,524

 

Income taxes

 

18,916

 

18,713

 

33,933

 

34,769

 

Net income from consolidated operations

 

40,197

 

41,850

 

72,108

 

77,755

 

Income from unconsolidated operations

 

3,802

 

1,825

 

9,258

 

5,085

 

Minority interest

 

(1,205

)

(822

)

(2,537

)

(1,881

)

Net income

 

$

42,794

 

$

42,853

 

$

78,829

 

$

80,959

 

 

 

 

 

 

 

 

 

 

 

Earnings per share - basic

 

$

0.32

 

$

0.31

 

$

0.58

 

$

0.59

 

Earnings per share - diluted

 

$

0.31

 

$

0.30

 

$

0.56

 

$

0.57

 

 

 

 

 

 

 

 

 

 

 

Average shares outstanding - basic

 

134,742

 

137,679

 

135,193

 

137,519

 

Average shares outstanding - diluted

 

138,739

 

142,494

 

139,586

 

142,133

 

 



 

Second Quarter Report

 

McCormick & Company, Incorporated

 

 

 

Consolidated Balance Sheet

 

 

(In thousands)

 

 

 

 

 

5/31/2005

 

5/31/2004

 

Assets

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

 

$

20,096

 

$

16,125

 

Receivables, net

 

328,117

 

309,700

 

Inventories

 

345,281

 

373,974

 

Prepaid expenses and other current assets

 

45,560

 

37,416

 

Total current assets

 

739,054

 

737,215

 

Property, plant and equipment, net

 

471,495

 

456,556

 

Goodwill and intangible assets, net

 

789,719

 

727,505

 

Prepaid allowances

 

50,078

 

79,711

 

Investments and other assets

 

136,317

 

129,287

 

Total assets

 

$

2,186,663

 

$

2,130,274

 

 

 

 

 

 

 

Liabilities and shareholders’ equity

 

 

 

 

 

Current liabilities

 

 

 

 

 

Short-term borrowings and current portion of long-term debt

 

$

421,455

 

$

142,810

 

Trade accounts payable

 

167,816

 

166,188

 

Other accrued liabilities

 

293,329

 

295,475

 

Total current liabilities

 

882,600

 

604,473

 

Long-term debt

 

271,202

 

495,884

 

Other long-term liabilities

 

197,745

 

204,900

 

Total liabilities

 

1,351,547

 

1,305,257

 

Minority interest

 

29,128

 

23,780

 

Shareholders’ equity

 

 

 

 

 

Common stock

 

372,127

 

312,192

 

Retained earnings

 

375,721

 

448,463

 

Accumulated other comprehensive income

 

58,140

 

40,582

 

Total shareholders’ equity

 

805,988

 

801,237

 

Total liabilities and shareholders’ equity

 

$

2,186,663

 

$

2,130,274

 

 



 

Second Quarter Report

 

McCormick & Company, Incorporated

 

 

 

Consolidated Statement of Cash Flows (Unaudited)

 

 

(In thousands)

 

 

 

 

 

Six Months Ended

 

 

 

5/31/2005

 

5/31/2004

 

Cash flows from operating activities

 

 

 

 

 

Net income

 

$

78,829

 

$

80,959

 

Adjustments to reconcile net income to net cash flow from operating activities:

 

 

 

 

 

Depreciation and amortization

 

35,493

 

34,702

 

Income from unconsolidated operations

 

(9,258

)

(5,085

)

Changes in operating assets and liabilities

 

(47,504

)

(31,943

)

Dividends from unconsolidated affiliates

 

9,020

 

900

 

Net cash flow from operating activities

 

66,580

 

79,533

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Capital expenditures

 

(30,316

)

(27,654

)

Proceeds from sale of property, plant and equipment

 

488

 

1,271

 

Net cash flow from investing activities

 

(29,828

)

(26,383

)

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Short-term borrowings, net

 

54,686

 

(28,686

)

Long-term debt borrowings

 

5

 

49,788

 

Long-term debt repayments

 

(352

)

(260

)

Proceeds from exercised stock options

 

28,983

 

31,273

 

Common stock acquired by purchase

 

(120,732

)

(80,740

)

Dividends paid

 

(43,337

)

(38,561

)

Net cash flow from financing activities

 

(80,747

)

(67,186

)

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

(6,244

)

5,020

 

Decrease in cash and cash equivalents

 

(50,239

)

(9,016

)

Cash and cash equivalents at beginning of period

 

70,335

 

25,141

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

20,096

 

$

16,125