McCormick Reports Financial Results for Third Quarter 2013 and Updates 2013 Financial Outlook
- Grew third quarter sales 4%, which included the impact of WAPC acquired in
May 2013 . Reported earnings per share of$0.78 .
- In the fourth quarter, the company expects to grow both sales and adjusted earnings per share approximately 7%. The adjusted earnings per share projection excludes the impact of an estimated
$20 million fourth quarter settlement charge that relates to a previously announced lump sum payout program offered to former U.S. employees with deferred vested pension benefits.
Chairman's Remarks
"We continue to invest in our leading brands around the world. We increased our 2013 marketing support by
"
Financial Results
Operating income increased 3% to
Earnings per share of
2013 Financial Outlook
In the fourth quarter,
Based on the third quarter results and this fourth quarter projection, fiscal year 2013 sales are expected to grow at the lower end of the company's 4% to 6% range. Adjusted operating income for the fiscal year is projected to grow 3% to 5%, compared to the previous range of 5% to 7%, excluding an unfavorable impact of approximately 3% from the fourth quarter settlement charge. This projection includes an increase of approximately
In the fourth quarter of 2013, the company expects to record an estimated
Business Segment Results |
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Consumer Business |
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(in millions) |
Three months ended |
Nine months ended |
||||||||||||||
8/31/2013 |
8/31/2012 |
8/31/2013 |
8/31/2012 |
|||||||||||||
Net sales |
$ |
612.4 |
$ |
568.3 |
$ |
1,773.2 |
$ |
1,671.2 |
||||||||
Operating income |
118.7 |
108.9 |
294.0 |
278.9 |
||||||||||||
Consumer business sales grew 8% when compared to the third quarter of 2012. Excluding the impact of currency, WAPC and a shift in sales, consumer business sales declined 3%, primarily due to softness in the
- Consumer sales in the
Americas rose 4%, with a minimal impact from currency. The company estimates that$30 million in sales shifted from the fourth quarter into the third quarter due to stronger retailer response to its U.S. holiday display program and retailer purchases in advance of a U.S. price increase. As in previous years,McCormick offered a holiday display program to U.S. retailers to encourage adequate supply and early displays for fall cooking and the holiday season. The U.S. price increase is effective in the fourth quarter and is being taken in response to 2013 increases in certain raw and packaging materials. This estimated shift in sales contributed 8% to sales growth in the third quarter. The sales softness in theAmericas region related to lower consumer demand early in the third quarter in spices and seasonings, including grilling items. Consumer demand had improved by the end of the third quarter.
- Consumer sales in EMEA grew 4% and in local currency were comparable to the year-ago period. During the third quarter, increased sales in
Poland and parts of westernEurope were driven by new product introductions and marketing programs. These increases were offset by a decline inU.K. sales which resulted from weak retailer sales across a number of food categories.
- Third quarter sales in the
Asia/Pacific region grew 52%, with WAPC adding 59%. Sales of the company's base business inChina grew at a double-digit rate, but were more than offset by a decline inIndia this period.
Consumer business operating income rose 9% when compared to the third quarter of 2012. This growth was driven largely by higher sales and CCI cost savings, which more than offset a
Industrial Business |
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(in millions) |
Three months ended |
Nine months ended |
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8/31/2013 |
8/31/2012 |
8/31/2013 |
8/31/2012 |
||||||||||||||
Net sales |
$ |
404.0 |
$ |
409.4 |
$ |
1,180.2 |
$ |
1,197.2 |
|||||||||
Operating income |
29.7 |
35.3 |
82.4 |
99.1 |
|||||||||||||
Industrial business sales declined 1% when compared to the third quarter of 2012. In local currency, sales were comparable to the year-ago period, with a slight increase in pricing, offset by lower volume and product mix. In local currency, industrial business sales declined 1% year-to-date.
- Industrial sales in the
Americas declined 2%, with minimal impact from currency. The company grew sales of snack seasonings and other flavors to food manufacturers in this region. However, demand from quick service restaurants continued to be weak this period as a result of lower restaurant traffic and menu emphasis on items not flavored byMcCormick .
- In EMEA, industrial sales declined 2%, but in local currency grew 4%. Both volume and product mix, as well as pricing actions contributed to this increase. Higher demand from quick service restaurants in this region drove increased sales of products that
McCormick supplies from operations inTurkey andSouth Africa .
- In the
Asia/Pacific region, sales rose 1% and in local currency grew 2%. Sales to quick service restaurants inChina have begun to recover from the impact on poultry sales of consumer concerns regarding bird flu. In addition, new product introductions led to higher sales inAustralia this period.
Industrial business operating income was
Non-GAAP Financial Measures
The table below includes a financial measure of projected diluted earnings per share excluding the expected estimated impact of a
This non-GAAP measure may be considered in addition to results prepared in accordance with GAAP, but it should not be considered a substitute for, or superior to, GAAP results. We intend to continue to provide this non-GAAP financial measure as part of our future earnings discussions and, therefore, the inclusion of this non-GAAP financial measure will provide consistency in our financial reporting. A reconciliation of this non-GAAP measure to GAAP financial results is provided below.
Fiscal year 2013 Projections |
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Earnings per share range |
$3.03 to $3.09 |
(a) |
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Impact of $20 million settlement charge |
.10 |
|||||||||||||
Adjusted earnings per share range |
$3.13 to $3.19 |
(a) |
||||||||||||
(a) The company has guided to the lower end of the earnings per share range and adjusted earnings per share range for fiscal 2013. |
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Live Webcast
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," "believe" and "plan." These statements may relate to: the expected results of operations of businesses acquired by us, the expected impact of raw material costs and our pricing actions on our 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, our ability to issue additional debt or equity securities and our expectations regarding purchasing shares of our common stock under the existing authorizations.
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 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, changes in regulatory requirements, and global economic conditions generally which would include the availability of financing, interest, inflation rates and investment return on retirement plan assets, as well as foreign currency fluctuations, risks associated with our information technology systems, the threat of data breaches or cyber attacks, 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 &
Every day, no matter where or what you eat, you can enjoy food flavored by
To learn more please visit us at www.mccormickcorporation.com.
For information contact:
Investor Relations:
Corporate Communications:
(Financial tables follow)
Third Quarter Report |
McCormick & Company, Incorporated |
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Consolidated Income Statement (Unaudited) |
||||||||||||||
(In millions except per-share data) |
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Three months ended |
Nine months ended |
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August 31, 2013 |
August 31, 2012 |
August 31, 2013 |
August 31, 2012 |
|||||||||||
Net sales |
$ |
1,016.4 |
$ |
977.7 |
$ |
2,953.4 |
$ |
2,868.4 |
||||||
Cost of goods sold |
608.8 |
586.0 |
1,789.8 |
1,733.0 |
||||||||||
Gross profit |
407.6 |
391.7 |
1,163.6 |
1,135.4 |
||||||||||
Gross profit margin |
40.1% |
40.1% |
39.4% |
39.6% |
||||||||||
Selling, general and administrative expense |
259.2 |
247.5 |
787.2 |
757.4 |
||||||||||
Operating income |
148.4 |
144.2 |
376.4 |
378.0 |
||||||||||
Interest expense |
14.0 |
13.2 |
41.4 |
40.7 |
||||||||||
Other income, net |
0.3 |
0.9 |
1.7 |
1.8 |
||||||||||
Income from consolidated operations before income taxes |
134.7 |
131.9 |
336.7 |
339.1 |
||||||||||
Income taxes |
35.3 |
33.0 |
94.0 |
93.8 |
||||||||||
Net income from consolidated operations |
99.4 |
98.9 |
242.7 |
245.3 |
||||||||||
Income from unconsolidated operations |
5.0 |
5.5 |
16.3 |
14.0 |
||||||||||
Net income |
$ |
104.4 |
$ |
104.4 |
$ |
259.0 |
$ |
259.3 |
||||||
Earnings per share - basic |
$ |
0.79 |
$ |
0.79 |
$ |
1.96 |
$ |
1.95 |
||||||
Earnings per share - diluted |
$ |
0.78 |
$ |
0.78 |
$ |
1.94 |
$ |
1.93 |
||||||
Average shares outstanding - basic |
132.1 |
132.7 |
132.2 |
132.8 |
||||||||||
Average shares outstanding - diluted |
133.5 |
134.3 |
133.7 |
134.3 |
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Third Quarter Report |
McCormick & Company, Incorporated |
||||
Consolidated Balance Sheet (Unaudited) |
|||||
(In millions) |
|||||
August 31, 2013 |
August 31, 2012 |
||||
Assets |
|||||
Cash and cash equivalents |
$ |
146.8 |
$ |
72.2 |
|
Trade accounts receivable, net |
462.4 |
411.2 |
|||
Inventories |
640.8 |
628.6 |
|||
Prepaid expenses and other current assets |
120.9 |
107.4 |
|||
Total current assets |
1,370.9 |
1,219.4 |
|||
Property, plant and equipment, net |
549.7 |
518.5 |
|||
Goodwill |
1,756.4 |
1,667.0 |
|||
Intangible assets, net |
347.5 |
345.4 |
|||
Investments and other assets |
328.5 |
306.7 |
|||
Total assets |
$ |
4,353.0 |
$ |
4,057.0 |
|
Liabilities |
|||||
Short-term borrowings and current portion of long-term debt |
$ |
360.0 |
$ |
231.3 |
|
Trade accounts payable |
324.7 |
317.5 |
|||
Other accrued liabilities |
369.6 |
353.8 |
|||
Total current liabilities |
1,054.3 |
902.6 |
|||
Long-term debt |
1,018.6 |
1,026.2 |
|||
Other long-term liabilities |
482.6 |
404.2 |
|||
Total liabilities |
2,555.5 |
2,333.0 |
|||
Shareholders' equity |
|||||
Common stock |
955.1 |
885.8 |
|||
Retained earnings |
1,011.9 |
909.6 |
|||
Accumulated other comprehensive loss |
(183.6) |
(89.5) |
|||
Non-controlling interests |
14.1 |
18.1 |
|||
Total shareholders' equity |
1,797.5 |
1,724.0 |
|||
Total liabilities and shareholders' equity |
$ |
4,353.0 |
$ |
4,057.0 |
|
Third Quarter Report |
McCormick & Company, Incorporated |
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Consolidated Cash Flow Statement (Unaudited) |
|||||
(In millions) |
|||||
Nine Months Ended |
|||||
August 31, 2013 |
August 31, 2012 |
||||
Operating activities |
|||||
Net income |
$ |
259.0 |
$ |
259.3 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|||||
Depreciation and amortization |
76.9 |
76.8 |
|||
Stock based compensation |
16.1 |
11.9 |
|||
Income from unconsolidated operations |
(16.3) |
(14.0) |
|||
Changes in operating assets and liabilities |
(111.7) |
(91.9) |
|||
Dividends from unconsolidated affiliates |
3.4 |
14.2 |
|||
Net cash provided by operating activities |
227.4 |
256.3 |
|||
Investing activities |
|||||
Acquisition of business |
(130.0) |
— |
|||
Capital expenditures |
(54.0) |
(62.2) |
|||
Proceeds from sale of property, plant and equipment |
2.0 |
0.7 |
|||
Net cash used in investing activities |
(182.0) |
(61.5) |
|||
Financing activities |
|||||
Short-term borrowings, net |
(31.8) |
12.1 |
|||
Long-term debt borrowings |
246.2 |
— |
|||
Long-term debt repayments |
(1.2) |
(4.6) |
|||
Proceeds from exercised stock options |
32.8 |
37.3 |
|||
Common stock acquired by purchase |
(92.1) |
(98.2) |
|||
Dividends paid |
(135.0) |
(123.6) |
|||
Net cash provided by (used in) financing activities |
18.9 |
(177.0) |
|||
Effect of exchange rate changes on cash and cash equivalents |
3.5 |
0.5 |
|||
Increase in cash and cash equivalents |
67.8 |
18.3 |
|||
Cash and cash equivalents at beginning of period |
79.0 |
53.9 |
|||
Cash and cash equivalents at end of period |
$ |
146.8 |
$ |
72.2 |
|
SOURCE