FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year
ended November 30, 1996 Commission file number 0-748
McCORMICK & COMPANY, INCORPORATED
(Exact name of Registrant as specified in its charter)
Maryland 52-0408290
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
18 Loveton Circle 21152
Sparks, Maryland
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (410) 771-7301
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Not Applicable Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No Par Value Common Stock Non-Voting, No Par Value
(Title of Class) (Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date.
Aggregate market value of the voting stock held by nonaffiliates of the
Registrant . . . . . . . $182,641,709
The aggregate market value indicated above was calculated as follows:
The number of shares of voting stock held by nonaffiliates of the Registrant
as of January 31, 1997 was 7,379,463. This number excludes shares held by
the McCormick Profit Sharing Plan and PAYSOP and its Trustees, the McCormick
Pension Plan and its Trustees, and the directors and officers of the
Registrant, who may or may not be affiliates. This number was then
multiplied by the closing price of the stock as of January 31, 1997, $24.75.
CLASS NUMBER OF SHARES OUTSTANDING DATE
Common Stock 10,987,195 1/31/97
Common Stock Non-Voting 65,802,523 1/31/97
DOCUMENTS INCORPORATED BY REFERENCE
Document Part of 10-K into
which incorporated
Registrant's 1996 Annual Report to Part I, Part II, Part IV
Stockholders
Registrant's Proxy Statement dated 2/19/97 Part III, Part IV
PART I
As used herein, the "Registrant" means McCormick & Company, Incorporated
and its subsidiaries, unless the context otherwise requires.
ITEM 1. BUSINESS
The Registrant, a diversified specialty food company, is principally
engaged in the manufacture of spices, seasonings, flavorings and other
specialty food products and sells such products to the retail food
market, the food service market and to industrial food processors
throughout the world. The Registrant also, through subsidiary
corporations, manufactures and markets plastic packaging products for
the food, cosmetic and health care industries.
The Registrant's Annual Report to Stockholders for 1996, which is
enclosed as Exhibit 13, contains a description of the general development
during the last fiscal year, of the business of the Registrant, which was
formed in 1915 under Maryland law as the successor to a business
established in 1889. Pages 7 through 13 of that Report are incorporated by
reference. Unless otherwise indicated, all references to amounts in this
Report or in the Annual Report to Stockholders for 1996 are amounts from
continuing operations. The Registrant's net sales increased 2.4% in 1996
to $ 1,732,506,000.
In March 1996, the Registrant formed a joint venture with Pioneer Products,
Inc. for the production and sale of dessert decorating products. The new
company, Signature Brands, LLC, is located in Ocala, Florida and
manufactures and distributes a broad range of such products under the Betty
Crocker (a trademark owned by General Mills) and Cake Mate brand names.
The Registrant implemented a restructuring plan in June 1996 which is
intended to increase focus on core businesses and improve its cost
structure. A description of the actions taken under this plan are set
forth in the Registrant's Annual Report to Stockholders for 1996 in Note 2
of the Notes to Consolidated Financial Statements on pages 22 and 23 and on
pages 37 and 38, which pages are incorporated by reference.
In August 1996, the Registrant sold substantially all of the assets of
Gilroy Foods, Incorporated and Gilroy Energy Company, Inc. to ConAgra, Inc.
and to an affiliate of Calpine Corporation, respectively. Gilroy Foods
manufactures and sells dehydrated onion, garlic, capsicum and vegetable
products. Gilroy Energy operates an energy cogeneration facility. The
Registrant's Annual Report to Stockholders for 1996 sets forth a
description of the sale of Gilroy Foods and Gilroy Energy on page 38 and in
Note 3 of the Notes to Consolidated Financial Statements on page 23. Those
pages of the Registrant's Annual Report are incorporated by reference.
In 1994, the Registrant announced a restructuring plan which reduced the
work force and implemented a program to eliminate redundant facilities and
positions, improve production and efficiency and eliminate certain
businesses and product lines. A description of the actions taken under
this plan are set forth in the Registrant's Annual Report to Stockholders
for 1996 in Note 2 of the Notes to Consolidated Financial Statements on
pages 22 and 23 and on pages 37 and 38, which pages are incorporated by
reference.
The Registrant operates in two business segments, Food Products and
Packaging Products, and has disclosed in Note 10 of the Notes to
Consolidated Financial Statements on pages 31 and 32 of its Annual Report
to Stockholders for 1996, which Note is incorporated by reference, the
financial information about the business segments required by this Item.
PRINCIPAL PRODUCTS/MARKETING
Spices, seasonings, flavorings and other specialty food products are the
Registrant's principal products. The Registrant also manufactures and
markets plastic bottles and tubes for food, personal care and other
products, primarily in the United States. The net sales value of each of
these product segments is set forth in Note 10 of the Notes to Consolidated
Financial Statements on pages 31 and 32 of the Registrant's Annual Report
to Stockholders for 1996, which Note is incorporated by reference. No
other products or classes of similar products or services contributed as
much as 10% to consolidated net sales during the last three fiscal years.
The Registrant markets its food service products and consumer products
through its own sales organization, food brokers and distributors. In the
industrial market, sales are made mostly through the Registrant's own sales
force. The Registrant markets its packaging products through its own sales
force and distributors.
RAW MATERIALS
Many of the spices and herbs purchased by the Registrant are imported
into the United States from the country of origin, although significant
quantities of some materials, such as paprika, dehydrated vegetables, onion
and garlic and food ingredients other than spices and herbs, originate in
the United States. The Registrant is a direct importer of certain raw
materials, mainly black pepper, vanilla beans, cinnamon, herbs and seeds
from the countries of origin. Some of the imported materials are purchased
from dealers in the United States. The principal purpose of such purchases
is to satisfy the Registrant's own needs. In addition, the Registrant
sells imported raw materials to other food processors. The Registrant also
purchases cheese and dairy powders from U.S. sources for use in many
industrial products.
The raw materials most important to the Registrant are onion, garlic and
capsicums (paprika and chili peppers), which are produced in the United
States, black pepper, most of which originates in India, Indonesia,
Malaysia and Brazil, and vanilla beans, a large proportion of which the
Registrant obtains from the Malagasy Republic and Indonesia. The
Registrant does not anticipate any material restrictions or shortages on
the availability of raw materials which would have a significant impact
on the Registrant's business in the foreseeable future.
Substantially all of the raw materials used in the packaging business
originate in the United States.
TRADEMARKS, LICENSES AND PATENTS
The Registrant owns a number of registered trademarks, which in the
aggregate may be material to the Registrant's business. However, the
loss of any one of those trademarks, with the exception of the Registrant's
"McCormick," "Schilling," "Schwartz" and "Club House" trademarks, would not
have a material adverse impact on the Registrant's business. The
"McCormick" and "Schilling" trademarks are extensively used by the
Registrant in connection with the sale of a substantial number of the
Registrant's products in the United States. The "McCormick" and
"Schilling" trademarks are registered and used in various foreign countries
as well. The "Schwartz" trademark is used by the Registrant in connection
with the sale of the Registrant's products in Europe and the "Club House"
trademark is used in connection with the sale of the Registrant's products
in Canada. The terms of the trademark registrations are as prescribed by
law and the registrations will be renewed for as long as the Registrant
deems them to be useful.
The Registrant has entered into a number of license agreements
authorizing the use of its trademarks by persons in foreign countries.
In the aggregate, the loss of those license agreements would not have a
material adverse impact on the Registrant's business. The terms of the
license agreements are generally 3 to 5 years or until such time as
either party terminates the agreement. Those agreements with specific
terms are renewable upon agreement of the parties.
The Registrant owns various patents, but they are not viewed as material
to the Registrant's business.
SEASONAL NATURE OF BUSINESS
Historically, the Registrant's sales and profits are lower in the first
two quarters of the fiscal year and increase in the third and fourth
quarters.
WORKING CAPITAL
In order to meet increased demand for its products during its fourth
quarter, the Registrant usually builds its inventories during the second
and third quarters. In common with other companies, the Registrant
generally finances working capital items (inventory and receivables)
through short-term borrowings, which include the use of lines of credit
and the issuance of commercial paper. The Registrant's Annual Report to
Stockholders for 1996 sets forth a description of the Registrant's
liquidity and capital resources on pages 41 and 42, which pages are
incorporated by reference.
CUSTOMERS
The Registrant has a large number of customers for its products. No
single customer accounted for as much as 10% of consolidated net sales
in 1996. In the same year, sales to the five largest customers
represented approximately 20% of consolidated net sales.
BACKLOG ORDERS
The dollar amount of backlog orders of the Registrant's business is not
material to an understanding of the Registrant's business, taken as a
whole.
GOVERNMENT CONTRACTS
No material portion of the Registrant's business is subject to
renegotiation of profits or termination of contracts or subcontracts at
the election of the Government.
COMPETITION
Although the Registrant is a leader in sales of certain spices and
seasoning and flavoring products, its business is highly competitive. For
further discussion, see pages 8 through 12, 37 and 39 of the Registrant's
Annual Report to Stockholders for 1996, which pages are incorporated by
reference.
RESARCH AND QUALITY CONTROL
The Registrant has emphasized quality and innovation in the development,
production and packaging of its products. Many of the Registrant's
products are prepared from confidential formulae developed by its
research laboratories and product development departments. The long
experience of the Registrant in its field contributes substantially to
the quality of the products offered for sale. Quality specifications
exist for the Registrant's products, and continuing quality control
inspections and testing are performed. Total expenditures for these and
other related activities during fiscal years 1996, 1995 and 1994 were
approximately $35,705,000, $33,825,000 and $34,050,000 respectively. Of
these amounts, expenditures for research and development amounted to
$12,216,000 in 1996, $12,015,000 in 1995 and $11,162,000 in 1994. The
amount spent on customer-sponsored research activities is not material.
ENVIRONMENTAL REGULATIONS
Compliance with Federal, State and local provisions related to
protection of the environment has had no material effect on the
Registrant's business. No material capital expenditures for
environmental control facilities are expected to be made during this
fiscal year or the next.
EMPLOYEES
The Registrant had on average approximately 8,400 employees during fiscal
year 1996 and approximately 7,300 employees on November 30, 1996.
FOREIGN OPERATIONS
International businesses have made significant contributions to the
Registrant's growth and profits. In common with other companies with
foreign operations, the Registrant is subject in varying degrees to
certain risks typically associated with doing business abroad, such as
local economic and market conditions, exchange and price controls,
restrictions on investment, royalties and dividends and exchange rate
fluctuations.
Note 10 of the Notes to Consolidated Financial Statements on pages 31 and
32 of the Registrant's Annual Report to Stockholders for 1996, and pages 38
through 41 of the Registrant's Annual Report to Stockholders for 1996
contain the information required by subsection (d) of Item 101 of
Regulation S-K, which pages are incorporated by reference.
ITEM 2. PROPERTIES
The location and general character of the Registrant's principal plants
and other materially important physical properties are as follows:
(a) Consumer Products
A plant is located in Hunt Valley, Maryland on approximately 52 acres
in the Hunt Valley Business Community. This plant, which contains
approximately 540,000 square feet, is owned in fee and is used for
processing spices and other food products. There is an approximately
110,000 square foot office building located in Hunt Valley, Maryland which
is the headquarters for the Registrant's Consumer Products division. Also
in Hunt Valley, Maryland is a facility of approximately 100,000 square feet
which contains the Registrant's printing operations and a warehouse. All
of these facilities are owned in fee. A plant of approximately 460,000
square feet and a distribution center of approximately 325,000 square feet
are located in Salinas, California and a plant of approximately 108,000
square feet is located in Commerce, California. These facilities are owned
in fee and used for milling, processing, packaging, and distributing spices
and other food products.
(b) Industrial Products
The Registrant has two principal plants devoted to industrial
flavoring products in the United States. A plant of 105,000 square feet
is located in Hunt Valley, Maryland and is owned in fee. A plant of
102,000 square feet is located in Dallas, Texas and is owned in fee.
(c) Spice Milling
Located adjacent to the consumer products plant in Hunt Valley is a
spice milling and cleaning plant which is owned in fee by the Registrant
and contains approximately 185,000 square feet. This plant services all
food product groups of the Registrant. Much of the milling and grinding
of raw materials for Registrant's seasoning products is done in this
facility.
(d) Packaging Products
The Registrant has three principal plants which are devoted to the
production of plastic products. A plant of approximately 275,000 square
feet is located in Anaheim, California and a plant of approximately 221,000
square feet is located in Easthampton, Massachusetts. Both of these
facilities are owned in fee. A plant of approximately 203,000 square feet
is located in Cranbury, New Jersey and is leased.
(e) International
The Registrant has a plant in London, Ontario which is devoted to the
processing, packaging and distribution of food products. This facility
is approximately 140,000 square feet and is owned in fee. The Registrant
has a new 251,000 square foot facility in Buckinghamshire, England which
contains the Registrant's U.K. headquarters and manufacturing plant for dry
products.
(f) Research and Development
The Registrant has a facility in Hunt Valley, Maryland which houses
the research and development laboratories and the technical capabilities
of the industrial division. The facility is approximately 110,000 square
feet and is owned in fee.
(g) Distribution
The new McCormick Distribution Center in Belcamp, Maryland opened in
March 1996. The leased 369,000 square foot facility handles the
distribution of consumer, food service and industrial products in the
eastern United States.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Registrant
or any of its subsidiaries is a party or to which any of their property
is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of Registrant's fiscal
year 1996 to a vote of security holders.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Registrant has disclosed at page 42 of its Annual Report to
Stockholders for 1996, which page is incorporated by reference, the
information relating to the market, market quotations, and dividends
paid on Registrant's common stocks required by this Item.
The approximate number of holders of common stock of the Registrant
based on record ownership as of January 31, 1997 was as follows:
Approximate Number
Title of Class of Record Holders
Common Stock, no par value 2,000
Common Stock Non-Voting, 9,900
no par value
ITEM 6. SELECTED FINANCIAL DATA
The Registrant has disclosed the information required by this Item in
the line items for 1992 through 1996 entitled "Net Sales," "Net income-
continuing operations," "Earnings per share - Continuing operations,"
"Common dividends declared," Long term debt" and "Total assets" on pages
14-15 of its Annual Report to Stockholders for 1996, which pages are
incorporated by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Registrant's Annual Report to Stockholders for 1996 at pages 37
through 42 contains a discussion and analysis of the Company's financial
condition and results of operations for the three fiscal years ended
November 30, 1996. Said pages are incorporated by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data for McCormick & Company,
Incorporated are included on pages 17 through 35 of the Annual Report to
Stockholders for 1996, which pages are incorporated by reference. The
report of independent auditors from Ernst & Young LLP on such financial
statements is included on page 36 of the Annual Report to Stockholders
for 1996; the supplemental schedule for 1994, 1995 and 1996 is included
on page 15 of this Report on Form 10-K.
The unaudited quarterly data required by Item 302 of Regulation S-K is
included in Note 12 of the Notes to Consolidated Financial Statements at
pages 34 and 35 of the Registrant's Annual Report to Stockholders for 1996,
which Note is incorporated by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
No response is required to this Item.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Registrant has filed with the Commission a definitive copy of its
Proxy Statement dated February 19, 1997, which sets forth the information
required by this Item at pages 3 through 8, which pages are incorporated by
reference. In addition to the executive officers and directors discussed in
the Proxy Statement, J. Allan Anderson and Christopher J. Kurtzman are also
executive officers of the Registrant.
Mr. Anderson is 50 years old and has had the following work experience
during the last five years: 1/92 to present - Vice President and
Controller; 3/91 to 1/92 - President and Chairman of the Board - Golden
West Foods, Inc. (a former subsidiary of the Company); 4/89 to 3/91 -
Vice President - Food Service & Industrial Groups.
Mr. Kurtzman is 44 years old and has had the following work experience
during the last five years: 2/96 to present - Vice President and
Treasurer; 5/94 to 2/96 - Assistant Treasurer-Domestic; 9/90 to 5/94 -
Assistant Treasurer-Investor Relations & Financial Services; 12/89 to 9/90
- - Assistant Treasurer- Financial Services.
ITEM 11. EXECUTIVE COMPENSATION
The Registrant has filed with the Commission a definitive copy of its
Proxy Statement dated February 19, 1997, which sets forth the information
required by this Item at pages 8 through 23, which pages are
incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The Registrant has filed with the Commission a definitive copy of its
Proxy Statement dated February 19, 1997, which sets forth the information
required by this Item at pages 2 through 7, which pages are incorporated by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Registrant has filed with the Commission a definitive copy of its
Proxy Statement dated February 19, 1997, which sets forth the information
required by this Item at pages 9 and 10, which pages are incorporated by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
(a) The following documents are filed as a part of this Form:
1. The consolidated financial statements for McCormick
& Company, Incorporated and subsidiaries which are listed in the Table
of Contents appearing on page 14 below.
2. The financial statement schedules required by Item
8 of this Form which are listed in the Table of Contents appearing on
page 14 below.
3. The exhibits which are filed as a part of this Form
and required by Item 601 of Regulation S-K are listed on the accompanying
Exhibit Index at pages 16 through 18 of this Report.
(b) The Registrant filed one report during the last quarter on
Form 8-K dated September 13, 1996 which reported the Registrant's sale of
the assets of Gilroy Foods, Incorporated and Gilroy Energy Company to
ConAgra Inc. and to an affiliate of Calpine Corporation, respectively.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report on Form
10-K to be signed on its behalf by the undersigned, thereunto duly
authorized.
McCORMICK & COMPANY, INCORPORATED
By:/s/ Robert J. Lawless President, Chief Executive
Robert J. Lawless Officer February 19, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Principal Executive Officer:
/s/ Robert J. Lawless President, Chief Executive
Robert J. Lawless Officer February 19, 1997
Principal Financial Officer:
/s/ Robert G. Davey Executive Vice President &
Robert G. Davey Chief Financial Office February 19, 1997
Principal Accounting Officer:
/s/ J. Allan Anderson Vice President &
J. Allan Anderson Controller February 19, 1997
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons, being a
majority of the Board of Directors of McCormick & Company, Incorporated,
on the date indicated:
THE BOARD OF DIRECTORS: DATE:
/s/ James J. Albrecht February 19, 1997
James J. Albrecht
/s/ James S. Cook February 19, 1997
James S. Cook
/s/ Robert G. Davey February 19, 1997
Robert G. Davey
/s/ Freeman A. Hrabowski, III February 19, 1997
Freeman A. Hrabowski, III
/s/ George W. Koch February 19, 1997
George W. Koch
/s/ Robert J. Lawless February 19, 1997
Robert J. Lawless
/s/ Charles P. McCormick, Jr. February 19, 1997
Charles P. McCormick, Jr.
/s/ George V. McGowan February 19, 1997
George V. McGowan
/s/ Carroll D. Nordhoff February 19, 1997
Carroll D. Nordhoff
/s/ Robert W. Schroeder February 19, 1997
Robert W. Schroeder
/s/ Richard W. Single, Sr. February 19, 1997
Richard W. Single, Sr.
/s/ William E. Stevens February 19, 1997
William E. Stevens
/s/ Karen D. Weatherholtz February 19, 1997
Karen D. Weatherholtz
CROSS REFERENCE SHEET
PART I ITEM REFERENCED MATERIAL/PAGE(S)PART
Item 1. Business Registrant's 1996 Annual Report
to Stockholders/Pages 7-13, 22-
23, 31-32 and 37-42.
Item 2. Properties None.
Item 3. Legal Proceedings None.
Item 4. Submission of None.
Matters to a Vote
of Security Holders.
PART II Item 5. Market for the Registrant's 1996 Annual
Registrant's Common Report to Stockholders/
Equity and Related Page 42.
Stockholder Matters.
Item 6. Selected Financial Registrant's 1996 Annual
Data. Report to Stockholders/Selected
Items on Pages 14-15.
Item 7. Management's Registrant's 1996 Annual
Discussion and Report to Stockholders/Pages
Analysis of 37-42.
Financial Condition
and Results of
Operations.
Item 8. Financial Registrant's 1996 Annual
Statements and Report to Stockholders/Pages
Supplementary 17-35 and 36; Page 15 of this
Data. Report.
Item 9. Changes in and None.
Disagreements with
Accountants on
Accounting and
Financial Disclosure.
PART III Item 10. Directors and Registrant's Proxy Statement
Executive Officers dated February 19, 1997/Pages
of the Registrant. 3-8.
Item 11. Executive Registrant's Proxy Statement
Compensation. dated February 19, 1997/Pages
8-23.
Item 12. Security Ownership Registrant's Proxy Statement
of Certain dated February 19, 1997/Pages
Beneficial Owners 2-7.
and Management.
Item 13. Certain Registrants Proxy Statement
Relationships and dated February 19, 1997/Pages
Related 9-10.
Transactions.
PART IV Item 14. Exhibits, Financial See Exhibit Index on pages 16
Statement Schedules through 18 and the Table of
and Reports on Form Contents at page 14 of this
8-K. Report.
McCORMICK & COMPANY, INCORPORATED
TABLE OF CONTENTS
AND RELATED INFORMATION
Included in the Company's 1996 Annual Report to Stockholders, the
following consolidated financial statements are incorporated by
reference in Item 8*:
Consolidated Balance Sheet, November 30, 1996 and 1995
Consolidated Income Statement for the Years Ended November 30,
1996, 1995 and 1994
Consolidated Statement of Cash Flows for the Years Ended November 30,
1996, 1995 and 1994
Consolidated Statement of Shareholders' Equity for the Years Ended
November 30, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
Report of Independent Auditors
Included in Part IV of This Annual Report:
Supplemental Financial Schedules:
II - Valuation and Qualifying Accounts
Schedules other than those listed above are omitted because of the
absence of the conditions under which they are required or because the
information called for is included in the consolidated financial
statements or notes thereto.
*Pursuant to Rule 12b-23 issued by the Commission under the Securities
Exchange Act of 1934, as amended, a copy of the 1996 Annual Report to
Stockholders of the Registrant for its fiscal year ended November 30,
1996 accompanies this Annual Report on Form 10-K.
<TABLE>
SUPPLEMENTAL FINANCIAL SCHEDULE II
CONSOLIDATED
<CAPTION>
McCORMICK & COMPANY, INCORPORATED
VALUATION AND QUALIFYING ACCOUNTS
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
BALANCE ADDITIONS
AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS OF YEAR
<S> <C> <C> <C> <C>
YEAR ENDED NOVEMBER 30, 1996
Allowance for doubtful
receivables....... $2,545,000 $1,713,000 $731,000 (F1) $3,527,000
YEAR ENDED NOVEMBER 30, 1995
Allowance for doubtful
receivables....... $2,520,000 $654,000 $629,000 (F1) $2,545,000
YEAR ENDED NOVEMBER 30, 1994
Allowance for doubtful
receivables....... $2,530,000 $1,132,000 $1,142,000 (F1) $2,520,000
<FN>
(F1) Accounts written off net of recoveries.
</FN>
</TABLE>
Exhibit Index
Item 601
Exhibit
Number Reference or Page
(2) Plan of acquisition,
reorganization, arrangement,
liquidation or succession Not applicable.
(3) Articles of Incorporation
and By-Laws
Restatement of Charter of Incorporated by reference from
McCormick & Company, Registration Form S-8, Registration
Incorporated dated Statement No. 33-39582 as filed
April 16, 1990. with the Securities and Exchange
Commission on March 25, 1991.
Articles of Amendment to Incorporated by reference
Charter of McCormick & Company, from Registration Form S-8,
Incorporated dated April 1, Registration Statement No.
1992. 33-59842 as filed with the
Securities and Exchange
Commission on March 19,
1993.
By-laws of McCormick & Company Incorporated by reference from
Incorporated-Restated and Amended Registrant's Form 10-Q for the
as of June 17, 1996. quarter ended May 31, 1996 as
filed with the Securities and
Exchange Commission on July 12,
1996.
(4) Instruments defining the rights of With respect to rights of
security holders, including securities, see Exhibit 3
indentures. (Restatement of Charter). No
instrument of Registrant with
respect to long-term debt
involves an amount of
authorized securities which
exceeds 10 percent of the
total assets of the Registrant
and its subsidiaries on a
consolidated basis. Registrant
agrees to furnish a copy of any
such instrument upon request of
the Commission.
(9) Voting Trust Agreement. Not applicable.
(10) Material contracts.
i) Registrant's supplemental pension plan for certain senior officers
is described in the McCormick Supplemental Executive Retirement
Plan, a copy of which was attached as Exhibit 10.1 to the
Registrant's Report on Form 10-K for the fiscal year 1992
as filed with the Securities and Exchange Commission on February
17, 1993, which report is incorporated by reference.
ii) Stock option plans, in which directors, officers and certain
other management employees participate, are described in the
Registrant's S-8 Registration Statements Nos. 33-33725 and
33-58197 filed with the Securities and Exchange Commission on
March 2, 1990 and March 23, 1995 respectively, which statements
are incorporated by reference.
iii) Consulting letter agreement between Registrant and Charles
P. McCormick, Jr. dated February 14, 1996, which letter is
incorporated by reference from Registrant's Form 10-Q dated
April 12, 1996.
iv) Asset Purchase Agreement among the Registrant, Gilroy Foods, Inc.
and ConAgra, Inc. dated August 28, 1996 which agreement is
incorporated by reference from Registrant's Report on Form 8-K
as filed with the Securities and Exchange Commission on September
13, 1996.
v) Asset Purchase Agreement among the Registrant, Gilroy Energy
Company, Inc. and Calpine Gilroy Cogen, L.P., dated August 28,
1996 which agreement is incorporated by reference from
Registrant's Report on Form 8-K as filed with the Securities
and Exchange Commission on September 13, 1996.
(11) Statement re computation of per- Page 19 of this Report on
share earnings. Form 10-K.
(12) Statements re computation of ratios. Page 42 of Exhibit 13.
(13) Annual Report to Security Holders
McCormick & Company, Incorporated Submitted in electronic format.
Annual Report to Stockholders for
1996.
(16) Letter re change in certifying Not applicable.
accountant.
(18) Letter re change in accounting Not applicable.
principles.
(21) Subsidiaries of the Registrant Page 44 of Exhibit 13.
(22) Published report regarding matters Not applicable.
submitted to vote of securities holders
(23) Consent of independent auditors Page 20 of this Report on
Form 10-K.
(24) Power of attorney Not applicable.
(27) Financial Data Schedule Submitted in electronic
format only.
(99) Additional exhibits Registrant's definitive
Proxy Statement dated
February 19, 1997.
<TABLE>
McCormick and Company, Inc. Part I - Exhibit 11
(In Thousands Except Per Share Amounts)
<CAPTION>
Statement re Computation of Per-Share Earnings* Year Ended November 30
Computation for Statement of Income 1996 1995 1994
<S> <C> <C> <C>
Net Income $41,918 $97,521 $61,157
Reconciliation of Weighted Average Number of
Shares Outstanding to Amount used in Primary
Earnings Per Share Computation
Weighted Average Number of Shares Outstanding 80,641 81,181 81,240
Add - Dilutive Effect of Outstanding Options
(as Determined by the Application of the
Treasury Stock Method) (F1) 61 138 391
Weighted Average Number of Shares Outstanding
As Adjusted for Equivalent Shares 80,702 81,319 81,631
PRIMARY EARNINGS PER SHARE $0.52 $1.20 $0.75
</TABLE>
<TABLE>
Year Ended November 30
<CAPTION>
Computation for Statement of Income 1996 1995 1994
<S> <C> <C> <C>
Reconciliation of Weighted Average Number of
Shares Outstanding to Amount used in Fully Diluted
Earnings Per Share Computation
Weighted Average Number of Shares Outstanding 80,641 81,181 81,240
Add - Dilutive Effect of Outstanding Options
(As Determined by the Application of the
Treasury Stock Method) (F1) 98 159 391
Weighted Average Number of Shares Outstanding
As Adjusted for Equivalent Shares 80,739 81,340 81,631
FULLY DILUTED EARNINGS PER SHARE $0.52 $1.20 $0.75
*See 1996 Annual Report, Note (1) of the Notes to Financial Statements.
<FN>
(F1) "This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%."
</FN>
</TABLE>
Exhibit 23 -- CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form
10-K) of McCormick & Company, Incorporated and subsidiaries of our report
dated January 16, 1997, included in the 1996 Annual Report to Shareholders
of McCormick & Company, Incorporated.
Our audits also included the financial statement schedule of McCormick &
Company, Incorporated and subsidiaries listed in Item 14(a). This schedule
is the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, the financial
statement schedule referred to above, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
We also consent to the incorporation by reference in the following
Registration Statements of McCormick & Company, Incorporated and
subsidiaries and in the related Prospectuses (if applicable) of our report
dated January 16, 1997, with respect to the consolidated financial
statements and schedule of McCormick & Company, Incorporated and
subsidiaries included in the 1996 Annual Report to Shareholders and
incorporated by reference in this Annual Report (Form 10-K) for the year
ended November 30, 1996.
Form Registration Number Date Filed
S-8 33-58197 3/23/95
S-3 33-66614 7/27/93
S-3 33-40920 6/18/91
S-3 33-40920 5/29/91
S-8 33-33724 3/2/90
S-8 33-33725 3/2/90
S-3 33-32712 12/21/89
S-8 33-24660 3/16/89
S-3 33-24959 9/15/88
S-8 33-24658 9/15/88
Ernst & Young LLP
Baltimore, Maryland
February 21, 1997
McCormick & Company, Incorporated Annual Report 1996
Company Description
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, foodservice and food
processors. A packaging group manufactures and markets plastic
bottles and tubes for food, personal care and other products.
McCormick products are processed and sold throughout the world.
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. Worldwide, McCormick
has 7,300 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.
Contents
Mission and Core Values 2
Financial Highlights 3
Letter to Shareholders 4
Report on Operations 7
Historical Financial Summary 14
Consolidated Income Statement 17
Consolidated Balance Sheet 18
Consolidated Statement of Cash Flows 19
Consolidated Statement of Shareholders' Equity 20
Notes to Consolidated Financial Statements 21
Management's Responsibility for Financial
Statements 36
Report of Independent Auditors 36
Management's Discussion and Analysis 37
Directors and Officers 43
McCormick Worldwide 44
Investor Information Inside back cover
[picture of Grill Mates Spicy Montreal Steak Seasoning
with steak on a plate]
The paper that the financials are printed on contains McCormick
Pure Ground Black Pepper. The 1997 Annual Meeting will be held
at 10:00 a.m., Wednesday, March 19, 1997, at Marriott's Hunt
Valley Inn, 245 Shawan Road (exit 20A off I-83 north of Baltimore),
Hunt Valley, Maryland 21031.
MISSION The primary mission of McCormick & Company, Incorporated is
to profitably expand its worldwide leadership position in the spice,
seasoning and flavoring markets.
CORE VALUES We believe that our people are the most important
ingredient to our success. We believe in continuously adding
value for our shareholders. We believe customers are the reason
we exist. We believe in doing business honestly and ethically.
We believe in focused achievement of goals and objectives
through teamwork.
[photo: Cinnamon flavors many dishes around the
world and is the scent for this year's annual report.]
<TABLE>
FINANCIAL HIGHLIGHTS
(dollars in millions except per-share data)
Year ended November 30
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net sales $1,732.5 $1,691.1 $1,529.4 $1,400.9 $1,323.9
Before restructuring charges
Net income from continuing
operations $83.1 $84.5 $88.8 $82.9 $73.6
Net income 81.5 95.2 107.5 73.1 95.2
Earnings per share -
continuing operations 1.03 1.04 1.09 1.01 .90
Earnings per share - total 1.01 1.17 1.32 .89 1.16
Return on shareholders' equity 16.2% 19.7% 22.1% 17.0% 23.3%
After restructuring charges
Net income from continuing
operations $43.5 $86.8 $42.5 $82.9 $73.6
Net income 41.9 97.5 61.2 73.1 95.2
Earnings per share - continuing
operations .54 1.07 .52 1.01 .90
Earnings per share - total .52 1.20 .75 .89 1.16
Return on shareholders' equity 8.6% 20.3% 12.8% 17.0% 23.3%
Dividends paid per share $ .56 $ .52 $ .48 $ .44 $.38
Margins
Gross profit 34.9% 34.5% 36.5% 38.5% 38.9%
Operating income 5.4% 10.2% 5.6% 10.1% 9.2%
Net income from continuing
operations 2.5% 5.1% 2.8% 5.9% 5.6%
Cash flow from operating
activity $201.7 $ 59.4 $ 72.5 $ 80.6 $117.3
Cash flow from investing
activity 187.9 (78.5) (184.0) (145.0) (121.3)
Cash flow from financing
activity (380.8) 17.7 113.9 79.1 4.2
Debt to total capital 47.1% 55.5% 54.6% 48.0% 42.5%
Shareholders' equity $450.0 $519.3 $490.0 $466.8 $437.9
Average shares outstanding and
equivalents (000's) 80,641 81,181 81,240 81,766 81,918
Ending shares outstanding
and equivalents (000's) 78,205 81,218 81,206 81,916 81,978
</TABLE>
[Bar graph showing Ten-Year Growth of One Dollar Invested in McCormick Stock
for the period of 1986 at $1.00 to 1996 at $5.65. Ten-year compound growth
rate of 19% (includes dividend reinvestment)]
[Bar graph showing Market Capitalization - Dollars in Millions. The graph
depicts in 1986 an amount of $514 and in 1996 an amount of $1,926.]
Letter to Shareholders
1996 was approached as a turnaround year and turnaround it was. Our
first-half performance, as expected, was sub-par. The second half
returned to growth, and we are again pointed in the right
direction.
Confidence in the future of the business led to our
announcement in August that we would, over time, buy back 10
million shares of the Company's outstanding stock on the open
market. Confidence also led us to approve a 7 percent increase in
the regular quarterly cash dividend. This is the 14th dividend
increase that we have declared over the last 10 years. McCormick
has paid dividends every year since 1925. We are pleased to reward
long-term shareholders and look forward to taking future actions
that will improve total return to them.
A year ago, we reported that we would measure ourselves in a new way,
creating shareholder value with a focus on generating both positive
and growing economic value added (EVA). We have been focused on
increasing our worldwide market share, more effectively managing
our assets and, of course, growing earnings per share. We firmly
believe that EVA is an excellent tool to measure shareholder value,
and increasing shareholder value results in a higher stock price. Proper
measurement gives incentive to our managers to perform like owners
of the business.
Of the year's actions, most significant was the sale of our garlic
and onion dehydration business, Gilroy Foods, Incorporated, to
ConAgra, Inc. Simultaneously, we sold Gilroy Energy Company, Inc.
to Calpine Corporation. As a result of both transactions, we are a
much stronger company. The sale of those businesses may be as
important to our future health as was our real estate divestiture
in 1989. These sales have helped to lessen our debt burden and will
provide the resources to take advantage of growth opportunities.
Our year was shaped by a comprehensive portfolio review. In addition
to the Gilroy sales, the Brooklyn, New York plant of our packaging
subsidiary, Setco, Inc., was closed. After year end, we entered
into agreements to sell Giza National Dehydration Company of Egypt
and Minipack Systems Limited of England. We are also divesting other
small, non-core businesses, and we are exiting certain minor,
non-core product lines.
In other developments, certain international manufacturing facilities
are being realigned to maximize efficiencies, most notably our new
operation at Haddenham in the United Kingdom. In Maryland, we
opened our new distribution center, which consolidated distribution
activities that occurred at nine other facilities. We merged our
Cake Mate brand with Pioneer Products to form Signature Brands. We
are happy to report that this new joint venture is doing extremely
well.
These are positive steps that improve our cash flow and asset
management and will help drive our business forward again.
The "Flavor Up!" advertising campaign which began in 1995 has
helped us market the McCormick brand more aggressively than ever
before. Highlighted by a series of radio and television ads, the
campaign has created results and strengthened brand loyalty versus
the competition. Our efforts are working, whether to promote Bag'n
Season, specialty blends like Grill Mates or our gravy line. We
are committed to the campaign because it is just one more way we
separate ourselves from the competition. The McCormick and
Schilling brand names are very powerful, and our vision is to
leverage the power of those brands.
An even greater avenue for growth for the Company is international.
Sales outside the United States, including joint ventures, are now
approximately 39 percent. Our goal is to increase this to at least
50 percent of our sales over time. One key area is China, which has
the availability of key raw materials so that we can process
in-country to our standard of quality. We currently operate facilities
in Guangzhou and Shanghai and are opening sales offices elsewhere.
There are no national spice brands, and we are creating the platform
to be that brand.
We continue to broaden our horizon within our industrial business by
introducing new products such as SavorySelect, ChileMex,
ColorBits and TastyBits. Industry reaction has been favorable.
Our Research & Technical Development team creates innovative,
value-added products that give McCormick customers the edge.
Whether the focus is retail, international or industrial, we have
growth opportunities for years to come.
Recent spice consumption data in the United States show that
per capita use is up to more than three pounds per year. The
popularity of ethnic foods continues to rise, and people are
increasingly conscious of the need to eat healthier foods. Spices
and seasonings not only make ethnic dishes stand out, they bring
added flavor to healthier foods that have reduced salt or fat.
Our business is benefiting from these major eating trends.
[photograph of Robert J. Lawless, President and CEO, (left) and
Charles P. McCormick, Jr., Chairman]
Effective January 1, 1997, Robert J. Lawless became Chief Executive
Officer in addition to President & Chief Operating Officer.
Charles P. McCormick, Jr., who had been serving as Chairman of
the Board & CEO since January 1, 1996, will continue as Chairman
and devote approximately 40 percent of his time to Company business.
Robert G. Davey was promoted to Executive Vice President & Chief
Financial Officer. Robert W. Schroeder, Vice President & General
Manager of the McCormick/Schilling Division, was elected to the
Board of Directors. Dr. Freeman A. Hrabowski, III, President of
the University of Maryland Baltimore County, has also been elected
to the Board.
During the year, there were additional executive appointments.
Richard W. Single, Sr. became Vice President-Government Affairs
and Secretary/Counsel to the Board of Directors. Robert W. Skelton
was promoted to Vice President & General Counsel, and W. Geoffrey
Carpenter was promoted to Assistant Secretary & Associate General
Counsel. Christopher J. Kurtzman was named Vice President & Treasurer.
He succeeds Donald A. Palumbo who retired. Robert C. Singer was
appointed Vice President-Acquisitions & Financial Planning.
He succeeds Samuel E. Banks who retired.
Dr. James J. Albrecht, Group Vice President-Asia/Pacific since 1993,
has been appointed Vice President-Science & Technology. Gary W. Zimmerman,
Vice President & General Manager of the McCormick Flavor Group
since 1992, became Group Vice President-Asia/Pacific. In addition,
Dorsey N. Baldwin, Vice President-Packaging Group and President of
Tubed Products, Inc., retired from the Company. He was succeeded by
Alan D. Wilson, as President and General Manager of Tubed Products.
We wish to thank our employees for their outstanding performance
under very competitive circumstances. They have demonstrated once
again that participative management remains a hallmark of our business.
Teamwork, so vital to our success, has led us to focus on our core
businesses, manage our assets more effectively, drive our brands,
return to profit growth and increase shareholder value.
[photograph of the Executive Committee: left to right, seated: Nordhoff,
Davey; standing: Lawless, McCormick.]
We believe the steps we are taking will produce the desired results
and ensure a bright future. The officers and the Board of Directors
join in thanking our shareholders, customers, suppliers and
employees for your continuing support of McCormick & Company,
Incorporated.
/s/Charles P. McCormick, Jr.
Charles P. McCormick, Jr.
Chairman of the Board
/s/Robert J. Lawless
President & Chief Executive Officer
Report on Operations
Much was accomplished during 1996. One year ago, the Company
identified several areas of focus if we were to return to the
type of successful performance our investors have enjoyed over
time. Concurrent with addressing increased competitive pressures,
our objective was to establish the platform for growth. As we
promised a year ago, we aggressively drove our brands. Our marketing
efforts were refocused on the consumer. This included significantly
increased advertising and other promotions to attract consumers to
our products. And finally, the Company worked to lower costs and
intensified asset management.
To get our house in order, we determined what had to be done - and with
determination, we did it. Taken as a whole, 1996 was a substandard
year. But looking deeper than the year-end numbers, you'll see that
the turnaround has happened. A poor first half of the year was
followed by a strong second half. Our successful return to growth
in the second half is our springboard to future increased earnings
and increased shareholder value.
Any telling of a turnaround story is a good news/bad news tale.
The bad news: We were in a situation where we needed to reverse
our course and return to growth. The good news: We did it. But
equally as important, our plan unfolded as described late last
year. This report will elaborate on how it happened, and why
we confidently say, "We're back." But first...
A Brief Look at Who We Are
McCormick's consumer, foodservice and some industrial businesses
are aligned globally into three zones: the Americas market,
the European market and the Asia/Pacific market.
McCormick's oldest and largest business is dedicated to the manufacture
and sale of consumer spices, herbs, extracts, proprietary seasoning
blends, sauces and marinades. These consumer products are sold in
the United States, primarily under the McCormick brand in the East,
the Schilling brand in the West, in Canada under the Club House
brand and in the United Kingdom under the Schwartz brand. In other
market zones, the McCormick brand name is primarily used.
The Food Service Division serves broadline foodservice distributors
and membership warehouse clubs.
The McCormick Flavor Group includes our U.S. industrial and fast food
spice, seasoning and flavor businesses. It sells to food processors
and major restaurant chains worldwide.
McCormick's Packaging Group, comprised of Setco, Inc. and Tubed
Products, Inc., is a U.S.-focused business that manufactures and
markets plastic bottles and tubes for food, personal care and other
products.
Our Portfolio Review
The cornerstone of our turnaround was an EVA-driven portfolio review
we performed on every part of our business. We determined which parts
would create long-term shareholder value and which would not. As a result,
the Company took a number of steps.
Last August, the Company sold Gilroy Foods, Incorporated, our
agricultural business located in Gilroy, California, to ConAgra, Inc.
It was an EVA-positive move to sell the business. As Gilroy grew,
it became very capital intensive, consuming too much of our resources
with inadequate returns in recent years. It was the right move for
the future growth of the Company.
At the same time, the Company sold Gilroy Energy Company, Inc. to Calpine
Corporation. Both transactions, in total, improved our cash flow and will
improve EVA. The proceeds from the sales allow us to pay down debt,
reinvest in our brands, commence a 10 million share stock repurchase
program and position ourselves to take advantage of numerous growth
opportunities.
The Brooklyn, New York plant of McCormick's packaging subsidiary,
Setco, was closed. We are realigning certain manufacturing operations
in Europe. After year end, we entered into agreements to sell Giza
National Dehydration Company of Egypt and Minipack Systems Limited of
England. Certain other small non-core businesses were also put up for sale.
Certain regions of our United States consumer business changed from a
direct sales force to a broker sales force, so we now have a broker
network across the entire U.S. This provides increased coverage of
individual retail stores and allows for more effective implementation
of our sales and marketing programs. Also, the Company is exiting certain
non-core product lines.
All of the actions mentioned above helped to make the Company stronger,
more competitive and enhanced our potential to grow the business in a
very focused way.
Our Return to Growth
After a series of down quarters, the second half of 1996 saw the Company
return to earnings growth. To continue the rebound, we will capitalize on
certain trends in the industry and execute a number of strategies, some
old and reliable, others new and innovative. Combined, they will help
McCormick maintain its position as the premier spice, flavor and extract
company in the world.
[picture of two Produce Partners sauce mixes and a plate of food]
One strategy that we mentioned in last year's report is our aggressive
effort to drive our brands with the "Flavor Up!" promotional campaign.
That effort continued in earnest in 1996. Highlighted by a series of radio
and television ads, the campaign has done more than just create excitement
in our retail business: It has created results.
Our Bag'n Season products are a perfect example. Bag'n Season helps
provide an excellent meal, quick and easy, with hardly any clean up.
It is a great product and has been for more than 20 years. Our only
problem was that few people knew about it. So we updated the
packaging and increased our promotional efforts. As a result, one
of our "old" products was accepted by consumers like a new product.
For the year, sales were up nearly 40 percent.
Grill Mates meat and poultry seasoning blends, developed for
outdoor barbecue cooking, experienced similar success. Sales for
the year were up approximately 40 percent. Likewise, after
increased advertising, we saw sales growth for our line of
low-fat gravies.
Our promotional efforts are working, and we see the direct
link to the "Flavor Up!" ad campaign. We're committed to them, and
they are just one more major way we separate ourselves from the
competition.
All three products are also excellent examples of McCormick's
extensive portfolio of value-added products, a list that will
continue to grow in 1997.
Another tactic in our effort to grow the business is in the
evolution of our relations with the grocery trade. For many years,
our consumer business has been trade driven, with most efforts
directed at obtaining premium shelf space in the stores. What we
are working for is a better blend, directing efforts at the
consumer as well as the trade. The "Flavor Up!" campaign is a good
example of consumer focus. An example of trade focus is our effort
in category management. With category management, McCormick acts as
the marketing consultant to the grocer, sharing data relative to
McCormick brand strength versus the competition and data relative
to volume movement. We help measure the success of the grocer's
merchandising strategies. The goal of this enhanced partnership is
to sell more consumer branded products, benefiting both the grocer
and McCormick.
[picture of a Bag'n Season]
The grocery trade is concerned about a trend of an
increasing percentage of product being sold through non-traditional
outlets such as warehouse stores, drug stores and club stores.
While we participate within all distribution channels, consumer
testing indicates that consumers prefer to buy spices from grocery
stores. Because of our category management practices, we believe
consumers will get a better value, and we will see more
profitability by greater sales of our branded products.
We are using both the tried-and-true methods and some new techniques
to help drive our brands. In the past few annual reports, we have
informed you about our perimeter strategy, where we have focused on
the perimeter area of the grocery store (the produce, seafood and
meat sections) as those parts of the store with the highest
shopping activity. As a result, we have focused aggressive
marketing techniques that have met with success. Our Old Bay and
Golden Dipt seafood lines have been very successful. Our Produce
Partners line was repackaged and reformulated resulting in
increased sales for the year.
A newer strategy has been our further exploration of cyberspace.
McCormick has had a web site (http://www.mccormick.com) for more
than a year, and in 1996, we added a recipe data base with
hundreds of recipes. So, as you "surf the net," you can plan
your next meal.
Our efforts to grow go beyond our well-known retail business.
Our industrial business continues to grow thanks to innovation,
a growing stable of value-added products and global expansion
among major customers.
In last year's report, we noted the introduction of FlavorCell,
our technology to encapsulate a wide range of liquid and
solid flavors. This innovative product answered a need for
food processors, and sales projections for the first year
were exceeded. The success of FlavorCell has been expanded by
other value-added products that give McCormick customers the
technical edge.
One new product is SavorySelect, a collection of natural
meat flavors. They all deliver the just-cooked tastes of beef,
chicken or pork for rich flavor in soups, marinades, gravies,
meats and other applications. Another creative product from our
Flavor Division is ChileMex, which captures the signature flavors
of popular chili-based Mexican cuisine. Chilies do more than add
heat to Mexican dishes: They add flavor. And, ChileMex answers a
need for restaurants capitalizing on this popular food trend.
One of the exciting industrial products to come out of the Flavor
Group's Ingredient Division is ColorBits. ColorBits is a line of
small, colorful food ingredients used primarily to enhance the
appearance of food. They have been very successful in snack seasonings,
confectionery, cheese and cereal applications. Food processors are
just scratching the surface for the potential applications for
this new product, and a similar product called TastyBits has been
introduced as well.
These products are attracting new customers, and it is also our
commitment to service that helps the Company maintain long-standing
relations with numerous food businesses. The list of multi-national
companies served by our industrial business reads like a "Who's
Who" of the food industry. Many of these businesses are restricting
their list of suppliers. Often we are selected as a supplier of
choice. In 1996, a Fortune 50 company named McCormick "Supplier of
the Year." For McCormick, it was the seventh time the Company has
won the honor in the nine years it has been awarded.
As these multi-national companies continue to expand globally, we, as a
trusted partner, continue the relationship around the world. To
strengthen the level of customer support in far-off lands,
McCormick has technical centers around the world poised to answer
any customer's needs. The combination of our extensive product
line, our innovative R&D staff and our respected reputation in the
food industry make McCormick a consistent winner in the flavoring
business.
The Food Service Division saw sales growth in 1996. One
of the major U.S. foodservice distributors named McCormick a
"Gold-Level Supplier," a distinction earned by only 10 of the
distributor's 1,500 suppliers.
In an effort to differentiate itself from the competition, the
Food Service Division launched a new packaging concept with an
"operator friendly" labeling system designed as a result of direct
input of hundreds of foodservice operators.
[picture of Schwartz One Pan Recipes mix with a plate of food
prepared using this product]
We also see potential for growth in the foodservice business due
to the trend in supermarket prepared foods. Grocery stores are
providing the prepared "meal-to-go" offerings that have become
popular among consumers with a taste for good food, but not enough
time to prepare a meal from scratch.
The Company will also look to its Packaging Group to contribute to
future growth. A major ingredient to the success of our Setco
operation is the expanding vitamin industry. Setco has developed
new packaging products and attracted new customers in the vitamin
industry and also continues to serve a number of cosmetic
and food companies, including McCormick. Tubed Products, Inc.,
(TPI), had a poor year in 1996 due to market pressures and
operational inefficiencies. TPI will look to rebound in 1997, its
50th year of operation.
Most of the efforts mentioned so far have been focused on U.S.
activities. A majority of our sales are in the United States,
but the Company has set a goal to increase sales outside the U.S.
to become half of McCormick's total sales in the future. There are
several countries where McCormick has long been a well-known name,
and there are others where McCormick is newer to the scene.
First, let's look at the Americas Zone.
Our Canadian operation saw record sales and profits in 1996.
Sales grew in all Canadian divisions but were particularly strong
in sales to food processors and foodservice operators. New business
from major customers and growth from snack, fast food and meat
segments fueled the record industrial growth. The club stores and
distributors provided new sales highs for McCormick Canada's
foodservice business.
McCormick de Mexico, our consumer joint venture, is still feeling
the effects of a weak economy. Although consumer confidence in
Mexico is still low, our unit sales grew modestly in 1996, and
a number of initiatives completed in 1996 should bear fruit in 1997
if economic activity picks up. Our first international alliance,
McCormick de Mexico, celebrates its 50th anniversary in 1997.
McCormick de Centro America, located in El Salvador, had an
excellent year, setting an all-time record in profits. It was their
sixth consecutive record-setting year.
[picture of McCormick Low Fat Bouillon products]
Despite a tough economic environment, McCormick de Venezuela
had a very strong year. Newly introduced products have been
quite successful, and we continue to look for additional growth
in this market.
A great amount of activity took place in the European Zone in
1996. Three of our operations in the United Kingdom are being
consolidated into one new facility in Haddenham. McCormick's
business in Europe is strongly U.K.-based in consumer,
industrial and foodservice, and the new facility acts as
McCormick's European headquarters.
The European Zone enjoyed another record year. The consumer business
continued to grow in the U.K., and steady sales of the core spice
line have been boosted by a very strong response to the authentic
mix and dry pour-over sauce line. Our relatively recent expansion
into the Baltic States and former Soviet Union has seen encouraging
results. These are emerging markets where we are pursuing
growth.
McCormick's industrial business in the European Zone also
enjoyed a successful 1996, with the Glentham flavor operations
posting substantial sales increases from both its U.K. and South
African facilities. Increased business was also the result of major
fast food companies continuing their global expansion.
Perhaps no area offers greater potential for international
expansion than the Asia/Pacific Zone. By the end of the decade,
60 percent of the world's population will be in Asia. Of the 100
largest cities in the world, 14 are in China. These numbers are
hard to ignore and represent tremendous opportunity for McCormick.
The Company has historically done well in major urban environments.
These consumers are attracted to our packaging and our high quality
standards. Their purchasing power is growing, and they have
expressed interest in buying Western goods.
Presently, there are few established brands in Asia, so McCormick
is creating the platform to become the national spice brand. To our
advantage, China has the availability of key raw materials, so we
can process in-country to our standard of quality. We have a plant
in Shanghai in northern China, and in 1996, we started production
at our new facility in Guangzhou in the south. In other parts of
the country, we are also opening sales offices.
The Company is aggressively expanding our consumer business in
several major cities in China and starting to penetrate others.
Consumers are responding favorably to our line of Szechuan seasonings
and fried rice seasonings as well as newer additions to
the Season'n Fry line and a collection of jelly dessert products
for children. Countries in this zone have great long-range
potential for consumer as well as industrial and foodservice
business. We look to this part of the world for growth as we seek
to balance our sales more evenly between United States and
international markets.
While 1996 was a sluggish year in Japan, our businesses in Australia
and the Philippines had good years with the Philippines achieving
records in sales and profits.
As previously stated, a great deal of McCormick's growth in the future
will come outside the United States. In each of these regions of
the world, there are diverse circumstances that confront any
enterprise hoping for expansion. In an effort to strengthen our
business strategies and review our business globally, the Company
has created four Global Business Councils (consumer, industrial,
foodservice, operations/procurement). Implemented along our
worldwide lines of business, the Councils will be the link between
the Corporate Mission and Operating Unit priorities. They will
create global strategies that will accelerate growth in ways that
no single division or zone can do independently. The Councils are
key vehicles to analyze and prioritize growth options around the
world.
Asset Management and Enhanced Efficiencies
The Company has made a significant effort to improve asset management.
We committed to reduce debt levels through aggressive balance sheet
management and have programs in place that are working. The past
year saw us focus on improving the management of working capital
using a dedicated inventory champion. A management incentive plan
linked to efficient use of working capital has resulted in an
improvement in inventory turnover.
At a number of our locations, we have taken steps to increase
efficiencies and facility utilization. One of the largest efforts
is the new facility at Haddenham, U.K. Another activity in our
effort to improve efficiencies was the opening of the new McCormick
Distribution Center in Maryland, which consolidated numerous
distribution facilities.
These actions were taken to improve the Company's overall
efficiencies and asset management and are key to keeping McCormick
the industry leader in a highly competitive environment.
[picture of McCormick Guangzhou products]
Performance
It all gets down to performance. The past 12 months have been
difficult and challenging. We don't, however, look at any one
year in a vacuum. The first two quarters were unacceptable.
We anticipated they would be down due, in part, to a significant
increase in funding for promotional activities and other
competitive pressures. Our second half resulted in a turnaround
that gives us the momentum to grow - in 1997 and beyond. The sale
of our Gilroy operations, the portfolio review and a dedication to
asset management resulted in a much improved balance sheet.
Debt reduction of $246 million resulted in a year-end debt to
total capital ratio of 47.1 percent, down from 55.5 percent in 1995.
And finally, excluding restructuring charges, earnings per share
from continuing operations increased 25 percent in the second half
of 1996 as compared to last year.
Our primary financial objective is to increase shareholder value.
To support that objective, the Company has adopted economic value
added (EVA) as a primary indicator to measure the performance of the
business. This value-based management tool combines into one measure
the profitability of our business after considering the associated
capital costs. Positive EVA is generated when the Company's net
operating profit after tax exceeds the cost to finance its capital.
We believe that consistent growth in EVA will directly translate
into superior returns for our shareholders over time.
The Company also believes that linking EVA to compensation and
properly educating the work force in its use are critical components
in the successful implementation of a value-based management program.
As a result, EVA is being incorporated into the incentive
compensation system. Significant time and energy were dedicated in
1996 to programs that resulted in extensive EVA training.
This training will continue in 1997. As all employees are trained
and learn of the opportunities they have to impact EVA, we believe
the Company, our employees and our shareholders will all benefit.
Over the long run, McCormick shareholders have been rewarded well.
The Company concluded 1996 with a total market capitalization of
$1.9 billion, approximately four times larger than in 1986. Over a
10-year period, the value of McCormick stock has grown at a compound
annual rate of 19 percent, including dividend reinvestment.
[photograph of two girls using the jelly dessert product made
at the McCormick Shanghai plant]
The Company is well positioned to grow the business and increase
shareholder value. The actions taken during the past year have made
us stronger, more focused and more aggressive. We successfully defended
against our main competitor's attempts to erode our market lead. Challenges
that have hampered our performance for a number of quarters were
addressed. We completed our portfolio review and strengthened our
balance sheet. And, our focus on increasing shareholder value and
a return to profit growth was intensified.
Growth...asset management...and performance: The three will be our
driving force in 1997. The year 1996 will be remembered as an important
chapter in the 107-year history of McCormick & Company. The year of the
turnaround. Now, watch us grow.
<TABLE>
Historical Financial Summary
(dollars in millions except per-share data)
<CAPTION>
For the Year 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales 1,732.5 1,691.1 1,529.4 1,400.9 1,323.9 1,276.3 1,166.2 1,110.2 1,099.1 1,011.1
Percent change over
prior year 2.4% 10.6% 9.2% 5.8% 3.7% 9.4% 5.0% 1.0% 8.7% 10.3%
Operating profit 93.3 172.6 86.0 142.1 121.4 100.6 86.9 74.5 65.4 53.7
Operating profit excluding
restructuring 151.4 168.7 156.5 142.1 121.4 100.6 86.9 74.5 65.4 53.7
Net income - continuing
operations 43.5 86.8 42.5 82.9 73.6 60.4 51.8 47.1 24.8 21.5
Net income(F1) 41.9 97.5 61.2 73.1 95.2 80.9 69.4 135.5 42.7 30.6
Earnings per share:(F2)
Continuing operations .54 1.07 .52 1.01 .90 .73 .62 .54 .27 .23
Discontinued operations .08 .13 .23 .21 .26 .25 .21 1.00 .12 .09
Extraordinary item (.10) - - - - - - - - -
Accounting changes(F3) - - - (.33) - - - - .07 -
Net earnings .52 1.20 .75 .89 1.16 .98 .83 1.54 .46 .32
Percentage of net sales:
Gross profit 34.9% 34.5% 36.5% 38.5% 38.9% 36.9% 36.0% 35.2% 32.6% 33.7%
Operating profit 5.4% 10.2% 5.6% 10.1% 9.2% 7.9% 7.5% 6.7% 6.0% 5.3%
Income - continuing
operations 2.5% 5.1% 2.8% 5.9% 5.6% 4.7% 4.4% 4.2% 2.3% 2.1%
Effective tax rate 38.7% 36.1% 40.5% 41.4% 39.4% 38.4% 38.0% 38.1% 46.6% 41.1%
Depreciation and
amortization 63.8 63.7 62.5 50.5 43.8 40.5 36.6 34.8 29.8 30.4
Capital expenditures 74.7 82.1 87.7 76.1 79.3 73.0 58.4 53.4 50.4 81.7
Common dividends
declared(F4) .57 .53 .49 .45 .40 .31 .24 .19 .14 .13
Market closing price:
High 25.00 26.50 24.75 30.25 28.75 22.88 13.38 12.50 7.25 6.44
Low 19.25 18.13 17.75 20.40 20.63 11.88 9.13 6.31 3.85 4.10
Dividend payout
ratio(F5) 50.5% 44.4% 36.4% 36.1% 32.8% 28.6% 28.9% 30.8% 36.5% 38.5%
Average shares outstanding
and equivalents
(000's) 80,641 81,181 81,240 81,766 81,918 82,396 83,720 87,772 93,068 94,408
At Year End
Current debt 108.9 297.3 214.0 84.7 122.6 78.2 30.4 20.3 49.5 76.7
Long-term debt 291.2 349.1 374.3 346.4 201.0 207.6 211.5 210.5 229.4 198.1
Total debt 400.1 646.4 588.3 431.1 323.6 285.8 241.9 230.8 278.9 274.8
Shareholders' equity 450.0 519.3 490.0 466.8 437.9 389.2 364.4 346.2 294.3 280.6
Total capital 850.1 1,165.7 1,078.3 897.9 761.5 675.0 606.3 577.0 573.2 555.4
Total assets 1,326.6 1,614.3 1,555.7 1,313.2 1,130.9 1,037.4 946.9 864.5 846.4 776.5
Return on equity 8.6% 20.3% 12.8% 17.0% 23.3% 21.8% 20.4% 40.0% 14.6% 11.3%
Percent debt to total
capital 47.1% 55.5% 54.6% 48.0% 42.5% 42.3% 39.9% 40.0% 48.7% 49.5%
Book value per
common share(F3) 5.75 6.39 6.03 5.70 5.45 4.88 4.56 4.18 3.27 3.00
<FN>
<F1>The Company disposed of its wholly-owned real estate subsidiary in 1989, and both Gilroy Foods, Inc.
and Gilroy Energy, Inc. in 1996.
<F2>All share data adjusted for 2-for-1 stock splits in January 1992, January 1990 and April 1988.
<F3>In 1993, the Company adopted SFAS No. 106 "Employers's Accounting for Postretirement
Benefits Other than Pensions," and in 1988, it adopted SFAS No.96, "Accounting for Income
Taxes."
<F4>Includes fourth quarter dividends for the years 1988-1996, which were declared in
December of each of those years.
<F5>Dividend payout ratio does not include gains or losses on sale of discontinued
operations, cumulative effect of accounting changes, restructuring charge or credit,
and extraordinary items.
</FN>
</TABLE>
[Bottom of page has two McCormick/Schilling coupons. One for an Extract/
Spice and the other for Dry Seasoning Mix or Bag'n Season Blend.]
[Next page has a picture of various international McCormick products and brands]
<TABLE>
Consolidated Income Statement
(in thousands except per-share data)
Year ended November 30
<CAPTION>
Consolidated results 1996 1995 1994
<S> <C> <C> <C>
Net sales $1,732,506 $1,691,086 $1,529,414
Cost of goods sold 1,128,032 1,106,935 970,564
Gross profit 604,474 584,151 558,850
Selling, general and
administrative expense 453,088 415,459 402,363
Restructuring charge (credit) 58,095 (3,904) 70,445
Operating income 93,291 172,596 86,042
Interest expense 33,811 39,298 25,585
Other (income) expense - net (2,254) 692 2,414
Income from consolidated continuing
operations before income taxes 61,734 132,606 58,043
Income taxes 23,871 47,866 23,515
Net income from consolidated continuing
operations 37,863 84,740 34,528
Income from unconsolidated operations 5,612 2,068 7,929
Net income from continuing operations 43,475 86,808 42,457
Income from discontinued operations,
net of income taxes 6,249 10,713 18,700
Net income before extraordinary item 49,724 97,521 61,157
Extraordinary loss from early
extinguishment of debt, net of
income tax benefit (7,806) - -
Net income $ 41,918 $ 97,521 $ 61,157
Earnings per share
Continuing operations $.54 $1.07 $.52
Discontinued operations .08 .13 .23
Extraordinary loss from early
extinguishment of debt (.10) - -
Total earnings per share $.52 $1.20 $.75
</TABLE>
See Notes to Consolidated Financial Statements, pages 21 - 35.
<TABLE>
Consolidated Balance Sheet
(in thousands)
Assets
November 30
<CAPTION>
1996 1995
<S> <C> <C>
Current assets
Cash and cash equivalents $ 22,418 $ 12,465
Receivables, less allowances of
$3,527 for 1996 and $2,545 for 1995 217,495 223,958
Inventories 245,089 383,222
Prepaid expenses 15,648 17,093
Deferred income taxes 33,762 33,980
Total current assets 534,412 670,718
Property, plant and equipment - net 400,394 524,807
Goodwill - net 165,066 180,751
Prepaid allowances 149,200 183,357
Investments and other assets 77,535 54,706
Trademarks, formulae, etc. 1 1
Human relations 1 1
$1,326,609 $1,614,341
</TABLE>
<TABLE>
Liabilities and Shareholders' Equity
November 30
<CAPTION>
1996 1995
<S> <C> <C>
Current liabilities
Short-term borrowings $ 98,450 $ 284,961
Current portion of long-term debt 10,477 12,352
Trade accounts payable 153,584 146,674
Other accrued liabilities 236,791 202,880
Total current liabilities 499,302 646,867
Long-term debt 291,194 349,111
Deferred income taxes 4,937 25,436
Other long-term liabilities 81,133 73,674
Total liabilities 876,566 1,095,088
Shareholders' equity
Common Stock, no par value;
authorized 160,000 shares;
issued and outstanding: 1996 -
11,533 shares, 1995 - 12,089 shares 48,541 48,133
Common Stock Non-Voting, no par value;
authorized 160,000 shares; issued
and outstanding: 1996 - 66,672 shares,
1995 - 69,129 shares 112,489 112,522
Retained earnings 313,847 387,657
Foreign currency translation adjustments (24,834) (29,059)
Total shareholders' equity 450,043 519,253
$1,326,609 $1,614,341
See Notes to Consolidated Financial Statements, pages 21- 35.
</TABLE>
<TABLE>
Consolidated Statement of Cash Flows
(in thousands)
Cash flows from operating activitiess Year ended November 30
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Net income $ 41,918 $ 97,521 $ 61,157
Adjustments to reconcile net income
to net cash provided by operating activities
Restructuring charge (credit) 58,095 (3,904) 70,445
Depreciation and amortization 63,788 63,698 62,540
Deferred income taxes (26,368) 15,697 (27,095)
Other 2,402 483 1,305
Income from unconsolidated operations (5,612) (2,068) (7,929)
Extraordinary item 7,806 - -
Changes in selected working capital items
Receivables (5,363) (21,560) (24,895)
Inventories 21,811 (13,751) (41,011)
Prepaid allowances 23,689 (40,133) (16,914)
Accounts payable 24,443 3,973 14,005
Other assets and liabilities (4,931) (40,549) (22,476)
Dividend received from unconsolidated affiliate - - 3,345
Net cash provided by operating activities 201,678 59,407 72,477
Cash flows from investing activities
Acquisitions of businesses - - (82,573)
Capital expenditures (74,654) (82,140) (87,676)
Proceeds from sale of discontinued
operations 248,766 - -
Proceeds from sale of assets 15,283 1,910 152
Other (1,497) 1,703 (13,929)
Net cash provided by (used in)
investing activities 187,898 (78,527) (184,026)
Cash flows from financing activities
Short-term borrowings - net (186,541) 85,148 7,023
Long-term debt borrowings 4,454 - 165,692
Long-term debt repayments (83,178) (20,186) (15,012)
Common stock issued 4,524 11,314 6,106
Common stock acquired by purchase (74,709) (16,330) (10,961)
Dividends paid (45,322) (42,202) (38,997)
Net cash provided by (used in)
financing activities (380,772) 17,744 113,851
Effect of exchange rate changes on cash
and cash equivalents 1,149 (1,725) 426
Increase/(decrease) in cash and
cash equivalents 9,953 (3,101) 2,728
Cash and cash equivalents at beginning of year 12,465 15,566 12,838
Cash and cash equivalents at end of year $ 22,418 $ 12,465 $ 15,566
See Notes to Consolidated Financial Statements, pages 21 -35.
</TABLE>
<TABLE>
Consolidated Statement of Shareholders' Equity
(dollars in thousands except per-share data)
<CAPTION>
Common Stock Common Currency Total
Common Non-Voting Stock Retained Translation Shareholders'
Shares Shares Amount Earnings Adjustments Equity
<S> <C> <C> <C> <C> <C> <C>
Balance, December 1,
1993 14,562 66,437 $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 and
retired (111) (300) (920) (10,041) (10,961)
Shares issued 281 337 6,106 6,106
Equal exchange (1,453) 1,453
Balance,
November 30, 1994 13,279 67,927 151,703 343,285 (5,024) 489,964
Net income 97,521 97,521
Dividends declared
($.52/share) (42,205) (42,205)
Currency translation
adjustments (24,035) (24,035)
Other adjustments 3,024 3,024
Shares purchased and
retired (435) (336) (2,362) (13,968) (16,330)
Shares issued 298 485 11,314 11,314
Equal exchange (1,053) 1,053
Balance,
November 30, 1995 12,089 69,129 160,655 387,657 (29,059) 519,253
Net income 41,918 41,918
Dividends declared
($.56/share) (45,326) (45,326)
Currency translation
adjustments 4,225 4,225
Other adjustments 158 158
Shares purchased and
retired (264) (3,111) (4,149) (70,560) (74,709)
Shares issued 189 173 4,524 4,524
Equal exchange (481) 481
Balance,-
November 30, 1996 11,533 66,672 $161,030 $313,847 $ (24,834) $450,043
See Notes to Consolidated Financial Statements, pages 21 - 35.
</TABLE>
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. In the
first quarter of fiscal 1995, the Company changed the end of the
reporting period for foreign subsidiaries from October 31 to
November 30 to provide uniform reporting on a worldwide basis.
Accordingly, an additional month of operating results for those
subsidiaries is included in the 1995 financial statements.
Investments in 20% to 50% owned affiliates are accounted for under
the equity method. Intercompany transactions have been eliminated.
Certain prior year amounts have been reclassified to conform to the
presentation in 1996.
Use of Estimates
Preparation of financial statements in conformity with generally
accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual amounts
could differ from these estimates.
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.
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 and depreciated over
its estimated useful life using straight-line methods for financial
reporting and both accelerated and straight-line methods for tax reporting.
Goodwill
Goodwill is amortized using the straight-line method over periods
up to 40 years.
On a periodic basis, the Company estimates the future undiscounted
cash flows of the businesses to which goodwill relates in order to
ensure that the carrying value of such goodwill has not been impaired.
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.
Research and Development
Research and development costs are expensed as incurred.
Earnings Per Share
Earnings per share have been computed by dividing net income by the
weighted average number of common shares outstanding during
the period.
Foreign Currency
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 resulting gains or losses 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 in a
hyperinflationary environment are included in the income statement.
The Company periodically enters into foreign exchange contracts to hedge
the impact of foreign currency fluctuations on its investments in certain
foreign subsidiaries, the impact of foreign currency transactions and the
impact of firm foreign currency commitments. The gains and losses
on foreign investment hedges, net of income taxes, are included in
the foreign currency translation adjustments account within
shareholders' equity. The gains and losses on foreign currency
transaction hedges are recognized in income and offset the foreign
exchange gains and losses on the underlying transactions. Gains and
losses of foreign currency firm commitment hedges are deferred and
included in the basis of the transactions underlying the
commitments.
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, 1996. The Company evaluates the credit
worthiness of the counterparties to forward exchange contracts for
foreign currency and considers nonperformance credit risk to be
remote.
Accounting and Disclosure Changes
In March 1995, the Financial Accounting Standards Board (FASB)
issued Statement No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." The Statement
requires that long-lived assets be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount
of the asset in question may not be recoverable. The Company must adopt
this Standard in its fiscal year beginning December 1, 1996. The
effect of this accounting change on the Company's consolidated
financial statements is not expected to be material.
In October 1995, FASB issued Statement No. 123, "Accounting for Stock-Based
Compensation." This new standard encourages, but does not require,
a fair-value- based method of accounting for stock-based
compensation plans. Alternatively, the Company can continue the
current method of accounting for stock compensation plans under the
existing rules of Accounting Principles Board No. 25, and disclose
the compensation expense that would be recorded under the new rules
in the Notes to the Financial Statements. The Company has decided
to adopt the disclosure provisions of the new standard in 1997.
Therefore, there will be no impact on the Company's consolidated
income statement.
2. Business Restructuring:
In the third quarter of 1996, the Company began implementation of a
restructuring plan and recorded a restructuring charge of $58,095
in 1996. This charge reduced net income by $39,582 or $.49 per
share. In addition, there are approximately $1,915 of additional
charges ($.02 per share) directly related to the restructuring plan
which could not be accrued but will be expensed as the plan is
implemented.
Specific actions under this plan include: the divestiture of certain
small non-core businesses; the divestiture of Giza National Dehydration
Company (Giza) of Egypt, which is consistent with the Company's sale of
Gilroy Foods, Giza's parent company; closing the Brooklyn, New York
packaging plant; the exit from certain minor, non-core product lines;
the rationalization of certain overseas manufacturing facilities; and in
our consumer business, the conversion from a direct sales force to a broker
sales force for certain regions in the U.S. Major components of
the restructuring charge include: severance and personnel costs of
$9,983; a $44,562 write-down to net realizable value of assets and
businesses identified for disposal; and other exit costs of $3,550.
The $1,915 of additional charges which will be expensed during the
implementation are principally costs to move equipment and
personnel.
These actions are expected to be completed in 1997 and will require
net cash outflows of approximately $12,000. Net sales of the small
non-core businesses and Giza, which are being divested by these actions,
were approximately 7% of consolidated net sales.
As of November 30, 1996, the Brooklyn, New York packaging plant has
been closed with production being transferred to another U.S. plant.
Also, the conversion to a broker sales force and exit from certain minor
non-core product lines is complete. In December 1996, the Company entered
into agreements to sell the Minipack business in the United Kingdom and
Giza in Egypt.
The components of the restructuring charge and remaining liability
are as follows:
11/30/96
Restructuring Remaining
Charge Amount
Severance and personnel costs $ 9,983 $ 2,628
Write-down of assets and businesses 44,562 23,378
Other exit costs 3,550 1,415
$58,095 $27,421
Additional costs to be expensed $ 1,915
In the fourth quarter of 1994, the Company recorded a charge of $70,445
for restructuring its business operations. At November 30, 1996,
the remaining restructuring liability is $14,911, principally for
realignment of some of our operations in the United Kingdom which
will be completed in early 1997. The Company has reduced its work
force by approximately 540 positions, an industrial products plant
has been closed, a frozen food business has been sold and a number
of administrative activities have been consolidated. A foodservice
products plant was closed in the second quarter of 1996, and
production was transferred to another facility. A consolidated
distribution facility was also completed in the second quarter of
1996.
3. Discontinued Operations:
On August 29, 1996, the Company sold substantially all assets of Gilroy
Foods, Incorporated (GFI) and Gilroy Energy Company, Inc. (GEC) to ConAgra,
Inc. and Calpine Corporation, respectively, for $263.3 million in total. GFI
manufactures and sells dehydrated onion, garlic, capsicum and vegetable
products. GEC operates an energy cogeneration facility.
The sale of GFI and GEC resulted in a $478 loss ($291 after tax) and
has been included in the caption, "Income from discontinued operations,
net of income taxes" in the Consolidated Income Statement. The operating
results of GFI and GEC have been reclassified for all periods presented
on the Consolidated Income Statement to the caption, "Income from
discontinued operations, net of income taxes." This caption includes
interest expense based on the debt specifically associated with GEC and
an allocation of interest to GFI assuming a debt to capital ratio similar
to the Company's. Income taxes have also been allocated based on the
statutory tax rates applicable to GFI and GEC. The income and
expense disclosures in Notes to Consolidated Financial Statements
exclude discontinued operations. Sales, interest expense and income
taxes applicable to discontinued operations are as follows:
1996 1995 1994
Net sales $129,373 $167,608 $165,358
Interest expense 11,173 15,972 13,074
Income taxes 3,841 5,834 10,235
The Company signed a three-year non-compete agreement with Calpine
Corporation. Under this agreement, McCormick received a 1996 payment
of $4,500, which is included in "Other (income) expense - net" in the
Consolidated Income Statement.
4. Investments:
The Company owns from 30% to 50% of its unconsolidated food products
affiliates. Although the Company reports its share of net income 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 $30,845 at November 30, 1996.
Summarized year-end information from the financial statements of these
companies representing 100% of the businesses follows:
Unconsolidated Affiliates
1996 1995 1994
Current assets $149,860 $113,486 $144,781
Noncurrent assets 79,566 70,670 80,087
Current liabilities 96,085 77,229 94,847
Noncurrent liabilities 45,988 42,362 43,157
Net sales 327,967 297,823 342,163
Gross profit 121,469 107,257 130,132
Net income 12,907 3,730 16,777
5. Financing Arrangements:
The Company's outstanding debt is as follows:
1996 1995
Short-term borrowings
Commercial paper $ 59,282 $261,705
Other 39,168 23,256
$ 98,450 $284,961
Weighted average interest rate at year end 6.54% 6.84%
Long-term debt
8.95% note due 2001 $ 74,504 $ 74,420
9.00% and 9.75% installment notes
due through 1999 and 2001 16,114 24,318
5.78% - 7.77% medium-term notes due
2004 to 2006 95,000 95,000
7.63% - 8.12% medium-term notes due 2024
with put option in 2004 55,000 55,000
9.34% pound sterling installment note due
through 2001 17,252 16,447
10.00% Canadian dollar bond due 1999 7,400 7,352
3.13% yen note due 1999 2,953 4,993
9.74% Australian dollar note due 1999 9,792 8,918
Other 13,179 9,695
Total excluding non-recourse debt 291,194 296,143
11.68% non-recourse installment note due 2006 - 52,968
$291,194 $349,111
The sale of GEC in 1996 necessitated prepayment of the 11.68% non-recourse
installment note due 2006. The prepayment resulted in an extraordinary loss
of $7,806, net of income tax benefits of $4,990.
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 debt above)
are as follows:
1996 1996 1995 1995
Total Amount Total Amount
Facility Borrowed Facility Borrowed
Available credit
facilities In support
of commercial paper
issuance $300,000 $ - $380,000 $ -
For the benefit of foreign
subsidiaries 90,577 39,168 83,185 23,109
Other 245,000 - 250,000 -
$635,577 $ 39,168 $713,185 $ 23,109
The Company's long-term debt agreements contain various restrictive
covenants, including limitations on the payment of cash dividends.
Under the most restrictive covenants, $215,783 of retained earnings
was available for dividends at November 30, 1996.
The holders of the medium-term notes due 2024 have a one-time option
to require retirement of these notes during 2004. Maturities of long-term
debt during the four years subsequent to November 30, 1997 are as
follows:
1998 - $15,524 2000 - $ 7,566
1999 - $28,173 2001 - $87,179
Credit facilities in support of commercial paper issuance require a
commitment fee of $225. All other credit facilities require no commitment
fee. Credit facilities for other purposes are subject to the availability
of funds.
At November 30, 1996, the Company had unconditionally guaranteed $17,035
of the debt of non-consolidated affiliates.
Interest paid in 1996, 1995 and 1994 was $47,330; $51,641 and $35,576
respectively.
Rental expense under operating leases was $12,428 in 1996; $11,616 in 1995
and $11,333 in 1994. Future annual fixed rental payments for the years
ending November 30, are as follows:
1997 - $10,163 2000 - $ 6,036
1998 - $ 7,447 2001 - $ 5,399
1999 - $ 6,244 Thereafter - $12,744
The Company has guaranteed the residual value of a leased distribution
center at 85% of its original cost.
6. Employee Benefit Plans
The net periodic cost of the Company's employee benefit plans follows:
1996 1995 1994
Pension plans
Defined benefit plans
Service cost $ 5,741 $ 5,509 $ 7,124
Interest cost on
projected benefit
obligations 10,380 9,972 9,909
Actual return on plan
assets (10,284) (14,067) 116
Net amortization and
deferral 1,425 6,904 (6,808)
Net pension cost 7,262 8,318 10,341
Foreign and other retirement
plans 3,072 2,957 2,013
Total pension expense $10,334 $11,275 $12,354
Profit sharing plan expense $ 3,175 $ 3,150 $ 6,250
Other postretirement benefits
Service cost $ 2,026 $ 1,829 $ 2,368
Interest cost 4,603 4,614 3,775
Amortization of prior
service cost (75) (111) -
Total other postretirement
benefit expense $ 6,554 $ 6,332 $ 6,143
Pension Plans
The Company has a non-contributory defined benefit plan (the principal
plan) covering substantially all United States 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 equity securities, fixed income securities and
short-term money market investments. The principal plan and
supplemental plan hold 426,894 and 44,877 shares, respectively, of
the Company's stock at November 30, 1996.
The Company also contributed 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 at September 30, the measurement date:
1996 1995
Actuarial present value
of benefit obligations:
Vested benefit obligation $117,077 $103,788
Accumulated benefit obligation 123,024 108,449
Projected benefit obligations for
service rendered to date $146,336 $132,063
Plan assets at fair value 117,448 101,331
Projected benefit obligations in
excess of plan assets 28,888 30,732
Unrecognized net loss (24,074) (18,330)
Unrecognized transition asset
and prior service cost 1,352 1,894
Pension liability included in the
Consolidated Balance Sheet $ 6,166 $14,296
1996 1995
Significant assumptions:
Discount rate 7.5% 8.0%
Salary scale 4.5% 5.0%
Expected return on plan assets 10.5% 10.5%
The conversion from a direct sales force to a broker sales force for
certain regions in the United States, which was a component of the
business restructuring in 1996, resulted in a curtailment in the
principal plan. The curtailment increased pension liability by $2,520.
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 United States employees other than those
covered by union-sponsored benefit plans. The Profit Sharing Plan assets
consist principally of equity securities, short-term money market
investments and fixed income securities. The Profit Sharing Plan holds
3,059,420 shares of the Company's voting stock at November 30, 1996.
Other 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. Health care benefits are based on the retiree's age and
service at retirement and require other cost-sharing features, such as
deductibles and co-insurance. Life insurance protection is non-contributory.
Other postretirement benefit plans are generally not funded.
The following table sets forth the amounts recognized in the Company's
Consolidated Balance Sheet as of November 30, the measurement date:
1996 1995
Accumulated other postretirement
benefit obligation
Retirees $38,006 $34,961
Fully eligible active participants 3,150 5,887
Other active participants 21,138 18,519
62,294 59,367
Unrecognized net (gain)/loss (496) (1,473)
Unrecognized prior service cost 967 1,616
Accrued other postretirement benefit
liability included in the Consolidated
Balance Sheet $62,765 $59,510
The assumed annual rate of increase in the cost of covered health
care benefits is 10.0% for 1997. It is assumed to decrease gradually
to 4.5% in the year 2007 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, 1996 by $6,711 and the aggregate of the service and
interest cost components of net periodic other postretirement benefit
cost for 1996 by $822.
The assumed weighted average discount rates were 7.5% for 1996 and 8.0%
for 1995.
Stock Purchase and Option Plans
The Company has an Employee Stock Purchase Plan enabling substantially
all United States 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 2,507 employees had outstanding subscriptions for
a total of 240,468 shares with a grant price of $22.00 per share at
November 30, 1996. The last date for exercise of the outstanding
subscriptions is May 31, 1997.
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, 1996, the average exercise price
of outstanding options was $22.79 per share, and the expiration
dates range from March 17, 1997 to March 19, 2006. The changes in
outstanding stock options and stock subscriptions during the past
three years were:
<TABLE>
Common Price
Common Non-Voting Range Per Share
<CAPTION>
(shares in thousands)
<S> <C> <C> <C>
Outstanding December 1, 1993 1,208 1,816 $ 4.41 - $26.00
Granted to 415 employees under
Stock Option Plans 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
Granted to 412 employees under
the Stock Option Plans and
3,146 employees in the Employee
Stock Purchase Plan 376 604 $22.00
Exercised (293) (494) $ 4.41 - $23.00
Cancelled or expired (30) (253) $11.06 - $26.00
Outstanding November 30, 1995 1,301 1,258 $ 4.41 - $26.00
Granted to 372 employees under
Stock Option Plans 534 179 $20.75 - $22.38
Exercised (189) (193) $11.06 - $23.00
Cancelled or expired (9) (144) $ 4.41 - $23.00
Outstanding November 30, 1996 1,637 1,100 $ 4.66 - $26.00
</TABLE>
Under all stock purchase and option plans, there were 1,927,751
shares reserved for future grants and 1,779,837 exercisable at
November 30, 1996 and 2,270,228 shares reserved for future grants
and 1,784,544 exercisable at November 30, 1995.
7. Income Taxes:
For financial reporting purposes, sources of income from consolidated
continuing operations before income taxes were:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <S> <C> <C>
Pretax income
United States $ 59,309 $104,270 $ 55,416
International 2,425 28,336 2,627
$ 61,734 $132,606 $ 58,043
Significant components of income taxes were:
Current
United States $ 33,503 $ 17,793 $ 31,818
State 8,448 5,177 6,683
International 8,288 8,212 8,391
Total current 50,239 31,182 46,892
Deferred
United States (20,036) 13,891 (16,107)
State (2,822) 2,183 (3,262)
International (3,510) 610 (4,008)
Total deferred (26,368) 16,684 (23,377)
$ 23,871 $ 47,866 $ 23,515
Tax expense (benefits) allocated directly to equity components was as follows:
Relating to employee stock options $(118) $(439) $(608)
Relating to foreign currency
translation adjustment - - (540)
</TABLE>
<TABLE>
Differences between income taxes computed at the United States federal
statutory rate and actual income taxes are as follows:
<CAPTION>
1996 1995 1994
Amount Percent Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C>
Tax at United States
statutory rate $21,607 35.0% $46,412 35.0% $20,315 35.0%
State income taxes, net of
United States benefits 2,648 4.3 5,689 4.3 2,490 4.3
(Lower)/higher effective
income taxes on earnings
in other countries 3,929 6.4 (423) (.3) 1,940 3.3
Rehabilitation investment and
other tax credits (2,674) (4.3) (3,553) (2.7) (1,156) (2.0)
Amended prior year
tax return (3,938) (6.4)
Other items 2,299 3.7 (259) (.2) (74) (.1)
Income tax expense $23,871 38.7% $47,866 36.1% $23,515 40.5%
</TABLE>
[photo: Our new distribution center consolidates activities from numerous
facilities.]
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities consist of the following:
<TABLE>
1996 1995
<S> <C> <C>
Current deferred income tax assets
Restructuring liability $ 13,183 $ 9,207
Employee benefits 7,839 8,229
State income tax 5,677 4,987
Accrued liabilities 3,807 4,132
Inventory 2,951 6,535
Bad debt reserve 2,320 807
Prepaid and other assets (2,214) (816)
Other 199 899
Total current deferred income
tax assets $ 33,762 $ 33,980
Noncurrent deferred income tax assets
Employee benefits $ 27,744 $ -
Property, plant and equipment (26,699) -
Accrued liabilities 5,516 -
Intangible assets (2,473) -
Prepaid allowances 1,649 -
Other 350 -
Total noncurrent deferred income
tax assets $ 6,087 $ -
Noncurrent deferred income tax
(liabilities)
Property, plant and equipment $ (4,937) $(51,555)
Employee benefits - 29,376
Accrued liabilities - 3,291
Prepaid allowances - 1,938
Intangible assets - (1,231)
Other - (7,255)
Total noncurrent deferred income
tax (liabilities) $ (4,937) $(25,436)
</TABLE>
In addition to the deferred tax assets shown in the table, the Company
also has certain tax credit carryforwards of $4,888 in 1996 and $3,888
in 1995. These tax credit carryforwards have been fully reserved due
to the restrictive provisions for their use in offsetting future taxes.
Deferred tax liabilities decreased significantly in 1996 primarily
due to deferred tax liabilities of GEC, which was sold, causing
these taxes to become currently payable. The remaining deferred tax
assets are primarily in the United States. The Company has a
history of having United States taxable income and anticipates
future taxable income to realize these assets.
United States income taxes are not provided for unremitted earnings of
international subsidiaries and affiliates. The Company's intention
is to reinvest these earnings permanently or to repatriate the
earnings only when it is tax effective to do so. Accordingly, the
Company believes that any United States tax on repatriated earnings
would be substantially offset by United States foreign tax credits.
Unremitted earnings of such entities were $86,679 at November 30,
1996.
Income taxes paid in 1996, 1995 and 1994 were $44,875;
$38,214 and $84,384 respectively.
8. 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 vote 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.
9. Fair Value and Financial Instruments:
Cash and cash equivalents, trade receivables, short-term borrowings,
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, based on a discounted
cash flow analysis using the Company's current incremental borrowing rate
for debt of similar maturities is as follows:
<TABLE>
<CAPTION>
1996 1995
Fair Carrying Fair Carrying
Value Value Value Value
<S> <C> <C> <C> <C>
Long-term debt
(including current portion) $312,697 $301,671 $405,702 $361,463
</TABLE>
Investments: Investments, consisting principally of investments in
unconsolidated affiliates, are not readily marketable. Therefore,
it is not practicable to estimate their fair value.
Forward exchange contracts for foreign currency: Forward exchange
contracts at November 30, 1996 are summarized as follows:
<TABLE>
<CAPTION>
Nominal Value Fair Value
<S> <C> <C>
Currency sold
UK pound sterling $ 7,255 $(398)
Canadian dollar 8,000 97
Other currencies 10,337 (219)
</TABLE>
All contracts outstanding hedge foreign currency commitments and,
accordingly, have no carrying amount on the balance sheet. The loss
explicitly deferred is $581 and is expected to be realized in 1997
as these transactions are realized. Other currencies in the table above
include the Swiss franc, South African rand, Australian dollar and
Japanese yen.
The fair value of forward exchange contracts is estimated using quoted
market prices for comparable instruments.
10. Business Segments and Geographic Areas:
Business Segments
The Company operates in two business segments, Food Products and
Packaging Products. The Food Products segment manufactures, markets
and distributes spices, seasonings, flavorings and other specialty
food products and sells these products to the retail food market,
the foodservice market and to industrial food processors throughout
the world. The Food Products segment represents the majority of the
Company and, accordingly, all Corporate items and eliminations have
been included in this segment. The Packaging Products segment
manufactures and markets plastic packaging products for the food,
cosmetic and health care industry, predominantly in the United States.
<TABLE>
<CAPTION>
Food Packaging
Products Products Consolidated
<S> <C> <C> <C>
1996
Net sales $1,532,296 $200,210 $1,732,506
Operating income (loss)(F1) 99,169 (5,878) 93,291
Identifiable assets 1,196,514 130,095 1,326,609
Capital expenditures 63,526 11,128 74,654
Depreciation and amortization 51,758 12,030 63,788
1995
Net sales $1,501,763 $189,323 $1,691,086
Operating income 153,287 19,309 172,596
Identifiable assets 1,473,006 141,335 1,614,341
Capital expenditures 70,357 11,783 82,140
Depreciation and amortization 51,083 12,615 63,698
1994
Net sales $1,355,180 $174,234 $1,529,414
Operating income(F2) 64,216 21,826 86,042
Identifiable assets 1,434,251 134,450 1,568,701
Capital expenditures 67,986 19,690 87,676
Depreciation and amortization 49,122 13,418 62,540
<FN>
(F1) Includes restructuring charges of $41,085 for Food Products and
$17,010 for Packaging Products.
(F2) Includes restructuring charges of $70,445 for Food Products and $0
for Packaging Products.
</FN>
</TABLE>
Packaging net sales include sales to the Food Products segment of
$30,186 in 1996; $34,527 in 1995 and $32,542 in 1994.
<TABLE>
Geographic Areas
<CAPTION>
North Other
America Europe Countries Total
<S> <C> <C> <C> <C>
1996
Net sales $1,311,292 $325,683 $95,531 $1,732,506
Net income (loss) - continuing
operations(F1) 52,197 84 (8,806) 43,475
Assets 984,676 254,576 87,357 1,326,609
1995
Net sales $1,276,066 $325,019 $90,001 $1,691,086
Net income - continuing operations 74,090 10,016 2,702 86,808
Assets 1,332,342 223,718 58,281 1,614,341
1994
Net sales $1,236,179 $239,353 $53,882 $1,529,414
Net income (loss) - continuing
operations(F2) 50,486 (6,286) (1,743) 42,457
Assets 1,324,474 202,612 41,615 1,568,701
<FN>
(F1) Includes net restructuring charges of $19,614 for North America,
$10,195 for Europe and $9,773 for Other Countries.
(F2) Includes net restructuring charges of $34,162 for North America and
$12,133 for Europe.
</FN>
Prior year amounts have been restated to conform to the restated
Consolidated Income Statement.
</TABLE>
11. Supplemental Financial Statement Data:
<TABLE>
1996 1995
<S> <C> <C>
Inventories:
Finished products and
work-in-process $125,849 $250,865
Raw materials and supplies 119,240 132,357
Inventories $245,089 $383,222
Property, plant and equipment:
Land and improvements $ 27,260 $ 30,645
Buildings 179,599 211,859
Machinery and equipment 432,525 595,682
Construction in progress 54,410 59,207
Accumulated depreciation (293,400) (372,586)
Property, plant and
equipment - net $400,394 $524,807
Other accrued liabilities:
Payroll and employee benefits $ 42,031 $ 41,935
Restructuring 42,332 18,918
Sales allowances 37,036 36,516
Income taxes 8,734 11,025
Other 106,658 94,486
Other accrued liabilities $236,791 $202,880
Goodwill:
Cost $211,035 $216,140
Accumulated amortization (45,969) (35,389)
Goodwill - net $165,066 $180,751
</TABLE>
<TABLE>
1996 1995 1994
<S> <C> <C> <C>
Income statement:
Depreciation $49,222 $45,064 $46,329
Research and development 12,216 12,015 11,162
Average shares outstanding 80,641 81,181 81,240
</TABLE>
[photo: Our Guangzhou facility opened with a Chinese celebration.]
12. Quarterly Data (Unaudited):
<TABLE>
1996 Quarters
<CAPTION>
1st 2nd 3rd 4th Year
<S> <C> <C> <C> <C> <C>
Net sales $ 395,799 $ 393,828 $ 405,451 $ 537,428 $1,732,506
Cost of goods sold 262,507 273,333 269,115 323,077 1,128,032
Gross profit 133,292 120,495 136,336 214,351 604,474
Selling, general and administrative
expense 110,828 98,563 103,184 140,513 453,088
Restructuring charge - - 57,538 557 58,095
Operating income 22,464 21,932 (24,386) 73,281 93,291
Interest expense 8,773 7,952 8,082 9,004 33,811
Other (income) expense - net (1,186) 818 524 (2,410) (2,254)
Income from consolidated continuing
operations before income taxes 14,877 13,162 (32,992) 66,687 61,734
Income taxes 5,361 4,695 (9,871) 23,686 23,871
Net income from consolidated
continuing operations 9,516 8,467 (23,121) 43,001 37,863
Income from unconsolidated operations 296 929 1,557 2,830 5,612
Net income from continuing operations 9,812 9,396 (21,564) 45,831 43,475
Income from discontinued operations,
net of income taxes (462) 1,599 5,112 - 6,249
Net income before extraordinary item 9,350 10,995 (16,452) 45,831 49,724
Extraordinary loss from early
extinguishment of debt, net of
income tax benefit - - (7,806) - (7,806)
Net income $ 9,350 $ 10,995 $(24,258) $ 45,831 $ 41,918
Earnings per share
Continuing operations $.12 $.12 $(.26) $.58 $.54
Discontinued operations - .02 .06 - .08
Extraordinary loss from early
extinguishment of debt - - (.10) - (.10)
Earnings per share $.12 $.14 $(.30) $.58 $.52
</TABLE>
<TABLE>
1995 Quarters
<CAPTION>
1st 2nd 3rd 4th Year
<S> <C> <C> <C> <C> <C>
Net sales $392,233 $408,504 $384,008 $506,341 $1,691,086
Cost of goods sold 261,850 270,940 260,621 313,524 1,106,935
Gross profit 130,383 137,564 123,387 192,817 584,151
Selling, general and administrative
expense 94,751 103,839 92,246 124,623 415,459
Restructuring charge (credit) (3,904) - - - (3,904)
Operating income 39,536 33,725 31,141 68,194 172,596
Interest expense 9,692 9,471 9,655 10,480 39,298
Other (income) expense - net (1,831) 1,270 459 794 692
Income from consolidated continuing
operations before income taxes 31,675 22,984 21,027 56,920 132,606
Income taxes 11,910 8,342 7,109 20,505 47,866
Net income from consolidated continuing
operations 19,765 14,642 13,918 36,415 84,740
Income from unconsolidated operations (796) 466 706 1,692 2,068
Net income from continuing operations 18,969 15,108 14,624 38,107 86,808
Income from discontinued operations,
net of income taxes 377 934 5,291 4,111 10,713
Net income $ 19,346 $ 16,042 $ 19,915 $ 42,218 $ 97,521
Earnings per share
Continuing operations $.24 $.19 $.18 $.47 $1.07
Discontinued operations - .01 .07 .05 .13
Earnings per share $.24 $.20 $.25 $.52 $1.20
</TABLE>
During the third quarter of 1996, the Company sold Gilroy Foods, Inc. and
Gilroy Energy Company and reported these businesses as discontinued
operations.
Changes in previously reported quarterly results are due to the
reclassification of discontinued operations using the accounting
methods described in Note 3.
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.
/s/Robert J. Lawless
Robert J. Lawless
President & Chief Executive Officer
/s/Robert G. Davey
Robert G. Davey
Executive Vice President & Chief Financial Officer
/s/J. Allan Anderson
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, 1996
and 1995 and the related consolidated statements of income, cash flows
and shareholders' equity for each of the three years in the period ended
November 30, 1996. 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, 1996 and 1995 and
the consolidated results of their operations and their cash flows for each
of the three years in the period ended November 30, 1996 in conformity
with generally accepted accounting principles.
/s/Ernst & Young LLP
Baltimore, Maryland
January 16, 1997
Management's Discussion and Analysis
Overview
For 1996, the Company reported net income of $41.9 million or $.52 per
share compared to $97.5 million or $1.20 per share last year. During
1996, the Company recorded a business restructuring charge,
reported discontinued operations for the sale of both Gilroy Foods,
Incorporated and Gilroy Energy Company, Inc. and recorded an
extraordinary loss on prepayment of debt associated with Gilroy
Energy. Excluding these transactions, net income on a comparable
basis was $83.1 million or $1.03 per share compared to $84.5
million or $1.04 per share last year.
Comparable earnings (excluding restructuring, discontinued operations
and the extraordinary item) for the first half of the year were less than
the same period in 1995. However, the second half of 1996 showed
improved comparable earnings over the same period in 1995.
[Graph]
Net Sales
(Continuing Operations)
1992 1993 1994 1995 1996
(dollars in millions)
$1,324 $1,401 $1,529 $1,691 $1,733
Business Restructuring
Over the past several years, the Company has experienced a significantly
increased global competitive environment. Additionally, there have been
several changes in management of the Company. These two factors have
been the primary drivers in a reassessment of the global strategic
direction and focus of the Company. As a result, the Company conducted a
portfolio review of its businesses with the intent of increasing
focus on core businesses. Additionally, the Company is continually
evaluating methods of improving its cost structure as it responds
to the competitive environment.
As a result of both the portfolio review and the cost structure
improvement process, the Company began implementation of a restructuring
plan and recorded a restructuring charge of $58.1 million in 1996.
This charge reduced net income by $39.6 million or $.49 per share.
In addition, there are approximately $1.9 million of additional charges
($.02 per share) directly related to the restructuring plan which could
not be accrued but will be expensed as the plan is implemented.
Specific actions under this plan include: the divestiture of
certain small non-core businesses; the divestiture of Giza National
Dehydration Company (Giza) of Egypt, which is consistent with the
Company's sale of Gilroy Foods, Giza's parent company; closing the
Brooklyn, New York packaging plant; the exit from certain minor,
non-core product lines; the rationalization of certain overseas
manufacturing facilities; and in our consumer business, the
conversion from a direct sales force to a broker sales force for
certain regions in the U.S.
Major components of the restructuring charge include: severance and
personnel costs of $10.0 million; a $44.6 million write-down to net
realizable value of assets and businesses identified for disposal,
and other exit costs of $3.6 million. The $1.9 million of additional
charges which will be expensed during the implementation are
principally costs to move equipment and personnel.
These actions are expected to be completed in 1997 and will require
net cash outflows of approximately $12.0 million. Net sales of the
small non-core businesses and Giza, which are being divested by these
actions, were approximately 7% of consolidated net sales.
The Company believes that the benefits from these actions will be
twofold. First, the Company will be strategically aligned to concentrate
on its core businesses. Second, the Company anticipates savings as
a result of these actions. These savings will be used to invest in
the Company's brands through product development and consumer promotional
activity, to maintain low-cost producer status in our core
businesses and to support our global expansion strategy.
The Company believes that this restructuring will enhance its ability
to achieve its financial objectives. Realization of the savings
from these actions, however, is dependent on the timing and
effectiveness of the execution of these actions and the response of
our competitors and customers.
As of November 30, 1996, the Brooklyn, New York packaging plant has
been closed with production transferred to another U.S. plant. Also,
the conversion to a broker sales force and exit from certain minor
non-core product lines is complete. In December 1996, the Company
entered into agreements to sell the Minipack business in the United
Kingdom and Giza in Egypt.
Discontinued Operations
On August 29, 1996, the Company sold substantially all of the assets of
Gilroy Foods, Incorporated (GFI) and Gilroy Energy Company, Inc. (GEC) to
ConAgra, Inc. and Calpine Corporation, respectively, for $263.3
million. GFI manufactures and sells dehydrated onion, garlic,
capsicum and vegetable products. GEC operates an energy
cogeneration facility.
The sale of GFI and GEC resulted in a $.5 million loss ($.3 million after
tax) and has been included in the caption, "Income from discontinued
operations, net of income taxes" in the Consolidated Income Statement.
The operating results of GFI and GEC have been reclassified on the
Consolidated Income Statement to the caption, "Income from discontinued
operations, net of income taxes," for all periods presented.
The sale of Gilroy Energy Company necessitated prepayment of the 11.68%
non-recourse installment note. The prepayment resulted in an
extraordinary net loss of $7.8 million. The Company used the
proceeds of the business sales net of the debt prepayment to pay
down short-term borrowings.
Results of Operations
1996 compared to 1995
The charts that follow set forth the changes in net sales from
continuing operations when compared to the prior years. Sales from
continuing operations increased 2.4% to $1.7 billion. The sales comparison
is impacted by a number of non-recurring factors. First, in 1995,
the Company changed the year-end reporting period for foreign
subsidiaries from October 31 to November 30 to provide uniform reporting
worldwide, which had the effect of an additional month of sales for
the foreign units in 1995. Also in 1995, the Company sold its frozen
food business at the end of the first quarter. Thus, one quarter's sales
for this divested business is included in 1995 sales. In 1996, the Cake Mate
brand was transferred to a joint venture to form Signature Brands,
the sales of which are no longer accounted for in the Company's
consolidated results. These changes had the effect of reducing
sales by 4.2% versus 1995. On a comparable basis, after adjusting
for these factors, sales increased 6.6%.
Sales were up due to both volume and price increases, partially offset
by unfavorable foreign exchange translations. Retail growth in the
Americas Zone was due to price increases and volume gains in a number of
heavily promoted product lines. Sales increases for the European Zone were
masked by the change in fiscal year mentioned above and unfavorable
currency exchange translations. Sales continue to grow strongly in
the Asia/Pacific Zone as we expand into new markets and introduce
new products.
Sales of unconsolidated operations increased 10.1% in 1996 due principally
to the sales of Signature Brands, a new joint venture in 1996. Foreign
exchange translations, primarily due to a weaker Japanese yen and Mexican
peso, had a negative effect on unconsolidated sales.
Operating income, excluding restructuring, as a percentage of net sales
decreased from 10.0% in 1995 to 8.7% in 1996.
Gross profit as a percentage of sales increased from 34.5% in 1995 to
34.9% in 1996. Gross margin percentages increased in both our U.S. retail
and industrial businesses as compared to last year. These were partially
offset by a slightly reduced gross margin percentage in our European
business and a more significant reduction in our U.S. packaging business.
In the U.S. retail business, gross margins improved during the year
due to stronger sales in our higher margin core businesses,
particularly in the second half of the year. The decreased gross
margin percentage in packaging products is due to competitive
pricing pressures, a write-off of inventory for products that have
been discontinued and manufacturing inefficiencies.
Selling, general and administrative expenses were higher than last
year on both a dollar basis and as a percentage of sales. The increase is
mainly due to additional advertising and promotion spending as the
Company continues to market the McCormick brand name more aggressively,
the adjustment of certain employee benefit accruals in both years and
increased information systems spending to allow the Company's systems
to cope with the change to the year 2000.
Interest expense decreased $5.5 million in 1996 as compared to
1995. This decrease is due to both declines in borrowing levels and
lower borrowing rates. In reclassifying the Statement of Income for
discontinued operations, interest expense was allocated to
discontinued operations. See Notes to Consolidated Financial
Statements for the amounts and methods of allocation used.
Other (income) expense - net includes $4.5 million of income from the
non-compete agreement relating to the GEC sale.
The Company recorded income tax expense on Income from Continuing
Operations at an effective rate of 38.7% in 1996 as compared to a
rate of 36.1% in 1995. The increased rate is due to certain
restructuring charges which are not tax deductible and the mix of
tax rates from differing tax jurisdictions. Excluding the effects of the
restructuring, the Company's effective tax rate is approximately
35.5% for 1996. This tax rate is lower in 1996 than what can be
expected in the future due to the favorable effect of refunds of
certain U.S. tax credits from prior years. In reclassifying the
Statement of Income for discontinued operations, income taxes were
allocated to discontinued operations. See Notes to Consolidated
Financial Statements for the amounts and methods of allocation
used.
Deferred tax liabilities decreased significantly in 1996
primarily due to deferred tax liabilities of GEC which was sold,
causing these taxes to become currently payable. The remaining
deferred tax assets are primarily in the United States. The Company
has a history of having United States taxable income and
anticipates future taxable income to realize these assets.
Income from unconsolidated operations improved in 1996 as compared
to 1995 mainly due to improved results of our Mexican joint venture
and the results of the Company's new joint venture, Signature Brands.
In the first quarter of fiscal 1995, the Company changed the end of
the reporting period for foreign subsidiaries from October 31 to
November 30 to provide uniform reporting on a worldwide basis.
Accordingly, an additional month of operation results for those
subsidiaries is included in the first quarter 1995 results, which
increased net income by $1.4 million.
Results of Operations
1995 compared to 1994
Sales from continuing operations grew 10.6% in 1995 to $1.7 billion.
The substantial growth in sales was primarily the result of volume gains
across all operating units with particularly strong performance from the
industrial, European and Asia/Pacific operations.
Sales from businesses acquired in 1994 contributed to the increase
over prior year sales. Additionally, in the first quarter of fiscal 1995,
the Company changed the end of the reporting period for foreign
subsidiaries from October 31 to November 30 to provide uniform
reporting on a worldwide basis. Net sales before acquisitions,
divestitures and the change for foreign susidiaries grew 8.1% over
1994.
Sales of unconsolidated operations in 1995 were $297.8 million, a
decrease of 13.0% versus the prior year. The decrease was primarily
due to the devaluation of the peso and resulting economic problems
in Mexico. The Mexican peso was devalued approximately 52% in 1995.
While we maintained a high market share for our Mexican mayonnaise
products, unit volumes declined 10% as a result of the economic conditions
that weakened consumer purchasing power.
<TABLE>
<CAPTION>
Sales from Continuing Operations
1996 1995 1994
<S> <C> <C> <C>
(in millions)
Americas
Retail $615,719 $ 600,606 $ 582,751
Industrial & foodservice 549,739 547,415 523,885
Europe
Retail 223,327 228,097 186,074
Industrial 97,698 94,262 55,567
Asia/Pacific
Retail 41,944 34,166 18,258
Industrial & foodservice 34,055 31,744 21,187
Packaging 170,024 154,796 141,692
Total $1,732,506 $1,691,086 $1,529,414
</TABLE>
<TABLE>
Sales from Continuing Operations
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
(percentage increase)
Americas
Retail 2.5% 3.1% 2.2%
Industrial & foodservice 0.4 4.5 10.7
Europe
Retail (2.1) 22.6 13.3
Industrial & foodservice 3.6 69.6 45.1
Asia/Pacific
Retail 22.8 87.1 20.5
Industrial & foodservice 7.3 49.8 42.8
Packaging 9.8 9.2 13.4
Total 2.4% 10.6% 9.2%
</TABLE>
<TABLE>
Sales Increase Analysis
<CAPTION>
1996 1995 1995
<S> <C> <C> <C>
Volume change 2.6% 4.6% 5.1%
Price and mix change 4.8 3.2 1.4
Foreign currency change (0.8) 0.3 (0.0)
Other Changes (F1) (4.2) 2.5 2.7
Total change from continuing
operations 2.4% 10.6% 9.2%
<FN>Other changes include the disposal of businesses which are not accounted for as
discounted operations, business acquisitions and the effect of the change in
reporting period for foreign subsidiaries.
</FN>
</TABLE>
The Company's gross profit margin decreased to 34.5% versus 36.5% for the
same period last year. The overall decline was a result of higher raw
material costs and higher mix of lower margin industrial sales. Multiple
cost increases in plastic resins and corrugated packaging negatively
impacted margins in our food and plastics businesses. Additionally,
increases in pepper costs had an adverse impact on all of our food
businesses. Gross margins improved as expected in our industrial flavor
and seasoning business. Competitive intensity in most of the markets in which we
do business increased in 1995.
Operating income increased to 10.2% of sales from 5.6% in 1994. Excluding
the restructuring charge and credit, operating profit margins declined
in 1995 to 10.0% from 10.2% in the prior year. Cost savings, mainly in the
administrative functions, partially offset weakened gross profit
margins. These savings are the result of the Company's restructuring
program.
Interest expense increased to $39.3 million in 1995 versus $25.6 million
in 1994. The higher financing costs were caused by higher debt levels.
Debt was used to finance acquisitions made in the previous year, higher
levels of prepaid allowances and higher working capital levels. Increases
in working capital were partially caused by temporary inventory buildup as
we consolidated plants identified for closing in our restructuring
program. We also made strategic purchases of certain commodities which
were expected to rise in cost and/or be in short supply.
Unconsolidated income from joint ventures decreased to $2.1 million
in 1995, down from $7.9 million in 1994. As mentioned previously,
the decline was primarily the result of weakness in our Mexican
operations brought on by the devaluation of the Mexican peso.
The Company's effective income tax rate for the year was 36.1%, 4.4
percentage points lower than the comparable rate for 1994. Factors
contributing to the favorable rate were lower effective
international income tax rates and higher United States income tax
credits.
Earnings per share for 1995 were $1.20, up 60% over $.75
in 1994. Excluding the restructuring charge in 1994 of $.57 and the
restructuring credit of $.03 in 1995, earnings per share in 1995
were down 11% versus the prior year. Net income was $97.5 million
in 1995, up 59% over 1994. Excluding the restructuring charge and
credit in 1994 and 1995 respectively, net income was down 11%.
Income from discontinued operations decreased mainly due to lower
crop yields for Gilroy Foods garlic.
Restructuring - 1994
In the fourth quarter of 1994, the Company recorded a charge of $70.4
million for restructuring its business operations. At November 30,
1996, the remaining restructuring liability is $14.9 million
principally for realignment of some of our operations in the United
Kingdom which will be completed in early 1997. The Company has
reduced its work force by approximately 540 positions, an
industrial products plant has been closed, a frozen food business
has been sold and a number of administrative activities have been
consolidated. A foodservice products plant was closed in the second
quarter of 1996, and production was transferred to another
facility. A consolidated distribution facility was also completed
in the second quarter of 1996.
Foreign Currency Management
The Company is subject 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 can increase or decrease the reported net
assets of foreign subsidiaries and reported net investments in foreign
affiliates. During 1995, the Mexican peso devaluation reduced the
Company's equity by $17.9 million. Generally, the Company's foreign
subsidiaries utilize local borrowings to limit their net asset exposure.
Additionally, management periodically enters into hedge contracts to further
reduce translation exposure. At year end, the Company did not have
any hedges in place to cover net asset exposures.
The Mexican economy has experienced increased inflation over the past three
years. This situation will cause the Company to consider Mexico as
highly inflationary for accounting purposes. Starting January 1,
1997, all translation gains or losses for our Mexican operations
will be recorded in the income statement rather than the
translation component of equity.
The Company is also exposed to foreign exchange risk for transactions
that are denominated in other than the applicable local currency. The
Company assesses its risk to foreign currency fluctuation along with other
business risks and opportunities that are caused by fluctuations in foreign
currencies. To reduce these risks, the Company may, from time to
time, enter into hedging contracts. The amount of hedge contracts
outstanding and their fair market value are summarized in the Notes
to Consolidated Financial Statements.
Financial Condition
In the Consolidated Statement of Cash Flows, cash flow from operating
activities increased from $59.4 million in 1995 to $201.7 million
in 1996.
Net income for 1996 was significantly below 1995.However, after adding
back the non-cash charges and credits for restructuring, 1996 was slightly
improved as compared to last year. The principal reason for the increased
operating cash flow is the Company's focus on asset management. All
working capital accounts showed improvement to last year and, in total,
contributed significantly to the increased cash flow. The decline in
prepaid allowances also contributed to increased operating cash flow.
Investing activities generated cash of $187.9 million in 1996 as
compared to a cash outflow of $78.5 million last year. The
significant change is mainly due to cash proceeds received on the
sale of GFI and GEC. An additional $12 million is still due in the
form of a note receivable on these sales. Capital expenditures are
lower than last year as the Company focuses its efforts on more
effective capital spending. The proceeds from the sale of assets
include the sale of certain assets to a joint venture which is now
operating the Cake Mate business and the sale of property no longer
used in the business.
<TABLE>
[Graph in chart form]
Capital Expenditures
<CAPTION>
1992 1993 1994 1995 1996
(dollars in millions)
<S> <C> <C> <C> <C> <C>
Capital Expenditures $79.3 $76.1 $87.7 $82.1 $74.7
Depreciation 40.0 47.0 56.8 56.3 57.9
</TABLE>
Cash flow from financing activities was a significant use of funds in
1996 as the proceeds from the sale of GFI and GEC were used to reduce
both short-term and long-term debt.
[Graph in chart form]
Cash Flows
From Operations
1992 1993 1994 1995 1996
(dollars in millions)
$117.3 $80.6 $72.5 $59.4 $201.7
In August 1996, the Company announced a new repurchase program to buy back
up to 10 million shares of the Company's outstanding stock from time to time
in the open market. The Company's prior repurchase program (2 million shares) is
complete.
The Company's ratio of debt to total capital was 47.1% as of November 30,
1996, down significantly from 55.5% at November 30, 1995. The improvement
in the debt to capital ratio was the result of the sale of GFI and GEC and
working capital improvement programs.
Management believes that internally generated funds and its existing
sources of liquidity are sufficient to meet current and anticipated
financing requirements over the next 12 months.
Over the last 10 years, dividends have increased 14 times and have
risen at a compounded annual rate of 17% since 1987. Total
dividends paid during fiscal 1996 were $45.3 million versus $42.2
million in 1995 and $39.0 million in 1994. The quarterly dividends
paid during the past three years are summarized below:
1996 1995 1994
First Quarter $ .14 $ .13 $ .12
Second Quarter .14 .13 .12
Third Quarter .14 .13 .12
Fourth Quarter .14 .13 .12
Total $ .56 $ .52 $ .48
In December 1996, the Board of Directors approved a 7% increase in the
quarterly dividend from $.14 to $.15 per share.
The high and low closing prices of common stock during fiscal quarters as
reported on the NASDAQ national market follow:
1996 1995
Quarter ended High Low High Low
February 28 $24.25 $21.25 $22.63 $18.13
May 31 23.13 21.88 23.25 20.44
August 31 22.38 19.25 23.25 20.75
November 30 25.00 20.75 26.50 21.50
[Bar graph]
Debt to Total Capital
1992 1993 1994 1995 1996
42.5% 48.0% 54.6% 55.5% 47.1%
[Bar graph]
Dividends Paid Per Share
1992 - $.38
1993 - $.44
1994 - $.48
1995 - $.52
1996 - $.56
Directors and Officers
Board of Directors
Executive Committee
Charles P. McCormick, Jr.
Robert J. Lawless
Robert G. Davey
Carroll D. Nordhoff
James J. Albrecht
James S. Cook +/
Executive in Residence
College of Business Administration
Northeastern University
Dr. Freeman A. Hrabowski, III
President
University of Maryland Baltimore County
George W. Koch +/
Of Counsel
Kirkpatrick & Lockhart
George V. McGowan /
Chairman of the Executive Committee
Baltimore Gas and Electric Company
Robert W. Schroeder
Vice President & General Manager
McCormick/Schilling Division
Richard W. Single, Sr.
William E. Stevens +/
Senior Vice President
Mills & Partners
Karen D. Weatherholtz
+ Audit Committee Member
/ Compensation Committee Member
Corporate Officers
Charles P. McCormick, Jr.
Chairman of the Board
Robert J. Lawless
President, Chief Executive Officer
Susan L. Abbott
Vice President - Quality Assurance
James J. Albrecht
Vice President -
Science & Technology
J. Allan Anderson
Vice President & Controller
Allen M. Barrett, Jr.
Vice President - Corporate
Communications
Robert G. Davey
Executive Vice President &
Chief Financial Officer
Randall B. Jensen
Vice President -
Operations Resources
Christopher J. Kurtzman
Vice President & Treasurer
C. Robert Miller, II
Vice President - Management
Information Systems
Marshall J. Myers
Vice President - Research &
Technical Development
Carroll D. Nordhoff
Executive Vice President
Robert C. Singer
Vice President -
Acquisitions &
Financial Planning
Richard W. Single, Sr.
Vice President - Government Affairs
& Secretary
Robert W. Skelton
Vice President, General Counsel &
Assistant Secretary
Karen D. Weatherholtz
Vice President -
Human Relations
W. Geoffrey Carpenter
Assistant Secretary &
Associate General Counsel
David P. Smith
Assistant Treasurer
Gordon M. Stetz, Jr.
Assistant Treasurer -
Financial Services
[photo: The Board of Directors: left to right, seated: Koch, McGowan,
Weatherholtz, Single, Nordhoff, Lawless, McCormick; standing: Stevens,
Cook, Albrecht, Hrabowski, Schroeder, Davey.]
McCormick Worldwide
The Americas Market Zone
Consolidated Operating Units
McCormick/Schilling Division
Hunt Valley, Maryland
Robert W. Schroeder
Vice President & General Manager
Food Service Division
Hunt Valley, Maryland
F. Christopher Cruger
Vice President & General Manager
McCormick Canada, Inc.
London, Ontario, Canada
Gerald W. Snowden
President
McCormick de Centro America, S.A.
de C.V.
San Salvador, El Salvador
Arduino Bianchi
Managing Director
McCormick de Venezuela, C.A.
Caracas, Venezuela
Alberto Diaz
Managing Director
Affiliates
McCormick de Mexico, S.A. de C.V. (50%)
Mexico City, Mexico
Signature Brands, L.L.C. (50%)
Ocala, Florida
European Market Zone
John C. Molan
Group Vice President - Europe
Consolidated Operating Units
Global Food Ingredients Europe
Buckinghamshire, England
Cameron D. F. Savage
Managing Director
McCormick U.K. plc
Buckinghamshire, England
John C. Molan
Managing Director
McCormick Glentham (Pty) Limited
Midrand, South Africa
John C. Eales
Managing Director
McCormick S.A.
Regensdorf Z.H., Switzerland
Ernest Abouchar
Managing Director
Oy McCormick Ab
Helsinki, Finland
Risto T. Heiskanen
Managing Director
Asia/Pacific Market Zone
Gary W. Zimmerman
Group Vice President - Asia/Pacific
Consolidated Operating Units
Bruce S. Galanter
Vice President & Managing Director -
Australia/Indonesia
McCormick Foods Australia Pty. Ltd.
Clayton, Victoria, Australia
McCormick (Guangzhou) Food Company, Ltd.
Guangzhou, China
Hector Veloso
General Manager
McCormick Ingredients Southeast Asia Private Limited
Jurong, Republic of Singapore
K. K. Foo
Operations Director
Shanghai McCormick Seasoning & Foodstuffs Co., Ltd. (90%)
Shanghai, People's Republic of China
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
Stange (Japan) K.K. (50%)
Tokyo, Japan
McCormick Flavor Group
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 Pesa, S.A. de C.V.
Mexico City, Mexico
Robert E. HornPresident
Affiliates
AVT-McCormick Ingredients Limited (50%)
Cochin, India
P.T. Sumatera Tropical Spices (30%)
Padang, Sumatera, Indonesia
Supherb Farms (50%)
Turlock, California
Vaessen Shoemaker de Mexico, S.A. de C.V. (50%)
Mexico City, Mexico
Packaging Group
Consolidated Operating Units
Setco, Inc.
Anaheim, California
Donald E. Parodi
President
Tubed Products, Inc.
Easthampton, Massachusetts
Alan D. Wilson, President
[Inside back cover]
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 - 1997
Record Date Payment Date
3/31/97 4/10/97
6/30/97 7/11/97
10/2/97 10/13/97
12/31/97 1/23/98
Shareholder/Investor Relations
For inquiries concerning shareholder records, stock certificates,
dividends or dividend reinvestment, please contact Shareholder Relations
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 (SEC) on Form 10-K, contact the
Treasurer's Office at the Corporate address or contact the SEC web
site:
http://www.sec.gov
For general questions about McCormick or information in the annual or
quarterly reports, contact the Treasurer's Office at the Corporate address
or telephone:
Report Ordering: (800) 424-5855 or
(410) 771-7537
Analysts' Inquiries: (410) 771-7244
Another source of McCormick information is located on the Internet.
Our web site is:
http://www.mccormick.com
Missing or Destroyed Certificates or Checks
Shareholders whose stock certificates or dividend checks are missing or
destroyed should notify Shareholder Relations 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 Shareholder Relations 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
Contact Shareholder Relations 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 Shareholder Relations 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 Shareholder Relations.
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 Shareholder Relations at:
(800) 424-5855 or
(410) 771-7537
Trademarks
Use of the (r within a circle) or "tm" in this annual report indicates
owned or used by McCormick & Conpany, Inc. and its subsidiaries.
This report is printed on recycled paper.
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [ x ]
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McCORMICK & COMPANY, INCORPORATED
(Name of Registrant as specified in its Charter)
The Board of Directors of McCormick & Company, Incorporated
(Name of Person(s) Filing Proxy Statement)
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[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
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provided by Exchange Act Rule 0-11(a)(2) and identify the filing
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McCORMICK & COMPANY, INCORPORATED
18 Loveton Circle
Sparks, Maryland 21152
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MARCH 19,
1997
The Annual Meeting of the Stockholders of McCormick & Company,
Incorporated will be held at the Hunt Valley Inn, Hunt Valley,
Maryland at 10:00 a.m., March 19, 1997, for the purpose of
considering and acting upon:
(a) the election of directors to act until the next Annual
Meeting of Stockholders or until their respective successors are
duly elected and qualified;
(b) the approval of the 1997 Employees Stock Purchase Plan,
which Plan, as set forth in Exhibit A to the Proxy Statement,
has been adopted by the Board of Directors subject to the
approval of the stockholders;
(c) the approval of the 1997 Stock Option Plan, which Plan, as
set forth in Exhibit B to the Proxy Statement, has been adopted
by the Board of Directors subject to the approval of the
stockholders;
(d) the ratification of the appointment of Ernst & Young LLP
as independent auditors of the Company to serve for the 1997 fiscal
year; and
(e) any other matters that may properly come before such
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on
December 31, 1996 as the record date for the determination of
stockholders entitled to notice of, and to vote at, the Meeting
or any adjournments thereof. Only holders of Common Stock shall
be entitled to vote. Holders of Common Stock Non-Voting are
welcome to attend and participate in this meeting.
IF YOU ARE A HOLDER OF COMMON STOCK, A PROXY CARD IS ENCLOSED.
PLEASE SIGN THE PROXY CARD PROMPTLY AND RETURN IT IN THE
ENCLOSED SELF-ADDRESSED ENVELOPE IN ORDER THAT YOUR STOCK MAY BE
VOTED AT THIS MEETING. THE PROXY MAY BE REVOKED BY YOU AT ANY
TIME BEFORE IT IS VOTED.
February 19, 1997 Richard W. Single, Sr.
Secretary
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished on or about February 19,
1997 to the holders of Common Stock in connection with the
solicitation by the Board of Directors of the Company of proxies
to be voted at the Annual Meeting of Stockholders or any
adjournments thereof. Any proxy given may be revoked at any time
insofar as it has not been exercised. Such right of revocation
is not limited or subject to compliance with any formal
procedure. The shares represented by all proxies received will
be voted in accordance with instructions contained in the
respective proxies. The cost of the solicitation of proxies will
be borne by the Company. In addition to the solicitation of
proxies by use of the mails, officers and regular employees of
the Company may solicit proxies by telephone, telegraph, or
personal interview. The Company also may request brokers and
other custodians, nominees, and fiduciaries to forward proxy
soliciting material to the beneficial owners of shares held of
record by such persons, and the Company may reimburse them for
their expenses in so doing.
At the close of business on December 31, 1996, there were
outstanding 11,494,557 shares of Common Stock which represent
all of the outstanding voting securities of the Company. Except
for certain voting limitations imposed by the Company's Charter
on beneficial owners of ten percent or more of the outstanding
Common Stock, each of said shares of Common Stock is entitled to
one vote. Only holders of record of Common Stock at the close of
business on December 31, 1996 will be entitled to vote at the
meeting or any adjournments thereof.
PRINCIPAL STOCKHOLDERS
On December 31, 1996, the assets of The McCormick Profit
Sharing Plan and PAYSOP (the "Plan") included 2,964,165 shares
of the Company's Common Stock, which represented 25.8% of the
outstanding shares of Common Stock. The address for the Plan is
18 Loveton Circle, Sparks, Maryland 21152. The Plan is not the
beneficial owner of the Common Stock for purposes of the voting
limitations described in the Company's Charter. Each Plan
participant has the right to vote all shares of Common Stock
allocated to such participant's Plan account. The Plan's
Investment Committee possesses investment discretion over the
shares, except that, in the event of a tender offer, each
participant of the Plan is entitled to instruct the Investment
Committee as to whether to tender Common Stock allocated to such
participant's account. Membership on the Investment Committee
consists of three directors, Robert G. Davey, Carroll D.
Nordhoff, and Karen D. Weatherholtz, and the Company's Vice
President & Controller, J. Allan Anderson, and the Company's
Vice President & Treasurer, Christopher J. Kurtzman. Mary D.
McCormick, whose address is 830 West 40th Street, Baltimore,
Maryland 21211, held 609,012 shares of Common Stock as of
December 31, 1996, representing 5.3% of the outstanding shares
of Common Stock. Harry K. Wells and his wife Lois L.Wells,
whose address is P. O. Box 409, Riderwood, Maryland 21139, held
in two trusts 586,623 shares of Common Stock as of December 31,
1996, representing 5.1% of the outstanding shares of Common
Stock.
ELECTION OF DIRECTORS
On March 19, 1997, Mr. George W. Koch will retire as a member
of the Board of Directors of the Company. The Company is
grateful to Mr. Koch for his contributions during his years of
service.
On December 16, 1996, Mr. Robert W. Schroeder was elected as
a member of the Board of Directors. Dr. Freeman A. Hrabowski, III
was elected as a member of the Board of Directors effective
January 16, 1997. Neither has previously stood for election to
the Board at an Annual Meeting of Stockholders.
The persons listed in the following table have been nominated
for election as directors to serve until the next Annual Meeting
of Stockholders or until their respective successors are duly
elected and qualified. Management has no reason to believe that
any of the nominees will be unavailable for election. In the
event a vacancy should occur, the proxy holders reserve the
right to reduce the total number of nominations for election.
There is no family relationship between any of the nominees. No
nominee has a substantial interest in any matter to be acted
upon at the Annual Meeting.
The following table shows, as of December 31, 1996, the names
and ages of all nominees, the principal occupation and business
experience of each nominee during the last five years, the year
in which each nominee was first elected to the Board of
Directors, the amount of securities beneficially owned by each
nominee, and directors and executive officers as a group, and
the nature of such ownership. Except as otherwise noted, no
nominee owns more than one percent of either class of the
Company's common stock.
REQUIRED VOTE OF STOCKHOLDERS. The favorable vote of at least a
majority of the shares of Common Stock of the Company present in
person or by proxy at a meeting at which a quorum is present is
required for the election of each nominee.
<TABLE>
The Board of Directors recommends that stockholders vote FOR each
of the nominees listed below.
<CAPTION>
Year First
Principal Occupation & Elected Amount and Nature<F1>of
Name Age Business Experience Director Beneficial Ownership
<S> <C> <C> <C> <C>
Common
Common Non-Voting
James J. Albrecht 64 Vice President - Science & 1987 81,530 49,256
Technology (1996 to Present);
Group Vice President --
Asia/Pacific (1993 to 1996);
Vice President & Managing
Director - International
Group (1989 to 1993)
James S. Cook 68 Executive in Residence, 1982 1,750 3,710
Northeastern University
(1986 to Present)
Robert G. Davey 47 Executive Vice President & 1994 22,945 4,614
Chief Financial Officer
(1996 to Present); Vice
President & Chief Financial
Officer (1994 to 1996);
President, McCormick Canada,
Inc., a subsidiary of the
Company (1991 to 1994)
Freeman A. Hrabowski, III 46 President, University of 1997 - 0 - - 0 -
Maryland Baltimore County
(1992 to Present); Executive
Vice President, University
of Maryland Baltimore County
(1987 to 1992)
Robert J. Lawless 50 President (1996 to Present), 1994 23,453 22,725
Chief Executive Officer
(1997 to Present) & Chief
Operating Officer (1995 to
Present), Executive Vice
President (1995 to 1996);
Senior Vice President - The
Americas (1994 to 1995);
Group Vice President -
Europe (1993 to 1994); Vice
President & Deputy Managing
Director, International Group
(1991 to 1993)
Charles P. McCormick, Jr. 68 Chairman of the Board 1955 264,787<F2> 19,167
(1995 to Present), Chief (2.3%)
Executive Officer (1996 to
1997); Chairman Emeritus
(1993 to 1994); Chairman
of the Board (1988 to 1993),
Chief Executive Officer
(1987 to 1992)
George V. McGowan 68 Chairman of the Executive 1983 2,253 2,782
Committee, Baltimore Gas
and Electric Company (1993
to Present); Chairman of the
Board & Chief Executive
Officer, Baltimore Gas and
Electric Company (1988 to 1992)
Carroll D. Nordhoff 51 Executive Vice President 1991 46,559 17,940
(1994 to Present); Executive
Vice President -The Americas
(1993 to 1994); Executive
Vice President - Corporate
Operations Staff (1992 to 1993)
Robert W. Schroeder 51 Vice President & General 1996 11,919 8,009
Manager, McCormick/Schilling
Division (1995 - Present); Vice
President - Sales & Marketing,
McCormick/Schilling Division
(1994 - 1995); Vice President -
Packaging Group (1991 - 1994)
Richard W. Single, Sr. 58 Vice President - Government 1988 80,139 19,407<F3>
Affairs & Secretary/Counsel
to the Board of Directors
(1996 - Present); Vice President
(1987 to 1996); Secretary and
General Counsel (1986 to 1996)
William E. Stevens 54 Senior Vice President, 1988 2,750 7,950
Mills & Partners, (1996 to
Present) President and
Chief Executive Officer,
United Industries Corp.
(1989 to 1996)
Karen D. Weatherholtz 46 Vice President -Human 1992 22,868 11,099
Relations (1988 to Present)
Directors and Executive Officers as a Group
(14 persons).................................................. 613,456 179,689
(5.4%)
<FN>
<F1>Includes shares of Common Stock and Common Stock Non-Voting
known to be beneficially owned by directors and executive officers
alone or jointly with spouses, minor children and relatives (if
any) who have the same home as the director or executive officer.
Also includes the following numbers of shares which could be
acquired within 60 days of December 31, 1996 pursuant to the
exercise of stock options: Dr. Albrecht - 4,910 shares of Common
Stock, 4,911 shares of Common Stock Non-Voting; Mr. Cook - 1,750
shares of Common Stock, 1,750 shares of Common Stock Non-Voting;
Mr. Davey - 7,840 shares of Common Stock, 4,614 shares of Common
Stock Non-Voting; Mr.Lawless - 8,127 shares of Common Stock, 4,709
shares of Common Stock Non-Voting; Mr. McCormick - 9,625 shares of
Common Stock, 8,375 shares of Common Stock Non-Voting; Mr. McGowan
- - 1,750 shares of Common Stock, 1,750 shares of Common Stock
Non-Voting; Mr. Nordhoff - 11,875 shares of Common Stock, 8,656
of Common Stock Non-Voting; Mr. Schroeder - 8,127 shares of
Common Stock, 4,709 of Common Stock Non-Voting; Mr. Single -
5,829 shares of Common Stock, 5,276 shares of Common Stock
Non-Voting; Mr. Stevens - 1,750 shares of Common Stock, 1,750
shares of Common Stock Non-Voting; Ms. Weatherholtz - 8,354
shares of Common Stock, 6,116 shares of Common Stock Non-Voting;
and directors and executive officers as a group - 80,099 shares of
Common Stock, 58,604 shares of Common Stock Non-Voting. Also
includes shares of Common Stock which are beneficially owned by
certain directors and officers by virtue of their participation in
the McCormick Profit Sharing Plan and PAYSOP: Dr. Albrecht - 8,230
shares; Mr. Davey - 1,564 shares; Mr. Lawless - 1,509 shares; Mr.
Nordhoff - 7,392 shares; Mr. Schroeder - 0 shares; Mr. Single -
16,289 shares; Ms. Weatherholtz - 8,347 shares; and directors and
executive officers as a group - 52,703 shares.
<F2>Includes 2,702 shares of Common Stock owned by Mr.
McCormick's wife. Mr. McCormick disclaims beneficial ownership
of said shares.
<F3>Includes 687 shares of Common Stock Non-Voting owned by Mr.
Single's son. Mr. Single disclaims beneficial ownership of said
shares.
</FN>
</TABLE>
BOARD COMMITTEES
The Board of Directors has established the following committees
to perform certain specific functions. There is no Nominating
Committee of the Board of Directors. Board Committee membership
as of February 19, 1997 is listed below.
AUDIT COMMITTEE. This Committee reviews the plan for and the
results of the independent audit and internal audit, reviews the
Company's financial information and internal accounting and
management controls, and performs other related duties. The
following directors are currently members of the Committee and
serve at the pleasure of the Board of Directors: Messrs. Cook,
Koch and Stevens. The Audit Committee held 6 meetings during the
last fiscal year.
COMPENSATION COMMITTEE. This Committee establishes and oversees
executive compensation policy; makes decisions about base pay,
incentive pay and any supplemental benefits for the Chief
Executive Officer, other members of the Executive Committee, and
any other executives listed in the proxy statement as one of the
five highest paid executives; and approves the grant of stock
options, the timing of the grants, the price at which the
options are to be offered, and the amount of the options to be
granted to employee directors and officers. The following
directors are members of the Committee and serve at the pleasure
of the Board of Directors: Messrs. Cook, Koch, McGowan and
Stevens. None of the Committee members are employees of the
Company or are eligible to participate in the Company's stock
option programs which are administered by the Committee. The
Compensation Committee held 3 meetings during the last fiscal
year.
EXECUTIVE COMMITTEE. This Committee possesses authority to
exercise all of the powers of the Board of Directors in the
management and direction of the affairs of the Company between
meetings of the Board of Directors, subject to specific
limitations and directions of the Board of Directors and subject
to limitations of Maryland law. This Committee also reviews and
approves all benefits and salaries of a limited group of senior
executives and reviews and approves individual awards under
approved stock option plans for all persons except directors and
officers (see Compensation Committee). The following directors
are currently members of the Committee and serve at the pleasure
of the Board of Directors: Messrs. Davey, Lawless, McCormick,
and Nordhoff. The Executive Committee held 18 meetings during
the last fiscal year.
ATTENDANCE AT MEETINGS
During the last fiscal year, there were 11 meetings of the
Board of Directors. All of the Directors were able to attend at
least 90% of the total number of meetings of the Board and the
Board Committees on which they served.
OTHER DIRECTORSHIPS
Certain individuals nominated for election to the Board of
Directors hold directorships in other companies. Dr. Hrabowski
is a director of Baltimore Gas and Electric Company, the
Baltimore Equitable Society, Mercantile Shareholders Corporation
and UNC, Incorporated. Mr. McGowan is a director of Baltimore
Gas and Electric Company, Baltimore Life Insurance Company, Life
of Maryland, Inc., NationsBank, N.A., Organization Resources
Counselors, Inc., and UNC, Incorporated.
REPORT ON EXECUTIVE COMPENSATION
Compensation Policy
The Company's executive compensation philosophy is to align the
interests of senior executive management with shareholder
interests through compensation linked to growth in profitability
and stock price performance. The principal elements of executive
compensation for the Company are base salary, annual management
incentive bonus, and stock options. Salary levels, annual bonus
targets, and stock option grant levels are established in part
on the basis of median levels of compensation expected to be
paid during the fiscal year to senior executive management of
companies in the manufacturing and food industries of a size
comparable to that of the Company. The Company makes these
determinations on the basis of, among other things, published
surveys and periodic special studies conducted by independent
compensation consultants. The most recent study was conducted
by Sibson and Company, Inc.
Compensation Committee and Executive Committee Determinations
Salary levels of the Company's senior executive officers are
reviewed annually and, where appropriate, are adjusted to
reflect individual responsibilities and performance as well as
the Company's competitive position within the food industry. The
Compensation Committee sets base salaries by targeting midpoints
of the marketplace average and adjusting each executive
officer's salary to reflect individual performance, experience
and contribution. The Compensation Committee considers salaries
paid to senior executives at companies which are comparable to
the Company (based on line of business or sales volume) in
establishing base salaries for senior executive management of
the Company. Those companies considered included most of the
fifteen companies in the S&P Food Products Index and other
manufacturing companies that are not included in that index but
had similar sales volumes.
Annual Management Incentive Bonuses for members of the Executive
Committee and any other executive officers identified in the
Summary Compensation Table on page 11 are determined by the
Compensation Committee. Bonuses for other senior management are
determined by the Executive Committee. Target bonuses are
established as a percentage of the midpoint of the salary range
of the executive officer's grade level, and the amount of the
target payable, if any, is based on the Company's financial
performance. The amount of target bonuses payable to operating
unit executives is based on a formula, weighted two thirds on
the achievement of operating profit and working capital
objectives of the executive's operating unit and one third on
growth in the Company's EPS.
In 1996, the Company accomplished a complete portfolio review,
including the sale of the Gilroy Foods businesses; balance sheet
objectives were achieved; and the Company returned to growth in
the second half of the year. As a result, the Compensation
Committee approved a bonus in the amount of 60% of target to the
corporate executives, since the accomplishments were consistent
with goals to increase economic value added (EVA).
STOCK OPTIONS
Stock options are granted by the Compensation Committee to key
management employees of the Company, including executive officers.
The purpose of stock option grants is to aid the Company in
securing and retaining capable employees by offering them an
incentive, in the form of a proprietary interest in the Company, to
join or continue in the service of the Company and to maximize
their efforts to promote its economic performance. This incentive
is created by granting options that have an exercise price of not
less than 100% of the fair market value of the underlying stock on
the date of grant, so that the employee may not profit from the
option unless the Company's stock price increases. Options granted
are designed to help the Company retain employees in that they are
not fully exercisable in the early years and "vest" only if the
employee remains with the Company. Accordingly, an employee must
remain with the Company for a period of years in order to enjoy the
full economic benefit of the option. The number of options granted
is a function of the recipient's salary grade level.
1996 Compensation Actions - Chief Executive Officer
As a non-employee Chief Executive Officer, Mr. McCormick has a
consulting agreement with the Company, which was approved by the
Compensation Committee. His stipend was $47,583.33 per month
during fiscal year 1996. In March 1996, Mr. McCormick was
awarded stock options in the amount of 500 shares voting and 500
shares non-voting in accordance with the grants made to the
other outside directors. In May 1996, he was awarded stock
options in the amount of 18,750 shares voting and 6,250 shares
non-voting.
At year end, the Compensation Committee approved an additional
payment of $195,300 to Mr. McCormick based on the achievement of
the Company's balance sheet objectives, accomplishment of a
complete portfolio review, and the Company's return to growth in
the second half of the year.
Mr. McCormick did not participate in the Compensation
Committee's deliberations about his consulting agreement.
Due to Mr. Blattman's retirement one month after the start of
the fiscal year, the Compensation Committee took no compensation
actions with respect to Mr. Blattman during 1996. Mr. Blattman
did, however, receive the same employee dividend payment that U.
S. employees at all levels receive in the year when they retire.
This payment was in the amount of $10,000 for Mr. Blattman.
1996 Compensation Actions - Other Executive Officers
Salary increases, bonuses and stock option grants for executive
officers were granted in a manner consistent with those granted
to other Company managers.
Submitted By:
COMPENSATION COMMITTEE EXECUTIVE COMMITTEE
George V. McGowan, Chairman Charles P. McCormick, Jr., Chairman
James S. Cook Robert G. Davey
George W. Koch Robert J. Lawless
William E. Stevens Carroll D. Nordhoff
Compensation Committee Interlocks and Insider Participation
During fiscal year 1996 the Compensation Committee was
comprised of four independent outside directors. Members are
James S. Cook, George W. Koch, George V. McGowan (Chairman) and
William E. Stevens. No member of the Committee has any
interlocking or insider relationship with the Company which is
required to be reported under the applicable rules and
regulations of the Securities and Exchange Commission.
At the close of fiscal year 1996, members of the Executive
Committee were Robert G. Davey, Robert J. Lawless, Charles P.
McCormick, Jr. (Chairman) and Carroll D. Nordhoff. All except
Mr. McCormick are employees and executive officers of the
Company. Mr. McCormick is a retired employee of the Company. The
table beginning on page 4 of this Proxy Statement sets forth the
business experience of each of the members.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
The following table sets forth the compensation paid by the Company
and its subsidiaries for services rendered during each of the fiscal
years ended November 30, 1996, 1995 and 1994 to the Chief Executive
Officer of the Company and each of the four most highly compensated
executive officers who were executive officers on the last day of
the 1996 fiscal year, determined by reference to total annual salary
and bonus for the 1996 fiscal year.
Long Term
Compensation
Annual Compensation
Awards All Other
Name and Fiscal <F1> Other Annual Securities Compensation
Principal Position Year Salary ($) Bonus ($) Compensation ($) Underlying ($) <F2>
<S> <C> <C> <C> <C> <C> <C>
Charles P. McCormick, Jr. 1996 - 195,300 600,000 <F3> 26,000 0
Chairman of the Board & 1995 - 6,690 226,800 <f3) 6,000 0
Chief Executive Officer 1994 - 42,000 93,467 <F3> 1,000 0
H. Eugene Blattman 1996 33,333 10,000 <F3> 0 1,539
President & Chief 1995 405,400 14,000 23,000 6,208
Executive Officer 1994 356,967 244,000 25,000 9,257
(1994 to January 1, 1996)
James J. Albrecht 1996 259,103 34,000 <F3> 13,200 3,359
Vice President - 1995 246,171 30,968 7,750 2,880
Science & Technology 1994 242,717 173,400 7,750 7,029
Robert G. Davey 1996 227,483 66,500 <F3> 17,800 3,097
Executive Vice President & 1995 194,350 6,825 11,500 2,735
Chief Financial Officer 1994 134,495 60,000 4,000 2,986
Robert J. Lawless 1996 359,567 123,540 <F3> 25,000 3,713
President & Chief 1995 239,567 40,031 12,250 2,736
Operating Officer 1994 192,358 150,000 38,290<F4> 4,800 6,490
Carroll D. Nordhoff 1996 255,594 63,300 <F3> 21,000 3,430
Executive Vice President 1995 242,629 8,447 13,250 3,026
1994 232,508 100,000 13,250 6,932
<FN>
<F1> Includes Corporate Board of Directors Fees and Service Awards.
<F2> Amounts paid or accrued under the Company's Profit Sharing
Plan for the accounts of such individuals. Figures for 1996
are estimates. The stated figure includes payments persons would
have received under the Company's Profit Sharing Plan but
for certain limits imposed by the Internal Revenue Code: (i) for
1996 for Messrs. Blattman, Albrecht, Davey, Lawless and
Nordhoff in the amounts of $1,461, $581, $319, $935 and $652,
respectively; (ii) for 1995 for Messrs. Blattman, Albrecht
and Nordhoff, payments in the amounts of $3,472, $144 and $290,
respectively; (iii) for 1994 for Messrs. Blattman, Albrecht
and Nordhoff in the amounts of $2,439, $211 and $114, respectively.
<F3> Mr. McCormick is paid a consulting fee for services rendered
to the Company. There is no amount of Other Annual
Compensation that is required to be reported.
<F4> The Company paid Mr. Lawless $577 in 1994 toward the
additional taxes payable by him from the inclusion in his income
of travel expenses for his wife, which expenses were incurred by
the Company in relocating Mr. Lawless to the United States
in 1994, and in having Mr. Lawless's wife accompany him on business
trips. The travel expenses of Mrs. Lawless were $23,770
in 1994.
</FN>
</TABLE>
COMPENSATION OF DIRECTORS
Corporate Board of Directors' fees were paid at the rate of
$5,400 per year for each director who was an employee of the
Company during the fiscal year ended November 30, 1996. Fees
paid to each director who was not an employee of the Company
presently consist of an annual retainer fee of $18,000 and
$1,100 for each Board meeting attended and $900 for each
Committee meeting attended.
On July 18, 1994, Mr. McCormick was elected as Chairman of the
Board. Mr. McCormick's services in such capacity are
consultative in nature. During 1996, the Company paid Mr.
McCormick $47,583 per month for his services as Chief Executive
Officer as well as Chairman of the Board. Mr. McCormick
received an incentive payment of $195,300 for services rendered
during fiscal year 1996.
PENSION PLAN TABLE
The following table shows the estimated annual benefits (on a
single-life basis), including supplemental benefits, payable
upon retirement (assuming retirement at age 65) to participants
in the designated average compensation and years of service
classifications:
<TABLE>
<CAPTION>
Average Years of Service
Compensation 15 Years 20 Years 25 Years 30 Years 35 Years
<S> <C> <C> <C> <C> <C>
$300,000 78,010 104,013 130,016 156,019 182,023
350,000 91,060 121,413 151,766 182,119 212,473
400,000 104,110 138,813 173,516 208,219 242,923
450,000 117,160 156,213 195,266 234,319 273,373
500,000 130,210 173,613 217,016 260,419 303,823
550,000 143,260 191,013 238,766 286,519 334,273
600,000 156,310 208,403 260,516 312,619 364,723
</TABLE>
The Company's Pension Plan is non-contributory. A majority of
the employees of the Company and participating subsidiaries are
eligible to participate in the Plan upon completing one year of
service and attaining age 21. The Plan provides benefits (which
are reduced by an amount equal to 50% of the participant's
Social Security benefit) based on an average of the participant's
highest consecutive 60 months of compensation, excluding any cash
bonuses, and length of service. In 1979, the Company adopted a
supplement to its Pension Plan to provide a limited group of its
senior executives with an inducement to retire before age 65. That
group of senior executives will receive credit for additional
service for employment after age 55. In 1983, the supplement was
expanded to include a significant portion of the senior executives'
bonuses in the calculation of pension benefits. The supplement was
amended in 1996 to provide that if a senior executive with Company
service outside the U.S. retires after serving at least his or her
last three years in the U.S., all of the executive's years of
Company service will be counted in calculating pension benefits.
The group of senior executives includes those listed in the table
on page 11.
For purposes of calculating the pension benefit, the average of
the highest consecutive 60 months of compensation for Dr. Albrecht
and Messrs. Blattman, Davey, Lawless, and Nordhoff as of November
30, 1996 was $421,138, $482,112, $251,923, $355,143 and $304,938,
respectively. The years of credited service for Dr. Albrecht and
Messrs. Blattman, Davey, Lawless, and Nordhoff as of the same date
were 14, 7, 3, 6, and 26 years, respectively.
Mr. Lawless and Mr. Davey are also entitled to receive pension
benefits under the registered pension plan ("RPP") offered to
employees of McCormick Canada, Inc. Benefits under the RPP are
based on the average of the participant's highest three consecutive
years of earnings. Upon retirement the Company has agreed to pay
Mr. Lawless and Mr. Davey a supplemental benefit equal to the
excess, if any, of the benefit calculated under the RPP (assuming
all their service at McCormick Canada and the Company had been
under the RPP) over (i) the pension benefit accrued under RPP
(based on his years of service with McCormick Canada) plus (ii)
the benefit accrued under the Company's Pension Plan (based on
years of service with the Company).
<TABLE>
STOCK OPTIONS
During the last fiscal year, the Company has granted stock
options to certain employees, including executive officers,
pursuant to stock option plans approved by the Company's
stockholders.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
Potential Realizable
Value At Assumed Annual
Rates of Stock Price
Appreciation For Option
Term ($)<F2>
Individual Grants<F1>
Number of % of Total Exercise or Expiration 0% 5% 10%
Securities Options/SARs Base Price Date
Underlying Granted to ($/Shares)
Name Options/SARs Employees in
Granted (#) Fiscal Year
<S> <C> <C> <C> <C> <C> <C> <C>
Charles P. McCormick, Jr. 26,000 3.6% $22.3750 03/19/01 $0 $160,680 $355,160
H. Eugene Blattman 0 0.0% $22.3750 03/19/01 $0 $0 $0
James J. Albrecht 13,200 1.8% $22.3750 03/19/01 $0 $81,576 $180,312
Robert G. Davey 17,800 2.5% $22.3750 03/19/01 $0 $110,004 $243,148
Robert J. Lawless 25,000 3.5% $22.3750 03/19/01 $0 $154,500 $341,500
Carroll D. Nordhoff 21,000 2.9% $22.3750 03/19/01 $0 $129,780 $286,860
<FN>
<F1> In general, the stock options are exercisable cumulatively as
follows: none of the shares granted during the first year of the
option; not more than 50% of the shares granted during the second
year of the option; and 100% of the shares granted, less any portion
of such option previously exercised, at any time during the period
between the end of the second year of the option and the expiration
date. Approximately 372 employees of the Company were granted
options under the Company's option plan during the last fiscal year.
<F2> The dollar amounts under these columns are the result of
calculations at 0%, and at the 5% and 10% compounded annual
rates set by the Securities and Exchange Commission, and
therefore are not intended to forecast future appreciation,
if any, in the price of the Company's common stock. The potential
realizable values illustrated at 5% and 10% compound annual
appreciation assume that the price of the Company's common
stock increases $6.18 and $13.66 per share, respectively,
over the 5-year term of the options. If the named executives
realize these values, the Company's stockholders will realize
aggregate appreciation in the price of the approximately 78
million shares of the Company's common stock outstanding as
of December 31, 1996 of approximately $480 million and $1.06
billion, over the same period.
</FN>
</TABLE>
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION/SAR VALUES
<CAPTION>
Value of Unexercised
Number of Shares In-the-Money
Underlying Unexercised Options/SARs
Shares Acquired Value Options/SARs at FY-End at FY-End ($)
Name on Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C> <C> <C>
Charles P. McCormick, Jr. 0 $0 18,000/29,000 $11,500/$66,375
H. Eugene Blattman 17,000 $83,500 62,000/0 $115,625/$0
James J. Albrecht 10,000 $51,250 9,821/28,879 $9,642/$62,996
Robert G. Davey 0 $0 12,454/26,846 $18,942/$63,796
Robert J. Lawless 6,000 $30,750 12,836/35,214 $19,144/$83,062
Carroll D. Nordhoff 0 $0 20,531/42,969 $27,003/$92,560
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Mr. McGowan, a director of the Company, failed to file on a
timely basis the Form 4 Report to the Securities and Exchange
Commission to report the exercise on March 12, 1996 of an option
for 1,000 shares of Common Stock and 1,000 shares of Common
Stock Non-Voting of the Company and the sale of 1,500 shares of
Common Stock on March 21, 1996. The transactions were reported
on a Form 5 filed by Mr. McGowan on January 14, 1997.
Set forth below is a line graph comparing the yearly percent
change in the Company's cumulative total shareholder return
(stock price appreciation plus reinvestment of dividends) on the
Company's common stock with (i) the cumulative total return of
the Standard & Poor's 500 Stock Index, assuming reinvestment of
dividends, and (ii) the cumulative total return of the Standard
& Poor's Food Products Index, assuming reinvestment of dividends.
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN<F1>
AMONG McCORMICK & COMPANY, INCORPORATED,
S&P 500 STOCK INDEX & S&P FOOD PRODUCTS INDEX<F2>
<CAPTION>
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
McCormick 100 140.29 116.51 97.36 124.00 132.44
S & P 500 100 118.47 130.44 131.80 180.54 230.84
S & P Food 100 115.73 106.99 112.58 144.69 183.30
Assumes $100 invested on December 1, 1991 in McCormick & Company
common stock, S&P 500 Stock Index and S&P Food Products Index
<FN>
<F1> Total Return Assumes Reinvestment of Dividends
<F2> Fiscal Year ending November 30
</FN>
</TABLE>
1997 EMPLOYEES STOCK PURCHASE PLAN
Since 1966 it has been the policy of the Company to make
available to virtually all of its employees the opportunity to
purchase shares of the Company's stock through employees stock
purchase plans. Since the Board of Directors believes that these
plans have been successful in achieving their purposes, a new
employees stock purchase plan is being submitted to the
stockholders at this time.
On January 16, 1997, the Board of Directors adopted the "1997
Employees Stock Purchase Plan," which is designed to meet the
requirements of the Internal Revenue Code for employee stock
purchase plans. The full text of the Plan is set forth in
Exhibit A to this Proxy Statement and reference is made thereto
for a complete statement of its terms and provisions. If the
Plan is not approved by the required vote of stockholders, it
will terminate. The Company intends to file a registration
statement under the Securities Act of 1933 to register the
shares subject to the Plan prior to the issuance of any
securities subject to issuance under the Plan.
Participation in the Plan is limited to persons who on March
19, 1997 are employees of the Company or designated subsidiaries
and, with stated exceptions, all such employees are eligible to
participate. It is estimated that approximately 5,100 employees
will be eligible to participate in the Plan.
Under the Plan, options are to be granted on March 19, 1997 to
each eligible employee to purchase the maximum number of shares
of Common Stock Non-Voting of the Company which, at the March
19, 1997 price can be purchased with approximately 10% of said
employee's compensation for one year, as defined in the Plan.
Payment for all shares purchased will be made through payroll
deductions over a 24-month period, beginning June 1, 1997. After
payroll deductions have begun, prepayment for the total shares
purchasable is permitted at any time before May 31, 1999.
Interest on all such amounts will accrue at the rate of 5% per
year, and will be paid to the employees after completion of
payment for their shares or upon prior withdrawal from the Plan.
The purchase price per share is the NASDAQ National Market
closing price of the Company's Common Stock Non-Voting in the
over-the-counter market as reported in The Wall Street Journal
for either March 19, 1997 or for the date of exercise, whichever
price is lower. The closing price of the Common Stock Non-Voting
as reported in The Wall Street Journal for February 3, 1997 was
$24.875.
Subject to certain limitations set forth in the Plan, employees
are permitted, at any time prior to May 31, 1999, to terminate
or reduce their payroll deductions, to reduce their options to
purchase, to exercise their options in whole or in part, or to
withdraw all or part of the balance in their accounts, with
interest.
The Plan also contains provisions governing the rights and
privileges of employees or their representatives in the event of
termination of employment, retirement, severance, lay-off,
disability, death or other events.
Certificates for all shares of stock purchased under the Plan
will be delivered as soon as practicable after May 31, 1999, or
on such earlier date as full payment is made for all shares
which the employee has elected to purchase. No employee or his
or her legal representative will have any rights as a stockholder
with respect to any shares to be purchased until completion of
payments for all the shares and the issuance of the stock
certificate.
The Plan contemplates that all funds contributed by employees
will be under the control of the Company and may be used for any
corporate purpose.
The Company has been advised by counsel that, under the U. S.
Internal Revenue Code, if a participant who is subject to U.S.
income taxation acquires stock upon the exercise of an option
under the Plan, the participant will not recognize income, and
the Company will not be allowed a deduction as a result of such
exercise, if the following conditions are met: (i) the Plan is
approved by the stockholders of the Company on or before January
15, 1998; (ii) at all times during the period beginning with the
grant of the option and ending on the day three months before
the date of such exercise, the participant was an employee of
the Company or a subsidiary of the Company; and (iii) the
participant makes no disposition of the stock within two years
after the grant of the option or within one year after the
transfer of the stock to the participant. In the event of a sale
or other disposition of such stock by the participant after
compliance with the applicable conditions set forth above, any
gain realized over the price paid for the stock will be treated
as long-term capital gain, and any loss will be treated as
long-term capital loss, in the year of the sale. If the
conditions stated in clauses (i) and (ii) are not met, the
participant will recognize compensation income upon the exercise
of the option. If the conditions in clauses (i) and (ii) are
met, but the condition in clause (iii) is not met, the
participant will recognize compensation income upon the early
disposition of the stock. In either case the amount of compensation
will be equal to the excess of the value of the stock on the date
of exercise over the purchase price, except that in the case of a
person subject to Section 16(b) of the Securities Exchange Act of
1934, the amount of compensation income will be determined based on
the value of the stock on the date on which the Section 16(b)
restriction lapses (and the inclusion in income of the compensation
will be delayed until that time). In general, compensation income
will be subject to income tax at regular income tax rates. If the
participant is treated as having received compensation income, an
equivalent deduction generally will be allowed to the Company or a
subsidiary of the Company. For the purpose of the foregoing, an
option is exercised on May 31, 1999 or such earlier date as the
employee makes an irrevocable election to purchase stock. No
income will result to participants upon the issuance of the
options.
The Company has been further advised by counsel that the interest
accrued on an employee's stock purchase account will be taxable
income in the year paid or applied to the purchase of stock on
behalf of such employee and an equivalent deduction will be allowed
to the Company or a subsidiary of the Company.
<TABLE>
The following table shows the estimated maximum number of shares of
Common Stock Non-Voting that each listed person, and
each listed group, will be entitled to acquire in accordance with
the provisions of the 1997 Employees Stock Purchase Plan
(based on the stock price in effect on February 3, 1997).
The-Dollar Value equals the number of shares that can be acquired
by each person or group multiplied by the February 3, 1997 stock
price.
NEW PLAN BENEFITS
1997 Employee Stock Purchase Plan<F1>
<CAPTION>
Name and Position Dollar Value ($) Number of Units
<S> <C> <C>
James J. Albrecht
Vice President -
Science & Technology $26,200 1,053
Robert G. Davey
Executive Vice President &
Chief Financial Officer $27,000 1,085
Robert J. Lawless
President, Chief Executive Officer
& Chief Operating Officer $47,000 1,889
Carroll D. Nordhoff
Executive Vice President $26,300 1,057
Executive Officer Group
(10 persons)
$219,070 8,806
Outside Director Group
(4 persons) N/A N/A
Non-Executive Officer/
Employee Group (approximately
5,100 persons) $17,336,878 696,959
<FN>
<F1> Messrs. Schroeder and Single and Ms. Weatherholtz, who are
nominees to the Board of Directors in addition to the persons
listed in the New Plan Benefits table, will receive options
under the Plan to purchase the following number of shares of
Common Stock Non-Voting: Mr. Schroeder, 964 shares, Mr.
Single, 770 shares and Ms. Weatherholtz, 663 shares.
Director nominees who are not employees of the Company are not
eligible to participate in the Plan. No person will receive
options for as much as 5% of the shares subject to the Plan.
</FN>
</TABLE>
The Plan contemplates that the Company will make available
sufficient shares of its Common Stock Non-Voting to allow each
eligible employee to elect to purchase the full number of shares
covered by the options granted. On the basis of the closing
price of the shares of the Company's Common Stock Non-Voting on
February 3, 1997, it is estimated that a maximum of 705,766
shares will be required if each eligible employee elects to
participate to the full extent of his or her option. The Plan
provides for adjustments in the case of certain changes in the
Company's capital structure.
REQUIRED VOTE OF STOCKHOLDERS. The favorable vote of at least a
majority of the shares of Common Stock of the Company present in
person or by proxy at a meeting at which a quorum is present is
required for the approval of the Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR
THE APPROVAL OF THE PLAN.
1997 STOCK OPTION PLAN
The Company's stock option plans are designed to provide an
incentive to officers and other key employees to enhance the
identity of their interests with the interests of stockholders
and to increase their stake in the future growth and prosperity
of the Company. The plans are also intended to induce the
continued employment of those employees and to enable the
Company to attract and retain key executives. Since the Board
of Directors believes that these plans have been successful in
achieving their purposes, a new stock option plan is being
submitted to the stockholders at this meeting.
On January 16, 1997, the Board of Directors of the Company
adopted the "1997 Stock Option Plan" which permits the grant of
"incentive stock options," which are designed to meet the
requirements of the Internal Revenue Code, and other stock
options. The full text of the Plan is set forth as Exhibit B to
this Proxy Statement, and reference is made thereto for a
complete statement of its terms and conditions. Adoption of the
Plan by the Board of Directors is subject to the approval of the
stockholders of the Company. If the Plan is not so approved by
the required vote of stockholders, it will terminate, and all
options granted thereunder will be canceled. On or about March
20, 1997, the Company intends to file a registration statement
under the Securities Act of 1933 to register the shares of stock
subject to the Plan.
A total of 3,750,000 shares of Common Stock and 1,250,000 shares
of Common Stock Non-Voting may be issued under the terms of the
Plan. No option may be granted under the Plan to any optionee
for more than 350,000 shares of stock. The number of shares
issuable under the Plan is subject to adjustment in the event of
certain changes in the Company's capital structure.
The Board of Directors has the power to administer the Plan and
select employees to receive options thereunder. The Board may
delegate its powers and functions in these respects to a committee.
The Compensation Committee will review and approve the grant of
options pursuant to the Company's stock option plans to the
Company's directors and officers. The Executive Committee reviews
and approves the grant of options to all other option plan
participants. No option may be granted after January 15, 2007,
although options may extend past that date.
The option price cannot be less than 100% of the market value of
the optioned stock on the date the option is granted. In fixing
market value, the Board uses the NASDAQ National Market closing
price of the common stock as reported for the day of granting
the option. The closing price for the stock as reported in The
Wall Street Journal for February 3, 1997, was $24.875. Payment
of the option price may be in cash or Company stock. The law
currently provides, and on the date of adoption of the Plan the
law provided, that to the extent that the aggregate fair market
value of stock (determined at the time the option is granted)
with respect to which incentive stock options are exercisable
for the first time by any individual during any calendar year
exceeds $100,000, such options shall be treated as options which
are not incentive stock options. No option shall be granted for
a period in excess of ten years. In the event of termination of
employment for reasons other than retirement, disability or
death, the options expire unless they are exercised within 30
days following such termination. Options are not transferable
otherwise than by will or under the laws of descent and
distribution. Recipients of options are required to remain in
the employ of the Company for a period of time, not less than
one year, as specified in the option agreements.
The Company has been advised by counsel that, under the U. S.
Internal Revenue Code, if a holder of an incentive stock option
who is subject to U. S. income taxation acquires stock upon the
exercise of his option, no income will result to the option
holder upon such exercise, and the Company will be allowed no
deduction as a result of such exercise, if the following
conditions are met: (i) the Plan is approved by the
stockholders of the Company on or before January 15, 1998; (ii)
the option holder, when the option is granted, does not own,
actually or constructively, stock possessing more than 10% of
the total combined voting power of all classes of stock of the
Company or any subsidiary of the Company; (iii) at all times
during the period beginning with the grant of the option and
ending on the day three months (one year, if the option holder
is totally and permanently disabled) before the date of such
exercise, the option holder was an employee of the Company or of
a subsidiary of the Company; and (iv) the option holder makes no
disposition of the stock within two years after the grant of
the option or within 12 months after the transfer of the stock
to him. In the event of a sale of such stock by the option
holder after compliance with the applicable conditions set forth
above, any gain realized on the shares acquired through exercise
of the option will be treated as long-term capital gain, and any
loss will be treated as long-term capital loss, in the year of
the sale. The excess of the value of the stock on the date of
exercise over the option price may, under certain circumstances,
be subject to the alternative minimum tax. If the option holder
fails to comply with conditions (i), (ii) and (iii) above, he
will be treated as having received compensation on the date of
exercise equal to the excess of the value of the stock on that
date over the option price; under certain conditions, a person
subject to Section 16(b) of the Securities Exchange Act of 1934
will be treated as having received compensation on the date on
which the Section 16(b) restriction lapses unless he elects,
within 30 days of the date of exercise, to use the value on the
date of exercise. If the option holder complies with conditions
(i), (ii) and (iii) above, but fails to comply with condition
(iv) above by disposing of the stock in an arms-length sale
within either the two-year or twelve-month period referred to in
condition (iv) the option holder will recognize compensation
income in the year of the disposition equal to the excess of the
value of the stock on the exercise date (or, if less, the amount
realized in the sale) over the option price. If the amount
realized on the sale exceeds the value of the stock on the
exercise date, the option holder will recognize a capital gain
equal to the amount realized on the sale less his tax basis (the
option price plus the compensation realized as a result of
exercising the option). If the option holder is treated as
having received compensation, an equivalent deduction generally
will be allowed to the Company or a subsidiary of the Company.
The Company has been further advised by counsel that, except as
provided below for persons subject to Section 16(b) of the
Securities Exchange Act of 1934, upon the exercise of an option
other than an incentive stock option, the option holder is
treated for U. S. federal income tax purposes as receiving
compensation income at that time equal to the excess of the
value of the stock on that date over the option price. In the
case of a person subject to Section 16(b), however, under
certain conditions, the option holder's compensation will be
calculated based on the value of the stock on the date on which
the Section 16(b) restriction lapses unless he elects, within 30
days of the date of exercise, to use the value on the date of
exercise. A deduction equivalent to the compensation realized
by the option holder generally will be allowed to the Company or
a subsidiary of the Company. The optionee's basis in such stock
will include his option price plus the amount of compensation
income realized as a result of exercise. When the optionee
sells the stock, he will recognize a long-term capital gain or
loss if, at the time of the sale, he has held the stock for more
than twelve months from the date of compensation recognition.
If the optionee has held such stock for twelve months or less,
his capital gain or loss will be short-term.
Section 162(m) of the Internal Revenue Code imposes a one
million dollar limit on the compensation that the Company may
deduct in any year with respect to its chief executive officer
and with respect to each of its other four most highly-compensated
officers. Performance-based compensation, however, is not subject
to this limitation, and the Plan is designed to permit the grant of
options that qualify as performance-based compensation.
The Board of Directors may terminate, suspend or amend the Plan
in whole or in part from time to time. The Board of Directors
may also separate the Plan into two plans, one for directors and
officers (administered by the Compensation Committee) and one
for all other Plan participants (administered by the Executive
Committee). No action, however, shall be taken without the
approval of the stockholders of the Company to increase the
maximum number of shares to be offered for sale under options,
change the option price, change the class of participants
eligible to receive options or extend the term of the Plan.
Section 15 of the Plan, set forth in Exhibit B, contains a
complete description of how the Plan may be amended.
REQUIRED VOTE OF STOCKHOLDERS The favorable vote of at least a
majority of shares of Common Stock of the Company present in
person or by proxy at a meeting at which a quorum is present is
required for approval of the Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
PLAN.
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors, upon recommendation of the Audit Committee,
has appointed the accounting firm of Ernst & Young LLP to serve as
the independent auditors of the Company for the current fiscal year
subject to ratification by the stockholders of the Company. Ernst
& Young LLP were first appointed to serve as independent auditors
of the Company in 1982 and are considered by management of the
Company to be well qualified.
Representatives of Ernst & Young LLP are expected to be present at
the Annual Meeting. They will have an opportunity to make a
statement if they desire to do so and are expected to be available
to respond to appropriate questions.
REQUIRED VOTE OF STOCKHOLDERS. The favorable vote of at least a
majority of the shares of Common Stock of the Company present
in person or by proxy at a meeting at which a quorum is present
is required for ratification of the appointment of independent
auditors.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR
RATIFICATION.
OTHER MATTERS
Management knows of no other matters which may be presented for
consideration at the meeting. However, if any other matters
properly come before the meeting, it is the intention of the
persons named in the proxy to vote such proxy in accordance with
their judgment on such matters.
VOTING PROCEDURES
Each matter submitted to the stockholders for a vote is deemed
approved if a majority of the shares of Common Stock of the
Company present in person or by proxy at a meeting at which a
quorum is present votes in favor of the matter. The presence in
person or by proxy of stockholders entitled to cast a majority
of all the votes entitled to be cast at the meeting constitutes
a quorum.
Stockholder votes are tabulated manually by the Company's
Shareholder Relations Office. Broker non-votes are neither
counted in establishing a quorum nor voted for or against
matters presented for stockholder consideration; proxy cards
which are executed and returned without any designated voting
direction are voted in the manner stated on the proxy card.
Abstentions and broker non-votes with respect to a proposal are
not counted as favorable votes, and therefore have the same
effect as a vote against the proposal.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Proposals of stockholders to be presented at the 1998 Annual
Meeting must be received by the Secretary of the Company prior
to October 18, 1997 to be considered for inclusion in the 1998
proxy material.
EXHIBIT A
McCORMICK & COMPANY, INCORPORATED
1997 EMPLOYEES STOCK PURCHASE PLAN
SECTION 1 - PURPOSE
The purpose of this Plan is to afford to employees of McCormick
& Company, Incorporated and designated subsidiaries (namely,
McCormick Canada, Inc., Mojave Foods Corporation, Setco, Inc.,
and Tubed Products, Inc.) (the "Corporations") an opportunity to
acquire shares of Common Stock Non-Voting of McCormick &
Company, Incorporated (the "Company") pursuant to options to
purchase granted by this Plan to them.
SECTION 2 - NUMBER OF SHARES OFFERED
The offering pursuant to this Plan is for a number of shares
of the Company's Common Stock Non-Voting sufficient to allow each
employee to elect to purchase the full number of shares
purchasable pursuant to the terms of Section 6 of this Plan.
SECTION 3 - ELIGIBLE EMPLOYEES
All persons who on March 19, 1997, are employees of the
Corporations will be eligible to participate in this Plan,
except for the following who shall not be eligible:
(a) Any employee whose customary employment as of March 19,
1997, was 16 hours or less per week or for not more than 4
months during the calendar year;
(b) Any employee who, immediately after March 19, 1997, would
own (as defined in the Internal Revenue Code, Sections 423 and
424(d)) stock, and/or hold outstanding options to purchase
stock, possessing 5% or more of the total combined voting power
or value of all classes of stock of the Company or of any
subsidiary;
(c) Any employee whose grant of an option hereunder would
permit his rights to purchase stock under this Plan and under
all other employee stock purchase plans, if any, of the Company
or its subsidiaries to accrue at a rate which exceeds $25,000 of
the fair market value of such stock (determined at the time such
option is granted) for each calendar year in which such option
is outstanding at any time; and
(d) Any employee residing in a state where the offer or sale
of the shares provided by this Plan is not authorized or permitted
by applicable state law.
SECTION 4 - EFFECTIVE DATE
The options under this Plan are granted as of March 19, 1997,
subject to approval of this Plan by the stockholders of the
Company within 12 months of its adoption by the Board of
Directors.
SECTION 5 - PURCHASE PRICE
The purchase price for all shares shall be the NASDAQ National
Market closing price of the Company's Common Stock Non-Voting on
the over-the-counter market as reported in The Wall Street
Journal either:
(a) For March 19, 1997 (which is the date of the grant), or
(b) For the date such option is exercised, whichever price is
lower.
SECTION 6 - NUMBER OF SHARES PURCHASABLE
Each eligible employee is, by the terms of this Plan, granted
an option to purchase a maximum number of shares of Common Stock
Non-Voting of the Company (increased by any fractional amount
required to make a whole share) which, at the purchase price, as
determined in accordance with Section 5(a), will most closely
approximate 10% of his compensation for one year, as below
defined. Notwithstanding any other provision of this Plan, no
employee may elect to purchase less than five shares nor may any
options be exercised for less than five shares.
Such compensation for one year shall be deemed to be the base
wage paid to such employee by the Corporations. The base wage
for such employee shall be computed as follows:
(a) The straight-line hourly base wage rate of such employee
in effect on March 19, 1997, multiplied by 2080 hours (40 hours
per week multiplied by 52 weeks), or by such number as the
Company deems to constitute the number of hours in a normal work
year for such employee; or
(b) The salary of such employee in effect on March 19, 1997,
annualized.
SECECTION 7 - ELECTION TO PURCHASE AND PAYROLL DEDUCTION
No later than April 28, 1997, an eligible employee may elect
to purchase all or part of the shares which he is entitled to
purchase under Section 6. Such election shall be made by the
execution and delivery to the Corporations of an approved
written form authorizing uniform periodic payroll deductions
over a two-year period beginning June 1, 1997, in such amounts
as will in the aggregate (exclusive of interest which, it is
contemplated, will be paid to the employee at the end of such
period) equal the total option price for all of the shares
covered by this election to purchase. If an employee fails to
make such election by April 28, 1997, the option provided by
this Plan shall terminate on that date. Except as otherwise
provided in the Plan, after payroll deductions have begun,
prepayment for the total shares purchasable will be permitted at
any time prior to May 31, 1999. In the event an employee makes
such prepayment, there shall be no payroll deductions under the
Plan on behalf of said employee after such prepayment.
SECTION 8 - INTEREST ON PAYROLL DEDUCTIONS
The Company and participating subsidiaries will maintain a
record of amounts credited to each employee authorizing a
payroll deduction pursuant to Section 7. Interest will accrue on
payroll deductions beginning June 1, 1997, on the average
balance of such deductions during the period of this Plan at the
rate of 5% per year. Such interest shall be payable to the
employee on or about May 31, 1999, or at such time as said
employee may for any reason terminate his election to purchase
shares under this Plan, or at such time as said employee
exercises his option to purchase stock under the Plan and
provides or pays in full the sum necessary to purchase such
shares.
SECTION 9 - CHANGES IN ELECTIONS TO PURCHASE
An employee may, at any time prior to May 31, 1999, by written
notice to the Corporations, direct the Corporations to reduce or
cease payroll deductions (or, if the payment for shares is being
made through periodic cash payments, notify the Corporations
that such payments will be reduced or terminated) or withdraw
part or all of the money in his account and continue payroll
deductions, in accordance with the following alternatives:
(a) Exercise his option to purchase the number of shares
which may be purchased at the purchase price with all or any
specified part of the amount (including interest) then credited to
his account, and withdraw any amount (including interest) remaining
in such account; or
(b) Reduce the amount of his subsequent payroll deductions
(or periodic cash payments) and/or withdraw all or any specified
part of the amount then credited to his account, in which event
his option to purchase shall be reduced to the number of shares
which may be purchased, at the March 19, 1997 price, with the
amount, if any, remaining in his account (exclusive of interest)
plus the aggregate amount of the authorized payroll deductions
(or periodic cash payments) to be made thereafter; or
(c) Withdraw the amount (including interest) in his account
and terminate his option to purchase
An employee may make only one withdrawal of all or part of his
account and continue his payroll deductions. If the employee
thereafter wishes to withdraw any funds from his account, he
must withdraw the entire amount (including interest) in his
account and terminate his option to purchase.
Any reduction made in the number of shares subject to an
option to purchase is subject to the provisions of Section 6 and
shall be permanent.
SECTION 10 - VOLUNTARY TERMINATION OF EMPLOYMENT OR DISCHARGE
In the event an employee voluntarily leaves the employ of the
Corporations, otherwise than by retirement under a plan of the
Corporations, or is discharged for cause prior to May 31, 1999,
he can elect within 10 days after termination of his employment
to:
(a) Exercise his option to purchase the number of shares
which may be purchased at the purchase price with all or any
specified part of the amount (including interest) then credited to
his account, and withdraw any amount (including interest) remaining
in such account; or
(b) Withdraw the amount (including interest) in his account
and terminate his option to purchase; or
(c) Exercise his option up to the number of shares
purchasable under this Plan (Section 6) with full payment for such
shares.
If the employee fails to make an election within 10 days after
termination of employment, he shall be deemed to have elected
subsection 10(b) above.
SECTION 11 - RETIREMENT OR SEVERANCE
In the event an employee who has an option to purchase shares
leaves the employ of the Corporations on or after March 19,
1997, because of retirement under a plan of the Corporations, or
because of termination of his employment by the Corporations for
any reason except discharge for cause, he may elect, within 10
days after the date of such retirement or termination, to:
(a) In the event of retirement only, continue his option to
purchase shares by making periodic cash payments to the
Corporations in amounts equal to the payroll deductions
previously authorized; or
(b) Exercise his option for the number of shares which may be
purchased at the purchase price with all or any specified part
of the amount (including interest) then credited to his account,
and withdraw any amount (including interest) remaining in such
account; or
(c) Exercise his option up to the number of shares
purchasable under this Plan (Section 6) with full payment for such
shares within said 10 day period; or
(d) Withdraw the amount (including interest) in his account
and terminate his option to purchase.
In the event the employee does not make an election within the
aforesaid 10 day period, he will be deemed to have elected
subsection 11(d) above.
SECTION 12 - LAY-OFF, AUTHORIZED LEAVE OF ABSENCE OR DISABILITY
Payroll deductions for shares for which an employee has an
option to purchase may be suspended during any period of absence
of the employee from work due to lay-off, authorized leave of
absence or disability or, if the employee so elects, periodic
payments for such shares may continue to be made in cash.
If such employee returns to active service prior to May 31,
1999, his payroll deductions will be resumed and if said
employee did not make periodic cash payments during his period
of absence, he shall, by written notice to his employing
Corporation within 10 days after his return to active service,
but not later than May 31, 1999, elect:
(a) To make up any deficiency in his account resulting from
a suspension of payroll deductions by an immediate cash payment;
or
(b) Not to make up such deficiency, in which event the number
of shares to be purchased by him shall be reduced to the number of
whole shares which may be purchased at the March 19, 1997 price,
with the amount, if any, then credited to his account (including
interest) plus the aggregate amount, if any, of all payroll
deductions to be made thereafter; or
(c) Withdraw the amount (including interest) in his account
and terminate his option to purchase.
An employee on lay-off, authorized leave of absence or disability
on May 31, 1999, shall deliver written notice to his employing
Corporation on or before May 31, 1999, electing one of the
alternatives provided in the foregoing clauses (a), (b) and
(c) of this Section 12. If any employee fails to deliver such
written notice within 10 days after his return to active service
or by May 31, 1999, whichever is earlier, he shall be deemed to
have elected subsection 12(c) above.
If the period of an employee's lay-off, authorized leave of
absence or disability shall terminate on or before May 31, 1999,
and the employee shall not resume active employment with the
Corporations, he shall make an election in accordance with the
provisions of Section 10 of this Plan.
SECTION 13 - DEATH
In the event of the death of an employee while his option to
purchase shares is in effect, the legal representatives of such
employee may, within 90 days after his death (but not later than
May 31, 1999) by written notice to the employing Corporation,
elect to:
(a) Make up any deficiency in such employee's account
occurring after his death or by reason of his prior illness and to
continue to make periodic cash payments for the remainder of the
period ending May 31,1999; or
(b) Withdraw the amount (including interest) in his account
and terminate his option to purchase; or
(c) Exercise the employee's option for the number of shares
which may be purchased at the purchase price with all or any
specified part of the amount (including interest) then credited
to his account, and withdraw any amount (including interest)
remaining in such account; or
(d) Exercise his option up to the number of shares
purchasable under this Plan (Section 6) with full payment for such
shares.
In the event the legal representatives of such employee fail
to deliver such written notice to the employing Corporation within
the prescribed period, the election to purchase shares shall
terminate and the amount, including interest, then credited to
the employee's account shall be paid to such legal representatives.
SECTION 14 - FAILURE TO MAKE PERIODIC CASH PAYMENTS
Under any of the circumstances contemplated by this Plan,
where the purchase of shares is to be made through periodic cash
payments in lieu of payroll deductions, the failure to make any
such payments shall reduce, to the extent of the deficiency in
such payments, the number of shares purchasable under this Plan.
SECTION 15 - FUNDS IN STOCK OPTION ACCOUNTS
Amounts credited to the employee's account shall be under the
control of the Company and may be used for any corporate
purpose. Amounts credited to the accounts of employees of
subsidiaries of the Company named in Section 1 of this Plan
shall be remitted to the Company from time to time. The amount,
exclusive of interest, credited to the account of each employee
shall be applied to pay for shares purchased by such employee
and any amount not used for this purpose shall be repaid to the
employee by the Company.
SECTION 16 - RIGHTS AS STOCKHOLDER
No employee, former employee, or his representatives shall
have any rights as a stockholder with respect to any shares of
stock which any employee has elected to purchase under this Plan
until full payment for all shares has been made and a certificate
for such shares has been issued. Certificates for shares will be
issued as soon as practicable after full payment for such shares
has been made. However, certificates for shares will not be
issued prior to approval of the Plan by the stockholders of the
Company.
SECTION 17 - NON-ASSIGNABILITY
No assignment or transfer by any employee, former employee or his
legal representatives of any option, election to purchase shares or
any other interest under this Plan will be recognized; any
purported assignment or transfer, whether voluntary or by operation
of law (except by will or the laws of descent and distribution),
shall have the effect of terminating such option, election to
purchase or other interest. An employee's option and election to
purchase shall be exercisable only by him during his lifetime and
upon his death, by his legal representative in accordance with
Section 13. If an election to purchase is terminated by reason of
the provisions of this Section 17, the only right thereafter
continuing shall be the right to have the amount then credited to
the employee's account, including interest, paid to the employee or
other person entitled thereto, as the case may be.
SECTION 18 - EFFECT OF CHANGES IN SHARES
In the event of any change in the capital stock of the Company
through merger, consolidation or reorganization, or in the event
of any dividend to holders of shares of the Common Stock Non-Voting
of the Company payable in stock of the same class in an amount in
excess of 2% in any year, or in the event of a stock split, or in
the event of any other change in the capital structure of the
Company, the Company will make such adjustments with respect to the
shares of stock subject to this offering as it deems equitable to
prevent dilution or enlargement of the rights of participating
employees.
SECTION 19 - ADMINISTRATION; MISCELLANEOUS
(a) The Compensation Committee of the Company (the
"Committee") or such employee or employees as they may designate,
shall be responsible for the administration of this Plan, including
the interpretation of its provisions, and the decision of the
Committee or of such other employee or employees with respect to
any question arising under the Plan shall be final and binding
for all purposes.
(b) Uniform policies shall be pursued in the administration of
this Plan and there shall be no discrimination between particular
employees or groups of employees. The Committee, or such employee
or employees as they may designate to administer this Plan, shall
have the authority, which shall be exercised without
discrimination, to make exceptions to the provisions of
this Plan under unusual circumstances where strict adherence to
such provisions would work undue hardship.
(c) The Company may allow a reasonable extension of the time
within which an election to purchase shares under this Plan
shall be made, if it shall determine there are circumstances
warranting such action, in which event such extension shall be
made available on a uniform basis to all employees similarly
situated; provided that in no event shall the period for payroll
deductions be extended beyond May 31, 1999.
SECTION 20 - AMENDMENT AND DISCONTINUANCE
The Board of Directors of the Company may alter, suspend or
terminate the Plan; provided, however, that, except to conform
the Plan from time to time to the requirements of the Internal
Revenue Code with respect to employee stock purchase plans, no
action of the Board shall increase the period during which this
Plan shall remain in effect, or further limit the employees of
the Corporations who are eligible to participate in the Plan, or
increase the maximum period during which any option granted
under the Plan may remain unexercised, or (other then as set
forth in Section 18 above) increase the number of shares of
stock to be optioned under the Plan or reduce the purchase price
per share, with respect to the shares optioned or to be optioned
under the Plan, or without the consent of the holder of the
option, otherwise alter or impair any option granted under the
Plan.
EXHIBIT B
McCORMICK & COMPANY, INCORPORATED
1997 STOCK OPTION PLAN
SECTION 1 - ADMINISTRATION
(a) Subject to paragraph (b) of this Section, this Plan shall
be administered by the Board of Directors at the principal office
of the Company; provided that the Board of Directors, any or all of
the powers conferred upon the Board of Directors under this Plan,
except the approval of the total number of shares to be optioned at
any one time and except any powers which under the applicable
Maryland law may not be delegated by the Board of Directors.
Except as limited by the Board of Directors, and subject to
paragraph (b) of this Section, the Executive Committee is
authorized to interpret the Plan, to prescribe, amend and rescind
rules and regulations relating to it, and to make all other
determinations necessary or advisable for its administration.
(b) The grant of options or shares of stock pursuant to the
Company's stock option plans for the Company's directors and
officers shall be administered by the Compensation Committee.
All determinations with respect to which officers and directors
may be awarded grants of options, the timing of the grants, and
the amount of options to be granted to officers and directors,
and other decisions arising out of the administration of the
Plan with respect to directors and officers, shall be made by
the Compensation Committee, and all references in this Plan
document to the authority of the Board of Directors in these
specified areas shall be deemed to refer to the Compensation
Committee. The review and approval of individual awards under
this Plan for all persons except directors and officers shall be
made by the Executive Committee, or another committee designated
by the Board of Directors. In the event the Board of Directors
deems it necessary in the future to separate the Plan into two
plans, one for directors and officers (administered by the
Compensation Committee) and one for all other Plan participants
(administered by the Executive Committee) then the Board of
Directors shall have the authority to so act, without the need
for further shareholder approval.
SECTION 2 - SHARES SUBJECT TO THE PLAN
The Board, from time to time, may provide for the option and
sale in the aggregate of up to three million, seven hundred
fifty thousand (3,750,000) shares of Common Stock and one
million two hundred and fifty thousand (1,250,000) shares of
Common Stock Non-Voting of this Corporation. If an option
ceases to be exercisable in whole or in part by reason of
expiration of the term of the option or upon or following
termination of employment of the optionee, the shares which are
subject to such option but as to which the option has not been
exercised shall continue to be available under the Plan. Shares
shall be made available from authorized and unissued stock.
SECTION 3 - TYPES OF OPTIONS
The Board may grant stock options which constitute "incentive
stock options" ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended, or stock options
which do not constitute ISOs ("NQSOs"). Each ISO shall be
designated as an ISO in the agreement evidencing the option. If
the agreement does not contain a designation that it is an ISO,
it shall not be an ISO.
SECTION 4 - PARTICIPANTS
The Board shall determine and designate from time to time
those key employees of this Corporation and its subsidiary
companies (herein collectively referred to as the Company) to whom
options shall be granted and who thereby become participants in the
Plan and the number of shares to be covered by each option.
SECTION 5 - ALLOTMENT OF SHARES
The Board shall determine the number of shares to be offered
from time to time to each participant pursuant to the options
granted under this Plan. The law currently provides, and on the
date of adoption of the Plan the law provided, that to the
extent that the aggregate fair market value of stock (determined
at the time the option is granted) with respect to which ISOs
are exercisable for the first time by any individual during any
calendar year (under all plans of the employer corporation and
its parent and subsidiary corporations) exceeds $100,000, such
options shall be treated as options which are not ISOs.
Notwithstanding anything contained herein to the contrary, the
maximum number of shares to be optioned to any participant under
an ISO, NQSO, or any combination thereof, shall not exceed three
hundred fifty thousand (350,000) shares of Common Stock and/or
Common Stock Non-Voting in the aggregate. No option may be
granted under the Plan after ten (10) years from the earlier of
the date the Plan is approved by the Board or by the
Corporation's stockholders.
SECTION 6 - OPTION PRICE
The option price per share for options granted hereunder shall
be determined by the Board and shall in no instance be less than
100% of the fair market value on the date the options are
granted.
SECTION 7 - OPTION PERIOD AND LIMITATIONS UPON EXERCISE OF
OPTIONS
The period during which an option may be exercised shall be
determined by the Board, except that no option shall be exercisable
after the expiration of ten (10) years from the date of the
granting thereof. Options granted under the Plan may be
exercised regardless of whether previously granted options have
been exercised in full or have expired by lapse of time. The
Board shall specify a period of time during which the participant
must be an employee of the Company, such period of time to be no
less than one (1) year from the date the option is granted. An
option may be exercised in full at any time, or from time to time
in part, during the option period subject to such limitations and
restrictions as may be included in the option, including provisions
insuring compliance with all applicable laws and regulations
pertaining to the sale of these securities.
SECTION 8 - EXERCISE OF OPTIONS AND PAYMENT FOR STOCK
The option may be exercised by sending a written notice to the
Company to the attention of the Office of the Secretary together
with payment in full for the stock. Payment for the stock may
be in the form of stock of this Corporation, taken into account
at its fair market value at the time of payment, or cash. Upon
receipt of notice and payment, the Company shall be obligated to
have the stock transferred to the optionee. A participant shall
have none of the rights of a shareholder until shares are issued
to him.
SECTION 9 - TERMINATION OF EMPLOYMENT
Subject to Sections 10, 11, and 12, the right to exercise an
option shall terminate thirty (30) days after a participant
ceases to be an employee.
SECTION 10 - RIGHTS IN THE EVENT OF RETIREMENT
If a participant retires prior to the expiration of his
options without having fully exercised his options, he shall
have the right to exercise his options up until their expiration
date. If a participant dies after retirement, but before
expiration of the option, Section 12 hereof shall be applicable.
SECTION 11 - RIGHTS IN THE EVENT OF DISABILITY
If a participant ceases to be an employee on account of total
and permanent disability without having fully exercised his
options, he shall have the right to exercise his options up
until their expiration date. If a participant dies after
becoming totally and permanently disabled, but before expiration
of the option , Section 12 hereof shall be applicable.
SECTION 12 - RIGHTS IN THE EVENT OF DEATH
If a participant dies prior to termination of the right to
exercise his option without having fully exercised his option,
the executors, administrators or personal representatives or
legatees or distributes of his estate shall have the right,
prior to the expiration of the term of the option, to exercise
such option in full at any time or from time to time in part.
SECTION 13 - EFFECT OF CHANGE IN STOCK SUBJECT TO THE PLAN
In the event there is any change in the Common Stock or Common
Stock Non-Voting of the Corporation through the declaration of
stock dividends, or through recapitalization resulting in stock
splits or combinations or exchanges of shares, or otherwise, the
number of shares available for option and the shares subject to
any option and the option price shall be appropriately adjusted;
provided, however, in such cases, fractional parts of shares
will be disregarded.
SECTION 14 - NON-ASSIGNABILITY
Options shall not be transferable other than by will or by the
laws of descent and distribution, and during a participant's
lifetime are exercisable only by him.
SECTION 15 - AMENDMENT
The Board may terminate, suspend, or amend the Plan in whole
or in part from time to time, including the adoption of amendments
deemed necessary or desirable to qualify the options under the
Internal Revenue Code and under rules and regulations promulgated
by the Securities and Exchange Commission with respect to employees
who are subject to the provisions of Section 16 of the Securities
and Exchange Act of 1934, or to correct any defect or supply an
omission or reconcile any inconsistency in the Plan or in any
option granted thereunder, or to separate the Plan into two
separate plans (in accordance with the provisions of Section 1)
without the approval of the stockholders of the Company; provided,
however; that no action shall be taken without the approval of the
stockholders of the Company to increase the maximum number of
shares to be offered for sale under options in the aggregate or to
any individual employee (except in accordance with the provisions
of Section 13), change the option price, change the class of
participants eligible to receive such options under the Plan, or
extend the term of the Plan. No amendment or termination or
modification of the Plan shall in any manner affect any option
theretofore granted without the consent of the optionee, except
that the Board may amend or modify the Plan in a manner that does
affect options theretofore granted upon a finding by the Board that
such amendment or modification is in the best interest of the
holder of outstanding options affected thereby.
SECTION 16 - EFFECTIVE
This Plan shall become effective immediately upon adoption of
the Board of Directors; provided, however, that it will be
subject to approval by the stockholders, which approval must be
obtained within twelve months of the date of the Board of
Directors' adoption of this Plan, and any options granted
hereunder prior to such approval by the stockholders shall
include a provision to the effect that no such option may be
exercised prior to stockholders approval of this Plan.
PROXY CARD
McCORMICK & COMPANY, INCORPORATED
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Charles P. McCormick, Jr., Robert
J. Lawless and Richard W. Single, Sr. and each of them, the proxies
of the undersigned, with several power of substitution, to vote all
shares of Common Stock which the undersigned is entitled to vote at
the Annual Meeting of Stockholders to be held on March 19, 1997,
and at any and all adjournments thereof, in accordance with the
following ballot and in accordance with their best judgment in
connection with such other business as may properly come before the
Meeting:
1. ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING
NOMINEES:
J. J. Albrecht, J. S. Cook, R.G. Davey, F. A. Hrabowski, III,
R.J. Lawless, C. P. McCormick, Jr., G. V. McGowan, C. D.
Nordhoff, R.W. Schroeder, R. W. Single, Sr., W. E. Stevens, K. D.
Weatherholtz
FOR all nominees listed above
WITHHELD for all nominees listed above
WITHHELD as to the following nominees only:________________
2. PROPOSAL TO APPROVE THE 1997 EMPLOYEES STOCK PURCHASE PLAN.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
FOR AGAINST ABSTAIN
3. PROPOSAL TO APPROVE THE 1997 STOCK OPTION PLAN.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL
FOR AGAINST ABSTAIN
4. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION.
FOR AGAINST ABSTAIN
5. IN THEIR DISCRETION, the proxies are authorized to vote on
such other matters as may properly come before the Meeting.
IN THE ABSENCE OF SPECIFIC INSTRUCTIONS APPEARING ON THE PROXY,
PROXIES WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE
APPROVAL OF THE PROPOSALS SET FORTH HEREIN, AND IN THE BEST
DISCRETION OF THE PROXIES AS TO ANY OTHER MATTERS WHICH THE PROXIES
DO NOT KNOW A REASONABLE TIME BEFORE THE SOLICITATION ARE TO BE
PRESENTED AT THE MEETING, OR AS MAY OTHERWISE PROPERLY COME BEFORE
THE MEETING.
Dated: ___________________, 1997
_________________________________
(Please sign as name(s) appear at left.
Ifjoint account, both owners should
sign)
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<FISCAL-YEAR-END> NOV-30-1996
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0
0
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<CGS> 1,128,032
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