Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF MANAGEMENT

We are responsible for the preparation and integrity of the consolidated financial statements appearing in our Annual Report. The consolidated financial statements were prepared in conformity with United States generally accepted accounting principles and include amounts based on our estimates and judgments. All other financial information in this report has been presented on a basis consistent with the information included in the financial statements.

We are also responsible for establishing and maintaining adequate internal control over financial reporting. We maintain a system of internal control that is designed to provide reasonable assurance as to the fair and reliable preparation and presentation of the consolidated financial statements, as well as to safeguard assets from unauthorized use or disposition.

Our control environment is the foundation for our system of internal control over financial reporting and is embodied in our Business Ethics Policy. It sets the tone of our organization and includes factors such as integrity and ethical values. Our internal control over financial reporting is supported by formal policies and procedures which are reviewed, modified and improved as changes occur in business conditions and operations.

The Audit Committee of the Board of Directors, which is composed solely of independent directors, meets periodically with members of management, the internal auditors and the independent registered public accounting firm to review and discuss internal control over financial reporting and accounting and financial reporting matters. The independent registered public accounting firm and internal auditors report to the Audit Committee and accordingly have full and free access to the Audit Committee at any time.

We conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). This assessment included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this assessment. Although there are inherent limitations in the effectiveness of any system of internal control over financial reporting, based on our assessment, we have concluded with reasonable assurance that our internal control over financial reporting was effective as of November 30, 2020.

Our internal control over financial reporting as of November 30, 2020 has been audited by Ernst & Young LLP.

Lawrence E. Kurzius
Chairman, President & Chief Executive Officer

Michael R. Smith
Executive Vice President & Chief Financial Officer

Christina M. McMullen
Vice President & Controller Chief Accounting Officer

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of McCormick & Company, Incorporated

Opinion on Internal Control over Financial Reporting

We have audited McCormick & Company, Incorporated’s internal control over financial reporting as of November 30, 2020, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, McCormick & Company, Incorporated (the Company) maintained, in all material respects, effective internal control over financial reporting as of November 30, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of November 30, 2020 and 2019, the related consolidated income statements, statements of comprehensive income, cash flow statements and statements of shareholders’ equity for each of the three years in the period ended November 30, 2020, and the related notes and the financial statement schedule listed in the Index at item 15(2) and our report dated January 28, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report of Management. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Baltimore, Maryland

January 28, 2021

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of McCormick & Company, Incorporated

Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of McCormick & Company, Incorporated (the Company) as of November 30, 2020 and 2019, the related consolidated income statements, statements of comprehensive income, cash flow statements and statements of shareholders’ equity for each of the three years in the period ended November 30, 2020, and the related notes and financial statement schedule listed in the Index at item 15(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at November 30, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended November 30, 2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of November 30, 2020, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated January 28, 2021 expressed an unqualified opinion thereon.

Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

			Valuation of Indefinite-lived Intangible Assets
Description of the Matter			At November 30, 2020, the Company's indefinite-lived intangible assets consist of brand names and trademarks with an aggregate carrying value of approximately $3.0 billion (of which $0.4 billion related to the Cholula brand name, which was acquired on November 30, 2020). As explained in Note 1 to the consolidated financial statements, these assets are assessed for impairment at least annually primarily using the relief-from-royalty methodology to determine their fair values. If the fair value of any of the brand names or trademarks is less than its carrying amount, an impairment loss is recognized in an amount equal to the difference. Auditing the Company's impairment assessments was complex due to the significant estimation required in determining the fair value of the brand names and trademarks. Significant management judgment is also involved in determining whether individual brand names and trademarks should be grouped for purposes of the fair value determination or must be evaluated individually. The Company's methodologies for estimating the fair value of these assets involve significant assumptions and inputs, including projected financial information for net sales and operating profit by brand, royalty rates, and discount rates, all of which are sensitive to and affected by economic, industry, and company-specific qualitative factors. These significant assumptions and inputs are forward-looking and could be affected by future economic and market conditions.
How We Addressed the Matter in Our Audit			We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company's controls over the Company’s indefinite-lived intangible asset review process, including controls over management’s review of its asset groupings and the significant assumptions described above. We tested controls over the review of methodologies used, significant assumptions and inputs, and completeness and accuracy of the data used in the measurements. To test the estimated fair value of the Company’s indefinite-lived intangible assets, we performed audit procedures that included, among others, evaluating the asset groupings used by the Company to perform its impairment assessment, assessing the methodologies and testing the significant assumptions discussed above and the underlying data used by the Company in its analyses. We compared the significant assumptions to current industry, market and economic trends, to the Company's historical results, to other guideline companies within the same industry, and to other relevant data. In addition, we evaluated management’s ability to estimate revenues by comparing the current year actual revenues for certain brand names or trademarks to the estimates made in the Company’s prior year impairment assessment. We also performed sensitivity analyses of the significant assumptions to evaluate the potential change in the fair values of the brand names and trademarks resulting from hypothetical changes in underlying assumptions. We involved an internal valuation specialist to assist in our evaluation of the methodologies used and significant assumptions and inputs used to determine the fair value of certain brand names and trademarks.
			Valuation of Acquired Intangible Assets
Description of the Matter			During 2020, the Company completed its acquisition of the parent company of Cholula Hot Sauce (“Cholula”) for net consideration of $803 million, and recognized identifiable intangible assets of $401 million, as disclosed in Note 2 to the consolidated financial statements. The transaction was accounted for as a business combination. Auditing the Company's purchase accounting for its acquisition of Cholula was complex due to the significant estimation required by management to determine the fair value of the acquired intangible assets, which principally consisted of brand names and trademarks. The estimation complexity was primarily due to the valuation models used to measure the fair value of the intangible assets and the sensitivity of the respective fair values to the significant underlying assumptions. The significant assumptions used to estimate the fair value of the intangible assets included discount rates, royalty rates and certain assumptions that form the basis of the forecasted results (e.g., revenue growth rates and operating profit margin). These significant assumptions are forward-looking and could be affected by future economic and market conditions.

How We Addressed the Matter in Our Audit			We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company's controls over its accounting for acquisitions. For example, we tested controls over the recognition and measurement of intangible assets, including the valuation models and underlying assumptions used to develop such estimates. We also tested management’s controls over the completeness and accuracy of the data used in the models. To test the estimated fair value of the intangible assets, we performed audit procedures that included, among others, evaluating the Company's valuation models and testing the significant assumptions used in the models, as well as testing the completeness and accuracy of the underlying data. We compared the significant assumptions to current industry, market and economic trends, to the assumptions used to value similar assets in other acquisitions, and to the historical results of the acquired business. We also involved an internal valuation specialist to assist in our evaluation of the significant assumptions and those procedures included the completion of independent calculations of the fair value of the acquired intangible assets.

We have served as the Company’s auditor since 1982.

Baltimore, Maryland

January 28, 2021

CONSOLIDATED INCOME STATEMENTS

for the year ended November 30 (millions except per share data)			2020			2019			2018
Net sales			$	5,601.3		$	5,347.4		$	5,302.8
Cost of goods sold			3,300.9			3,202.1			3,209.5
Gross profit			2,300.4			2,145.3			2,093.3
Selling, general and administrative expense			1,281.6			1,166.8			1,163.4
Transaction and integration expenses			12.4			—			22.5
Special charges			6.9			20.8			16.3
Operating income			999.5			957.7			891.1
Interest expense			135.6			165.2			174.6
Other income, net			17.6			26.7			24.8
Income from consolidated operations before income taxes			881.5			819.2			741.3
Income tax expense (benefit)			174.9			157.4			(157.3)
Net income from consolidated operations			706.6			661.8			898.6
Income from unconsolidated operations			40.8			40.9			34.8
Net income			$	747.4		$	702.7		$	933.4
Earnings per share–basic			$	2.80		$	2.65		$	3.55
Earnings per share–diluted			$	2.78		$	2.62		$	3.50

See Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

for the year ended November 30 (millions)			2020			2019			2018
Net income			$	747.4		$	702.7		$	933.4
Net income attributable to non-controlling interest			4.3			1.9			3.3
Other comprehensive income (loss):
Unrealized components of pension and other postretirement plans (including curtailment gains of $18.0 for 2018)			(80.4)			(149.8)			72.6
Currency translation adjustments			89.7			(25.5)			(119.8)
Change in derivative financial instruments			(0.9)			1.1			2.3
Deferred taxes			18.1			33.2			(17.2)
Total other comprehensive income (loss)			26.5			(141.0)			(62.1)
Comprehensive income			$	778.2		$	563.6		$	874.6

See Notes to Consolidated Financial Statements.

CONSOLIDATED BALANCE SHEETS

at November 30 (millions)			2020			2019
Assets
Cash and cash equivalents			$	423.6		$	155.4
Trade accounts receivable, less allowances of $5.2 for 2020 and $5.6 for 2019			528.5			502.9
Inventories			1,032.6			801.2
Prepaid expenses and other current assets			98.9			90.7
Total current assets			2,083.6			1,550.2
Property, plant and equipment, net			1,028.4			952.6
Goodwill			4,986.3			4,505.2
Intangible assets, net			3,239.4			2,847.0
Other long-term assets			752.0			507.1
Total assets			$	12,089.7		$	10,362.1
Liabilities
Short-term borrowings			$	886.7		$	600.7
Current portion of long-term debt			263.9			97.7
Trade accounts payable			1,032.3			846.9
Other accrued liabilities			863.6			609.1
Total current liabilities			3,046.5			2,154.4
Long-term debt			3,753.8			3,625.8
Deferred taxes			727.2			697.6
Other long-term liabilities			622.2			427.6
Total liabilities			8,149.7			6,905.4
Shareholders’ equity
Common stock, no par value; authorized 320.0 shares; issued and outstanding: 2020–18.0 shares, 2019–18.6 shares			484.0			447.6
Common stock non-voting, no par value; authorized 320.0 shares; issued and outstanding: 2020–248.9 shares, 2019–247.2 shares			1,497.3			1,441.0
Retained earnings			2,415.6			2,055.8
Accumulated other comprehensive loss			(470.8)			(500.2)
Total McCormick shareholders’ equity			3,926.1			3,444.2
Non-controlling interests			13.9			12.5
Total shareholders’ equity			3,940.0			3,456.7
Total liabilities and shareholders’ equity			$	12,089.7		$	10,362.1

See Notes to Consolidated Financial Statements.

CONSOLIDATED CASH FLOW STATEMENTS

for the year ended November 30 (millions)			2020			2019			2018
Operating activities
Net income			$	747.4		$	702.7		$	933.4
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			165.0			158.8			150.7
Stock-based compensation			46.0			37.2			25.6
Non-cash nonrecurring income tax benefit (related to enactment of the U.S. Tax Act)			—			—			(309.4)
Non-cash special charges			—			—			3.0
Loss (gain) on sale of assets			3.0			(1.6)			(5.4)
Deferred income tax (benefit) expense			(11.2)			20.9			40.1
Income from unconsolidated operations			(40.8)			(40.9)			(34.8)
Changes in operating assets and liabilities (net of effect of businesses acquired):
Trade accounts receivable			4.8			12.2			19.8
Inventories			(200.2)			(20.9)			(10.0)
Trade accounts payable			164.2			128.2			72.8
Other assets and liabilities			133.8			(81.5)			(91.8)
Dividends received from unconsolidated affiliates			29.3			31.7			27.2
Net cash provided by operating activities			1,041.3			946.8			821.2
Investing activities
Acquisitions of businesses (net of cash acquired)			(803.0)			—			(4.2)
Capital expenditures (including expenditures for capitalized software)			(225.3)			(173.7)			(169.1)
Other investing activities			2.7			2.7			14.8
Net cash used in investing activities			(1,025.6)			(171.0)			(158.5)
Financing activities
Short-term borrowings, net			286.5			41.0			305.5
Long-term debt borrowings			527.0			—			25.9
Payment of debt issuance costs			(1.1)			—			—
Long-term debt repayments			(257.7)			(447.7)			(797.9)
Proceeds from exercised stock options			56.6			90.9			78.2
Taxes withheld and paid on employee stock awards			(13.0)			(12.7)			(11.6)
Payment of contingent consideration			—			—			(2.5)
Purchase of minority interest			—			—			(13.0)
Common stock acquired by purchase			(47.3)			(95.1)			(62.3)
Dividends paid			(330.1)			(302.2)			(273.4)
Net cash provided by (used in) financing activities			220.9			(725.8)			(751.1)
Effect of exchange rate changes on cash and cash equivalents			31.6			8.8			(1.8)
Increase (decrease) in cash and cash equivalents			268.2			58.8			(90.2)
Cash and cash equivalents at beginning of year			155.4			96.6			186.8
Cash and cash equivalents at end of year			$	423.6		$	155.4		$	96.6

See Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(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
Balance, November 30, 2017			20.0			242.0			$	1,672.9		$	1,166.5		$	(279.5)		$	11.0		$	2,570.9
Net income									—			933.4			—			—			933.4
Net income attributable to non-controlling interest									—			—			—			3.3			3.3
Other comprehensive income (loss), net of tax									—			—			(59.5)			(2.6)			(62.1)
Dividends									—			(280.5)			—			—			(280.5)
Adoption of ASU 2018-02									—			20.9			(20.9)			—			—
Buyout of minority interest									—			(12.4)			—			(0.4)			(12.8)
Stock-based compensation									25.6			—			—			—			25.6
Shares purchased and retired			(0.6)			(0.8)			(16.8)			(67.7)			—			—			(84.5)
Shares issued			3.4			0.2			88.9			—			—			—			88.9
Equal exchange			(3.7)			3.7			—			—			—			—			—
Balance, November 30, 2018			19.1			245.1			$	1,770.6		$	1,760.2		$	(359.9)		$	11.3		$	3,182.2
Net income									—			702.7			—			—			702.7
Net income attributable to non-controlling interest									—			—			—			1.9			1.9
Other comprehensive loss, net of tax									—			—			(140.3)			(0.7)			(141.0)
Dividends									—			(309.3)			—			—			(309.3)
Stock-based compensation									37.2			—			—			—			37.2
Shares purchased and retired			(0.4)			(1.2)			(15.4)			(97.8)			—			—			(113.2)
Shares issued			3.0			0.2			96.2			—			—			—			96.2
Equal exchange			(3.1)			3.1			—			—			—			—			—
Balance, November 30, 2019			18.6			247.2			$	1,888.6		$	2,055.8		$	(500.2)		$	12.5		$	3,456.7
Net income									—			747.4			—			—			747.4
Net income attributable to non-controlling interest									—			—			—			4.3			4.3
Other comprehensive income (loss), net of tax									—			—			29.4			(2.9)			26.5
Dividends									—			(338.5)			—			—			(338.5)
Stock-based compensation									46.0			—			—			—			46.0
Shares purchased and retired			(0.3)			(0.2)			(13.6)			(49.1)			—			—			(62.7)
Shares issued			1.6			—			60.3			—			—			—			60.3
Equal exchange			(1.9)			1.9			—			—			—			—			—
Balance, November 30, 2020			18.0			248.9			$	1,981.3		$	2,415.6		$	(470.8)		$	13.9		$	3,940.0

See Notes to Consolidated Financial Statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation

The financial statements include the accounts of our majority-owned or controlled subsidiaries and affiliates. Intercompany transactions have been eliminated. Investments in unconsolidated affiliates, over which we exercise significant influence, but not control, are accounted for by the equity method. Accordingly, our share of net income or loss of unconsolidated affiliates is included in net income.

Foreign Currency Translation

For majority-owned or controlled subsidiaries and affiliates, if located outside of the U.S., with functional currencies other than the U.S. dollar, asset and liability accounts are translated at the rates of exchange at the balance sheet date and the resultant translation adjustments are included in accumulated other comprehensive income (loss), a separate component of shareholders’ equity. Income and expense items are translated at average monthly rates of exchange. Gains and losses from foreign currency transactions of these majority-owned or controlled subsidiaries and affiliates — that is, transactions denominated in other than their functional currency — other than intercompany transactions designated as long-term investments, are included in net earnings.

Our unconsolidated affiliates located outside the U.S. generally use their local currencies as their functional currencies. The asset and liability accounts of those unconsolidated affiliates are translated at the rates of exchange at the balance sheet date, with the resultant translation adjustments included in accumulated other comprehensive income (loss) of those affiliates. Income and expense items of those affiliates are translated at average monthly rates of exchange. We record our ownership share of the net assets and accumulated other comprehensive income (loss) of our unconsolidated affiliates in our consolidated balance sheet on the lines entitled “Other long-term assets” and “Accumulated other comprehensive loss,” respectively. We record our ownership share of the net income of our unconsolidated affiliates in our consolidated income statement on the line entitled “Income from unconsolidated operations.”

Use of Estimates

Preparation of financial statements that follow accounting principles generally accepted in the U.S. requires us to make estimates and assumptions that affect the amounts reported in the financial statements and notes. Actual amounts could differ from these estimates.

Cash and Cash Equivalents

All highly liquid investments purchased with an original maturity of three months or less are classified as cash equivalents.

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined under the first-in, first-out costing method (FIFO), including the use of average costs which approximate FIFO.

Property, Plant and Equipment

Property, plant and equipment is stated at historical cost and depreciated over its estimated useful life using the straight-line method for financial reporting and both accelerated and straight-line methods for tax reporting. The estimated useful lives range from 20 to 50 years for buildings and 3 to 12 years for machinery, equipment and other assets. Assets leased under capital leases are depreciated over the shorter of the lease term or their useful lives unless it is reasonably certain that we will obtain ownership by the end of the lease term. Repairs and maintenance costs are expensed as incurred.

Computer Software

We capitalize costs of software developed or obtained for internal use. Capitalized software development costs include only (1) direct costs paid to others for materials and services to develop or buy the software, (2) payroll and payroll-related costs for employees who work directly on the software development project and (3) interest costs while developing the software. Capitalization of these costs stops when the project is substantially complete and ready for use.

The net book value of capitalized software totaled $116.0 million and $76.4 million at November 30, 2020 and 2019, respectively. Such amounts are recorded within "Other long-term assets" in the consolidated balance sheet. Software is amortized using the straight-line method over a range of 3 to 13 years, but not exceeding the expected life of the product. The net book value of capitalized software includes $86.7 million and $44.9 million at November

30, 2020 and 2019, respectively, which had not yet been placed into service and relates to our future implementation of a global enterprise resource planning (ERP) system.

Goodwill and Other Intangible Assets

We review the carrying value of goodwill and indefinite-lived intangible assets and conduct tests of impairment on an annual basis as described below. We also test goodwill for impairment if events or circumstances indicate it is more likely than not that the fair value of a reporting unit is below its carrying amount and test indefinite-lived intangible assets for impairment if events or changes in circumstances indicate that the asset might be impaired. Separable intangible assets that have finite useful lives are amortized over those lives.

Determining the fair value of a reporting unit or an indefinite-lived purchased intangible asset is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, assumed royalty rates, future economic and market conditions and determination of appropriate market comparables. We base our fair value estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Actual future results may differ from these estimates.

Goodwill Impairment

Our reporting units used to assess potential goodwill impairment are the same as our business segments. We calculate fair value of a reporting unit by using a discounted cash flow model and then compare that to the carrying amount of the reporting unit, including intangible assets and goodwill. If the carrying amount of the reporting unit exceeds the calculated fair value, we would determine the implied fair value of the reporting unit’s goodwill. An impairment charge would be recognized to the extent the carrying amount of goodwill exceeds the implied fair value.

Indefinite-lived Intangible Asset Impairment

Our indefinite-lived intangible assets consist of acquired brand names and trademarks. We primarily determine fair value by using a relief-from-royalty method and then compare that to the carrying amount of the indefinite-lived intangible asset. If the carrying amount of the indefinite-lived intangible asset exceeds its fair value, an impairment charge would be recorded to the extent the recorded indefinite-lived intangible asset exceeds the fair value.

Long-lived Asset Impairment

Fixed assets and amortizable intangible assets are reviewed for impairment as events or changes in circumstances occur indicating that the carrying value of the asset may not be recoverable. Undiscounted cash flow analyses are used to determine if an impairment exists. If an impairment is determined to exist, the loss would be calculated based on the excess of the asset’s carrying value over its estimated fair value.

Revenue Recognition

We manufacture, market and distribute spices, seasoning mixes, condiments and other flavorful products to the entire food industry—retailers, food manufacturers and foodservice businesses. We recognize sales as performance obligations are fulfilled when control passes to the customer. Revenues are recorded net of trade and sales incentives and estimated product returns. Known or expected pricing or revenue adjustments, such as trade discounts, rebates and returns, are estimated at the time of sale. Any taxes collected on behalf of government authorities are excluded from net sales. We account for product shipping and handling as fulfillment activities with costs for these activities recorded within cost of goods sold. Amounts billed and due from our customers are classified as accounts receivable on the balance sheet and require payment on a short-term basis. Our allowance for doubtful accounts represents our estimate of probable non-payments and credit losses in our existing receivables, as determined based on a review of past due balances and other specific account data.

The following table sets forth our net sales by the Americas, Europe, Middle East and Africa (EMEA) and Asia Pacific (APAC) geographic regions:

(millions)			Americas			EMEA			APAC			Total
2020
Net sales			$	3,974.9		$	1,046.7		$	579.7		$	5,601.3
2019
Net sales			$	3,711.3		$	986.1		$	650.0		$	5,347.4
2018
Net sales			$	3,627.5		$	1,021.1		$	654.2		$	5,302.8

Performance Obligations

Our revenues primarily result from contracts or purchase orders with customers, which generally are both short-term in nature and have a single performance obligation—the delivery of our products to customers. We assess the goods and services promised in our customers’ contracts or purchase orders and identify a performance obligation for each promise to transfer a good or service (or bundle of goods or services) that is distinct. To identify the performance obligations, we consider all the goods or services promised, whether explicitly stated or implied based on customary business practices.

Significant Judgments

Sales are recorded net of trade and sales incentives and estimated product returns. Known or expected pricing or revenue adjustments, such as trade discounts, rebates or returns, are estimated at the time of sale. Where applicable, future reimbursements are estimated based on a combination of historical patterns and future expectations regarding these programs. Key sales terms, such as pricing and quantities ordered, are established on a frequent basis such that most customer arrangements and related incentives have a one-year or shorter duration. Estimates that affect revenue, such as trade incentives and product returns, are monitored and adjusted each period until the incentives or product returns are realized. The adjustments recognized during the year ended November 30, 2020, 2019 and 2018 resulting from updated estimates of revenue for prior year product sales were not significant. The unsettled portion remaining in accrued liabilities for these activities was $183.3 million and $137.2 million at November 30, 2020 and 2019, respectively.

Practical Expedients

We have elected the following policy elections and practical expedients with respect to revenue recognition:

• Shipping and handling costs — We elected to account for shipping and handling activities that occur before the customer has obtained control of a good as fulfillment activities (i.e., an expense) rather than as a promised service.

• Measurement of transaction price — We elected to exclude from the measurement of transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by us from a customer for sales, value added and other excise taxes.

• Incremental cost of obtaining a contract — We elected to expense any incremental costs of obtaining a contract when the contract is for a period of one year or less.

Shipping and Handling

Shipping and handling costs on our products sold to customers related to activities that occur before the customer has obtained control of a good are included in cost of goods sold in the consolidated income statement.

Brand Marketing Support

Total brand marketing support costs, which are included in our consolidated income statement in the line entitled "Selling, general and administrative expense", were $230.3 million, $214.6 million and $218.7 million for 2020, 2019 and 2018, respectively. Brand marketing support costs include advertising and promotions but exclude trade funds paid to customers for such activities. All trade funds paid to customers are reflected in the consolidated income statement as a reduction of net sales. Promotion costs include public relations, shopper marketing, social marketing activities, general consumer promotion activities and depreciation of assets used in these promotional activities. Advertising costs include the development, production and communication of advertisements through television, digital, print and radio. Development and production costs are expensed in the period in which the advertisement is first run. All other costs of advertising are expensed as incurred. Advertising expense was $174.8 million, $150.8 million and $147.2 million for 2020, 2019 and 2018, respectively.

Research and Development

Research and development costs are expensed as incurred and are included in our consolidated income statement in the line entitled "Selling, general and administrative expense". Research and development expense was $68.6 million, $67.3 million and $69.4 million for 2020, 2019 and 2018, respectively.

Income Taxes

Income taxes are recognized in accordance with the liability method of accounting. Deferred taxes are recognized for the estimated taxes ultimately payable or recoverable based on enacted tax law. Changes in enacted tax rates are reflected in the tax provision as they occur.

As more fully described in note 13, the U.S. Tax Act created a new requirement that certain income earned by foreign subsidiaries, referred to as Global Intangible Low-Taxed Income (GILTI), must be included in the gross income of the subsidiary’s U.S. shareholder; this provision of the U.S. Tax Act was effective for us beginning on December 1, 2018. Accounting principles generally accepted in the U.S. provide for an accounting policy election of either recognizing deferred taxes for temporary differences expected to reverse as GILTI in future years or recognizing such taxes as a current period expense when incurred. We have elected to treat GILTI as a current period expense when incurred.

In accordance with ASC 740, Income Taxes, we recognize a tax position in our financial statements when it is more likely than not that the position will be sustained upon examination based on the technical merits of the position. That position is then measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement.

Stock-Based Compensation

Stock-based compensation expense is recognized in accordance with ASC 718, Compensation – Stock Compensation. We recognize stock-based compensation expense associated with options and restricted stock units (RSUs), which contain provisions that such awards fully vest upon an employee’s retirement, ratably over the shorter of the vesting period or the employees’ retirement eligibility date. Accordingly, we recognize stock-based compensation associated with options and RSUs subject to immediate retirement eligible vesting provisions on the date of grant.

Compensation expense associated with our long-term performance plan (LTPP) is recorded in the income statement ratably over the three-year period of the program based on the number of shares ultimately expected to be awarded using our estimate of the most likely outcome of achieving the performance objectives. We estimate forfeitures at the time of grant based on historical experience and revises this estimate in subsequent periods if actual forfeitures differ.

We recognize stock-based compensation expense associated with price-vested stock options ratably over the vesting period as such options do not contain provisions that fully vest these awards upon an employee’s retirement.

Stock Split

On September 28, 2020, our Board of Directors approved a 2-for-1 stock split in the form of a stock dividend on all shares of the Company’s two classes of common stock, Common Stock and Common Stock Non-Voting. On November 30, 2020, one like share was issued for each share outstanding to shareholders of record as of November 20, 2020. Trading of the Company’s common stock began on a split-adjusted basis on December 1, 2020. All common stock and per-share data have been retroactively adjusted for the impact of the stock split.

Derivative Instruments

We record all derivatives on our balance sheet at fair value. The fair value of derivative instruments is recorded in our consolidated balance sheet on the lines entitled “Other current assets", "Other long-term assets", "Other accrued liabilities" or "Other long-term liabilities". Gains and losses representing either hedge ineffectiveness, hedge components excluded from the assessment of effectiveness, or hedges of translational exposure are recorded in our consolidated income statement in the lines entitled "Other income (expense), net" or "Interest expense". In our consolidated cash flow statement, settlements of cash flow and fair value hedges are classified as operating activities; settlements of all other derivative instruments, including instruments for which hedge accounting has been discontinued, are classified consistent with the nature of the instruments.

Cash flow hedges. Qualifying derivatives are accounted for as cash flow hedges when the hedged item is a forecasted transaction. Gains and losses on these instruments are recorded in our consolidated balance sheet on the line entitled “Accumulated other comprehensive income (loss)" until the underlying transaction is recorded in earnings. When the hedged item is realized, gains or losses are reclassified from "Accumulated other comprehensive income (loss)" in our consolidated balance sheet to our consolidated income statement on the same line items as the underlying transactions.

Fair value hedges. Qualifying derivatives are accounted for as fair value hedges when the hedged item is a recognized asset, liability, or firm commitment. Gains and losses on these instruments are recorded in earnings, offsetting gains and losses on the hedged item.

Net investment hedges. Qualifying derivative and nonderivative financial instruments are accounted for as net investment hedges when the hedged item is a nonfunctional currency investment in a subsidiary. Gains and losses on these instruments are included in foreign currency translation adjustments, a component of “Accumulated other comprehensive income (loss)" in our consolidated balance sheet.

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 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 recognize the overfunded or underfunded status of our defined benefit pension plans as an asset or a liability in our balance sheet, with changes in the funded status recorded through other comprehensive income in the year in which those changes occur.

The expected return on plan assets is determined using the expected rate of return and a calculated value of plan assets referred to as the market-related value of plan assets. Differences between assumed and actual returns are amortized to the market-related value of assets on a straight-line basis over five years.

We use the corridor approach in the valuation of defined benefit pension and postretirement benefit plans. The corridor approach defers all actuarial gains and losses resulting from variances between actual results and actuarial assumptions. Those unrecognized gains and losses are amortized when the net gains and losses exceed 10% of the greater of the market-related value of plan assets or the projected benefit obligation at the beginning of the year. The amount in excess of the corridor is amortized over the average remaining life expectancy of retired plan participants, for plans whose benefits have been frozen, or the average remaining service period to retirement date of active plan participants.

Accounting Pronouncements Adopted in 2020

We adopted the new accounting standard for leases, Accounting Standards Codification Topic 842 Leases (ASC 842), as of December 1, 2019 and we elected to do so using a modified retrospective transition method. That modified retrospective transition method allowed us to initially apply the standard at the adoption date and recognize a cumulative-effect adjustment to retained earnings in the opening balance sheet in the period of adoption without restating prior periods. ASC 842 revised prior practice related to accounting for leases under Accounting Standards Codification Topic 840 Leases (ASC 840) for both lessees and lessors and requires lessees to recognize most leases on their balance sheets as lease liabilities with corresponding right-of-use (ROU) assets. Under ASC 842, the lease liability is equal to the present value of lease payments, and the ROU asset is based on the lease liability, subject to adjustments, such as for deferred rent and initial direct costs. For income statement purposes, ASC 842 retains a dual model similar to ASC 840, requiring leases to be classified as either operating or finance. For lessees, operating leases result in straight-line expense (similar to prior accounting by lessees for operating leases under ASC 840) while finance leases result in a front-loaded expense pattern (similar to prior accounting by lessees for capital leases under ASC 840).

We elected the package of practical expedients permitted under the transition guidance, which, among other things, allows us to carry forward the historical lease classification. In addition, we made accounting policy elections to combine the lease and non-lease components for all asset categories other than real estate. We also made elections to exclude from balance sheet reporting those leases with initial terms of 12 months or less (short-term leases).

Adoption of the new standard resulted in the recording of operating lease ROU assets and lease liabilities of $136.5 million and $140.0 million, respectively, with the difference due to prepaid and deferred rents that were reclassified to the ROU asset value. No cumulative-effect adjustment to opening retained earnings was required as of December 1, 2019. The standard did not materially affect our consolidated net income or cash flows for our fiscal year ended November 30, 2020. See note 7 for further details.

Recently Issued Accounting Pronouncements — Pending Adoption

In January 2017, the FASB issued ASU No. 2017-04 Intangibles—Goodwill and Other Topics (Topic 350)—Simplifying the Test for Goodwill Impairment. This guidance eliminates the requirement to calculate the implied fair value of goodwill of a reporting unit to measure a goodwill impairment charge. Instead, a company will record an impairment charge based on the excess of a reporting unit's carrying amount over its fair value. The new standard will be effective for the first quarter of our fiscal year ending November 30, 2021. We do not expect this guidance to have a material impact on our financial statements.

In June 2016, the FASB issued ASU No. 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which institutes a new model for recognizing credit losses on financial instruments that are not measured at fair value. The new standard is effective for the first quarter of our fiscal year ending November 30, 2021, and it will primarily impact our credit losses recognized for trade accounts receivable. This guidance will not have a material impact on our consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes. The new guidance removes certain exceptions to the general principles for income taxes and also improves consistent application of accounting by clarifying or amending existing guidance. The new standard is effective for the first quarter of our fiscal year ending November 30, 2022, and interim periods within those years. We are currently evaluating the impact that the new guidance will have on our consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04 Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting that provides optional expedients for a limited period of time for accounting for contracts, hedging relationship, and other transactions affected by the London Interbank Offered Rate (LIBOR) or other reference rate expected to be discontinued. These optional expedients can be applied from March 2020 through December 31, 2022. We are currently evaluating the impact that the new guidance will have on our consolidated financial statements.

2. ACQUISITIONS

Acquisitions are part of our strategy to increase sales and profits.

Acquisition of Cholula Hot Sauce

On November 30, 2020, we completed the acquisition of the parent company of Cholula Hot Sauce® (Cholula) from L Catterton. The purchase price was approximately $803.0 million, net of cash acquired, subject to certain customary purchase price adjustments. The acquisition was funded with cash and short-term borrowings. Cholula, a premium Mexican hot sauce brand, is a strong addition to McCormick’s global branded flavor portfolio, which we believe broadens our offering in the high growth hot sauce category to consumers and foodservice operators and accelerate our condiment growth opportunities with a complementary authentic Mexican flavor hot sauce. At the time of the acquisition, annual sales of Cholula were approximately $96 million. The results of Cholula’s operations have been included in our financial statements as a component of our consumer and flavor solutions segments from the date of acquisition.

The purchase price of Cholula was preliminarily allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. We estimated the fair values based on in-process independent valuations, discounted cash flow analyses, quoted market prices, and estimates made by management, a number of which are subject to finalization. The allocation of the purchase price will be finalized within the allowable measurement period. The preliminary allocation, net of cash acquired, of the fair value of the Cholula acquisition is summarized in the table below (in millions):

Trade accounts receivable			$	15.2
Inventories			16.5
Goodwill			410.5
Intangible assets			401.0
Other assets			12.5
Trade accounts payable			(6.8)
Other accrued liabilities			(7.4)
Deferred taxes			(35.6)
Other long-term liabilities			(2.9)
Total			$	803.0

The preliminary fair value of intangible assets was determined using income methodologies. We valued the acquired brand names and trademarks using the relief from royalty method, an income approach. For customer relationships, we used the distributor method, a variation of the excess earnings method that uses distributor-based inputs for margins and contributory asset charges. Some of the more significant assumptions inherent in developing the preliminary valuations included the estimated annual net cash flows for each indefinite-lived or definite-lived intangible asset (including net sales, operating profit margin, and working capital/contributory asset charges), royalty rates, the discount rate that appropriately reflects the risk inherent in each future cash flow stream, the assessment of each asset’s life cycle, and competitive trends, as well as other factors. We determined the assumptions used in the financial forecasts using historical data, supplemented by current and anticipated market conditions, estimated product category growth rates, management plans, and market comparables.

We used carrying values to value trade receivables and payables, as well as certain other current and non-current assets and liabilities, as we determined that they represented the fair value of those items. We valued finished goods and work-in-process inventory using a net realizable value approach, which resulted in a step-up of $4.9 million that will be recognized in cost of goods sold in 2021 as the related inventory is sold. Raw materials and packaging inventory was valued using the replacement cost approach.

Deferred income tax assets and liabilities represent the expected future tax consequences of temporary differences between the fair values of the assets acquired and liabilities assumed and their tax bases.

The preliminary valuation of the acquired net assets of Cholula includes $380.0 million allocated to indefinite-lived brand assets and $21.0 million allocated to definite-lived intangible assets with a weighted-average life of 15 years. As a result of the acquisition, we recognized a total of $410.5 million of goodwill. That goodwill primarily represents the intangible assets that do not qualify for separate recognition, such as the value of leveraging our brand building expertise, our insights in demand from consumer and flavor solutions customers for value-added flavor solutions, and our supply chain capabilities, as well as expected synergies from the combined operations and assembled workforce. Our income tax basis in the acquired intangible assets and goodwill approximates $285 million. The final allocation of the fair value of the Cholula acquisition, including the allocation of goodwill to our reporting units, which are the consumer and flavor solutions segments, was not complete as of November 30, 2020, but will be finalized within the allowable measurement period.

We expect transaction and integration expenses related to our acquisition of Cholula to total approximately $35 million, of which $11.2 million of transaction expenses were incurred in 2020. We anticipate incurring the balance of those transaction and integration expenses in fiscal 2021. We incurred an additional $1.2 million of transaction and integration expenses in 2020 related to our acquisition of FONA International, LLC and certain of its affiliates. See footnote 19 for additional details.

The impact of Cholula on our 2020 consolidated income before taxes, was principally the effect of the previously noted transaction expenses, and an insignificant amount of interest expense.

Acquisition of RB Foods

On August 17, 2017, we completed the acquisition of Reckitt Benckiser's Food Division (RB Foods) from Reckitt Benckiser Group plc. The purchase price was approximately $4.21 billion. In December 2017, we paid $4.2 million associated with the final working capital adjustment.

Total transaction and integration expenses related to the RB Foods acquisition totaled $22.5 million in 2018, of which $0.3 million and $22.2 million represented transaction expenses and integration expenses, respectively.

Other Acquisitions

On September 21, 2018, we purchased the remaining 10% ownership interest in our Shanghai subsidiary for a cash payment of $12.7 million. In conjunction with our purchase of this remaining 10% minority interest, we have eliminated the minority interest in that subsidiary and recorded an adjustment of $12.4 million to retained earnings in our consolidated balance sheet. The $12.7 million payment is reflected in the financing activities section of our consolidated cash flow statement for 2018.

3. 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 Chairman, President and Chief Executive Officer. Upon presentation of any such proposed action (generally including details with respect to estimated costs, which typically consist principally of employee severance and related benefits, together with ancillary costs associated with the action that may include a non-cash component, such as an asset impairment, or a component which relates to inventory adjustments that are included in cost of goods sold; impacted employees or operations; expected timing; and expected savings) to the Management Committee and the Committee’s advance approval, expenses associated with the 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. In 2018, we also included in special charges, as approved by our Management Committee, expense associated with a one-time payment, made to eligible U.S. hourly employees, to distribute a portion of the non-recurring net income tax benefit recognized in connection with the enactment of the U.S. Tax Act and as more fully described in note 13.

The following is a summary of special charges recognized for the years ended November 30 (in millions):

			2020			2019			2018
Employee severance and related benefits			$	4.1		$	6.2		$	2.0
Other costs (1)			2.8			14.6			14.3
Total special charges			$	6.9		$	20.8		$	16.3

(1) Included in other costs for 2018 are non-cash fixed asset impairment charges of $3.0 million.

The following is a summary of special charges by business segments for the years ended November 30 (in millions):

			2020			2019			2018
Consumer segment			$	5.5		$	13.1		$	10.0
Flavor solutions segment			1.4			7.7			6.3
Total special charges			$	6.9		$	20.8		$	16.3

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

During 2020, we recorded $6.9 million of special charges, consisting of (i) $5.3 million related to streamlining actions in our EMEA region, including $3.8 million related to severance and related benefits and $1.0 million of third party expenses and $0.5 million related to other costs; and (ii) $1.6 million related to our GE initiative. Of the $6.9 million in special charges recorded during 2020, approximately $4.8 million were paid in cash, with the remaining accrual expected to be paid in 2021. As of November 30, 2020, reserves associated with special charges are included in the line entitled "Trade accounts payable" and "Other accrued liabilities" in our consolidated balance sheet.

During 2019, we recorded $20.8 million of special charges, consisting primarily of (i) $14.1 million related to our GE initiative, including $10.6 million of third-party expenses, $2.1 million related to severance and related benefits, and $1.4 million related to other costs, (ii) $2.3 million of employee severance and related benefits associated with streamlining actions in the Americas and (iii) $3.9 million related to streamlining actions in our EMEA region. Of the $20.8 million in special charges recorded during 2019, approximately $16.8 million were paid in cash, with the remaining accrual paid in 2020.

During 2018, we recorded $16.3 million of special charges, consisting primarily of: (i) $11.5 million related to our global enablement initiative, as more fully described below; (ii) a one-time payment, in the aggregate amount of $2.2 million made to certain U.S. hourly employees to distribute a portion of the non-recurring net income tax benefit recognized in connection with the enactment of the U.S. Tax Act; (iii) $1.0 million related to employee severance benefits and other costs directly associated with the relocation of one of our Chinese manufacturing facilities; and (iv) $1.6 million related to employee severance benefits and other costs related to the transfer of certain manufacturing operations in our Asia/Pacific region to a new facility then under construction in Thailand. Of the $11.5 million in special charges recognized in 2018 related to our GE initiative, $7.5 million related to third party expenses, $3.0 million represented a non-cash asset impairment charge, and $1.0 million related to employee severance benefits. That non-cash asset impairment charge was related to the write-off of certain software assets that are incompatible with our future move, approved in 2018, to a new global ERP platform to facilitate planned actions under our GE initiative to align and simplify our end-to-end processes to support our future growth.

Of the $16.3 million in special charges recorded during 2018, approximately $12.3 million were paid in cash and $3.0 million represented a non-cash asset impairment, with the remaining accrual paid in 2019.

During 2017, our Management Committee approved a multi-year initiative during which we have executed and expect to continue to execute significant changes to our global processes, capabilities and operating model to provide a scalable platform for future growth. We expect this initiative to enable us to accelerate our ability to work globally and cross-functionally by aligning and simplifying processes throughout McCormick, in part building upon our current shared services foundation and expanding the end-to-end processes presently under that foundation. We expect this initiative, which we refer to as Global Enablement (GE), to enable this scalable platform for future growth while reducing costs, enabling faster decision making, increasing agility and creating capacity within our organization.

While we are continuing to fully develop the details of our GE operating model, we expect the cost of the GE initiative—to be recognized as “Special charges” in our consolidated income statement over its multi-year course—to range from approximately $60 million to $65 million. Of that $60 million to $65 million, we estimate that approximately sixty percent will be attributable to cash payments associated with related costs of GE implementation and transition, including outside consulting and other costs and approximately forty percent will be attributable to employee severance and related benefit payments both directly related to the initiative. Since its inception through November 30, 2020, we have recognized a total of $39.9 million of special charges associated with our GE initiative.

4. GOODWILL AND INTANGIBLE ASSETS

The following table displays intangible assets as of November 30:

			2020						2019
(millions)			Gross carrying amount			Accumulated amortization			Gross carrying amount			Accumulated amortization
Definite-lived intangible assets			$	336.8		$	127.4		$	308.3		$	104.3
Indefinite-lived intangible assets:
Goodwill			4,986.3			—			4,505.2			—
Brand names and trademarks			3,030.0			—			2,643.0			—
			8,016.3			—			7,148.2			—
Total goodwill and intangible assets			$	8,353.1		$	127.4		$	7,456.5		$	104.3

We acquired Cholula in November 2020 (see note 2). A preliminary valuation of the acquired net assets of Cholula resulted in the allocation of $410.5 million to goodwill, $380.0 million to indefinite-lived intangible assets associated with the acquired brand names and trademarks, and $21.0 million to definite-lived intangible assets. We expect to finalize the valuation of the acquired net assets of Cholula, including the related goodwill and intangible assets, within the one-year measurement period from the date of acquisition.

Intangible asset amortization expense was $20.2 million, $20.3 million and $20.6 million for 2020, 2019 and 2018, respectively. At November 30, 2020, definite-lived intangible assets had a weighted-average remaining life of approximately 10 years.

The changes in the carrying amount of goodwill by segment for the years ended November 30 were as follows:

			2020						2019
(millions)			Consumer			Flavor Solutions			Consumer			Flavor Solutions
Beginning of year			$	3,377.6		$	1,127.6		$	3,398.9		$	1,129.0
Increases from acquisitions			273.7			136.8			—			—
Foreign currency fluctuations			59.9			10.7			(21.3)			(1.4)
End of year			$	3,711.2		$	1,275.1		$	3,377.6		$	1,127.6

A preliminary valuation of the acquired net assets of Cholula resulted in the allocation of $273.7 million and $136.8 million of goodwill to the consumer segment and flavor solutions segment, respectively.

5. INVESTMENTS IN AFFILIATES

Summarized annual and year-end information from the financial statements of unconsolidated affiliates representing 100% of the businesses follows:

(millions)			2020			2019			2018
Net sales			$	870.3		$	863.0		$	807.9
Gross profit			318.0			316.2			290.5
Net income			93.7			90.5			78.9
Current assets			$	421.7		$	426.3		$	342.1
Noncurrent assets			126.2			134.0			129.9
Current liabilities			192.3			223.8			172.1
Noncurrent liabilities			12.2			9.2			10.0

Royalty income from unconsolidated affiliates was $19.5 million, $19.0 million and $18.5 million for 2020, 2019 and 2018, respectively.

Our principal earnings from unconsolidated affiliates is from our 50% interest in McCormick de Mexico, S.A. de C.V. Profit from this joint venture represented 75% of income from unconsolidated operations in 2020, 72% in 2019 and 76% in 2018.

6. FINANCING ARRANGEMENTS

Our outstanding debt, including capital leases, was as follows at November 30:

(millions)			2020			2019
Short-term borrowings
Commercial paper			$	845.8		$	575.3
Other			40.9			25.4
			$	886.7		$	600.7
Weighted-average interest rate of short-term borrowings at year-end			0.3		%	2.5		%
Long-term debt
3.90% notes due 7/8/2021(1)			$	250.0		$	250.0
2.70% notes due 8/15/2022			750.0			750.0
Term loan due 8/17/2022(2)			—			250.0
3.50% notes due 8/19/2023(3)			250.0			250.0
3.15% notes due 8/15/2024			700.0			700.0
3.25% notes due 11/15/2025(4)			250.0			250.0
3.40% notes due 8/15/2027(5)			750.0			750.0
2.50% notes due 4/15/2030			500.0			—
4.20% notes due 8/15/2047			300.0			300.0
7.63%–8.12% notes due 2024			55.0			55.0
Other, including capital leases			195.8			171.6
Unamortized discounts, premiums, debt issuance costs and fair value adjustments(6)			16.9			(3.1)
			4,017.7			3,723.5
Less current portion			263.9			97.7
			$	3,753.8		$	3,625.8

(1)Interest rate swaps, settled upon the issuance of these notes in 2011, effectively set the interest rate on the $250 million notes at a weighted-average fixed rate of 4.01%.

(2)The term loan was prepayable in whole or in part. Also, the term loan due in 2022 required quarterly principal payments of 2.5% of the initial principal amount.

(3)Interest rate swaps, settled upon the issuance of these notes in 2013, effectively set the interest rate on the $250 million notes at a weighted-average fixed rate of 3.30%.

(4)Interest rate swaps, settled upon the issuance of these notes in 2015, effectively set the interest rate on the $250 million notes at a weighted-average fixed rate of 3.45%. The fixed interest rate on $100 million of the 3.25% notes due in 2025 is effectively converted to a variable rate by interest rate swaps through 2025. Net interest payments are based on 3-month LIBOR plus 1.22% during this period (our effective rate as of November 30, 2020 was 1.44%).

(5)Interest rate swaps, settled upon the issuance of these notes in 2017, effectively set the interest rate on the $750 million notes at a weighted-average fixed rate of 3.44%. The fixed interest rate on $250 million of the 3.40% notes due in 2027 is effectively converted to a variable rate by interest rate swaps through 2027. Net interest payments are based on 3-month LIBOR plus 0.685% during this period (our effective rate as of November 30, 2020 was 0.91%).

(6)Includes unamortized discounts, premiums and debt issuance costs of $(24.4) million and $(23.6) million as of November 30, 2020 and 2019, respectively. Includes fair value adjustment associated with interest rate swaps designated as fair value hedges of $41.3 million and $20.5 million as of November 30, 2020 and 2019, respectively.

Maturities of long-term debt, including capital leases, during the fiscal years subsequent to November 30, 2020 are as follows (in millions):

2021			$	263.9
2022			765.0
2023			265.2
2024			791.9
2025			271.4
Thereafter			1,643.4

In April 2020, we issued $500.0 million of 2.50% notes due April 15, 2030, with cash proceeds received of $495.0 million, net of discounts and underwriters' fees. Interest is payable semiannually in arrears in April and October of each year.

In August 2017, we issued an aggregate amount of $2.5 billion of senior unsecured notes. These notes are due as follows: $750.0 million due August 15, 2022, $700.0 million due August 15, 2024, $750.0 million due August 15, 2027 and $300.0 million due August 15, 2047 with stated fixed interest rates of 2.70%, 3.15%, 3.40% and 4.20%, respectively. Interest is payable semiannually in arrears in August and February of each year. The net proceeds received from the issuance of these notes were $2,479.3 million and were used to partially fund our acquisition of RB Foods.

In connection with our acquisition of RB Foods, we entered into a Term Loan Agreement (Term Loan) in August 2017. The Term Loan provides for three-year and five-year senior unsecured term loans, each for $750 million. The net proceeds received from the issuance of the Term Loan was $1,498.3 million. The three-year loan was payable at maturity. The five-year loan was payable in equal quarterly installments in an amount of 2.5% of the initial principal amount, with the remaining unpaid balance due at maturity. The three-year and five-year loans were each prepayable in whole or in part. In 2019 and 2018, we repaid the three-year loan in the amounts of $130.0 million and $370.0 million, respectively. Prior to payoff, the three-year loan bore interest at LIBOR plus 1.125%. In 2020, 2019 and 2018, we repaid $250.0 million, $306.3 million and $175.0 million, respectively, of the five-year loan. Prior to payoff, the five-year loan bore interest at LIBOR plus 1.25%. The interest rates were based on our credit rating.

We have available credit facilities with domestic and foreign banks for various purposes. Some of these lines are committed lines and others are uncommitted lines and could be withdrawn at various times. We have a five-year $1.0 billion revolving credit facility, which will expire in August 2022. The current pricing for the credit facility, on a fully drawn basis, is LIBOR plus 1.25%. The pricing of the credit facility is based on a credit rating grid that contains a fully drawn maximum pricing of the credit facility equal to LIBOR plus 1.75%. This credit facility supports our commercial paper program and, after $845.8 million was used to support issued commercial paper, we have $154.2 million of capacity at November 30, 2020. In December 2020, we entered into a 364-day $1.0 billion revolving credit facility which will expire in December 2021. The current pricing for that credit facility, on a fully drawn basis, is LIBOR plus 1.25%. The pricing of the credit facility is based on a credit rating grid that contains a fully drawn maximum pricing of the credit facility equal to LIBOR plus 1.75%. The provisions of our revolving credit facilities restrict subsidiary indebtedness and require us to maintain certain minimum and maximum financial ratios for interest expense coverage and our leverage ratio. The applicable leverage ratio is reduced periodically. As of November 30, 2020, our capacity under the five-year $1.0 billion revolving credit facility was not affected by these covenants. We do not expect that these covenants would limit our access to our revolving credit facilities for the foreseeable future; however, the leverage ratio could restrict our ability to utilize this facility.

In addition, we have several uncommitted lines totaling $316.6 million, which have a total unused capacity at November 30, 2020 of $212.8 million. These lines, by their nature, can be withdrawn based on the lenders’ discretion. Committed credit facilities require a fee, and commitment fees were $1.3 million for both 2020 and 2019.

In 2018, we consolidated our Corporate staff and certain non-manufacturing U.S. employees into our new headquarters building in Hunt Valley, Maryland. The 15-year lease for that building requires monthly lease payments of approximately $0.9 million which began in April 2019. The $0.9 million monthly lease payment is subject to adjustment after an initial 60-month period and thereafter on an annual basis as specified in the lease agreement. Upon commencement of fit-out in the second quarter of 2018, we obtained access to the building, which resulted in the lease commencement date for accounting purposes. We have recognized this lease as a capital lease, with the leased asset of $116.1 million and $124.7 million included in property, plant and equipment, net, as of November 30, 2020 and 2019, respectively. As of November 30, 2020, the total lease obligation was $130.9 million, of which $7.1 million was included in the current portion of long-term debt and $123.8 million was included in long-term debt. As of November 30, 2019, the total lease obligation was $137.7 million, of which $6.8 million was included in the current portion of long-term debt and $130.9 million was included in long-term debt. During 2020, 2019 and 2018, respectively, we recognized amortization expense of $8.7 million, $8.7 million and $5.2 million related to the leased asset.

At November 30, 2020, we had guarantees outstanding of $0.7 million with terms of one year or less. As of both November 30, 2020 and 2019, we had outstanding letters of credit of $32.2 million. These letters of credit typically act as a guarantee of payment to certain third parties in accordance with specified terms and conditions. The unused portion of our letter of credit facility was $13.8 million at November 30, 2020.

7. LEASES

Our lease portfolio primarily consists of (i) certain real estate, including those related to a number of administrative, distribution and manufacturing locations; (ii) certain machinery and equipment, including forklifts; and (iii) automobiles, delivery trucks and other vehicles, including an airplane. When our real estate lease arrangements

include lease and non-lease components (for example, common area maintenance), we account for each component separately, based on their relative standalone prices. For all other asset categories, we combine lease components and non-lease components into a single lease commitment. We determine if an agreement is a lease or contains a lease at inception. Leases with an initial term of 12 months or less (short-term leases) are not recorded on the balance sheet.

ROU assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are based on the estimated present value of lease payments over the lease term and are recognized at the lease commencement date.

As most of our leases do not provide an implicit borrowing rate, we use our estimated incremental borrowing rate in determining the present value of lease payments. The estimated incremental borrowing rate is derived from information available at the lease commencement date.

Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. A limited number of our lease agreements include rental payments that are adjusted periodically based on a market rate or index. Our lease agreements generally do not contain residual value guarantees or material restrictive covenants, with the exception of the non-cancellable synthetic lease discussed below.

The following presents the components of our lease expense for the year ended November 30, 2020 (in millions):

Operating lease cost			$	41.2
Finance lease cost:
Amortization of ROU assets			9.0
Interest on lease liabilities			4.5
Net lease cost			$	54.7
(1) Net lease cost does not include short-term leases, variable lease costs or sublease income, all of which are immaterial.

Rental expense under operating leases (primarily buildings and equipment) was $48.1 million in 2019 and $58.5 million in 2018.

Supplemental balance sheet information related to leases as of November 30, 2020 were as follows (in millions):

Leases						Classification
Assets:
Operating lease ROU assets						Other long-term assets						$	136.8
Finance lease ROU assets						Property, plant and equipment, net						120.7
Total leased assets												$	257.5
Liabilities:
Current
Operating						Other accrued liabilities						$	37.3
Finance						Current portion of long-term debt						7.3
Non-current
Operating						Other long-term liabilities						103.5
Finance						Long-term debt						125.5
Total lease liabilities												$	273.6

Information regarding our lease terms and discount rates as of November 30, 2020 were as follows:

			Weighted-average remaining lease term (years)			Weighted-average discount rate
Operating leases			5.6			1.9		%
Finance leases			13.9			3.3		%

The future maturity of our lease liabilities as of November 30, 2020 were as follows (in millions):

			Operating leases						Finance leases						Total
2021			$	39.4					$	11.4					$	50.8
2022			29.2						11.4						40.6
2023			22.3						11.4						33.7
2024			15.3						11.5						26.8
2025			12.6						11.7						24.3
Thereafter			28.8						114.0						142.8
Total lease payments			147.6						171.4						319.0
Less: Imputed interest			6.8						38.6						45.4
Total lease liabilities			$	140.8					$	132.8					$	273.6

Supplemental cash flow and other information related to leases for the year ended November 30, 2020 were as follows (in millions):

Cash paid for amounts included in the measurements of lease liabilities:
Operating cash flows used for operating leases			$	41.5
Operating cash flows used for finance leases			4.5
Financing cash flows used for finance leases			6.9
ROU assets obtained in exchange for lease liabilities
Operating leases			$	36.6

During October 2020, we entered into a non-cancellable synthetic lease for a distribution facility with an estimated construction cost of $315 million. The lease will commence upon completion of construction of the facility, for which we are the construction agent, which is expected to be in the later part of fiscal 2022. The term of the lease is five years after commencement. The lease contains options to negotiate a renewal of the lease or to purchase or sell the facility at the end of the lease term. Upon lease commencement, the ROU asset and lease liability will be determined and recorded. The lease arrangement also contains a residual value guarantee of approximately 75% of the total construction cost. The lease also contains covenants that are consistent with our revolving credit agreements as disclosed in Note 6.

8. FINANCIAL INSTRUMENTS

We use derivative financial instruments to enhance our ability to manage risk, including foreign currency 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

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. 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. Forward contracts are generally less than 18 months duration. Currency swap agreements are established in conjunction with the terms of the underlying debt issues.

At November 30, 2020, we had foreign currency exchange contracts to purchase or sell $383.8 million of foreign currencies as compared to $489.2 million at November 30, 2019. 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 November 30, 2020 have durations of less than 18 months.

Contracts which are designated as hedges of anticipated purchases denominated in a foreign currency (generally purchases of raw materials 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. 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.

We also enter into fair value foreign currency exchange contracts to manage exposure to currency fluctuations in certain intercompany loans between subsidiaries as well as currency exposure to third-party non-functional currency assets or liabilities. The notional value of these contracts was $212.3 million and $357.5 million at November 30, 2020 and 2019, respectively. Any gains or losses recorded based on both the change in fair value of these contracts and the change in the currency component of the underlying loans are recognized in our consolidated income statement as other income, net.

Beginning in the first quarter of 2019, we also utilized cross currency interest rate swap contracts that are designated as net investment hedges. As of November 30, 2020, we had cross currency interest rate swap contracts of (i) $250 million notional value to receive $250 million at three-month U.S. LIBOR plus 0.685% and pay £194.1 million at three-month GBP LIBOR plus 0.740% and (ii) £194.1 million notional value to receive £194.1 million at three-month GBP LIBOR plus 0.740% and pay €221.8 million at three-month Euro EURIBOR plus 0.808%. These cross-currency interest rate swap contracts expire in August 2027.

Interest Rates

We finance a portion of our operations with both fixed and variable rate debt instruments, primarily commercial paper, notes and bank loans. We utilize interest rate swap agreements to minimize worldwide financing costs and to achieve a desired mix of variable and fixed rate debt.

As of November 30, 2020 and 2019, we have outstanding interest rate swap contracts for a notional amount of $350.0 million. Those interest rate swap contracts include a $100 million notional value of interest rate swap contracts where we receive interest at 3.25% and pay a variable rate of interest based on three-month LIBOR plus 1.22%. These swaps, which expire in November 2025, are designated as fair value hedges of the changes in fair value of $100 million of the $250 million 3.25% medium-term notes due 2025. We also have $250 million notional interest rate swap contracts where we receive interest at 3.40% and pay a variable rate of interest based on three-month LIBOR plus 0.685%, which expire in August 2027, and are designated as fair value hedges of the changes in fair value of $250 million of the $750 million 3.40% term notes due 2027.

Any unrealized gain or loss on these swaps was offset by a corresponding increase or decrease in the value of the hedged debt. Hedge ineffectiveness was not material.

All derivatives are recognized at fair value in our balance sheet and recorded in either other current assets, or other long-term assets, other accrued liabilities or other long-term liabilities depending upon their nature and maturity.

The following tables disclose the notional amount and fair values of derivative instruments on our consolidated balance sheet:

As of November 30, 2020:
(millions)			Asset Derivatives									Liability Derivatives
Derivatives			Balance sheet location			Notional amount			Fair value			Balance sheet location			Notional amount			Fair value
Interest rate contracts			Other current assets/Other long-term assets			$	350.0		$	43.1		Other accrued liabilities			$	—		$	—
Foreign exchange contracts			Other current assets			27.5			1.4			Other accrued liabilities			356.3			8.2
Cross currency contracts			Other current assets/Other long-term assets			—			—			Other long-term liabilities			524.4			18.8
Total									$	44.5								$	27.0
As of November 30, 2019:
(millions)			Asset Derivatives									Liability Derivatives
Derivatives			Balance sheet location			Notional amount			Fair value			Balance sheet location			Notional amount			Fair value
Interest rate contracts			Other current assets/Other long-term assets			$	350.0		$	20.9		Other accrued liabilities			$	—		$	—
Foreign exchange contracts			Other current assets			293.1			3.3			Other accrued liabilities			196.1			3.6
Cross currency contracts			Other current assets/Other long-term assets			495.5			3.2			Other accrued liabilities			—			—
Total									$	27.4								$	3.6

The following tables disclose the impact of derivative instruments on other comprehensive income (OCI), accumulated other comprehensive income (AOCI) and our consolidated income statement for the years ended November 30, 2020, 2019 and 2018:

Fair value hedges (millions)
			Income statement location			Income (expense)
Derivative			2020			2019			2018
Interest rate contracts			Interest expense			$	5.2		$	—		$	(0.1)

			Income statement location			Gain (loss) recognized in income												Income statement location			Gain (loss) recognized in income
Derivative			2020			2019			2018			Hedged Item			2020			2019			2018
Foreign exchange contracts			Other income, net			$	(4.0)		$	0.2		$	(2.9)		Intercompany loans			Other income, net			$	3.0		$	(0.9)		$	2.7

Cash flow hedges (millions)
			Gain (loss) recognized in OCI									Income statement location			Gain (loss) reclassified from AOCI
Derivative			2020			2019			2018			2020			2019			2018
Interest rate contracts			$	—		$	—		$	—		Interest expense			$	0.5		$	0.5		$	0.5
Foreign exchange contracts			1.9			(0.2)			2.6			Cost of goods sold			1.6			1.6			(3.3)
Total			$	1.9		$	(0.2)		$	2.6					$	2.1		$	2.1		$	(2.8)

The amount of gain or loss recognized in income on the ineffective portion of derivative instruments is not material. The net amount of accumulated other comprehensive income expected to be reclassified into income related to these contracts in the next twelve months is a $0.7 million increase to earnings.

Net investment hedges (millions)
			Gain (loss) recognized in OCI						Income statement location			Gain (loss) excluded from the assessment of hedge effectiveness
Derivative			2020			2019						2020			2019
Cross currency contracts			$	(20.8)		$	1.1		Interest expense			$	3.1		$	5.4

For all net investment hedges, no amounts have been reclassified out of other comprehensive income (loss). The amounts noted in the tables above for OCI do not include any adjustments for the impact of deferred income taxes.

Fair Value of Financial Instruments

The carrying amount and fair value of financial instruments as of November 30 were as follows:

			2020						2019
(millions)			Carrying amount			Fair value			Carrying amount			Fair value
Long-term investments			$	129.9		$	129.9		$	124.4		$	124.4
Long-term debt (including current portion)			4,017.7			4,357.1			3,723.5			3,859.0
Level 1 valuation techniques						4,161.3						3,437.5
Level 2 valuation techniques						195.8						421.5
Derivatives related to:
Interest rates (assets)			43.1			43.1			20.9			20.9
Foreign currency (assets)			1.4			1.4			3.3			3.3
Foreign currency (liabilities)			8.2			8.2			3.6			3.6
Cross currency (assets)			—			—			3.2			3.2
Cross currency (liabilities)			18.8			18.8			—			—

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. The fair value for Level 2 long-term debt is determined by using quoted prices for similar debt instruments. Investments in affiliates are not readily marketable, and it is not practicable to estimate their fair value. Long-term investments are comprised of fixed income and equity securities held on behalf of employees in certain employee benefit plans and are stated at fair value on the balance sheet.

Concentrations of Credit Risk

We are potentially exposed to concentrations of credit risk with trade accounts receivable and financial instruments. 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. We generally have a large and diverse customer base which limits our concentration of credit risk. At November 30, 2020, we did not have amounts due from any single customer that exceed 10% of consolidated trade accounts receivable. Current credit markets are highly volatile and some of our customers and counterparties are highly leveraged. We continue to closely monitor the credit worthiness of our customers and counterparties and generally do not require collateral. We believe that the allowance for doubtful accounts properly recognized trade receivables at realizable value. We consider nonperformance credit risk for other financial instruments to be insignificant.

9. 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 management’s own assumptions.

Our population of assets and liabilities subject to fair value measurements on a recurring basis are as follows:

						Fair value measurements using fair value hierarchy as of November 30, 2020
(millions)			Fair value			Level 1			Level 2
Assets:
Cash and cash equivalents			$	423.6		$	423.6		$	—
Insurance contracts			126.0			—			126.0
Bonds and other long-term investments			3.9			3.9			—
Interest rate derivatives			43.1			—			43.1
Foreign currency derivatives			1.4			—			1.4
Total			$	598.0		$	427.5		$	170.5
Liabilities:
Foreign currency derivatives			8.2			—			8.2
Cross currency contracts			18.8			—			18.8
Total			$	27.0		$	—		$	27.0

						Fair value measurements using fair value hierarchy as of November 30, 2019
(millions)			Fair value			Level 1			Level 2
Assets:
Cash and cash equivalents			$	155.4		$	155.4		$	—
Insurance contracts			121.7			—			121.7
Bonds and other long-term investments			2.7			2.7			—
Interest rate derivatives			20.9			—			20.9
Foreign currency derivatives			3.3			—			3.3
Cross currency contracts			3.2			—			3.2
Total			$	307.2		$	158.1		$	149.1
Liabilities:
Foreign currency derivatives			3.6			—			3.6
Total			$	3.6		$	—		$	3.6

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 and foreign currency derivatives are based on values for similar instruments using models with market-based inputs.

At November 30, 2020 and 2019, we had no financial assets or liabilities that were subject to a level 3 fair value measurement.

10. ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table sets forth the components of accumulated other comprehensive loss, net of tax where applicable, as of November 30 (in millions):

			2020			2019
Accumulated other comprehensive loss, net of tax where applicable
Foreign currency translation adjustment (1)			$	(174.0)		$	(266.5)
Unrealized loss on foreign currency exchange contracts			(0.4)			—
Unamortized value of settled interest rate swaps			(0.1)			0.3
Pension and other postretirement costs			(296.3)			(234.0)
			$	(470.8)		$	(500.2)

(1)During the year ended November 30, 2020, the foreign currency translation adjustment of accumulated other comprehensive loss decreased by $92.5 million, including the impact of a $20.8 million increase associated with net investment hedges. During the year ended November 30, 2019, the foreign currency translation adjustment of accumulated other comprehensive loss increased by $24.9 million, of which $0.9 million was associated with net investment hedges. These net investment hedges are more fully described in Note 8.

The following table sets forth the amounts reclassified from accumulated other comprehensive income (loss) and into consolidated net income for the years ended November 30:

(millions)																								Affected line items in the consolidated income statement
Accumulated other comprehensive income (loss) components						2020						2019						2018
(Gains)/losses on cash flow hedges:
Interest rate derivatives						$	(0.5)					$	(0.5)					$	(0.5)					Interest expense
Foreign exchange contracts						(1.6)						(1.6)						3.3						Cost of goods sold
Total before taxes						(2.1)						(2.1)						2.8
Tax effect						0.5						0.4						(0.6)						Income taxes
Net, after tax						$	(1.6)					$	(1.7)					$	2.2
Amortization of pension and postretirement benefit adjustments:
Amortization of prior service (credits) costs (1)						$	(4.0)					$	(8.0)					$	(8.5)					Other income, net
Amortization of net actuarial losses (1)						11.0						2.6						12.6						Other income, net
Total before taxes						7.0						(5.4)						4.1
Tax effect						(1.6)						1.2						(1.0)						Income taxes
Net, after tax						$	5.4					$	(4.2)					$	3.1

(1) This accumulated other comprehensive income (loss) component is included in the computation of total pension expense and total other postretirement expense (refer to note 11 for additional details).

11. 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 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.

During fiscal year 2017, we made significant changes to certain of our employee benefit plans and retirements plans that froze the accrual of certain defined benefit pension plans in the U.S. and the United Kingdom. Also, on December 1, 2017, our Management Committee approved the freezing of benefits under our pension plans in Canada. The effective date of this freeze was November 30, 2019. Although those plans have 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.

As a result of the change to our pension plans in Canada, we remeasured pension assets and benefit obligations as of the date of the approval indicated above and, in fiscal year 2018, we reduced the Canadian plan benefit obligations by $17.5 million. These remeasurements resulted in a non-cash, pre-tax net actuarial gain of $17.5 million in fiscal year 2018. These net actuarial gains consist principally of a curtailment gain of $18.0 million, which is included in our consolidated statement of comprehensive income for 2018 as a component of "Other comprehensive income (loss)" on the line entitled "Unrealized components of pension plans". Deferred taxes associated with this actuarial gain, together with other unrealized components of pension plans recognized during 2018, are also included in that statement as a component of "Other comprehensive income (loss)".

Included in our consolidated balance sheet as of November 30, 2020 on the line entitled "Accumulated other comprehensive loss" was $383.4 million ($296.3 million net of tax) related to net unrecognized actuarial losses that have not yet been recognized in net periodic pension or postretirement benefit cost. We expect to recognize $13.5 million ($9.7 million net of tax) in net periodic pension and postretirement benefit costs during 2021 related to the amortization of actuarial losses of $13.2 million and the amortization of prior service cost of $0.3 million.

Defined Benefit Pension Plans

The significant assumptions used to determine benefit obligations are as follows as of November 30:

			United States						International
			2020			2019			2020			2019
Discount rate—funded plans			2.8		%	3.4		%	1.9		%	2.2		%
Discount rate—unfunded plan			2.7		%	3.3		%	—			—
Salary scale			—			—			2.9		%	2.9		%

The significant assumptions used to determine pension expense for the years ended November 30 are as follows:

			United States									International
			2020			2019			2018			2020			2019			2018
Discount rate—funded plans			3.4		%	4.7		%	4.0		%	2.2		%	3.3		%	2.9		%
Discount rate—unfunded plan			3.3		%	4.6		%	3.9		%	—			—			—
Salary scale			—		%	—		%	3.8		%	2.9		%	3.4		%	3.5		%
Expected return on plan assets			6.8		%	7.0		%	7.3		%	4.9		%	5.5		%	5.6		%

Annually, we undertake a process, with the assistance of our external investment consultants, to evaluate the appropriate projected rates of return to use for our pension plans’ assumptions. We engage our investment consultants' research teams to develop capital market assumptions for each asset category in our plans to project investment returns into the future. The specific methods used to develop expected return assumptions vary by asset category. We adjust the outcomes for the fact that plan assets are invested with actively managed funds and subject to tactical asset reallocation.

Our pension expense for the years ended November 30 was as follows:

			United States									International
(millions)			2020			2019			2018			2020			2019			2018
Service cost			$	3.2		$	2.1		$	17.0		$	1.3		$	3.6		$	4.3
Interest costs			29.3			34.4			31.6			7.5			9.5			9.2
Expected return on plan assets			(40.6)			(42.5)			(43.4)			(15.3)			(16.4)			(16.6)
Amortization of prior service costs			0.5			0.5			—			0.1			0.2			0.1
Amortization of net actuarial loss			7.8			2.3			9.9			2.0			1.2			2.8
Settlement/curtailment loss			—			—			—			1.3			—			0.5
			$	0.2		$	(3.2)		$	15.1		$	(3.1)		$	(1.9)		$	0.3

A rollforward of the benefit obligation, fair value of plan assets and a reconciliation of the pension plans’ funded status as of November 30, the measurement date, follows:

			United States						International
(millions)			2020			2019			2020			2019
Change in benefit obligation:
Benefit obligation at beginning of year			$	884.8		$	752.6		$	345.6		$	292.9
Service cost			3.2			2.1			1.3			3.6
Interest costs			29.3			34.4			7.5			9.5
Employee contributions			—			—			—			0.6
Actuarial loss			82.1			134.6			19.1			51.8
Benefits paid			(41.4)			(38.9)			(14.1)			(14.7)
Expenses paid			—			—			(0.2)			(0.3)
Foreign currency impact			—			—			12.5			2.2
Benefit obligation at end of year			$	958.0		$	884.8		$	371.7		$	345.6
Change in fair value of plan assets:
Fair value of plan assets at beginning of year			$	671.9		$	640.4		$	340.9		$	306.5
Actual return on plan assets			47.3			62.2			28.6			42.4
Employer contributions			10.4			8.2			1.5			3.2
Employee contributions			—			—			—			0.8
Benefits paid			(41.4)			(38.9)			(14.1)			(14.7)
Foreign currency impact			—			—			11.8			2.7
Fair value of plan assets at end of year			$	688.2		$	671.9		$	368.7		$	340.9
Funded status			$	(269.8)		$	(212.9)		$	(3.0)		$	(4.7)
Pension plans in which accumulated benefit obligation exceeded plan assets
Projected benefit obligation			$	958.0		$	884.8		$	110.4		$	103.9
Accumulated benefit obligation			945.1			874.8			106.5			100.4
Fair value of plan assets			688.2			671.9			87.7			83.6

Included in the U.S. in the preceding table is a benefit obligation of $110.5 million and $105.4 million for 2020 and 2019, respectively, related to our Supplemental Executive Retirement Plan (SERP). The assets related to this plan,

which totaled $86.4 million and $85.5 million as of November 30, 2020 and 2019, respectively, are held in a rabbi trust and accordingly have not been included in the preceding table.

Amounts recorded in the balance sheet for all defined benefit pension plans as of November 30 consist of the following:

			United States						International
(millions)			2020			2019			2020			2019
Non-current pension asset			$	—		$	—		$	19.6		$	15.6
Accrued pension liability			269.8			212.9			22.6			20.3
Deferred income tax assets			74.0			58.5			14.3			13.3
Accumulated other comprehensive loss			235.5			183.9			63.7			60.1

The accumulated benefit obligation is the present value of pension benefits (whether vested or unvested) attributed to employee service rendered before the measurement date and based on employee service and compensation prior to that date. The accumulated benefit obligation differs from the projected benefit obligation in that it includes no assumption about future compensation or service levels. The accumulated benefit obligation for the U.S. pension plans was $945.1 million and $874.8 million as of November 30, 2020 and 2019, respectively. The accumulated benefit obligation for the international pension plans was $367.9 million and $342.2 million as of November 30, 2020 and 2019, respectively.

The investment objectives of the defined benefit pension plans are to provide assets to meet the current and future obligations of the plans at a reasonable cost to us. The goal is to optimize the long-term return across the portfolio of investments at a moderate level of risk. Higher-returning assets include mutual, co-mingled and other funds comprised of equity securities, utilizing both active and passive investment styles. These more volatile assets are balanced with less volatile assets, primarily mutual, co-mingled and other funds comprised of fixed income securities. Professional investment firms are engaged to provide advice on the selection and monitoring of investment funds, and to provide advice on the allocation of plan assets across the various fund managers. This advice is based in part on the duration of each plan’s liability. The investment return performances are evaluated quarterly against specific benchmark indices and against a peer group of funds of the same asset classification.

The allocations of U.S. pension plan assets as of November 30, by asset category, were as follows:

			Actual						2020
Asset Category			2020			2019			Target
Equity securities			63.2		%	63.3		%	59.0		%
Fixed income securities			22.0		%	21.5		%	23.2		%
Other			14.8		%	15.2		%	17.8		%
Total			100.0		%	100.0		%	100.0		%

The allocations of the international pension plans’ assets as of November 30, by asset category, were as follows:

			Actual						2020
Asset Category			2020			2019			Target
Equity securities			50.9		%	50.4		%	53.0		%
Fixed income securities			48.3		%	48.9		%	47.0		%
Other			0.8		%	0.7		%	—		%
Total			100.0		%	100.0		%	100.0		%

The following tables set forth by level, within the fair value hierarchy as described in note 9, pension plan assets at their fair value as of November 30 for the United States and international plans:

As of November 30, 2020			United States
(millions)			Total fair value			Level 1			Level 2
Cash and cash equivalents			$	28.1		$	28.1		$	—
Equity securities:
U.S. equity securities(a)			271.1			138.2			132.9
International equity securities(b)			159.2			147.6			11.6
Fixed income securities:
U.S. government/corporate bonds(c)			57.1			54.9			2.2
High yield bonds(d)			37.3			—			37.3
International/government/corporate bonds(e)			29.1			29.1			—
Insurance contracts(f)			1.1			—			1.1
Other types of investments:
Real estate (g)			24.5			20.6			3.9
Natural resources (h)			9.7			—			9.7
Total			$	617.2		$	418.5		$	198.7
Investments measured at net asset value(i)
Hedge funds(j)			39.5
Private equity funds(k)			4.8
Private debt funds(l)			26.7
Total investments			$	688.2

As of November 30, 2020			International
(millions)			Total fair value			Level 1			Level 2
Cash and cash equivalents			$	3.1		$	3.1		$	—
International equity securities(b)			187.6			—			187.6
Fixed income securities:
International/government/corporate bonds(e)			155.4			—			155.4
Insurance contracts(f)			22.6			—			22.6
Total investments			$	368.7		$	3.1		$	365.6

As of November 30, 2019			United States
(millions)			Total fair value			Level 1			Level 2
Cash and cash equivalents			$	15.3		$	15.3		$	—
Equity securities:
U.S. equity securities(a)			276.5			148.5			128.0
International equity securities(b)			145.5			134.2			11.3
Fixed income securities:
U.S./government/ corporate bonds(c)			51.2			49.1			2.1
High yield bonds(d)			40.1			—			40.1
International/government/ corporate bonds(e)			26.8			26.8			—
Insurance contracts(f)			1.1			—			1.1
Other types of investments:
Real estate (g)			25.9			22.0			3.9
Natural resources (h)			12.0			—			12.0
Total			$	594.4		$	395.9		$	198.5
Investments measured at net asset value(i)
Hedge funds(j)			49.3
Private equity funds(k)			3.2
Private debt funds(l)			25.0
Total investments			$	671.9

As of November 30, 2019						International
(millions)			Total fair value			Level 1			Level 2
Cash and cash equivalents			$	2.5		$	2.5		$	—
International equity securities(b)			171.6			—			171.6
Fixed income securities:
International/government/corporate bonds(e)			144.7			—			144.7
Insurance contracts(f)			22.1			—			22.1
Total investments			$	340.9		$	2.5		$	338.4

(a)This category comprises equity funds and collective equity trust funds that most closely track the S&P index and other equity indices.

(b)This category comprises international equity funds with varying benchmark indices.

(c)This category comprises funds consisting of U.S. government and U.S. corporate bonds and other fixed income securities. An appropriate benchmark is the Barclays Capital Aggregate Bond Index.

(d)This category comprises funds consisting of real estate related debt securities with an appropriate benchmark of the Barclays Investment Grade CMBS Index.

(e)This category comprises funds consisting of international government/corporate bonds and other fixed income securities with varying benchmark indices.

(f)This category comprises insurance contracts, the majority of which have a guaranteed investment return.

(g)This category comprises funds investing in real estate investment trusts (REIT). An appropriate benchmark is the MSCI U.S. REIT Index.

(h)This category comprises funds investing in natural resources. An appropriate benchmark is the Alerian master limited partnership (MLP) Index.

(i)Certain investments that are valued using the net asset value per share (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy. These are included to permit reconciliation of the fair value hierarchy to the aggregate pension plan assets.

(j)This category comprises hedge funds investing in strategies represented in various HFRI Fund Indices. The net asset value is generally based on the valuation of the underlying investment. Limitations exist on the timing from notice by the plan of its intent to redeem and actual redemptions of these funds and generally range from a minimum of one month to several months.

(k)This category comprises private equity, venture capital and limited partnerships. The net asset is based on valuation models of the underlying securities as determined by the general partner or general partner's designee. These valuation models include unobservable inputs that cannot be corroborated using verifiable observable market data. These funds typically have redemption periods of approximately 10 years.

(l)This category comprises limited partnerships funds investing in senior loans, mezzanine and distressed debt. The net asset is based on valuation models of the underlying securities as determined by the general partner or general partner's designee. These valuation models include unobservable inputs that cannot be corroborated using verifiable observable market data. These funds typically have redemption periods of approximately 10 years.

For the plans’ hedge funds, private equity funds and private debt funds, we engage an independent advisor to compare the funds’ returns to other funds with similar strategies. Each fund is required to have an annual audit by

an independent accountant, which is provided to the independent advisor. This provides a basis of comparability relative to similar assets.

Equity securities in the U.S. pension plans included McCormick stock with a fair value of $50.6 million (0.6 million shares and 7.4% of total U.S. pension plan assets) and $64.4 million (0.8 million shares and 9.6% of total U.S. pension plan assets) at November 30, 2020 and 2019, respectively. Dividends paid on these shares were $0.9 million in both 2020 and 2019.

Pension benefit payments in our most significant plans are made from assets of the pension plans. It is anticipated that future benefit payments for the U.S. and international plans for the next 10 fiscal years will be as follows:

(millions)			United States			International
2021			$	43.7		$	12.0
2022			43.7			11.7
2023			44.7			12.8
2024			47.5			12.4
2025			48.7			12.8
2026-2030			252.8			66.0

U.S. Defined Contribution Retirement Plans

Effective December 1, 2018 for the U.S. defined contribution retirement plan, we match 100% of a participant’s contribution up to the first 3% of the participant’s salary, and 66.7% of the next 3% of the participant’s salary. In addition, we make contributions of 3% of the participant's salary for all U.S. employees who are employed on December 31 of each year. Prior to December 1, 2018 for the U.S. defined contribution retirement plan, we matched 100% of a participant’s contribution up to the first 3% of the participant’s salary, and 50% of the next 2% of the participant’s salary. In addition, we made contributions of 3% of the participant's salary for U.S. employees not covered by the defined benefit plan. Some of our smaller U.S. subsidiaries sponsor separate 401(k) retirement plans. We also sponsor a non-qualified defined contribution retirement plan. Our contributions charged to expense under all U.S. defined contribution retirement plans were $30.8 million, $28.2 million and $15.5 million in 2020, 2019 and 2018, respectively.

At the participant’s election, 401(k) retirement plans held 2.9 million shares of McCormick stock, with a fair value of $267.3 million, at November 30, 2020. Dividends paid on the shares held in the 401(k) retirement plans in 2020 and 2019 were $3.8 million and $3.9 million, respectively, in each year.

Postretirement Benefits Other Than Pensions

We currently provide postretirement medical and life insurance benefits to certain U.S. employees who were covered under the active employees’ plan and retire after age 55 with at least five years of service. The subsidy provided under these plans is based primarily on age at date of retirement. These benefits are not pre-funded but paid as incurred. Employees hired after December 31, 2008 are not eligible for a company subsidy. They are eligible for coverage on an access-only basis.

Our other postretirement benefit (income) expense for the years ended November 30 follows:

(millions)			2020			2019			2018
Service cost			$	1.9		$	1.8		$	2.0
Interest costs			2.0			2.7			2.4
Amortization of prior service credits			(4.6)			(8.7)			(8.6)
Amortization of actuarial gains			(0.1)			(0.9)			(0.1)
Postretirement benefit (income) expense			$	(0.8)		$	(5.1)		$	(4.3)

Rollforwards of the benefit obligation, fair value of plan assets and a reconciliation of the plans’ funded status at November 30, the measurement date, follow:

(millions)			2020			2019
Change in benefit obligation:
Benefit obligation at beginning of year			$	67.2		$	62.9
Service cost			1.9			1.8
Interest costs			2.0			2.7
Participant contributions			2.1			0.3
Plan amendments			—			(0.4)
Actuarial loss			3.9			4.1
Benefits paid			(6.4)			(4.2)
Benefit obligation at end of year			$	70.7		$	67.2
Change in fair value of plan assets:
Fair value of plan assets at beginning of year			$	—		$	—
Employer contributions			4.3			3.9
Participant contributions			2.1			0.3
Benefits paid			(6.4)			(4.2)
Fair value of plan assets at end of year			$	—		$	—
Other postretirement benefit liability			$	70.7		$	67.2

Estimated future benefit payments (net of employee contributions) for the next 10 fiscal years are as follows:

(millions)			Retiree medical			Retiree life insurance			Total
2021			$	3.6		$	1.5		$	5.1
2022			3.6			1.5			5.1
2023			3.7			1.4			5.1
2024			3.7			1.4			5.1
2025			3.7			1.4			5.1
2026-2030			17.5			6.5			24.0

The assumed discount rate in determining the benefit obligation was 2.3% and 3.1% for 2020 and 2019, respectively.

For 2020, the assumed annual rate of increase in the cost of covered health care benefits is 6.8% (6.5% last year). It is assumed to decrease gradually to 4.5% in the year 2032 (4.5% in 2030 last year) and remain at that level thereafter. A one percentage point increase or decrease in the assumed health care cost trend rate would have had an immaterial effect on the benefit obligation and the total of service and interest cost components for 2020.

12. 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 beginning in 2020, price-vested stock options. Total stock-based compensation expense for 2020, 2019 and 2018 was $46.0 million, $37.2 million and $25.6 million, respectively. Total unrecognized stock-based compensation expense related to our RSUs and stock options at November 30, 2020 was $23.2 million and the weighted-average period over which this will be recognized is 1.3 years. Total unrecognized stock-based compensation expense related to our price-vested stock options at November 30, 2020 was $23.3 million and the weighted-average period over which this will be recognized is 3.0 years. Total unrecognized stock-based compensation expense related to our LTPP is variable in nature and is dependent on the company's execution against established performance metrics under performance cycles related to this plan. As of November 30, 2020, we have 6.6 million shares remaining available for future issuance under our RSUs, stock option and LTPP award programs.

For all awards, forfeiture rates are considered in the calculation of compensation expense.

The following summarizes the key terms and the methods of valuation and expense recognition for each of our stock-based compensation awards.

RSUs

RSUs are valued at the market price of the underlying stock, discounted by foregone dividends, on the date of grant. Substantially all of the RSUs granted vest over a three-year term or, if earlier, upon the retirement eligibility

date of the holder.

A summary of our RSU activity for the years ended November 30 follows:

(shares in thousands)			2020						2019						2018
			Shares			Weighted- average price			Shares			Weighted- average price			Shares			Weighted- average price
Beginning of year			762			$	57.95		846			$	51.53		534			$	43.24
Granted			296			67.03			258			71.62			556			56.36
Vested			(325)			57.56			(318)			52.08			(226)			44.08
Forfeited			(19)			62.96			(24)			56.78			(18)			48.27
Outstanding—end of year			714			$	61.74		762			$	57.95		846			$	51.53

Stock Options (Other than Price-Vested Stock Options)

Stock options are granted with an exercise price equal to the market price of the stock on the date of grant. Substantially all of the options, with the exception of price-vested options detailed below, vest ratably over a three-year period or, if earlier, upon the retirement-eligibility dates of the holders and are exercisable over a 10-year period. Upon exercise of the option, shares are issued from our authorized and unissued shares.

The fair value of the options is estimated with a lattice option pricing model which uses the assumptions in the following table. We believe the lattice model provides an appropriate estimate of fair value of our options as it allows for a range of possible outcomes over an option term and can be adjusted for changes in certain assumptions over time. Expected volatilities are based primarily on the historical performance of our stock. We also use historical data to estimate the timing and amount of option exercises and forfeitures within the valuation model. The expected term of the options is an output of the option pricing model and estimates the period of time that options are expected to remain unexercised. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. Compensation expense is calculated based on the fair value of the options on the date of grant.

The per share weighted-average fair value for all options granted was $13.27, $13.76 and $10.15 in 2020, 2019 and 2018, respectively. These fair values were computed using the following range of assumptions for the years ended November 30:

			2020			2019			2018
Risk-free interest rates			0.0 - 0.6%			2.2 - 2.5%			1.7 - 2.9%
Dividend yield			1.8		%	1.5		%	2.0		%
Expected volatility			22.8		%	17.4%			18.4%
Expected lives			7.9 years			7.5 years			7.6 years

Under our stock option plans, we may issue shares on a net basis at the request of the option holder. This occurs by netting the option cost in shares from the shares exercised.

A summary of our stock option activity for the years ended November 30 follows:

(shares in millions)			2020						2019						2018
			Shares			Weighted- average exercise price			Shares			Weighted- average exercise price			Shares			Weighted- average exercise price
Beginning of year			5.2			$	48.09		7.2			$	41.30		9.6			$	35.96
Granted			0.7			69.31			0.6			73.70			0.8			52.98
Exercised			(1.4)			41.01			(2.6)			35.54			(3.2)			27.64
Outstanding—end of year			4.5			53.56			5.2			48.09			7.2			41.30
Exercisable—end of year			3.2			$	47.76		3.8			$	43.31		5.6			$	38.27

As of November 30, 2020, the intrinsic value (the difference between the exercise price and the market price) for all options currently outstanding was $178.7 million and for options currently exercisable was $146.0 million. At November 30, 2020, the differences between options outstanding and options expected to vest and their related weighted-average exercise prices, aggregate intrinsic values and weighted-average remaining lives were not material. The total intrinsic value of all options exercised during the years ended November 30, 2020, 2019 and 2018 was $68.4 million, $111.0 million and $108.0 million, respectively. A summary of our stock options outstanding and exercisable at November 30, 2020 follows:

(shares in millions)			Options outstanding									Options exercisable
Range of exercise price			Shares			Weighted- average remaining life (yrs.)			Weighted- average exercise price			Shares			Weighted- average remaining life (yrs.)			Weighted- average exercise price
$23.00 - $37.50			0.5			2.8			$	33.99		0.5			2.8			$	33.99
$37.51 - $56.00			2.7			5.9			48.36			2.5			5.8			47.97
$56.01 - $74.50			1.3			8.9			71.27			0.2			8.3			73.64
			4.5			6.5			$	53.56		3.2			5.6			$	47.76

Price-Vested Stock Options

In November 2020, we granted approximately 2,482,000 price-vested stock options to certain employees. The price-vested stock options were granted with an exercise price of $93.49 which was equal to the market price of our stock on the date of grant. The price-vested options are not exercisable until a three year service condition is achieved, and will become exercisable after that time period only if the average closing price of our stock price equals or exceeds thresholds of 60%, 80% or 100% appreciation from the exercise price for 30 consecutive trading days within a five-year period from the date of grant. If the options become exercisable, they are exercisable up to 10 years from the date of grant. The options granted were divided equally between the three appreciation thresholds. Employees who are retirement eligible vest on a pro-rata basis over a three-year period if the market condition is met in the five-year period from the date of grant. If the market conditions are not met in the five-year period from the date of grant, the options do not become exercisable and will be forfeited.

The fair value of the price-vested options was estimated using a lattice model. The per share weighted-average fair value for the price-vested stock options granted was $11.88, $9.26, and $7.05, for the 60%, 80% and 100% appreciation thresholds, respectively. These fair values were computed using the following range of assumptions:

Risk-free interest rates			0.85		%
Dividend yield			1.5		%
Expected volatility			21.2		%
Expected lives			5.6 - 6.2 years

LTPP

Our LTPP grants in 2018 will deliver awards in a combination of cash and company stock. The stock compensation portion of the LTPP grants in 2018 awards shares of company stock if certain company performance objectives are met at the end of a three-year period. LTPP awards granted in 2020 and 2019 will be delivered entirely in company stock, with the target award calculated using a combination of a market-based total shareholder return and performance-based components. These awards are valued based on the fair value of the underlying stock on the date of grant.

A summary of the LTPP award activity for the years ended November 30 follows:

(shares in thousands)			2020						2019						2018
			Shares			Weighted- average price			Shares			Weighted- average price			Shares			Weighted- average price
Beginning of year			392			$	57.98		436			$	41.78		440			$	42.16
Granted			130			86.14			136			75.26			172			50.95
Vested			(88)			44.98			(114)			43.20			(120)			37.01
Performance adjustment			(44)			50.95			(66)			44.98			(52)			43.20
Forfeited			(8)			65.68			—			—			(4)			48.71
Outstanding—end of year			382			$	71.20		392			$	57.98		436			$	41.78

13. INCOME TAXES

The provision for income taxes for the years ended November 30 consists of the following:

(millions)			2020			2019			2018
Income taxes
Current
Federal			$	98.3		$	52.3		$	92.9
State			14.8			10.7			11.0
International			73.0			73.5			78.7
			186.1			136.5			182.6
Deferred
Federal			4.6			26.4			(340.3)
State			0.5			3.6			1.5
International			(16.3)			(9.1)			(1.1)
			(11.2)			20.9			(339.9)
Total income tax expense (benefit)			$	174.9		$	157.4		$	(157.3)

In December 2017, President Trump signed into law Pub. L. 115-97, “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018” (this legislation is referred to herein as the U.S. Tax Act). The U.S. Tax Act provides for significant changes in the U.S. Internal Revenue Code of 1986, as amended. Certain provisions of the U.S. Tax Act were effective during our fiscal year ended November 30, 2018 with all provisions of the U.S. Tax Act effective as of the beginning of our fiscal year beginning December 1, 2018. The U.S. Tax Act contains provisions with separate effective dates but is generally effective for taxable years beginning after December 31, 2017. The U.S. Tax Act creates a new requirement that certain income earned by foreign subsidiaries, known as Global Intangible Low-Taxed Income (GILTI), must be included in the gross income of the subsidiary’s U.S. shareholder. This provision of the U.S. Tax Act was effective for us for our fiscal year beginning December 1, 2018.

Beginning on January 1, 2018, the U.S. Tax Act lowered the U.S. corporate income tax rate from 35% to 21% on our U.S. earnings from that date and beyond. The revaluation of our U.S. deferred tax assets and liabilities to the 21% corporate tax rate has reduced our net U.S. deferred income tax liability by $380.0 million and is reflected as a reduction in our income tax expense in our results for the year ended November 30, 2018. The U.S. Tax Act imposed a one-time transition tax on post-1986 earnings of non-U.S. affiliates that have not been repatriated for purposes of U.S. federal income tax, with those earnings taxed at rates of 15.5% for earnings reflected by cash and cash equivalent items and 8% for other assets. This transition tax, based on our fiscal 2018 tax return filed in fiscal 2019, was $76.0 million (we estimated the transition tax to be $75.3 million in fiscal 2018). The cash tax effects of the transition tax, reduced by the utilization of $21.1 million of current and carried forward excess foreign tax credits, as well as other items of $7.7 million, resulted in a net tax liability of $47.2 million, which can be remitted in installments over an eight-year period as we are doing. As of November 30, 2020, our remaining unpaid transition tax is $39.7 million. In addition to the estimated transition tax of $75.3 million recognized in 2018, we incurred additional foreign withholding taxes, net of a U.S. foreign tax credit, of $7.9 million and a $4.7 million reduction in our fiscal 2018 income taxes as a consequence of the transition tax, both of which we recognized as a component of our income tax expense for the year ended November 30, 2018, for a net transition tax impact recognized in 2018 of $78.5 million.

The components of income from consolidated operations before income taxes for the years ended November 30 follow:

(millions)			2020			2019			2018
Pretax income
United States			$	624.3		$	569.0		$	492.2
International			257.2			250.2			249.1
			$	881.5		$	819.2		$	741.3

A reconciliation of the U.S. federal statutory rate with the effective tax rate for the years ended November 30 follows:

			2020			2019			2018
Federal statutory tax rate			21.0		%	21.0		%	22.2		%
State income taxes, net of federal benefits			1.5			1.6			1.5
International tax at different effective rates			1.3			1.6			0.4
U.S. tax on remitted and unremitted earnings			0.8			0.5			0.6
Stock compensation expense			(1.5)			(2.8)			(2.9)
U.S. manufacturing deduction			—			—			(0.8)
Changes in prior year tax contingencies			(0.3)			(0.3)			(0.8)
Non-recurring benefit of U.S. Tax Act			—			(0.2)			(40.7)
Valuation allowance release			(1.4)			—			—
Intra-entity asset transfer			(1.1)			(1.8)			—
Other, net			(0.5)			(0.4)			(0.7)
Total			19.8		%	19.2		%	(21.2)		%

Deferred tax assets and liabilities are comprised of the following as of November 30:

(millions)			2020			2019
Deferred tax assets
Employee benefit liabilities			$	121.9		$	103.3
Other accrued liabilities			40.3			32.3
Inventory			10.6			7.5
Tax loss and credit carryforwards			59.7			46.8
Operating lease liabilities			33.0			—
Other			47.9			48.1
Valuation allowance			(31.5)			(32.4)
			281.9			205.6
Deferred tax liabilities
Depreciation			89.1			82.6
Intangible assets			815.1			770.5
Lease ROU assets			32.2			—
Other			4.5			5.5
			940.9			858.6
Net deferred tax liability			$	(659.0)		$	(653.0)

At November 30, 2020, we have tax loss carryforwards of $214.4 million. Of these carryforwards, $0.1 million expire in 2021, $9.6 million from 2022 through 2023, $77.9 million from 2024 through 2037 and $126.8 million may be carried forward indefinitely. In addition, one of our non-U.S. subsidiaries has a capital loss carryforward of $5.0 million which may be carried forward indefinitely. At November 30, 2020, we also have U.S. foreign tax credit carryforwards of $7.3 million which expire in 2030.

A valuation allowance has been provided to cover deferred tax assets that are not more likely than not realizable. The net decrease of $0.9 million in the valuation allowance from November 30, 2019 to November 30, 2020 resulted primarily from the net reversal of valuation allowances for net operating losses, capital losses and other tax attributes in certain non-US jurisdictions.

Prior to the U.S. Tax Act, we asserted that substantially all of the undistributed earnings of our international subsidiaries and joint ventures were considered indefinitely invested and accordingly, no deferred taxes were provided. Pursuant to the provisions of the U.S. Tax Act, these earnings were subjected to a one-time transition tax in 2018. The transition tax was recognized in 2018 and was based on cumulative earnings prior to the U.S. Tax Act. Our intent is to continue to reinvest undistributed earnings of our international subsidiaries and joint ventures indefinitely. As of November 30, 2020, we have $1.3 billion of earnings that are considered indefinitely reinvested. While federal income tax expense has been recognized as a result of the U.S. Tax Act, we have not provided any additional deferred taxes with respect to items such as foreign withholding taxes, state income tax or foreign exchange gain or loss. It is not practicable for us to determine the amount of unrecognized tax expense on these reinvested international earnings.

The following table summarizes the activity related to our gross unrecognized tax benefits for the years ended November 30:

(millions)			2020			2019			2018
Balance at beginning of year			$	32.0		$	27.9		$	39.1
Additions for current year tax positions			7.8			6.6			6.5
Additions for prior year tax positions			2.5			0.6			0.3
Reductions for prior year tax positions			—			(0.3)			(6.9)
Settlements			—			—			—
Statute expirations			(4.2)			(2.5)			(9.1)
Foreign currency translation			1.2			(0.3)			(2.0)
Balance at November 30			$	39.3		$	32.0		$	27.9

As of November 30, 2020, November 30, 2019, and November 30, 2018, if recognized, $39.3 million, $32.0 million and $27.5 million, respectively, of the unrecognized tax benefits would affect the effective rate.

We record interest and penalties on income taxes in income tax expense. We recognized interest and penalty expense of $0.8 million, $2.1 million and $0.1 million in 2020, 2019 and 2018, respectively. As of November 30, 2020 and 2019, we had accrued $8.3 million and $7.1 million, respectively, of interest and penalties related to unrecognized tax benefits.

Tax settlements or statute of limitation expirations could result in a change to our uncertain tax positions. We believe that the reasonably possible total amount of unrecognized tax benefits as of November 30, 2020 that could decrease in the next 12 months as a result of various statute expirations, audit closures and/or tax settlements would not be material.

We file income tax returns in the U.S. federal jurisdiction and various state and non-U.S. jurisdictions. The open years subject to tax audits vary depending on the tax jurisdictions. In the U.S federal jurisdiction, we are no longer subject to income tax audits by taxing authorities for years before 2017. In other major jurisdictions, we are no longer subject to income tax audits by taxing authorities for years before 2014.

We are under normal recurring tax audits in the U.S. and in several jurisdictions outside the U.S. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, we believe that our reserves for uncertain tax positions are adequate to cover existing risks and exposures.

14. CAPITAL STOCK AND EARNINGS PER SHARE

Holders of Common Stock have full voting rights except that (1) the voting rights of persons who are deemed to own beneficially 10% or more of the outstanding shares of Common Stock are limited to 10% of the votes entitled to be cast by all holders of shares of Common Stock regardless of how many shares in excess of 10% are held by such person; (2) we have the right to redeem any or all shares of Common Stock owned by such person unless such person acquires more than 90% of the outstanding shares of each class of our common stock; and (3) at such time as such person controls more than 50% of the votes entitled to be cast by the holders of outstanding shares of Common Stock, automatically, on a share-for-share basis, all shares of Common Stock Non-Voting will convert into shares of Common Stock.

Holders of Common Stock Non-Voting will vote as a separate class on all matters on which they are entitled to vote. Holders of Common Stock Non-Voting are entitled to vote on reverse mergers and statutory share exchanges where our capital stock is converted into other securities or property, dissolution of the company and the sale of substantially all of our assets, as well as forward mergers and consolidation of the company or any amendment to our charter repealing the right of the Common Stock Non-Voting to vote on any such matters.

The reconciliation of shares outstanding used in the calculation of basic and diluted earnings per share for the years ended November 30 follows:

(millions)			2020			2019			2018
Average shares outstanding—basic			266.5			265.1			263.1
Effect of dilutive securities:
Stock options/RSUs/LTPP			2.6			3.0			3.4
Average shares outstanding—diluted			269.1			268.1			266.5

The following table sets forth the stock options and RSUs for the years ended November 30 which were not considered in our earnings per share calculation since they were antidilutive:

(millions)			2020			2019			2018
Antidilutive securities			0.1			0.2			0.4

15. COMMITMENTS AND CONTINGENCIES

During the normal course of our business, we are occasionally involved with various claims and litigation. Reserves are established in connection with such matters when a loss is probable and the amount of such loss can be reasonably estimated. At November 30, 2020 and 2019, no material reserves were recorded. The determination of probability and the estimation of the actual amount of any such loss are inherently unpredictable, and it is therefore possible that the eventual outcome of such claims and litigation could exceed the estimated reserves, if any. However, we do not expect the outcome of the matters currently pending will have a material adverse effect on our financial statements.

16. BUSINESS SEGMENTS AND GEOGRAPHIC AREAS

Business Segments

We operate in two business segments: consumer and flavor solutions. The consumer and flavor solutions segments manufacture, market and distribute spices, 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,” “Lawry’s,” “Zatarain’s,” “Simply Asia,” “Thai Kitchen,” “Ducros,” “Vahiné,” "Cholula," “Schwartz,” “Club House,” “Kamis,” “Kohinoor,” "DaQiao," "Drogheria & Alimentari," "Stubb's," "OLD BAY" 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 businesses in China and India, where foodservice sales are managed by and reported in our consumer segment.

In each of our segments, we produce and sell many individual products which are similar in composition and nature. With their primary attribute being flavor, the products within each of our segments are regarded as fairly homogenous. It is impracticable to segregate and identify sales and profits for each of these individual product lines.

We measure segment performance based on operating income excluding special charges as this activity is managed separately from the business segments. We also excluded transaction and integration expenses related to our acquisitions of Cholula, FONA and RB Foods from our measure of segment performance as these expenses are similarly managed separately from the business segments. These transaction and integration expenses excluded from our segment performance measure include the amortization of the acquisition-date fair value adjustment of inventories that is included in cost of goods sold, costs directly associated with that acquisition and costs associated with integrating the businesses. 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.

We have a large number of customers for our products. Sales to one of our consumer segment customers, Wal-Mart Stores, Inc., accounted for approximately 12% of consolidated sales in 2020 and 11% of consolidated sales in 2019 and 2018. Sales to one of our flavor solutions segment customers, PepsiCo, Inc., accounted for approximately 11% of consolidated sales in 2020 and 10% of consolidated sales in both 2019 and 2018.

Accounting policies for measuring segment operating income and assets are consistent with those described in note 1. Because of integrated manufacturing for certain products within the segments, products are not sold from one segment to another but rather inventory is transferred at cost. Inter-segment sales are not material. Corporate assets include cash, deferred taxes, investments and certain fixed assets.

Business Segment Results

(millions)			Consumer			Flavor Solutions			Total segments			Corporate & other			Total
2020
Net sales			$	3,596.7		$	2,004.6		$	5,601.3		$	—		$	5,601.3
Operating income excluding special charges			780.9			237.9			1,018.8			—			1,018.8
Income from unconsolidated operations			34.1			6.7			40.8			—			40.8
Assets			—			—			11,339.2			750.5			12,089.7
Capital expenditures			—			—			150.1			75.2			225.3
Depreciation and amortization			—			—			123.9			41.1			165.0
2019
Net sales			$	3,269.8		$	2,077.6		$	5,347.4		$	—		$	5,347.4
Operating income excluding special charges and transaction and integration expenses			676.3			302.2			978.5			—			978.5
Income from unconsolidated operations			31.8			9.1			40.9			—			40.9
Assets			—			—			9,950.3			411.8			10,362.1
Capital expenditures			—			—			121.8			51.9			173.7
Depreciation and amortization			—			—			118.0			40.8			158.8
2018
Net sales			$	3,247.0		$	2,055.8		$	5,302.8		$	—		$	5,302.8
Operating income excluding special charges and transaction and integration expenses			637.1			292.8			929.9			—			929.9
Income from unconsolidated operations			29.5			5.3			34.8			—			34.8
Assets			—			—			10,015.8			240.6			10,256.4
Capital expenditures			—			—			126.3			42.8			169.1
Depreciation and amortization			—			—			115.0			35.7			150.7

A reconciliation of operating income excluding special charges and, for 2020 and 2018, transaction and integration expenses, to operating income for 2020, 2019 and 2018 is as follows:

(millions)			Consumer						Flavor Solutions						Total
2020
Operating income excluding special charges and transaction and integration expenses			$	780.9					$	237.9					$	1,018.8
Less: Special charges			5.5						1.4						6.9
Less: Transaction and integration expenses			7.5						4.9						12.4
Operating income			$	767.9					$	231.6					$	999.5
2019
Operating income excluding special charges			$	676.3					$	302.2					$	978.5
Less: Special charges			13.1						7.7						20.8
Operating income			$	663.2					$	294.5					$	957.7
2018
Operating income excluding special charges and transaction and integration expenses			$	637.1					$	292.8					$	929.9
Less: Special charges			10.0						6.3						16.3
Less: Transaction and integration expenses			15.0						7.5						22.5
Operating income			$	612.1					$	279.0					$	891.1

Geographic Areas

We have net sales and long-lived assets in the following geographic areas:

(millions)			United States			EMEA			Other countries			Total
2020
Net sales			$	3,445.9		$	1,046.7		$	1,108.7		$	5,601.3
Long-lived assets			7,202.0			1,135.6			916.5			9,254.1
2019
Net sales			$	3,226.3		$	986.1		$	1,135.0		$	5,347.4
Long-lived assets			6,397.0			1,032.4			875.4			8,304.8
2018
Net sales			$	3,145.0		$	1,021.1		$	1,136.7		$	5,302.8
Long-lived assets			6,411.0			1,057.1			874.6			8,342.7

Long-lived assets include property, plant and equipment, goodwill and intangible assets, net of accumulated depreciation and amortization.

17. SUPPLEMENTAL FINANCIAL STATEMENT DATA

Supplemental consolidated information with respect to our income statement, balance sheet and cash flow follow:

For the year ended November 30 (millions)			2020			2019			2018
Other income, net
Pension and other postretirement benefit income			$	10.0		17.7			12.2
Interest income			7.8			10.1			7.1
Other			(0.2)			(1.1)			5.5
			$	17.6		$	26.7		$	24.8

At November 30 (millions)			2020			2019
Inventories
Finished products			$	499.3		$	413.3
Raw materials and work-in-process			533.3			387.9
			$	1,032.6		$	801.2
Prepaid expenses			$	38.0		$	36.0
Other current assets			60.9			54.7
			$	98.9		$	90.7
Property, plant and equipment
Land and improvements			$	87.2		$	67.5
Buildings (including capital lease)			698.2			658.5
Machinery, equipment and other			1,102.9			1,007.8
Construction-in-progress			125.5			85.8
Accumulated depreciation			(985.4)			(867.0)
			$	1,028.4		$	952.6
Other long-term assets
Investments in affiliates			$	193.0		$	186.0
Long-term investments			129.9			124.4
Right of use asset			136.8			—
Software, net of accumulated amortization $281.8 for 2020 and $275.0 for 2019			116.0			76.4
Other			176.3			120.3
			$	752.0		$	507.1
Other accrued liabilities
Payroll and employee benefits			$	260.7		$	184.9
Sales allowances			183.3			137.2
Dividends payable			90.7			82.4
Other			328.9			204.6
			$	863.6		$	609.1
Other long-term liabilities
Pension			$	286.1		$	226.9
Postretirement benefits			66.2			62.7
Operating lease liability			103.5			—
Unrecognized tax benefits			46.0			37.6
Other			120.4			100.4
			$	622.2		$	427.6

For the year ended November 30 (millions)			2020			2019			2018
Depreciation			$	121.1		$	113.6		$	104.8
Software amortization			12.4			13.7			14.0
Interest paid			134.1			169.8			179.8
Income taxes paid			183.3			137.2			154.6

Dividends paid per share were $1.24 in 2020, $1.14 in 2019 and $1.04 in 2018. Dividends declared per share were $1.27 in 2020, $1.17 in 2019, and $1.07 in 2018.

18. SELECTED QUARTERLY DATA (UNAUDITED)

(millions except per share data)			First			Second			Third			Fourth
2020
Net sales			$	1,212.0		$	1,401.1		$	1,430.3		$	1,557.9
Gross profit			469.9			579.5			590.3			660.7
Operating income			194.2			257.4			273.0			274.9
Net income			144.7			195.9			206.1			200.7
Basic earnings per share			0.54			0.74			0.77			0.75
Diluted earnings per share			0.54			0.73			0.76			0.74
Dividends paid per share—
Common Stock and Common Stock Non-Voting			0.31			0.31			0.31			0.31
Dividends declared per share—
Common Stock and Common Stock Non-Voting			—			0.31			0.31			0.65
2019
Net sales			$	1,231.5		$	1,301.9		$	1,329.2		$	1,484.8
Gross profit			466.9			508.5			539.9			630.0
Operating income			196.9			208.1			253.5			299.2
Net income			148.0			149.4			191.9			213.4
Basic earnings per share			0.56			0.56			0.72			0.80
Diluted earnings per share			0.55			0.56			0.72			0.79
Dividends paid per share—
Common Stock and Common Stock Non-Voting			0.28			0.29			0.28			0.29
Dividends declared per share—
Common Stock and Common Stock Non-Voting			—			0.29			0.28			0.60

Operating income for the first quarter of 2020 included $1.0 million of special charges, with an after-tax impact of $0.7 million and no per share impact for both basic and diluted earnings per share. Operating income for the second quarter of 2020 included $2.9 million of special charges, with an after-tax impact of $2.0 million and a per share impact of $0.01 for both basic and diluted earnings per share. Operating income for the third quarter of 2020 included $0.1 million of special charges, with an after-tax impact of $0.1 million and no per share impact for both basic and diluted earnings per share. Operating income for the fourth quarter of 2020 included $2.9 million of special charges, with an after-tax impact of $2.0 million and a per share impact of $0.01 for both basic and diluted earnings per share. Operating income for the fourth quarter of 2020 included $12.4 million of transaction and integration expenses, with an after-tax impact of $10.5 million and a per share impact of $0.04 for both basic and diluted earnings per share.

Operating income for the first quarter of 2019 included $2.1 million of special charges, with an after-tax impact of $1.6 million and a per share impact of $0.01 for both basic and diluted earnings per share. Operating income for the second quarter of 2019 included $7.1 million of special charges, with an after-tax impact of $5.4 million and a per share impact of $0.02 for both basic and diluted earnings per share. Operating income for the third quarter of 2019 included $7.7 million of special charges, with an after-tax impact of $6.1 million and a per share impact of $0.01 for both basic and diluted earnings per share. Net income for the third quarter of 2019 included $1.5 million of non-recurring income tax benefit related to enactment of the U.S. Tax Act, with no per share impact for both basic and diluted earnings per share. Operating income for the fourth quarter of 2019 included $3.9 million of special charges, with an after-tax impact of $3.0 million and a per share impact of $0.02 for both basic and diluted earnings per share.

See note 3 for details with respect to actions undertaken in connection with these special charges. See note 13 for details regarding the non-recurring income tax benefits related to enactment of the U.S. Tax Act.

Earnings per share are computed independently for each of the quarters presented. Therefore, the sum of the quarters may not be equal to the full year earnings per share.

19. SUBSEQUENT EVENT (UNAUDITED)

On December 30, 2020, we purchased FONA International, LLC and certain of its affiliates (FONA), a privately held company, for a purchase price of approximately $710 million, net of cash acquired, subject to certain customary purchase price adjustments. FONA is a leading manufacturer of clean and natural flavors providing solutions for a diverse customer base across various applications for the food, beverage and nutritional markets. The acquisition of FONA in fiscal 2021 expands the breadth of our flavor solutions segment into attractive categories, as well as extends our technology platform and strengthens our capabilities. The acquisition was funded with cash and commercial paper.