Good morning. This is Kasey Jenkins, Vice President of McCormick Investor Relations. Thank you for joining today's Fourth Quarter Earnings Call. To accompany this call, we posted set of slides at ir.mccormick.com. At this time, all participants are in listen-only mode. Following our remarks, we will begin a question-and-answer session. [Operator Instructions]. We'll begin with remarks from Lawrence Kurzius, Chairman, President and CEO; and Mike Smith, Executive Vice President and CFO. During our remarks, we will refer to certain non-GAAP financial measures. These include adjusted gross profit margins, adjusted operating income, and adjusted earnings per share that exclude the impact of transaction and integration expenses related to the Reckitt Benckiser Foods or RB Foods acquisition, special charges and income taxes excluding certain non-recurring impact associated with the recently enacted U.S. tax legislation as well as information in constant currency. Reconciliations to the GAAP results are included in this morning's press release and slides. As a reminder, today's presentation contains projections and other forward-looking statements. Actual results could differ materially from those projected. The company undertakes no obligation to update or revise publicly any forward-looking statements whether because of new information, future events, or other factors. As seen on Slide 2, our forward-looking statements also provides information on Risk Factors that could affect our financial results. It is now my pleasure to turn the discussion over to Lawrence.

Thank you, Kasey. Good morning everyone. Thanks for joining us. Our fourth quarter 2017 kept another year of record financial results, with strong core business performance and the incremental impact of acquisitions. Our broad global flavor portfolio continues to drive growth and differentiate McCormick. We exceeded each of our key financial targets in 2017, delivering double-digit growth rates in sales, operating income, and adjusted earnings per share. We see substantial cost savings, expanded adjusted operating margin, and delivered our sixth consecutive year of record cash flow. Our sales growth and focus on profit realization drove excellent financial results across both our consumer and industrial segments and reflects the effectiveness of our strategies and engagement of employees around the world. McCormick's business platform is growing an advantage, across all regions and categories, as seen on Slide 5, McCormick is flavoring food and beverages, you probably enjoy something flavored by us everyday no matter where or what you choose to eat. This morning, you will hear about our 2017 accomplishments which were driven by successes spanning the portfolio. Our sales growth in flavors organically and through our Giotti acquisition continued to shift our portfolio to more value-added product. We further strengthened our flavor leadership expanding condiments and sauces as well as branded food service with the RB Foods acquisition. Our investments in new products, brand marketing capabilities and infrastructure, drove growth across several categories including U.S. spices and seasonings where we significantly increased our product innovation versus recent years. Heading into 2018 I'm confident our momentum will continue. This morning, I will begin with our fourth quarter results, reflect on our 2017 achievements, provide an update on our RB Foods integration, and then share with you some of our 2018 business plans. After that, I'll turn it over to Mike, who'll go…

Thanks, Lawrence, and good morning everyone. As Lawrence indicated, our fourth quarter financial results were a strong finish to the year. I'll begin with some additional perspective on these results and discuss in more depth, our 2018 financial guidance. On a constant currency basis, we grew sales 20%, acquisitions pricing taking in response to higher material costs and higher volume and product mix each contributed to the increase as seen on Slide 14. In constant currency, both our consumer and industrial segments delivered strong top-line growth. The consumer segment grew sales 18% in constant currency, with increases in each of our three regions. Our acquisition of RB Foods contributed 14% of the sales growth. The combined growth from pricing, volume, and product mix improved sequentially from the previous quarters in 2017. On Slide 15, consumer segment sales in the Americas rose 24% in constant currency versus the fourth quarter of 2016 with 19% of the increase from the acquisition of RB Foods. The remaining increase was driven by pricing, new products, and expanded distribution, with growth achieved across the branded portfolio as well as in private label. EMEA consumer sales increased 2% in constant currency. This sales growth was led by the acquisition of RB Foods as well as Ducros and Vahine. Additionally, as Lawrence mentioned, we returned to sales growth in the UK as we lapped the impact versus a year ago of a large retailers reduction of shelf space for food products. We grew consumer sales in the in the Asia-Pacific region 4% in constant currency. In China, sales increases were driven by the base business including e-commerce as well as by new products. Sales growth in India was led by improved category management and the launch of spice mixes. For the consumer segment in total, we grew…

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions]. Our first question comes from the line of Alexia Howard with Bernstein. Please proceed with your question.

Okay. So just a couple of areas, there's obviously a bit of confusion I guess about this conversion of the control brands to private label. Could you quantify how much that margin affected the IRI numbers in terms of the consumer takeaway and do you make the private label for that customer? And if you were to strip all that out, is your branded product in the U.S. still losing share to private label excluding the impact of that conversion and then I have a quick follow-up.

Hey Alexia that you recently put out a note on this that I think described the situation very well. We try not to talk about specific customers. So you named a customer in that note, I'm not going to name that customer, but I think everyone know who we're talking about. There was a major customer with whom we had a control label brand that we sold exclusively to them and they made the decision as they have with many other brands to convert that brand to private label and we continue to be the manufacturer of that brand. The conversion of the brand itself reached to the data and that kind of all channel data as a big growth in private label with a big impact on us in that all channel data and that's a big driver of the difference between all channels and grocery. If you look at the grocery portion of the market, we actually gained share in herbs and spices in the fourth quarter but when you look at the multi-channel data, we lost about 90 basis points and that's because of that conversion with that customer. I'll just go on to further comment on that that the conversion in itself really is not financially meaningful to us. The margin structures of the business is comparable we're a substantial provider of private label or some spices to the industry, that's a profitable business for us and so this was neutral in that aspect. The customer did make the decision to have a very strong promotion and merchandising programs for that private label product through the holiday season. That was a detriment to both the category profitability for that customer and to the extent that there was trade down from the McCormick brand that was a -- that would have been a negative for us confined to that customer.

And then just as a follow-up --

I think I hit all your points there by the way.

Yes, absolutely. Can I just follow-up on the e-commerce in the U.S., should we be worried that Amazon will be focusing heavily on its 365 brands since the Whole Foods Market acquisition with the online side and how profitable are your online sales in the U.S. relative to the brick-and-mortar stores and I will pass it on. Thank you so much.

Again I hate to talk about specific customers. So I'll speak to e-commerce pretty broadly. Our e-commerce growth I think we've mentioned on the call globally last year was 67%, it was very strong in the U.S. we have one of our largest customer teams dedicated to the customer that you named and our business with them is pretty strong and robust. We don't see an undue impact on private label in that customer. And I think if you did a survey of the front pages of the spice section and went line-by-line through it, you'd find that we're pretty -- you'd find that we're very well represented actually. This is an area that we've over invested in for several years now we continue to over invest in it. We expect very strong growth in e-commerce as a channel through -- certainly through 2018 and we believe that this is founded on our belief that consumers ultimately will shop for food where they shop for everything else which means it's going to be a very strong e-commerce component. So we continue to invest heavily in this. I have to say we're pretty strong with the performance -- we are pretty pleased with the performance of our e-commerce business. This is one of the areas where we think we are ahead of the curve and we're bringing an awful lot to the party with the brands that we acquire. We also saw with the RB Foods brands, Frank's and French's are somewhat underrepresented in e-commerce, so we’ll be able to grow those along with our platform.

And are margins are they comparable and I will pass it on.

Oh, sorry. Yes, I'd say so, yes, absolutely.

Thank you. Our next question comes from the line of Robert Moskow with Credit Suisse. Please proceed with your question.

Hi thank you. I guess I'd like to ask about the planned trade promotion reductions that you mentioned by RB. Can I assume that that's mostly just French's Mustard and maybe if you break down how RB is performing a little more in a little more detail is Frank's still growing the way you expected and maybe a little bit about your plans for growth on both of these for 2018 and how you're coping with the trade promotion in the first quarter?

Great, hey well first of all good morning, Rob and Happy New Year. The reduction in trade promotion was planned by the seller. So this is part of the promotional plan that we -- that we inherited from the seller that was already in place in the prior year, the brand some promotions that were unprofitable that moved a lot of volume but at a margin loss. So those promotions were planned to be scaled back and if you were to -- if you -- I don't know if you all do this in the Nielsen Data that you have, but in our IRI Data, we can separate base volume from incremental volume from promoted volume. The base volume component on the French's business, and when I say French's business I'm including Frank's it was not just French's Mustard it was French's and Frank's RedHot as well. The underlying business shows good base business growth that was on the incremental volume part that that the decline occurred and again that was planned that would have been expected by running fewer of these unprofitable promotions. We're pretty pleased with the off-take trends. I will admit that we've had some supply chain hiccups along the way. I would say that the -- we're still operating under a transition services agreement with the seller. I would say that we would have put a different priority on some of the customer service needs than as the owner of the brand then they would as being no longer the owner. And so I would expect to see that improve. And I also think that as we bring our category management and other analytical tools to bear which were really capabilities that they did not have as we bring those to bear, we're going to see improving trends on both brands as we go through fiscal 2018. Once we have this fully under our control, we've got the sales organizations consolidated in the fourth quarter; we get full control of supply chain and logistics in a few days, I just I think that that there is -- when we have this fully in our control, we're going to do better. We have already with our selling organization begun securing additional distribution points and at a number of important customers improved shelf placement and improved share of shelf. So I'm pretty optimistic about it, so.

And just one follow-up question, from an operating profit standpoint, I mean fourth quarter results were just a little bit late versus us and I think the Street and then the guidance a little bit late to sales in line. How do they compare to your internal expectations for operating profit?

Hey Rob, this is Mike. We gave guidance at the third quarter call of operating profit increase of 20% to 21%. So we came at 19.7%, so slightly short as you noted. As most of the rest of the industry, we saw an uptick in freight in the fourth quarter especially due to carrier constraints, so that was part of the miss. We also -- we over delivered the CCI which helped the gross margin line but we invested some of that in A&P and we gave guidance of high-single-digit growth in A&P for the full-year and we came in at almost 10%. So we did invest a little bit more behind primarily in North America and China we had strong holiday programs for that holiday and also the liquid gravies. In China we're opening a key model stores a lot of digital support over there. So we're reinvesting some of those earnings and that was really but freight I'd say is a big driver of that.

Okay. But your guidance is for low-single-digit material cost inflation, Mike, so does that includes the freight element or is that on top of that?

For next year, remember we have freight on inbound, freight goes to cost of goods sold but we have freight for outbound distribution that goes through SG&A. So when you see couple of people noted SG&A is up is because of outbound distribution freight. Most companies put it into cost of goods sold.

Thank you. Our next question comes from the line of Akshay Jagdale with Jefferies. Please proceed with your question.

Thank you. Good morning, thanks for the question. I wanted to follow-up on Alexia’s questioning around the U.S. business and just thinking more sort of long-term brand health wise and category management, just your update on the initiatives there. I know in our recent conversation I had with you Lawrence you mentioned that you felt confident that about the health of the business and that consumers are not trading down to private label even though the optics a little bit confusing on our end, right? So can you just give us a higher level view of why you're confident of that, any data points you could share there that would be helpful? And then as it relates to your category management initiatives, can you tell us sort of where you are or where your retail customers are in adopting some of the changes that you have suggested over the years and why is that one of your largest customers is seemingly doing something that you would not have suggested? And then just lastly when should we expect to see market share gains if that is an expectation you have because 4% growth is a pretty good outcome in the losing share. So I just want to make sure, you still have that goal of growing share? Thank you, great.

Sure thanks. That was a long question, so Akshay I'll try and touch on everything but if missed something remind me at the end. And I'll start with that 4% growth that you mentioned. McCormick brands were up 4% in urban spice category in the U.S. in the fourth quarter, private label certainly was up by more than that but I don't know if you all have noticed that all other brands were down almost 4%. You know at least in our category, this idea of challenger brands is two years ago news. As private label grows, and we as the largest player in the category grow, those smaller players are the ones that are really suffering and who are actually losing volume. So both McCormick and private label are growing. Private label growth numbers are bigger than ours and so we have lost some share, but again that was in that all channel and is a bit distorted by what's happening at one particular non-grocery customer. If you look at grocery alone, we gained share in the fourth quarter and we continue to be optimistic that we're going to -- that we not just optimistic, we continue to drive plan to grow share in herbs and spices in the U.S. I'll point out that we participated in a lot of other categories. We gained share in recipe mixes which is a significant category for us and I would expect that growth -- that share growth to continue. I would expect that in condiments, it will also be a share gain as we go through 2018. That all said, we're also not chasing unprofitable growth and we recognize that we participate in the profitable growth of the private label side of the business as well and so that figures into our calculations as well. Did I get everything there Akshay?

Yes. You got most of it just one follow-up on that and then I have a question for Mike but the follow-up I had was so I mean should we -- should we just expect an absolute sort of growth number more so than market share gains when we're looking at specifically the Nielsen Data, I mean like 4% growth is nothing to apologize about, right? And so I'm just wondering if we should have an expectation for market share gains in a category that's growing 6% in the U.S. and then I have a follow-up for Mike.

I will still stand by what I said about U.S. herbs and spices. We are a company that is pretty competitive and I think that right now there's some a bit of distortion because of what's happening on the private label side. But it'd be our expectation to get back to share growth and it's certainly one of our -- one of our goal. I'll admit it has been more elusive than I would have liked it to be.

And don't underestimate the fact that gaining share in a grocery using its category management tools, we've really made a lot of progress with the grocery customers, so we're really happy internally about that and we think we can replicate that with the customer that has made this decision.

Some of these decisions are being driven by broader store categories rather than a strategy related to herbs and spices specifically. So there is a lot of concern for customers that are targeting the same consumer segment that the discounters entering the market are countering and they have very strong efforts to differentiate themselves and establish strong positions on price to protect themselves at that end and that's driven some of the strategies that may be irrational for the categories a whole but might make sense for them as a retailer brand.

Perfect. In the interest of time, I will get back in line, thank you.

Thanks, Akshay.

Thanks, Akshay.

Thank you. Our next question comes from the line of Andrew Lazar with Barclays. Please proceed with your question.

So to wrap some of this together a little bit and maybe hard to parse out some of this but if we were to try and best we can account for the control brand conversion that you've talked about as well as the better growth that you see in a lot of the unmeasured channels. I guess how much closer to the 6.5% category growth rate do you think McCormick would have been understanding that you are gaining share in grocery because I guess what I'm getting at it, it seems like the gap had been the market share gap had been narrowing. And then given some of these other distortions maybe it's widened again but I'm trying to get a sense of it ex those distortions if it really has been widening or not.

I don't have the hard numbers on that, Andrew. I think that's a great question. I would say that we've got the same sense though, we've gotten to share growth position in grocery as we were just saying and unmeasured channels are contributing a substantial part of growth they were I mean it contributed about 1.4% to our growth rate in the fourth quarter and so they are very meaningful for us. It's hard to put a number on it. We do believe that we're making progress I'll also say that we believe that the -- that this control label issue is really more around the promotional and merchandising activity that the customer put behind it in the holiday season. They already have recognized that it was unprofitable for them and have made change that strategy and we see that really as more of a short-term phenomena than as an enduring issue. And so there's a lot of noise in the in the month-to-month date and if you hang any one particular month or even 12-week period you can be let astray.

Also Andrew you have to be careful with when we take pricing because of the pricing differential between brand and private label so we take a 2% price increase because private label they're passing through pennies on black pepper and vanilla, their percentage increase on pricing is higher maybe it's 3% so that's a little bit of that that gain of share that you're seeing.

Got it. That's helpful perspective. Thank you and obviously historically you've been pretty effective at ultimately pointing out the data to certain large retailers and getting them to sort of come around which I would assume you'll do pretty aggressively this time around as well. One follow-up would be on the pricing you mentioned some incremental pricing that you took in 2018 was that similarly on where you've taken pricing before like vanilla and garlic or is a little bit broader based. And I think last quarter you mentioned the elasticity around volume was even a little bit below perhaps what you had expected is that still kind of the trend that you've seen with respect to the incremental pricing. Thank you.

Andrew it's a little different in 2017 we were taking we had mid-single-digit cost increases primarily led by garlic and vanilla. Garlic has come back down as we thought. Vanilla stayed pretty high, and actually, that's still going up, a lot of crop shortage still. What we're seeing in 2018 black pepper is continuing the trend down which is great, garlic as I mentioned before, other commodities like cinnamon are going up, and packaging is going up some flexible film, oils going back up, so plastics and things like that. So we're going to do some surgical pricing, most of the pricing impact you'll see coming through the P&L will be from last year's pricing wrap however there's not a lot of new pricing planned for this year more surgical base.

But Andrew I think you're asking about 2017 pricing that we actually got away and that was definitely more surgically targeted.

Great. Thank you very much.

Thank you. [Operator Instructions]. Our next question comes from the line of David Driscoll with Citi. Please proceed with your question.

I feel that was targeted towards me as the next speaker here, thank you for the opportunity to ask one question so I'll keep it one. That's fine. I'm sure there’s plenty of a good questions coming after me. Tax rate just wanted to talk a little bit about what went into the 24% I think the overall tax rate guidance was like 27% but pretty much you guys had kind of come in at 26% for much years and then it's something like 60% in the business as U.S. the 14 point percentage reduction in the statutory federal rate would have suggested to us a larger impact then what you guys are talking about with the 24%. And then I think you said in your prepared comments that after the next fiscal year it actually goes up a little bit more. So we just love to hear a few of your comments about how this tax reform affected you, maybe why wasn't it maybe more like 21%? And then the final related point here was, did you reinvest any of those savings? And I'll leave it there. Thank you.

I think you got three questions in there, David, now. This is Mike. Yes, our guidance is 24% that's really that the underlying tax rate. As you know we've given guidance in the past 28% to 29%. You have the discrete tax items which came through stock comp income has come through. That's new accounting rules. This quarter we had some settlements on some tax audits which were favorable. So when you think about 24% I compare that to the 28% to 29% but there are -- we've been favorable in the last couple of years as you've mentioned we've gone down to 26% for the last three to four years in a row. But overall this is a positive for us. This is a transition year for us we're non-calendar year company. So the first month is at 35%. The next 11 months are at 21%. The full tax bill doesn't come into effect for us until 2019. So some of the non-U.S. income minimum taxes like the guilty tax or the de-tax don't come in until 2019 so that's why we're saying the underlying tax rate of 24% might slightly go up in 2019 but we're -- and don't forget state and local. I think everyone forgets the 1% to 2% for state and local as you do your model so consider those. From a capital allocation perspective we're not changing anything. We're -- we have invest -- we'll invest the savings in growth. We invest them in -- we're a dividend aristocrat, continue to pay dividends on our accelerated EPS growth, and we pay down debt which we're really excited about paying down the RB debt faster just like we did the prepayment in 2017.

Thank you. Our next question comes from the line of Rob Dickerson with Deustche Bank. Please proceed with your question.

Thank you very much. Good morning. Just one I guess my one question is just rates of reinvestment on RB Foods. I know I think when you announced that the acquisition, I asked about reinvestment. The bit of the line at that point was basically this is a very well run business and had sizable or let's say substantial enough investment to support the brands. And I realize even though there is some distortions in some tracked channel data that we're seeing. Overall we're not those tracked channels actually are still significant. And what we're not seeing is -- let's call it a higher rate of growth than I think we would have expected. So I'm just wondering on the reinvestment side as you guide to brand investment being higher than the rate of sales has that -- has the forecast for your investment increased for 2018 relative to maybe where you saw it and whether or not it has where do you plan on really strategically investing the most is it on spices, is it on R&D etcetera? Thanks.

Well, I'll take the sales side of it and I'll pass it over to Mike to talk about the reinvestment side. And I will just say that our plan for RB sales growth and in fact absolute sales dollars for fiscal 2018 exactly matches our acquisition model and we still are expecting strong growth under our full ownership. We are still expecting the same level of accretion that we talked about when we did the deal and if anything our early experience with the brand has been more positive than that we expected we are seeing, I'd say more opportunities than we initially assessed in the food service side of the business. We are experiencing some tremendous growth in the Canadian market and we're off to a really good start in the conversion of the whole international business to our very robust international infrastructure. So I'd say, if anything well our internal plans are tied to the original model that we are more optimistic about the growth potential of the brand than we were in the beginning. So Mike can I --

Yes, I think overall we're happy with the level of advertisement and conversion of RB in total dollars. But as we said, in a call three months ago we're going to focus it on higher ROI investments. Good example is they haven't had new TV ad for seven years. So we're going to -- we're developing a new ad now which will we believe in TV investments and A&P has high IRR, just like digital does. So those are the types of things we're going to do, but we're still within the model's bounds.

Thank you. Our last question for today comes from the line of Brett Hundley with The Vertical Group. Please proceed with your question.

Hey good morning guys and thanks for taking my questions. It's related to organic revenue growth and I really wanted to isolate the U.S. retail market and just talk about gaining share versus an overall growth rate that you desire and really the crux of the question is just when we do store walks at least here in and in my Mid-Atlantic region we are seeing some retailers drop assortment or linear space for some categories including spices, some condiment areas and so I'm just curious, if that is more broad-based going forward across more regions, do you still believe that you can grow at an overall growth rate that you want in that environment as you filter in e-commerce or do you think that shareholders should maybe shift growth expectations a little bit towards more international?

Well first of all I would say that our organic growth rate in the U.S. market is pretty strong. I mean we were nearly 5% in the fourth quarter and excluding acquisitions and I think that we have no reason which is right in the middle of our kind of our long-term guidance for the company as a whole. And so we have and we see no reason to back off of that, again as you look at herbs and spices specifically, we’ve grown private labels grown -- it's been those other brands that have gotten killed on a lot of the shelf space losses have been to them notwithstanding the stores you've gone to. And by the way, send Kasey, after this call, will list all those stores. So I can get on the right sales team. But notwithstanding your observation, we’ve actually gained points of distribution in the last year and we would expect to continue to do so in 2018. So I think our outlook for organic growth in the U.S. continues to be strong and I think and we would expect a good balance of U.S. base and international growth. Mike do you want to add to that?

I think, again, just to reiterate our category management tools are probably influencing some of the things you’re seeing with some of the pacing of smaller brands going away.

Thank you. Ladies and gentlemen, we have come to end of our time for questions. I’ll turn the floor back to Mr. Kurzius for any final comments.

Well thanks everyone for your questions and my apologies for those to whom we didn't get to in the queue. We have gone more than 10 minutes over time and so I would encourage you to give Kasey Jenkins a call after we conclude here because we want to take everybody's questions and thank you for participating in today's call. McCormick is a global leader in flavor, and we're differentiated with a broad and advantaged portfolio which continues to drive growth, we're responding readily to changes in the industry with new ideas, innovation, and purpose with a keen focus on growth, performance, and people we continue to perform strong globally and build shareholder value. I'm incredibly proud of the top tier 2017 business results we delivered, and where McCormick is as a company on our continued growth trajectory, I’m confident in our continuing momentum for growth in 2018 and I look forward to reporting to you on the shareholder value we will continue to create.

Thank you, Lawrence. And thanks everyone for joining today’s call. If you have any further questions regarding today’s information you can reach me at (410) 771-7140. This concludes this morning's conference.