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 MAY 31, 2001 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. <TABLE> <CAPTION> Shares Outstanding June 30, 2001 ------------------ <S> <C> Common Stock 7,978,729 Common Stock Non-Voting 61,134,096 </TABLE>
PART I - FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS McCORMICK & COMPANY, INCORPORATED CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) (in thousands except per share amounts) <TABLE> <CAPTION> Three Months Ended Six Months Ended May 31, May 31, 2001 2000 2001 2000 ---- ---- ---- ---- <S> <C> <C> <C> <C> Net sales $567,140 $485,724 $1,100,644 $948,127 Cost of goods sold 345,627 315,242 670,636 613,813 -------- -------- ---------- -------- Gross profit 221,513 170,482 430,008 334,314 Selling, general and administrative expense 171,943 129,108 335,499 256,351 Special charges 0 464 0 966 -------- -------- ---------- -------- Operating income 49,570 40,910 94,509 76,997 Interest expense 13,784 8,313 28,071 15,719 Other (income)/expense 73 (54) (900) 86 -------- -------- ---------- -------- Income before income taxes 35,713 32,651 67,338 61,192 Income taxes 11,821 11,649 22,289 21,838 -------- -------- ---------- -------- Net income from consolidated operations 23,892 21,002 45,049 39,354 Income from unconsolidated operations 3,181 3,200 9,260 9,265 Minority Interest (437) 0 (1,087) 0 -------- -------- ---------- -------- Net income $ 26,636 $ 24,202 $ 53,222 $ 48,619 ======== ======== ========== ======== Earnings per common share - basic $0.39 $0.35 $0.78 $0.70 ======== ======== ========== ======== Earnings per common share - assuming dilution $0.38 $0.35 $0.76 $0.70 ======== ======== ========== ======== Cash dividends declared per common share $0.20 $0.19 $0.40 $0.38 ======== ======== ========== ======== </TABLE> See notes to condensed consolidated financial statements. (2)
McCORMICK & COMPANY, INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEET (in thousands) <TABLE> <CAPTION> May 31, May 31, Nov. 30, 2001 2000 2000 -------- -------- -------- (Unaudited) (Unaudited) <S> <C> <C> <C> ASSETS Current Assets Cash and cash equivalents $ 47,484 $ 28,451 $ 23,890 Accounts receivable, net 248,641 175,195 303,340 Inventories Raw materials and supplies 127,770 100,301 120,556 Finished products and work-in process 157,400 151,732 153,483 ---------- ---------- ---------- 285,170 252,033 274,039 Other current assets 20,158 19,213 18,806 ---------- ---------- ---------- Total current assets 601,453 474,892 620,075 ---------- ---------- ---------- Property, plant and equipment 825,398 750,627 780,000 Less: Accumulated depreciation (430,739) (394,180) (407,001) ---------- ---------- ---------- Total property, plant and equipment, net 394,659 356,447 372,999 ---------- ---------- ---------- Intangible assets, net 441,214 138,059 453,038 Prepaid allowances 104,918 124,082 96,072 Other assets 108,898 101,837 117,756 ---------- ---------- ---------- Total assets $1,651,142 $1,195,317 $1,659,940 ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Short-term borrowings $ 221,761 $ 196,421 $ 473,132 Current portion of long-term debt 81,379 5,812 78,829 Trade accounts payable 169,930 143,505 185,256 Other accrued liabilities 236,351 181,029 289,939 ---------- ---------- ---------- Total current liabilities 709,421 526,767 1,027,156 ---------- ---------- ---------- Long-term debt 454,298 235,084 160,192 Other long-term liabilities 117,176 99,047 113,249 ---------- ---------- ---------- Total liabilities 1,280,895 860,898 1,300,597 ---------- ---------- ---------- Shareholders' Equity Common stock 58,008 50,130 49,824 Common stock non-voting 135,232 123,724 125,522 Retained earnings 280,729 202,863 263,262 Accumulated other comprehensive income (103,722) (42,298) (79,265) ---------- ---------- ---------- Total shareholders' equity 370,247 334,419 359,343 ---------- ---------- ---------- Total liabilities and shareholders' equity $1,651,142 $1,195,317 $1,659,940 ========== ========== ========== </TABLE> See notes to condensed consolidated financial statements. (3)
McCORMICK & COMPANY, INCORPORATED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (in thousands) <TABLE> <CAPTION> Six Months Ended May 31, 2001 2000 ---- ---- <S> <C> <C> Cash flows from operating activities Net income $ 53,222 $ 48,619 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 36,606 28,377 Income from unconsolidated operations (9,260) (9,265) Changes in operating assets and liabilities (51,214) (37,668) Other 17,487 8,061 --------- -------- Net cash provided by operating activities 46,841 38,124 --------- -------- Cash flows from investing activities Capital expenditures (51,635) (23,075) Acquisitions of businesses 0 (4,115) Other 526 123 --------- -------- Net cash used in investing activities (51,109) (27,067) --------- -------- Cash flows from financing activities Short-term borrowings, net (251,362) 100,266 Long-term debt borrowings 296,656 0 Long-term debt repayments 0 (5,431) Common stock issued 19,212 4,030 Common stock acquired by purchase (9,605) (66,143) Dividends paid (27,470) (26,264) --------- -------- Net cash provided by financing activities 27,431 6,458 --------- -------- Effect of exchange rate changes on cash and cash equivalents 431 (1,025) Increase in cash and cash equivalents 23,594 16,490 Cash and cash equivalents at beginning of period 23,890 11,961 --------- -------- Cash and cash equivalents at end of period $ 47,484 $ 28,451 ========= ======== </TABLE> See notes to condensed consolidated financial statements. (4)
McCORMICK & COMPANY, INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. ACCOUNTING POLICIES BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position and the results of operations for the interim periods. The results of consolidated operations for the three and six month periods ended May 31, 2001 are not necessarily indicative of the results to be expected for the full year. Historically, the Company's consolidated sales and net income are lower in the first half of the fiscal year and increase in the second half. For further information, refer to the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended November 30, 2000. ACCOUNTING AND DISCLOSURE CHANGES In December 1999, the Securities and Exchange Commission (SEC) released Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements." The effective date of this bulletin has been deferred by the SEC until the fourth quarter of fiscal years beginning after December 15, 1999, and accordingly will be adopted by the Company in the fiscal year ending November 30, 2001. The Company is currently evaluating the impact of SAB 101. If there is an effect of adopting this bulletin, it will be recorded as a cumulative effect of an accounting change. In addition, the Company will be required to reclassify certain shipping and handling costs billed to customers as sales in accordance with EITF 00-10 and to reclassify certain marketing expenses as a reduction of sales in accordance with EITF 00-14 and EITF 00-25. These reclassifications will not impact net income. EITF 00-10 is required to be implemented for the fiscal year ending November 30, 2001; however, EITF 00-14 and EITF 00-25 are required to be adopted by fiscal quarters beginning after December 15, 2001. RECLASSIFICATIONS In the fourth quarter of 2000, the Company reclassified goodwill amortization expense from other (income) expense to selling, general and administrative expense. All prior period financial information has been reclassified to conform to the current (5)
presentation. Goodwill amortization expense for the second quarter of 2001 and 2000 was $3.3 million and $1.3 million, respectively. Goodwill amortization expense for the six months ended May 31, 2001 and 2000 was $6.5 million and $2.5 million, respectively. 2. EARNINGS PER SHARE The following table sets forth the reconciliation of shares outstanding: <TABLE> <CAPTION> Three months ended Six months ended May 31, May 31, 2001 2000 2001 2000 ---- ---- ---- ---- (in thousands) <S> <C> <C> <C> <C> Average shares outstanding - basic 68,824 68,675 68,669 69,112 Effect of dilutive securities: Stock options and Employee stock purchase plan 1,230 930 1,027 478 ------ ------ ------ ------ Average shares outstanding - assuming dilution 70,054 69,605 69,696 69,590 ====== ====== ====== ====== </TABLE> 3. COMPREHENSIVE INCOME The following table sets forth the components of comprehensive income: <TABLE> <CAPTION> Three Months Ended Six Months Ended May 31, May 31, 2001 2000 2001 2000 ---- ---- ---- ---- (in thousands) <S> <C> <C> <C> <C> Net income $26,636 $24,202 $53,222 $48,619 Other comprehensive income: Foreign currency translation adjustments (36,640) (9,568) (17,428) (11,634) Derivative financial instruments 1,981 1,288 (7,029) 3,480 ----- ----- ------- ----- Comprehensive income $(8,023) $15,922 $28,765 $40,465 ===== ====== ====== ====== </TABLE> 4. BUSINESS SEGMENTS The Company operates in three business segments: consumer, industrial and packaging. The consumer and industrial segments manufacture, market and distribute spices, herbs, seasonings, flavorings and other specialty food products throughout the world. The consumer segment sells consumer spices, herbs, extracts, proprietary seasoning blends, sauces and marinades to the consumer food market under a variety of brands, including the McCormick brand in the U.S., Ducros in continental Europe, Club House in Canada, and Schwartz in the U.K. The industrial segment sells to (6)
food processors, restaurant chains, distributors, warehouse clubs and institutional operations. The packaging segment manufactures and markets plastic packaging products for food, personal care and other industries, predominantly in the U.S. Tubes and bottles are also produced for the Company's food segments. In each of its segments, the Company produces and sells many individual products that are similar in composition and nature. It is impractical to segregate and identify profits for each of these individual product lines. The Company measures segment performance based on operating income. Intersegment sales are generally accounted for at current market value or cost plus markup. Because of manufacturing integration for certain products within the food segments, inventory cost, including the producing segment's overhead and depreciation, is transferred and recognized in the operating income of the receiving segment. Corporate and eliminations includes general corporate expenses, intercompany eliminations and other charges not directly attributable to the segments. <TABLE> <CAPTION> Total Corporate & Consumer Industrial Food Packaging Eliminations Total -------- ---------- ---- --------- ------------ ----- (in millions) <S> <C> <C> <C> <C> <C> <C> QUARTER ENDED MAY 31, 2001 Net sales $273.2 $244.6 $517.8 $49.3 $ - $567.1 Intersegment sales - 2.5 2.5 9.0 (11.5) - Operating income 26.5 24.1 50.6 5.9 (6.9) 49.6 Income from unconsolidated operations 2.7 0.5 3.2 - - 3.2 SIX MONTHS ENDED MAY 31, 2001 Net sales $542.8 $463.5 $1,006.3 $94.3 $ - $1,100.6 Intersegment sales - 5.1 5.1 18.2 (23.3) - Operating income 53.7 43.5 97.2 11.1 (13.8) 94.5 Income from unconsolidated operations 8.7 0.6 9.3 - - 9.3 <CAPTION> Total Corporate & Consumer Industrial Food Packaging Eliminations Total -------- ---------- ---- --------- ------------ ----- (in millions) <S> <C> <C> <C> <C> <C> <C> QUARTER ENDED MAY 31, 2000 Net sales $201.4 $239.2 $440.6 $45.1 $ - $485.7 Intersegment sales - 2.6 2.6 10.0 (12.6) - Operating income 21.8 21.0 42.8 6.3 (8.2) 40.9 Income from unconsolidated operations 2.7 0.5 3.2 - - 3.2 SIX MONTHS ENDED MAY 31, 2000 Net sales $404.4 $456.6 $861.0 $87.1 $ - $948.1 Intersegment sales - 5.1 5.1 18.2 (23.3) - Operating income 46.4 35.9 82.3 11.5 (16.8) 77.0 Income from unconsolidated operations 8.4 0.9 9.3 - - 9.3 </TABLE> 5. LONG-TERM DEBT During the first quarter of 2001 the Company issued a total of $300 million in medium-term notes under a $375 million shelf registration statement filed with the Securities and Exchange Commission (SEC) in January 2001. The primary purpose of these notes is to finance the acquisition of Ducros, which was completed in August 2000, and replace substantially all of the existing commercial paper notes that were used to temporarily (7)
finance the acquisition. Medium-term notes in the amount of $150 million were issued in January 2001 and mature in 2006, with interest paid semi-annually at the rate of 6.4%. Additional medium-term notes in the amount of $150 million were issued in January 2001 and mature in 2008, with interest paid semi-annually at the rate of 6.8%. In September 2000 the Company entered into forward starting interest rate swaps to manage the interest rate risk associated with the anticipated issuance of fixed-rate medium-term notes. These forward starting swaps were settled in the first quarter of 2001, concurrent with the issuance of the medium-term notes. The settlement costs on these swaps in the first quarter of 2001 included in other comprehensive income was $14.7 million. The notes were issued at a discount of $2.2 million and $1.1 million of debt origination fees were incurred. The discount, swap settlement and debt issuance costs are being amortized over the life of the medium-term notes and included as a component of interest expense. With these costs considered, the effective interest rate on the medium-term notes is 7.62%. (8)
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW For the quarter ended May 31, 2001, the Company reported net income of $26.6 million versus $24.2 million for the comparable period last year. Diluted earnings per share were $.38 for the second quarter of 2001 compared to $.35 last year. For the six months ended May 31, 2001, net income was $53.2 million versus $48.6 million for the comparable period last year. Diluted earnings per share were $.76 for the first six months of 2001, compared to $.70 last year. The Company continued to realize improved financial performance throughout its global operations in 2001. In the quarter and six months ended May 31, 2001, sales in each of its three operating segments improved versus the comparable period last year. Operating income increased in the Company's Consumer and Industrial segments but decreased in its Packaging segment, compared to the second quarter of 2000. Earnings per share for the quarter ended May 31, 2001, increased to $.38 from $.35 in 2000. Results from Ducros for the quarter diluted earnings by $.04 per share. In the second quarter, excluding dilution from the Ducros acquisition, earnings per share for 2001 were $.42, an increase of $.07 versus the prior year. This was achieved through $.05 of higher operating income, $.01 in reduced interest expense and $.01 from a lower effective tax rate. RESULTS OF OPERATIONS Net sales for the quarter ended May 31, 2001, increased 16.8% over the comparable quarter of 2000. Excluding foreign exchange and the Ducros business, sales grew 6.0% over the comparable quarter of 2000. For the six months ended May 31, 2001, net sales increased 16.1% over the comparable period last year. Excluding foreign exchange and the Ducros business, sales grew 4.3% over the comparable period last year. <TABLE> <CAPTION> Three months ended Six months ended May 31, May 31, 2001 2000 2001 2000 ---- ---- ---- ---- (in millions) <S> <C> <C> <C> <C> NET SALES Consumer $273.2 $201.4 $ 542.8 $404.4 Industrial 244.6 239.2 463.5 456.6 Packaging 49.3 45.1 94.3 87.1 ------ ------ -------- ------ $567.1 $485.7 $1,100.6 $948.1 </TABLE> Consumer sales rose 35.7% versus last year's second quarter and increased 7.3% excluding the impact of Ducros and foreign exchange. In local currency, consumer sales were up 7.4% (9)
in the Americas, due primarily to increased volume and to a lesser extent pricing. In Europe, sales were up 6.5% (excluding Ducros). This increase is attributable to increases in volume and favorable product mix. Sales in Asia increased by 9.4% due primarily to volume increases in Australia and China partially offset by decreases due to product mix. For the six months ended May 31, 2001, consumer sales increased $138.3 million or 34.2%. Excluding the impact of Ducros and foreign exchange, sales increased 4.0% due to volume growth offset slightly by negative product mix. Industrial sales increased 2.2% versus last year's second quarter and 4.2% excluding foreign exchange. In local currency, industrial sales increased 4.3% in the Americas primarily due to higher restaurant sales, strong snack seasoning sales, and increased sales to membership clubs and food distributors in the food service business. Sales in Europe were unchanged. Sales in Asia rose 11.0%, which was primarily attributable to very strong restaurant sales. For the six months ended May 31, 2001, industrial sales increased $7.0 million or 1.5%. Excluding the impact of foreign exchange, sales increased 3.7% due to volume growth offset slightly by negative price and product mix. The packaging business reported third party sales increased 9.3% and 8.3% for the quarter and six months, respectively. The increase was driven by both strong tube and bottle sales. Gross profit margin for the quarter was 39.1%, 4.0 percentage points above last year. This increase resulted from a shift in product mix to higher margin, more value-added products, including the recently acquired Ducros business, as well as cost reduction initiatives. These factors also impacted the six months ended May 31, 2001, improving the Company's gross profit margin to 39.1% from 35.3% in the comparable period last year. Selling, general and administrative expenses increased in the second quarter and six months ended May 31, 2001, as compared to last year in both dollar terms and as a percentage of net sales. These increases were primarily due to the new Ducros business, including $4.1 million in related goodwill amortization expense year to date, as well as increased distribution expenses due to higher energy costs. These increases were partially offset by decreased advertising costs resulting from the timing of promotional activities that were shifted to the second half of the fiscal year. (10)
<TABLE> <CAPTION> Three months ended Six months ended May 31, May 31, 2001 2000 2001 2000 ---- ---- ---- ---- (in millions) <S> <C> <C> <C> <C> OPERATING INCOME Consumer $26.5 $21.8 $53.7 $46.4 Industrial 24.1 21.0 43.5 35.9 Packaging 5.9 6.3 11.1 11.5 ---- ---- ----- ----- Combined segments (1) $56.5 $49.1 $108.3 $93.8 </TABLE> (1)- Excludes impact of general corporate expenses included as Corporate & Eliminations. See Note 4 in the Notes to Condensed Consolidated Financial Statements. Operating income increased $8.7 million or 21.2% and operating margin increased to 8.7% from 8.3% for the quarter ended May 31, 2001, as compared to last year. In the consumer segment, operating income was $26.5 million, 21.5% ahead of last year's quarter. This increase is due primarily to the addition of the Ducros business, as well as increases in the Americas primarily a result of higher sales. As a percent of net sales, operating income decreased to 9.7% from 10.8%, a result of the dilutive effect of the Ducros acquisition including the amortization of goodwill. Operating income for the quarter in the industrial segment increased to $24.1 million, a 14.8% increase versus last year. As a percent of net sales, operating income increased to 9.9%, which compares to 8.8% in 2000. Margin improvement in the industrial business was particularly strong due to product mix in the food service and restaurant divisions, as well as cost reduction initiatives. Operating profit, including inter-segment business, in the packaging division was $5.9 million, a decrease of 6.1%. As a percent of net sales, operating profit decreased to 10.1% from 11.4% as a result of higher resin costs and unfavorable product mix for the quarter due to the current environment in the drug and vitamin industry. These factors for all segments also impacted the six months ended May 31, 2001, improving the Company's operating income margin to 8.6% from 8.1% in the comparable period last year. For the six months, operating income increased $17.5 million or 22.7%. However, in the first quarter of 2000, the industrial segment booked a reserve in the amount of $3.8 million for the AmeriServ bankruptcy. Excluding this reserve, the operating income margin increased to 8.6% from 8.5% at May 31, 2001 and 2000, respectively. Interest expense for the three and six months ended May 31, 2001 was $13.8 million and $28.1 million, respectively, versus $8.3 million and $15.7 million for the comparable period last year. The total debt levels in 2001 are significantly higher compared to last year as a result of the Ducros acquisition. Excluding Ducros, the interest expense for the quarter would have been down compared to the prior year due to favorable interest rates. The effective tax rate for both the quarter and six months ended May 31, 2001 was 33.1% versus 35.7% for both the quarter and six months ended May 31, 2000. The Company transacts business in many different taxing jurisdictions around the world, which all incur (11)
differing tax rates. The mix of earnings among these jurisdictions is what has caused a lower tax rate in 2001 versus 2000. Income from unconsolidated operations was $3.2 million and $9.3 million for the three months and six months ended May 31, 2001, respectively, which is comparable to last year. The Ducros acquisition included an investment in a joint venture with a minority interest. This minority interest was $.4 million and $1.1 million for the three and six months ended May 31, 2001, respectively. MARKET RISK SENSITIVITY FOREIGN CURRENCY The fair value of the Company's portfolio of forward contracts was $.7 million and $1.2 million as of May 31, 2001 and May 31, 2000, respectively. INTEREST RATES The fair value of the Company's forward starting interest rate swaps was $(.7) million and $6.3 million as of May 31, 2001 and May 31, 2000, respectively. The Company intends to hold the interest rate swaps until maturity. During the first quarter of 2001, the Company settled the forward starting interest rate swaps used to manage the interest rate risk associated with the medium-term notes issued during the quarter. See Note 5 of Notes to Condensed Consolidated Financial Statements for more details. The following table details the maturity values and average interest rates by year for the Company's fixed and variable debt instruments: <TABLE> <CAPTION> Year of Maturity There- (MILLIONS) 2001 2002 2003 2004 after Total - --------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> Fixed rate $ 81.1 $ 0.2 $ 0.0 $16.0 $432.2 $529.5 Ave. interest rate 8.82% 7.78% 0.00% 7.17% 7.48% - --------------------------------------------------------------------------------------------------------------------------- Variable rate $222.1 $ 0.3 $ 0.3 $ 0.3 $ 4.9 $227.9 Ave. interest rate 5.78% 6.67% 6.67% 6.67% 5.15% - --------------------------------------------------------------------------------------------------------------------------- </TABLE> The fair value of outstanding debt at May 31, 2001 approximates its carrying value. FINANCIAL CONDITION In the Condensed Consolidated Statement of Cash Flows, cash flows provided by operating activities increased from $38.1 million to $46.8 million for the six months ended May 31, 2000 and 2001, respectively. This increase is primarily due to favorable profits excluding depreciation and amortization. The increase in profits together with an increase in dividends from unconsolidated affiliates was partially offset by the $14.7 million swap settlement in the first quarter of 2001 as a result of the Ducros acquisition financing. (12)
Investing activities used cash of $51.1 million in the first six months of 2001 versus $27.1 million in the comparable period of 2000. Increased capital expenditures versus the prior year make up a majority of the increase in the cash used for investing activities. This increase is primarily related to spending for our Beyond 2000 project. Capital expenditures are projected to reach $85-95 million in 2001. Cash flows from financing activities provided cash of $27.4 million in the six months ended May 31, 2001, compared to $6.5 million in the same period last year. Last year, 2.1 million shares of common stock were repurchased under the Company's share repurchase program. This program was suspended due to the Ducros acquisition, therefore no shares were repurchased this year under the plan. In the six months ended May 31, 2001, there was significant activity in the Company's stock option plan which resulted in the increase in common stock issued and accounted for the majority of the $9.6 million of common stock acquired. Additionally, the Company also finalized its medium-term note program for the Ducros acquisition, which replaced substantially all of the existing commercial paper notes used to finance the transaction. The Company's ratio of debt-to-total capital was 66.5% as of May 31, 2001, up from 56.6% at May 31, 2000 and 65.8% at November 30, 2000. The increase since year-end was primarily due to unfavorable foreign currency translation adjustments which resulted in a 1.0 percentage point change to the debt-to-total capital ratio. The increase since May 31, 2000 is primarily due to additional debt issued in connection with the Ducros acquisition. Management believes that internally generated funds and its existing sources of liquidity are sufficient to meet current and anticipated financing requirements over the next 12 months. FORWARD-LOOKING INFORMATION Certain statements contained in this report, including those related to the stock repurchase program, the holding period and market risks associated with financial instruments, the impact of foreign exchange fluctuations and the adequacy of internally generated funds and existing sources of liquidity are "forward-looking statements" within the meaning of Section 21E of the Securities and Exchange Act of 1934. Forward-looking statements are based on management's current views and assumptions and involve risks and uncertainties that could significantly affect expected results. Operating results may be materially affected by external factors such as: actions of competitors, customer relationships, and final negotiation of third-party contracts, the impact of stock market conditions on the stock repurchase program, fluctuations in the cost and availability of supply- (13)
chain resources and global economic conditions, including interest and currency rate fluctuations and inflation rates. The Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK For information regarding the Company's exposure to certain market risks, see Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in the Company's Annual Report on Form 10-K for the year ended November 30, 2000. Except as described in the Management's Discussion and Analysis of Financial Condition and Results of Operations, there have been no significant changes in the Company's financial instrument portfolio or market risk exposures since year end. (14)
PART II - OTHER INFORMATION Item 4. Submission of matters to a vote of Security Holders (a) The Company held its Annual Meeting of Stockholders on March 21, 2001. (b) No response required. (c) 1. The following individuals were nominees for the Board of Directors. The number of votes for or withheld for each nominee is as follows: Barry H. Beracha - for 7,393,448, withheld 36,481; James T. Brady - for 7,391,203, withheld 38,726; Francis A. Contino - for 7,326,623, withheld 103,306; Robert G. Davey - for 7,384,511, withheld 45,418; Edward S. Dunn, Jr. - for 7,407,102, withheld 22,827; Freeman A. Hrabowski, III - for 7,409,911, withheld 20,018; Robert J. Lawless - for 7,407,688, withheld 22,241; John Molan - for 7,345,797, withheld 84,132; Carroll D. Nordhoff - for 7,408,627 withheld 21,302; Robert W. Schroeder - for 7,411,850, withheld 18,079; William E. Stevens - for 7,395,633, withheld 34,296; Karen D. Weatherholtz - for 7,357,464, withheld 72,465. 2. The approval of the 2001 Employee Stock Purchase Plan. The number of votes for, against, abstaining or broker non-vote is as follows: For 7,378,596; Against 33,416; Abstain 17,917; Broker Non-Votes 0. 3. The approval of the 2001 Stock Option Plan. The number of votes for, against, abstaining or broker non-vote is as follows: For 6,908,089; Against 115,689; Abstain 39,482; Broker Non-Votes 366,699. 4. The ratification of the appointment of Ernst & Young as independent auditors. The number of votes for, against or abstaining is as follows: For 7,361,948; Against 52,246; Abstain 15,735; Broker Non-Votes 0. (d) No response required. Item 6. Exhibits and Reports on Form 8-K <TABLE> <S> <C> <C> (a) Exhibits See Exhibit Index at pages 17-19 of this Report on Form 10-Q. (b) Reports on Form 8-K. None. </TABLE> (15)
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: JULY 13, 2001 By: /s/ FRANCIS A. CONTINO ---------------------- ----------------------------- Francis A. Contino Executive Vice President & Chief Financial Officer Date: JULY 13, 2001 By: /s/ KENNETH A. KELLY, JR. ---------------------- ------------------------------- Kenneth A. Kelly, Jr. Vice President & Controller (16)
EXHIBIT INDEX <TABLE> <CAPTION> ITEM 601 EXHIBIT NUMBER REFERENCE OR PAGE <S> <C> (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 reference Company, Incorporated dated April l6, from Registration Form 1990 S-8, Registration No. 33-39582 as filed with the Securities and Exchange Commission on March 25, 1991. Articles of Amendment to Charter of Incorporated by reference McCormick & Company, Incorporated from Registration Form dated April 1, 1992 S-8 Registration Statement No. 33-59842 as filed with the Securities and Exchange Commission on March 19, 1993. By-laws of McCormick & Company, Incorporated by reference Incorporated-Restated and from Registrant's Form Amended as of June 17, 1996. 10-Q for the quarter ended May 31, 1996 as filed with the Securities and Exchange Commission on July 12, 1996. (4) Instruments defining the rights of With respect to rights of security holders, including 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 instrument upon request of the Securities and Exchange Commission. </TABLE> (17)
(10) Material contracts. (i) Registrant's supplemental pension plan for certain senior officers is described in the McCormick Supplemental Executive Retirement Plan, a copy of which was attached as Exhibit 10.1 to the Registrant's Report on Form 10-K for the fiscal year 1992 as filed with the Securities and Exchange Commission on February 17, 1993, which report is incorporated by reference. (ii) Mid-Term Incentive Program provided to a limited number of senior executives, a description of which is incorporated by reference from pages 19 and 20 of the Registrant's definitive Proxy Statement dated February 18, 1998, as filed with the Commission on February 17, 1998, which pages are incorporated by reference. (iii) Stock Purchase Agreement among the Registrant, Eridania Beghin-Say and Compagnie Francaise de Sucrerie - CFS, dated August 31, 2000, which agreement is incorporated by reference from Registrant's Report on Form 8-K, as filed with the Securities and Exchange Commission on September 15, 2000, as amended on Form 8-K/A filed with the Securities and Exchange Commission on November 14, 2000. (iv) Directors' Non-Qualified Stock Option Plan provided to members of the Registrant's Board of Directors who are not also employees of the Registrant, is described in Registrant's S-8 Registration Statement No. 333-74963 as filed with the Securities and Exchange Commission on March 24, 1999, which statement is incorporated by reference. (v) Deferred Compensation Plan in which directors, officers and certain other management employees participate, a description of which is incorporated by reference from the Registrant's S-8 Registration Statement No. 333-93231 as filed with the Securities and Exchange Commission on December 12, 1999, which statement is incorporated by reference. (vi) Stock option plans, in which directors, officers and certain other management employees participate, are described in Registrant's S-8 Registration Statement No. 333-57590 as filed with the Securities and Exchange Commission on March 25, 2001, which statement is incorporated by reference. <TABLE> <S> <C> (11) Statement re computation of per- Not applicable. share earnings. (15) Letter re unaudited interim Not applicable. financial information. (18) Letter re change in accounting Not applicable. principles. </TABLE> (18)
<TABLE> <S> <C> (19) Report furnished to security holders. Not applicable. (22) Published report regarding matters Not applicable. submitted to vote of securities holders. (23) Consent of experts. Not applicable. (24) Power of attorney. Not applicable. (99) Additional exhibits. (99.1) Financial data schedule. Submitted in electronic format only. </TABLE> (19)