McCORMICK & COMPANY 2007 ANNUAL REPORT
McCORMICK & COMPANY 2007 ANNUAL REPORT |
| MANAGEMENT’S DISCUSSION AND ANALYSIS | ||||
| Commodity Risk – We purchase certain raw materials
which are subject to price volatility caused by weather,
market conditions, growing and harvesting conditions,
governmental actions and other factors beyond our control.
Our most significant raw materials are cheese,
pepper, soybean oil, wheat, sweeteners, garlic, capsicums
and onion. While future movements of raw
material costs are uncertain, we respond to this volatility
in a number of ways, including strategic raw material purchases,
purchases of raw material for future delivery and
customer price adjustments. We have not used derivatives
to manage the volatility related to this risk. Credit Risk – The customers of our consumer business are predominantly food retailers and food wholesalers. Consolidations in these industries have created larger customers, some of which are highly |
leveraged. In addition,
competition has increased with the growth in alternative
channels including mass merchandisers, dollar stores,
warehouse clubs and discount chains. This has caused
some customers to be less profitable and increased our
exposure to credit risk. We continually evaluate and monitor
our credit exposure to our customers and believe that
the risks have been adequately provided for in our bad
debt allowance. CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS The following table reflects a summary of our contractual obligations and commercial commitments as of November 30, 2007: |
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| (a) Includes $150 million of debt due in less than 1 year in the “More than 5 years” category based on our ability and intent to refinance this amount for this term. (b) Raw material purchase obligations outstanding as of year-end may not be indicative of outstanding obligations throughout the year due to our response to varying raw material cycles. (c) Other purchase obligations primarily consist of advertising media commitments. In 2008, our pension and postretirement funding is expected to be approximately $22 million. Pension and postretirement funding can vary significantly each year due to changes in legislation and our significant assumptions. As a result, we have not presented pension and postretirement funding in the table above. |
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McCormick & Company 2007 Annual Report 30 |
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