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 was hampered by an environment of volatile costs for many raw and packaging materials. However, we have begun to improve margins in recent quarters due to 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 (CCI) program, we expect to increase gross profit margin in 2009 at least 50 basis points. Under the CCI program each business unit develops cost reduction opportunities and sets specific goals. 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 with innovation, marketing and expanded distribution.

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. 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. 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 at least $20 million over 2008 with three quarters of the increase due to the addition of the Lawry's business.

We are expanding distribution 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.

In 2008 and 2009, we also gained new distribution with value-priced retailers in the Americas and EMEA. In China, we are expanding distribution of our brand into 10 additional cities.

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 the latter part of 2008 and into 2009, the global economy weakened considerably, which has led to a less certain environment. In addition to a more difficult economy, the dollar strengthened relative to 2008, which unfavorably impacted our net sales and profits from international operations. For fiscal year 2009, these factors have impacted 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. Since early in 2008, the program has been 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             Nine months ended
                                        August 31,                    August 31,
    (in millions)                   2009           2008          2009            2008

    Net sales                     $   791.7       $ 781.6      $ 2,267.5       $ 2,269.7
    Percent increase (decrease)         1.3 %                        (.1 )%
    Gross profit                  $   319.0       $ 308.4      $   905.5       $   892.1
    Gross profit margin                40.3 %        39.5 %         39.9 %          39.3 %

The sales increase of 1.3% for the third quarter includes a 5.0% unfavorable impact from foreign currency exchange rates. With a stronger dollar in the third quarter of 2009 when compared to 2008, exchange rates have had a negative effect on sales.

Excluding the foreign currency impact, we grew sales 6.3%. Approximately one half of the increase came from pricing actions and the other half from the combination of volume and product mix. The volume and product mix increase includes incremental sales from the Lawry's acquisition, which added 3.5% to the quarter. This was largely offset by lower sales volumes and product mix 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 nine months ended August 31, 2009, the sales decrease of 0.1% versus the same period last year includes 7.1% from the unfavorable impact of foreign currency. The 7.0% increase excluding the foreign currency impact was due to pricing actions, along with favorable product mix and higher volumes, including a 4.7% increase from acquisitions.

Gross profit margin increased 0.8% and 0.6% for the third quarter

and first nine months of the year, respectively. We have seen continued increases in our gross profit margin, driven by our move toward a more favorable business mix, including the addition of Lawry's. Our margin improvement is also being driven by our CCI program, our restructuring actions and discretionary cost controls throughout our operations. Our increases thus far this year are ahead of the goal we set early in 2009 to increase gross profit margin at least 50 basis points.

                                                       Three months ended             Nine months ended
                                                           August 31,                    August 31,
(in millions)                                         2009            2008           2009           2008

Selling, general & administrative expense (SG&A)    $   201.5        $ 212.9       $   608.3       $ 639.6
Percent of net sales                                     25.5 %         27.2 %          26.8 %        28.2 %

The reduction in our SG&A as a percentage of net sales in the third quarter includes progress with our CCI program and cost controls. This reduction in SG&A was net of a $2.4 million increase in marketing support. 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. Other factors favorably affecting SG&A this quarter were lower distribution costs and favorable benefit expenses. For the nine months ended August 31, 2009, our marketing support has increased by $13.1 million or 15% 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 CCI program and cost controls, as well as reductions in distribution costs and benefit expenses. As a percentage of net sales, the decrease in SG&A for the nine months ended August 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             Nine months ended
                                                        August 31,                    August 31,
                                                    2009           2008           2009            2008

Pre-tax restructuring charges
Other restructuring charges                       $     .9        $   2.6       $     8.2        $  1.7
Recorded in cost of goods sold                          -              .9              -            2.5

Reduction in operating income                           .9            3.5             8.2           4.2
Income tax effect                                      (.2 )         (1.1 )          (2.5 )        (1.3 )

Reduction in net income                           $     .7        $   2.4       $     5.7        $  2.9

Reduction in earnings per share - diluted         $     -         $  0.02       $    0.04        $ 0.02

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 charges 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 reorganization of distribution networks in the U.S and U.K. These restructuring charges were partially offset by a $6.1 million credit related to the disposal of assets. This credit was primarily the result of a gain on the disposal of our Salinas manufacturing facility.

                                   Three months ended        Nine months ended
                                       August 31,               August 31,
            (in millions)          2009          2008         2009        2008

            Interest expense    $     12.8    $     12.8   $     40.2    $  40.3
            Other income, net           .3          10.0          1.8       16.4

Interest expense in the third quarter of 2009 was equal to interest expense in the third quarter of 2008. Total average debt outstanding was higher in 2009 when compared to 2008, which is due to the acquisitions made in 2008. This was offset by lower interest rates. In other income for 2008, there is a $7.9 million net gain related to the Lawry's acquisition. This includes a gain on the sale our Season-All business net of costs to rebalance our debt structure. In addition, interest income has been lower in the three and nine months ended August 31, 2009 versus the same periods in the prior year due to lower interest rates.