HUNT
VALLEY, Md., Oct. 3, 2023
/PRNewswire/ -- McCormick & Company, Incorporated (NYSE:MKC), a
global leader in flavor, today reported financial results for the
third quarter ended August 31, 2023
and reaffirmed fiscal 2023 sales and operating profit
outlook.
- Sales increased 6% in the third quarter from the year-ago
period. In constant currency, sales also grew 6%. Both comparisons
include a 1% unfavorable impact attributable to a slower economic
recovery in China.
- Operating income was $245
million in the third quarter compared to $235 million in the year-ago period. Adjusted
operating income was $251 million, a
5% increase from $239 million in the
year-ago period.
- Earnings per share was $0.63
in the third quarter as compared to $0.82 in the year-ago period. Adjusted earnings
per share was $0.65 compared to
$0.69 in the year-ago
period.
- Cash flow from operations through the third quarter of 2023
was $660 million compared to
$250 million in the year-ago
period.
- For fiscal year 2023, McCormick reaffirmed its sales and
operating profit outlook and increased its adjusted earnings per
share outlook.
President and CEO's Remarks
Brendan M. Foley, President and
CEO, stated, "We drove another quarter of strong performance,
reflecting sustained demand and effective execution of our growth
strategies across our Consumer and Flavor Solutions segments,
reinforcing the confidence that we have in our competitive
advantages and differentiation. Our results reflect strong
underlying business trends that were in line with our expectations
across our business, notwithstanding our Consumer segment in APAC,
where the pace of China's economic
recovery has been slower than anticipated. We remain confident in
our ability to deliver on our outlook and in the sustained
trajectory of our business.
"We drove 6% sales growth in the third quarter, reflecting
continued effective price realization and an improvement in our
underlying business volume trends. Our performance
underscores the strength of our brands and categories, as well as
the power of our marketing, category management, differentiated
customer engagement, and new products. In our Consumer segment,
sales growth in the Americas and EMEA regions was partially offset
by an unfavorable China impact. In
Flavor Solutions, our exceptional performance continued, we
delivered our tenth consecutive quarter of constant currency
double-digit sales growth. Across our broad portfolio, we are
continuing to capitalize on strong demand and deliver on our growth
plans.
"We drove significant improvement in our third quarter gross
margin performance relative to last year. This improvement reflects
the continued recovery of the cost inflation that our pricing
lagged last year as well as cost savings from our CCI and GOE
programs. Our focus on increasing our profit realization is driving
results.
"As we look ahead, we remain committed to our long-term
financial algorithm and driving sustained value creation through
top line growth and margin expansion. We are excited about the
opportunities for future growth in both segments to advance our
leadership position and differentiation. We will continue to
innovate and renovate and drive industry-leading brand marketing,
customer engagement and category management. We will also
diligently optimize our cost structure to drive long-term
profitable growth.
"Importantly, we will continue to leverage the strength of our
culture and the power of people to build the next generation of
leaders and capabilities. This is one of our most important
commitments, as our teams around the world drive our momentum and
success, and I am grateful for and energized by both their ongoing
contributions and the results that they are driving. Our business
fundamentals remain strong, and we are confident we will continue
to not only deliver strong sales growth, but also drive total
shareholder return at an industry-leading pace."
Third Quarter 2023 Results
McCormick reported 6% sales growth in the third quarter from the
year-ago period, with minimal currency impact. Constant currency
sales growth reflected an 8% increase from pricing actions,
partially offset by a 2% volume and mix decline attributable to the
impact of a slower than expected economic recovery in China, the Kitchen Basics divestiture, the
exit of the Consumer business in Russia, and the Company's strategic decisions
to discontinue low margin business. All other volume and product
mix was flat to the third quarter of the prior year.
Gross profit margin expanded 150 basis points versus the third
quarter of last year. This expansion was driven by pricing actions
and cost savings led by the Company's Comprehensive Continuous
Improvement (CCI) and Global Operating Effectiveness (GOE) programs
partially offset by cost inflation. Selling, general, and
administrative expenses increased from the year-ago period driven
by an increase in employee incentive compensation expense as well
as higher distribution and brand marketing costs partially offset
by CCI-led and GOE cost savings.
Operating income increased to $245
million in the third quarter of 2023 compared to
$235 million in the third quarter of
2022. Excluding special charges, adjusted operating income was
$251 million in the third quarter of
2023 compared to $239 million in the
year-ago period. In constant currency, adjusted operating income
increased 5% from the year-ago period driven by the favorable
impact of higher sales and gross margin expansion partially offset
by higher selling, general, and administrative expenses.
Earnings per share was $0.63 in
the third quarter of 2023 compared to $0.82 in the year-ago period. Special charges
lowered earnings per share by $0.02
in the third quarter of 2023. The net favorable impact of the gain
on the sale of the Kitchen Basics business and special charges
increased earnings per share by $0.13
in 2022. Excluding these impacts, adjusted earnings per share was
$0.65 in the third quarter of 2023
compared to $0.69 in the year-ago
period. This decrease was driven by the net impact of lapping the
benefit of an optimization of the Company's debt portfolio in the
third quarter of last year and the increase in income from
unconsolidated operations driven by strong performance in our
largest joint venture, McCormick de Mexico.
Net cash provided by operating activities through the third
quarter of 2023 was $660 million
compared to $250 million through the
third quarter of 2022. The increase was primarily driven by higher
operating income and working capital improvements, including lower
inventory.
Fiscal Year 2023 Financial Outlook
For fiscal year 2023, McCormick reaffirmed its sales and
operating income outlook, despite a lower than previously expected
benefit from lapping the COVID-related disruptions in China. The Company increased its adjusted
earnings per share outlook, driven by the strong year-to-date and
projected performance of its joint venture, McCormick de
Mexico.
McCormick's broad and advantaged global flavor portfolio enables
the Company to meet the rising demand for flavor around the world.
The Company is capitalizing on the growing consumer interests in
healthy and flavorful cooking, digital engagement, valuing trusted
brands, and purpose-minded practices. This, coupled with the
breadth and reach of McCormick's portfolio and its proven
strategies, positions the Company to sustainably continue its
growth trajectory.
McCormick continues to expect strong underlying business
performance in 2023 driven by sales growth. The Company also
expects a favorable impact to operating income from its GOE program
and the lapping of the negative impact of the COVID-related
disruptions in China in 2022,
partially offset by the Kitchen Basics divestiture and an expected
increase in employee incentive compensation expenses given the
anticipated improvement in underlying business performance. In
addition, the Company expects earnings per share growth will be
tempered by higher interest expense and a higher projected
effective tax rate compared to 2022. Excluding this interest and
tax headwind, McCormick's operating performance growth is expected
to be strong. The Company expects minimal impact on net sales,
operating income, and earnings per share from currency rates in
2023.
In 2023, McCormick expects to grow sales by 5% to 7% compared to
2022. The Company expects sales growth to be driven primarily by
pricing actions which, in conjunction with cost savings, are
expected to offset inflationary pressures. McCormick also expects
to drive continued growth through the strength of its brands, as
well as brand marketing, new products, category management, and
differentiated customer engagement plans.
Operating income in 2023 is expected to grow by 11% to 13% from
$864 million in 2022. The Company
anticipates approximately $55 million
of special charges in 2023 that relate to previously announced
organizational and streamlining actions. Excluding the impact of
special charges and integration expenses in 2023 and 2022, adjusted
operating income is expected to increase 10% to 12%.
McCormick projects 2023 earnings per share to be in the range of
$2.46 to $2.51, compared to $2.52 of earnings per share in 2022. The Company
expects special charges to lower earnings per share by $0.16 in 2023. Excluding special charges, the
Company projects 2023 adjusted earnings per share to be in the
range of $2.62 to $2.67, as compared to previously reported
guidance of $2.60 to $2.65 and adjusted earnings per share of
$2.53 in 2022. The increase from
previous guidance reflects an updated expectation of the
contribution from the Company's joint venture, McCormick de
Mexico. The year-over-year
expected increase of 4% to 6% reflects strong operating
performance, partially offset by an 8% headwind from higher
interest expense due to the higher interest-rate environment and
lapping the impact of an optimization of the Company's debt
portfolio last year, as well as a 1% headwind from an anticipated
increase in the Company's projected adjusted effective tax rate.
For fiscal 2023, the Company expects strong cash flow driven by
profit and working capital initiatives and anticipates returning a
significant portion of cash flow to shareholders through
dividends.
Business Segment Results
Consumer Segment
(in
millions)
|
|
Three months
ended
|
|
Nine months
ended
|
|
|
8/31/2023
|
|
8/31/2022
|
|
8/31/2023
|
|
8/31/2022
|
Net sales
|
|
$
937.1
|
|
$
927.9
|
|
$ 2,758.7
|
|
$ 2,720.1
|
Operating income,
excluding special charges
|
|
173.3
|
|
183.7
|
|
500.3
|
|
475.5
|
Consumer segment sales increased 1% from the third quarter of
2022, with minimal currency impact, reflecting a 5% increase from
pricing actions partially offset by lower volume of 4%. The lower
volume includes a 2% decline attributable to slower than expected
recovery in the China Consumer business as well as a 2% decline
attributable to the Kitchen Basics divestiture, the exit of the
Consumer business in Russia and
the Company's strategic decisions to discontinue low margin
business.
- Consumer sales in the Americas increased 1% from the third
quarter of 2023, or 2% in constant currency. The increase was
driven by pricing actions partially offset by lower volume and
product mix, including a 2% decline related to the Kitchen Basics
divestiture and the discontinuation of business to drive margin
improvement.
- Consumer sales in Europe,
Middle East and Africa (EMEA) increased 15% compared to the
year-ago period. In constant currency, sales grew 10% driven by
pricing actions partially offset by lower volume and product mix.
The sales increase included a 2% unfavorable impact from the exit
of the Consumer business in Russia.
- Consumer sales in the Asia-Pacific region (APAC) decreased 16%
compared to the year-ago period. In constant currency, sales
declined 11% with a 15% volume decline partially offset by a 4%
increase from pricing actions. The volume decline was driven by a
15% unfavorable impact from China
due primarily to lower consumption in the current period related to
a slower than anticipated economic recovery as well as lapping
strong demand in the prior year.
Consumer segment operating income, excluding special charges,
decreased 6% in the third quarter of 2023 compared to the year-ago
period. In constant currency, operating income decreased 5%.
Pricing actions and cost savings were more than offset by lower
volume, attributable primarily to China, higher inflation, distribution and
brand marketing costs as well as an increase in employee incentive
compensation.
Flavor Solutions Segment
(in
millions)
|
|
Three months
ended
|
|
Nine months
ended
|
|
|
8/31/2023
|
|
8/31/2022
|
|
8/31/2023
|
|
8/31/2022
|
Net sales
|
|
$
747.6
|
|
$
667.7
|
|
$ 2,150.7
|
|
$ 1,934.7
|
Operating income,
excluding special charges, transaction and integration
expenses
|
|
77.8
|
|
54.9
|
|
212.6
|
|
164.0
|
Flavor Solutions segment sales increased 12% from the third
quarter of 2022. In constant currency, sales increased 11%
reflecting a 10% increase from pricing actions and 1% from volume.
Volume growth was partially impacted by the Company's strategic
decisions to discontinue low margin business. Flavor Solutions
segment sales growth was strong across all regions.
- In the Americas, Flavor Solutions sales rose 11% compared to
the third quarter of 2022. In constant currency, sales increased
10%, reflecting a 9% increase from pricing actions and 1% growth in
volume and product mix.
- The EMEA region's Flavor Solutions sales grew 17% compared to
the third quarter of 2022. In constant currency, sales increased
15% with pricing actions partially offset by lower volume and
product mix. Included in this increase is a 1% decline related to
the pruning of low margin business.
- The APAC region's Flavor Solutions sales increased 7% compared
to the third quarter of 2022. In constant currency, 13% sales
growth reflects a 7% increase from pricing actions and 6% growth in
volume and product mix.
Flavor Solutions segment operating income,
excluding special charges, grew 42% in the third quarter of
2023 compared to the year-ago period, or 41% in constant currency.
Pricing actions, higher volume, and cost savings more than offset
the impact of higher cost inflation and higher distribution costs
as well as an increase in employee incentive compensation.
Non-GAAP Financial Measures
The tables below include financial measures of adjusted
operating income, adjusted operating income margin, adjusted income
tax expense, adjusted income tax rate, adjusted net income and
adjusted diluted earnings per share. These represent non-GAAP
financial measures which are prepared as a complement to our
financial results prepared in accordance with United States generally accepted accounting
principles. These financial measures exclude the impact, as
applicable, of the following:
Special charges – In our consolidated income statement, we
include a separate line item captioned "Special charges" in
arriving at our consolidated operating income. Special charges
consist of expenses and income associated with certain actions
undertaken by the Company to reduce fixed costs, simplify or
improve processes, and improve our competitiveness and are of such
significance in terms of both up-front costs and
organizational/structural impact to require advance approval by our
Management Committee. Expenses associated with the approved actions
are classified as special charges upon recognition and monitored on
an on-going basis through completion.
Transaction and integration expenses – We exclude certain costs
associated with our acquisitions and their subsequent integration
into the Company. Such costs, which we refer to as "Transaction and
integration expenses", include transaction costs associated with
each acquisition, as well as integration costs following the
respective acquisition, including the impact of the acquisition
date fair value adjustment for inventories.
Gain on sale of Kitchen Basics - We exclude the gain realized
upon our sale of the Kitchen Basics business in August 2022. As more fully described in note 17
in our Annual Report on Form 10-K for the year ended November 30, 2022, the pre-tax gain associated
with the sale was $49.6 million and
is included in Other income, net in our consolidated income
statement for the year ended November 30,
2022.
We believe that these non-GAAP financial measures are important.
The exclusion of the items noted above provides additional
information that enables enhanced comparisons to prior periods and,
accordingly, facilitates the development of future projections and
earnings growth prospects. This information is also used by
management to measure the profitability of our ongoing operations
and analyze our business performance and trends.
These non-GAAP financial measures may be considered in addition
to results prepared in accordance with GAAP, but they should not be
considered a substitute for, or superior to, GAAP results. In
addition, these non-GAAP financial measures may not be comparable
to similarly titled measures of other companies because other
companies may not calculate them in the same manner that we do. We
intend to continue to provide these non-GAAP financial measures as
part of our future earnings discussions and, therefore, the
inclusion of these non-GAAP financial measures will provide
consistency in our financial reporting. A reconciliation of these
non-GAAP financial measures to the related GAAP financial measures
is provided below:
(in millions except per
share data)
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
8/31/2023
|
|
8/31/2022
|
|
8/31/2023
|
|
8/31/2022
|
Operating
income
|
$
245.0
|
|
$ 235.2
|
|
$
665.8
|
|
$ 599.3
|
Impact of transaction
and integration expenses
|
—
|
|
—
|
|
—
|
|
2.2
|
Impact of special
charges (1)
|
6.1
|
|
3.4
|
|
47.1
|
|
38.0
|
Adjusted operating
income
|
$
251.1
|
|
$ 238.6
|
|
$
712.9
|
|
$ 639.5
|
% increase versus
year-ago period
|
5.2 %
|
|
|
|
11.5 %
|
|
|
Adjusted operating
income margin (2)
|
14.9 %
|
|
15.0 %
|
|
14.5 %
|
|
13.7 %
|
|
|
|
|
|
|
|
|
Income tax
expense
|
$
42.7
|
|
$
59.3
|
|
$
117.4
|
|
$ 115.4
|
Impact of transaction
and integration expenses
|
—
|
|
—
|
|
—
|
|
0.6
|
Impact of special
charges (1)
|
1.3
|
|
0.7
|
|
11.0
|
|
10.7
|
Impact of sale of
Kitchen Basics
|
—
|
|
(11.6)
|
|
—
|
|
(11.6)
|
Adjusted income tax
expense
|
$
44.0
|
|
$
48.4
|
|
$
128.4
|
|
$ 115.1
|
Adjusted income tax
rate (3)
|
21.4 %
|
|
21.2 %
|
|
21.8 %
|
|
20.0 %
|
|
|
|
|
|
|
|
|
Net income
|
$
170.1
|
|
$ 222.9
|
|
$
461.3
|
|
$ 496.3
|
Impact of transaction
and integration expenses
|
—
|
|
—
|
|
—
|
|
1.6
|
Impact of special
charges (1)
|
4.8
|
|
2.7
|
|
36.1
|
|
27.3
|
Impact of after-tax
gain on sale of Kitchen Basics
|
—
|
|
(38.0)
|
|
—
|
|
(38.0)
|
Adjusted net
income
|
$
174.9
|
|
$ 187.6
|
|
$
497.4
|
|
$ 487.2
|
% increase (decrease)
versus year-ago period
|
(6.8) %
|
|
|
|
2.1 %
|
|
|
|
|
|
|
|
|
|
|
Earnings per share -
diluted
|
$
0.63
|
|
$
0.82
|
|
$
1.71
|
|
$
1.83
|
Impact of transaction
and integration expenses
|
—
|
|
—
|
|
—
|
|
0.01
|
Impact of special
charges (1)
|
0.02
|
|
0.01
|
|
0.13
|
|
0.10
|
Impact of after-tax
gain on sale of Kitchen Basics
|
—
|
|
(0.14)
|
|
—
|
|
(0.14)
|
Adjusted earnings per
share - diluted
|
$
0.65
|
|
$
0.69
|
|
$
1.84
|
|
$
1.80
|
% increase (decrease)
versus year-ago period
|
(5.8) %
|
|
|
|
2.2 %
|
|
|
|
|
(1)
|
Special charges for the
nine months ended August 31, 2022 include a $10.0 million non-cash
intangible asset impairment charge associated with our exit of our
business operations in Russia. We exited our Kohinoor rice product
line in India in the fourth quarter of fiscal 2021. Special charges
for the nine months ended August 31, 2022 include a $13.6 million
gain associated with the sale of the Kohinoor brand
name.
|
(2)
|
Adjusted operating
income margin is calculated as adjusted operating income as a
percentage of net sales for each period presented.
|
(3)
|
Adjusted income tax
rate is calculated as adjusted income tax expense as a percentage
of income from consolidated operations before income taxes
excluding transaction and integration expenses and special charges
of $205.5 million and $588.1 million for the three and nine months
ended August 31, 2023, respectively: and $228.5 million and $575.1
million for the three and nine months ended August 31, 2022,
respectively.
|
Because we are a multi-national company, we are subject to
variability of our reported U.S. dollar results due to changes in
foreign currency exchange rates. Those changes have been volatile
over the past several years. The exclusion of the effects of
foreign currency exchange, or what we refer to as amounts expressed
"on a constant currency basis", is a non-GAAP measure. We believe
that this non-GAAP measure provides additional information that
enables enhanced comparison to prior periods excluding the
translation effects of changes in rates of foreign currency
exchange and provides additional insight into the underlying
performance of our operations located outside of the U.S. It should
be noted that our presentation herein of amounts and percentage
changes on a constant currency basis does not exclude the impact of
foreign currency transaction gains and losses (that is, the impact
of transactions denominated in other than the local currency of any
of our subsidiaries in their local currency reported results).
Percentage changes in sales and adjusted operating income
expressed on a constant currency basis are presented excluding the
impact of foreign currency exchange. To present this information
for historical periods, current period results for entities
reporting in currencies other than the U.S. dollar are translated
into U.S. dollars at the average exchange rates in effect during
the corresponding period of the comparative year, rather than at
the actual average exchange rates in effect during the current
fiscal year. As a result, the foreign currency impact is equal to
the current year results in local currencies multiplied by the
change in the average foreign currency exchange rate between the
current fiscal period and the corresponding period of the
comparative year. Rates of constant currency growth (decline)
follow:
|
|
|
Three Months Ended
August 31, 2023
|
|
|
|
Percentage Change
as Reported
|
|
Impact of Foreign
Currency Exchange
|
|
Percentage Change
on
Constant Currency
Basis
|
Net
sales
|
|
|
|
|
|
|
|
Consumer
Segment
|
|
|
|
|
|
|
|
Americas
|
|
|
1.4 %
|
|
(0.3) %
|
|
1.7 %
|
EMEA
|
|
|
14.9 %
|
|
4.5 %
|
|
10.4 %
|
APAC
|
|
|
(15.8) %
|
|
(5.3) %
|
|
(10.5) %
|
Total Consumer
segment
|
|
|
1.0 %
|
|
(0.3) %
|
|
1.3 %
|
Flavor Solutions
Segment
|
|
|
|
|
|
|
|
Americas
|
|
|
11.3 %
|
|
1.2 %
|
|
10.1 %
|
EMEA
|
|
|
16.7 %
|
|
1.6 %
|
|
15.1 %
|
APAC
|
|
|
7.4 %
|
|
(5.6) %
|
|
13.0 %
|
Total Flavor
Solutions segment
|
|
|
12.0 %
|
|
0.6 %
|
|
11.4 %
|
Total net
sales
|
|
|
5.6 %
|
|
0.1 %
|
|
5.5 %
|
Adjusted operating
income
|
|
|
|
|
|
|
|
Consumer
segment
|
|
|
(5.7) %
|
|
(0.5) %
|
|
(5.2) %
|
Flavor
Solutions segment
|
|
|
41.7 %
|
|
0.9 %
|
|
40.8 %
|
Total adjusted
operating income
|
|
|
5.2 %
|
|
(0.2) %
|
|
5.4 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
August 31, 2023
|
|
|
|
Percentage Change
as Reported
|
|
Impact of Foreign
Currency Exchange
|
|
Percentage Change
on
Constant Currency
Basis
|
Net
sales
|
|
|
|
|
|
|
|
Consumer
Segment
|
|
|
|
|
|
|
|
Americas
|
|
|
2.5 %
|
|
(0.5) %
|
|
3.0 %
|
EMEA
|
|
|
3.3 %
|
|
(2.0) %
|
|
5.3 %
|
APAC
|
|
|
(7.0) %
|
|
(6.8) %
|
|
(0.2) %
|
Total Consumer
segment
|
|
|
1.4 %
|
|
(1.5) %
|
|
2.9 %
|
Flavor Solutions
Segment
|
|
|
|
|
|
|
|
Americas
|
|
|
12.0 %
|
|
0.9 %
|
|
11.1 %
|
EMEA
|
|
|
10.9 %
|
|
(4.6) %
|
|
15.5 %
|
APAC
|
|
|
6.4 %
|
|
(6.6) %
|
|
13.0 %
|
Total Flavor
Solutions segment
|
|
|
11.2 %
|
|
(1.0) %
|
|
12.2 %
|
Total net
sales
|
|
|
5.5 %
|
|
(1.3) %
|
|
6.8 %
|
Adjusted operating
income
|
|
|
|
|
|
|
|
Consumer
segment
|
|
|
5.2 %
|
|
(1.4) %
|
|
6.6 %
|
Flavor
Solutions segment
|
|
|
29.6 %
|
|
0.3 %
|
|
29.3 %
|
Total adjusted
operating income
|
|
|
11.5 %
|
|
(1.0) %
|
|
12.5 %
|
To present "constant currency" information for the fiscal year
2023 projection, projected sales and adjusted operating income for
entities reporting in currencies other than the U.S. dollar are
translated into U.S. dollars at the company's budgeted exchange
rates for 2023 and are compared to the 2022 results, translated
into U.S. dollars using the same 2023 budgeted exchange rates,
rather than at the average actual exchange rates in effect during
fiscal year 2022. To estimate the percentage change in adjusted
earnings per share on a constant currency basis, a similar
calculation is performed to arrive at adjusted net income divided
by historical shares outstanding for fiscal year 2022 or projected
shares outstanding for fiscal year 2023, as appropriate.
The following provides a reconciliation of our estimated
earnings per share to adjusted earnings per share for 2023 and
actual results for 2022:
|
Year Ended
|
|
2023
Projection
|
|
11/30/22
|
Earnings per share -
diluted
|
$2.46 to
$2.51
|
|
$
2.52
|
Impact of transaction
and integration expenses
|
—
|
|
0.01
|
Impact of special
charges
|
0.16
|
|
0.14
|
Impact of after-tax
gain on sale of Kitchen Basics
|
—
|
|
(0.14)
|
Adjusted earnings per
share - diluted
|
$2.62 to
$2.67
|
|
$
2.53
|
Live Webcast
As previously announced, McCormick will hold a conference call
with analysts today at 8:00 a.m. ET.
The conference call will be webcast live via the McCormick website.
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
statements concerning expected performance, such as those relating
to net sales, gross margin, earnings, cost savings, special
charges, acquisitions, brand marketing support, volume and product
mix, income tax expense and the impact of foreign currency rates
are "forward-looking statements" within the meaning of Section 21E
of the Securities Exchange Act of 1934, as amended. These
statements may be identified by the use of words such as "may,"
"will," "expect," "should," "anticipate," "intend," "believe" and
"plan" and similar expressions. These statements may relate to: the
impact of the COVID-19 pandemic on our business, suppliers,
consumers, customers, and employees; disruptions or inefficiencies
in the supply chain, including any impact of COVID-19; the expected
results of operations of businesses acquired by the company; the
expected impact of the inflationary cost environment, including
commodity, packaging materials and transportation costs on our
business; the expected impact of pricing actions on the company's
results of operations and gross margins; the impact of price
elasticity on our sales volume and mix; the expected impact of
factors affecting our supply chain, including transportation
capacity, labor shortages, and absenteeism; the expected impact of
productivity improvements, including those associated with our CCI
program, streamlining actions, including our GOE program, and
global enablement initiative; the impact of the ongoing conflict
between Russia and Ukraine, including the potential for broader
economic disruption; expected working capital improvements;
expectations regarding growth potential in various geographies and
markets, including the impact from customer, channel, category, and
e-commerce expansion; expected trends in net sales and earnings
performance and other financial measures; the expected timing and
costs of implementing our business transformation initiative, which
includes the implementation of a global enterprise resource
planning (ERP) system; the expected impact of accounting
pronouncements; the expectations of pension and postretirement plan
contributions and anticipated charges associated with those 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; the
anticipated sufficiency of future cash flows to enable the payments
of interest and repayment of short- and long-term debt, working
capital needs, planned capital expenditures, as well as quarterly
dividends and the ability to obtain additional short- and long-term
financing or issue additional debt securities; and expectations
regarding purchasing shares of McCormick's common stock under the
existing repurchase authorization.
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 factors such as: the
company's ability to drive revenue growth; the success of our brand
marketing, new products, category management and customer
engagement plans; the company's ability to increase pricing to
offset, or partially offset, inflationary pressures on the cost of
our products; damage to the company's reputation or brand name;
loss of brand relevance; increased private label use; the company's
ability to drive productivity improvements, including those related
to our CCI program and streamlining actions, including our GOE
program; product quality, labeling, or safety concerns; negative
publicity about our products; actions by, and the financial
condition of, competitors and customers; the longevity of mutually
beneficial relationships with our large customers; the ability to
identify, interpret and react to changes in consumer preference and
demand; business interruptions due to natural disasters, unexpected
events or public health crises, including COVID-19; issues
affecting the company's supply chain and procurement of raw
materials, including fluctuations in the cost and availability of
raw and packaging materials; labor shortage, turnover and labor
cost increases; the impact of the ongoing conflict between
Russia and Ukraine, including the potential for broader
economic disruption; government regulation, and changes in legal
and regulatory requirements and enforcement practices; the lack of
successful acquisition and integration of new businesses; global
economic and financial conditions generally, including stability of
financial institutions, availability of financing, interest and
inflation rates, and the imposition of tariffs, quotas, trade
barriers and other similar restrictions; foreign currency
fluctuations; the effects of increased level of debt service
following the Cholula and FONA
acquisitions as well as the effects that such increased debt
service may have on the company's ability to borrow or the cost of
any such additional borrowing, our credit rating, and our ability
to react to certain economic and industry conditions; risks
associated with the phase-out of LIBOR; impairments of
indefinite-lived intangible assets; assumptions we have made
regarding the investment return on retirement plan assets, and the
costs associated with pension obligations; the stability of credit
and capital markets; risks associated with the company's
information technology systems, including the threat of data
breaches and cyber-attacks; the company's ability to successfully
implement our business transformation initiative; fundamental
changes in tax laws; including interpretations and assumptions we
have made, and guidance that may be issued, and volatility in our
effective tax rate; climate change; Environmental, Social and
Governance (ESG) matters; infringement of intellectual property
rights, and those of customers; litigation, legal and
administrative proceedings; the company's inability to achieve
expected and/or needed cost savings or margin improvements;
negative employee relations; and other risks described in the
company's filings with the Securities and Exchange Commission.
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
McCormick & Company, Incorporated is a global leader in
flavor. With over $6 billion in
annual sales across 170 countries and territories, we manufacture,
market and distribute spices, seasoning mixes, condiments and other
flavorful products to the entire food industry including e-commerce
channels, grocery, food manufacturers and foodservice businesses.
Our most popular brands with trademark registrations include
McCormick, French's, Frank's RedHot, Stubb's, OLD BAY, Lawry's,
Zatarain's, Ducros, Vahiné, Cholula, Schwartz, Kamis, DaQiao, Club House,
Aeroplane and Gourmet Garden. Every day, no matter where or what
you eat or drink, you can enjoy food flavored by McCormick.
Founded in 1889 and headquartered in Hunt Valley, Maryland USA, McCormick is guided
by our principles and committed to our Purpose – To Stand Together
for the Future of Flavor. McCormick envisions A World United by
Flavor where healthy, sustainable and delicious go hand in hand. To
learn more, visit www.mccormickcorporation.com or follow McCormick
& Company on Twitter, Instagram and LinkedIn.
For information contact:
Investor Relations:
Faten Freiha -
faten_freiha@mccormick.com
Global Communications:
Lori Robinson -
lori_robinson@mccormick.com
(Financial tables follow)
Third Quarter
Report
|
|
McCormick &
Company, Incorporated
|
|
|
|
|
|
|
|
|
|
Consolidated Income
Statement (Unaudited)
|
|
|
|
|
|
|
|
|
(In millions except
per-share data)
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Nine months
ended
|
|
|
August 31,
2023
|
|
August 31,
2022
|
|
August 31,
2023
|
|
August 31,
2022
|
Net sales
|
|
$
1,684.7
|
|
$
1,595.6
|
|
$
4,909.4
|
|
$
4,654.8
|
Cost of goods
sold
|
|
1,061.9
|
|
1,028.9
|
|
3,108.2
|
|
3,004.7
|
Gross profit
|
|
622.8
|
|
566.7
|
|
1,801.2
|
|
1,650.1
|
Gross profit
margin
|
|
37.0 %
|
|
35.5 %
|
|
36.7 %
|
|
35.4 %
|
Selling, general and
administrative expense
|
|
371.7
|
|
328.1
|
|
1,088.3
|
|
1,010.6
|
Transaction and
integration expenses
|
|
—
|
|
—
|
|
—
|
|
2.2
|
Special
charges
|
|
6.1
|
|
3.4
|
|
47.1
|
|
38.0
|
Operating
income
|
|
245.0
|
|
235.2
|
|
665.8
|
|
599.3
|
Interest
expense
|
|
52.7
|
|
37.9
|
|
155.5
|
|
104.7
|
Other income,
net
|
|
7.1
|
|
77.4
|
|
30.7
|
|
89.9
|
Income from
consolidated operations before income taxes
|
|
199.4
|
|
274.7
|
|
541.0
|
|
584.5
|
Income tax
expense
|
|
42.7
|
|
59.3
|
|
117.4
|
|
115.4
|
Net income from
consolidated operations
|
|
156.7
|
|
215.4
|
|
423.6
|
|
469.1
|
Income from
unconsolidated operations
|
|
13.4
|
|
7.5
|
|
37.7
|
|
27.2
|
Net income
|
|
$
170.1
|
|
$
222.9
|
|
$
461.3
|
|
$
496.3
|
|
|
|
|
|
|
|
|
|
Earnings per share -
basic
|
|
$
0.63
|
|
$
0.83
|
|
$
1.72
|
|
$
1.85
|
|
|
|
|
|
|
|
|
|
Earnings per share -
diluted
|
|
$
0.63
|
|
$
0.82
|
|
$
1.71
|
|
$
1.83
|
|
|
|
|
|
|
|
|
|
Average shares
outstanding - basic
|
|
268.4
|
|
268.3
|
|
268.4
|
|
$
268.1
|
Average shares
outstanding - diluted
|
|
270.1
|
|
270.2
|
|
269.8
|
|
270.4
|
Third Quarter
Report
|
McCormick &
Company, Incorporated
|
|
|
|
|
|
Consolidated Balance
Sheet (Unaudited)
|
|
|
|
|
(In
millions)
|
|
|
|
|
|
|
August 31,
2023
|
|
November 30,
2022
|
Assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
154.7
|
|
$
334.0
|
Trade accounts
receivable, net
|
|
624.5
|
|
573.7
|
Inventories
|
|
1,225.5
|
|
1,340.1
|
Prepaid expenses and
other current assets
|
|
122.8
|
|
138.9
|
Total current
assets
|
|
2,127.5
|
|
2,386.7
|
Property, plant and
equipment, net
|
|
1,285.7
|
|
1,198.0
|
Goodwill
|
|
5,252.4
|
|
5,212.9
|
Intangible assets,
net
|
|
3,364.4
|
|
3,387.9
|
Investments and other
assets
|
|
960.1
|
|
939.4
|
Total
assets
|
|
$
12,990.1
|
|
$
13,124.9
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Short-term borrowings
and current portion of long-term debt
|
|
$
1,391.8
|
|
$
1,507.3
|
Trade accounts
payable
|
|
1,099.9
|
|
1,171.0
|
Other accrued
liabilities
|
|
679.3
|
|
754.1
|
Total current
liabilities
|
|
3,171.0
|
|
3,432.4
|
Long-term
debt
|
|
3,385.3
|
|
3,642.3
|
Deferred
taxes
|
|
864.5
|
|
866.3
|
Other long-term
liabilities
|
|
499.2
|
|
484.7
|
Total
liabilities
|
|
7,920.0
|
|
8,425.7
|
Shareholders'
equity
|
|
|
|
|
Common stock
|
|
2,191.5
|
|
2,138.6
|
Retained
earnings
|
|
3,251.7
|
|
3,022.5
|
Accumulated other
comprehensive loss
|
|
(393.9)
|
|
(480.6)
|
Total McCormick
shareholders' equity
|
|
5,049.3
|
|
4,680.5
|
Non-controlling
interests
|
|
20.8
|
|
18.7
|
Total shareholders'
equity
|
|
5,070.1
|
|
4,699.2
|
Total liabilities and
shareholders' equity
|
|
$
12,990.1
|
|
$
13,124.9
|
Third Quarter
Report
|
|
McCormick & Company, Incorporated
|
|
|
|
|
|
Consolidated Cash
Flow Statement (Unaudited)
|
|
|
|
|
(In
millions)
|
|
|
|
|
|
|
Nine Months
Ended
|
|
|
August 31,
2023
|
|
August 31,
2022
|
Operating
activities
|
|
|
|
|
Net income
|
|
$
461.3
|
|
$
496.3
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
|
150.4
|
|
148.2
|
Stock-based
compensation
|
|
51.1
|
|
49.1
|
Gain on sale of
intangible asset
|
|
—
|
|
(13.6)
|
Gain on sale of a
business
|
|
—
|
|
(49.6)
|
Asset impairment
charge
|
|
—
|
|
10.0
|
Income from
unconsolidated operations
|
|
(37.7)
|
|
(27.2)
|
Changes in operating
assets and liabilities (net of business disposed)
|
|
|
|
|
Trade accounts
receivable
|
|
(22.9)
|
|
(43.6)
|
Inventories
|
|
139.7
|
|
(238.5)
|
Trade accounts
payable
|
|
(90.4)
|
|
100.8
|
Other assets and
liabilities
|
|
(41.9)
|
|
(209.6)
|
Dividends from
unconsolidated affiliates
|
|
50.5
|
|
27.8
|
Net cash flow provided
by operating activities
|
|
660.1
|
|
250.1
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
Proceeds from sale of a
business
|
|
—
|
|
95.2
|
Proceeds from sale of
intangible asset
|
|
—
|
|
13.6
|
Capital expenditures
(including software)
|
|
(187.2)
|
|
(166.8)
|
Other investing
activities
|
|
2.4
|
|
2.5
|
Net cash flow used in
investing activities
|
|
(184.8)
|
|
(55.5)
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
Short-term borrowings,
net
|
|
(850.0)
|
|
898.1
|
Long-term debt
borrowings
|
|
496.4
|
|
—
|
Payment of debt
issuance costs
|
|
(1.1)
|
|
—
|
Long-term debt
repayments
|
|
(12.7)
|
|
(768.7)
|
Proceeds from exercised
stock options
|
|
15.9
|
|
39.9
|
Taxes withheld and paid
on employee stock awards
|
|
(10.8)
|
|
(19.4)
|
Common stock acquired
by purchase
|
|
(26.7)
|
|
(26.1)
|
Dividends
paid
|
|
(313.8)
|
|
(297.5)
|
Other financing
activities
|
|
1.6
|
|
—
|
Net cash flow used in
financing activities
|
|
(701.2)
|
|
(173.7)
|
|
|
|
|
|
Effect of exchange rate
changes on cash and cash equivalents
|
|
46.6
|
|
(28.7)
|
Decrease in cash and
cash equivalents
|
|
(179.3)
|
|
(7.8)
|
Cash and cash
equivalents at beginning of period
|
|
334.0
|
|
351.7
|
|
|
|
|
|
Cash and cash
equivalents at end of period
|
|
$
154.7
|
|
$
343.9
|
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SOURCE McCormick & Company, Incorporated