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 May 31, 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)

Maryland	52-0408290
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

 

24 Schilling Road, Suite 1,
Hunt Valley,	MD	21031
(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 class	Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $0.01 per share	MKC.V	New York Stock Exchange
Common Stock Non-Voting, Par Value $0.01 per share	MKC	New 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 Filer	☐	Smaller 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
	May 31, 2024
Common Stock	16,614,663
Common Stock Non-Voting	252,015,474

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION			4
	ITEM 1	FINANCIAL STATEMENTS	4
	ITEM 2	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	23
	ITEM 3	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	38
	ITEM 4	CONTROLS AND PROCEDURES	38
PART II - OTHER INFORMATION			39
	ITEM 1	LEGAL PROCEEDINGS	39
	ITEM 1a	RISK FACTORS	39
	ITEM 2	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	39
	ITEM 3	DEFAULTS UPON SENIOR SECURITIES	40
	ITEM 4	MINE SAFETY DISCLOSURES	40
	ITEM 5	OTHER INFORMATION	40
	ITEM 6	EXHIBITS	41

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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 May 31,				Six months ended May 31,
	2024		2023		2024		2023
Net sales	$	1,643.2	$	1,659.2	$	3,245.9	$	3,224.7
Cost of goods sold	1,023.6		1,043.7		2,027.0		2,046.3
Gross profit	619.6		615.5		1,218.9		1,178.4
Selling, general and administrative expense	383.7		380.5		745.3		716.6
Special charges	1.8		13.2		6.0		41.0
Operating income	234.1		221.8		467.6		420.8
Interest expense	52.9		52.2		103.2		102.8
Other income, net	12.4		12.5		23.5		23.6
Income from consolidated operations before income taxes	193.6		182.1		387.9		341.6
Income tax expense	26.2		40.3		75.8		74.7
Net income from consolidated operations	167.4		141.8		312.1		266.9
Income from unconsolidated operations	16.8		10.3		38.1		24.3
Net income	$	184.2	$	152.1	$	350.2	$	291.2
Earnings per share – basic	$	0.69	$	0.57	$	1.30	$	1.09
Earnings per share – diluted	$	0.68	$	0.56	$	1.30	$	1.08
Average shares outstanding – basic	268.6		268.4		268.5		268.3
Average shares outstanding – diluted	269.7		269.8		269.7		269.8
Cash dividends paid per share – voting and non-voting	$	0.42	$	0.39	$	0.84	$	0.78
Cash dividends declared per share – voting and non-voting	$	0.42	$	0.39	$	0.42	$	0.39

See notes to condensed consolidated financial statements (unaudited).

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McCORMICK & COMPANY, INCORPORATED

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

(in millions)

 

	Three months ended May 31,				Six months ended May 31,
	2024		2023		2024		2023
Net income	$	184.2	$	152.1	$	350.2	$	291.2
Net income attributable to non-controlling interest	1.8		2.0		3.9		2.8
Other comprehensive income (loss):
Unrealized components of pension and other postretirement plans	(1.0)		(0.9)		(1.2)		(1.9)
Currency translation adjustments	6.6		10.0		4.6		57.0
Change in derivative financial instruments	(0.5)		(8.4)		(3.8)		(13.8)
Tax benefit	1.1		5.2		1.5		6.2
Total other comprehensive income (loss), net of tax	6.2		5.9		1.1		47.5
Comprehensive income	$	192.2	$	160.0	$	355.2	$	341.5

See notes to condensed consolidated financial statements (unaudited).

5

McCORMICK & COMPANY, INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEET

(in millions)

 

	May 31, 2024		November 30, 2023
	(unaudited)
ASSETS
Cash and cash equivalents	$	166.3	$	166.6
Trade accounts receivable, net of allowances	598.5		587.5
Inventories, net
Finished products	618.4		570.0
Raw materials and work-in-process	539.8		556.5
	1,158.2		1,126.5
Prepaid expenses and other current assets	146.4		121.0
Total current assets	2,069.4		2,001.6
Property, plant and equipment, net	1,366.1		1,324.7
Goodwill	5,257.2		5,260.1
Intangible assets, net	3,338.9		3,356.7
Other long-term assets	956.0		919.2
Total assets	$	12,987.6	$	12,862.3
LIABILITIES AND SHAREHOLDERS’ EQUITY
Short-term borrowings	$	352.4	$	272.2
Current portion of long-term debt	786.6		799.3
Trade accounts payable	1,210.3		1,119.3
Other accrued liabilities	635.0		908.1
Total current liabilities	2,984.3		3,098.9
Long-term debt	3,325.8		3,339.9
Deferred taxes	851.0		861.2
Other long-term liabilities	472.3		478.8
Total liabilities	7,633.4		7,778.8
Shareholders’ equity
Common stock	601.9		597.1
Common stock non-voting	1,632.8		1,602.5
Retained earnings	3,480.3		3,249.7
Accumulated other comprehensive loss	(387.6)		(388.6)
Total McCormick shareholders' equity	5,327.4		5,060.7
Non-controlling interests	26.8		22.8
Total shareholders’ equity	5,354.2		5,083.5
Total liabilities and shareholders’ equity	$	12,987.6	$	12,862.3

See notes to condensed consolidated financial statements (unaudited).

6

McCORMICK & COMPANY, INCORPORATED

CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)

(in millions)

 

	Six months ended May 31,
	2024		2023
Operating activities
Net income	$	350.2	$	291.2
Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation and amortization	102.9		96.6
Stock-based compensation	31.1		38.5
Deferred income tax expense (benefit)	(27.8)		(1.2)
Income from unconsolidated operations	(38.1)		(24.3)
Changes in operating assets and liabilities
Trade accounts receivable	(13.6)		26.5
Inventories	(28.9)		71.7
Trade accounts payable	90.7		(81.9)
Other assets and liabilities	(209.2)		(58.2)
Dividends from unconsolidated affiliates	44.2		35.3
Net cash flow provided by operating activities	301.5		394.2
Investing activities
Capital expenditures (including software)	(130.3)		(118.6)
Other investing activities	0.2		2.5
Net cash flow used in investing activities	(130.1)		(116.1)
Financing activities
Short-term borrowings, net	80.3		(776.8)
Long-term debt borrowings	—		496.4
Payment of debt issuance costs	—		(1.1)
Long-term debt repayments	(28.0)		(9.1)
Proceeds from exercised stock options	10.4		11.1
Taxes withheld and paid on employee stock awards	(8.9)		(10.8)
Common stock acquired by purchase	(4.5)		(18.6)
Dividends paid	(225.5)		(209.2)
Other financing activities	4.0		—
Net cash flow used in financing activities	(172.2)		(518.1)
Effect of exchange rate changes on cash and cash equivalents	0.5		33.4
Increase (decrease) in cash and cash equivalents	(0.3)		(206.6)
Cash and cash equivalents at beginning of period	166.6		334.0
Cash and cash equivalents at end of period	$	166.3	$	127.4

See notes to condensed consolidated financial statements (unaudited).

7

McCORMICK & COMPANY, INCORPORATED

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)

(in millions)

(millions)	Common Stock Shares	Common Stock Non-Voting Shares	Common Stock Amount		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Non-controlling Interests		Total Shareholders’ Equity
Three months ended May 31, 2024
Balance, February 29, 2024	16.6	251.7	$	2,213.4	$	3,412.8	$	(393.7)	$	24.9	$	5,257.4
Net income			—		184.2		—		—		184.2
Net income attributable to non-controlling interest			—		—		—		1.8		1.8
Other comprehensive income, net of tax			—		—		6.1		0.1		6.2
Dividends			—		(112.7)		—		—		(112.7)
Stock-based compensation			19.4		—		—		—		19.4
Shares purchased and retired	(0.1)	—	(4.1)		(4.0)		—		—		(8.1)
Shares issued	0.3	—	6.0		—		—		—		6.0
Equal exchange	(0.2)	0.2	—		—		—		—		—
Balance, May 31, 2024	16.6	251.9	$	2,234.7	$	3,480.3	$	(387.6)	$	26.8	$	5,354.2
Six months ended May 31, 2024
Balance, November 30, 2023	16.8	251.3	$	2,199.6	$	3,249.7	$	(388.6)	$	22.8	$	5,083.5
Net income			—		350.2		—		—		350.2
Net income attributable to non-controlling interest			—		—		—		3.9		3.9
Other comprehensive income, net of tax			—		—		1.0		0.1		1.1
Dividends			—		(112.7)		—		—		(112.7)
Stock-based compensation			31.1		—		—		—		31.1
Shares purchased and retired	(0.2)	—	(7.4)		(6.9)		—		—		(14.3)
Shares issued	0.6	—	11.4		—		—		—		11.4
Equal exchange	(0.6)	0.6	—		—		—		—		—
Balance, May 31, 2024	16.6	251.9	$	2,234.7	$	3,480.3	$	(387.6)	$	26.8	$	5,354.2
Three months ended May 31, 2023
Balance, February 28, 2023	17.4	250.8	$	2,152.1	$	3,155.1	$	(437.1)	$	17.6	$	4,887.7
Net income			—		152.1		—		—		152.1
Net income attributable to non-controlling interest			—		—		—		2.0		2.0
Other comprehensive income, net of tax			—		—		5.6		0.3		5.9
Dividends			—		(104.6)		—		—		(104.6)
Stock-based compensation			26.7		—		—		—		26.7
Shares purchased and retired	(0.3)	—	(7.9)		(11.2)		—		—		(19.1)
Shares issued	0.3	—	6.2		—		—		—		6.2
Equal exchange	(0.2)	0.2	—		—		—		—		—
Balance, May 31, 2023	17.2	251.0	$	2,177.1	$	3,191.4	$	(431.5)	$	19.9	$	4,956.9

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Six months ended May 31, 2023
Balance, November 30, 2022	17.4	250.6	$	2,138.6	$	3,022.5	$	(480.6)	$	18.7	$	4,699.2
Net income			—		291.2		—		—		291.2
Net income attributable to non-controlling interest			—		—		—		2.8		2.8
Other comprehensive income (loss), net of tax			—		—		49.1		(1.6)		47.5
Dividends			—		(104.6)		—		—		(104.6)
Stock-based compensation			38.5		—		—		—		38.5
Shares purchased and retired	(0.4)	—	(12.7)		(17.7)		—		—		(30.4)
Shares issued	0.6	—	12.7		—		—		—		12.7
Equal exchange	(0.4)	0.4	—		—		—		—		—
Balance, May 31, 2023	17.2	251.0	$	2,177.1	$	3,191.4	$	(431.5)	$	19.9	$	4,956.9

See notes to condensed consolidated financial statements (unaudited).

9

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 six-month period ended May 31, 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 May 31, 2024 and November 30, 2023, the amounts due to suppliers participating in the SCF and included in trade accounts payable were approximately $360.4 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

10

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 and six months ended May 31, 2024 and 2023

(in millions):

	Three months ended May 31,				Six months ended May 31,
	2024		2023		2024		2023
Employee severance and related benefits	$	1.0	$	7.0	$	3.1	$	31.8
Other costs
Cash	0.8		5.8		2.9		8.0
Non-Cash	—		0.4		—		1.2
Total special charges	$	1.8	$	13.2	6.0		41.0

During the three months ended May 31, 2024, we recorded $1.8 million of special charges, consisting principally of $1.8 million associated with our Global Operating Effectiveness (GOE) program, as more fully described below.

During the six months ended May 31, 2024, we recorded $6.0 million of special charges, consisting principally of $4.6 million associated with our 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 May 31, 2023, we recorded $13.2 million of special charges, consisting principally of $8.6 million associated with our GOE program, as more fully described below, $1.3 million associated with the transition of a manufacturing facility in EMEA, as more fully described below, and streamlining actions of $3.2 million in the Americas region.

During the six months ended May 31, 2023, we recorded $41.0 million of special charges, consisting principally of $33.4 million associated with our GOE program, as more fully described below, $2.2 million associated with the transition of a manufacturing facility in EMEA, as more fully described below, and streamlining actions of $4.5 million in the Americas region and $0.9 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 May 31, 2024, under our GOE program included $1.8 million in severance and related benefits costs. Special charges recognized during the six months ended May 31, 2024, under our GOE program included $3.9 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 May 31, 2023, under our GOE program included $7.0 million in severance and related benefits costs and $1.6 million of third-party expenses and other costs. Special charges recognized during the six months ended May 31, 2023, under our GOE program included $11.5 million in severance and related benefits costs and $2.2 million of third-party expenses and other costs.

11

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 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 May 31, 2024, we recognized a reversal of $0.8 million associated with severance and related benefits costs and $0.8 million in third-party expenses and other costs. During the six months ended May 31, 2024, we recognized a reversal of $0.8 million associated with severance and related benefits costs and $2.2 million in third-party expenses and other costs. During the three months ended May 31, 2023, we recognized $0.4 million in accelerated depreciation and $0.9 million in third-party expenses and other costs. During the six months ended May 31, 2023, we recognized $0.8 million in accelerated depreciation and $1.4 million in third-party expenses and other costs.

As of May 31, 2024, accruals associated with special charges of $13.8 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 and six months ended May 31, 2024 and 2023 (in millions):

	Three months ended May 31,				Six months ended May 31,
	2024		2023		2024		2023
Consumer segment	$	1.5	$	8.4	$	3.3	$	27.4
Flavor solutions segment	0.3		4.8		2.7		13.6
Total special charges	$	1.8	$	13.2	$	6.0	$	41.0

3.    FINANCING ARRANGEMENTS AND FINANCIAL INSTRUMENTS

As of May 31, 2024, we maintained a 364-day $500 million revolving credit facility, which was entered into in June 2023 and expired in June 2024. We continue to maintain a committed five-year $1.5 billion revolving credit facility which will expire in June 2026.

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.

The following is a summary of the notional amounts of outstanding foreign currency exchange contracts as of May 31, 2024 and November 30, 2023 (in millions):

	May 31, 2024		November 30, 2023
Fair value hedges	$	824.9	$	765.4
Cash flow hedge	114.7		235.0
Total	$	939.6	$	1,000.4

All of these contracts were designated as hedges of foreign currency denominated assets or liabilities or hedges of anticipated purchases denominated in a foreign currency. Hedge ineffectiveness was not material. All foreign currency exchange contracts outstanding at May 31, 2024 have durations of less than 18 months, including $233.1 million of notional contracts that have an initial duration of less than one month and are used to hedge short-term cash flow funding.

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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. Gains or losses on net investment hedges, exclusive of interest accruals, are included in foreign currency translation adjustments in accumulated other comprehensive loss. We exclude the interest accruals on cross-currency interest rate swap contracts from the assessment and measurement of hedge effectiveness. We recognize the interest accruals on cross-currency interest rate swap contracts within interest expense.

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 Derivatives					Liability Derivatives
	Balance sheet location	Notional amount		Fair value		Balance sheet location	Notional amount		Fair value
As of May 31, 2024
Interest rate contracts	Other current assets / Other long-term assets	$	—	$	—	Other accrued liabilities / Other long-term liabilities	$	600.0	$	53.8
Foreign exchange contracts	Other current assets	260.5		2.4		Other accrued liabilities	679.1		9.0
Cross currency contracts	Other current assets / Other long-term assets	722.1		27.1		Other long-term liabilities	237.8		5.0
Total				$	29.5				$	67.8
As of November 30, 2023
Interest rate contracts	Other current assets / Other long-term assets	$	—	$	—	Other accrued liabilities / Other long-term liabilities	$	600.0	$	52.8
Foreign exchange contracts	Other current assets	161.3		2.5		Other accrued liabilities	839.1		16.0
Cross currency contracts	Other current assets / Other long-term assets	719.6		24.6		Other long-term liabilities	238.9		7.5
Total				$	27.1				$	76.3

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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 and six months ended May 31, 2024 and 2023 (in millions):

Fair Value Hedges
Derivative	Income statement location	(Expense) income
		Three months ended May 31, 2024		Three months ended May 31, 2023		Six months ended May 31, 2024		Six months ended May 31, 2023
Interest rate contracts	Interest expense	$	(5.1)	$	(4.0)	$	(10.2)	$	(7.7)

	Income statement location	Gain (loss) recognized in income					Income statement location	Gain (loss) recognized in income
Derivative		2024		2023		Hedged item		2024		2023
Three months ended May 31,
Foreign exchange contracts	Other income, net	$	(3.8)	$	(6.5)	Intercompany loans	Other income, net	$	2.5	$	7.2
Six months ended May 31,
Foreign exchange contracts	Other income, net	$	(6.7)	$	(5.7)	Intercompany loans	Other income, net	$	3.9	$	7.1

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 and six months ended May 31, 2024 and 2023.

Cash Flow Hedges
Derivative	Gain (loss) recognized in OCI				Income statement location	Gain (loss) reclassified from AOCI
	2024		2023			2024		2023
Three months ended May 31,
Interest rate contracts	$	—	$	(2.6)	Interest expense	$	(0.1)	$	0.1
Foreign exchange contracts	(0.1)		(1.3)		Cost of goods sold	0.2		(0.1)
Total	$	(0.1)	$	(3.9)		$	0.1	$	—
Six months ended May 31,
Interest rate contracts	$	—	$	(2.6)	Interest expense	$	(0.3)	$	0.2
Foreign exchange contracts	(0.3)		(2.4)		Cost of goods sold	1.5		(1.3)
Total	$	(0.3)	$	(5.0)		$	1.2	$	(1.1)

As of May 31, 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 $0.5 million as a decrease to earnings.

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Net Investment Hedges
Derivative	Gain (loss) recognized in OCI				Income statement location	Gain (loss) excluded from the assessment of hedge effectiveness
	2024		2023			2024		2023
Three months ended May 31,
Cross currency contracts	$	(0.9)	$	(3.8)	Interest expense	$	2.4	$	2.9
Six months ended May 31,
Cross currency contracts	$	5.0	$	(9.6)	Interest expense	$	4.6	$	6.2

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 $22.5 million as of May 31, 2024. As collecting agent on the sold receivables, we had $5.5 million of cash collected that was not yet remitted to the third-party financial institution as of May 31, 2024. The incremental costs of selling receivables under this arrangement were insignificant for the three months and six months ended May 31, 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 May 31, 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):

			May 31, 2024
	Fair Value		Level 1		Level 2
Assets
Cash and cash equivalents	$	166.3	$	166.3	$	—
Insurance contracts	118.9		—		118.9
Bonds and other long-term investments	0.3		0.3		—
Foreign currency derivatives	2.4		—		2.4
Cross currency contracts	27.1		—		27.1
Total	$	315.0	$	166.6	$	148.4
Liabilities
Foreign currency derivatives	$	9.0	$	—	$	9.0
Interest rate derivatives	53.8		—		53.8
Cross currency contracts	5.0		—		5.0
Total	$	67.8	$	—	$	67.8

 

			November 30, 2023
	Fair Value		Level 1		Level 2
Assets
Cash and cash equivalents	$	166.6	$	166.6	$	—
Insurance contracts	114.7		—		114.7
Bonds and other long-term investments	0.3		0.3		—
Foreign currency derivatives	2.5		—		2.5
Cross currency contracts	24.6		—		24.6
Total	$	308.7	$	166.9	$	141.8
Liabilities
Foreign currency derivatives	$	16.0	$	—	$	16.0
Interest rate derivatives	52.8		—		52.8
Cross currency contracts	7.5		—		7.5
Total	$	76.3	$	—	$	76.3

At May 31, 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):

	May 31, 2024		November 30, 2023
Carrying amount	$	4,112.4	$	4,139.2
Level 1 valuation techniques	$	3,727.6	$	3,682.0
Level 2 valuation techniques	130.6		159.0
Total fair value	$	3,858.2	$	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 May 31, 2024 and 2023 (in millions):

	United States pension				International pension				Other postretirement benefits
	2024		2023		2024		2023		2024		2023
Service cost	$	0.4	$	0.5	$	0.2	$	0.1	$	0.2	$	0.3
Interest costs	9.3		9.1		2.6		2.3		0.6		0.6
Expected return on plan assets	(9.9)		(10.6)		(4.0)		(3.7)		—		—
Amortization of prior service costs	0.1		0.1		—		0.1		(0.1)		(0.1)
Amortization of net actuarial losses (gains)	(0.1)		—		(0.1)		(0.1)		(0.7)		(0.5)
Total (income) expense	$	(0.2)	$	(0.9)	$	(1.3)	$	(1.3)	$	—	$	0.3

The following table presents the components of our pension (income) and other postretirement benefits expense for the six months ended May 31, 2024 and 2023 (in millions):

	United States pension				International pension				Other postretirement benefits
	2024		2023		2024		2023		2024		2023
Service cost	$	0.8	$	1.0	$	0.3	$	0.3	$	0.4	$	0.6
Interest costs	18.6		18.1		5.3		4.8		1.2		1.2
Expected return on plan assets	(19.8)		(21.2)		(8.0)		(7.4)		—		—
Amortization of prior service costs	0.2		0.2		—		0.1		(0.2)		(0.2)
Amortization of net actuarial losses (gains)	(0.2)		0.1		(0.1)		(0.1)		(1.3)		(1.0)
Total (income) expense	$	(0.4)	$	(1.8)	$	(2.5)	$	(2.3)	$	0.1	$	0.6

During the six months ended May 31, 2024 and 2023, we contributed $3.5 million and $3.6 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 $(2.3) million and $(2.8) million for the three months ended May 31, 2024 and 2023, respectively. For the six months ended May 31, 2024 and 2023, the net aggregate amount of pension and other postretirement benefits income, excluding service cost components was $(4.3) million and $(5.4) million, respectively.

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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 May 31,				Six months ended May 31,
	2024		2023		2024		2023
Stock-based compensation expense	$	19.4	$	26.7	$	31.1	$	38.5

Our 2024 annual grant of stock options and RSUs occurred in the second quarter, similar to the 2023 annual grant. Additionally, during the first quarter, approximately 380,000 stock option shares were granted.

The weighted-average grant-date fair value of each stock option granted in 2024 was $17.63 and in 2023 was $19.35, each as calculated under a lattice pricing model. Substantially all of the stock options and RSUs granted in 2024 and 2023 vest ratably over a three-year period or, if earlier, upon the retirement eligibility date of the holder. The fair values of stock option grants in the stated periods were computed using the following assumptions for our various stock compensation plans:

	2024	2023
Risk-free interest rates	4.1% - 5.5%	3.5% - 4.9%
Dividend yield	2.3%	1.9%
Expected volatility	22.8%	21.8%
Expected lives (in years)	7.1	7.3

The following is a summary of our stock option activity for the six months ended May 31, 2024 and 2023:

	2024			2023
(shares in millions)	Number of Shares	Weighted- Average Exercise Price		Number of Shares	Weighted- Average Exercise Price
Outstanding at beginning of period	5.3	$	70.43	4.8	$	67.08
Granted	1.2	72.88		0.9	81.79
Exercised	(0.2)	39.60		(0.2)	46.90
Forfeited	(0.1)	84.84		—	—
Outstanding at end of the period	6.2	$	71.94	5.5	$	70.12
Exercisable at end of the period	4.5	$	69.43	4.0	$	63.77

As of May 31, 2024, the intrinsic value (the difference between the exercise price and the market price) for all options outstanding was $43.0 million and for options currently exercisable was $41.4 million. The total intrinsic value of all options exercised during the six months ended May 31, 2024 and 2023 was $7.4 million and $7.4 million, respectively.

The following is a summary of our RSU activity for the six months ended May 31, 2024 and 2023:

	2024			2023
(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 period	494	$	76.94	480	$	77.62
Granted	262	72.90		243	78.29
Vested	(192)	84.69		(222)	78.12
Forfeited	(15)	82.26		(13)	86.69
Outstanding at end of period	549	$	72.15	488	$	77.51

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The following is a summary of our price-vested stock options activity for the six months ended May 31, 2024 and 2023:

	2024			2023
(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 period	2,055	$	9.40	2,107	$	9.40
Forfeited	—	—		(50)	9.40
Outstanding at end of period	2,055	$	9.40	2,057	$	9.40

The following is a summary of our LTPP activity for the six months ended May 31, 2024 and 2023:

	2024			2023
(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 period	474	$	94.34	451	$	106.32
Granted	192	66.49		167	89.00
Vested	(181)	98.30		(176)	86.14
Forfeited	(12)	83.08		(16)	93.53
Outstanding at end of period	473	$	81.55	426	$	93.67

7.    INCOME TAXES

Income tax expense for the three months ended May 31, 2024 included $20.2 million of net discrete tax benefits consisting principally of the following: (i) $19.4 million of tax benefits associated with the recognition of a deferred tax asset related to an international legal entity reorganization, (ii) $1.3 million of tax benefit from the reversal of certain reserves for unrecognized tax benefits and related interest associated with the expiration of statutes of limitations in a non-U.S. jurisdiction, (iii) $0.3 million of excess tax benefits associated with stock-based compensation, and (iv) $0.8 million of tax expense resulting from a state tax matter.

Income tax expense for the six months ended May 31, 2024 included $18.6 million of net discrete tax benefits consisting principally of the following: (i) $19.4 million of tax benefits associated with the recognition of a deferred tax asset related to an international legal entity reorganization, (ii) $1.3 million of tax benefit from the reversal of certain reserves for unrecognized tax benefits and related interest associated with the expiration of statutes of limitations in a non-U.S. jurisdiction, (iii) $1.9 million of tax expense resulting from state tax matters, and (iv) $0.2 million of tax expense associated with stock-based compensation.

Income tax expense for the three months ended May 31, 2023 included $3.0 million of net discrete tax benefits consisting principally of the following: (i) $1.2 million of tax benefits from the reversal of certain reserves for unrecognized tax benefits and related interest associated with the expiration of statutes of limitations in a non-U.S. jurisdiction, (ii) $1.2 million of tax benefit related to a tax settlement, and (iii) $0.6 million of excess tax benefits associated with stock-based compensation.

Income tax expense for the six months ended May 31, 2023 included $6.8 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) $1.2 million of tax benefits from the reversal of certain reserves for unrecognized tax benefits and related interest associated with the expiration of statutes of limitations in a non-U.S. jurisdiction, (iii) $1.2 million of tax benefit related to a tax settlement (iv) $0.8 million of tax benefits related to the revaluation of deferred taxes resulting from changes in tax rates, and (v) $0.4 million of excess tax benefits associated with stock-based compensation.

Other than additions for current year tax positions, there were no significant changes to unrecognized tax benefits during the six months ended May 31, 2024.

As of May 31, 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.

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8.    CAPITAL STOCK AND EARNINGS PER SHARE

The following table sets forth the reconciliation of average shares outstanding (in millions):

	Three months ended May 31,		Six months ended May 31,
	2024	2023	2024	2023
Average shares outstanding – basic	268.6	268.4	268.5	268.3
Effect of dilutive securities:
Stock options/RSUs/LTPP	1.1	1.4	1.2	1.5
Average shares outstanding – diluted	269.7	269.8	269.7	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 May 31,		Six months ended May 31,
	2024	2023	2024	2023
Anti-dilutive securities	3.6	1.9	3.2	2.0

The following table sets forth common stock activity (in millions):

	Three months ended May 31,		Six months ended May 31,
	2024	2023	2024	2023
Shares issued under stock options, RSUs, LTPP and employee stock purchase plans	0.3	0.3	0.6	0.6
Shares repurchased under the stock repurchase program and shares withheld for taxes under stock options, RSUs, and LTPP	0.1	0.3	0.2	0.4

As of May 31, 2024, $497.0 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):

	May 31, 2024		November 30, 2023
Foreign currency translation adjustment (1)	$	(300.7)	$	(305.7)
Unrealized gain (loss) on foreign currency exchange contracts	(2.3)		0.8
Unamortized value of settled interest rate swaps	(2.5)		(2.7)
Pension and other postretirement costs	(82.1)		(81.0)
Accumulated other comprehensive loss	$	(387.6)	$	(388.6)

(1)During the six months ended May 31, 2024, the foreign currency translation adjustment of accumulated other comprehensive loss decreased on a net basis by $5.0 million, inclusive of $5.0 million of unrealized gains 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 ended				Six months ended				Affected Line Items in the Condensed Consolidated Income Statement
	May 31, 2024		May 31, 2023		May 31, 2024		May 31, 2023
(Gains)/losses on cash flow hedges:
Interest rate derivatives	$	0.1	$	(0.2)	$	0.3	$	(0.3)	Interest expense
Foreign exchange contracts	(0.2)		(0.1)		(1.5)		(1.3)		Cost of goods sold
Total before tax	(0.1)		(0.3)		(1.2)		(1.6)
Tax effect	—		0.1		0.3		0.4		Income tax expense
Net, after tax	$	(0.1)	$	(0.2)	$	(0.9)	$	(1.2)
Amortization of pension and postretirement benefit adjustments:
Amortization of prior service costs (1)	$	—	$	0.1	$	—	$	0.1	Other income, net
Amortization of net actuarial (gains)(1)	$	(0.9)	$	(0.6)	(1.6)		(1.0)		Other income, net
Total before tax	(0.9)		(0.5)		(1.6)		(0.9)
Tax effect	0.2		0.1		0.4		0.2		Income tax expense
Net, after tax	$	(0.7)	$	(0.4)	$	(1.2)	$	(0.7)

(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.

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We measure segment performance based on operating income excluding special charges, as this activity is managed separately from the business segments.

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.

	Consumer		Flavor Solutions		Total
			(in millions)
Three months ended May 31, 2024
Net sales	$	904.5	$	738.7	$	1,643.2
Operating income excluding special charges	149.3		86.6		235.9
Income from unconsolidated operations	16.1		0.7		16.8
Three months ended May 31, 2023
Net sales	$	912.1	$	747.1	$	1,659.2
Operating income excluding special charges	153.6		81.4		235.0
Income from unconsolidated operations	10.8		(0.5)		10.3
Six months ended May 31, 2024
Net sales	$	1,826.0	$	1,419.9	$	3,245.9
Operating income excluding special charges	325.6		148.0		473.6
Income from unconsolidated operations	37.6		0.5		38.1
Six months ended May 31, 2023
Net sales	$	1,821.6	$	1,403.1	$	3,224.7
Operating income excluding special charges	327.0		134.8		461.8
Income from unconsolidated operations	24.6		(0.3)		24.3

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A reconciliation of operating income excluding special charges to operating income is as follows (in millions):

	Consumer		Flavor Solutions		Total
Three months ended May 31, 2024
Operating income excluding special charges	$	149.3	$	86.6