McCormick sales, profit set records last year

Fourth-quarter earnings up 31%, to 54 cents a share

January 30, 2003|By Gus G. Sentementes | Gus G. Sentementes,SUN STAFF

Strong fourth-quarter sales across all divisions helped lead McCormick & Co. Inc. to what the world's largest spice maker said was a record year for sales and earnings.

The Sparks-based company reported yesterday net income of $77.2 million, or 54 cents per diluted share, for the quarter that ended Nov. 30 - a 31 percent increase over 2001's fourth-quarter profit of $59.1 million, or 42 cents per share.

Excluding goodwill amortization and special charges, McCormick said, it met Wall Street's 55-cents-per-share estimate for the quarter.

McCormick's total sales rose nearly 8 percent to $703.4 million from $652 million in the quarter. And the company's packaging division, which supplies tubes and bottles to other manufacturers, saw sales rise 9 percent - the division's first quarterly sales increase in a year and a half, said Robert J. Lawless, McCormick's chairman, president and chief executive officer.

For the year, McCormick reported a profit of $179.8 million, or $1.26 per diluted share, compared with a 2001 profit of $146.6 million, or $1.05 per diluted share.

McCormick's sales rose 4.5 percent to $2.3 billion from $2.2 billion in 2001.

Excluding amortization and special charges, the company reported earnings per share of $1.30, meeting the target set by Wall Street analysts, according to a survey by Zacks Investment Research Inc.

"We're pleased with our results in 2002," Lawless told analysts during a conference call.

McCormick is in the middle of a three- to four-year computer and logistical systems upgrade expected to cost more than $150 million, Lawless said.

The company completed upgrades at several U.S. business units in June, but it hasn't given an overall figure on how much it expects in annual savings from the effort.

Lawless said profit margin increases, supply chain improvements, favorable prices on raw materials and new product sales helped McCormick's bottom line during the year.

"Across all our businesses, 10 percent of sales came from new products developed in the last three years," Lawless said.

Most of the special charges that McCormick took in 2002 - which the company did not enumerate - were related to the consolidation of Canadian facilities and the restructuring of the company's sales and distribution operations in the United States, Lawless said in a separate telephone interview yesterday.

Pension plan costs

The company also put $15.2 million into its pension plan in 2002 to make up for stock market declines, and it expects to pump roughly 60 percent more - or $24.3 million - into the plan in this year, Lawless said.

Offering McCormick's outlook for 2003, Lawless said yesterday that the company's earnings per share is estimated to grow by 9 percent to 11 percent - the same range the company offered at the beginning of last year.

"We have set aggressive yet achievable goals for 2003," said Lawless.

"I'm confident that 2003 will be another year of record sales and earnings at McCormick."

McCormick also estimated that its free cash flow, which was $61 million in 2002, will reach $100 million this year, thanks mostly to increased working capital and lower inventory, Lawless said.

Acquisitions

The extra money will be used to snap up other companies, Lawless said.

Earlier this month, the company bought UNIQsauces, a British condiment maker, for $19.5 million in cash.

"The first priority with this cash is to acquire new businesses," Lawless said.

"They had an excellent year," said Bentley Offutt, a research analyst with Baltimore-based Offutt Securities, an institutional research brokerage firm.

"I think perhaps the most interesting thing going into the future is the fact that their focus is going to be on free cash flow."

McCormick's shares lost 16 cents to $22.10 in trading on the New York Stock Exchange yesterday.

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