Exhibit 99.1
FOR IMMEDIATE RELEASE
McCORMICK REPORTS THIRD QUARTER INCREASE IN SALES AND PROFITS
SPARKS, MD, SEPTEMBER 28 - - - - McCormick & Company, Incorporated (NYSE:MKC), today reported increased sales and earnings per share for the third quarter ended August 31, 2005.
Sales for the quarter were $623 million, a 1.5% increase from the third quarter of 2004. Sales from the Silvo business acquired in 2004 and favorable foreign exchange rates were offset in part by lower sales to industrial customers.
Earnings per share for the third quarter were 35¢ compared to earnings per share of 33¢ reported in the third quarter of 2004. Higher operating income from the sales increase as well as higher margins added 2¢ to earnings per share. The negative effects of higher interest rates and an increase in the effective tax rate were offset by higher income from the Company’s joint venture in Mexico and lower shares outstanding.
Through the first three quarters of 2005, the Company funded $141 million of share repurchases and $65 million of dividends with net cash from operations and increased borrowings. Year-to-date, dividend payments increased 12% compared to 2004 and share repurchases rose 30%. During this period, the Company has maintained capital expenditures at the same level as 2004.
Chairman’s Comments
Robert J. Lawless, Chairman, President & CEO, commented, “During the third quarter, we achieved higher profits with increased sales and income from our consumer business, the benefit of our cost savings program and improved income from joint ventures. As expected, sales to industrial customers were weak this quarter. We were also affected by higher interest rates and an increase in our tax rate. Based on our outlook for the fourth quarter, we continue to expect 2005 fiscal year earnings per share of $1.58 to $1.62.
“During 2005, the Company has been challenged by a high cost inventory of vanilla beans, weakness in industrial sales, an accounting adjustment and the effects of hurricane Katrina. Together, these factors have interrupted a period of strong sales and profit growth that began in 1999. As announced early in September, a review of our industrial business is underway as well as certain actions to improve the efficiency of our entire supply chain. With these actions, we are confident that long term, our sales growth, margin improvement and strong cash flow will once again lead to excellent financial results and increased value for McCormick shareholders.”
Business Segment Results
Consumer Business |
| Three Months Ended |
| Nine Months Ended |
| ||||||||
(in thousands) |
| 8/31/05 |
| 8/31/04 |
| 8/31/05 |
| 8/31/04 |
| ||||
Net sales |
| $ | 315,549 |
| $ | 303,239 |
| $ | 961,399 |
| $ | 899,630 |
|
Operating income |
| 58,869 |
| 56,776 |
| 167,184 |
| 151,390 |
| ||||
For the third quarter, sales for McCormick’s consumer business rose 4% versus the prior year. This follows a 12% sales increase in the third quarter of 2004. In 2005, higher volume, price and product mix increased sales 3%, due largely to the acquisition of Silvo in November 2004. Favorable foreign exchange rates added 1%. In the Americas, sales increased 3% due primarily to favorable pricing and product mix, as well as to favorable foreign exchange rates that added 1%. Consumer sales in Europe rose 8% for the quarter, including an unfavorable 1% from foreign exchange rates. Silvo increased sales in Europe 11%, while difficult market conditions, primarily in France, had a negative effect. In the third quarter, sales declined slightly in the Asia/Pacific region.
Operating income increased 4%, in line with the higher sales. This follows an increase in operating income of 25% during the third quarter of 2004.
Industrial Business |
| Three Months Ended |
| Nine Months Ended |
| ||||||||
(in thousands) |
| 8/31/05 |
| 8/31/04 |
| 8/31/05 |
| 8/31/04 |
| ||||
Net sales |
| $ | 307,182 |
| $ | 310,305 |
| $ | 893,527 |
| $ | 882,439 |
|
Operating income |
| 30,969 |
| 31,207 |
| 74,831 |
| 85,478 |
| ||||
For the third quarter of 2005, sales for McCormick’s industrial business decreased 1% when compared to 2004. This followed a 9% sales increase in the third quarter of 2004. In the third quarter of 2005, lower vanilla prices reduced sales 3% and favorable foreign exchange added 1%. During this period, the Company experienced volatility in demand with certain customers as well as pricing pressure due to competitive activity. These factors affected industrial sales in the Americas which declined 1%, despite a 1% increase from favorable foreign exchange rates. In Europe, sales decreased 8%, with a 1% negative impact from foreign exchange rates. In addition to volatility and competitive pressure, sales in this region were also affected by the elimination of certain lower margin products. Sales in the Asia/Pacific region rose 15% driven by increases in both China and Australia. In this region, 4% was added by favorable foreign exchange rates during the quarter.
With lower sales, industrial business operating income declined 1% compared to the prior year.
Live Webcast
As previously announced, McCormick will hold a conference call with the analysts today at 10:00 a.m. EDT. 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 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)
9/2005
Third Quarter Report |
| McCormick & Company, Incorporated |
Consolidated Income Statement
(In thousands except per-share data)
|
| Three Months Ended |
| Nine Months Ended |
| ||||||||
|
| 8/31/2005 |
| 8/31/2004 |
| 8/31/2005 |
| 8/31/2004 |
| ||||
Net sales |
| $ | 622,731 |
| $ | 613,544 |
| $ | 1,854,926 |
| $ | 1,782,069 |
|
Cost of goods sold |
| 379,394 |
| 374,385 |
| 1,142,075 |
| 1,089,298 |
| ||||
Gross profit |
| 243,337 |
| 239,159 |
| 712,851 |
| 692,771 |
| ||||
Gross profit margin |
| 39.1 | % | 39.0 | % | 38.4 | % | 38.9 | % | ||||
Selling, general & administrative expense |
| 164,437 |
| 164,963 |
| 504,211 |
| 493,848 |
| ||||
Special charges / (credits) |
| — |
| 195 |
| 630 |
| (6,184 | ) | ||||
Operating income |
| 78,900 |
| 74,001 |
| 208,010 |
| 205,107 |
| ||||
Interest expense |
| 12,536 |
| 10,558 |
| 35,562 |
| 29,826 |
| ||||
Other income, net |
| (487 | ) | (532 | ) | (444 | ) | (1,216 | ) | ||||
Income from consolidated operations before income taxes |
| 66,851 |
| 63,975 |
| 172,892 |
| 176,497 |
| ||||
Income taxes |
| 22,603 |
| 19,769 |
| 56,536 |
| 54,538 |
| ||||
Net income from consolidated operations |
| 44,248 |
| 44,206 |
| 116,356 |
| 121,959 |
| ||||
Income from unconsolidated operations |
| 4,571 |
| 3,222 |
| 13,829 |
| 8,309 |
| ||||
Minority interest |
| (849 | ) | (1,232 | ) | (3,386 | ) | (3,113 | ) | ||||
Net income |
| $ | 47,970 |
| $ | 46,196 |
| $ | 126,799 |
| $ | 127,155 |
|
|
|
|
|
|
|
|
|
|
| ||||
Earnings per common share - basic |
| $ | 0.36 |
| $ | 0.34 |
| $ | 0.94 |
| $ | 0.93 |
|
Earnings per common share - diluted |
| $ | 0.35 |
| $ | 0.33 |
| $ | 0.91 |
| $ | 0.90 |
|
|
|
|
|
|
|
|
|
|
| ||||
Average shares outstanding - basic |
| 133,956 |
| 136,961 |
| 134,828 |
| 137,341 |
| ||||
Average shares outstanding - diluted |
| 137,382 |
| 141,687 |
| 138,842 |
| 141,984 |
| ||||
Consolidated Balance Sheet
(In thousands)
|
| 8/31/2005 |
| 8/31/2004 |
| ||
Assets |
|
|
|
|
| ||
Current assets |
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 46,117 |
| $ | 25,909 |
|
Receivables, net |
| 321,735 |
| 325,675 |
| ||
Inventories |
| 357,251 |
| 377,187 |
| ||
Prepaid expenses and other current assets |
| 49,528 |
| 45,728 |
| ||
Total current assets |
| 774,631 |
| 774,499 |
| ||
Property, plant and equipment, net |
| 469,578 |
| 454,756 |
| ||
Goodwill and intangible assets, net |
| 826,870 |
| 725,940 |
| ||
Prepaid allowances |
| 55,113 |
| 70,589 |
| ||
Investments and other assets |
| 145,450 |
| 132,114 |
| ||
Total assets |
| $ | 2,271,642 |
| $ | 2,157,898 |
|
|
|
|
|
|
| ||
Liabilities and shareholders’ equity |
|
|
|
|
| ||
Current liabilities |
|
|
|
|
| ||
Short-term borrowings and current portion of long-term debt |
| $ | 427,045 |
| $ | 167,766 |
|
Trade accounts payable |
| 170,034 |
| 161,172 |
| ||
Other accrued liabilities |
| 300,865 |
| 289,522 |
| ||
Total current liabilities |
| 897,944 |
| 618,460 |
| ||
Long-term debt |
| 268,942 |
| 496,274 |
| ||
Other long-term liabilities |
| 245,933 |
| 211,512 |
| ||
Total liabilities |
| 1,412,819 |
| 1,326,246 |
| ||
Minority interest |
| 29,828 |
| 26,006 |
| ||
Shareholders’ equity |
|
|
|
|
| ||
Common stock |
| 383,733 |
| 320,041 |
| ||
Retained earnings |
| 383,476 |
| 449,192 |
| ||
Accumulated other comprehensive income |
| 61,786 |
| 36,413 |
| ||
Total shareholders’ equity |
| 828,995 |
| 805,646 |
| ||
Total liabilities and shareholders’ equity |
| $ | 2,271,642 |
| $ | 2,157,898 |
|
Consolidated Statement of Cash Flows (Unaudited)
(In thousands)
|
| Nine Months Ended |
| ||||
|
| 8/31/2005 |
| 8/31/2004 |
| ||
Cash flows from operating activities |
|
|
|
|
| ||
Net income |
| $ | 126,799 |
| $ | 127,155 |
|
Adjustments to reconcile net income to net cash flow from operating activities: |
|
|
|
|
| ||
Depreciation and amortization |
| 54,220 |
| 53,427 |
| ||
Income from unconsolidated operations |
| (13,829 | ) | (8,309 | ) | ||
Changes in operating assets and liabilities |
| (43,869 | ) | (50,526 | ) | ||
Dividends from unconsolidated affiliates |
| 10,544 |
| 2,400 |
| ||
Net cash flow from operating activities |
| 133,865 |
| 124,147 |
| ||
|
|
|
|
|
| ||
Cash flows from investing activities |
|
|
|
|
| ||
Capital expenditures |
| (45,831 | ) | (45,132 | ) | ||
Proceeds from sale of property, plant and equipment |
| 636 |
| 1,971 |
| ||
Net cash flow from investing activities |
| (45,195 | ) | (43,161 | ) | ||
|
|
|
|
|
| ||
Cash flows from financing activities |
|
|
|
|
| ||
Short-term borrowings, net |
| 59,914 |
| 10,328 |
| ||
Long-term debt borrowings |
| — |
| 50,088 |
| ||
Long-term debt repayments |
| (2,610 | ) | (16,394 | ) | ||
Proceeds from exercised stock options |
| 41,056 |
| 38,447 |
| ||
Common stock acquired by purchase |
| (141,280 | ) | (108,438 | ) | ||
Dividends paid |
| (64,821 | ) | (57,755 | ) | ||
Net cash flow from financing activities |
| (107,741 | ) | (83,724 | ) | ||
|
|
|
|
|
| ||
Effect of exchange rate changes on cash and cash equivalents |
| (5,147 | ) | 3,506 |
| ||
Increase/(decrease) in cash and cash equivalents |
| (24,218 | ) | 768 |
| ||
Cash and cash equivalents at beginning of period |
| 70,335 |
| 25,141 |
| ||
|
|
|
|
|
| ||
Cash and cash equivalents at end of period |
| $ | 46,117 |
| $ | 25,909 |
|