McCormick & Company, Incorporated (NYSE: MKC), today reported record sales and earnings per share for the third quarter of 2000. Earnings per share for the quarter ended August 31 were 45 cents, an increase of 15% over 1999’s earnings per share of 39 cents, excluding special charges. Net sales were $496 million, up 4% over the third quarter of 1999, and 5% excluding the impact of foreign currency. The Company’s gross profit margin increased to 34.9% from 34.4%. Gross profit margin continues to be positively impacted by cost reductions and a continued shift in sales toward more value-added products, particularly in the industrial business.
Consumer Business
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Sales for McCormick’s consumer business rose 4% over last year’s third quarter and 6% excluding the impact of foreign currency. In local currency, consumer sales were up 6% in the Americas, 2% in Europe, and 13% in Asia. These sales were primarily volume-driven and benefited from effective promotions and new products. Operating profit for the quarter was $31.6 million, 17% ahead of 1999’s third quarter. As a percent of sales, operating profit rose to 15.6% from 14.0%.
Industrial Business
Industrial sales rose 3% for the quarter and 4% excluding the impact of foreign currency. In local currency, industrial sales were up 4% in the Americas, unchanged in Europe, and up 11% in Asia. In the Americas, sales to U.S. warehouse clubs and distributors continue to be strong as well as industrial sales in Mexico and Canada. With a move to more value-added products, reduced costs and improved supply chain management, gross profit margins in this segment continue to improve. Operating profit for the quarter was $23.9 million, a 6% increase over the prior year. As a percent of net sales, operating profit margin rose to 9.6% from 9.4%.
Packaging Business
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By GlobalDataThe packaging business reported third party sales up 8% for the quarter over last year, with the increase primarily in tubes. Operating profit (including intersegment business) was $4.9 million, a decrease of 7%. The decrease was due to this quarter’s product mix in the plastic bottle business as well as increased resin costs. As a percent of total sales, operating profit (including intersegment business) declined to 8.7% from 10.2%.
Ducros Acquisition
The Company completed its acquisition of Ducros on August 31, 2000. Accordingly, operating results for this business will be included in the fourth quarter. Due to the recent nature of the transaction, the net assets acquired are all reflected in Other Assets. Debt issued for the acquisition is included in Short-Term Borrowings, which the Company expects to refinance as long-term debt in the near future.
Commented Robert J. Lawless, Chairman, President & CEO, “With one quarter remaining, we expect fiscal 2000 to be a record year in sales and earnings. Gross profit margin improvement continues to be a driving force in our success, and we have system and process initiatives underway to build on this improvement during the next few years. Investment in support of brand building has never been higher and will be a key factor in sustaining a consistent and improving financial performance.
“With the acquisition of Ducros, we have gained a leading share in Europe. Actions to integrate this business and build upon our combined strength are well underway. We are extremely pleased to join forces with a premier brand and terrific team.
“We are certainly pleased with our results through the third quarter. As we begin our important fourth quarter, we are confident that our performance will remain strong. We expect to achieve earnings per share growth in the 16-18% range for fiscal year 2000, well ahead of our initial goal of 11-14%.
“Behind McCormick’s strong financial performance are effective strategies and superior execution. I am confident that the efforts and talent of our employees around the world will continue to build value for our shareholders. Our momentum is increasing, and we look forward with enthusiasm to 2001.”
Forward-Looking Statement
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 and 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, fluctuations in the cost and availability of supply chain resources and foreign economic conditions, including currency rate fluctuations.
About McCormick
McCormick & Co., Inc. 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. In addition, the packaging group manufactures and markets specialty plastic bottles and tubes for personal care and other industries.
Consolidated Income Statement (Unaudited)
(In thousands except per-share data)
Three Months Ended Nine Months Ended
8/31/00 8/31/99 8/31/00 8/31/99
NET SALES
Consumer $201,857 $193,210 $606,305 $574,120
Industrial 248,605 241,510 705,164 688,046
Packaging 45,404 42,041 132,524 124,316
Total Net sales 495,866 476,761 1,443,993 1,386,482
Cost of goods sold 323,011 312,532 936,824 919,179
Gross profit 172,855 164,229 507,169 467,303
Gross profit margin 34.9% 34.4% 35.1% 33.7%
Selling, general &
administrative expense (a) 120,403 118,723 374,140 350,902
Special charges 57 3,039 1,023 17,704
Operating income 52,395 42,467 132,006 98,697
Interest expense 9,089 8,231 24,808 24,519
Other expense (a) 1,323 485 4,023 792
Income before income taxes 41,983 33,751 103,175 73,386
Income taxes 14,950 12,904 36,788 32,376
Net income from consolidated
operations 27,033 20,847 66,387 41,010
Income from unconsolidated
operations 4,232 4,514 13,497 8,317
NET INCOME $31,265 $25,361 $79,884 S49,327
EARNINGS PER SHARE - BASIC $0.46 $0.36 $1.16 $0.69
Average shares outstanding
- basic 68,425 71,220 68,908 71,700
EARNINGS PER SHARE - ASSUMING
DILUTION (b) $0.45 $0.35 $1.15 $0.68
Average shares outstanding -
assuming dilution 69,047 71,800 69,611 72,230
(a) For the quarter, Royalty income of $2,626 and $1,557 has been
reclassified from Other expense to Selling, general & administrative
expense for 2000 and 1999, respectively. For the nine months ended,
Royalty income of $7,648 and $4,140 has been reclassified from Other
expense to Selling, general & administrative expense for 2000 and 1999,
respectively.
(b) For the quarter, Earnings Per Share - Assuming Dilution, excluding
special charges were $0.45 and $0.39 for 2000 and 1999, respectively. For
the nine months ended, Earnings Per Share - Assuming Dilution, excluding
special charges were $1.16 and $0.92 for 2000 and 1999, respectively.
Condensed Consolidated Balance Sheet (Unaudited)
(In thousands)
8/31/00 8/31/99
Assets
Receivables $186,456 $183,294
Inventories 274,170 271,407
Prepaid allowances 114,216 136,653
Property, plant and equipment, net 354,847 364,458
Other assets (c) 680,850 278,131
Total assets $1,610,539 $1,233,943
Liabilities and shareholders' equity
Short-term borrowings $606,832 $213,020
Other current liabilities 321,585 320,766
Long-term debt 233,334 242,197
Other liabilities 101,289 101,680
Shareholders' equity 347,499 356,280
Total liabilities and shareholders'
equity $l,610,539 $1,233,943
(c) Other assets includes all of the net assets of Ducros acquired on
August 31, 2000. The acquisition was funded by short-term borrowing,
which the Company expects to refinance as long-term debt in the near
future.
