Form 10-Q |
MARYLAND | 52-0408290 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
18 Loveton Circle, P. O. Box 6000, Sparks, MD | 21152-6000 |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code (410) 771-7301 |
Large Accelerated Filer | ý | Accelerated Filer | ¨ |
Non-Accelerated Filer | ¨ | Smaller Reporting Company | ¨ |
Shares Outstanding | ||||
August 31, 2013 | ||||
Common Stock | 12,194,775 | |||
Common Stock Non-Voting | 119,856,083 |
ITEM 1 | |||
ITEM 2 | |||
ITEM 3 | |||
ITEM 4 | |||
ITEM 1 | |||
ITEM 1a | |||
ITEM 2 | |||
ITEM 4 | |||
ITEM 6 |
ITEM 1. | FINANCIAL STATEMENTS |
Three months ended August 31, | Nine months ended August 31, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net sales | $ | 1,016.4 | $ | 977.7 | $ | 2,953.4 | $ | 2,868.4 | |||||||
Cost of goods sold | 608.8 | 586.0 | 1,789.8 | 1,733.0 | |||||||||||
Gross profit | 407.6 | 391.7 | 1,163.6 | 1,135.4 | |||||||||||
Selling, general and administrative expense | 259.2 | 247.5 | 787.2 | 757.4 | |||||||||||
Operating income | 148.4 | 144.2 | 376.4 | 378.0 | |||||||||||
Interest expense | 14.0 | 13.2 | 41.4 | 40.7 | |||||||||||
Other income, net | 0.3 | 0.9 | 1.7 | 1.8 | |||||||||||
Income from consolidated operations before income taxes | 134.7 | 131.9 | 336.7 | 339.1 | |||||||||||
Income taxes | 35.3 | 33.0 | 94.0 | 93.8 | |||||||||||
Net income from consolidated operations | 99.4 | 98.9 | 242.7 | 245.3 | |||||||||||
Income from unconsolidated operations | 5.0 | 5.5 | 16.3 | 14.0 | |||||||||||
Net income | $ | 104.4 | $ | 104.4 | $ | 259.0 | $ | 259.3 | |||||||
Earnings per share – basic | $ | 0.79 | $ | 0.79 | $ | 1.96 | $ | 1.95 | |||||||
Average shares outstanding – basic | 132.1 | 132.7 | 132.2 | 132.8 | |||||||||||
Earnings per share – diluted | $ | 0.78 | $ | 0.78 | $ | 1.94 | $ | 1.93 | |||||||
Average shares outstanding – diluted | 133.5 | 134.3 | 133.7 | 134.3 | |||||||||||
Cash dividends paid per share | $ | 0.34 | $ | 0.31 | $ | 1.02 | $ | 0.93 |
Three months ended August 31, | Nine months ended August 31, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net income | $ | 104.4 | $ | 104.4 | $ | 259.0 | $ | 259.3 | |||||||
Net income attributable to non-controlling interest | 0.2 | 0.4 | 1.1 | 1.6 | |||||||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||
Unrealized components of pension plans | 8.5 | 1.8 | 30.6 | 12.1 | |||||||||||
Currency translation adjustments | (7.8 | ) | 38.8 | (53.6 | ) | (36.7 | ) | ||||||||
Change in derivative financial instruments | 5.3 | (1.8 | ) | 13.0 | (1.6 | ) | |||||||||
Less: Deferred taxes | (5.5 | ) | (0.9 | ) | (13.8 | ) | (4.3 | ) | |||||||
Comprehensive income | $ | 105.1 | $ | 142.7 | $ | 236.3 | $ | 230.4 |
Aug 31, 2013 | Aug 31, 2012 | Nov 30, 2012 | |||||||||
(unaudited) | (unaudited) | ||||||||||
ASSETS | |||||||||||
Current Assets | |||||||||||
Cash and cash equivalents | $ | 146.8 | $ | 72.2 | $ | 79.0 | |||||
Trade accounts receivables, net | 462.4 | 411.2 | 465.9 | ||||||||
Inventories | |||||||||||
Finished products | 328.8 | 311.7 | 289.0 | ||||||||
Raw materials and work-in-process | 312.0 | 316.9 | 326.0 | ||||||||
640.8 | 628.6 | 615.0 | |||||||||
Prepaid expenses and other current assets | 120.9 | 107.4 | 125.5 | ||||||||
Total current assets | 1,370.9 | 1,219.4 | 1,285.4 | ||||||||
Property, plant and equipment | 1,368.2 | 1,297.1 | 1,333.1 | ||||||||
Less: accumulated depreciation | (818.5 | ) | (778.6 | ) | (785.8 | ) | |||||
Property, plant and equipment, net | 549.7 | 518.5 | 547.3 | ||||||||
Goodwill | 1,756.4 | 1,667.0 | 1,695.3 | ||||||||
Intangible assets, net | 347.5 | 345.4 | 323.5 | ||||||||
Investments and other assets | 328.5 | 306.7 | 313.9 | ||||||||
Total assets | $ | 4,353.0 | $ | 4,057.0 | $ | 4,165.4 | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
Current Liabilities | |||||||||||
Short-term borrowings | $ | 107.9 | $ | 229.0 | $ | 140.3 | |||||
Current portion of long-term debt | 252.1 | 2.3 | 252.3 | ||||||||
Trade accounts payable | 324.7 | 317.5 | 375.8 | ||||||||
Other accrued liabilities | 369.6 | 353.8 | 419.2 | ||||||||
Total current liabilities | 1,054.3 | 902.6 | 1,187.6 | ||||||||
Long-term debt | 1,018.6 | 1,026.2 | 779.2 | ||||||||
Other long-term liabilities | 482.6 | 404.2 | 498.4 | ||||||||
Total liabilities | 2,555.5 | 2,333.0 | 2,465.2 | ||||||||
Shareholders’ Equity | |||||||||||
Common stock | 348.7 | 325.2 | 332.6 | ||||||||
Common stock non-voting | 606.4 | 560.6 | 575.6 | ||||||||
Retained earnings | 1,011.9 | 909.6 | 934.6 | ||||||||
Accumulated other comprehensive loss | (183.6 | ) | (89.5 | ) | (159.9 | ) | |||||
Non-controlling interests | 14.1 | 18.1 | 17.3 | ||||||||
Total shareholders’ equity | 1,797.5 | 1,724.0 | 1,700.2 | ||||||||
Total liabilities and shareholders’ equity | $ | 4,353.0 | $ | 4,057.0 | $ | 4,165.4 |
Nine months ended August 31, | |||||||
2013 | 2012 | ||||||
Cash flows from operating activities | |||||||
Net income | $ | 259.0 | $ | 259.3 | |||
Adjustments to reconcile net income to net cash flow provided by operating activities: | |||||||
Depreciation and amortization | 76.9 | 76.8 | |||||
Stock-based compensation | 16.1 | 11.9 | |||||
Income from unconsolidated operations | (16.3 | ) | (14.0 | ) | |||
Changes in operating assets and liabilities | (111.7 | ) | (91.9 | ) | |||
Dividends from unconsolidated affiliates | 3.4 | 14.2 | |||||
Net cash flow provided by operating activities | 227.4 | 256.3 | |||||
Cash flows from investing activities | |||||||
Acquisition of business | (130.0 | ) | — | ||||
Capital expenditures | (54.0 | ) | (62.2 | ) | |||
Proceeds from sale of property, plant and equipment | 2.0 | 0.7 | |||||
Net cash flow used in investing activities | (182.0 | ) | (61.5 | ) | |||
Cash flows from financing activities | |||||||
Short-term borrowings, net | (31.8 | ) | 12.1 | ||||
Long-term debt borrowings | 246.2 | — | |||||
Long-term debt repayments | (1.2 | ) | (4.6 | ) | |||
Proceeds from exercised stock options | 32.8 | 37.3 | |||||
Common stock acquired by purchase | (92.1 | ) | (98.2 | ) | |||
Dividends paid | (135.0 | ) | (123.6 | ) | |||
Net cash flow provided by (used in) financing activities | 18.9 | (177.0 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 3.5 | 0.5 | |||||
Increase in cash and cash equivalents | 67.8 | 18.3 | |||||
Cash and cash equivalents at beginning of period | 79.0 | 53.9 | |||||
Cash and cash equivalents at end of period | $ | 146.8 | $ | 72.2 |
1. | ACCOUNTING POLICIES |
2. | ACQUISITIONS |
3. | FINANCING ARRANGEMENTS AND FINANCIAL INSTRUMENTS |
As of August 31, 2013 | Asset Derivatives | Liability Derivatives | |||||||||||||||||
Balance Sheet Location | Notional Amount | Fair Value | Balance Sheet Location | Notional Amount | Fair Value | ||||||||||||||
Interest rate contracts | Other current assets | $ | 100.0 | $ | 11.5 | ||||||||||||||
Foreign exchange contracts | Other current assets | 57.5 | 1.4 | Other accrued liabilities | $ | 66.0 | $ | 1.0 | |||||||||||
Total | $ | 12.9 | $ | 1.0 | |||||||||||||||
As of August 31, 2012 | Asset Derivatives | Liability Derivatives | |||||||||||||||||
Balance Sheet Location | Notional Amount | Fair Value | Balance Sheet Location | Notional Amount | Fair Value | ||||||||||||||
Interest rate contracts | Other current assets | $ | 100.0 | $ | 16.6 | ||||||||||||||
Foreign exchange contracts | Other current assets | 81.5 | 0.7 | Other accrued liabilities | $ | 100.0 | $ | 1.6 | |||||||||||
Total | $ | 17.3 | $ | 1.6 | |||||||||||||||
As of November 30, 2012 | Asset Derivatives | Liability Derivatives | |||||||||||||||||
Balance Sheet Location | Notional Amount | Fair Value | Balance Sheet Location | Notional Amount | Fair Value | ||||||||||||||
Interest rate contracts | Other current assets | $ | 100.0 | $ | 16.7 | Other accrued liabilities | $ | 50.0 | $ | 0.1 | |||||||||
Foreign exchange contracts | Other current assets | 123.1 | 0.9 | Other accrued liabilities | 65.7 | 1.9 | |||||||||||||
Total | $ | 17.6 | $ | 2.0 |
Fair Value Hedges | ||||||||||||||||||
Derivative | Income statement location | Expense | ||||||||||||||||
For the 3 months ended August 31, 2013 | For the 3 months ended August 31, 2012 | For the 9 months ended August 31, 2013 | For the 9 months ended August 31, 2012 | |||||||||||||||
Interest rate contracts | Interest expense | $ | 1.2 | $ | 1.1 | $ | 3.7 | $ | 3.5 |
Cash Flow Hedges – | ||||||||||||||||||
For the 3 months ended August 31, | ||||||||||||||||||
Derivative | Gain or (Loss) recognized in OCI | Income statement location | Gain or (Loss) reclassified from AOCI | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||||
Interest rate contracts | $ | 4.7 | $ | — | Interest expense | $ | (0.3 | ) | $ | (0.3 | ) | |||||||
Foreign exchange contracts | 0.2 | (1.5 | ) | Cost of goods sold | 0.3 | 0.1 | ||||||||||||
Total | $ | 4.9 | $ | (1.5 | ) | $ | — | $ | (0.2 | ) | ||||||||
Cash Flow Hedges – | ||||||||||||||||||
For the 9 months ended August 31, | ||||||||||||||||||
Derivative | Gain or (Loss) recognized in OCI | Income statement location | Gain or (Loss) reclassified from AOCI | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||||
Interest rate contracts | $ | 9.2 | $ | — | Interest expense | $ | (1.0 | ) | $ | (1.0 | ) | |||||||
Foreign exchange contracts | 2.3 | (1.9 | ) | Cost of goods sold | (0.4 | ) | 0.7 | |||||||||||
Total | $ | 11.5 | $ | (1.9 | ) | $ | (1.4 | ) | $ | (0.3 | ) |
4. | FAIR VALUE MEASUREMENTS |
• | Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. |
• | Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. |
• | Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions. |
Fair value measurements using fair value hierarchy As of | ||||||||||||||||
August 31, 2013 | ||||||||||||||||
Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents | $ | 146.8 | $ | 146.8 | $ | — | $ | — | ||||||||
Insurance contracts | 84.3 | — | 84.3 | — | ||||||||||||
Bonds & other long-term investments | 13.0 | 13.0 | — | — | ||||||||||||
Interest rate derivatives | 11.5 | — | 11.5 | — | ||||||||||||
Foreign currency derivatives | 1.4 | — | 1.4 | — | ||||||||||||
Total | $ | 257.0 | $ | 159.8 | $ | 97.2 | $ | — | ||||||||
Liabilities | ||||||||||||||||
Foreign currency derivatives | $ | 1.0 | $ | — | $ | 1.0 | $ | — |
Fair value measurements using fair value hierarchy As of | ||||||||||||||||
August 31, 2012 | ||||||||||||||||
Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents | $ | 72.2 | $ | 72.2 | $ | — | $ | — | ||||||||
Insurance contracts | 71.1 | — | 71.1 | — | ||||||||||||
Bonds & other long-term investments | 12.9 | 12.9 | — | — | ||||||||||||
Interest rate derivatives | 16.6 | — | 16.6 | — | ||||||||||||
Foreign currency derivatives | 0.7 | — | 0.7 | — | ||||||||||||
Total | $ | 173.5 | $ | 85.1 | $ | 88.4 | $ | — | ||||||||
Liabilities | ||||||||||||||||
Foreign currency derivatives | $ | 1.6 | $ | — | $ | 1.6 | — |
Fair value measurements using fair value hierarchy As of | ||||||||||||||||
November 30, 2012 | ||||||||||||||||
Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents | $ | 79.0 | $ | 79.0 | $ | — | $ | — | ||||||||
Insurance contracts | 72.5 | — | 72.5 | — | ||||||||||||
Bonds & other long-term investments | 13.6 | 13.6 | — | — | ||||||||||||
Interest rate derivatives | 16.7 | — | 16.7 | — | ||||||||||||
Foreign currency derivatives | 0.9 | — | 0.9 | — | ||||||||||||
Total | $ | 182.7 | $ | 92.6 | $ | 90.1 | $ | — | ||||||||
Liabilities | ||||||||||||||||
Foreign currency derivatives | $ | 1.9 | $ | — | $ | 1.9 | $ | — | ||||||||
Interest rate derivatives | 0.1 | — | 0.1 | — | ||||||||||||
Total | $ | 2.0 | $ | — | $ | 2.0 | $ | — |
5. | EMPLOYEE BENEFIT AND RETIREMENT PLANS |
United States | International | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Defined benefit plans | |||||||||||||||
Service cost | $ | 5.8 | $ | 4.4 | $ | 2.2 | $ | 1.7 | |||||||
Interest costs | 7.8 | 8.0 | 3.1 | 3.1 | |||||||||||
Expected return on plan assets | (10.4 | ) | (9.5 | ) | (4.2 | ) | (4.0 | ) | |||||||
Amortization of prior service costs | — | — | 0.1 | 0.1 | |||||||||||
Recognized net actuarial loss | 7.4 | 4.5 | 1.3 | 0.9 | |||||||||||
Total pension expense | $ | 10.6 | $ | 7.4 | $ | 2.5 | $ | 1.8 |
United States | International | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Defined benefit plans | |||||||||||||||
Service cost | $ | 17.4 | $ | 13.1 | $ | 6.7 | $ | 5.1 | |||||||
Interest costs | 23.4 | 23.9 | 9.5 | 9.5 | |||||||||||
Expected return on plan assets | (31.0 | ) | (28.3 | ) | (12.9 | ) | (12.1 | ) | |||||||
Amortization of prior service costs | — | — | 0.3 | 0.3 | |||||||||||
Recognized net actuarial loss | 22.1 | 13.6 | 4.2 | 2.7 | |||||||||||
Total pension expense | $ | 31.9 | $ | 22.3 | $ | 7.8 | $ | 5.5 |
Three months ended August 31, | Nine months ended August 31, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Other postretirement benefits | ||||||||||||||||
Service cost | $ | 1.3 | $ | 0.9 | $ | 3.8 | $ | 3.0 | ||||||||
Interest costs | 1.0 | 1.1 | 3.0 | 3.6 | ||||||||||||
Amortization of prior service costs | (0.3 | ) | (1.0 | ) | (0.9 | ) | (3.0 | ) | ||||||||
Amortization of losses/(gains) | 0.3 | (0.1 | ) | 1.0 | — | |||||||||||
Total other postretirement expense | $ | 2.3 | $ | 0.9 | $ | 6.9 | $ | 3.6 |
6. | STOCK-BASED COMPENSATION |
Three months ended August 31, | Nine months ended August 31, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Stock-based compensation expense | $ | 3.6 | $ | 3.3 | $ | 16.1 | $ | 11.9 |
2013 | 2012 | ||
Risk-free interest rates | 0.1 - 1.8% | 0.1 - 2.2% | |
Dividend yield | 1.9% | 2.3% | |
Expected volatility | 14.5 - 20.6% | 16.5 - 21.6% | |
Expected lives | 6.2 | 6.1 |
2013 | 2012 | ||||||||||||
(shares in millions) | Number of Shares | Weighted- Average Exercise Price | Number of Shares | Weighted- Average Exercise Price | |||||||||
Outstanding at beginning of period | 5.1 | $ | 40.06 | 6.6 | $ | 34.98 | |||||||
Granted | 0.9 | 71.60 | 0.8 | 54.24 | |||||||||
Exercised | (1.0 | ) | 32.59 | (1.7 | ) | 30.41 | |||||||
Outstanding at end of the period | 5.0 | 47.28 | 5.7 | 39.31 | |||||||||
Exercisable at end of the period | 3.0 | $ | 39.68 | 3.4 | $ | 34.78 |
2013 | 2012 | ||||||||||||
(shares in thousands) | Number of Shares | Weighted- Average Grant-Date Fair Value | Number of Shares | Weighted- Average Grant-Date Fair Value | |||||||||
Outstanding at beginning of period | 192 | $ | 49.65 | 233 | $ | 43.23 | |||||||
Granted | 89 | 71.60 | 112 | 54.24 | |||||||||
Vested | (113 | ) | 51.09 | (146 | ) | 42.74 | |||||||
Forfeited | (3 | ) | 55.16 | (6 | ) | 47.42 | |||||||
Outstanding at end of period | 165 | $ | 60.64 | 193 | $ | 49.84 |
2013 | 2012 | ||||||||||||
(shares in thousands) | Number of Shares | Weighted- Average Grant-Date Fair Value | Number of Shares | Weighted- Average Grant-Date Fair Value | |||||||||
Outstanding at beginning of period | 240 | $ | 46.63 | 120 | $ | 44.47 | |||||||
Granted | 94 | 64.74 | 120 | 48.78 | |||||||||
Outstanding at end of period | 334 | $ | 51.73 | 240 | $ | 46.63 |
7. | INCOME TAXES |
8. | EARNINGS PER SHARE AND STOCK ISSUANCE |
Three months ended August 31, | Nine months ended August 31, | ||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||
Average shares outstanding – basic | 132.1 | 132.7 | 132.2 | 132.8 | |||||||
Effect of dilutive securities: | |||||||||||
Stock options/RSUs/MTIP | 1.4 | 1.6 | 1.5 | 1.5 | |||||||
Average shares outstanding – diluted | 133.5 | 134.3 | 133.7 | 134.3 |
Three months ended August 31, | Nine months ended August 31, | ||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||
Anti-dilutive securities | 0.9 | 0.2 | 0.5 | 0.5 |
Three months ended August 31, | Nine months ended August 31, | ||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||
Shares issued under stock option, employee stock purchase plans and RSUs | 0.1 | 0.4 | 0.9 | 1.4 | |||||||
Shares repurchased in connection with the stock repurchase program | — | 0.5 | 1.4 | 1.8 |
9. | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) |
August 31, 2013 | August 31, 2012 | November 30, 2012 | |||||||||
Foreign currency translation adjustment | $ | 112.7 | $ | 144.2 | $ | 166.3 | |||||
Unrealized gain (loss) on foreign currency exchange contracts | 0.4 | (0.9 | ) | (1.6 | ) | ||||||
Unamortized value of settled interest rate swaps | 2.4 | (4.6 | ) | (4.1 | ) | ||||||
Pension and other postretirement costs | (299.1 | ) | (228.2 | ) | (320.5 | ) | |||||
Accumulated other comprehensive loss | $ | (183.6 | ) | $ | (89.5 | ) | $ | (159.9 | ) |
10. | BUSINESS SEGMENTS |
Consumer | Industrial | Total | |||||||||
(in millions) | |||||||||||
Three months ended August 31, 2013 | |||||||||||
Net sales | $ | 612.4 | $ | 404.0 | $ | 1,016.4 | |||||
Operating income | 118.7 | 29.7 | 148.4 | ||||||||
Income from unconsolidated operations | 4.0 | 1.0 | 5.0 | ||||||||
Three months ended August 31, 2012 | |||||||||||
Net sales | $ | 568.3 | $ | 409.4 | $ | 977.7 | |||||
Operating income | 108.9 | 35.3 | 144.2 | ||||||||
Income from unconsolidated operations | 4.7 | 0.8 | 5.5 | ||||||||
Consumer | Industrial | Total | |||||||||
(in millions) | |||||||||||
Nine months ended August 31, 2013 | |||||||||||
Net sales | $ | 1,773.2 | $ | 1,180.2 | $ | 2,953.4 | |||||
Operating income | 294.0 | 82.4 | 376.4 | ||||||||
Income from unconsolidated operations | 13.8 | 2.5 | 16.3 | ||||||||
Nine months ended August 31, 2012 | |||||||||||
Net sales | $ | 1,671.2 | $ | 1,197.2 | $ | 2,868.4 | |||||
Operating income | 278.9 | 99.1 | 378.0 | ||||||||
Income from unconsolidated operations | 11.1 | 2.9 | 14.0 |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
2013 Projected Earnings per Share range - diluted (A) | $3.03 to $3.09 | |
Expected estimated U.S. pension settlement charge | $0.10 | |
Adjusted 2013 Projected Earnings per Share range - diluted (A) | $3.13 to $3.19 |
Three months ended August 31, | Nine months ended August 31, | ||||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Net sales | $ | 1,016.4 | $ | 977.7 | $ | 2,953.4 | $ | 2,868.4 | |||||||
Percent increase | 4.0 | % | 6.2 | % | 3.0 | % | 10.9 | % | |||||||
Gross profit | $ | 407.6 | $ | 391.7 | $ | 1,163.6 | $ | 1,135.4 | |||||||
Gross profit margin | 40.1 | % | 40.1 | % | 39.4 | % | 39.6 | % |
Three months ended August 31, | Nine months ended August 31, | ||||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Selling, general & administrative expense (SG&A) | $ | 259.2 | $ | 247.5 | $ | 787.2 | $ | 757.4 | |||||||
Percent of net sales | 25.5 | % | 25.4 | % | 26.7 | % | 26.4 | % |
Three months ended August 31, | Nine months ended August 31, | |||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | ||||||||||
Interest expense | $ | 14.0 | $ | 13.2 | $ | 41.4 | $ | 40.7 | ||||||
Other income, net | 0.3 | 0.9 | 1.7 | 1.8 |
Three months ended August 31, | Nine months ended August 31, | |||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | ||||||||||
Income from consolidated operations before income taxes | $ | 134.7 | $ | 131.9 | $ | 336.7 | $ | 339.1 | ||||||
Income taxes | 35.3 | 33.0 | 94.0 | 93.8 | ||||||||||
Effective tax rate | 26.2 | % | 25.0 | % | 27.9 | % | 27.7 | % |
Three months ended August 31, | Nine months ended August 31, | |||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | ||||||||||
Income from unconsolidated operations | $ | 5.0 | $ | 5.5 | $ | 16.3 | $ | 14.0 |
Three months ended August 31, | Nine months ended August 31, | ||||||
2012 Earnings per share – diluted | $ | 0.78 | $ | 1.93 | |||
Higher operating income | 0.02 | 0.01 | |||||
WAPC acquisition transaction costs | — | (0.02 | ) | ||||
Impact of interest expense and other income | (0.01 | ) | — | ||||
Impact of tax rate | (0.01 | ) | (0.01 | ) | |||
Higher unconsolidated income | — | 0.02 | |||||
Impact of lower shares outstanding | — | 0.01 | |||||
2013 Earnings per share – diluted | $ | 0.78 | $ | 1.94 |
Three months ended August 31, | Nine months ended August 31, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
(in millions) | |||||||||||||||
Net sales | $ | 612.4 | $ | 568.3 | $ | 1,773.2 | $ | 1,671.2 | |||||||
Percent increase | 7.8 | % | 8.9 | % | 6.1 | % | 13.3 | % | |||||||
Operating income | 118.7 | 108.9 | 294.0 | 278.9 | |||||||||||
Operating income margin | 19.4 | % | 19.2 | % | 16.6 | % | 16.7 | % |
Three months ended August 31, | Nine months ended August 31, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
(in millions) | |||||||||||||||
Net sales | $ | 404.0 | $ | 409.4 | $ | 1,180.2 | $ | 1,197.2 | |||||||
Percent (decrease)/increase | (1.3 | )% | 2.8 | % | (1.4 | )% | 7.7 | % | |||||||
Operating income | 29.7 | 35.3 | 82.4 | 99.1 | |||||||||||
Operating income margin | 7.4 | % | 8.6 | % | 7.0 | % | 8.3 | % |
August 31, 2013 | August 31, 2012 | November 30, 2012 | |||||||||
Notional value | $ | 123.5 | $ | 181.5 | $ | 188.8 | |||||
Unrealized gain (loss) | 0.4 | (0.9 | ) | (1.0 | ) |
Nine months ended August 31, | |||||||
2013 | 2012 | ||||||
(in millions) | |||||||
Net cash provided by operating activities | $ | 227.4 | $ | 256.3 | |||
Net cash used in investing activities | (182.0 | ) | (61.5 | ) | |||
Net cash provided by (used in) financing activities | 18.9 | (177.0 | ) |
2013 | 2012 | ||||||
Number of shares of common stock repurchased | 1.4 | 1.8 | |||||
Dollar amount | $ | 92.1 | $ | 98.2 |
August 31, 2013 | August 31, 2012 | Nov 30, 2012 | |||||||
Net income | $ | 407.5 | $ | 391.0 | $ | 407.8 | |||
Depreciation and amortization | 102.9 | 101.9 | 102.8 | ||||||
Interest expense | 55.3 | 54.2 | 54.6 | ||||||
Income tax expense | 140.1 | 144.9 | 139.8 | ||||||
EBITDA | 705.8 | 692.0 | 705.0 | ||||||
Total debt | $ | 1,378.6 | $ | 1,257.5 | $ | 1,171.8 | |||
Total debt/EBITDA | 1.95 | 1.82 | 1.66 |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 4. | CONTROLS AND PROCEDURES |
ITEM 1. | LEGAL PROCEEDINGS |
ITEM 1.A | RISK FACTORS |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
ISSUER PURCHASES OF EQUITY SECURITIES | ||||||||||||
Period | Total Number of Shares Purchased | Average Price Paid per share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||
June 1, 2013 to June 30, 2013 | CS – 0 | $ | — | — | $ | 45 | million | |||||
CSNV – 0 | $ | — | — | |||||||||
July 1, 2013 to July 31, 2013 | CS – 200 | $ | 70.11 | 200 | $ | 45 | million | |||||
CSNV – 0 | $ | — | — | |||||||||
August 1, 2013 to August 31, 2013 | CS – 0 | $ | — | — | $ | 45 | million | |||||
CSNV – 0 | $ | — | — | |||||||||
Total | CS – 200 | $ | 70.11 | 200 | $ | 45 | million | |||||
CSNV – 0 | $ | — | — |
ITEM 6. | EXHIBITS |
Exhibit Number | Description | |||
(3) | (i) | Articles of Incorporation and By-Laws | ||
Restatement of Charter of McCormick & Company, Incorporated dated April 16, 1990 | Incorporated by reference from Exhibit 4 of Registration Form S-8, Registration No. 33-39582 as filed with the Securities and Exchange Commission on March 25, 1991. | |||
Articles of Amendment to Charter of McCormick & Company, Incorporated dated April 1, 1992 | Incorporated by reference from Exhibit 4 of Registration Form S-8, Registration Statement No. 33-59842 as filed with the Securities and Exchange Commission on March 19, 1993. | |||
Articles of Amendment to Charter of McCormick & Company, Incorporated dated March 27, 2003 | Incorporated by reference from Exhibit 4 of Registration Form S-8, Registration Statement No. 333-104084 as filed with the Securities and Exchange Commission on March 28, 2003. | |||
(ii) | By-Laws | |||
By-Laws of McCormick & Company, Incorporated Amended and Restated on June 26, 2012 | Incorporated by reference from Exhibit 3(ii) of McCormick's Form 10-Q for the quarter ended May 31, 2012, File No. 1-14920, as filed with the Securities and Exchange Commission on July 2, 2012. |
(4) | Instruments defining the rights of security holders, including indentures |
(i) | See Exhibit 3 (Restatement of Charter and By-Laws) |
(ii) | Summary of Certain Exchange Rights, incorporated by reference from Exhibit 4.1 of McCormick’s Form 10-Q for the quarter ended August 31, 2001, File No. 0-748, as filed with the Securities and Exchange Commission on October 12, 2001. |
(iii) | Indenture dated December 5, 2000 between McCormick and SunTrust Bank, incorporated by reference from Exhibit 4(iii) of McCormick’s Form 10-Q for the quarter ended August 31, 2003, File No. 1-14920, as filed with the Securities and Exchange Commission on October 14, 2003. |
(iv) | Indenture dated December 7, 2007 between McCormick and The Bank of New York, incorporated by reference from Exhibit 4.1 of McCormick’s Form 8-K dated December 4, 2007, File No. 0-748, as filed with the Securities and Exchange Commission on December 10, 2007. |
(v) | Indenture dated July 8, 2011 between McCormick and U.S. Bank National Association, incorporated by reference from Exhibit 4.1 of McCormick’s Form 8-K dated July 5, 2011, File No. 1-14920, as filed with the Securities and Exchange Commission on July 8, 2011. |
(vi) | Form of 5.20% Notes due 2015, incorporated by reference from Exhibit 4.2 of McCormick’s Form 8-K dated December 1, 2005, File No. 0-748, as filed with the Securities and Exchange Commission on December 6, 2005. |
(vii) | Form of 5.75% Notes due 2017, incorporated by reference from Exhibit 4.2 of McCormick’s Form 8-K dated December 4, 2007, File No. 0-748, as filed with the Securities and Exchange Commission on December 10, 2007. |
(viii) | Form of 5.25% Notes due 2013 (issued pursuant to an Indenture between McCormick and The Bank of New York Mellon, formerly known as The Bank of New York, as trustee, a copy of which was filed with the Securities and Exchange Commission as Exhibit 4.1 to McCormick’s Form 8-K on December 10, 2007, File No. 0-748), incorporated by reference from Exhibit 4.1 of McCormick’s Form 8-K dated September 3, 2008, File No. 1-14920, as filed with the Securities and Exchange Commission on September 4, 2008. |
(ix) | Form of 3.90% Notes due 2021, incorporated by reference from Exhibit 4.2 of McCormick’s Form 8-K dated July 5, 2011, File No. 1-14920, as filed with the Securities and Exchange Commission on July 8, 2011. |
(x) | Form of 3.50% Notes due 2023, incorporated by reference from Exhibit 4.2 of McCormick's Form 8-K dated August 14, 2013, File No. 1-14920, as filed with the Securities and Exchange Commission on August 19, 2013. |
(10) | Material Contracts |
(i) | McCormick’s supplemental pension plan for certain senior and executive officers, amended and restated with an effective date of January 1, 2005, adopted by the Compensation Committee of the Board of Directors on November 28, 2008, which agreement is incorporated by reference from Exhibit 10(i) of McCormick’s 10-K for the fiscal year ended November 30, 2009, File No. 1-14920, as filed with the Securities and Exchange Commission on January 28, 2010.* |
(ii) | The 2001 Stock Option Plan, in which officers and certain other management employees participate, is set forth on pages 33 through 36 of McCormick’s definitive Proxy Statement dated February 15, 2001, File No. 1-14920, as filed with the Securities and Exchange Commission on February 14, 2001, and incorporated by reference herein.* |
(iii) | 2004 Long-Term Incentive Plan, in which officers and certain other management employees participate, is set forth in Exhibit A of McCormick’s definitive Proxy Statement dated February 17, 2004, File No. 1-14920, as filed with the Securities and Exchange Commission on February 17, 2004, and incorporated by reference herein.* |
(iv) | 2004 Directors’ Non-Qualified Stock Option Plan, provided to members of McCormick’s Board of Directors who are not also employees of McCormick, is set forth in Exhibit B of McCormick’s definitive Proxy Statement dated February 17, 2004, File No. 1-14920, as filed with the Securities and Exchange Commission on February 17, 2004, and incorporated by reference herein.* |
(v) | Directors’ Share Ownership Program, provided to members of McCormick’s Board of Directors who are not also employees of McCormick, is set forth on page 28 of McCormick’s definitive Proxy Statement dated February 17, 2004, File No. 1-14920, as filed with the Securities and Exchange Commission on February 17, 2004, and incorporated by reference herein.* |
(vi) | Deferred Compensation Plan, as restated on January 1, 2000, and amended on August 29, 2000, September 5, 2000 and May 16, 2003, in which directors, officers and certain other management employees participate, a copy of which Plan document and amendments was attached as Exhibit 10(viii) of McCormick’s Form 10-Q for the quarter ended August 31, 2003, File No. 1-14920, as filed with the Securities and Exchange Commission on October 14, 2003, and incorporated by reference herein.* |
(vii) | 2005 Deferred Compensation Plan, amended and restated with an effective date of January 1, 2005, in which directors, officers and certain other management employees participate, which agreement is incorporated by reference from Exhibit 4.1 of McCormick’s Form S-8, Registration No. 333-155775, as filed with the Securities and Exchange Commission on November 28, 2008.* |
(viii) | The 2007 Omnibus Incentive Plan, in which directors, officers and certain other management employees participate, is set forth in Exhibit A of McCormick’s definitive Proxy Statement dated February 20, 2008, File No. 1-14920, as filed with the Securities and Exchange Commission on February 20, 2008, and incorporated by reference herein, as amended by Amendment No. 1 thereto, which Amendment is incorporated by reference from Exhibit 10(xi) of McCormick’s 10-K for the fiscal year ended November 30, 2008, File No. 1-14920, as filed with the Securities and Exchange Commission on January 28, 2009.* |
(ix) | The 2013 Omnibus Incentive Plan, in which directors, officers and certain other management employees participate, is incorporated by reference from Exhibit 4.1 of McCormick's Form S-8, |
(x) | Form of Mid-Term Incentive Program Agreement, incorporated by reference from Exhibit 10(x) of McCormick's Form 10-Q for the quarter ended May 31, 2013, File No. 1-14920, as filed with the Securities and Exchange Commission on June 28, 2013. |
(xi) | Form of Restricted Stock Units Agreement, incorporated by reference from Exhibit 10(xi) of McCormick's Form 10-Q for the quarter ended May 31, 2013, File No. 1-14920, as filed with the Securities and Exchange Commission on June 28, 2013. |
(xii) | Form of Restricted Stock Units Agreement for Directors, incorporated by reference from Exhibit 10(xii) of McCormick's Form 10-Q for the quarter ended May 31, 2013, File No. 1-14920, as filed with the Securities and Exchange Commission on June 28, 2013. |
(xiii) | Form of Non-Qualified Stock Option Agreement, incorporated by reference from Exhibit 10(xiii) of McCormick's Form 10-Q for the quarter ended May 31, 2013, File No. 1-14920, as filed with the Securities and Exchange Commission on June 28, 2013. |
(xiv) | Form of Non-Qualified Stock Option Agreement for Directors, incorporated by reference from Exhibit 10(xiv) of McCormick's Form 10-Q for the quarter ended May 31, 2013, File No. 1-14920, as filed with the Securities and Exchange Commission on June 28, 2013. |
* | Management contract or compensatory plan or arrangement. |
McCORMICK & COMPANY, INCORPORATED | |||
September 27, 2013 | By: | /s/ Gordon M. Stetz, Jr. | |
Gordon M. Stetz, Jr. | |||
Executive Vice President & Chief Financial Officer | |||
September 27, 2013 | By: | /s/ Kenneth A. Kelly, Jr. | |
Kenneth A. Kelly, Jr. | |||
Senior Vice President & Controller |
Date: September 27, 2013 | /s/ Alan D. Wilson |
Alan D. Wilson | |
Chairman, President & Chief Executive Officer |
Date: September 27, 2013 | /s/ Gordon M. Stetz, Jr. |
Gordon M. Stetz, Jr. | |
Executive Vice President & Chief Financial Officer |
/s/ Alan D. Wilson | |
Alan D. Wilson | |
Chairman, President & Chief Executive Officer | |
Date: September 27, 2013 |
/s/ Gordon M. Stetz, Jr. | |
Gordon M. Stetz, Jr. | |
Executive Vice President & Chief Financial Officer | |
Date: September 27, 2013 |
Financial instruments (Tables)
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Aug. 31, 2013
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Fair values of derivative instruments on balance sheet | The following table discloses the fair values of derivative instruments on our balance sheet (in millions):
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Fair Value Hedging [Member]
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Impact of fair value and cash flow hedges on other comprehensive income, accumulated other comprehensive income and income statement | The following tables disclose the impact of derivative instruments on our other comprehensive income (OCI), accumulated other comprehensive income (AOCI) and our income statement for the three and nine month periods ending August 31, 2013 and 2012 (in millions):
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Cash Flow Hedging [Member]
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Impact of fair value and cash flow hedges on other comprehensive income, accumulated other comprehensive income and income statement |
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Employee Benefit and Retirement Plans
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Aug. 31, 2013
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EMPLOYEE BENEFIT AND RETIREMENT PLANS | EMPLOYEE BENEFIT AND RETIREMENT PLANS The following table presents the components of our pension expense of the defined benefit plans for the three months ended August 31, (in millions):
The following table presents the components of our pension expense of the defined benefit plans for the nine months ended August 31, (in millions):
During the nine months ended August 31, 2013 and 2012, we made $45.1 million and $61.7 million, respectively, in total contributions to our pension plans. Total contributions to our pension plans in fiscal year 2012 were $104.3 million. The following table presents the components of our other postretirement benefits expense (in millions):
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Acquisition - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified |
9 Months Ended | 9 Months Ended | 12 Months Ended | ||
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Aug. 31, 2013
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Aug. 31, 2012
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Nov. 30, 2012
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Aug. 31, 2013
Wuhan Asia-Pacific Condiments Co. Ltd (WAPC) [Member]
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May 31, 2013
Wuhan Asia-Pacific Condiments Co. Ltd (WAPC) [Member]
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Business Acquisition [Line Items] | |||||
Acquisition purchase price | $ 146.7 | ||||
Cash paid | 130.0 | 0 | 130.0 | ||
Other liabilities | 16.7 | ||||
Annual sales | 122 | ||||
Business acquisition valuation of assets allocated to tangible assets | 31.1 | ||||
Business acquisition valuation of assets allocated to other intangible assets | 37.7 | ||||
Business acquisition valuation of assets allocated to goodwill | 1,756.4 | 1,667.0 | 1,695.3 | 77.9 | |
Business Combination, Pro Forma Information, Revenue of Acquiree since Acquisition Date, Actual | 26.7 | ||||
Acquisition related costs | $ 4.1 |
Fair Value Measurements (Tables)
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Aug. 31, 2013
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets and liabilities measured at fair value on recurring basis | Our population of financial assets and liabilities subject to fair value measurements on a recurring basis are as follows (in millions):
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Stock-Based Compensation - Summary of MTIP awards (Details) (Performance Shares [Member], USD $)
In Thousands, except Per Share data, unless otherwise specified |
9 Months Ended | |
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Aug. 31, 2013
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Aug. 31, 2012
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Performance Shares [Member]
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||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | ||
Outstanding at beginning of period, Number of Shares | 240 | 120 |
Granted, Number of Shares | 94 | 120 |
Outstanding at end of period, Number of Shares | 334 | 240 |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Roll Forward] | ||
Outstanding at beginning of period, Weighted-Average Grant-Date Fair Value | $ 46.63 | $ 44.47 |
Granted, Weighted-Average Grant-Date Fair Value | $ 64.74 | $ 48.78 |
Outstanding at end of period, Weighted-Average Grant-Date Fair Value | $ 51.73 | $ 46.63 |
Financial Instruments- Impact of Fair Value Hedges on Other Comprehensive Income, Accumulated Other Comprehensive Income and Income Statement (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Aug. 31, 2013
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Aug. 31, 2012
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Aug. 31, 2013
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Aug. 31, 2012
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Derivative Instruments, Gain (Loss) [Line Items] | ||||
Interest expense | $ 14.0 | $ 13.2 | $ 41.4 | $ 40.7 |
Interest Expense [Member] | Fair Value Hedging [Member] | Interest rate contract [Member]
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||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Interest expense | $ 1.2 | $ 1.1 | $ 3.7 | $ 3.5 |
Business Segments (Detail) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Aug. 31, 2013
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Aug. 31, 2012
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Aug. 31, 2013
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Aug. 31, 2012
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Segment Reporting Information [Line Items] | ||||
Net sales | $ 1,016.4 | $ 977.7 | $ 2,953.4 | $ 2,868.4 |
Operating income | 148.4 | 144.2 | 376.4 | 378.0 |
Income from unconsolidated operations | 5.0 | 5.5 | 16.3 | 14.0 |
Consumer
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||||
Segment Reporting Information [Line Items] | ||||
Net sales | 612.4 | 568.3 | 1,773.2 | 1,671.2 |
Operating income | 118.7 | 108.9 | 294.0 | 278.9 |
Income from unconsolidated operations | 4.0 | 4.7 | 13.8 | 11.1 |
Industrial [Member]
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||||
Segment Reporting Information [Line Items] | ||||
Net sales | 404.0 | 409.4 | 1,180.2 | 1,197.2 |
Operating income | 29.7 | 35.3 | 82.4 | 99.1 |
Income from unconsolidated operations | $ 1.0 | $ 0.8 | $ 2.5 | $ 2.9 |
Stock-Based Compensation-Selling, General and Administrative Expense (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Aug. 31, 2013
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Aug. 31, 2012
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Aug. 31, 2013
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Aug. 31, 2012
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Share-based Compensation [Abstract] | ||||
Total stock-based compensation expense | $ 3.6 | $ 3.3 | $ 16.1 | $ 11.9 |
Earnings Per Share and Stock Issuances-Reconciliation of Average Shares Outstanding (Details)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Aug. 31, 2013
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Aug. 31, 2012
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Aug. 31, 2013
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Aug. 31, 2012
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Earnings Per Share, Basic and Diluted [Abstract] | ||||
Average shares outstanding - basic (shares) | 132.1 | 132.7 | 132.2 | 132.8 |
Effect of dilutive securities: [Abstract] | ||||
Stock options/Restricted Stock Units (RSUs)/MTIP | 1.4 | 1.6 | 1.5 | 1.5 |
Average shares outstanding-diluted | 133.5 | 134.3 | 133.7 | 134.3 |
Employee Benefit And Retirement Plans - Components of Pension Expense of Defined benefit plans (Detail) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Aug. 31, 2013
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Aug. 31, 2012
|
Aug. 31, 2013
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Aug. 31, 2012
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United States [Member]
|
||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Service cost | $ 5.8 | $ 4.4 | $ 17.4 | $ 13.1 |
Interest costs | 7.8 | 8.0 | 23.4 | 23.9 |
Expected return on plan assets | (10.4) | (9.5) | (31.0) | (28.3) |
Amortization of prior service costs | 0 | 0 | 0 | 0 |
Recognized net actuarial loss | 7.4 | 4.5 | 22.1 | 13.6 |
Total pension expense | 10.6 | 7.4 | 31.9 | 22.3 |
International [Member]
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||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Service cost | 2.2 | 1.7 | 6.7 | 5.1 |
Interest costs | 3.1 | 3.1 | 9.5 | 9.5 |
Expected return on plan assets | (4.2) | (4.0) | (12.9) | (12.1) |
Amortization of prior service costs | 0.1 | 0.1 | 0.3 | 0.3 |
Recognized net actuarial loss | 1.3 | 0.9 | 4.2 | 2.7 |
Total pension expense | $ 2.5 | $ 1.8 | $ 7.8 | $ 5.5 |
Earnings Per Share and Stock Issuances-Additional Information (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Aug. 31, 2013
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Aug. 31, 2013
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Aug. 31, 2012
|
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Earnings Per Share, Basic and Diluted [Abstract] | |||
Stock repurchase program, remaining authorized repurchase amount | $ 45 | ||
Stock repurchase program, authorized amount | $ 400 | $ 400 |
Financial Instruments-Additional Information (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Aug. 31, 2013
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Aug. 31, 2013
|
Aug. 31, 2012
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Derivative [Line Items] | |||
Notes Payable, Noncurrent | $ 250 | $ 250 | |
Maximum time frame for foreign exchange contracts, months | 15 months | ||
Amount of accumulated other comprehensive income expected to be reclassified as an increase to earnings in next 12 months | 0.8 | 0.8 | |
Debt Instrument, Interest Rate, Stated Percentage | 3.50% | 3.50% | |
Long-term debt borrowings | 246.2 | 246.2 | 0 |
Debt, Weighted Average Interest Rate | 3.30% | 3.30% | |
Interest Rate Swap [Member]
|
|||
Derivative [Line Items] | |||
Derivative Liability, Notional Amount | 175.0 | 175.0 | |
Unrealized Gain (Loss) on Price Risk Cash Flow Derivatives, before Tax | 9 | ||
Interest Rate Swap [Member] | Treasury Lock [Member]
|
|||
Derivative [Line Items] | |||
Interest rate contracts, Notional Amount | $ 175 | $ 175 |
Accounting Policies
|
9 Months Ended |
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Aug. 31, 2013
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Accounting Policies [Abstract] | |
ACCOUNTING POLICIES | ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and notes required by United States generally accepted accounting principles ("U.S. GAAP") for complete financial statements. In our opinion, the accompanying condensed consolidated financial statements contain all adjustments, which are of a normal and recurring nature, necessary to present fairly the financial position and the results of operations for the interim periods presented. The results of consolidated operations for the three and nine month periods ended August 31, 2013 are not necessarily indicative of the results to be expected for the full year. Historically, our net sales, net income and cash flow from operations are lower in the first half of the fiscal year and increase in the second half. The typical increase in net sales, net income and cash flow from operations in the second half of the year is largely due to the consumer business cycle in the U.S., where customers typically purchase more products in the fourth quarter due to the Thanksgiving and Christmas holiday seasons. For further information, refer to the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended November 30, 2012. Accounting and Disclosure Changes In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2013-02 Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income . This guidance is intended to provide disclosure on items reclassified out of accumulated other comprehensive income either in the notes or parenthetically on the face of the income statement. Early adoption is permitted, however we have not currently elected to early adopt this standard. We do not expect any material impact on our financial statements from adoption. In June 2011, the FASB issued Accounting Standards Update No. 2011-05 Comprehensive Income (Topic 220): Presentation of Comprehensive Income. This guidance is intended to increase the prominence of other comprehensive income in financial statements by presenting it in either a single statement or two-statement approach. We adopted this new accounting pronouncement with our first quarter of 2013 and included a Consolidated Statement of Comprehensive Income in this filing. |
Financial instruments
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Aug. 31, 2013
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FINANCIAL INSTRUMENTS | FINANCING ARRANGEMENTS AND FINANCIAL INSTRUMENTS We use derivative financial instruments to enhance our ability to manage risk, including foreign currency and interest rate exposures, which exist as part of our ongoing business operations. We do not enter into contracts for trading purposes, nor are we a party to any leveraged derivative instruments. The use of derivative financial instruments is monitored through regular communication with senior management and the use of written guidelines. In August 2013, we issued $250 million of 3.50% Notes due 2023, with net cash proceeds received of $246.2 million. Interest is payable semiannually in arrears in March and September of each year. Of these Notes, $175 million were subject to interest rate hedges as further disclosed below. The net proceeds from this offering, plus cash on hand, were used to pay off $250 million of 5.25% Notes that matured in September 2013. In November 2012, April and August 2013, we entered into a total of $175 million of forward starting interest rate swap and Treasury rate lock agreements to manage our interest rate risk associated with the anticipated issuance of fixed rates notes in August 2013. We cash settled all of these agreements, which were designated as cash flow hedges, for a gain of $9.0 million simultaneous with the issuance of the notes at an all in effective fixed rate of 3.30% on the full $250 million of notes. The gain on these agreements is deferred in accumulated other comprehensive income and will be amortized to reduce interest expense over the life of the notes. Hedge ineffectiveness of these agreements was not material. As of August 31, 2013, the maximum time frame for our foreign exchange forward contracts is 15 months. For all derivatives, the net amount of accumulated other comprehensive income expected to be reclassified in the next 12 months is $0.8 million as an increase to earnings. All derivatives are recognized at fair value in the balance sheet and recorded in either current or noncurrent other assets or other accrued liabilities or other long-term liabilities depending upon nature and maturity. The following table discloses the fair values of derivative instruments on our balance sheet (in millions):
The following tables disclose the impact of derivative instruments on our other comprehensive income (OCI), accumulated other comprehensive income (AOCI) and our income statement for the three and nine month periods ending August 31, 2013 and 2012 (in millions):
The amount of gain or loss recognized in income on the ineffective portion of derivative instruments is not material. The amounts noted in the tables above for OCI do not include any adjustments for the impact of deferred income taxes. |
Stock-based Compensation
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9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 31, 2013
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | STOCK-BASED COMPENSATION We have three types of stock-based compensation awards: restricted stock units (RSUs), stock options and company stock awarded as part of our mid-term incentive program (MTIP). The following table sets forth the stock-based compensation recorded in selling, general and administrative (SG&A) expense (in millions):
Our 2013 annual grant of stock options and RSUs occurred in the second quarter, similar to the 2012 annual grant. The weighted-average grant-date fair value of an option granted in 2013 was $9.47 and in 2012 was $7.17 as calculated under a lattice pricing model. The fair values of option grants in the stated periods were computed using the following range of assumptions for our various stock compensation plans:
The following is a summary of all stock option activity for the nine months ended August 31, 2013 and 2012:
As of August 31, 2013 the intrinsic value (the difference between the exercise price and the market price) for all options outstanding was $104.3 million and for exercisable options was $82.9 million. The total intrinsic value of all options exercised during the nine months ended August 31, 2013 and 2012 was $35.4 million and $42.5 million, respectively. The following is a summary of all of our RSU activity for the nine months ended August 31, 2013 and 2012:
The following is a summary of the MTIP award activity for the nine months ended August 31, 2013 and 2012:
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Fair Value Measurements
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Aug. 31, 2013
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS Fair value can be measured using valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). Accounting standards utilize a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
Our population of financial assets and liabilities subject to fair value measurements on a recurring basis are as follows (in millions):
The fair values of insurance contracts are based upon the underlying values of the securities in which they are invested and are from quoted market prices from various stock and bond exchanges for similar type assets. The fair values of bonds and other long-term investments are based on quoted market prices from various stock and bond exchanges. The fair values for interest rate and foreign currency derivatives are based on values for similar instruments using models with market based inputs. |
Earnings Per Share and Stock Issuances-Antidilutive Securities not Considered in Earnings Per Share Calculation (Details)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||
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Aug. 31, 2013
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Aug. 31, 2012
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Aug. 31, 2013
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Aug. 31, 2012
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Earnings Per Share, Basic and Diluted [Abstract] | ||||
Anti-dilutive securities | 0.9 | 0.2 | 0.5 | 0.5 |
Financial Instruments-Impact of Cash Flow Hedges on Other Comprehensive Income, Accumulated Other Comprehensive Income and Income Statement (Details) (Cash Flow Hedging [Member], USD $)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||
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Aug. 31, 2013
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Aug. 31, 2012
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Aug. 31, 2013
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Aug. 31, 2012
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Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain or (Loss) recognized in OCI | $ 4.9 | $ (1.5) | $ 11.5 | $ (1.9) |
Gain or (Loss) reclassified from AOCI | 0 | (0.2) | (1.4) | (0.3) |
Interest rate contract [Member]
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Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain or (Loss) recognized in OCI | 4.7 | 0 | 9.2 | 0 |
Interest rate contract [Member] | Interest Expense [Member]
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Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain or (Loss) reclassified from AOCI | (0.3) | (0.3) | (1.0) | (1.0) |
Foreign Exchange Contract [Member]
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Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain or (Loss) recognized in OCI | 0.2 | (1.5) | 2.3 | (1.9) |
Foreign Exchange Contract [Member] | Cost of Sales [Member]
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Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain or (Loss) reclassified from AOCI | $ 0.3 | $ 0.1 | $ (0.4) | $ 0.7 |
Employee Benefit and Retirement Plans-Components of Other Postretirement Benefit Expenses (Details) (Other postretirement benefits [Member], USD $)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||
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Aug. 31, 2013
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Aug. 31, 2012
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Aug. 31, 2013
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Aug. 31, 2012
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Other postretirement benefits [Member]
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Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||||
Service cost | $ 1.3 | $ 0.9 | $ 3.8 | $ 3.0 |
Interest costs | 1.0 | 1.1 | 3.0 | 3.6 |
Amortization of prior service costs | (0.3) | (1.0) | (0.9) | (3.0) |
Amortization of losses | 0.3 | (0.1) | 1.0 | 0 |
Total other postretirement expense | $ 2.3 | $ 0.9 | $ 6.9 | $ 3.6 |