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, 1993
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 Identification
incorporation or organization) No.)
18 Loveton Circle
Sparks, Maryland 21152
(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 [ X ]
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 $202,359,567
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, 1994 was 8,894,926. 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, 1994, $22.75.
CLASS NUMBER OF SHARES DATE
OUTSTANDING
Common Stock 13,530,457 1/31/94
Common Stock Non-Voting 67,602,346 1/31/94
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT PART OF FORM 10-K INTO
WHICH INCORPORATED
Registrant's 1993 Annual Report
to Stockholders Part I, Part II, Part IV
Registrant's Proxy Statement
dated 2/16/94 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 foodservice 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 1993, 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 20 of
that Report are incorporated by reference. The Registrant's net
sales increased 5.8% in 1993 to $1,556,566 due to both sales price
and volume changes.
The Registrant operates in one business segment and has
disclosed in Note 10 of the Notes to Consolidated Financial
Statements on page 33 of its Annual Report to Stockholders for
1993, which Note is incorporated by reference, the financial
information about the business segment required by this Item.
SPECIALTY FOOD BUSINESS
The Registrant's Annual Report to Stockholders for 1993 sets
forth a description of the business conducted by the Registrant on
pages 7 through 9. Those pages of the Registrant's Annual Report
are incorporated by reference.
PRINCIPAL PRODUCTS/MARKETING
Spices, seasonings, flavorings, and other specialty food
products are the Registrant's principal products. Spices,
seasonings, flavorings, and other specialty food products accounted
for approximately 90% of net sales on a consolidated basis during
the three fiscal years ended November 30, 1993. No other product
or class of similar products or services contributed as much as 10%
to consolidated net sales during the last three fiscal years. The
Registrant's efforts will continue to be directed primarily in the
area of spices, seasonings, flavorings, and other specialty food
products. The Registrant markets its consumer and foodservice
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.
PRODUCTS/INDUSTRY SEGMENTS
The Registrant has not announced or made public information
about a new product or industry segment that would require the
investment of a material amount of the assets of the Registrant or
that otherwise is material.
RAW MATERIALS
Many of the spices and herbs purchased by the Registrant are
imported into the United States from the country of origin,
although substantial quantities of particular materials, such as
paprika, dehydrated vegetables, onion and garlic, and substantially
all of the specialty food ingredients other than spices and herbs,
originate in the United States. Some of the imported materials are
purchased from dealers 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. The principal purpose of such purchases is to satisfy the
Registrant's own needs. The Registrant also sells imported raw
materials to other food processors.
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.
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 and Schilling 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 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.
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 1993. 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
specialty food 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, and is the largest producer
and distributor of dehydrated onions and garlic in the United
States, its business is highly competitive. For further
discussion, see pages 12 and 14 of the Registrant's Annual Report
to Stockholders for 1993, which pages are incorporated by
reference.
RESEARCH 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 1993, 1992 and 1991 were
approximately $38,226,000, $35,968,000 and $33,052,000,
respectively. Of these amounts, expenditures for research and
development amounted to $12,259,000 in 1993, $11,844,000 in 1992
and $11,438,000 in l991. 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 8,600 employees
during fiscal year 1993.
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
page 33 of the Registrant's Annual Report to Stockholders for 1993
contains the information required by subsection (d) of Item 101 of
Regulation S-K, which Note is incorporated by reference.
PACKAGING OPERATIONS
The Registrant's Annual Report to Stockholders for 1993 sets
forth a description of the Registrant's packaging group on page 9,
which page is incorporated by reference. Setco, Inc. and Tubed
Products, Inc., which comprise Registrant's packaging group, are
wholly owned subsidiaries of the Registrant and are, respectively,
manufacturers of plastic bottles and plastic squeeze tubes.
Substantially all of the raw materials used in the packaging
business originate in the United States. The market for plastic
packaging is highly competitive. The Registrant is the largest
single customer of the packaging group. All intracompany sales have
been eliminated from the Registrant's consolidated financial
statements.
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
contains approximately 540,000 square feet and is owned in fee. A
plant of approximately 475,000 square feet located in Salinas,
California is owned in fee and a plant of approximately 108,000
square feet located in Commerce, California is leased. These plants
are used for processing, packaging and distributing spices and
other food products.
(b) INDUSTRIAL PRODUCTS
(i) A plant complex is located in Gilroy, California
consisting of connected and adjacent buildings owned in fee and
providing approximately 894,000 square feet of space for milling,
dehydrating, packaging, warehousing and distributing onion, garlic
and capsicums. Adjacent to this plant complex is a 4.3 acre
cogeneration facility which supplies steam to the dehydration
business as well as electricity to Pacific Gas & Electric Company.
The cogeneration facility was financed with an installment note
secured by the property and equipment. This note is non-recourse to
the Registrant.
(ii) The Registrant has two principal plants devoted to
industrial flavoring products in the United States. A plant of
102,000 square feet is located in Hunt Valley, Maryland and is
owned in fee. A plant of 102,400 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 four principal plants which are devoted to
the production of plastic containers. The facilities are located in
California, Massachusetts, New York and New Jersey, and range in
size from 178,000 to 280,000 square feet. The plants in New York
and New Jersey are leased and part of the Massachusetts facility
was financed through an industrial revenue bond which is still
outstanding.
(e) INTERNATIONAL
The Registrant has a plant in London, Ontario which is devoted
to the processing, packaging an distribution of food products. This
facility is approximately 145,000 square feet and is owned in fee.
(f) RESEARCH AND DEVELOPMENT
The Registrant has a facility in Hunt Valley, Maryland which
houses the corporate research and development laboratories and
the technical capabilities of the industrial division. The facility
is approximately 200,000 square feet and is owned in fee.
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 1993 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 19 of its Annual Report
to Stockholders for 1993, 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, 1994 was as
follows:
Approximate Number
Title of Class of Record Holders
Common Stock, no par value 2,075
Common Stock Non-Voting, 10,892
no par value
ITEM 6. SELECTED FINANCIAL DATA
The Registrant has disclosed the information required by this
Item in the Historical Financial Summary of its Annual Report to
Stockholders for 1993 at page 20, which page is 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 1993 at
pages 11 through 19 contains a discussion and analysis of the
Company's financial condition and results of operations for the
three fiscal years ended November 30, 1993. 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 21 through 34 of the
Annual Report to Stockholders for 1993, which pages are
incorporated by reference. The report of independent auditors from
Ernst & Young on such financial statements is included on page 35
of the Annual Report to Stockholders for 1993; supplemental
schedules for 1991, 1992 and 1993 are included on pages 14 through
19 of this Report on Form 10-K.
The unaudited quarterly data required by Item 302 of
Regulation S-K is included in Note 11 of the Notes to Consolidated
Financial Statements at page 34 of the Registrant's Annual Report
to Stockholders for 1993, 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 16, 1994, which sets forth
the information required by this Item at pages 3 through 9, which
pages are incorporated by reference. In addition to the executive
officers and directors discussed in the Proxy Statement, J. Allan
Anderson and Donald A. Palumbo are also executive officers of the
Registrant.
Mr. Anderson is 47 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 subsidiary of the Company);
4/89 to 3/91 - Vice President - Food Service & Industrial
Groups.
Mr. Palumbo is 51 years old and has been the Company's Vice
President and Treasurer since January 1988.
ITEM 11. EXECUTIVE COMPENSATION
The Registrant has filed with the Commission a definitive copy
of its Proxy Statement dated February 16, 1994, which sets forth
the information required by this Item at pages 9 through 17, 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 16, 1994 which sets forth the
information required by this Item at pages 4 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 16, 1994 which sets forth the
information required by this Item at page 7, which page is
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
13 below.
2. The financial statement schedules required by Item
8 of this Form which are listed in the Table of
Contents appearing on page 13 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
20 and 21 of this Report.
(b) The Registrant filed two reports during the last quarter
on Form 8-K dated September 9, 1993 and November 18, 1993
respectively, both of which reported the issuance of a press
release.
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/ Bailey A. Thomas
Bailey A. Thomas
Chairman of the Board &
Chief Executive Officer February 21, 1994
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/ Bailey A. Thomas Chairman of the Board &
Bailey A. Thomas Chief Executive Officer February 21,1994
PRINCIPAL FINANCIAL OFFICER:
/s/ James A. Hooker Vice President &
James A. Hooker Chief Financial
Officer February 21, 1994
PRINCIPAL ACCOUNTING OFFICER:
/s/ J. Allan Anderson Vice President &
J. Allan Anderson Controller February 21, 1994
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 21, 1994
James J. Albrecht
/s/ H. Eugene Blattman February 21, 1994
H. Eugene Blattman
/s/ James S. Cook February 21, 1994
James S. Cook
/s/ Harold J. Handley February 21, 1994
Harold J. Handley
/s/ James A. Hooker February 21, 1994
James A. Hooker
/s/ George W. Koch February 21, 1994
George W. Koch
/s/ Charles P. McCormick, Jr. February 21, 1994
Charles P. McCormick, Jr.
/s/ George V. McGowan February 21, 1994
George V. McGowan
/s/ Carroll D. Nordhoff February 21, 1994
Carroll D. Nordhoff
/s/ Richard W. Single, Sr. February 21, 1994
Richard W. Single, Sr.
/s/ William E. Stevens February 21, 1994
William E. Stevens
/s/ Bailey A. Thomas February 21, 1994
Bailey A. Thomas
/s/ Karen D. Weatherholtz February 21, 1994
Karen D. Weatherholtz
CROSS REFERENCE SHEET
PART ITEM REFERENCED MATERIAL/PAGE(S)
PART I Item 1. Business Registrant's 1993 Annual
Report to Stockholders/
Pages 7-20 and 33.
Item 2. Properties None.
Item 3. Legal None.
Proceedings
Item 4. Submission of None.
Matters to a
Vote of Security
Holders.
PART II Item 5. Market for the Registrant's 1993 Annual
Registrant's Report to Stockholders/
Common Equity Page 19.
and Related
Stockholder Matters.
Item 6. Selected Financial Registrant's 1993
Data. Annual Report to
Stockholders/Page 20.
Item 7. Management's Registrant's 1993 Annual
Discussion and Report to Stockholders/
Analysis of Pages 11-19.
Financial Condition
and Results of
Operations.
Item 8. Financial Registrant's 1993 Annual
Statements and Report to Stockholders/
Supplementary Pages 21-35 and Pages
Data. 14-19 of this Report.
Item 9. Changes in and None.
Disagreements with
Accountants on
Accounting and
Financial Disclosure.
PART III Item 10. Directors and Registrant's Proxy
Executive Officers Statement dated February
of the Registrant. 16, 1994/Pages 3-9.
Item 11. Executive Registrant's Proxy
Compensation. Statement dated February
16, 1994/Pages 9-17.
Item 12. Security Ownership Registrant's Proxy
of Certain Statement dated
Beneficial February 16, 1994/Pages
Owners and 4-7.
Management.
Item 13. Certain Registrant's Proxy
Relationships Statement and Related
Transactions. dated February 16, 1994/
Page 7.
PART IV Item 14. Exhibits, See Exhibit Index pages 20
Financial and 21 and the Table of
Statement Contents at page 13 of this
Schedules and Report.
Reports on
Form 8-K.
McCORMICK & COMPANY, INCORPORATED
TABLE OF CONTENTS
AND RELATED INFORMATION
Included in the Company's 1993 Annual Report to Stockholders, the
following consolidated financial statements are incorporated by
reference in Item 8*:
Consolidated Balance Sheets, November 30, 1993 and 1992
Consolidated Statements of Income for the Years Ended
November 30, 1993, 1992 and 1991
Consolidated Statements of Shareholders Equity for the Years
Ended November 30, 1993, 1992 and 1991
Consolidated Statements of Cash Flows for the Years Ended
November 30, 1993, 1992 and 1991
Notes to Consolidated Financial Statements, November 30, 1993
Report of Independent Auditors
Included in Part IV of This Annual Report:
Supplemental Financial Schedules:
II - Amounts Receivable From Related Parties and Underwriters,
Promoters, and Employees Other Than Related Parties
V - Property, Plant and Equipment
VI - Accumulated Depreciation and Amortization of Property,
Plant and Equipment
VIII - Valuation and Qualifying Accounts
IX - Short-Term Borrowings
X - Supplementary Income Statement Information
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 1993 Annual Report to
Stockholders of the Registrant for its fiscal year
ended November 30, 1993 accompanies this Annual
Report Form 10-K.
McCORMICK & COMPANY, INCORPORATED SUPPLEMENTAL FINANCIAL SCHEDULE II
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, CONSOLIDATED
PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN D COLUMN E COLUMN E
BALANCE
BALANCE DEDUCTIONS DEDUCTIONS AT END OF PERIOD
AT (1) (2) (2)
BEGINNING AMOUNTS AMOUNTS (1) NOT
OF PERIOD ADDITIONS COLLECTED WRITTEN OFF CURRENT CURRENT
NAME OF DEBTOR
Year Ended November 30, 1993:
James E. Angelo
interest @ federal rate (AFR)
receivable, due on Sale of Prop. $220,000 -0- -0- -0- -0- $220,000
Bailey A. Thomas
interest @ Company's short-term
borrowing rate
receivable, due On Demand* -0- $150,000 $150,000 -0- -0- -0-
Year Ended November 30, 1992:
George E. Clausen
interest @ federal rate (AFR)
receivable, due On Demand $320,000 -0- $320,000 -0- -0- -0-
James E. Angelo
interest @ federal rate (AFR)
receivable, due on Sale of Prop. $220,000 -0- -0- -0- -0- $220,000
Robert J. Lawless
non-interest bearing receivable,
due on Sale of Property $180,000 -0- $180,000 -0- -0- -0-
James Merritt
non-interest bearing receivable,
due on Sale of Property -0- $105,000 $105,000 -0- -0- -0-
Year Ended November 30, 1991:
George E. Clausen
interest @ federal rate (AFR)
receivable, due On Demand $320,000 -0- -0- -0- -0- $320,000
James E. Angelo
interest @ federal rate (AFR)
receivable, due on Sale of Prop. $220,000 -0- -0- -0- -0- $220,000
Gilbert A. Wheeler
interest @ prime rate
receivable, due On Demand $110,000 -0- $110,000 -0- -0- -0-
Robert J. Lawless
non-interest bearing receivable,
due on Sale of Property -0- $180,000 -0- -0- $180,000 -0-
*The loan was repaid by Mr. Thomas within 5 days.
McCORMICK & COMPANY, INCORPORATED SUPPLEMENTAL FINANCIAL SCHEDULE V
PROPERTY, PLANT AND EQUIPMENT CONSOLIDATED
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
BALANCE AT OTHER BALANCE
BEGINNING ADDITIONS CHANGES- AT END
CLASSIFICATION OF YEAR AT COST RETIREMENTS ADD (DEDUCT) OF YEAR
YEAR ENDED NOVEMBER 30, 1993:
Land and improvements......... $ 27,199,000 $ 740,000 $ 375,000 $ 1,265,000 (A) $ 28,566,000
(247,000)(C)
(16,000)(D)
Buildings and improvements.... 166,362,000 29,590,000 1,196,000 4,965,000 (A) 199,621,000
192,000 (C)
(292,000)(D)
Machinery and equipment....... 433,040,000 56,463,000 7,817,000 14,677,000 (A) 494,143,000
56,000 (C)
(2,276,000)(D)
Construction in progress...... 43,370,000 (10,730,000) - (148,000)(D) 32,492,000
TOTAL................. $669,971,000 $76,063,000 $ 9,388,000 $18,176,000 $754,822,000
YEAR ENDED NOVEMBER 30, 1992:
Land and improvements......... $ 24,537,000 $ 301,000 $ 44,000 $ 2,500,000 (A) $ 27,199,000
(89,000)(D)
(6,000)(C)
Buildings and improvements.... 151,980,000 10,490,000 855,000 4,746,000 (A) 166,362,000
(122,000)(F)
120,000 (D)
3,000 (C)
Machinery and equipment....... 398,163,000 49,933,000 20,020,000 5,359,000 (A) 433,040,000
450,000 (C)
(553,000)(F)
(292,000)(D)
Construction in progress...... 30,627,000 18,639,000 (B) (5,896,000)(D) 43,370,000
TOTAL................. $605,307,000 $79,363,000 $20,919,000 $ 6,220,000 $669,971,000
YEAR ENDED NOVEMBER 30, 1991:
Land and improvements......... $ 21,489,000 $ 3,401,000 $ 133,000 $ 10,000 (D) $ 24,537,000
(230,000)(F)
Buildings and improvements.... 130,374,000 25,503,000 1,586,000 198,000 (C) 151,980,000
(312,000)(D)
(2,197,000)(F)
Machinery and equipment....... 373,939,000 44,653,000 12,084,000 2,410,000 (A) 398,163,000
198,000 (C)
(2,271,000)(D)
(8,682,000)(F)
Construction in progress...... 30,573,000 (96,000) (B) 150,000 (D) 30,627,000
TOTAL................. $556,375,000 $73,461,000 $13,803,000 $(10,726,000) $605,307,000
Notes: (A) Assets of purchased businesses. (B) Net change in account. (C) Other adjustments.
(D) Effect of exchange rate changes on translating property, plant and equipment of foreign subsidiaries in
accordance with FASB Statement 52, "Foreign Currency Translation."
(E) Generally, asset lives for depreciation are 40 years for buildings, 2 to 12 years for machinery and equipment.
(F) Assets of business disposals.
SUPPLEMENTAL FINANCIAL SCHEDULE VI
CONSOLIDATED
McCORMICK & COMPANY, INCORPORATED
ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
BALANCE AT ADDITIONS OTHER BALANCE
BEGINNING CHARGED TO COSTS CHANGES- AT END
OF YEAR AND EXPENSES RETIREMENTS ADD (DEDUCT) OF YEAR
CLASSIFICATION
YEAR ENDED NOVEMBER 30, 1993:
Land and improvements......... $ 1,639,000 $ 195,000 $ 73,000 $ $ 1,761,000
Buildings and improvements.... 45,373,000 6,452,000 652,000 112,000 (A) 51,279,000
(6,000)(B)
Machinery and equipment...... 204,438,000 40,055,000 7,073,000 (1,252,000)(A) 236,172,000
4,000 (B)
TOTAL................. $251,450,000 $46,702,000 $7,798,000 $(1,142,000) $289,212,000
YEAR ENDED NOVEMBER 30, 1992:
Land and improvements......... $ 1,477,000 $ 197,000 $ 32,000 $ (3,000) (A) $ 1,639,000
Buildings and improvements.... 40,942,000 5,556,000 673,000 (398,000) (A) 45,373,000
(15,000) (B)
(39,000) (C)
Machinery and equipment....... 184,363,000 34,280,000 11,961,000 (2,054,000) (A) 204,438,000
29,000 (B)
(219,000) (C)
TOTAL................. $226,782,000 $40,033,000 $12,666,000 $(2,699,000) $251,450,000
YEAR ENDED NOVEMBER 30, 1991:
Land and improvements......... $ 1,444,000 $ 127,000 $ 15,000 $ 1,000 (A) $ 1,477,000
(80,000)(B)
Buildings and improvements.... 37,099,000 4,939,000 1,269,000 15,000 (A) 40,942,000
287,000 (B)
(129,000)(C)
Machinery and equipment....... 163,849,000 31,980,000 10,378,000 (316,000)(A) 184,363,000
2,253,000 (B)
(3,025,000)(C)
TOTAL................. $202,392,000 $37,046,000 $11,662,000 $ (994,000) $226,782,000
Notes: (A) Effect of exchange rate changes on translating property, plant and equipment of foreign subsidiaries in
accordance with FASB Statement 52, "Foreign Currency Translation."
(B) Other adjustments.
(C) Assets of business disposals.
SUPPLEMENTAL FINANCIAL SCHEDULE VIII
CONSOLIDATED
McCORMICK & COMPANY, INCORPORATED
VALUATION AND QUALIFYING ACCOUNTS
COLUMN A COLUMN B COLUMN C COLUMN C COLUMN D COLUMN E
ADDITIONS ADDITIONS
BALANCE CHARGED CHARGED
AT TO COSTS TO BALANCE
BEGINNING AND OTHER AT END
OF YEAR EXPENSES ACCOUNTS DEDUCTIONS (A) OF YEAR
DESCRIPTION
YEAR ENDED NOVEMBER 30, 1993
Deducted from assets to which they apply:
Allowance for doubtful receivables....... $2,651,000 $ 355,000 $ $ 476,000 $2,530,000
YEAR ENDED NOVEMBER 30, 1992
Deducted from assets to which they apply:
Allowance for doubtful receivables....... $3,465,000 $ 364,000 $1,178,000 $2,651,000
YEAR ENDED NOVEMBER 30, 1991
Deducted from assets to which they apply:
Allowance for doubtful receivables....... $2,521,000 $1,682,000 $ 738,000 $3,465,000
Notes:
(A) Accounts written off net of recoveries.
SUPPLEMENTAL FINANCIAL SCHEDULE IX
CONSOLIDATED
McCORMICK & COMPANY, INCORPORATED
SHORT-TERM BORROWINGS
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
MAXIMUM AVERAGE WEIGHTED
CATEGORY OF AMOUNT AMOUNT AVERAGE
AGGREGATE BALANCE WEIGHTED OUTSTANDING OUTSTANDING INTEREST RATE
SHORT-TERM AT END OF AVERAGE DURING THE DURING THE DURING THE
BORROWINGS YEAR INTEREST RATE YEAR YEAR (A) YEAR (B)
YEAR ENDED NOVEMBER 30, 1993:
Commercial Paper (C)........ $ 70,000,000 3.29% $265,000,000 $177,916,000 3.38%
Bank Loans - Domestic (D)... 4,000,000 3.30 87,999,000 22,725,000 3.23
Bank Loans - Foreign (D)(E). 2,389,000 25.08 23,876,000 13,420,000 12.59
TOTAL..................... $ 76,389,000
YEAR ENDED NOVEMBER 30, 1992:
Commercial Paper (C)........ $ 95,000,000 3.73% $206,500,000 $140,750,000 4.25%
Bank Loans - Domestic (D)... 6,100,000 3.50 55,875,000 27,932,000 4.07
Bank Loans - Foreign (D).... 10,457,000 9.93 17,971,000 11,680,000 9.29
TOTAL..................... $111,557,000
YEAR ENDED NOVEMBER 30, 1991:
Commercial Paper (C)........ $ 20,000,000 5.31% $ 68,410,000 $ 42,686,000 6.41%
Bank Loans - Domestic (D)... 19,300,000 4.92 80,000,000 32,473,000 6.29
Bank Loans - Foreign (D).... 4,364,000 14.00 8,362,000 6,042,000 16.00
TOTAL..................... $ 43,664,000
NOTES:
(A) The average amount outstanding during the period was computed by dividing the total of month-end outstanding principal
balances by 12.
(B) Weighted average interest rate was calculated by dividing interest expense by the average amount outstanding during
the period.
(C) Commercial paper maturity dates range generally sixty days or less from the date of issue with no provision for the
extension of maturity.
(D) See Note 3 to Financial Statements for general terms of aggregate short-term borrowings.
(E) Approximately 55% of the end of year balance was from Venezuelan loans bearing interest rates ranging from 7.6%-64.0%.
Approximately 6% of the average amount outstanding was from Venezuelan loans.
SUPPLEMENTAL FINANCIAL SCHEDULE X
CONSOLIDATED
McCORMICK & COMPANY, INCORPORATED
SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE THREE YEARS ENDED NOVEMBER 30, 1993
COLUMN A COLUMN B
ITEM CHARGED TO COSTS AND EXPENSES
1993 1992 1991
Maintenance and repairs.......... $25,232,000 $23,822,000 $21,254,000
NOTE:
Amounts for advertising, depreciation and amortization of intangible assets, royalties and taxes other than payroll and
income taxes are not presented as such amounts are less than 1% of total sales.
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 McCormick Incorporated by
& Company Incorporated - Restated and reference from
Amended as of September 21, 1987. Registrant's Report on
Form 10-K for the
fiscal year of 1990
as filed with the
Securities and
Exchange Commission on
February 18, 1991.
By-laws of McCormick & Company Incorporated by
Incorporated - Restated and Amended reference from
as of September 21, 1987. Registrant's
Report on Form 10-K
for the fiscal year of
1989 as filed with the
Securities and
Exchange Commission on
February 20, 1990.
(4) Instruments defining the rights of With respect to rights
security holders, including of holders of equity
indentures securities, see
Exhibit 3 (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 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. Stock
option plans, in which
directors, officers
and certain other
management employees
participate, are
described in the
Registrant's S-8
Registration
Statements Nos.
2-96166, 33-33725 and
33-39582 filed with
the Securities and
Exchange Commission on
March 1, 1985, March
2, 1990 and March 25,
1991, respectively,
which statements are
incorporated by
reference.
(11) Statement re computation of per- Page 22 of this Report
share earnings on Form 10-K.
(12) Statements re computation of ratios Pages 14-18 of Exhibit
13.
(13) Annual Report to Security Holders
McCormick & Company, Incorporated Bound separately with
Annual Report to Stockholders for separately numbered
1993. pages.
(16) Letter re change in certifying Not applicable.
accountant
(18) Letter re change in accounting Not applicable.
principles
(21) Subsidiaries of the Registrant Page 38 of Exhibit
13.
(22) Published report regarding matters Not applicable.
submitted to vote of securities holders
(23) Consent of independent auditors Page 23 of this Report
on Form 10-K.
(24) Power of attorney Not applicable.
(27) Financial Data Schedule Not applicable.
(28) Information from reports furnished Not applicable.
to state insurance regulatory authorities
(99) Additional exhibits Registrant's
definitive Proxy
Statement dated
February 16, l994.
Information furnished
pursuant to Rule
15d-21 on Form 10-K/A,
to be filed not later
than May 28, l994.
REPORT ON OPERATIONS
CONSUMER PRODUCTS
McCormick's oldest and largest business consists of spices, herbs,
extracts, proprietary seasoning blends, and easy-to-use liquid
flavorings and marinades. These retail products are sold primarily
in the United States under the McCormick name in the East, the
Schilling and Crescent labels in the West, and the Club House
brand in Canada. Given the highly competitive nature of the
consumer products business and the recessionary economies in some
of our markets, 1993 was a very good year.
One part of our strategy to grow our retail business includes the
introduction of new products and line extensions. Some 40 new
products were introduced during 1993. Examples include:
Old Bay Seas'n Easy product line for fish,
A new line of Caribbean spices known as La Cocina de
McCormick,
A new line of dry seasoning mixes for rice,
Bag 'n Season for Hot 'n Spicy Wings,
McCormick International Collection of gourmet spices,and
Holiday Potpourri.
Consumer studies show the perimeter aisles of grocery stores are
the highest traffic areas. In order to take advantage of this
shopping pattern, we have successfully integrated recently acquired
brands from Golden Dipt, Produce Partners, and Prepco, dramatically
increasing our presence in the seafood and produce departments.
The Old Bay and Golden Dipt lines of products answer the increasing
consumer demand for quick and easy seasoning ideas for fish and
other seafood items. Emphasis is also being placed on Thai and
Hispanic style seasonings, both fast-growing categories. Focus on
total quality, statistical process control, and new computerized
communications with grocery customers continues to provide
productivity gains and cost savings.
INDUSTRIAL AND FOOD SERVICE
The McCormick Flavor Group, which includes our industrial and fast
food spice, seasonings and flavor businesses, had another strong
year of sales and profit growth.
The Flavor Division achieved significant sales increases in 1993
with leading food processors and fast food chains. Additionally,
the Division received the Best of the Best supplier award from a
major multinational food processor and has been named a preferred
supplier by several other major domestic as well as international
customers.
Growth is being supported by capital expenditures, such as the one
for the new Technical Resource Center which opened in early 1993.
This new center provides creative space for customers to use with
our technical specialists in the development of new products. This
expansion of technical laboratory facilities will help the Flavor
Division maintain its industry leadership in superior flavor
systems. The mission is to develop a customer-focused formula
management process which enables employees to be consistent in
exceeding customer expectations and thereby gain competitive
worldwide advantages for McCormick.
In 1993, this Division also experienced significant growth in sales
volumes in the coatings systems product line by concentrating
attention on select accounts which service major fast food chains
and multinational food processors. By continuing to supply
technologically superior flavor systems, we successfully serve more
than 80 of the top 100 food processors.
The Food Service Division primarily serves broad-line foodservice
distributors and warehouse clubs, areas characterized by continuing
consolidation.
This Division has expanded its business in a rapidly changing
environment through operating efficiencies, superior customer
service and contemporary new products. New items include Dry
Rotisserie Style Seasoning, Thai Seasoning, California Garlic
Blends, and the continued growth of 1992 favorites Montreal Steak
Seasoning and Caribbean Jerk Seasoning.
Gilroy Foods, McCormick's agriculturally -based California
subsidiary, experienced a short crop in 1992 which unfavorably
impacted earnings in 1993. This unit expects to return to normal
profit levels in 1994.
In support of McCormick's global expansion strategy, Gilroy Foods
acquired 80 percent of National Dehydration Company of Egypt. This
venture will primarily support the United Kingdom and European
markets. Another joint venture, Alimentos Deshidratados del Bajio,
was formed to produce and market chilies and dehydrated vegetables
in Mexico.
SupHerb Farms, McCormick's joint venture with Daragal of France,
which produces frozen and freeze-dried herbs, opened its new state-
of-the-art processing facility in Turlock, California. We continue
to be excited about the possibilities for this business venture.
Gilroy Energy Company, Gilroy Foods' cogeneration facility,
concluded its sixth very successful year of operations.Golden
West Foods significantly improved its performance in the latter
part of 1993 by expanding its product mix into higher margin
specialty frozen food items and improving productivity within its
operations.
INTERNATIONAL
1993 was an excellent year for the International Group. Sales
increased 16 percent in local currencies over the prior year.
Especially noteworthy was the performance of McCormick U.K. This
unit enjoyed solid profit growth despite a recessionary economy.
Part of the success came from the launch of new products, including
rice seasonings and liquid sauces featuring international flavors.
Cost containment measures also helped to improve gross margins.
Through careful cost controls and operations improvements,
McCormick Canada and McCormick Australia reported good years
despite difficult local economies. Our Latin American businesses
in El Salvador and Venezuela continued to perform very well.
Among unconsolidated units, substantial improvement occurred in the
sales and profit performance of McCormick-Lion, our consumer joint
venture in Japan. Our joint venture in Mexico also continued to
show strong sales growth. Profit performance was impacted by more
aggressive marketing programs to support additional capacity at the
San Luis Potosi plant.
Our joint ventures in China and the Philippines performed well,
with further progress expected in 1994. Based on the successful
launch of consumer products in the Shanghai and Beijing markets, we
plan to expand the sale of similar products in Southern China
during 1994.
PACKAGING
McCormick's Packaging Group - which includes Setco and Tubed
Products - continues to enjoy growth in specialized niche markets
while also supplying other McCormick units with plastic packaging
for foodservice and consumer products.
During 1993, Tubed Products completed renovation and increased
capacity at the facility in Freehold, New Jersey. Additional tube
manufacturing and decorating machines were installed at the
facilities in Oxnard, California, and Easthampton, Massachusetts.
In addition to expanding decorating production capacity, the
Easthampton plant has begun production of high barrier, multi-layer
plastic tubes. This provides new sales opportunities.
Setco completed the acquisition and integration of the Admiral
Plastics plant in New York in March of 1993. This acquisition
provides entry into a new market of the pharmaceutical business.
To meet increasing customer demands, capacity was added to Setco
plants in Cranbury, New Jersey, and Anaheim, California.
OVERVIEW - 1993
The Company earned $1.22 per share from continuing operations in
fiscal year 1993. This represents a 5% increase over the $1.16
reported in 1992 and compares to gains of 18% in both 1992 and
1991. The Company adopted the new accounting standard for
postretirement benefits (Statement of Financial Accounting
Standards [SFAS] No. 106) in 1993 causing a one-time charge to
earnings of $.33 per share resulting in net earnings of $.89 per
share. The adoption of SFAS No. 106 also reduced earnings in 1993
by an additional $.03 per share to reflect ongoing accrued expenses
associated with these benefits. The increase in the federal
corporate income tax rate retroactive to January 1 also reduced
earnings by approximately $.03 per share. Adjusting 1993 earnings
for the additional expenses described and excluding a $.02 gain on
the sale of a divested business in 1992, profits increased 12% over
1992 on a comparable basis. Operating performance was below the
Company's earnings growth objective of 15%. This was primarily
due to high cost onion inventories; other factors were competitive
pressures and weak economic conditions in a number of the markets
in which we operate.
Sales of $1.56 billion increased 5.8% over 1992. Excluding the
impact of unfavorable foreign currency exchange rates, particularly
in the United Kingdom and Canada, sales increased by 9%. Sales of
unconsolidated operations in 1993 were $310 million, an increase of
16% over 1992.
Return on equity from continuing operations declined slightly to
22.0% versus 23.3% in 1992 and 21.8% in 1991. Return on equity
after taking into effect the adoption of the accounting change
discussed above was 17.0%.
Net income from continuing operations was 6.4% of net sales in 1993
versus 6.5% in 1992 and 5.7% in 1991.
Dividends were increased in December 1992 to an annual rate of $.44
per share and again in December 1993 to $.48 per share. These
dividend increases reflect management's continued confidence in the
long-term outlook for the Company.
The 2 million share repurchase program authorized in October 1991
was completed. In June 1993, the Company authorized an additional
2 million share repurchase program which was approximately 12%
complete at fiscal yearend.
The consumer products business reported higher profits and sales as
it continued to expand its product offerings through line
extensions and niche acquisitions. The operating environment for
consumer products companies remains difficult as the industry
focuses on cost reductions and efficiencies in a highly competitive
environment.
Most of our industrial and foodservice operations reported
increased operating profits and sales during 1993. However, our
Gilroy Foods unit experienced significantly lower operating profits
due to high onion costs. This situation, a result of fewer acres
planted and lower crop yields of product produced in 1992 for sale
in 1993, materially affected Gilroy's margins. The crop harvested
in mid-year 1993 produced acceptable yields, and margins are
expected to return to normal levels. Our industrial flavor and
seasonings business had an excellent year participating as a key
ingredient supplier in several significant new product launches by
its customers.
Sales and operating profits at our international operating units
increased significantly in 1993 on a local currency basis. Both the
United Kingdom and Canada, our largest consolidated international
operations, achieved increases despite the difficult economic
environments in which they operated.
Sales and operating profits at our packaging operations increased
significantly in 1993. During the year, the Company completed the
acquisition of the bottle business of Admiral Plastics. With this
acquisition, the Company enhanced its position as a quality
supplier of plastic bottles for the food, cosmetic and
pharmaceutical industries. The plastic tube business of Peerless
Tube, acquired in 1992, was successfully integrated into our Tubed
Products unit.
Earnings of our unconsolidated joint ventures increased
approximately 4% in 1993. McCormick de Mexico brought additional
capacity on stream in 1993 and engaged in heavy sales promotional
efforts to build market share. McCormick-Lion, our consumer
products operation in Japan, reported improved results due to
successful implementation of cost reduction programs.
Management remains confident that our current focus on profitable
expansion and margin improvement, combined with continued emphasis
on total quality, will generate increased shareholder value.
SALES
Sales from consolidated operations grew by 5.8% in 1993 to a record
level of $1.56 billion. Excluding the unfavorable effects of
foreign exchange rates, sales increased 9% versus our stated sales
growth objective of 10%.
Our domestic consumer products business experienced modest sales
growth in an environment that is both mature and highly
competitive. Continued focus on adding products which cater to the
consumer's demand for more convenience and variety contributed to
the 4% unit sales increase. A primary marketing thrust is to
position more McCormick products around the perimeter of the
grocery store. This is evidenced by our recent acquisition of the
consumer products line of Golden Dipt, which provides us with a
more extensive presence in the seafood department. Also, the
acquisition of product lines and brands such as Produce Partners,
Zebbies and Great Guacamole, provides us with additional products
in high traffic produce departments. The impact of private label
products on the sales of branded consumer products was a prime
concern for the grocery industry during 1993. Within the spice
industry, private label products are not new and the category has
not shown any recent growth. The Company has packaged private label
spices for many years. As a supplier of these products, we do not
believe they are a significant threat to our branded consumer
business.
Our domestic consumer products business continues to experience
margin pressure. Higher discounts and allowances are being
required to defend our distribution base. We expect that these
intensely competitive market conditions will exist throughout 1994.
We intend to defend aggressively our share of the consumer spice
and seasoning market.
Industrial/Food Service sales were up in 1993 due in part to the
success of new consumer products launched by our industrial
customers. These combined operations provide a broad array of high
quality flavor systems and ingredients, product development and
support services. Such capabilities continue to position us as a
preferred source for major multinational food processors.
In the packaging area, acquisition of the Admiral Plastics' bottle
business and continued expansion in our existing business
contributed to significant sales growth. Our ability to provide
customers with high quality specialty packaging along with
excellent customer service has enhanced our niche position in this
industry.
International sales growth was affected by continued economic
weakness and unfavorable foreign exchange rates in many of the
countries in which we operate. In local currency, sales growth in
the United Kingdom was excellent. Our U.K. operations continue to
expand its retail product line and gain further penetration in the
industrial marketplace.
Sales by our joint venture units, which are not consolidated,
reached $310 million, a 16% increase over 1992. These companies
have become increasingly important as a method to grow our business
in new geographical markets or product categories. In these
ventures, our partner provides critical market knowledge or
distribution strength that complements our overall capabilities in
the spice and seasoning business.
Sales
Consolidated 1993 1992 1991 1993 1992 1991
(in millions) (percentage of total)
Consumer Products $ 531.0 $ 509.0 $ 483.5 34.1% 34.7% 33.9%
Industrial/Food Service 537.3 503.9 536.1 34.5% 34.2% 37.5%
International 321.6 317.0 292.6 20.7% 21.5% 20.5%
Packaging 124.9 97.2 73.4 8.0% 6.6% 5.1%
Total Food and
Packaging 1,514.8 1,427.1 1,385.6 97.3% 97.0% 97.0%
Gilroy Energy 41.8 44.3 42.3 2.7% 3.0% 3.0%
Total $1,556.6 $1,471.4 $1,427.9 100.0% 100.0% 100.0%
Percentage Change 1993 1992 1991
Volume Price Volume Price Volume Price
Total Change Change Total Change Change Total Change Change
Consumer Products 4.3% 4.0% 0.3% 5.3% 3.3% 2.0% 11.1% 6.0% 5.1%
Industrial/Food
Service 6.6% 8.4% (1.8)% (6.0)% (4.0)% (2.0)% 3.6% 3.8% (0.2)%
International 1.4% 8.8% (7.4)% 8.3% 7.9% 0.4% 14.1% 8.1% 6.0%
Packaging 28.6% 25.5% 3.1% 32.4% 34.3% (1.9)% 10.2% 5.2% 5.0%
Total Food and
Packaging 6.1% 7.7% (1.6)% 3.0% 3.1% (0.1)% 8.6% 5.5% 3.1%
Gilroy Energy (5.7)% (4.2)% (1.5)% 4.7% 4.3% 0.4% (10.8)% (12.4)% 1.6%
Total 5.8% 7.7% (1.9)% 3.0% 3.1% (0.1)% 7.9% 4.8% 3.1%
Excluding divested
businesses:
Industrial/Food Service 9.2% 11.2% (2.0)% 3.6% 3.8% (0.2)%
Total Food and Packaging 8.7% 8.7% 0.0% 8.6% 5.5% 3.1%
We believe growth opportunities exist in our businesses and have
outlined the prospects for our various operations below:
Our consumer products business operates in a mature market where
the consumer's primary interest is purchasing products which
provide convenience and variety. We have focused our efforts on
developing high quality products which meet these needs. There is
potential to market a number of new value-added products,
particularly in the seasoning mix category. Our focus on marketing
McCormick products in the perimeter and other sections of the store
will provide additional growth. We will continue to evaluate niche
acquisitions which support this effort. Given the current low
inflationary environment with modest price increase expectations
and the mature nature of this market, we expect our consumer
business to grow at a rate less than our Corporate objective.
Industrial/Food Service sales growth of 6.6% was affected somewhat
by lower inventories as a result of a smaller onion crop and lower
yields at our Gilroy Foods unit. Our Food Service spice and
seasoning business continues to supply high quality products to
foodservice distributors and wholesale clubs. Our industrial
ingredients and flavor business had an outstanding year. As a
premier supplier of flavor systems to many of the major global food
processors, we continue to position ourselves as a partner to our
customers in the product development area. The opening of a new
state-of-the-art technical service center provides complete product
development capabilities for our customers. We provide our
customers with full service from the initial product concept stage
through flavor development and final manufacturing process setup.
With our technical resources in flavor systems development, we
provide our customers with the ability to differentiate their
products in the marketplace. We believe these capabilities,
provided on a global basis, position us for significant growth
potential in the future.
International sales growth continues to be an area of primary
importance to the Company. We are pursuing alternatives to
increase our presence in the European consumer spice market. We
have also begun to focus more intensely on retail operations in the
Pacific Rim area. We believe there are significant opportunities to
expand our retail presence in this area as a number of economies
continue their rapid development. Our efforts to expand our
industrial capabilities in the international market continued
throughout the year. We anticipate significant growth from this
area of our business as we support global expansion of our
major customers.
We have continued to expand our capabilities in the specialized
packaging niche we serve and believe future growth in our packaging
business will come from further market penetration. We expect this
business to grow at a rate near our Company objective.
EARNINGS
Our objective is to grow earnings per share (EPS) at an average
rate of 15% per year over time. EPS from continuing operations
reached $1.22, an increase of 5% over 1992. Total earnings per
share for 1993 were $.89 after deducting the one-time charge of
$.33 per share due to the adoption of SFAS No. 106 relating to
postretirement benefits. Our earnings from continuing operations
were impacted by three significant factors: first, both gross and
operating margins were reduced during the first three quarters of
the year by high onion costs, a result of fewer acres planted and
lower crop yields of product produced at our Gilroy Foods unit;
second, adoption of SFAS No. 106 reduced earnings from continuing
operations by $.03 per share to reflect the ongoing portion of this
expense; and third, the higher federal corporate income tax rate
retroactive to January 1, 1993 reduced earnings by $.03 per share.
Earnings in 1992 included a $.02 gain on the sale of a divested
business. After adjusting each respective year's results for these
factors, earnings from continuing operations increased 12% on a
comparable basis over 1992.Due in part to the high onion costs
at our Gilroy Foods unit throughout most of 1993, gross profit
margins for the Company declined to 38.7% in 1993 from 39.7% in
1992. The graph on this page displays margins over the past five
years. With the harvest of the 1993 crop, Gilroy's onion cost will
return to normal in 1994. Gross profits were also affected by the
faster growth rate of our industrial/food service and packaging
businesses relative to the consumer business. The gross margin of
these industrial businesses is less than that of the consumer
business. Therefore, the mix of our business this year had the
impact of reducing overall gross profit margins. We continued to
remove costs from our business. The graph on page 1 of this report
displays the distribution of the sales dollar as compared to
previous years. As shown, we continue to make progress in reducing
our cost of materials as a percent of sales.
Profit from operations increased to 11.6% of sales versus 11.4% in
1992 and 10.2% in 1991. As shown by the graph on this page, gross
profit margin declined while operating profit margin increased. As
described, our growing industrial and packaging businesses
experience a lower gross margin than our consumer business.
However, these businesses require a considerably lower level of
selling and promotional expenses. Therefore, even with a lower
overall gross profit rate, our operating profit margin increased as
we continued our cost containment programs throughout the
Corporation.
Interest expense increased slightly in 1993 to $31.1 million versus
$30.9 million in 1992 and $27.5 million in 1991. This increase was
primarily due to higher debt levels resulting from acquisitions
made in 1993. The lower interest rates experienced throughout 1993
helped offset the increased expense from the higher debt levels.
Other income in 1993 was $2.4 million lower than 1992 because 1992
included a gain on the sale of an industrial cleaning supply
business.
The effective tax rate in 1993 was 40.4% versus 38.3% in 1992 and
37.2% in 1991. The increased 1993 effective tax rate was due to
the new federal tax legislation retroactive to January 1, 1993.
Unconsolidated income from joint ventures increased to $10.3
million, up from $9.9 million in 1992. Improved results achieved
by our consumer joint venture in Japan contributed to the increase.
Joint ventures will play an increasingly important role as we
continue to pursue growth opportunities around the world.
Earnings
1993 1992 1991 1993 1992 1991
(in millions) (percentage of sales)
Gross profit $603.2 $584.0 $541.3 38.7% 39.7% 37.9%
Profit from operations 180.5 167.2 145.5 11.6% 11.4% 10.2%
Income before taxes 149.9 138.3 114.9 9.6% 9.4% 8.1%
Net income before
accounting change 99.7 95.2 80.9 6.4% 6.5% 5.7%
Net income 73.1 95.2 80.9 4.7% 6.5% 5.7%
Earnings per share before
accounting change 1.22 1.16 .98
Earnings per share .89 $ 1.16 $ .98
[At this point, a bar graph depicting gross profit and operating profit
as a percent of sales over the last five years appears and is represented
by the following table.]
PROFIT MARGINS
Percent of Sales
Year Gross Profit Operating Profit
1989 35.3 8.2
1990 36.6 9.6
1991 37.9 10.2
1992 39.7 11.4
1993 38.7 11.6
We remain committed to the achievement of 15% earnings growth on
average. However, in the near-term, achieving this objective
remains a challenge and requires accomplishment of the following:
*10% sales growth,
*A four-year cost reduction program targeted to save 10% of cost of
goods sold. Fiscal 1993's target of saving 3% was achieved. Some
of the programs we are using to achieve these savings include the
following:
- - Continued cost reductions through our global sourcing program
which is expanding and providing incremental savings,
- - Our Total Quality process which fosters an environment conducive
to continuous improvements by empowering our employees who strive
to improve customer service and production processes,
- - Supply chain management which reduces the cost of operations by
eliminating any step in the process that does not add value,
- - Capital spending focused on providing our worldwide manufacturing
locations with the most efficient production equipment available.
This emphasis positions us globally as a low-cost producer and
enhances our ability to be a supplier to our customers worldwide.
*Continued operating profit margin improvement despite the impact
of sales mix,
*Increased contributions from our unconsolidated operations as they
grow at a faster rate.
We do not believe that current projected rates of inflation will
have a material effect on our operating results.As described
above, during the year the Company adopted SFAS No. 106, Employers
Accounting for Postretirement Benefits Other than Pensions. This
accounting change resulted in a one-time, non-cash charge of $26.6
million after tax or $.33 per share. Additionally, this new
accounting method resulted in an increase in the ongoing after-tax
cost of postretirement benefits of $2.2 million or $.03 per share.
During the year, the Company also adopted SFAS No. 107, Disclosures
About Fair Value of Financial Instruments, which requires
disclosure of the estimated fair value of certain financial
instruments. Cash, receivables, short-term borrowings, accounts
payable, and accrued liabilities are reflected in the financial
statements at fair value because of the short-term maturity of
these instruments. Investments, principally in unconsolidated
affiliates, are not readily marketable and therefore it is not
practicable to estimate their fair value. The fair value of the
Company's long-term debt instruments is disclosed in Notes to
Financial Statements, Number 3.
In November 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 112, Employers'
Accounting for Postemployment Benefits. This standard requires
that employers accrue a liability for their obligation to provide
postemployment benefits as employees earn the right to receive
them, provided that payment of the benefits is probable and the
amount of the benefits can be reasonably estimated. The Company has
not yet determined when this standard will be adopted. The effect
of this accounting change on the Company's financial statements is
not expected to be material. The Company must adopt this standard
no later than in its fiscal year ending November 30, 1995.
LIQUIDITY
The Company's current ratio was 1.4 at yearend compared to 1.1 and
1.2 at the end of 1992 and 1991, respectively. The significant
improvement was attributable to the Company's refinancing of short-
term debt under our $150 million medium-term note program. The
Company's current ratio does not represent a complete measure of
the cash resources available to finance operating requirements. We
maintain relationships with a number of domestic and foreign banks
that provide credit facilities of $290 million which increase our
liquidity. These facilities were not in use at yearend.
During 1993, Moody's upgraded the Company's commercial paper rating
to P-1. Standard & Poor's reaffirmed the Company's A-1 rating.
Reported net income reflects the one-time non-cash charge of $26.6
million incurred with adoption of SFAS No. 106. Overall, cash flows
from operations were reduced by approximately $37 million versus
1992 due to an increase in operating assets. This was primarily a
result of a return to normal inventory levels at our Gilroy Foods
subsidiary and increased inventories associated with new product
introductions by our industrial customers. The accounts receivable
turnover rate stabilized at 12.9 times versus 12.9 and 13.3 times
in 1992 and 1991, respectively. Inventory turnover rate was 3.1
times in 1993 and 1992, and 3.5 times in 1991.
Liquidity
1993 1992 1991
(in millions)
Net income $ 73.1 $ 95.2 $ 80.9
Accounting change for
postretirement benefits 26.6
Depreciation and other
non-cash charges 39.4 31.5 36.8
Dividends received from
unconsolidated subsidiaries 10.4 5.6 3.2
Change in operating assets
and liabilities (68.9) (15.0) (46.5)
Cash flow from operations $ 80.6 $117.3 $ 74.4
Current ratio 1.4 1.1 1.2
RETURN ON EQUITY
Return on equity (ROE), calculated by dividing net income from
continuing operations by average shareholders' equity,
was 22.0% versus 23.3% in 1992 and 21.8% in 1991. After reducing
net income and equity for the impact of the one-time charge
relating to the adoption of SFAS No. 106, total ROE for 1993 was
17.0%.
As described previously, due to high onion costs, higher federal
corporate income tax rates, and the impact of SFAS No. 106,
operating earnings grew at a 5% rate in 1993, a deceleration from
the earnings growth rate experienced in previous years. The lower
earnings growth rate was the primary reason for the slight decline
in our ROE from continuing operations.
Management continues to focus on margins and asset utilization to
help us maintain our ROE at a level above 20%. Programs that
generate margin improvement include the following:
*Emphasis on our cost reduction program including continuing
benefit from our global sourcing efforts,
*Capital investments in plant and equipment focused on making us a
low cost producer,
*Company-wide emphasis on Total Quality to improve performance and
customer service.
Improving our asset utilization is also key to increasing our ROE.
Our efforts in this area include:
*Continual analysis of our worldwide production operations for
opportunities to improve efficiencies,
*Making working capital management a significant factor in our
incentive compensation program,
*Constant review of our entire asset base for areas where returns
are not meeting our objectives.
CAPITAL STRUCTURE/DEBT FINANCING
Our objective is to maintain total debt to total capital at 40% or
less, excluding non-recourse debt.
Total debt to total capital, excluding non-recourse debt of $59.7
million associated with Gilroy Energy Company, was 44.3% at yearend
versus 37.4% in 1992 and 36.4% in 1991.
The 1993 yearend ratio was affected by the adoption of SFAS No. 106
which created a one-time charge to equity of $26.6 million. On a
comparable basis to 1992, adding back the one-time charge, debt to
total capital was 42.9%. Over the course of 1993, several
acquisitions were completed and capital expenditures remained at a
relatively high level, the primary factors allowing the Company to
slightly exceed its objective.
In 1993, the Company's long-term debt rating of A was reaffirmed by
both major debt rating services. Operating cash flows remain strong
and should be sufficient to cover capital expenditures and dividend
payouts in 1994.
[At this point, a bar graph depicting debt to total capital over
the last five years appears and is represented by the following
table.]
DEBT TO TOTAL CAPITAL
(Excludes non-recourse debt)
Year Percent
1989 32.6
1990 32.9
1991 36.4
1992 37.4
1993 44.3
During 1993, the Company negotiated revolving credit facilities
aggregating $290 million on favorable terms with a syndicate of
domestic and foreign banks. These revolvers replaced credit
facilities aggregating $236 million. During 1993, the Company also
put in place a $150 million medium-term note program for the
purpose of refinancing short-term debt. At yearend, $30 million of
the notes had been issued with a term of 12 years at rates of 5.78%
to 6.1%. This credit facility also enabled reclassification of
$120 million of commercial paper as long-term debt in 1993.
We continue to seek acquisitions throughout the world that fit our
mission and strategy. Our primary justification for making an
acquisition continues to be the timely achievement of an acceptable
return on investment. When a strategic acquisition of significant
size occurs which provides the Company with important marketing and
growth opportunities, management may decide to increase the debt to
total capital ratio for a period of time. In such an event,
management would require plans and programs be in place that
provide reasonable assurance the Company would again be operating
within its capital structure objective.
CAPITAL EXPENDITURES
Capital expenditures were $76 million in 1993 versus $79 million in
1992 and $73 million in 1991. The majority of our capital spending
is oriented toward projects that increase efficiency and improve
yields or expand capacity. Major capital spending projects in 1993
included the following:
*Opened a condiment manufacturing and distribution center in
Scotland,
*Increased manufacturing capacity and expanded product capabilities
at Tubed Products,
*Added spray drying and liquid compounding capacity for our
industrial customer base,
*Expanded production capabilities and capacity of Setco,
*Installed an electrical substation and support equipment at
Gilroy Foods to reduce utility costs.
We will continue to pursue capital spending projects which will
help ensure our position as a low-cost producer. We anticipate that
capital spending in 1994 will be somewhat lower than the 1993
level.
[At this point, a bar graph depicting property additions and
depreciation over the last five years appears, and is represented
by the following table.]
CAPITAL EXPENDITURES
$ In Millions
Year Property Additions Depreciation
1989 53 32
1990 58 33
1991 73 37
1992 79 40
1993 76 47
DIVIDENDS
Dividends have increased 11 times since 1987 and have risen at a
compounded rate of 23%. Total dividends paid during fiscal 1993
were $35.6 million versus $30.4 million in 1992 and $22.4 million
in 1991. In December 1992, the Board of Directors authorized an
increase in the annual dividend rate from $.40 per share to $.44
per share. The quarterly dividends paid during the past three years
are summarized below.
1993 1992 1991
First Quarter $.11 $.09 $.065
Second Quarter .11 .09 .065
Third Quarter .11 .10 .075
Fourth Quarter .11 .10 .075
Total $.44 $.38 $.280
In December 1993, the Board of Directors approved an increase
in the quarterly dividend from $.11 to $.12 per share, a 9%
increase. Our objective is to pay dividends equal to 25%-35% of
current net income to shareholders of common stocks.
PRICE RANGE OF COMMON STOCK
The high and low closing prices of common stock during fiscal
quarters as reported on the NASDAQ national market follow:
1993 1992
Quarter ended High Low High Low
February 28 $30.25 $24.75 $28.25 $21.25
May 31 26.00 22.50 28.00 21.75
August 31 24.75 20.50 26.00 20.63
November 30 26.25 21.63 28.75 25.25
HISTORICAL FINANCIAL SUMMARY(DOLLARS IN MILLIONS EXCEPT PER-SHARE DATA)
OPERATING RESULTS 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
Net sales 1,556.6 1,471.4 1,427.9 1,323.0 1,246.1 1,220.3 1,078.5 975.7 873.0 788.4
Cost of goods sold 953.4 887.4 886.6 838.2 805.9 812.6 710.2 637.4 564.5 503.1
Gross profit 603.2 584.0 541.3 484.8 440.2 407.7 368.3 338.3 308.5 285.3
Selling, general &
admin. exp. 422.7 416.8 395.8 357.7 338.2 312.9 305.2 271.3 247.9 220.1
Operating profit 180.5 167.2 145.5 127.1 102.0 94.8 63.1 67.0 60.6 65.2
Interest & other
income/exp. (30.6) (28.9) (30.6) (22.8) (23.5) (31.0) (22.5) (23.5) (21.4) (13.6)
Income before
income taxes 149.9 138.3 114.9 104.3 78.5 63.8 40.6 43.5 39.2 51.6
Provision for income
taxes (60.5) (53.0) (42.8) (38.6) (29.5) (27.8) (16.6) (19.4) (18.1) (24.8)
Income consolidated
ops. 89.4 85.3 72.1 65.7 49.0 36.0 24.0 24.1 21.1 26.8
Income unconsolidated
ops. 10.3 9.9 8.8 3.7 3.5 (.4) .4 .3 .5 .8
Income continuing
ops. 99.7 95.2 80.9 69.4 52.5 35.6 24.4 24.4 21.6 27.6
Income discont. real
estate ops. 83.0 .7 6.2 5.3 6.2 27.0
Accounting changes (26.6) 6.4
Net income 73.1 95.2 80.9 69.4 135.5 42.7 30.6 29.7 27.8 54.6
Gross profit margin 38.7% 39.7% 37.9% 36.6% 35.3% 33.4% 34.1% 34.7% 35.3% 36.2%
Operating profit
margin 11.6% 11.4% 10.2% 9.6% 8.2% 7.8% 5.9% 6.9% 6.9% 8.3%
Profit margin
consolidated 5.7% 5.8% 5.1% 5.0% 3.9% 3.0% 2.2% 2.5% 2.4% 3.4%
Percent change over prior year
Net sales 5.8% 3.0% 7.9% 6.2% 2.1% 13.2% 10.5% 11.8% 10.7% 6.1%
Income continuing
ops. 4.7% 17.7% 16.6% 32.1% 47.5% 45.9% .0% 13.0% (21.7)% .0%
Effective tax rate 40.4% 38.3% 37.2% 37.0% 37.6% 43.6% 40.9% 44.6% 46.2% 48.1%
LIQUIDITY
Depreciation and
amortization 50.5 43.8 40.5 36.6 34.8 29.8 30.4 24.5 23.5 20.9
Capital expenditures 76.1 79.3 73.0 58.4 53.4 50.4 81.7 82.9 41.3 31.3
Current ratio 1.4 1.1 1.2 1.3 1.7 1.4 1.4 1.4 1.3 1.4
CAPITAL STRUCTURE
Current debt 82.6 120.5 76.7 30.4 20.3 49.5 76.7 51.9 56.5 44.8
Long-term debt 288.8 141.3 145.8 148.2 147.2 166.1 139.5 102.2 94.8 96.6
Non-recourse debt 59.7 61.8 63.3 63.3 63.3 63.3 58.6 24.6
Total debt 431.1 323.6 285.8 241.9 230.8 278.9 274.8 178.7 151.3 141.4
Shareholders' equity 466.8 437.9 389.2 364.4 346.2 294.3 280.6 271.6 261.1 243.7
Total capital 897.9 761.5 675.0 606.3 577.0 573.2 555.4 450.3 412.4 385.1
Total assets 1,313.2 1,130.9 1,037.4 946.9 864.5 846.4 776.5 648.1 582.4 542.5
Return on equity -
continuing ops. 22.0% 23.3% 21.8% 20.4% 15.5% 14.6% 11.1% 11.9% 11.9% 15.5%
Return on equity -
total 17.0% 23.3% 21.8% 20.4% 40.0% 14.6% 11.3% 11.3% 11.3% 23.2%
Percent debt to
total capital 48.0% 42.5% 42.3% 39.9% 40.0% 48.7% 49.5% 39.7% 36.7% 36.7%
Debt to capital excluding -
non-recourse 44.3% 37.4% 36.4% 32.9% 32.6% 42.3% 43.5% 36.2% 36.7% 36.7%
PER COMMON SHARE (1)
Income - continuing
ops. 1.22 1.16 .98 .83 .60 .38 .26 .25 .22 .28
Income - discont. real
estate ops. .94 .01 .06 .06 .06 .27
Income before accounting
changes 1.22 1.16 .98 .83 1.54 .39 .32 .31 .28 .55
Accounting changes (.33) .07
Total earnings .89 1.16 .98 .83 1.54 .46 .32 .31 .28 .55
EPS growth from
continuing ops. 5% 18% 18% 38% 58% 46% 4% 14% (21)% 0%
Book value 5.70 5.45 4.88 4.56 4.18 3.27 3.00 2.83 2.68 2.50
Common dividends
declared (2) .45 .40 .31 .24 .19 .14 .13 .11 .11 .14
Market closing price:
High 30.25 28.75 22.88 13.38 12.50 7.25 6.44 5.66 4.75 4.27
Low 20.50 20.63 11.88 9.13 6.31 3.85 4.10 4.16 3.85 3.57
Dividend payout
ratio (3) 36.1% 32.8% 28.6% 28.9% 30.8% 36.5% 38.5% 37.4% 38.6% 25.5%
Average shares outstanding -
and equivalents(000's) 81,766 81,918 82,396 83,720 87,772 93,068 94,408 96,848 98,000 99,184 (1)
(1) All share data adjusted for 2-for-1 stock splits in January 1992,
January 1990 and April 1988.
(2) Includes fourth quarter dividends for the years 1986 and
1988-1993, which were declared in December of each of those years.
(3) Dividend payout ratio does not include gain on sale of
discontinued real estate operations, or cumulative effect of
accounting changes.
CONSOLIDATED INCOME
Year ended November 30
1993 1992 1991
(in thousands except per-share data)
Net sales $1,556,566 $1,471,369 $1,427,902
Cost of goods sold 953,409 887,394 886,514
Gross profit 603,157 583,975 541,388
Selling, general and administrative expense 422,700 416,788 395,811
Profit from operations 180,457 167,187 145,577
Other income 6,397 8,778 5,040
Interest expense 31,102 30,895 27,464
Other expense 5,862 6,757 8,205
Income before income taxes 149,890 138,313 114,948
Provision for income taxes 60,500 53,000 42,800
Income from consolidated operations 89,390 85,313 72,148
Income from unconsolidated operations 10,290 9,904 8,776
Net income before cumulative effect
on prior years of accounting change 99,680 95,217 80,924
Cumulative effect on prior years of
accounting change for postretirement benefits (26,626)
Net Income $ 73,054 $ 95,217 $ 80,924
Earnings per common share
Before cumulative effect of accounting change $1.22 $1.16 $.98
Cumulative effect on prior years of
accounting change (.33)
Earnings per common share $ .89 $1.16 $.98
See Notes to Financial Statements, pages 26-34.
Consolidated Balance Sheet November 30
Assets 1993 1992
(in thousands)
Current assets
Cash and cash equivalents $ 12,838 $ 1,806
Receivables
Trade 158,904 134,277
Other 18,727 26,348
Allowance for losses (2,530) (2,651)
175,101 157,974
Inventories
Finished products and
work-in-process 215,538 186,547
Raw materials and supplies 105,713 95,635
321,251 282,182
Prepaid expenses 17,960 19,748
Deferred income taxes 13,003 6,382
Total current assets 540,153 468,092
Investments 45,728 41,526
Property, plant and equipment
Land and improvements 28,566 27,199
Buildings and improvements 199,621 166,362
Machinery and equipment 494,143 433,040
Construction in progress 32,492 43,370
754,822 669,971
Less accumulated depreciation and
amortization 289,212 251,450
Property, plant and
equipment - net 465,610 418,521
Excess cost of acquisitions-net 130,638 87,619
Prepaid allowances 126,399 110,792
Other assets 4,706 4,327
Goodwill, trademarks, formulae, etc. 1 1
Human relations 1 1
$1,313,236 $1,130,879
See Notes to Financial Statements, pages 26-34.
November 30
Liabilities and Shareholders'
Equity 1993 1992
(in thousands)
Current liabilities
Notes payable $ 76,389 $ 111,557
Current portion of
long-term debt 8,299 10,916
Outstanding checks 25,401 24,149
Trade accounts payable 113,884 108,537
Accrued payroll 29,781 31,665
Accrued sales allowances 31,240 26,882
Other accrued expenses
and liabilities 90,980 88,057
Income taxes 16,893 17,803
Total current liabilities 392,867 419,566
Long-term debt 346,436 201,080
Deferred income taxes 39,006 58,219
Employee benefit
liabilities 63,875 10,412
Other liabilities 4,231 3,664
Total liabilities 846,415 692,941
Shareholders' equity
Common Stock, no par value;
authorized 160,000,000
shares; issued and
outstanding: 1993 -
14,562,000 shares, 1992
- - 14,357,000 shares 53,470 42,294
Common Stock Non-Voting,
no par value;
authorized 160,000,000
shares; issued and
outstanding: 1993 -
66,437,000 shares,
1992-65,951,000 shares 93,047 80,449
Retained earnings 330,327 318,711
Foreign currency
translation adjustments (10,023) (3,516)
Total shareholders'
equity 466,821 437,938
Commitments and contingent
liabilities $1,313,236 $1,130,879
See Notes to Financial Statements, pages 26-34.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Common Retained Currency Translation
CHANGES IN AMOUNTS Stocks Earnings Adjustments Total
(in thousands except per-share data)
Balance, December 1, 1990 $ 75,316 $274,357 $ 14,694 $364,367
Net income 80,924 80,924
Dividends declared ($.28/share) (22,435) (22,435)
Currency translation adjustments (6,320) (6,320)
Shares purchased (5,417) (52,274) (57,691)
Shares issued 30,358 30,358
Balance, November 30, 1991 100,257 280,572 8,374 389,203
Net income 95,217 95,217
Dividends declared ($.38/share) (30,435) (30,435)
Currency translation adjustments (11,890) (11,890)
Shares purchased (4,633) (26,643) (31,276)
Shares issued 27,119 27,119
Balance, November 30, 1992 122,743 318,711 (3,516) 437,938
Net income 73,054 73,054
Dividends declared ($.44/share) (35,553) (35,553)
Currency translation adjustments (6,507) (6,507)
Other adjustments (3,066) (3,066)
Shares purchased (3,580) (22,819) (26,399)
Shares issued 27,354 27,354
Balance, November 30, 1993 $146,517 $330,327 $(10,023) $466,821
CHANGES IN SHARES ISSUED AND OUTSTANDING
Common Common
Non-Voting
(in thousands)
Balance, November 30, 1990 14,444 65,422
Purchased and retired (624) (2,498)
Issued 1,087 1,851
Equal exchange (466) 466
Balance, November 30, 1991 14,441 65,241
Purchased and retired (393) (861)
Issued 1,073 807
Equal exchange (764) 764
Balance, November 30, 1992 14,357 65,951
Purchased and retired (286) (676)
Issued 791 862
Equal exchange (300) 300
Balance, November 30, 1993 14,562 66,437
See Notes to Financial Statements, pages 26-34.
CONSOLIDATED CASH FLOWS
Year ended November 30
1993 1992 1991
(in thousands)
Cash flows from operating activities
Net income $ 73,054 $ 95,217 $ 80,924
Adjustments to reconcile net income to
net cash providedby operating activities
Cumulative effect of accounting change 26,626
Depreciation and amortization 50,522 43,839 40,476
Provision for deferred income taxes (1,077) (706) 6,062
Loss/(gain) on sales of assets 201 (1,779) (940)
Share of income from unconsolidated operations (10,290) (9,904) (8,776)
Changes in operating assets and liabilities
net of effectsfrom businesses acquired or
sold
Receivables (increase)/decrease (26,293) 1,446 (7,537)
Inventories (increase) (34,089) (14,795) (33,049)
Prepaid expenses (increase)/decrease 1,719 (64) (71)
Prepaid allowances (increase) (15,763) (8,577) (20,672)
Other assets (increase)/decrease (393) 209 (182)
Outstanding checks increase/(decrease) 1,252 (10,068) 2,335
Accounts payable increase 7,117 15,408 1,266
Accrued payroll increase/(decrease) (1,884) 2,276 2,291
Accrued sales allowances increase/(decrease) 4,358 (1,378) (582)
Other accrued exp. and liabilities increase/(decrease) (4,070) (10,319) 13,421
Income taxes payable increase/(decrease) (6,185) 5,065 (6,284)
Other non-current liabilities increase 5,379 5,820 2,526
Dividend received from unconsolidated affiliate 10,391 5,635 3,182
Net cash provided by operating activities 80,575 117,325 74,390
Cash flows from investing activities
Acquisitions of businesses (75,915) (43,703) (246)
Purchases of property, plant and equipment (76,063) (79,345) (72,978)
Proceeds from sale of assets 1,461 5,726 14,583
Proceeds from forward exchange contract 9,288
Other investments (3,823) (3,965) (2,861)
Net cash (used in) investing activities (145,052) (121,287) (61,502)
Cash flows from financing activities
Notes payable increase 85,159 69,075 18,259
Long-term debt
Borrowings 38,535 4,714 76,873
Repayments (10,002) (34,954) (51,476)
Stocks
Issued 27,354 27,077 24,858
Acquired by purchase (26,399) (31,276) (57,691)
Dividends paid (35,551) (30,431) (22,433)
Net cash provided by/(used in) financing activities 79,096 4,205 (11,610)
Effect of exchange rate changes on cash and cash equivalents (3,587) (4,461) (601)
Increase/(decrease) in cash and cash equivalents 11,032 (4,218) 677
Cash and cash equivalents at beginning of year 1,806 6,024 5,347
Cash and cash equivalents at end of year $ 12,838 $ 1,806 $ 6,024
See Notes to Financial Statements, pages 26-34.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands except per-share data)
1. Summary of Accounting Policies:
Consolidation
The financial statements include all majority-owned
subsidiaries. Subsidiaries outside the United States and Canada are
consolidated using an October 31 yearend.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased
with an original maturity date of three months or less to be cash
equivalents.
The Company's central cash management system is designed to
maintain zero balances at certain banks. Accounting records
classify checks written but not presented to these banks as
outstanding checks.
Inventories
Inventories are stated at the lower of cost (first-in, first-
out) or market.
Prepaid Allowances
The Company incurs costs in connection with certain contracts
which extend beyond a one-year period. These costs are deferred
and amortized over the life of the contracts.
Investments
Investments in the Company's unconsolidated affiliates are
carried on the equity basis; other investments are stated at
cost.
The excess cost of acquisition of subsidiaries and affiliates
is being amortized using the straight-line method principally over
40 years. Accumulated amortization of excess cost of acquisitions
was $23,994 at November 30, 1993 and $19,936 at November 30, 1992.
Property, Plant and Equipment
Property, plant and equipment is stated on the basis of
historical cost. Depreciation is computed using principally the
straight-line method. Depreciation expense was $46,702 in 1993;
$40,033 in 1992 and $37,046 in 1991.
Upon sale or retirement of property, plant and equipment,
related costs and accumulated depreciation are removed from the
accounts and any resulting gain or loss is reflected in other
income or other expense, respectively.
Capitalized leased assets and leasehold improvements are
amortized over the shorter of their estimated life or the period of
the related leases.
Revenue Recognition
Sales revenue is recorded and recognized as products are
shipped and services are rendered.
Income Taxes
The Company provides for income taxes using the liability
method pursuant to Statement of Financial Accounting Standards
(SFAS) No. 109, Accounting for Income Taxes. Deferred income taxes
are provided for temporary differences arising between the tax
basis of assets and liabilities and their book basis as reported in
the financial statements.
Research and Development
Research and development costs are charged to operations as
incurred. Such costs were $12,259 in 1993; $11,844 in 1992 and
$11,438 in 1991.
Earnings Per Share
Earnings per common share have been computed by dividing net
income by the weighted average number of common shares outstanding
during the period (80,799,000 shares in 1993; 80,116,000 shares in
1992 and 80,030,000 shares in 1991), plus dilutive common
equivalent shares applicable to outstanding stock option and
purchase plans (967,000 shares in 1993; 1,802,000 shares in 1992
and 2,366,000 shares in 1991).
Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of trade accounts
receivable. Because the Company has a large and diverse customer
base with no single customer accounting for a significant
percentage of trade accounts receivable, there was no material
concentration of credit risk at November 30, 1993.
Accounting Change
In November 1993, the Company decided to adopt SFAS No. 106,
Employers Accounting for Postretirement Benefits Other than
Pensions effective as of December 1, 1992. This accounting
standard requires the expected cost of postretirement benefits be
accrued during the years that employees render services. Prior to
1993, the Company recognized these expenses based on claims
paid.
The Company is immediately recognizing a transition obligation
which is based on the aggregate amount that would have been
recorded in prior years had the new standard been in effect for
those years, as a one-time charge to 1993 income of $26.6 million
or $.33 per share, net of approximately $17.2 million of income tax
benefit. The incremental change to 1993 net income by applying SFAS
106 rather than the previous accounting method was $2.2 million net
of income tax benefit, or $.03 per share.
Results for the first three quarters of 1993 have been restated to
reflect this change. Prior year financial statements have not been
restated (see Note 11).
Fair Value of Financial Instruments
SFAS No. 107 Disclosures About Fair Value of Financial
Instruments requires disclosure of the estimated fair value of
certain financial instruments. Cash, receivables, short-term
borrowings, accounts payable, and accrued liabilities are reflected
in the financial statements at fair value because of the short-term
maturity of these instruments. Investments, principally in
unconsolidated affiliates, are not readily marketable and therefore
it is not practicable to estimate their fair value. The fair value
of thnme Company's long-term debt instruments is disclosed in Note
3.
2. Investments:
The Company owns from 21.9% to 50% of its unconsolidated food
products affiliates. Although the Company reports its share of
earnings from the affiliates, their financial statements are not
consolidated with those of the Company. The Company's share of
undistributed earnings of the affiliates was $17,200 at November
30, 1993.
Summarized yearend information from the financial statements
of these companies representing 100% of their businesses follows:
UNCONSOLIDATED AFFILIATES
1993 1992 1991
Current assets $136,713 $120,410 $ 94,508
Non-current assets 68,974 57,611 46,303
Current liabilities 87,512 80,748 77,517
Non-current liabilities 35,138 26,566 16,798
Net sales 309,527 268,182 218,564
Gross profit 122,515 110,001 91,042
Net income $ 20,557 $ 19,756 $ 18,140
3. Financing Arrangements and Long-Term Debt:
At November 30, 1990, the Company had committed credit
facilities with domestic and foreign banks in aggregate of
$256,000. The Company maintains these credit facilities largely to
assure liquidity and support commercial paper issuance. There were
no borrowings outstanding against these facilities at November 30,
1990. The Company is required to pay a commitment fee on the
unused portion of these facilities.
The Company has short-term lending arrangements for the
benefit of its foreign subsidiaries which provide for lines of
credit aggregating $33,000. Borrowings under these agreements
totaled $4,700. The Company also has informal money market rate
borrowing agreements with its domestic and foreign banks in excess
of $100,000, subject to availability of funds; compensation is not
required. Short-term borrowings under these arrangements totaled
$3,600 at November 30, 1990.
The Company's long-term debt at November 30 consisted of the
following:
1993 1992
8.95% note due 2001 $ 74,279 $ 74,215
9.00% installment note due 2001 15,909 20,455
9.75% installment note due 2003 31,500 35,000
5.78% - 6.10% notes due 2005 30,000
10.00% Bond due 1999 7,489
Commercial paper notes supported
by note agreements 120,000
Industrial revenue bonds 7,054 9,664
Other 2,617 2,007
288,848 201,080
11.68% non-recourse installment
note due 2006 57,588 59,739
Total $346,436 $260,819
The installment note agreements require sinking fund payments.
The Company's long-term debt agreements contain various restrictive
covenants including payment of cash dividends. Under the most
restrictive covenant, $239,282 of retained earnings was available
for dividends at November 30, 1993.
In August 1993, the Company filed a shelf registration to
establish a medium-term note program in the amount of $150,000.
This program will allow the Company to issue notes in various
maturities ranging from 9 months to 30 years. At November 30, 1993,
the Company had issued $30,000 of notes with maturities of 12 years
and an average coupon of 5.95%.
Certain commercial paper notes have been classified as
long-term debt, reflecting the Company's ability and intention to
refinance this amount on a long-term basis through existing credit
facilities.
Industrial revenue bonds are payable in installments from 1993
to 2002 with interest rates ranging from 3.48% to 7.63%.
The non-recourse installment note is secured by property and
equipment owned by Gilroy Energy Company, Inc. with a net book
value of $65,745.
Maturities of long-term debt during the four years
subsequent to November 30, 1994 are as follows:
1995 - $10,110 1997 - $9,910
1996 - $ 8,705 1998 - $9,114
The estimated fair value of long-term debt at November 30,
1993, using discounted cash flow analysis based on the Company's
current incremental borrowing rate for debt of similar remaining
maturities was $378,701. This amount excludes $8,299 current
portion of long-term debt which in considered to be at fair value.
The Company enters into forward exchange contracts to hedge
the impact of foreign currency fluctuations on its net investments
in certain foreign subsidiaries. At November 30, 1993, the Company
had outstanding $29,838 of forward exchange contracts with
commercial banks expiring in 1994. The gains or losses on these
contracts are included in the foreign currency translation
adjustments account within shareholders' equity. The fair value of
these contracts using market prices for comparable instruments was
$29,700.
Interest paid in 1993, 1992 and 1991 was $31,739, $32,243 and
$25,233 respectively, of which $73, $127 and $741 was capitalized
in 1993, 1992 and 1991 respectively.
4. Employee Benefit Plans:
Pension Plans
The Company has two non-contributory defined benefit pension
plans, one covering substantially all domestic employees other than
those covered under union-sponsored multi-employer plans, and
another to provide supplemental retirement benefits for certain
officers. Plan benefits are generally based on the employee's years
of service and compensation during the last five years of
employment. At November 30, 1993, Company employees numbering
approximately 4,466 were eligible to participate, and were
participants in the Plans. 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 Company contributed $13,370 to its principal plan in
1993. The Plans' assets consist primarily of short-term money
market investments, fixed income investments and equity securities,
which included 149,742 shares of Company stocks at November 30,
1993.
A summary of the components of pension cost for the defined
benefit plans and the total costs charged to pension expense
follows:
1993 1992 1991
Defined benefit plans
Service cost - benefits earned during the period $ 6,137 $ 4,912 $ 4,401
Interest cost on projected benefit obligations 9,272 8,741 8,069
Actual return on plan assets including unrealized (gain)/loss (7,070) (7,238) (11,383)
Net amortization and deferral 852 700 4,685
Net pension cost 9,191 7,115 5,772
Multi-employer pension plans 1,591 1,477 1,488
Foreign retirement plans 1,907 1,988 1,900
Total pension expense $12,689 $10,580 $ 9,160
The following table sets forth the defined benefit plans' funded
status, amounts recognized in the Company's Consolidated Balance
Sheet and significant assumptions as of September 30:
1993 1992
Funded status
Actuarial present value of benefit
obligation Vested $108,071 $ 95,669
Non-vested 4,177 3,309
Accumulated benefit obligation 112,248 (a) $ 98,978 (c)
Balance sheet recognition
Projected benefit obligation
for service rendered to date (144,209) $(125,114)
Plan assets at fair value 103,207 (b) 87,261 (d)
Projected benefit obligation
in excess of plan assets (41,002) (37,853)
Unrecognized net loss from past
experience different from that
assumed and effects of changes
in assumptions 39,512 28,876
Unrecognized net transition
asset and prior service cost (3,529) (4,222)
Accrued pension cost recognized
in Consolidated Balance Sheet (5,019) $ (13,199)
Significant assumptions
Weighted-average discount rate 7.0% 7.5%
Rate of increase in compensation
levels 5.0% 5.0%
Long-term rate of return on
plan assets 10.5% 10.5%
Principal Supplemental
Plan Plan
(a) Accumulated benefit
obligation - 1993 $98,562 $13,686
(b) Plan assets at fair
value - 1993 $94,233 $ 8,974
(c) Accumulated benefit
obligation - 1992 $88,290 $10,688
(d) Plan assets at
fair value - 1992 $82,372 $ 4,889
Profit Sharing Plan
The Company makes contributions to the McCormick Profit
Sharing Plan in accordance with the Plan's provisions.
Contributions were $6,500 in 1993; $5,700 in 1992 and
$4,900 in 1991. At November 30, 1993, Company employees numbering
approximately 5092 were eligible to participate, and were
participants in the Plan.
Postretirement Benefits
The Company provides health care and life insurance benefits
to eligible retirees having at least 10 years of service. Health
care benefits are also extended to eligible dependents of retirees
as long as the retiree remains covered. Medical benefits are
contributory based on the retiree's age and service at retirement
and require other cost-sharing features such as deductibles and
coinsurance. Life insurance protection is non-contributory. These
benefit plans are not funded. The Company pays for claims as
incurred. Amounts paid were $1,819 in 1993; $2,360 in 1992 and
$1,262 in 1991.
SFAS No. 106 requires companies to accrue the cost of
postretirement benefits during the years that employees render
service. As discussed in Note 1, the Company adopted SFAS No. 106,
effective December 1, 1992 and recorded a one-time charge of $26.6
million net of deferred income tax benefits for accumulated
postretirement benefits. In addition to this one-time charge, the
Company's postretirement benefit expense for 1993 increased
approximately $3.6 million due to SFAS No. 106. The net periodic
cost for postretirement health care and life insurance benefits
during 1993 includes the following:
Service cost $1,947
Interest cost 3,333
Net postretirement benefit cost $5,280
The accumulated postretirement benefit obligation (APBO) which
is classified with Employee benefit liabilities on the Consolidated
Balance Sheet, included the following at November 30, 1993:
Current retirees $18,357
Fully eligible active plan participants 10,725
Other active plan participants 18,377
Accrued Postretirement benefit liability $47,459
The weighted-average annual rate in increase in the per capita
cost of covered benefits (i.e., health care trend rate) assumed for
the medical plan is 13% for 1994 and is assumed to gradullay
decrease to 6% in 2006 and remain at that level thereafter.
Increasing the assumed health care cost trend rate by one
percentage point in each year would increase the accumulated
postretirement benefit obligation at November 30, 1993, by $6,100,
and the aggregate of the service and interest cost components of
net periodic postretirement benefit cost for 1993 by $800.
The weighted-average discount rate used in determining the
accumulated postretirement benefit obligation at November 30, 1993,
was 7.75%.
Postemployment Benefits
In November 1992, the Financial Accounting Standards Board
issued SFAS No. 112, Employers' Accounting for Postemployment
Benefits. This standard requires that employers accrue a liability
for their obligation to provide postemployment benefits as
employees earn the right to receive them, provided that payment of
the benefits is probable and the amount of the benefits can be
reasonably estimated. The Company has not yet determined when the
Standard will be adopted. The effect of this accounting change on
the Company's financial statement is not expected to be material.
The Company must adopt this standard no later than in its fiscal
year ending November 30, 1995.
Stock Option Plans
Under the 1984 and 1990 Stock Option Plans, options to
purchase shares of the Company's common stocks have been or may be
granted to employees of the Company and its subsidiaries at the
fair market value on the date granted. Approximately 398 employees
of the Company were granted options under the Company's option
plans during the fiscal year ended November 30, 1993. At November
30, 1993, the average exercise price for outstanding options was
$15.50 per share and the expiration dates ranged from February 19,
1994 to March 16, 2003.
The Company also has an Employees Stock Purchase Plan in which
the purchase price is the lower of fair market value at the date
granted or exercised. There were subscriptions for 555,657 shares
under the Plan at November 30, 1993, at a purchase price of $22.63
per share or the closing price on the date of exercise, whichever
price is less. At November 30, 1993, Company employees numbering
4,254 were participants in the 1993 Employees Stock Purchase Plan.
Changes in outstanding stock options during the year were:
Common Price Range
Common Non-Voting Per Share
(shares in thousands)
Outstanding December 1, 1992 1,436 1,935 $3.55 - $26.00
Granted 192 784 $22.63
Exercised (413) (830) $3.55 - $22.63
Cancelled or expired (7) (73) $18.00 - $26.00
Outstanding November 30, 1993 1,208 1,816 $4.41 - $26.00
Under all plans, there were 4,205,919 shares reserved for future
grants and 2,406,408 shares exercisable as of November 30, 1993
5. Income Taxes:
For financial reporting purposes, income before income taxes
includes the following components:
1993 1992 1991
Pretax income:
Domestic $132,450 $125,249 $100,017
Foreign 17,440 13,064 14,931
149,890 $138,313 $114,948
Significant components of the income tax provision follows:
Current:
Federal $ 44,878 $ 40,298 $ 25,640
Foreign 7,577 5,122 6,146
State 9,122 8,286 4,952
Total current 61,577 53,706 36,738
Deferred:
Federal (968) (718) 5,091
Foreign 121 32 (36)
State (230) (20) 1,007
Total deferred (1,077) (706) 6,062
$ 60,500 $ 53,000 $ 42,800
Tax expense allocated directly to contributed capital relating
to employee stock options was $2,304 in 1993; $4,116 in 1992, and
$2,583 in 1991. Tax expense allocated directly to contributed
capital relating to translation adjustments was $(3,291) in 1993
and $(2,834) in 1992.
The significant components of the deferred income tax assets and
(liability) follow:
1993 1992
Current deferred income tax assets:
Inventory capitalization $ 5,041 $ 4,661
Casualty insurance 3,540
State income tax 2,261 1,938
Coupon expense 1,852 1,783
Other 4,568 3,653
Total current deferred income tax assets 17,262 12,035
Current deferred income tax liabilities:
Prepaid insurance (1,807)
(1,807)
Employee benefits (875) (4,234)
Other (1,577) (1,419)
Total current deferred income tax liabilities (4,259) (5,653)
Total net current deferred income tax asset $ 13,003 $ 6,382
Noncurrent deferred income tax assets:
Employee benefits $ 25,350 $ 4,182
Other 4,827 7,119
Total noncurrent deferred income tax assets 30,177 11,301
Noncurrent deferred income tax liabilities:
Tax over book depreciation (53,214) (51,360)
Property exchange (7,440) (10,184)
Other (8,529) (7,976)
Total noncurrent deferred income tax liabilities (69,183) (69,520)
Total net noncurrent deferred income tax liability $ (39,006) $(58,219)
No valuation allowance is provided for deferred income tax assets.
Income tax expense varies from the amount computed by applying
the statutory federal income tax rate to income before income taxes
as follows:
1993 1992 1991
Federal statutory tax rate 35.0% 34.0% 34.0%
State income taxes, net of federal tax benefits 3.8 4.0 3.7
Foreign taxes in excess of federal statutory rate 1.1 .5 .9
Rehabilitation investment and other tax credits (.8) (.6) (.4)
Federal tax rate change effect on deferred taxes .8
Other items .5 .4 (1.0)
Actual income tax rate 40.4% 38.3% 37.2%
Income taxes are provided at rates applicable in the countries
in which the income is earned. Provision for United States income
taxes is not made for unremitted earnings of foreign subsidiaries
and affiliates as those earnings are considered to be indefinitely
reinvested. Upon distribution, these earnings would be subject to
both U.S. income taxes (subject to an adjustment for foreign tax
credits) and withholding taxes payable to the various foreign
countries. Determination of the unrecognized deferred tax
liability for temporary differences related to investments in
foreign subsidiaries and foreign corporate joint ventures at
November 30, 1993 and November 30, 1992 is not practicable.
Unremitted earnings of such entities were $54,457 at November 30,
1993.
Income taxes paid in 1993; 1992 and 1991 were $66,143; $46,521
and $41,391 respectively.
6. Capital Stocks:
Holders of Common Stock have full voting rights except that
(1) the voting rights of persons who are deemed to own beneficially
10% or more of the outstanding shares of voting Common Stock are
limited to 10% of the votes entitled to be cast by all holders of
shares of Common Stock regardless of how many shares in excess of
10% are held by such person; (2) the Company has the right to
redeem any or all shares of stock owned by such person unless such
person acquires more than 90% of the outstanding shares of each
class of the Company's Common Stock; and (3) at such time as such
person controls more than 50% of the votes entitled to be cast by
the holders of outstanding shares of voting Common Stock,
automatically, on a share-for-share basis, all shares of Common
Stock Non-Voting will convert into shares of Common Stock.
Holders of Common Stock Non-Voting are entitled to vote on reverse
mergers and statutory share exchanges where the capital stock of the
Company is converted into other securities or property, dissolution
of the Company and the sale of substantially all of the assets of
the Company, as well as forward mergers and consolidation of the
Company. Holders of Common Stock Non-Voting will vote as a separate
class on all matters on which the holders of Common Stock Non-
Voting are entitled to vote.
7. Foreign Currency Translation:
The Company has included in net income all foreign exchange
gains and losses arising from foreign currency transactions and the
effects of foreign exchange rate fluctuations on subsidiaries and
affiliates operating in highly inflationary economies. The
aggregate foreign exchange losses included in other expenses and
gains included in other income were $151 loss in 1993; $146 gain in
1992 and $100 gain in 1991.
Effects of foreign exchange rate fluctuations for other
foreign Company operations are included in the foreign currency
translation adjustments account within shareholders equity. The
change in the amount of this account at November 30, 1993 as
compared to November 30, 1992, is primarily due to differences in
the exchange rate for both the British pound sterling and the
Canadian dollar on those dates.
8. Leases:
Rental expense was $12,416 in 1993; $11,772 in 1992 and
$13,015 in 1991. Future annual fixed rental payments required
during the fiscal years 1994 through 1998, for noncancelable
operating leases are $9,067; $7,515; $5,889; $4,354, and $3,484
respectively. The remaining obligation after 1998 is $13,658.
9. Acquisitions:
In December 1992, the Company acquired the consumer products
business of Golden Dipt (a division of DCA Food Industries), and a
foil package line of consumer products from Prepared Products
Company. Also, the Company's wholly owned subsidiary, Gilroy Foods,
Inc., acquired an 80% interest in National Dehydration Company of
Giza, Egypt. In March 1993, the Company's wholly owned subsidiary,
Setco, Inc., acquired the assets of Admiral Plastics in New York;
Gilroy Foods, Inc. acquired the fresh and dehydrated onion and
garlic operations of Haas Foods, Inc., and the Company acquired
Produce Partners, a line of consumer products. In September 1993,
Gilroy Foods, Inc. acquired the assets and dehydrated vegetable
business of Cade Grayson Company.
The assets and liabilities acquired in these transactions have
been recorded using the purchase method of accounting at their
estimated fair values at the date of acquisition. The aggregate
purchase price of all acquisitions was $75,915, including $48,548
of excess cost which is being amortized over 40 years. The
accompanying financial statements include the results of operations
of these businesses from the date of acquisition. While these
acquistions are expected to contribute positively to the Company's
future sales and earnings, they are not material in relation to the
Company's consolidated financial statements for 1993, and
therefore, proforma financial information has not been presented.
10. Business Segment:
The Company operates in one segment, specialty foods, which
consists principally of manufacturing, marketing and distributing
seasonings, flavorings and food products. It also includes the
plastic packaging group. The following presents information about
operations in different geographic areas:
North Other
America Europe Countries Total
1993
Net sales $1,315,848 $201,178 $39,540 $1,556,566
Net income before accounting
change for postretirement
benefits 93,353 5,552 775 99,680
Assets 1,157,923 135,574 19,739 1,313,236
Liabilities 768,386 69,381 8,648 846,415
1992
Net sales $1,233,590 $201,025 36,754 1,471,369
Net income 91,261 2,671 1,285 95,217
Assets 986,186 126,429 18,264 1,130,879
Liabilities 620,942 64,859 7,140 692,941
1991
Net sales $1,220,006 $175,068 $32,828 $1,427,902
Net income 77,053 2,511 1,360 80,924
Assets 910,409 111,019 15,978 1,037,046
Liabilities 569,381 72,023 6,799 648,203
11. Quarterly Data (Unaudited):
1993 Quarters
1st 2nd 3rd 4th Year
Net sales $339,585 $361,300 $394,928 $460,753 $1,556,566
Gross profit 122,902 132,427 155,226 192,602 603,157
Income before cumulative effect
of accounting change 17,264(a) 17,536(b) 24,367(c) 40,513(d) 99,680
Cumulative effect of accounting
change for postretirement benefits (26,626) (26,626)
Net income (loss) (9,362)(a) 17,536(b) 24,367(c) 40,513(d) 73,054
Earnings per common share before
cumulative effect of accounting change .21 (a) .21(b) .30(c) .50(d) 1.22
Cumulative effect of accounting change
for postretirement benefits (.33) (.33)
Earnings (loss) per common share $(.12)(a) $.21(b) .30(c) .50(d) $.89
(a) Reflects $557 or $.01 per share reduction due to accounting change for postretirement benefits. As originally reported,
net income was $17,821 or $.22 per share.
(b) Reflects $557 or $.01 per share reduction due to accounting change for postretirement benefits. As originally reported,
net income was $18,093 or $.22 per share.
(c) Reflects $557 reduction due to accounting change for postretirement benefits. As originally reported, net income was
$24,924 or $.30 per share.Also reflects $.02 per share reduction due to the increase in the federal corporate tax rate.
(d) Reflects $558 or $.01 per share reduction due to accounting change for postretirement benefits and $.01 per share
reduction due to the increase in the federal corporate tax rate.
1st 2nd 3rd 4th Year
Net sales $322,255 $336,643 $360,300 $452,171 $1,471,369
Gross profit 123,525 128,179 141,448 190,823 583,975
Net income 17,324 18,948(a) 23,923 35,022 95,217(a)
Earnings per common share $.21 $.23(a) $.29 $.43 $1.16(a)
(a) Includes gain from sale of industrial cleaning supply business of $1,900 or $.02 per share.
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. These financial statements have been audited
by the Company's independent auditors, Ernst & Young, for each of
the three years in the period ended November 30, 1993. 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/Bailey A. Thomas
Chairman of the Board & Chief Executive Officer
/s/James A. Hooker
Vice President & Chief Financial Officer
/s/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, 1993 and 1992, and the related consolidated statements of
income, shareholders' equity, and cash flows for each of the three
years in the period ended November 30, 1993. 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 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, 1993 and 1992, and the consolidated
results of their operations and their cash flows for each of the
three years in the period ended November 30, 1993 in conformity
with generally accepted accounting principles.
As discussed in Note 4 to the consolidated financial
statements, the Company changed its method of accounting for
postretirement benefits other than pensions in 1993.
/s/Ernst & Young
Baltimore, Maryland January 17, 1994
APPENDIX TO EXHIBIT 13: REGISTRANT'S ANNUAL REPORT TO STOCKHOLDERS
FOR 1993
GRAPHICS APPENDIX LIST
EDGAR VERSION TYPESET VERSION
Page 15 - Bar Graph Captioned Page 15 - Bar graph depicting
PROFIT MARGINS - omitted gross profit and operating
profit as a percent of sales
for fiscal years 1989 through
1993. The text and numbers
used in this graph appear in
the text of the EDGAR version.
Page 18 - Bar Graph Captioned Page 18 - Bar graph depicting
DEBT TO TOTAL CAPITAL - omitted debt to total capital for
fiscal years 1989 through 1993.
The text and numbers used in
this graph appear in the text
of the EDGAR version.
Page 18 - Bar Graph Captioned
CAPITAL EXPENDITURES - omitted Page 18 - Bar graph depicting
property additions and
depreciation for fiscal years
1989 through 1993. The text
and numbers used in this
graph appear in the text
of the EDGAR version.
[TEXT]
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 17, 1994, included in the 1993 Annual
Report Shareholders of McCormick & Company, Incorporated.
Our audits also included the financial statement schedules of
McCormick & Company, Incorporated and subsidiaries listed in Item
14(a). These schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion based on
our audits. In our opinion, the financial statement schedules
referred to above, when considered in relation to the basic
financial statements taken as a whole, present fairly in all
material respects the information set forth herein.
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 17, 1994, with respect to the consolidated
financial statements and schedules of McCormick & Company,
Incorporated and subsidiaries included in the 1993 Annual Report to
Shareholders and incorporated by reference in this Annual Report
(Form 10-K) for the year ended November 30, 1993.
Form Registration Number Date Filed
S-3 33-66614 7/23/93
S-8 33-59842 3/19/93
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 12/1/89
S-8 33-24660 10/7/88
S-8 33-24658 9/15/88
S-8 2-96166 3/1/85
Baltimore, Maryland
February 21, 1994 /s/Ernst & Young
Ernst & Young
McCORMICK & COMPANY, INCORPORATED
18 LOVETON CIRCLE
SPARKS, MARYLAND 21152
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
MARCH 16,1994
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 16, 1994, 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 ratification of the appointment of Ernst & Young as
independent auditors of the Company to serve for the 1994 fiscal
year; and
(c) 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, 1993 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 16, 1994 Richard W. Single, Sr.
Secretary
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished on or about February 16,
1994 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, 1993, there were
outstanding 13,529,280 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, 1993 will be entitled to vote at the
meeting or any adjournments thereof.
PRINCIPAL STOCKHOLDER
On December 31, 1993, the assets of The McCormick Profit
Sharing Plan and PAYSOP (the "Plan") included 3,744,388 shares of
the Company's Common Stock, which represented 27.68% 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 jurisdiction 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 five directors, H. Eugene Blattman, James A. Hooker,
Carroll D. Nordhoff, Bailey A. Thomas, and Karen D. Weatherholtz,
and the Company's Vice President & Controller, J. Allan Anderson,
and the Company's Vice President & Treasurer, Donald A. Palumbo.
ELECTION OF DIRECTORS
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, 1993, 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 approximate amounts 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.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR
EACH OF THE NOMINEES LISTED BELOW.
YEAR
FIRST
PRINCIPAL OCCUPATION & ELECTED AMOUNT AND NATURE* OF
NAME AGE BUSINESS EXPERIENCE DIRECTOR BENEFICIAL OWNERSHIP
COMMON
NON-
COMMON VOTING
James J. Albrecht 61 Group Vice President 1987 84,219 51,528
Asia/Pacific (1993 to Present);
Vice President & Managing
Director-International Group
(1989 to 1993); Vice
President - Food Service and
Industrial Groups (1987 to 1989)
H. Eugene Blattman 57 President (1993 to Present) 1991 19,823 18,504
& Chief Operating Officer
(1992 to Present); Executive
Vice President (1992 to 1993);
Vice President - Flavor and
Agribusiness Group (1991 -
1992); Chairman of the Board
(1990 to 1992) & President
(1989 to 1991) of Gilroy Foods,
Incorporated, a subsidiary of
the Company; President &
Chief Executive Officer,
IM Foods (1987 to 1989)
James S. Cook 65 Executive in Residence, 1982 1,250 2,850
Northeastern University (1986
to Present)
Harold J. Handley 57 Senior Vice President (1993 1990 12,191 19,971
to Present); Vice President
(1990 - 1993) & General
Manager (1989 to Present) -
McCormick/Schilling
Division; Vice President -
Sales & Marketing,
McCormick/ Schilling Division
(1987 to 1989)
James A. Hooker 57 Vice President (1984 to present) 1991 32,996 10,178
& Chief Financial Officer
(1991 to Present); Controller
(1982 to 1991)
George W. Koch 67 Of Counsel, Kirkpatrick & 1989 1,250 5,727
Lockhart (1992 to Present);
Partner, Kirkpatrick &
Lockhart (1990 to 1991)
President & Chief Executive
Officer - Grocery Manufacturers
of America, Inc. (1966 to 1990)
Charles P. McCormick, Jr.** 65 Chairman Emeritus (1993 to 1955 306,788 23,792
Present); Chairman of the (2.26%)
Board (1988 to 1993); Chief
Executive Officer (1987 to 1992)
George V. McGowan 65 Chairman of the Executive 1983 1,250 2,203
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 48 Executive Vice President - 1991 39,664 23,455
The Americas (1993 to
Present); Executive Vice
President - Corporate Operations Staff
(1992 to 1993); Vice President
& General Manager, Food Service
Division (1989 to 1992);
Vice President-Operations,
McCormick/Schilling
Division (1988 to 1989)
Richard W. Single, Sr.*** 55 Vice President (1987 to 1988 75,088 20,728
Present); Secretary and
General Counsel (1986 to
Present)
William E. Stevens 51 President and Chief 1988 1,250 6,450
Executive Officer,
United Industries Corp.
(1988 to Present)
Bailey A. Thomas**** 62 Chairman of the Board 1977 152,590 101,139
(1993 to Present) & (1.12%)
Chief Executive Officer
(1992 to Present); President
(1988 to 1993); Chief
Operating Officer
(1987 to 1992)
Karen D. Weatherholtz 43 Vice President - Human 1992 20,740 18,086
Relations (1988 to Present)
Directors and Executive Officers as a Group
(15 persons)
841,647 333,768
(6.16%)
* Includes shares of Common Stock and Common Stock Non-Voting
known to be beneficially owned by directors and officers alone or
jointly with spouses, minor children and relatives (if any) who
have the same home as the director or officer. Also includes the
following numbers of shares which could be acquired within 60
days of December 31, 1993 pursuant to the exercise of stock
options: Dr. Albrecht - 15,709 shares of Common Stock, 15,709
shares of Common Stock Non-Voting; Mr. Blattman - 7,613 shares
of Common Stock, 9,028 shares of Common Stock Non-Voting; Mr.
Cook - 1,250 shares of Common Stock, 1,250 shares of Common
Stock Non-Voting; Mr. Handley - 4,325 shares of Common Stock,
5,373 shares of Common Stock Non-Voting; Mr. Hooker - 6,885
shares of Common Stock, 7,848 shares of Common Stock Non-Voting;
Mr. Koch - 1,250 shares of Common Stock, 1,250 shares of
Common Stock Non-Voting; Mr. McCormick - 13,000 shares of
Common Stock, 13,000 shares of Common Stock Non-Voting; Mr.
McGowan - 1,250 shares of Common Stock, 1,250 shares of Common
Stock Non-Voting; Mr. Nordhoff - 11,885 shares of Common Stock,
11,984 of Common Stock Non-Voting; Mr. Single - 5,025 shares of
Common Stock, 15,377 shares of Common Stock Non-Voting; Mr.
Stevens - 1,250 shares of Common Stock, 1,250 shares of Common
Stock Non-Voting; Mr. Thomas - 25,522 shares of Common Stock,
34,918 shares of Common Stock Non-Voting; Ms. Weatherholtz -
6,885 shares of Common Stock, 6,884 shares of Common Stock
Non-Voting; and directors and executive officers as a group -
120,824 shares of Common Stock, 146,477 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 - 10,078 shares; Mr. Blattman - 2,210
shares; Mr. Handley - 2,398 shares; Mr. Hooker - 13,155 shares;
Mr. Nordhoff - 6,298 shares; Mr. Single - 13,381 shares; Mr.
Thomas - 20,931 shares; Ms. Weatherholtz - 5,301 shares; and
directors and executive officers as a group - 101,803 shares.
Of these amounts, approximately 563 shares are credited to the
PAYSOP accounts of the nominees and approximately 740 shares are
credited to the PAYSOP accounts of the directors and executive
officers as a group.
** Includes 3,033 shares of Common Stock owned by Mr.
McCormick's wife. Mr. McCormick disclaims beneficial ownership
of said shares.
*** Includes 640 shares of Common Stock Non-Voting owned by Mr.
Single's son. Mr. Single disclaims beneficial ownership of said
shares.
**** Includes 2,778 shares of Common Stock and 2,164 shares
of Common Stock Non-Voting owned by Mr. Thomas' wife and 2,616
shares of Common Stock Non-Voting owned by Mr. Thomas' wife and
son. Mr. Thomas disclaims beneficial ownership of said shares.
On April 1, 1993, the Company loaned Mr. Bailey A. Thomas,
a director and executive officer of the Company, an amount equal
to $150,000 in connection with the purchase of certain residential
real estate. The principal amount of the loan, together with costs
plus interest at the rate of 3.4% for one day and 3.28% for four
days, was repaid in full on April 6, 1993 by Mr. Thomas.
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 16, 1994 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 six meetings during
the last fiscal year.
COMPENSATION COMMITTEE. On November 15, 1993, the Board of
Directors approved the consolidation of the Compensation and
Stock Option Committees into one committee to be called the
Compensation Committee. This Committee establishes and oversees
executive compensation policy; makes decisions about base pay,
incentive pay and any supplemental benefits for the CEO, other
members of the Executive Committee, and any other executives
listed in the proxy as one of the five highest paid executives;
and approves the grant or acquisition 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 were members of
the Committee until November 15, 1993: Messrs. Cook, McGowan,
McCormick and Thomas. The following directors are members of the
new Committee and serve at the pleasure of the Board of
Directors: Messrs. Cook, Koch, McGowan and Stevens. None of the
new 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 five meetings during the last fiscal year, four of
which were held jointly with the Stock Option Committee.
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. Blattman, Handley, Hooker,
Nordhoff and Thomas. The Executive Committee held 41 meetings
during the last fiscal year.
STOCK OPTION COMMITTEE. Prior to its consolidation with the
Compensation Committee, this Committee reviewed and approved the
grant of options pursuant to the Company's stock option plans for
the Company's directors and officers. The following directors
were members of the Committee until November 15, 1993: Messrs.
Cook, Koch and Stevens. The Committee held five meetings during
the last fiscal year, four of which were held jointly with the
Compensation Committee.
ATTENDANCE AT MEETINGS
During the last fiscal year, there were 9 regularly scheduled
meetings of the Board of Directors. All of the Directors were
able to attend over 88% 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. Mr. Cook is a
director of Chemet Corporation. Mr. Koch is a director of Borden
Chemicals and Plastics Company L.P. Mr. McGowan is a director of
American Security Bank, Baltimore Gas and Electric Company,
Baltimore Life Insurance Company, Hartland & Co., Life of
Maryland, Inc., Maryland National Bank, Organization Resources
Counselors, Inc., and UNC Incorporated. Mr. Thomas is a director
of Crown Central Petroleum Corporation.
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.
During 1993, the Compensation Committee engaged an independent
compensation consultant, Sibson and Co., Inc., to review the
Company's executive compensation policies and practices. As part of
its review, the independent consultant compared the compensation of
the Company's senior executive officers with the compensation of
executive officers of other food and manufacturing companies. The
independent consultant, whose findings and report were reviewed by
both the Compensation Committee and the Stock Option Committee,
confirmed that the base salaries of senior executive management are
consistent with the median levels paid to senior executives having
similar roles and responsibilities at food and manufacturing
companies of comparable size. The independent consultant also
concluded that the Company's annual incentive plan design, which is
based on profit growth, meets the Company's compensation
objectives. The independent consultant also concluded, however,
that both target and actual total compensation are below the
average for the food industry, primarily because the number of
stock options granted are less than those of comparable companies.
The new provisions of the Internal Revenue Code relating to
the deductibility of executive compensation do not apply to the
Company for the period covered by this Proxy Statement. In 1994,
the Company will address its policy with respect to qualifying
compensation paid to its executive officers for deductibility
under the new provisions.
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 performance graph that appears below compares
the performance of the Company's common stock to that of the S&P
Food Products Index and the S&P 500 Index. Sibson and Co., Inc.
recommended that the Compensation Committee consider 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 below 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. Bonuses for the chief executive officer and other
officers who are part of the Corporate staff are based on growth
in the Company's earnings per share (EPS) as compared to the
previous year. Bonuses vary depending on the level of growth in
EPS. The targeted increase in growth in EPS is intended to equal
or exceed the growth rate of other companies within the food
industry. The amount of target bonuses payable to operating unit
executives is based on a formula, weighted two thirds on growth
in profit of the executive's operating unit and one third on
growth in the Company's EPS. The independent consultant retained
by the Compensation Committee confirmed that target bonuses are
consistent with median levels established for executives having
similar responsibilities at comparable companies.
STOCK OPTION COMMITTEE DETERMINATIONS
Stock options were granted by the Stock Option 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
benefits of the option.
In determining the persons to whom stock options will be
granted and the number of options to be granted to such persons,
the Stock Option Committee considered a variety of factors,
including the responsibilities of individual officers and their
expected future contributions to the Company. The number of
options granted is not based on corporate performance but is
rather a function of the recipient's salary grade level. Grant
levels are intended to approximate option awards granted to
executives having similar responsibilities at comparable
companies. Prior grants are considered in making new stock
options awards. As indicated above, the independent consultant
retained by the Compensation Committee concluded that the stock
options granted to the Company's executive officers provide
lesser opportunity for economic benefit than do stock options
granted by comparable companies.
1993 COMPENSATION ACTIONS - MR. THOMAS
Mr. Thomas participates in the same compensation programs
provided to other McCormick executives and managers.
Effective January 1, 1993, the Compensation Committee increased
Mr. Thomas' annual rate of base pay by a total of 8.9% compared
to the annualized rate of pay for Mr. Thomas in March 1992. This
increase represented a combination of both an annual merit increase
based on individual performance, as well as a promotional increase
for his assumption of the title and additional duties of Chairman
of the Board. In addition, the Company's performance, national
economic conditions (e.g., rate of inflation), and compensation
paid to senior executives at other comparable companies were also
considered in granting Mr. Thomas' annual merit increase. This
percentage increase was consistent with the increases granted to
other executives and management employees receiving merit and
promotional increases.
For fiscal year 1993, the Compensation Committee approved a
management incentive bonus for Mr. Thomas in an amount equal to
his target bonus adjusted for corporate performance. The target
bonus was set as a percentage of the mid-point of the salary
range. The adjustment reflects the level of Company EPS growth
over the previous fiscal year and is established based on growth
rates competitive with the food industry.
A stock option grant was approved for Mr. Thomas in 1993 by the
Stock Option Committee. The number of options granted to Mr.
Thomas was not based on corporate performance but was a function
of Mr. Thomas' salary grade level. The grant level for Mr. Thomas
was unchanged from 1992 and was intended to approximate in value
the option awards granted to CEO's having similar responsibilities
at comparable companies. The Compensation Committee will consider
making changes in the grant level in future years in light of the
results of the independent consultant study cited above. The option
was granted at an option price per share of 100% of the fair market
value of the stock on the date of grant.
Mr. Thomas did not participate in the Compensation or Stock
Option Committees' deliberations of his salary increase, annual
bonus award or stock option grant.
1993 COMPENSATION ACTIONS - OTHER EXECUTIVE OFFICERS
Compensation actions for other executive officers were made
using similar criteria as those used for Mr. Thomas. Salary
increases and bonuses for executive officers were granted in a
manner consistent with those granted to other McCormick managers.
Stock option grants for executive officers were approved by the
Stock Option Committee. In no case did the grant exceed the
guideline level, which the compensation consultant found to be
below market competitive levels.
Submitted By:
COMPENSATION COMMITTEE STOCK OPTION COMMITTEE EXECUTIVE COMMITTEE
(UNTIL 11/15/93) (UNTIL 11/15/93)
James S. Cook James S. Cook Bailey A. Thomas
Charles P. McCormick, Jr. George W. Koch H. Eugene Blattman
George V. McGowan William E. Stevens Harold J. Handley
Bailey A. Thomas James A. Hooker
Carroll D. Nordhoff
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year 1993, the Compensation Committee of the
Board of Directors was comprised of four directors, one of whom,
Bailey A. Thomas, was an executive officer of McCormick during
fiscal year 1993. Other members were James S. Cook, Charles P.
McCormick, Jr. (retired Chairman of the Board), and George V.
McGowan. On April 1, 1993, the Company loaned Mr. Thomas an
amount equal to $150,000 in connection with the purchase of
certain residential real estate. The principal amount of the
loan, together with costs plus interest at the rate of 3.4% for
one day and 3.28% for four days, was repaid in full on April 6,
1993 by Mr. Thomas.
The Stock Option Committee was comprised entirely of
independent outside directors since it was formed several years
ago. Members of the Stock Option Committee were James S. Cook,
George W. Koch, and William E. Stevens.
On November 15, 1993, the Board of Directors unanimously
approved consolidation of the Compensation and the Stock Option
Committees into one committee to be called the Compensation
Committee. Composition of this Committee was changed so that
all members are independent outside directors. Members are James
S. Cook, George W. Koch, George V. McGowan (Chairman) and William
E. Stevens. No member of the Committee, as it is restructured,
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.
Members of the Executive Committee were Bailey A. Thomas, H.
Eugene Blattman, Harold J. Handley, James A. Hooker and Carroll
D. Nordhoff, all of whom are employees and executive officers of
the Company. The Table beginning on page four of this Proxy
Statement sets forth the business experience of each of the
members.
SUMMARY COMPENSATION TABLE
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, 1993, 1992 and 1991 to the
Chief Executive Officer and each of the four most highly
compensated executive officers who were executive officers on the
last day of the fiscal year, determined by reference to total
annual salary and bonus for the 1993 fiscal year.
Long Term
Compensation
Annual Compensation Awards
All Other
Name & Principal Fiscal Other Annual Securities Underlying Compensation
Position Year Salary($)* Bonus($) Compensation ($) Options/SARs(#)** ($)***
Bailey A. Thomas **** 1993 492,387 377,875 ***** 13,000 6,172.98
Chairman of the Board & 1992 444,460 475,570 13,000 6,660.32
Chief Executive Officer
H. Eugene Blattman 1993 322,067 239,125 ***** 13,000 6,172.98
President & 1992 270,233 252,700 8,000 7,507.82
Chief Operating Officer 1991 207,417 106,000 10,000 6,603.85
James J. Albrecht 1993 236,483 168,500 ***** 5,000 6,172.98
Group Vice President - 1992 225,483 165,000 5,000 7,475.91
Asia/Pacific 1991 214,567 160,600 10,000 6,603.05
Harold J. Handley 1993 246,317 68,400 ***** 8,000 6,172.98
Senior Vice President; 1992 228,400 125,000 8,000 7,505.82
General Manager - 1991 216,400 131,200 10,000 6,603.85
McCormick/Schilling Division
James A. Hooker 1993 221,900 90,000 ***** 8,000 6,020.30
Vice President & 1992 205,400 131,480 8,000 7,062.61
Chief Financial Officer 1991 157,800 100,000 6,000 6,383.59
*Includes Corporate Board of Directors Fees and Service Awards.
**The 1991 options have been adjusted for the 2-for-1 stock split
which occurred in January 1992.
***Amounts paid or accrued under the Company's Profit Sharing Plan
for the accounts of such individuals.
****Since Mr. Thomas was not the Chief Executive Officer during
fiscal year 1991, under applicable rules of the Securities and
Exchange Commission, his compensation for that year may not be
shown.
*****There is no amount of Other Annual Compensation that is
required to be reported.
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, 1993. 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.
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:
Years of Service
Average
Compensation 15 Years 20 Years 25 Years 30 Years 35 Years
$250,000 $64,995 $86,659 $108,324 $129,989 $151,654
300,000 78,045 104,059 130,074 156,089 182,104
350,000 91,095 121,459 151,824 182,189 212,554
400,000 104,145 138,859 173,574 208,289 243,004
450,000 117,195 156,259 195,324 234,389 273,454
600,000 156,345 208,459 260,574 312,689 364,804
750,000 195,495 260,659 325,824 390,989 456,154
925,000 241,170 321,559 401,949 482,339 562,729
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 group of senior executives includes those listed
in the table on page 13.
For purposes of calculating the pension benefit, the average
of the highest consecutive 60 months of compensation for Dr.
Albrecht and Messrs. Blattman, Handley, Hooker, and Thomas as of
November 30, 1993 was $351,143, $354,676, $329,485, $257,709 and
$756,489, respectively. The years of credited service for Dr.
Albrecht and Messrs. Blattman, Handley, Hooker, and Thomas as of
the same date were 10, 4, 7, 10 and 32 years, respectively.
STOCK OPTIONS
During the last fiscal year, the Company has granted stock
options to certain employees, including executive officers,
pursuant to stock option plans approved by the Company's
stockholders.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential
Realizable Value
At Assumed
Annual Rates of
Stock Price
Appreciation For
Individual Grants* Option Term ($)**
Number of % of Total Exercise or Base Expiration
Securities Options/SARs Price Date
Name Underlying Granted To ($/Share)
Options/SARs Employees in
Granted (#) Fiscal Year 0% 5% 10%
Bailey A. Thomas 13,000 3.4% $22.625 3/16/98 $0 $81,261 $179,566
H. Eugene Blattman 13,000 3.4% $22.625 3/16/98 $0 $81,261 $179,566
James J. Albrecht 5,000 1.3% $22.625 3/16/98 $0 $31,254 $69,064
Harold J. Handley 8,000 2.1% $22.625 3/16/98 $0 $50,007 $110,502
James A. Hooker 8,000 2.1% $22.625 3/16/98 $0 $50,007 $110,502
*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 398 employees of the Company
were granted options under the Company's option plans during the
last fiscal year.
**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
$6.25 and $13.81 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 81 million shares of the Company's
common stock outstanding as of December 31, 1993 of approximately
$506 million and $1.1 billion, respectively, over the same
period.
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION/SAR VALUES
Value of Unexercised
Number of Securities In-the-Money
Shares Acquired Value Underlying Unexercised Options/SARs
Name on Exercise (#) Realized ($) Options/SARs at FY-End(#) at FY-End ($)
Exercisable/Unexercisable Exercisable/Unexercisable
Bailey A. Thomas 1,555 $ 34,599 70,487/32,530 $833,713/$66,442
H. Eugene Blattman 20,000 $377,500 15,226/21,774 $121,562/$12,188
James J. Albrecht 32,400 $788,738 31,418/13,382 $405,995/$20,880
Harold J. Handley -0- $0 8,650/17,350 $45,413/$12,087
James A. Hooker -0- $0 13,769/14,231 $104,625/$5,000
Set forth below is a table comparing the yearly percentage 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.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG McCORMICK & COMPANY, INCORPORATED,
S&P 500 STOCK INDEX & S&P FOOD PRODUCTS INDEX**
Index 1989 1990 1991 1992 1993
McCormick $185.56 $174.10 $317.26 $445.09 $369.63
S&P 500 130.84 126.30 151.99 180.07 197.58
S&P Foods 134.71 146.82 192.67 222.98 206.14
Assumes $100 invested on December 1, 1988 in McCormick & Company
common stock, S&P 500 Stock Index and S&P Food Products Index
* Total Return Assumes Reinvestment of Dividends
** Fiscal year ending November 30
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors, upon recommendation of the Audit
Committee, has appointed the accounting firm of Ernst & Young 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 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 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 1995 ANNUAL MEETING
Proposals of stockholders to be presented at the 1995 Annual
Meeting must be received by the Secretary of the Company prior to
October 19, 1994 to be considered for inclusion in the 1995 proxy
material.
February 21, 1994
McCormick and Company, Inc. Part I - Exhibit 11
(In Thousands Except Per Share Amounts)
Statement re Computation of Per-Share Earnings*
Year Year Year
Ended Ended Ended
Nov 30 Nov 30 Nov 30
1993 1992 1991
Computation for Statement of Income
Net Income $73,054 $95,217 $80,924
Reconciliation of Weighted Average Number of
Shares Outstanding to Amount used in Primary
Earnings Per Share Computation
Weighted Average Number of Shares
Outstanding 80,799 80,116 80,030
Add - Dilutive Effect of Outstanding Options
(as Determined by the Application of the
Treasury Stock Method) 967 1,802 2,366
Weighted Average Number of Shares Outstanding
As Adjusted for Equivalent Shares 81,766 81,918 82,396
PRIMARY EARNINGS PER SHARE $0.89 $1.16 $0.98
Year Year Year
Ended Ended Ended
Nov 30 Nov 30 Nov 30
Computation for Statement of Income 1993 1992 1991
Reconciliation of Weighted Average Number of
Shares Outstanding to Amount used in Fully Diluted
Earnings Per Share Computation
Weighted Average Number of Shares Outstanding 80,799 80,116 80,030
Add - Dilutive Effect of Outstanding Options
(As Determined by the Application of the
Treasury Stock Method) 990 1,857 2,514
Weighted Average Number of Shares Outstanding
As Adjusted for Equivalent Shares 81,789 81,973 82,544
FULLY DILUTED EARNINGS PER SHARE $0.89 $1.16 $0.98
*See 1993 Annual Report, Note (1) of the Notes to Financial Statements.
