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Executives

Alan D. Wilson - Chairman, Chief Executive Officer and President

Gordon M. Stetz - Chief Financial Officer, Executive Vice President, Director and Chairman of Investment Committee

Joyce L. Brooks - Vice President of Investor Relations and Member of Investment Committee

Analysts

Andrew Lazar - Barclays Capital, Research Division

Ann H. Gurkin - Davenport & Company, LLC, Research Division

Christopher Growe - Stifel, Nicolaus & Co., Inc., Research Division

Thilo Wrede - Jefferies & Company, Inc., Research Division

Eric Serotta - Wells Fargo Securities, LLC, Research Division

Robert Moskow - Crédit Suisse AG, Research Division

Alexia Howard - Sanford C. Bernstein & Co., LLC., Research Division

Akshay S. Jagdale - KeyBanc Capital Markets Inc., Research Division

Robert Dickerson - Consumer Edge Research, LLC

Mitchell B. Pinheiro - Janney Montgomery Scott LLC, Research Division

Eric R. Katzman - Deutsche Bank AG, Research Division

Kenneth Goldman - JP Morgan Chase & Co, Research Division

McCormick & Co. (MKC) Q4 2011 Earnings Call January 26, 2012 8:00 AM ET

Operator

Greetings, and welcome to McCormick's Fourth Quarter 2011 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Joyce Brooks, Vice President, Investor Relations for McCormick. Thank you. Ms. Brooks, you may begin.

Joyce L. Brooks

Good morning, and welcome to our review of McCormick's fourth quarter financial results and 2012 outlook. We have posted a set of slides to accompany today's call at our website, ir.mccormick.com.

With me are Alan Wilson, Chairman, President and CEO; and Gordon Stetz, Executive Vice President and CFO. Also joining us for the first time is Mike Smith, who was named Vice President, Treasury and Investor Relations in October. Mike has been with McCormick since 1991 and brings to this role his experience in a variety of leadership positions, most recently as Vice President of Finance for a U.S. consumer business.

This morning, Alan's going to begin with some highlights from 2011 and then discuss our perspective on the current business environment and McCormick's growth opportunities as we head into 2012. Gordon will provide a review of our fourth quarter financial performance and introduce our 2012 financial guidance. After that, we look forward to discussing your questions and some closing remarks from Alan.

As a reminder, our presentation today 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 as a result of new information, future events or other factors. As seen on slide 2, our forward-looking statement also provides information on risk factors that could affect our financial results.

In addition, certain information that we will present today are not GAAP measures. This relates to financial results from 2010 that exclude items affecting comparability. We present this non-GAAP information for comparative purposes alongside the most recently comparable GAAP measures. Reconciliations of GAAP to non-GAAP measures can be found in the presentation slides for our call.

It is now my pleasure to turn the discussion over to Alan.

Alan D. Wilson

Thanks, Joyce. Good morning, everyone, and thanks for joining us. McCormick's financial results in the 2011 fourth quarter were a strong finish to a year of solid growth and important accomplishments. We delivered these results in a period of volatile material cost and a challenging economic environment in many of our markets. Our financial performance demonstrated the resiliency of our business and the ability of our leadership team and employees throughout the company to adapt to the current environment. I want to recognize and thank our employees for their efforts and achievements.

We grew sales in the fourth quarter by 13%, including a 5% benefit from our latest acquisition activity. Pricing rose 6%, yet we still achieved a 1% increase in volume and product mix. Product innovation, higher brand marketing and distribution gains helped drive the sales growth.

Fourth quarter earnings per share were $0.98 compared to $0.99 in the fourth quarter of 2010. Operating income rose 4% despite $7 million of transaction cost related to acquisitions completed in 2011, which lowered earnings per share by $0.05. We also had an unfavorable impact from a higher tax rate, increased interest expense and a slight decline in income from unconsolidated operations. Gordon will go into more details, but if you consider these headwinds, we had solid underlying growth in earnings per share, which reflected our strong sales performance and significant CCI cost savings.

For the full year, we grew sales 11% and 9% in local currency. This was well ahead of our initial expectation for 5% to 7% growth in local currency. Acquisitions were not in our initial range and added 2% of our growth for the year. Pricing added 5% to sales, above our initial projection, as we responded to a double-digit increase in material cost. In light of these pricing actions, we were extremely pleased with our volume and product mix, which rose 2.5% in 2011 excluding the impact of acquisitions.

I want to spend a moment on our key sales drivers in 2011, and we'll start with Kamis in Poland and Kohinoor in India. These businesses are helping to reshape our portfolio of leading brands around the world with more exposure in emerging markets.

The integration of these businesses has progressed well to date, and we've maintained their pace of growth. With the addition of these businesses and our projected growth in China, Mexico and other countries, we now expect sales in emerging markets to account for at least 13% of 2012 sales. This is a significant increase from 2010, when sales in emerging markets accounted for 9% of sales. Keep in mind that we have additional presence in these markets through our unconsolidated operations. Income from these operations contributed 7% of our 2011 net income.

Product innovation continues to be a primary component of our sales growth. New products launched in the past 3 years accounted for 9% of 2011 sales. Rather than 1 or 2 big launches, we achieved broad-based success across a number of our growth platforms. In our consumer business, we launched more than 200 new branded products in 2011, well ahead of our normal pace which is closer to 100. These included 6 new World Flavors Recipe Inspirations in the U.S. and the launch of this product line in Canada and the United Kingdom. Grinders is another growth platform, and we added new versions in the U.S., the U.K. and France along with an introduction of Grinders in China.

Our team in France developed nearly 40 new products, including an organic line of spices and herbs and a number of Vahiné dessert items. One of our biggest successes was here in the U.S. with Zatarain’s frozen entrées. Including new items, we grew sales of Zatarain’s frozen entrées 40%, and our sales of these new items now comprise nearly 1/4 of our total Zatarain’s brand sales.

For our industrial business, we had strong demand for new products from food manufacturers, particularly for flavor solutions that feature all-natural ingredients, reduced sodium, lower calorie and other healthy attributes. In the U.S., these types of health and wellness projects accounted for nearly 40% of our product development projects in 2011.

We're driving sales with brand marketing support. Promotion and advertising reached $187 million in 2011, up 12% from 2010 and up 72% from 5 years ago. As a percentage of sales, brand marketing support continues to rise, reaching 7.6% of net sales for our consumer business in 2011, up from 6.3% in 2006.

About 1/3 of the 2011 increase was in digital marketing, one of our highest return investments in brand marketing support. We had an effective digital marketing program behind Grill Mates in the U.S. that contributed to a 7% unit increase in 2011. Support behind our Hispanic products in the U.S., including television and a sampling program, helped drive a 9% increase in sales of these products, which exceeded $100 million in 2011.

2011 was a particularly strong year for distribution gains. Wins included both brand and private label, with penetration of multiple channels: grocery, club store, dollar stores, drug chains in the U.S. and in Europe, grocery, medium and small store formats and discounters. Our industrial business continues to benefit from the global expansion of strategic customers. In 2011, we supported the opening of new quick service restaurant locations in China, the Middle East, Russia and for the first time, India.

Cost savings from Comprehensive Continuous Improvements, CCI, is our fuel for growth. CCI is our ongoing effort to improve productivity and reduce cost across the organization. In 2011, our CCI cost savings funded incremental brand marketing support as well as helped to offset the unfavorable impact of increased material costs. Led by our CCI champions and with the engagement of employees throughout the business, we achieved $65 million in cost savings in 2011, a result that was well ahead of our initial goal for the year. Since we embarked in our CCI activity in 2009, our cumulative savings have reached $156 million.

Our cash flow was clearly impacted by the material cost inflation that we faced in 2011. Cash flow from operations was $340 million compared to $388 million in the prior year due largely to increased inventory. The increase in material cost affected the value of the inventory we held and also led us to increase our raw material quantities of certain spices and herbs, which is how we hedge these items. As Gordon will discuss, we expect to improve our cash flow in 2012.

We are committed to returning cash to shareholders and used $238 million of our cash for dividends and share repurchases in 2011. In November, McCormick's board approved an 11% increase in the quarterly dividend, our 26th consecutive annual increase. Including the dividends, our total shareholder return was 13% for fiscal year ending November 30, 2011. For the 10 years ended November 30, our total annual shareholder return has been 11%. This exceeds the return of the food group as well as the S&P 500 as shown on Slide 8.

While we continue to operate in a difficult environment, we expect a year of strong sales growth and higher profit in 2012. While Gordon will discuss the financial outlook in more detail, I'd like to spend the next few minutes on the current environment and our opportunities for growth in the year.

Based on recent discussions within the food industry, there continues to be a focus on higher material cost and the impact of pricing actions. So let's start with that topic.

In 2011, based on the strength of our brands and our industrial customer relationships, we were able to offset a double-digit increase in material costs with a combination of pricing and CCI cost savings. Our most recent action was a price increase of about 5% for our North American consumer business products and industrial food service items. This went into effect in the fourth quarter and was taken in response to further material cost increases in the second half of 2011, which we expect to persist in 2012. The effect of this pricing action will carry over into 2012 with an anticipated favorable sales impact in the first 3 quarters. While the timing and percentage increase varied, we've taken similar actions in a number of our other markets.

In order to gauge the impact of our price increases, we've been actively monitoring and analyzing consumption information. Based on our work to date, we can state that retailers have accepted the pricing actions on our branded products and have reflected them in shelf prices. Price increases have also been accepted on the private label products we supply. In addition, we've seen branded competitors take similar pricing actions.

Based on our analysis of recent U.S. consumption data, we've seen some general slowdown, particularly in measured channels, in both the category and our branded sales. In addition, the rate of growth for private label has also slowed in recent weeks. Similar results have been seen in other food categories. Our shipment trends during this period for both brand and private label have been in line with these consumption trends.

While other factors may be behind some of this near-term fluctuation, we attribute a portion of the trend in branded spice and seasoning volumes to our pricing actions. As those of you who have followed us for a while know, it's not unusual for us to see an initial volume impact following a price increase. In the upcoming quarters, we plan to reallocate a portion of our brand value marketing to more coupons and other promotional tools. We will monitor the situation closely as we expect this pressure on sales volumes to be a headwind in 2012, particularly in the first quarter results.

As for our outlook for material costs, we expect further volatility in 2012. Based on the insights of our global procurement team, we expect our 2012 raw and packaging material increases to be broad based across our supply chain and then the aggregate to rise at a high-single digit rate.

At this time, we believe we're priced appropriately based on this cost outlook and have no plans for further significant pricing actions in our consumer businesses. For our Industrial business, we continue to pass through increases on major commodities as well as on flavor ingredients, including spices and herbs. As explained in our September call, the pricing actions for flavor ingredients occurred with a little bit of a lag but have been accepted by our customers.

Across both businesses, we expect to offset projected 2012 material cost inflation with a combination of pricing actions, including a carryover benefit from 2011 increases and CCI cost savings. Pricing is expected to add about 5% to sales. CCI cost savings for 2012 are expected to be at least $40 million. This year's projects will include the consolidation of one of our manufacturing facilities in Canada and the creation of wet product manufacturing for our consumer business in North America. This new capability will allow us to move production of Lawry's marinades from a co-packer in 2012 and establish a manufacturing base for our condiments, sauces and spreads growth platform.

Even in this environment of higher prices, we grew sales volume in 2011. And in 2012, we have activity underway behind each of our 3 avenues of growth: base business, innovation and acquisitions. McCormick's leadership group will be discussing these in more depth at our April investor meeting, but let me provide a quick overview this morning.

We'll be driving base business growth with brand marketing support. We're planning to increase our 2012 brand marketing at least $10 million following our $20 million increase in 2011, and our programs will continue to adapt to today's consumer. This includes another significant increase in digital marketing, more Hispanic programs in the U.S. and an emphasis on value to include targeted coupons. Our new products will receive a portion of advertising support to build new awareness and trial. For example, all major U.K. customers now have Recipe Inspirations on the shelf, and we began our advertising campaign this month. Also driving base business growth will be a carryover effect from some of the distribution gain in 2011. And in 2012, we continue to pursue new distribution opportunities, including further penetration of alternative channels and improving our category share.

Our product innovation activity is also designed to build share as well as differentiate our brand. We have an exciting line of new products for our consumer business for the first part of 2012. In the U.S., we'll be introducing new Grill Mates rubs, marinades and seasoning blends; Perfect Pinch varieties that include Southwest Sweet 'n Smoky; Gourmet blends; 5 new Lawry's items, including Mediterranean Herb & White Wine Marinade; 8 new products under our Simply Asia and Thai Kitchen banner; and additional varieties of Zatarain’s frozen entrées.

To date, the restaging of our dry seasoning mixes in the U.S. has included product reformulation with natural ingredients and new advertising. In 2012, we'll introduce this next phase of this restaging, which includes new flavor varieties, new packaging design and new merchandising as well as an introduction of a premium line of gourmet dry seasoning mixes to prepare dishes like sweet basil and oregano bruschetta chicken.

We also have innovative -- innovation underway behind dry seasoning mixes outside the U.S. with our limited addition items in the U.K. In France, our product development team has another busy year underway with plans for 20 new Ducros brand items and 10 Vahiné dessert products. In China, dry seasoning mixes, jams and sauces will be among our new product launches.

On the industrial side of our business, we have a robust new product pipeline in each of our 3 regions. Customers continue to turn to McCormick as they work to improve the health profile of their products and at the same time, deliver great taste. This month, we broke ground in China to create our Asian Technical Innovation Center, where customers can come to collaborate with us on the development of on-trend consumer-preferred products.

Our third avenue of growth is acquisitions. In our developed markets, we're seeking strong brands like Kitchen Basics that could expand our flavor portfolio. And we're expanding geographically through acquisitions with an emphasis on emerging markets. In 2011, we completed transactions that meet both of these criteria and have created strong momentum for 2012.

Kamis is off to a great start. The integration of Kamis is well underway, and we are already pursuing growth opportunities. One of these opportunities is to bring our category management expertise to this business. In the first 3 months following the acquisition, we've met with each of Kamis' top customers and in doing so, uncovered numerous joint opportunities to improve product assortment and merchandising. We also worked to build consumer demand during the holidays, delivering more television ads in November and December that will run in either of the previous 2 years.

The integration of Kohinoor is also well underway. We've augmented the Kohinoor management team and completed meetings with each major customer to ensure that the new leadership is well received and meeting expectations. In 2012, this business will be continuing to build retail distribution against -- across India and develop new products for the market.

And just briefly, to round out my remarks on acquisitions, for Kitchen Basics in the U.S., our 2012 focus is on product innovation and optimizing our brand position within the category of liquid stocks. In Turkey, in less than one year, our new joint venture has developed 42 items and achieved 100% acceptance of all Ducros brand in the modern trade. We are poised for rapid growth in 2012.

Toward the end of his remarks, Gordon will discuss how these sales growth initiatives, along with our pricing actions, cost inflation and CCI program, will shape our financial outlook. But let me state that while we are cautious, given the continued volatility in material cost and the economic pressure faced by the consumer in many of our markets, I'm pleased with our prospects for growth in 2012. We have excellent opportunities and initiatives underway in each part of our business.

I'll now turn it over to Gordon for a discussion of our fourth quarter financial results and then our 2012 guidance.

Gordon M. Stetz

Thanks, Alan, and good morning, everyone. Given the difficult economic situation that consumers are facing in many of our large markets, we were encouraged by our solid financial performance for the fourth quarter and operating results, which were generally in line with our expectations.

In each of our 2 segments, we grew sales at a double-digit rate, with a 13% increase for the total business. Operating income was up 4% net of a 4% headwind from acquisition-related transaction cost, and we delivered earnings per share of $0.98 compared to $0.99 in the fourth quarter of 2010, including the unfavorable impacts of these transaction costs and tax rate.

Let's start with top line growth and a look at our consumer business. As seen on Slide 14, we grew consumer business sales 13.5%, with a 12% increase in local currency. In a period of increased pricing, our volumes held up well, and we had a strong contribution from acquisition activity in the fourth quarter of 2011.

In the Americas region, we grew consumer business sales 7%. As seen on Slide 15, sales from Kitchen Basics added 3% to growth, and the effect of currency was minimal. Pricing was up 7% this period with the impact of both our December 2010 price increase and the pricing actions that went into effect in the fourth quarter of 2011.

Along with these price increases, we had some shift in sales as customers purchased product in advance of the increases. In fact, we were affected by an estimated $10 million shift into the fourth quarter of 2010 from the first quarter of fiscal 2011 and by an estimated $10 million shift into the third quarter of 2011 from the fourth quarter of 2011. So compared to the year ago period, these shifts in customer purchases created a $20 million headwind for us in the fourth quarter of 2011. This had an unfavorable impact of about 4% on consumer sales in the Americas region, a 3% sales impact on the total consumer business and a 2% sales impact on our fourth quarter sales for the total company.

In the Americas region, volume and product mix declined 3%, which reflects the 4% unfavorable impact from the shift in sales, offset in part by a 1% increase in the underlying business. We are pleased with this result given the pricing actions implemented in 2011. In Europe, the Middle East and Africa, EMEA, we grew consumer sales 36% with a 32% increase in local currency. Our Kamis acquisition added 26% to sales this quarter, with the remaining increase mainly from pricing. Excluding Kamis, we had a 1% increase in volume and product mix. The primary drivers of growth this period were export sales into developing markets and improved results in some of the smaller markets, such as Portugal.

We remain cautious in our business outlook in Western Europe. Our fourth quarter performance was solid in France, with increased pricing only slightly offset by lower volume and product mix. We supported sales of our Ducros and Vahiné brands in this market throughout 2011 with incremental brand marketing support, distribution gains and a number of new product introductions.

In the U.K., we continue to operate in a competitive retail environment, where private label share has increased in many categories. We have launched differentiated new products, such as Recipe Inspirations and are delivering enhanced promotional programs to offer value to consumers. We are also redirecting a portion of our brand marketing support to emphasize the value of our products. While these initiatives combined with the merchandising of our brands in store and execution of specific activities are showing encouraging results, we expect our business in the U.K. to continue to be under pressure in 2012.

Consumer business sales in the Asia Pacific region rose 36% and in local currency were up 29%, with Kohinoor in India adding 33% to sales this period. Excluding this impact, sales this period were below the fourth quarter of 2010. A change in the timing of customer purchases in China led to a sales shift, which unfavorably impacted the fourth quarter of 2011.

For the full year, in local currency, consumer sales in China rose 10%. For the fourth quarter and throughout 2011, our business in Australia has been challenged by a tough retail and competitive environment. Across the entire region, we expect solid growth in our Asia Pacific consumer business in 2012, led by new products, expanded distribution and stepped-up marketing in China along with the incremental sales from Kohinoor.

Fourth quarter operating income for our consumer business increased $5 million to $164 million, with the favorable impact of higher sales and CCI cost savings offset in part by increased material cost and $7 million of transaction cost related to the completion of the Kamis and Kohinoor acquisitions. During the quarter, we invested an incremental $9 million behind our brands, with increased advertising behind Thanksgiving in the U.S., Recipe Inspirations in Canada, Vahiné products in France and Grinders in China. $4 million of the increase related to our acquisitions.

Let's turn to the sales performance of our industrial business. For this segment, we also grew sales at a double-digit rate. In local currency, the increase was 12%. McCormick continues to drive industrial business sales with product innovation and expanded distribution to support our strategic customers as they grow globally.

On Slide 20, industrial sales in the Americas grew 11%, with 6% from pricing and 4% from volume and product mix. We grew sales to food manufacturers at a double-digit rate, with new products that included snack seasonings in both the U.S. and Mexico. Many of these products featured all-natural ingredients, reduced sodium, lower calorie and other healthy attributes for which we continue to see high demand. Sales to the food service industry also rose with the increase due primarily to pricing actions.

In EMEA, our industrial business had another quarter of strong sales growth. We grew fourth quarter sales 12% and in local currency, 13% as a result of favorable volume and product mix. We are meeting greater demands from quick service restaurants with products that we supply from operations in the U.K., Turkey and South Africa.

In the Asia Pacific region, industrial business sales rose 29% and in local currency, grew 22%. Australia, China and sales in Southeast Asia all achieved strong increases in sales of new products, such as beverage flavors, as well as more basic ingredients, including pepper. For sales to quick service restaurants, we also benefited this period from their promotional activity and expansion in the region.

Operating income for the industrial business rose 5% to $28 million. This was a significant improvement from the decline in profit that we reported in the third quarter and due in part to our ability to get price increases in place for many of the smaller ingredients that are not part of the pricing protocol. This profit growth puts our industrial business back on track with a 5-year record of increases in operating income. For the year, industrial operating income was up 4%. In this period of material cost volatility, we are closely managing our pricing actions and cost pass-through protocol.

For the total business, fourth quarter operating income rose 4% from the year ago period. This is after the effect of a 4% unfavorable impact from acquisition-related transaction cost. At the gross profit line, we achieved a 7% increase in gross profit dollars with the strong sales performance and CCI cost savings.

During the quarter and for the fiscal year, we were able to offset material cost inflation with a combination of pricing actions and CCI cost savings. Gross profit margin ended 2011 at 41.2%, down 130 basis points from 42.5% in 2010. As a percentage of net sales, the positive effects of our pricing actions and CCI cost savings were more than offset by material cost inflation as well as unfavorable segment and product sales mix.

Product mix within the industrial business was unfavorable, with increased demand for ingredients as well as weakness in our sales of branded food service items. Segment mix also weighed on gross profit margin with our 2011 sales growth from the industrial business a bit higher than the consumer business.

SG&A rose 10% from the fourth quarter of 2011 but as a percentage of sales, was down 80 basis points. This period, SG&A included a $10 million increase in brand marketing support, $9 million for our consumer business and $1 million behind our branded food service products in our industrial business. For the year, we increased marketing by $20 million, with $4 million of the increase in both the fourth quarter and fiscal year related to acquisitions. SG&A this quarter also included the $7 million of transaction cost related to Kamis and Kohinoor.

Our mix of earnings during the fourth quarter of 2011 led to a tax rate of 28.7%, which compared favorably to our 31% guidance for the fiscal year. Even at this reduced rate, the fourth quarter 2011 tax rate exceeded the 26.7% tax rate that we had in the fourth quarter of 2010. If you recall, in the year ago period, we had a favorable impact from U.S. foreign tax credits that resulted from the repatriation of cash from foreign subsidiaries.

Moving to income from unconsolidated operations. We reported $4.5 million this quarter, down $1.4 million from the fourth quarter of 2010. Results from our joint venture in Mexico were under pressure from higher soybean oil cost and the devaluation of the Mexican peso. While we had incremental profit from our Eastern joint venture in India in the quarter, we also had investment spending behind the [indiscernible] joint venture in Turkey this period.

For the full year, sales of our unconsolidated operations rose 32%, with 18% of the increase from our new Eastern joint venture in India and 14% of the increase from existing businesses, particularly our long-standing joint venture in Mexico. Profit from higher sales was offset in part by material cost pressure, currency impact and our initial investments to launch our brand in Turkey. Income from our unconsolidated operations ended 2011 at $25.4 million and accounted for 7% of our reported net income.

Early in 2012, we expect the favorable impact of higher sales to be largely offset by unfavorable material cost as well as currency exchange rates. This is likely to cause a decline in income from unconsolidated operations in the first quarter. For the full year, we project income from unconsolidated operations to be about even with 2011.

At the bottom line, as shown on Slide 27, fourth quarter 2011 earnings per share was $0.98 compared to $0.99 in the prior year period. Operating income added $0.04, which included $0.05 from acquisition-related transaction cost. This $0.04 increase was offset by a higher tax rate, lower joint venture income and higher interest expense. While we continue to expect 2012 accretion from our latest acquisitions, their profit impact was neutral in the fourth quarter during the integration phase of these businesses.

Let's turn next to our year-end balance sheet and 2011 cash flow. We maintained a solid balance sheet in 2011 even with the spike in material cost and a $441 million investment in acquisitions and joint venture interest. Debt at November 30 was $1.3 billion compared to $0.9 billion at the end of fiscal year 2010. We expect to continue our pay down of debt in 2012 as we return to our target debt ratios and prepare for future acquisitions.

A portion of our debt was used to finance increased inventory in 2011. As we have discussed throughout the year, much of the increase was due to increased material cost as well as strategic inventory positions we've taken for certain spices and herbs in order to secure a steady supply of high-quality materials for our customers. At year end, inventory was up $136 million, with about 1/3 of the increase due to the cost impact, 1/3 to strategic positions and about 15% related to our acquisitions.

In 2012, we anticipate further material cost inflation, but given our current outlook, we expect inventory to level off and begin to decline as we work down a portion of our strategic inventory. In addition, we have seen some early progress with our new inventory management processes in North America and expect this to have further benefits in that region in 2012 before we expand it to other regions.

As evidence of our progress, net cash flows from operating activities in the fourth quarter of 2011 exceeded cash flow in the fourth quarter of 2010. For the full year, net cash flows were $340 million in 2011 compared to $388 million in 2010. The increased inventory was the primary reason for this decrease.

During the year, we used a combination of cash, debt and proceeds from stock option exercises to fund $441 million of acquisitions, $149 million of dividends, $97 million of capital expenditures and $89 million of share repurchases. In 2012, we expect to further pay down our debt and resume our share repurchases in the absence of any acquisition activity. At November 30, 2011, $270 million remained of our $400 million share repurchase authorization.

Let's turn next to our outlook for 2012 on Slide 29. As Alan described, we continue to operate in an uncertain environment, facing further cost inflation and consumers that are under economic pressure in many of our markets. We are responding to this environment with our latest pricing actions and CCI program and have initiatives in place to drive sales with product innovation, brand marketing support, new distribution and our acquisitions. At the top line, we are projecting 9% to 11% sales growth in local currency. We estimate this range will be reduced by 2% based on prevailing foreign exchange rates.

Acquisitions will be an important driver of sales growth in 2012, and we expect an incremental impact of 5% to 6% in the first 3 quarters from Kamis, Kohinoor and Kitchen Basics. For the full year, the expected sales increase is 4%.

We anticipate sales of our base business to grow 5% to 7%, with a similar increase in both the consumer and industrial segments. We expect our pricing actions to be a large driver of this 5% to 7% increase, with volume and product mix flat to up slightly. While we are seeing an impact on volumes from our latest pricing, we expect to offset this with our new products, brand marketing and distribution expansion activity.

Operating income is projected to grow 9% to 11%, driven largely by higher sales. We expect to offset high-single digit cost inflation with our pricing actions and at least $40 million in CCI cost savings. We plan to increase total brand marketing support by at least $10 million with about half of the increase related to the acquisitions. As Alan indicated, this builds upon the $20 million of incremental brand marketing support in 2011.

There are 2 more factors to keep in mind as you update your 2012 financial models. First, we recorded $11 million of transaction cost in 2011 related to completion of acquisitions. This will create a favorable variance for us in the second half of the year when comparing 2012 to 2011.

The second factor largely offsets this favorable variance and relates to our retirement benefit expense, which is projected to increase $9 million in 2012. This increase is largely a result of the very low discount rate at November 30, 2011, which was used in the actuarial calculation of 2012 expense. Below the operating income line, we expect interest expense to be higher following our 2011 acquisitions, and we project a tax rate of 30%, which compares to 29% in 2011.

Although we believe 2012 will be a year of strong sales growth for our joint ventures, as I indicated previously, unconsolidated income is expected to be about even with 2011 as a result of increased material cost and the unfavorable exchange rate of the Mexican peso. At the bottom line, our guidance for 2012 earnings per share is $3.01 to $3.06.

We do not typically provide quarterly guidance. However, based on our current outlook, we expect earnings per share of $0.51 to $0.54 in the first quarter. This is down from $0.57 in the year ago period, and there are several factors behind this projection.

The first relates to cost inflation. If you look at our first quarter of 2011, gross profit margin increased by 130 basis points. At that time, we were not yet feeling the impact of higher material cost, but this quickly reversed in the second quarter when year-on-year gross profit margin declined 120 basis points. So we have a bit of a tough comparison in the first quarter of 2012 as it relates to gross profit margin, which we expect to be down around 250 basis points, similar to what we reported in the last 2 quarters of 2011. For the balance of the year, we expect gross profit margin to be close to the prior year.

The second factor also relates to raw material costs and the effect on our income from unconsolidated operations. As I mentioned earlier, higher costs year-on-year and currency exchange rates are going to cause a decrease in income from unconsolidated operations, which is expected to lower first quarter earnings per share by about $0.02.

Third, we plan to increase our brand marketing support in the first quarter by more than $5 million. As a result of these factors, our first quarter is going to be a slower start to 2012, but we expect to resume profit growth beginning with the second quarter.

The last part of our 2012 outlook to cover is cash. As indicated earlier, we expect to achieve an increase in net cash flow from operations primarily driven by higher net income and a reduction in inventory. We are planning capital expenditures of $100 million to $110 million, further debt reduction and share repurchases that will result in a slight decline in our shares outstanding.

To summarize, our 2012 outlook is for 9% to 11% growth in sales in local currency, a 9% to 11% increase in operating income and a solid EPS result. We are committed to solid execution of our growth initiatives and to achieving these goals.

Alan has a few closing remarks, but let's turn next to your questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is coming from Akshay Jagdale of KeyBanc Capital Markets.

Akshay S. Jagdale - KeyBanc Capital Markets Inc., Research Division

So my first question is regarding fiscal '12 growth and your EPS outlook. Just is it possible for you to talk to us about the growth in terms of base business versus acquisition and the cost that you had last year? So the way I thought about the growth is I've broken out the growth between base business growth and then the accretion from your acquisitions as well as the lower cost related to the transactions that you did. So it seems to me that base business growth is going to be well below sort of your normal long-term growth rate in terms of operating income. And it looks like it's mainly because of higher commodity cost, and it looks like all of it's going to hit you, really, in 1Q. Am I reading that correctly? Or am I missing something? I know the retirement benefit expense may be something to do with it, but is that the right way to think about it?

Gordon M. Stetz

Yes. Certainly, as we're building our budgets and plans, we look at the incrementality, the acquisitions. And as we indicated last year, those acquisitions are expected to be accretive and the guidance we gave was $0.07 and $0.09. I'd say we're still within that guidance as we built our outlook for 2012. So the factors that you pointed to, which we talked about in the call, the material cost as well as the pension, I’d just like to emphasize that, are impacting the base business.

Akshay S. Jagdale - KeyBanc Capital Markets Inc., Research Division

So if you just look at longer term, obviously, you've done a tremendous job of building shareholder value, and your targets internally as well are very much in line with shareholders’. So it seems like some exogenous factors, just commodity costs that are out of your control, have impacted your base business significantly over the last, let's call it 12 months. So should we expect that to sort of reverse as we go forward? So the base business has been growing at a lower rate than normal recently. But if commodity costs level out or even come down, should we expect to see that growth sort of come back in a sense that maybe at some point, you start growing at a much faster rate for a short period of time than you have been recently? Is that a possibility? Or you're -- you think if that happens, you will just reinvest back in the business and continue to grow sort of 9% to 11% on the bottom line?

Alan D. Wilson

We would -- what’s happened with all the cost volatility over the last couple of years has impacted our long-term growth model, which is built around being able to invest behind the business but also to improve margins in a fairly stable cost environment. So what we've been doing is adapting our business over the last, really, 2 years to take more pricing than we would typically take. Certainly, as with our strong CCI programs, as we start to see stability -- even if we don't see a big retreat in cost, as we start to see stability, our model kind of starts to work again, because our CCI program is generally built towards increasing our margins, while our pricing is just to offset cost. What we've seen in the last 2 years is we've needed a combination of pricing and CCI to offset the increased costs.

Akshay S. Jagdale - KeyBanc Capital Markets Inc., Research Division

So in other words, I mean, just would you -- would we -- should we expect to see an acceleration in growth even if it's above your long-term target? I mean, is that possible? Or would you -- if that happens, would you tend to invest that in future growth initiatives?

Alan D. Wilson

I think we've been pretty balanced through the combination of investment for growth behind our consumer and our industrial businesses and returning returns to shareholders to increase EPS. So we would likely spend some of the money, and we would likely take some of the earnings.

Operator

Our next question is coming from Ken Goldman of JPMorgan Chase & Co.

Kenneth Goldman - JP Morgan Chase & Co, Research Division

So you're the second food manufacturer in the last couple of weeks to call out weak overall food trends in traditional channels, not just in spices, obviously, but overall. And I think this is maybe counter to what some people expected as the economy maybe slowly recovers. So just curious for your insight there. Do you think traffic's maybe down because of continued high pricing? And I'm sure that's a big part of it, or there's some other drivers we're not seeing. Maybe club and dollar stores are just doing something better and unique in terms of marketing and attracting consumers. Just curious, I know you don't have a presence across the whole store, but I'm curious what your insights are there.

Alan D. Wilson

I think there is some impact, as some of the other manufacturers have talked about, of people moving to other channels, like dollar and club and that sort of thing. What we are seeing is some consumer behavior, which we've not seen before, that has led to a decline in the most recent period in the data that we have.

Kenneth Goldman - JP Morgan Chase & Co, Research Division

Okay. And what would you say is the normal run rate, separate subject, for your CCI annual savings? I know it's difficult to forecast these items. Sometimes they come in, obviously, faster or slower than expected. But how should we think about this going forward? Because a $25 million swing year-on-year is not insignificant.

Alan D. Wilson

Year-on-year, we try to target about $50 million of CCI savings, just below, and for the last couple of years, we've been able to overachieve that. And I'd also point out, the $40 million goal that we set this year, we expect is a goal that we’ll hit and likely exceed. So we're setting targets and trying to drive it. It's really a part of our ongoing operations, and we've got some good ideas and some good projects that we think will be good, that will help us.

Kenneth Goldman - JP Morgan Chase & Co, Research Division

Okay. So you do see the $40 million -- I know you're not promising this -- but as potentially conservative?

Gordon M. Stetz

We typically hit what -- at least hit what we say we're going to hit.

Operator

Our next question is coming from Alexia Howard of Sanford C. Bernstein.

Alexia Howard - Sanford C. Bernstein & Co., LLC., Research Division

Just one quick question as a follow-up to Ken's question and then something on new products. Are you seeing a pickup in the restaurant sector? And is that putting pressure, as far as you're seeing it, on the packaged food space in general? I'm just wondering whether it's not just growth in dollar stores and alternative channels but maybe a pickup in the restaurant sector, which you may have a good handle on from your industrial business, might be causing some of the pressure on the packaged food sector. And then secondly, in new products, you mentioned new products represent about 9% of sales at the moment. What do you think is the right long-term level of that? Can you accelerate that? And maybe can you make any commentary about how quickly that's expanded over the last 2 or 3 years?

Alan D. Wilson

Yes. Thanks, Alexia. In the fourth quarter, we did see some positive volume growth in the restaurant sector, which we kind of view as healthy, because it's been a couple of years of pretty significant declines. And so I don't want to speculate on what -- if consumers are eating out and not cooking at home, I don't think we're seeing that return as much, but we did see some positive volume growth late in the year in our food service business. Secondly, on the new products, we would expect a new product sales to be in -- to be something in the order of 10% to 12%, so 9% over the last 3 years, we would expect, as we go forward, that to be a higher percentage.

Operator

Our next question is coming from Thilo Wrede of Jefferies & Company.

Thilo Wrede - Jefferies & Company, Inc., Research Division

Are your industrial contracts, are they completely repriced now to reflect not only the inflation that you saw in 2011 but also to reflect the inflation you're expecting for 2012?

Alan D. Wilson

For the most part -- I mean, we've got a broad range of contracts with customers across the world, but generally, we are appropriately priced. Now a lot of the major commodities like wheat and soybean oil gets passed through as those commodities change. So as we see increases, we price. And then as we see decreases, we pass through that pricing. But I'd say, by and large, as we caught up in the fourth quarter, that we're appropriately priced. And we'll -- as we see additional inflation, we'll deal with that. Or if we see some softening in cost, we'll deal with that.

Thilo Wrede - Jefferies & Company, Inc., Research Division

And then could you give just a little bit more color on your comment that you will resume the share repurchases? Is that going to start soon? Or is that more back loaded in the fiscal year?

Alan D. Wilson

I would suggest that you would -- by the end of the first quarter, you'll start to see activity as we report.

Operator

Our next question is coming from Rob Moskow of Crédit Suisse Group.

Robert Moskow - Crédit Suisse AG, Research Division

Just a couple of follow-ups. If the share repurchase continues, do you think you could ever get back to your long-term guidance of 2% reduction in share count as a result of share repurchase? And then secondly, your cost inflation for this year is a lot higher than I thought it would be, up in the high-single digit range. Is it your objective to just kind of wait and see before taking another price increase? Or are you comfortable that the pricing that you have in the market right now plus the CCI is enough to just get you back to keep the gross margins from falling further? And then one more follow-up. Regarding the acquisitions, is there any dilution to your gross margin from those acquisitions?

Alan D. Wilson

I'll take the pricing commodity question, let Gordon handle the share buyback and the margin question. But in terms of our pricing, as we see it today, we don't anticipate taking additional -- significant additional pricing. Now we also didn't anticipate that as we went into the fourth quarter of this year if you talked -- when we talked last January, but what we saw was a fairly significant run-up in cost, and so we thought we had to do that. And you can see from our margin performance that we did have to do that. But as we sit here today, we don't anticipate significant pricing for the rest of the year, but again, we'll adapt our plans as we see cost. And I'll let Gordon handle the other 2 questions.

Gordon M. Stetz

Yes, in terms of the 2%. The 2% on our long-term guidance, we think about this either as an accretive acquisition, Rob, or a share repurchase. In the absence of -- and you'll -- this year, in our guidance, we talked about the 7% to 9%, and that, in fact, reflects a 2% to 3% type of a benefit on EPS. In the absence of an acquisition, we would be buying back shares in that financial leverage to return to a 2% benefit on the shares outstanding, and that's purely opportunistic based on what the pipeline is. In terms of the dilutive impact, I'd say, without getting too specific on the gross margin structures, that the acquisition -- we talked about the operating income margin of the Kamis acquisition at 16% to 17%. Its margin structure is a healthy margin structure that reflects strong consumer businesses that we -- in the rest of our European businesses. And the business in India as an emerging market, as you would expect, would be lower margin structure. But again, that's higher growth, and we would expect to get scale in margin improvement over time in that one.

Robert Moskow - Crédit Suisse AG, Research Division

Gordon and Alan, it's -- this is the second year in a row that we've had EPS guidance that's well below the normal range of 9% to 11%. When do you think you get back to that normal range, if not better?

Alan D. Wilson

I think in a stable environment, a stable cost environment, we can certainly execute that. But what we want to do is give you the best transparency over what we're seeing at this point.

Operator

Our next question is coming from Chris Growe of Stifel, Nicolaus & Co.

Christopher Growe - Stifel, Nicolaus & Co., Inc., Research Division

I had -- first, a quick one, sort of a follow-up. The accretion from acquisitions in 2012, is that just the absence of cost? Is there actual accretion as well on top of the absence of those costs, the $11 million of cost, in 2011?

Gordon M. Stetz

There's actual accretion, incremental profit after interest, and that's that 7% to 9% number that we've guided to previously.

Christopher Growe - Stifel, Nicolaus & Co., Inc., Research Division

$0.07 to $0.09 per share, then you had the $0.06 drag. So we can just back into some rough math if it's going to benefit EPS in 2012.

Gordon M. Stetz

I'm sorry? I -- would you say that again, Chris?

Christopher Growe - Stifel, Nicolaus & Co., Inc., Research Division

So it's $0.07 to $0.09 of accretion in 2012?

Gordon M. Stetz

That's correct.

Christopher Growe - Stifel, Nicolaus & Co., Inc., Research Division

And that's -- again, you're comparing against roughly $0.07 in cost in 2011.

Gordon M. Stetz

Right. So -- but remember also, the other thing that's offsetting that $0.07 is an incremental $9 million of retirement benefit. But yes, your math is correct.

Christopher Growe - Stifel, Nicolaus & Co., Inc., Research Division

Okay. Yes. And then I want to understand, with the marketing increase for the year, in '12, the $10 million increase, does that incorporate acquisitions? And then if I could add to that, does that also -- is that -- a broad consumer support, does that include promotion as well?

Alan D. Wilson

It's -- I'll answer for the first one, and Gordon can talk more about how things get allocated. But the $10 million increase is about half from the base business and about half coming from acquisitions.

Gordon M. Stetz

And depending on the nature of the promotional expense, the $10 million does contemplate more consumer-facing promotional. But there probably will be additional dollars, as Alan indicated, on some of the value messaging that would be between gross and net.

Christopher Growe - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And so I guess I'm -- so the -- my last question, sort of a follow-up to that would be as you're shifting more to promotion, that seems like it's mostly occurring in Europe consumer. I think you started that or did some of that in 2011 as well. I mean, have you seen that stabilize the business or does that need to step up a little more heavily in '12 to try and stabilize be it trade down to private label or just some of the more difficult consumer trends in the business?

Alan D. Wilson

It's very similar to what we did in 2009, when we saw the weakness. And it's putting an emphasis, one, on the messaging to consumers on value, and we're ramping that up and then secondly, using some of our promotion plans and really targeting those. So we expect there will be some balance. We’re kind of rebalancing our whole marketing program for the year to make sure that we're getting back to a healthy volume growth.

Christopher Growe - Stifel, Nicolaus & Co., Inc., Research Division

Okay. So we should see better volumes throughout the year, and a suspicion that that’s spending, correct?

Alan D. Wilson

We expect that -- we expect it to have a positive impact.

Operator

Our next question is coming from Ann Gurkin of Davenport & Company.

Ann H. Gurkin - Davenport & Company, LLC, Research Division

Just wanted to return to your comments regarding your outlook for the U.K. and France. Do you think it's going to get worse from here for '12 -- have you modeled that -- or look like Q4? Can you just give me some more details, I guess, particularly on France?

Gordon M. Stetz

Well, as I -- we said in our remarks, France in the fourth quarter continues to be resilient. We had sales growth mainly through price execution, but volumes held up in a tough environment. U.K. continues to be challenging. So as we -- and we've seen stabilization in the other markets, which we had expected would occur as we progressed through 2011. So I guess that outlook that I've just described is a similar outlook as we look into 2012, and that's baked into our thinking. And then obviously, we have the benefit of the acquisition that we just did in Europe as well.

Alan D. Wilson

Yes. It's a pretty steady state outlook. Obviously, we're not contemplating any major collapse in Europe or anything like that, but we expect it to be a continued pressure.

Ann H. Gurkin - Davenport & Company, LLC, Research Division

Great. That's helpful. And then secondly, on -- it was nice to hear that private label is increasing prices. Is that gap between branded and private label pretty much in line with historic measures? Can you comment on that?

Alan D. Wilson

Yes. We -- the gap is pretty similar to historical levels, but what we are doing is really analyzing the price thresholds that we've crossed to understand the impact on volume. But if I look at the year and even in the 4-week period, we've seen private label prices go up at about the same level on a percentage basis as brand.

Operator

Our next question is coming from Eric Katzman of Deutsche Bank.

Eric R. Katzman - Deutsche Bank AG, Research Division

A couple of questions. I guess I want to follow up on Ken's initial question, because I think it's a very important one. I just -- I'm not -- I mean, are you as confused as I am in terms of trying to understand how QSR can be up, because obviously QSR purchases per serving are so much more expensive than cooking your own food at home. And yet, the industry and yourself today are talking about pretty significant elasticity hits. And it sounds like, if anything, as 2011 progressed, that dynamic got worse. So why should we be at all confident that even with a little bit of advertising or more promotion, that this consumer who is just so cautious can be convinced to kind of open up the wallet for core products or all the new products that you're putting out there?

Alan D. Wilson

I think as you point out, it is a better value than necessarily going to a restaurant and much cheaper to cook at home. And that's what we're trying to convince the consumer and show them that for a lower cost, you can actually have a better and healthier meal. But there is a consumer behavior that we are, again, watching and targeting, and us and our retail partners will be working on how we do that. Now on the other side of that, we also have a pretty significant participation in those restaurant sales. And as that goes through our food service distribution business, it's not necessarily a bad tradeoff for us.

Eric R. Katzman - Deutsche Bank AG, Research Division

Okay. And then if I could follow up on the raw material side of things. We have no visibility on a lot of your raw materials. And we kind of got a surprise last quarter, and it sounded like you were a bit surprised at how much those items had moved up. But is it because you've locked in via raw material purchases that your costs in 2012, Gordon, are going to be up so much? Because I would normally assume that whether it's, I don't know, cinnamon or pepper or vanilla farmers are going to plant from fence post to fence post to try to exploit the higher prices. So have you kind of hurt yourself a little by buying in so much inventory?

Alan D. Wilson

No. Actually, our inventory positions are better than the current market's, because we're out seeing and anticipating what's going to happen. So we're not upside down at all on our inventory. We're still seeing some competition for land in some of those emerging markets where people aren't necessarily planting more pepper volumes. And when they decide to do that, it takes about 3 years before they have significant yields. We've seen them move to shorter cash crops like cassava, which is a thickener that's used. So there is continuing to be pressure on the spice commodities that we buy, but our strategic inventory positions are an advantage for us.

Eric R. Katzman - Deutsche Bank AG, Research Division

So just with that -- Alan, with that time lag on the farmer intent and the yield, so are -- do you think that this could be a multi-year issue on raw materials even if you're a little bit better than the spot market for, I don't know, whatever, the next couple of quarters based on your inventory?

Alan D. Wilson

Yes. Specifically in pepper, we've seen pepper almost quadruple in -- or triple in 4 years and double in the last 18 months. Now we don't anticipate it's going to continue to rise at that kind of rate, but we have not seen significant softness. I mean, it softens from time to time, and we take advantage of that, but we haven't seen significant softness to this point in that. It has been a couple of years of that acceleration. I think that's my main point, is -- and typically, a lot of our materials are on those kind of cycles, where they'll be up for a couple of years and then as plantings increase and yields go up, then they start to come down again.

Operator

Our next question is coming from Eric Serotta of Wells Fargo Investments.

Eric Serotta - Wells Fargo Securities, LLC, Research Division

Most of my questions have been answered, but I wanted to follow up on your comments about mix. You commented how you had some negative overall segment mix from industrial growing a bit faster than consumer and some negative mix within industrial. I'm wondering whether you could comment upon the mix impact within consumer. How did your sort of premium products perform relative to your more baseline products? And was mix a positive or a negative contributor in the consumer segment?

Gordon M. Stetz

This is Gordon. I'd say mix was not a major factor in the overall consumer segment performance. Most of the volume performance within the quarter that was impacted within consumer relates to the timing issues that I spoke about earlier, mainly in the U.S. consumer business, and that's a volume issue.

Eric Serotta - Wells Fargo Securities, LLC, Research Division

Okay. And how did your premium products perform relative to your base or core products?

Gordon M. Stetz

Yes. If we're speaking about the gourmet relative to, say, red cap, they were generally in line with each other. There wasn't any divergence between the 2.

Operator

Our next question is coming from Andrew Lazar of Barclays Capital.

Andrew Lazar - Barclays Capital, Research Division

Just 2 quick ones. One, have you been able to -- I've generally thought that you and others can manage any kind of a shift from a channel perspective, whether it be from traditional grocery to alternative channels, can manage that in a relatively sort of margin-neutral way, at least. And we've had one company recently talk about this being kind of a negative hit for them, albeit it was a private label entity. So I just want to get a sense of how you manage that and if you typically are able to manage that in a pretty margin-neutral way, sort of at a minimum. And then just a quick follow-up.

Alan D. Wilson

Generally, we can manage it in a fairly margin-neutral way. I think what the other company was talking about is a move in their business to more opening price point-type business from a standard private label-type product. We do very little opening price point. We do some but not very much. Ours tend to be more standard private label. And then our whole selling story is to do the right thing for the whole category. So even where we have a private label presence in an alternative channel, we are also bringing branded solutions to those customers. So we -- it helps maintain a similar kind of margin than what we see across the rest of our business.

Andrew Lazar - Barclays Capital, Research Division

Got it. Okay. And then also wanted to ask -- I don't want to beat this too much. I'm just trying to get an understanding, because I still find myself very confused over sort of recent consumer behavior or just lack of kind of consumption, I guess, if you will, from the -- just the broader consumer given the weakness we've seen broadly in the industry. So do we think that it's primarily just some of the normal elasticity that this industry sees when they get pricing through? Or are they -- is the consumer -- I've heard everything from they're wasting less product in their household than they typically do. I assume there's maybe some inventory de-stocking at retailer levels. Like, I'm just trying to get a sense of if we think there's something that's beyond normal elasticity that the consumer's dealing with. Or -- because I'm still very confused. And I hear all these different answers, but no one seems to have a great -- sort of really a great read on it.

Alan D. Wilson

I don't know that we have great insight on it at this point. I mean, for our products, warm weather at this time of year isn't necessarily a good thing. We like a little cold weather to get people back to cooking chili. And so we kind of see that, and I know people have talked about that as part of the issue. But I don't think we have a firm handle on really what's happened in the very short period. Now if you look over the course of the longer-term 6 months and 12 months, the pattern isn't that dramatically different than what we've seen historically. But I think what everybody's kind of looking at is what happened in the last couple of weeks of the year.

Andrew Lazar - Barclays Capital, Research Division

Right. Right. And the last thing is in the quarter at least, it looks like x the sort of a volume shift in your Americas consumer business, volume was still flat to up in spite of all that, admittedly your quarter ends in November, but it wasn't like we saw some -- at least, at this stage, some huge volume sort of decline.

Alan D. Wilson

No. That's correct.

Operator

Our next question is coming from Robert Dickerson of Consumer Edge Research.

Robert Dickerson - Consumer Edge Research, LLC

Just a couple of quick easy questions. I guess first is just on taxes. I haven't really -- I haven't heard anyone ask a question on taxes. I'm kind of surprised. I know, I think, what, the beginning of the year, the guidance was for 31%, and I know in Q3, you had the benefit and got $0.09. And then I think the expectation -- I may have even asked this last quarter -- the expectation for full year wasn't really changed. But you did come in quite below such that you got basically 29% tax rate for the year which, if you just do the math, winds up being more than half of your EPS improvement. So if I'm thinking about fiscal '12, you're guiding to 30%, but I'm assuming there's no -- there's nothing within that 30% that could potentially make it lower again.

Gordon M. Stetz

A couple of things. One is that we actually had an unfavorability on the tax relative to prior year. The -- what you may be citing in terms of...

Robert Dickerson - Consumer Edge Research, LLC

No, I'm just talking about guidance. I...

Gordon M. Stetz

Yes. Okay. Versus the guidance. I understand.

Robert Dickerson - Consumer Edge Research, LLC

Yes. Like you beat last year and you beat this year both on tax.

Alan D. Wilson

Yes. Obviously, tax is a very difficult thing to forecast. You're just trying to anticipate mix of earnings, and it's also a volatile legislative environment. And there are programs and tax credits and things that get hung up in the heated discussion right now, and you cannot include that in any type of a guidance as you start a year until these things land and are resolved. So we start with our best estimate as to what we know now in the legislative environment, as to what we know now as it relates to currencies and its impact on the mix of earnings and the earnings themselves, and that's our guidance. Obviously, there's things that resolve during the course of the year that can be favorable and unfavorable. Last year, they tended to be more favorable than our initial guidance. So I can tell you the best I can say at the moment is the guidance we're giving you is based on all the knowledge we have at this moment on all those factors.

Robert Dickerson - Consumer Edge Research, LLC

Okay. Fair enough. Okay. And then just a quick follow-up question from what Chris asked before on the acquisitions, just to be clear. I know -- so this year, it was the $0.07 in cost that's been -- that's inclusive in earnings. But then next year, we're saying $0.07 to $0.09 in accretion? Or is it really $0.07 year-over-year benefit from not having the cost and then there's an additional $0.02 potential upside, which is really the accretion?

Gordon M. Stetz

No. It's going back to Chris' point. We are not repeating the $0.07 of transaction cost, and we have an incremental benefit from the acquisitions in $0.07 and $0.09. And again -- then that's offset by the incremental retirement cost of $9 million or partially offset all of those numbers.

Robert Dickerson - Consumer Edge Research, LLC

So kind of on average, about $0.14 of benefit for '12?

Gordon M. Stetz

Yes. Yes.

Alan D. Wilson

That's correct.

Joyce L. Brooks

We've run a bit over an hour. Why don't we take one more question and then we'll turn it back over to Alan.

Operator

Our last question is coming from Mitch Pinheiro of Janney Montgomery Scott.

Mitchell B. Pinheiro - Janney Montgomery Scott LLC, Research Division

I'll let everybody go. My questions have been answered.

Alan D. Wilson

Just to wrap up, at -- just a couple of comments. We've been pretty effective at adapting our business to meet a very challenging environment. As we head into 2012, we're managing through this with cost -- the cost volatility with our pricing and our CCI. Our product innovation and our marketing support are meeting consumer demands for flavor, convenience and value. As we've increased our participation in emerging markets with the acquisition of leading brands, we expect that to drive higher growth. I'm confident that we're well positioned, and we've got the leadership and the employees in place to meet the challenges and deliver a year of strong financial performance for McCormick shareholders. We appreciate your time and attention. We'll turn it back over to Joyce.

Joyce L. Brooks

Thanks, Alan. I'd like to add my thanks to everyone listening on today's call. We hope you can also join our next earnings call, which is planned for Tuesday, March 27 and that you have on your calendar our McCormick Investor Day scheduled in New York on April 17. Through February 2, you may access a telephone replay of today's call by dialing (877) 660-6853. The account number for this replay is 309, and the ID number is 383424. You can also listen to a replay on our website later today. If anyone has additional questions regarding today's information, please give me a call at (410) 771-7244.

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