McCormick Reports Third Quarter Results, Provides Latest 2015 Financial Outlook
SPARKS, Md., Oct. 1, 2015 /PRNewswire/ -- McCormick & Company, Incorporated (NYSE: MKC), a global leader in flavor, today reported financial results for the third quarter ended August 31, 2015 and provided its latest outlook for fiscal year 2015.
Third Quarter 2015 Results
McCormick reported a 2% sales increase in the third quarter from the year-ago period, and in constant currency, grew sales 7%. In constant currency, consumer business sales rose 7% due to increased volume and product mix driven by product innovation, brand marketing support and expanded distribution, as well as the impact of acquisitions completed in 2015. The increase was broad-based with growth in each region, including the U.S. market where actions have been underway to improve performance. In constant currency, industrial business sales grew 8% both from higher volume and product mix, pricing actions to offset higher material costs and an acquisition completed in 2015. The rate of constant currency sales growth continues to be particularly strong in the Europe, Middle East and Africa (EMEA) region, driven by innovation, increased distribution and geographic expansion. Also, improved demand from quick service restaurants in China has continued in 2015, following weak results in the second half of 2014.
Operating income was $139 million in the third quarter compared to $157 million in the year-ago period. Excluding special charges, adjusted operating income was $154 million compared to $160 million of adjusted operating income in the year-ago period. In constant currency, adjusted operating income rose 1%, with the favorable impact of higher sales and cost savings more than offsetting higher material input costs and increased benefit expenses, as well as a $3 million decline in profit from the Kohinoor business from the year-ago period.
The company recorded $15 million of special charges in the third quarter of 2015. Related to previously announced streamlining actions in North America and EMEA, the company recorded $2 million of special charges. The remaining special charges related to the company's majority owned Kohinoor business, purchased in 2011. In the third quarter of 2015, the company approved a plan for this business to discontinue the sale of certain lower margin basmati rice product lines and focus on higher-margin items. This led to the determination of a $10 million non-cash impairment charge to reduce the value of the Kohinoor brand name. In addition, a $3 million special charge was recorded in cost of goods sold, which represents an inventory write-down directly related to the decision to discontinue the sale of those lower margin basmati rice product lines. The $3 million special charge included in cost of good sold, along with a $2 million year-on-year decline in gross profit prior to that special charge, lowered gross profit margin by 0.5 percentage points in the third quarter.
Earnings per share was $0.76 in the third quarter compared to $0.94 in the year-ago period. Excluding the $0.09 impact of special charges in the third quarter of 2015, adjusted earnings per share was $0.85 compared to $0.95 adjusted earnings per share in the third quarter of 2014, which excluded $0.01 of special charges. Third quarter 2015 adjusted earnings per share declined $0.10 from the year ago period, mainly due to a higher tax rate and the decline in adjusted operating income. This rate of decline was consistent with the guidance previously provided by McCormick. The most significant impact on earnings per share was the tax rate, which was 30% in the third quarter of 2015 compared to 21% in the third quarter of 2014, when the rate was favorably impacted by discrete tax items. For the fourth quarter of 2015, the company continues to expect a tax rate of approximately 29%.
The company continues to generate strong cash flow and net cash provided by operating activities for the first three quarters of the fiscal year was $317 million in 2015 compared to $276 million in 2014. Full report.
