-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, JO+1ekmrnvBol6vYvdCCnNRysKg4LKDIHX0mX3mrqfSoz38cs5LP5f35HWb172iK D1UmpOdIfyCoO14rUwMrqg== 0000063754-94-000026.txt : 19941101 0000063754-94-000026.hdr.sgml : 19941101 ACCESSION NUMBER: 0000063754-94-000026 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940831 FILED AS OF DATE: 19941013 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCCORMICK & CO INC CENTRAL INDEX KEY: 0000063754 STANDARD INDUSTRIAL CLASSIFICATION: 2090 IRS NUMBER: 520408290 STATE OF INCORPORATION: MD FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-00748 FILM NUMBER: 94552480 BUSINESS ADDRESS: STREET 1: 18 LOVETON CIRCLE STREET 2: P O BOX 6000 CITY: SPARKS STATE: MD ZIP: 21152 BUSINESS PHONE: 4107717301 FORMER COMPANY: FORMER CONFORMED NAME: MCCORMICK & CO DATE OF NAME CHANGE: 19660620 10-Q 1 MCCORMICK & CO. 10-Q 3RD QUARTER 1994 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Form 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended August 31, 1994 Commission File Number 0-748 McCORMICK & COMPANY, INCORPORATED (Exact name of registrant as specified in its charter) MARYLAND 52-0408290 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 18 Loveton Circle, P. O. Box 6000, Sparks, MD 21152-6000 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (410) 771-7301 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 filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Shares Outstanding August 31, 1994 Common Stock 13,261,000 Common Stock Non-Voting 67,953,000 McCORMICK & COMPANY, INCORPORATED INDEX Page No. Part I. FINANCIAL INFORMATION Condensed Consolidated Balance Sheets 2 Condensed Consolidated Statements of Income 3 Condensed Consolidated Statements of Cash Flows 4 Notes to Condensed Consolidated Financial Statements 5,6,7 Management's Discussion and Analysis of Financial Condition and Results of Operations 8,9 Part II. OTHER INFORMATION 10 PART I. FINANCIAL INFORMATION McCORMICK & COMPANY, INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands) Aug. 31, Aug. 31, Nov. 30, 1994 1993 1993 ASSETS Current Assets Cash and cash equivalents $ 14,137 $ 10,881 $ 12,838 Accounts receivable - net 200,476 180,838 175,101 Inventories Raw materials 116,953 103,173 105,713 Work in process 47,645 36,975 36,418 Finished goods 201,800 169,341 179,120 366,398 309,489 321,251 Prepaid expenses 6,385 3,868 17,960 Deferred income taxes 13,003 6,382 13,003 Total current assets 600,399 511,458 540,153 Investments 51,019 43,267 45,728 Property - net 497,997 460,355 465,610 Excess cost of acquisitions - net 197,221 129,910 130,638 Prepaid allowances 155,201 139,513 126,399 Other assets 5,452 4,350 4,708 Total assets $1,507,289 $1,288,853 $1,313,236 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Notes payable $ 272,899 $ 158,603 $ 76,389 Current portion of long-term debt 10,864 8,334 8,299 Outstanding checks 11,676 14,216 25,401 Accounts payable, trade 113,874 94,561 113,884 Accrued payroll 26,715 24,724 29,781 Accrued sales allowances 24,822 23,443 31,240 Other accrued exp. and liabilities 93,196 80,877 90,980 Income taxes 7,148 4,995 16,893 Total current liabilities 561,194 409,753 392,867 Long-term debt 355,303 340,607 346,436 Deferred income taxes 30,169 41,133 39,006 Employee benefit liabilities 61,302 52,080 63,875 Other liabilities 4,083 4,414 4,231 Total liabilities 1,012,051 847,987 846,415 Shareholders' Equity Common Stock, no par value 49,808 52,136 53,470 Common Stock Non-Voting, no par 100,809 92,494 93,047 Retained earnings 357,235 302,955 330,327 Foreign currency trans. adj. (12,614) (6,719) (10,023) Total shareholders' equity 495,238 440,866 466,821 Total liabilities and shareholders' equity $1,507,289 $1,288,853 $1,313,236 See notes to financial statements. (2) McCORMICK & COMPANY, INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (Dollars In Thousands Except Per Share Amounts) Three Months Ended Nine Months Ended August 31 August 31 1994 1993 1994 1993 Net sales $422,141 $394,928 $1,186,206$1,095,813 Costs of goods sold 264,086 239,702 753,708 685,258 Gross profit 158,055 155,226 432,498 410,555 Selling, general and administrative expense 107,627 107,425 308,200 300,485 Profit from operations 50,428 47,801 124,298 110,070 Other income 1,304 1,467 4,346 4,743 Interest expense 9,743 7,736 26,903 22,984 Other expense 1,824 1,695 6,135 4,578 Income before income taxes 40,165 39,837 95,606 87,251 Provision for income taxes 15,030 17,041 36,480 35,283 Income from consol. operations 25,135 22,796 59,126 51,968 Income from unconsol. ops. 1,307 1,571 4,755 7,199 Income before accounting change 26,442 24,367 63,881 59,167 Cumulative effect on prior years of accounting change - - - (26,626) Net income $ 26,442 $ 24,367 $ 63,881 $ 32,541 Earnings per share bef. accounting $0.33 $0.30 $0.79 $0.72 change Cumulative effect on prior years of accounting change - - - ($0.33) Total earnings per share $0.33 $0.30 $0.79 $0.39 Cash dividends declared per common share $0.12 $0.11 $0.36 $0.33 See notes to financial statements. (3) McCORMICK & COMPANY, INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollars In Thousands) Nine Months Ended August 31, August 31, 1994 1993 Cash flows from operating activities Net income $ 63,881 $ 32,541 Depreciation and amortization 44,518 37,346 Provision for deferred income taxes 3,614 3,642 Gain (loss) on sale of assets 245 (23) Share of income from unconsolidated operations (4,755) (7,199) Dividend received from unconsolidated subsidiary 3,345 7,257 Cumulative effect of accounting change - 26,626 Changes in operating assets and liabilities net of effects from businesses acquired and disposed (132,571) (132,646) Net cash used in operating activities (21,723) (32,456) Cash flows from investing activities Acquisitions of businesses (82,413) (73,737) Purchases of property, plant and equipment (64,950) (56,918) Proceeds from sale of assets 195 272 Proceeds (payments) from forward exchange contract (520) 9,584 Other investments (4,595) (1,608) Net cash used in investing activities (152,283) (122,407) Cash flows from financing activities Notes payable 122,055 197,568 Long-term debt Borrowings 102,425 398 Repayments (14,899) (7,389) Common stocks Issued 5,034 23,576 Acquired by purchase (8,658) (23,287) Dividends Paid (29,248) (26,657) Net cash provided by financing activities 176,709 164,209 Effect of exchange rate changes on cash and cash equivalents (1,404) (271) Increase/(Decrease) in cash and cash equivalents 1,299 9,075 Cash and cash equivalents at beginning of period 12,838 1,806 Cash and cash equivalents at end of period $ 14,137 $ 10,881 See notes to financial statements. (4) McCORMICK & COMPANY, INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in Thousands Except per Share Amounts) 1. In the opinion of the Company, the accompanying consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of August 31, 1994, August 31, 1993 and November 30, 1993, and the results of operations for the three and nine month periods ended August 31, 1994 and August 31, 1993, and the cash flows for the nine month periods ended August 31, 1994 and August 31, 1993. Certain reclassi- fications have been made to the 1993 financial statements to conform with the 1994 presentation. 2. The results of consolidated operations for the three and nine month periods ended August 31, 1994 are not necessarily indicative of the results to be expected for the full year. Historically, the Company's consolidated sales and profits are lower in the first two quarters of the fiscal year, and increase in the third and fourth quarters. 3. Earnings per common share for the three and nine month periods ended August 31, 1994 were computed by dividing net income by the weighted average number of common shares outstanding (81,292,000 - three months and 81,244,000 - nine months). Earnings per common share for the three and nine month periods ended August 31, 1993 were computed by dividing net income by the weighted average number of common shares outstanding (81,012,000 - three months, 80,744,000 - nine months), plus dilutive common equivalent shares applicable to outstanding stock option and purchase plans (768,000 shares - three months, 1,030,000 shares - nine months). Common stock equivalents were not added to fiscal year 1994 weighted average common shares outstanding because they resulted in an insignificant dilution of earnings per share. 4. Interest paid during the nine month periods ended August 31, 1994 and August 31, 1993 was $29,862 and $26,300 respectively. Income taxes paid during the same periods were $54,100 and $44,500 respectively. 5. Changes in foreign currency exchange rates required adjustments to both the Excess Cost of Acquisition account and the Foreign Currency Translation Adjustments account at August 31, 1994 and are primarily responsible for the changes in the translation adjustment account for the periods presented. These exchange rate changes plus amounts recorded as a result of business acquisitions largely account for the change in the Excess Cost of Acquisition account for the periods presented. (5) 6. During the third quarter of 1994 the Company renewed certain prepaid allowance contracts. Payments associated with these contracts are reflected in the Prepaid Allowance account at August 31, 1994. 7. During the first nine months of 1994, the Company acquired the following: Grupo Pesa, a Mexican seasoning company, the spice business of Tuko Oy of Finland, the retail seasoning brand of Hy's Fine Foods, Ltd. of Canada, the dessert business of Traders Pty., Ltd. of Australia, Butty, a Swiss herb and spice business, Minipack, a packaging business in the United Kingdom, and Noel Holdings, Ltd., a leading supplier of specialty foods based in the United Kingdom. The assets and liabilities acquired in these transactions have been recorded using the purchase method of accounting at their estimated fair values at the date of acquisition. The aggregate purchase price of these acquisitions was $82,413. While these acquisitions 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, and therefore pro forma financial information has not been presented. 8. In November 1993, the Company adopted 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 recognized a transition obligation which was 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 $26,600 or $.33 per share, net of approximately $17,200 of income tax benefit. The incremental change to 1993 net income by applying SFAS 106 rather than the previous accounting method was $2,200 net of income tax benefit, or $.03 per share. Results for the first three quarters of 1993 have been restated to reflect this change. 9. 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 expects to adopt the standard in the 4th quarter of 1994. The effect of this accounting change on the Company's financial statements will not be material. (6) 10. 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 estimated fair value of long-term debt at August 31, 1994, using discounted cash flow analysis based on the Company's current incremental borrowing rate for debt of similar remaining maturities was $368,463. This amount excludes $10,864 current portion of long-term debt which is considered to be at fair value. 11. Through its medium-term note program, at August 31, 1994, the Company had issued $105,000 of notes. Included with these issues $95,000 have maturities of 12 years and coupon rates ranging from 5.78% to 7.77%. The remaining $10 million have a final maturity of 30 years with a put option in year ten, and a coupon rate of 7.63%. The Company also had available credit facilities with domestic and foreign banks in the aggregate of $340,000. There were no borrowings outstanding against these facilities. At August 31, 1994, the Company's commercial paper issuance amounted to $277,540, of which $45,000 has been classified as long-term debt reflecting the Company's ability and intention to refinance this amount on a long-term basis through its medium-term note program. (7) McCORMICK & COMPANY, INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Consolidated net sales for the three and nine months ended August 31, 1994 increased 7% and 8% respectively over the corresponding periods last year. In terms of sales volume alone, the increases were 7% for both the quarter and the first nine months. Third quarter sales improved for most of the Company's businesses. Sales from newly acquired businesses contributed approximately 2% to the third quarter increase. Earnings per share increased 10% for both the third quarter and first nine months of fiscal 1994. Earnings per share for the quarter were $.33 versus $.30 in 1993. Earnings for the first nine months of 1994 increased to $.79, compared to the prior year's earnings of $.72 before the cumulative effect of accounting change. Operating profit improvement slowed in the third quarter largely due to margin pressure in our industrial units. Selling, general and administrative expenses for the quarter were held level with 1993 and helped moderate the effect of lower gross margins. The Company's overall operating profit margin for the third quarter was 11.9% as compared to 12.1% last year. The operating profit margin for the first nine months is slightly ahead of last year. Rising interest rates coupled with a higher debt level drove interest expense for the quarter up $2 million over last year's third quarter. This increase was offset by a comparatively lower provision for income taxes this year. Last year the tax provision was increased in the third quarter to adjust for the retroactive federal income tax rate increase. Slightly below last year, income from unconsolidated operations for the quarter continue to be affected by lower earnings from our Mexican retail joint venture which is experiencing increased competition in the markets it serves. Return on equity , calculated by dividing twelve months to date net income by average shareholder's equity during that period, was 21.9% at August 31, 1994. This meets the Company's objective of exceeding a 20% return on equity. Financial Condition The Company's capital structure (excluding $57.6 million non-recourse debt) was 54% debt to total capital at August 31, 1994, up from 44.3% at year end and 50.4% at August 31, 1993. During the third quarter the Company increased borrowings by approximately $109 million. This cash was primarily used for acquisitions of businesses, capital spending, shareholder dividends (8) and seasonal working capital needs. Typically the Company reduces borrowing in the fourth quarter which historically produces the highest percentage of sales volume, profits and cash flows from operations. The Company's current ratio declined to 1.1 at the end of the third quarter as compared to 1.4 at year end 1993, and 1.2 at August 31 last year. During the third quarter the Company issued $30 million of notes under its medium-term note program. Included with these issues, $20 million have a term of 12 years with coupon rates ranging from 7.67% to 7.77%. The remaining $10 million have a final maturity of 30 years with a put option in year ten, and a coupon rate of 7.63%. The Company continues to maintain $290 million of committed credit facilities that provide additional liquidity. These facilities were not in use at the end of the third quarter. Other Events On October 11, 1994 the Company announced a plan of restructuring which will result in a charge to 4th quarter 1994 earnings of approximately $66 million before tax ($44 million after tax). This plan includes the closing of two domestic manufacturing facilities, the realignment of the Company's manufacturing operations in the United Kingdom, the sale of the Company's frozen food subsidiary, and the consolidation of a number of staff activities. These actions will result in the reduction of 600 positions or 7% of the Company's worldwide work force. This restructuring is viewed by management as an investment in the future to keep the Company in a leadership position in the markets in which we compete, to assure our status as a low cost producer and ultimately to enhance shareholder value. (9) PART II - OTHER INFORMATION Item 6 Exhibits and Reports on Form 8-K (a) No response required. (b) Reports on Form 8-K. On October 12, 1994, the Company filed a report on Form 8-K, dated October 11, 1994, in response to Item 5 Other Events of Form 8-K, which incorporated by reference a Press Release dated October 11, 1994 announcing a major restructuring program. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. McCORMICK & COMPANY, INCORPORATED Date: October 12, 1994 By: Robert G. Davey Vice President & Chief Financial Officer Date: October 12, 1994 By: J. Allan Anderson Vice President & Controller (10) EX-27 2
5 1000 QTR-3 NOV-30-1994 AUG-31-1994 14137 0 203422 (2946) 366398 600399 819027 (321030) 1507289 561194 355303 150617 0 0 344621 1507289 1186206 1186206 753708 (308200) (1789) 0 (26903) 95606 (36480) 63881 0 0 0 63881 0.79 0.79
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