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Gaylord Entertainment Co. (MKC)

Q3 2007 Earnings Call

September 27, 2007, 10:00 AM ET

Executives

Joyce Brooks - Assistant Treasurer

Robert J. Lawless - Chairman and CEO

Francis A. Contino - EVP, Strategic Planning and CFO

Alan D. Wilson - President and COO

Analysts

Terry Bivens - Bear Stearns

Jonathan Feeney - Wachovia Securities

Eric Serotta - Merrill Lynch

Christopher Growe - A. G. Edwards

Eric Katzman - Deustche Bank

Robert Moskow - Credit Suisse

Gil Alexander - Darphil Associates

Mitch Pinheiro - Janney, Montgomery, Scott

Oliver Wood - Stifel Nicolaus

Andrew Lazar - Lehman Brothers

Presentation

Operator

Good morning. My name Morsa and I will be your conference operator today. At this time, I would like to welcome everyone for the McCormick & Company Third Quarter Financial Results Conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question-and-answer period. [Operator Instructions].

Thank you. It is now my pleasure to turn the floor over to Joyce Brooks. Ma'am you may begin your conference.

Joyce Brooks - Assistant Treasurer

Good morning and thank you for joining this morning's teleconference. With me on today's call are Bob Lawless, Chairman and CEO of McCormick, Alan Wilson, President and COO, Fran Contino, Executive Vice President, Strategic Planning and CFO and Paul Beard, Vice President of Finance and Treasurer. Also sitting in on today's call is Gordon Stetz, currently Vice President of Finance for Europe, who will replace Fran as CFO effective November 1st.

Bob will be discussing McCormick's financial results for the third quarter ending August 31st, including business update and will provide an outlook for the fourth quarter and year. At the end of his remarks, we look forward to your questions.

Before we begin our discussion, please note that during the course of this conference call, we may make projections or other forward-looking statements and actual results could differ materially from those projected in our forward-looking statements. In addition, information we present today, which excludes restructuring charges are not GAAP measures and we present this information for comparative purposes alongside the most directly comparable GAAP measures.

Please refer to this morning's press release, which is posted on our website for more specific information on these topics. As indicated in the press release, 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. Today's event is being webcast and following the call an audio replay can be abscessed at ir.mccormick.com.

I would now like to turn the discussion over to Bob.

Robert J. Lawless - Chairman and Chief Executive Officer

Thank you, Joyce. And good morning to those on the call and joining… those joining us by webcast. I want to begin by stating that we are pleased with our third quarter results with both sales and profits ahead of expectations. We grew sales 8% and reporting earnings per share of $0.43, which was $0.45 on a comparable basis, excluding restructuring charges.

Our consumer business performance was particularly strong this quarter with sales up 9% and 16% increase in operating income, excluding restructuring charges. On the other hand, we had a tough quarter for industrial business, which is working through challenges from increased raw material costs and general weakness in the restaurant industry.

Let me discuss each of these businesses in more detail starting with our consumer business. Sales for this part of our business rose 8.5% with a favorable impact of 2.4% from foreign exchange rates; an increase of 6.1% was primarily driven by higher volume. Consumer sales in the Americas were up 7.9% this quarter with a 0.5% benefit from foreign currency. Sales were affected significantly by an estimated $9 million to $11 million of earlier sales for the fall season in the U. S. consumer business. By encouraging our customers to buy early, we are able to achieve operative… operational efficiency by moving some of our production out of the peak fourth quarter.

We also expect to benefit from early store placement for promoted items. This move added 3.5% to 4.5% to the third quarter sales in the Americas. While this action will lower fourth quarter sales the percentage reduction will close to the 3%, as this is our peak sales period for the consumer business in the Americas.

For a second quarter now, we were unfavorably impacted by the expansion into private label line by one of our warehouse club customers. While we are supplier of some of this private label, a number of our branded products are no longer carried by this customer. This reduced sale in the region by approximately 1%.

Offsetting this decrease was the incremental impact to Simply Asia Foods in the month of June. As a reminder, our acquisition of this business occurred at the end of June 2006. The underlying growth in the third quarter from the consumer’s business in Americas was 3% to 4% range. This increase was driven by our revitalization initiative for the core business and a growth of other product lines, including Hispanic, seafood compliments, Zatarain's and gourmet products in the U. S. and our Club House brand products in Canada.

We are making great progress in 2007 with the number of stores converted to new merchandising system. As of last week, we completed 6,150 stores, up from 4,750 that we have reported at the end of June. Another 1,500 will be set before the holiday seasons. We continued with these conversions in 2008 with an estimated 12,000 to 14,000 stores in total, completing the changeover.

In addition to the revitalization of our core spices seasoning line, we are encouraged by other growth drivers. This includes our seafood revitalization, which is well under way and the introduction of new items such a reduced sodium version, our popular item such as seasoning blends and Zatarain’s rice mixes. Our gourmet line continues to do well with the expanded gourmet organic products launched early in the year for the U. S. and more recently in Canada.

I would like next to turn to our consumer business in Europe. As in the Americas, we are making great progress with the growth initiatives in this market with improved financial results for this part of our business. In total, sales rose 9.7% as it heads through towards 2007. Foreign exchange rates had a significant impact adding 6.2% to sales. With improved and incremental marketing support, we grew sales volume with Ducros branded products in France. Sales of our Schwartz branded products in the U. K. has a better product introductions, marketing support and higher price. In both of these key markets, we are continuing to make strides with improved merchandising for retail customers.

In early September, Lawrence Kurzius, President of this region joined me at an Investor Conference during which we focused on our business in Europe. I encourage anyone who wants to hear more about the turnaround underway for this part of the business to access the replay of this presentation on our website, or to contact Joyce Brooks.

In the Asia-Pacific region, we increased sales 10.6% with a 9.3% benefit from foreign exchange rates. Sales growth in China continued at a rapid pace with another double digit increase, expanded distribution and marketing support behind our course core spices and seasoning products drove sales volume with increase in a number of wet products. Sales growth in China was offset in part by lower sales in our branded spices, and herb line in Australia. This was due to the move by our large retailer earlier in 2007 to introduce the private labels alliance spices and herbs. Our emphasis in Australia remains on value-added items and we are achieving growth for product lines such as airplane brand gelatin.

Across all regions, operating income for the consumer business was $70.5 million, when restructuring charges are excluded. This is a strong increase of 16.2% from the third quarter of 2006 with the benefit of higher sales and lower selling, general and administrative expense. Marketing support was up in line with the third quarter sales increase. As I stated earlier, we continually extremely pleased with the consumer business performance.

Moving on to our industrial business. We made progress with our transformation efforts and achieved good growth in a number of variance. However, third quarter results were unfavorably affected by the effects of higher material cost and a general weakness on the restaurant industry. We increased industrial business sales 7.4%; foreign exchanges rates had a 2.6% favorable impact and the elimination of low margins customers and SKUs reduced sales by 2.4%. An increase of 7.2% was driven equally by volume and by price and product mix.

In the Americas, sales rose 2.9% from last year. Foreign exchange rates added 0.7% and customer SKU elimination reduced sales by 2.6%. A sales increase of 4.8% was mainly due to price increase taken to keep pace with increase of material costs including pepper, soya oil and flour.

Higher volume in this quarter was achieved with increased sales of snack’s seasonings, new beverage flavors and other new items to large food manufacturers. This part of our business is performing in line with our targets for 2007. However, we have continued to experience reduced sales for the restaurant side of our business, which is being affected by the general weakness in the foodservice industry.

Europe had another good sales quarter for the industrial business. Following year-to-date increase of 22.5%, sales for the third quarter rose 16.1%, which was an 8.8% increase in local currency. In this region, the elimination of low margin customers and SKUs reduced sales by 2.5%.

An increase of 11.3% was volume related and due to strong promotional and new product sales to Quick Service Restaurants. Sales of Schwartz and Ducros branded products to the foodservice channel also rose in this quarter. About one-third of the increase was incremental sales of condiments from a joint venture in South Africa, which was added in the fourth quarter of 2006. While we expect some moderation of growth in the fourth quarter, we are extremely pleased with our industrial sales performance and turnaround in Europe.

In Asia-Pacific region, we increased industrial sales 27.3%, and in local currency the increase was 18.8% with equal contributions from higher volume, and for favorable price and product mix. With increased sales in both Australia and China, especially, with Quick Service Restaurant customers; these customers have awarded the supply of new items to McCormick performing and we are benefiting from their promotions and growth in these markets.

Excluding restructuring charges, operating income for the industrial business was $22.6 million compared to $22.7 million in the third quarter of in 2006. Our 7% sales increase and the benefit of cost savings and favorable in general, selling and administrative expenses were offset by higher material costs during this quarter. We are in a unique period right now when costs of some of our main commodities including flour and soya oil have risen to unprecedented levels and continue to trade with tremendous volatility. Costs for these commodities rose rapidly during the third quarter and toward the end of the quarter we began to see increased cheese prices, as well. While we were in the process of passing these higher costs through to our strategic customers with higher prices, operating income could again be impacted by these factors in the fourth quarter.

Next, I would like to comment on how the consumer and industry results came together for the third quarter. For the total business, we achieved a sales increase of 8% and in local currency the increase was 5.5%. Whereas, we are very pleased with our sales growth this quarter, profit margin has fallen below our objective for 2007. Gross profit margin for the third quarter decreased 90 basis points. The decline occurred on the industrial side of our business.

If you recall, we achieved a significant improvement in the first quarter this year as we realized cost savings related to our restructuring program. In the second quarter, higher commodity costs began to offset these savings. We also incurred some costs related to maintaining customer service levels during several facility consolidations. At that time, we expected that our pricing actions would catch up with higher material costs in the second half and the costs to maintain customer service levels would lessen. While the customer service situation lessened in the third quarter, commodity costs increased further and are expected to remain at a high level through the fourth quarter. So, as I indicated a moment ago, we are still in the catch up mode on our pass through pricing with industrial customers. Please keep in mind that in the period of rising costs our pricing protocol with industrial customers preserves gross profit dollars but results in a lower gross profit margin.

In our consumer business, we are being impacted to a lesser extent by basic commodities but are beginning to face other increases including packaging costs. We will take appropriate actions to off see these… offset these increases as we move into 2008. The bottom line is that the gross profit margin will continue to be under pressure for the rest of 2007 and most likely into the first part of 2008. This is particularly frustrating as we have made great progress over our restructuring program and are on track to achieve our cost reductions at or above $30 million goal for 2007.

As we have in the past, we will provide more specific 2008 guidance for gross profit margin and other financial factors in our January conference call when we announce our 2007 fourth quarter results. As a percent of sales and excluding restructuring charges, third quarter selling, general and administrative expenses were 26.9% for this year compared to 28.3% last year. Again, we are benefiting from reductions in those operating expenses as part of our restructuring program. We will also have lower incentive compensation expense in the third quarter of 2007 compared to the third quarter of 2006, in which we increased our year-to-date accrual.

Interest expense was up $1.8 million this quarter due to increased debt levels and higher interest rates on our short-term debt. We applied a tax rate of 30.7% to the third quarter in order to bring our year-to-date rate to 30.4%. This includes an underlying rate of 31%, as well as the benefits for some discrete tax items in 2007. A tax rate of 31% is below our guidance of 32% and is a result of our income across various tax jurisdictions in which we operate. In the third quarter of 2006, the tax rate was 26.1% which also included a year-to-date rate reduction, as well as a resolution of an international tax audit. Our tax rate was also low in the fourth quarter of 2006 at 29.8%.

Income from unconsolidated operations continue at a high level reported in the third quarter 2006 with good performance in our McCormick-Zatarain joint venture. As I will describe more fully in a minute, we stepped up the pace of our share repurchases this quarter and reduced shares outstanding by 1.8%. We reported third quarter EPS of 43%... $0.43 compared to $0.32 in 2006. Charges related to the restructuring program reduced earnings per share $0.02 in the third quarter of 2007 and $0.10 in the third quarter of 2006. Excluding the impact of these restructuring charges, EPS rose $0.03 or 7.1%. We estimate the earlier timing of sales for our U. S. consumers business add an approximately $0.02. Other sales of increases and improved operating income margins added another $0.03. We had unfavorable effects from the higher tax rates versus 2006 of $0.02 and from higher interest expense of $0.01. Lower average outstanding shares added $0.01 EPS.

I want to spend a few moments on the latest balance sheet and our cash flow information. At the end of the quarter, accounts receivables were up $72 million compared to August 31st 2006. Foreign exchange rate accounted for $13 million of the increase. The timing of value-added tax remittances added $17 million. The remaining $42 million increase included receivable related to heavier sale at quarter end that included the earlier fall season sale to our U. S. consumer business.

Inventories continued to be high ending the quarter at $440 million compared to $417 million at the end of 2006. Foreign exchange rate accounted for $9 million of the increase. Above one-half of the remaining $14 million is due to higher material cost and one-half due to higher volumes, primarily in certain international locations. In the U. S. and Europe, we began to make good pleasant progress to both our consumer and industrial business in reducing inventory volumes.

Midway through the third quarter, we stepped up the pace of our share repurchase given the lower price of McCormick stock. By quarter end, we have purchased 2.5 million shares at an average price of $36.33, for the total to be $9.3 million. This compared to $27.6 million in the third quarter of 2006. Year-to-date our repurchases have totaled $146.8 million and we expect to repurchase up to $180 million worth of shares by year end. This should reduce average shares outstanding by approximately 2% for the 2007 fiscal year when option and RSU activity is considered.

At August 31st 2007, $59 million remained on the current $400 million authorization that the Board approved in June of 2005. The Board will be discussing a new authorization at the upcoming meeting. On the cash flow statement, we also reported an acquisition of $30 million from the Thai Kitchens brand in Europe. The business was operated separately from Simply Asia Foods in the U. S. and we recently negotiated and completed this transaction. Annual sales are approximately $7 million.

Let’s take a look at the fourth quarter. We are well prepared for the important holiday season with our new merchandising systems, new products on the shelves and brand marketing plans, all designs to drive sales. As pointed out earlier, we expect the estimated $9 million to $11 million earlier sales related to the fall season to lower fourth quarter sales. The estimated $0.02 EPS benefit of these sales in the third quarter, are expect to driven unfavorably impact on the fourth quarter earnings per share.

While we experienced greater than expected pressure on our industrial profit margin, we have been able to offset this with lower expenses, including those resulting from a restructuring program. We have also had the benefit of lower tax rate and favorable foreign exchanges rates that are likely to continue into the fourth quarter.

So, as we look ahead to the balance of fiscal year, we reaffirm the increased outlook shared in our June conference call. Sales are expected to grow 5% to 7% versus our initial guidance of 4% to 6%. And our EPS guidance is 9% to 11% increase versus the 8% to 10% goal set at the beginning of the year on a comparable basis, excluding restructuring charges.

Before I summarize, let me comment briefly on the transition of CFO that will take place on November 1. Many of you listening on today's call know the succession planning has been priority, not only for me, but for McCormick entire Board of Directors. I consider the passing of the CFO role from Fran to Gordon to be a perfect example of effectiveness of succession planning at McCormick.

Following positions at General Foods and Citicorp, Gordon joined McCormick in 1987 and was identified earlier in this group as a high talented manager. His role at McCormick began with financial analysis and Investor Relations and progressed strategic planning and acquisitions. The head of Finance and Administration for our U. S. consumer business, and most recently the Vice President of Finance for Europe. During his years with McCormick Gordon was instrumental on the acquisition of Ducros, the implement of SAP and our U. S. consumer business, a successful launch of our shared services organization and the restructuring and transformation of our European business.

We have great confidence in his abilities, knowledge and experience that we have Gordon… welcome Gordon into the CFO position on November 1. As excited as I am about the prospects of Gordon in his new role, it's with equal pride and admiration and looking back… look back on what Fran Contino has achieved as CFO of McCormick. From the day Fran joined McCormick in 1998, Fran approached this business with the fresh perspective and an incredible focus. As CFO, his initiative in leadership with the catalyst to significant change and accomplishments, accomplishments that continue to benefit our Company today.

These include the successful development and implementation of SAP worldwide, an increased gross profit margin through supply chain initiatives and most recently our restructuring program. We leave behind an excellent financial organization that is able to expertly navigate the ever more challenging regulatory and reporting environment. In the interest of time I will end with the statement that Fran has been an equal part of the shareholder value, we have built at this great Company.

Even though Fran is with us through July of next year, I want to take a few minutes today, this should be his last earnings call, to recognize his accomplishment with our shareholders and analysts, especially those who worked and developed their relationship with him over the years.

Francis A. Contino - Executive Vice President, Strategic Planning and Chief Financial Officer

Thanks Bob for those kind remarks. I will try to keep my composure as this is a kind of a sentimental day for me, but I did want to tell you how fortunate I feel that I am given the fact that I made the decision nearly 10 years ago to come with McCormick. There couldn’t have been a more rewarding experience and the Company has done extremely well and it’s been a joy for me, particularly working side-by-side with you and under your great leadership.

I would also like to say that one of the many joys of being a CFO is having an opportunity to work in Investor Relations. And I would like to thank everybody on the call and listening in, who have given me the opportunity to meet them and to share the story about McCormick. It surely is something that I really enjoyed.

And finally I would like to close with saying how pleased and delighted to welcome Gordon into this role. Gordon is a person, I have now known for all those 10 years and a person that is so well-qualified with little succession learning curve time that will be necessary. In fact he is ready to go and we are very fortunate to have. So thanks to all of you on the call I really appreciate it.

Robert J. Lawless - Chairman and Chief Executive Officer

Thank you Fran, but an important thing to remember, you are not going anywhere until we get these tough questions out of the way in the next 10 or 15 or 20 minutes.

Let me share some final thoughts with you. Our business is not without challenges. As was clear in today’s message, our industrial business is in a period right now, where it’s under pressure with steep cost increases for several commodities and a general weakness in the restaurant industry. We have been able to offset these headwinds and expect to do so in the future by the following items.

Tremendous progress with our revitalization programs designed to improve the consumer shopping experience, increase purchases and reduce customer labor costs. Progress with innovative new products that meet today’s trends towards flavor, wellness and convenience. Progress with our efforts to lower costs through our restructuring program, at the midway point this program has been well executed and we are on track to meet or exceed our savings targets. And throughout McCormick employees are focused on the right things to move our business forward and to achieve a positive change.

Our accomplishments are doing the financial performance that includes a 7.5% year-to-date sales growth and most importantly a 16% increase in earnings per share on a comparable basis, excluding restructuring charges. And at the same time, as I said earlier, we maintain our guidance for the year despite these costs pressures.

Together with Alan, Fran and Gordon and the rest of the leadership team at McCormick, I am extremely confident that our market position, growth initiatives and sustainable throughout strategy will lead to increased value for McCormick shareholders.

To our shareholders and everyone on the call, we thank you for your interest and attention. And now we would like to discuss your questions.

Question and Answer

Operator

Thank you. [Operator Instructions].

Your first question is coming from Terry Bivens with Bear Stearns. Please go ahead.

Terry Bivens - Bear Stearns

Good morning everyone.

Robert J. Lawless - Chairman and Chief Executive Officer

Good morning, Terry.

Terry Bivens - Bear Stearns

And Fran, good luck, hit them straight. Bob, just with regard to your remarks this morning, I must say, a little bit more… little bit less buoyant than I thought they might be. Let’s… on the issue of the advance shipments there, I guess, my expectation had been that, I know, you guys are trying to expand the fall into a cooking season, but I guess I thought that now you stand apart a little bit from the normal holiday sales, so I guess I was a bit surprised to hear to what added to Q3 might be subtracted from Q4. Can you give us a little bit more color on that, the thinking behind that?

Robert J. Lawless - Chairman and Chief Executive Officer

Well, I think, Terry in the past years we have talked and Alan talked on previous conference calls where we always had intention this time of the year to make sure the stores, warehouses and in fact the stores had inventory appropriately placed for the fall season, because it’s such a significant part of the year for us.

And the strategy, we implemented, we think are very simple. We gave them extended payment terms to allow them to place orders to ensure the inventories and their warehouses and through the stores. And whether it’s a one to one transfer, what I said… tried to say in the call was, that’s our expectation at this point in time. But we are very optimistic for the fall season that the inventories are there and the challenges associated with retail inventory management in the trade creates pressure on everybody in the consumer products industry and really gives us excitement that we are there this year versus other years.

Terry Bivens - Bear Stearns

Have you made any assumptions in your fourth quarter estimates for reorders?

Robert J. Lawless - Chairman and Chief Executive Officer

We really haven't at this particular point in time, that the real strategy is the inventories out of our distribution centers and to their distribution centers.

Terry Bivens - Bear Stearns

Okay. And just briefly on commodities. If you could give us a little more color on the pass-through mechanism, for example, as I look at cheese, if you just look at block prices, it looks like they should have peaked in Q3 and should be coming down in Q4. But I took from the tenure of your remarks that the commodity pressure if anything is going to be slightly greater in Q4.

Robert J. Lawless - Chairman and Chief Executive Officer

Bear in mind the process, Terry and for everyone on the call that we have in the industrial business, obviously there is a lag or gap between the prices going up and our ability to pass-through the quarterly price increases to our customers.

Terry Bivens - Bear Stearns

Right.

Robert J. Lawless - Chairman and Chief Executive Officer

So cheese is a perfect example and I would concur completely with you, cheese prices have sort of peaked. But we are in the process of passing those peak prices on to our customers during the fourth quarter and you could logically think we would see some litigation as we move into 2008, on that particular commodity.

But once again we are in an unprecedented period, as far as price increases in our business on five or six or seven items. And the ability to pass the price increases through and keep the same gap and time that we have always had, we find and I think its evidenced in our report in the third quarter that gap is increasing and as a result we see that tension in the fourth quarter in industrial business.

Terry Bivens - Bear Stearns

Okay. Thank you very much.

Robert J. Lawless - Chairman and Chief Executive Officer

Thanks, Terry.

Operator

Thank you. Your next question is coming from John Feeney with Wachovia. Please go ahead.

Jonathan Feeney - Wachovia Securities

Good morning. Thank you.

Robert J. Lawless - Chairman and Chief Executive Officer

Good morning, Jon.

Jonathan Feeney - Wachovia Securities

Congratulations Fran. It’s been a pleasure working with you.

Robert J. Lawless - Chairman and Chief Executive Officer

Thank you.

Jonathan Feeney - Wachovia Securities

Bob could you… we are talking about that wholesale call customers that’s expanded their private label initiatives. Could you refresh our memory as to two branded, your brands, are you confident your brands offer the retailer better per square foot. Profit economics and private label and if so do you have the data going to have these conversations to with other retailers, so that more of this activity doesn’t come up.

Alan D. Wilson - President and Chief Operating Officer

We are... this Alan Wilson. We are confident that our brands bring significant value and command a premium to private label and that it is good proposition. There is certainly a place for private label in the mix and a place for a strong, the strong leading national brand in that mix.

Certain customers have… in some cases having more aggressive private label strategy, not just in our category, but across the whole store. And so we work with them to try to make sure that they are maximizing the best value for our categories, as they are making those decisions, that we have a tremendous amount of data on what the consumer want and we try as best we can to sell that and work with those customers to maximize the value to the consumer and for them through there sales are in profits.

Robert J. Lawless - Chairman and Chief Executive Officer

The only thing I would add Jon, if that we continue to sell McCormick’s products; McCormick’s branded products throughout the distribution system of this particular costumers. So, no one on the call should do this, this is an overall customer that's eroding to zero. They have taken certain selected items in our category and chosen to put them in a particular private label, as Alan had said. And you can rest assured, we work real hard in that and we do participate in some of the sales of the private label items. At the same time there is a tremendous demand for our branded items on the North American scale and we worked very hard on that.

Jonathan Feeney - Wachovia Securities

Yes, sure. We are just seeing where both producers if both of you are in this command position to talked about value chain wide economics. So, your particular branded skew versus the private label skew, I guess, hopefully, you will be… convinced people that they ought to be expecting the branded side not the private label side?

Robert J. Lawless - Chairman and Chief Executive Officer

That's okay.

Jonathan Feeney - Wachovia Securities

Just one other question if you wouldn’t mind, on the industrial business, do you talked about… increasingly about… these not good of the foodservice industry in the U. S. and how that's affecting your business? Is there a negative margin mix between, say your small ingredients business like Doritos, et cetera versus restaurant that we might be… and some other lower margins there?

Robert J. Lawless - Chairman and Chief Executive Officer

Well, I don’t know if there is a negative margin mix. I think Jon, that goes back to what we talked about earlier in the call is the escalation of some of these particular raw material prices is particularly specific to the commodity use in that foodservice sector versus other sectors. So may be answer to your question is, yes, it's impacting the margins on that sector and as a result of the pass-throughs, there is a gap in timing, as I addressed earlier.

Jonathan Feeney - Wachovia Securities

That makes perfect sense, Robert. Just wanted like-for-like, I mean is a dollar of revenues to a restaurant in the U. S. a comparable margin to a dollar of revenues to a food manufacturer; typically… typically higher margin one or the other? Or is it the same?

Robert J. Lawless - Chairman and Chief Executive Officer

I would say very similar in a normalized cost environment, Jonathan.

Jonathan Feeney - Wachovia Capital Markets

Okay.

Robert J. Lawless - Chairman and Chief Executive Officer

Thanks so much.

Jonathan Feeney - Wachovia Capital Markets

Thanks very much.

Operator

Thank you. Your next question is coming from Eric Serotta with Merrill Lynch. Please go ahead.

Eric Serotta - Merrill Lynch

Good morning.

Robert J. Lawless - Chairman and Chief Executive Officer

Good morning Eric.

Eric Serotta - Merrill Lynch

Bob, you explained the increase in receivables and inventories a bit, but when I take a step back and look at the broader picture, we have seen sort of a steady march up in the cash conversion cycle over the past more than a year. Just wondering when you foresee a turn in that for the positive? And how long you see that taking to get back to more normalized level in terms of the cash conversion cycle?

Robert J. Lawless - Chairman and Chief Executive Officer

Eric, you know as we address every quarter conference call, we have had restructuring process with all the major facilities in the world and especially, on the industrial side of our business, we want to that customer service, so everything we saw in inventory increase was premeditated by the management team. So, while we have said before the inventories are too high, we don’t want anybody on the call to think they are high and not being managed. We were in control of what we are doing. We are adding to that and now two things that are continuing to be pressure, one is currency… foreign currency and the other is overall cost increases in a raw material base, which weren’t budgeted as we work back to December 1st, 2006. For a fiscal year 2007, we see mitigation of that. We are… more comparable numbers are in the fourth quarter 2007 and obviously, much more comparable as we move into the first quarter 2008 to the second quarter of 2008. So, it’s a fluid situation, as I said in the script, we are not happy with the inventory levels that at this particular point in time. They are going down in the consumer and industrial businesses in North America and Europe. I don’t want anybody on the call to think there isn’t tremendous activities around lowering inventories. That’s being mitigated by the fact of foreign currency exchange and by the overall pressures on cost.

Eric Serotta - Merrill Lynch

Okay. And since you guys are now more than half way through the restructuring program and I think you have completed the major announced facility consolidation, should we expect moderating impact from inventory build for facility consolidation and then I have a final question on consumer.

Robert J. Lawless - Chairman and Chief Executive Officer

That is correct except for the European situation. Bear in mind, we put SAP Europe and the restructuring programs in the overall savings for 2008 of $10 million will come from our European and Middle-East and African operations. So, we will see some elevation there, Eric but North American environment should be reduced yes.

Eric Serotta - Merrill Lynch

Okay. And then just looking at the Americas consumer topline it was up 3% to 4%, you said on an underlined basis excluding the seasonal pull… pull forward of that $9 million to $11 million. Did you specify what the mix was there between pricing and volume, as well as what pepper price pass-through, was in particular?

Alan D. Wilson - President and Chief Operating Officer

We didn’t specify it but its about 1% pricing.

Eric Serotta - Merrill Lynch

It’s about 1% price and is that true organic price mix or is that pepper price pass-through for that 1%?

Alan D. Wilson - President and Chief Operating Officer

The only pricing we took this year was pepper.

Eric Serotta - Merrill Lynch

Okay. The extra month of Simply Asia added approximately what in the quarter?

Robert J. Lawless - Chairman and Chief Executive Officer

Virtually diminimus in the quarter.

Eric Serotta - Merrill Lynch

Okay. Great. Well, thanks a lot, good luck.

Robert J. Lawless - Chairman and Chief Executive Officer

Thanks.

Operator

Thank you your next question is coming from Chris Growe with A. G. Edwards. Please go ahead.

Christopher Growe - A. G. Edwards

Thank you. Good morning.

Robert J. Lawless - Chairman and Chief Executive Officer

Good morning.

Christopher Growe - A. G. Edwards

Hi guys. I just want to follow-up quickly on the working capital question and that is; your account receivable in the quarter, can you attribute the growth over and above sales mostly to the U. S. consumer division, the favorable term you offer there?

Robert J. Lawless - Chairman and Chief Executive Officer

Yes. Yes.

Christopher Growe - A. G. Edwards

Okay. I just want to be clear on that. And then relative to your gross margin, you attributed about 90 basis points decline roughly to the industrial division. You have an accelerated… I guess you had an acceleration of cost savings coming through that position then to help offset that… therefore to keep profitability pretty constant year-over-year. Is that right or--?

Robert J. Lawless - Chairman and Chief Executive Officer

That is correct. I mean the summary on our industrial businesses… the programs that we put in place in 2006, which obviously improved the benefits of 2007 is totally being mitigated by the overall cost increases in our business. And Chris then, as I addressed with the lag then… the lag is getting price revenue for that is wider than we have anticipated before. But everybody should realize we still have the same protocols in place. And the offsetting price increases for the commodity increases will in fact happen in our industrial business, we are just in a larger gap on time than we normally be.

Christopher Growe - A. G. Edwards

Okay. And then… why don’t you give us an update on the, sort of the SKU reductions that are occurring on cost industrial division. Should we expect some sort of pick-up there in those… in that activity or are you pleased with the progress so far and focusing on those core customers?

Robert J. Lawless - Chairman and Chief Executive Officer

Yes. Please with where we are today. I don’t think a pick-up would be appropriate at this point Chris. At some point in time this is going to curtail all off and I think as I said in the call, somewhere above 2% was the impact we had in the quarter relative to the SKU reduction and that’s going to tail off as we move into 2008.

Christopher Growe - A. G. Edwards

Okay. And I am sorry, just one more follow-up and that is relative to the cost savings. You just mentioned $10 million in 2008. That’s mostly coming from Europe. Is that sort of the total amount of cost savings roughly coming that are coming through next year?

Robert J. Lawless - Chairman and Chief Executive Officer

That’s what we indicated in our total restructuring program, Chris when we made $10 million in 2006, $30 million in ’07 and $10 million in ’08. Please bear in mind that we haven’t got our 2008 budgeting process together and our budget together so while I wouldn’t say that’s the only cost savings, that’s the one we have publicly stated at this point in time.

Christopher Growe - A. G. Edwards

Fair enough.

Robert J. Lawless - Chairman and Chief Executive Officer

Okay?

Christopher Growe - A. G. Edwards

Okay. Thanks a lot.

Robert J. Lawless - Chairman and Chief Executive Officer

Thanks Chris.

Operator

Thank you. Your next question is coming from Eric Katzman with Deustche Bank. Please go ahead.

Eric Katzman - Deustche Bank

Hi, good morning everybody.

Robert J. Lawless - Chairman and Chief Executive Officer

Morning Eric.

Eric Katzman - Deustche Bank

Fran, best of luck. Yes, Gordon you are going to have some big shoes to fill. In terms of long-term targets… raised your long-term target expectation back at your analysts meeting in New York. And I am wondering now, with hindsight given the volatility that we are seeing in raw material costs, across the Board if you think that may been a little bit too aggressive, Bob?

Robert J. Lawless - Chairman and Chief Executive Officer

I don’t think so, Eric. And that was driven by the cost savings programs we had. We are still very comfortable with the topline sales growth both in the consumer and industrial businesses. I think we are fine. I think the piece that surprised us, which we addressed in the conference call, is the tremendous volatility that has taken place all of week-by-week in some of these commodities. And thus our ability to pass these through on a quarterly basis to our customers, that gap, as I said to Chris, that gap is larger than we anticipated but I don’t think at this point in time we should modify any of our long-term goals. What I also said though, Eric was that it’s going to have an impact as we move into the early part of 2008.

Eric Katzman - Deustche Bank

Okay. And then kind of… I guess, talking about the mix issue. While consumer trends may be moving away from foodservice given that people have to eat. In some respects, I would normally think that and maybe this is a kind of, something that would occur longer than just a one quarter phenomenon. And I would assume that the change from industrial sales, i.e. QSR foodservice moving to consumer is going to be a mix shift positive for you? Isn’t… shouldn’t that--?

Robert J. Lawless - Chairman and Chief Executive Officer

I would say the answer to that is yes. And what gives us encouragement is that the program that our U. S. consumer folks put in place where we had inventory placed in their warehouses in the third quarter for sale in the fourth quarter and you are quite right. I don’t think this is an immediate transformation between the foodservice and eat-at-home. But we think the holiday season this year just because of this phenomenon inventories being available will be positive for our U. S. consumer business.

Eric Katzman - Deustche Bank

And then… just last question and then I will pass it on. I guess one of the concerns in the industry today is as we… as prices move up, consumers may trade down. Are you seeing just more broadly in terms of your overall consumer product line in the U. S.? Are you seeing the consumer trade down at all in terms of any prices that you have put through, so… like for example, you said you put through a price increase in pepper. Is McCormick pepper selling less than private label pepper?

Alan D. Wilson - President and Chief Operating Officer

McCormick pepper has had some volume hits this year but the overall category has as well, so we haven’t seen necessarily a big shift in share. But we really work hard at maintaining our price gap between the brand and private label.

Robert J. Lawless - Chairman and Chief Executive Officer

The other thing I would say, Eric to add what Alan said is, if you look at the volatility in commodities that we addressed. Other than pepper, most of those are part of our industrial business as opposed to our consumer business, maybe different than other consumer products manufacture companies that appear today. So, we increased prices on pepper quite regularly in 2007. But our focus right today on this cost segment and what the conference call script hopefully addressed was, this is an industrial business phenomenon with us, not a general business phenomenon.

Eric Katzman - Deustche Bank

Okay. Thank you very much.

Robert J. Lawless - Chairman and Chief Executive Officer

Thanks Eric.

Operator

Thank you. Your next question is coming from Robert Moskow with Credit Suisse. Please go ahead.

Robert Moskow - Credit Suisse

Thank you. Good afternoon and good luck to you Fran.

Robert J. Lawless - Chairman and Chief Executive Officer

Hey Rob.

Robert Moskow - Credit Suisse

I wanted to know your cash flow from operations is down substantially from the prior year. Its $22 million year-to-date and it was over $100 million a year ago. Do you have any guidance for us on free cash flow this year and do you expect free cash flow to be down?

Francis A. Contino - Executive Vice President, Strategic Planning and Chief Financial Officer

Yes. A list of items that led to this decline are really timing issues and some shift in some of the activities, inner liability account. I just wanted to point out for instance that we had nearly $30 million of benefits primarily incentive payments that were greater than in this time period reflecting the bonuses we paid on the 2006 year compared to the lower bonuses or practically no benefits in the… for the 2005 year. And then we had higher restructuring charges in this period… in this nine months period, than we had the year before. And we are having… we have had some increases in our receivables in this period, reflecting some of our higher sales growth that we talked about.

And in the European operation, purely timing with VAT payments from one period to the next. So, we feel pretty confident that our cash flow will return to the levels that it has been at and that we expect our free cash flow not to be suffering. In fact, we are starting to see our ITO improved, which means that our inventory relative to our sales growth is starting to improve.

Robert J. Lawless - Chairman and Chief Executive Officer

The other thing, Rob, we… you know as we addressed, we bought a lot of stock forward in the third quarter versus the fourth quarter and that to shift in the movement there. And the fourth quarter obviously is the significant volume quarter for us, so just to reinforce with Fran and I don’t think there is any tension around the free cash flow from McCormick in ’07.

Robert Moskow - Credit Suisse

The free cash flow was about $230 million in ’06, should we think it’s about the same in ’07, or little below?

Robert J. Lawless - Chairman and Chief Executive Officer

I think a little bit below in 2007 versus 2006.

Robert Moskow - Credit Suisse

Okay. And then maybe a catch up in ’08, a share purchasing starts off at the commodity cost again?

Robert J. Lawless - Chairman and Chief Executive Officer

That’s correct, yes.

Robert Moskow - Credit Suisse

Okay. And then, could you more specific for us on the option expense. You have said that competition expense was a benefit in this quarter. I have about $4 million of options expense in the quarter last year?

Robert J. Lawless - Chairman and Chief Executive Officer

It really wasn’t anything to do with options; it all has to do with incentive competition.

Robert Moskow - Credit Suisse

Incentive compensation.

Robert J. Lawless - Chairman and Chief Executive Officer

And I think as Fran says, Rob, it’s a significant swing from 2007 third quarter versus 2006 third quarter.

Robert Moskow - Credit Suisse

Give us a sense about how much?

Francis A. Contino - Executive Vice President, Strategic Planning and Chief Financial Officer

Well, it’s a period when we show up what we expect our benefits to be for Europe and it has an impact but we have not disclosed that matter. So, but it’s large enough to talk about.

Robert Moskow - Credit Suisse

Okay. And lastly, you set out an industrial business margin expansion goal of 250 basis to 350 basis points, is that goal now delayed?

Robert J. Lawless - Chairman and Chief Executive Officer

Exactly, Rob exactly. It’s not dismissed and it’s not off the radar screen at all for industrial folks. But based upon what's happened just recently in the delay in timing some of these pass-throughs is not delayed, yes. We said by the end of 2008, we get the 250 basis points to 350 basis points, that’s obviously going to bounce in the 2000… fiscal 2009.

Robert Moskow - Credit Suisse

And the industrial customer, you rationalized your industrial customer base a lot to get to the… it’s a big customers and this might be a little far fetched. But the customers they do a let go, do you have any sense, the ones you let go were faster growing? Or… and maybe you have kind of left here with them slower growing ones or is that really not an issue, think about it?

Robert J. Lawless - Chairman and Chief Executive Officer

I think the Rob, the answer to that is, if you look at our sales growth, we are very comfortable with our sales growth, globally in the industrial business. So, the answer is really no. We are comfortable with the portfolio that we have streamlined down to and once again, these cost increases are really on the foodservice side of our business, not on the food manufacturer side of our business. And it’s a phenomenon that we are in and the good news is there is protocols in placed to work ourselves out of this, its just taking a little more time.

Robert Moskow - Credit Suisse

Okay. Thank you very much.

Robert J. Lawless - Chairman and Chief Executive Officer

Thanks Rob.

Operator

Thank you. Your next question is coming from Gil Alexander with Darphil Associates. Please go ahead.

Gil Alexander - Darphil Associates

Good morning.

Robert J. Lawless - Chairman and Chief Executive Officer

Good morning.

Gil Alexander - Darphil Associates

On the fourth quarter, could you give us some estimate of what you think your restructuring… your restructuring charge will be?

Robert J. Lawless - Chairman and Chief Executive Officer

What… we really don’t break that out by quarter, the only thing I would say is that the restructuring charges as Fran addressed earlier, in 2007, we are primarily pre-structure savings I should say, we were impacting the first and second quarter more than the third quarter and fourth quarter.

Gil Alexander - Darphil Associates

Thank you very much.

Robert J. Lawless - Chairman and Chief Executive Officer

Thanks very much.

Operator

Thank you. Your next question is coming from Mitch Pinheiro with Janney, Montgomery, Scott. Please go ahead.

Mitch Pinheiro - Janney, Montgomery, Scott

Hey good morning.

Robert J. Lawless - Chairman and Chief Executive Officer

Hey good morning.

Mitch Pinheiro - Janney, Montgomery, Scott

Hey Fran, best wishes. Don’t hit him straight, hit him long. Hey real quick, could you talk a little bit about what you are seeing in the marketplace relative to safety. And has McCormick, have you seen increase activity relative on industrial side to ingredient suppliers et cetera?

Alan D. Wilson - President and Chief Operating Officer

Obviously, this is Alan. With the lot of the discussion today, there is an increase emphasis by our customers and our consumers on food safety. And we think that plays pretty well to our strength, because that’s something that we really emphasize inside and with our customers. But it is certainly being highlights; it got everybody’s attention right now. We think that place is one of our strength.

Mitch Pinheiro - Janney, Montgomery, Scott

Are you seeing, I mean could that represent incremental growth in ’08?

Robert J. Lawless - Chairman and Chief Executive Officer

I think it’s a competitive differentiator over time, Mitch, versus, as Alan said versus McCormick and other suppliers, yes.

Mitch Pinheiro - Janney, Montgomery, Scott

Okay.

Robert J. Lawless - Chairman and Chief Executive Officer

Once again though, I think it's important to realize that it will be a competitive differentiator or but it’s a cost associated with that. It's built into our budgeting process and our forecast process. But we do have a global quality program. We think in our sector it’s an unparallel whether it’s an issue in China or India or North America, we have the appropriate resources applied against it and its getting tremendous focus under Alan’s leadership.

Mitch Pinheiro - Janney, Montgomery, Scott

Well, its competitive differentiation and that expertise may seem like maybe there is pricing in it for you, in other words paying a premium for that. Improved food safety, sort of dynamics in your organization, I didn’t know if that’s possible?

Robert J. Lawless - Chairman and Chief Executive Officer

It’s something we work on everyday on many…

Mitch Pinheiro - Janney, Montgomery, Scott

Yes, obviously. But speaking of pricing and one thing I want to understand is we are still three months from fiscal… I guess two months from fiscal '08 right? And so in terms of the pricing… the re-pricing of the pass-throughs, is there that much of a lag or is this is a situation where… I mean why wouldn't we be pretty lot closer to or lot smaller of a pricing lag there?

Robert J. Lawless - Chairman and Chief Executive Officer

I think it’s the speed and volatility, Mitch with what prices are going up. I mean you just take soya, we could charge soya, we get everybody in the same room. And it’s going up daily, not weekly or monthly like commodities used to go up. And then it will drop down a little bit and go up again. So, it’s the tremendous volatility.

Mitch Pinheiro - Janney, Montgomery, Scott

Okay.

Robert J. Lawless - Chairman and Chief Executive Officer

And bear in mind, we have quarterly pricing protocols and so we have to factor that in the overall pricing mechanism we have with our customers.

Mitch Pinheiro - Janney, Montgomery, Scott

Will prices fall quicker on the lag, on the other side? Or do you think it will be equal to the--?

Robert J. Lawless - Chairman and Chief Executive Officer

I think, it's equal.

Mitch Pinheiro - Janney, Montgomery, Scott

Okay. Advertising and marketing expense in the third quarter, did you talk about … did you talk about that? I didn’t… if you did, I didn't hear it.

Robert J. Lawless - Chairman and Chief Executive Officer

If it's… once again the situation we find ourselves in we are not cutting our marketing expenses and advertising expenses 2007 over 2006. And I think one of the things, you always want to hear, Mitch, is the fourth quarter… the fourth quarter in 2007 will be on par with 2006. But the important thing is remember in 2006, we increased marketing and advertising expense significantly in the fourth quarter.

Mitch Pinheiro - Janney, Montgomery, Scott

Okay. All right. Thank you. And one more thing, in the consumer business with the… sort of $9 million to $11 million sort of advance shipments, is this… you talked about some of the positives in manufacturing in your heavy season and being… having stuff in place in the stores earlier. Is there any other dynamic positive or negative to consumer margins related to this? Is there anything have to think about as far as margins are concerned there?

Robert J. Lawless - Chairman and Chief Executive Officer

I don’t think so, Mitch. Now, there is nothing, now let’s… now once again, the absorption during the fourth quarter in both of our businesses because of the significant volume is not something that we really worry about.

Mitch Pinheiro - Janney, Montgomery, Scott

Okay.

Robert J. Lawless - Chairman and Chief Executive Officer

Okay.

Mitch Pinheiro - Janney, Montgomery, Scott

Thank you.

Robert J. Lawless - Chairman and Chief Executive Officer

Okay.

Operator

Thank you. Your next question is coming from Oliver Wood with Stifel Nicolaus. Please go ahead.

Oliver Wood - Stifel Nicolaus

Great. Thanks a lot. I just have one question; it’s a follow-up on the advanced shipments. I just wanted to make sure; I heard correctly that the $9 million to $11 million sales translates into $0.02 in EPS and I am asking because when I do the math, I get a much smaller impact on EPS?

Robert J. Lawless - Chairman and Chief Executive Officer

No, that's not right. That’s $0.02, about $4 million.

Oliver Wood - Stifel Nicolaus

Okay.

Robert J. Lawless - Chairman and Chief Executive Officer

Okay.

Oliver Wood - Stifel Nicolaus

So, where the… I shouldn’t say we are advanced, much higher margin product set?

Robert J. Lawless - Chairman and Chief Executive Officer

Consumer… yes, the consumer business, it's the time of the year, that its flows through, so that’s our estimate what the impact is at this point.

Oliver Wood - Stifel Nicolaus

Okay. Great. Thanks so much.

Robert J. Lawless - Chairman and Chief Executive Officer

Thank you.

Operator

Thank you. Your next question is coming from Andrew Lazar with Lehman Brothers. Please go ahead.

Andrew Lazar - Lehman Brothers

Good morning.

Robert J. Lawless - Chairman and Chief Executive Officer

Good morning, Andrew.

Andrew Lazar - Lehman Brothers

And Fran, I want to wish you the best as well and thank you for all your help over the years.

Fran A. Contino - Executive Vice President, Strategic Planning and Chief Financial Officer

Thank you.

Andrew Lazar - Lehman Brothers

With respect to America's consumer, the organic sales growth rate was, as you mentioned Bob, 3% to 4%. And that was a pretty healthy uptick from where we were more recently and even last quarter, where I think it was close to the 1% or so. And given obviously they are very healthy variable contribution margins on that business. I am trying to get a sense of the drivers behind the better organic sales growth, I assuming that the thing you have been doing all along, it's the revitalization, the shelving and all that. I guess the question, do you feel like you hit an inflection point in that business specifically, so America’s consumer, where maybe that type of year-over-year growth in the upcoming quarters, meaning 3% or 4% organic is more likely and there is a building confidence if that’s the way it can go.

Robert J. Lawless - Chairman and Chief Executive Officer

I think it’s the later, Andrew, even we are confident of our consumer business, we are confident of Zatarain's growth continued, Simply Asia is continuing to grow in that area. Hispanic and seafood areas continue to grow and I think as we look at this overall, when we call consumer merchandising program or we are putting in the new racks, we are putting new products. We are taking out SKUs, making a better more shopable for the consumers, that's in very much the embryonic stages. So, as we would see that, moving toward the fourth quarter and into ’08 and ’09, we expect increased volume gains under that, as the consumer becomes much more familiar with the very, very confusing category. And we are seeing results of that now and we are very positive, encouraged by that and we think for the future, that just accrues more benefits on the consumer side.

Andrew Lazar - Lehman Brothers

Okay. And then… last thing on the early shipment. Just curious, how was… what was the main issue? Is it… was out of stocks, I guess, one of the bigger issues that you are trying to resolve, at the retailer in pass kind of holiday periods.

Robert J. Lawless - Chairman and Chief Executive Officer

Yes, couple of things…

Andrew Lazar - Lehman Brothers

I think you able to help you get that.

Robert J. Lawless - Chairman and Chief Executive Officer

It’s making sure that the displays are in the store when the consumer is ready to buy them. And getting them through to the customers’ supply chain quickly enough to make that happen. We believe we have seen it before that the earlier the displays are in the store, the more the consumer ends up buying.

Andrew Lazar - Lehman Brothers

So, you a hoping it’s obviously not a one for… a direct one-for-one shift at the end of the day?

Robert J. Lawless - Chairman and Chief Executive Officer

That’s what we are counting on.

Andrew Lazar - Lehman Brothers

Okay. And then I guess with respect to… back in New York, you talked a lot about the role that acquisitions have played in the growth of McCormick over the last couple of years and that was something obviously you are going to think… long and hard obviously going forward, a bigger contributor. It obviously you didn't come up on the call, but there is no reason I guess so much you actually pull the trigger on something. But is there anything changed on that front with respect to either the pipeline or what you are seeing or strategically and how you think about it?

Robert J. Lawless - Chairman and Chief Executive Officer

No, not at all. The only hope we have is maybe with the situation in the equity markets… the private equity markets maybe some of the multiples may come down a little bit, but nothing’s changed from McCormick standpoint. No.

Andrew Lazar - Lehman Brothers

And last year… do you… and I missed this. I apologize. What’s your… now your best guess around full year tax rate?

Robert J. Lawless - Chairman and Chief Executive Officer

32, this year. Or did you say next year?

Andrew Lazar - Lehman Brothers

Actually this year. For full year ‘07.

Robert J. Lawless - Chairman and Chief Executive Officer

31.

Andrew Lazar - Lehman Brothers

31. Okay. Great. Thank you very much.

Robert J. Lawless - Chairman and Chief Executive Officer

Thanks, Andrew.

Operator

Thank you. There appear to be no further questions. I would like to turn the floor back over to Joyce Brooks for any closing comments.

Joyce Brooks - Assistant Treasurer

Thank you. This concludes today’s call. Till October 4th, you may access the telephone replay of the call by dialing 877-549-4471 and the access code for the replay is 9133189. You can also listen to our replay on the website after 2 PM today.

If you have further questions or points to discuss regarding today’s information, please give me a call at 410-771-7244.

Operator

Thank you. This concludes today’s McCormick and Company third quarter financial results conference call. You may now disconnect.

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