McCORMICK & COMPANY
 2008 ANNUAL REPORT
 
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Management’s Discussion and Analysis

The purpose of Management’s Discussion and Analysis (MD&A) is to provide an understanding of McCormick’s business, financial results and financial condition.
The MD&A is organized in the following sections:
■ Business Overview
■ Results of Operations
■ Liquidity and Financial Condition
■ Acquisitions
■ Impairment Charge
■ Restructuring Activities
■ Other information, including critical accounting estimates and assumptions and forward-looking information
 		  

 
 

The information in the charts and tables in the MD&A are for the years ended November 30. All dollars are in millions, except per share data. We analyze and measure the profitability of our two business segments excluding the impact of our restructuring activities for all years presented, as well as the impact of the impairment charge that was recorded in the fourth quarter of 2008 and affected our consumer business. As such, operating income and operating income margin results for our two business segments exclude these items. All other results include the impact of these charges.

  
   
Business Overview
 		      
  Executive Summary    

 

 

 McCormick is a global leader in the manufacture, marketing and distribution of spices, herbs, seasonings, specialty foods and flavors to the entire food industry. Customers range from retail outlets and food manufacturers to food service businesses. The Company was founded in 1889 and built on a culture of Multiple Management which engages employees in problem-solving, high performance and professional development.
       We have approximately 7,500 full-time employees in facilities located around the world. Our major sales, distribution and production facilities are located in North America and Europe. Additional facilities are based in Mexico, Central America, Australia, China, Singapore, Thailand and South Africa. In 2008, 41.9% of sales were outside the United States.

Listed below are significant highlights of the discussion and analysis that follows:

■ In 2008 net sales rose 8.9% to $3.2 billion driven by price increases taken to offset higher costs, as well as increased volume and product mix, and favorable foreign currency exchange rates.

■ Earnings per share were $1.94 in 2008 compared to $1.73 in 2007, an increase
of 12.1%.		   ■ We achieved $31 million of incremental cost reductions in 2008, including $11 million of savings from our restructuring program.

■ At the end of 2008, the restructuring program announced in 2005 had reached $56 million in annual savings.

■ In July 2008 we acquired the assets of the Lawry’s business from a subsidiary of Unilever for $604 million in cash. Based on the purchase price, this was our largest acquisition to date. We increased commercial paper to fund the acquisition and in September 2008 issued $250 million in 5-year notes to refinance a portion of the outstanding commercial paper.

■ From the time an agreement to acquire Lawry’s was reached in November 2007, we have curtailed our share repurchase program to reduce the higher level of debt from this acquisition.

■ In the fourth quarter of 2008, our Board of Directors approved a 9.1% increase in the current quarterly dividend rate to $0.24 per share. As a result, the current annualized dividend rate at the beginning of 2009 is $0.96 per share.
 
 
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