McCormick & Company, Incorporated (NYSE:MKC) Q3 2015 Earnings Conference Call Transcript
Oct 01, 2015 • 08:00 am ET
Good morning. This is Joyce Brooks, VP of IR. Thank you for joining today's call for a discussion of McCormick's Third Quarter Financial Results and our current outlook for 2015. To accompany our call, we've posted a set of slides at ir.mccormick.com. At this time, all participants are in a listen-only mode. Following our remarks, we will begin a question-and-answer session. (Operator Instructions).
With me this morning are Alan Wilson, Chairman and CEO; Lawrence Kurzius, President and COO; Gordon Stetz, EVP and CFO; and Mike Smith, SVP, Corporate Finance. During our remarks we will refer to non-GAAP financial measures. These include adjusted operating income and adjusted earnings per share that exclude the impact of special charges, as well as information in constant currency. Reconciliations to the GAAP results are included in this morning's press release and slides.
(Forward-Looking Cautionary Statements)
It's now my pleasure to turn the discussion over to Alan.
Thank you, Joyce. Good morning everyone and thanks for joining us. McCormick's third quarter and year-to-date financial performance reflect the effectiveness of our growth strategies and engagement of our employees around the world. With the mid single-digit sales increase in constant currency on our base business and added momentum for our latest acquisitions, we are tracking well toward the upper end of our fiscal year 2015 sales growth targets.
At the bottom line, despite some added headwinds, we still expect to deliver an increase in adjusted earnings per share for the fiscal year, including the impact of the unfavorable currency. Taking a look at the third quarter, we had a particularly strong broad-based increase at the top line, growing sales 7% in constant currency.
We're driving this growth through innovation, brand marketing and the expansion of distribution and current consumer markets like Poland and Latin America and expanded support for our industrial customers as they move into new parts of Asia and the Middle East. The three acquisitions completed this year, the latest being Stubb's in August are providing an added boost to McCormick's sales and will have a full impact in the fourth quarter.
I mentioned that some added 2015 headwinds and these specifically affected our third quarter profit results. In constant currency, adjusted operating income rose 1% from the year ago period compared to a 4% increase through the first half. Kohinoor results lowered our growth rate by two percentage points. I'll come back to this topic in a minute. Aside from this impact, our strong sales in the savings related to our stepped-up cost reduction programs are more than offsetting increases in material costs and employee benefit expenses.
Moving to adjusted earnings per share, if you recall at the time of our call back in early July, we guided to a double-digit decline from the year ago period due to a projected year-on-year increase in the tax rate, resulting from the favorable discrete tax items in the third quarter of 2014.
Our guidance also anticipated some added pressure from currency. Our actual result for the quarter at