UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended November 30, 2006

Commission file number 001-14920

McCORMICK & COMPANY, INCORPORATED

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

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: Not applicable.

Indicate by check mark if the registrant is a well-know seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes x No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act
Yes o No x

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 such filing requirements for the past 90 days.  Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o No x

State the aggregate market value of the voting and non-voting common equity held by non-affiliates.  The aggregate market value shall be computed by reference to the price at which the common equity was sold, or the average bid and asked prices of such common equity, as of the last business day of the registrant’s most recently completed second quarter.

The aggregate market value of the voting common equity held by non-affiliates at May 31, 2006: $285,001,059

The aggregate market value of the non-voting common equity held by non-affiliates at May 31, 2006: $4,039,740,055

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  Check one:

Large accelerated filer   x          Accelerated filer   o          Non-accelerated filer   o

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

DOCUMENTS INCORPORATED BY REFERENCE

PART I

As used herein, the “Registrant” means McCormick & Company, Incorporated and its subsidiaries, unless the context otherwise requires.

Item 1.  Business

The Registrant, a diversified specialty food company, is a global leader in the manufacture, marketing and distribution of spices, herbs, seasoning blends and other flavors to the entire food industry. The Registrant was formed in 1915 under Maryland law as the successor to a business established in 1889.

The Registrant operates in two business segments: consumer and industrial. The consumer segment sells spices, herbs, extracts, seasoning blends, sauces, marinades and specialty foods to the consumer food market under a variety of brands, including “McCormick,” “Zatarain’s,” “Simply Asia” and “Thai Kitchens” in the US, “Ducros,” “Vahine” and “Silvo” in continental Europe, “Club House” in Canada and “Schwartz” in the U.K. The industrial segment sells seasoning blends, natural spices and herbs, wet flavors, coating systems and compound flavors to food manufacturers and the food service industry, served both directly and indirectly through distributors.

Please refer to pages 18 and 19, of the Registrant’s Annual Report to Stockholders for 2006 for descriptions of our consumer and industrial businesses, and pages 7 through 13, of the Registrant’s Annual Report to Stockholders for 2006 for a discussion of growth initiatives for the business. Such pages of the Registrant’s Annual Report to Stockholders for 2006 are incorporated herein by reference.

For financial information about the Registrant’s business segments, please refer to pages 20 through 24, “Management’s Discussion and Analysis,” and Note 15, “Business Segments and Geographic Areas” of the Notes to Consolidated Financial Statements on pages 55 and 56 of the Annual Report to Stockholders for 2006, which pages are incorporated herein by reference.

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Raw Materials

The most significant raw materials to the Registrant are cheese, pepper, capsicums, garlic, onion and vanilla.  Pepper, vanilla beans and other spices and herbs are generally sourced from countries other than the United States. Others, like onion, are primarily sourced from within the United States. The Registrant is not aware of any government restrictions or other factors that would have a material adverse effect on the availability of these raw materials. Because the raw materials are agricultural products, they may be subject to price volatility caused by weather and other unpredictable factors.  The Registrant responds to this volatility in a number of ways including strategic raw material purchases, purchases of raw material for future delivery and customer price adjustments.

Customers

The Registrant’s products are sold directly to customers and also through brokers, wholesalers and distributors. In the consumer segment, products are resold to consumers through retail outlets, including grocery, mass merchandise, warehouse clubs, discount and drug stores under a variety of brands.  In the industrial segment, products are used by food and beverage manufacturers as ingredients for their finished goods and by food service customers as ingredients for menu items to enhance the flavor of their foods. Customers for the industrial segment include food manufacturers and the food service industry, which are supplied both directly and through distributors.

The Registrant has a large number of customers for its products.  No single customer accounted for 10% or more of consolidated net sales in 2006.  Sales to the Registrant’s five largest customers represented approximately 29.6% of consolidated net sales.

The dollar amount of backlog orders of the Registrant’s business is not material to an understanding of the Registrant’s business, taken as a whole.  No material portion of the Registrant’s business is subject to renegotiation of profits or termination of contracts or subcontracts at the election of the U.S. Government.

Trademarks, Licenses and Patents

The Registrant owns a number of trademark registrations.  Although in the aggregate these trademarks may be material to the Registrant’s business, the loss of any one of those trademarks, with the exception of the Registrant’s “McCormick,” “Club House,” “Ducros,” “Schwartz,” “Vahine” and “Zatarain’s” trademarks, would not have a material adverse effect on the Registrant’s business. The “McCormick” trademark is extensively used by the Registrant in connection with the sale of virtually all of the Registrant’s food products worldwide. The terms of the trademark registrations are as prescribed by law and the registrations will be renewed for as long as the Registrant deems them to be useful.

The Registrant has entered into a number of license agreements authorizing the use of its trademarks by affiliated and non-affiliated entities. The loss of these license agreements would not have a material adverse effect on the Registrant’s business.  The term of the license agreements is generally three to five years or until such time as either party terminates the agreement.  Those agreements with specific terms are renewable upon agreement of the parties.

The Registrant owns various patents, but they are not viewed as material to the Registrant’s business.

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Seasonal Nature of Business

Due to seasonal factors inherent in the business, the Registrant’s sales, income and cash from operations generally are lower in the first two quarters of the fiscal year, increase in the third quarter and are significantly higher in the fourth quarter. The seasonality reflects customer and consumer buying patterns, primarily in the consumer segment.

Working Capital

In order to meet increased demand for its consumer products during its fourth quarter, the Registrant usually builds its inventories during the third quarter. The Registrant generally finances working capital items (inventory and receivables) through short-term borrowings, which include the use of lines of credit and the issuance of commercial paper.  For a description of the Registrant’s liquidity and capital resources, see Note 7 “Financing Arrangements” of the Notes to Consolidated Financial Statements on pages 49 and 50 of the Registrant’s Annual Report to Stockholders for 2006, which page is incorporated by reference, and the “Liquidity and Financial Condition” section of “Management’s Discussion and Analysis” on pages 24 through 26 of the Registrant’s Annual Report to Stockholders for 2006, which pages are incorporated by reference.

Competition

The Registrant is a global leader in the manufacture and sale of spices, herbs, extracts, seasoning blends and flavorings and competes in a geographic market that is international and highly competitive. For further discussion, see pages 18 and 19 of the Registrant’s Annual Report to Stockholders for 2006, which pages are incorporated by reference.

Research and Development

Many of the Registrant’s products are prepared from confidential formulae developed by its research laboratories and product development teams. Expenditures for research and development were $43.6 million in 2006, $43.1 million in 2005 and $39.3 million in 2004. The amount spent on customer-sponsored research activities is not material.

Environmental Regulations

The cost of compliance with federal, state and local provisions related to protection of the environment has had no material effect on the Registrant’s business. There were no material capital expenditures for environmental control facilities in 2006 and there are no material expenditures planned for such purposes in 2007.

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Employees

The Registrant had approximately 7,500 employees worldwide as of December 31, 2006. The Registrant believes its relationship with employees to be good. The Registrant has no collective bargaining contracts in the United States. At the Registrant’s foreign subsidiaries, approximately 840 employees are covered by collective bargaining agreements or similar arrangements.

Financial Information About Geographic Locations

For information on the net sales and long-lived assets of the Registrant, see Note 15, “Business Segments and Geographic Areas” of the Notes to Consolidated Financial Statements on pages 55 and 56 of the Annual Report to Stockholders for 2006, and the “Market Risk Sensitivity” section of “Management’s Discussion and Analysis” on pages 29 through 31 of the Registrant’s Annual Report to Stockholders for 2006, which pages are incorporated by reference.

Foreign Operations

The Registrant is subject in varying degrees to certain risks typically associated with a global business, such as local economic and market conditions, restrictions on investments, royalties and dividends and exchange rate fluctuations. Approximately 38% of sales in 2006 were from international operations.

Forward-Looking Information

For a discussion of forward-looking information, see the “Forward-Looking Information” section of “Management’s Discussion and Analysis” on page 34 of the Registrant’s Annual Report to Stockholders for 2006, which page is incorporated by reference.

Available Information

The Registrant’s Internet website address is: www.mccormick.com. The Registrant makes available free of charge through its website its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such documents are electronically filed with, or furnished to, the SEC.  The Registrant’s website also includes the Registrant’s Corporate Governance Guidelines, Business Ethics Policy and charters of its Audit Committee, Compensation Committee and Nominating/Corporate Governance Committee.  These documents are also available in print to any shareholder upon request.

Item 1A.  Risk Factors

The following are certain risk factors that could affect the Registrant’s business, financial condition and results of operations. These risk factors should be considered in connection with evaluating the forward-looking statements contained in this Annual Report on Form 10-K because these factors could cause the actual results and conditions to differ materially from those projected in forward-looking statements. Before you buy the Registrant’s common stock, you should know that making such an investment involves some risks, including the risks described below. The risks that are highlighted

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here are not the only ones that the Registrant faces.  If any of the risks actually occur, the Registrant’s business, financial condition or results of operations could be negatively affected. In that case, the trading price of the Registrant’s securities could decline, and you may lose all or part of your investment.

Price Fluctuations In The Raw Material Markets May Negatively Impact Us.

The Registrant purchases certain raw materials which are subject to price volatility caused by weather, market conditions, growing and harvesting conditions, governmental actions and other factors beyond our control. The most significant raw materials are cheese, pepper, capsicums, garlic, onion and vanilla. While future movements of raw material costs are uncertain, the Registrant responds to this volatility in a number of ways, including strategic raw material purchases, purchases of raw material for future delivery and customer price adjustments. The Registrant has not used derivatives to manage the volatility related to this risk.  Any actions the Registrant may take in response to price fluctuations may not effectively limit or eliminate its exposure to a decline in operating results due to changes in raw material prices. Therefore, the Registrant cannot assure you that future raw material price fluctuations will not have a negative impact on our business, financial condition or operating results.

Fluctuations In The Foreign Currency Markets May Negatively Impact Us.

The Registrant is exposed to fluctuations in foreign currency cash flows primarily related to raw material purchases. The Registrant is also exposed to fluctuations in the value of foreign currency investments in subsidiaries and unconsolidated affiliates and cash flows related to repatriation of these investments. Additionally, the Registrant is exposed to volatility in the translation of foreign currency earnings to U.S. dollars. Primary exposures include the U.S. dollar versus the functional currencies of our major markets (Euro, British pound sterling, Canadian dollar, Australian dollar, Mexican peso and Chinese renminbi). On occasion, the Registrant may enter into forward and option contracts to manage these foreign currency risks. However, these contracts may not effectively limit or eliminate the Registrant’s exposure to a decline in operating results due to foreign currency translation. Therefore, the Registrant cannot assure you that future exchange rate fluctuations will not have a negative impact on its business, financial position or operating results.

Increases In Interest Rates May Negatively Impact Us.

The Registrant had total outstanding short-term borrowings of approximately $80.8 million at an average interest rate of approximately 5.5% on November 30, 2006. The Registrant’s policy is to manage our interest costs using a mix of fixed and variable rate debt. The Registrant also uses interest rate swaps to achieve a desired proportion of fixed and variable rate debt. The Registrant utilizes derivative financial instruments to enhance its ability to manage risk, including interest rate exposures that exist as part of its ongoing business operations. The Registrant does not enter into contracts for trading purposes, nor is it a party to any leveraged derivative instrument. The Registrant’s use of derivative financial instruments is monitored through regular communication with senior management and the utilization of written guidelines. However, its use of these instruments may not effectively limit or eliminate its exposure to a decline in operating results due to changes in interest rates. Therefore, the Registrant cannot assure you that future interest rate increases will not have a material negative impact on its business, financial position or operating results.

Item 1B.  Unresolved Staff Comments

None.

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Item 2.  Properties

The Registrant’s principal executive offices and primary research facilities are owned and are located in suburban Baltimore, Maryland.

The following is a list of the Registrant’s principal manufacturing properties, all of which are owned except for the facilities in Commerce and Union City, California and Melbourne, Australia which are leased:

United States

Atlanta, Georgia — industrial

Commerce, California — consumer

Dallas, Texas — industrial

Hunt Valley, Maryland — consumer and industrial (3 principal plants)

New Orleans, Louisiana — consumer

South Bend, Indiana — industrial

Union City, California — consumer

Canada

London, Ontario — consumer and industrial

Mexico

Cuautitlan de Romero Rubio, Mexico — industrial

United Kingdom

Haddenham, England — consumer and industrial

Littleborough, England — consumer and industrial

France

Carpentras — consumer and industrial

Monteux — consumer (2 principal plants)

The Netherlands

Papendrecht — consumer

Australia

Melbourne — consumer and industrial

China

Guangzhou — consumer and industrial

Shanghai — consumer and industrial

In addition to distribution facilities and warehouse space available at its manufacturing facilities, the Registrant leases regional distribution facilities in Belcamp, Maryland, Salinas, California, and Dallas, Texas and owns a distribution facility in Monteux, France.  The Registrant also owns, leases or contracts other properties used for manufacturing consumer and industrial products and for sales, warehousing, distribution and administrative functions.

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The Registrant believes its plants are well maintained and suitable for their intended use. The Registrant further believes that these plants generally have adequate capacity and can accommodate seasonal demands, changing product mixes and additional growth. Many additions and improvements have been made to these facilities over the years and the plants’ manufacturing equipment includes equipment of the latest type and technology.

Item 3.  Legal Proceedings

There are no material pending legal proceedings in which the Registrant or any of its subsidiaries is a party or in which any of their property is the subject.

Item 4.  Submission of Matters to a Vote of Security Holders

No matter was submitted during the fourth quarter of Registrant’s fiscal year 2006 to a vote of security holders.

PART II

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The Registrant has disclosed in Note 17, “Selected Quarterly Data (Unaudited)” of the Notes to Consolidated Financial Statements on page 57 of the Registrant’s Annual Report to Stockholders for 2006, which page is incorporated by reference, the information relating to the market price and dividends paid on the Registrant’s classes of common stock. The market price of the Registrant’s common stock at the close of business on December 29, 2005 was $38.60 for the Common Stock and $38.56 for the Common Stock Non-Voting.

The Registrant’s Common Stock and Common Stock Non-Voting are listed and traded on the New York Stock Exchange. The approximate number of holders of Common Stock of the Registrant based on record ownership as of December 29, 2006 was as follows:

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The following table summarizes the Company’s purchases of Common Stock (CS) and Common Stock Non-Voting (CSNV) during the fourth quarter of 2006:

ISSUER PURCHASES OF EQUITY SECURITIES

Note:        In June 2005, the Board of Directors approved an additional $400 million share repurchase authorization.  As of November 30, 2006, $206.1 million remained of the $400 million authorization.  This amount is expected to be sufficient for 2007 share repurchases.

Item 6.  Selected Financial Data

This information is set forth on the line items titled “Net sales,” “Net income from continuing operations,” “Earnings per share — Diluted — Continuing operations,” “Common dividends declared,” “Long-term debt” and “Total assets” in the “Historical Financial Summary” on page 58 of the Registrant’s Annual Report to Stockholders for 2006, which line items are incorporated by reference. See also Note 1 “Summary of Significant Accounting Policies” on pages 42 through 44 of the Registrant’s Annual Report to Stockholders for 2006, which pages are incorporated by reference.

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

This information is set forth in “Management’s Discussion and Analysis” on pages 18 through 34 of the Registrant’s Annual Report to Stockholders for 2006, which pages are incorporated by reference.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

This information is set forth in the “Market Risk Sensitivity” section of “Management’s Discussion and Analysis” on pages 29 through 31 of the Registrant’s Annual Report to Stockholders for 2006, which pages are incorporated by reference, and in Note 8 “Financial Instruments” on pages 50 and 51 of the Registrant’s Annual Report to Stockholders for 2006, which pages are incorporated by reference.

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Item 8.  Financial Statements and Supplementary Data

The financial statements and supplementary data are included on pages 38 through 57 of the Registrant’s Annual Report to Stockholders for 2006, which pages are incorporated by reference. The report of Ernst & Young LLP, Independent Registered Public Accounting Firm, on such financial statements is included on pages 36 and 37 of the Registrant’s Annual Report to Stockholders for 2006, which page is incorporated by reference. The supplemental schedule for 2004, 2005 and 2006 is included on page 15 of this Report on Form 10-K.

The unaudited quarterly data is included in Note 17, “Selected Quarterly Data (Unaudited)” of the Notes to Consolidated Financial Statements on page 57 of the Registrant’s Annual Report to Stockholders for 2006, which page is incorporated by reference.

Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.  Controls and Procedures

Disclosure Controls and Procedures

The Registrant maintains a system of disclosure controls and procedures that is designed to provide reasonable assurance that information, which is required to be disclosed, is accumulated and communicated to management in a timely manner. The Registrant’s principal executive officer and principal financial officer evaluated as of November 30, 2006 the effectiveness of this system of disclosure controls and procedures, and have concluded that such disclosure controls and procedures were effective as of such date.

Internal Control over Financial Reporting

Management’s report on the Registrant’s internal controls over financial reporting and the report of the Registrant’s Independent Registered Public Accounting Firm on internal controls over financial reporting are included on pages 36 and 37 of the Registrant’s Annual Report to Stockholders for 2006, which page is incorporated by reference.  No change occurred in our internal controls over financial reporting (as defined in Rule 13a-15(f)) during the last fiscal quarter which was identified in connection with the evaluation required by Rule 13a-15(a) as materially affecting, or reasonably likely to materially affect, our internal control over financial reporting.

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Certifications

The certifications of the Registrant’s Chief Executive Officer and Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002 are filed as Exhibits 31.1 and 31.2 to this Annual Report on Form 10-K. Additionally, as required by Section 303A.12(a) of the New York Stock Exchange (“NYSE”) Listed Company Manual, the Registrant’s Chief Executive Officer filed a certification with the NYSE on April 20, 2006 reporting that he was not aware of any violation by us of the NYSE’s Corporate Governance listing standards.

Item 9B.  Other Information

None.

PART III

Item 10.  Directors and Executive Officers of the Registrant

Information responsive to this item is set forth in the sections titled “Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Registrant’s Proxy Statement for 2007, incorporated by reference herein, to be filed within 120 days after the end of the Registrant’s fiscal year (the “2007 Proxy Statement”).

In addition to the executive officers described in the Registrant’s Proxy Statement for 2007 incorporated by reference in Item 10 of this Report, the following individuals are also executive officers of the Registrant: Paul C. Beard, Kenneth A. Kelly, Jr., Charles T. Langmead, Robert W. Skelton and Karen D. Weatherholtz.

Mr. Beard is 52 years old and has held the following positions with the Registrant: March 2002 to present — Vice President, Finance & Treasurer; January 2000 to March 2002 — Vice President & General Manager, Global Restaurant Division.

Mr. Kelly is 52 years old and has held the following positions with the Registrant: February 2000 to present — Vice President, Controller.

Mr. Langmead is 49 years old and has held the following positions with the Registrant:  September 2005 to present — President, U.S. Industrial Group; February 2002 to September 2005 — Vice President & General Manager, Food Service & Global Restaurant Divisions; April 1999 to February 2002 — Vice President & General Manager, Food Service Division.

Mr. Skelton is 59 years old and has held the following positions with the Registrant: November 2002 to present — Senior Vice President, General Counsel & Secretary; June 1997 to November 2002 — Vice President, General Counsel & Secretary.

Ms. Weatherholtz is 56 years old and has held the following positions with the Registrant: November 1999 to present — Senior Vice President, Human Relations.

The Registrant has adopted a code of ethics that applies to all employees, including its principal executive officer, principal financial officer, principal accounting officer and its Board of Directors. A copy of the code of ethics is available on the Registrant’s Internet website at www.mccormick.com and

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is available in print to any shareholder upon request. The Registrant intends to satisfy the disclosure requirement under Item 10 of Form 8-K regarding an amendment to, or a waiver from, a provision of its code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or persons performing similar functions, by posting such information on its website at the Internet website address set forth above.

Item 11.  Executive Compensation

Information responsive to this item is incorporated herein by reference to the sections titled “Report on Executive Compensation,” “Summary Compensation Table,” “Compensation of Directors,” “Pension Plan Table,” “Stock Options — Option Grants in Last Fiscal Year,” “Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values,” “Equity Compensation Plan Information,” “Mid-Term Incentive Plan” and “Performance Graph — Shareholder Return” in the Registrant’s 2007 Proxy Statement.

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Transactions

Information responsive to this item is incorporated herein by reference to the sections titled “Principal Stockholders,” “Election of Directors” and “Equity Compensation Plan Information” in the Registrant’s 2007 Proxy Statement.

Item 13.  Certain Relationships and Related Transactions

Information responsive to this Item is incorporated herein by reference to the section entitled “Independence of Directors” in the Registrant’s 2007 Proxy Statement.

Item 14.  Principal Accountant Fees and Services

Information responsive to this item is incorporated herein by reference to the section titled “Report of Audit Committee and Fees of Independent Registered Public Accounting Firm” in the Registrant’s 2007 Proxy Statement.

PART IV

Item 15.  Exhibits, Financial Statement Schedules

(a)           The following documents are filed as a part of this report:

1.             The consolidated financial statements for McCormick & Company, Incorporated and subsidiaries which are listed in the Table of Contents appearing on page 15 of this Report.

2.             The financial statement schedule required by Item 8 of this Form 10-K which is listed in the Table of Contents appearing on page 15 of this Report.

3.             The exhibits that are filed as a part of this Form 10-K and required by Item 601 of Regulation S-K and Item 15(c) of this Form 10-K are listed on the accompanying Exhibit Index at pages 17 and 18 of this Report.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

McCORMICK & COMPANY, INCORPORATED

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons, being a majority of the Board of Directors of McCormick & Company, Incorporated, on the date indicated:

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TABLE OF CONTENTS AND RELATED INFORMATION

Included in the Registrant’s 2005 Annual Report to Stockholders, the following consolidated financial statements are incorporated by reference in Item 8*:

Consolidated Income Statement for the years ended November 30, 2006, 2005 & 2004

Consolidated Balance Sheet, November 30, 2006 & 2005

Consolidated Cash Flow Statement for the years ended November 30, 2006, 2005 & 2004

Consolidated Statement of Shareholders’ Equity for the years ended November 30, 2006, 2005 & 2004

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Included in Part IV of this Annual Report:

Supplemental Financial Schedule:

II  — Valuation and Qualifying Accounts

Schedules other than those listed above are omitted because of the absence of the conditions under which they are required or because the information called for is included in the consolidated financial statements or notes thereto.

*Pursuant to Rule 12b-23 issued by the Commission under the Securities Exchange Act of 1934, as amended, a copy of the 2006 Annual Report to Stockholders of the Registrant for its fiscal year ended November 30, 2006 is being furnished with this Annual Report on Form 10-K.

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Supplemental Financial Schedule II Consolidated

McCORMICK & COMPANY, INCORPORATED

VALUATION AND QUALIFYING ACCOUNTS
(IN MILLIONS) (1)

Notes:

(1)             The table excludes discontinued operations.

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EXHIBIT INDEX

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*                    Management contract or compensatory plan or arrangement.

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Exhibit 13

Table of Contents

Business Description

McCormick is a global leader in the manufacture, marketing and distribution of spices, herbs, seasonings and other flavors to the entire food industry. Customers range from retail outlets and food service providers to food manufacturers. Founded in 1889 and built on a culture of Multiple Management, McCormick has approximately 7,500 employees.

Vision Statement

McCormick will be the leading global supplier of value-added flavor solutions. Building on strong brands and innovative products, we will be the recognized leader in providing superior quality, value and service to customers and consumers around the world.

Values

This year’s annual report is scented with nutmeg – the dried, aromatic seed of an apricot-like fruit. McCormick imports nutmeg from Indonesia and other tropical locations. Piney and citrus-like flavors combine with sweet and bitter tastes to provide nutmeg's distinctive flavor.

Letter to Shareholders

We are on a rewarding and exciting journey. It’s rewarding in that we’re surpassing our goals, earning superior shareholder returns and achieving excellent growth. It’s exciting because we have initiatives underway that position us well to continue that success.

Our 2006 results were record-setting. Earnings per share were $1.50 – up substantially from 2005 on a comparable basis. In addition, we met or exceeded all our financial goals – clearly showing that our disappointing 2005 was just a bump in the road.

Surpassing Our Goals

Our three key financial goals for 2006 were to:

·                  Increase sales by 3% to 5%.

·                  Increase our gross profit margin by 1.0 percentage point.

·                  Increase our earnings per share by 8% to 10% on a comparable basis.

We increased sales by 5%. Consumer sales increased by 5%, and industrial sales increased by 4%. Sales grew with successful new products, effective marketing programs, the acquisition of Simply Asia Foods, and higher pricing.

We increased our gross profit margin by 1.0 percentage point through a combination of cost savings programs, pricing and a favorable business mix. Our gross profit margin reached 41.0%. That’s an increase of 5.8 percentage points since 2000 and the result of our aggressive pursuit of gross profit margin improvement.

We increased earnings per share by 14% on a comparable basis. That comparison excludes the impact of stock-based compensation expense, which we began to record in 2006, and restructuring charges. Including 22¢ of restructuring charges and 11¢ of stock-based compensation expense, our earnings per share for 2006 were $1.50. In 2005, our earnings per share – including 5¢ of restructuring expense – were $1.56.

Earning Superior Shareholder Returns

Over the past 10 years, our average annual total return to shareholders has been 14%. That compares with the 9% average annual return of our food industry group and the 8% average annual return of the S&P 500. Total return to shareholders is the combination of stock price appreciation and dividends.

In November 2006, we increased our quarterly dividend 11% to 20¢ per share. We have been paying dividends since 1925, and we have increased the dividend annually for the last 20 consecutive years.

In 2006, our common stock price rose 24%. That reflects both our strong performance and our strong outlook.

Our business continues to generate a high level of cash. Our 2006 cash from operations was $311 million. We returned more than 80% of this amount to shareholders through dividends and repurchased shares. The remainder we’ve invested in growing our business.

Achieving Excellent Growth

Our growth strategy is straightforward: improve margins, invest in the business and increase sales and profits. There are four initiatives we have in place to continue our growth – advance, revitalize, transform and innovate.

Over the past 10 years, our total shareholder return on an annual basis has been 14%.This has exceeded the total shareholder returns of our food industry group as well as the S&P 500 Index.

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We are advancing with the restructuring plan we announced in late 2005. The plan includes consolidating our global manufacturing and eliminating administrative redundancies. These actions reduced our costs by $10 million in 2006, and we expect to deliver another $30 million of savings in 2007. By the end of 2008, total annual cost savings should be $50 million.

We are revitalizing our McCormick brand spices and seasonings in the United States. This line of products accounts for about one-third of our consumer business sales. New products, new labels and new flip-top caps – along with new store shelving that makes shopping easier for the consumer and restocking easier for grocers – will roll out through 2008. We have already seen the early signs of success from this initiative.

We are transforming our U.S. industrial business and have already made significant progress. We’re simplifying and focusing our resources on growing with large customers who have the greatest potential to add profitable sales. We have reduced the number of industrial customers we serve from 1,000 to fewer than 750. This progress – along with similar actions we’ve taken in Europe and a rebound from a difficult year in 2005 – improved operating income for our industrial business by 26% on a comparable basis, excluding the impact of restructuring charges and stock-based compensation expense.

We are innovating by leading and staying on top of the latest trends in our major markets. Innovation is vital to the long-term health of our business. Consumer demand – for convenience, freshness, ethnic flavors and more – guides not only our new product development, but also our acquisition strategy. For example, in June 2006, we added the fast-growing Thai Kitchen® and Simply Asia® brands that offer authentic Asian flavors to U.S. consumers.

Continuing Our Success

While our initiatives have us well positioned for continued growth and success, two of the challenges we face are higher costs and competition.

Higher costs for certain materials, employee benefits and energy affect our business and our industry. We offset those higher costs with improvements in efficiency and pricing actions as appropriate.

Our business is highly competitive in both the consumer and industrial segments. Our superior quality and innovation in products as well as services, give us a competitive advantage. Recent examples include our store merchandising ideas and our new Create IT® Center.

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Our icon brands, leading market share and breadth of flavor solutions are truly unique. No one can match what we offer and achieve. We provide great taste – whether eating at home or out, enjoying ethnic cuisine or comfort foods, limiting fat or salt intake, cooking on the grill or in the microwave.

Flavor is a great business for us with very few boundaries.

Accomplishing a Great Deal

Every year, our leaders and employees overcome many challenges and achieve results of which we’re proud. But 2006 was particularly striking. After the challenges of 2005, not only did we achieve a rebound in our business but significant progress was made in preparing for future sustained growth.

Our accomplishments included: the ahead-of-plan transfer and consolidation of production from what was our second largest plant, the turnaround in our industrial business, the implementation of B2K in Europe, the success of the first stage of revitalization for the largest part of our consumer business, the completion of a great acquisition and higher profit from our joint venture in Mexico.

I congratulate our employees and leaders around the world. Never have I seen so many do so much this quickly.

A Rewarding and Exciting Journey

The road we’ve taken has been successful. To continue that success, we continue to build upon the strong foundation of our executive team. Our Board of Directors is instrumental in this process and in developing our business strategy and governance principles.

Alan Wilson has been promoted to President & COO. Since joining McCormick in 1993, Alan has earned respect as a leader who sets direction, is willing to make tough decisions and is comfortable with complexity. We also announced the promotion of Mark Timbie to President– North American Consumer Foods and named Lawrence Kurzius President– Europe, Middle East and Africa.

After 29 years of distinguished service, Karen Weatherholtz, Senior Vice President – Human Relations is retiring from the Company and the Board. A Board member since 1992, she has contributed greatly during her career, instilling strong values, developing an effective organization and motivating our workforce. Barry Beracha is also retiring from our Board. He has been a director since 2000 and has chaired the Compensation Committee over the past few years. We appreciate his contributions and service. We are pleased that Michael Mangan, Senior Vice President, CFO of The Black & Decker Corporation has joined the Board.

In 2007, our Multiple Management philosophy will mark its 75th anniversary. This problem-solving and professional development system – which brings together employees from all levels and functions – is key to our continuing success and performance like we had in 2006.

We are on a rewarding and exciting journey. Our strategy is effective and sustainable. Our passion for the business and our ability to execute drive our strategy. With the initiatives we have in place today, I am confident that we will continue to reward your loyalty and support with value creation and superior returns.

Robert J. Lawless, Chairman and CEO

Dividends per share 1987-2006

We have been paying dividends since 1925, and we have increased the dividend annually for the last 20 consecutive years.

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In 2000, the percentage of our sales from value-added products was approximately 60%. Today, more than 70% of our sales are from value-added products.

On the Journey…with Bob Lawless

How do you balance restructuring, revitalization and other initiatives with running the business?

Talented, dedicated and hard-working employees and effective leadership make it happen. It takes setting clear plans, keeping an eye on our goals and maintaining open communication.

In the past, we have had success managing the business while also implementing key initiatives and programs like B2K and integrating major acquisitions like Ducros. There’s no reason why that shouldn’t continue in the future.

How will we benefit from the increasing interest in healthier products?

I believe it presents an enormous opportunity for us. Think about it. Reducing salt, removing fat and lowering sugar content takes away a lot of flavor. We provide flavor that can take the place of what goes away.

Over the years we have grown from a supplier of natural spices and herbs, to a leading provider of value-added products. In 2000, the percentage of our sales from value-added products was approximately 60%. Today, more than 70% of our sales are from
value-added products.

In recent years, our development efforts have included a focus on wellness. In 2006 we introduced a number of lower sodium items such as chili and taco seasonings. In 2007, we will expand our line of organic products. For our restaurant and food manufacturing customers, we are developing seasonings, condiments and other flavors that add great taste to healthier products.

Going beyond the products we provide, in 2007 we are forming the McCormick Science Institute to advance the health benefits of spices and herbs.

What makes McCormick a good investment?

We are a good investment for many reasons. Here are a half dozen that stand out to me:

·                  Spanning all types of food and beverages across our consumer and industrial businesses, flavor is an exciting business with few boundaries.

·                  Our strategy – to improve margins, invest in the business, and grow sales and profits – is successful and sustainable.

·                  We deliver on our commitments – our aggressive plans launched at the end of 2005 are already yielding significant results.

·                  We generate a significant amount of cash, strategically investing it in capital projects, dividends, share repurchases and acquisitions.

·                  We possess strong values and a deep culture. For 75 years we have embraced the principles of participative management and engaged employees at all levels.

·                  Our great track record in building shareholder value during the past 10 years provides reason to look forward to the next 10 years with equal enthusiasm.

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Financial Highlights

for the year ended November 30 (millions except per share data )

In 2006, charges related to our restructuring plan reduced operating income by $84.1 million, net income by $30.3 million and diluted earnings per share by $0.22. Stock-based compensation, which we began to record in 2006, reduced operating income by $22.0 million, net income by $15.1 million and diluted earnings per share by $0.11.

In 2005, charges related to restructuring reduced operating income by $11.2 million, net income by $7.5 million and diluted earnings per share by $0.05.

On a comparable basis, excluding the impact of restructuring charges and stock-based compensation expense, diluted earnings per share rose 14% in 2006.

The price of McCormick stock rose 24% to $38.72 during fiscal year 2006.

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Our new seasoning mix line has a production rate that is approximately nine times faster than the equipment it replaced. Productivity improvements and capital investments enabled us to consolidate several manufacturing plants.

Our Journey...We Are Advancing

We are significantly improving margins throughout our business. Since 2000, our gross profit margin has increased by 5.8 percentage points, reaching 41.0% in 2006. Driving our gross profit margin improvement are better productivity, improvements in our supply chain and other cost reduction actions. In addition, with new products and acquisitions, we have shifted our business focus toward higher-margin, more value-added offerings.

In 2002, we began to lay the groundwork for further margin improvement with our B2K program. This is a global initiative that makes efficient use of state-of-the-art information technology. We have followed that with an ambitious restructuring plan – announced in late 2005 – under which we are consolidating our global manufacturing and distribution facilities. The restructuring also includes eliminating administrative redundancies and creating a more efficient way to market and sell our products.

We have made great progress. Consolidating our manufacturing resulted in major efficiency improvements. It enabled us to eliminate significant expense and close several plants including our second largest plant, which was located in California. Additional actions included streamlining two of our major joint ventures and the merging of U.S. consumer business sales organizations.

By the end of 2006, actions taken under the plan reduced our costs by $10 million. We’re working toward an additional $30 million in savings in 2007, and we’re on track to achieve our goal of $50 million in cost savings by the end of 2008

·

Alan Wilson

President and COO

“A company-wide restructuring plan is removing complexity and increasing effectiveness. We expect to achieve $50 million in annual costs savings by 2008.”

In 2006 we reached a gross profit margin of 41.0%. Since 2000, this was an increase of 5.8 percentage points.

B2K is our global initiative that makes effective use of state-of-the-art information technology. We began B2K in our U.S. business operations in 2002 and implemented it in our major European operations in 2006.

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Our new gravity-feed shelving allows consumers to locate their favorite products more easily and readily see what’s new. For our retail customers, restocking time is reduced by up to 40%.

Our Journey...We Are Revitalizing

In our consumer business, we spark growth by bringing excitement and news to the consumer. That’s part of our responsibility as a leader in markets around the world.

Over the last two years, the excitement comes from our actions to provide consumers with the flavor choices they want. For example, we revitalized our dry seasoning mix business in the U.S. marketplace, and followed that with an update of this product line in Europe. In addition, we introduced a number of new contemporary wet sauces and pastes that include our Finishing Sauces in U.S. markets, Schwartz® for Fish in the U.K., and Szechuan pastes in China.

In 2006, we began a revitalization effort that will be the most comprehensive change to our spice and seasoning line in the United States since the mid-1980s. Through 2008 we will be installing new shelving systems in major grocery stores across the country to improve the consumer’s shopping experience and reduce restocking time by up to 40%. New flip-top caps and more attractive labels introduced in 2006, are providing added convenience and appeal. In addition, we have replaced slow-moving items with roasting rubs, signature blends, gourmet grinders and other innovative products in line with current and future trends.

Increased sales in the second half of 2006 are an early sign of success with this initiative.

Revitalization will never be finished. We will continue to make dynamic changes to stay relevant to the consumer and add value for our customers.

Mark Timbie

President – North American Consumer Foods

“In the U.S., we expect significant increases in sales of our McCormick brand products and of the entire category as we revitalize our spice and seasoning line with new merchandising, new packaging and new products.”

As a leader in markets around the world, it is our responsibility to bring innovation and excitement to the consumer and to drive category growth.

Wet sauces and pastes – including these McCormick brand Szechuan pastes recently launched in China – are a fresh alternative to dried herbs and spices in markets around the world.

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At our CreateIT® Center – which we opened in early 2007 – we engage strategic industrial customers at the front end of their process to discuss trends and develop winning new product ideas.

Our Journey...We Are Transforming

In our industrial business, we have sharpened our focus. We are now concentrating our efforts on meeting the needs and demands of the global leaders among food manufacturers and in the food service industry. These are our largest and most strategic customers, and they offer us significant growth potential – during 2006, we supplied less than 25% of the seasonings, coating and other flavors they purchased.

To take advantage of this growth opportunity, we have been directing our resources toward more-profitable, faster-growing customers and away from less-profitable, slower-growing customers. This effort has reduced the number of our industrial business customers in the U.S. – from 1,000 to fewer than 750 – and significantly increased our growth and profit potential. The smaller customers we dropped made minimal purchases – they made up 25% of our customers, but accounted for only 2% of our industrial business sales. We will continue to reduce the types and numbers of customers – and products – that don’t have growth and profit opportunities in line with our goals and strategies.

Our transformation has included not only an increased focus on strategic customers, but also a reorganization of our sales force and an invigorated emphasis on exploring growth opportunities. It has led to renewed energy and momentum in our industrial business – as well as to several successful new product launches during 2006, including snack seasonings, chicken coatings and beverage flavors. By the end of 2008, our goal is to increase the operating income margin for our industrial business by 2.5-to-3.5 percentage points.

Chuck Langmead

President – U. S. Industrial Group

“Our strategic industrial customers – quick-service restaurants, food and beverage manufacturers and food service distributors – are the global leaders in their industry.”

In Europe, sharpening our focus on key industrial customers has eliminated complexity and dropped those customers and products that are smaller, slower-growing and which account for little of our revenue and profit.

Our goal is to increase the operating income margin for our industrial business by 2.5-to-3.5 percentage points by 2008.

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Whether it’s in a kitchen in Europe, a restaurant in Asia or on-the-go in North America – we are experimenting with bold and zesty flavors. Across our consumer and industrial businesses, our flavor reaches all sectors of the global food industry.

Our Journey...We Are Innovating

Innovation is vital – 10% of our sales in 2006 came from products that we have introduced since 2004.

Our extensive databases on consumer trends and grocery store sales, and our collaborative work with top culinary chefs on product and recipe development give us an unmatched expertise. One way we use that expertise is to create and publish our Flavor Forecast, which we share with customers, consumers and food editors. It can be found on our web site at www.mccormick.com.

Current trends driving what consumers purchase and prepare include freshness, convenience, ethnic and wellness. Our new product platforms reflect these trends and include authentic Hispanic products, organic herbs and spices, wet sauces and pastes, and lower sodium items.

We pursue innovation – opportunities for growth – through product development, as well as through the acquisition of complementary brands and businesses. In 2006, we acquired the Thai Kitchen® and Simply Asia® brands, extending our array of flavors for the U.S. consumer. Thai Kitchen is the No.1 brand in the Thai food category. Simply Asia extends our offerings into Szechuan and other varieties. These are the fastest-growing brands in the Asian category.

We are a global leader in providing flavor to the entire food industry. We plan to maintain and strengthen that leadership through continuous innovation made possible by our unique ability to expand our flavor platform.

Lawrence Kurzius

President – Europe, Middle East & Africa

“We are able to leverage the latest trends with our range of products that include seasonings, sauces, coatings and more. Our opportunity to deliver flavor has few boundaries.”

In 2006, 10% of our global sales came from products that we have introduced in the last three years.

In 2006, we acquired Thai Kitchen and Simply Asia, fast-growing brands that offer consumers authentic, easy-to-prepare Asian dishes. Since 2002, sales of these products have grown at a 32% compound annual rate.

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The Multiple Management Story

75 years of the journey

In 2007, McCormick & Company celebrates the 75th anniversary of Multiple Management. Part professional development program and part business improvement process, Multiple Management represents the cultural backbone of our Company.

In 1932, then-President Charles P. McCormick was thrust into his new position upon the sudden death of his uncle, Company founder, Willoughby McCormick. In one of a series of sweeping moves designed to save the business from failing during the great depression, “ C.P.” created one of the first attempts at participative management in the United States. What he called the “Junior Board,” now the Multiple Management Board (MMB), allows employees at all levels of the Company to play a stronger role, be involved in more decision-making and implement ideas to grow the business.

C.P. McCormick began with one MMB which has now grown to 14, with more than half at McCormick locations outside the United States. Thousands of McCormick employees have been professionally developed through the MMB over the years. Management trends in the world of business have come and gone, but for seven and a half decades Multiple Management has worked for McCormick and for the employees who have grown because of it. Multiple Management is a team-based system that allows a diverse, cross-section of employees to develop and work on projects to improve nearly any aspect of the business. The objectives of the MMB are to 1) train and educate employees and 2) create recommendations to contribute to the growth of the business. The following list includes some projects worked on by MMB members in recent years,

What C.P. McCormick began in 1932 was revolutionary for its time, gave employees a larger role in the business and became the foundation of our company culture.

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and they represent thousands of projects worked on to improve the business over 75 years: Energy Conservation, Activity-Based Costing, Raw Material Warehouse Efficiency, Management Performance Appraisal, Value Stream Mapping, Information Security Awareness, Capacity Utilization, Benchmarking New Product Development, Global Marketing Communication, Customer Service Metrics and Work/Life Balance.

C.P. McCormick’s vision of Multiple Management included as much benefit to the employee participant as to the business. The MMB offers an environment for employees to develop core skills crucial for professional development: project management, communication, research, critical analysis, leadership, among others. Lessons learned while on an MMB serve employees throughout their careers.

C.P. McCormick’s son, Charles P. McCormick Jr., is a former President and Chairman of the Company and a graduate of the MMB. He said, “The philosophy of Multiple Management created a spirit which became our inner strength. It augments and transcends goals, strategies and business plans. The nurturing of this spirit remains the heartbeat of McCormick.”

Here are some comments made by current employees: “My service on the MMB was invaluable; not only did it allow me to see the big picture beyond my job, it allowed me to take risks and learn.….It was such a professionally rewarding experience. It challenged me.….What I got from my MMB service was a professional maturity and self-awareness.….The feedback we received from other Board members allowed me to grow. It was a fantastic journey of learning and development.”

The Multiple Management philosophy, begun 75 years ago, has fulfilled C.P. McCormick’s dream of a robust business with engaged employees.

MMB members work in teams on projects to improve a wide range of business activities. It’s common for Board members to gain exposure to parts of the business that they would not encounter in their “regular” jobs.

MMB membership offers employees the chance to interact with all levels of the business, express their views based on detailed research and offer recommendations to top management. Since its inception in 1932, the Board has seen a high percentage of its recommendations enacted.

In addition to project work that helps drive our growth, the Board offers employees opportunities to develop professional skills that will serve them throughout their careers.

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Left to right

J. Michael Fitzpatrick

Freeman A. Hrabowski, III

Robert J. Lawless

Michael D. Mangan

John P. Bilbrey

Karen D. Weatherholtz

William E. Stevens

Barry H. Beracha

Margaret M.V. Preston

Francis A. Contino

James T. Brady

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Board of Directors

Barry H. Beracha 64

Executive Vice President

Sara Lee Corporation (retired)

Chief Executive Officer

Sara Lee Bakery Group (retired)

Chicago, Illinois

Director since 2000

Compensation Committee

John P. Bilbrey 50

Senior Vice President

The Hershey Company

President – Hershey International

Hershey, Pennsylvania

Director since 2005

Compensation Committee

James T. Brady 66

Managing Director, Mid-Atlantic

Ballantrae International, Ltd.

Ijamsville, Maryland

Director since 1998

Audit Committee*

Francis A. Contino 61

Executive Vice President –

Strategic Planning &

Chief Financial Officer

McCormick & Company, Inc.

Director since 1998

J. Michael Fitzpatrick 60

President & Chief Operating Officer

Rohm and Haas Company (retired)

Philadelphia, Pennsylvania

Director since 2001

Audit Committee

Nominating/Corporate Governance

Committee

Freeman A. Hrabowski, III 56

President

University of Maryland

Baltimore County

Baltimore, Maryland

Director since 1997

Nominating / Corporate Governance

Committee*

Robert J. Lawless 60

Chairman of the Board

& Chief Executive Officer

McCormick & Company, Inc.

Director since 1994

Michael D. Mangan 50

Senior Vice President

Chief Financial Officer

The Black & Decker Corporation

Towson, Maryland

Director since 2007

Audit Committee

Margaret M.V. Preston 49

Market Executive

The Private Bank of America

Banc of America Investment

Services, Inc.

New York, New York

Director since 2003

Nominating / Corporate Governance

Committee

William E. Stevens 64

Chairman, BBI Group

St. Louis, Missouri

Director since 1988

Compensation Committee*

Karen D.Weatherholtz 56

Senior Vice President –

Human Relations

McCormick & Company, Inc.

Director since 1992

* Denotes committee chairman

Executive Officers

Robert J. Lawless

Chairman of the Board

& Chief Executive Officer

Paul C. Beard

Vice President – Finance

& Treasurer

Francis A. Contino

Executive Vice President –

Strategic Planning &

Chief Financial Officer

Kenneth A. Kelly, Jr.

Vice President & Controller

Lawrence E. Kurzius

President – Europe,

Middle East & Africa

Charles T. Langmead

President –

U.S. Industrial Group

Robert W. Skelton

Senior Vice President,

General Counsel &

Secretary

Mark T. Timbie

President – North American

Consumer Foods

Karen D. Weatherholtz

Senior Vice President –

Human Relations

Alan D. Wilson

President & Chief Operating

Officer

Corporate Governance

McCormick’s mission is to enhance shareholder value. McCormick employees conduct business under the leadership of the Chief Executive Officer and the oversight and direction of the Board of Directors. Both management and the Board of Directors believe that the creation of long-term shareholder value requires us to conduct our business honestly and ethically and in accordance with applicable laws. We also believe that shareholder value is well served if the interests of our employees, customers, suppliers, consumers, and the communities in which we live, are appropriately addressed.

McCormick’s success is grounded in its value system as evidenced by our core values.

We are open and honest in business dealings inside and outside McCormick. We are dependable and truthful and keep our promises.

Our employees and our Board of Directors are committed to growing our business in accordance with our governance structure, principles and code of ethics.

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Management’s Discussion and Analysis

The purpose of the Management’s Discussion and Analysis (MD&A) is to provide an understanding of McCormick’s financial results and condition.

A Global Business

McCormick & Company is a global leader in the manufacture, marketing and distribution of spices, herbs, seasonings and other flavors to the entire food industry. Our major sales, distribution and production facilities are located in North America and Europe. Additional facilities are based in Mexico, Central America, Australia, China, Singapore, Thailand and South Africa. In 2006, 38% of sales were outside the United States.

We operate in two business segments, consumer and industrial. Consistent with market conditions in each segment, our consumer business has a higher overall profit margin than our industrial business.

Across both segments, we have the customer base and product breadth to participate in all types of eating occasions, whether it is cooking at home, dining out, purchasing a quick service meal or enjoying a snack.

Our Financial Objectives

With good visibility into our business prospects and operating environment, growth objectives are used as internal goals and to provide a financial outlook for our shareholders. In 2006, annual objectives were set to grow sales 3-5% and earnings per share on a comparable basis 8-10% through 2008.

Our business generates strong cash flow which has increased in the past 10 years. Actions to grow net income and improve working capital should lead to further gains. We have consistently paid dividends and expect to increase dividends at a rate similar to the increase in earnings per share. Additional cash is being used to fund strategic acquisitions and capital projects. An active share repurchase program is lowering shares outstanding and improving value for McCormick shareholders.

During the past five years, 84% of cash from operations directly benefited shareholders in the form of dividends and share repurchase.

A Sustainable Strategy

Our strategy – to improve margins, invest in our business and increase sales and profits – is as effective now as it was in 1998 when we developed it.

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During the past five years, this strategy has led to average annual sales growth of 7% with acquisitions driving approximately one quarter of the increase. Gross profit margin has risen from 38.0% in 2001 to 41.0% in 2006 and driven higher operating income and net income.

We are increasing margins with cost-savings programs, new capabilities and processes introduced through our B2K program, acquisitions of high-margin brands and the introduction of higher-margin, more value-added products.

A portion of the cost savings is being used to fund product development and advertising. During the past five years, we have increased research and development expense more than 60%. In 2006, we spent $58 million in advertising to consumers compared to $25 million in 2001. These are effective investments that are driving sales and profit growth at McCormick.

A Sustainable Strategy

Key Growth Initiatives

Four key initiatives are underway to continue our growth of sales and profits.

·      A restructuring program to improve our global supply chain was announced in 2005 and will extend through 2008. This plan is reducing our complexity and creating an organization more focused on growth opportunities. Our goal is to reduce annual costs by $50 million.

·      We are building consumer interest by revitalizing our consumer brands. Currently underway is the revitalization of McCormick brand spices and seasonings in the United States. Along with new products, new labels and new flip-top caps, we are introducing new store shelving systems to make shopping easier for the consumer and restocking easier for grocers.

·      Significant progress has been made transforming our U.S. industrial business. We’re simplifying and focusing our resources on growing with large customers who have the greatest potential to add profitable sales. From 2005 to 2008, we expect to increase operating income margin, excluding restructuring charges, by 2.5 to 3.5 percentage points.

·      We are leading and staying on top of the latest trends through innovation. Consumer demand for convenience, freshness, ethnic flavors and more, guides both our new product development and our acquisition strategy.

2006 Net Sales by

Business and Region

Consumer Business

From locations around the world, our consumer brands reach nearly 100 countries.

Customers: A variety of retail outlets that include grocery, mass merchandise, warehouse clubs, discount and drug stores, served directly and indirectly through distributors or wholesalers.

Products: Spices, herbs, extracts, seasoning blends, sauces, marinades and specialty foods. We supply both branded and private label products.

Market position: A 40-60% market share in primary markets, more than twice the size of the next largest branded competitor. As the market leader, we can more efficiently develop and support our brands.

Competitors: More than 250 other brands in U.S. and more in international markets. Some are owned by large food manufacturers, while others are supplied by small privately owned companies.

Growth opportunities: Developing innovative products, increasing marketing effectiveness, expanding distribution and acquiring leading brands and niche products.

Industrial Business

We provide a wide range of products to multi-national food manufacturers and restaurants.

Customers: Food manufacturers and the food service industry. Food service customers are supplied both directly and indirectly through distributors.

Products: Seasoning blends, natural spices and herbs, wet flavors, coating systems and compound flavors.

Market position: A leading supplier to many of the large multi-national food manufacturers and restaurants. We have one of the broadest ranges of flavor solutions in the industry and expertise in sensory, culinary and other areas.

Competitors: Tend to specialize in one or several ranges of products. Some competitors are publicly held flavor companies, while others are small privately owned firms.

Growth opportunities: Supporting the global expansion of customers, building current and new strategic partnerships, developing consumer-preferred, value-added products.

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I n d e x

The MD&A is organized as follows:

All charts provided in Management’s Discussion and Analysis are for the year ended November 30. All dollars are in millions, except per share data. Unless otherwise indicated, the results include the impact of restructuring activities for all years presented and stock-based compensation in 2006.

Results of Operations – 2006 compared to 2005

Key initiatives that drove sales in 2006 included higher volume driven by acquisitions, new products and effective marketing programs, as well as pricing actions taken early in the year. Sales from Simply Asia Foods, acquired in the third quarter of 2006, contributed 0.7% to the sales increase. Foreign exchange rates had an unfavorable effect on sales in the first half of 2006 and a favorable effect on reported sales in the second half of the year. On a full year basis, the sales effect of foreign exchange rates was slightly favorable.

The increase in margin is attributable to initiatives to reduce costs, pricing actions taken early in 2006 in response to the higher costs of certain materials, employee benefits and energy, and a more favorable product mix. Included in cost of goods sold are restructuring charges for production facilities that are being closed. These charges reduced gross profit margin in 2006 by 0.5%. Also, gross profit margin in 2005 was negatively impacted by higher costs of vanilla.

The increase in SG&A was primarily due to increased incentive compensation on higher earnings, as well as stock-based compensation and higher advertising costs. Stock-based compensation of $22.0 million, which accounted for a 0.8 percentage point increase as a percentage of net sales, was recorded in 2006 as result of the adoption of Statement of Financial Accounting Standards (SFAS) 123(R) effective December 1, 2005 (see note 3 of the financial statements). Advertising expense increased by $12.7 million, adding another 0.5 percentage point increase to SG&A as a percentage of net sales, as we spent at a higher level to support the consumer brands.

The following is a summary of restructuring activities:

Pre-tax restructuring charges for both 2006 and 2005 include actions under our restructuring plans. These include charges to consolidate our global manufacturing, rationalize our distribution facilities, improve our go-to-market strategy and eliminate administrative redundancies. The gain on the sale of unconsolidated operations in 2006 is primarily for the redemption of our ownership investment in Signature Brands LLC (Signature) and, to a lesser extent, the sale of our consumer joint venture in Japan. More details of the restructuring charges are discussed later in MD&A and in note 4 of the financial statements.

Interest expense in 2006 increased $5.5 million. Higher interest rates on our variable rate debt during 2006 accounted for most of this increase. Average borrowings during the year increased slightly.

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Other income increased to $7.1 million in 2006 compared to $0.4 million in 2005 due mostly to higher interest income.

The effective tax rate was 29.0% in 2006 down from 32.7% in 2005. This decrease is due to both the mix of earnings among the different tax jurisdictions in which we do business and several discrete tax benefits. The discrete items were the favorable resolution of an international tax audit for $3.5 million, a $1.0 million reduction of accruals recorded for state tax audits and a $0.6 million additional tax benefit related to the closure of our operation in Finland. In 2007, we expect the rate to be closer to the 2005 rate.

We participated in two separate joint ventures with the same joint venture partner, Hero A.G. We owned 50% of Signature and 51% of Dessert Products International, S.A.S. (DPI). Signature is a cake decorating business in the U.S. and DPI markets the Vahine® brand of dessert aids in France and other European countries.

In the second quarter of 2006 we received the remaining 49% share of DPI in redemption of our 50% ownership investment in Signature. Since this transaction happened early in the year, it resulted in a decrease in our income from unconsolidated operations but also decreased the negative impact of our minority interest reported in the income statement. Excluding these effects, the increase in unconsolidated income is mainly from our joint venture in Mexico where stronger mayonnaise sales and moderate soybean oil prices contributed to the improved performance of this joint venture.

The following table outlines the major components of the changes in diluted earnings per share from 2005 to 2006:

Results of Operations – Segments

In 2006, we changed the way we internally manage and report our business segment results. The management and reporting of sales and income related to warehouse club customers was moved to the consumer business from the industrial business. Also, to better represent the profitability of our two segments, we began to allocate 100% of our SG&A to our business segments. In addition, since restructuring activities are managed separately from the business segments, the segments are being measured on operating income excluding net charges from restructuring activities. In line with these changes, prior year segment results have been restated to be comparable with the current presentation.

Consumer Business

We began recording stock-based compensation expense in 2006. Total stock-based compensation expense recorded in the consumer business operating results was $13.9 million.

Higher volume, pricing actions and a favorable product mix added 5.3%, while foreign exchange rates had no effect on sales. This included sales from Simply Asia Foods, acquired in June 2006, which added 1.3% to sales. In the Americas, consumer business sales increased 8.1%, with 1.9% of the sales increase attributable to the Simply Asia Foods acquisition and 0.6% from favorable foreign exchange. The majority of the increase was driven by higher volume from new product introductions and more effective marketing, as well as pricing actions in the U.S. taken early in 2006. In 2006, we grew sales of Hispanic products, Grill Mates®, lower sodium items, slow cooker seasonings and more, with new varieties and marketing support. Print advertisements helped drive sales of gourmet products and gravy items. A new program, across our entire line of products, encouraged consumers to replace out-of-date spices and herbs. During the fourth quarter of 2005, demand for our McCormick® and Zatarain’s® consumer products in the Gulf region of the U.S. was lower due to the effects of Hurricane Katrina. This had a positive impact when 2006 is compared to 2005.

In Europe, sales declined 0.8%, with unfavorable foreign exchange rates reducing sales 1.5%. Lower distribution in The Netherlands and our decision to exit

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Finland early in 2006 reduced sales. In the U.K., sales of Schwartz® branded herbs and spices were strong, but were offset in part by weaker performance in dry seasoning mixes and some non-core wet products. In France, higher sales in 2006 were led by core spice and seasoning products. Sales in the Asia/Pacific region increased 1.1%, including a decline of 0.5% due to unfavorable foreign exchange rates. The sales contribution from China was particularly strong in 2006, partially offset by a decline in Australia.

The decrease in operating income and operating income margin (operating income as a percentage of net sales), excluding restructuring charges was driven by stock-based compensation expense, increased incentive compensation expense and increased advertising expense in 2006, partially offset by strong sales performance and cost reduction efforts.

Industrial Business

We began recording stock-based compensation expense in 2006. Total stock-based compensation expense recorded in the industrial business operating results was $8.1 million.

Higher volumes related to new product introductions was the primary driver of the sales increase while favorable foreign exchange rates added 0.4%. As part of the global industrial strategy, certain low margin business was eliminated which reduced sales by approximately 1% in 2006. Sales in the Americas rose 4.9% with favorable foreign exchange rates adding 0.7%. This increase reflects higher sales to strategic customers. Sales to food manufacturers led this increase with particular strength in snack seasonings and new flavors for beverages and other consumer products. We increased sales to both quick service and casual dining restaurants. Sales of our seasoning and coating systems for chicken were especially strong. We also benefited from higher volume and a price increase implemented earlier in 2006 for products sold to food service distributors. In this region, customer and product rationalization reduced sales approximately 1.0%.

In Europe, sales increased 4.1%, which was negatively impacted by an unfavorable foreign exchange rate impact of 1.3%. Some of the same types of products as in the Americas drove the increase in Europe, including snack seasonings and products to flavor chicken sold through the food service channel. In this region, customer and product rationalization reduced sales approximately 1.0%. In the Asia/Pacific region, sales declined 2.4%, including a favorable foreign exchange rate effect which increased sales 1.3%. The main reason for this decline is the loss of certain low margin products in Australia, which began in the first quarter of 2006. In China, we have continued to grow sales to both food service customers and food manufacturers.

The higher operating income and operating income margin, excluding restructuring activities, was driven by higher sales and gross profit margin, partially offset by stock-based compensation and higher incentive compensation accruals due to the higher profit level. Cost savings from our restructuring plan and a focus on strategic customers lifted margins in 2006. Also, the industrial business was negatively impacted in 2005 by several factors including extreme volatility in the vanilla market.

Results of Operations – 2005 compared to 2004

Key initiatives that drove sales in 2005 included acquisitions, new products, improved marketing and price increases. Favorable foreign exchange rates added 1.0% for the year. Sales from Silvo, acquired at the end of 2004, contributed 1.5% to the sales increase. During 2005, net sales were negatively impacted by several factors. First, industrial sales were reduced by lower pricing of vanilla products and the elimination of lower-margin products in Europe. Second, consumer sales in the fourth quarter were affected by the impact of Hurricane Katrina on sales in the Gulf region of the U.S. Third, consumer sales of a limited range of higher volume spice and herb items in France continued to be adversely impacted by low priced products in alternative retail channels. We estimate that these three factors lowered sales for 2005 by approximately 2%.

In 2005, we exceeded our goal of lowering costs by $25 million, achieving savings of $33 million. Improved segment

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mix through a higher proportion of consumer versus industrial sales and pricing actions also improved gross profit margin. Significant cost increases in certain raw materials, packaging and fuel offset much of the gross profit margin increase.

Selling, general and administrative expenses were higher in 2005 than 2004 on a dollar basis but declined as a percentage of net sales. The dollar increase was primarily due to increased distribution expenses and higher sales promotion expenses. The increase in distribution expenses was primarily due to higher fuel costs. In our consumer business, we increased sales promotion expenses in order to launch several new products and to support our brand name. The decrease in selling, general and administrative expenses as a percentage of net sales was primarily due to lower incentive compensation associated with our 2005 results. In addition, advertising was down slightly as we suspended some of our advertising for the Zatarain’s brand following Hurricane Katrina.

The following is a summary of restructuring activities:

The 2004 pre-tax restructuring activities included a net gain of $8.7 million recorded in 2004 for funds received from a class action lawsuit that was settled in our favor. The charges in 2005 are primarily due to the implementation of the new restructuring plan, discussed later in MD&A and in note 4 of the financial statements.

Interest expense in 2005 increased $7.2 million. Average borrowings during the year increased slightly, however, higher interest rates on our variable rate debt during 2005 accounted for most of this increase.

Other income decreased to $0.4 million in 2005 compared to $2.1 million in 2004 due to lower interest income.

The effective tax rate was 32.7% in 2005 up from 30.3% in 2004. The increase in the effective tax rate was due to the final utilization of certain net operating loss carry forwards in 2004 which were no longer available in 2005 and the mix of earnings among the different tax jurisdictions in which we operate.

Income from unconsolidated operations increased 41% in 2005 compared to 2004. This increase is mainly attributable to higher income from our joint venture in Mexico where more effective marketing programs and promotions, new product launches, reduced expenses and lower soybean oil costs all contributed to the improved performance.

The following table outlines the major components of the change in diluted earnings per share from 2004 to 2005:

Consumer Business

Sales from Silvo, acquired in November 2004, added 2.7% to sales and favorable foreign exchange rates added 0.9%. The additional increase of 0.4% was mainly driven by pricing actions taken in 2005. In the Americas, consumer business sales increased 2.2% with 2.4% of the sales increase from pricing actions and a favorable product mix, 0.5% from favorable foreign exchange rates and a volume decrease of 0.7%. During the fourth quarter, demand for our McCormick and Zatarain’s consumer products in the Gulf region of the U.S. was lower due to the effects of Hurricane Katrina. This had a negative impact of approximately 1% on the full year results.  The remaining increase was driven by more effective marketing, new product introductions and pricing actions.

In Europe, sales rose 9.9%, with Silvo adding 10.0%, favorable foreign exchange contributing 1.4%, both offset

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by decreases from unfavorable volume, price and product mix of 1.5%. We experienced difficult retail conditions for a limited range of larger volume spice and herb products in France. While progress was made in slowing the migration of sales to alternative channels, the poor economic conditions in France complicated the recovery. In this region we have been successfully growing sales of value-added products such as dessert items, pastes and grinders with retail customers. Sales in the Asia/Pacific region decreased 2.7% due to unfavorable volume, price and product mix of 5.7% partly offset by favorable foreign exchange rates of 3.0%. Volumes in China were adversely affected by our reduction in the number of distributors as we move to a higher quality network.

Operating income excluding restructuring activities from our consumer business increased 12.3% to $288.0 million. The operating income increase was driven by strong sales performance, cost reduction efforts and pricing actions. When comparing operating income margin excluding restructuring activities, cost savings on supply chain initiatives more than offset increases in fuel and the negative profit impact of challenging market conditions in Europe, particularly in France.

Industrial Business

For 2005, sales from the industrial business rose 0.8% as compared to 2004. Favorable foreign exchange rates added 1.1% to sales while unfavorable volume, price and product mix decreased sales 0.3%. As anticipated, lower vanilla pricing in 2005 decreased sales approximately 2% and actions to eliminate lower margin products in Europe decreased sales approximately 1%. Sales in the Americas rose 1.6% with favorable foreign exchange rates adding 1.0%. In this region, lower vanilla pricing reduced sales approximately 3%. The remaining sales increase was due to strength in snack food seasonings, certain new product successes and improved sales in the food service distributor channel.

In Europe, sales declined 4.5% as unfavorable volume, price and product mix reduced sales 5.5% offset by favorable foreign exchange rates which added 1.0%. Included in the 5.5% decrease from unfavorable volume, price and product mix was the impact of the elimination of lower margin products which decreased sales approximately 4%. In the Asia/Pacific region, sales increased 7.4% with a 4.9% increase from higher volume, favorable price and product mix and 2.5% from foreign exchange rates. The increase was driven by strong sales of snack seasonings and to quick service restaurants which continue to expand their stores.

The sale of high cost vanilla beans during a period of declining prices, reduced operating income approximately $15 million during 2005, offsetting the benefit of cost reduction efforts. Operating income in 2004 was reduced by a $6.2 million operational accounting adjustment at an industrial plant in Scotland.

Liquidity and Financial Condition

Amounts of $7.0 million and $7.1 million in 2005 and 2004, respectively, reflect the reclassification of expenditures for in-store displays from investing to operating activities to conform to current year presentation.

We generate strong cash flow from operations which enables us to fund operating projects and investments that are designed to meet our growth objectives, make substantial share repurchases, increase our dividend and fund capital projects and restructuring costs.

In the cash flow statement, the changes in operating assets and liabilities are presented excluding the effects of changes in foreign currency exchange rates, as these do not reflect actual cash flows. Accordingly, the amounts in the cash flow statement do not agree with changes in the operating assets and liabilities that are presented in the balance sheet.

Operating Cash Flow – When 2006 cash provided by operations is compared to 2005, the decrease was primarily the result of spending on restructuring of $55.9 million and lower dividends from unconsolidated operations, offset by higher operating income, exclusive of restructuring.

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In total, changes in operating assets and liabilities were comparable between 2006 and 2005. However, increases in inventories attributable to a build-up in anticipation of production transfer from facilities that will be closed, as well as increased purchases of certain raw materials, were offset by an increase in other accrued liabilities in 2006 as compared to the same period last year. The increase in other accrued liabilities is due to increased incentive compensation and restructuring charges. When 2005 is compared to 2004, the change in operating cash flow was primarily the result of a reduction in receivables in 2005 as compared to an increase in 2004 and higher dividends received from unconsolidated operations. These favorable cash flows were offset by an increase in inventory in 2005 as compared to 2004 when inventory decreased and a decrease in other liabilities in 2005 compared to an increase in 2004.

Investing Cash Flow – Included in 2006 was $9.2 million in net proceeds from the redemption of a joint venture (see note 4 of the financial statements). Net capital expenditures (capital expenditures less proceeds from the sale of fixed assets) were $78.7 million in 2006, $64.5 million in 2005 and $59.9 million in 2004. The increase in net capital expenditures in 2006 is mainly due to increased spending under our restructuring program. This higher level is expected to be maintained for 2007 as we continue with the program. Cash outflow for the acquisition of businesses was primarily the Simply Asia Foods asset purchase in 2006, a small business purchase in France in 2005 and the Silvo business in 2004.

Financing Cash Flow – We increased our total borrowings $77.2 million in 2006, compared to a decrease of $67.6 million in 2005 and an increase of $19.3 million in 2004. The main cause of the increase in 2006 was to fund the Simply Asia Foods asset purchase for $97.6 million. In 2006, we issued $100 million of 5.80% senior notes due 2011. Net interest payments are payable semi-annually in arrears in January and July of each year. Also, in 2006, we issued $200 million of 5.20% senior notes due 2015. Net interest payments are payable semi-annually in arrears in June and December of each year. The net proceeds from the $200 million offering were used to pay down $195 million of long-term debt which matured in 2006. In 2005, we paid off $30 million of medium-term notes at maturity. In 2004, we issued a total of $50 million in medium-term notes which mature on April 15, 2009 and pay interest semi-annually at a rate of 3.35%. The net proceeds of this 2004 issuance were used to pay down short-term debt.

The following table outlines the activity in our share repurchase programs:

In the fourth quarter of 2005, we completed our $300 million share repurchase authorization and began to buy against our $400 million authorization approved by the Board of Directors in June 2005. As of November 30, 2006, $206 million remained under the $400 million share repurchase program. We expect to continue to repurchase shares under this authorization during 2007. The common stock issued in 2006, 2005 and 2004 relates to our stock compensation plans.

Net share repurchase is net of proceeds from exercised stock options. Net capital expenditures are net of proceeds from sale of fixed assets.

Our dividend history over the last three years is as follows:

In November 2006, the Board of Directors approved an 11.1% increase in the quarterly dividend from $0.18 to $0.20 per share. During the last five years, dividends per share have risen at a compound annual rate of 12.5%.

Cash payments to pension plans, including unfunded plans, were $41.2 million in 2006, $32.8 million in 2005 and $30.6 million in 2004. We plan to make 2007 pension plan contributions similar to those made in 2006. Future increases or decreases in pension liabilities and required

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cash contributions are highly dependent on changes in interest rates and the actual return on plan assets. We base our investment of plan assets, in part, on the duration of each plan’s liabilities. Across all plans, approximately 66% of assets are invested in equities, 27% in fixed income investments and 7% in other investments.

The increase of our debt-to-total-capital ratio in 2006 (total capital includes debt, minority interest and shareholders’ equity) was the result of an increase in our total debt of $81.0 million, partially offset by a significant increase in capital. The increase in debt is due to the acquisition of Simply Asia Foods and the increase in equity is primarily due to the effect of foreign currency translation adjustments. During the year, the level of our short-term debt varies. It is usually lower, however, at the end of the year. The average short-term borrowings outstanding for the year ended November 30, 2006 and 2005 were $271.9 million and $299.3 million, respectively.

The reported values of our assets and liabilities held in our non-U.S. subsidiaries and affiliates have been significantly affected by fluctuations in foreign exchange rates between periods. During the year ended November 30, 2006, the exchange rates for the Euro, British pound sterling and Canadian dollar were substantially higher versus the U.S. dollar than in 2005. Exchange rate fluctuations resulted in an increase in accounts receivable of $23 million, inventory of $12 million, goodwill of $59 million and other comprehensive income of $110 million since November 30, 2005.

In March 2006, we entered into interest rate swap contracts for a total notional amount of $100 million to receive interest at 5.20% and pay a variable rate of interest based on three-month LIBOR minus ..05%. We designated these swaps, which expire on December 15, 2015, as fair value hedges of the changes in fair value of $100 million of the $ 200 million 5.20% medium-term notes due 2015 that we issued in December 2005. As of November 30, 2006, the fair value of this swap contract was an unrealized gain of $2.3 million, which was offset by a corresponding increase in value of the hedged debt. Any unrealized gain or loss on this swap will be offset by a corresponding increase or decrease in value of the hedged debt. No hedge ineffectiveness is recognized as the interest rate swap qualifies for the “shortcut” treatment.

We have available credit facilities with domestic and foreign banks for various purposes. The amount of unused credit facilities at November 30, 2006 was $499.1 million. Management believes that internally generated funds and the existing sources of liquidity under our credit facilities are sufficient to meet current liquidity needs and longer-term financing requirements. If an acquisition would require funds in excess of existing sources of liquidity, funding from additional credit facilities or equity issuances would be sought.

Acquisitions

On June 27, 2006, we purchased the assets of Epicurean International (Simply Asia Foods) for $97.6 million in cash. This business operates in North America and is included in our consumer segment from the date of acquisition. Simply Asia Foods develops, imports and markets a line of authentic, easy-to-prepare Asian products under the Thai Kitchen® and Simply Asia® brands and has annual sales of approximately $50 million. Its primary products include noodle and soup bowls, meal kits, coconut milk, and various sauces and pastes. Acquisitions such as Simply Asia Foods are a part of our growth strategy to improve margins and increase sales and profits.

The excess purchase price over the estimated fair value of the net tangible assets purchased was $91.0 million. The allocation of the purchase price included in our financial statements is based on preliminary estimates, subject to revision after appraisals have been finalized. Revisions to the allocation, which may be significant, will be reported as changes to various assets and liabilities, including goodwill and other intangible assets. As of November 30, 2006, $26.3 million was allocated to other intangibles assets and $64.7 million remained in goodwill. We expect the final valuation to result in a value for brands and other intangible assets, a portion of which will be amortizable and a portion of which will be non-amortizable. Based on preliminary estimates, we have included amortization expense in our income statement.

The $97.6 million purchase price was initially funded with commercial paper. In July 2006, we issued $100 million of 5.80% senior notes due 2011 to pay down this commercial paper debt (see note 7 of the financial statements).

On August 1, 2006, we invested $5.0 million in an industrial joint venture in South Africa.

On November 1, 2004, we purchased C.M. van Sillevoldt B.V. (Silvo), the market leader in the Dutch spices and herbs consumer market, for €58 million in cash

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(equivalent to $74.5 million) funded with cash from operations and current credit facilities. Silvo sells spices, herbs and seasonings under the Silvo® brand in The Netherlands and the India® brand as well as private label store brands in Belgium. The brand has a strong heritage, high recognition among consumers and is the leading brand of herbs and spices in The Netherlands. Silvo is included in our consumer segment and the results of operations have been included in our consolidated results from the date of acquisition. A detailed analysis of the intangible assets of this acquisition resulted in our conclusion that the excess purchase price should be accounted for as the value of the acquired brand and goodwill. No other intangible assets were identified as a result of this analysis. We concluded that a large portion of the value of the excess purchase price resides in the Dutch consumers’ cultural connections with the Silvo brand name. Based on an analysis of the premium value that is derived from consumer loyalty and trust in the Silvo brand’s quality, we assigned $35.0 million of the excess purchase price to this non-amortizable brand. Given Silvo’s strong brand name recognition in the marketplace, we intend to use and support the brand name indefinitely. The remaining $25.6 million of excess purchase price remained as goodwill in the consumer segment.

B2K

Late in 1999, we initiated the B2K program as a global program of business process improvement. B2K is designed to re-engineer transactional processes, strengthen the product development process, extend collaborative processes with trading partners, optimize the supply chain and generally enhance our capabilities to increase sales and profit. An integral part of B2K is the design and implementation of an enterprise-wide state-of-the-art technology and information system platform.

The implementation of B2K in our U.S. operations was completed in 2004. We began to rollout B2K to our international operations in 2005 with implementation in Europe, which was completed in the second quarter of 2006. Remaining implementation efforts for other international locations are targeted for completion by the end of 2008.

Restructuring Charges

As part of our plan to improve margins, we announced in September 2005 significant actions to improve the effectiveness of our supply chain and reduce costs. At that time, we also stated that a comprehensive review of our global industrial business was underway to identify improvements. These actions were included in the comprehensive restructuring plan which the Board of Directors approved in November 2005. As part of this plan, over a three-year period, we are consolidating our global manufacturing, rationalizing our distribution facilities, improving our go-to-market strategy, eliminating administrative redundancies and rationalizing our joint venture partnerships. In addition, for the industrial business, we are reallocating resources to key customers and taking pricing actions on lower volume products to meet new margin targets. A new forecasting process was installed and the use of technology is being accelerated to monitor and manage the business. Through 2008, these actions are intended to reduce the number of industrial business customers and products in the U.S. by approximately 25%. Sales related to these customers and products represent approximately 2-5% of industrial business sales in the U.S. As these sales have minimal profit, this reduction is expected to lead to higher margins. These reductions also led to the consolidation of certain manufacturing facilities.

We expect that the restructuring plan will reduce complexity and increase the organizational focus on growth opportunities in both the consumer and industrial businesses. In addition, we are projecting $50 million ($34 million after-tax) of annual cost savings by the end of 2008. In 2006, we realized $10 million ($7 million after- tax) of savings and estimate that another $30 million ($20 million after-tax) will be realized in 2007. We expect that this will improve margins and increase earnings per share, offset higher costs, as well as allow us to invest a portion of these savings in sales growth drivers such as brand advertising. These savings are expected to be reflected in both cost of goods sold and selling, general and administrative expenses in the income statement.

We are projecting $50 million of annual cost savings by the end of 2008.

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Total pre-tax charges under this restructuring plan are estimated to be $110-$130 million with approximately 65% related to the consumer segment and 35% related to the industrial segment. We originally estimated pre-tax charges of $130-$150 million under this program. However, after considering the $33.7 million pre-tax gain on our Signature investment and other refinements to the estimates, we now anticipate pre-tax charges of $110- $130 million for this program. Of these charges, we expect that $85-$95 million will consist of severance and other personnel costs and $40-$45 million of other exit costs. Asset write-offs are expected to be $20-$25 million, excluding the gain on our Signature investment of $34 million.

In the fourth quarter of 2005, $10.7 million ($7.2 million after-tax) of charges were recorded, of which $10.5 million related to our consumer business. These charges included certain severance costs associated with the closing of our manufacturing plant in Salinas, California, closing costs for a small plant in Belgium and costs associated with reorganization of the sales and distribution networks in the U.S. and Europe. Following the $10.7 million charge recorded in 2005, we recorded $50.4 million during 2006, including the gain on Signature. The remaining portion will be incurred approximately 65% in 2007 and 35% in 2008.

For the total plan, the cash related portion of the charges will be $95-$105 million, of which $46.7 million was spent in 2006 (after offsetting the $9.2 million in cash received from the Signature gain below). We intend to fund this spending through internally generated funds. A significant portion of the cash expenditures are for employee severance. The actions being taken pursuant to the restructuring plan are expected to reduce our global workforce by approximately 1,000 over the three-year period. Approximately 700 employees have been notified, of which the majority have left in fiscal 2006. From inception of the project in November 2005, $48.2 million in cash has been spent on restructuring charges under the plan, after offsetting the $9.2 million in net cash received from the sale of Signature.

Joint Venture Transactions – We participated in two separate joint ventures with the same joint venture partner, Hero A.G. We owned 50% of Signature and 51% of DPI. In the second quarter of 2006, we received the remaining 49% share of DPI in redemption of our 50% ownership investment in Signature. In addition, we received $9.2 million in cash with this transaction.

In recording this transaction, we valued both the investment received and the investment given at their fair value. On the disposition of our Signature investment, the fair value of our investment was $56.0 million as compared to our book value of this unconsolidated subsidiary of $21.7 million. After consideration of transaction costs of $0.6 million and taxes of $7.2 million, we recorded a net after-tax gain of $26.5 million which is shown on the line entitled “Gain on sale of unconsolidated operations” in our income statement. On the acquisition of the 49% minority interest of DPI, the fair value of these shares was assessed at $46.9 million. Since this business was consolidated, the book value of this 49% share was shown as $29.9 million of minority interest on our balance sheet. After consideration of transaction costs of $0.7 million, we allocated $17.7 million to goodwill. The impact of increasing our share in DPI and disposing of Signature on future net income is not material.

In the third quarter of 2006, in connection with exiting an unconsolidated joint venture in Japan, we recorded a net gain of $0.3 million, after-tax.

These actions are part of our plan to simplify our joint venture structure under the restructuring program and focus on those areas we believe have strong growth potential.

Other Restructuring Costs – In 2006, we recorded restructuring charges, exclusive of the gain on Signature, of $84.1 million ($57.1 million after-tax). The costs recorded during 2006 primarily included severance costs and special early retirement benefits, asset write-downs and other exit costs. These expenses were classified in restructuring charges ($72.4 million) and cost of goods sold ($11.7 million) in the income statement. Through 2006, actions included: our voluntary separation program in several functions in the U.S. that led to severance costs and special early retirement benefits; closures of manufacturing facilities in Salinas, California; Hunt Valley, Maryland; Sydney, Australia; Paisley, Scotland; and Kerava, Finland; and the reduction of both administrative and plant personnel at other global locations. In our income statement, restructuring charges under this program are displayed in three line items. The gain related to our disposition of Signature and a joint venture in Japan as described under joint venture transactions is on the line entitled “Gain on sale of unconsolidated operations.” Other restructuring costs are included in restructuring charges and cost of goods sold.

Restructuring charges in the consumer business were $57.1 million in 2006, which included severance costs and

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special early retirement benefits associated with our voluntary separation program in several functions in the U.S.; closures of manufacturing facilities in Salinas, California, Sydney, Australia, and Kerava, Finland; and the reduction of both administrative and plant personnel at other global locations. Restructuring charges in the industrial business were $27.0 million in 2006, which consisted of severance costs and special early retirement benefits associated with our voluntary separation program in several functions in the U.S.; closures of manufacturing facilities in Hunt Valley, Maryland, and Paisley, Scotland; and the reduction of both administrative and plant personnel at other global locations.

In 2001, we adopted a plan to streamline our operations which was completed in 2005. This plan included the consolidation of several distribution and manufacturing locations, the reduction of 392 administrative and manufacturing positions, and the reorganization of several joint ventures. The cost of the total plan was $30.9 million ($21.1 million after- tax). Total cash expenditures in connection with these costs approximated $16.2 million, which was funded through internally generated funds. The remaining $14.7 million of costs associated with the plan consisted of write-offs of assets. Annualized cash savings from the plan were approximately $8.0 million ($5.3 million after-tax). Savings under the plan are being used for spending on initiatives such as brand support and supply chain management. These savings are included within the cost of goods sold and selling, general and administrative expense in the income statement.

During the year ended November 30, 2005, we recorded restructuring charges of $0.5 million ($0.3 million after-tax). The costs recorded in 2005 primarily were severance costs.

During the year ended November 30, 2004, we recorded restructuring charges of $6.2 million ($4.3 million after-tax). The costs recorded in 2004 primarily included costs related to the consolidation of industrial manufacturing facilities in the U.K. and Canada, the reorganization of a consumer joint venture and additional severance costs. During 2004, total cash expenditures in connection with the 2001 restructuring plan were $4.7 million. Also included in restructuring charges/(credits) was 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 our favor in the second quarter of 2004. 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. We, as a purchaser of such products, participated as a member of the plaintiff class. In the second quarter of 2004, we received $11.1 million as a settlement of this claim and as a result of the settlement, were required to settle claims against us for a portion of this gross amount. The net gain recorded was $8.7 million.

Market Risk Sensitivity

We utilize derivative financial instruments to enhance our ability to manage risk, including foreign exchange and interest rate exposures, which exist as part of our ongoing business operations. We do not enter into contracts for trading purposes, nor are we a party to any leveraged derivative instrument. The use of derivative financial instruments is monitored through regular communication with senior management and the utilization of written guidelines. The information presented below should be read in conjunction with notes 7 and 8 of the financial statements.

Foreign Exchange Risk – We are exposed to fluctuations in foreign currency in the following main areas: cash flows related to raw material purchases; the translation of foreign currency earnings to U.S. dollars; the value of foreign currency investments in subsidiaries and unconsolidated affiliates and cash flows related to repatriation of these investments. Primary exposures include the U.S. dollar versus functional currencies of our major markets (Euro, British pound sterling, Australian dollar, Canadian dollar, Mexican peso and Chinese renminbi). We routinely enter into foreign currency exchange contracts to facilitate managing foreign currency risk.

During 2006, the foreign currency translation component in other comprehensive income was principally related to the impact of exchange rate fluctuations on our net investments in France, the U.K., Canada and Australia. We did not hedge our net investments in subsidiaries and unconsolidated affiliates.

The following table summarizes the foreign currency exchange contracts held at November 30, 2006. All contracts are valued in U.S. dollars using year-end 2006 exchange rates and have been designated as hedges of foreign currency transactional exposures, firm commitments or anticipated transactions, all with a maturity period of less than one year.

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Foreign Currency Exchange Contracts at November 30, 2006

We have a number of smaller contracts with an aggregate notional value of $3.0 million to purchase or sell various other currencies, such as the Australian dollar and the Japanese yen as of November 30, 2006. The aggregate fair value of these contracts was $(0.1) million at November 30, 2006.

At November 30, 2005, we had foreign currency exchange contracts for the Euro, British pound sterling, Canadian dollar, Australian dollar, Japanese yen and Singapore dollar with a notional value of $24.0 million, all of which matured in 2006. The fair value of these contracts was $(0.6) million at November 30, 2005.

Contracts with durations which are less than 5 days and used for short-term cash flow funding are not included in the notes or table above.

Interest Rate Risk – Our policy is to manage interest rate risk by entering into both fixed and variable rate debt arrangements. We also use interest rate swaps to minimize worldwide financing costs and to achieve a desired mix of fixed and variable rate debt. The table that follows provides principal cash flows and related interest rates, excluding the effect of interest rate swaps and the amortization of any discounts or fees, by fiscal year of maturity at November 30, 2006 and 2005. For foreign currency-denominated debt, the information is presented in U.S. dollar equivalents. Variable interest rates are based on the weighted-average rates of the portfolio at the end of the year presented.

Year of Maturity at November 30, 2006

Year of Maturity at November 30, 2005