McCormick & Company, Incorporated
1994 Annual Report
McCORMICK & COMPANY, INCORPORATED is the largest spice company in
the world. The Company is the leader in the manufacture, marketing
and distribution of spices, seasonings, flavors, and other food
products to the food industry - retail outlets, foodservice and
food processors. A packaging group manufactures and markets plastic
bottles and tubes for food, personal care and other industries.
Founded in 1889, McCormick "pioneered with products and
people," and in 1932 started participative management. For more
than 60 years, McCormick has thrived with Multiple Management - a
philosophy and system of management development - which, along with
enlightened leadership, helps shape our corporate culture.
Multiple Management encourages a belief in the "power of people,"
recognizes the dignity of the individual, the dynamics of human
relationships, the need for participation at all levels of
employment, and the importance of sharing the rewards of success.
Headquartered in Sparks, Maryland, McCormick has sales of $1.7
billion. Recently, Fortune magazine ranked the Company 270 on the
Fortune 500. Worldwide, McCormick has 9,000 employees - people
loyal to a heritage of product quality and customer service which
has made McCormick a success over the years. Publicly held and
traded on NASDAQ, the Company has more than 25,000 shareholders -
many are employees. McCormick has paid dividends every year since
1925.
The 1995 Annual Meeting will be held at 10:00 a.m., Wednesday,
March 15, 1995, at Marriott's Hunt Valley Inn, 245
Shawan Road (exit 20A off I-83 north of Baltimore), Hunt Valley,
Maryland 21031.
DEDICATION TO BAILEY A. THOMAS
Following the sudden death last July of Bailey A. Thomas, our
Chairman and CEO, an editorial in THE BALTIMORE SUN
referred to him as the "Spicemeister," one who "knew the spice
business inside and out," and a man who "had a
global vision for McCormick that has paid off handsomely."
The editorial also stated, "His folksy manner was genuine. He
liked people. His colleagues were amazed that he knew everyone by
first name. He also would conjure up hilarious stunts to keep
workers and managers laughing. But there was no mistaking his sharp
mind and deep devotion to his company."
Born on a small truck farm on the Eastern Shore of Maryland,
Bailey attended a four-room schoolhouse which had neither
electricity nor running water. By age 11, he had started his own
business selling Christmas cards. His life story from rural farm
boy to Chairman of one of the nation's Fortune 300 corporations is
a real Horatio Alger story.
Bailey's 33-year McCormick career was marked by
numerous business accomplishments, a reputation for integrity, and
his ability to smile and create smiles in others. He played a major
role in leading the Company to its most profitable years ever and
a commitment to major global expansion. To many, Bailey was a very
sharp businessman. To us, he was a friend.
[Photograph of Bailey A. Thomas, former Chairman and CEO, omitted]
[Photograph of Company product encircled by globe, which appears
at the bottom of each odd-numbered page beginning on page 1 and
ending on page 21, and also pages 37 and 39, omitted]
[Stamps stating the name of some of the source countries for
the Company's products, and a drawing of those products, which
appear throughout the report, omitted]
Contents
Dedication to Bailey A. Thomas 1
Mission, Financial Objectives
and Core Values. . . 2
Financial Highlights. . 3
Letter to Shareholders. 5
Report on Operations. . 9
Management's Discussion and Analysis 12
Historical Financial Summary 20
Income. . . . . . . . . 23
Balance Sheet . . . . . 24
Statement of Shareholders' Equity 25
Cash Flows. . . . . . . 26
Notes to Financial Statements 27
Management's Responsibility for
Financial Statements 37
Report of Independent Auditors 37
Directors and Officers. 38
McCormick Worldwide . . 39
Investor Information Inside back cover
The scent of this year's annual report is Vanilla Butter & Nut
Flavor.
MISSION
The primary mission of McCormick & Company, Incorporated is to
expand its worldwide leadership position in the spice, seasoning
and flavoring markets.
FINANCIAL OBJECTIVES
These objectives are highlighted on pages 20 and 21 in the
Historical Financial Summary.
Exceed a 20% return on equity.
Achieve an average net sales growth rate of 10% per year.
Maintain an average earnings per share growth rate of 15% per year
over time.
Pay out 25% to 35% of net income in dividends.
Maintain total debt to total capital at 40% or less, excluding
non-recourse debt.
OUR CORE VALUES
We believe in adding value for our shareholders.
We believe customers are the reason we exist.
We believe in successful achievement, through teamwork and
participation.
We believe in doing business ethically and honestly.
We believe in respect and concern for one another.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Year ended November 30
1994 1993 1992 1991 1990
(dollars in millions except per-share data)
<S> <C> <C> <C> <C> <C>
Consolidated net sales $1,694.8 $1,556.6 $1,471.4 $1,427.9 $1,323.0
Net income, before accounting
change(F1) $ 61.2 $ 99.7 $ 95.2 $ 80.9 $ 69.4
Accounting change for postretirement
benefits (26.6)
Net income $ 61.2 $ 73.1 $ 95.2 $ 80.9 $ 69.4
Earnings per share, before
accounting change(F2) $ .75 $ 1.22 $ 1.16 $ .98 $ .83
Earnings per share, total(F2) .75 .89 1.16 .98 .83
Dividends per share (paid) .48 .44 .38 .28 .23
Margins
Gross profit, consolidated
operations 37.1% 38.7% 39.7% 37.9% 36.6%
Operating profit, consolidated
operations 7.6% 11.6% 11.4% 10.2% 9.6%
Income from consolidated
operations 3.1% 5.7% 5.8% 5.1% 5.0%
Income before accounting change 3.6% 6.4% 6.5% 5.7% 5.2%
Debt to total capital excluding
non-recourse debt 52.0% 44.3% 37.4% 36.4% 32.9%
Debt to total capital 54.6% 48.0% 42.5% 42.3% 39.9%
Shareholders' equity $ 490.0 $ 466.8 $ 437.9 $ 389.2 $ 364.4
Return on shareholders' equity,
before accounting change(F3) 12.8% 22.0% 23.3% 21.8% 20.4%
Return on shareholders' equity,
total(F3) 12.8% 17.0% 23.3% 21.8% 20.4%
Average shares outstanding and
equivalents (000's) 81,240 81,766 81,918 82,396 83,720
Ending shares outstanding and
equivalents (000's) 81,206 81,916 81,978 81,978 82,176
<FN>
1 Includes 1994 restructuring charge of $70.4.
2 Includes 1994 restructuring charge of $.57 per share.
3 Return on shareholders' equity before 1994 restructuring charge was 22.1%.
</FN>
All share information is adjusted for a 2-for-1 stock split in January 1992.
Margin and return information for consolidated operations excludes the accounting change
for postretirement benefits in 1993.
</TABLE>
<TABLE>
<CAPTION>
SALES DOLLAR DISTRIBUTION
(excludes share of unconsolidated earnings and 1994 restructuring charge)
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Materials and Related
Expenses 48.8cents 47.4cents 48.7cents 49.6cents 51.0cents
Salaries, Wages and
Employee Benefits 21.9 22.7 21.3 20.7 20.4
Marketing, Administrative
and Related Expenses 11.6 12.6 13.1 14.0 13.1
Retained Earnings 3.6 3.5 3.7 3.8 3.6
Taxes 3.4 3.9 3.6 3.0 2.9
Depreciation 3.4 3.0 2.7 2.6 2.5
Distribution and Warehousing 2.7 2.6 2.7 2.8 2.9
Dividends 2.3 2.3 2.1 1.6 1.4
Interest 2.3 2.0 2.1 1.9 2.2
$1.00 $1.00 $1.00 $1.00 $1.00
</TABLE>
[Pie chart depicting the above SALES DOLLAR DISTRIBUTION for 1994 omitted]
[Photograph of miscellaneous products of the Company and other objectives,
omitted]
LETTER TO SHAREHOLDERS
We are pleased to report that 1994 was another record year for
McCormick, with sales increasing 9 percent and earnings, on a
comparable basis with 1993, increasing 8 percent. Our quarterly
cash dividend on common stock also increased 8 percent by Board
approval on December 19, 1994. This marked the 70th year of
consecutive dividend payments by your Company. During the last five
years (1990-1994), dividend payments have increased at a compounded
rate in excess of 21 percent. Considering both our industry and
competitive environments, 1994 results were respectable although
results fell short of our long-term objectives. There are several
key reasons why the year was not up to our standards. An increase
in commodity prices resulted in some decline in our industrial
margins. We anticipate improvement in 1995. In addition, due to
promotional expenses required to protect market share against
aggressive competition, our joint venture in Mexico was less
profitable than anticipated. Finally, we experienced increased
competition and price cutting in our consumer business. Near term
we expect this to continue.
We are taking the necessary steps to ensure that we continue to
increase market share in our core business. These steps include
remaining competitive, increasing marketing spending, investing in
new products, and upgrading and modernizing our plants and
equipment. These actions will keep us on the leading edge of our
industry.
RESTRUCTURING
In October, we announced a comprehensive restructuring of our
business operations, including plant consolidations, functional and
departmental consolidations, and staff reductions. The action will
result in a reduction of approximately 600 positions, or 7 percent
of our worldwide workforce. The restructuring is designed to
generate continued long-term growth and profitability, meet the
competitive challenges of the future, and enhance shareholder and
employee value. Benefits of this action, including support for the
McCormick brands and assistance in meeting our financial
objectives, will be felt near the end of 1995 and during 1996.
FUTURE
The Company announced seven new acquisitions and two new joint
ventures during 1994. In addition, we are increasing our equity
position in our consumer and industrial business in Shanghai,
China, to 90 percent, subject to governmental approval. That the
new businesses are located in Mexico, Indonesia, Finland, India,
Switzerland, Australia, and the United Kingdom indicates the
strength of our commitment to worldwide growth in spices,
seasonings and flavorings.
We will support our global strategy to become the leader in all
those zones where we operate. We are very pleased with our strong
performance in the United Kingdom and see further opportunities in
Europe. And we see great potential in Asia/Pacific where millions
of consumers are ready to be introduced to our products.
As our key customers continue to grow, we have the opportunity to
grow with them and offer a wide range of capabilities. We are going
to be innovative, take greater advantage of our brands, and strive
to take action to be selected by more companies as their preferred
supplier. We will continue to grow our leadership position in each
of our categories.
With strong retail and industrial sales, we are building momentum
for the future. We see industrial margins returning to better
levels as well as the benefits of recent acquisitions, cost
improvements, and restructuring.
What we envision for McCormick is an organization that will
continue to beat the competition, be well positioned for the
future, and remain independent by achieving excellent sales and
profits.
According to the American Spice Trade Association, the annual
consumption of spices could reach one billion pounds by the turn of
the century. The most significant development in the United States
spice scene today involves the "hot trend" in spices. Consumption
in the United States of black pepper, red pepper, mustard, and
ginger, the "hot" spices, has increased almost 50 percent in just
the past five years.
Such data provides ample evidence for us to be enthusiastic about
consumer trends and eager to be innovative with new products and
services. We will be focusing on those parts of our business,
whether they be new technologies, key processes, or small
improvements, which can really make a difference n our performance.
PERSONNEL
We were saddened last summer by the sudden death of Bailey A.
Thomas, our Chairman and CEO. It is largely due to Bailey's vision
that we operate today as a global organization, and we will
continue to grow the Company in the successful way he envisioned.
As a result of our untimely loss, Charles P. McCormick, Jr., who
had been serving as Chairman Emeritus, has returned as Chairman of
the Board. H. Eugene Blattman was promoted to President & CEO.
Other organizational changes during the year included the
appointment of Carroll D. Nordhoff as Executive Vice President of
the Corporation, Robert J. Lawless as Senior Vice President-The
Americas, Harold J. Handley as Senior Vice President-Europe, Dorsey
N. Baldwin as Vice President-Packaging Group, and Robert W.
Schroeder as Vice President-Sales & Marketing for the
McCormick/Schilling Division.
In addition, James A. Hooker retired as Vice President & Chief
Financial Officer and was succeeded by Robert G. Davey. John W.
Felton retired as Vice President-Corporate Communications and was
succeeded by Allen M. Barrett, Jr. John H. Nelson retired as Vice
President-Science & Technology. Alan D. Wilson was appointed Vice
President-Procurement. Donald E. Parodi was named President of
Setco, Inc.
For more than 60 years, we have been enriched by Multiple
Management, which promotes participation at all levels
of employment and the importance of sharing the rewards of success.
Because we focus on the customer and practice the basic core values
that have made McCormick a success, we are excited about our future
and expect to reach our objectives over time.
The officers and members of the Board of Directors join in
thanking our shareholders, customers, suppliers, and
employees for your support. We look forward to your participation
in a bright future for McCormick & Company.
Charles P. McCormick, Jr.
Chairman of the Board
H. Eugene Blattman
President & Chief Executive Officer
[Photograph of Charles P. McCormick, Jr., Chairman of Board, and
H. Eugene Blattman, President and CEO, omitted]
[Picture of various products of the Company, and certain other
objects, omitted]
Report on Operations
In October, the Company announced a comprehensive restructuring of
its business operations, including plant consolidations, functional
and departmental consolidations, and staff reductions. Trends in
our industry suggest that competition will continue to intensify.
The restructuring takes place during a period of financial strength
for the Company in order to position ourselves for continued future
earnings growth. The restructuring program represents an investment
in our future and will improve our competitive position.
Specifically, the major elements of the restructuring plan
include closing the McCormick Flavor Group's production acility in
Hayward, California. Products manufactured there will now be
produced at McCormick's facility in Salinas, California. The Food
Service Division's spice production operation in Hunt Valley,
Maryland, will be closed with products manufactured there being
shifted to the Company's consumer products plant also in
Hunt Valley. Golden West Foods, our frozen food subsidiary in
Bedford, Virginia, will be offered for sale. There will also be a
realignment of some of McCormick's operations in the United
Kingdom. There will be other functional consolidations and staff
reductions throughout the Company. A more detailed description of
the Company's restructuring plan is contained in Management's
Discussion and Analysis.
THE AMERICAS MARKET ZONE
McCormick's oldest and largest business is the manufacture and
retail sale of spices, herbs, extracts, proprietary seasoning
blends, sauces, and marinades. These consumer products are sold in
the United States, primarily under the McCormick name in the East,
the Schilling label in the West, and in Canada under the Club
House brand. In other markets of the Americas Zone, the McCormick
brand name is primarily used.
While both sales and profits of our consumer business reached
records levels, growth has slowed from the rates experienced over
the past few years. Consumer eating trends are causing a gradual
shift in the channels through which we sell our spices and
seasonings. Although total spice consumption is increasing, we are
seeing a slight decline in home use, as consumers seek the
convenience of foods prepared outside the home.
Additionally, competition has intensified over the past few
years. Our challenge and our strategy is to grow our leadership
position in this market. We will achieve this by building on our
strong brand, innovating with new products and processes and by
operating our plants and offices more efficiently.
As in previous years, we continued a strategy to grow our retail
business by introducing new products. More than 30 new products
were introduced in 1994, many in response to new consumer eating
trends. Examples include:
Rotisserie Recipe Chicken Seasonings
Seasoned Pepper Blends
Fajita and Caribbean Jerk International Seasonings
Classic and Spicy Pizza Seasonings, and
Cake Mate Flintstone Candy Decorations.
Additional new products were introduced specifically aimed at
health-conscious consumers. They included:
The McCormick Collection's Fat Free Recipe Blends
Old Bay Fat Free Tartar & Cocktail Sauces
Golden Dipt Fat Free Marinades, and
Lower Sodium Taco Seasoning.
Operationally, improvements occurred at our largest plant in
Hunt Valley, Maryland. The plant was entirely reengineered,
including the relocation of production lines, the installation of
robotic palletizers and the conversion to high-speed foil
production to start in March 1995. Improved administrative
processes have also reduced costs.
At McCormick Canada, the Club House Division experienced healthy
retail growth in a flat market. Expanded distribution and the
introduction of several new retail and foodservice products helped
maintain our leadership in that market. Hy's, a leading brand of
steak house seasonings in Canada, was acquired during the year.
It was a strong year for our operations in Central and South
America. Despite a recession, McCormick de Venezuela had a solid
year, culminating in the acquisition of Salsa Ideal, a tomato
ketchup manufacturer. McCormick de Centro America, our subsidiary
in El Salvador, celebrated its 25th anniversary by enjoying its
third consecutive year of record sales and profits. Leading market
share positions in Central America in virtually all its product
lines and market segments were increased.
The Food Service Division primarily serves broad-line
foodservice distributors and warehouse clubs. Sales to
distributors increased by 8 percent, exceeding the market average
growth. The continued consolidation of warehouse clubs had an
adverse impact on sales and profits for this division. New
distribution gains are being made with restaurant chains. McCormick
was the first to market a line of Rotisserie Style Chicken Glazes
to capitalize on a new, popular eating trend.
[Photograph of three employees, omitted]
THE EUROPEAN MARKET ZONE
McCormick's European Zone enjoyed a record financial year, led by
solid gains at our operations in the United Kingdom. A number of
new products was launched under the Schwartz brand, including three
new pour-over sauces:
Garlic & Pepper, Pepper & Mushroom, and Curry. Sales of the new
pour-over sauce line have been well above expectations.
McCormick (UK) acquired Noel Holdings, Ltd., the leading supplier
of specialty foods to the U.K. foodservice industry. Its product
line includes herbs, spices, seasonings, and gherkins, plus a wide
range of sauces, condiments and drink mixes. Noel offers McCormick
significant opportunities for growth in the foodservice sector.
In Switzerland, the Company acquired the herb and spice company,
Butty. This acquisition increases McCormick's presence in the Swiss
consumer market and significantly strengthens access to the Swiss
foodservice arena.
In Finland, McCormick acquired the spice business of Tuko Oy, a
major food distributor to the retail grocery and foodservice trade.
Tuko had been a McCormick licensee for many years. Under the new
structure, our products have been introduced into the Nordic
countries, Russia and the Baltic States.
[Photograph of four employees and bottling line, omitted]
THE ASIA/PACIFIC MARKET ZONE
The Asia/Pacific Zone had a record year in sales and earnings.
Sales growth was well balanced among consumer, foodservice and
industrial businesses. With many underdeveloped, but rapidly
expanding markets, the Asia/Pacific Zone has high growth potential.
This was one of the most exciting years or McCormick Australia
since it became a wholly owned subsidiary 25 years ago. In
addition to record sales and profits, McCormick Australia acquired
the dessert business of Traders Pty. Ltd. This included the
Aeroplane Jelly (gelatin) brand, one of the most well-known brands
in Australia.
McCormick's strategy is to combine our expertise in flavorings with
Traders brands to expand the dessert category overall. A major
renovation of our Melbourne manufacturing facility was begun. It
will enable us to serve our fast food and retail customers more
effectively.
McCormick and P.T. Rodamas of Jakarta, Indonesia, formed a new
joint venture, P.T. McCormick Indonesia. The new company will
manufacture and market spices, herbs, seasonings, condiments, and
sauces. This is a major step to build a presence in a key country
of more than 180 million people.
This past year saw McCormick take strategic steps to capitalize
on the enormous potential of the Chinese market. Our sales of
consumer products in China continue to grow. Additionally, we are
increasing our equity position in this joint venture, underscoring
our optimism for growth in this emerging market.
MCCORMICK FLAVOR GROUP
The McCormick Flavor Group includes our industrial and fast food
spice, seasoning and flavor businesses. It sells to food processors
and major restaurant chains. Solid gains were made in sales and
distribution. The Flavor Group, however, experienced margin
pressure and an earnings decline as a result of increased operating
and raw material costs and delay in passing these costs through in
the form of price increases. Consequently, the Group fell short
of financial objectives.
In a move to improve efficiencies, the Corporate Research and
Development Function and the McCormick Flavor Division Technical
Function merged, allowing McCormick to capitalize on the synergies
of the two groups and heighten the focus on customer support and
new product development.
The Flavor Group opened a 52,000-square-foot Atlanta Distribution
Center. This facility will provide improved distribution services
to customers in the Southeast United States while lowering
warehouse and distribution costs for other McCormick units.
McCormick Ingredients spice mill facility, celebrating its 10th
anniversary, achieved the highest plant sanitation rating
attainable from the American Institute of Baking.
Outside the United States, the Flavor Group took steps to
continue to grow our business. In Mexico, we acquired
Grupo Pesa, a leading seasoning supplier to Mexico's food
processing industry. In India, we formed a joint venture
with A.V. Thomas Group called AVT-McCormick Ingredients Ltd.
Located in Cochin, the new company will produce whole
and ground naturally sterilized spices for direct shipment to
Europe, the United States and other world markets. This acquisition
is a strategic addition to our global supply network.
Construction has also begun for a manufacturing facility in
Guangzhou, China. It will produce sauces, syrups and toppings for
major industrial and fast food customers. Production start-up is
targeted for November 1995.
GILROY FOODS, INCORPORATED
Gilroy Foods, McCormick's agriculturally-based California
subsidiary, reported improved results over last year's
abnormally poor year. Sales and profits were up, but both failed to
meet objectives. Price competition and higher than expected costs
depressed margins. Additionally, delays in the start-up of Gilroy's
new manufacturing facility in Egypt had an adverse profit impact.
There was continued growth for SupHerb Farms, our joint venture
with Daregal of France. Shipments of SupHerb's quick frozen herbs
began this summer, and the response from our customers has been
favorable.
Gilroy Energy Company concluded its seventh successful year of
operation.
PACKAGING GROUP
McCormick's Packaging Group, including Setco and Tubed Products,
supplies plastic tubes and bottles to McCormick units and provides
packaging for other customers in the pharmaceutical, cosmetics and
food industries.
Tubed Products grew faster than the market in its specialized
niche and had another successful year. At its Oxnard, California
and Easthampton, Massachusetts plants, tube manufacturing and
decorating lines were added.
In addition, the Company acquired Minipack Systems Limited of
Hampshire, United Kingdom. Minipack produces plastic sample
containers.
Results for Setco did not meet expectations. Price increases
could not cover rapidly escalating raw material costs.
Additionally, the unit's Brooklyn, New York, facility experienced
operational problems which impacted profits. Improvements late in
the year should yield better results in 1995.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Overview - 1994
The Company earned $.75 per share in fiscal year 1994. This is a
decrease from the $.89 reported in 1993 and $1.16 in 1992. The
Company's 1994 earnings were reduced by a comprehensive
restructuring plan of its business operations causing a one-time
charge to earnings of $.57 per share. Earnings per share for 1993
were reduced by a $.33 one-time charge for an accounting change.
Earnings growth of 8% before restructuring in 1994 and the
accounting change in 1993 was below the Company's earnings growth
objective of 15%. Contributing to the lower growth ratewere price
and cost pressure in the industrial business, competitive
conditions in North American consumer products and higher interest
expenses.
Sales of $1.69 billion increased 9% over 1993. In 1993,
consolidated sales increased 6% over 1992. Sales of
unconsolidated operations in 1994 were $342 million, an increase of
10% over 1993. In 1993, these operations increased sales 16% over
1992.
Return on equity declined to 12.8% versus 22.0% in 1993 and 23.3%
in 1992. Return on equity in 1994 before the effect of the
restructuring charge was 22.1%.
Gross profit was 37.1% of net sales in 1994 versus 38.7% in 1993.
Profit from operations was 7.6% in 1994 versus 11.6% in 1993. The
restructuring charge discussed above, equal to 4.2% of net sales,
accounted for the decline.
Net income was 3.6% of net sales in 1994 versus 6.4% in 1993 and
6.5% in 1992.
Dividends were increased in December 1993 to an annual rate of
$.48 per share and again in December 1994 to $.52 per share. These
dividend increases reflect management's continued confidence in the
long-term outlook for the Company.
Even in an environment of intense competition for shelf space and
a focus on cost reduction and operating efficiencies within our
industry, domestic consumer products reported higher sales and
profits. This was a result of continued growth of product offerings
on the perimeter of the grocery store, new products aimed at
health-conscious consumers and price increases.
The European Zone, aided by acquisitions, had excellent growth in
sales and profits making 1994 a record financial year. Acquisitions
in the United Kingdom, Switzerland and Finland added to our Number
One position in the U.K. and the Swiss consumer markets and
positioned us for growth in Scandinavia, Russia and Eastern
Europe.
In Asia/Pacific, sales and operating profit grew significantly
despite adverse economic conditions in some areas. The acquisition
of the Aeroplane Jelly (gelatin) brand from Traders Pty. in the
fourth quarter of 1994 added to the excellent performance.
Most of our industrial businesses reported significant sales
increases during 1994. The exception was our Food Service Division
which lost sales volume as a result of consolidations in the
warehouse club market. Our Gilroy Foods unit improved operating
profit margins after a year in which higher onion costs materially
reduced Gilroy's margins. Our industrial flavor and seasoning
business had an excellent year in terms of sales growth as
we became the supplier of choice with many of our industrial
customers. However, gross margins came under pressure due to
increased costs in several commodities. As a result, this business
reported lower operating profit in 1994 compared to 1993.
Sales at our packaging operations increased significantly in
1994. Profits were not up to expectations due in large part to
temporarily higher costs associated with the integration of a 1993
acquisition. During 1994, the Company made its first packaging
acquisition outside the United States with the purchase of Minipack
Systems Limited in the United Kingdom.
Earnings of our unconsolidated joint ventures decreased to $8
million in 1994 from $10 million in 1993. McCormick de Mexico, the
largest of our unconsolidated joint ventures, incurred higher
marketing expense in an intensely competitive marketplace in order
to maintain market share.
We are confident that our focus on increasing global market
share, new products that meet changing consumer trends, cost
containment, total quality, and superior customer service will
continue to increase shareholder value.
CONSOLIDATED NET SALES ($ MILLIONS)
[At this point a bar graph entitled Consolidated Net Sales
depicting consolidated net sales in millions of dollars for the
fiscal years 1990 through 1994 appears and is represented by the
following table]
YEAR CONSOLIDATED NET SALES ($MILLIONS)
1990 1,323
1991 1,428
1992 1,471
1993 1,557
1994 1,694
<TABLE>
<CAPTION>
Sales
Consolidated 1994 1993 1992 1994 1993 1992
(in millions) (percentage of total)
<S> <C> <C> <C> <C> <C> <C>
Americas $ 716.6 $ 706.0 $ 678.1 42.2% 45.4% 46.1%
Europe 238.4 201.2 201.0 14.1% 12.9% 13.7%
Asia/Pacific 33.4 26.2 28.0 2.0% 1.7% 1.9%
Industrial 524.7 456.5 422.8 30.9% 29.3% 28.7%
Packaging 141.7 124.9 97.2 8.4% 8.0% 6.6%
Total Food and
Packaging 1,654.8 1,514.8 1,427.1 97.6% 97.3% 97.0%
Gilroy Energy 40.0 41.8 44.3 2.4% 2.7% 3.0%
Total $1,694.8 $1,556.6 $1,471.4 100.0% 100.0% 100.0%
</TABLE>
<TABLE>
<CAPTION>
Percentage Change 1994 1993 1992
Total Volume Price Total Volume Price Total Volume Price
Change Change Change Change Change Change Change Change Change
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Americas 1.5% 1.2% 0.3% 4.1% 4.7% (0.6)% (6.9)% (7.4)% 0.5%
Europe 18.5% 14.9% 3.6% 0.1% 9.9% (9.8)% 14.8% 11.0% 3.8%
Asia/Pacific 27.4% 27.8% (0.4)% (6.4)% (3.4)% (3.0)% 5.9% 10.6% (4.7)%
Industrial 14.9% 13.7% 1.2% 8.0% 9.5% (1.5)% 10.4% 12.8% (2.4)%
Packaging 13.4% 9.9% 3.5% 28.6% 25.5% 3.1% 32.4% 34.3% (1.9)%
Total Food and
Packaging 9.3% 8.0% 1.3% 6.2% 8.1% (1.9)% 3.0% 3.1% (0.1)%
Gilroy Energy (4.1)% 0.8% (4.9)% (5.8)% (4.3)% (1.5)% 4.7% 4.3% 0.4%
Total 8.9% 7.8% 1.1% 5.8% 7.7% (1.9)% 3.0% 3.1% (0.1)%
</TABLE>
SALES
Sales from consolidated operations grew by 9% in 1994 to a record
level of $1.69 billion. Sales in 1993 of $1.56 billion increased 6%
over 1992.
Sales of the Americas Zone include our domestic consumer products
business, the Food Service Division, Golden West Foods, and wholly
owned subsidiaries in Canada, where the Club House brand is
marketed, El Salvador, and Venezuela. This area is our largest and
most mature market. It is also highly competitive, making
distribution gains more challenging than in the past. Despite these
difficult conditions, sales were up modestly for 1994, with
gains similar to 1993. New products introduced by
McCormick/Schilling that follow consumer eating trends to more
ethnic, value-added, and healthy foods contributed to sales growth.
We also introduced new products into the categories that occupy the
perimeter of the grocery store which is the most heavily traveled
part of the store. Old Bay Fat Free Tartar & Cocktail Sauces and
Golden Dipt Fat Free Marinades target both the health trend and the
perimeter marketing strategy. Food Service sales to distributors
increased at a rate greater than the market. However, these gains
were offset by distribution losses to warehouse clubs as that
market channel continued to consolidate. McCormick Canada showed
healthy growth in a flat market due to the introduction of new
products and expanded distribution. The operations in El Salvador
and Venezuela had exceptional years with a combined increase
greater than our Corporate objective.
We will continue to support a strategy of introducing new
products into the higher traffic areas of the grocery
store as well as new products that meet changing consumer eating
trends. As with last year, high levels of discounts and allowances
are being required to defend our distribution base. We are firmly
committed to strengthen our leadership position, support the
McCormick brand and aggressively pursue market share in a highly
competitive environment that is likely to continue in 1995.
Sales in the European Zone grew significantly, with contributions
from acquisitions made during 1994 in Finland, Switzerland and the
U.K. Our retail business in the U.K. added line extensions to the
very successful Creamy Pepper dry pour-over sauce, which has become
one of the highest selling items under the Schwartz label. The
acquisition in Finland has gained new distribution in the Baltic
States and Russia.
Asia/Pacific sales grew to record levels in 1994 as sales to fast
food operators were a significant factor in this growth. The
acquisition of the Aeroplane Jelly brand in the fourth quarter also
contributed, and adds a new category, desserts, to our product
offerings in the region.
Industrial sales were up in 1994 due to our continued success
with leading restaurant chains and food processing companies. Our
full array of products from basic ingredients to highly
sophisticated flavors, plus a reputation for service, quality and
product development, make us the supplier of choice with our
customers. These capabilities have led to success in supplying
seasonings for a number of new salty snack products as well as the
highly successful rotisserie chicken products offered by many
restaurants. Also adding to our growth is the fact that our
customers are consolidating their suppliers in an attempt to reduce
costs. Due to our "one-stop shopping" capabilities, we are
increasing our volumes with them.
Our packaging business grew in 1994 due to market growth and
increased penetration of those markets. We have added production
lines at Tubed Products' facilities and entered into the
international market with the acquisition of Minipack Systems in
the United Kingdom. Minipack produces sample size replicas of
branded products. This acquisition complements our portfolio of
high value-added, niche packaging products. These investments will
enable us to continue to provide customers with high quality,
specialty packaging.
Consolidated sales in 1993 were 6% ahead of sales in 1992. This
increase came primarily from the sales of flavor systems and
seasonings for new consumer products launched by our industrial
customers. The acquisition of Admiral Plastics' bottle business and
new products in the consumer products business that serve the
consumer demand for variety and convenience also contributed to
growth in 1993.
Unconsolidated sales from our joint venture units reached $342
million, a 10% increase over 1993. In 1993, sales from joint
ventures were 16% ahead of 1992. We look to joint ventures as an
important vehicle to grow our business around the world and will
continue to develop them to take advantage of opportunities on a
global basis.
In 1994, our consolidated sales increased 9% over 1993, which is
an improvement over the compounded growth rate over the last three
years of 6%. We believe, however, the objective of 10% is
attainable over time for the following reasons:
Domestic consumer products, largest of our businesses in the
Americas Zone, operates in a mature market with changing consumer
preferences for convenience, value and variety. New products were
introduced in 1994, and more will be offered in 1995 to meet these
needs. The trend to more highly seasoned ethnic foods continues,
and we will target new product development here as well. We have
seen excellent results from our "perimeter of the store" marketing
strategy and will focus promotional activity in this area to
increase usage of products in this category. We plan to support the
McCormick brand aggressively in order to maintain our premiere
status in our market.
Our Canadian subsidiary, selling under the Club House brand,
operates in much the same environment as our domestic consumer
products business. We will use the same strategy of providing the
consumer convenience, value and variety to increase sales in this
operating unit. We will also seek niche acquisitions to enhance
this business.
The European Zone will take advantage of recent acquisitions in the
U.K., Switzerland and Finland to increase our sales in the U.K.,the
European continent, Russia, and the Baltic countries. The
acquisitions in the U.K. have solidified our presence in all three
market channels consumer, foodservice and industrial and have given
us an opportunity in the packaging industry for the first time.
Asia/Pacific provides tremendous opportunity for growth. Increasing
disposable income in the emerging economies of China and Indonesia
enables consumers to buy branded spices that are conveniently
packaged and offer a higher level of quality. We have positioned
ourselves in this region through joint ventures and wholly owned
subsidiaries to take advantage of growth opportunities.
Our industrial business unit had sales growth that was well over
our Corporate objective of 10%. Our customers are major food
processors and restaurant chains who demand the product
development, service, quality, and technical resources that we can
provide. We are able to offer them a combination of superior
capabilities and one-stop shopping for all their ingredient and
flavor requirements. We believe our reputation as a quality
supplier and our singular status as a full-line ingredient and
flavor house will enable us to grow the industrial business at a
rate that exceeds the Corporate sales growth objective.
In 1994, we made our first international acquisition in the
specialized packaging niche we serve. We believe future growth will
come from further domestic market penetration and expansion of
newly acquired Minipack's capabilities in the U.S. market. We
expect this business to grow at a rate near our Corporate
objective.
EARNINGS
1994 1993 1992 1994 1993 1992
(in millions) (percentage of sales)
Gross profit $628.2 $603.2 $584.0 37.1% 38.7% 39.7%
Restructuring
charge 70.4 4.2%
Profit from
operations 128.2 180.5 167.2 7.6% 11.6% 11.4%
Income before
taxes 87.0 149.9 138.3 5.1% 9.6% 9.4%
Net income before accounting
change 61.2 99.7 95.2 3.6% 6.4% 6.5%
Net Income 61.2 73.1 95.2 3.6% 4.7% 6.5%
Earnings per share before
accounting change .75 1.22 1.16
Earnings per share $ .75 $ .89 $ 1.16
EARNINGS
Our objective is to grow earnings per share (EPS) at 15% per year
over time. Total earnings per share in 1994 were $.75. EPS in 1993
was $.89 and $1.16 in 1992. The Company's 1994 earnings were
reduced by a comprehensive restructuring plan of its business
operations causing a one-time charge to earnings of $.57 per share.
Earnings per share in 1993 were reduced by a $.33 one-time charge
for an accounting change. In addition, in 1993 higher onion costs
at our Gilroy Foods unit and the higher federal corporate income
tax rate negatively impacted earnings.
In 1994, we experienced increasing competitive intensity in most
of the markets in which we do business. Pressure on margins is
being felt at all levels of distribution of the food industry. We
believe that this business environment is not likely to change in
the near term. Consequently, we announced in October a
comprehensive restructuring of our business operations, including
plant consolidations, functional and departmental consolidations
and staff reductions. This action was taken after months of careful
evaluation and planning with participation from all business units
and staff functions. Opportunities were identified to
consolidate certain manufacturing facilities and administrative
activities to eliminate redundancies and improve productivity and
efficiency. We believe these actions support our mission to expand
our worldwide leadership position in the spice, seasoning and
flavoring markets and will position us to achieve our stated
financial objectives. We are undertaking this action now, while
sales and earnings growth is strong, to position our Company
for the future and stay ahead of the competition. The specific
actions that will be taken are as follows:
A reduction of approximately 600 positions or 7% of our worldwide
workforce through position eliminations and a voluntary special
retirement program. The majority of these positions will be
eliminated over the next six months,
Closing the McCormick Flavor Group's production facility in
Hayward, California, and consolidating products manufactured there
with production at our facility in Salinas, California,
Closing the Food Service Division's plant in Hunt Valley, Maryland,
and transferring production to the consumer products plant in Hunt
Valley,
Realignment of some of our operations in the U.K.,
Golden West Foods, Inc., our frozen food subsidiary in Bedford,
Virginia, will be offered for sale, and
Consolidation of certain administrative activities to reduce
redundancy and paperwork.
The consolidation of facilities and administrative activities
will be accomplished over the next two years.
Strong consideration was given to the impact on our employees.
The voluntary special retirement program will create openings to
absorb some of the displaced employees. We have also provided
enhanced severance benefits as well as transition and outplacement
services.
The restructuring charges totaled $70 million before tax and $46
million after tax. Cash expenditures associated with the
restructuring program, net of tax benefits to be received, total
$53 million, of which $42 millionare in capital expenditures.
Approximately $31 million will be required in 1995 and $22 million
in 1996. The Company will fund the cash required by the
restructuring program through income tax benefits from the plan,
working capital reductions and by limiting total capital spending.
As a result, implementation of the restructuring plan is not
expected to have a material effect on the liquidity of the Company.
The savings from the plan are expected to begin late in 1995 and
will be used to invest in the Company's brands through product
development and consumer promotional activity, maintain low-cost
producer status in our core businesses, and support our global
expansion strategy. These programs should enable the Company to
achieve its financial objectives over time.
Our earnings in 1994 were impacted by three significant factors
in addition to the restructuring. These were as follows: first,
lower margins in our industrial flavor and seasoning business due
in part to higher domestic commodity costs in vegetable oil, wheat
flour and dairy products and the lag time in being able to pass
these through in the form of price increases; second, our joint
venture in Mexico continued to experience challenges to their
leading position in mayonnaise and associated products which was
defended vigorously with high levels of promotional spending; and
third, an increase in interest expenses that resulted from rising
short-term rates and higher levels of debt.
Gross margins declined to 37.1% in 1994 from 38.7% in 1993. This
is due in part to the changing mix of our sales as lower gross
margin industrial sales increase at a faster rate than consumer
product sales. The margins were also lower due to the difficulty in
passing on the higher commodity costs to our industrial customers.
We believe this situation is temporary, and margins in our
industrial flavor and seasoning business should improve in 1995.
Profit from operations decreased to 7.6% of sales and includes
the restructuring charge of $70 million, which is 4.2% of sales.
Excluding the restructuring charge, profit from operations in 1994
was 11.8%. Operating profit margins in 1993 and 1992 were 11.6% and
11.4%, respectively. Before the restructuring charge, these margins
show a positive trend, even as gross margins decline. This is due
to our continuing efforts to control expenses and eliminate
non-value added costs throughout the Company.
Interest expense increased to $38.7 million in 1994 versus $31.1
million in 1993. This was caused by rising interest rates and
higher debt levels. Debt was used to finance acquisitions in 1994
which totaled $83 million.
Higher working capital was partially caused by inventory build-up
as we re-engineered our consumer products plant in Hunt Valley,
Maryland, and made strategic purchases of certain commodities which
are expected to rise in cost and/or be in short supply in 1995.
Unconsolidated income from joint ventures decreased to $8 million
in 1994, down from $10 million in 1993. As mentioned above, our
joint venture in Mexico reported significantly lower earnings due
to an investment in a marketing campaign to defend market share.
Joint ventures will provide opportunities for earnings growth in
the future, and we will continue to develop ventures on a global
basis.
Earnings per share in 1993 were $.89 compared to $1.16 in 1992.
Earnings in 1993 were impacted by the following factors: first,
operating margins at Gilroy Foods were lower during the first three
quarters of the year due to high onion costs; second, adoption of
SFAS No. 106 reduced earnings $.33 per share; and third, the higher
federal corporate income tax rate reduced earnings per share by
$.03.
The Company remains committed to the achievement of 15% earnings
growth over time. However, in the near term, achieving the
objective remains a challenge due to the intensely competitive
domestic and international markets and the expectation for a
continued low inflationary environment. In order to accomplish our
objective over time, we must:
Achieve sales growth of 10%,
Successfully implement the restructuring plan. Success will be
measured by:
Efficiencies gained in the consumer products plants in Salinas,
California, and Hunt Valley, Maryland, after consolidation with the
Hayward, California, facility and the Food Service plant in Hunt
Valley,
Cost reduction in the U.K. operations as facility modernization and
realignment is implemented,
Productivity gains in administrative functions, and
Increased growth of McCormick branded products.
Continue our total quality process which empowers employees to seek
process improvement continuously and to act in the best interests
of customers and shareholders,
Focus capital spending on projects that will maintain our low-cost
producer status on a worldwide basis,
Continue to remove costs from the system through our global
sourcing and supply chain management programs, and
Increase contributions from our unconsolidated joint ventures.
We do not believe that current projected rates of inflation will
have a material effect on our operating results.
During the year, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 112, "Employers' Accounting for
Postemployment Benefits." This standard requires that employers
accrue a liability for their obligation to provide postemployment
benefits as employees earn the right to receive them, provided that
payment of the benefits is probable and the amount of the benefits
can be reasonably estimated. The effect of this accounting change
was not material on the Company's financial statements. In 1993,
the Company adopted SFAS No.106, "Employers' Accounting for
Postretirement Benefits Other than Pensions." This accounting
change resulted in a one-time, non-cash charge of $26.6 million
after tax or $.33 per share. Additionally, this accounting method
resulted in an increase in the ongoing after-tax cost of
postretirement benefits of $2.2 million or $.03 per share.
LIQUIDITY
1994 1993 1992
(in millions)
Net income $ 61.2 $ 73.1 $ 95.2
Restructuring charge 70.4
Accounting change for
postretirement benefits 26.6
Depreciation and other
non-cash charges 28.8 39.4 31.5
Dividends received from
unconsolidated subsidiaries 3.3 10.4 5.6
Change in operating assets
and liabilities (91.2) (68.9) (15.0)
Cash flow from operations $ 72.5 $ 80.6 $117.3
Current ratio 1.1 1.4 1.1
LIQUIDITY
The Company's current ratio was 1.1 at yearend compared to 1.4 and
1.1 at the end of 1993 and 1992, respectively. The decrease is
attributable to the rise in short-term debt that was used as the
financing vehicle for acquisitions made during 1994 and the
increase in inventory levels during the year. The Company's current
ratio does not represent a complete measure of the cash resources
available to finance operating requirements. We maintain
relationships with a number of domestic and foreign banks that
provide committed credit facilities of $300 million which increase
our liquidity. These facilities were not in use at yearend.
Overall cash flows from operations were reduced by approximately
$8 million from 1993 due to an increase in operating assets. This
was primarily a result of an increase in inventory levels during
the reengineering of the Hunt Valley, Maryland, consumer products
facility and strategic purchases of commodities expected to
increase in price or be in short supply in 1995. Inventory turnover
rate was 3.0 in 1994; 3.1 in both 1993 and 1992. Accounts
receivable were also higher due primarily to the timing of sales in
November as more sales occurred in the latter part of the month and
were not collected at November 30.
The Company is subjected to foreign currency translation risks at
all of its subsidiaries and affiliates located outside the United
States, principally in the United Kingdom, Canada, Australia, and
Mexico. Increases or decreases in the value of the applicable
foreign currency relative to the U.S. dollar have the impact of
increasing or decreasing the reported net assets of foreign
subsidiaries and reported net investments in foreign affiliates.
Management periodically enters into forward contracts for the
delivery of foreign currencies to hedge certain of its exposures to
these increases or decreases. Had these hedges not been in place,
net assets would have increased or (decreased) by $1.7 million in
1994, $0 in 1993 and $(4.9) million in 1992. At November 30,
1994, the Company's only outstanding forward contract was a hedge
against a portion of its net investments in Mexico. In addition,
during the latter part of 1994, the Company's United Kingdom and
Australian subsidiaries have utilized local borrowings to limit
their net asset exposure.
The Company is also exposed to foreign exchange risk for
transactions that are denominated in other than the applicable
local currency. Such transactions that are significant to the
Company are hedged with forward exchange contracts. The impact of
this risk and the related hedging activity was not material to the
Company during the three-year period ended November 30, 1994. The
Company's exposure to foreign exchange risk from unsettled
transactions at November 30, 1994, is not considered to be
material.
In December 1994, and January 1995, the Mexican peso was devalued
by approximately 35%. This devaluation will require an unfavorable
adjustment in 1995 to shareholders' equity of approximately $14
million. Management does not expect the impact of the devaluation
at this level to have a material effect on earnings in the future.
RETURN ON EQUITY
Return on equity (ROE), calculated by dividing net income from
continuing operations by average shareholders' equity, was 12.8%
versus 22.0% in 1993 and 23.3% in 1992. The restructuring charge is
the primary reason for the decline in ROE. ROE before the impact
of the restructuring charge on net income and equity was 22.1%.
Management is committed to achieving our ROE objective of
exceeding 20% and has implemented programs to improve margins and
increase asset utilization. Margin improvement will be accomplished
by the following:
Operational efficiencies through implementation of the
restructuring plan,
Emphasis on capital investments in plant and equipment that will
maintain our low-cost producer status, and
Continued emphasis on total quality and global sourcing to improve
performance and customer service.
Asset utilization will be improved with our efforts in the
following areas:
Consolidation of the manufacturing facilities as part of the
restructuring plan to increase capacity utilization,
Increasing the significance of working capital management in our
incentive compensation program, and
Disposal of those assets that are not meeting our return
objectives.
CAPITAL STRUCTURE/DEBT FINANCING
Our objective is to maintain total debt to total capital at 40% or
less, excluding non-recourse debt.
Total debt to total capital, excluding non-recourse debt of $57.6
million associated with Gilroy Energy Company, was 52.0% at yearend
versus 44.3% in 1993 and 37.4% in 1992.
During 1994, acquisitions and capital expenditures remained at a
relatively high level. Working capital requirements, particularly
inventory, as discussed previously, increased above 1993. These are
the primary factors causing the Company to exceed its objective.
Management is implementing programs to bring our debt/capital
ratio within our objective over time. The principal program is to
reduce inventories significantly. This is a major priority for
operating management and is included in a revised management
incentive program as an important component of incentive pay.
In 1994, the Company's long-term debt rating of "A" was
reaffirmed by both major debt-rating services. Operating
cash flows remain strong and should be sufficient to cover capital
expenditures and dividend payouts in 1995.
During 1994, the Company issued the remaining $120 million in
medium-term notes under the $150 million program authorized in
1993. Notes issued in 1994 under the program have expiration dates
ranging from 2004 to 2024 at rates of 6.24% to 8.12%. At yearend,
$150 million of the notes had been issued with expiration dates
ranging from 2004 to 2024 at rates of 5.78% to 8.12%. The notes due
in 2024 have put options with notification dates in 2004.
In June 1993, the Company authorized an additional 2 million
share repurchase program which was approximately 33% complete at
fiscal yearend.
CAPITAL EXPENDITURES ($ MILLIONS)
[At this point a bar graph entitled Capital Expenditures and
depicting property additions and depreciation in millions of
dollars for the fiscal years 1990 through 1994 appears and is
represented by the following table]
YEAR PROPERTY ADDITIONS DEPRECIATION
($MILLIONS) ($MILLIONS)
1990 58 33
1991 73 37
1992 79 40
1993 76 47
1994 88 57
CAPITAL EXPENDITURES
Capital expenditures were $88 million in 1994 versus $76 million in
1993 and $79 million in 1992. The majority of our capital spending
is oriented toward projects that increase efficiency and improve
yields or expand capacity. Major capital spending projects in 1994
included the following:
Installation of new bottle and tube equipment to support new
business in our packaging group,
Reengineering of the Hunt Valley consumer packaging operation to
reduce costs, fully automate case packing and improve throughput,
Initial phases of construction of a new facility in Guangzhou,
China, to produce sauces, syrups and toppings for major industrial
and fast food customers,
Upgrading of existing facility and installation of wet sauce
process and packaging equipment at McCormick Australia,
Installation of a thermal energy storage system to increase power
output at Gilroy Energy, and
Expansion of capacity and efficiency improvements at our Toronto
industrial seasoning plant.
We will continue to pursue capital spending projects which will
add profitable growth and help ensure our position as a low-cost
producer. We anticipate that capital spending in 1995, including
capital associated with our restructuring plan, will be at the same
level as recent years.
DIVIDENDS
Dividends have increased 13 times since 1987 and have risen at a
compounded rate of 21%. Total dividends paid during fiscal 1994
were $39.0 million versus $35.6 million in 1993 and $30.4 million
in 1992. In December 1993, the Board of Directors authorized an
increase in the annual dividend rate from $.44 per share to $.48
per share. The quarterly dividends paid during the past three years
are summarized below.
DIVIDENDS PAID PER SHARE (DOLLARS)
[At this point a bar graph depicting dividends paid per share for
the fiscal the fiscal years 1990 through 1994 appears and is
represented by the following table]
YEAR DIVIDENDS PAID PER SHARE (DOLLARS)
1990 .23
1991 .28
1992 .38
1993 .44
1994 .48
1994 1993 1992
First Quarter $.12 $.11 $.09
Second Quarter .12 .11 .09
Third Quarter .12 .11 .10
Fourth Quarter .12 .11 .10
Total $.48 $.44 $.38
In December 1994, the Board of Directors approved an increase in
the quarterly dividend from $.12 to $.13 per share, an 8% increase.
Our objective is to pay dividends equal to 25-35% of current net
income to shareholders of common stocks.
PRICE RANGE OF COMMON STOCK
The high and low closing prices of common stock during fiscal
quarters as reported on the NASDAQ national market
follow:
1994 1993
Quarter ended High Low High Low
February 28 $24.75 $21.00 $30.25 $24.75
May 31 23.50 20.00 26.00 22.50
August 31 22.50 17.75 24.75 20.50
November 30 20.38 17.75 26.25 21.63
<TABLE>
<CAPTION>
Historical Financial Summary
(dollars in millions except per-share data)
OPERATING RESULTS 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales 1,694.8 1,556.6 1,471.4 1,427.9 1,323.0 1,246.1 1,220.3 1,078.5 975.7 873.0
Cost of goods sold 1,066.6 953.4 887.4 886.6 838.2 805.9 812.6 710.2 637.4 564.5
Gross profit 628.2 603.2 584.0 541.3 484.8 440.2 407.7 368.3 338.3 308.5
Selling, general & admin.
exp. 429.6 422.7 416.8 395.8 357.7 338.2 312.9 305.2 271.3 247.9
Restructuring charge 70.4
Operating profit 128.2 180.5 167.2 145.5 127.1 102.0 94.8 63.1 67.0 60.6
Interest & other
income/exp. (41.2) (30.6) (28.9) (30.6) (22.8) (23.5) (31.0) (22.5) (23.5) (21.4)
Income before income
taxes 87.0 149.9 138.3 114.9 104.3 78.5 63.8 40.6 43.5 39.2
Provision for income
taxes (33.7) (60.5) (53.0) (42.8) (38.6) (29.5) (27.8) (16.6) (19.4) (18.1)
Income - consolidated
ops. 53.3 89.4 85.3 72.1 65.7 49.0 36.0 24.0 24.1 21.1
Income - unconsolidated
ops. 7.9 10.3 9.9 8.8 3.7 3.5 (.4) .4 .3 .5
Income - continuing
ops. 61.2 99.7 95.2 80.9 69.4 52.5 35.6 24.4 24.4 21.6
Income - discont. real
estate ops.(F1) 83.0 .7 6.2 5.3 6.2
Accounting changes(F2) (26.6) 6.4
Net income 61.2 73.1 95.2 80.9 69.4 135.5 42.7 30.6 29.7 27.8
Gross profit margin 37.1% 38.7% 39.7% 37.9% 36.6% 35.3% 33.4% 34.1% 34.7% 35.3%
Operating profit margin 7.6% 11.6% 11.4% 10.2% 9.6% 8.2% 7.8% 5.9% 6.9% 6.9%
Profit margin -
consolidated 3.1% 5.7% 5.8% 5.1% 5.0% 3.9% 3.0% 2.2% 2.5% 2.4%
Percent change over prior year
Net sales 8.9% 5.8% 3.0% 7.9% 6.2% 2.1% 13.2% 10.5% 11.8% 10.7%
Income - continuing ops. (38.6)% 4.7% 17.7% 16.6% 32.1% 47.5% 45.9% .0% 13.0% (21.7)%
Effective tax rate 38.8% 40.4% 38.3% 37.2% 37.0% 37.6% 43.6% 40.9% 44.6% 46.2%
LIQUIDITY
Depreciation and
amortization 62.5 50.5 43.8 40.5 36.6 34.8 29.8 30.4 24.5 23.5
Capital expenditures 87.7 76.1 79.3 73.0 58.4 53.4 50.4 81.7 82.9 41.3
Current ratio 1.1 1.4 1.1 1.2 1.3 1.7 1.4 1.4 1.4 1.3
CAPITAL STRUCTURE
Current debt 211.9 82.6 120.5 76.7 30.4 20.3 49.5 76.7 51.9 56.5
Long-term debt 318.8 288.8 141.3 145.8 148.2 147.2 166.1 139.5 102.2 94.8
Non-recourse debt 57.6 59.7 61.8 63.3 63.3 63.3 63.3 58.6 24.6
Total debt 588.3 431.1 323.6 285.8 241.9 230.8 278.9 274.8 178.7 151.3
Shareholders' equity 490.0 466.8 437.9 389.2 364.4 346.2 294.3 280.6 271.6 261.1
Total capital 1,078.3 897.9 761.5 675.0 606.3 577.0 573.2 555.4 450.3 412.4
Total assets 1,555.7 1,313.2 1,130.9 1,037.4 946.9 864.5 846.4 776.5 648.1 582.4
Return on equity -
continuing ops. 12.8% 22.0% 23.3% 21.8% 20.4% 15.5% 14.6% 11.1% 11.9% 11.9%
Return on equity -
total 12.8% 17.0% 23.3% 21.8% 20.4% 40.0% 14.6% 11.3% 11.3% 11.3%
Percent debt to total
capital 54.6% 48.0% 42.5% 42.3% 39.9% 40.0% 48.7% 49.5% 39.7% 36.7%
Debt to capital excluding
non-recourse debt 52.0% 44.3% 37.4% 36.4% 32.9% 32.6% 42.3% 43.5% 36.2% 36.7%
PER COMMON SHARE(F3)
Income - continuing ops. .75 1.22 1.16 .98 .83 .60 .38 .26 .25 .22
Income - discont. real
estate ops.(F1) .94 .01 .06 .06 .06
Income before accounting
changes .75 1.22 1.16 .98 .83 1.54 .39 .32 .31 .28
Accounting changes(F2) (.33) .07
Total earnings .75 .89 1.16 .98 .83 1.54 .46 .32 .31 .28
EPS growth from
continuing ops. (39)% 5% 18% 18% 38% 58% 46% 4% 14% (21)%
Book value 6.03 5.70 5.45 4.88 4.56 4.18 3.27 3.00 2.83 2.68
Common dividends
declared(F4) .49 .45 .40 .31 .24 .19 .14 .13 .11 .11
Market closing price:
High 24.75 30.25 28.75 22.88 13.38 12.50 7.25 6.44 5.66 4.75
Low 17.75 20.40 20.63 11.88 9.13 6.31 3.85 4.10 4.16 3.85
Dividend payout
ratio(F5) 36.4% 36.1% 32.8% 28.6% 28.9% 30.8% 36.5% 38.5% 37.4% 38.6%
Average shares outstanding
And equivalents (000's) 81,240 81,766 81,918 82,396 83,720 87,772 93,068 94,408 96,848 98,000
<FN>
F1 The Company disposed of its wholly owned real estate subsidiary in 1989.
F2 In 1993, the Company adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other
than Pensions," and in 1988, it adopted SFAS No. 96, "Accounting for Income Taxes."
F3 All share data adjusted for 2-for-1 stock splits in January 1992, January 1990 and April 1988.
F4 Includes fourth quarter dividends for the years 1986 and 1988-1993, which were declared
in December of each of those years.
F5 Dividend payout ratio does not include gain on sale of discontinued real estate operations,
cumulative effect of accounting changes and restructuring charge.
</FN>
</TABLE>
[Photograph of various Company products, and other objects, omitted]
Consolidated Income
Year ended November 30
1994 1993 1992
(in thousands except per-share data)
Net sales $1,694,772 $1,556,566 $1,471,369
Cost of goods sold 1,066,573 953,409 887,394
Gross profit 628,199 603,157 583,975
Selling, general and
administrative expense 429,518 422,700 416,788
Restructuring charge 70,445
Profit from operations 128,236 180,457 167,187
Other income 6,175 6,397 8,778
Interest expense 38,659 31,102 30,895
Other expense 8,774 5,862 6,757
Income before income taxes 86,978 149,890 138,313
Provision for income taxes 33,750 60,500 53,000
Income from consolidated
operations 53,228 89,390 85,313
Income from unconsolidated
operations 7,929 10,290 9,904
Net income before cumulative
effect on prior years of
accounting change 61,157 99,680 95,217
Cumulative effect on prior years of accounting change
for postretirement benefits (26,626)
Net Income $ 61,157 $ 73,054 $ 95,217
Earnings per common share
Before cumulative effect
of accounting change $ .75 $ 1.22 $ 1.16
Cumulative effect on
prior years of accounting
change (.33)
Earnings per common share $ .75 $ .89 $ 1.16
See Notes to Financial Statements, pages 27-35
CONSOLIDATED BALANCE SHEET
November 30
Assets 1994 1993
(in thousands)
Current assets
Cash and cash equivalents $ 15,566 $ 12,838
Receivables
Trade 189,915 158,904
Other 21,416 18,727
Allowance for losses (2,520) (2,530)
208,811 175,101
Inventories
Finished products and
work-in-process 249,054 215,538
Raw materials and supplies 125,413 105,713
374,467 321,251
Prepaid expenses 15,343 17,960
Deferred income taxes 43,470 13,003
Total current assets 657,657 540,153
Investments 62,410 45,728
Property, plant and equipment
Land and improvements 30,461 28,566
Buildings and improvements 211,456 199,621
Machinery and equipment 557,833 494,143
Construction in progress 37,307 32,492
837,057 754,822
Less accumulated depreciation
and amortization 332,458 289,212
Property, plant and equipment
- net 504,599 465,610
Excess cost of acquisitions - net 196,166 130,638
Prepaid allowances 143,181 126,399
Other assets 4,686 4,706
Goodwill, trademarks, formulae, etc. 1 1
Human relations 1 1
$1,568,701 $1,313,236
See Notes to Financial Statements, pages 27-35
November 30
Liabilities and Shareholders' Equity 1994 1993
(in thousands)
Current liabilities
Notes payable $ 202,542 $ 76,389
Current portion of long-term debt 11,532 8,299
Outstanding checks 17,955 25,401
Trade accounts payable 128,236 113,884
Accrued payroll 30,424 29,781
Accrued sales allowances 38,373 31,240
Accrued restructuring costs 50,334
Other accrued expenses and liabilities 107,125 90,980
Income taxes 14,307 16,893
Total current liabilities 600,828 392,867
Long-term debt 374,288 346,436
Deferred income taxes 19,229 39,006
Employee benefit liabilities 68,375 63,875
Other liabilities 16,017 4,231
Total liabilities 1,078,737 846,415
Shareholders' equity
Common Stock, no par value; authorized 160,000,000
shares; issued and outstanding:
1994 - 13,279,000 shares,
1993 - 14,562,000 shares 50,006 53,470
Common Stock Non-Voting, no par value;
authorized 160,000,000 shares; issued
and outstanding: 1994 -
67,927,000 shares, 1993 -
66,437,000 shares 101,697 93,047
Retained earnings 343,285 330,327
Foreign currency translation adjustments (5,024) (10,023)
Total shareholders' equity 489,964 466,821
Commitments and contingent liabilities $1,568,701 $1,313,236
See Notes to Financial Statements, pages 27-35
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Common Retained Currency Translation
Changes in Amounts Stocks Earnings Adjustments Total
(in thousands except per-share data)
<S> <C> <C> <C> <C>
Balance, December 1, 1991 . $100,257 $280,572 $ 8,374 $389,203
Net income. . . . . . . . . 95,217 95,217
Dividends declared ($.38/share) (30,435) (30,435)
Currency translation adjustments (11,890) (11,890)
Shares purchased. . . . . . (4,633) (26,643) (31,276)
Shares issued . . . . . . . 27,119 27,119
Balance, November 30, 1992. 122,743 318,711 (3,516) 437,938
Net income. . . . . . . . . 73,054 73,054
Dividends declared ($.44/share) (35,553) (35,553)
Currency translation adjustments (6,507) (6,507)
Other adjustments . . . . . (3,066) (3,066)
Shares purchased. . . . . . (3,580) (22,819) (26,399)
Shares issued . . . . . . . 27,354 27,354
Balance, November 30, 1993. 146,517 330,327 (10,023) 466,821
Net income. . . . . . . . . 61,157 61,157
Dividends declared ($.48/share) (39,000) (39,000)
Currency translation adjustments 4,999 4,999
Other adjustments . . . . . 842 842
Shares purchased. . . . . . (920) (10,041) (10,961)
Shares issued . . . . . . . 6,106 6,106
Balance, November 30, 1994. $151,703 $343,285 $ (5,024) $489,964
</TABLE>
CHANGES IN SHARES ISSUED AND OUTSTANDING Common
Common Non-Voting
(in thousands)
Balance, November 30, 1991. . . . . . . 14,441 65,241
Purchased and retired . . . . . . . . . (393) (861)
Issued. . . . . . . . . . . . . . . . . 1,073 807
Equal exchange. . . . . . . . . . . . . (764) 764
Balance, November 30, 1992. . . . . . . 14,357 65,951
Purchased and retired . . . . . . . . . (286) (676)
Issued. . . . . . . . . . . . . . . . . 791 862
Equal Exchange. . . . . . . . . . . . . (300) 300
Balance, November 30, 1993. . . . . . . 14,562 66,437
Purchased and retired . . . . . . . . . (111) (300)
Issued. . . . . . . . . . . . . . . . . 281 337
Equal exchange. . . . . . . . . . . . . (1,453) 1,453
Balance, November 30, 1994. . . . . . . 13,279 67,927
See Notes to Financial Statements, pages 27-35
<TABLE>
<CAPTION>
CONSOLIDATED CASH FLOWS
Year ended November 30
1994 1993 1992
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities
Net income. . . . . . . . . . . . . . . . $ 61,157 $ 73,054 $ 95,217
Adjustments to reconcile net income to net
cash provided by operating activities
Restructuring charges. . . . . . . . . . 70,445
Cumulative effect of accounting change . 26,626
Depreciation and amortization. . . . . . 62,540 50,522 43,839
Provision for deferred income taxes. . . (27,095) (1,077) (706)
Loss/(gain) on sales of assets . . . . . 1,305 201 (1,779)
Share of income from unconsolidated operations (7,929) (10,290) (9,904)
Changes in operating assets and liabilities net of effects
from businesses acquired or sold
Receivables (increase)/decrease. . . . (24,895) (26,293) 1,446
Inventories (increase) . . . . . . . . (41,011) (34,089) (14,795)
Prepaid expenses (increase)/decrease . 2,621 1,719 (64)
Prepaid allowances (increase). . . . . (16,914) (15,763) (8,577)
Other assets (increase)/decrease . . . (1,028) (393) 209
Outstanding checks increase/(decrease) (7,446) 1,252 (10,068)
Accounts payable increase. . . . . . . 5,597 7,117 15,408
Accrued payroll increase/(decrease). . 643 (1,884) 2,276
Accrued sales allowances increase/(decrease) 7,133 4,358 (1,378)
Other accrued expenses and liabilities
increase/(decrease) 8,078 (4,070) (10,319)
Income taxes payable increase/(decrease) (26,763) (6,185) 5,065
Other non-current liabilities increase 2,694 5,379 5,820
Dividend received from unconsolidated affiliate 3,345 10,391 5,635
Net cash provided by operating activities 72,477 80,575 117,325
Cash flows from investing activities
Acquisitions of businesses. . . . . . . . (82,573) (75,915) (43,703)
Purchases of property, plant and equipment (87,676) (76,063) (79,345)
Proceeds from sale of assets. . . . . . . 152 1,461 5,726
Proceeds/(payments) on settlement of forward
exchange contracts (1,894) 9,288
Other investments . . . . . . . . . . . . (12,035) (3,823) (3,965)
Net cash (used in) investing activities. (184,026) (145,052) (121,287)
Cash flows from financing activities
Notes payable increase. . . . . . . . . . 7,023 85,159 69,075
Long-term debt borrowings . . . . . . . . 165,692 38,535 4,714
Long-term debt repayments . . . . . . . . (15,012) (10,002) (34,954)
Stocks issued . . . . . . . . . . . . . . 6,106 27,354 27,077
Stocks acquired by purchase . . . . . . . (10,961) (26,399) (31,276)
Dividends paid. . . . . . . . . . . . . . (38,997) (35,551) (30,431)
Net cash provided by financing activities 113,851 79,096 4,205
Effect of exchange rate changes on cash
and cash equivalents 426 (3,587) (4,461)
Increase/(decrease) in cash and cash equivalents 2,728 11,032 (4,218)
Cash and cash equivalents at beginning of year 12,838 1,806 6,024
Cash and cash equivalents at end of year. . $ 15,566 $ 12,838 $ 1,806
</TABLE>
See Notes to Financial Statements, pages 27-35
Notes to Consolidated
Financial Statements
(dollars in thousands except per-share data)
1. Summary of Accounting Policies:
CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and all majority-owned subsidiaries. Subsidiaries outside
the United States and Canada are consolidated using an October 31
yearend. Investments in 20 percent to 50 percent owned affiliates
are accounted for under the equity method. Other investments are
accounted for under the cost method. All significant intercompany
transactions have been eliminated.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with
an original maturity date of three months or less to be cash
equivalents.
The Company's central cash management system is designed to
maintain zero balances at certain banks. Checks written but not
yet presented to these banks are included in the Consolidated
Balance Sheet as outstanding checks.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out)
or market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Depreciation is
computed principally using the straight-line method over the
estimated useful lives of the related assets. Capitalized leased
assets and leasehold improvements are amortized over the shorter of
their estimated useful lives or the period of the related leases.
Amortization of capitalized leased assets is included in
depreciation and amortization expense.
The expense for depreciation and amortization of property, plant
and equipment was $56,845 in 1994; $46,702 in 1993 and $40,033 in
1992.
EXCESS COST OF ACQUISITIONS
The excess cost of acquisitions of subsidiaries and affiliates is
being amortized using the straight-line method over 40 years.
Accumulated amortization of excess cost of acquisitions was $28,921
and $23,994 at November 30, 1994 and 1993, respectively.
The Company evaluates the realizability of the excess cost of
acquisitions based upon expectations of undiscounted future cash
flows and operating income for each business having a material
goodwill balance. Based upon its most recent analysis, the Company
believes that no material impairment of the excess cost of
acquisitions exists at November 30, 1994.
PREPAID ALLOWANCES
Prepaid allowances arise when the Company prepays sales discounts
and marketing allowances to certain customers in connection with
multi-year sales contracts. These costs are capitalized and
amortized over the lives of the contracts, generally ranging from
three to five years. The amounts reported in the Consolidated
Balance Sheet are stated at the lower of unamortized cost or
management's estimate of the net realizable value of these costs.
REVENUE RECOGNITION
Sales revenue is recognized as products are shipped and services
are rendered.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to operations as
incurred. Such costs were $12,999 in 1994; $12,259 in 1993 and
$11,844 in 1992.
INCOME TAXES
The Company provides for income taxes using the liability method
pursuant to Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes." Deferred income taxes are
provided for temporary differences arising between the tax basis of
assets and liabilities and their book basis as reported in the
financial statements.
EARNINGS PER SHARE
Earnings per common share have been computed by dividing net
income by the weighted average number of common shares outstanding
during the period (81,240,000 shares in 1994; 80,799,000 shares in
1993 and 80,116,000 shares in 1992), plus dilutive common
equivalent shares applicable to outstanding stock option and
purchase plans (no shares used in 1994; 967,000 shares in 1993 and
1,802,000 shares in 1992).
FOREIGN CURRENCY TRANSLATION
The functional currency for the majority of the Company's
operations outside of the United States is the applicable local
currency. The translation from the applicable foreign currencies to
the United States dollar is performed for balance sheet accounts
using the current exchange rates in effect at the balance sheet
date and for revenue and expense accounts using the weighted
average exchange rate during the period. The gains or losses, net
of applicable deferred income taxes, resulting from such
translation are included in the foreign currency adjustments
account within shareholders' equity.
The Company periodically enters into forward exchange contracts to
hedge the impact of foreign currency fluctuations on its
investments in certain foreign subsidiaries. The gains and losses,
net of deferred income taxes, on these contracts are included in
the foreign currency translation adjustments account within
shareholders' equity.
Gains or losses resulting from foreign currency transactions and
the translation of the financial statements for those operations
outside of the United States whose functional currency is other
than the local currency are included in other income.
FAIR VALUE
The following methods and assumptions were used by the Company in
estimating fair value disclosures for financial instruments:
Cash and cash equivalents, trade receivables, short-term
borrowings, current portion of long-term debt, accounts
payable and accrued liabilities: The amounts reported in the
Consolidated Balance Sheet approximate fair value.
Long-term debt: The fair value of long-term debt is based on a
discounted cash flow analysis using the Company's current
incremental borrowing rate for debt of similar maturities.
Forward exchange contracts for foreign currency: The fair value of
forward exchange contracts for foreign currency are estimated using
quoted market prices for comparable instruments.
Investments, consisting principally of investments in
unconsolidated affiliates, are not readily marketable. Therefore,
it is not practicable to estimate their fair value.
CREDIT RISK
The Company is potentially subjected to concentrations of credit
risk with trade accounts receivable, prepaid allowances and forward
exchange contracts for foreign currency. Because the Company has a
large and diverse customer base with no single customer accounting
for a significant percentage of trade accounts receivable and
prepaid allowances, there was no material concentration of credit
risk in these accounts at November 30, 1994. The Company evaluates
the creditworthiness of the counterparties to forward exchange
contracts for foreign currency and considers nonperformance credit
risk to be remote.
ACCOUNTING CHANGES
In November 1994, the Company adopted SFAS No. 112, "Employers'
Accounting for Postemployment Benefits." SFAS No. 112 requires the
accrual of the expected costs of providing certain benefits after
employment, but before retirement, principally the Company's
long-term disability benefits, during the years that the employee
renders the necessary service. The adoption of SFAS No. 112 did not
have a material impact on net income for 1994. Prior year
financial statements have not been restated for the effects of
applying SFAS No. 112.
Effective December 1, 1992, the Company adopted SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other than
Pensions." SFAS No. 106 requires the accrual of the expected costs
of providing postretirement benefits during the years that the
employee renders the necessary service. Prior year financial
statements have not been restated for the effects of applying SFAS
No. 106.
2. Investments:
The Company owns from 21.9% to 50% of its unconsolidated food
products affiliates. Although the Company reports its share of
earnings from the affiliates, their financial statements are not
consolidated with those of the Company. The Company's share of
undistributed earnings of the affiliates was $22,440 at November
30, 1994.
Summarized yearend information from the financial statements of
these companies representing 100% of their businesses follows:
Unconsolidated Affiliates
1994 1993 1992
Current assets $144,781 $136,713 $120,410
Non-current assets 80,087 68,974 57,611
Current liabilities 94,847 87,512 80,748
Non-current liabilities 43,157 35,138 26,566
Net sales 342,163 309,527 268,182
Gross profit 130,132 122,515 110,001
Net income $ 16,777 $ 20,557 $ 19,756
3. Financing Arrangements:
The Company's outstanding indebtedness is as follows:
1994 1993
Short-term notes payable:
Commercial paper $135,000 $ 60,000
Other. . . . . . 67,542 16,389
$202,542 $ 76,389
Weighted-average interest rate 6.42% 3.94%
Long-term debt:
8.95% note due 2001 $ 74,343 $ 74,279
9.00% and 9.75% installment
notes due through 2000
and 2002 . . . 35,864 47,409
5.78% - 7.77% medium-term
notes due 2004 to 2006 95,000 30,000
7.63% - 8.12% medium-term
notes due 2024 with put
option in 2004 55,000
9.34% pound sterling
installment note due
through 2001 . 18,787
10.00% Canadian dollar bond
due 1999 . . . 7,266 7,489
3.13% yen note due 1999 7,280
9.74% Australian dollar note
due 1999 . . . 9,218
Commercial paper supported
by note agreements 120,000
Other. . . . . . 16,094 9,671
Total excluding non-recourse
debt . . . . . 318,852 288,848
11.68% non-recourse
installment note due 2006 55,436 57,588
$374,288 $346,436
The Company's long-term debt agreements contain various
restrictive covenants, including limitations on the payment of cash
dividends. Under the most restrictive covenants, $227,536 of
retained earnings was available for dividends at November 30, 1994.
The holders of the medium-term notes due 2024 have a one-time
option to require retirement of these notes during 2004.
Certain commercial paper notes have been classified as long-term
debt at November 30, 1993, reflecting the Company's ability and
intent at that time to refinance this amount on a long-term basis.
The non-recourse installment note is secured by property and
equipment owned by Gilroy Energy Company, Inc. with a net book
value of $64,238 at November 30, 1994.
Maturities of long-term debt during the four years subsequent to
November 30, 1995 are as follows:
1996 - $12,870 1998 - $11,672
1997 - $12,414 1999 - $27,723
The Company has available credit facilities with domestic and
foreign banks for various purposes. The available credit
facilities and the amounts outstanding under each category of
facility (and included in indebtedness above) are as follows:
<TABLE>
<CAPTION>
1994 1993
Total Amount Total Amount
Facility Borrowed Facility Borrowed
<S> <C> <C> <C> <C>
Available credit facilities:
In support of commercial
paper issuance $300,000 $290,000
For the benefit of foreign
subsidiaries . 57,242 17,978 37,446 $ 3,692
Other . . . . . 445,000 22,830 200,000 4,000
$802,242 $40,808 $527,446 $ 7,692
</TABLE>
Credit facilities in support of commercial paper issuance require
a commitment fee of $300. All other credit facilities require no
commitment fee. Credit facilities for other purposes are subject to
the availability of funds.
At November 30, 1994, the Company had unconditionally guaranteed
the debt of affiliates amounting to $11,742.
Interest paid in 1994, 1993 and 1992 amounted to $40,699; $31,739
and $32,243 respectively, of which $124; $73 and $127 were
capitalized in 1994, 1993 and 1992, respectively.
Rental expense under operating leases was $13,843 in 1994;
$12,416 in 1993 and $11,772 in 1992. Future annual fixed rental
payments for the years ending November 30, are as follows:
1995 - $9,812 1998 - $4,618
1996 - $7,539 1999 - $4,395
1997 - $7,671 Thereafter - $12,690
4. Employee Benefit Plans:
The net periodic cost of the Company's employee benefit plans
follows:
1994 1993 1992
Pension plans:
Defined benefit plans
Service cost -
benefits earned
during the period $ 7,124 $ 6,137 $ 4,912
Interest cost on
projected benefit
obligations 9,909 9,272 8,741
Actual return on
plan assets including
unrealized (gain)/loss 116 (7,070) (7,238)
Net amortization
and deferral (6,808) 852 700
Net pension cost 10,341 9,191 7,115
Multi-employer
pension plans 1,977 1,591 1,477
Foreign retirement plans 2,013 1,907 1,988
Total pension expense $14,331 $12,689 $10,580
Profit sharing plan expense $ 6,250 $ 6,500 $ 5,700
Postretirement benefits
Service cost $ 2,368 $ 1,947
Interest cost 3,775 3,333
Total postretirement benefit
expense $ 6,143 $ 5,280 $ 2,360
PENSION PLANS
The Company has a non-contributory defined benefit plan (the
principal plan) covering substantially all domestic employees other
than those covered under union-sponsored plans, and a
non-contributory defined benefit plan (the supplemental plan)
providing supplemental retirement benefits to certain officers. The
benefits provided by both plans are generally based on the
employee's years of service and compensation during the last
five years of employment. The Company's funding policy is to comply
with federal laws and regulations and to provide the principal plan
with assets sufficient to meet future benefit payments. The plan
assets for both plans consist principally of short-term money
market investments, fixed income securities and equity securities.
The principal plan holds 306,573 shares of the Company's stock at
November 30, 1994.
The Company also contributes to union-sponsored, multi-employer
pension plans and certain retirement plans of its foreign
subsidiaries.
The following table sets forth the principal and supplemental
plans' funded status, amounts recognized in the Company's
Consolidated Balance Sheet and significant assumptions as of
September 30, the measurement date:
<TABLE>
<CAPTION>
1994 1993
Before Impact of Net at
Workforce Workforce Measurment
Reduction Reduction Date
<S> <C> <C> <C> <C>
Funded Status:
Actuarial present value of
benefit obligation
Vested $102,976 $ (1,539) $101,437 $108,071
Non-vested 4,590 (672) 3,918 4,177
Accumulated benefit obligation $107,566 $ (2,211) $105,355 $112,248
Balance sheet recognition
Projected benefit obligation
for service rendered to date $134,572 $ (7,238) $127,334 $144,209
Plan assets at fair value 98,193 (16,248) 81,945 103,207
Projected benefit obligation in
excess of plan assets 36,379 9,010 45,389 41,002
Unrecognized net loss from past
experience different from that
assumed of changes in
assumptions (29,724) 5,480 (24,244) (39,512)
Unrecognized net transition asset
and prior service cost 2,836 (690) 2,146 3,529
Additional minimum liability 5,047 5,047 6,710
Accrued pension cost $ 14,538 $ 13,800 $ 28,338 $ 11,729
Accrued pension costs included in:
Accrued expenses $ 4,000 $ 4,000
Accrued restructuring costs $ 13,800
Noncurrent employee benefit liabilities $ 10,538 $ 7,729
</TABLE>
<TABLE>
<CAPTION>
1994 1993
Principal Supplemental Principal Supplemental
Plan Plan Plan Plan
<S> <C> <C> <C> <C>
Significant assumptions:
Weighted-average discount rate 8.0% 8.5% 7.0% 7.5%
Rate of increase in
compensation levels 5.0% 5.0% 5.0% 5.0%
Long-term rate of return
on plan assets 10.5% 10.5% 10.5% 10.5%
</TABLE>
The workforce reduction and voluntary special retirement program
that are components of the restructuring plan announced by the
Company in the fourth quarter of 1994 resulted in a curtailment of
the principal plan. A significant number of individuals electing
the voluntary special retirement program are expected to elect to
receive their benefits in lump sum distributions which result in a
settlement of a portion of the pension liability. The impact of the
curtailment, settlement and enhanced benefits of the special
voluntary retirement program are presented above.
PROFIT SHARING PLAN
The Company makes contributions to the McCormick Profit Sharing
Plan in accordance with the Plan's provisions. The Profit Sharing
Plan is available to substantially all domestic employees other
than those covered by union-sponsored benefit plans. The Profit
Sharing Plan assets consist principally of short-term money market
investments, fixed income securities and equity securities. The
Profit Sharing Plan holds 3,711,487 shares of the Company's stock
at November 30, 1994.
POSTRETIREMENT BENEFITS
The Company provides health care and life insurance benefits to
eligible retirees having at least 10 years of service. Health care
benefits are also extended to eligible dependents of retirees as
long as the retiree remains covered. Medical benefits are based on
the retiree's age and service at retirement and require other
cost-sharing features, such as deductibles and coinsurance. Life
insurance protection is non-contributory. These benefit plans
are not funded.
The following table sets forth the amounts recognized in the
Company's Consolidated Balance Sheet and significant assumptions as
of November 30, the measurement date:
1994 1993
Accumulated postretirement
benefit obligation
Current retirees $ 19,808 $ 18,357
Fully eligible active plan
participants 12,082 10,725
Other active plan
participants 21,369 18,377
53,259 47,459
Unrecognized net loss from
past experience different from
that assumed and effects of
changes in assumptions 2,545
Accrued postretirement
benefit liability $ 55,804 $ 47,459
Accrued postretirement costs
included in:
Accrued restructuring costs $ 4,200
Noncurrent employee benefit
liabilities $ 51,604 $ 47,459
Significant assumption:
Weighted-average
discount rate 8.50% 7.75%
The assumed weighted-average annual rate of increase in the per
capita cost of covered health care benefits is 13% for 1995. It is
assumed to decrease gradually to 6% in the year 2006 and remain at
that level thereafter. Increasing this assumed health care cost
trend rate by one percentage point in each year would increase the
accumulated postretirement benefit obligation at November 30, 1994,
by $6,584 and the aggregate of the service and interest cost
components of net periodic postretirement benefit cost for 1994 by
$914.
The workforce reduction plan and voluntary special retirement
program that are components of the restructuring plan announced by
the Company in the fourth quarter of 1994 resulted in a curtailment
of the postretirement benefit plan. The restructuring charge
includes $4,200 representing the net pre-tax cost of postretirement
benefits granted to individuals electing the voluntary special
retirement program who would not have otherwise been entitled to
the full amount of postretirement benefits under the provisions of
the plan and the curtailment.
The Company adopted the provisions of SFAS No. 106 in the fourth
quarter of 1993. SFAS No. 106 requires the Company to accrue the
cost of postretirement benefits during the years that employees
render service. In connection with this adoption, the Company
recorded a one-time charge of $26,626, net of deferred income tax
benefit for accumulated postretirement benefits. In addition to
this one-time charge, the Company's postretirement benefit expense
increased by approximately $4,175 and $3,666 in 1994 and 1993
respectively due to SFAS No. 106. Prior to the adoption of SFAS No.
106, the Company recorded as postretirement benefit expense, the
amount actually paid for such benefits during the year.
STOCK PURCHASE AND OPTION PLANS
The Company has an Employee Stock Purchase Plan enabling
substantially all domestic employees to purchase the Company's
common stock at the lower of the stock price on the grant date or
the exercise date. Under this plan a total of 2,512 employees had
outstanding subscriptions for a total of 373,902 shares with a
grant price of $22.63 per share at November 30, 1994. The last date
for exercise of the outstanding subscriptions is May 31, 1995.
Under the Company's 1984 and 1990 Stock Option Plans and the
McCormick (U.K.) Share Option Schemes, options to purchase shares
of the Company's common stock have been or may be granted to
employees. The option price for shares granted under these plans is
the fair market value on the grant date. At November 30, 1994, the
average exercise price of outstanding options was $19.54 per share,
and the expiration dates ranged from January 14, 1995 to June 23,
2004. The changes in outstanding stock options during the past
three years were:
<TABLE>
<CAPTION>
Common Price
Common Non-voting Range Per Share
<S> <C> <C> <C>
(shares in thousands)
Outstanding December 1, 1991. . 1,808 2,585 $3.55-$18.00
Granted (to 370 employees). . 189 193 $26.00
Exercised . . . . . . . . . . (545) (771) $3.55-$18.00
Cancelled or expired. . . . . (16) (72) $4.66-$26.00
Outstanding November 30, 1992 . 1,436 1,935 $3.55-$26.00
Granted to 398 employees under the Stock Option
Plans and 4,254 employees in the Employee Stock
Purchase Plan. . . . . . . . 192 784 $22.63
Exercised . . . . . . . . . . (413) (830) $3.55-$22.63
Cancelled or expired. . . . . (7) (73) $18.00-$26.00
Outstanding November 30, 1993 . 1,208 1,816 $4.41-$26.00
Granted (to 415 employees). . 384 130 $18.50-$23.00
Exercised . . . . . . . . . . (340) (408) $4.56-$22.63
Cancelled or expired. . . . . (4) (137) $4.56-$26.00
Outstanding November 30, 1994 . 1,248 1,401 $4.41-$26.00
</TABLE>
Under all stock purchase and option plans, there were 2,774,787
shares reserved for future grants and 1,928,527 exercisable at
November 30, 1994 and 4,205,919 shares reserved for future grants
and 2,406,408 exercisable at November 30, 1993.
5. Income Taxes:
For financial reporting purposes, income before income taxes
includes the following components:
1994 1993 1992
Pretax income:
Domestic. . . . . . $ 84,351 $132,450 $125,249
Foreign . . . . . . 2,627 17,440 13,064
$ 86,978 $149,890 $138,313
Significant components of the income tax provision follow:
Current:
Federal . . . . . . $ 43,348 $ 44,878 $ 40,298
Foreign . . . . . . 8,391 7,577 5,122
State . . . . . . . 9,106 9,122 8,286
Total current . . . 60,845 61,577 53,706
Deferred:
Federal . . . . . . (19,199) (968) (718)
Foreign (4,008) 121 32
State . . . . . . . (3,888) (230) (20)
Total deferred. . . (27,095) (1,077) (706)
$ 33,750 $ 60,500 $ 53,000
Tax expense allocated directly to contributed capital was as
follows:
Relating to employee
stock options $ 608 $ 2,304 $ 4,116
Relating to translation adjustments
and foreign currency hedge
transactions. . . . $ 540 $(3,291) $(2,834)
The reconciliation between income tax attributable to continuing
operations computed at the United States federal statutory rate and
income taxes actually provided, follow:
<TABLE>
<CAPTION>
1994 1993 1992
Amount Percent Amount Percent Amount Percent
<s. <C> <C> <C> <C> <C> <C>
Tax at federal statutory rate $30,442 35.0% $52,408 35.0% $47,027 34.0%
State income taxes, net of
federal benefits 3,855 4.4 5,695 3.8 5,533 4.0
Higher effective income
taxes in other countries 1,940 2.2 1,648 1.1 692 .5
Rehabilitation investment
and other tax credits (1,156) (1.3) (1,199) (.8) (829) (.6)
Federal tax rate change
effect on deferred taxes 1,199 .8
Other items (1,331) (1.5) 749 .5 577 .4
Actual income taxes
provided $33,750 38.8% $60,500 40.4% $53,0003 8.3%
</TABLE>
The significant components of the deferred income tax asset and
(liability) follow:
1994 1993
Current deferred income tax assets:
Restructuring charge. . . . $ 19,677
Inventory capitalization . 4,054 $ 5,041
Employee benefits . . . . . 8,352
Casualty insurance. . . . . 2,737 3,540
State income tax. . . . . . 5,022 2,261
Coupon expense. . . . . . . 1,743 1,852
Other . . . . . . . . . . . 3,819 4,568
Total current deferred income
tax assets 45,404 17,262
Current deferred income tax (liabilities):
Prepaid insurance . . . . . (1,758) (1,807)
Employee benefits . . . . . (875)
Other . . . . . . . . . . . (176) (1,577)
Total current deferred
income tax (liabilities) (1,934) (4,259)
Total net current deferred
income tax asset $ 43,470 $ 13,003
Noncurrent deferred income tax assets:
Employee benefits . . . . . $ 26,069 $ 25,350
Restructuring . . . . . . . 3,983
Other . . . . . . . . . . . 8,448 4,827
Total noncurrent deferred
income tax assets 38,500 30,177
Noncurrent deferred income tax (liabilities):
Tax over book depreciation. (44,344) (53,214)
Property exchange . . . . . (4,177) (7,440)
Other . . . . . . . . . . . (9,208) (8,529)
Total noncurrent deferred
income tax (liabilities) (57,729) (69,183)
Total net noncurrent deferred
income tax (liability) $ (19,229) $ (39,006)
No valuation allowance is provided for deferred income tax assets.
Income taxes are provided at rates applicable in the countries in
which the income is earned. Provision for United States income
taxes is not made for unremitted earnings of foreign subsidiaries
and affiliates as those earnings are considered to be indefinitely
reinvested. Upon distribution, these earnings would be subject to
United States federal income taxes (subject to an adjustment for
foreign tax credits) and withholding taxes payable to the various
foreign countries.
Determination of the unrecognized deferred tax liability for
temporary differences related to investments in foreign
subsidiaries and foreign affiliates at November 30, 1994 and
November 30, 1993 is not practical. Unremitted earnings of such
entities were $65,953 at November 30, 1994.
Income taxes paid in 1994, 1993 and 1992 were $84,384; $66,143
and $46,521, respectively.
6. Capital Stocks:
Holders of Common Stock have full voting rights except that (1)
the voting rights of persons who are deemed to own beneficially 10%
or more of the outstanding shares of voting Common Stock are
limited to 10% of the votes entitled to be cast by all holders of
shares of Common Stock regardless of how many shares in excess of
10% are held by such person; (2) the Company has the right to
redeem any or all shares of stock owned by such person unless such
person acquires more than 90% of the outstanding shares of each
class of the Company's Common Stock; and (3) at such time as such
person controls more than 50% of the votes entitled to be cast by
the holders of outstanding shares of voting Common Stock,
automatically, on a share-for-share basis, all shares of Common
Stock Non-Voting will convert into shares of Common Stock.
Holders of Common Stock Non-Voting are entitled to vote on
reverse mergers and statutory share exchanges where the capital
stock of the Company is converted into other securities or
property, dissolution of the Company and the sale of substantially
all of the assets of the Company, as well as forward mergers and
consolidation of the Company.
Holders of Common Stock Non-Voting will vote as a separate class
on all matters on which the holders of Common Stock Non-Voting are
entitled to vote.
7. Fair Value:
The fair value of the Company's financial instruments at
November 30, 1994 and 1993 follows:
<TABLE>
<CAPTION>
1994 1993
Fair Carrying Fair Carrying
Value Value Value Value
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 15,566 $ 15,566 $ 12,838 $ 12,838
Trade receivables 189,915 189,915 158,904 158,904
Short-term borrowings 202,542 202,542 76,389 76,389
Current portion of long-term
debt. . . . . . 11,532 11,532 8,299 8,299
Accounts payable and
accrued expenses 354,492 354,492 265,885 265,885
Long-term debt. . 347,365 374,288 378,701 346,436
</TABLE>
The table below summarizes by currency the contractual amounts of
the Company's forward exchange contracts, all of which are held for
purposes other than trading, at November 30, 1994:
Carrying
Forward Amount Fair
Contracts (Liability) Value
Currency: Mexican Peso $10,000 $(308) $(440)
8. Acquisitions:
During 1994 the Company made the following acquisitions:
Grupo Pesa, a Mexican seasoning company;
the spice business of Tuko Oy of Finland;
the retail seasoning brand of Hy's Fine Foods, Ltd. of Canada;
the dessert business of Traders Pty., Ltd. of Australia;
Butty, a Swiss herb and spice business;
Minipack Systems Limited, a packaging business in the United
Kingdom; and
Noel Holdings, Ltd., a leading supplier of specialty foods based in
the United Kingdom.
The assets and liabilities acquired in these transactions have
been recorded using the purchase method of accounting at their
estimated fair values at the date of acquisition. The aggregate
purchase price of all acquisitions was $82,573 including $65,105
allocated to excess cost of acquisitions which is being amortized
principally over 40 years. The accompanying financial statements
include the results of operations of the acquired businesses from
the date of acquisition. While all of these investments are
expected to contribute positively to the Company's future sales and
earnings, none of them was material in relation to the Company's
consolidated financial statements, and therefore, proforma
financial information has not been presented.
9. Business Restructuring:
In the fourth quarter of 1994, the Company recorded a $70,445
charge for restructuring its business operations. This
restructuring charge reduced 1994 net income for the year and for
the fourth quarter by $46,295 or $.57 per share. The charge
provides for costs associated with reducing the workforce and a
two-year program that will eliminate redundant facilities and
positions, improve productivity and efficiency, and eliminate
certain businesses and product lines. Specific actions include a
reduction of approximately 600 positions worldwide through position
eliminations and a voluntary special retirement program; closing an
industrial products plant and a foodservice products plant and
transferring the production to other existing facilities;
realignment of some of our operations in the U.K.; offering for
sale the Golden West Foods, Inc. frozen foods subsidiary; and
consolidating certain administrative activities.
The workforce reduction accomplished through position
eliminations will be substantially completed during 1995.
The voluntary special retirement program was available on December
1, 1994 and closed on February 1, 1995. The components of the
restructuring charge and remaining liability at November 30, 1994
are as follows:
Restructuring Remaining
Charge Liability
Workforce reduction $24,375 $24,263
Plant consolidations
and closings 33,477 33,414
Other restructuring
projects 12,593 6,513
70,445 64,190
Income tax benefits (24,150) (23,434)
$46,295 $40,756
Included in the restructuring charge are fixed asset write-offs
of $12,945 and other asset write-offs of $7,410.
The pre-tax restructuring liability which is anticipated to be
expended in 1995 is included as a current liability in the balance
sheet. The remaining portion is included in other non-current
liabilities.
10. Business Segment:
The Company operates in one segment, specialty foods, which
consists principally of manufacturing, marketing and distributing
seasonings, flavorings and food products. It also includes the
plastic packaging group. The following presents information about
operations in different geographic areas:
<TABLE>
<CAPTION>
North Other
America Europe Countries Total
<S> <C> <C> <C> <C>
1994
Net sales . . $1,401,537 $239,353 $53,882 $1,694,772
Net income (loss) 69,186(a) (6,286)(a) (1,743) 61,157
Assets. . . . 1,324,474 202,612 41,615 1,568,701
Liabilities . 910,323 147,565 20,849 1,078,737
(a) . . . . . Includes 1994 net restructuring charge in North America of $34,162 and
in Europe of $12,133.
1993
Net sales . . $1,315,848 $201,178 $39,540 $1,556,566
Net income before
accounting change for
postretirement benefits 93,353 5,552 775 99,680
Assets. . . . 1,157,923 135,574 19,739 1,313,236
Liabilities . 768,386 69,381 8,648 846,415
1992
Net sales . . $1,233,590 $201,025 $36,754 $1,471,369
Net income. . 91,261 2,671 1,285 95,217
Assets. . . . 986,186 126,429 18,264 1,130,879
Liabilities . 620,942 64,859 7,140 692,941
</TABLE>
11. Quarterly Data (Unaudited)
<TABLE>
<CAPTION>
1994 Quarters
1st 2nd 3rd 4th Year
<S> <C> <C> <C> <C> <C>
Net sales . . . $367,723 $396,342 $422,141 $508,566 $1,694,772
Gross profit. . 132,771 141,672 158,055 195,701 628,199
Net income (loss) 18,310 19,129 26,442 (2,724)(a) 61,157(a)
Earnings (loss) per
common share. $.23 $.23 $.32 $(.03)(a) $.75(a)
(a) . . . . . . Includes restructuring charge of $46,295 or $.57 per share.
</TABLE>
<TABLE>
<CAPTION>
1993 Quarters
1st 2nd 3rd 4th Year
<S> <C> <C> <C> <C> <C>
Net sales . . . $339,585 $361,300 $394,928 $460,753 $1,556,566
Gross profit. . 122,902 132,427 155,226 192,602 603,157
Income before cumulative
effect of accounting
change. . . . 17,264(a) 17,536(b) 24,367(c) 40,513(d) 99,680
Cumulative effect of
accounting change for
postretirement
benefits (26,626) (26,626)
Net income (loss) (9,362)(a) 17,536(b) 24,367(c) 40,513(d) 73,054
Earnings per common share
before cumulative effect
of accounting change $.21(a) $.21(b) $.30(c) $.50(d) $1.22
Cumulative effect of
accounting change for
postretirement
benefits (.33) (.33)
Earnings (loss) per
common share. $(.12)(a) $.21(b) $.30(c) $.50(d) $.89
</TABLE>
(a) Reflects $557 or $.01 per share reduction due to accounting
change for postretirement benefits. As originally reported, net
income was $17,821 or $.22 per share.
(b) Reflects $557 or $.01 per share reduction due to accounting
change for postretirement benefits. As originally reported, net
income was $18,093 or $.22 per share.
(c) Reflects $557 reduction due to accounting change for
postretirement benefits. As originally reported, net income was
$24,924 or $.30 per share. Also reflects $.02 per share reduction
due to the increase in the federal corporate tax rate.
(d) Reflects $558 or $.01 per share reduction due to accounting
change for postretirement benefits and $.01 per share reduction due
to the increase in the federal corporate tax rate.
MANAGEMENT'S RESPONSIBILITY FOR
FINANCIAL STATEMENTS
The consolidated financial statements of McCormick & Company,
Incorporated and subsidiaries have been prepared by the Company in
accordance with generally accepted accounting principles.
Management has primary responsibility for the financial information
presented and has applied judgment to the information available,
made estimates, and given due consideration to materiality in
preparing the financial information in this annual report.
The financial statements, in the opinion of management, present
fairly the consolidated financial position, results of operations,
and cash flows of the Company and subsidiaries for the stated dates
and periods in conformity with generally accepted accounting
principles. The financial statements in this report have been
audited by the Company's independent auditors, Ernst & Young LLP.
The independent auditors review and evaluate control systems and
perform such tests of the accounting information and records as
they consider necessary to reach their opinion on the Company's
consolidated financial statements. In addition, McCormick's
Internal Audit function performs audits of accounting records,
reviews accounting systems and internal controls, and recommends
improvements when appropriate.
The Audit Committee of the Board of Directors is composed of
outside directors. The committee meets periodically with the
Internal Audit staff, with members of management, and with the
independent auditors, in order to review annual audit plans,
financial information, and the Company's internal accounting and
management controls.
The Company believes that it maintains accounting systems and
related controls, and communicates policies and procedures, which
provide reasonable assurance that the financial records are
reliable, while providing appropriate information for management of
the business and maintaining accountability for assets.
H. Eugene Blattman
President & Chief Executive Officer
Robert G. Davey
Vice President & Chief Financial Officer
J. Allan Anderson
Vice President & Controller, Chief Accounting Officer
REPORT OF INDEPENDENT AUDITORS
To the Shareholders
McCormick & Company, Incorporated
We have audited the accompanying consolidated balance sheets of
McCormick & Company, Incorporated and subsidiaries as of November
30, 1994 and 1993, and the related consolidated statements of
income, shareholders' equity, and cash flows for each of the three
years in the period ended November 30, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We have conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of McCormick & Company, Incorporated and
subsidiaries at November 30, 1994 and 1993, and the consolidated
results of their operations and their cash flows for each of the
three years in the period ended November 30, 1994 in conformity
with generally accepted accounting principles.
As discussed in Note 4 to the consolidated financial statements,
the Company changed its method of accounting for postretirement
benefits other than pensions in 1993.
Baltimore, Maryland
January 16, 1995
[Photograph of members of the Board of Directors, omitted]
DIRECTORS AND OFFICERS
BOARD OF DIRECTORS
Executive Committee
Charles P. McCormick, Jr.
H. Eugene Blattman
Robert G. Davey
Carroll D. Nordhoff
James J. Albrecht
James S. Cook # *
Executive in Residence
College of Business Administration
Northeastern University
Harold J. Handley
George W. Koch # *
Of Counsel
Kirkpatrick & Lockhart
Robert J. Lawless
George V. McGowan *
Chairman of the Executive Committee
Baltimore Gas and Electric Company
Richard W. Single, Sr.
William E. Stevens # *
President & Chief Executive Officer
United Industries Corp.
Karen D. Weatherholtz
# Audit Committee Member
* Compensation Committee Member
CORPORATE OFFICERS
Charles P. McCormick, Jr.
Chairman of the Board
H. Eugene Blattman
President & Chief Executive Officer
Susan L. Abbott
Vice President - Quality Assurance
James J. Albrecht
Group Vice President - Asia/Pacific
J. Allan Anderson
Vice President & Controller
Samuel E. Banks
Vice President - Acquisitions & Financial Planning
Allen M. Barrett, Jr.
Vice President - Corporate Communications
Robert G. Davey
Vice President & Chief Financial Officer
Harold J. Handley
Senior Vice President - Europe
Randall B. Jensen
Vice President - Operations Resources
Robert J. Lawless
Senior Vice President - The Americas
C. Robert Miller, II
Vice President - Management Information Systems
Marshall J. Myers
Vice President - Research & Technical Development
Carroll D. Nordhoff
Executive Vice President
Donald A. Palumbo
Vice President & Treasurer
Richard W. Single, Sr.
Vice President, Secretary & General Counsel
Karen D. Weatherholtz
Vice President - Human Relations
Alan D. Wilson
Vice President - Corporate Procurement
W. Geoffrey Carpenter
Assistant Secretary & Associate Counsel
Christopher J. Kurtzman
Assistant Treasurer - Domestic
John D. O'Neill, Jr.
Assistant Treasurer - Financial Services
Robert W. Skelton
Assistant Secretary & Associate General Counsel
David P. Smith
Assistant Treasurer - International
McCormick Worldwide
The Americas
Market Zone
Robert J. Lawless
Senior Vice President -
The Americas
CONSOLIDATED
OPERATING UNITS
McCORMICK/SCHILLING
DIVISION
Hunt Valley, Maryland
Robert J. Lawless
General Manager
FOOD SERVICE DIVISION
Hunt Valley, Maryland
Robert J. Murphy
Vice President & General Manager
MOJAVE FOODS
CORPORATION
Commerce, California
Phillip L. Moore
Managing Director
McCORMICK CANADA, INC.
London, Ontario, Canada
Gerald W. Snowden
President
McCORMICK de CENTRO
AMERICA, S.A. de C.V.
San Salvador, El Salvador
Jack D. Letzer
Managing Director
McCORMICK de
VENEZUELA, C.A.
Caracas, Venezuela
Alberto Diaz
Managing Director
GOLDEN WEST FOODS, INC.
Bedford, Virginia
Steen A. Metz
President
AFFILIATES
FESTIN FOODS CORP. (50%)
Carlsbad, California
McCORMICK de MEXICO
S.A. de C.V. (50%)
Mexico City, Mexico
European Market Zone
Harold J. Handley
Senior Vice President - Europe
CONSOLIDATED
OPERATING UNITS
McCORMICK U.K. plc
High Wycombe
Buckinghamshire, England
Harold J. Handley
Managing Director
GLENTHAM INTERNATIONAL
(S.A.) (Pty) LIMITED
Midrand, South Africa
John C. Eales
Managing Director
McCORMICK INGREDIENTS EUROPE, INC.
Bloomendaal, Netherlands
Cameron Savage
Managing Director
McCORMICK S.A.
Regensdorf Z.H., Switzerland
Ernest Abouchar
Managing Director
Oy McCORMICK Ab
Helsinki, Finland
Richard D. Frisch
Acting Managing Director
Asia/Pacific
Market Zone
James J. Albrecht
Group Vice President - Asia/Pacific
CONSOLIDATED
OPERATING UNITS
McCORMICK FOODS
AUSTRALIA PTY. LTD.
Clayton, Victoria, Australia
Russell Eves
Managing Director
McCORMICK THAILAND, INC.
Bangkok, Thailand
Victor K. Sy
President
AFFILIATES
McCORMICK-LION LIMITED (49%)
Tokyo, Japan
McCORMICK PHILIPPINES, INC. (50%)
Manila, Philippines
P.T. KIMBALLMAS SEJATI (50%)
Jakarta, Indonesia
P.T. McCORMICK INDONESIA (50%)
Jakarta, Indonesia
SHANGHAI McCORMICK
SEASONING & FOODSTUFFS
COMPANY, LIMITED (35%)
Shanghai, People's Republic of China
McCormick
Flavor Group
Gary W. Zimmerman
Vice President & General Manager
CONSOLIDATED
OPERATING UNITS
McCORMICK FLAVOR DIVISION - U.S.A.
Hunt Valley, Maryland
Howard W. Kympton, III
Vice President & General Manager
McCORMICK INGREDIENTS
Hunt Valley, Maryland
Thomas A. Barry
Vice President & General Manager
McCORMICK (GUANGZHOU) FOOD COMPANY, LTD.
Guangzhou, China
Gary W. Zimmerman
Managing Director
McCORMICK PESA, S.A. de C.V.
Mexico City, Mexico
Robert E. Horn
President
McCORMICK INGREDIENTS
SOUTHEAST ASIA PRIVATE
LIMITED
Jurong, Republic of Singapore
Robert C. Williamson
Managing Director
AFFILIATES
AVT-McCORMICK INGREDIENTS
LIMITED (50%)
Cochin, India
KANCOR FLAVOURS AND EXTRACTS LIMITED (40%)
Angamally, India
McCORMICK & WILD, INC. (50%)
Hunt Valley, Maryland
P.T. SUMATERA TROPICAL SPICES (30%)
Padang, Sumatera, Indonesia
SESACO CORPORATION (21.9%)
Rockford, Illinois
STANGE (JAPAN) K.K. (50%)
Tokyo, Japan
VAESSEN SHOEMAKER de
MEXICO, S.A. de C.V. (50%)
Mexico City, Mexico
Gilroy Foods, Incorporated
Van Tunstall
President
CONSOLIDATED
OPERATING UNITS
GILROY ENERGY COMPANY, INC.
Robert P. Kraemer
President
GIZA NATIONAL DEHYDRATION
COMPANY (81.7%)
Cairo, Egypt
John E. Call
Managing Director
AFFILIATES
SUPHERB FARMS (50%)
Turlock, California
ALIMENTOS DESHIDRATADOS del BAJIO S.A. de C.V. (33.3%)
Celaya, Mexico
Packaging Group
Dorsey N. Baldwin
Vice President
CONSOLIDATED
OPERATING UNITS
SETCO, INC.
Anaheim, California
Donald E. Parodi
President
TUBED PRODUCTS, INC.
Easthampton, Massachusetts
Dorsey N. Baldwin
President
MINIPACK SYSTEMS LIMITED
Southampton, England
Andrew P. Goodman
President
Regularly priced at $24.95, the cookbook is available to
McCormick shareholders for the one-time special price
of $15.95, plus shipping and handling, until November 30, 1995.
Please send me:
_____McCORMICK/SCHILLING'S NEW SPICE COOKBOOK
at $15.95 each $________
5% sales tax applicable on cookbooks shipped
within Maryland $________
Shipping and handling, $3.00 each book $________
Enclosed is my check or money order made
payable to McCormick & Company, Inc.
for the total $________
Please provide:
Name. . . . . . . . . . . . . . .
(Please print clearly.)
Address . . . . . . . . . . . . .
(No P.O. Boxes.)
City __________________________ State ________ Zip
Daytime phone number ( _____ ). .
[Photograph of new spice cookbook, omitted]
Send this coupon, photocopy or complete information, plus the
amount of your order by check or money order, to:
McCormick/Schilling Spices
PO Box 2026A
Rock Island, Illinois 61204-2026
Offer good only in the continental U.S. For orders to be shipped
outside the continental U.S., write to the above address. Offer
expires November 30, 1995 or while supplies last. Offer not
valid where taxed or restricted.
Please allow 4-6 weeks for delivery.
A Special Offer For
McCormick Shareholders
McCORMICK/SCHILLING'S NEW SPICE COOKBOOK presents a palette of
traditional tastes and new pleasers, such as vanilla butter sauce
for lobster, and peppercorn ice cream. Designed to accommodate all
skill levels of cooks, the new cookbook features three recipe
sections: easy 20-minute family recipes, fine dining, and
party-themed entertaining. It also offers a history of spices,
general cooking instructions, and flavor profiles of all the
major herbs and spices to help you paint with flavors.
The cookbook presents an appealing place where tantalizing tastes
meet our modern lifestyle from quick and easy Southwest White
Chili to Oysters Rockefeller to a Make-Your-Own-Curry Party. From
soup to nuts, it's there.
Start with the Show Stopper Soup and finish with the Dessert
Spices. There's even something especially for children - edible toy
party favors for the kids to make. Fast, fancy and fun - there's
something for everyone.
INVESTOR INFORMATION
Corporate Address
McCormick & Company,
Incorporated
18 Loveton Circle
Sparks, MD 21152-6000
USA
(410) 771-7301
Common Stock
Traded Over-the-Counter,
NASDAQ National Market List
Symbol: MCCRK
Common Stock Dividend
Dates - 1995
Record Date Payment Date
3/31/95 4/10/95
7/06/95 7/14/95
9/29/95 10/09/95
12/29/95 1/19/96
Shareholder/Investor Relations
For inquiries concerning shareholder records, certificates,
dividends or dividend reinvestment, please contact the
Shareholder Relations Office at the Corporate address or telephone:
(800) 424-5855 or
(410) 771-7537
To obtain without cost a copy of the annual report filed with the
Securities & Exchange Commission on Form 10-K, please contact the
Treasurer's Office at the Corporate address.
For general questions about McCormick or information in the
annual or quarterly reports, please contact the Treasurer's Office
at the Corporate address or telephone:
Report Ordering:
(800) 424-5855 or
(410) 771-7155
Analysts' Inquiries:
(410) 771-7244
Missing or Destroyed Certificates or Checks
Shareholders whose certificates or dividend checks are missing or
destroyed should notify the Shareholder Relations Office
immediately so that a "stop" can be placed on the old certificate
or check, and a new certificate or check can be issued.
Address Change
Shareholders should advise the Shareholder Relations Office
immediately of any change in address. Please include
the old address and the new address.
All changes of address must be submitted in writing.
TRANSFER AGENT AND REGISTRAR
Please contact the Shareholder Relations Office at the Corporate
address or telephone:
(800) 424-5855 or
(410) 771-7786
Multiple Dividend Checks and Duplicate Mailings
Some shareholders hold their stock in different but similar names
(for example, as John Q. Doe and J.Q. Doe). When this occurs, it is
necessary to create a separate account for each name. Even though
the mailing addresses are the same, we are required to mail
separate dividend checks and annual and quarterly reports for each
account.
We encourage shareholders to eliminate multiple dividend checks
and mailings by contacting the Shareholder Relations Office and
requesting an account consolidation.
Shareholders who want to eliminate duplicate mailings but still
receive multiple dividend checks and proxy material may do so by
contacting the Shareholder Relations Office.
DIVIDEND REINVESTMENT PLAN
Shareholders may automatically reinvest their dividends and make
optional cash purchases of stock through the Company's Dividend
Reinvestment Plan, subject to limitations set forth in the Plan
prospectus. A Plan prospectus and enrollment form may be obtained
by contacting the Shareholder Relations Office at:
(800) 424-5855 or
(410) 771-7537
Trademarks
Use of trademark symbols in this annual report indicates trademarks
owned or used by McCormick & Company, Incorporated.
This entire report is printed on recycled paper.
McCormick & Company, Incorporated
18 Loveton Circle
Sparks, MD 21152-6000
USA
(410) 771-7301
Appendix to Exhibit 13: Registrant's Annual Report to Stockholders
for 1994
Graphics Appendix List
EDGAR Version Typeset Version
Section - Management's
Discussion and Analysis -
Bar graph captioned Bar graph entitled Consolidated
"Consolidated Net Sales Net Sales depicting consolidated
(Millions") - omitted net sales in millions of dollars
for fiscal years 1990 through
1994. The text and numbers used
in this graph appear in the text
of the EDGAR version.
Section - Management's Discussion
and Analysis - Subsection Capital
Structure/Debt Financing -
Bar graph captioned Bar graph entitled Capital
"Capital Expenditures Expenditures and depicting
property ($ Millions") - omitted additions and depreciation in
millions of dollars for fiscal
years 1990 through 1994. The
text and numbers used in this
graph appear in the text of the
EDGAR version.
Section - Management's Discussion
and Analysis - Subsection Capital
Expenditures - Bar graph captioned Bar graph entitled Dividends
"Dividends Paid Per Share Paid Per Share depicting
(Dollar)" - omitted dividends paid per share for the
fiscal years 1990 through 1994.
The text and numbers used in
this graph appear in the
text of the EDGAR version.
