MKC » Topics » Business Segments

These excerpts taken from the MKC 10-K filed Jan 28, 2009.

Business Segments

We operate in two business segments, consumer and industrial. Consistent with market conditions in each segment, our consumer business has a higher overall profit margin than our industrial business. In 2008, the consumer business contributed 58.3% of sales and 81.3% of operating income excluding restructuring and impairment charges. The industrial business contributed 41.7% of sales and 18.7% of operating income excluding restructuring charges.

Across both segments, we have the customer base and product breadth to participate in all types of eating occasions, whether it is cooking at home, dining out, purchasing a quick service meal or enjoying a snack. We offer consumers a range of products from premium to value-priced.

Business Segments

We operate in two business segments: consumer and industrial. The consumer and industrial segments manufacture, market and distribute spices, herbs, seasonings, specialty foods and flavors throughout the world. The 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 Lawry’s, Zatarain’s, Simply Asia, Thai Kitchen, Ducros, Schwartz, Vahiné, Silvo, Club House and Billy Bee. The industrial segment sells to other food manufacturers and the food service 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. It is impractical to segregate and identify revenue and profits for each of these individual product lines.

We measure segment performance based on operating income excluding restructuring charges from our restructuring programs as this activity is managed separately from the business segment. In 2008 we also measured our segments excluding the non-cash impairment charge to reduce the value of the Silvo brand. 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. Asset-related information has been disclosed in the aggregate.

Sales to a customer in our industrial segment accounted for 10% of consolidated sales in 2008 and 2007.

Accounting policies for measuring segment operating income and assets are consistent with those described in note 1, “Summary of Significant Accounting Policies.” Because of manufacturing integration for certain products

 

MCCORMICK & COMPANY 2008 ANNUAL REPORT    61


Notes to Consolidated Financial Statements

within the segments, products are not sold from one segment to another but rather inventory is transferred at cost. Intersegment sales are not material. Corporate assets include cash, deferred taxes, certain investments and fixed assets.

A reconciliation of operating income excluding impairment and restructuring charges (which we use to measure segment profitability) to operating income is as follows:

 

(millions)

   Total

2008

  

Operating income, excluding impairment and restructuring charges

   $ 422.1

Less: Impairment charge

     29.0

Less: Restructuring charges

     16.6
  
      

Operating income

   $ 376.5
      

2007

  

Operating income, excluding restructuring charges

   $ 388.2

Less: Restructuring charges

     34.0
      

Operating income

   $ 354.2
      

2006

  

Operating income, excluding restructuring charges

   $ 353.7

Less: Restructuring charges

     84.1
      

Operating income

   $ 269.6
      

EXCERPTS ON THIS PAGE:

10-K (2 sections)
Jan 28, 2009
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