We are advancing with the restructuring plan we announced in late 2005. The plan includes consolidating our global manufacturing and eliminating administrative redundancies. These actions reduced our costs by $10 million in 2006, and we expect to deliver another $30 million of savings in 2007. By the end of 2008, total annual cost savings should be $50 million.

     We are revitalizing our McCormick brand spices and seasonings in the United States. This line of products accounts for about one-third of our consumer business sales. New products, new labels and new flip-top caps – along with new store shelving that makes shopping easier for the consumer and restocking easier for grocers – will roll out through 2008. We have already seen the early signs of success from this initiative.

     We are transforming our U.S. industrial business and have already made significant progress. We’re simplifying and focusing our resources on growing with large customers who have the greatest potential to add profitable sales. We have reduced the number of industrial customers we serve from 1,000 to fewer than 750. This progress – along with similar actions we’ve taken in Europe and a rebound from a difficult year in 2005 – improved operating income for our industrial business by 26% on a comparable basis, excluding the impact of restructuring charges and stock-based compensation expense.

     We are innovating by leading and staying on top of the latest trends in our major markets. Innovation is vital to the long-term health of our business. Consumer demand – for convenience, freshness, ethnic flavors and more –guides not only our new product development, but also our acquisition strategy. For example, in June 2006, we added the fast-growing Thai Kitchen® and Simply Asia® brands that offer authentic Asian flavors to U.S. consumers.

Continuing Our Success

While our initiatives have us well positioned for continued growth and success, two of the challenges we face are higher costs and competition.

     Higher costs for certain materials, employee benefits and energy affect our business and our industry. We offset those higher costs with improvements in efficiency and pricing actions as appropriate.

     Our business is highly competitive in both the consumer and industrial segments. Our superior quality and innovation in products as well as services, give us a competitive advantage. Recent examples include our store merchandising ideas and our new CreateIT ® Center.