Despite rising commodity, packaging and energy costs, spice manufacturer and distributor McCormick & Company (NYSE: MKC) posted good 4Q and FY2007 earnings results reported last week. Fourth sales increased 7%, with the bulk of that coming from international markets, especially China which posted 20% increase in sales. EPS increased 12% to $1.92, beyond the high end of the previous forecast, and the company raised its dividend 10%.

McCormick & Company is doing all it can to improve and solidify its financial position. Several years ago, the company instituted a restructuring and cost cutting initiative that has resulted in annual savings approaching $50 million. McCormick is simplifying its supply lines, reducing inventories and introducing a new gravity-fed merchandising systems for grocery store shelves.

McCormick is discontinuing lower profit margin products and making acquisitions with high margin potential. Recent acquisitions include Simply Asia Food and Lawry's. MicCormick is also growing its Hispanic spices product line and preparing to introduce a line of health and wellness products.

The only fly in the ointment is that McCormick increased tis debt level to buy back $157 million worth of stock and pay out $104 million individends. Given the slowdown in consumer spending, its unknown severity and duration, it makes little sense for a company to take on more debt. The stock currently trades in the mid-$30s.