SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarterly Period Ended August 31, 2005

Commission File Number 001-14920

McCORMICK & COMPANY, INCORPORATED

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code (410) 771-7301

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days.   Yes ý     No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes ý     No o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o     No ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

TABLE OF CONTENTS

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PART I – FINANCIAL INFORMATION

ITEM 1        FINANCIAL STATEMENTS

McCORMICK & COMPANY, INCORPORATED

CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

(in thousands except per share amounts)

See notes to condensed consolidated financial statements.

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McCORMICK & COMPANY, INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEET

(in thousands)

See notes to condensed consolidated financial statements.

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McCORMICK & COMPANY, INCORPORATED

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

(in thousands)

See notes to condensed consolidated financial statements.

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McCORMICK & COMPANY, INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.                             ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of McCormick & Company, Incorporated (the “Company”) have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and notes required by United States generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments, which are of a normal and recurring nature, necessary to present fairly the financial position and the results of operations for the interim periods.

The results of consolidated operations for the three and nine month periods ended August 31, 2005 are not necessarily indicative of the results to be expected for the full year. Historically, the Company’s consolidated sales and net income are lower in the first half of the fiscal year and increase in the second half. The increase in sales and earnings in the second half of the year is mainly due to the U.S. consumer business cycle, where customers purchase more products in the fourth quarter holiday season.

For further information, refer to the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2004.

Accounting and Disclosure Changes

In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment,” a revision of SFAS No. 123, “Accounting for Stock-Based Compensation” and superseding APB Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS No. 123R requires the Company to expense grants made under the stock option and employee stock purchase plan programs. The cost will be recognized over the vesting period of the plans. Pro-forma compensation expense related to stock options subject to accelerated vesting upon retirement is currently recognized over the entire period of actual employment (up to the date of actual retirement). Upon adoption of SFAS No. 123R, compensation expense related to accelerated vesting will be recognized up to the date on which the employee becomes eligible to retire, regardless of the date on which the employee actually retires. If there are no changes made to the Company’s stock option plan, the Company believes this change will have a material effect upon adoption of this statement. The Company is continuing to evaluate the alternatives allowed under the standard, which the Company is required to adopt beginning in the first quarter of 2006.

In March 2005, the FASB issued Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations.” The Interpretation clarifies the accounting for a conditional asset retirement obligation as identified in SFAS No. 143, “Accounting for Asset Retirement

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Obligations.” Interpretation No. 47 is effective for fiscal years ending after December 15, 2005. The Company believes there will be no material effect upon adoption of this statement.

Stock Based Employee Compensation

The Company uses the intrinsic value method as defined in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” to account for stock options issued to employees and directors. Accordingly, no compensation expense is recognized for these stock options since all options granted have an exercise price equal to the market value of the underlying stock on the grant date. The following table illustrates the effect on net income and earnings per common share if the Company had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock Based Compensation.” Pro-forma compensation expense related to stock options subject to accelerated vesting upon retirement is recognized over the period of employment up to the date of actual retirement.

In the first quarter of 2005, the Company changed the valuation model used for estimating the fair value of options granted from a Black-Scholes option pricing model to a binomial lattice pricing model. This change was made because management believes that the binomial lattice pricing model provides a better estimate of fair value of options granted by the Company. The binomial model can incorporate a range of possible outcomes over an option’s term and can be adjusted for changes in certain assumptions over time. The Black-Scholes model assumptions are more constant over time, which is not always consistent with an employee’s exercise behavior. In accordance with APB 20, “Accounting Changes,” this change was made for options granted to employees and directors beginning in the first quarter of 2005. A total of 2.4 million stock options were granted in the first quarter of 2005 at a weighted average fair value of $7.47 per share. The Black-Scholes model would have produced a value that was approximately 15% higher. The three and nine month after-tax decrease in pro forma stock based employee compensation expense as a result of this change was approximately $0.2 million and $0.5 million, respectively, and is reflected in the table below. The 2005 decrease in pro forma stock based employee compensation expense is anticipated to be approximately $1.2 million ($0.8 million after-tax). The employee stock purchase plan continues to be valued using the Black-Scholes model as employee exercise patterns are not relevant to this plan.

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Reclassifications

Certain amounts in the prior year have been reclassified to conform to the current year presentation. The effect of these reclassifications is not material to the condensed consolidated financial statements.

2.                             SPECIAL (CREDITS)/CHARGES

During the fourth quarter of 2001, the Company adopted a plan to further streamline its operations. This plan included the consolidation of several distribution and manufacturing locations, the reduction of administrative and manufacturing positions, and the reorganization of several joint ventures. As of August 31, 2005, the targeted 392 position reductions had taken place.

The total cost of the plan was $32.8 million ($22.3 million after tax). Total cash expenditures were $22.9 million, funded through internally generated funds. The Company does not expect to incur any other costs related to the plan.

The Company recorded special charges under the 2001 restructuring plan of $0.6 million ($0.4 million after tax) for the nine months ended August 31, 2005. The costs recorded in 2005 are the final portion of severance and related benefits associated with position eliminations. During the three and nine months ended August 31, 2004, the Company recorded special charges under the 2001 restructuring plan of $0.2 million ($0.1 million after tax) and $2.5 million ($1.7 million after tax). The costs recorded in 2004 are costs to relocate machinery and equipment and the write-off of certain assets related to the consolidation of industrial manufacturing facilities in the U.K. These expenses were classified in the special (credits)/charges line in the condensed consolidated statement of income.

The major components of the special charges and the remaining accrual balance related to the 2001 restructuring plan as of August 31, 2005 follow (in thousands):

The major components of the special charges and the remaining accrual balance related to the 2001 restructuring plan as of August 31, 2004 follow (in thousands):

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Also included in special charges/(credits) for the nine months ended August 31, 2004 is a net gain of $8.7 million ($5.5 million after tax) related to funds received from a class action lawsuit that was settled in the Company’s favor. This matter dated back to 1999 when a number of class action lawsuits were filed against manufacturers and sellers of various flavor enhancers for their violation of antitrust laws. The Company, as a purchaser of such products, participated as a member of the plaintiff class. In the third quarter of 2004, the Company received $11.1 million as a settlement of this claim and as a result of the settlement, was required to settle claims against the Company for a portion of this gross amount. The net gain recorded was $8.7 million. This amount was recorded as a special credit and was not allocated to the business segments.

3.                             EARNINGS PER SHARE

The following table sets forth the reconciliation of average shares outstanding (in thousands):

During the quarter ended August 31, 2005, the Company issued 571,302 shares of common stock under its stock option and employee stock purchase plans and repurchased 604,000 shares of common stock in connection with its stock repurchase program. During the nine months ended August 31, 2005, the Company issued 2,252,304 shares of common stock under its stock option and employee stock purchase plans and repurchased 3,961,576 shares of common stock in connection with its stock repurchase program. During the quarter ended August 31, 2004, the Company issued 410,446 shares of common stock under its stock option and employee stock purchase plans and repurchased 809,026 shares of common stock in connection with its stock repurchase program. During the nine months ended August 31, 2004, the Company issued 2,752,147 shares of common stock under its stock option and employee stock purchase plans and repurchased 3,225,297 shares of common stock in connection with its stock repurchase program. Under its stock option plans, the Company may issue shares on a net basis at the request of the option holder. This occurs when the option price is settled by tendering outstanding shares held for at least six months by the option holder.

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4.                             COMPREHENSIVE INCOME

The following table sets forth the components of comprehensive income (in thousands):

5.                             PENSION AND POSTRETIREMENT BENEFITS

The following table presents the components of the Company’s pension expense for the three months ended August 31, 2005 and 2004 (in thousands):

The following table presents the components of the Company’s pension expense for the nine months ended August 31, 2005 and 2004 (in thousands):

On December 31, 2004, the Company paid $22 million for its annual contribution to its major U.S. pension plan. Contributions to international plans are generally funded throughout the year. Total contributions to the Company’s pension plans in 2005 are expected to be approximately $37.0 million.

The following table presents the components of the Company’s other

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postretirement benefits expense for the three and nine months ended August 31, 2005 and 2004 (in thousands):

6.                    FINANCIAL INSTRUMENTS

On March 31, 2005, the Company entered into forward starting interest rate swaps to manage the interest rate risk associated with the anticipated issuance of $100 million fixed rate medium-term notes expected to be issued in late 2005 under the Company’s existing shelf registration statement. The Company’s intention is to cash settle these swaps upon issuance of the medium-term notes thereby effectively locking in the fixed interest rate in effect at the time the swaps were initiated. The Company has designated these outstanding interest rate swap contracts, which expire on December 15, 2005, as hedges of the variability in cash flows in the future quarterly interest payments on the debt due to changes in the benchmark interest rate that will occur in the period prior to issuance. The proceeds upon issuance of the medium-term notes will be used to pay down maturing long-term debt. The gain or loss on these swaps is deferred in other comprehensive income and will be amortized over the ten-year life of the medium-term notes as a component of interest expense. Hedge ineffectiveness associated with these hedges was not material in the quarter.

In January 2005, the Company entered into a $400 million five-year credit facility, which expires in January 2010. This facility replaces the credit facilities totaling $350 million existing on November 30, 2004, of which $125 million would have expired in June 2005 and $225 million would have expired in June 2006.

In addition, in January 2005, the Company filed a $500 million shelf registration statement with the Securities and Exchange Commission, which became effective February 23, 2005. Under the shelf registration statement, the Company may offer and sell any combination of debt securities in one or more offerings of up to a total dollar amount of $500 million.

7.                    COMMITMENTS AND CONTINGENCIES

In the first quarter of 2005, Premier Foods, PLC (Premier Foods), a supplier, notified the Company of a market withdrawal of Worcester Sauce supplied by Premier Foods. The product contained Sudan One, a red dye not permitted for food use. In response to Premier Foods’ notification, the Company withdrew all Worcester Sauce products supplied by Premier Foods and any other products containing Worcester Sauce as an ingredient. In the first quarter of 2005, the Company recorded a charge of $0.7 million ($0.5 million after-tax) in cost of

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goods sold related to this withdrawal. Although the Company expects to be fully indemnified by Premier Foods for these costs, it is premature to record a receivable for such costs as of August 31, 2005. The Company has not had additional claims from customers in the third quarter of 2005. The Company has filed a claim for damages and expects to be fully indemnified for costs incurred.

8.                    BUSINESS SEGMENTS

The Company operates in two business segments: consumer and industrial. The consumer and industrial segments manufacture, market and distribute spices, herbs, seasonings, condiments and other flavors throughout the world. The consumer segment sells to retail outlets, including grocery, drug, dollar and mass merchandise stores under a variety of brands, including McCormick and Zatarain’s in the U.S., Ducros, Vahine and Silvo in continental Europe, Club House in Canada, and Schwartz in the U.K. The industrial segment sells to other food processors and the restaurant industry both directly and through distributors and warehouse clubs.

The Company measures segment performance based on operating income. 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. Because of manufacturing integration for certain products within the segments, products are not sold from one segment to another but rather inventory is transferred at cost. Corporate and eliminations includes general corporate expenses and other charges not directly attributable to the segments.

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ITEM 2        MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Sales for the third quarter of 2005 rose to $622.7 million, an increase of 1.5% above the third quarter of 2004. Sales from the Silvo business acquired in 2004 added 1.6% and favorable foreign exchange rates added 0.7%, which was offset in part by lower sales to industrial customers. Sales for the nine months ended August 31, 2005 were $1,854.9 million, an increase of 4.1% compared to the same period of the previous year. Higher volume, higher prices and favorable product mix contributed 2.5% of the increase, with 1.8% of that attributable to Silvo. Favorable foreign exchange rates added 1.6%.

Diluted earnings per share for the third quarter were $0.35 compared to $0.33 for the third quarter of 2004. Higher operating income from the sales increase as well as higher margins added $0.02 to earnings per share. The negative effects of higher interest rates and an increase in the effective tax rate were offset by higher income from the Company’s joint venture in Mexico and lower number of shares outstanding.

Diluted earnings per share from continuing operations for the nine months ended August 31, 2005 were $0.91 compared to $0.90 for the same period of 2004. This increase was due to higher operating profit on increased sales, higher income from unconsolidated operations and lower shares outstanding. This increase was partially offset by higher interest rates, a higher effective tax rate and a class action settlement gain in the prior year.

For the nine months ended August 31, 2005, net cash flow from operating activities was $133.9 million as compared to $124.1 million for the same period last year. In 2005, the Company used operating cash flow and additional borrowings to fund $141.3 million of share repurchases and $64.8 million of dividend payments. In 2004, the Company used operating cash flow and additional borrowings to fund $108.4 million of share repurchases and $57.8 million of dividend payments.

RESULTS OF OPERATIONS - SEGMENTS

CONSUMER BUSINESS

For the third quarter of 2005, sales from McCormick’s consumer business rose 4.1% compared to the same period in 2004. Volume, price

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and product mix drove 3.5% of the increase and favorable foreign exchange rates added 0.6%. Sales from Silvo accounted for 3.2% of the 3.5% increase. The Company has been successful in driving consumer business sales this year with the introduction of new products, pricing actions, new media advertising, a focus on Hispanic consumers in the U.S. and other important initiatives. However, consumer business sales in the third quarter were negatively affected by three factors: the timing of sales in the Americas, tough business conditions in Europe and streamlining actions to improve our profitability in the Asia/Pacific region.

In the Americas, sales rose 2.8% with 0.7% from favorable foreign exchange rates. The remaining increase of 2.1% trails the 5.3% increase achieved last quarter which was driven by an early start to the grilling season and distribution of new products. Also, at the end of the third quarter, the Company had a small negative impact on the shipment of Zatarain’s products due to Hurricane Katrina. Additionally, this year’s third quarter increase followed a sales increase of 13.5% in the third quarter of 2004 that was driven by new product success, effective marketing and new distribution. Year-to-date consumer sales in the Americas are up 4.1%, with 3.5% of the increase from higher volume, price and product mix. Grinders, GrillMates, Hispanic items and the introduction of new dry seasoning mix items are some of the product successes behind this increase.

Third quarter sales in Europe increased 7.7%. Silvo sales added 11.0% and foreign exchange rates were slightly unfavorable with a 0.5% negative impact. The remaining decrease from volume, price and product mix was 2.8%. Market conditions continue to be tough in this region, particularly in France. The Company has been successfully growing sales of value-added products such as dessert items, pastes and grinders with retail customers. However, hard discounters continue to place pressure on a limited number of core ingredient items. The Company continues to work with customers to promote special packs and critical items to combat these pressures. While progress has been made in slowing the migration of sales to alternative channels, the poor economic conditions in France are complicating the recovery.

In the Asia/Pacific region, sales declined 1.5% in the third quarter. During this period, foreign exchange rates had a positive impact of 6.1%. While sales in Australia were strong during the quarter, steps to improve our profitability in China limited overall sales growth for the region. With SAP in place for over a year, the Company is identifying additional low margin items that are being deemphasized from a promotional standpoint and in some cases eliminated. In addition, sales were affected by our reduction in the number of distributors in China as the Company moves to a higher quality network. While these steps are affecting near-term sales, they will lead to a better-positioned and more profitable business model for the long-term.

For the nine months ended August 31, 2005, sales from McCormick’s consumer business increased 6.9%. Favorable foreign exchange rates added 1.7%, and higher volume, price and product mix added 5.1%. Of the 5.1% increase, sales from Silvo added 3.6%.

Third quarter operating income for the consumer business

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increased 3.7% compared to the same period of 2004. The operating income increase was driven mainly by increased sales. This 3.7% increase also includes a $1.0 million liability which was accrued in the third quarter for preliminary estimated costs to repair the damage at the Zatarain’s facility as a result of Hurricane Katrina. Furthermore, this increase in operating income follows an increase of 25% for the third quarter of 2004 that was achieved with higher sales, an emphasis on higher-margin products and cost reduction efforts. Operating income margin (operating income as a percentage of sales) was 18.7% in both the third quarter of 2005 and 2004.

For the nine months ended August 31, 2005, operating income for the consumer business increased 10.4% compared to the same period of 2004. Operating income margin for the nine months ended August 31, 2005 increased to 17.4% compared to 16.8% in the comparable period last year. These increases were due to increased sales and cost savings initiatives offset in part by lower vanilla margins in the first half of the year.

INDUSTRIAL BUSINESS