Company Overview McCormick is a global food company that manufactures spices, herbs, and flavorings. The company began in 1889 and is headquartered in Hunt Valley, Maryland. It’s brands include Zatarain’s, Old Bay Seasoning, Ducros, Club House, Billy Bee Honey, Schwartz, Aeroplane Jelly, and Keen’s Mustard, Thai Kitchen, and Simply Asia. McCormick distributes their products to retail outlets, food manufacturers, and foodservice businesses. They have facilities in North America, Europe, China, Australia, Mexico, India, Singapore, Central America, Thailand, and South Africa. The company has two business segments: consumer and industrial. The consumer business spans a variety of retail outlets that include grocery, mass merchandise, warehouse clubs, discount, and drug stores. The industrial business provides wide range of products to multinational food manufacturers and foodservice customers. The two largest industrial customers are PepsiCo, Inc. and Wal-Mart Stores, Inc., which each account for approximately 11% of consolidated net sales. The company’s sales, income, and cash from operations are affected by seasonality. Business is slower in the first two quarters of the fiscal year, increase in the third quarter, and are significantly higher in the fourth quarter due to the holiday season. McCormick has a number of competitors. Some specialize in a specific range of products and others have a limited geographic reach. McCormick’s strategy to compete is to focus on brand recognition and loyalty, product innovation, price and value, and product quality.
Assets
McCormick’s current assets include cash and cash equivalents of $53.9 million, trade accounts receivable (net of allowances of $4.5 million for 2011) of $427 million, inventories of $613.7 million, and prepaid expenses and other current assets of $128.3 million. Current assets can be converted to cash or used to pay current liabilities within 12 months. McCormick also has property, plant, and equipment (net of accumulated depreciation) of $523.1 million, goodwill of $1,694.2 million, intangible assets (net of accumulated amortization) of $350 million, and investments and other assets of $297.6 million. McCormick reports inventory at the lower of cost or market. Cost is determined using standard or average costs which approximate the first-in, first-out costing method. Property, plant, and equipment is stated at historical cost and depreciated over its estimated useful life using the straight-line method for financial reporting and both accelerated and straight-line methods for tax reporting. The estimated useful lives range from 20 to 40 years for buildings and 3 to 12 years for machinery, equipment, and computer software. Included in other intangible assets, McCormick owns a number of trademark registrations. The “Mc-McCormick” trademark is extensively used in connection with the sale of the company’s food products, both in US and non-US markets.
Liabilities
McCormick’s current liabilities include short-term borrowing of $217 million, current portion of long-term debt of $5.4 million, trade accounts payable of $366.6 million, and other accrued liabilities of $404.3 million. Current liabilities are liabilities of the business that can be paid in cash within the fiscal year or the operating cycle of the business. McCormick’s also has long-term debt of $1,029.7 million and other long-term liabilities of $446.3 million.
Equity
The approximate number of holders of the company’s common stock, no par value, was 2,100. The approximate number of holders of the company’s common stock, non-voting, no par value was 10,200. The earnings per share – basic was $2.82 and the book value per share was $12.17.
Income and Expenses McCormick had net sales of $3,697.6 million in 2011 and $3,336.8 million in 2010. There was a 10.8% increase in net sales from 2010 to 2011. Net
