Sparks, Md., Nov. 25 - McCormick & Company, Incorporated today announced that it will record a non-cash impairment charge in the fourth quarter to reduce the value of the Silvo brand. Aside from this adjustment, the Company affirmed its previous guidance on earnings per share for fiscal year 2008.
Acquired in 2004, Silvo is a leading brand of spices, seasonings and specialty foods in The Netherlands. The financial results of this business have been adversely affected by a reduction in retail distribution driven by changing market conditions. The Company has been pursuing an aggressive plan to build sales and profit for the Silvo brand; however, execution of the plan has been below original expectations. As a result of the Company’s annual impairment testing and in accordance with the Financial Accounting Standards Board’s Statement No. 142, “Goodwill and Other Intangible Assets,” the Company will record a non-cash impairment charge of $28 million to $32 million in the fourth quarter, or $0.16 to $0.18 per diluted share after-tax. The final amount of this non-cash charge will be announced in January with the Company’s fiscal year-end financial results.
Alan D. Wilson, President and CEO, stated, “Our team in Europe has worked hard to grow our Silvo brand, but our progress to date has been disappointing and we must reduce the value of this brand on our balance sheet. Silvo continues to be the brand preferred by consumers in The Netherlands, and we, therefore, remain committed to expanding our distribution in this market.”
As a result of the impairment charge, the Company currently expects earnings per share of $1.86 to $1.92 in 2008, compared to $1.73 in 2007. The 2008 earnings per share range includes $0.16 to $0.18 of impairment charges, approximately $0.10 of restructuring charges, and related to the Lawry’s acquisition, a $0.07 gain on the sale of the Season-All business and $0.03 payment to rebalance the debt portfolio. On a non-GAAP basis, which excludes these items and the impact of restructuring charges in 2007, the Company has affirmed its previous outlook for a 9 to 11% growth rate in 2008 earnings per share. Although the Company has been challenged with a more difficult economic environment and less favorable currency exchange rates in the fourth quarter of its fiscal year, its sales have been resilient and its profit performance has been in line with its earlier forecast.
Mr. Wilson stated, “In a difficult economy our business has continued to perform well. As we near our fiscal year-end, we are on-track with our objectives for sales and profit growth from our businesses. We will continue to face challenges in 2009. However, the strength of our brands, the momentum behind marketing and product innovation, improvements in our supply chain and a sound balance sheet give us confidence that McCormick is well-positioned for growth in 2009 and beyond.“