McCormick & Company Earnings Call Nuggets: Core Ingredient Cost Outlook and Price Points
Core Ingredient Cost Outlook
David Driscoll – Citigroup: Two questions, one on the cost outlook, the inflation outlook, and one on that comment about 2014 tax and retirement costs. On the cost outlook, I believe what you wrote there was, in 2014, you’re looking for low-single-digit material cost increases. I guess, I just wanted to get your impressions that if we have a deflation in the grain markets, potentially affecting much of the grocery store, how do you see your business in 2014, in comparison to what might be many other categories, in fact, seeing price declines while you guys are actually having to take pricing. So that’s the first one?
Alan D. Wilson – Chairman, President and CEO: Our commodities certainly are different. Most of our products are grown outside the U.S. in areas that are within a few degrees of the equator and there is a lot of different dynamics that impact that, weather, like monsoons in India can impact some of our costs. We are certainly not expecting cost declines across our core spice and seasonings ingredients. We may see some that impact more of our Industrial business and things like grains, but we are going to be a little counter to what you may be seeing in some of the other commodities. I’ll let Gordon take the other part of the question.
David Driscoll – Citigroup: Second question was just on 2014 tax and retirement costs. It seemed like from the comments, both from the lump sum payment, like I’m struggling to understand why that’s not favorable to the retirement cost picture going forward in 2014. The tax rate, it doesn’t seem like it should be moving up much. So when you make this comment that it’s less of a headwind, that still suggest that it is a headwind, it’s just less of a headwind. But kind of why is it? It doesn’t seem like it perhaps should be.
Gordon M. Stetz – EVP and CFO: David, just to focus first on the retirement going forward, what we are seeing when we say less of a headwind is, really we’re speaking to the fact that this year’s increase in the operating income expense impact of that was a function of the interest rate environment, primarily where rates declined at the end of last year when we established our valuation. Our expectation given the rate environment is certainly that rates and as well as everyone knows this on the call, rates shouldn’t decline any further. So at a minimum, we would expect that our expense not to go up like it did this year. Then, if it is a favorability, it will be purely a function of what the rate environment is at November 30 when we establish the valuation date. To your point on tax rate, again, the favorable rate that we experienced in 2012, was primarily a function of a transaction we did, which was cash repatriation, which we did not duplicate this year and do not anticipate a similar transaction at this stage, as we look into 2014. So again, we’re not looking for any unfavorable comparison related to the tax rate as we head into 2014, as we had experienced in 2013.
Ken Goldman – JPMorgan: Alan, if I heard you correctly, I may not have. I thought you said, you mentioned some success in reducing opening price points at certain retailers and that this is encouraging consumers to trade up to private label with branded alternative. So, again, I may have not heard that right, but it’s often that a company talks about trading consumers up to private label, so maybe could you give some color there?
Alan D. Wilson – Chairman, President and CEO: Yes, sure. What opening price point in the spice business and has been there for a long time where these products, we have a number of these brands like Fifth Seasons and Spice Classics and a couple of other controlled brands that would show up actually in our branded sales that sell between $0.50 and $1 and a number – some retailers, some major retailers have reduced their reliance on those. What’s happening is, that’s improving the category sales and profits for the retailer a lot of those are shifting into private label, but that’s a good thing for both us and them.
Ken Goldman – JPMorgan: Then when you look at the change in your Consumer performance in the Americas from the beginning of the quarter to the end. I know you touched on this a little bit, but can you just again add some color as to what you maybe think some of the biggest drivers were of that improvement (inter-quarter)?
Alan D. Wilson – Chairman, President and CEO: I never like to use whether as an excuse, but the early part of June, it was a fairly atypical weather for the early part of the summer, I think that impact that we saw and the reason I can say that with some confidence is because of the impact on grilling items, which is a big part of our summer sales in the U.S. So, I think there was something going on there and we’ve seen it from the releases by retailers and other food manufacturers that the beginning of summer was weaker than I think they expected. We’re encouraged by what we’ve seen later in summer and what we’re seeing early in the fall.
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