McCormick Announces First Quarter Financial Results and Reaffirms 2009 Profit Outlook
- Sales rose 7% in local currency. Unfavorable foreign currency exchange rates reduced sales 8%.
-
Reported earnings per share of
$0.44 . On a comparable basis, excluding restructuring charges, earnings per share rose 7%. - The Company reaffirmed its projected increase in 2009 earnings per share.
In the first quarter of 2009, sales declined 1%, but in local currency rose 7%. The Company grew sales through acquisitions and pricing actions to offset higher costs. For the consumer business, acquisitions were a key driver behind a 9% sales increase in local currency. During the first quarter, the mix of sales in several markets shifted toward dry seasoning mixes and value-priced products with lower volumes of other items including premium priced products. Also, in the Americas region, consumer purchases exceeded the unit volume of products sold to customers, as certain retailers worked to lower their inventory levels following strong purchases for the fourth quarter holiday period. For the industrial business, sales in local currency rose 5% with increases in each of the three operating regions.
An increase in both operating income and operating income margin in the
first quarter was achieved with a positive sales mix and cost savings.
The Company is working to reduce costs with the completion of its
restructuring program and the on-going savings generated from its
Comprehensive Continuous Improvement program. Projects under the CCI
program span each location and business unit and include cost
optimization, cost avoidance and productivity improvements. Higher
operating income was offset in part by a reduction in income from
unconsolidated operations which was due to the impact of unfavorable
foreign exchange rates and higher cost soybean oil on the Company’s
joint venture in
For the first quarter, earnings per share rose to
In the first quarter of 2009, cash flow from operations was closer to a more normal pattern as compared to a stronger result in the same period in 2008 when higher cash flow was driven in part by the timing of receivable collections. Throughout 2009 the Company expects to use available cash to reduce debt associated with the acquisition of Lawry’s and to fund dividends.
“As we manage through this challenging environment, we are working to
lower expenses and manage our costs. Our Comprehensive Continuous
Improvement program and restructuring actions have us on track to
achieve
Higher sales, a favorable business mix and cost savings are expected to
increase 2009 earnings per share to a range of
Business Segment Results |
||||
Consumer Business |
||||
(in millions) |
Three Months Ended |
|||
2/28/09 |
2/29/08 |
|||
Net sales |
$420.6 |
$410.5 |
||
Operating income |
74.0 |
64.4 | ||
Operating income, excluding restructuring charges |
74.3 |
67.0 | ||
For the first quarter, consumer business sales rose 2% when compared to 2008, and in local currency grew 9%. Higher volume and product mix added 5% to sales, which included an 8% benefit from acquisitions. Pricing actions taken to offset higher costs added 4% to sales.
- Consumer sales in the Americas rose 11% and in local currency grew 13%. Higher pricing added 5% to sales. Volume and product mix added 8%, including an increase of 13% of incremental sales from acquisitions. While the Company grew sales of dry seasoning mixes, Hispanic products and value-priced items, sales of gourmet items and seafood seasonings were lower this period. In addition, consumer purchases exceeded the unit volume of products sold to customers, as certain retailers worked to lower their inventory levels following strong purchases for the fourth quarter holiday period.
-
Consumer sales in EMEA declined 13%, but rose 2% in local currency.
Pricing actions added 3% to sales while unfavorable volume and product
mix reduced sales by 1%. Lower sales in other markets offset strong
sales in
France which were led by a successful relaunch of the Vahiné brand line of dessert products. -
First quarter sales in the
Asia/Pacific region declined 6%, but rose 4% in local currency driven by a double-digit increase in volume and product mix inChina .
For the first quarter, higher sales, a favorable business mix and improved productivity led to an 11% increase in consumer business operating income, excluding restructuring charges.
Industrial Business |
||||
(in millions) |
Three Months Ended |
|||
2/28/09 |
2/29/08 |
|||
Net sales |
$297.9 |
$313.5 | ||
Operating income |
15.8 |
13.0 | ||
Operating income, excluding restructuring charges |
16.0 |
14.3 | ||
For the first quarter, industrial business sales declined 5%, but grew 5% in local currency when compared to 2008 with particularly strong increases in international markets. Pricing actions to offset increased costs of certain commodities added 5% to sales. Volume and product mix were flat to the prior year, including a 2% benefit from acquisitions, which were primarily food service sales of Lawry’s brand products.
- Industrial sales in the Americas declined 1% but rose 4% in local currency. Pricing actions added 6%. Unfavorable volume and product mix lowered sales by 2%, which included a 3% benefit from acquisitions. In this region, the Company continued to be affected by restaurant industry weakness, as well as lower sales to food manufacturers during this period.
- In EMEA, industrial sales declined 21%, but increased a strong 9% in local currency with 6% from pricing and 3% from volume and product mix. Sales growth was achieved with both restaurant customers and food manufacturers in the first quarter.
-
Strong demand by quick service restaurant customers in the
Asia/Pacific region continued into the first quarter, where sales were flat, but grew 7% in local currency.
With a favorable business mix and productivity improvements, operating
income for the industrial business rose 12% to
Non-GAAP Financial Measures
The non-GAAP information in this press release is not a measure that is defined in generally accepted accounting principles (“GAAP”). The non-GAAP information in this press release excludes restructuring charges, as well as unusual items recorded in fiscal year 2008 which were comprised of amounts related to the Lawry’s acquisition, including the gain on the sale of Season-All, and a non-cash impairment charge related to the value of the Silvo brand. Management believes the non-GAAP 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 and analyze the Company’s business performance and trends. Management believes the non-GAAP measure provides a more consistent basis for assessing the Company’s performance than the closest GAAP equivalent. Management therefore uses the non-GAAP information alongside the most directly comparable GAAP measures in this press release.
Reconciliation of GAAP to non-GAAP Financial Measures
The Company has provided below certain non-GAAP financial results excluding amounts related to a restructuring program in 2009 and 2008, as well as unusual items recorded in the third and fourth quarters of 2008.
(in millions except per share data) |
Three Months Ended |
|||||||
2/28/09 |
2/29/08 |
|||||||
Operating income |
$ |
89.8 |
$ | 77.4 | ||||
Impact of restructuring charges |
.5 |
3.9 | ||||||
Adjusted operating income |
$ |
90.3 |
$ | 81.3 | ||||
% increase versus prior period |
11.1 |
% |
||||||
Net income |
$ |
57.7 |
$ | 51.4 | ||||
Impact of restructuring charges * |
.3 |
2.7 | ||||||
Adjusted net income |
$ |
58.0 |
$ | 54.1 | ||||
Earnings per share - diluted |
$ |
.44 |
$ | .39 | ||||
Impact of restructuring charges |
- |
.02 | ||||||
Adjusted earnings per share – diluted |
$ |
.44 |
$ | .41 | ||||
% increase versus prior period |
7.3 |
% |
||||||
* The impact of restructuring activity on net income includes: | ||||||||
Restructuring charges included in cost of good sold |
- |
$ | (.3 | ) | ||||
Restructuring charges |
(.5 |
) |
(3.6 | ) | ||||
Tax impact included in income taxes |
.2 |
1.2 | ||||||
$ |
(.3 |
) |
$ | (2.7 | ) | |||
Twelve Months Ended |
||||||||
11/30/08 |
||||||||
Earnings per share – diluted | $ | 1.94 | ||||||
Impact of restructuring charges | .09 | |||||||
Impact of impairment charge | .15 | |||||||
Net gain related to Lawry’s acquisition |
(.04 |
) |
||||||
Adjusted earnings per share – diluted |
$ |
2.14 |
||||||
Live Webcast
As previously announced, McCormick will hold a conference call with
analysts today at
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
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, and global economic conditions generally which
would include the availability of financing, interest and inflation
rates as well as foreign currency fluctuations and other risks described
in the Company’s filings with the
About McCormick
First Quarter Report |
McCormick & Company, Incorporated |
|||||
Consolidated Income Statement (Unaudited) | ||||||
(In millions except per-share data) | ||||||
Three Months Ended | ||||||
February 28, 2009 | February 29, 2008 | |||||
Net sales | $ | 718.5 | $ | 724.0 | ||
Cost of goods sold | 434.3 | 438.2 | ||||
Gross profit | 284.2 | 285.8 | ||||
Gross profit margin | 39.6% | 39.5% | ||||
Selling, general and administrative expense | 193.9 | 204.8 | ||||
Restructuring charges | 0.5 | 3.6 | ||||
Operating income | 89.8 | 77.4 | ||||
Interest expense | 14.4 | 14.8 | ||||
Other income, net | 0.5 | 3.3 | ||||
Income from consolidated operations before income taxes | 75.9 | 65.9 | ||||
Income taxes | 21.4 | 19.8 | ||||
Net income from consolidated operations | 54.5 | 46.1 | ||||
Income from unconsolidated operations | 3.2 | 5.3 | ||||
Net income | $ | 57.7 | $ | 51.4 | ||
Earnings per common share - basic | $ | 0.44 | $ | 0.40 | ||
Earnings per common share - diluted | $ | 0.44 | $ | 0.39 | ||
Average shares outstanding - basic | 130.3 | 128.0 | ||||
Average shares outstanding - diluted | 131.9 | 131.1 | ||||
First Quarter Report | McCormick & Company, Incorporated | |||||
Consolidated Balance Sheet (Unaudited) | ||||||
(In millions) | ||||||
For the periods ending | ||||||
February 28, 2009 | February 29, 2008 | |||||
Assets | ||||||
Current assets | ||||||
Cash and cash equivalents | $ | 23.4 | $ | 24.4 | ||
Trade receivables, net | 342.0 | 387.3 | ||||
Inventories | 447.8 | 449.4 | ||||
Prepaid expenses and other current assets | 107.8 | 90.2 | ||||
Total current assets | 921.0 | 951.3 | ||||
Property, plant and equipment, net | 451.7 | 486.7 | ||||
Goodwill, net | 1,227.7 | 947.7 | ||||
Intangible assets, net | 369.4 | 227.8 | ||||
Prepaid allowances | 35.9 | 45.5 | ||||
Investments and other assets | 155.3 | 199.3 | ||||
Total assets | $ | 3,161.0 | $ | 2,858.3 | ||
Liabilities and shareholders' equity | ||||||
Current liabilities | ||||||
Short-term borrowings and current portion of long-term debt | $ | 395.8 | $ | 119.9 | ||
Trade accounts payable | 253.1 | 251.3 | ||||
Other accrued liabilities | 283.4 | 366.5 | ||||
Total current liabilities | 932.3 | 737.7 | ||||
Long-term debt | 884.4 | 676.7 | ||||
Other long-term liabilities | 249.9 | 288.5 | ||||
Total liabilities | 2,066.6 | 1,702.9 | ||||
Shareholders' equity | ||||||
Common stock | 588.7 | 512.8 | ||||
Retained earnings | 481.6 | 360.4 | ||||
Accumulated other comprehensive income | 24.1 | 282.2 | ||||
Total shareholders' equity | 1,094.4 | 1,155.4 | ||||
Total liabilities and shareholders' equity | $ | 3,161.0 | $ | 2,858.3 | ||
First Quarter Report | McCormick & Company, Incorporated | |||||||
Consolidated Cash Flow Statement (Unaudited) | ||||||||
(In millions) | ||||||||
Three Months Ended | ||||||||
February 28, 2009 | February 29, 2008 | |||||||
Cash flows from operating activities | ||||||||
Net income | $ | 57.7 | $ | 51.4 | ||||
Adjustments to reconcile net income to net cash flow from operating activities: |
||||||||
Depreciation and amortization | 20.0 | 22.4 | ||||||
Stock based compensation | 2.7 | 3.7 | ||||||
Income from unconsolidated operations | (3.2 | ) | (5.3 | ) | ||||
Changes in operating assets and liabilities | (91.3 | ) | (47.9 | ) | ||||
Dividends from unconsolidated affiliates | 0.8 | - | ||||||
Net cash flow from operating activities | (13.3 | ) | 24.3 | |||||
Cash flows from investing activities | ||||||||
Acquisitions of businesses | - | (76.4 | ) | |||||
Capital expenditures | (15.4 | ) | (17.3 | ) | ||||
Proceeds from sale of property, plant and equipment | - | 0.1 | ||||||
Net cash flow from investing activities | (15.4 | ) | (93.6 | ) | ||||
Cash flows from financing activities | ||||||||
Short-term borrowings, net | 41.6 | (29.7 | ) | |||||
Long-term debt borrowings | - | 248.3 | ||||||
Long-term debt repayments | (0.1 | ) | (150.1 | ) | ||||
Proceeds from exercised stock options | 4.2 | 6.0 | ||||||
Dividends paid | (31.2 | ) | (28.2 | ) | ||||
Net cash flow from financing activities | 14.5 | 46.3 | ||||||
Effect of exchange rate changes on cash and cash equivalents |
(1.3 | ) | 1.5 | |||||
Increase/(decrease) in cash and cash equivalents | (15.5 | ) | (21.5 | ) | ||||
Cash and cash equivalents at beginning of period | 38.9 | 45.9 | ||||||
Cash and cash equivalents at end of period | $ | 23.4 | $ | 24.4 | ||||
Source:
McCormick & Company, Incorporated
Corporate Communications:
John
McCormick, 410-771-7110
john_mccormick@mccormick.com
or
Investor
Relations:
Joyce Brooks, 410-771-7244
joyce_brooks@mccormick.com