MCCORMICK & COMPANY 2004 ANNUAL REPORT Income from unconsolidated operations decreased 11.0% in 2004 when compared to 2003. This decline is mainly attributable to lower income from the Company’s Signature Brands and Japan joint ventures. The Signature Brands business, a cake decorating business in the U.S., was impacted by a decline in the overall U.S. cake mix cat- egory. The Company’s retail joint venture in Japan moved its business to a new distributor in 2004 with the objective of building sales in this market over time. The joint venture in Japan is currently working through a period of start-up costs associated with the transition to this new distributor until a higher level of sales is achieved. Income from the company’s joint venture in Mexico was equal to last year. Income from continuing operations was $214.5 million in 2004 compared to $199.2 million in 2003. Diluted earn- ings per share from continuing operations increased $0.12, comprised of $0.18 from higher sales and operating margin and a $0.02 benefit from fewer shares outstanding and lower tax rate, offset by a $0.05 decline in other income, a $0.02 increase in interest expense and minority interest, and a $0.01 decline in income from unconsoli- dated operations.  In 2004, sales for the consumer business increased 15.3% compared to 2003. Higher volumes added 10.0% to sales, with 4.3% of the volume increase due to the impact, in the first half of the year, of the Zatarain’s busi- ness. Favorable foreign exchange added 4.3% and posi- tive price and product mix added 1.0%. Sales rose 16.1% in the Americas, with 14.6% of the sales increase from higher volume, 0.8% from price and product mix, and 0.7% from foreign exchange. New products, more effec- tive marketing and distribution gains drove an 8.1% vol- ume increase, with the remaining 6.5% attributable to the Zatarain’s acquisition. Price increases on certain products were partially offset by the change in mix of products sold. Sales in Europe rose 14.1%, with favorable foreign exchange contributing 11.7%, the Silvo acquisition in November 2004 adding 1.3%, and price and product mix adding 1.1%. Excluding the foreign exchange and Silvo sales benefits, sales in Europe remained relatively flat. New product and distribution gains were offset by more Consumer Business Industrial Business intense competitive conditions, particularly in France. The spice and seasoning category in France was affected by private label and economy products, particularly with the expansion of discount retail chains into this market. Sales in the Asia/Pacific region increased 11.2%, with favorable foreign exchange contributing 10.4% and higher volume adding 2.7%, partially offset by a 1.9% decline due to unfavorable price and product mix. Volume was affected by an initiative in China to de-emphasize lower margin products. New private label business in Australia con- tributed to an unfavorable price and product mix. Operating income for the consumer business increased 16.8% to $269.7 million, despite a $14.7 million increase in advertising expense. The operating income increase was driven by strong sales performance, cost reduction efforts and pricing actions. Operating income margin (operating income as a percentage of sales) increased from 19.9% in 2003 to 20.1% in 2004. Cost savings on supply chain initiatives more than offset increases in fuel, employee benefit, advertising costs, international reorgan- ization costs, as well as the difficult competitive environ- ment in Europe. Special charges in the consumer business decreased to $1.0 million in 2004 from $1.8 mil- lion in 2003. Special charges in the consumer business for 2004 consisted of additional costs associated with the finalization of the production facilities consolidation in Canada. Special charges in the consumer business for 2003 consisted of costs associated with the production facilities consolidation in Canada and the realignment of consumer sales operations in Australia. As discussed previously, the Company sold its Jenks brokerage business in the U.K. on July 1, 2003 and accord- ingly, results of this business were classified as discontin- ued operations. For 2004, sales from the industrial business rose 7.1% as compared to 2003. Higher volumes added 2.7%, favor- able foreign exchange added 3.0% and price and product mix added 1.4%. Sales in the Americas rose 5.7% due to a 4.2% volume increase that was largely driven by sales of new products such as coating systems and sales of snack seasonings. Favorable price and product mix contributed 1.0% and foreign exchange added another 0.5%. Strength in warehouse club sales also contributed to sales growth and more than offset continued weakness in the 23 for the year ended November 30 (millions) 2004 2003 Net sales $1,186.4 $1,107.3 Operating income 113.6 108.9 Operating income margin 9.6% 9.8% for the year ended November 30 (millions) 2004 2003 Net sales $1,339.8 $1,162.3 Operating income 269.7 230.9 Operating income margin 20.1% 19.9%