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McCORMICK & COMPANY 2007 ANNUAL REPORT


	MANAGEMENT’S DISCUSSION AND ANALYSIS
	RESTRUCTURING ACTIVITIES		personnel costs and $50 to $55 million of other exit costs. Asset write-offs are expected to be $10 to $15 million, exclusive of the $34 million gain on our redemption of Signature in 2006. Restructuring charges to date include $10.7 million recorded in 2005, $50.1 million recorded during 2006 (including the gain on Signature) and $34.8 million recorded in 2007. For the total plan, the cash related portion of the charges will be $95 to $105 million, with total cash spent to date of $83.3 million, after offsetting the $9.2 million in net cash received from the redemption of Signature. This program is expected to be completed by the end of fiscal year 2008. We are funding this spending through internally generated funds. A significant portion of the cash expenditures are for employee severance. The actions being taken pursuant to the restructuring plan are expected to eliminate 1,200 positions over the three-year period. Of the expected global workforce reduction, 1,015 positions have been eliminated as of November 30, 2007. *Joint Venture Transactions* – Previously, we participated in two separate joint ventures with the same joint venture partner, Hero A.G. We owned 50% of Signature and 51% of DPI. In 2006, we received the remaining 49% share of DPI in redemption of our 50% ownership investment in Signature. In addition, we received $9.2 million in cash with this transaction. In recording this transaction, we valued both the investment received and the investment given at their fair value. On the disposition of our Signature investment, the fair value of our investment was $56.0 million as compared to our book value of this unconsolidated subsidiary of $21.7 million. After consideration of transaction costs of $0.6
	As part of our plan to improve margins, we announced in September 2005 significant actions to improve the effectiveness of our supply chain and reduce costs. At that time, we also stated that a comprehensive review of our global industrial business was underway to identify improvements. These actions were included in the comprehensive restructuring plan which the Board of Directors approved in November 2005. As part of this plan, over a three-year period, we are consolidating our global manufacturing, rationalizing our distribution facilities, improving our go-to-market strategy, eliminating administrative redundancies and rationalizing our joint venture partnerships. In addition, for the industrial business, we are reallocating resources to key customers and taking pricing actions on lower volume products to meet new margin targets. Through 2008, these actions are intended to reduce the number of industrial business customers and products in the U.S. by approximately 25%. Sales related to these customers and products represented approximately 2 to 5% of industrial business sales in the U.S. As these sales had minimal profit, this reduction is expected to lead to higher margins. These reductions also led to the consolidation of certain manufacturing facilities. The restructuring plan is reducing complexity and increasing the organizational focus on growth opportunities in both the consumer and industrial businesses. We are projecting up to $55 million ($37 million after-tax) of annual cost savings by the end of 2008. In 2006, we realized $10 million ($7 million after-tax) of savings and another $35 million ($24 million after-tax) in 2007. This has improved margins and increased earnings per share, offset higher costs, as well as allowed us to invest a portion of these savings in sales growth drivers such as brand advertising. These savings are reflected in both cost of goods sold and selling, general and administrative expenses in the income statement. Total pre-tax charges under this restructuring plan are estimated to be $115 to $125 million with approximately 65% related to the consumer segment and 35% related to the industrial segment. Of these charges, we expect that $85 to $90 million will consist of severance and other

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