
	SPECIAL CHARGES

We continue to evaluate changes to our organization structure to enable us to reduce fixed costs, simplify or improve processes, and improve our competitiveness.

In late 2013, we announced a reorganization in parts of the Europe, Middle East and Africa (EMEA) region to further improve EMEA’s profitability and process standardization while supporting its competitiveness and long-term growth. These actions included the closure of our current sales and distribution operations in The Netherlands, with the transition to a third-party distributor model to continue to sell the Silvo brand, as well as actions intended to reduce selling, general and administrative activities throughout EMEA, including the centralization of shared service activity across the region into Poland. In fiscal years 2013 and 2014, we recorded a total of $27.1 million of cash and non-cash charges related to this reorganization. We expect to realize annual cost savings of approximately $10 million in 2015 related to this EMEA reorganization.

The following table outlines the major components of accrual balances and activity relating to the special charges associated with the EMEA reorganization plan undertaken in 2013 and 2014 for the six months ended May 31, 2015 (in millions):



	Employee severance and related benefits			Other related costs			Total
Balance as of November 30, 2014	$	9.3		$	0.7		$	10.0
Cash paid	(2.4		)	(0.6		)	(3.0		)
Impact of foreign exchange	(1.6		)	(0.1		)	(1.7		)
Reversal into income (special charges)	(1.9		)	—			(1.9		)
Balance as of May 31, 2015	$	3.4		$	—		$	3.4

During the three months ended May 31, 2015, the company reversed $1.9 million of reserves previously accrued as part of the EMEA reorganization plan undertaken in 2013 and 2014, principally as a result of a decision by EMEA management that employee attrition, which has occurred and is expected to continue, obviated the need for certain accrued employee severance and related benefits.

In January 2015, we offered a voluntary retirement plan, which included enhanced separation benefits but did not include supplementary pension benefits, to certain U.S. employees aged 55 years or older with at least ten years of service to the Company. Upon our receipt of notification from participants that they accepted this plan, which closed in the first quarter of 2015, we accrued special charges of $24.5 million, consisting of employee severance and related costs that will be paid in cash. Substantially all of the affected employees will leave the company in 2015, and the majority exited by the second quarter.

The voluntary retirement plan is part of our ongoing North American effectiveness initiative that, upon completion, is expected to generate cost savings of approximately $10 million in 2015 and annual cost savings with a full year impact of approximately $25 million beginning in 2016. During the second quarter, we accrued special charges of $1.9 million, consisting of employee severance and related costs, associated with our North American effectiveness initiative. We currently estimate the total cost to implement the North American effectiveness initiative to approximate $27 million, including the cost of the voluntary early retirement plan and other actions necessary to achieve the cost savings previously described, consisting principally of severance and related benefits that will be paid in cash. The following table outlines the major components of accrual balances and activity relating to the special charges associated with our North American effectiveness initiative for the six months ended May 31, 2015 (in millions):



	Employee severance and related benefits			Other related costs			Total
Special charges	$	25.4		$	1.0		$	26.4
Cash paid	(19.5		)	(0.7		)	(20.2		)
Balance as of May 31, 2015	$	5.9		$	0.3		$	6.2

In the first quarter of 2015, we recorded a special charge of $3.9 million to undertake actions, principally consisting of severance and related costs, to change our organization structure to further reduce selling, general and administrative expenses throughout EMEA. The actions associated with this special charge are expected to be completed in 2015 and to generate annual cost savings of $3.0 million by 2016.

In the second quarter of 2015, additional projects were identified in the EMEA region to further enhance organization efficiency and streamline processes in this region to support its competitiveness and long-term growth. These initiatives center on actions intended to reduce fixed costs and improve business processes, as well as continue to drive simplification across the business and supply chain. These actions include the transfer of certain additional activities to the recently established McCormick Shared Services Center in Lodz, Poland. During the second quarter of 2015, we recorded special charges of $19.0 million related to this element of the EMEA plan consisting of $17.9 million for employee severance and related benefits and $1.1 million for non-cash fixed asset impairment. In total, including the amounts recorded during the first and second quarters of 2015, the company expects to record approximately $25 million of charges related to these actions, with approximately $24 million of cash expenses and approximately $1 million of non-cash fixed asset impairment expenses. Of the approximately $24 million of cash expenditures associated with these special charges, approximately $13 million are expected to be spent in 2015 and the balance spent in 2016. Related annual cost savings are projected to be approximately $16 million by the end of 2017.

The following table outlines the major components of accrual balances and activity relating to the special charges associated with the EMEA reorganization plans undertaken in 2015 for the six months ended May 31, 2015 (in millions):



	Employee severance and related benefits			Other related costs			Total
Special charges	$	21.4		$	1.5		$	22.9
Cash paid	(1.9		)	—			(1.9		)
Impairment of fixed assets recorded	—			(1.1		)	(1.1		)
Impact of foreign exchange	(0.1		)	—			(0.1		)
Balance as of May 31, 2015	$	19.4		$	0.4		$	19.8

Of the $19.0 million of special charges recorded in our consolidated financial statements in the second quarter of 2015, $15.7 million related to our consumer business segment and $3.3 million related to our industrial business segment. Of the $47.4 million of special charges recorded in our consolidated financial statements for the six months ended May 31, 2015, $34.9 million related to our consumer business segment and $12.5 million related to our industrial business segment. All liability balances associated with our special charges are included in other accrued liabilities in our consolidated balance sheet.