MCCORMICK & COMPANY 2004 ANNUAL REPORT Special Charges Additional capital spending of approximately $25 million and an additional expense of approximately $15 million is antici- pated under this program. Capital costs under the B2K pro- gram are for computer hardware, software and software development and are reflected in property, plant and equip- ment in the consolidated balance sheet. Costs expensed under the B2K program include costs of business re-engi- neering, data conversion and training and are reflected in both cost of sales and selling, general and administrative expense in the consolidated statement of income. In 2001, McCormick adopted a plan to further streamline its operations. This plan, adopted during the fourth quarter of 2001, included the consolidation of several distribution and manufacturing locations, the reduction of administra- tive and manufacturing positions, and the reorganization of several joint ventures. The estimated cost of the total plan is approximately $32.6 million ($25.6 million after-tax). Total cash expenditures in connection with these costs approxi- mates $16.7 million, which is funded through internally generated funds. The remaining $15.9 million of costs associated with the plan consist of write-offs of assets. The total cost of the plan includes $1.8 million of special charges related to Packaging and Jenks that have been classified as income from discontinued operations in the consolidated statement of income. Annualized cash sav- ings from the plan are expected to be approximately $8.0 million ($5.3 million after-tax), most of which have been realized to date. Savings under the plan are being used for spending on initiatives such as brand support and supply chain management. These savings are included within the cost of goods sold and selling, general and administrative expenses in the consolidated statement of income. In 2001, the Company recorded $11.2 million ($7.4 mil- lion after-tax) of charges from continuing operations asso- ciated with the 2001 restructuring plan. Of this amount, $10.3 million was classified as special charges and $0.9 million as cost of goods sold in the consolidated state- ment of income. These charges related to the consolida- tion of manufacturing in Canada, a distribution center consolidation in the U.S., a product line elimination and a realignment of the Company’s sales operations in the U.K., and a workforce reduction which encompasses plans in all segments and across all geographic areas. During the year ended November 30, 2002, the Company recorded $7.5 million ($5.5 million after-tax) of special charges associated with the 2001 restructuring plan, which could not be accrued at the time of the original announcement in 2001. These charges included the write- off of an investment in an industry purchasing consortium, further costs of lease exit and relocation costs related to the workforce reduction and realignment of consumer sales operations in the U.S. and further severance and other costs related to the previously discussed workforce reduction. Also included in the 2002 charges were further costs related to the closure of a U.S. distribution center and further costs of the consolidation of manufacturing in Canada which included the disposition of a manufacturing facility. During 2002, total cash expenditures in connection with the plan were $6.3 million. The major components of the 2002 special charges include charges for employee termination benefits of $3.3 million, asset write-downs of $3.3 million, and other related exit costs of $0.9 million.  During the year ended November 30, 2003, the Company recorded special charges related to continuing operations of $5.5 million ($3.6 million after-tax). The costs recorded in 2003 included additional costs associated with the consolidation of production facilities in Canada, net of a gain on the sale of a manufacturing facility, severance and other costs related to the consolidation of industrial manufacturing in the U.K. and the realignment of the Company’s consumer sales operations in Australia. During 2003, total cash expenditures in connection with the plan were $4.7 million. The major components of the 2003 special charges include charges for employee termination benefits of $4.7 million, gain on the sale of assets of $(0.6) million, and other related exit costs of $1.4 million.  During the year ended November 30, 2004, the Company recorded special charges related to continuing operations of $6.2 million ($4.3 million after-tax). The costs recorded in 2004 primarily include costs related to the con- solidation of industrial manufacturing facilities in the U.K. and Canada, the reorganization of a consumer joint venture and additional severance costs for position elimi- nations. During 2004, total cash expenditures in connec- tion with the plan were $4.7 million. Also included in special charges/(credits) is a net gain of $8.7 million ($5.5 million after-tax) related to funds received from a class action lawsuit that was settled in the Company’s favor in the second quarter of 2004. This matter dated back to 1999 when a number of class action lawsuits were filed against manufacturers and sellers of various flavor enhancers for their violation of antitrust laws. The Company, as a purchaser of such products, participated as a member of the plaintiff class. In the second quarter of 2004, the Company received $11.1 million as a settlement of this claim and as a result of the settlement, was required to settle claims against the Company for a portion of this gross amount. The net gain recorded was $8.7 mil- lion. This amount was recorded as a special credit and was not allocated to the business segments.  29