Item 1. FINANCIAL STATEMENTS

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Item 1. FINANCIAL STATEMENTS

McCORMICK & COMPANY, INCORPORATED

CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)

(in millions except per share amounts)




	Three months ended
	February 29, 2024		February 28, 2023
Net sales	$	1,602.7	$	1,565.5
Cost of goods sold	1,003.4		1,002.6
Gross profit	599.3		562.9
Selling, general and administrative expense	361.6		336.1

Special charges	4.2		27.8
Operating income	233.5		199.0
Interest expense	50.3		50.6

Other income, net	11.1		11.1
Income from consolidated operations before income taxes	194.3		159.5
Income tax expense	49.6		34.4
Net income from consolidated operations	144.7		125.1
Income from unconsolidated operations	21.3		14.0
Net income	$	166.0	$	139.1
Earnings per share – basic	$	0.62	$	0.52
Earnings per share – diluted	$	0.62	$	0.52
Average shares outstanding – basic	268.4		268.2
Average shares outstanding – diluted	269.6		269.8
Cash dividends paid per share – voting and non-voting	$	0.42	$	0.39

See notes to condensed consolidated financial statements (unaudited).

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McCORMICK & COMPANY, INCORPORATED

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

(in millions)




	Three months ended
	February 29, 2024		February 28, 2023
Net income	$	166.0	$	139.1
Net income attributable to non-controlling interest	2.1		0.8
Other comprehensive income (loss):
Unrealized components of pension and other postretirement plans	(0.2)		(1.0)
Currency translation adjustments	(2.0)		47.0
Change in derivative financial instruments	(3.3)		(5.4)
Tax benefit	0.4		1.0
Total other comprehensive income (loss), net of tax	(5.1)		41.6
Comprehensive income	$	163.0	$	181.5

See notes to condensed consolidated financial statements (unaudited).

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McCORMICK & COMPANY, INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEET

(in millions)


	February 29, 2024		November 30, 2023
	(unaudited)
ASSETS

Cash and cash equivalents	$	178.0	$	166.6
Trade accounts receivable, net of allowances	567.5		587.5
Inventories, net
Finished products	574.3		570.0
Raw materials and work-in-process	555.3		556.5
	1,129.6		1,126.5
Prepaid expenses and other current assets	145.1		121.0
Total current assets	2,020.2		2,001.6
Property, plant and equipment, net	1,354.5		1,324.7
Goodwill	5,253.6		5,260.1
Intangible assets, net	3,346.8		3,356.7
Other long-term assets	915.0		919.2
Total assets	$	12,890.1	$	12,862.3
LIABILITIES AND SHAREHOLDERS’ EQUITY

Short-term borrowings	$	329.5	$	272.2
Current portion of long-term debt	798.4		799.3
Trade accounts payable	1,133.3		1,119.3
Other accrued liabilities	712.6		908.1
Total current liabilities	2,973.8		3,098.9
Long-term debt	3,329.1		3,339.9
Deferred taxes	858.3		861.2
Other long-term liabilities	471.5		478.8
Total liabilities	7,632.7		7,778.8
Shareholders’ equity
Common stock	594.1		597.1
Common stock non-voting	1,619.3		1,602.5
Retained earnings	3,412.8		3,249.7
Accumulated other comprehensive loss	(393.7)		(388.6)
Total McCormick shareholders' equity	5,232.5		5,060.7
Non-controlling interests	24.9		22.8
Total shareholders’ equity	5,257.4		5,083.5
Total liabilities and shareholders’ equity	$	12,890.1	$	12,862.3

See notes to condensed consolidated financial statements (unaudited).

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McCORMICK & COMPANY, INCORPORATED

CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)

(in millions)




	Three months ended
	February 29, 2024		February 28, 2023
Operating activities
Net income	$	166.0	$	139.1
Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation and amortization	45.8		47.8
Stock-based compensation	11.7		11.8




Income from unconsolidated operations	(21.3)		(14.0)
Changes in operating assets and liabilities
Trade accounts receivable	16.5		9.7
Inventories	(2.3)		(0.2)
Trade accounts payable	14.4		(54.8)
Other assets and liabilities	(118.8)		(49.9)
Dividends from unconsolidated affiliates	26.4		13.9
Net cash flow provided by operating activities	138.4		103.4
Investing activities




Capital expenditures (including software)	(62.0)		(61.5)


Other investing activities	0.2		—

Net cash flow used in investing activities	(61.8)		(61.5)
Financing activities
Short-term borrowings, net	57.3		67.9


Long-term debt repayments	(14.1)		(3.6)
Proceeds from exercised stock options	4.4		5.2
Taxes withheld and paid on employee stock awards	(4.9)		(6.1)
Common stock acquired by purchase	(0.3)		(3.5)
Dividends paid	(112.7)		(104.6)
Other financing activities	2.6		—
Net cash flow used in financing activities	(67.7)		(44.7)
Effect of exchange rate changes on cash and cash equivalents	2.5		25.6
Increase in cash and cash equivalents	11.4		22.8
Cash and cash equivalents at beginning of period	166.6		334.0
Cash and cash equivalents at end of period	$	178.0	$	356.8

See notes to condensed consolidated financial statements (unaudited).

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McCORMICK & COMPANY, INCORPORATED

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)

(in millions)



(millions)	Common Stock Shares	Common Stock Non-Voting Shares	Common Stock Amount		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Non-controlling Interests		Total Shareholders’ Equity












Three months ended February 29, 2024
Balance, November 30, 2023	16.8	251.3	$	2,199.6	$	3,249.7	$	(388.6)	$	22.8	$	5,083.5
Net income			—		166.0		—		—		166.0
Net income attributable to non-controlling interest			—		—		—		2.1		2.1
Other comprehensive (loss), net of tax			—		—		(5.1)		—		(5.1)

Stock-based compensation			11.7		—		—		—		11.7
Shares purchased and retired	(0.1)	—	(3.3)		(2.9)		—		—		(6.2)
Shares issued	0.3	—	5.4		—		—		—		5.4
Equal exchange	(0.4)	0.4	—		—		—		—		—
Balance, February 29, 2024	16.6	251.7	$	2,213.4	$	3,412.8	$	(393.7)	$	24.9	$	5,257.4













Three months ended February 28, 2023
Balance, November 30, 2022	17.4	250.6	$	2,138.6	$	3,022.5	$	(480.6)	$	18.7	$	4,699.2
Net income			—		139.1		—		—		139.1
Net income attributable to non-controlling interest			—		—		—		0.8		0.8
Other comprehensive income (loss), net of tax			—		—		43.5		(1.9)		41.6

Stock-based compensation			11.8		—		—		—		11.8
Shares purchased and retired	(0.1)	—	(4.8)		(6.5)		—		—		(11.3)
Shares issued	0.3	—	6.5		—		—		—		6.5
Equal exchange	(0.2)	0.2	—		—		—		—		—
Balance, February 28, 2023	17.4	250.8	$	2,152.1	$	3,155.1	$	(437.1)	$	17.6	$	4,887.7

See notes to condensed consolidated financial statements (unaudited).

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McCORMICK & COMPANY, INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1.ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and notes required by United States generally accepted accounting principles (GAAP) for complete financial statements. In our opinion, the accompanying condensed consolidated financial statements contain all adjustments, which are of a normal and recurring nature, necessary to present fairly the financial position and the results of operations for the interim periods presented.

The results of consolidated operations for the three-month period ended February 29, 2024 are not necessarily indicative of the results to be expected for the full year. Historically, our net sales, net income and cash flow from operations have been lower in the first half of the fiscal year and higher in the second half of the fiscal year. The historical increase in net sales, net income and cash flow from operations in the second half of the year has largely been due to the consumer business cycle in the U.S., where customers typically purchase more products in the fourth quarter due to the Thanksgiving and Christmas holiday seasons.

For further information, refer to the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended November 30, 2023.

Accounts Payable - Supplier Finance Program

As more fully described in our Annual Report on Form 10-K for the year ended November 30, 2023, we participate in a Supply Chain Financing program (SCF) with several global financial institutions (SCF Banks). Under the SCF, qualifying suppliers may elect to sell their receivables from us to an SCF Bank, enabling participating suppliers to negotiate their receivables sales arrangements directly with the respective SCF Bank. We are not party to those agreements and have no economic interest in a supplier’s decision to sell a receivable.

All outstanding amounts related to suppliers participating in the SCF are recorded within the line entitled Trade accounts payable in our condensed consolidated balance sheets, and the associated payments are included in operating activities within our consolidated statements of cash flows. As of February 29, 2024 and November 30, 2023, the amounts due to suppliers participating in the SCF and included in trade accounts payable were approximately $308.6 million and $300.5 million, respectively.

Accounting Pronouncement Partially Adopted

In September 2022, the FASB issued ASU No. 2022-04: Liabilities - Supplier Finance Programs (Topic 450-50): Disclosure of Supplier Finance Program Obligations, that requires entities that use supplier finance programs in connection with the purchase of goods and services to disclose the key terms of the programs and information about obligations outstanding at the end of the reporting period, including a roll-forward of those obligations. The guidance does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations. We adopted the new standard's requirements to disclose the key terms of the programs and information about obligations outstanding as of November 30, 2023. The standard’s requirement to disclose a roll-forward of obligations outstanding will be effective for our fiscal year ending November 30, 2025. The partial adoption of this standard did not have a material impact on our consolidated financial statements nor do we expect the adoption of the future disclosure requirements to have a material impact on our consolidated financial statements.

Recently Issued Accounting Pronouncements — Pending Adoption

In November 2023, the FASB issued ASU No. 2023-07: Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures that requires entities to report incremental information about significant segment expenses included in a segment’s profit or loss measure as well as the name and title of the chief operating decision maker. The guidance also requires interim disclosures related to reportable segment profit or loss and assets that had previously only been disclosed annually. The new standard is effective for our annual period ending November 30, 2025 and our interim periods during the fiscal year ending November 30, 2026. The guidance does not affect recognition or measurement in our consolidated financial statements.

In December 2023, the FASB issued ASU No. 2023-09: Income Taxes (Topic 740): Improvements to Income Tax Disclosures that requires entities to disclose additional information about federal, state, and foreign income taxes primarily related to the income tax rate reconciliation and income taxes paid. The new standard also eliminates certain existing disclosure requirements

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

SPECIAL CHARGES

In our consolidated income statement, we include a separate line item captioned "Special charges" in arriving at our consolidated operating income. Special charges consist of expenses, including related impairment charges, associated with certain actions undertaken to reduce fixed costs, simplify or improve processes, and improve our competitiveness and are of such significance in terms of both up-front costs and organizational/structural impact to require advance approval by our Management Committee, comprised of our senior management, including our President and Chief Executive Officer. Expenses associated with any approved action are classified as special charges upon recognition and monitored on an on-going basis through completion. Certain ancillary expenses related to these actions approved by our Management Committee do not qualify for accrual upon approval but are included as special charges as incurred during the course of the actions.

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

The following is a summary of special charges recognized in the three months ended February 29, 2024 and February 28, 2023

(in millions):




	Three months ended
	February 29, 2024		February 28, 2023
Employee severance and related benefits	$	2.1	$	24.8
Other costs
Cash	2.1		2.2
Non-Cash	—		0.8
Total special charges	$	4.2	$	27.8

During the three months ended February 29, 2024, we recorded $4.2 million of special charges, consisting principally of $2.8 million associated with our Global Operating Effectiveness (GOE) program, as more fully described below, and $1.4 million associated with the transition of a manufacturing facility in Europe, Middle East, and Africa (EMEA), as more fully described below.

During the three months ended February 28, 2023, we recorded $27.8 million of special charges, consisting principally of $24.8 million associated with our GOE program, as more fully described below, $0.9 million associated with the transition of a manufacturing facility in EMEA, and streamlining actions of $1.3 million in the Americas region and $0.8 million in the EMEA region.

In 2022, our Management Committee approved the GOE program, which is expected to eliminate costs associated with our supply chain operations, as well as across the remainder of the organization. The GOE program included a voluntary retirement plan, which included enhanced separation benefits to certain U.S. employees aged 55 years or older with at least ten years of service to the company. This voluntary retirement plan commenced in November 2022, and participants were required to submit their notifications by December 30, 2022. The GOE program also includes other employee separation actions as other related costs within the program. The total costs incurred under the GOE program were approximately $48 million as of November 30, 2023. Special charges recognized during the three months ended February 29, 2024, under our GOE program included $2.1 million in severance and related benefits costs and $0.7 million of third-party expenses and other costs. Special charges recognized during the three months ended February 28, 2023, under our GOE program included $19.7 million associated with the voluntary retirement program, $4.5 million in severance and related benefits costs and $0.6 million of third-party expenses and other costs.

In 2022, our Management Committee approved an initiative to consolidate our manufacturing operations in the United Kingdom into a net-zero carbon condiments manufacturing and distribution center facility with state-of-the-art technology. We expect to execute these changes to our supply chain operations and improve profitability, from a combination of lower headcount and non-headcount costs, by consolidating our operations into a scalable platform while expanding our capacity. We expect the cost of the initiative to approximate $40 million—to be recognized as special charges in our consolidated income statement through 2024. Of that $40 million, we expect the costs to include employee severance and related benefits, non-cash accelerated depreciation, equipment relocation costs, decommissioning and other property related lease exit costs, all directly

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related to the initiative. The total costs incurred under this program were approximately $36 million as of November 30, 2023. During the three months ended February 29, 2024, we recognized $1.4 million in third-party expenses and other costs. During the three months ended February 28, 2023, we recognized $0.4 million in accelerated depreciation and $0.5 million in third-party expenses and other costs.

As of February 29, 2024, accruals associated with special charges of $15.9 million, are included in other accrued liabilities in our consolidated balance sheet.

The following is a breakdown by business segment of special charges for the three months ended February 29, 2024 and February 28, 2023 (in millions):




	Three months ended
	February 29, 2024		February 28, 2023
Consumer segment	$	1.8	$	19.0
Flavor solutions segment	2.4		8.8
Total special charges	$	4.2	$	27.8

FINANCING ARRANGEMENTS AND FINANCIAL INSTRUMENTS

We use derivative financial instruments to enhance our ability to manage risk, including foreign currency, net investment and interest rate exposures, which exist as part of our ongoing business operations. We do not enter into contracts for trading purposes, nor are we a party to any leveraged derivative instrument, and all derivatives are designated as hedges. We are not a party to master netting arrangements, and we do not offset the fair value of derivative contracts with the same counterparty in our financial statement disclosures. The use of derivative financial instruments is monitored through regular communication with senior management and the use of written guidelines.

Foreign currency exchange risk. We are potentially exposed to foreign currency fluctuations affecting net investments in subsidiaries, transactions (both third-party and intercompany) and earnings denominated in foreign currencies. We assess foreign currency risk based on transactional cash flows and translational volatility and may enter into forward contract and currency swaps with highly-rated financial institutions to reduce fluctuations in the long or short currency positions. Currency swap agreements are established in conjunction with the terms of the underlying debt issues.

The following is a summary of the notional amounts of outstanding foreign currency exchange contracts as of February 29, 2024 and November 30, 2023 (in millions):


	February 29, 2024		November 30, 2023
Fair value hedges	$	787.0	$	765.4
Cash flow hedge	166.7		235.0
Total	$	953.7	$	1,000.4

All of these contracts were designated as hedges of anticipated purchases denominated in a foreign currency or hedges of foreign currency denominated assets or liabilities. Hedge ineffectiveness was not material. All foreign currency exchange contracts outstanding at February 29, 2024 have durations of less than 18 months, including $208.5 million of notional contracts that have an initial duration of less than one month and are used to hedge short-term cash flow funding.

Contracts which are designated as hedges of foreign currency denominated assets are considered fair value hedges. These foreign currency exchange contracts manage both exposure to currency fluctuations in certain intercompany loans between subsidiaries as well as currency exposure to third-party non-functional currency assets or liabilities. Gains and losses from contracts that are designated as hedges of assets, liabilities or firm commitments are recognized through income, offsetting the change in fair value of the hedged item. Contracts which are designated as hedges of anticipated purchases denominated in a foreign currency (generally purchases of inventory in U.S. dollars by operating units outside the U.S.) are considered cash flow hedges. The gains and losses on these contracts are deferred in accumulated other comprehensive income until the hedged item is recognized in cost of goods sold, at which time the net amount deferred in accumulated other comprehensive income is also recognized in cost of goods sold.

We also utilize cross currency interest rate swap contracts that are designated as net investment hedges. Any gains or losses on net investment hedges are included in foreign currency translation adjustments in accumulated other comprehensive loss.

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

The following table discloses the notional amount and fair values of derivative instruments on our balance sheet (in millions):


	Asset Derivatives					Liability Derivatives
	Balance sheet location	Notional amount		Fair value		Balance sheet location	Notional amount		Fair value
As of February 29, 2024
Interest rate contracts	Other current assets / Other long-term assets	$	—	$	—	Other long-term liabilities	$	600.0	$	51.9
Foreign exchange contracts	Other current assets	286.9		2.6		Other accrued liabilities	666.8		18.1
Cross currency contracts	Other current assets / Other long-term assets	716.8		27.9		Other long-term liabilities	236.7		4.9
Total				$	30.5				$	74.9
As of November 30, 2023
Interest rate contracts	Other current assets / Other long-term assets	$	—	$	—	Other long-term liabilities	$	600.0	$	52.8
Foreign exchange contracts	Other current assets	161.3		2.5		Other accrued liabilities	839.1		16.0
Cross currency contracts	Other current assets / Other long-term assets	719.6		24.6		Other long-term liabilities	238.9		7.5
Total				$	27.1				$	76.3

The following tables disclose the impact of derivative instruments on our other comprehensive income (OCI), accumulated other comprehensive loss (AOCI) and our consolidated income statement for the three months ended February 29, 2024 and February 28, 2023 (in millions):


Fair Value Hedges

Derivative	Income statement location	(Expense) income
		Three months ended February 29, 2024		Three months ended February 28, 2023

Interest rate contracts	Interest expense	$	(5.1)	$	(3.7)


	Income statement location	Gain (loss) recognized in income					Income statement location	Gain (loss) recognized in income
Derivative		Three months ended February 29, 2024		Three months ended February 28, 2023		Hedged item		Three months ended February 29, 2024		Three months ended February 28, 2023

Foreign exchange contracts	Other income, net	$	(2.9)	$	1.0	Intercompany loans	Other income, net	$	1.4	$	(0.1)

The gains (losses) recognized on fair value hedges relating to currency exposure on third-party non-functional currency assets or liabilities were not material during the three months ended February 29, 2024 and February 28, 2023.

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Cash Flow Hedges
Derivative	Gain (loss) recognized in OCI				Income statement location	Gain (loss) reclassified from AOCI
	Three months ended February 29, 2024		Three months ended February 28, 2023			Three months ended February 29, 2024		Three months ended February 28, 2023

Interest rate contracts	$	—	$	—	Interest expense	$	(0.2)	$	0.1
Foreign exchange contracts	(0.2)		(1.1)		Cost of goods sold	1.3		1.2
Total	$	(0.2)	$	(1.1)		$	1.1	$	1.3

As of February 29, 2024, the net amount of accumulated other comprehensive loss associated with all cash flow and settled interest rate cash flow hedge derivatives expected to be reclassified in the next 12 months is $0.1 million as an increase to earnings.


Net Investment Hedges
Derivative	Gain (loss) recognized in OCI				Income statement location	Gain (loss) excluded from the assessment of hedge effectiveness
	Three months ended February 29, 2024		Three months ended February 28, 2023			Three months ended February 29, 2024		Three months ended February 28, 2023

Cross currency contracts	$	(5.9)	$	(5.8)	Interest expense	$	2.2	$	3.3

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

Since the third quarter of 2023, we have maintained a nonrecourse accounts receivable sale program whereby certain eligible U.S. receivables are sold to a third-party financial institution in exchange for cash. The program provides us with an additional means for managing liquidity. Under the terms of the arrangement, we act as the collecting agent on behalf of the financial institution. We account for the transfer of receivables as a sale at the point control is transferred through derecognition of the receivable on our condensed consolidated balance sheet. The outstanding amount of receivables sold under this program were $19.2 million as of February 29, 2024. As collecting agent on the sold receivables, we had $4.2 million of cash collected that was not yet remitted to the third-party financial institution as of February 29, 2024. The incremental costs of selling receivables under this arrangement were insignificant for the three months ended February 29, 2024.

FAIR VALUE MEASUREMENTS

Fair value can be measured using valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). Accounting standards utilize a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.

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At February 29, 2024 and November 30, 2023, we had no financial assets or liabilities that were subject to a level 3 fair value measurement. Our population of financial assets and liabilities subject to fair value measurements on a recurring basis are as follows (in millions):


			February 29, 2024
	Fair Value		Level 1		Level 2
Assets
Cash and cash equivalents	$	178.0	$	178.0	$	—
Insurance contracts	117.0		—		117.0
Bonds and other long-term investments	1.3		1.3		—

Foreign currency derivatives	2.6		—		2.6
Cross currency contracts	27.9		—		27.9
Total	$	326.8	$	179.3	$	147.5
Liabilities
Foreign currency derivatives	$	18.1	$	—	$	18.1
Interest rate derivatives	51.9		—		51.9
Cross currency contracts	4.9		—		4.9
Total	$	74.9	$	—	$	74.9


			November 30, 2023
	Fair Value		Level 1		Level 2
Assets
Cash and cash equivalents	$	166.6	$	166.6	$	—
Insurance contracts	114.7		—		114.7
Bonds and other long-term investments	0.3		0.3		—

Foreign currency derivatives	2.5		—		2.5
Cross currency contracts	24.6		—		24.6
Total	$	308.7	$	166.9	$	141.8
Liabilities
Foreign currency derivatives	$	16.0	$	—	$	16.0
Interest rate derivatives	52.8		—		52.8
Cross currency contracts	7.5		—		7.5
Total	$	76.3	$	—	$	76.3

At February 29, 2024 and November 30, 2023, the carrying amounts of interest rate derivatives, foreign currency derivatives, cross currency contracts, insurance contracts, and bond and other long-term investments were equal to their respective fair values. Because of their short-term nature, the amounts reported in the balance sheet for cash and cash equivalents, receivables, short-term borrowings and trade accounts payable approximate fair value. Investments in affiliates are not readily marketable, and it is not practicable to estimate their fair value.

Insurance contracts, bonds, and other long-term investments are comprised of fixed income and equity securities held for certain non-qualified U.S. employee benefit plans and are stated at fair value on the balance sheet. The fair values of insurance contracts are based upon the underlying values of the securities in which they are invested and are from quoted market prices from various stock and bond exchanges for similar type assets. The fair values of bonds and other long-term investments are based on quoted market prices from various stock and bond exchanges. The fair values for interest rate derivatives, foreign currency derivatives, and cross currency contracts are based on values for similar instruments using models with market-based inputs.

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The following table sets forth the carrying amounts and fair values of our long-term debt including the current portion thereof (in millions):


	February 29, 2024		November 30, 2023
Carrying amount	$	4,127.5	$	4,139.2


Level 1 valuation techniques	$	3,727.1	$	3,682.0
Level 2 valuation techniques	144.8		159.0
Total fair value	$	3,871.9	$	3,841.0

The fair value for Level 2 long-term debt is determined by using quoted prices for similar debt instruments.

EMPLOYEE BENEFIT AND RETIREMENT PLANS

We sponsor defined benefit pension plans in the U.S. and certain foreign locations. In addition, we sponsor defined contribution plans in the U.S. We also contribute to defined contribution plans in locations outside the U.S., including government-sponsored retirement plans. We also currently provide postretirement medical and life insurance benefits to certain U.S. employees and retirees. We previously froze the accrual of future benefits under certain defined benefit pension plans in the U.S. and certain foreign locations. Although our defined benefit plans in the U.S., United Kingdom and Canada have generally been frozen, employees who are participants in the plans retained benefits accumulated up to the date of the freeze, based on credited service and eligible earnings, in accordance with the terms of the plans.

The following table presents the components of our pension (income) and other postretirement benefits expense for the three months ended February 29, 2024 and February 28, 2023 (in millions):


	United States pension				International pension				Other postretirement benefits
	2024		2023		2024		2023		2024		2023

Service cost	$	0.4	$	0.5	$	0.1	$	0.2	$	0.2	$	0.3
Interest costs	9.3		9.0		2.7		2.5		0.6		0.6
Expected return on plan assets	(9.9)		(10.6)		(4.0)		(3.7)		—		—
Amortization of prior service costs	0.1		0.1		—		—		(0.1)		(0.1)
Amortization of net actuarial losses (gains)	(0.1)		0.1		—		—		(0.6)		(0.5)

Total (income) expense	$	(0.2)	$	(0.9)	$	(1.2)	$	(1.0)	$	0.1	$	0.3

During the three months ended February 29, 2024 and February 28, 2023, we contributed $1.8 million and $1.9 million, respectively, to our pension plans. Total contributions to our pension plans in fiscal year 2023 were $9.2 million.

All of the amounts in the tables above for pension (income) and other postretirement benefits expense, other than service cost, were included in other income, net within our consolidated income statements. The net aggregate amount of pension and other postretirement benefits (income), excluding service cost components, was $(2.0) million and $(2.6) million for the three months ended February 29, 2024 and February 28, 2023, respectively.

STOCK-BASED COMPENSATION

We have four types of stock-based compensation awards: restricted stock units ("RSUs"), stock options, company stock awarded as part of our long-term performance plan ("LTPP") and price-vested stock options. The following table sets forth the stock-based compensation expense recorded in selling, general and administrative ("SG&A") expense (in millions):




	Three months ended
	February 29, 2024		February 28, 2023
Stock-based compensation expense	$	11.7	$	11.8

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

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The following is a summary of our stock option activity for the three months ended February 29, 2024 and February 28, 2023:


	2024			2023
(shares in millions)	Number of Shares	Weighted- Average Exercise Price		Number of Shares	Weighted- Average Exercise Price
Outstanding at beginning of period	5.3	$	70.43	4.8	$	67.08
Granted	0.4	65.99		—	—
Exercised	(0.1)	37.74		(0.1)	49.50
Outstanding at end of the period	5.6	$	70.54	4.7	$	67.32
Exercisable at end of the period	3.9	$	65.36	3.5	$	58.79

As of February 29, 2024, the intrinsic value (the difference between the exercise price and the market price) for all options outstanding was $38.4 million and for options currently exercisable was $37.3 million. The total intrinsic value of all options exercised during the three months ended February 29, 2024 and February 28, 2023 was $2.6 million and $2.1 million, respectively.

The following is a summary of our RSU activity for the three months ended February 29, 2024 and February 28, 2023:


	2024			2023
(shares in thousands)	Number of Shares	Weighted- Average Grant-Date Fair Value		Number of Shares	Weighted- Average Grant-Date Fair Value
Outstanding at beginning of period	494	$	76.94	480	$	77.62

Vested	(3)	92.74		(26)	52.48
Forfeited	(9)	83.59		(7)	88.35
Outstanding at end of period	482	$	76.71	447	$	78.89

The following is a summary of our price-vested stock options activity for the three months ended February 29, 2024 and February 28, 2023:


	2024			2023
(shares in thousands)	Number of Shares	Weighted- Average Grant-Date Fair Value		Number of Shares	Weighted- Average Grant-Date Fair Value
Outstanding at beginning of period	2,055	$	9.40	2,107	$	9.40


Forfeited	—	—		(39)	9.40
Outstanding at end of period	2,055	$	9.40	2,068	$	9.40

The following is a summary of our LTPP activity for the three months ended February 29, 2024 and February 28, 2023:


	2024			2023
(shares in thousands)	Number of Shares	Weighted- Average Grant-Date Fair Value		Number of Shares	Weighted- Average Grant-Date Fair Value
Outstanding at beginning of period	474	$	94.34	451	$	106.32
Granted	192	66.49		167	89.00
Vested	(181)	98.30		(176)	86.14
Forfeited	(10)	91.65		(11)	94.58
Outstanding at end of period	475	$	81.53	431	$	93.64

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INCOME TAXES

Income tax expense for the three months ended February 29, 2024 included $1.6 million of discrete tax expense consisting principally of the following: (i) $1.1 million of tax expense resulting from a state tax matter, and (ii) $0.5 million of tax expense associated with stock-based compensation.

Income tax expense for the three months ended February 28, 2023 included $3.8 million of net discrete tax benefits consisting principally of the following: (i) $3.2 million of tax benefits associated with the adjustment of a valuation allowance due to changes in judgment about the realizability of the deferred tax asset, (ii) $0.8 million of tax benefits related to the revaluation of deferred taxes resulting from changes in tax rates, and (iii) $0.2 million of tax expense associated with stock-based compensation.

Other than additions for current year tax positions, there were no significant changes to unrecognized tax benefits during the three months ended February 29, 2024.

As of February 29, 2024, we believe the reasonably possible total amount of unrecognized tax benefits that could increase or decrease in the next 12 months as a result of various statute expirations, audit closures, and/or tax settlements would not be material to our consolidated financial statements.

CAPITAL STOCK AND EARNINGS PER SHARE

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




	Three months ended
	February 29, 2024	February 28, 2023
Average shares outstanding – basic	268.4	268.2
Effect of dilutive securities:
Stock options/RSUs/LTPP	1.2	1.6
Average shares outstanding – diluted	269.6	269.8

The following table sets forth the stock options and RSUs that were not considered in our earnings per share calculation since they were anti-dilutive (in millions):




	Three months ended
	February 29, 2024	February 28, 2023
Anti-dilutive securities	3.5	1.6

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




	Three months ended
	February 29, 2024	February 28, 2023
Shares issued under stock options, RSUs, LTPP and employee stock purchase plans	0.3	0.3
Shares repurchased under the stock repurchase program and shares withheld for taxes under stock options, RSUs, and LTPP	0.1	0.1

As of February 29, 2024, $501.2 million remained of the $600 million share repurchase program authorization approved by our Board of Directors in November 2019.

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ACCUMULATED OTHER COMPREHENSIVE LOSS

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


	February 29, 2024		November 30, 2023
Foreign currency translation adjustment (1)	$	(308.0)	$	(305.7)
Unrealized gain (loss) on foreign currency exchange contracts	(1.8)		0.8

Unamortized value of settled interest rate swaps	(2.6)		(2.7)
Pension and other postretirement costs	(81.3)		(81.0)
Accumulated other comprehensive loss	$	(393.7)	$	(388.6)

(1)During the three months ended February 29, 2024, the foreign currency translation adjustment of accumulated other comprehensive loss increased on a net basis by $2.3 million, inclusive of $5.9 million of unrealized losses associated with net investment hedges. These net investment hedges are more fully described in note 3.

The following table sets forth the amounts reclassified from accumulated other comprehensive income (loss) and into consolidated net income (in millions):


	Three months ended				Affected Line Items in the Condensed Consolidated Income Statement
	February 29, 2024		February 28, 2023
(Gains)/losses on cash flow hedges:
Interest rate derivatives	$	0.2	$	(0.1)		Interest expense

Foreign exchange contracts	(1.3)		(1.2)			Cost of goods sold
Total before tax	(1.1)		(1.3)
Tax effect	0.3		0.3			Income tax expense
Net, after tax	$	(0.8)	$	(1.0)

Amortization of pension and postretirement benefit adjustments:

Amortization of net actuarial (gains)(1)	$	(0.7)	$	(0.4)		Other income, net
Total before tax	(0.7)		(0.4)
Tax effect	0.2		0.1			Income tax expense
Net, after tax	$	(0.5)	$	(0.3)

(1)This accumulated other comprehensive income (loss) component is included in the computation of total pension (income) and other postretirement benefits expense (refer to note 5 for additional details).

BUSINESS SEGMENTS

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

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

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Although the segments are managed separately due to their distinct distribution channels and marketing strategies, manufacturing and warehousing are often integrated to maximize cost efficiencies. We do not segregate jointly utilized assets by individual segment for purposes of internal reporting, performance evaluation, or capital allocation. Because of manufacturing integration for certain products within the segments, products are not sold from one segment to another but rather inventory is transferred at cost. Intersegment sales are not material.


	Consumer		Flavor Solutions		Total
			(in millions)
Three months ended February 29, 2024
Net sales	$	921.5	$	681.2	$	1,602.7
Operating income excluding special charges	176.3		61.4		237.7
Income (loss) from unconsolidated operations	21.5		(0.2)		21.3

Three months ended February 28, 2023
Net sales	$	909.5	$	656.0	$	1,565.5
Operating income excluding special charges	173.4		53.4		226.8
Income from unconsolidated operations	13.8		0.2		14.0

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


	Consumer		Flavor Solutions		Total
Three months ended February 29, 2024
Operating income excluding special charges	$	176.3	$	61.4	$	237.7
Less: Special charges	1.8		2.4		4.2


Operating income	$	174.5	$	59.0	$	233.5

Three months ended February 28, 2023
Operating income excluding special charges	$	173.4	$	53.4	$	226.8
Less: Special charges	19.0		8.8		27.8

Operating income	$	154.4	$	44.6	$	199.0

Total segment operating income as disclosed in the preceding table represents our consolidated operating income. The reconciliation of that operating income to income from consolidated operations before income taxes, which includes interest expense and other income, net is presented on the consolidated income statement.

The following table sets forth our net sales, by geographic area, for the three months ended February 29, 2024 and February 28, 2023 (in millions):


	Americas		EMEA		APAC		Total

Three months ended February 29, 2024	$	1,117.1	$	306.7	$	178.9	$	1,602.7
Three months ended February 28, 2023	1,094.7		283.9		186.9		1,565.5

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