0000063754-24-000033.txt : 20240326 0000063754-24-000033.hdr.sgml : 20240326 20240326161924 ACCESSION NUMBER: 0000063754-24-000033 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 70 CONFORMED PERIOD OF REPORT: 20240229 FILED AS OF DATE: 20240326 DATE AS OF CHANGE: 20240326 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCCORMICK & CO INC CENTRAL INDEX KEY: 0000063754 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FOOD PREPARATIONS & KINDRED PRODUCTS [2090] ORGANIZATION NAME: 04 Manufacturing IRS NUMBER: 520408290 STATE OF INCORPORATION: MD FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-14920 FILM NUMBER: 24783788 BUSINESS ADDRESS: STREET 1: 24 SCHILLING ROAD STREET 2: SUITE 1 CITY: HUNT VALLEY STATE: MD ZIP: 21031 BUSINESS PHONE: 4107717301 MAIL ADDRESS: STREET 1: 24 SCHILLING ROAD STREET 2: SUITE 1 CITY: HUNT VALLEY STATE: MD ZIP: 21031 FORMER COMPANY: FORMER CONFORMED NAME: MCCORMICK & CO DATE OF NAME CHANGE: 19660620 10-Q 1 mkc-20240229.htm 10-Q mkc-20240229
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q

(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 29, 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File Number 001-14920
 McCORMICK & COMPANY, INCORPORATED
(Exact name of registrant as specified in its charter)
Maryland52-0408290
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 
24 Schilling Road, Suite 1,
Hunt Valley, MD21031
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code    (410) 771-7301

Securities registered pursuant to Section 12(b) of the Act:
 Trading
Title of each classSymbol(s)Name of each exchange on which registered
Common Stock, Par Value $0.01 per shareMKC.VNew York Stock Exchange
Common Stock Non-Voting, Par Value $0.01 per shareMKCNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes       No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
Accelerated Filer
Non-Accelerated FilerSmaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.      
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  



Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 Shares Outstanding
February 29, 2024
Common Stock16,667,386 
Common Stock Non-Voting251,745,319 




TABLE OF CONTENTS

3

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

McCORMICK & COMPANY, INCORPORATED
CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)
(in millions except per share amounts)
 
Three months ended
February 29, 2024February 28, 2023
Net sales$1,602.7 $1,565.5 
Cost of goods sold1,003.4 1,002.6 
Gross profit599.3 562.9 
Selling, general and administrative expense361.6 336.1 
Special charges 4.2 27.8 
Operating income233.5 199.0 
Interest expense50.3 50.6 
Other income, net11.1 11.1 
Income from consolidated operations before income taxes194.3 159.5 
Income tax expense49.6 34.4 
Net income from consolidated operations144.7 125.1 
Income from unconsolidated operations
21.3 14.0 
Net income$166.0 $139.1 
Earnings per share – basic$0.62 $0.52 
Earnings per share – diluted$0.62 $0.52 
Average shares outstanding – basic268.4 268.2 
Average shares outstanding – diluted269.6 269.8 
Cash dividends paid per share – voting and non-voting$0.42 $0.39 
See notes to condensed consolidated financial statements (unaudited).

4

McCORMICK & COMPANY, INCORPORATED
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
(in millions)
 
Three months ended
February 29, 2024February 28, 2023
Net income$166.0 $139.1 
Net income attributable to non-controlling interest2.1 0.8 
Other comprehensive income (loss):
Unrealized components of pension and other postretirement plans(0.2)(1.0)
Currency translation adjustments(2.0)47.0 
Change in derivative financial instruments(3.3)(5.4)
Tax benefit0.4 1.0 
Total other comprehensive income (loss), net of tax(5.1)41.6 
Comprehensive income$163.0 $181.5 
See notes to condensed consolidated financial statements (unaudited).

5


McCORMICK & COMPANY, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions)
 
February 29,
2024
November 30,
2023
 (unaudited) 
ASSETS
Cash and cash equivalents$178.0 $166.6 
Trade accounts receivable, net of allowances567.5 587.5 
Inventories, net
Finished products574.3 570.0 
Raw materials and work-in-process555.3 556.5 
1,129.6 1,126.5 
Prepaid expenses and other current assets145.1 121.0 
Total current assets2,020.2 2,001.6 
Property, plant and equipment, net1,354.5 1,324.7 
Goodwill5,253.6 5,260.1 
Intangible assets, net3,346.8 3,356.7 
Other long-term assets915.0 919.2 
Total assets$12,890.1 $12,862.3 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Short-term borrowings$329.5 $272.2 
Current portion of long-term debt798.4 799.3 
Trade accounts payable1,133.3 1,119.3 
Other accrued liabilities712.6 908.1 
Total current liabilities2,973.8 3,098.9 
Long-term debt3,329.1 3,339.9 
Deferred taxes858.3 861.2 
Other long-term liabilities471.5 478.8 
Total liabilities7,632.7 7,778.8 
Shareholders’ equity
Common stock594.1 597.1 
Common stock non-voting1,619.3 1,602.5 
Retained earnings3,412.8 3,249.7 
Accumulated other comprehensive loss(393.7)(388.6)
Total McCormick shareholders' equity5,232.5 5,060.7 
Non-controlling interests24.9 22.8 
Total shareholders’ equity5,257.4 5,083.5 
Total liabilities and shareholders’ equity$12,890.1 $12,862.3 
See notes to condensed consolidated financial statements (unaudited).

6


McCORMICK & COMPANY, INCORPORATED
CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
(in millions)
 
Three months ended
February 29, 2024February 28, 2023
Operating activities
Net income$166.0 $139.1 
Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation and amortization45.8 47.8 
Stock-based compensation11.7 11.8 
Income from unconsolidated operations(21.3)(14.0)
Changes in operating assets and liabilities
Trade accounts receivable16.5 9.7 
Inventories (2.3)(0.2)
Trade accounts payable14.4 (54.8)
Other assets and liabilities(118.8)(49.9)
Dividends from unconsolidated affiliates26.4 13.9 
Net cash flow provided by operating activities138.4 103.4 
Investing activities
Capital expenditures (including software)(62.0)(61.5)
Other investing activities0.2  
Net cash flow used in investing activities(61.8)(61.5)
Financing activities
Short-term borrowings, net57.3 67.9 
Long-term debt repayments(14.1)(3.6)
Proceeds from exercised stock options4.4 5.2 
Taxes withheld and paid on employee stock awards(4.9)(6.1)
Common stock acquired by purchase(0.3)(3.5)
Dividends paid(112.7)(104.6)
Other financing activities2.6  
Net cash flow used in financing activities(67.7)(44.7)
Effect of exchange rate changes on cash and cash equivalents2.5 25.6 
Increase in cash and cash equivalents11.4 22.8 
Cash and cash equivalents at beginning of period166.6 334.0 
Cash and cash equivalents at end of period$178.0 $356.8 
See notes to condensed consolidated financial statements (unaudited).
7



McCORMICK & COMPANY, INCORPORATED
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
(in millions)
(millions)Common Stock SharesCommon Stock
Non-Voting Shares
Common Stock AmountRetained EarningsAccumulated Other Comprehensive (Loss) IncomeNon-controlling InterestsTotal Shareholders’ Equity
Three months ended February 29, 2024
Balance, November 30, 2023
16.8 251.3 $2,199.6 $3,249.7 $(388.6)$22.8 $5,083.5 
Net income— 166.0 — — 166.0 
Net income attributable to non-controlling interest— — — 2.1 2.1 
Other comprehensive (loss), net of tax— — (5.1) (5.1)
Stock-based compensation11.7 — — — 11.7 
Shares purchased and retired(0.1) (3.3)(2.9)— — (6.2)
Shares issued0.3  5.4 — — — 5.4 
Equal exchange(0.4)0.4 — — — — — 
Balance, February 29, 2024
16.6 251.7 $2,213.4 $3,412.8 $(393.7)$24.9 $5,257.4 
Three months ended February 28, 2023
Balance, November 30, 2022
17.4 250.6 $2,138.6 $3,022.5 $(480.6)$18.7 $4,699.2 
Net income— 139.1 — — 139.1 
Net income attributable to non-controlling interest— — — 0.8 0.8 
Other comprehensive income (loss), net of tax— — 43.5 (1.9)41.6 
Stock-based compensation11.8 — — — 11.8 
Shares purchased and retired(0.1) (4.8)(6.5)— — (11.3)
Shares issued0.3  6.5 — — — 6.5 
Equal exchange(0.2)0.2 — — — — — 
Balance, February 28, 2023
17.4 250.8 $2,152.1 $3,155.1 $(437.1)$17.6 $4,887.7 
See notes to condensed consolidated financial statements (unaudited).

8


McCORMICK & COMPANY, INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

1.ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and notes required by United States generally accepted accounting principles (GAAP) for complete financial statements. In our opinion, the accompanying condensed consolidated financial statements contain all adjustments, which are of a normal and recurring nature, necessary to present fairly the financial position and the results of operations for the interim periods presented.
The results of consolidated operations for the three-month period ended February 29, 2024 are not necessarily indicative of the results to be expected for the full year. Historically, our net sales, net income and cash flow from operations have been lower in the first half of the fiscal year and higher in the second half of the fiscal year. The historical increase in net sales, net income and cash flow from operations in the second half of the year has largely been due to the consumer business cycle in the U.S., where customers typically purchase more products in the fourth quarter due to the Thanksgiving and Christmas holiday seasons.
For further information, refer to the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended November 30, 2023.
Accounts Payable - Supplier Finance Program
As more fully described in our Annual Report on Form 10-K for the year ended November 30, 2023, we participate in a Supply Chain Financing program (SCF) with several global financial institutions (SCF Banks). Under the SCF, qualifying suppliers may elect to sell their receivables from us to an SCF Bank, enabling participating suppliers to negotiate their receivables sales arrangements directly with the respective SCF Bank. We are not party to those agreements and have no economic interest in a supplier’s decision to sell a receivable.
All outstanding amounts related to suppliers participating in the SCF are recorded within the line entitled Trade accounts payable in our condensed consolidated balance sheets, and the associated payments are included in operating activities within our consolidated statements of cash flows. As of February 29, 2024 and November 30, 2023, the amounts due to suppliers participating in the SCF and included in trade accounts payable were approximately $308.6 million and $300.5 million, respectively.
Accounting Pronouncement Partially Adopted
In September 2022, the FASB issued ASU No. 2022-04: Liabilities - Supplier Finance Programs (Topic 450-50): Disclosure of Supplier Finance Program Obligations, that requires entities that use supplier finance programs in connection with the purchase of goods and services to disclose the key terms of the programs and information about obligations outstanding at the end of the reporting period, including a roll-forward of those obligations. The guidance does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations. We adopted the new standard's requirements to disclose the key terms of the programs and information about obligations outstanding as of November 30, 2023. The standard’s requirement to disclose a roll-forward of obligations outstanding will be effective for our fiscal year ending November 30, 2025. The partial adoption of this standard did not have a material impact on our consolidated financial statements nor do we expect the adoption of the future disclosure requirements to have a material impact on our consolidated financial statements.
Recently Issued Accounting Pronouncements — Pending Adoption
In November 2023, the FASB issued ASU No. 2023-07: Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures that requires entities to report incremental information about significant segment expenses included in a segment’s profit or loss measure as well as the name and title of the chief operating decision maker. The guidance also requires interim disclosures related to reportable segment profit or loss and assets that had previously only been disclosed annually. The new standard is effective for our annual period ending November 30, 2025 and our interim periods during the fiscal year ending November 30, 2026. The guidance does not affect recognition or measurement in our consolidated financial statements.
In December 2023, the FASB issued ASU No. 2023-09: Income Taxes (Topic 740): Improvements to Income Tax Disclosures that requires entities to disclose additional information about federal, state, and foreign income taxes primarily related to the income tax rate reconciliation and income taxes paid. The new standard also eliminates certain existing disclosure requirements
9

related to uncertain tax positions and unrecognized deferred tax liabilities. The guidance is effective for our fiscal year ending November 30, 2026. The guidance does not affect recognition or measurement in our consolidated financial statements.

2.      SPECIAL CHARGES
In our consolidated income statement, we include a separate line item captioned "Special charges" in arriving at our consolidated operating income. Special charges consist of expenses, including related impairment charges, associated with certain actions undertaken to reduce fixed costs, simplify or improve processes, and improve our competitiveness and are of such significance in terms of both up-front costs and organizational/structural impact to require advance approval by our Management Committee, comprised of our senior management, including our President and Chief Executive Officer. Expenses associated with any approved action are classified as special charges upon recognition and monitored on an on-going basis through completion. Certain ancillary expenses related to these actions approved by our Management Committee do not qualify for accrual upon approval but are included as special charges as incurred during the course of the actions.
We continue to evaluate changes to our organizational structure to reduce fixed costs, simplify or improve processes, and improve our competitiveness.
The following is a summary of special charges recognized in the three months ended February 29, 2024 and February 28, 2023
(in millions):
Three months ended
February 29, 2024February 28, 2023
Employee severance and related benefits$2.1 $24.8 
Other costs
Cash2.1 2.2 
Non-Cash 0.8 
Total special charges$4.2 $27.8 

During the three months ended February 29, 2024, we recorded $4.2 million of special charges, consisting principally of $2.8 million associated with our Global Operating Effectiveness (GOE) program, as more fully described below, and $1.4 million associated with the transition of a manufacturing facility in Europe, Middle East, and Africa (EMEA), as more fully described below.
During the three months ended February 28, 2023, we recorded $27.8 million of special charges, consisting principally of $24.8 million associated with our GOE program, as more fully described below, $0.9 million associated with the transition of a manufacturing facility in EMEA, and streamlining actions of $1.3 million in the Americas region and $0.8 million in the EMEA region.
In 2022, our Management Committee approved the GOE program, which is expected to eliminate costs associated with our supply chain operations, as well as across the remainder of the organization. The GOE program included a voluntary retirement plan, which included enhanced separation benefits to certain U.S. employees aged 55 years or older with at least ten years of service to the company. This voluntary retirement plan commenced in November 2022, and participants were required to submit their notifications by December 30, 2022. The GOE program also includes other employee separation actions as other related costs within the program. The total costs incurred under the GOE program were approximately $48 million as of November 30, 2023. Special charges recognized during the three months ended February 29, 2024, under our GOE program included $2.1 million in severance and related benefits costs and $0.7 million of third-party expenses and other costs. Special charges recognized during the three months ended February 28, 2023, under our GOE program included $19.7 million associated with the voluntary retirement program, $4.5 million in severance and related benefits costs and $0.6 million of third-party expenses and other costs.
In 2022, our Management Committee approved an initiative to consolidate our manufacturing operations in the United Kingdom into a net-zero carbon condiments manufacturing and distribution center facility with state-of-the-art technology. We expect to execute these changes to our supply chain operations and improve profitability, from a combination of lower headcount and non-headcount costs, by consolidating our operations into a scalable platform while expanding our capacity. We expect the cost of the initiative to approximate $40 million—to be recognized as special charges in our consolidated income statement through 2024. Of that $40 million, we expect the costs to include employee severance and related benefits, non-cash accelerated depreciation, equipment relocation costs, decommissioning and other property related lease exit costs, all directly
10

related to the initiative. The total costs incurred under this program were approximately $36 million as of November 30, 2023. During the three months ended February 29, 2024, we recognized $1.4 million in third-party expenses and other costs. During the three months ended February 28, 2023, we recognized $0.4 million in accelerated depreciation and $0.5 million in third-party expenses and other costs.
As of February 29, 2024, accruals associated with special charges of $15.9 million, are included in other accrued liabilities in our consolidated balance sheet.
The following is a breakdown by business segment of special charges for the three months ended February 29, 2024 and February 28, 2023 (in millions):
Three months ended
February 29, 2024February 28, 2023
Consumer segment$1.8 $19.0 
Flavor solutions segment2.4 8.8 
Total special charges$4.2 $27.8 


3.    FINANCING ARRANGEMENTS AND FINANCIAL INSTRUMENTS
We use derivative financial instruments to enhance our ability to manage risk, including foreign currency, net investment and interest rate exposures, which exist as part of our ongoing business operations. We do not enter into contracts for trading purposes, nor are we a party to any leveraged derivative instrument, and all derivatives are designated as hedges. We are not a party to master netting arrangements, and we do not offset the fair value of derivative contracts with the same counterparty in our financial statement disclosures. The use of derivative financial instruments is monitored through regular communication with senior management and the use of written guidelines.
Foreign currency exchange risk. We are potentially exposed to foreign currency fluctuations affecting net investments in subsidiaries, transactions (both third-party and intercompany) and earnings denominated in foreign currencies. We assess foreign currency risk based on transactional cash flows and translational volatility and may enter into forward contract and currency swaps with highly-rated financial institutions to reduce fluctuations in the long or short currency positions. Currency swap agreements are established in conjunction with the terms of the underlying debt issues.
The following is a summary of the notional amounts of outstanding foreign currency exchange contracts as of February 29, 2024 and November 30, 2023 (in millions):
February 29, 2024November 30, 2023
Fair value hedges$787.0 $765.4 
Cash flow hedge166.7 235.0 
Total$953.7 $1,000.4 
All of these contracts were designated as hedges of anticipated purchases denominated in a foreign currency or hedges of foreign currency denominated assets or liabilities. Hedge ineffectiveness was not material. All foreign currency exchange contracts outstanding at February 29, 2024 have durations of less than 18 months, including $208.5 million of notional contracts that have an initial duration of less than one month and are used to hedge short-term cash flow funding.
Contracts which are designated as hedges of foreign currency denominated assets are considered fair value hedges. These foreign currency exchange contracts manage both exposure to currency fluctuations in certain intercompany loans between subsidiaries as well as currency exposure to third-party non-functional currency assets or liabilities. Gains and losses from contracts that are designated as hedges of assets, liabilities or firm commitments are recognized through income, offsetting the change in fair value of the hedged item. Contracts which are designated as hedges of anticipated purchases denominated in a foreign currency (generally purchases of inventory in U.S. dollars by operating units outside the U.S.) are considered cash flow hedges. The gains and losses on these contracts are deferred in accumulated other comprehensive income until the hedged item is recognized in cost of goods sold, at which time the net amount deferred in accumulated other comprehensive income is also recognized in cost of goods sold.
We also utilize cross currency interest rate swap contracts that are designated as net investment hedges. Any gains or losses on net investment hedges are included in foreign currency translation adjustments in accumulated other comprehensive loss.
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Interest rate risk. We finance a portion of our operations with both fixed and variable rate debt instruments, principally commercial paper, notes and bank loans. We utilize interest rate derivative contracts, including interest rate swap agreements, to minimize worldwide financing costs and to achieve a desired mix of variable and fixed rate debt.
The following table discloses the notional amount and fair values of derivative instruments on our balance sheet (in millions):
Asset DerivativesLiability Derivatives
 Balance sheet
location
Notional
amount
Fair
value
Balance sheet
location
Notional
amount
Fair
value
As of February 29, 2024
Interest rate contractsOther current
assets / Other long-term assets
$ $ Other long-term liabilities$600.0 $51.9 
Foreign exchange contractsOther current
assets
286.9 2.6 Other accrued
liabilities
666.8 18.1 
Cross currency contractsOther current assets / Other long-term assets716.8 27.9 Other long-term liabilities236.7 4.9 
Total$30.5 $74.9 
As of November 30, 2023
Interest rate contractsOther current
assets / Other long-term assets
$ $ Other long-term liabilities$600.0 $52.8 
Foreign exchange contractsOther current
assets
161.3 2.5 Other accrued
liabilities
839.1 16.0 
Cross currency contractsOther current
assets / Other long-term assets
719.6 24.6 Other long-term liabilities238.9 7.5 
Total$27.1 $76.3 
The following tables disclose the impact of derivative instruments on our other comprehensive income (OCI), accumulated other comprehensive loss (AOCI) and our consolidated income statement for the three months ended February 29, 2024 and February 28, 2023 (in millions):
Fair Value Hedges
DerivativeIncome statement
location
(Expense) income
  Three months ended February 29, 2024Three months ended February 28, 2023
Interest rate contractsInterest expense$(5.1)$(3.7)
Income statement locationGain (loss) recognized in incomeIncome statement locationGain (loss) recognized in income
DerivativeThree months ended February 29, 2024Three months ended February 28, 2023Hedged itemThree months ended February 29, 2024Three months ended February 28, 2023
Foreign exchange contractsOther income, net$(2.9)$1.0 Intercompany loansOther income, net$1.4 $(0.1)
The gains (losses) recognized on fair value hedges relating to currency exposure on third-party non-functional currency assets or liabilities were not material during the three months ended February 29, 2024 and February 28, 2023.
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Cash Flow Hedges
DerivativeGain (loss)
recognized in OCI
Income
statement
location
Gain (loss)
reclassified from
AOCI
Three months ended February 29, 2024Three months ended February 28, 2023 Three months ended February 29, 2024Three months ended February 28, 2023
Interest rate contracts$ $ Interest
expense
$(0.2)$0.1 
Foreign exchange contracts(0.2)(1.1)Cost of goods sold1.3 1.2 
Total$(0.2)$(1.1)$1.1 $1.3 

As of February 29, 2024, the net amount of accumulated other comprehensive loss associated with all cash flow and settled interest rate cash flow hedge derivatives expected to be reclassified in the next 12 months is $0.1 million as an increase to earnings.
Net Investment Hedges
DerivativeGain (loss)
recognized in OCI
Income
statement
location
Gain (loss)
excluded from the assessment of hedge effectiveness
 Three months ended February 29, 2024Three months ended February 28, 2023 Three months ended February 29, 2024Three months ended February 28, 2023
Cross currency contracts$(5.9)$(5.8)Interest
expense
$2.2 $3.3 
For all net investment hedges, no amounts have been reclassified out of accumulated other comprehensive loss. The amounts noted in the tables above for OCI do not include any adjustments for the impact of deferred income taxes.
Since the third quarter of 2023, we have maintained a nonrecourse accounts receivable sale program whereby certain eligible U.S. receivables are sold to a third-party financial institution in exchange for cash. The program provides us with an additional means for managing liquidity. Under the terms of the arrangement, we act as the collecting agent on behalf of the financial institution. We account for the transfer of receivables as a sale at the point control is transferred through derecognition of the receivable on our condensed consolidated balance sheet. The outstanding amount of receivables sold under this program were $19.2 million as of February 29, 2024. As collecting agent on the sold receivables, we had $4.2 million of cash collected that was not yet remitted to the third-party financial institution as of February 29, 2024. The incremental costs of selling receivables under this arrangement were insignificant for the three months ended February 29, 2024.
4.    FAIR VALUE MEASUREMENTS
Fair value can be measured using valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). Accounting standards utilize a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.
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At February 29, 2024 and November 30, 2023, we had no financial assets or liabilities that were subject to a level 3 fair value measurement. Our population of financial assets and liabilities subject to fair value measurements on a recurring basis are as follows (in millions):
February 29, 2024
  
Fair ValueLevel 1Level 2
Assets
Cash and cash equivalents$178.0 $178.0 $ 
Insurance contracts117.0  117.0 
Bonds and other long-term investments1.3 1.3  
Foreign currency derivatives2.6  2.6 
Cross currency contracts27.9  27.9 
Total$326.8 $179.3 $147.5 
Liabilities
Foreign currency derivatives$18.1 $ $18.1 
Interest rate derivatives51.9  51.9 
Cross currency contracts4.9  4.9 
Total$74.9 $ $74.9 
 
November 30, 2023
  
Fair ValueLevel 1Level 2
Assets
Cash and cash equivalents$166.6 $166.6 $ 
Insurance contracts114.7  114.7 
Bonds and other long-term investments0.3 0.3  
Foreign currency derivatives2.5  2.5 
Cross currency contracts24.6  24.6 
Total$308.7 $166.9 $141.8 
Liabilities
Foreign currency derivatives$16.0 $ $16.0 
Interest rate derivatives52.8  52.8 
Cross currency contracts7.5  7.5 
Total$76.3 $ $76.3 
At February 29, 2024 and November 30, 2023, the carrying amounts of interest rate derivatives, foreign currency derivatives, cross currency contracts, insurance contracts, and bond and other long-term investments were equal to their respective fair values. Because of their short-term nature, the amounts reported in the balance sheet for cash and cash equivalents, receivables, short-term borrowings and trade accounts payable approximate fair value. Investments in affiliates are not readily marketable, and it is not practicable to estimate their fair value.
Insurance contracts, bonds, and other long-term investments are comprised of fixed income and equity securities held for certain non-qualified U.S. employee benefit plans and are stated at fair value on the balance sheet. The fair values of insurance contracts are based upon the underlying values of the securities in which they are invested and are from quoted market prices from various stock and bond exchanges for similar type assets. The fair values of bonds and other long-term investments are based on quoted market prices from various stock and bond exchanges. The fair values for interest rate derivatives, foreign currency derivatives, and cross currency contracts are based on values for similar instruments using models with market-based inputs.
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The following table sets forth the carrying amounts and fair values of our long-term debt including the current portion thereof (in millions):
February 29, 2024November 30, 2023
Carrying amount$4,127.5 $4,139.2 
Level 1 valuation techniques$3,727.1 $3,682.0 
Level 2 valuation techniques144.8 159.0 
Total fair value$3,871.9 $3,841.0 
The fair value for Level 2 long-term debt is determined by using quoted prices for similar debt instruments.
5.     EMPLOYEE BENEFIT AND RETIREMENT PLANS    
We sponsor defined benefit pension plans in the U.S. and certain foreign locations. In addition, we sponsor defined contribution plans in the U.S. We also contribute to defined contribution plans in locations outside the U.S., including government-sponsored retirement plans. We also currently provide postretirement medical and life insurance benefits to certain U.S. employees and retirees. We previously froze the accrual of future benefits under certain defined benefit pension plans in the U.S. and certain foreign locations. Although our defined benefit plans in the U.S., United Kingdom and Canada have generally been frozen, employees who are participants in the plans retained benefits accumulated up to the date of the freeze, based on credited service and eligible earnings, in accordance with the terms of the plans.
The following table presents the components of our pension (income) and other postretirement benefits expense for the three months ended February 29, 2024 and February 28, 2023 (in millions):
 United States pensionInternational pensionOther postretirement benefits
 202420232024202320242023
Service cost$0.4 $0.5 $0.1 $0.2 $0.2 $0.3 
Interest costs9.3 9.0 2.7 2.5 0.6 0.6 
Expected return on plan assets(9.9)(10.6)(4.0)(3.7)  
Amortization of prior service costs0.1 0.1   (0.1)(0.1)
Amortization of net actuarial losses (gains)(0.1)0.1   (0.6)(0.5)
Total (income) expense $(0.2)$(0.9)$(1.2)$(1.0)$0.1 $0.3 
During the three months ended February 29, 2024 and February 28, 2023, we contributed $1.8 million and $1.9 million, respectively, to our pension plans. Total contributions to our pension plans in fiscal year 2023 were $9.2 million.
All of the amounts in the tables above for pension (income) and other postretirement benefits expense, other than service cost, were included in other income, net within our consolidated income statements. The net aggregate amount of pension and other postretirement benefits (income), excluding service cost components, was $(2.0) million and $(2.6) million for the three months ended February 29, 2024 and February 28, 2023, respectively.

6.    STOCK-BASED COMPENSATION
We have four types of stock-based compensation awards: restricted stock units ("RSUs"), stock options, company stock awarded as part of our long-term performance plan ("LTPP") and price-vested stock options. The following table sets forth the stock-based compensation expense recorded in selling, general and administrative ("SG&A") expense (in millions):
Three months ended
February 29, 2024February 28, 2023
Stock-based compensation expense$11.7 $11.8 

Our 2024 annual grant of stock options and RSUs will occur in the second quarter, similar to the 2023 annual grant. During the three months ended February 29, 2024, approximately 380,000 stock option shares were granted.

15

The following is a summary of our stock option activity for the three months ended February 29, 2024 and February 28, 2023:
 20242023
(shares in millions)Number
of
Shares
Weighted-
Average
Exercise
Price
Number
of
Shares
Weighted-
Average
Exercise
Price
Outstanding at beginning of period5.3 $70.43 4.8 $67.08 
Granted0.4 65.99   
Exercised(0.1)37.74 (0.1)49.50 
Outstanding at end of the period5.6 $70.54 4.7 $67.32 
Exercisable at end of the period3.9 $65.36 3.5 $58.79 
As of February 29, 2024, the intrinsic value (the difference between the exercise price and the market price) for all options outstanding was $38.4 million and for options currently exercisable was $37.3 million. The total intrinsic value of all options exercised during the three months ended February 29, 2024 and February 28, 2023 was $2.6 million and $2.1 million, respectively.
The following is a summary of our RSU activity for the three months ended February 29, 2024 and February 28, 2023:
 20242023
(shares in thousands)Number
of
Shares
Weighted-
Average
Grant-Date
Fair Value
Number
of
Shares
Weighted-
Average
Grant-Date
Fair Value
Outstanding at beginning of period494 $76.94 480 $77.62 
Vested(3)92.74 (26)52.48 
Forfeited(9)83.59 (7)88.35 
Outstanding at end of period482 $76.71 447 $78.89 
The following is a summary of our price-vested stock options activity for the three months ended February 29, 2024 and February 28, 2023:
 20242023
(shares in thousands)Number
of
Shares
Weighted-
Average
Grant-Date Fair Value
Number
of
Shares
Weighted-
Average
Grant-Date
Fair Value
Outstanding at beginning of period2,055 $9.40 2,107 $9.40 
Forfeited  (39)9.40 
Outstanding at end of period2,055 $9.40 2,068 $9.40 
The following is a summary of our LTPP activity for the three months ended February 29, 2024 and February 28, 2023:
 20242023
(shares in thousands)Number
of
Shares
Weighted-
Average
Grant-Date
Fair Value
Number
of
Shares
Weighted-
Average
Grant-Date
Fair Value
Outstanding at beginning of period474 $94.34 451 $106.32 
Granted192 66.49 167 89.00 
Vested(181)98.30 (176)86.14 
Forfeited(10)91.65 (11)94.58 
Outstanding at end of period475 $81.53 431 $93.64 

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7.    INCOME TAXES
Income tax expense for the three months ended February 29, 2024 included $1.6 million of discrete tax expense consisting principally of the following: (i) $1.1 million of tax expense resulting from a state tax matter, and (ii) $0.5 million of tax expense associated with stock-based compensation.
Income tax expense for the three months ended February 28, 2023 included $3.8 million of net discrete tax benefits consisting principally of the following: (i) $3.2 million of tax benefits associated with the adjustment of a valuation allowance due to changes in judgment about the realizability of the deferred tax asset, (ii) $0.8 million of tax benefits related to the revaluation of deferred taxes resulting from changes in tax rates, and (iii) $0.2 million of tax expense associated with stock-based compensation.
Other than additions for current year tax positions, there were no significant changes to unrecognized tax benefits during the three months ended February 29, 2024.
As of February 29, 2024, we believe the reasonably possible total amount of unrecognized tax benefits that could increase or decrease in the next 12 months as a result of various statute expirations, audit closures, and/or tax settlements would not be material to our consolidated financial statements.

8.    CAPITAL STOCK AND EARNINGS PER SHARE
The following table sets forth the reconciliation of average shares outstanding (in millions):
Three months ended
February 29, 2024February 28, 2023
Average shares outstanding – basic268.4 268.2 
Effect of dilutive securities:
Stock options/RSUs/LTPP1.2 1.6 
Average shares outstanding – diluted269.6 269.8 
The following table sets forth the stock options and RSUs that were not considered in our earnings per share calculation since they were anti-dilutive (in millions):
Three months ended
February 29, 2024February 28, 2023
Anti-dilutive securities3.5 1.6 
The following table sets forth common stock activity (in millions):
Three months ended
February 29, 2024February 28, 2023
Shares issued under stock options, RSUs, LTPP and employee stock purchase plans 0.3 0.3 
Shares repurchased under the stock repurchase program and shares withheld for taxes under stock options, RSUs, and LTPP0.1 0.1 
As of February 29, 2024, $501.2 million remained of the $600 million share repurchase program authorization approved by our Board of Directors in November 2019.
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9.    ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table sets forth the components of accumulated other comprehensive loss, net of tax, where applicable (in millions):

February 29, 2024November 30, 2023
Foreign currency translation adjustment (1)
$(308.0)$(305.7)
Unrealized gain (loss) on foreign currency exchange contracts(1.8)0.8 
Unamortized value of settled interest rate swaps(2.6)(2.7)
Pension and other postretirement costs(81.3)(81.0)
Accumulated other comprehensive loss$(393.7)$(388.6)
(1)During the three months ended February 29, 2024, the foreign currency translation adjustment of accumulated other comprehensive loss increased on a net basis by $2.3 million, inclusive of $5.9 million of unrealized losses associated with net investment hedges. These net investment hedges are more fully described in note 3.

The following table sets forth the amounts reclassified from accumulated other comprehensive income (loss) and into consolidated net income (in millions):
Three months endedAffected Line Items in the Condensed Consolidated Income Statement
February 29, 2024February 28, 2023
(Gains)/losses on cash flow hedges:
Interest rate derivatives$0.2 $(0.1)Interest expense
Foreign exchange contracts(1.3)(1.2)Cost of goods sold
Total before tax(1.1)(1.3)
Tax effect0.3 0.3 Income tax expense
Net, after tax$(0.8)$(1.0)
Amortization of pension and postretirement benefit adjustments:
Amortization of net actuarial (gains)(1)
$(0.7)$(0.4)Other income, net
Total before tax(0.7)(0.4)
Tax effect0.2 0.1 Income tax expense
Net, after tax$(0.5)$(0.3)
(1)This accumulated other comprehensive income (loss) component is included in the computation of total pension (income) and other postretirement benefits expense (refer to note 5 for additional details).

10.    BUSINESS SEGMENTS
We operate in two business segments: consumer and flavor solutions. The consumer and flavor solutions segments manufacture, market and distribute spices, herbs, seasoning mixes, condiments and other flavorful products throughout the world. Our consumer segment sells to retail channels, including grocery, mass merchandise, warehouse clubs, discount and drug stores, and e-commerce under the “McCormick” brand and a variety of brands around the world, including “French’s”, “Frank’s RedHot”, “OLD BAY”, “Lawry’s”, “Zatarain’s”, “Simply Asia”, “Thai Kitchen”, “Ducros”, “Vahine”, “Cholula”, “Schwartz”, “Club House”, “Kamis”, “DaQiao”, “La Drogheria”, “Stubb's”, and “Gourmet Garden”. Our flavor solutions segment sells to food manufacturers and the foodservice industry both directly and indirectly through distributors, with the exception of our business in China, where foodservice sales are managed by and reported in our consumer segment.
We measure segment performance based on operating income excluding special charges, as this activity is managed separately from the business segments.
18

Although the segments are managed separately due to their distinct distribution channels and marketing strategies, manufacturing and warehousing are often integrated to maximize cost efficiencies. We do not segregate jointly utilized assets by individual segment for purposes of internal reporting, performance evaluation, or capital allocation. Because of manufacturing integration for certain products within the segments, products are not sold from one segment to another but rather inventory is transferred at cost. Intersegment sales are not material.
ConsumerFlavor SolutionsTotal
 (in millions)
Three months ended February 29, 2024
Net sales$921.5 $681.2 $1,602.7 
Operating income excluding special charges176.3 61.4 237.7 
Income (loss) from unconsolidated operations21.5 (0.2)21.3 
Three months ended February 28, 2023
Net sales$909.5 $656.0 $1,565.5 
Operating income excluding special charges173.4 53.4 226.8 
Income from unconsolidated operations13.8 0.2 14.0 

A reconciliation of operating income excluding special charges to operating income is as follows (in millions):
ConsumerFlavor SolutionsTotal
Three months ended February 29, 2024
Operating income excluding special charges$176.3 $61.4 $237.7 
Less: Special charges1.8 2.4 4.2 
Operating income$174.5 $59.0 $233.5 
Three months ended February 28, 2023
Operating income excluding special charges$173.4 $53.4 $226.8 
Less: Special charges19.0 8.8 27.8 
Operating income$154.4 $44.6 $199.0 
Total segment operating income as disclosed in the preceding table represents our consolidated operating income. The reconciliation of that operating income to income from consolidated operations before income taxes, which includes interest expense and other income, net is presented on the consolidated income statement.
The following table sets forth our net sales, by geographic area, for the three months ended February 29, 2024 and February 28, 2023 (in millions):
AmericasEMEAAPACTotal
Three months ended February 29, 2024
$1,117.1 $306.7 $178.9 $1,602.7 
Three months ended February 28, 2023
1,094.7 283.9 186.9 1,565.5 

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help the reader understand McCormick & Company, Incorporated, our operations, and our present business environment from the perspective of management. MD&A is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and the accompanying notes thereto, included in Item 1 of this report. We use certain non-GAAP information more fully described below under the caption Non-GAAP Financial Measures that we believe is important for purposes of comparison to prior periods and development of future projections and earnings growth prospects. This information is also used by management to measure the profitability of our ongoing operations and analyze our business performance and trends. Unless otherwise noted, the dollar and share information in the charts and tables in MD&A are in millions, except per share data.
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Business profile
McCormick is a global leader in flavor. We manufacture, market and distribute spices, seasoning mixes, condiments and other flavorful products to the entire food industry retailers, food manufacturers and the foodservice business. In fiscal year 2023, approximately 39% of our sales were outside of the U.S. We also are partners in a number of joint ventures that are involved in the manufacture and sale of flavorful products, the most significant of which is McCormick de Mexico. We manage our business in two business segments, consumer and flavor solutions.
Executive Summary
In the first quarter of 2024, we achieved net sales growth of 2.4% over the first quarter 2023 level, including impact from the following factors:
Pricing actions, principally implemented in the prior year, contributed 2.7% to the increase in net sales.
Volume and product mix unfavorably impacted our net sales growth by 1.0%, exclusive of divestitures. Our decisions to exit certain low margin businesses contributed approximately 0.6% to the unfavorable impact of volume and product mix. The consumer segment experienced unfavorable volume and product mix of 2.2% and the flavor solutions segment experienced favorable product and mix of 0.7%.
Divestitures negatively impacted our net sales increase by 0.2%.
Net sales growth was positively impacted by fluctuations in currency rates that increased sales growth by 0.9%. Excluding this impact, we grew sales by 1.5% over the prior year quarter on a constant currency basis.
Operating income was $233.5 million in the first quarter of 2024 and $199.0 million in the comparable 2023 period. We recorded $4.2 million and $27.8 million of special charges in the first quarter of 2024 and 2023, respectively, related to organization and streamlining actions. In the first quarter of 2024, the effects of a 140 basis points improvement in our gross profit margin, primarily associated with the effects of favorable product mix, pricing actions that were implemented in the prior year and cost savings from our GOE and CCI programs, that were partially offset by commodity inflation. Also, in the first quarter of 2024, selling, general and administrative expenses as a percentage of sales increased 110 basis points, including a 90 basis points impact associated with the higher level of advertising and promotion expenses. Excluding special charges, adjusted operating income was $237.7 million in the first quarter of 2024, an increase of 4.8%, compared to $226.8 million in the year-ago period. In constant currency, adjusted operating income increased 4.3%.
Diluted earnings per share was $0.62 and $0.52 in the first quarter of 2024 and 2023, respectively. The increase in diluted earnings per share for the first quarter of 2024 was driven primarily by the impact of higher operating income, including the effects of lower special charges, the unfavorable effects of an increase in the effective tax rate, and the favorable effects of an increase in income from unconsolidated operations. Special charges lowered earnings per share by $0.01 and $0.07 in the first quarter of 2024 and 2023, respectively. Excluding the effects of special charges, adjusted diluted earnings per share was $0.63 in the first quarter of 2024 and $0.59 in the first quarter of 2023, or an increase of 6.8%.
A detailed review of our first quarter 2024 performance compared to the first quarter of fiscal 2023 appears in the section titled “Results of Operations – Company” and “Results of Operations – Segments”. For a reconciliation of non-GAAP to reported amounts, see the subsequent discussion under the heading "Non-GAAP Financial Measures".
Recent Events
Our industry continues to be impacted by commodity cost inflation, labor cost inflation, and other global macro-economic conditions. While we are seeing moderation in input cost inflation from that experienced in 2023, we expect inflationary pressures to persist into fiscal 2024. However, we anticipate GOE program and CCI program-led cost savings as well as previously implemented pricing actions to mitigate those inflationary pressures. We will also be lapping 2023 price increases and anticipate favorable net price realization in 2024. Additionally, in some instances, the pricing actions we take have been impacted by consumer behavior, or price elasticity, which unfavorably impacts our sales volume and mix.
We are fueling our investment in growth with cost savings from our CCI program, an ongoing initiative to improve productivity and reduce costs throughout the organization, as well as savings from the organization and streamlining actions described in note 2 of notes to our consolidated financial statements that includes our GOE program. Our CCI and GOE programs both delivered cost savings in 2023. Our CCI program funds brand marketing support, product innovation and other growth initiatives. We expect our CCI program, GOE program, and other organization and streamlining actions to deliver additional savings in 2024.
20

2024 Outlook
In 2024, we expect net sales to range from a decline of 2% to 0% from our net sales in 2023 including a 1% unfavorable impact of foreign currency rates, or to range from a decline of 1% to an increase of 1% on a constant currency basis. We anticipate that the 2024 sales change will include a favorable impact from previously implemented pricing actions. We anticipate that our volume and product mix will be impacted by the divestiture of our Giotti canning business in the third quarter of last year, and the pruning of low margin businesses.
We expect our 2024 gross profit margin to range from 50 basis points to 100 basis points higher than our gross profit margin of 37.6% in 2023. The projected 2024 increase in gross profit margin is principally due to the net effect of (i) the favorable impact of pricing actions, (ii) the favorable impacts of product mix, (iii) the favorable impact of anticipated Global Operating Effectiveness Program and CCI cost savings, and (iv) a low single-digit percentage impact of inflation in 2024 compared to 2023.
In 2024, we expect an increase in operating income of 8% to 10%, which includes a 1% unfavorable impact from foreign currency rates, over the 2023 level. The projected 2024 change in operating income includes the effects of the anticipated increase in our gross profit margin as well as SG&A cost savings from our CCI and GOE programs, which will be partially offset by our investments to drive volume growth, including brand marketing. We expect our brand marketing investments in 2024 to increase in the high-single digits over the 2023 level. We also expect approximately $15 million of special charges in 2024 that relate to previously announced organization and streamlining actions; in 2023, special charges were $61.2 million. Excluding special charges, we expect 2024’s adjusted operating income to increase by 3% to 5%, which includes a 1% unfavorable impact from foreign currency rates, or to increase by 4% to 6% on a constant currency basis.
We estimate that our 2024 effective tax rate, including the net favorable impact of anticipated discrete tax items, will be 22% as compared to 21.8% in 2023. Excluding projected taxes associated with special charges, we estimate that our adjusted effective tax rate will be approximately 22% in 2024, or comparable to an adjusted effective tax rate of 22.0% in 2023.
We also expect that our income from unconsolidated operations, including the performance of our largest joint venture, McCormick de Mexico, will increase by a mid-teens percentage rate over the 2023 level.
Diluted earnings per share was $2.52 in 2023. Diluted earnings per share for 2024 is projected to range from $2.76 to $2.81. Excluding the per share impact of special charges of $61.2 million adjusted diluted earnings per share was $2.70 in 2023. Adjusted diluted earnings per share, excluding an estimated per share impact from special charges of $0.04, is projected to range from $2.80 to $2.85 in 2024, or an increase of 4% to 6% over adjusted diluted earnings per share of $2.70 in 2023.
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RESULTS OF OPERATIONS – COMPANY
 Three months ended
February 29, 2024February 28, 2023
Net sales$1,602.7 $1,565.5 
Percent increase 2.4 %2.8 %
Components of percent change in net sales increase (decrease):
               Pricing actions2.7 %10.6 %
               Volume and product mix(1.0)%(4.6)%
 Divestitures(0.2)%(0.7)%
               Foreign exchange0.9 %(2.5)%
Gross profit$599.3 $562.9 
Gross profit margin37.4 %36.0 %
Sales for the first quarter of 2024 increased by 2.4% from the prior year level and increased by 1.5% on a constant currency basis (that is, excluding the impact of foreign currency exchange as more fully described under the caption, Non-GAAP Financial Measures). Pricing actions increased sales by 2.7% as compared to the prior year period principally due to pricing actions implemented in the prior year. Unfavorable volume and product mix decreased sales by 1.0%, including the impact of price elasticity. Unfavorable volume and product mix in our consumer segment exceeded the favorable volume and product mix in our flavor solutions segment. Our decisions to discontinue certain low margin businesses contributed approximately 0.6% to the unfavorable impact of volume and product mix. Also, the divestiture of our Giotti canning business unfavorably impacted sales by 0.2% as compared to the prior year period. Sales were also impacted by favorable foreign currency rates that increased net sales by 0.9% in the first quarter of 2024 compared to the year-ago quarter and is excluded from our measure of sales growth of 1.5% on a constant currency basis.
Gross profit for the first quarter of 2024 increased by $36.4 million, or 6.5%, from the comparable period in 2023. Our gross profit margin for the three months ended February 29, 2024 was 37.4%, an increase of 140 basis points from the comparable period in 2023. The increase in gross profit margin in the quarter ended February 29, 2024 was driven by the favorable impact of our pricing actions, as previously described, favorable product and customer mix, and cost savings led by our CCI and GOE programs. These favorable impacts were partially offset by increased commodity costs as compared to the 2023 period.
 Three months ended
February 29, 2024February 28, 2023
Selling, general & administrative expense (SG&A)$361.6 $336.1 
Percent of net sales22.6 %21.5 %
SG&A increased by $25.5 million in the first quarter of 2024 as compared to the 2023 level, driven primarily by advertising and promotional spend, increased selling and market costs and a higher investment in research and development. These costs were partially offset by CCI-led and GOE cost savings, as compared to the 2023 period. SG&A as a percentage of net sales increased by 110 basis points from the prior year levels due primarily to a 90 basis point increase in advertising and promotional expenses as compared to the prior year period.

 Three months ended
February 29, 2024February 28, 2023
Total special charges$4.2 $27.8 

During the three months ended February 29, 2024, we recorded $4.2 million of special charges. Those special charges principally consisted of $2.8 million associated with the GOE program and $1.4 million associated with the transition of a manufacturing facility in Europe, Middle East, and Africa (EMEA).
During the three months ended February 28, 2023, we recorded $27.8 million of special charges. Those special charges principally consisted of $24.8 million associated with the GOE program, including $19.7 million under our voluntary retirement program, $0.9 million associated with the transition of a manufacturing facility in EMEA, and streamlining actions of $1.3 million in the Americas region and $0.8 million in the EMEA region.
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Details with respect to the composition of special charges are included in note 2 of the notes to the accompanying condensed consolidated financial statements.

 Three months ended
February 29, 2024February 28, 2023
Interest expense$50.3 $50.6 
Other income, net11.1 11.1 

Interest expense decreased slightly in the three months ended February 29, 2024, as compared to the prior year period, driven by the effects of a reduction in average borrowing levels which were partially offset by higher short-term interest rates. Other income, net for the three months ended February 29, 2024 remained consistent, as compared to the prior year period.

 Three months ended
February 29, 2024February 28, 2023
Income from consolidated operations before income taxes$194.3 $159.5 
Income tax expense 49.6 34.4 
Effective tax rate25.5 %21.6 %
The provision for income taxes is based on the estimate of the annual effective tax rate adjusted to reflect the tax impact of items discrete to the fiscal period. We record tax expense or tax benefits that do not relate to ordinary income in the current fiscal year discretely in the period in which such items occur pursuant to the requirements of U.S. GAAP. Examples of such types of discrete items not related to ordinary income include, but are not limited to, excess tax benefits or expense associated with stock-based compensation, changes in estimates of the outcome of tax matters related to prior years, including reversals of reserves upon the lapsing of statutes of limitations, provision-to-return adjustments, the settlement of tax audits, changes in enacted tax rates, and changes in the assessment of deferred tax valuation allowances.
Income tax expense for the three months ended February 29, 2024 included $1.6 million of discrete tax expense consisting principally of $1.1 million of tax expense resulting from a state tax matter, and $0.5 million of tax expense associated with stock-based compensation.
Income tax expense for the three months ended February 28, 2023 included $3.8 million of net discrete tax benefits consisting principally of $3.2 million of tax benefits associated with the adjustment of a valuation allowance due to changes in judgment about the realizability of the deferred tax asset, $0.8 million of tax benefits related to the revaluation of deferred taxes resulting from changes in tax rates, and $0.2 million of tax expense associated with stock-based compensation.
 Three months ended
February 29, 2024February 28, 2023
Income from unconsolidated operations$21.3 $14.0 

Income from unconsolidated operations, which is presented net of the elimination of earnings attributable to non-controlling interests, increased by $7.3 million for the three months ended February 29, 2024, as compared to the year ago period. The increase was driven by higher earnings of our largest joint venture, McCormick de Mexico.
The following table outlines the major components of the change in diluted earnings per share from 2023 to 2024:
Three months ended February 28, 2023 and February 29, 2024
2023 Earnings per share – diluted$0.52 
Impact of change in operating income0.04 
Decrease in special charges, net of taxes0.06 
Increase in income from unconsolidated operations0.03 
Impact of change in effective income tax rate, excluding taxes on special charges(0.03)
2024 Earnings per share – diluted$0.62 
23

RESULTS OF OPERATIONS — SEGMENTS
We measure the performance of our business segments based on operating income, excluding special charges for the periods presented. See note 10 of the notes to our accompanying condensed consolidated financial statements for additional information on our segment measures as well as for a reconciliation by segment of operating income, excluding special charges, to consolidated operating income. In the following discussion, we refer to our previously described measure of segment profit as segment operating income.
CONSUMER SEGMENT
 Three months ended
 February 29, 2024February 28, 2023
  
Net sales$921.5 $909.5 
Percent increase (decrease)1.3 %(1.8)%
Segment operating income$176.3 $173.4 
Segment operating income margin19.1 %19.1 %
In the first quarter of 2024, sales of our consumer segment increased by 1.3% as compared to the first quarter of 2023 and increased by 0.7% on a constant currency basis. The 1.3% increase was driven primarily by EMEA partially offset by lower sales in the APAC region, all as compared to the prior year quarter. Pricing actions favorably impacted sales by 2.9% as compared to the prior year period principally due to pricing actions implemented in the prior year. Unfavorable volume and product mix decreased consumer segment sales by 2.2% in the first quarter of 2024 as compared to the same period last year, including the impact of price elasticity. Our decision to discontinue certain low margin businesses also contributed 0.8% to the unfavorable impact of volume and product mix. Sales in the first quarter of 2024 reflected a favorable impact from foreign currency rates that increased consumer segment sales by 0.6% compared to the year-ago quarter and is excluded from our measure of sales growth of 0.7% on a constant currency basis.
In the Americas region, consumer sales increased 0.1% in the first quarter of 2024 as compared to the same quarter of 2023 and increased by 0.1% on a constant currency basis. Pricing actions, principally implemented in the prior year, increased sales by 2.7% as compared to the prior year period. For the first quarter of 2024, unfavorable volume and product mix decreased sales by 2.6% as compared to the corresponding period in 2023. This reduction included a 1.1% impact of our decision to discontinue a low margin business. Foreign currency rates did not have a significant impact on sales in the quarter. Our sales growth on a constant currency basis was 0.1% for the quarter.
In the EMEA region, consumer sales increased 13.3% in the first quarter of 2024 as compared to the same quarter of 2023 and increased by 8.2% on a constant currency basis. Pricing actions, principally implemented in the prior year, increased sales by 5.3% as compared to the 2023 period. Sales were favorably impacted by volume and product mix during the first quarter of 2024 and increased sales by 2.9% from the prior year level. During the first quarter of 2024, a favorable impact from foreign currency rates increased sales by 5.1% compared to the year-ago period and is excluded from our measure of sales growth of 8.2% on a constant currency basis.
In the APAC region, consumer sales decreased 7.4% in the first quarter of 2024 as compared to the first quarter of 2023 and decreased by 5.4% on a constant currency basis. Pricing actions, principally implemented in the prior year, increased sales by 0.9% as compared to the prior year period. For the quarter ended February 29, 2024, unfavorable volume and product mix decreased sales by 6.3%, which included the effects of customer inventory reductions. During the first quarter of 2024, an unfavorable impact from foreign currency rates decreased sales by 2.0% compared to the year-ago period and is excluded from our measure of sales decline of 5.4% on a constant currency basis.
Segment operating income for our consumer segment increased by $2.9 million, or 1.7%, in the first quarter of 2024 from the first quarter of 2023. The increase in segment operating income was driven by the effects of an increase in gross profit primarily due to favorable pricing actions and CCI-led and GOE cost savings more than offsetting increased commodity costs and SG&A expenses, that was primarily driven by higher advertising and promotion expenses, all as compared to the prior year period. Segment operating margin for our consumer segment in the first quarter of 2024 was 19.1% and was comparable to the first quarter of 2023 as an increase in gross margin was offset by an increase in SG&A as a percentage of sales, driven by an increase in advertising and promotion spend, all as compared to the prior year period. On a constant currency basis, segment operating income for our consumer segment increased by 1.4% in the first quarter of 2024 in comparison to the same period in 2023.
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FLAVOR SOLUTIONS SEGMENT
 Three months ended
 February 29, 2024February 28, 2023
 
Net sales$681.2 $656.0 
Percent increase3.8 %10.0 %
Segment operating income$61.4 $53.4 
Segment operating income margin9.0 %8.1 %
In the first quarter of 2024, sales of our flavor solutions segment increased by 3.8% as compared to the first quarter of 2023 and increased by 2.5% on a constant currency basis. Pricing actions across all regions increased sales by 2.4% in the first quarter of 2024 as compared to the prior year period principally due to pricing actions implemented in the prior year. Favorable volume and product mix increased segment sales by 0.7% as compared to the prior period as growth in the Americas and APAC regions were partially offset by lower volume and product mix in the EMEA region. Volume and product mix includes a 0.4% unfavorable impact from the prior year associated with our decision to discontinue certain low margin businesses. The divestiture of our Giotti canning business unfavorably impacted sales by 0.6% as compared to the prior year period. The favorable impact of foreign currency rates increased flavor solutions segment sales by 1.3% compared to the year-ago quarter and is excluded from our measure of sales growth of 2.5% on a constant currency basis.
In the Americas region, flavor solutions sales increased by 4.7% in the first quarter of 2024 as compared to the first quarter of 2023 and increased by 3.4% on a constant currency basis. Pricing actions, principally due to those implemented in the prior year, favorably impacted sales by 1.9% during the quarter ended February 29, 2024, as compared to the prior year period. Favorable volume and product mix increased flavor solutions sales in the Americas by 1.5% during the first quarter of 2024, including the effects of growth in sales to packaged food and nutrition and healthcare companies, as compared to the prior year period. A favorable impact from foreign currency rates increased sales by 1.3% compared to the first quarter of 2023 and is excluded from our measure of sales growth of 3.4% on a constant currency basis.
In the EMEA region, flavor solutions sales increased by 1.8% in the first quarter of 2024 as compared to the first quarter of 2023 and declined by 1.4% on a constant currency basis. Pricing actions, principally due to those implemented in the prior year, favorably impacted sales by 4.0% in the first quarter of 2024 as compared to the prior period level. Unfavorable volume and product mix decreased segment sales in the EMEA region by 2.5% as compared to the corresponding period in 2023 including the effects of consumer spending at quick service restaurants and packaged food and beverage companies and a 1.8% impact of our decision to discontinue a low margin business. The divestiture of our Giotti canning business unfavorably impacted sales by 2.9% as compared to the prior year period. A favorable impact from foreign currency rates increased sales by 3.2% compared to the first quarter of 2023 and is excluded from our measure of sales decline of 1.4% on a constant currency basis.
In the APAC region, flavor solutions sales increased 1.5% in the first quarter of 2024 as compared to the first quarter of 2023 and increased by 4.5% on a constant currency basis. Pricing actions, principally due to those implemented in the prior year, favorably impacted sales by 3.5% as compared to the prior year period. Favorable volume and product mix increased segment sales by 1.0% in the first quarter of 2024. An unfavorable impact from foreign currency rates decreased sales by 3.0% compared to the first quarter of 2023 and is excluded from our measure of sales growth of 4.5% on a constant currency basis.
Segment operating income for our flavor solutions segment increased by $8.0 million, or 15.0%, in the first quarter of 2024 as compared to the first quarter of 2023. The increase in segment operating income was driven by the effects of an increase in gross profit primarily due to the higher level of sales driven by favorable pricing, product and customer mix, and CCI-led and GOE cost savings which more than offset increased commodity and conversion costs and the higher level of SG&A expenses. Segment operating margin for our flavor solutions segment increased by 90 basis points from the prior year level to 9.0% in the first quarter of 2024. That increase was principally the result of an increase in gross margin, as previously described, which was partially offset by a higher level of SG&A as a percentage of sales, all as compared to 2023. On a constant currency basis, segment operating income for our flavor solutions segment increased by 13.7% in the first quarter of 2024 as compared to the same period in 2023.

MARKET RISK SENSITIVITY
We utilize derivative financial instruments to enhance our ability to manage risk, including foreign exchange and interest rate exposures, which exist as part of our ongoing business operations. We do not enter into contracts for trading purposes, nor are we a party to any leveraged derivative instrument. The use of derivative financial instruments is monitored through regular communication with senior management and the utilization of written guidelines.
25


Foreign Exchange Risk
We are exposed to foreign currency risk affecting net investments in subsidiaries, transactions (both third-party and intercompany) and earnings denominated in foreign currencies. Management assesses foreign currency risk based on transactional cash flows and translational volatility and may enter into forward contract and currency swaps with highly-rated financial institutions to reduce fluctuations in the long or short currency positions. We do not enter into contracts for trading purposes, nor are we a party to any leveraged derivative instruments. All derivatives are designated as hedges.
The following table sets forth the notional values and unrealized net gain (loss) of the portfolio of our forward foreign currency and cross currency swap contracts:
February 29, 2024November 30, 2023
Forward foreign currency:
  Notional value$953.7 $1,000.4 
  Unrealized net gain (loss)(15.5)(13.5)
Cross currency swaps:
  Notional value953.5 958.5 
  Unrealized net gain 23.0 17.1 
The outstanding notional value is a result of our decisions on foreign currency exposure coverage, based on our foreign currency and foreign currency translation exposures.
Interest Rate Risk
We manage our interest rate exposure by entering into both fixed and variable rate debt arrangements. We use interest rate swaps to minimize worldwide financing costs and to achieve a desired mix of fixed and variable rate debt. We do not enter into contracts for trading purposes, nor are we a party to any leveraged derivative instruments, and all derivatives are designated as hedges.
The following table sets forth the notional values and unrealized net gain (loss) of our interest rate swap contracts:
February 29, 2024November 30, 2023
Notional value$600.0 $600.0 
Unrealized net (loss)(51.9)(52.8)
The change in fair values of our interest rate swap contracts is due to changes in interest rates on the notional amounts outstanding as of each date as well as the remaining duration of our interest rate derivative contracts.
Commodity Risk
We purchase certain raw materials which are subject to price volatility caused by weather, market conditions, growing and harvesting conditions, governmental actions and other factors beyond our control. Our most significant raw materials are dairy products, pepper, onion, garlic, capsicums (red peppers and paprika), tomato products, salts, and wheat products. While future movements of raw material costs are uncertain, we respond to this volatility in a number of ways, including strategic raw material purchases, purchases of raw material for future delivery and customer price adjustments. We generally have not used derivatives to manage the volatility related to this risk.
Credit Risk
The customers of our consumer segment are predominantly food retailers and food wholesalers. Consolidations in these industries have created larger customers. In addition, competition has increased with the growth in alternative channels including mass merchandisers, dollar stores, warehouse clubs, discount chains and e-commerce. This has caused some customers to be less profitable and increased our exposure to credit risk. Some of our customers and counterparties are highly leveraged. We continue to closely monitor the credit worthiness of our customers and counterparties. We believe that our allowance for doubtful accounts properly recognizes trade receivables at realizable value. We consider nonperformance credit risk for other financial instruments to be insignificant.
26

NON-GAAP FINANCIAL MEASURES
The following table includes financial measures of adjusted operating income, adjusted operating income margin, adjusted income tax expense, adjusted income tax rate, adjusted net income and adjusted diluted earnings per share. These represent non-GAAP financial measures, which are prepared as a complement to our financial results prepared in accordance with United States generally accepted accounting principles. These financial measures exclude the impact of special charges and the associated income tax effects, as applicable.
Special charges consist of expenses and income, as applicable, associated with certain actions undertaken by us to reduce fixed costs, simplify or improve processes, and improve our competitiveness and are of such significance in terms of both up-front costs and organizational/structural impact to require advance approval by our Management Committee. Expenses associated with the approved actions are classified as special charges upon recognition and monitored on an on-going basis through completion.
Details with respect to the composition of special charges set forth below are included in note 2 of the notes to our accompanying condensed consolidated financial statements. Details with respect to the composition of special charges for the year ended November 30, 2023 are included in note 3 of the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended November 30, 2023.
We believe that these non-GAAP financial measures are important. The exclusion of the items noted above provides additional information that enables enhanced comparisons to prior periods and, accordingly, facilitates the development of future projections and earnings growth prospects. This information is also used by management to measure the profitability of our ongoing operations and analyze our business performance and trends.
These non-GAAP financial measures may be considered in addition to results prepared in accordance with GAAP, but they should not be considered a substitute for, or superior to, U.S. GAAP results. In addition, these non-GAAP financial measures may not be comparable to similarly titled measures of other companies because other companies may not calculate them in the same manner that we do. We intend to continue to provide these non-GAAP financial measures as part of our future earnings discussions and, therefore, the inclusion of these non-GAAP financial measures will provide consistency in our financial reporting.
27

A reconciliation of these non-GAAP financial measures to the related GAAP financial measures follows:
For the year ended November 30, 2023For the three months ended Estimated for the year ending November 30, 2024
February 29, 2024February 28, 2023
Operating income$963.0 $233.5 $199.0 
Impact of special charges
61.2 4.2 27.8 
Adjusted operating income$1,024.2 $237.7 $226.8 
Operating income margin (1)
14.5 %14.6 %12.7 %
Impact of special charges0.9 %0.2 %1.8 %
Adjusted operating income margin (1)
15.4 %14.8 %14.5 %
Income tax expense$174.5 $49.6 $34.4 
Impact of special charges14.5 1.1 6.5 
Adjusted income tax expense $189.0 $50.7 $40.9 
Income tax rate (2)
21.8 %25.5 %21.6 %
Impact of special charges0.2 %— %0.2 %
Adjusted income tax rate (2)
22.0 %25.5 %21.8 %
Net income$680.6 $166.0 $139.1 
Impact of special charges46.7 3.1 21.3 
Adjusted net income$727.3 $169.1 $160.4 
Earnings per share – diluted$2.52 $0.62 $0.52 $2.76 to $2.81
Impact of special charges0.18 0.01 0.07 0.04 
Adjusted earnings per share – diluted$2.70 $0.63 $0.59 $2.80 to $2.85
(1)Operating income margin, impact of special charges, and adjusted operating income margin are calculated as operating income, impact of special charges, and adjusted operating income as a percentage of net sales for each period presented.
(2)Income tax rate is calculated as income tax expense as a percentage of income from consolidated operations before income taxes. Adjusted income tax rate is calculated as adjusted income tax expense as a percentage of income from consolidated operations before income taxes excluding special charges of $198.5 million and $187.3 million for the three months ended February 29, 2024, and February 28, 2023 respectively. Adjusted income tax rate is calculated as adjusted income tax expense as a percentage of income from consolidated operations before income taxes excluding special charges of $859.9 million for the year ended November 30, 2023.
Because we are a multi-national company, we are subject to variability of our reported U.S. dollar results due to changes in foreign currency exchange rates. Those changes have been volatile over the past several years. The exclusion of the effects of foreign currency exchange, or what we refer to as amounts expressed “on a constant currency basis”, is a non-GAAP measure. We believe that this non-GAAP measure provides additional information that enables enhanced comparison to prior periods excluding the translation effects of changes in rates of foreign currency exchange and provides additional insight into the underlying performance of our operations located outside of the U.S. It should be noted that our presentation herein of amounts and percentage changes on a constant currency basis does not exclude the impact of foreign currency transaction gains and losses (that is, the impact of transactions denominated in other than the local currency of any of our subsidiaries in their local currency reported results).

Percentage changes in sales and adjusted operating income expressed on a constant currency basis are presented excluding the impact of foreign currency exchange. To present this information for historical periods, current period results for entities reporting in currencies other than the U.S. dollar are translated into U.S. dollars at the average exchange rates in effect during the corresponding period of the comparative year, rather than at the actual average exchange rates in effect during the current fiscal year. As a result, the foreign currency impact is equal to the current year results in local currencies multiplied by the
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change in the average foreign currency exchange rate between the current fiscal period and the corresponding period of the comparative year.

Rates of constant currency growth (decline) follow:
Three months ended February 29, 2024
Percentage Change
as Reported
Impact of Foreign Currency ExchangePercentage Change on Constant Currency Basis
Net sales:
Consumer segment:
Americas0.1 %— %0.1 %
EMEA13.3 %5.1 %8.2 %
APAC(7.4)%(2.0)%(5.4)%
Total Consumer segment1.3 %0.6 %0.7 %
Flavor Solutions segment:
Americas4.7 %1.3 %3.4 %
EMEA1.8 %3.2 %(1.4)%
APAC1.5 %(3.0)%4.5 %
Total Flavor Solutions segment3.8 %1.3 %2.5 %
Total net sales2.4 %0.9 %1.5 %
Adjusted operating income:
Consumer segment1.7 %0.3 %1.4 %
Flavor Solutions segment15.0 %1.3 %13.7 %
Total adjusted operating income4.8 %0.5 %4.3 %

To present constant currency information for the fiscal year 2024 projection, projected sales and adjusted operating income for entities reporting in currencies other than the U.S. dollar are translated into U.S. dollars at the company’s budgeted exchange rates for 2024 and are compared to the 2023 results, translated into U.S. dollars using the same 2024 budgeted exchange rates, rather than at the average actual exchange rates in effect during fiscal year 2023.
Projections for the Year Ending November 30, 2024
Percentage change in net sales(2)% to 0%
Impact of unfavorable foreign currency exchange%
Percentage change in net sales in constant currency(1)% to 1%
Percentage change in adjusted operating income3% to 5%
Impact of unfavorable foreign currency exchange%
Percentage change in adjusted operating income in constant currency4% to 6%

LIQUIDITY AND FINANCIAL CONDITION
 Three months ended
 February 29, 2024February 28, 2023
 
Net cash provided by operating activities$138.4 $103.4 
Net cash used in investing activities(61.8)(61.5)
Net cash used in financing activities(67.7)(44.7)
The primary objective of our financing strategy is to maintain a prudent capital structure that provides us flexibility to pursue our growth objectives. We use a combination of equity and short- and long-term debt. We use short-term debt, comprised
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primarily of commercial paper, principally to finance ongoing operations, including our requirements for working capital (accounts receivable, prepaid expenses and other current assets, and inventories, less accounts payable, accrued payroll, and other accrued liabilities). We are committed to maintaining investment grade credit ratings.
Our cash flows from operations enable us to fund operating projects and investments that are designed to meet our growth objectives, service our debt, fund or increase our quarterly dividends, fund capital projects and other investments, and make share repurchases when appropriate. Due to the cyclical nature of a portion of our business, our cash flow from operations has historically been the strongest during the fourth quarter of our fiscal year. Due to the timing of the interest payments on our long-term debt, interest payments are higher in the first and third quarter of our fiscal year.
We believe that our sources of liquidity, which include existing cash balances, cash flows from operations, existing credit facilities, our commercial paper program, and access to capital markets, will provide sufficient liquidity to meet our debt obligations, including any repayment of debt or refinancing of debt, working capital needs, planned capital expenditures, and payment of anticipated quarterly dividends for at least the next twelve months.
In the condensed consolidated cash flow statement, the changes in operating assets and liabilities are presented excluding the translation effects of changes in foreign currency exchange rates as these do not reflect actual cash flows. Accordingly, the amounts in the cash flow statement do not agree with changes in the operating assets and liabilities that are presented in the balance sheet.
Operating Cash Flow Net cash provided by operating activities of $138.4 million for the three months ended February 29, 2024, increased $35.0 million from the same period of 2023. This increase was primarily driven by an increase in net income, as well as the improvement in cash provided by accounts payable. This was partially offset by the higher amount of certain employee benefits accrued as of the prior year-end and paid in the subsequent fiscal year.
Investing Cash Flow Cash used in investing activities of $61.8 million for the three months ended February 29, 2024 increased by $0.3 million as compared to $61.5 million for the corresponding period in 2023. Capital expenditures increased from the 2023 level of $61.5 million to $62.0 million. We expect 2024 capital expenditures to approximate $290 million.
Financing Cash Flow Financing activities used cash of $67.7 million for the first three months of 2024 and increased $23.0 million as compared to $44.7 million for the corresponding period in 2023. The increase is a result of changes in our net borrowings, share issuance activity associated with the exercise of stock options, share repurchase activity, and dividends, all as described below.
The following table outlines our net borrowing activities:
 Three months ended
 February 29, 2024February 28, 2023
 
Net increase in short-term borrowings$57.3 $67.9 
Repayments of long-term debt(14.1)(3.6)
Net cash provided by borrowing activities$43.2 $64.3 
The following table outlines the activity in our share repurchase program for the three months ended February 29, 2024 and February 28, 2023:
20242023
Number of shares of common stock repurchased (in thousands)44 
Dollar amount (in millions)$0.3 $3.5 
As of February 29, 2024, $501 million remained of the $600 million share repurchase program that was authorized by the Board of Directors in November 2019. The timing and amount of any shares repurchased is determined by our management based on its evaluation of market conditions and other factors.
During the three months ended February 29, 2024, we received proceeds of $4.4 million from exercised stock options as compared to $5.2 million received in the corresponding 2023 period. We repurchased $4.9 million and $6.1 million of common stock during the three months ended February 29, 2024 and February 28, 2023, respectively, in conjunction with employee tax withholding requirements associated with our stock compensation plans.
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We increased dividends paid to $112.7 million, or a per share quarterly dividend of $0.42, in the first three months of 2024 from $104.6 million, or a per share quarterly dividend of $0.39, of dividends paid in the same period last year. The timing and amount of any future dividends is determined by our Board of Directors.
Most of our cash is in our subsidiaries outside of the U.S. We manage our worldwide cash requirements by considering available funds among the many subsidiaries through which we conduct our business and the cost effectiveness with which those funds can be accessed. Those balances are generally available without legal restrictions to fund ordinary business operations, capital projects and any possible future acquisitions.
At February 29, 2024 and February 28, 2023, we temporarily used $539.3 million and $150.1 million, respectively, of cash from our non-U.S. subsidiaries to pay down short-term debt in the U.S. During a quarter, our short-term borrowings vary, but are typically lower at the end of a quarter. The average short-term borrowings outstanding for the three months ended February 29, 2024 and February 28, 2023 were $828.9 million and $1,460.0 million, respectively. Total average debt outstanding for the three months ended February 29, 2024 and February 28, 2023 was $4,883.9 million and $5,265.0 million, respectively.
The reported values of our assets and liabilities are significantly affected by fluctuations in foreign exchange rates between periods. At February 29, 2024, the exchange rate for the Mexican peso was higher than the U.S. dollar at November 30, 2023. At February 29, 2024, the exchange rate for the Euro, British pound sterling, Canadian dollar, Chinese renminbi, Polish zloty, South African rand, and Australian dollar were lower than the U.S. dollar at November 30, 2023.
Credit and Capital Markets
Cash flows from operating activities are our primary source of liquidity for funding growth, dividends, capital expenditures and share repurchases. We also rely on our revolving credit facilities, or borrowings backed by these facilities, to fund working capital needs and other general corporate requirements.
Our committed revolving credit facilities include a five-year $1.5 billion revolving credit facility, which will expire in June 2026 and a 364-day $500 million revolving credit facility, which was entered into in June 2023 and will expire in June 2024. The current pricing for the five-year credit facility, on a fully drawn basis, is Term SOFR plus 1.25%. The pricing of that credit facility is based on a credit rating grid that contains a fully drawn maximum pricing of the credit facility equal to Term SOFR plus 1.75%. The current pricing for the 364-day credit facility, on a fully drawn basis, is Term SOFR plus 1.23%. The pricing of that credit facility is based on a credit rating grid that contains a fully drawn maximum pricing of the credit facility equal to Term SOFR plus 1.60%.
The provisions of each revolving credit facility restrict subsidiary indebtedness and require us to maintain a minimum interest coverage ratio. We do not expect that this covenant would limit our access to either revolving credit facilities for the foreseeable future.
We generally use our revolving credit facilities to support our issuance of commercial paper. If the commercial paper market is not available or viable, we could borrow directly under our revolving credit facilities. These facilities are made available by a syndicate of banks, with various commitments per bank. If any of the banks in this syndicate are unable to perform on their commitments, our liquidity could be impacted, which could reduce our ability to grow through funding of our working capital. We periodically review our banking and financing relationships, considering the stability of the institutions and other aspects of the relationships. In addition, we engage in regular communication with all banks participating in our credit facility. During these communications, none of the banks have indicated that they may be unable to perform on their commitments. Based on these communications and our monitoring activities, we believe our banks will perform on their commitments.

Material Cash Requirements

We will continue to have cash requirements to support seasonal working capital needs and capital expenditures, to pay interest, to service debt, and to fund acquisitions. As part of our ongoing operations, we enter into contractual arrangements that obligate us to make future cash payments. Our primary obligations include principal and interest payments on our outstanding short-term borrowings and long-term debt. In the next year, our most significant debt service obligation is the maturity of our $700.0 million, 3.15% notes due in August 2024. Also in June 2024, our $500 million, 364-day revolving credit facility matures. Our other cash requirements include raw material purchases, lease payments, income taxes, anticipated quarterly dividends, and pension and postretirement benefits, as well as other contractual obligations.
These obligations impact our liquidity and capital resource needs. To meet those cash requirements, we intend to use our existing cash, cash equivalents and internally generated funds, to borrow under our existing credit facilities or under other short-
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