McCORMICK
McCORMICK & COMPANY 2007 ANNUAL REPORT
backmailpdfprintnext
  
     
     
  MANAGEMENT’S DISCUSSION AND ANALYSIS  
 
We have a number of smaller contracts with an aggregate notional value of $7.0 million to purchase or sell various other currencies, such as the Australian dollar and the Japanese yen as of November 30, 2007. The aggregate fair value of these contracts was $(0.1) million at November 30, 2007.
     At November 30, 2006, we had foreign currency exchange contracts for the Euro, British pound sterling, Canadian dollar, Australian dollar, Japanese yen and Singapore dollar with a notional value of $47.9 million, all of which matured in 2006. The aggregate fair value of these contracts was $(0.2) million at November 30, 2006.
    Contracts with durations which are less than 5 days and used for short-term cash flow funding are not included in the
notes or table above.		  


    Interest Rate Risk – Our policy is to manage interest rate risk by entering into both fixed and variable rate debt arrangements. We also use interest rate swaps to minimize worldwide financing costs and to achieve a desired mix of fixed and variable rate debt. The table that follows provides principal cash flows and related interest rates, excluding the effect of interest rate swaps


and the amortization of any discounts or fees, by fiscal year of maturity at November 30, 2007 and 2006. For foreign currency-denominated debt, the information is presented in U.S. dollar equivalents. Variable interest rates are based on the weighted-average rates of the portfolio at the end of the year presented.
The table above displays the debt by the terms of the original debt instrument without consideration of interest rate swaps and any loan discounts or origination fees. Interest rate swaps have the following effects. The variable interest rate on $75 million of commercial paper is hedged by interest rate swaps through 2011. Net interest payments on the $75 million will be fixed at 6.35% during this period. Interest rate swaps, settled upon the issuance of the medium-term notes maturing in 2008, effectively fixed the interest rate on $150 million of notes at a weighted-average fixed rate of 7.71%. The fixed interest rate on $50 million of 3.35% medium-term notes due in 2009 is effectively converted to a variable rate by interest rate swaps through 2009. Net interest payments are based on LIBOR minus 0.21% during this period. The fixed interest rate on $100 million of the 5.20% medium-term note due in 2015 is effectively converted to a variable rate by interest rate swaps through 2015. Net interest payments are based on LIBOR minus 0.05% during this period.
     In December 2007 we issued $250 million of 5.75% medium-term notes due in 2017. Forward treasury lock agreements, of $150 million, settled upon the issuance of these medium-term notes, effectively fixed the interest rate on the full $250 million of notes at a weighted-average fixed rate of 6.25%. A portion of the net proceeds of these medium-term notes will be used to pay down $150 million of current maturity of long-term debt maturing in 2008. As a result, the current portion of medium-term notes maturing in 2008 were classified in the “Thereafter” totals in the table above to reflect the 2017 maturity date of the new issuance. On a pro forma basis, after giving consideration to the issuance of the $250 million of medium-term notes and the repayment of the $150 million of medium-term notes, the “Thereafter” totals for 2007 would be $505.0 million of fixed rate debt at an average interest rate of 5.77%.
 
McCormick & Company 2007 Annual Report        29
  
back
next