What made 2005 a temporary setback in your track record of strong long-term performance?

We face and meet challenges every year, and we did a good job with the extraordinary number and types of challenges that developed during 2005. However, two of those challenges had a particularly significant impact on our earnings:

>   A dramatic decline in the cost of vanilla early in 2005 - the first of its kind in more than 20 years - lowered our first-half earnings per share by approximately 5 cents.

>   Flat sales in our industrial business - compared with an average sales increase of 5% over the last five years - further reduced our earnings per share.

We've taken actions to address these challenges. In our industrial business, by focusing our development capabilities on strategic customers with good margins and strong growth prospects, we will restore this business to its historical growth rates. As for vanilla, changes in sourcing and customer negotiations will make future volatility less likely.

We are confident that our strategies and growth initiatives, our cost reduction efforts and experience in running our business will have us back on track in 2006.

What are your key drivers of sales growth?

New products are a vital part of our sales growth. In recent years, at least 10% of our annual sales came from products launched within the current and two preceding years.

Our innovative marketing enhances our growth potential. For example, in the United States, we are relaunching our major consumer product lines with new packaging, new merchandising and new items. This rollout began late in 2005 and will continue through 2006. Geographically, we are expanding into new markets with our current products, with new products and through acquisitions. In our existing markets, we are seeking to acquire brands that have a strong flavor profile complementing our existing product lineup.

What makes McCormick different? Why is it a good investment?

First, we overcome obstacles quickly. Despite the significant challenges of 2005, we were able to deliver a 3% sales increase and 3% increase in earnings per share. Second, with focused leadership and motivated employees, we continue to execute well, even in a period of challenges. During 2005, we demonstrated this ability with our progress in implementing B2K in Europe, the integration of the Silvo acquisition, the quick recovery of our Zatarain's operations following Hurricane Katrina and the relaunch of our entire dry seasoning mix line in the U.S.

Third, our customers count on us for great flavors. This is the key element of our successful and long-standing relationships. The fourth area I want to point to is our willingness to challenge ourselves. We continue to seek ways to improve our leadership and organization, our capabilities and processes, our products and marketing, and our relationships with customers and suppliers.

This is a great business - making food taste terrific. No one does that better than McCormick. We are uniquely positioned to continue building shareholder value.