Financial Performance - Net sales for the three months ended February 28, 2021, increased to $1,481.5 million, up 22.2% from $1,212.0 million in the same period of 2020[11] - Gross profit rose to $577.5 million, representing a 23% increase compared to $469.9 million in the prior year[11] - Operating income improved to $236.3 million, a 21.6% increase from $194.2 million year-over-year[11] - Net income for the period was $161.8 million, up 11.5% from $144.7 million in the same quarter of 2020[11] - Earnings per share (diluted) increased to $0.60, compared to $0.54 in the previous year, reflecting an 11.1% growth[11] - The consumer segment generated net sales of $946.8 million, while the flavor solutions segment contributed $534.7 million, indicating strong performance across both segments[90] - Operating income for the same period was $236.3 million, compared to $194.2 million in 2020, reflecting an increase of 21.7%[11] - The company reported a net income of $161.8 million for the three months ended February 28, 2021, up from $144.7 million in the same period of 2020, an increase of 11.0%[13] - Operating income excluding special charges and transaction and integration expenses for the three months ended February 28, 2021, was $262.5 million, compared to $195.2 million for the same period in 2020, reflecting a 34.4% increase[90] Cash Flow and Assets - Cash and cash equivalents decreased to $256.1 million from $423.6 million at the end of the previous quarter[17] - Total assets increased to $12,685.1 million, up from $12,089.7 million as of November 30, 2020[16] - The company reported a net cash flow used in operating activities of $(32.2) million, compared to $44.8 million in the same period last year[17] - The company made an acquisition of businesses totaling $(706.6) million during the period, significantly impacting cash flow from investing activities[18] - Total current liabilities decreased to $2,423.7 million from $3,046.5 million, a reduction of 20.4%[16] - Long-term debt increased to $4,739.2 million from $3,753.8 million, an increase of 26.3%[16] - Shareholders' equity rose to $4,164.7 million as of February 28, 2021, compared to $3,940.0 million as of November 30, 2020, an increase of 5.7%[16] Acquisitions - The acquisition of Cholula Hot Sauce was completed for approximately $803.0 million, with annual sales at the time of acquisition around $96 million[35] - The acquisition of FONA International, LLC was completed for approximately $706.6 million, with annual sales at the time of acquisition around $114 million[37] - Transaction and integration expenses related to the Cholula and FONA acquisitions are expected to total approximately $35 million and $30 million, respectively[42] - During the three months ended February 28, 2021, transaction and integration expenses related to the acquisitions amounted to $25.1 million[43] - Goodwill increased by $389.6 million due to the acquisition of FONA, with total goodwill for the consumer segment reaching $3,727.6 million and for the flavor solutions segment $1,669.4 million as of February 28, 2021[51] COVID-19 Impact - The company anticipates that the balance of at-home versus away-from-home food demand will be a significant factor influencing fiscal 2021 performance due to COVID-19[28] - The impact of COVID-19 on the consumer segment resulted in a significant increase in at-home consumption, while the flavor solutions segment faced decreased demand from certain customers[27] Expenses and Charges - Special charges recognized in the three months ended February 28, 2021 totaled $1.1 million, compared to $1.0 million in the same period of 2020[45] - Stock-based compensation expense rose to $14.2 million for the three months ended February 28, 2021, up from $6.4 million in the same period of 2020[73] - The company incurred transaction and integration expenses of $18.8 million during the three months ended February 28, 2021, which were excluded from operating income calculations[11] - Transaction-related expenses included in cost of goods sold for the three months ended February 28, 2021, were $6.3 million, compared to the previous year's $0[90] Financial Instruments and Derivatives - As of February 28, 2021, the company had foreign currency exchange contracts totaling $558.9 million, up from $383.8 million at November 30, 2020, all designated as hedges[55] - The notional value of cross currency interest rate swap contracts as of February 28, 2021, was $250 million, with contracts expiring in August 2027[58] - The company had outstanding interest rate swap contracts for a notional amount of $350 million, including contracts with a notional value of $100 million expiring in November 2025[60] - The total fair value of asset derivatives as of February 28, 2021, was $34.1 million, while liability derivatives totaled $34.5 million[63] - For the three months ended February 28, 2021, interest rate contracts recognized an income expense of $2.0 million, compared to $0.5 million for the same period in 2020[65] - The company recorded a loss of $2.1 million on foreign exchange contracts for the three months ended February 28, 2021[65] Tax and Pension - Income taxes for the three months ended February 28, 2021, included a net discrete tax expense of $5.3 million, primarily due to deferred state tax expenses related to the acquisition of FONA[77] - The total pension expense for the three months ended February 28, 2021, was $0 million, compared to an expense of $0.1 million for the same period in 2020[71] - The company contributed $2.3 million to pension plans during the three months ended February 28, 2021, compared to $1.9 million in the same period of 2020[71] - Total contributions to pension plans in fiscal year 2020 were $11.9 million[71]
McCormick(MKC_V) - 2021 Q1 - Quarterly Report