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McCORMICK & COMPANY 2007 ANNUAL REPORT


	MANAGEMENT’S DISCUSSION AND ANALYSIS
	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, 2007, $49 million remained under the $400 million share repurchase program. The pace of share repurchases in 2008 will be moderated in anticipation of the Lawry’s acquisition (see note 2 of the financial statements). The common stock issued in 2007, 2006 and 2005 relates to our stock compensation plans. Our dividend history over the last three years is as follows:
			The decrease in our debt-to-total-capital ratio in 2007 (total capital includes debt, minority interest and shareholders’ equity) was the result of a significant increase in shareholders’ equity of $151.8 million, partially offset by an increase in our total debt. A large increase in equity was due to the effect of foreign currency translation adjustments and the increase in debt was due to funding our share repurchase program. During the year, the level of our short-term debt varies and it is usually lower at the end of the year. The average short-term borrowings outstanding for the year ended November 30, 2007 and 2006 were $369.4 million and $271.9 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, 2007, the exchange rates for the Euro, British pound sterling and Canadian dollar were substantially higher versus the U.S. dollar than in 2006. Exchange rate fluctuations resulted in an increase in accounts receivable of $23 million, inventory of $15 million, goodwill of $61 million and other comprehensive income of $123 million since November 30, 2006. In August 2007, we entered into $150 million of forward treasury lock agreements to manage the interest rate risk associated with the forecasted issuance of $250 million of fixed rate medium-term notes issued subsequent to our 2007 fiscal year-end. We cash settled these treasury lock agreements for a loss of $10.5 million simultaneous with the issuance of the medium-term notes and effectively fixed the interest rate on the $250 million notes at a weighted average fixed rate of 6.25%. We had designated these outstanding forward treasury lock agreements, which were terminated on December 4, 2007, as cash flow hedges. The loss on these agreements will be deferred in other comprehensive income and will be amortized over the 10-year life of the medium-term notes as a component of interest expense. Hedge ineffectiveness of these agreements was not material in 2007. A portion of the proceeds of this $250 million debt issuance will be used to repay $150 million of notes maturing in 2008.

	In November 2007, the Board of Directors approved a 10.0% increase in the quarterly dividend from $0.20 to $0.22 per share. During the last five years, dividends per share have risen at a compound annual rate of 14.9%. Cash payments to pension plans, including unfunded plans, were $41.6 million in 2007, $41.2 million in 2006 and $32.8 million in 2005. During 2007, our primary U.S. defined benefit pension plan moved from underfunded to overfunded status driven by good return on plan assets, a change in the liability due to the impact of a higher discount rate and a cash contribution of $22.0 million. Because of the current overfunded status of this pension plan as of November 30, 2007, it is likely that the 2008 pension plan contributions will be significantly less than in 2007. Future increases or decreases in pension liabilities and required 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 62% of assets are invested in equities, 32% in fixed income investments and 6% in other investments.

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