OVERVIEW

Our Business

We are a global leader in the manufacture, marketing and distribution of spices, herbs, seasonings, specialty foods and flavors to the entire food industry. Customers range from retail outlets and food manufacturers to food service businesses. 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. Annually, approximately 40% of our sales have been outside of the United States.

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. We offer consumers a range of products from premium to value-priced.

Our Strategy

Our strategy is to improve margins, invest in our business and increase sales and profits.

Improving Margins - Beginning in the latter part of 2007, our progress with margin improvement has been hampered by an environment of volatile costs for many raw and packaging materials. However, we have continued to make progress with cost-savings programs, new capabilities and improved processes. We are also improving margins with the acquisition of strong consumer brands such as Lawry's and the introduction of higher-margin, more value-added industrial products.

With the benefit of the Lawry's acquisition and our Comprehensive Continuous Improvement program, we expect to increase gross profit margin in 2009. Under the Comprehensive Continuous Improvement program each business unit develops cost reduction opportunities and sets specific goals. Projects fall into the areas of cost optimization, cost avoidance and productivity that include SAP utilization and streamlining processes. Our long-term goal is to continue to increase gross profit margin and to achieve a higher operating income margin.

Investing in the Business - We are investing in our consumer

business by revitalizing our core brands in the United States and abroad, including new products, new packaging and more effective merchandising such as gravity feed shelving. Beginning in 2009, dry seasoning mixes, which have shown an increase in sales due to value pricing and convenience, now feature more natural ingredients and new packaging. There is a revitalization of our Vahine dessert products underway in France and gravity feed shelving has been introduced in China and Australia.

As an industry leader, McCormick brings innovative ideas to consumers. We are on the forefront of taste trends and develop an annual Flavor Forecast® for the benefit of chefs, food editors, customers and consumers. Many of the new products currently being developed provide convenience, ethnic flavors and bold taste. Industrial customers are particularly interested in more natural flavor solutions that utilize our expertise in spices and herbs. We founded the McCormick Science Institute in 2007 to conduct research on the health benefits of spices and herbs.

We are increasing our marketing support to drive growth of our brands. In 2008 our marketing support expenditures were 13% higher than in 2007 and were up 51% from 2003. Our goal in 2009 is to increase marketing support by an additional $20 million over 2008 with three quarters of the increase due to the addition of the Lawry's business.

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, such as India, China and Eastern Europe. In our developed markets, we are seeking consumer brands that deliver great flavor, meet a growing consumer trend and have a defensible niche position.

Increasing Sales and Profits - With the investments in our business, we have long-term annual objectives to grow sales 4 to 6% and increase earnings per share 9 to 11%. In 2009, the global economy has weakened considerably, leading to a less certain environment. In addition to a more difficult economy, the dollar has strengthened relative to 2008, which unfavorably impacts our net sales and profits from international operations. For fiscal year 2009, we expect these factors to impact our financial results which are projected to be above 2008 but below our long-term annual objectives.

Our business generates strong cash flow. Actions to grow profit and improve our working capital, as well as our cash conversion cycle, are designed to lead to higher levels of cash generation. We have a share repurchase program that has lowered our shares outstanding. Currently the program is curtailed while we pay down debt from the Lawry's acquisition. We are also building shareholder return with consistent dividend payments. We have paid dividends every year since 1925 and increased the dividend in each of the past 23 years.

RESULTS OF OPERATIONS - COMPANY



                                    Three months ended             Six months ended
                                          May 31,                       May 31,
    (in millions)                   2009           2008          2009            2008

    Net sales                     $   757.3       $ 764.1      $ 1,475.8       $ 1,488.1
    Percent increase (decrease)         (.9 )%                       (.8 )%
    Gross profit                  $   302.2       $ 297.9      $   586.5       $   583.7
    Gross profit margin                39.9 %        39.0 %         39.7 %          39.2 %

The sales decline of 0.9% for the second quarter includes an 8.3% unfavorable impact from foreign currency exchange rates. With a stronger dollar in the second quarter of 2009, exchange rates have had a negative effect on sales.

Excluding the foreign currency impact, we grew sales 7.4%. Pricing increased sales 4.5% in the second quarter. Volume and product mix added 2.9% to sales, with a strong contribution from the consumer business partially offset by slightly lower volume and mix in the industrial business. Included in the 2.9% increase of volume and product mix were incremental sales from the Lawry's acquisition, which added 5.4% to the quarter. This was largely offset by lower sales in EMEA (Europe, Middle East and Africa region) for the quarter. The impact of Lawry's includes the reduction in sales from the disposition of Season-All.

For the six months ended May 31, 2009, the sales decrease of 0.8% versus the same period last year includes 8.2% from the unfavorable impact of foreign currency. The 7.4% increase excluding the foreign currency impact was due to pricing actions, along with favorable product mix and higher volumes, including a 5.4% increase from acquisitions.

Gross profit margin increased 0.9% and 0.5% for the second quarter and first half of the year, respectively. We have seen continued increases in our gross profit margin, driven by our move toward a more favorable business mix, our Comprehensive Continuous Improvement program, our restructuring actions and discretionary cost controls throughout our operations. Our increases thus far this year are within the goal we set early in 2009 to increase gross profit margin at least 50 basis points.

                                                       Three months ended             Six months ended
                                                            May 31,                       May 31,
(in millions)                                         2009            2008           2009          2008

Selling, general & administrative expense (SG&A)    $   212.9        $ 222.0       $  406.8       $ 426.7
Percent of net sales                                     28.1 %         29.1 %         27.5 %        28.7 %

The reduction in our SG&A as a percentage of net sales in the second quarter includes progress with our Comprehensive

Continuous Improvement program and cost controls. This reduction in SG&A was net of a $10.3 million increase in marketing support, as well as $7.0 million of expenses related to the bankruptcy of a U.K. food service distributor. The underlying decrease in SG&A reflects our efforts to manage expenses, improve productivity and integrate the Lawry's business with minimal incremental operating expenses. This also includes reductions in incentive compensation expense and stock-based compensation expense for the second quarter when compared to the same period last year. For the six months ended May 31, 2009, our marketing support has increased by $10.5 million over the prior year and we have recorded $7.3 million of expenses related to the bankruptcy of a U.K. food service distributor. However, SG&A in total dollars and as a percentage of net sales decreased due to our Comprehensive Continuous Improvement program and cost controls, as well as reductions in incentive compensation expense and stock-based compensation expense. As a percentage of net sales, the decrease in SG&A for the six months ended May 31, 2009 is also due to the integration of the Lawry's business with minimal incremental operating expenses.

The following is a summary of restructuring activities (in millions):

                                                         Three months ended           Six months ended
                                                               May 31,                     May 31,
                                                         2009           2008          2009          2008

Pre-tax restructuring charges/(credits)
Other restructuring charges/(credits)                  $     6.8       $  (4.6 )    $     7.3       $ (.9 )
Recorded in cost of goods sold                                .1           1.5             -          1.7

Reduction (increase) in operating income                     6.9          (3.1 )          7.3          .8
Income tax effect                                           (2.2 )         1.0           (2.3 )       (.3 )

Reduction (increase) in net income                     $     4.7       $  (2.1 )    $     5.0       $  .5


Reduction (increase) in earnings per share - diluted   $    0.04       $ (0.02 )    $    0.04       $  -

The restructuring charges in 2009 include severance costs, asset write-downs, accelerated depreciation and other exit costs related to the consolidation of production facilities in Europe, including the closure of our manufacturing plant in The Netherlands, and the reorganization of distribution networks in the U.K. The restructuring credits in 2008 include severance costs associated with the reduction of administrative personnel in Europe and Canada, other exit and inventory write-off costs related to the consolidation of production facilities in Europe and the U.S. and the reorganization of distribution networks in the U.S and U.K. These restructuring charges were offset by the $8.4 million gain recorded on disposal of our Salinas manufacturing facility in 2008.

                                   Three months ended        Six months ended
                                        May 31,                  May 31,
            (in millions)          2009          2008        2009        2008

            Interest expense    $     13.0    $     12.7   $    27.5    $  27.5
            Other income, net          1.2           3.0         1.7        6.4

Interest expense was slightly higher for the second quarter of 2009 when compared to 2008. Total average debt outstanding was higher in 2009 when compared to 2008, which is due to the acquisitions made in 2008. This was mostly offset by lower interest rates. In addition, the decrease in other income was due to lower interest income in the three and six months ended May 31, 2009 versus the same periods in the prior year.