for the year ended November 30 (millions) 2004 2003 2002 Operating activities Net income $214.5 $ 210.8 $179.8 Net income from discontinued operations – (4.7) (6.0) Gain on sale of discontinued operations – (9.0) – Cumulative effect of accounting change – 2.1 – Net income from continuing operations  214.5 199.2 173.8 Adjustments to reconcile net income from continuing operations to  net cash provided by continuing operating activities: Depreciation and amortization 72.0 65.3 53.4 Deferred income taxes (1.7) 15.6 21.1 Income from unconsolidated operations (14.6) (16.4) (22.4) Changes in operating assets and liabilities: Receivables (35.5) 9.8 (35.0) Inventories 33.8 (50.0) (18.7) Prepaid allowances 27.2 13.5 2.7 Trade accounts payable 5.7 (17.1) 13.3 Other assets and liabilities  38.5 (38.7) 1.3 Dividends received from unconsolidated affiliates 9.6 20.6 19.1 Net cash provided by continuing operating activities 349.5 201.8 208.6 Investing activities Acquisitions of businesses (74.5) (202.9) (1.4) Purchase price adjustment – 50.0 – Capital expenditures (69.8) (91.6) (100.4) Proceeds from sale of discontinued operations – 133.9 – Proceeds from sale of property, plant and equipment 2.8 9.9 6.5 Net cash used in continuing investing activities (141.5) (100.7) (95.3) Financing activities Short-term borrowings, net (14.3) 17.2 (73.8) Long-term debt borrowings 50.1 – – Long-term debt repayments (16.5) (.8) (.6) Proceeds from exercised stock options 53.0 29.5 23.2 Common stock acquired by purchase (173.8) (119.5) (5.1) Dividends paid (76.9) (64.1) (58.6) Net cash used in continuing financing activities (178.4) (137.7) (114.9) Effect of exchange rate changes on cash and cash equivalents 15.6 19.0 9.5 Net cash (used in)/provided by discontinued operations – (4.6) 8.1 Increase /(decrease) in cash and cash equivalents 45.2 (22.2) 16.0 Cash and cash equivalents at beginning of year 25.1 47.3 31.3 Cash and cash equivalents at end of year $ 70.3 $ 25.1 $ 47.3 See Notes to Consolidated Financial Statements, pages 41-55. 39 consolidated statement of cash flows MCCORMICK & COMPANY 2004 ANNUAL REPORT