Management's Discussion and Analysis

     In Europe, sales rose 9.9%, with Silvo adding 10.0%, favorable foreign exchange contributing 1.4%, both offset by decreases from unfavorable volume, price and product mix of 1.5%. We experienced difficult retail conditions for a limited range of larger volume spice and herb products in France. While progress was made in slowing the migration of sales to alternative channels, the poor economic conditions in France complicated the recovery. In this region we have been successfully growing sales of valueadded products such as dessert items, pastes and grinders with retail customers. Sales in the Asia/Pacific region decreased 2.7% due to unfavorable volume, price and product mix of 5.7% partly offset by favorable foreign exchange rates of 3.0%. Volumes in China were adversely affected by our reduction in the number of distributors as we move to a higher quality network.

     Operating income excluding restructuring activities from our consumer business increased 12.3% to $288.0 million. The operating income increase was driven by strong sales performance, cost reduction efforts and pricing actions. When comparing operating income margin excluding restructuring activities, cost savings on supply chain initiatives more than offset increases in fuel and the negative profit impact of challenging market conditions in Europe, particularly in France.

Industrial Business

	2005			2004
Net sales	$	1,113.7		$	1,105.2
Percent growth		.8	%
Operating income, excluding     restructuring activities		66.7			73.8
Operating income margin, excluding     restructuring activities		6.0	%		6.7	%

For 2005, sales from the industrial business rose 0.8% as compared to 2004. Favorable foreign exchange rates added 1.1% to sales while unfavorable volume, price and product mix decreased sales 0.3%. As anticipated, lower vanilla pricing in 2005 decreased sales approximately 2% and actions to eliminate lower margin products in Europe decreased sales approximately 1%. Sales in the Americas rose 1.6% with favorable foreign exchange rates adding 1.0%. In this region, lower vanilla pricing reduced sales approximately 3%. The remaining sales increase was due to strength in snack food seasonings, certain new product successes and improved sales in the food service distributor channel.

     In Europe, sales declined 4.5% as unfavorable volume, price and product mix reduced sales 5.5% offset by favorable foreign exchange rates which added 1.0%. Included in the 5.5% decrease from unfavorable volume, price and product mix was the impact of the elimination of lower margin products which decreased sales approximately 4%. In the Asia/Pacific region, sales increased 7.4% with a 4.9% increase from higher volume, favorable price and product mix and 2.5% from foreign exchange rates. The increase was driven by strong sales of snack seasonings and to quick service restaurants which continue to expand their stores.

     The sale of high cost vanilla beans during a period of declining prices, reduced operating income approximately $15 million during 2005, offsetting the benefit of cost reduction efforts. Operating income in 2004 was reduced by a $6.2 million operational accounting adjustment at an industrial plant in Scotland.

Liquidity and Financial Condition

	2006			2005			2004
Net cash provided by     operating activities	$	310.8		$	332.2		$	342.4
Net cash used in     investing activities		(172.1	)		(70.0	)		(134.4	)
Net cash used in     financing activities		(127.2	)		(294.4	)		(178.4	)

Amounts of $7.0 million and $7.1 million in 2005 and 2004, respectively, reflect the reclassification of expenditures for in-store displays from investing to operating activities to conform to current year presentation.

We generate strong cash flow from operations which enables us to fund operating projects and investments that are designed to meet our growth objectives, make substantial share repurchases, increase our dividend and fund capital projects and restructuring costs.

     In the cash flow statement, the changes in operating assets and liabilities are presented excluding the effects of changes in foreign currency exchange rates, as these do not reflect actual cash flows. Accordingly, the amounts in the cash flow statement do not agree with changes in the operating assets and liabilities that are presented in the balance sheet.

     Operating Cash Flow - When 2006 cash provided by operations is compared to 2005, the decrease was primarily the result of spending on restructuring of $55.9 million and lower dividends from unconsolidated operations, offset by higher operating income, exclusive of restructuring.