MCCORMICK & COMPANY 2004 ANNUAL REPORT management’s discussion and analysis Discontinued Operations Market Risk Sensitivity Costs yet to be incurred from the 2001 restructuring plan include the possible reorganization of a joint venture and completion of the reorganization of certain industrial manufacturing facilities in the U.K. These actions are expected to be completed in 2005. The total 2001 restruc- turing plan includes severance charges for 392 position reductions. As of November 30, 2004, 389 of the 392 planned position reductions had taken place. Refer to note 4 of the notes to consolidated financial statements for further information. Jenks of $2.6 million (net of an income tax benefit of $0.6 million) in the third quarter of 2003. Included in this loss is a write-off of goodwill of $0.4 million. The operating results of Packaging and Jenks were classified as “Income from discontinued operations, net” in the consolidated statement of income. Jenks was pre- viously included in the Company’s consumer segment, and Packaging was previously reported as a separate seg- ment. Certain fixed overhead charges previously allo- cated to Packaging have been reallocated to the other business segments. The cash flows of Packaging and Jenks were reported as “Net cash (used in)/provided by discontinued operations” in the consolidated statement of cash flows.  On August 12, 2003, the Company completed the sale of substantially all the operating assets of its packaging seg- ment (Packaging) to the Kerr Group, Inc. Packaging manu- factured certain products used for packaging the Company’s spices and seasonings as well as packaging products used by manufacturers in the vitamin, drug and personal care industries. Under the terms of the sale agreement, Packaging was sold for $132.5 million in cash and possible additional future payments over five years contingent on the buyer meeting certain performance objectives. At the end of the first year of such possible con- tingent payment periods, no additional payment was due from the buyer for that year. The proceeds were used to pay off a substantial portion of the commercial paper bor- rowing related to the Zatarain’s acquisition in 2003.The final purchase price is also subject to other contingencies related to the performance of certain customer contracts which could result in a decrease in the sale price. The Company recorded a net gain on the sale of Packaging of $11.6 million (net of income taxes of $7.9 million) in the third quarter of 2003. Included in this gain was a net pen- sion and postretirement curtailment gain of $3.3 million and the write-off of goodwill of $0.7 million. The contingent consideration, if any, associated with the sale of Packaging will be recognized in the future as an adjustment to the gain based on the performance criteria established. The Company also entered into a multi-year, market priced agreement with the acquirer to purchase certain packaging products. The Company utilizes derivative financial instruments to enhance its ability to manage risk, including foreign exchange and interest rate exposures, which exist as part of its ongoing business operations. The Company does not enter into contracts for trading purposes, nor is it a party to any leveraged derivative instrument. The use of derivative financial instruments is monitored through regu- lar communication with senior management and the uti- lization of written guidelines. The information presented below should be read in conjunction with notes 7 and 8 of the notes to consolidated financial statements. Foreign Exchange Risk – The Company is exposed to fluctuations in foreign currency in the following main areas: cash flows related to raw material purchases; the translation of foreign currency earnings to U.S. dollars; the value of foreign currency investments in subsidiaries and unconsolidated affiliates and cash flows related to repatri- ation of these investments. Primary exposures include the U.S. dollar versus functional currencies of the Company’s major markets (Euro, British pound sterling, Australian dol- lar, Canadian dollar, Mexican peso, Japanese yen, and Chinese renminbi). The Company enters into foreign cur- rency exchange contracts to facilitate managing foreign currency risk.  The following table summarizes the foreign currency exchange contracts held at November 30, 2004. All con- tracts are valued in U.S. dollars using year-end 2004 exchange rates and have been designated as hedges of foreign currency transactional exposures, firm commit- ments or anticipated transactions, all with a maturity period of less than one year. On July 1, 2003 the Company sold the assets of Jenks Sales Brokers (Jenks), a division of the Company’s wholly- owned U.K. subsidiary, to Jenks’ senior management for $5.8 million in cash. Jenks provided sales and distribution services for other consumer product companies and was previously reported as a part of the Company’s consumer segment. The Company recorded a net loss on the sale of 30