Annual Report (Form 10-K), fiscal year 1994

Item 1. Business
The Registrant, a diversified specialty food company, is principally engaged in the manufacture of spices, seasonings, flavorings and other specialty food products and sells such products to the retail food market, the foodservice market and to industrial food processors throughout the world. The Registrant also, through subsidiary corporations, manufactures and markets plastic packaging products for the food, cosmetic and health care industries.
The Registrant's Annual Report to Stockholders for 1994, which is enclosed as Exhibit 13, contains a description of the general development, during the last fiscal year, of the business of the Registrant, which was formed in 1915 under Maryland law as the successor to a business established in 1889. Pages 9 through 21 of that Report are incorporated by reference. The Registrant's net sales increased 8.9% in 1994 to $1,694,772,000 due to both sales price and volume changes.
The Registrant operates in one business segment and has disclosed in Note 10 of the Notes to Consolidated Financial Statements on page 35 of its Annual Report to Stockholders for 1994, which Note is incorporated by reference, the financial information about the business segment required by this Item.
SPECIALTY FOOD BUSINESS
The Registrant's Annual Report to Stockholders for 1994 sets forth a description of the business conducted by the Registrant on pages 9 through 11. Those pages of the Registrant's Annual Report are incorporated by reference.
Principal Products/Marketing
Spices, seasonings, flavorings, and other specialty food products are the Registrant's principal products. Spices, seasonings, flavorings, and other specialty food products accounted for approximately 90% of net sales on a consolidated basis during the three fiscal years ended November 30, 1994. No other product or class of similar products or services contributed as much as 10% to consolidated net sales during the last three fiscal years. The Registrant's efforts will continue to be directed primarily in the area of spices, seasonings, flavorings, and other specialty food products.
The Registrant markets its consumer and foodservice products through its own sales organization, food brokers and distributors. In the industrial market, sales are made mostly through the Registrant's own sales force.
Products/Industry Segments
The Registrant has not announced or made public information about a new product or industry segment that would require the investment of a material amount of the assets of the Registrant or that otherwise is material.
Raw Materials Many of the spices and herbs purchased by the Registrant are imported into the United States from the country of origin, although substantial quantities of particular materials, such as paprika, dehydrated vegetables, onion and garlic, and substantially all of the specialty food ingredients other than spices and herbs, originate in the United States. Some of the imported materials are purchased from dealers in the United States. The Registrant is a direct importer of certain raw materials, mainly black pepper, vanilla beans, cinnamon, herbs and seeds from the countries of origin. The principal purpose of such purchases is to satisfy the Registrant's own needs. The Registrant also sells imported raw materials to other food processors.
The raw materials most important to the Registrant are onion, garlic and capsicums (paprika and chili peppers), which are produced in the United States, black pepper, most of which originates in India, Indonesia, Malaysia and Brazil, and vanilla beans, a large proportion of which the Registrant obtains from the Malagasy Republic and Indonesia.
Trademarks, Licenses and Patents
The Registrant owns a number of registered trademarks, which in the aggregate may be material to the Registrant's business. However, the loss of any one of those trademarks, with the exception of the Registrant's "McCormick" and "Schilling" trademarks, would not have a material adverse impact on the Registrant's business. The "McCormick" and "Schilling" trademarks are extensively used by the Registrant in connection with the sale of a substantial number of the Registrant's products in the United States. The "McCormick" and "Schilling" trademarks are registered and used in various foreign countries as well. The terms of the trademark registrations are as prescribed by law and the registrations will be renewed for as long as the Registrant deems them to be useful.
The Registrant has entered into a number of license agreements authorizing the use of its trademarks by persons in foreign countries. In the aggregate, the loss of those license agreements would not have a material adverse impact on the Registrant's business. The terms of the license agreements are generally 3 to 5 years or until such time as either party terminates the agreement. Those agreements with specific terms are renewable upon agreement of the parties.
The Registrant owns various patents, but they are not viewed as material to the Registrant's business.
Seasonal Nature of Business
Historically, the Registrant's sales and profits are lower in the first two quarters of the fiscal year and increase in the third and fourth quarters.
Working Capital
In order to meet increased demand for its products during its fourth quarter, the Registrant usually builds its inventories during the second and third quarters. In common with other companies, the Registrant generally finances working capital items (inventory and receivables) through short-term borrowings, which include the use of lines of credit and the issuance of commercial paper.
Customers
The Registrant has a large number of customers for its products. No single customer accounted for as much as 10% of consolidated net sales in 1994. In the same year, sales to the five largest customers represented approximately 20% of consolidated net sales.
Backlog Orders
The dollar amount of backlog orders of the Registrant's specialty food business is not material to an understanding of the Registrant's business, taken as a whole.
Government Contracts
No material portion of the Registrant's business is subject to renegotiation of profits or termination of contracts or subcontracts at the election of the government.
Competition
Although the Registrant is a leader in sales of certain spices and seasoning and flavoring products, and is the largest producer and distributor of dehydrated onions and garlic in the United States, its business is highly competitive. For further discussion, see pages 13 and 17 of the Registrant's Annual Report to Stockholders for 1994, which pages are incorporated by reference.
Research and Quality Control
The Registrant has emphasized quality and innovation in the development, production and packaging of its products. Many of the Registrant's products are prepared from confidential formulae developed by its research laboratories and product development departments. The long experience of the Registrant in its field contributes substantially to the quality of the products offered for sale. Quality specifications exist for the Registrant's products,and continuing quality control inspections and testing are performed. Total expenditures for these and other related activities during fiscal years 1994, 1993 and 1992 were approximately $39,562,000, $38,226,000, and $35,968,000 respectively. Of these amounts, expenditures for research and development amounted to $12,999,000 in 1994, $12,259,000 in 1993, and $11,844,000 in 1992. The amount spent on customer-sponsored research activities is not material.
Environmental Regulations
Compliance with Federal, State and local provisions related to protection of the environment has had no material effect on the Registrant's business. No material capital expenditures for environmental control facilities are expected to be made during this fiscal year or the next.
Employees
The Registrant had on average approximately 8,900 employees during fiscal year 1994.
Foreign Operations
International businesses have made significant contributions to the Registrant's growth and profits. In common with other companies with foreign operations, the Registrant is subject in varying degrees to certain risks typically associated with doing business abroad, such as local economic and market conditions, exchange and price controls, restrictions on investment, royalties and dividends and exchange rate fluctuations.
Note 10 of the Notes to Consolidated Financial Statements on page 35 of the Registrant's Annual Report to Stockholders for 1994, and page 13 of the Registrant's Annual Report to Stockholders for 1994 contain the information required by subsection (d) of Item 101 of Regulation S-K, which pages are incorporated by reference.
Packaging Operations
The Registrant's Annual Report to Stockholders for 1994 sets forth a description of the Registrant's packaging group on page 11, which page is incorporated by reference. Setco, Inc. and Tubed Products, Inc., which comprise Registrant's packaging group, are wholly owned subsidiaries of the Registrant and are, respectively, manufacturers of plastic bottles and plastic squeeze tubes.
Substantially all of the raw materials used in the packaging business originate in the United States. The market for plastic packaging is highly competitive. The Registrant is the largest single customer of the packaging group. All intracompany sales have been eliminated from the Registrant's consolidated financial statements.
Item 2.



Item 2. Properties
The location and general character of the Registrant's principal plants and other materially important physical properties are as follows:
(a) Consumer Products
A plant is located in Hunt Valley, Maryland on approximately 52 acres in the Hunt Valley Business Community. This plant, which contains approximately 540,000 square feet, is owned in fee and is used for processing and distributing spices and other food products. A plant of approximately 475,000 square feet located in Salinas, California is owned in fee and is used for milling, processing, packaging, and distributing spices and other food products.
(b) Industrial Products
(i)A plant complex is located in Gilroy, California consisting of connected and adjacent buildings owned in fee and providing approximately 894,000 square feet of space for milling, dehydrating, packaging, warehousing and distributing onion, garlic and capsicums. Adjacent to this plant is a 4.3 acre cogeneration facility which supplies steam to the dehydration business as well as electricity to Pacific Gas & Electric Company. The cogeneration facility was financed with an installment note secured by the property and equipment. This note is non-recourse to the Registrant.
(ii)The Registrant has two principal plants devoted to industrial flavoring products in the United States. A plant of 102,000 square feet is located in Hunt Valley, Maryland and is owned in fee. A plant of 102,400 square feet is located in Dallas, Texas and is owned in fee.
(c) Spice Milling
Located adjacent to the consumer products plant in Hunt Valley is a spice milling and cleaning plant which is owned in fee by the Registrant and contains approximately 185,000 square feet. This plant services all food product groups of the Registrant. Much of the milling and grinding of raw materials for Registrant's seasoning products is done in this facility.
(d) Packaging Products
The Registrant has four principal plants which are devoted to the production of plastic containers. The facilities are located in California, Massachusetts, New York and New Jersey, and range in size from 178,000 to 280,000 square feet. The plants in New York and New Jersey are leased.
(e) International
The Registrant has a plant in London, Ontario which is devoted to the processing, packaging and distribution of food products. This facility is approximately 145,000 square feet and is owned in fee.
(f) Research and Development
The Registrant has a facility in Hunt Valley , Maryland which houses the research and development laboratories and the technical capabilities of the industrial division. The facility is approximately 109,000 square feet and is owned in fee.
Item 3.

Item 3. Legal Proceedings
There are no material pending legal proceedings to which the Registrant or any of its subsidiaries is a party or to which any of their property is subject.
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted during the fourth quarter of Registrant's fiscal year 1994 to a vote of security holders.
PART II
Item 5.

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Registrant has disclosed at page 19 of its Annual Report to Stockholders for 1994, which page is incorporated by reference, the information relating to the market, market quotations, and dividends paid on Registrant's common stocks required by this Item.
The approximate number of holders of common stock of the Registrant based on record ownership as of January 31, 1995 was as follows:
Approximate Number Title of Class of Record Holders
Common Stock, no par value 2,086 Common Stock Non-Voting, 10,880 no par value
Item 6.

Item 6. Selected Financial Data
The Registrant has disclosed the information required by this Item in the Historical Financial Summary of its Annual Report to Stockholders for 1994 at pages 20 and 21, which pages are incorporated by reference.
Item 7.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The Registrant's Annual Report to Stockholders for 1994 at pages 12 through 19 contains a discussion and analysis of the Company's financial condition and results of operations for the three fiscal years ended November 30, 1994. Said pages are incorporated by reference.
Item 8.


Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary data for McCormick & Company, Incorporated are included on pages 23 through 36 of the Annual Report to Stockholders for 1994, which pages are incorporated by reference. The report of independent auditors from Ernst & Young on such financial statements is included on page 37 of the Annual Report to Stockholders for 1994; the supplemental schedule for 1992, 1993 and 1994 is included on page 14 of this Report on Form 10-K.
The unaudited quarterly data required by Item 302 of Regulation S-K is included in Note 11 of the Notes to Consolidated Financial Statements at page 36 of the Registrant's Annual Report to Stockholders for 1994, which Note is incorporated by reference.
Item 9.

Item 9. Changes in and None. Disagreements with Accountants on Accounting and Financial Disclosure.
PART III Item 10.




Item 11.Executive Registrant's Proxy Compensation. Statement dated February 15, 1995/Pages 9-18.
Item 12.

Item 12.Security Ownership Registrant's Proxy of Certain Statement dated February Owners and Management.15, 1995/Pages 4-7.
Item 13.

Item 13.Certain Relationships Registrant's Proxy and Related Statement dated February Transactions. 15, 1995/Page 7.
PART IV Item 14.