OVERVIEW

Our Business

We are 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. 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.

We operate in two business segments, consumer and industrial. Profit margins in our consumer business are higher than the profit margins in our industrial business, which is consistent with the experience of other manufacturers operating in the same business segments. On average, approximately 80% of our product costs are from materials and packaging and approximately 20% are from labor and overhead. 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 Strategy

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

Improving Margins - Our goal is to improve profit margins with cost savings from our restructuring program and supply chain initiatives, the elimination of lower margin business, acquisitions of high-margin brands and the introduction of higher-margin, more value-added products. The restructuring program that is underway is designed to improve our global supply chain. This plan, which was announced in 2005 and will extend through 2008 and possibly into 2009, is intended to reduce our complexity and create an organization more focused on growth opportunities.

While our long-term goal is to improve profit margins, we do not expect to achieve this goal in 2008. This is primarily due to the effects of higher commodity costs that we began to experience in the second half of 2007 and which are continuing into 2008. While we have been able to offset the dollar impact of these higher costs through our pricing actions, we do not expect to improve profit margin in 2008.

Investing in the Business - We are investing in our consumer business by revitalizing our McCormick brand spices and seasonings in the United States. We started introducing new labels and new flip-top caps in 2006 and are continuing to roll out new store shelving displays that make shopping easier for the consumer and restocking easier for retailers. These projects are expected to be completed in 2008. A similar effort is underway that is designed to drive growth of our Schwartz brand in the U.K. and the Ducros brand in France. In the second half of 2008, we are relaunching our

entire line of Vahine dessert items in France with significantly upgraded packaging.

We have increased our marketing support to drive growth of our brands. From 2002 to 2007 we doubled our advertising expense. With investments in advertising, sampling, interactive media and other programs, we plan a double digit increase in total marketing support for 2008.

Through acquisitions we are adding leading brands to extend our reach into new geographic regions where we currently have little or no distribution. We have a particular interest in emerging markets that offer high growth potential. In our developed markets, we are seeking brands that have a niche position and meet a growing consumer trend.

We have made significant progress in transforming our U.S. industrial business. We have simplified the business and are focusing our resources on large customers who have the greatest potential to add profitable sales. Over the years we have grown industrial sales by maintaining a commitment to service and quality while working with our strategic partners to expand markets and develop new products.

Across all of our businesses, we are focused on monitoring and leading the latest trends through innovation. Convenience, freshness, wellness and ethnic flavors drive consumer demand and are a part of our new product development and acquisition strategy.

Increasing Sales and Profits - 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. Our current objective in 2008 is to grow sales 9 to 10%. Our guidance for 2008 earnings per share is between $2.04 to $2.08. Sales growth is benefitting from increased volume and product mix, including the addition of Lawry's and Bill Bee Honey Products. Also adding to sales in 2008 is higher pricing taken to offset higher input costs, as well as favorable foreign exchange rates. Our long-term financial objectives continue to be to grow sales 4 to 6% and earnings per share 9 to 11%.

RESULTS OF OPERATIONS - COMPANY



                                  Three months ended           Nine months ended
                                      August 31,                  August 31,
          (in millions)            2008          2007         2008          2007
          Net sales             $    781.6      $ 716.2     $ 2,269.7     $ 2,056.1
          Percent growth               9.1 %                     10.4 %
          Gross profit          $    308.4      $ 284.3     $   892.1     $   820.5
          Gross profit margin         39.5 %       39.7 %        39.3 %        39.9 %

The sales increase of 9.1% for the third quarter includes 2.9% for the favorable impact of foreign currency. With a weak dollar through the first three quarters, exchange rates have had a positive effect on sales, but stronger dollar exchange rates could have a negative sales impact in the fourth quarter.

In addition to the foreign exchange rate benefit, we were able to realize a 4.4% increase in sales due to pricing in the third quarter. Volume and product mix were up 1.8%, with a strong contribution from the consumer business partially offset by lower volume and mix in the industrial business. Incremental sales from acquisitions added 2.9% to the quarter. These included Lawry's, Billy Bee in Canada and Thai Kitchen Europe, less the reduction in sales from the disposition of Season-All. For the nine months ended August 31, 2008, the sales increase of 10.4% versus the same period last year includes 3.5% from the favorable impact of foreign currency. The remaining 6.9% increase was due to pricing actions, along with favorable volume and product mix, including a 1.7% increase from acquisitions.

Gross profit increased 8.5% and 8.7% for the third quarter and first nine months of the year over the comparable periods from last year, respectively, while the gross profit margin remains under pressure from higher and more volatile commodity and energy costs. Through a combination of pricing actions, cost savings and favorable product mix, we have an effective offset to these dollar cost increases. However, on a gross profit margin basis these changes had a net unfavorable impact of 20 basis points for the quarter and 60 basis points for the first nine months of the year. Restructuring charges in both 2008 and 2007 had a negligible impact on our gross profit margin.

                                                       Three months ended            Nine months ended
                                                           August 31,                   August 31,
(in millions)                                          2008           2007           2008          2007
Selling, general & administrative expense (SG&A)    $    212.9       $ 192.6      $    639.6      $ 581.8
Percent of net sales                                      27.2 %        26.9 %          28.2 %       28.3 %

The primary reason for the increase in SG&A as a percentage of net sales in the third quarter is our increase in marketing support by $6.8 million with print advertising, interactive media and other programs designed to drive sales of our branded products. For the nine months ended August 31, 2008, we have significantly increased our marketing support over the prior year, however, SG&A as a percentage of net sales decreased primarily as a result of the cost savings from reductions in operating expenses as part of our restructuring program.

Lower interest rates led to a favorable variance in interest expense, offsetting the fact that total average debt outstanding was higher in 2008 when compared to 2007. In connection with the acquisition of Lawry's, we sold our Season-All business and recorded a $12.9 million pre-tax gain in other income, net in the third quarter of 2008. Also, we made a $5.0 million payment to terminate existing forward starting interest rate swaps in connection with the rebalancing of our debt structure. In addition, interest income was higher in the nine months ended August 31, 2008 versus the same period in the prior year.