McCormick Announces Record Sales and Profit for Fiscal Year 2008; Well-Positioned for Growth in 2009
SPARKS, Md.--(BUSINESS WIRE)--
-- Increased net sales 9%, exceeding $3 billion for the first time.
Increased fourth quarter sales 5%.
-- Achieved earnings per share of $1.94 versus $1.73 in fiscal year 2007.
On a comparable basis, excluding restructuring charges and unusual
items, earnings per share increased 11%. Fourth quarter earnings per
share was $0.62 versus $0.67 in 2007. On a comparable basis, earnings
per share rose 12% in the fourth quarter of 2008.
-- For fiscal year 2009, projecting sales growth of 2 to 4%, a 9 to 11%
increase in local currency. Earnings per share expected to increase 7 to
9% on a comparable basis with 2008.
Fiscal year results
Pricing actions, acquisitions of leading brands, innovative new
products, increased marketing support and favorable foreign exchange
rates led to a 9% increase in net sales in 2008. This exceeded the
Company's initial projection of 4 to 6% sales growth. The Company also
offset higher costs with a higher-margin product mix and
The Company's operating income performance led to an increase in
earnings per share to
With the introduction of "McCormick profit" in 2008, the Company is
improving its management of working capital, and achieved a five day
reduction in its cash conversion cycle during the year. This
improvement, as well as lower payments for restructuring activity and
retirement plan contributions, led to a
Fourth quarter results
For the fourth quarter of 2008, the Company increased sales 5% over the fourth quarter of 2007 and in local currency the increase was 9%. Pricing actions to offset higher input costs added 7% to sales and acquisitions added 4% to sales. Other increases in volume and product mix for the consumer business were more than offset by an unfavorable impact from the industrial business, for a net reduction of 2%. Weakness in the restaurant industry has limited growth for the industrial segment.
Higher sales, favorable product mix and productivity improvements led to a 7% increase in fourth quarter gross profit, and a gross profit margin of 43.7%, compared to 43.2% in the fourth quarter of 2007. Operating income declined 5%, but on a comparable basis, excluding restructuring and impairment charges, grew 14%. This increase was the result of higher sales, favorable product mix and productivity improvements, and included an 8% increase in marketing support.
Fourth quarter earnings per share were
Financial outlook
Looking ahead to 2009, the Company expects another solid year in sales and profit growth. In local currency, sales are projected to grow 9 to 11% based largely on the Company's growth initiatives which include incremental sales from the 2008 acquisition of Lawry's. Based on current conditions, unfavorable currency exchange rates are expected to lower sales by 7%, leading to a growth range of 2 to 4%.
Higher sales, a favorable business mix and cost savings are expected to
increase 2009 earnings per share to a range of
Higher net income and further improvements in its management of working capital will continue to generate strong cash flow from operations. In 2009, the Company expects to use the majority of its cash from operations to pay down the debt associated with the acquisition of Lawry's, as well as to fund dividend payments, capital expenditures and contributions to its pension plans.
Mr. Wilson stated, "We will continue to face challenges in 2009. However, the strength of our brands, momentum behind marketing and product innovation, improvements in our supply chain and a sound balance sheet give us confidence that McCormick is well-positioned for growth in 2009 and beyond."
Business Segment Results
Consumer Business
(in millions) Three Months Ended Twelve Months Ended
11/30/08 11/30/07 11/30/08 11/30/07
Net sales $579.9 $536.6 $1,850.8 $1,671.3
Operating income 107.0 120.0 304.6 290.1
Operating income, excluding 145.5 130.1 343.3 313.9
restructuring and impairment charges
For fiscal year 2008, the Company grew consumer business sales 11% and
8% in local currency when compared to 2007. Higher volume and product
mix added 5% to sales, including the impact of acquisitions which
accounted for 4% of the increase. Pricing actions taken to offset higher
input costs added another 3% to sales. Consumer sales in the Americas
rose 13% and 12% in local currency. In this region, higher volume and
product mix added 8% to sales including a 5% impact from acquisitions,
as well as the benefit of new products, new distribution and increased
marketing support. Higher pricing added 4% to consumer sales in the
Americas. Consumer sales in
Consumer business operating income, excluding restructuring and
impairment charges rose to
For the fourth quarter, the Company grew consumer business sales 8% and
11% in local currency when compared to 2007. Higher volume and product
mix added 7% to sales, including the impact of acquisitions which
accounted for 6% of the increase. Pricing actions taken to offset higher
costs added another 4% to sales. Consumer sales in the Americas rose 15%
and 16% in local currency. In this region, higher volume and product mix
added 13% to sales including an 8% impact from acquisitions, as well as
the benefit of new products, new distribution and increased marketing
support. Higher pricing added 3% to consumer sales in the Americas.
Consumer sales in EMEA declined 10%, with 6% from unfavorable foreign
exchange rates. Pricing actions added 5% to sales while unfavorable
volume and product mix reduced sales by 9%. In this region, the Company
was impacted by trade inventory reductions as well as a slow-down in
consumer purchases in a difficult economy. Early in 2009, sales in this
region have begun to stabilize and the Company has plans for marketing
programs and innovation to support its brands during the year. Fourth
quarter sales in the
Industrial Business
(in millions) Three Months Ended Twelve Months Ended
11/30/08 11/30/07 11/30/08 11/30/07
Net sales $327.0 $323.5 $1,325.8 $1,244.9
Operating income 18.7 12.0 71.9 64.1
Operating income, excluding 21.6 16.7 78.8 74.3
restructuring charges
For fiscal year 2008, sales for McCormick's industrial business
increased 6% over 2007. The increase in local currency was also 6%.
Higher prices taken in response to increased costs of certain
commodities increased sales by 8%. While the Company successfully
introduced new products during this period, volume and product mix
declined 2% as a result of lower sales to restaurant customers in the
Americas and
The industrial business was able to grow profit during an economic
downturn and period of volatile and increasing material costs during
2008. Operating income excluding restructuring charges rose 6% to
For the fourth quarter, the Company grew industrial business sales 1%
and 6% in local currency compared to 2007. Pricing actions to offset
increased costs of certain commodities added 12% to sales, while volume
and product mix reduced sales 6% as a result of lower sales to
restaurant customers in the Americas and
Non-GAAP Financial Measures
The non-GAAP information in this press release (which excludes restructuring charges, amounts related to the Lawry's acquisition, including the gain on the sale of Season-All, and an impairment charge related to the value of the Silvo brand) is not a measure that is defined in generally accepted accounting principles ("GAAP"). 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 2008 and 2007 and a fourth quarter non-cash impairment charge to reduce the value of the Silvo brand. Also excluded are amounts related to the acquisition of Lawry's in the third quarter of 2008, which include the gain on the sale of Season-All.
(in millions except Three Months Ended Twelve Months Ended
per share data)
11/30/08 11/30/07 11/30/08 11/30/07
Operating income $ 125.7 $ 132.0 $ 376.5 $ 354.2
Impact of 12.4 14.8 16.6 34.0
restructuring charges
Impact of impairment 29.0 - 29.0 -
charge
Adjusted operating $ 167.1 $ 146.8 $ 422.1 $ 388.2
income
% increase versus 13.8 % 8.7 %
prior period
Net income $ 82.5 $ 87.6 $ 255.8 $ 230.1
Impact of
restructuring charges 8.6 10.1 11.5 24.2
*
Impact of impairment 20.1 - 20.1 -
charge
Net gain related to
Lawry's acquisition - - (5.5 ) -
($7.9 pre-tax)
Adjusted net income $ 111.2 $ 97.7 $ 282.0 $ 254.3
Earnings per share - $ 0.62 $ 0.67 $ 1.94 $ 1.73
diluted
Impact of 0.07 0.08 0.09 0.18
restructuring charges
Impact of impairment 0.15 - 0.15 -
charge
Net gain related to - - (0.04 ) -
Lawry's acquisition
Adjusted earnings per $ 0.84 $ 0.75 $ 2.14 $ 1.92
share - diluted
% increase versus 12.0 % 11.5 %
prior period
* The impact of
restructuring activity
on net income
includes:
Restructuring charges
included in cost of $ (2.0 ) $ (0.7 ) $ (4.5 ) $ (3.3 )
good sold
Restructuring charges (10.4 ) (14.1 ) (12.1 ) (30.7 )
Tax impact included in 3.8 4.6 5.1 10.6
income taxes
Loss on sale of
unconsolidated - - - (0.8 )
operations
$ (8.6 ) $ (10.1 ) $ (11.5 ) $ (24.2 )
Above amounts may not
add due to rounding.
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
Fourth Quarter Report McCormick & Company, Incorporated Consolidated Income Statement (In millions except per-share data; for periods endingNovember 30 ) Three Months Ended Twelve Months Ended 2008 2007 2008 2007 Net sales $ 906.9 $ 860.1 $ 3,176.6 $ 2,916.2 Cost of goods sold 510.7 488.8 1,888.4 1,724.4 Gross profit 396.2 371.3 1,288.2 1,191.8 Gross profit margin 43.7 % 43.2 % 40.6 % 40.9 % Selling, general and 231.1 225.2 870.6 806.9 administrative expense Restructuring charges 10.4 14.1 12.1 30.7 Impairment charge 29.0 - 29.0 - Operating income 125.7 132.0 376.5 354.2 Interest expense 16.3 15.6 56.7 60.6 Other income, net (1.6 ) (2.3 ) (18.0 ) (8.8 ) Income from consolidated 111.0 118.7 337.8 302.4 operations before income taxes Income taxes 32.2 36.3 100.6 92.2 Net income from consolidated 78.8 82.4 237.2 210.2 operations Income from unconsolidated 3.7 5.2 18.6 20.7 operations Loss on sale of unconsolidated - - - (0.8 ) operations Net income $ 82.5 $ 87.6 $ 255.8 $ 230.1 Earnings per common share - $ 0.63 $ 0.69 $ 1.98 $ 1.78 basic Earnings per common share - $ 0.62 $ 0.67 $ 1.94 $ 1.73 diluted Average shares outstanding - 130.2 127.6 129.1 129.3 basic Average shares outstanding - 132.3 130.8 131.8 132.7 diluted
Fourth Quarter Report McCormick & Company, Incorporated Consolidated Balance Sheet (In millions; for periods endingNovember 30 ) 2008 2007 Assets Current assets Cash and cash equivalents $ 38.9 $ 45.9 Receivables, net 414.7 456.5 Inventories 439.0 430.2 Prepaid expenses and other current assets 75.7 50.5 Total current assets 968.3 983.1 Property, plant and equipment, net 461.1 487.6 Goodwill, net 1,230.2 879.5 Intangible assets, net 374.8 207.5 Prepaid allowances 32.9 39.3 Investments and other assets 153.0 190.5 Total assets $ 3,220.3 $ 2,787.5 Liabilities and shareholders' equity Current liabilities Short-term borrowings and current portion of $ 354.0 $ 149.6 long-term debt Trade accounts payable 266.1 243.3 Other accrued liabilities 414.0 468.4 Total current liabilities 1,034.1 861.3 Long-term debt 885.2 573.5 Other long-term liabilities 245.7 267.6 Total liabilities 2,165.0 1,702.4 Shareholders' equity Common stock 581.8 501.0 Retained earnings 425.4 323.8 Accumulated other comprehensive income 48.1 260.3 Total shareholders' equity 1,055.3 1,085.1 Total liabilities and shareholders' equity $ 3,220.3 $ 2,787.5
Fourth Quarter Report McCormick & Company, Incorporated Consolidated Cash Flow Statement (In millions; for periods endingNovember 30 ) Twelve Months Ended 2008 2007 Cash flows from operating activities Net income $ 255.8 $ 230.1 Adjustments to reconcile net income to net cash flow from operating activities: Depreciation and amortization 85.6 82.6 Impairment charge 29.0 - (Gains)/Losses on sales of assets (22.9 ) 0.5 Stock based compensation 18.2 21.4 Loss on sale of unconsolidated operation - 0.8 Income from unconsolidated operations (18.6 ) (20.7 ) Changes in operating assets and liabilities (45.9 ) (109.7 ) Dividends from unconsolidated affiliates 13.4 19.5 Net cash flow from operating activities 314.6 224.5 Cash flows from investing activities Acquisitions of businesses (693.3 ) (15.9 ) Capital expenditures (85.8 ) (78.5 ) Net proceeds from sale of business 14.0 - Proceeds from sale of property, plant and 18.1 1.6 equipment Net cash flow from investing activities (747.0 ) (92.8 ) Cash flows from financing activities Short-term borrowings, net 156.5 66.0 Long-term debt borrowings 503.0 - Long-term debt repayments (150.4 ) (0.5 ) Proceeds from exercised stock options 48.8 43.0 Common stock acquired by purchase (11.0 ) (157.0 ) Dividends paid (113.5 ) (103.6 ) Net cash flow from financing activities 433.4 (152.1 ) Effect of exchange rate changes on cash and (8.0 ) 17.3 cash equivalents Increase/(decrease) in cash and cash (7.0 ) (3.1 ) equivalents Cash and cash equivalents at beginning of 45.9 49.0 period Cash and cash equivalents at end of period $ 38.9 $ 45.9
CONTACT:
Corporate Communications:
john_mccormick@mccormick.com
or
Investor Relations:
joyce_brooks@mccormick.com
Source: