ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
MARYLAND | 52-0408290 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
24 Schilling Road, Suite 1, Hunt Valley, MD | 21031 |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code (410) 771-7301 |
Trading | |||
Title of each class | Symbol(s) | Name of each exchange on which registered | |
Common Stock | MKC-V | New York Stock Exchange | |
Common Stock Non-Voting | MKC | New York Stock Exchange | |
Large Accelerated Filer | x | Accelerated Filer | ¨ | |
Non-Accelerated Filer | ¨ | Smaller Reporting Company | ¨ | |
Emerging Growth Company | ¨ | |||
Shares Outstanding | ||||
May 31, 2019 | ||||
Common Stock | ||||
Common Stock Non-Voting | ||||
ITEM 1 | |||
ITEM 2 | |||
ITEM 3 | |||
ITEM 4 | |||
ITEM 1 | |||
ITEM 1a | |||
ITEM 2 | |||
ITEM 3 | DEFAULTS UPON SENIOR SECURITIES | ||
ITEM 4 | |||
ITEM 5 | OTHER INFORMATION | ||
ITEM 6 | |||
ITEM 1. | FINANCIAL STATEMENTS |
Three months ended May 31, | Six months ended May 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net sales | $ | $ | $ | $ | |||||||||||
Cost of goods sold | |||||||||||||||
Gross profit | |||||||||||||||
Selling, general and administrative expense | |||||||||||||||
Transaction and integration expenses (related to RB Foods acquisition) | |||||||||||||||
Special charges | |||||||||||||||
Operating income | |||||||||||||||
Interest expense | |||||||||||||||
Other income, net | |||||||||||||||
Income from consolidated operations before income taxes | |||||||||||||||
Income tax expense (benefit) | ( | ) | |||||||||||||
Net income from consolidated operations | |||||||||||||||
Income from unconsolidated operations | |||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||
Earnings per share – basic | $ | $ | $ | $ | |||||||||||
Average shares outstanding – basic | |||||||||||||||
Earnings per share – diluted | $ | $ | $ | $ | |||||||||||
Average shares outstanding – diluted | |||||||||||||||
Cash dividends paid per share – voting | $ | $ | $ | $ | |||||||||||
Cash dividends paid per share – non-voting | $ | $ | $ | $ | |||||||||||
Cash dividends declared per share – voting | $ | $ | $ | $ | |||||||||||
Cash dividends declared per share – non-voting | $ | $ | $ | $ | |||||||||||
Three months ended May 31, | Six months ended May 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net income | $ | $ | $ | $ | |||||||||||
Net income attributable to non-controlling interest | |||||||||||||||
Other comprehensive income (loss): | |||||||||||||||
Unrealized components of pension and postretirement plans (including a curtailment gain of $18.0 for the six months ended May 31, 2018) | ( | ) | |||||||||||||
Currency translation adjustments | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Change in derivative financial instruments | ( | ) | |||||||||||||
Deferred taxes | ( | ) | ( | ) | |||||||||||
Total other comprehensive income (loss) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Comprehensive income | $ | $ | $ | $ | |||||||||||
May 31, 2019 | May 31, 2018 | November 30, 2018 | |||||||||
(unaudited) | (unaudited) | ||||||||||
ASSETS | |||||||||||
Current Assets | |||||||||||
Cash and cash equivalents | $ | $ | $ | ||||||||
Trade accounts receivable, net | |||||||||||
Inventories, net | |||||||||||
Finished products | |||||||||||
Raw materials and work-in-process | |||||||||||
Prepaid expenses and other current assets | |||||||||||
Total current assets | |||||||||||
Property, plant and equipment | |||||||||||
Less: accumulated depreciation | ( | ) | ( | ) | ( | ) | |||||
Property, plant and equipment, net | |||||||||||
Goodwill | |||||||||||
Intangible assets, net | |||||||||||
Investments and other assets | |||||||||||
Total assets | $ | $ | $ | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
Current Liabilities | |||||||||||
Short-term borrowings | $ | $ | $ | ||||||||
Current portion of long-term debt | |||||||||||
Trade accounts payable | |||||||||||
Other accrued liabilities | |||||||||||
Total current liabilities | |||||||||||
Long-term debt | |||||||||||
Deferred taxes | |||||||||||
Other long-term liabilities | |||||||||||
Total liabilities | |||||||||||
Shareholders’ Equity | |||||||||||
Common stock | |||||||||||
Common stock non-voting | |||||||||||
Retained earnings | |||||||||||
Accumulated other comprehensive loss | ( | ) | ( | ) | ( | ) | |||||
Non-controlling interests | |||||||||||
Total shareholders’ equity | |||||||||||
Total liabilities and shareholders’ equity | $ | $ | $ | ||||||||
Six months ended May 31, | |||||||
2019 | 2018 | ||||||
Operating activities | |||||||
Net income | $ | $ | |||||
Adjustments to reconcile net income to net cash flow provided by operating activities: | |||||||
Depreciation and amortization | |||||||
Stock-based compensation | |||||||
Non-cash net income tax benefit (related to enactment of the U.S. Tax Act) | ( | ) | |||||
Fixed asset impairment charge | |||||||
Income from unconsolidated operations | ( | ) | ( | ) | |||
Changes in operating assets and liabilities | ( | ) | ( | ) | |||
Dividends from unconsolidated affiliates | |||||||
Net cash flow provided by operating activities | |||||||
Investing activities | |||||||
Acquisition of businesses | ( | ) | |||||
Capital expenditures (including software) | ( | ) | ( | ) | |||
Other investing activities | |||||||
Net cash flow used in investing activities | ( | ) | ( | ) | |||
Financing activities | |||||||
Short-term borrowings, net | |||||||
Long-term debt borrowings | |||||||
Long-term debt repayments | ( | ) | ( | ) | |||
Proceeds from exercised stock options | |||||||
Taxes withheld and paid on employee stock awards | ( | ) | ( | ) | |||
Common stock acquired by purchase | ( | ) | ( | ) | |||
Dividends paid | ( | ) | ( | ) | |||
Net cash flow used in financing activities | ( | ) | ( | ) | |||
Effect of exchange rate changes on cash and cash equivalents | |||||||
Increase in cash and cash equivalents | |||||||
Cash and cash equivalents at beginning of period | |||||||
Cash and cash equivalents at end of period | $ | $ | |||||
(millions) | Common Stock Shares | Common Stock Non-Voting Shares | Common Stock Amount | Retained Earnings | Accumulated Other Comprehensive (Loss) Income | Non-controlling Interests | Total Shareholders’ Equity | ||||||||||||
Three months ended May 31, 2018 | |||||||||||||||||||
Balance, February 28, 2018 | $ | $ | $ | ( | ) | $ | $ | ||||||||||||
Net income | — | — | — | ||||||||||||||||
Net income attributable to non-controlling interest | — | — | — | ||||||||||||||||
Other comprehensive income (loss), net of tax | — | — | ( | ) | ( | ) | ( | ) | |||||||||||
Dividends | — | ( | ) | — | — | ( | ) | ||||||||||||
Stock-based compensation | — | — | — | ||||||||||||||||
Shares purchased and retired | ( | ) | ( | ) | ( | ) | — | — | ( | ) | |||||||||
Shares issued | — | — | — | ||||||||||||||||
Equal exchange | ( | ) | — | — | — | — | — | ||||||||||||
Balance, May 31, 2018 | $ | $ | $ | ( | ) | $ | $ | ||||||||||||
Six months ended May 31, 2018 | |||||||||||||||||||
Balance, November 30, 2017 | $ | $ | $ | ( | ) | $ | $ | ||||||||||||
Net income | — | — | — | ||||||||||||||||
Net income attributable to non-controlling interest | — | — | — | ||||||||||||||||
Other comprehensive income (loss), net of tax | — | — | ( | ) | ( | ) | ( | ) | |||||||||||
Adoption of ASU No. 2018-02 | — | ( | ) | — | — | ||||||||||||||
Dividends | — | ( | ) | — | — | ( | ) | ||||||||||||
Stock-based compensation | — | — | — | ||||||||||||||||
Shares purchased and retired | ( | ) | ( | ) | ( | ) | ( | ) | — | — | ( | ) | |||||||
Shares issued | — | — | — | ||||||||||||||||
Equal exchange | ( | ) | — | — | — | — | — | ||||||||||||
Balance, May 31, 2018 | $ | $ | $ | ( | ) | $ | $ | ||||||||||||
Three months ended May 31, 2019 | |||||||||||||||||||
Balance, February 28, 2019 | $ | $ | $ | ( | ) | $ | $ | ||||||||||||
Net income | — | — | — | ||||||||||||||||
Net income attributable to non-controlling interest | — | — | — | ||||||||||||||||
Other comprehensive income (loss), net of tax | — | — | ( | ) | ( | ) | ( | ) | |||||||||||
Dividends | — | ( | ) | — | — | ( | ) | ||||||||||||
Stock-based compensation | — | — | — | ||||||||||||||||
Shares purchased and retired | ( | ) | ( | ) | ( | ) | ( | ) | — | — | ( | ) | |||||||
Shares issued | — | — | — | ||||||||||||||||
Equal exchange | ( | ) | — | — | — | — | — | ||||||||||||
Balance, May 31, 2019 | $ | $ | $ | ( | ) | $ | $ | ||||||||||||
Six months ended May 31, 2019 | |||||||||||||||||||
Balance, November 30, 2018 | $ | $ | $ | ( | ) | $ | $ | ||||||||||||
Net income | — | — | — | ||||||||||||||||
Net income attributable to non-controlling interest | — | — | — | ||||||||||||||||
Other comprehensive income (loss), net of tax | — | — | ( | ) | ( | ) | ( | ) | |||||||||||
Dividends | — | ( | ) | — | — | ( | ) | ||||||||||||
Stock-based compensation | — | — | — | ||||||||||||||||
Shares purchased and retired | ( | ) | ( | ) | ( | ) | ( | ) | — | — | ( | ) | |||||||
Shares issued | — | — | — | ||||||||||||||||
Equal exchange | ( | ) | — | — | — | — | — | ||||||||||||
Balance, May 31, 2019 | $ | $ | $ | ( | ) | $ | $ | ||||||||||||
1. | ACCOUNTING POLICIES |
• | Shipping and handling costs – The Company elected to account for shipping and handling activities that occur before the customer has obtained control of a good as fulfillment activities (i.e., an expense) rather than as a promised service. |
• | Measurement of transaction price – The Company has elected to exclude from the measurement of transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from a customer for sales, value added and other excise taxes. |
• | Incremental cost of obtaining a contract – The Company elected to expense any incremental costs of obtaining a contract if the contract is for a period of one year or less. |
Accounting Changes | ||||||||||||
Previously Reported | Revenue Recognition (1) | Pension | Recast (1) | |||||||||
For the three months ended May 31, 2018: | ||||||||||||
Net sales | $ | $ | ( | ) | $ | $ | ||||||
Cost of goods sold | ||||||||||||
Gross profit | ( | ) | ( | ) | ||||||||
Selling, general and administrative expense | ( | ) | ||||||||||
Operating income | ( | ) | ||||||||||
Other income, net | ||||||||||||
For the six months ended May 31, 2018: | ||||||||||||
Net sales | $ | $ | ( | ) | $ | $ | ||||||
Cost of goods sold | ||||||||||||
Gross profit | ( | ) | ( | ) | ||||||||
Selling, general and administrative expense | ( | ) | ||||||||||
Operating income | ( | ) | ||||||||||
Other income, net | ||||||||||||
(1) | Amounts reflected in these columns for the six months ended May 31, 2018 have been reclassified from the corresponding amounts included in the Form 8-K that we furnished on March 11, 2019. This reclassification is a revision of the recast of previously reported historical information associated with our retrospective adoption of the Revenue Recognition ASU and Pension ASU in the first quarter of 2019, as follows: (i) decreased cost of goods sold by $ |
2. | ACQUISITIONS |
Three months ended May 31, 2018 | Six months ended May 31, 2018 | |||||
Transaction expenses | $ | $ | ||||
Integration expenses | ||||||
Total | $ | $ | ||||
3. | SPECIAL CHARGES |
Three months ended May 31, | Six months ended May 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Employee severance and related benefits | $ | $ | $ | $ | |||||||||||
Other costs | |||||||||||||||
Total | $ | $ | $ | $ | |||||||||||
Three months ended May 31, | Six months ended May 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Consumer segment | $ | $ | $ | $ | |||||||||||
Flavor solutions segment | |||||||||||||||
Total special charges | $ | $ | $ | $ | |||||||||||
As of May 31, 2019 | Asset Derivatives | Liability Derivatives | |||||||||||||||||
Balance sheet location | Notional amount | Fair value | Balance sheet location | Notional amount | Fair value | ||||||||||||||
Interest rate contracts | Other current assets | $ | $ | Other accrued liabilities | $ | $ | |||||||||||||
Foreign exchange contracts | Other current assets | Other accrued liabilities | |||||||||||||||||
Cross currency contracts | Investments and other assets | Other long-term liabilities | |||||||||||||||||
Total | $ | $ | |||||||||||||||||
As of May 31, 2018 | Asset Derivatives | Liability Derivatives | |||||||||||||||||
Balance sheet location | Notional amount | Fair value | Balance sheet location | Notional amount | Fair value | ||||||||||||||
Interest rate contracts | Other current assets | $ | $ | Other accrued liabilities | $ | $ | |||||||||||||
Foreign exchange contracts | Other current assets | Other accrued liabilities | |||||||||||||||||
Total | $ | $ | |||||||||||||||||
As of November 30, 2018 | Asset Derivatives | Liability Derivatives | |||||||||||||||||
Balance sheet location | Notional amount | Fair value | Balance sheet location | Notional amount | Fair value | ||||||||||||||
Interest rate contracts | Other current assets | $ | $ | Other accrued liabilities | $ | $ | |||||||||||||
Foreign exchange contracts | Other current assets | Other accrued liabilities | |||||||||||||||||
Total | $ | $ | |||||||||||||||||
Fair Value Hedges | ||||||||||||||||||
Derivative | Income statement location | Income (expense) | ||||||||||||||||
Three months ended May 31, 2019 | Three months ended May 31, 2018 | Six months ended May 31, 2019 | Six months ended May 31, 2018 | |||||||||||||||
Interest rate contracts | Interest expense | $ | $ | $ | $ | |||||||||||||
Three months ended May 31, | Income statement location | Gain (loss) recognized in income | Income statement location | Gain (loss) recognized in income | |||||||||||
Derivative | 2019 | 2018 | Hedged item | 2019 | 2018 | ||||||||||
Foreign exchange contracts | Other income, net | $ | $ | ( | ) | Intercompany loans | Other income, net | $ | ( | ) | $ | ||||
Six months ended May 31, | Income statement location | Gain (loss) recognized in income | Income statement location | Gain (loss) recognized in income | |||||||||||
Derivative | 2019 | 2018 | Hedged item | 2019 | 2018 | ||||||||||
Foreign exchange contracts | Other income, net | $ | $ | ( | ) | Intercompany loans | Other income, net | $ | ( | ) | $ | ||||
Cash Flow Hedges | ||||||||||||||||||
Three months ended May 31, | ||||||||||||||||||
Derivative | Gain or (loss) recognized in OCI | Income statement location | Gain or (loss) reclassified from AOCI | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||||
Interest rate contracts | $ | $ | Interest expense | $ | $ | |||||||||||||
Foreign exchange contracts | Cost of goods sold | ( | ) | |||||||||||||||
Total | $ | $ | $ | $ | ( | ) | ||||||||||||
Six months ended May 31, | ||||||||||||||||||
Derivative | Gain or (Loss) recognized in OCI | Income statement location | Gain or (Loss) reclassified from AOCI | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||||
Interest rate contracts | $ | $ | Interest expense | $ | $ | |||||||||||||
Foreign exchange contracts | Cost of goods sold | ( | ) | |||||||||||||||
Total | $ | $ | $ | $ | ( | ) | ||||||||||||
Net Investment Hedges | ||||||||||||||||||
Three months ended May 31, | ||||||||||||||||||
Derivative | Gain or (loss) recognized in OCI | Income statement location | Gain or (loss) excluded from the assessment of hedge effectiveness | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||||
Cross currency contracts | $ | $ | Interest expense | $ | $ | |||||||||||||
Six months ended May 31, | ||||||||||||||||||
Derivative | Gain or (loss) recognized in OCI | Income statement location | Gain or (loss) excluded from the assessment of hedge effectiveness | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||||
Cross currency contracts | $ | ( | ) | $ | Interest expense | $ | $ | |||||||||||
5. | 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. |
May 31, 2019 | ||||||||||||
Fair Value | Level 1 | Level 2 | ||||||||||
Assets | ||||||||||||
Cash and cash equivalents | $ | $ | $ | |||||||||
Insurance contracts | ||||||||||||
Bonds and other long-term investments | ||||||||||||
Interest rate derivatives | ||||||||||||
Foreign currency derivatives | ||||||||||||
Cross currency contracts | — | |||||||||||
Total | $ | $ | $ | |||||||||
Liabilities | ||||||||||||
Foreign currency derivatives | $ | $ | $ | |||||||||
Cross currency contracts | ||||||||||||
Total | $ | $ | $ | |||||||||
May 31, 2018 | ||||||||||||
Fair Value | Level 1 | Level 2 | ||||||||||
Assets | ||||||||||||
Cash and cash equivalents | $ | $ | $ | |||||||||
Insurance contracts | ||||||||||||
Bonds and other long-term investments | ||||||||||||
Foreign currency derivatives | ||||||||||||
Total | $ | $ | $ | |||||||||
Liabilities | ||||||||||||
Foreign currency derivatives | $ | $ | $ | |||||||||
Interest rate derivatives | ||||||||||||
Total | $ | $ | $ | |||||||||
November 30, 2018 | ||||||||||||
Fair Value | Level 1 | Level 2 | ||||||||||
Assets | ||||||||||||
Cash and cash equivalents | $ | $ | $ | |||||||||
Insurance contracts | ||||||||||||
Bonds and other long-term investments | ||||||||||||
Foreign currency derivatives | ||||||||||||
Total | $ | $ | $ | |||||||||
Liabilities | ||||||||||||
Foreign currency derivatives | $ | $ | $ | |||||||||
Interest rate derivatives | ||||||||||||
Total | $ | $ | $ | |||||||||
May 31, 2019 | May 31, 2018 | November 30, 2018 | |||||||||
Carrying amount | $ | $ | $ | ||||||||
Fair value | |||||||||||
Level 1 valuation techniques | $ | $ | $ | ||||||||
Level 2 valuation techniques | |||||||||||
Total fair value | $ | $ | $ | ||||||||
6. | EMPLOYEE BENEFIT AND RETIREMENT PLANS |
United States | International | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Defined benefit plans | |||||||||||||||
Service cost | $ | $ | $ | $ | |||||||||||
Interest costs | |||||||||||||||
Expected return on plan assets | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Amortization of prior service costs | |||||||||||||||
Amortization of net actuarial losses | |||||||||||||||
Total pension (income) expense | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||
United States | International | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Defined benefit plans | |||||||||||||||
Service cost | $ | $ | $ | $ | |||||||||||
Interest costs | |||||||||||||||
Expected return on plan assets | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Amortization of prior service costs | |||||||||||||||
Amortization of net actuarial losses | |||||||||||||||
Total pension (income) expense | $ | ( | ) | $ | $ | ( | ) | $ | |||||||
Three months ended May 31, | Six months ended May 31, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Other postretirement benefits | ||||||||||||||||
Service cost | $ | $ | $ | $ | ||||||||||||
Interest costs | ||||||||||||||||
Amortization of prior service credits | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Amortization of net actuarial gains | ( | ) | ( | ) | ||||||||||||
Total other postretirement benefits (income) expense | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
7. | STOCK-BASED COMPENSATION |
Three months ended May 31, | Six months ended May 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Stock-based compensation expense | $ | $ | $ | $ | |||||||||||
2019 | 2018 | ||
Risk-free interest rates | 2.2 - 2.5% | 1.7 - 2.9% | |
Dividend yield | |||
Expected volatility | |||
Expected lives (in years) | |||
2019 | 2018 | ||||||||||||
(shares in millions) | Number of Shares | Weighted- Average Exercise Price | Number of Shares | Weighted- Average Exercise Price | |||||||||
Outstanding at beginning of period | $ | $ | |||||||||||
Granted | |||||||||||||
Exercised | ( | ) | ( | ) | |||||||||
Outstanding at end of the period | $ | $ | |||||||||||
Exercisable at end of the period | $ | $ | |||||||||||
2019 | 2018 | ||||||||||||
(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 | $ | $ | |||||||||||
Granted | |||||||||||||
Vested | ( | ) | ( | ) | |||||||||
Forfeited | ( | ) | ( | ) | |||||||||
Outstanding at end of period | $ | $ | |||||||||||
2019 | 2018 | ||||||||||||
(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 | $ | $ | |||||||||||
Granted | |||||||||||||
Vested | ( | ) | ( | ) | |||||||||
Outstanding at end of period | $ | $ | |||||||||||
8. | INCOME TAXES |
9. | EARNINGS PER SHARE AND STOCK ISSUANCE |
Three months ended | Six months ended | ||||||||||
May 31, 2019 | May 31, 2018 | May 31, 2019 | May 31, 2018 | ||||||||
Average shares outstanding – basic | |||||||||||
Effect of dilutive securities: | |||||||||||
Stock options/RSUs/LTPP | |||||||||||
Average shares outstanding – diluted | |||||||||||
Three months ended | Six months ended | ||||||||||
May 31, 2019 | May 31, 2018 | May 31, 2019 | May 31, 2018 | ||||||||
Anti-dilutive securities | |||||||||||
Three months ended | Six months ended | ||||||||||
May 31, 2019 | May 31, 2018 | May 31, 2019 | May 31, 2018 | ||||||||
Shares issued, net of shares withheld for taxes, under stock options, RSUs, LTPP and employee stock purchase plans | |||||||||||
Shares repurchased under the stock repurchase program | |||||||||||
10. | ACCUMULATED OTHER COMPREHENSIVE LOSS |
May 31, 2019 | May 31, 2018 | November 30, 2018 | |||||||||
Foreign currency translation adjustment | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||
Unrealized loss on foreign currency exchange contracts | ( | ) | ( | ) | ( | ) | |||||
Unamortized value of settled interest rate swaps | |||||||||||
Pension and other postretirement costs | ( | ) | ( | ) | ( | ) | |||||
Accumulated other comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||
Three months ended | Six months ended | Affected Line Items in the Condensed Consolidated Income Statement | |||||||||||||||||
Accumulated Other Comprehensive Income (Loss) Components | May 31, 2019 | May 31, 2018 | May 31, 2019 | May 31, 2018 | |||||||||||||||
(Gains)/losses on cash flow hedges: | |||||||||||||||||||
Interest rate derivatives | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | Interest expense | ||||||
Foreign exchange contracts | ( | ) | ( | ) | Cost of goods sold | ||||||||||||||
Total before tax | ( | ) | ( | ) | |||||||||||||||
Tax effect | ( | ) | ( | ) | Income taxes | ||||||||||||||
Net, after tax | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||
Amortization of pension and postretirement benefit adjustments: | |||||||||||||||||||
Amortization of prior service costs (credit) (1) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | Other income, net | ||||||
Amortization of net actuarial losses (1) | Other income, net | ||||||||||||||||||
Total before tax | ( | ) | ( | ) | |||||||||||||||
Tax effect | ( | ) | ( | ) | Income taxes | ||||||||||||||
Net, after tax | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||
11. | BUSINESS SEGMENTS |
Consumer | Flavor Solutions | Total | |||||||||
(in millions) | |||||||||||
Three months ended May 31, 2019 | |||||||||||
Net sales | $ | $ | $ | ||||||||
Operating income excluding special charges | |||||||||||
Income from unconsolidated operations | |||||||||||
Three months ended May 31, 2018 | |||||||||||
Net sales | $ | $ | $ | ||||||||
Operating income excluding special charges and transaction and integration expenses | |||||||||||
Income from unconsolidated operations | |||||||||||
Six months ended May 31, 2019 | |||||||||||
Net sales | $ | $ | $ | ||||||||
Operating income excluding special charges and transaction and integration expenses | |||||||||||
Income from unconsolidated operations | |||||||||||
Six months ended May 31, 2018 | |||||||||||
Net sales | $ | $ | $ | ||||||||
Operating income excluding special charges and transaction and integration expenses | |||||||||||
Income from unconsolidated operations | |||||||||||
Consumer | Flavor Solutions | Total | |||||||||
Three months ended May 31, 2019 | |||||||||||
Operating income excluding special charges | $ | $ | $ | ||||||||
Less: Special charges | |||||||||||
Operating income | $ | $ | $ | ||||||||
Three months ended May 31, 2018 | |||||||||||
Operating income excluding special charges and transaction and integration expenses | $ | $ | $ | ||||||||
Less: Special charges | |||||||||||
Less: Transaction and integration expenses | |||||||||||
Operating income | $ | $ | $ | ||||||||
Six months ended May 31, 2019 | |||||||||||
Operating income excluding special charges and transaction and integration expenses | $ | $ | $ | ||||||||
Less: Special charges | |||||||||||
Operating income | $ | $ | $ | ||||||||
Six months ended May 31, 2018 | |||||||||||
Operating income excluding special charges and transaction and integration expenses | $ | $ | $ | ||||||||
Less: Special charges | |||||||||||
Less: Transaction and integration expenses | |||||||||||
Operating income | $ | $ | $ | ||||||||
Americas | EMEA | Asia/Pacific | Total | ||||||||||
Three months ended May 31, 2019 | $ | $ | $ | $ | |||||||||
Three months ended May 31, 2018 | |||||||||||||
Six months ended May 31, 2019 | |||||||||||||
Six months ended May 31, 2018 | |||||||||||||
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Three months ended | Six months ended | ||||||||||||||
May 31, 2019 | May 31, 2018 | May 31, 2019 | May 31, 2018 | ||||||||||||
Net sales | $ | 1,301.9 | $ | 1,301.3 | $ | 2,533.4 | $ | 2,516.7 | |||||||
Percent increase | — | % | 19.5 | % | 0.7 | % | 19.4 | % | |||||||
Components of percent growth in net sales – increase (decrease): | |||||||||||||||
Volume and product mix | 2.1 | % | 2.4 | % | 3.1 | % | 2.1 | % | |||||||
Pricing actions | 0.7 | % | 0.3 | % | 0.4 | % | 0.5 | % | |||||||
Acquisitions | — | % | 13.2 | % | — | % | 13.0 | % | |||||||
Foreign exchange | (2.8 | )% | 3.6 | % | (2.8 | )% | 3.8 | % | |||||||
Gross profit | $ | 508.5 | $ | 505.4 | $ | 975.4 | $ | 965.8 | |||||||
Gross profit margin | 39.1 | % | 38.8 | % | 38.5 | % | 38.4 | % | |||||||
Three months ended | Six months ended | ||||||||||||||
May 31, 2019 | May 31, 2018 | May 31, 2019 | May 31, 2018 | ||||||||||||
Selling, general & administrative expense (SG&A) | $ | 293.3 | $ | 300.6 | $ | 561.2 | $ | 569.0 | |||||||
Percent of net sales | 22.6 | % | 23.1 | % | 22.2 | % | 22.6 | % | |||||||
Three months ended | Six months ended | ||||||||||||||
May 31, 2019 | May 31, 2018 | May 31, 2019 | May 31, 2018 | ||||||||||||
Total special charges | $ | 7.1 | $ | 8.4 | $ | 9.2 | $ | 10.6 | |||||||
Three months ended | Six months ended | ||||||||||||||
May 31, 2019 | May 31, 2018 | May 31, 2019 | May 31, 2018 | ||||||||||||
Transaction and integration expenses | $ | — | $ | 7.8 | $ | — | $ | 16.5 | |||||||
Three months ended | Six months ended | ||||||||||||||
May 31, 2019 | May 31, 2018 | May 31, 2019 | May 31, 2018 | ||||||||||||
Interest expense | $ | 42.4 | $ | 44.2 | $ | 85.4 | $ | 86.0 | |||||||
Other income, net | 6.3 | 4.6 | 12.4 | 8.7 | |||||||||||
Three months ended | Six months ended | ||||||||||||||
May 31, 2019 | May 31, 2018 | May 31, 2019 | May 31, 2018 | ||||||||||||
Income from consolidated operations before income taxes | $ | 172.0 | $ | 149.0 | $ | 332.0 | $ | 292.4 | |||||||
Income tax expense (benefit) | 32.1 | 33.1 | 54.2 | (238.0 | ) | ||||||||||
Effective tax rate | 18.7 | % | 22.2 | % | 16.3 | % | (81.4 | )% | |||||||
Three months ended | Six months ended | ||||||||||||||
May 31, 2019 | May 31, 2018 | May 31, 2019 | May 31, 2018 | ||||||||||||
Income from unconsolidated operations | $ | 9.5 | $ | 7.4 | $ | 19.6 | $ | 15.5 | |||||||
Three months ended May 31, | Six months ended May 31, | ||||||
2018 Earnings per share – diluted | $ | 0.93 | $ | 4.11 | |||
Increase in operating income | 0.06 | 0.10 | |||||
Impact of net discrete tax benefit recognized as a result of the U.S. Tax Act | — | (2.24 | ) | ||||
Decrease in special charges, net of taxes | 0.01 | 0.01 | |||||
Decrease in transaction and integration expenses attributable to RB Foods acquisition, net of taxes | 0.04 | 0.10 | |||||
Decrease in interest expense, net of taxes | 0.01 | — | |||||
Increase in other income, net of taxes | 0.01 | 0.02 | |||||
Increase in unconsolidated income | 0.02 | 0.03 | |||||
Other impact of income taxes | 0.05 | 0.11 | |||||
Impact of higher shares outstanding | (0.01 | ) | (0.02 | ) | |||
2019 Earnings per share – diluted | $ | 1.12 | $ | 2.22 | |||
Three months ended | Six months ended | ||||||||||||||
May 31, 2019 | May 31, 2018 | May 31, 2019 | May 31, 2018 | ||||||||||||
(in millions) | |||||||||||||||
Net sales | $ | 764.1 | $ | 768.8 | $ | 1,509.0 | $ | 1,513.4 | |||||||
Percent (decrease) increase | (0.6 | )% | 20.2 | % | (0.3 | )% | 19.9 | % | |||||||
Segment operating income | $ | 137.8 | $ | 129.1 | $ | 273.1 | $ | 259.6 | |||||||
Segment operating income margin | 18.0 | % | 16.8 | % | 18.1 | % | 17.2 | % | |||||||
Three months ended | Six months ended | ||||||||||||||
May 31, 2019 | May 31, 2018 | May 31, 2019 | May 31, 2018 | ||||||||||||
Net sales | $ | 537.8 | $ | 532.5 | $ | 1,024.4 | $ | 1,003.3 | |||||||
Percent increase | 1.0 | % | 18.6 | % | 2.1 | % | 18.6 | % | |||||||
Segment operating income | $ | 77.4 | $ | 75.7 | $ | 141.1 | $ | 137.2 | |||||||
Segment operating income margin | 14.4 | % | 14.2 | % | 13.8 | % | 13.7 | % | |||||||
May 31, 2019 | May 31, 2018 | November 30, 2018 | |||||||||
Forward foreign currency: | |||||||||||
Notional value | $ | 528.2 | $ | 452.9 | $ | 494.9 | |||||
Unrealized net gain (loss) | 5.3 | 0.6 | (2.0 | ) | |||||||
Cross currency swaps: | |||||||||||
Notional value | 492.6 | — | — | ||||||||
Unrealized net gain (loss) | (0.6 | ) | — | — | |||||||
May 31, 2019 | May 31, 2018 | November 30, 2018 | |||||||||
Notional value | $ | 350.0 | $ | 100.0 | $ | 100.0 | |||||
Unrealized net gain (loss) | 12.1 | (5.8 | ) | (6.4 | ) | ||||||
• | Special charges – Special charges consist of expenses associated with certain actions undertaken by the Company to reduce fixed costs, simplify or improve processes, and improve our competitiveness and are of such significance in terms of both up-front costs and organizational/structural impact to require advance approval by our Management Committee. Upon presentation of any such proposed action (including details with respect to estimated costs, which generally consist principally of employee severance and related benefits, together with ancillary costs associated with the action that may include a non-cash component or a component which relates to inventory adjustments that are included in cost of goods sold; impacted employees or operations; expected timing; and expected savings) to the Management Committee and the Committee’s advance approval, expenses associated with the approved action are classified as special charges upon recognition and monitored on an on-going basis through completion. In 2018, we also included in special charges, as approved by our Management Committee, expense associated with a one-time payment, made to eligible U.S. hourly employees, to distribute a portion of the non-recurring net income tax benefit recognized in connection with the enactment of the U.S. Tax Act as that non-recurring income tax benefit is excluded from our computation of adjusted income taxes, adjusted net income and adjusted diluted earnings per share, each a non-GAAP measure. |
• | Transaction and integration costs associated with the RB Foods acquisition – We exclude certain costs associated with our acquisition of RB Foods in August 2017 and its subsequent integration into the Company. Such costs, which we refer to as “Transaction and integration costs”, include transaction costs associated with the acquisition, as well as integration costs following the acquisition. The size of this acquisition and related costs, and therefore the impact on the comparability of our results, distinguishes it from our past, recent and smaller acquisitions, the costs of which have not been excluded from our non-GAAP financial measures. |
• | Income taxes associated with the U.S. Tax Act – In connection with the enactment of the U.S. Tax Act in December 2017, we recorded a net income tax benefit of $297.9 million during the six months ended May 31, 2018, which included the estimated impact of the tax benefit from revaluation of net U.S. deferred tax liabilities based on the lower corporate income tax rate and the tax expense associated with the one-time transition tax on previously unremitted earnings of non-U.S. subsidiaries. |
For the year ended November 30, 2018 | For the three months ended | For the six months ended | Estimated for the year ending November 30, 2019 | |||||||||||||||||||
May 31, 2019 | May 31, 2018 | May 31, 2019 | May 31, 2018 | |||||||||||||||||||
Operating income | $ | 891.1 | $ | 208.1 | $ | 188.6 | $ | 405.0 | $ | 369.7 | ||||||||||||
Impact of transaction and integration expenses | 22.5 | — | 7.8 | — | 16.5 | |||||||||||||||||
Impact of special charges | 16.3 | 7.1 | 8.4 | 9.2 | 10.6 | |||||||||||||||||
Adjusted operating income | $ | 929.9 | $ | 215.2 | $ | 204.8 | $ | 414.2 | $ | 396.8 | ||||||||||||
Adjusted operating income margin (1) | 17.5 | % | 16.5 | % | 15.7 | % | 16.3 | % | 15.8 | % | ||||||||||||
Income tax expense (benefit) | $ | (157.3 | ) | $ | 32.1 | $ | 33.1 | $ | 54.2 | $ | (238.0 | ) | ||||||||||
Non-recurring benefit, net, of the U.S. Tax Act (2) | 301.5 | — | — | — | 297.9 | |||||||||||||||||
Impact of transaction and integration expenses | 4.9 | — | 1.7 | — | 3.5 | |||||||||||||||||
Impact of special charges | 3.8 | 1.7 | 1.9 | 2.2 | 2.5 | |||||||||||||||||
Adjusted income tax expense | $ | 152.9 | $ | 33.8 | $ | 36.7 | $ | 56.4 | $ | 65.9 | ||||||||||||
Adjusted income tax rate (3) | 19.6 | % | 18.9 | % | 22.2 | % | 16.5 | % | 20.6 | % | ||||||||||||
Net income | $ | 933.4 | $ | 149.4 | $ | 123.3 | $ | 297.4 | $ | 545.9 | ||||||||||||
Impact of transaction and integration expenses | 17.6 | — | 6.1 | — | 13.0 | |||||||||||||||||
Impact of special charges | 12.5 | 5.4 | 6.5 | 7.0 | 8.1 | |||||||||||||||||
Non-recurring benefit, net, of the U.S. Tax Act (2) | (301.5 | ) | — | — | — | (297.9 | ) | |||||||||||||||
Adjusted net income | $ | 662.0 | $ | 154.8 | $ | 135.9 | $ | 304.4 | $ | 269.1 | ||||||||||||
Earnings per share – diluted | $ | 7.00 | $ | 1.12 | $ | 0.93 | $ | 2.22 | $ | 4.11 | $5.09 to $5.19 | |||||||||||
Impact of transaction and integration expenses | 0.13 | — | 0.04 | — | 0.10 | — | ||||||||||||||||
Impact of total special charges | 0.10 | 0.04 | 0.05 | 0.05 | 0.06 | 0.11 | ||||||||||||||||
Non-recurring benefit, net, of the U.S. Tax Act (2) | (2.26 | ) | — | — | — | (2.24 | ) | — | ||||||||||||||
Adjusted earnings per share – diluted | $ | 4.97 | $ | 1.16 | $ | 1.02 | $ | 2.27 | $ | 2.03 | $5.20 to $5.30 | |||||||||||
(1) | Adjusted operating income margin is calculated as adjusted operating income as a percentage of net sales for each period presented. | ||||
(2) | The non-recurring income tax benefit, net, associated with enactment of the U.S. Tax Act of $297.9 million for the six-month period ended May 31, 2018 and $301.5 million for the year ended November 30, 2018, is more fully described in note 8 of notes to the accompanying financial statements. | ||||
(3) | Adjusted income tax rate is calculated as adjusted income tax expense as a percentage of income from consolidated operations before income taxes excluding special charges and for the 2018 periods, transaction and integration expenses, or $179.1 million and $341.2 million for the three and six months ended May 31, 2019, respectively, $165.2 million and $319.5 million for the three and six months ended May 31, 2018, respectively, and $780.1 million for the year ended November 30, 2018. | ||||
Three Months Ended May 31, 2019 | ||||||
Percentage Change as Reported | Impact of Foreign Currency Exchange | Percentage Change on Constant Currency Basis | ||||
Net sales: | ||||||
Consumer segment: | ||||||
Americas | 1.8 | % | (0.4 | )% | 2.2 | % |
EMEA | (6.5 | )% | (7.7 | )% | 1.2 | % |
Asia/Pacific | (3.7 | )% | (6.3 | )% | 2.6 | % |
Total Consumer | (0.6 | )% | (2.6 | )% | 2.0 | % |
Flavor Solutions segment: | ||||||
Americas | 2.3 | % | (0.6 | )% | 2.9 | % |
EMEA | (0.8 | )% | (9.7 | )% | 8.9 | % |
Asia/Pacific | (4.1 | )% | (5.7 | )% | 1.6 | % |
Total Flavor Solutions | 1.0 | % | (3.0 | )% | 4.0 | % |
Total net sales | — | % | (2.8 | )% | 2.8 | % |
Adjusted operating income: | ||||||
Consumer segment | 6.7 | % | (2.1 | )% | 8.8 | % |
Flavor Solutions segment | 2.2 | % | (3.2 | )% | 5.4 | % |
Total adjusted operating income | 5.1 | % | (2.5 | )% | 7.6 | % |
Six Months Ended May 31, 2019 | ||||||
Percentage Change as Reported | Impact of Foreign Currency Exchange | Percentage Change on Constant Currency Basis | ||||
Net sales: | ||||||
Consumer segment: | ||||||
Americas | 2.2 | % | (0.4 | )% | 2.6 | % |
EMEA | (6.0 | )% | (6.9 | )% | 0.9 | % |
Asia/Pacific | (2.9 | )% | (6.1 | )% | 3.2 | % |
Total Consumer | (0.3 | )% | (2.7 | )% | 2.4 | % |
Flavor Solutions segment: | ||||||
Americas | 4.0 | % | (0.7 | )% | 4.7 | % |
EMEA | (0.4 | )% | (9.3 | )% | 8.9 | % |
Asia/Pacific | (4.7 | )% | (5.5 | )% | 0.8 | % |
Total Flavor Solutions | 2.1 | % | (3.0 | )% | 5.1 | % |
Total net sales | 0.7 | % | (2.8 | )% | 3.5 | % |
Adjusted operating income: | ||||||
Consumer segment | 5.2 | % | (2.2 | )% | 7.4 | % |
Flavor Solutions segment | 2.8 | % | (3.2 | )% | 6.0 | % |
Total adjusted operating income | 4.4 | % | (2.5 | )% | 6.9 | % |
Projection for Year Ending November 30, 2019 | ||
Percentage change in net sales | 1% to 3% | |
Impact of unfavorable foreign currency exchange rates | 2% | |
Percentage change in net sales in constant currency | 3% to 5% | |
Projection for Year Ending November 30, 2019 | ||
Percentage change in adjusted operating income | 6% to 8% | |
Impact of unfavorable foreign currency exchange rates | 2% | |
Percentage change in adjusted operating income in constant currency | 8% to 10% | |
Projection for Year Ending November 30, 2019 | ||
Percentage change in adjusted earnings per share | 5% to 7% | |
Impact of unfavorable foreign currency exchange rates | 2% | |
Percentage change in adjusted earnings per share in constant currency | 7% to 9% | |
May 31, 2019 | May 31, 2018 | November 30, 2018 | |||||||
Net income | $ | 684.9 | $ | 829.8 | $ | 933.4 | |||
Depreciation and amortization | 155.6 | 141.2 | 150.7 | ||||||
Interest expense | 174.0 | 152.3 | 174.6 | ||||||
Income tax expense (benefit) | 134.9 | (147.3 | ) | (157.3 | ) | ||||
EBITDA | $ | 1,149.4 | $ | 976.0 | $ | 1,101.4 | |||
Adjustments to EBITDA (1)(2) | 44.9 | 136.9 | 57.3 | ||||||
Adjusted EBITDA | $ | 1,194.3 | $ | 1,112.9 | $ | 1,158.7 | |||
Net debt | $ | 4,606.3 | $ | 5,027.6 | $ | 4,674.8 | |||
Leverage ratio (1) | 3.9 | 4.5 | 4.0 | ||||||
(1) | Adjustments to EBITDA are determined under the leverage ratio covenant in our $1.0 billion revolving credit and term loan agreements and includes special charges, stock-based compensation expense and transaction and integration costs (related to the RB Foods acquisition), including other debt costs. | |
(2) | The leverage ratio covenant in our $1.0 billion revolving credit facility and the Term Loan provide that Adjusted EBITDA also includes the pro forma impact of acquisitions. Our leverage ratio, including the pro-forma impact of acquisitions, under the terms of those agreements as of May 31, 2018 was 4.4. | |
Six months ended | |||||||
May 31, 2019 | May 31, 2018 | ||||||
Net cash provided by operating activities | $ | 314.2 | $ | 234.9 | |||
Net cash used in investing activities | (54.0 | ) | (63.2 | ) | |||
Net cash used in financing activities | (220.7 | ) | (161.6 | ) | |||
2019 | 2018 | ||||||
Number of shares of common stock repurchased | 0.4 | 0.3 | |||||
Dollar amount | $ | 59.8 | $ | 32.1 | |||
May 31, 2019 | May 31, 2018(1) | November 30, 2018 | ||||||
Leverage ratio | 3.9 | 4.5 | 4.0 | |||||
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 | ||||||
March 1, 2019 to March 31, 2019 | CS – 16,555 (1) | $ | 147.45 | 16,555 | $91 million | |||||
CSNV – 21,373 | $ | 146.97 | 21,373 | |||||||
April 1, 2019 to April 30, 2019 | CS – 19,420 (2) | $ | 153.79 | 19,420 | $80 million | |||||
CSNV – 61,875 | $ | 152.82 | 61,875 | |||||||
May 1, 2019 to May 31, 2019 | CS – 0 | $ | — | — | $67 million | |||||
CSNV – 73,125 | $ | 154.11 | 73,125 | |||||||
Total | CS – 35,975 | $ | 150.87 | 35,975 | $67 million | |||||
CSNV – 156,373 | $ | 152.63 | 156,373 | |||||||
(1) | On March 27, 2019 and March 28, 2019, we purchased 9,164 shares and 7,391 shares, respectively, of our common stock from our U.S. defined contribution retirement plan to manage shares, based upon participant activity, in the plan's company stock fund. The prices paid per share of $147.00 and $148.01 represented the closing price of the common shares on March 27, 2019 and March 28, 2019, respectively. |
(2) | On April 10, 2019 and April 22, 2019, we purchased 10,415 shares and 9,005 shares, respectively, of our common stock from our U.S. defined contribution retirement plan to manage shares, based upon participant activity, in the plan's company stock fund. The prices paid per share of $154.49 and $152.97 represented the closing price of the common shares on April 10, 2019 and April 22, 2019, respectively. |
ITEM 6. | EXHIBITS |
Exhibit Number | Description | |||
(2) | Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession | |||
(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. | |||
(ii) | By-Laws | |||
(4) | Instruments defining the rights of security holders, including indentures |
(i) | See Exhibit 3 (Restatement of Charter and By-Laws) |
(ii) |
(iii) |
(iv) |
(v) |
(vi) |
(vii) |
(viii) |
(ix) |
(x) |
(10) | Material Contracts |
(i) |
(ii) |
(iii) |
(vi) |
(vii) |
(viii) |
(x) |
(xi) |
(xii) |
(xiii) |
(xiv) |
(i) |
(ii) |
(i) |
(ii) |
* | Management contract or compensatory plan or arrangement. |
McCORMICK & COMPANY, INCORPORATED | |||
June 27, 2019 | By: | /s/ Michael R. Smith | |
Michael R. Smith | |||
Executive Vice President & Chief Financial Officer | |||
June 27, 2019 | By: | /s/ Christina M. McMullen | |
Christina M. McMullen | |||
Vice President & Controller | |||
Date: June 27, 2019 | /s/ Lawrence E. Kurzius |
Lawrence E. Kurzius | |
Chairman, President & Chief Executive Officer | |
Date: June 27, 2019 | /s/ Michael R. Smith |
Michael R. Smith | |
Executive Vice President & Chief Financial Officer | |
/s/ Lawrence E. Kurzius | |
Lawrence E. Kurzius | |
Chairman, President & Chief Executive Officer | |
Date: June 27, 2019 | |
/s/ Michael R. Smith | |
Michael R. Smith | |
Executive Vice President & Chief Financial Officer | |
Date: June 27, 2019 | |
Document and Entity Information |
6 Months Ended |
|---|---|
|
May 31, 2019
shares
| |
| Document Information [Line Items] | |
| Entity Registrant Name | MCCORMICK & CO INC |
| Entity Central Index Key | 0000063754 |
| Current Fiscal Year End Date | --11-30 |
| Entity Filer Category | Large Accelerated Filer |
| Document Type | 10-Q |
| Document Period End Date | May 31, 2019 |
| Document Fiscal Year Focus | 2019 |
| Document Fiscal Period Focus | Q2 |
| Amendment Flag | false |
| Entity Small Business | false |
| Entity Emerging Growth Company | false |
| Common Stock | |
| Document Information [Line Items] | |
| Entity Common Stock, Shares Outstanding | 9,475,811 |
| Nonvoting Common Stock | |
| Document Information [Line Items] | |
| Entity Common Stock, Shares Outstanding | 123,050,380 |
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
May 31, 2019 |
May 31, 2018 |
May 31, 2019 |
May 31, 2018 |
|
| CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME [Abstract] | ||||
| Net income | $ 149.4 | $ 123.3 | $ 297.4 | $ 545.9 |
| Net income attributable to non-controlling interest | 0.7 | 1.1 | 1.2 | 2.0 |
| Other comprehensive income (loss): | ||||
| Unrealized components of pension and postretirement plans (including a curtailment gain of $18.0 for the three months ended February 28, 2018) | 0.3 | 0.4 | (2.1) | 20.8 |
| Currency translation adjustments | (58.6) | (88.4) | (21.9) | (26.4) |
| Change in derivative financial instruments | (0.1) | 2.7 | 0.0 | 1.7 |
| Deferred taxes | 2.4 | (0.3) | 0.4 | (5.3) |
| Comprehensive income | (56.0) | (85.6) | (23.6) | (9.2) |
| Comprehensive Income (Loss), Net of Tax, Attributable to Parent | $ 94.1 | $ 38.8 | $ 275.0 | $ 538.7 |
Accounting Policies |
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| 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. We made an immaterial adjustment to the accompanying Condensed Consolidated Statement of Comprehensive Income that decreased both currency translation adjustments as well as comprehensive income by $1.5 million and $1.2 million for the three and six months ended May 31, 2018, respectively, to conform to the presentation included in the Consolidated Statement of Comprehensive Income included in our Annual Report on Form 10-K for the year ended November 30, 2018. The results of consolidated operations for the six-month period ended May 31, 2019 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, 2018. Significant Accounting Policies The following significant accounting policies were updated in 2019 to reflect changes upon our adoption of ASU No. 2014-09 Revenue from Contracts with Customers (Topic 606) (the “Revenue Recognition ASU”), ASU No. 2017-07 Compensation – Retirement Benefits (Topic 715) – Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (the “Pension ASU”), and ASU No. 2017-12 Derivatives and Hedging (Topic 815) – Targeted Improvements to Accounting for Hedging Activities. Revenue Recognition We manufacture, market and distribute spices, seasoning mixes, condiments and other flavorful products to the entire food industry – retailers, food manufacturers and foodservice businesses. We recognize sales as performance obligations are fulfilled when control passes to the customer. Revenues are recorded net of trade and sales incentives and estimated product returns. Known or expected pricing or revenue adjustments, such as trade discounts, rebates or returns, are estimated at the time of sale. Any taxes collected on behalf of government authorities are excluded from net sales. We account for product shipping and handling as fulfillment activities with costs for these activities recorded within cost of goods sold. Amounts billed and due from our customers are classified as accounts receivable on the balance sheet and require payment on a short-term basis. Our allowance for doubtful accounts represents our estimate of probable non-payments and credit losses in our existing receivables, as determined based on a review of past due balances and other specific account data. Performance Obligations Our revenues primarily result from contracts or purchase orders with customers, which are generally short-term in nature. The Company assesses the goods and services promised in its customers’ contracts or purchase orders and identifies a performance obligation for each promise to transfer a good or service (or bundle of goods or services) that is distinct. To identify the performance obligations, the Company considers all the goods or services promised, whether explicitly stated or implied based on customary business practices. Significant Judgments Sales are recorded net of trade and sales incentives and estimated product returns. Known or expected pricing or revenue adjustments, such as trade discounts, rebates or returns, are estimated at the time of sale. Where applicable, future reimbursements are estimated based on a combination of historical patterns and future expectations regarding these programs. Key sales terms, such as pricing and quantities ordered, are established on a frequent basis such that most customer arrangements and related incentives have a one-year or shorter duration. Estimates that affect revenue, such as trade incentives and product returns, are monitored and adjusted each period until the incentives or product returns are realized. The adjustments recognized during the three and six months ended May 31, 2019 and 2018 resulting from updated estimates of revenue for prior year product sales were not significant. The unsettled portion remaining in accrued liabilities for these activities was $119.0 million, $135.5 million and $142.1 million at May 31, 2019, May 31, 2018 and November 30, 2018, respectively. Other In each of our segments, we produce and sell many individual products which are similar in composition and nature. With their primary attribute being flavor, we regard the products within each of our segments to be fairly homogenous. Our business segments each sell to similar channels and customers. See note 11 for revenues reported by business segment, which is consistent with how we organize and manage our operations, and for revenues reported by geographic region. Practical Expedients As more fully described below, we adopted the Revenue Recognition ASU in the first quarter of 2019 using the full retrospective method, including applying the following policy elections and practical expedients upon that adoption:
Shipping and Handling Shipping and handling costs on our products sold to customers related to activities that occur before the customer has obtained control of a good are included in cost of goods sold in the consolidated income statement. Brand Marketing Support Total brand marketing support costs are included in selling, general and administrative expense in the consolidated income statement. Brand marketing support costs include advertising and promotions but exclude trade funds paid to customers for such activities. All trade funds paid to customers are reflected in the consolidated income statement as a reduction of net sales. Promotion costs include public relations, shopper marketing, social marketing activities, general consumer promotion activities and depreciation of assets used in these promotional activities. Advertising costs include the development, production and communication of advertisements through television, digital, print and radio. Development and production costs are expensed in the period in which the advertisement is first run. All other costs of advertising are expensed as incurred. Derivative Instruments We record all derivatives on the balance sheet at fair value. The fair value of derivative instruments is recorded in other current assets, other assets, other accrued liabilities or other liabilities. Gains and losses representing either hedge ineffectiveness, hedge components excluded from the assessment of effectiveness, or hedges of translational exposure are recorded in the consolidated income statement in other income (expense), net or interest expense. In the consolidated cash flow statement, settlements of cash flow and fair value hedges are classified as an operating activity; settlements of all other derivative instruments, including instruments for which hedge accounting has been discontinued, are classified consistent with the nature of the instrument. Cash flow hedges. Qualifying derivatives are accounted for as cash flow hedges when the hedged item is a forecasted transaction. Gains and losses on these instruments are recorded in accumulated other comprehensive income (loss) until the underlying transaction is recorded in earnings. When the hedged item is realized, gains or losses are reclassified from accumulated other comprehensive income (loss) to the consolidated income statement on the same line item as the underlying transaction. Fair value hedges. Qualifying derivatives are accounted for as fair value hedges when the hedged item is a recognized asset, liability, or firm commitment. Gains and losses on these instruments are recorded in earnings, offsetting gains and losses on the hedged item. Net investment hedges. Qualifying derivative and nonderivative financial instruments are accounted for as net investment hedges when the hedged item is a nonfunctional currency investment in a subsidiary. Gains and losses on these instruments are included in foreign currency translation adjustments in accumulated other comprehensive income (loss). Accounting Pronouncements Adopted in 2019 We elected to adopt the Revenue Recognition ASU on a full retrospective basis. We adopted the Pension ASU on a retrospective basis as required by the standard. These new accounting standards are summarized below. In May 2014, the FASB issued the Revenue Recognition ASU, which supersedes previously existing revenue recognition guidance. Under this new guidance, companies apply a principles-based five-step model to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration for which the company expects to be entitled to in exchange for those goods or services. The model encompasses the following steps: (1) determination of whether a contract - an agreement between two or more parties that creates legally enforceable rights and obligations - exists; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when (or as) the performance obligation is satisfied. The new revenue recognition guidance allows companies to account for shipping and handling activities that occur before and after the customer has obtained control of a product as fulfillment activities rather than as a promised service; and we applied this accounting policy election. In addition, the new revenue guidance requires that customer payments be accounted for as a reduction in the transaction price unless the payment to a customer is in exchange for a distinct good or service. The adoption of this standard did not have and is not expected to have an effect on the timing of our revenue recognition. Upon adoption of the Revenue Recognition ASU in fiscal 2019, we made the following changes to our revenue recognition accounting policy and disclosure practices. We classify shipping and handling expenses as a component of cost of goods sold, rather than our prior practice of recording these costs as a component of selling, general and administrative expense. Also, we classify all payments to direct and indirect customers, including certain trade funds used for cooperative advertising and displays, as a reduction of revenue. Prior to our adoption of the Revenue Recognition ASU, we presented certain of those payments as brand marketing support costs and included these payments as a component of selling, general and administrative expense. There was no effect on operating income, net income, or basic and diluted earnings per share upon our adoption of the Revenue Recognition ASU in 2019. In March 2017, the FASB issued the Pension ASU. This guidance revises how employers that sponsor defined benefit pension and other postretirement plans present the net periodic benefit cost in their income statement and requires that the service cost component of net periodic benefit cost be presented in the same income statement line items as other employee compensation costs from services rendered during the period. Of the components of net periodic benefit cost, only the service cost component is eligible for asset capitalization. The other components of the net periodic benefit cost must be presented separately from the line items that include the service cost and outside of any subtotal of operating income on the income statement. The new standard was adopted as of December 1, 2018 and has been applied on a retrospective basis. Adoption of the new standard solely impacts classification within our consolidated income statement, with no change to net income or basic and diluted earnings per share. The adoption of the Revenue Recognition ASU and the Pension ASU, on a retrospective basis, impacted our previously reported results for the three and six months ended May 31, 2018 as follows:
We adopted the following new accounting standards in the first six months of 2019 on a prospective basis: In August 2017, the FASB issued ASU No. 2017-12 Derivatives and Hedging (Topic 815)—Targeted Improvements to Accounting for Hedging Activities. This guidance eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires, for qualifying hedges, the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The guidance also modifies the accounting for components excluded from the assessment of hedge effectiveness, eases documentation and assessment requirements and modifies certain disclosure requirements. The new standard is effective for the first quarter of our fiscal year ending November 30, 2020, with early adoption permitted in any interim period or fiscal year before the effective date. We have elected to adopt this guidance effective December 1, 2018. There was no material impact to our financial statements upon adoption. In October 2016, the FASB issued ASU No. 2016-16 Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory. The ASU eliminates the deferral of the tax effects of intra-entity asset transfers other than inventory. As a result, the tax expense from the intercompany sale of assets, other than inventory, and associated changes to deferred taxes will be recognized when the sale occurs even though the pre-tax effects of the transaction have not been recognized. This new standard was effective beginning in fiscal year 2019 and is required to be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of December 1, 2018, the first day of our fiscal year 2019. There was no cumulative-effect adjustment upon adoption. As more fully disclosed in note 8, during the six months ended May 31, 2019, we recognized a discrete tax benefit of $16.2 million under the provisions of this standard. The on-going effect of the adoption of the standard will depend on the nature and amount of future transactions. In January 2017, the FASB issued ASU No. 2017-01 Business Combinations (Topic 805)—Clarifying the Definition of a Business. This guidance changes the definition of a business to assist entities in evaluating when a set of transferred assets and activities constitutes a business. The guidance requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities is not a business. The guidance also requires a business to include at least one substantive process and narrows the definition of outputs by more closely aligning it with how outputs are described in the Revenue Recognition ASU. The new standard is effective for the first quarter of our fiscal year ending November 30, 2019. We currently cannot estimate the impact that adoption of this ASU will have on our financial statements and related disclosures as its application is dependent on the facts and circumstances of individual transactions. In August 2018, the U.S. Securities and Exchange Commission ("SEC") adopted the final rule under SEC Release No. 33-10532 Disclosure Update and Simplification, to eliminate or modify certain disclosure rules that are redundant, outdated, or duplicative of U.S. GAAP or other regulatory requirements. Among other changes, the amendments eliminated the annual requirement to disclose the high and low trading prices of our common stock. In addition, the amendments provide that disclosure requirements related to the analysis of shareholders' equity are expanded for interim financial statements. An analysis of the changes in each caption of shareholders' equity presented in the balance sheet must be provided in a note or separate statement, as well as the amount of dividends per share for each class of shares, and we have provided this disclosure beginning in the first quarter of 2019. Recently Issued Accounting Pronouncements — Pending Adoption In January 2017, the FASB issued ASU No. 2017-04 Intangibles—Goodwill and Other Topics (Topic 350)—Simplifying the Test for Goodwill Impairment. This guidance eliminates the requirement to calculate the implied fair value of goodwill of a reporting unit to measure a goodwill impairment charge. Instead, a company will record an impairment charge based on the excess of a reporting unit's carrying amount over its fair value. The new standard will be effective for the first quarter of our fiscal year ending November 30, 2021. Early adoption is permitted for all entities for annual and interim goodwill impairment testing dates after January 1, 2017. While we are still evaluating the timing of adoption, we currently do not expect this guidance to have a material impact on our financial statements. In February 2016, the FASB issued ASU No. 2016-02 Leases (Topic 842). This guidance revises existing practice related to accounting for leases under Accounting Standards Codification Topic 840 Leases (ASC 840) for both lessees and lessors. Our leases principally relate to: (i) certain real estate, including that related to a number of administrative, distribution and manufacturing locations, and, beginning in May 2018, to our new headquarters building; (ii) certain machinery and equipment, including a corporate airplane and automobiles; and (iii) certain software. The new guidance in ASU No. 2016-02 requires lessees to recognize a right-of-use asset and a lease liability for virtually all leases (other than leases that meet the definition of a short-term lease). The lease liability will be equal to the present value of lease payments and the right-of-use asset will be based on the lease liability, subject to adjustment such as for initial direct costs. For income statement purposes, the new standard retains a dual model similar to ASC 840, requiring leases to be classified as either operating or finance. For lessees, operating leases will result in straight-line expense (similar to current accounting by lessees for operating leases under ASC 840) while finance leases will result in a front-loaded expense pattern (similar to current accounting by lessees for capital leases under ASC 840). In July 2018, the FASB issued ASU No. 2018-11 Leases (Topic 842) Targeted Improvements which provides an additional transition method that allows entities to initially apply the new standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption without restating prior periods. The new standard will be effective for the first quarter of our fiscal year ending November 30, 2020. We intend to adopt the requirements of the new standard via a cumulative-effect adjustment without restating prior periods. We are currently in the process of evaluating our existing lease portfolio, including accumulating all of the necessary information required to properly account for leases under the new standard. Additionally, we are implementing new software to assist in the accounting and are evaluating changes to our processes and internal controls to ensure we meet the standard’s reporting and disclosure requirements. Based on our assessment to date, we expect that the adoption of ASU No. 2016-02 will not have a material effect on our results of operations but will result in an increase in lease-related assets and liabilities recognized in our Consolidated Balance Sheets. We are unable to quantify the amount of that increase at this time.
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Acquisitions |
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| ACQUISITIONS | ACQUISITIONS In August 2017, we completed the acquisition of Reckitt Benckiser's Food Division ("RB Foods") from Reckitt Benckiser Group plc. The purchase price was approximately $4.21 billion, net of acquired cash of $24.3 million. During the six months ended May 31, 2018, we paid an additional $4.2 million associated with the final working capital adjustment. During the three and six months ended May 31, 2018, we incurred $7.8 million and $16.5 million, respectively, of transaction and integration expenses related to the RB Foods acquisition. Those costs consisted of outside advisory, service and consulting costs; employee-related costs; and other costs related to the acquisition. The following are the transaction and integration expenses related to the RB Foods acquisition that we have recorded for the three and six months ended May 31, 2018 (in millions):
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Special Charges |
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| Special Charges [Text Block] | SPECIAL CHARGES In our consolidated income statement, we include a separate line item captioned “Special charges” in arriving at our consolidated operating income. Special charges consist of expenses associated with certain actions undertaken by the Company to reduce fixed costs, simplify or improve processes, and improve our competitiveness and are of such significance in terms of both up-front costs and organizational/structural impact to require advance approval by our Management Committee, comprised of our senior management, including our Chairman, President and Chief Executive Officer. Upon presentation of any such proposed action (generally including details with respect to estimated costs, which typically consist principally of employee severance and related benefits, together with ancillary costs associated with the action that may include a non-cash component or a component which relates to inventory adjustments that are included in cost of goods sold; impacted employees or operations; expected timing; and expected savings) to the Management Committee and the Committee’s advance approval, expenses associated with the approved action are classified as special charges upon recognition and monitored on an on-going basis through completion. The following is a summary of special charges recognized in the three and six months ended May 31, 2019 and 2018 (in millions):
We continue to evaluate changes to our organization structure to enable us to reduce fixed costs, simplify or improve processes, and improve our competitiveness. In 2017, our Management Committee approved a multi-year initiative during which we expect to execute significant changes to our global processes, capabilities and operating model to provide a scalable platform for future growth. We expect this initiative to enable us to accelerate our ability to work globally and cross-functionally by aligning and simplifying processes throughout McCormick, in part building upon our current shared services foundation and expanding the end-to-end processes presently under that foundation. We expect this initiative, which we refer to as Global Enablement (GE), to enable this scalable platform for future growth while reducing costs, enabling faster decision making, increasing agility and creating capacity within our organization. While we are continuing to fully develop the details of our GE operating model, we expect the cost of the GE initiative—to be recognized as “Special charges” in our consolidated income statement over its expected multi-year course—to range from approximately $55 million to $65 million. Of that $55 million to $65 million, we estimate that half will be attributable to employee severance and related benefit payments and half will be attributable to cash payments associated with the related costs of GE implementation and transition, including outside consulting and other costs directly related to the initiative. We incurred $11.5 million and $12.7 million of special charges associated with our GE initiative during 2018 and 2017, respectively. The GE initiative is expected to generate annual savings, ranging from approximately $30 million to $40 million, once all actions are implemented. During the three months ended May 31, 2019, we recorded $7.1 million of special charges, consisting primarily of (i) $4.1 million related to our GE initiative, including $2.5 million of third-party expenses, $1.1 million related to employee severance and related benefits, and $0.5 million related to other costs, (ii) $2.3 million of employee severance and related benefits associated with streamlining actions in the Americas region, and (iii) $0.6 million related to streamlining actions in our Europe, Middle East and Africa (EMEA) region. During the six months ended May 31, 2019, we recorded $9.2 million of special charges, consisting primarily of (i) $6.2 million related to our GE initiative, including $3.5 million of third-party expenses, $1.7 million related to employee severance and related benefits, and $1.0 million related to other costs, (ii) $2.3 million of employee severance and related benefits associated with streamlining actions in the Americas and (iii) $0.6 million related to streamlining actions in EMEA. During the three months ended May 31, 2018, we recorded $8.4 million of special charges, consisting primarily of: (i) $5.5 million related to our GE initiative, as more fully described below; (ii) a one-time payment, in the aggregate amount of $2.2 million, made to eligible U.S. hourly employees to distribute a portion of the non-recurring net income tax benefit recognized in connection with the enactment of the U.S. Tax Act and more fully described in note 9; and (iii) $0.6 million related to employee severance and related benefits and other costs directly associated with the relocation of our Chinese manufacturing facilities. Of the $5.5 million in special charges recognized in the second quarter of 2018 related to our GE initiative, $2.5 million related to third party expenses and $3.0 million represented a non-cash asset impairment charge. That non-cash asset impairment charge was related to the write-off of certain software assets that are incompatible with our future move, approved in the second quarter of 2018, to a new global enterprise planning (ERP) platform to facilitate planned actions under our GE initiative to align and simplify our end-to-end processes to support our future growth. During the six months ended May 31, 2018, we recorded $10.6 million of special charges, consisting primarily of: (i) $6.7 million related to our GE initiative, consisting of $3.7 million of third party expenses and the non-cash asset impairment charge of $3.0 million previously described, (ii) a one-time payment, in the aggregate amount of $2.2 million described earlier made to certain U.S. hourly employees associated with the enactment of the U.S Tax Act; (iii) $0.8 million related to employee severance and related benefits and other costs directly associated with the relocation of one of our Chinese manufacturing facilities; and (iv) $0.7 million related to employee severance benefits and other costs related to the transfer of certain manufacturing operations in our Asia Pacific region to a new facility then under construction in Thailand. Of the $9.2 million in special charges recognized during the six months ended May 31, 2019, approximately $4.8 million were paid in cash, with the remaining accrual expected to be paid during the remainder of fiscal year 2019. In addition to the amounts recognized in the first six months of 2019, we expect to incur additional special charges during the remainder of 2019. We expect total special charges in 2019 of $20.0 million, consisting principally of: (i) approximately $15.0 million associated with our GE initiative comprised of third party expenses, employee severance benefits and other costs; and (ii) $2.3 million of employee severance and related benefits associated with streamlining actions in the Americas. The following is a breakdown by business segments of special charges for the three and six months ended May 31, 2019 and 2018 (in millions):
All remaining balances associated with our special charges are included in accounts payable and other accrued liabilities in our consolidated balance sheet.
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Financial Instruments |
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| Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FINANCIAL ARRANGEMENTS AND FINANCIAL INSTRUMENTS | FINANCING ARRANGEMENTS AND FINANCIAL INSTRUMENTS During each of the six months ended May 31, 2019 and 2018, we repaid $37.5 million (the required quarterly principal installment) of the five-year term loan due August 17, 2022. During the six months ended May 31, 2019 and 2018, we repaid $50.0 million and $100.0 million, respectively, of the three-year term loan due August 17, 2020. During the six months ended May 31, 2018, we repaid the $250 million, 5.75% notes that matured on December 15, 2017. We use derivative financial instruments to enhance our ability to manage risk, including foreign currency, net investment 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 instrument and all derivatives are designated as hedges. We are not a party to master netting arrangements, and we do not offset the fair value of derivative contracts with the same counterparty in our financial statement disclosures. The use of derivative financial instruments is monitored through regular communication with senior management and the use of written guidelines. Foreign currency exchange risk. We are potentially exposed to foreign currency fluctuations affecting net investments in subsidiaries, transactions (both third-party and intercompany) and earnings denominated in foreign currencies. Management assesses foreign currency risk based on transactional cash flows and translational volatility and may enter into forward contracts and currency swaps to reduce fluctuations in long or short currency positions. Forward contracts and options are generally less than 18 months duration. Currency swap agreements are established in conjunction with the term of underlying debt issues. For foreign currency cash flow and fair value hedges, the assessment of effectiveness is generally based on changes in spot rates. Contracts which are designated as hedges of anticipated purchases denominated in a foreign currency (generally purchases of raw materials in U.S. dollars by operating units outside the U.S.) are considered cash flow hedges. At May 31, 2019, the notional value of these contracts was $76.1 million. We also enter into fair value foreign currency exchange contracts to manage exposure to currency fluctuations in certain intercompany loans between subsidiaries. At May 31, 2019, the notional value of these contracts was $452.1 million. During the three months ended May 31, 2019 and 2018, we recognized gains (losses) of $1.0 million and $(0.4) million, respectively, on the change in fair value of these contracts and (losses) gains of $(1.4) million and $0.2 million, respectively, on the change in the currency component of the underlying loans. During the six months ended May 31, 2019 and 2018, we recognized gains (losses) of $2.7 million and $(2.6) million, respectively, on the change in fair value of these contracts and (losses) gains of $(3.2) million and $2.2 million, respectively, on the change in the currency component of the underlying loans. Both the gains and the losses were recognized in our consolidated income statement as other income, net. Beginning in the first quarter of 2019, we also utilized cross currency interest rate swap contracts that are considered net investment hedges. As of May 31, 2019, we had notional value of cross currency interest rate swap contracts of (i) $250 million notional value to receive $250 million at three-month U.S. LIBOR plus 0.685% and pay £194.1 million at three-month GBP LIBOR plus 0.740% and (ii) £194.1 million notional value to receive £194.1 million at three-month GBP LIBOR plus 0.740% and pay €221.8 million at three-month Euro EURIBOR plus 0.808%. These cross currency interest rate swap contracts expire in August 2027. Interest rate risk. We finance a portion of our operations with both fixed and variable rate debt instruments, principally commercial paper, notes and bank loans. We utilize interest rate swap agreements, including forward-starting swaps, to reduce interest rate volatility and funding costs associated with certain debt issues, and achieve a desired mix of variable and fixed rate debt. Fixed-to-variable interest rate swaps are designated and accounted for as fair value hedges and the assessment of effectiveness is based on changes in the fair value of the underlying debt. As of May 31, 2019, we have outstanding interest rate swap contracts for a notional amount of $350 million. Those interest rate swap contracts include a $100 million notional value of interest rate swap contracts, where we receive interest at 3.25% and pay a variable rate of interest based on three-month LIBOR plus 1.22%, which expire in November 2025, and are designated as fair value hedges of the changes in fair value of $100 million of the $250 million 3.25% medium-term notes due 2025. We also have $250 million notional interest rate swap contracts where we receive interest at 3.40% and pay a variable rate of interest based on three-month LIBOR plus 0.685%, which expire in August 2027, and are designated as fair value hedges of the changes in fair value of $250 million of the $750 million 3.40% term notes due 2027. Any realized gain or loss on either of these swaps was offset by a corresponding increase or decrease of the value of the hedged debt. All derivatives are recognized at fair value in the balance sheet and recorded in either other current assets, or noncurrent other assets, other accrued liabilities or other long-term liabilities depending upon their nature and maturity. The following table discloses the notional amount and 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 consolidated income statement for the three and six-month periods ended May 31, 2019 and 2018 (in millions):
For all cash flow and settled interest rate fair value hedge derivatives, the net amount of accumulated other comprehensive income (loss) expected to be reclassified in the next 12 months is $2.1 million as an increase to earnings.
For all net investment hedges, no amounts have been reclassified out of other comprehensive income (loss). The amounts noted in the tables above for OCI do not include any adjustments for the impact of deferred income taxes.
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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:
At May 31, 2019, May 31, 2018 and November 30, 2018, we had no financial assets or liabilities that were subject to a level 3 fair value measurement. Our population of financial assets and liabilities subject to fair value measurements on a recurring basis are as follows (in millions):
Because of their short-term nature, the amounts reported in the balance sheet for cash and cash equivalents, receivables, short-term borrowings and trade accounts payable approximate fair value. 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. The following table sets forth the carrying amounts and fair values of our long-term debt (including the current portion thereof) at May 31, 2019, May 31, 2018 and November 30, 2018 (in millions):
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| Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| EMPLOYEE BENEFIT AND RETIREMENT PLANS | EMPLOYEE BENEFIT AND RETIREMENT PLANS During the first quarter of 2018, our Management Committee approved the freezing of benefits under our pension plans in Canada. The effective date of this freeze is November 30, 2019. Although those plans will be frozen, employees who are participants in the plans will retain benefits accumulated up to the date of the freeze, based on credited service and eligible earnings, in accordance with the terms of the plans. As a result of this change, we remeasured pension assets and benefit obligations as of the date of the approval (December 1, 2017) and we reduced the Canadian plan benefit obligations by $17.5 million. This remeasurement resulted in non-cash, pre-tax net actuarial gains of $17.5 million for the six months ended May 31, 2018. This net actuarial gain consists principally of a curtailment gain of $18.0 million and is included in our consolidated statement of comprehensive income for the six months ended May 31, 2018, as a component of Other comprehensive income (loss) on the line entitled Unrealized components of pension plans. Deferred taxes associated with these actuarial gains, together with other unrealized components of pension plans recognized during the six months ended May 31, 2018, is also included in that statement as a component of Other comprehensive income (loss). The following table presents the components of our pension (income) expense of the defined benefit plans for the three months ended May 31, 2019 and 2018 (in millions):
The following table presents the components of our pension (income) expense of the defined benefit plans for the six months ended May 31, 2019 and 2018 (in millions):
During the six months ended May 31, 2019 and 2018, we contributed $4.5 million and $7.7 million, respectively, to our pension plans. Total contributions to our pension plans in fiscal year 2018 were $13.5 million. The following table presents the components of our other postretirement benefits (income) expense (in millions):
In conjunction with our adoption of the Pension ASU, all of the amounts in the tables above for pension expense and other postretirement benefits expense, other than service cost, were included in the income statement caption "Other income, net" within our consolidated income statements. The aggregate amount of pension and other postretirement benefits (income) expense, excluding service cost components, were $(4.4) million and $(3.1) million for the three months ended May 31, 2019 and 2018, respectively, and $(8.8) million and $(5.7) million for the six months ended May 31, 2019 and 2018, respectively.
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Stock-based Compensation |
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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 long-term performance plan (LTPP). The following table sets forth the stock-based compensation expense recorded in selling, general and administrative (SG&A) expense (in millions):
Our 2019 annual grant of stock options and RSUs occurred in the second quarter, similar to the 2018 annual grant. The weighted-average grant-date fair value of each stock option granted in 2019 was $27.51 and in 2018 was $20.30 as calculated under a lattice pricing model. Substantially all of the stock options and RSUs granted in 2019 vest ratably over a three-year period or, if earlier, upon the retirement eligibility date of the holder. The fair values of stock 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 our stock option activity for the six months ended May 31, 2019 and 2018:
As of May 31, 2019, the intrinsic value (the difference between the exercise price and the market price) for all options outstanding was $203.3 million and for options currently exercisable was $179.9 million. The total intrinsic value of all options exercised during the six months ended May 31, 2019 and 2018 was $59.6 million and $18.8 million, respectively. The following is a summary of our RSU activity for the six months ended May 31, 2019 and 2018:
The following is a summary of our LTPP activity for the six months ended May 31, 2019 and 2018:
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Income Taxes |
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May 31, 2019 | |
| Income Tax Disclosure [Abstract] | |
| INCOME TAXES | INCOME TAXES Income taxes for the three months ended May 31, 2019 included $11.3 million of discrete tax benefits consisting principally of excess tax benefits associated with share-based compensation. Income taxes for the six months ended May 31, 2019 included $28.9 million of discrete tax benefits consisting principally of $16.2 million of tax benefits associated with an intra-entity asset transfer that occurred during the first quarter under the provisions of ASU No. 2016-16, which was adopted on December 1, 2018, and $12.9 million of excess tax benefits associated with share-based compensation. Income taxes for the three months ended May 31, 2018 included $2.4 million of discrete tax benefits consisting of $1.1 million of excess tax benefits associated with share-based compensation, and $1.3 million related to the reversal of unrecognized tax benefits and related interest associated with the expiration of statutes of limitation in non-U.S. jurisdictions. Income taxes for the six months ended May 31, 2018 included $305.4 million of discrete tax benefits consisting of the $297.9 million net benefit associated with the U.S. Tax Act, described below, $4.5 million of excess tax benefits associated with share-based compensation, and $3.5 million related to the reversal of unrecognized tax benefits and related interest associated with the expiration of statutes of limitation in non-US jurisdictions, offset by a $0.5 million net detriment related to the revaluation of deferred tax assets related to legislation enacted in a non-U.S. jurisdiction in our first quarter. In December 2017, President Trump signed into law H.R. 1, “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018” (this legislation was formerly called the “Tax Cuts and Jobs Act” and is referred to herein as the “U.S. Tax Act”). The U.S. Tax Act provided for significant changes in the U.S. Internal Revenue Code of 1986, as amended. Certain provisions of the U.S. Tax Act were effective during our fiscal year ended November 30, 2018 with all provisions of the U.S. Tax Act effective as of the beginning of our fiscal year beginning December 1, 2018. The U.S. Tax Act contains provisions with separate effective dates but is generally effective for taxable years beginning after December 31, 2017. The U.S. Tax Act creates a new requirement that certain income earned by foreign subsidiaries, known as GILTI, must be included in the gross income of the subsidiary's U.S. shareholder. This provision of the U.S. Tax Act was effective for us for our fiscal year beginning December 1, 2018. The FASB allows an accounting policy election of either recognizing deferred taxes for temporary differences expected to reverse as GILTI in future years or recognizing such taxes as a current period expense when incurred. We have elected to treat GILTI as a current period expense when incurred. The Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 (SAB 118) on December 23, 2017. SAB 118 provided a one-year measurement period from a registrant’s reporting period that includes the U.S. Tax Act’s enactment date to allow registrants sufficient time to obtain, prepare and analyze information to complete the accounting required under ASC 740 Income Taxes. As more fully described in note 12 of notes to consolidated financial statements included in our Annual Report on Form 10-K for the year ended November 30, 2018, we recognized a $301.5 million income tax benefit, net, associated with the U.S. Tax Act during the year ended November 30, 2018. The net tax benefit related to the U.S. Tax Act was provisional and changed during the measurement period, which ended in the quarter ended November 30, 2018, as a result of, among other things, changes in interpretations and assumptions we made, guidance issued and other actions taken as a result of the U.S. Tax Act different from that previously assumed. During the three months ended May 31, 2018, there was no change to the $297.9 million provisional net benefit recognized in the first quarter of 2018 related to the U.S. Tax Act, as described below. Beginning on January 1, 2018, the U.S. Tax Act lowered the U.S. corporate income tax rate from 35% to 21% on our U.S. earnings from that date and beyond. As of May 31, 2018, we estimated that the revaluation of our U.S. deferred tax assets and liabilities to the 21% corporate tax rate reduced our net U.S. deferred income tax liability by $376.5 million and we reflected that amount as a reduction in our income tax expense for the six months ended May 31, 2018. The U.S. Tax Act imposed a one-time transition tax on post-1986 earnings of non-U.S. affiliates that had not been repatriated for purposes of U.S. federal income tax, with those earnings taxed at rates of 15.5% for earnings reflected by cash and cash equivalent items and 8% for other assets. As of May 31, 2018, we estimated this transition tax to be $78.6 million, including related additional foreign withholding taxes of $6.3 million associated with previously unremitted prior year earnings of certain foreign subsidiaries that are no longer considered indefinitely reinvested, which we have recognized as a component of our income tax expense for the six months ended May 31, 2018. Other than additions for current year tax positions, there were no significant changes to unrecognized tax benefits during the three and six months ended May 31, 2019. |
Earnings Per Share and Stock Issuances |
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| Earnings Per Share, Basic and Diluted [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| EARNINGS PER SHARE AND STOCK ISSUANCES | EARNINGS PER SHARE AND STOCK ISSUANCE The following table sets forth the reconciliation of average shares outstanding (in millions):
The following table sets forth the stock options and RSUs for the three and six months ended May 31, 2019 and 2018 that were not considered in our earnings per share calculation since they were anti-dilutive (in millions):
The following table sets forth the common stock activity for the three and six months ended May 31, 2019 and 2018 (in millions):
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Accumulated Other Comprehensive Income (Loss) |
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| Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | ACCUMULATED OTHER COMPREHENSIVE LOSS The following table sets forth the components of accumulated other comprehensive income (loss), net of tax, where applicable (in millions):
In conjunction with the adoption of ASU No. 2018-02 Income Statement – Reporting Comprehensive Income (Topic 220) –Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, we reclassified $20.9 million of other comprehensive income, primarily associated with pension and other postretirement plans, from accumulated other comprehensive income to retained earnings effective December 1, 2017. The following table sets forth the amounts reclassified from accumulated other comprehensive income (loss) and into consolidated net income for the three and six months ended May 31, 2019 and 2018 (in millions):
(1) This accumulated other comprehensive income (loss) component is included in the computation of total pension expense and other postretirement benefits expense (refer to note 6 for additional details).
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Business Segments |
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| Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BUSINESS SEGMENTS | BUSINESS SEGMENTS We operate in two business segments: consumer and flavor solutions. The consumer and flavor solutions segments manufacture, market and distribute spices, seasoning mixes, condiments and other flavorful products throughout the world. Our consumer segment sells to retail outlets, including grocery, mass merchandise, warehouse clubs, discount and drug stores under the “McCormick” brand and a variety of brands around the world, including “French’s”, “Frank’s RedHot”, “Lawry’s”, “Zatarain’s”, “Simply Asia”, “Thai Kitchen”, “Ducros”, “Vahine”, “Schwartz”, “Club House”, “Kamis”, “Kohinoor”, “DaQiao”, “Drogheria & Alimentari”, “Stubb's”, and “Gourmet Garden”. Our flavor solutions segment sells to food manufacturers and the foodservice industry both directly and indirectly through distributors. In each of our segments, we produce and sell many individual products which are similar in composition and nature. With their primary attribute being flavor, we regard the products within each of our segments to be fairly homogenous. It is impracticable to segregate and identify sales and profits for each of these individual product lines. We measure segment performance based on operating income excluding special charges, as this activity is managed separately from the business segments, and transaction and integration expenses related to our acquisition of RB Foods, as these expenses are similarly managed separately from the business segments. These transaction and integration expenses excluded from our segment performance measure include the amortization of the acquisition-date fair value adjustment of inventories that is included in cost of goods sold, costs directly associated with that acquisition and costs associated with integrating the RB Foods business. Although the segments are managed separately due to their distinct distribution channels and marketing strategies, manufacturing and warehousing are often integrated to maximize cost efficiencies. We do not segregate jointly utilized assets by individual segment for internal reporting, evaluating performance or allocating capital. Because of manufacturing integration for certain products within the segments, products are not sold from one segment to another but rather inventory is transferred at cost. Intersegment sales are not material.
A reconciliation of operating income excluding special charges and, for the three months ended February 28, 2018, transaction and integration expenses, to operating income is as follows (in millions):
The following table sets forth our net sales, by geographic area, for the three and six months ended May 31, 2019 and 2018 (in millions):
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Accounting Policies (Policies) |
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| Basis of presentation | 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. We made an immaterial adjustment to the accompanying Condensed Consolidated Statement of Comprehensive Income that decreased both currency translation adjustments as well as comprehensive income by $1.5 million and $1.2 million for the three and six months ended May 31, 2018, respectively, to conform to the presentation included in the Consolidated Statement of Comprehensive Income included in our Annual Report on Form 10-K for the year ended November 30, 2018. The results of consolidated operations for the six-month period ended May 31, 2019 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, 2018. Significant Accounting Policies The following significant accounting policies were updated in 2019 to reflect changes upon our adoption of ASU No. 2014-09 Revenue from Contracts with Customers (Topic 606) (the “Revenue Recognition ASU”), ASU No. 2017-07 Compensation – Retirement Benefits (Topic 715) – Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (the “Pension ASU”), and ASU No. 2017-12 Derivatives and Hedging (Topic 815) – Targeted Improvements to Accounting for Hedging Activities. Revenue Recognition We manufacture, market and distribute spices, seasoning mixes, condiments and other flavorful products to the entire food industry – retailers, food manufacturers and foodservice businesses. We recognize sales as performance obligations are fulfilled when control passes to the customer. Revenues are recorded net of trade and sales incentives and estimated product returns. Known or expected pricing or revenue adjustments, such as trade discounts, rebates or returns, are estimated at the time of sale. Any taxes collected on behalf of government authorities are excluded from net sales. We account for product shipping and handling as fulfillment activities with costs for these activities recorded within cost of goods sold. Amounts billed and due from our customers are classified as accounts receivable on the balance sheet and require payment on a short-term basis. Our allowance for doubtful accounts represents our estimate of probable non-payments and credit losses in our existing receivables, as determined based on a review of past due balances and other specific account data. Performance Obligations Our revenues primarily result from contracts or purchase orders with customers, which are generally short-term in nature. The Company assesses the goods and services promised in its customers’ contracts or purchase orders and identifies a performance obligation for each promise to transfer a good or service (or bundle of goods or services) that is distinct. To identify the performance obligations, the Company considers all the goods or services promised, whether explicitly stated or implied based on customary business practices. Significant Judgments Sales are recorded net of trade and sales incentives and estimated product returns. Known or expected pricing or revenue adjustments, such as trade discounts, rebates or returns, are estimated at the time of sale. Where applicable, future reimbursements are estimated based on a combination of historical patterns and future expectations regarding these programs. Key sales terms, such as pricing and quantities ordered, are established on a frequent basis such that most customer arrangements and related incentives have a one-year or shorter duration. Estimates that affect revenue, such as trade incentives and product returns, are monitored and adjusted each period until the incentives or product returns are realized. The adjustments recognized during the three and six months ended May 31, 2019 and 2018 resulting from updated estimates of revenue for prior year product sales were not significant. The unsettled portion remaining in accrued liabilities for these activities was $119.0 million, $135.5 million and $142.1 million at May 31, 2019, May 31, 2018 and November 30, 2018, respectively. Other In each of our segments, we produce and sell many individual products which are similar in composition and nature. With their primary attribute being flavor, we regard the products within each of our segments to be fairly homogenous. Our business segments each sell to similar channels and customers. See note 11 for revenues reported by business segment, which is consistent with how we organize and manage our operations, and for revenues reported by geographic region. Practical Expedients As more fully described below, we adopted the Revenue Recognition ASU in the first quarter of 2019 using the full retrospective method, including applying the following policy elections and practical expedients upon that adoption:
Shipping and Handling Shipping and handling costs on our products sold to customers related to activities that occur before the customer has obtained control of a good are included in cost of goods sold in the consolidated income statement. Brand Marketing Support Total brand marketing support costs are included in selling, general and administrative expense in the consolidated income statement. Brand marketing support costs include advertising and promotions but exclude trade funds paid to customers for such activities. All trade funds paid to customers are reflected in the consolidated income statement as a reduction of net sales. Promotion costs include public relations, shopper marketing, social marketing activities, general consumer promotion activities and depreciation of assets used in these promotional activities. Advertising costs include the development, production and communication of advertisements through television, digital, print and radio. Development and production costs are expensed in the period in which the advertisement is first run. All other costs of advertising are expensed as incurred. Derivative Instruments We record all derivatives on the balance sheet at fair value. The fair value of derivative instruments is recorded in other current assets, other assets, other accrued liabilities or other liabilities. Gains and losses representing either hedge ineffectiveness, hedge components excluded from the assessment of effectiveness, or hedges of translational exposure are recorded in the consolidated income statement in other income (expense), net or interest expense. In the consolidated cash flow statement, settlements of cash flow and fair value hedges are classified as an operating activity; settlements of all other derivative instruments, including instruments for which hedge accounting has been discontinued, are classified consistent with the nature of the instrument. Cash flow hedges. Qualifying derivatives are accounted for as cash flow hedges when the hedged item is a forecasted transaction. Gains and losses on these instruments are recorded in accumulated other comprehensive income (loss) until the underlying transaction is recorded in earnings. When the hedged item is realized, gains or losses are reclassified from accumulated other comprehensive income (loss) to the consolidated income statement on the same line item as the underlying transaction. Fair value hedges. Qualifying derivatives are accounted for as fair value hedges when the hedged item is a recognized asset, liability, or firm commitment. Gains and losses on these instruments are recorded in earnings, offsetting gains and losses on the hedged item. Net investment hedges. Qualifying derivative and nonderivative financial instruments are accounted for as net investment hedges when the hedged item is a nonfunctional currency investment in a subsidiary. Gains and losses on these instruments are included in foreign currency translation adjustments in accumulated other comprehensive income (loss).
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| Accounting and disclosure charges | Accounting Pronouncements Adopted in 2019 We elected to adopt the Revenue Recognition ASU on a full retrospective basis. We adopted the Pension ASU on a retrospective basis as required by the standard. These new accounting standards are summarized below. In May 2014, the FASB issued the Revenue Recognition ASU, which supersedes previously existing revenue recognition guidance. Under this new guidance, companies apply a principles-based five-step model to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration for which the company expects to be entitled to in exchange for those goods or services. The model encompasses the following steps: (1) determination of whether a contract - an agreement between two or more parties that creates legally enforceable rights and obligations - exists; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when (or as) the performance obligation is satisfied. The new revenue recognition guidance allows companies to account for shipping and handling activities that occur before and after the customer has obtained control of a product as fulfillment activities rather than as a promised service; and we applied this accounting policy election. In addition, the new revenue guidance requires that customer payments be accounted for as a reduction in the transaction price unless the payment to a customer is in exchange for a distinct good or service. The adoption of this standard did not have and is not expected to have an effect on the timing of our revenue recognition. Upon adoption of the Revenue Recognition ASU in fiscal 2019, we made the following changes to our revenue recognition accounting policy and disclosure practices. We classify shipping and handling expenses as a component of cost of goods sold, rather than our prior practice of recording these costs as a component of selling, general and administrative expense. Also, we classify all payments to direct and indirect customers, including certain trade funds used for cooperative advertising and displays, as a reduction of revenue. Prior to our adoption of the Revenue Recognition ASU, we presented certain of those payments as brand marketing support costs and included these payments as a component of selling, general and administrative expense. There was no effect on operating income, net income, or basic and diluted earnings per share upon our adoption of the Revenue Recognition ASU in 2019. In March 2017, the FASB issued the Pension ASU. This guidance revises how employers that sponsor defined benefit pension and other postretirement plans present the net periodic benefit cost in their income statement and requires that the service cost component of net periodic benefit cost be presented in the same income statement line items as other employee compensation costs from services rendered during the period. Of the components of net periodic benefit cost, only the service cost component is eligible for asset capitalization. The other components of the net periodic benefit cost must be presented separately from the line items that include the service cost and outside of any subtotal of operating income on the income statement. The new standard was adopted as of December 1, 2018 and has been applied on a retrospective basis. Adoption of the new standard solely impacts classification within our consolidated income statement, with no change to net income or basic and diluted earnings per share. The adoption of the Revenue Recognition ASU and the Pension ASU, on a retrospective basis, impacted our previously reported results for the three and six months ended May 31, 2018 as follows:
We adopted the following new accounting standards in the first six months of 2019 on a prospective basis: In August 2017, the FASB issued ASU No. 2017-12 Derivatives and Hedging (Topic 815)—Targeted Improvements to Accounting for Hedging Activities. This guidance eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires, for qualifying hedges, the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The guidance also modifies the accounting for components excluded from the assessment of hedge effectiveness, eases documentation and assessment requirements and modifies certain disclosure requirements. The new standard is effective for the first quarter of our fiscal year ending November 30, 2020, with early adoption permitted in any interim period or fiscal year before the effective date. We have elected to adopt this guidance effective December 1, 2018. There was no material impact to our financial statements upon adoption. In October 2016, the FASB issued ASU No. 2016-16 Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory. The ASU eliminates the deferral of the tax effects of intra-entity asset transfers other than inventory. As a result, the tax expense from the intercompany sale of assets, other than inventory, and associated changes to deferred taxes will be recognized when the sale occurs even though the pre-tax effects of the transaction have not been recognized. This new standard was effective beginning in fiscal year 2019 and is required to be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of December 1, 2018, the first day of our fiscal year 2019. There was no cumulative-effect adjustment upon adoption. As more fully disclosed in note 8, during the six months ended May 31, 2019, we recognized a discrete tax benefit of $16.2 million under the provisions of this standard. The on-going effect of the adoption of the standard will depend on the nature and amount of future transactions. In January 2017, the FASB issued ASU No. 2017-01 Business Combinations (Topic 805)—Clarifying the Definition of a Business. This guidance changes the definition of a business to assist entities in evaluating when a set of transferred assets and activities constitutes a business. The guidance requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities is not a business. The guidance also requires a business to include at least one substantive process and narrows the definition of outputs by more closely aligning it with how outputs are described in the Revenue Recognition ASU. The new standard is effective for the first quarter of our fiscal year ending November 30, 2019. We currently cannot estimate the impact that adoption of this ASU will have on our financial statements and related disclosures as its application is dependent on the facts and circumstances of individual transactions. In August 2018, the U.S. Securities and Exchange Commission ("SEC") adopted the final rule under SEC Release No. 33-10532 Disclosure Update and Simplification, to eliminate or modify certain disclosure rules that are redundant, outdated, or duplicative of U.S. GAAP or other regulatory requirements. Among other changes, the amendments eliminated the annual requirement to disclose the high and low trading prices of our common stock. In addition, the amendments provide that disclosure requirements related to the analysis of shareholders' equity are expanded for interim financial statements. An analysis of the changes in each caption of shareholders' equity presented in the balance sheet must be provided in a note or separate statement, as well as the amount of dividends per share for each class of shares, and we have provided this disclosure beginning in the first quarter of 2019. Recently Issued Accounting Pronouncements — Pending Adoption In January 2017, the FASB issued ASU No. 2017-04 Intangibles—Goodwill and Other Topics (Topic 350)—Simplifying the Test for Goodwill Impairment. This guidance eliminates the requirement to calculate the implied fair value of goodwill of a reporting unit to measure a goodwill impairment charge. Instead, a company will record an impairment charge based on the excess of a reporting unit's carrying amount over its fair value. The new standard will be effective for the first quarter of our fiscal year ending November 30, 2021. Early adoption is permitted for all entities for annual and interim goodwill impairment testing dates after January 1, 2017. While we are still evaluating the timing of adoption, we currently do not expect this guidance to have a material impact on our financial statements. In February 2016, the FASB issued ASU No. 2016-02 Leases (Topic 842). This guidance revises existing practice related to accounting for leases under Accounting Standards Codification Topic 840 Leases (ASC 840) for both lessees and lessors. Our leases principally relate to: (i) certain real estate, including that related to a number of administrative, distribution and manufacturing locations, and, beginning in May 2018, to our new headquarters building; (ii) certain machinery and equipment, including a corporate airplane and automobiles; and (iii) certain software. The new guidance in ASU No. 2016-02 requires lessees to recognize a right-of-use asset and a lease liability for virtually all leases (other than leases that meet the definition of a short-term lease). The lease liability will be equal to the present value of lease payments and the right-of-use asset will be based on the lease liability, subject to adjustment such as for initial direct costs. For income statement purposes, the new standard retains a dual model similar to ASC 840, requiring leases to be classified as either operating or finance. For lessees, operating leases will result in straight-line expense (similar to current accounting by lessees for operating leases under ASC 840) while finance leases will result in a front-loaded expense pattern (similar to current accounting by lessees for capital leases under ASC 840). In July 2018, the FASB issued ASU No. 2018-11 Leases (Topic 842) Targeted Improvements which provides an additional transition method that allows entities to initially apply the new standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption without restating prior periods. The new standard will be effective for the first quarter of our fiscal year ending November 30, 2020. We intend to adopt the requirements of the new standard via a cumulative-effect adjustment without restating prior periods. We are currently in the process of evaluating our existing lease portfolio, including accumulating all of the necessary information required to properly account for leases under the new standard. Additionally, we are implementing new software to assist in the accounting and are evaluating changes to our processes and internal controls to ensure we meet the standard’s reporting and disclosure requirements. Based on our assessment to date, we expect that the adoption of ASU No. 2016-02 will not have a material effect on our results of operations but will result in an increase in lease-related assets and liabilities recognized in our Consolidated Balance Sheets. We are unable to quantify the amount of that increase at this time.
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Accounting Policies (Tables) |
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| Schedule of Change in Accounting Policy | he adoption of the Revenue Recognition ASU and the Pension ASU, on a retrospective basis, impacted our previously reported results for the three and six months ended May 31, 2018 as follows:
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Acquisitions Acquisitions (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||
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May 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||
| Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||
| Schedule of Business Acquisitions, by Acquisition | The following are the transaction and integration expenses related to the RB Foods acquisition that we have recorded for the three and six months ended May 31, 2018 (in millions):
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Special Charges (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting Information [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Charges Summary [Table Text Block] | The following is a summary of special charges recognized in the three and six months ended May 31, 2019 and 2018 (in millions):
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| Special Charges Summary by Segment [Table Text Block] | The following is a breakdown by business segments of special charges for the three and six months ended May 31, 2019 and 2018 (in millions):
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Financial Instruments (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair values of derivative instruments on balance sheet | The following table discloses the notional amount and fair values of derivative instruments on our balance sheet (in millions):
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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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| Fair Value Hedging | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 consolidated income statement for the three and six-month periods ended May 31, 2019 and 2018 (in millions):
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| Cash Flow Hedging | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Impact of fair value and cash flow hedges on other comprehensive income, accumulated other comprehensive income and income statement |
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Fair Value Measurements (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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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| Fair Value, by Balance Sheet Grouping | The following table sets forth the carrying amounts and fair values of our long-term debt (including the current portion thereof) at May 31, 2019, May 31, 2018 and November 30, 2018 (in millions):
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Employee Benefit and Retirement Plans (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of defined benefit plans disclosures | The following table presents the components of our pension (income) expense of the defined benefit plans for the three months ended May 31, 2019 and 2018 (in millions):
The following table presents the components of our pension (income) expense of the defined benefit plans for the six months ended May 31, 2019 and 2018 (in millions):
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| Schedule of costs of retirement plans | The following table presents the components of our other postretirement benefits (income) expense (in millions):
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Stock-Based Compensation (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Based Compensation in Selling, General and Administrative Expense | The following table sets forth the stock-based compensation expense recorded in selling, general and administrative (SG&A) expense (in millions):
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| Summary of Option Activity | The following is a summary of our stock option activity for the six months ended May 31, 2019 and 2018:
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| Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block] |
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| Schedule of Share-based Compensation, Restricted Stock Units Award Activity | The following is a summary of our RSU activity for the six months ended May 31, 2019 and 2018:
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| Schedule of Share Based Compensation, Performance Shares, Activity | The following is a summary of our LTPP activity for the six months ended May 31, 2019 and 2018:
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Earnings Per Share and Stock Issuances (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
May 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share, Basic and Diluted [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reconciliation of average shares outstanding | The following table sets forth the reconciliation of average shares outstanding (in millions):
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| Anti-dilutive securities not considered in earnings per share calculation | The following table sets forth the stock options and RSUs for the three and six months ended May 31, 2019 and 2018 that were not considered in our earnings per share calculation since they were anti-dilutive (in millions):
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| Common stock activity | The following table sets forth the common stock activity for the three and six months ended May 31, 2019 and 2018 (in millions):
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Accumulated Other Comprehensive Income (Loss) (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of accumulated other comprehensive income (loss) | The following table sets forth the components of accumulated other comprehensive income (loss), net of tax, where applicable (in millions):
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| Reclassification out of Accumulated Other Comprehensive Income | The following table sets forth the amounts reclassified from accumulated other comprehensive income (loss) and into consolidated net income for the three and six months ended May 31, 2019 and 2018 (in millions):
(1) This accumulated other comprehensive income (loss) component is included in the computation of total pension expense and other postretirement benefits expense (refer to note 6 for additional details).
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Business Segments (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business segments |
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| Reconciliation of Operating Profit (Loss) from Segments to Consolidated | A reconciliation of operating income excluding special charges and, for the three months ended February 28, 2018, transaction and integration expenses, to operating income is as follows (in millions):
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| Schedule of Disclosure on Geographic Areas | The following table sets forth our net sales, by geographic area, for the three and six months ended May 31, 2019 and 2018 (in millions):
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Accounting Policies Accounting Policies - Additional Information (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
May 31, 2019 |
May 31, 2018 |
May 31, 2019 |
May 31, 2018 |
Nov. 30, 2018 |
|
| Summary Of Significant Accounting Policies [Line Items] | |||||
| Currency translation adjustments | $ 58.6 | $ 88.4 | $ 21.9 | $ 26.4 | |
| Comprehensive Income (Loss), Net of Tax, Attributable to Parent | 94.1 | 38.8 | 275.0 | 538.7 | |
| Sales Allowances Current | $ 119.0 | 135.5 | $ 119.0 | 135.5 | $ 142.1 |
| New Accounting Pronouncement or Change in Accounting Principle, Effect of Adoption, Quantification | 20.9 | ||||
| Adjustment | |||||
| Summary Of Significant Accounting Policies [Line Items] | |||||
| Currency translation adjustments | $ 1.5 | $ 1.2 | |||
Acquisitions - Business Acquisitions (Details) - RB Foods - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | 12 Months Ended | |
|---|---|---|---|---|
May 31, 2018 |
May 31, 2018 |
Nov. 30, 2017 |
Aug. 31, 2017 |
|
| Business Acquisition [Line Items] | ||||
| Payments to Acquire Businesses, Net of Cash Acquired | $ 4,210.0 | |||
| Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Cash and Equivalents | $ 24.3 | |||
| Working Capital Adjustments | $ 4.2 | |||
| Business Combination, Separately Recognized Transactions, Additional Disclosures, Acquisition Cost Expensed | $ 7.8 | $ 16.5 |
Acquisitions - Cost Expensed (Details) - RB Foods - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended |
|---|---|---|
May 31, 2018 |
May 31, 2018 |
|
| Business Acquisition [Line Items] | ||
| Transaction expenses included in cost of goods sold | $ 0.0 | $ 0.2 |
| Integration expenses | 7.8 | 16.3 |
| Total | $ 7.8 | $ 16.5 |
Financial Instruments - Impact of Fair Value Hedges on Other Comprehensive Income, Accumulated Other Comprehensive Income and Income Statement (Details) - Fair Value Hedging - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
May 31, 2019 |
May 31, 2018 |
May 31, 2019 |
May 31, 2018 |
|
| Interest Expense | Interest rate contracts | ||||
| Derivative Instruments, Gain (Loss) [Line Items] | ||||
| Interest income (expense) | $ 0.2 | $ 0.1 | $ 0.4 | $ 0.2 |
| Other Income | Foreign exchange contracts | ||||
| Derivative Instruments, Gain (Loss) [Line Items] | ||||
| Foreign Currency Transaction Gain (Loss), Realized | 1.0 | (0.4) | 2.7 | (2.6) |
| Other Income | Loans Payable | ||||
| Derivative Instruments, Gain (Loss) [Line Items] | ||||
| Foreign Currency Transaction Gain (Loss), Realized | $ (1.4) | $ 0.2 | $ (3.2) | $ 2.2 |
Employee Benefit And Retirement Plans - Additional Information (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|
May 31, 2019 |
May 31, 2018 |
May 31, 2019 |
May 31, 2018 |
Nov. 30, 2018 |
|
| Defined Benefit Plan Disclosure [Line Items] | |||||
| Other income, net | $ 6.3 | $ 4.6 | $ 12.4 | $ 8.7 | |
| Defined Benefit Plan, Accumulated Benefit Obligation, (Increase) Decrease for Settlement and Curtailment | 17.5 | ||||
| Defined Benefit Plan, Accumulated Other Comprehensive Income (Loss), Gain (Loss), before Tax | 18.0 | 18.0 | |||
| Payment for Pension Benefits | 4.5 | 7.7 | $ 13.5 | ||
| Pension and other postretirement costs | 119.3 | 157.6 | 119.3 | 157.6 | $ 117.8 |
| Foreign Plan [Member] | |||||
| Defined Benefit Plan Disclosure [Line Items] | |||||
| Defined Benefit Plan, Accumulated Benefit Obligation, (Increase) Decrease for Settlement and Curtailment | 17.5 | ||||
| Accounting Standards Update 2017-07 [Member] | |||||
| Defined Benefit Plan Disclosure [Line Items] | |||||
| Other income, net | $ (4.4) | $ (3.1) | $ (8.8) | $ (5.7) | |
Employee Benefit and Retirement Plans - Components of Other Postretirement Benefit Expenses (Details) - Other Postretirement Benefit Plan - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
May 31, 2019 |
May 31, 2018 |
May 31, 2019 |
May 31, 2018 |
|
| Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||||
| Service cost | $ 0.5 | $ 0.6 | $ 1.0 | $ 1.2 |
| Interest costs | 0.6 | 0.6 | 1.3 | 1.2 |
| Amortization of prior service costs | (2.1) | (2.1) | (4.3) | (4.3) |
| Defined Benefit Plan, Amortization of Gain (Loss) | 0.2 | 0.0 | 0.4 | 0.0 |
| Total other postretirement expense | $ (1.2) | $ (0.9) | $ (2.4) | $ (1.9) |
Stock-Based Compensation - Additional Information (Detail) $ / shares in Units, $ in Millions |
6 Months Ended | |
|---|---|---|
|
May 31, 2019
USD ($)
award_type
$ / shares
|
May 31, 2018
USD ($)
$ / shares
|
|
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
| Granted, Weighted-Average Grant-Date Fair Value | $ / shares | $ 27.51 | $ 20.30 |
| Number of stock-based compensation award types | award_type | 3 | |
| Intrinsic value for all options outstanding | $ 203.3 | |
| Intrinsic value for exercisable options | 179.9 | |
| Total Intrinsic Value of all options exercised | $ 59.6 | $ 18.8 |
Stock-Based Compensation - Selling, General and Administrative Expense (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
May 31, 2019 |
May 31, 2018 |
May 31, 2019 |
May 31, 2018 |
|
| Share-based Compensation [Abstract] | ||||
| Total stock-based compensation expense | $ 16.1 | $ 11.8 | $ 22.8 | $ 16.1 |
Earnings Per Share and Stock Issuances - Additional Information (Details) $ in Millions |
May 31, 2019
USD ($)
|
|---|---|
| Class of Stock [Line Items] | |
| Stock repurchase program, remaining authorized repurchase amount | $ 67.2 |
| Stock repurchase program, authorized amount | $ 600.0 |
Earnings Per Share and Stock Issuances - Reconciliation of Average Shares Outstanding (Details) - shares shares in Millions |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
May 31, 2019 |
May 31, 2018 |
May 31, 2019 |
May 31, 2018 |
|
| Earnings Per Share, Basic and Diluted [Abstract] | ||||
| Average shares outstanding - basic (shares) | 132.3 | 131.4 | 132.3 | 131.3 |
| Effect of dilutive securities: [Abstract] | ||||
| Stock options/Restricted Stock Units (RSUs)/MTIP | 1.6 | 1.5 | 1.6 | 1.6 |
| Average shares outstanding-diluted | 133.9 | 132.9 | 133.9 | 132.9 |
Earnings Per Share and Stock Issuances - Antidilutive Securities not Considered in Earnings Per Share Calculation (Details) - shares shares in Millions |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
May 31, 2019 |
May 31, 2018 |
May 31, 2019 |
May 31, 2018 |
|
| Earnings Per Share, Basic and Diluted [Abstract] | ||||
| Anti-dilutive securities | 0.2 | 0.5 | 0.1 | 0.4 |
Earnings Per Share and Stock Issuances - Common Stock Activity (Details) - shares shares in Millions |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
May 31, 2019 |
May 31, 2018 |
May 31, 2019 |
May 31, 2018 |
|
| Stock Options And Restricted Stock Units | ||||
| Employee Stock Purchase Plan [Line Items] | ||||
| Shares issued, net of shares withheld for taxes, under stock options, RSUs, LTPP and employee stock purchase plans | 0.7 | 0.2 | 0.8 | 0.5 |
| Share Repurchase Program | ||||
| Employee Stock Purchase Plan [Line Items] | ||||
| Shares repurchased under the stock repurchase program | 0.2 | 0.1 | 0.4 | 0.3 |
Business Segments - Additional Information (Detail) $ in Millions |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
|
May 31, 2019
USD ($)
|
May 31, 2018
USD ($)
|
May 31, 2019
USD ($)
segment
|
May 31, 2018
USD ($)
|
|
| Revenues | $ 1,301.9 | $ 1,301.3 | $ 2,533.4 | $ 2,516.7 |
| Number of operating segments | segment | 2 | |||
| Europe Middle East And Africa [Member] | ||||
| Revenues | 249.4 | 260.1 | $ 492.2 | 511.6 |
| Asia Pacific [Member] | ||||
| Revenues | 156.4 | 162.7 | 338.1 | 350.2 |
| Americas [Member] | ||||
| Revenues | $ 896.1 | $ 878.5 | $ 1,703.1 | $ 1,654.9 |
Business Segments (Detail) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
May 31, 2019 |
May 31, 2018 |
May 31, 2019 |
May 31, 2018 |
|
| Segment Reporting Information [Line Items] | ||||
| Revenues | $ 1,301.9 | $ 1,301.3 | $ 2,533.4 | $ 2,516.7 |
| Operating income | 208.1 | 188.6 | 405.0 | 369.7 |
| Less: Special charges | 7.1 | 8.4 | 9.2 | 10.6 |
| Less: Transaction and integration expenses | 0.0 | 7.8 | 0.0 | 16.5 |
| Operating income excluding special charges | 215.2 | 204.8 | 414.2 | 396.8 |
| Income from unconsolidated operations | 9.5 | 7.4 | 19.6 | 15.5 |
| Consumer | ||||
| Segment Reporting Information [Line Items] | ||||
| Revenues | 764.1 | 768.8 | 1,509.0 | 1,513.4 |
| Operating income | 132.9 | 118.5 | 266.7 | 242.2 |
| Less: Special charges | 4.9 | 5.4 | 6.4 | 6.4 |
| Less: Transaction and integration expenses | 5.2 | 11.0 | ||
| Operating income excluding special charges | 137.8 | 129.1 | 273.1 | 259.6 |
| Income from unconsolidated operations | 7.5 | 6.0 | 15.4 | 13.1 |
| Flavor Solutions | ||||
| Segment Reporting Information [Line Items] | ||||
| Revenues | 537.8 | 532.5 | 1,024.4 | 1,003.3 |
| Operating income | 75.2 | 70.1 | 138.3 | 127.5 |
| Less: Special charges | 2.2 | 3.0 | 2.8 | 4.2 |
| Less: Transaction and integration expenses | 2.6 | 5.5 | ||
| Operating income excluding special charges | 77.4 | 75.7 | 141.1 | 137.2 |
| Income from unconsolidated operations | 2.0 | 1.4 | 4.2 | 2.4 |
| Americas [Member] | ||||
| Segment Reporting Information [Line Items] | ||||
| Revenues | 896.1 | 878.5 | 1,703.1 | 1,654.9 |
| Europe Middle East And Africa [Member] | ||||
| Segment Reporting Information [Line Items] | ||||
| Revenues | 249.4 | 260.1 | 492.2 | 511.6 |
| Asia Pacific [Member] | ||||
| Segment Reporting Information [Line Items] | ||||
| Revenues | $ 156.4 | $ 162.7 | $ 338.1 | 350.2 |
| Less: Special charges | $ 0.7 | |||