Greetings and welcome to the McCormick's third quarter 2010 conference call. (Operator Instructions) It is now my pleasure to introduce your host Joyce Brooks, Vice President, Investor Relations, for McCormick.

Good morning to everyone on today's call and to those joining us by webcast. The purpose of our call is to provide an update on our business, review McCormick's third quarter financial results, and share our latest 2010 outlook. We have posted a set of slides to accompany today's call at our Website, ir.mccormick.com. In the room with me are Alan Wilson, Chairman, President and CEO; Gordon Stetz, Executive Vice President and CFO; and Paul Beard, Senior Vice President, Finance and Treasurer. Alan will begin with the business update, followed by Gordon who will review our financial results and outlook. After that we look forward to discussing your questions. As a reminder, our presentation today contains projections and other forward-looking statements, and actual results could differ materially from those projected. The company undertakes no obligation to update or revise publicly any forward-looking statements whether as a result of new information, future events or other factors. In addition, certain information that we will present today are not GAAP measures. This includes information which excludes the impact of a significant tax accrual reversal recorded in the third quarter of 2010 and restructuring charges recorded in 2009. We present this non-GAAP information for comparative purposes alongside the most directly comparable GAAP measures. Reconciliations of GAAP to non-GAAP measures can be found in this latest press release and in the presentation slides for our call. It is now my pleasure to turn the discussion over to Alan.

Thanks, Joyce. Good morning everyone, and thank you for joining us. We're pleased to report another quarter of strong financial performance at McCormick. While the economy continues to be challenging, and consumers in many of our markets remain cautious, we achieved solid sales growth, exceptional margin improvement and a strong increase in profits. With the range of conditions across our major markets, our pace of sales growth vary by market. While the benefits of product innovation, incremental marketing and expanded distribution have been offset in part by certain areas of weakness, we consider our year-to-date sales result a solid performance in today's environment. During the same period, gross profit margin improvement has been tracking well ahead of our 50 basis point objective, with gross profit margin up 130 basis points year-to-date. Our margin improvement has made its way to the bottom line, more than offsetting higher brand marketing support and increased pension cost, and as a result, we have increased EPS at a double digit pace through the first three quarters when items affecting comparability are excluded. This margin performance is being driven both by Comprehensive Continuous Improvement, our CCI program and a more favorable mix of business. McCormick employees have made excellent progress in increasing productivity. Throughout our operations, we are buying more effectively, applying tools and technology and streamlining processes. We expect to surpass our initial goal to reduce cost by $35 to $40 million in 2010, and now project at least $45 million in cost savings. We have CCI champions in place in all major locations, and they already have a list of projects ready for 2011. We are also seeing a more favorable mix of business being achieved in two ways. First, consumer sales growth outpaced that of the industrial business. With the inherently higher margin…

Thanks, Alan, and good morning everyone. We are extremely pleased with our latest financial results. Clearly, improved margins and higher profits were the headline news this quarter. We also had some areas of solid sales growth as well as parts of the business that remained under pressure. For the total company, sales rose 0.4% and in local currency were up 1.5% due primarily to favorable volume and product mix. As indicated on Slide 15, in the Americas region, consumer business sales rose 4% and in local currency grew 3%. Incremental sales from new products, particularly Recipe Inspirations drove favorable volume and product mix along with increased sales of Hispanic products and Lawry's items. Sales from the Sam's Club lead market and distribution gains for Billy Bee Honey in Canada also added to sales volume and product mix. Spicing in this region was also favorable in the third quarter. While the Pepper increase that Alan mentioned had a minimal impact on sales, we had a favorable net sales impact from lower food productivity in comparison to the prior year period, although on a year-to-date basis we are about even with last year's coupon expense. Consumer sales in EMEA declined 10% from the year-ago quarter with a 1% decrease in local currency. Sales in France remained strong this period with the Ducros brand outperforming the category. In our other large market, the U.K., we are growing sales with new products such as Perfect Shake and our Flavorful range, and we were recently awarded new distribution in the Convenience Store channel. In the fourth quarter, our marketing focus will be on both the U.K. and France with an emphasis on new products and incremental brand support. The third quarter sales increases in our primary markets were offset again this quarter by lower sales…

(Operator Instructions) Our first question is coming from the line of Alexia Howard with Sanford Bernstein.

I just wanted to ask about the gross margin outlook. I think your guidance suggested there's going to be some downturn in the fourth quarter despite the very strong performance year-to-date. Could you maybe just give us an idea of what's driving that? In particular, the commodity outlook would be helpful.

As we indicated in our last call, we had some pressures on a number of commodity items; pepper being one, garlic, some packaging items. So the impact of those we are expecting to start to feel into the fourth quarter and that's coloring our outlook as we look into how we perform this quarter.

And just a real quick follow-up, I was looking at the consumer takeaway data here in the U.S. and it looks as though the price gaps related to private label seem to be on the rise again. And I'm wondering whether you're seeing anything in terms of private label activity? It seems as though in other areas we're maybe seeing a little bit of a pull back in promotional activity. So I was a little surprised to see that, and I was wondering if you could give that too and what the explanation might be?

I think it was a reflection of increased promotion in private label and more of a reflection that in the quarter we were not promoting as heavily. And what I'll say is as we head into fourth quarter, we're back to similar levels that we had last year in the fourth quarter with both coupon activity and price promotion.

Our next question is coming from the line of Alex Bisson with Northcoast Research.

First on coupon activity, you mentioned presently that it was down; I assume that means you're issuing fewer coupons not that fewer being redeemed. Can you just talk a little bit about the decision to pull back on that?

Yes, that's correct. What we're seeing or what we've done in the third quarter, as you recall last year we were very heavy on coupon activity in the quarter. We dialed back that and focused more of our spending against TV advertising for things like grilling and recipe inspirations. And so that's a result that was a conscious effort in the fourth quarter again, because it's such an important part of our sales for the year we're back to a level that's more like what we did last year.

And then Gordon is it possible to kind of parse out the increase in your inventory between kind of the increase in cost versus the increase in units and mix?

I guess the best way to describe it Alex would be, there was not one particular item that I can point to as the increase. We mentioned a number of things; we had an SAP implementation in China particular. We talked about the upward pressure on raw material items. So there's not one item that I could point to in particular. So as a combination it's spread pretty evenly across all those events.

Our next question is from the line of Ken Goldman with JPMorgan.

A question about innovation going into 2011. It seems like you had some pretty successful products in the Consumer business this year. I'm wondering what the pipeline looks like going into next year. And also what retail willingness is to accept new items. I mean given the economy and consumers caution still some of the new items are often accretive to mix. And some retailers, from my understanding in some other categories have pushed back on some new items that have maybe been at higher price, higher margin items. So I'm just curious how you think about both, your pipeline and retailer acceptance to that?

We feel really good about our pipeline both in the products that we're supplying from a consumer standpoint and the product that we're supplying to other consumer manufacturers. I think it is a mixed bag out there, but we're hearing from a lot of retailers that in order to grow they need innovation. In fact recent discussions that we've had with some of our large customers are that they really want to see more innovation, because that's how you get a growth. Certainly, you've got to get the product mix and the price points right for it to be successful with consumers. And that is certainly a factor and I think we're still a bit in a mode where you want to make sure that what you do, you do right. And it's not just throwing a whole bunch of stuff out there to see what works. I think there's still a lot of scrutiny. But I think we're kind of coming out of the mode where everybody kind of hunkered down and focused on small stuff. And are more working on a new product innovation. I think it's healthy for the business, it's healthy for the retailers, and it's certainly good for consumers.

And can you give us an update on the Sam's Club tests?

Without getting into specifics on the customer, when we typically replace competitors products, our customers see good growth in sales. And I would say, we're not projecting what the customer's are going to do, but we're seeing results from those markets that we're pretty happy with.

And one last one, on the tax rate, if my numbers are right, I think you've done close to 30% for the tax rate on a pro-forma basis for the first three quarters of the year. I think if I'm reading you right, you're guiding to a 32% tax rate for the whole year, so that implies a fairly hefty 34% to 35% tax rate in the fourth quarter. Is that right or are my numbers slightly off there?

We're guiding to a 32% underlying rate, which excludes a number of the discrete items that are holding that year-to-date breakdown of 30%. So we're saying, if the underlying rate is going to continue to be 32% absent for any of those discrete items.

And, Gordon, for modeling next year, how do we think about the tax rate, or is it too early to do that.

It's a bit too early. We'll certainly be able to provide you with all of that guidance in January, but it's a bit too early for us. And obviously with the uncertainty around a lot of the tax legislation, it's difficult call to make at this moment.

Our next question is from the line of Chris Growe with Stifel Nicolaus.

This is actually (Stephen Greg with Mandalay Research). A couple of questions, two months ago in the Wall Street Journal there was article mentioned, how e-commerce is going to revolutionize and shape the way companies do business in 2011. Can you provide some color as to what your plan on your e-commerce initiatives are going to be in the next couple of years and how do you plan to get there?

We're not getting too much into next year. Over the last couple of years, we have really increased the percentage of spend against things like social media and reaching consumers in different ways. And we're going to continue to beat that up. We're active on all the networks like Facebook and Twitter, and reaching directly to one-on-one with consumers. In terms of how we're also dealing that with our retailers, we're working with them and making sure that our products for future and recipe, so before the consumer gets to the store they're thinking about our products. And so it's a combination of reaching directly to consumers with our marketing efforts and working with customers on shopper marketing to make sure that our brands are preferred. In terms of direct sales to consumers through the internet, that's not something that we're aggressively doing. Certainly in areas where certain products aren't available, we make those available on the internet but it's not a heavy emphasis for us internally. I think I'm getting of what you're asking.

Is mobile going to be very important to you guys, are you guys going to try and make in a name albeit like Android will have, providing certain apps to allow customers to find your information much more effectively.

Yes, we've got an iPhone app that's active now. With recipes, we've done the same thing in Europe with our Schwartz brand and with some kind of fun things. So when you shake your iPhone on the Schwarz app you get different recipes that pop up. So we're doing a number of those kinds of things to try to reach consumers.

On a separate note, what I'm noticing on transportation cost, we're seeing (across-to-aboard) transportation costs are rising pretty dramatically as a percentage of revenue going up. What are you guys giving any attention to or putting any types of program in place to reduce transportation cost? And how are you planning to get there?

We have a transportation management system that helps us optimize our routes. And as we're working with our customers on making sure that we're doing everything we can to minimize those increases, certainly as things change we consistently look at our network to make sure that we're doing it as effectively and efficiently as possible. But just like in some of our commodity costs we are seeing some transportation costs go up.

You have about a percentage what you're seeing go up in the last year, have you guys have any metrics or anything?

I'm sorry, say that again.

Have you run any number to see, what have your costs gone up this year on a percentage basis of revenues? Have you guys run those numbers?

We haven't shared any of those metrics, but I'll say it certainly has been rising as you've heard across through other industries. And it is certainly something that we take into our outlook as we give guidance into the fourth quarter.

Okay. And in terms of reducing those, you said, I know you have system that is kind of helping with that.

Yes, that's the way how we try to optimize. We optimize through route management, that's our primary vehicle.

And final question going forward. Obviously you guys had a great quarter. We're still looking at possible recession where companies are looking at really highly control cost. How are you guys going to be in 2011 really looking at your supply chain operations? I know you just had the SAP implementation in China. But how are you guys looking at supply chain operations to overall reduce costs and transportation and raw materials and the like to make sure overall you're improving the bottomline?

Well, our CCI program, Comprehensive Continues Improvement has really geared it all back. And a lot of the $45 million in savings we're projecting this year is a combination of supply chain as well as product sourcing and SG&A savings. We have a very similar effort and a pipeline of projects that are built against next year as well. As you may recall, we shared $150 million savings objective in our Analyst Meeting this year. We are well on track to hit that over the next couple of years. And it's a big part of our algorithm. It's very much about reducing our cost. Reinvesting that money back into the business to help grow sales, and that's been our algorithm for quite a while.

Our next question is from the line of Andrew Lazar of Barclays Capital.

One, year-to-date, I think your organic sales is running maybe just a bit below sort of the 2% to 4% organic target that you'd set in sales for the year. Is 2% to 4% organic still the right target for the year at this stage based on what you've got planned in the fourth quarter from a merchandising perspective? Or is that something we have to reconsider?

We're holding that guidance. Obviously our fourth quarter is our biggest and most important quarter of the year. We feel very positive about our plans for the fourth quarter. Obviously we've got to execute those. But we're bullish on our fourth quarter.

And I know that, I guess in the fourth quarter coming up you've intimated that inflation is going to peak up a bit, perhaps run a bit ahead of pricing. And that you're considering potentially some additional moves where it makes sense and it's justified. It may be too early, but what type of read are you getting on, let's say the areas where you've taken some pricing like in pepper around volume or consumer reaction. And does that make you more or less willing to take some more action, especially because you raised your productivity targets which can help you offset some of that? I'm trying to get a sense of viewing the industry or in a place where when and if it's justified, if it can be kind of done judiciously given everyone's raised productivity?

Pricing is something that we give a lot of thought before we raise it again, because as somebody pointed out earlier those price gaps between the brand and private label are very important to us. What we've seen in, it's really a read to consumer reaction on pepper. We just announced and implemented the increase over the last couple of weeks. But we take that very carefully to make sure that we understand the tradeoff between recovering cost by raising prices and the impact on volume. And as we're looking at what we're going to do over the next year, we're considering all those things. What we have to do to recover cost. Offset obviously by our savings programs and then the impact that we'll get on volume and then the investment we'll need to make in advertising and promotion to keep the consumers coming. So it's something that we very tightly consider. We were successful in getting the pepper price increase through. And we're going to watch certainly volumes, it's something that we're really sensitive to.

Our next question is from the line of Robert Dickerson with Consumer Edge Research.

I just had a quick question on just the free cash flow. And obviously it sounds like you're saving some of the cash in the short term for the SAP implementation in Asia. But I know before you had mentioned that you were expecting about $45 million in anticipated contributions into pensions for the year. Is that still correct?

Yes, that's correct. And a lot of those largely done already and reflected in the cash flow.

And then still as we look at the balance sheet now and we see a bit of a ramp in inventories just in Q3. Is that solely do you think from Asia?

As I said earlier, it's a combination of factors as we've described. It's partially that, it's certainly the raw material cost pressure. It's securing supply for the fourth quarter. A little bit of it quite frankly, if we could have been better on our own forecasting, and so that's where our teams are focused. We're making investments. We've got profit fees. Our VP of supply chain is all over this. So it's an area of focus. And as we shared with everyone during the investor conference, this is the area we look for over the next two to three years for improvement and our performance to give us the next level of improvement on our cash conversion cycle.

Just another question following up a little bit to Andrew's question on the topline. It sounds like you are staying with the 2% to 4% organic growth target for the year which would imply that you are obviously expecting a strong fourth quarter. But could you just comment on just a little bit how we should look at the data that obviously we all see on a scanner basis, because since 2007 you've still continued to loose some dollar share and track channels. And I'm not sure that could just be because of a shift to more demand in track channels or if it's because the pricing is too high. I'm just trying to get a little bit of clarity so that I can understand better how to read a loss in share in those channels relative to what we're not seeing in other channels.

Just keeping that in perspective, generally what everybody is looking at is a very small portion of our overall sales. The scanner data that you're talking about covers only spices and herbs and people have ignored our share gains in dry season mixes. You are only looking at about half the store population in the U.S. because it doesn't cover warehouse clubs, dollar stores mass market like Wal-Mart and others. And it doesn't include all the sales that we had to Hispanic stores or Zatarain's Products and so it's capturing a smaller portion of that. Now we're not happy about share losses in any channel. And our teams are working aggressively to make sure that we both continue to grow our share in the grocery channel and that we drive sales and volume through that. Because that's something that we are very, very sensitive to. But again, I don't want to put too much emphasis on what represents a smaller percentage of our sales as we look at those. But we certainly look at it and monitor it and take actions to correct it when we see downturns.

Our next question is from the line of Robert Moskow of Credit Suisse group.

I was concerned heading into the quarter also because of the Nielsen data because it showed a sequential deceleration in measure channels. And I was wondering the U.S. consumer business turned out better than I thought. Can you give us a sense of how much of that might have been from new products that you shipped to the trade and may be just hasn't been picked up yet by Nielsen?

It's hard for me to say what's in that Nielsen database. We're in our (light house) and we have a custom database that captures the McCormick branded products which include Lawry's Old Bay, Lawry's and Zatarain's and all those sorts of things. So it's hard for me to calibrate what we're seeing in Nielsen. I think directionally, what you saw was correct in those channels but it missed so much of the rest of the product mix and customer mix that it's indicative of a trend. But it's not necessarily indicative of what's happening.

Okay. So zero then, Alan, from new product shipments. Just filling up pipeline, you think it all would have been captured by retain by now?

Our Recipe Inspirations for instance should be scanning by now because we started shipping.

Yes, Recipe Inspirations are scanning, but what I don't know is that on the Nielsen database.

Marketing, you maintained the guidance to have marketing up $20 million year-over-year, which is a nice increase but also you have $0.07 of upside. Often you decide to reinvest that upside into marketing to some degree. And you say that you are not happy with market share trends in some of these channels. So why not put more into marketing in the fourth quarter instead of dropping it all at the bottomline?

We are going to look at opportunities to do that. Again, we want a balanced measure of our spinning. And want to make sure that our spins are all efficient. And as you can figure now, we're two months away from the end of the year, and most of our plans are pretty well locked an loaded.

(Operator Instructions) Our next question is from Mitch Pinheiro with Janney Montgomery Scott.

Just so I understand in the industrial business, you have prices down in the third quarter. But with pepper and other commodity costs heading higher, should we expect higher price increases in industrial in the fourth quarter or the pass-through still continuing?

There is a bit of a lag effect with how we pass-through commodities in the industrial business, because it's based on the coverage and the positions that we have. So what we're seeing right now is the impact, at least in this quarter, the impact of diary costs that were reduced versus this time last year, and it's based on the positions that we work with our customers to take and pass-through. I think over time, as commodity costs go up you'll start to see the pricing impact of that as we pass those through.

I guess this quarter, the margins in the industrial segment reached 9%, and in light of your long term goal, I guess back in May you throw up a 9% to 10% sort of target for 2013. But I know quarterly, there's some variance per quarter, but you're almost at that low end of your target range. So does this mean that perhaps the long term goal could be on the low side, or are there other structural factors that I don't see or we should consider?

Well, there are still some things to think about there, because as commodities go up, and we pass those through, we'll recover the dollars, but we won't necessarily recover the margin. That's kind of the impact we saw in 2008 and 2009. Part of the margin increase we're seeing now is we're passing through lower costs, but we're also not passing margin down. So we're seeing a little bit of help in margin in that. I would say that we're happy with the progress on margin so far in our industrial business. And we certainly feel good about the fact that we've got momentum that will continue to build as we improve the mix of that business and focus on more and more value-added products and as we continue to manage our costs. So I'd say, we're not setting a new goal out there, but we're real happy with where we're at.

Obviously, your new product activity with your large industrial customers helped your margin mix, especially in the early years. Is there any way you could frame what you think is sort of new product activity this year versus last year from your meaningful customers? I mean, is new product activity up at a double digit rate or any way you can give us some color on that?

Yes, this is something unusual. This is something we usually measure toward the end of the year, and we reported that Q1 in January.

I would say, as a trend, new product activity to consumer manufacturers is up versus this time last year. But if I look at it on a quarter-to-quarter basis, we had some new product introductions in quick service last year that have now lapped a year. And so there's an awful lot of moving parts in the pipeline. So I'd hate to give you a bad number based on that but just in general, our new product activity with consumer manufacturers is really strong when you see the pipeline for quick service. But so far this year, I think our quick food service was a little stronger last year.

Okay, last question. So, just with guidance, the low end of the guidance range would suggest flattish profit growth in the fourth quarter I believe. And I'm just trying to just understand what would be the key factor that would determine where you are in the range.

Obviously, the sales and margin mix would probably be the two biggest factors, Mitch. And this being our largest fourth quarter, this is the quarter where those two factors can be very significant.

Should it be at the low end of your guidance range? It would just mean that sales are just softer.

Sales softer and the mix of the overall business, both in the products and in the overall portfolio is not quite as strong, and likewise, on the upper end we had stronger sales and a better mix in the whole portfolio.

Our next question is from the line Eric Katzman with Deutsche Bank.

Just a couple of questions. I guess we've been kind of dealing with this IRI, Neilsen issue for over 10 years I would say, and how it's not really relevant to the bulk of your business. But if you look over the entire business, including international, industrial, all the other products that you guys have been successful in, is it probably fair to say that IRI Neilsen measures in terms of what people look at spice and seasonings, is that probably less than 10% of your business today?

I think we kind of calculated it based on preparing this call. We think it's something around 10%. It's a little more than that but not a lot more.

Then the second question I guess has to do with, I think Ken from JP asked this. I was kind of surprised about his question on new products and kind of that he's hearing from retailers, I guess not wanting to get new products. I guess in this environment given that promotion really hasn't worked for most companies in terms of driving consumption, certainly the retailers are not happy with the deflation and the impact that it's had on their businesses and ultimately their stock, it would seem to be, maybe you're indicating this with the new product stuff, but it seems to me that if anything, they want to go the other way.

That's more where we're seeing a lot more energy in product innovation and acceptance by retailers to get back to growth than necessarily where we were. And I'm comparing it to where it was a year ago, where there wasn't as much receptivity of new products. And now I'm seeing actually as much a pull from retailers for new products, at least in the categories where we're servicing.

And I would also think that within that effort, it's probably, they would want you to have somewhat let's say stealth kind of mix/price improvement as to what's coming on to their shelf. I mean, what's the value to them putting out new products if they are even lower priced, which again would kind of lead to deflation which is what they don't want.

There's certainly a lot of discussion on making sure the price points are right on new products. And we're conscious of that as well. There is certainly a push. When you have something that's new to the world, the consumer doesn't necessarily have a basis of comparison. Our Recipe Inspiration is a great example of that where if you look at it on a per ounce for the spices, its fairly significant, but if you look at it on an absolute price point versus buying five or seven bottles of spice, it's a real value to the consumer. So it's a way of making sure you're delivering value, and taking the opportunity to improve margins along the way. The ringbacks are pretty good.

And then, I don't know if you're going to be able to answer this, Alan. But obviously with Unilever buying Alberto Culver, there are some assets in there were you I'm pretty sure publicly talked about a desire to have some of those seasoning blends that they own. They got out of Lawry's and that was very accretive to you. Is it fair to say that that's another possible acquisition in addition to all the JVs you seem to be kind of putting together?

We don't really want to comment on any potential acquisitions out there at this point. Certainly, anything that's available in our space would be something that we'd be interested in having a look at.

There are no further questions at this time. I would like to turn the call back over to Ms. Brooks for closing comments.