McCormick & Co. became the latest company to announce it would use part of its new tax savings to invest in employees, announcing bonuses and hourly wage increases Tuesday.
The company’s announcement came as it reported strong first-quarter results, including sales increases and an improved outlook for the year based on federal tax reform.
“At McCormick, we take a long-term view of the people in our organization,” Lawrence E. Kurzius, chairman, president and CEO of McCormick, said in a statement. “We want McCormick to be a great place for people to come to work and have engaging fulfilling careers.”
For the first quarter, McCormick saw its adjusted income tax rate drop from 28 percent last year to 19 percent this year. The company estimates that for the rest of the year, its adjusted income tax rate will be around 23 percent.
Around 2,000 American-based hourly employees will receive a one-time bonus of $1,000 in May.
McCormick will also accelerate hourly employee wage increases planned for over the next three years that could affect the majority of its hourly workforce in the United States, the company said. About 1,300 employees will receive a second round of raises over the second half of the year.
These wage increases are aimed at providing competitive compensation and increasing the retention of top talent, the company said.
The bonuses and raises will affect employees in locations without an established wage and benefit structure.
Other plans for the tax benefit include strategic investments, paying dividends and reducing debt.
The company did not disclose how much of its tax savings would be allotted to employee compensation and how much to dividends, debt reduction and investments.
McCormick reported a strong first quarter on Tuesday, attributing much of the growth to increased sales following last year’s acquisition of RB Foods. Overall, sales rose 19 percent from the first quarter a year ago.
“McCormick is a global leader in flavor with a broad and advantaged global portfolio which continues to grow and position us to fully meet the demand for flavor around the world,” Kurzius said. “We are focused on growth, delivering against our objectives, strengthening our organization and building the McCormick of the future. Through the execution of our strategies we are becoming even better positioned to drive future growth and are confident in our continued success.”
Earnings per share also increased significantly, up to $3.18 from 74 cents last year. Much of the increase can be attributed to the non-recurring favorable impact of the tax legislation, the company said.
Adjusted earnings per share also increased, from 76 cents to $1, a 32 percent increase.
The company updated its 2018 financial outlook, expecting sales to increase 13 to 15 percent. Overall, McCormick expects earnings per share this year to reach between $6.85 and $6.95. In 2017, earnings per share were $3.72. The company also attributed this increase to the tax overhaul.
Several companies operating in Maryland previously made commitments to give their workers bonuses or increase salaries as a result of the federal tax legislation. Apple, Bank of America, BB&T Bank, SunTrust Bank, PNC, WalMart and Wells Fargo are among the companies that have made commitments.
But these commitments tend to be just a portion of how companies have used the tax savings. Last month, Morgan Stanley estimated that just 13 percent of the tax savings were being spent on worker compensation.
Instead, companies intend to spend 43 percent of the savings on stock buybacks and dividend payments, 19 percent on mergers and acquisitions, 17 percent on capital spending, and 8 percent on balance-sheet repair, the survey reported.