Driving Long-Term Profitable Growth
2 0 2 2 A N N U A L R E P O R T
W E A R E E N D - T O - E N D F L A V O R
Global
Net Sales
By Segment
and Region
Global
Net Sales
By Product
Category
Consumer Segment
Flavor Solutions Segment
Consumer Segment
Flavor Solutions Segment
Americas
Americas
U.S. Spices & Seasonings
Flavors
Europe, Middle East and Africa
Europe, Middle East and Africa
International Spices & Seasonings
Branded Foodservice
Asia/Pacific
Asia/Pacific
Recipe Mixes
Custom Condiments
Condiments & Sauces
Coatings, Bulk Spices & Herbs
Regional Leaders
A W A R D S A N D R E C O G N I T I O N
McCormick was recognized in the Corporate
Knights’ Index of the world’s 100 most
sustainable corporations. McCormick has
ranked at the top of the Food Products
sector for the past seven years.
The Terra Carta Seal was awarded to
McCormick in 2021 and recognizes global
corporations that demonstrate a commitment
to, and momentum towards, the creation of
genuinely sustainable markets.
McCormick was recognized as one of
America’s Most JUST Companies by JUST
Capital. This list recognizes McCormick’s
commitment to serving its workers,
customers, communities, the environment,
and shareholders.
In 2022, McCormick became a constituent
of the FTSE4Good Index Series. The
Index Series is designed to measure the
performance of companies demonstrating
strong Environmental, Social, and
Governance (ESG) practices.
McCormick was again included in
DiversityInc’s Top 50 list for Diversity,
which assesses the performance of U.S.
companies in six key areas of diversity and
inclusion management.
LEAD companies represent the highest level
of engagement with the UN Global Compact.
McCormick has been included on the list
since 2021.
In line with our Purpose-led Performance principle, and as we consider sustainability throughout our business,
we have moved to a lighter, condensed printed Annual Report, which is also available digitally at ir.mccormick.com.
F E L L O W S H A R E H O L D E R S
In 2022 we experienced a year of unique challenges as we navigated an
increasingly dynamic global environment. The combination of persistently high
cost inflation and supply chain challenges, significant COVID related disruptions in
China, and the conflict in Ukraine contributed to a challenging and volatile year that
impacted our financial performance.
• Net sales grew 3%¹. Sales growth was driven by strong growth in our Flavor
Solutions segment partially offset by a decline in our Consumer segment,
which was impacted by the Kitchen Basics divestiture, significant COVID
related disruptions in China, and exits of low margin business in India and our
Consumer business in Russia.
• Adjusted operating income¹ declined 16% primarily due to higher cost inflation
and supply chain costs, partially offset by pricing, lower selling, general, and
administrative costs, and CCI-led cost savings.
• Earnings per share declined 10% to $2.52; adjusted earnings per share¹
declined 17% to $2.53.
McCormick has paid dividends since
1925 and has increased its dividend for
the past 37 consecutive years.
Importantly, while we were short of our goals in 2022, we view these results as
In 2022, McCormick returned $397
a temporary setback in our long-term performance, which includes generating
double-digit annualized shareholder returns in the past 5-, 10-, 15- and 20-year
periods that exceed both the packaged food index and our flavor house peers.
The fundamentals that drove this industry-leading historical financial performance
remain strong.
million to shareholders through cash
dividends, an increase of 9% . At the
end of the year, the quarterly dividend
was increased 5%.
Consumers’ rising demand for flavor, whether through our products or our
customers’ products is the foundation for our sales growth. We have intentionally
focused on great, fast-growing categories. We continue to capitalize on the long-
term consumer trends of cooking at home, clean and flavorful eating, valuing
trusted brands, and purpose minded practices. Our alignment with these trends
and the rising demand for flavor, in combination with the breadth and reach of our
global portfolio and our strategic investments, provide a strong foundation for
sustainable growth.
In our Consumer segment, we are entering 2023 with positive momentum. Our
increased brand marketing investments, with our messaging emphasizing value
and showing consumers how our products help to stretch their grocery dollars
without sacrificing flavor, coupled with our new product innovation centered around
value, freshness, convenience, and heat is resonating with consumers. We are also
collaborating with our customers to ensure the right assortment and price points on
shelf to optimize category performance.
1 These are non-GAAP financial results excluding items affecting comparability. The details of these adjustments are provided in
the Non-GAAP Financial Measures within Management’s Discussion and Analysis in the Company’s 10-K.
2022 Annual Report 1
In our Flavor Solutions segment, our sales growth has been
This past year we saw several changes to our executive
outstanding with continued momentum across all regions,
leadership team:
and we continue to realize the benefits from the combined
capabilities of FONA and McCormick. In 2023, we plan to
drive further growth with our culinary-inspired innovation,
differentiated customer engagement approach, as well as by
targeting opportunities in high-growth categories, expanding
distribution, and leveraging heat as a competitive advantage.
We are taking action to optimize our cost structure and increase
our profitability. Our top supply chain priority is keeping our
customers in supply. As we responded to demand volatility
over the past several years, we incurred additional costs to
service our customers and have seen inefficiencies develop in
our supply chain. Through our Global Operating Effectiveness
Program, we are taking actions to normalize our supply
chain cost structure as well as increase our organizational
effectiveness and efficiency to drive cost savings. Our actions
•
Brendan Foley was promoted to President and Chief
Operating Officer in June 2022. Since joining McCormick
in 2014, Brendan has been instrumental in leading
McCormick’s overall growth. He is a respected leader and
a champion of our Multiple Management and Purpose-led
Performance philosophies.
•
Lisa Manzone, who served as Chief Human Relations
Officer since 2015, retired from the company in December
2022 after 15 years of distinguished service.
•
Sarah Piper was named Chief Human Relations Officer
effective December 1, 2022. Sarah brings extensive human
relations expertise both from her tenure at McCormick as
well as her external experience.
are already yielding results, and we expect to realize the
I am incredibly proud of the entire McCormick team, and I am
benefits of the program in 2023 and 2024.
confident that we have the right team in place for continued
Our Purpose-led Performance commitment remains strong and
success.
we continue to be recognized for our achievements in doing
As we look ahead to 2023, we will focus on capitalizing on
what’s right for people, communities where we live, work, and
strong demand, optimizing our cost structure, and positioning
source, and the planet we all share. We were honored to be
McCormick to deliver sustainable growth. The compounding
included on Fortune’s 2022 Change the World list, named by
benefit of our relentless focus on growth, performance, and
Just Capital as one of America’s Most JUST Companies for
people continues to position McCormick to drive sales growth
2023, and most recently to be named in the Corporate Knights
and, balanced with our focus on lowering costs to expand
Global 100 Sustainability Index as the No. 1 most sustainable
margins, realize long-term sustainable earnings growth, and
corporation in both the Food Products sector and in the
create long-term shareholder value.
Consumer Staples sector for 2023. This marks the seventh
consecutive year that McCormick has been featured on the
list. As a global citizen, we understand our role in ensuring
a sustainable future and look forward to continuing on our
On behalf of the McCormick Board of Directors and the
executive team, I would like to thank you for your continued
support and confidence.
Purpose-led Performance journey.
Sincerely,
The collective power of our approximately 14,000 employees
worldwide drive our momentum and success. Demonstrating
our high-performance culture, which is rooted in our
fundamental values of integrity, fairness, mutual respect,
teamwork, and innovation, they did a tremendous job navigating
this past year’s volatile environment. I thank them for their
dedicated efforts and engagement.
Lawrence E. Kurzius
Chairman and Chief Executive Officer
2 McCormick & Company, Inc.
B O A R D O F D I R E C T O R S
Anne Bramman 55
Michael A. Conway 56
Freeman A. Hrabowski, III 72
Lawrence E. Kurzius 64
Chairman and Chief Executive Officer
McCormick & Company, Inc.
Director since 2015
E X E C U T I V E O F F I C E R S
Lawrence E. Kurzius
Chairman and Chief Executive Officer
Michael R. Smith
Executive Vice President and Chief
Financial Officer
Brendan M. Foley
President and Chief Operating Officer
Sarah J. Piper
Chief Human Relations Officer
Jeffery D. Schwartz
Vice President, General Counsel and
Corporate Secretary
Malcolm S. Swift
President, Global Flavor Solutions and
Chief Administrative Officer
Former Chief Financial Officer
Nordstrom, Inc.
Seattle, Washington
Director since 2020
— Audit Committee
Group President, International
& Channel Development
Starbucks Corporation
Seattle, Washington
Director since 2015
Former President
University of Maryland
Baltimore County,
Baltimore, Maryland
Director since 1997
— Nominating and Corporate
Governance Committee
— Nominating and Corporate
Governance Committee*
Patricia Little 62
Michael D. Mangan 66
Maritza G. Montiel 71
Former Senior Vice President,
and Chief Financial Officer
The Hershey Company
Hershey, Pennsylvania
Director since 2010
— Nominating and Corporate
Governance Committee
Former President
Worldwide Power Tools & Accessories
The Black & Decker Corporation
Towson, Maryland
Director since 2007**
Former Deputy Chief Executive
Officer and Vice Chairman
Deloitte LLP
Washington, D.C.
Director since 2015
— Compensation and Human Capital
Committee, Nominating and
Corporate Governance Committee
— Audit Committee*
Margaret M.V. Preston 65
Gary M. Rodkin 70
Jacques Tapiero 64
Managing Director
Cohen Klingenstein LLC
New York, New York
Director since 2003
— Compensation and Human
Capital Committee
W. Anthony Vernon 66
Former Chief Executive Officer
Kraft Foods Group, Inc.
Northfield, Illinois
Director since 2017
— Compensation and Human
Capital Committee*
Former Chief Executive Officer
ConAgra Foods, Inc.
Omaha, Nebraska
Director since 2017
— Audit Committee
Former Senior Vice President
& President, Emerging Markets
Eli Lilly and Company,
Indianapolis, Indiana
Director since 2012
— Compensation and Human
Capital Committee
Indicates Chair Position on the Committee
*
** Lead Director
OUR TRUSTED BRANDS
In nearly 170 countries and territories across the globe
A N E W O R L E A N S T R A D I T I O N S I N C E 1 8 8 9
A N E W O R L E A N S T R A D I T I O N S I N C E 1 8 8 9
A N E W O R L E A N S T R A D I T I O N S I N C E 1 8 8 9
A N E W O R L E A N S T R A D I T I O N S I N C E 1 8 8 9
Bertie
2022 Annual Report 3
THIS PAGE LEFT INTENTIONALLY BLANK
Table of Contents to Form 10-K
PART I
Item 1
Item 1A
Item 1B
Item 2
Item 3
Item 4
PART II
Item 5
Item 6
Item 7
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market For Registrant’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
[Reserved]
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
Item 7A
Quantitative and Qualitative Disclosures About Market Risk
Item 8
Item 9
Item 9A
Item 9B
Item 9C
PART III
Item 10
Item 11
Item 12
Item 13
Financial Statements and Supplementary Data
Report of Management
Report of Independent Registered Public Accounting Firm
Consolidated Income Statements
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Cash Flow Statements
Consolidated Statements of Shareholders’ Equity
Notes to Consolidated Financial Statements
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and
Director Independence
Item 14
Principal Accountant Fees and Services
PART IV
Item 15
Exhibits, Financial Statement Schedules
Page
9
12
22
22
22
22
23
23
24
44
45
45
46
49
49
50
51
52
53
75
75
75
75
76
76
76
76
76
76
2022 Annual Report 5
THIS PAGE LEFT INTENTIONALLY BLANK
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
S ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended November 30, 2022
OR
£ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
Commission file number 001-14920
McCORMICK & COMPANY, INCORPORATED
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction of
incorporation or organization)
24 Schilling Road, Suite 1, Hunt Valley, Maryland
(Address of principal executive offices)
52-0408290
(IRS Employer
Identification No.)
21031
(Zip Code)
Registrant’s telephone number, including area code: (410) 771-7301
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Common Stock, Par Value $0.01 per share
Common Stock Non-Voting, Par Value $0.01 per share
MKC.V
MKC
New York Stock Exchange
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: Not applicable.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes S No £
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes £ No S
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes S No £
2022 Annual Report 7
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to
submit and post such files). Yes S No £
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting
company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Check one:
Large Accelerated Filer S
Non-accelerated Filer £ (Do not check if a smaller reporting company)
£
Accelerated Filer
Smaller Reporting Company £
Emerging Growth Company £
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. £
Indicate by check mark if the registrant has filed a report on and attestation on its management’s assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by
the registered public accounting firm that prepared or issued its audit report. S
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £ No S
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the
price at which the common equity was last sold, or the average bid and asked prices of such common equity, as of the last business
day of the registrant’s most recently completed second fiscal quarter.
The aggregate market value of the Voting Common Stock held by non-affiliates at May 31, 2022: $1,614,689,363
The aggregate market value of the Non-Voting Common Stock held by non-affiliates at May 31, 2022: $23,223,291,177
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
Class
Number of Shares Outstanding
Date
Common Stock
Common Stock Non-Voting
17,380,371
250,721,185
December 30, 2022
December 30, 2022
DOCUMENTS INCORPORATED BY REFERENCE
Document
Part of 10-K into Which Incorporated
Proxy Statement for
McCormick’s March 29, 2023
Annual Meeting of Stockholders
(the “2023 Proxy Statement”)
Part III
8 McCormick & Company, Inc.
PART I.
As used herein, references to “McCormick,” “we,” “us” and “our”
are to McCormick & Company, Incorporated and its consolidated
subsidiaries or, as the context may require, McCormick & Company,
Incorporated only.
ITEM 1. BUSINESS
McCormick is a global leader in flavor. We manufacture, market and
distribute spices, seasoning mixes, condiments and other flavorful
products to the entire food industry–retailers, food manufacturers
and foodservice businesses. We also are partners in a number of joint
ventures that are involved in the manufacture and sale of flavorful
products, the most significant of which is McCormick de Mexico. Our
major sales, distribution and production facilities are located in North
America, Europe and China. Additional facilities are based in Australia,
Central America, Thailand and South Africa.
On December 30, 2020, we completed the purchase of FONA
International, LLC and certain of its affiliates (FONA), a privately held
company. The purchase price was approximately $708 million, net of
cash acquired. 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 broadens our value-add offerings with products
that are highly complementary to our existing portfolio. By combining
the portfolios and infrastructures, we have added manufacturing
capacity as well as greater scale and expect to accelerate our global
flavor growth. At the time of the acquisition, annual sales of FONA
were approximately $114 million. The results of FONA’s operations
have been included in our financial statements as a component of our
flavor solutions segment from the date of acquisition.
On November 30, 2020, we completed the purchase of the parent
company of Cholula Hot Sauce® (Cholula) from L Catterton. The
purchase price was approximately $801 million, net of cash acquired.
Cholula, a premium Mexican hot sauce brand, is a strong addition to
our global branded flavor portfolio, which broadens our offerings in
the high growth hot sauce category to consumers and foodservice
operators and accelerates 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.
Business Segments
We operate in two business segments, consumer and flavor solutions.
Demand for flavor is growing globally, and across both segments we
have the customer base and product breadth to participate in all types
of eating occasions. Our products deliver flavor when cooking at home,
dining out, purchasing a quick service meal or enjoying a snack. We
offer our customers and consumers a range of products, extending
from premium to value-priced, to meet the increasing demand for cer-
tain product attributes such as clean-label, organic, natural, reduced
sodium, gluten-free and non-GMO (genetically modified organisms).
Consistent with market conditions in each segment, our consumer
segment has a higher overall profit margin than our flavor solutions
segment. In 2022, the consumer segment contributed approximately
59% of consolidated net sales and 80% of consolidated operating
income, and the flavor solutions segment contributed approximately 41%
of consolidated net sales and 20% of consolidated operating income.
Consumer Segment. From locations around the world, our brands
reach consumers in approximately 160 countries and territories. Our
leading brands in the Americas include McCormick®, French’s®,
Frank’s RedHot®, Lawry’s® Cholula Hot Sauce® and Club House®, as
well as brands such as Gourmet Garden® and OLD BAY®. We also
market authentic regional and ethnic brands such as Zatarain’s®,
Stubb’s®, Thai Kitchen® and Simply Asia®. In the Europe, Middle East
and Africa (EMEA) region, our major brands include the Ducros®,
Schwartz®, Kamis® and La Drogheria® brands of spices, herbs and
seasonings and an extensive line of Vahiné® brand dessert items. In
China, we market our products under the McCormick and DaQiao®
brands. In Australia, we market our spices and seasonings under the
McCormick brand, our dessert products under the Aeroplane® brand,
and packaged chilled herbs under the Gourmet Garden brand.
Elsewhere in the Asia/Pacific region, we market our products under
the McCormick brand as well as other brands.
Approximately two thirds of our consumer segment sales are spices
and seasonings and condiments and sauces. Within the spices and
seasoning category, we are the brand leader globally and a category
leader in our key markets. In the condiments and sauces category, we
are one of the brand leaders globally and in the U.S. There are numer-
ous competitive brands of spices and seasonings, and condiments and
sauces in the U.S. and additional brands in international markets. Some
are owned by large food manufacturers, while others are supplied by
small privately-owned companies. In this competitive environment,
we are leading with innovation and brand marketing, and applying our
analytical tools to help customers optimize the profitability of their
sales of these categories while simultaneously working to increase our
sales and profit.
Our customers span a variety of retailers that include grocery, mass mer-
chandise, warehouse clubs, discount and drug stores, and e-commerce
retailers, served directly and indirectly through distributors or wholesal-
ers. In addition to marketing our branded products to these customers,
we are also a leading supplier of private label items, also known as store
brands. In our businesses in China and, prior to 2022, India, foodservice
sales are managed by and reported in our consumer segment.
Flavor Solutions Segment. In our flavor solutions segment, we provide
a wide range of products to multinational food manufacturers and
foodservice customers. The foodservice customers are supplied with
branded, packaged products both directly by us and indirectly through
distributors, with the exception of our businesses in China and, prior to
2022, India, where foodservice sales are managed by and reported in
our consumer segment. We supply food manufacturers and foodservice
customers with customized flavor solutions, and many of these cus-
tomer relationships have been active for decades. Our range of flavor
2022 Annual Report 9
solutions remains one of the broadest in the industry and includes
seasoning blends, spices and herbs, condiments, coating systems and
compound flavors. In addition to a broad range of flavor solutions, our
long-standing customer relationships are evidence of our effectiveness
in building customer intimacy. Our customers benefit from our expertise
in many areas, including sensory testing, culinary research, food safety
and flavor application.
Our flavor solutions segment has a number of competitors. Some
tend to specialize in a particular range of products and have a limited
geographic reach. Other competitors include large publicly held flavor
companies that are more global in nature, but which also tend to focus
on providing integrated solutions extending beyond flavor through the
use of other functional and nutritional ingredients.
Raw Materials
The most significant raw materials used in our business are dairy
products, pepper, onion, capsicums (red peppers and paprika), garlic,
wheat products, vegetable oils, and vanilla. Pepper and other spices
and herbs are generally sourced from countries other than the United
States. Other raw materials, like dairy products and onion, are primarily
sourced locally, either within the United States or from our international
locations. Because these raw materials are agricultural products, they
are subject to fluctuations in market price and availability caused by
weather, growing and harvesting conditions, market conditions, includ-
ing inflationary cost increases, and other factors beyond our control.
We respond to this volatility in a number of ways, including strategic
raw material purchases, purchases of raw material for future delivery,
customer price adjustments and cost savings from our Comprehensive
Continuous Improvement (CCI) program. There has been, and there
could continue to be, a difference between the timing of when these
customer price adjustments and cost savings impact our results of
operations and when the impact of cost inflation occurs. Additionally,
in some instances the pricing actions we take have been impacted by
price elasticity which unfavorably impacts our sales volume and mix.
In addition, we rely on third-party transportation providers to deliver
raw materials as well as our products to our customers. Reduced avail-
ability of transportation capacity due to labor shortages and higher
fuel costs has caused an increase in the cost of transportation for us
and our suppliers.
Customers
Our products are sold directly to customers and also through brokers,
wholesalers and distributors. In the consumer segment, products are
then sold to consumers under a number of brands through a variety
of retail channels, including grocery, mass merchandise, warehouse
clubs, discount and drug stores, and e-commerce. In the flavor solu-
tions segment, products are used by food and beverage manufacturers
as ingredients for their finished goods and by foodservice customers
as ingredients for menu items, as well as provided to their own cus-
tomers for use in dine-in and take-out eating occasions, all to enhance
the flavor of their foods. Customers for the flavor solutions segment
include food manufacturers and the foodservice industry supplied
through a variety of channels including directly and indirectly through
distributors, wholesale foodservice suppliers and e-commerce.
10 McCormick & Company, Inc.
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 2022, 11% of consolidated
sales in 2021 and 12% of consolidated sales in 2020. Sales to one of
our flavor solutions segment customers, PepsiCo, Inc., accounted for
approximately 11% of consolidated sales in 2022, 2021 and 2020. In
2022, 2021 and 2020, the top three customers in our flavor solutions
segment represented between 47% and 52% of our global flavor
solutions sales.
Trademarks, Licenses and Patents
We own a number of trademark registrations. Although in the
aggregate these trademarks are material to our business, the loss of
any one of those trademarks, with the exception of our “McCormick,”
“French’s ,” “Frank’s RedHot,” “Lawry’s,” “Zatarain’s,” “Cholula,”
“Stubb’s,” “Club House,” “Ducros,” “Schwartz,” “Vahiné,” “OLD BAY,”
“Simply Asia,” “Thai Kitchen,” “Kamis,” “La Drogheria,” “DaQiao,”
and “Gourmet Garden” trademarks, would not have a material adverse
effect on our business. The “Mc – McCormick” trademark is exten-
sively used by us in connection with the sale of our food products in
the U.S. and certain non-U.S. markets. The terms of the trademark
registrations are as prescribed by law, and the registrations will be
renewed for as long as we deem them to be useful.
We have entered into a number of license agreements authorizing
the use of our trademarks by affiliated and non-affiliated entities. The
loss of these license agreements would not have a material adverse
effect on our business. The term of the license agreements is generally
two to three years or until such time as either party terminates the
agreement. Those agreements with specific terms may be renewable
upon agreement of the parties.
We also own various patents, none of which are individually material
to our business.
Seasonality
Due to seasonal factors inherent in our business, our sales, income
and cash from operations generally are higher in the fourth quarter
due to the holiday season. This seasonality reflects customer and
consumer buying patterns, primarily in the consumer segment.
Working Capital
In order to meet increased demand for our consumer products during our
fourth quarter, we usually build our inventories during the third quarter
of the fiscal year. We generally finance working capital items (inventory
and receivables) through short-term borrowings, which include the
use of lines of credit and the issuance of commercial paper. For a
description of our liquidity and capital resources, see note 6 of notes to
our consolidated financial statements and the “Liquidity and Financial
Condition” section of “Management’s Discussion and Analysis.”
Competition
Each segment operates in markets around the world that are highly
competitive. In this competitive environment, our growth strategies
include customer engagement and product innovation based on
consumer insights. In the consumer segment, we are building brand
recognition and loyalty through advertising and promotions. In our
flavor solutions segment, we are differentiated by our culinary and
consumer inspired flavor development as well as the breadth of our
product offering and customer engagement.
Governmental Regulation
We are subject to numerous laws and regulations around the world
that apply to our global businesses. In the United States, the safety,
production, transportation, distribution, advertising, labeling and
sale of many of our products and their ingredients are subject to the
Federal Food, Drug, and Cosmetic Act; the Food Safety Modernization
Act; the Federal Trade Commission Act; state consumer protection
laws; competition laws, anti-corruption laws, customs and trade laws;
federal, state and local workplace health and safety laws; privacy
laws; various federal, state and local environmental protection laws;
and various other federal, state and local statutes and regulations.
Outside the United States, our business is subject to numerous similar
statutes, laws and regulatory requirements.
Human Capital
We believe in the Power of People – our employees and customers
across the world. Our high-performance culture is rooted in our shared
values and respect for all contributions of every employee. Our key
human capital objectives are to attract, retain and develop the highest
quality talent. We employ various human resource programs in support
of these objectives. We believe diversity, equity and inclusion are at
the core of our values and strategic business priorities. Throughout
our business, we champion equality, supporting parity for women and
under-represented groups as we work to create ethical, safe and sup-
portive workplaces where our employees thrive. We believe a diverse
and inclusive workplace results in business growth and encourages
increased innovation, retention of talent and a more engaged workforce.
We have various employee ambassador groups that provide a supportive,
collaborative space for employees to come together to promote inclusion.
We prioritize the mental health and wellness of our employees by
offering and encouraging participation in various programs and initiatives.
Respect for human rights is fundamental to our business and its commit-
ment to ethical business conduct.
We had approximately 14,200 full-time employees worldwide as of
November 30, 2022. Our operations have not been affected significantly
by work stoppages, other than those associated with temporary closures
of plants related to the COVID-19 pandemic, and, in the opinion of
management, employee relations are good. We have approximately
400 employees in the United States who are covered by a collective
bargaining contract. At our subsidiaries outside the U.S., approximately
2,600 employees are covered by collective bargaining agreements or
similar arrangements.
Through our continuous listening strategy, we measure employee
engagement on an ongoing basis to solicit feedback and understand
views of our employees, work environment and culture. The results
from these surveys are used to implement programs and processes
designed to enhance employee engagement and improve the
employee experience.
We are committed to the safety, health, and security of our employees.
We believe a hazard-free environment is a critical enabler for the suc-
cess of our business. Throughout our operations, we strive to ensure
that all of our employees have access to safe workplaces that allow
them to succeed in their jobs.
Information about our Executive Officers
In addition to the executive officers indicated in the 2023 Proxy
Statement incorporated by reference in Part III, Item 10 of this Report,
the other executive officer of McCormick is Sarah Piper.
Ms. Piper is 46 years old and has held the position of Chief Human
Relations Officer since December 2022. Starting in 2017, Ms. Piper
served as Vice President of Total Rewards. In 2020, she assumed the
role of Vice President, Human Relations for the Americas. Prior to
holding her most current position, she served as Senior Vice President,
Global Human Relations Business Partners where she was responsible
for leading the global HR Business Partner organization to deliver
human capital strategies.
Operations Outside of the U.S.
We are subject in varying degrees to certain risks typically associated
with a global business, such as local economic and market condi-
tions, exchange rate fluctuations, and restrictions on investments,
royalties and dividends. In fiscal year 2022, approximately 38% of
sales were from non-U.S. operations. For information on how we
manage some of these risks, see the “Market Risk Sensitivity” section
of “Management’s Discussion and Analysis.”
Forward-Looking Information
Certain statements contained in this report, including statements
concerning expected performance such as those relating to net sales,
gross margin, earnings, cost savings, transaction and integration expenses,
special charges, acquisitions, brand marketing support, volume and product
mix, income tax expense, and the impact of foreign currency rates are
“forward-looking statements” within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended. These statements may be
identified by the use of words such as “may,” “will,” “expect,” “should,”
“anticipate,” “intend,” “believe” and “plan” and similar expressions. These
statements may relate to: the impact of the COVID-19 pandemic on our
business, suppliers, consumers, customers, and employees; disruptions or
inefficiencies in the supply chain, including any impact of COVID-19; the
expected results of operations of businesses acquired by the Company; the
expected impact of the inflationary cost environment, including commodity,
packaging materials and transportation costs on our business; the expected
impact of pricing actions on the Company’s results of operations and
gross margins; the impact of price elasticity on our sales volume and
mix; the expected impact of factors affecting our supply chain, including
transportation capacity, labor shortages, and absenteeism; the expected
impact of productivity improvements, including those associated with
our Comprehensive Continuous Improvement (CCI) program, streamlining
actions, including our Global Operating Effectiveness Program (GOEP) and
global enablement initiative; the impact of the ongoing conflict between
Russia and Ukraine, including the potential for broader economic disruption;
expected working capital improvements; expectations regarding growth
potential in various geographies and markets, including the impact from
customer, channel, category, and e-commerce expansion; expected trends
in net sales and earnings performance and other financial measures; the
expected timing and costs of implementing our business transformation
initiative, which includes the implementation of a global enterprise resource
planning (ERP) system; the expected impact of accounting pronouncements;
the expectations of pension and postretirement plan contributions and
anticipated charges associated with those plans; the holding period and
market risks associated with financial instruments; the impact of foreign
exchange fluctuations; the adequacy of internally generated funds and
existing sources of liquidity, such as the availability of bank financing; the
anticipated sufficiency of future cash flows to enable the payments of
interest and repayment of short- and long-term debt, working capital needs,
planned capital expenditures, and quarterly dividends; our ability to obtain
additional short- and long-term financing or issue additional debt securities;
and expectations regarding purchasing shares of McCormick’s common
stock under the existing repurchase authorization.
2022 Annual Report 1 1
These and other forward-looking statements are based on manage-
ment’s current views and assumptions and involve risks and uncertain-
ties that could significantly affect expected results. Results may be
materially affected by factors such as: the company’s ability to drive
revenue growth; the company’s ability to increase pricing to offset,
or partially offset, inflationary pressures on the cost of our products;
damage to the company’s reputation or brand name; loss of brand
relevance; increased private label use; the company’s ability to drive
productivity improvements, including those related to our CCI program
and streamlining actions, including our GOEP; product quality, labeling,
or safety concerns; negative publicity about our products; actions by,
and the financial condition of, competitors and customers; the longevity
of mutually beneficial relationships with our large customers; the ability
to identify, interpret and react to changes in consumer preference and
demand; business interruptions due to natural disasters, unexpected
events or public health crises, including COVID-19; issues affecting the
company’s supply chain and procurement of raw materials, including
fluctuations in the cost and availability of raw and packaging materials;
labor shortage, turnover and labor cost increases; the impact of the
ongoing conflict between Russia and Ukraine, including the potential
for broader economic disruption; government regulation, and changes
in legal and regulatory requirements and enforcement practices; the
lack of successful acquisition and integration of new businesses; global
economic and financial conditions generally, availability of financing,
interest and inflation rates, and the imposition of tariffs, quotas, trade
barriers and other similar restrictions; foreign currency fluctuations;
the effects of increased level of debt service following the Cholula
and FONA acquisitions as well as the effects that such increased debt
service may have on the company’s ability to borrow or the cost of any
such additional borrowing, our credit rating, and our ability to react to
certain economic and industry conditions; risks associated with the
phase-out of LIBOR; impairments of indefinite-lived intangible assets;
assumptions we have made regarding the investment return on retire-
ment plan assets, and the costs associated with pension obligations;
the stability of credit and capital markets; risks associated with the
company’s information technology systems, including the threat of data
breaches and cyber-attacks; the company’s inability to successfully
implement our business transformation initiative; fundamental changes
in tax laws; including interpretations and assumptions we have made,
and guidance that may be issued, and volatility in our effective tax rate;
climate change; Environmental, Social and Governance (ESG) matters;
infringement of intellectual property rights, and those of customers; liti-
gation, legal and administrative proceedings; the company’s inability to
achieve expected and/or needed cost savings or margin improvements;
negative employee relations; and other risks described herein under
Part I, Item 1A “Risk Factors.”
Actual results could differ materially from those projected in the
forward-looking statements. We undertake no obligation to update or
revise publicly any forward-looking statements, whether as a result
of new information, future events or otherwise, except as may be
required by law.
Available Information
Our principal corporate internet website address is:
www.mccormickcorporation.com. We make available free of charge
through our website our Annual Report on Form 10-K, quarterly reports
on Form 10-Q, current reports on Form 8-K, and amendments to those
reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Exchange Act as soon as reasonably practicable after such docu-
ments are electronically filed with, or furnished to, the United States
12 McCormick & Company, Inc.
Securities and Exchange Commission (the SEC). The information and
other content contained on our website are not part of (or incorporated
by reference in) this report or any other document we file with the SEC.
The SEC maintains an internet website at www.sec.gov that contains
reports, proxy and information statements, and other information regard-
ing McCormick. Our website also includes our Corporate Governance
Guidelines, Business Ethics Policy and charters of the Audit Committee,
Compensation & Human Capital Committee, and Nominating/Corporate
Governance Committee of our Board of Directors.
ITEM 1A. RISK FACTORS
The following are certain risk factors that could affect our business,
financial condition and results of operations. These risk factors should
be considered in connection with evaluating the forward-looking
statements contained in this Annual Report on Form 10-K because
these factors could cause the actual results and conditions to differ
materially from those projected in forward-looking statements. Before
you buy our Common Stock or Common Stock Non-Voting, you should
know that making such an investment involves risks, including the
risks described below. Additional risks and uncertainties that are not
presently known to us or are currently deemed to be immaterial also
may materially adversely affect our business, financial condition, or
results of operations in the future. If any of the risks actually occur,
our business, financial condition or results of operations could be neg-
atively affected. In that case, the trading price of our securities could
decline, and you may lose part or all of your investment.
Risks Related to Our Company, Business and Operations
Deterioration of global economic conditions, an economic
recession, periods of inflation, or economic uncertainty in our
key markets may adversely affect customer and consumer
spending as well as demand for our products.
Global economic conditions can be uncertain and volatile. Our
business and results of operations have in the past been, and may
continue to be, adversely affected by changes in global economic con-
ditions including inflation, rising interest rates, availability of capital
markets, consumer spending rates, energy availability and costs, the
negative impacts caused by pandemics and public health crises, such
as the COVID-19 pandemic, as well as the potential impacts of geo-
political uncertainties, including the ongoing conflict between Russia
and Ukraine, and the effect of governmental initiatives to manage
economic conditions. As global economic conditions continue to be
volatile or economic uncertainty remains, trends in consumer spending
also remain unpredictable and subject to reductions due to credit
constraints and uncertainties about the future. We are a manufacturer
and distributor of flavor products. As such, many of our products are
purchased by our customers based on end-user demand from consum-
ers. Some of the factors that may influence consumer spending include
general economic conditions, high levels of unemployment, health
crises (such as the COVID-19 pandemic), higher consumer debt levels,
reductions in net worth based on market declines and uncertainty,
home foreclosures and reductions in home values, fluctuating interest
and foreign currency exchange rates and credit availability, fluctuating
fuel and other energy costs, fluctuating commodity prices, inflationary
pressure, tax rates and general uncertainty regarding the overall future
economic environment. Unfavorable economic conditions may lead
customers and consumers to delay or reduce purchases of our prod-
ucts. Consumer demand for our products may not reach our targets,
or may decline, when there is an economic downturn or economic
uncertainty in our key markets. Our sensitivity to economic cycles and
any related fluctuation in customer and consumer demand may have
a material negative impact on our business, financial conditions or
results of operations.
We have many iconic brands with long-standing consumer recognition.
Our success depends on our ability to maintain our brand image for our
existing products, extend our brands to new platforms, and expand our
brand image with new product offerings.
A pandemic, including COVID-19, could have an adverse
impact on our business, financial condition, and results of
operations.
The COVID-19 pandemic has had, and could continue to have, a nega-
tive impact on financial markets, economic conditions, and portions
of our industry as a result of changes in consumer behavior, retailer
inventory levels, cost inflation, manufacturing and supply chain
disruption, and overall macroeconomic conditions. The ongoing impli-
cations of the COVID-19 pandemic could adversely impact our busi-
ness and results of operations in a number of ways, including but not
limited to:
• Shifts and volatility in consumer spending and purchasing
behaviors;
• Continued increase in raw material and commodity costs;
• Shutdowns or slowdowns of one or more of our production
facilities;
• Further disruptions in our supply chain and in our ability to obtain
ingredients, packaging, and other sourced materials due to contin-
ued labor shortages and/or volatility in the labor market, govern-
mental restrictions, or the failure of our suppliers, distributors, or
manufacturers to meet their obligations to us; or
• Significant changes in the political conditions in markets in which
we manufacture, sell or distribute our products, including quaran-
tines, import/export restrictions, price controls, or governmental
or regulatory actions, closures or other restrictions that limit or
close our operating and manufacturing facilities, restrict our
employees’ ability to travel or perform necessary business func-
tions, or otherwise prevent our third-party partners, suppliers, or
customers from sufficiently staffing operations, including opera-
tions necessary for the production, distribution, sale, and support
of our products.
The duration and extent of the impact from the COVID-19 pandemic
depends on future developments that cannot be accurately predicted
at this time, such as the severity and transmission rate of the virus,
the emergence and spread of variants, infection rates in areas we
operate, the extent and effectiveness of containment actions, includ-
ing the continued availability and effectiveness of vaccines in the
markets where we operate, and the impact of these and other factors
on our employees, customers, suppliers, distributors, and manufactur-
ers. Should these conditions persist for a prolonged period, including
any of the above factors and others that are currently unknown,
the COVID-19 pandemic could have a material adverse effect on
our business, financial condition, and results of operations. The impact
of the COVID-19 pandemic may also exacerbate other risks discussed
in this Item 1A, Risk Factors, any of which could have a material
effect on us.
We continually make efforts to maintain and improve relationships
with our customers and consumers and to increase awareness
and relevance of our brands through effective marketing and other
measures. From time to time, our customers reevaluate their mix of
product offerings, and consumers have the option to purchase private
label or other competitive products instead of our branded products.
In the event that we are unable to supply our products to customers
in the time frame and quantities that they desire, whether due to
increased demand or other factors, our customers may discontinue all
or a portion of their purchases from us and source competitive brands.
If a significant portion of our branded business was switched to private
label or competitive products, it could have a material negative impact
on our consumer segment.
Our reputation for manufacturing high-quality products is widely
recognized. In order to safeguard that reputation, we have adopted
rigorous quality assurance and quality control procedures which are
designed to ensure the safety of our products. A serious breach of our
quality assurance or quality control procedures, deterioration of our
quality image, impairment of our customer or consumer relationships
or failure to adequately protect the relevance of our brands may lead
to litigation, customers purchasing from our competitors or consumers
purchasing other brands or private label items that may or may not
be manufactured by us, any of which could have a material negative
impact on our business, financial condition or results of operations.
The food industry generally is subject to risks posed by food spoilage
and contamination, product tampering, product recall, import alerts and
consumer product liability claims. For instance, we may be required to
recall certain of our products should they be mislabeled, contaminated
or damaged. Additionally, certain of our raw materials could be blocked
from entering the country if they were subject to government-imposed
actions. We have and may continue to become involved in lawsuits
and legal proceedings if it is alleged that the consumption of any of our
products could cause injury or illness, or that any of our products are
mislabeled or fail to meet applicable legal requirements (even if the
allegation is untrue). A product recall, import alert or an adverse result
in any such litigation, or negative perceptions regarding food products
and ingredients, could result in our having to pay fines or damages,
incur additional costs or cause customers and consumers in our
principal markets to lose confidence in the safety and quality of certain
products or ingredients, any of which could have a negative effect on
our business or financial results and, depending upon the significance
of the affected product, that negative effect could be material to our
business or financial results. Negative publicity about these concerns,
whether or not valid, may discourage customers and consumers from
buying our products or cause disruptions in production or distribution
of our products and adversely affect our business, financial condition
or results of operations.
Damage to our reputation or brand name, loss of brand relevance,
increase in use of private label or other competitive brands by
customers or consumers, or product quality or safety concerns
could negatively impact our business, financial condition or
results of operations.
The rising popularity of social networking and other consumer-oriented
technologies has increased the speed and accessibility of information
dissemination (whether or not accurate), and, as a result, negative,
inaccurate, or misleading posts or comments on websites may generate
adverse publicity that could damage our reputation or brands.
2022 Annual Report 13
Customer consolidation, consumer behaviors, and competitive,
economic and other pressures facing our customers, may
impact our financial condition or results of operations.
A number of our customers, such as supermarkets, warehouse
clubs and food distributors, have consolidated in recent years and
consolidation could continue. Such consolidation could present a
challenge to margin growth and profitability in that it has produced
large, sophisticated customers with increased buying power who are
more capable of operating with reduced inventories; resisting price
increases; demanding lower pricing, increased promotional programs
and specifically tailored products; and shifting shelf space currently
used for our products to private label and other competitive prod-
ucts. The economic and competitive landscape for our customers is
constantly changing, such as the emergence of new sales channels
like e-commerce, and our customers’ responses to those changes
could impact our business. The continued growth of e-commerce and
its impact of consumer habits and preferences has accelerated since
the onset of the COVID-19 pandemic in many of the markets we serve
and our financial results may be impacted if we are unable to adapt
to changing consumer preferences and market dynamics. In addition,
our flavor solutions segment may be impacted if the reputation or
perception of the customers of our flavor solutions segment declines.
These factors could have an adverse impact on our business, financial
condition or results of operations.
The inability to maintain mutually beneficial relationships with
large customers could adversely affect our business, financial
condition and results of operations.
We have a number of major customers, including two large customers
that, in the aggregate, constituted approximately 23% of consoli-
dated sales in 2022. The loss of either of these large customers due
to events beyond our control, or a material negative change in our
relationship with these large customers or other major customers
could have an adverse effect on our business, financial condition and
results of operations.
Issues regarding procurement of raw materials may negatively
impact us.
Our purchases of raw materials are subject to fluctuations in market
price and availability caused by inflationary pressures, weather,
growing and harvesting conditions, climate change, market conditions,
governmental actions and other factors beyond our control, including
the COVID-19 pandemic. The most significant raw materials used by us
in our business are dairy products, pepper, onion, capsicums (red pep-
pers and paprika), garlic, wheat products, vegetable oils, and vanilla.
While future price movements of raw material costs are uncertain, we
seek to mitigate the market price risk in a number of ways, including
strategic raw material purchases, purchases of raw material for future
delivery, customer price adjustments and cost savings from our CCI
program. We generally have not used derivatives to manage the vol-
atility related to this risk. To the extent that we have used derivatives
for this purpose, it has not been material to our business. Any actions
we take in response to market price fluctuations may not effectively
limit or eliminate our exposure to changes in raw material prices.
Therefore, we cannot provide assurance that future raw material price
fluctuations will not have a negative impact on our business, financial
condition or operating results.
14 McCormick & Company, Inc.
In addition, we may have very little opportunity to mitigate the risk of
availability of certain raw materials due to the effect of weather on crop
yield, fire, natural disasters, growing and harvesting conditions, govern-
ment actions, political unrest in producing countries, action or inaction
by suppliers in response to laws and regulations, changes in agricultural
programs and other factors beyond our control. Therefore, we cannot
provide assurance that future raw material availability will not have a
negative impact on our business, financial condition or operating results.
Political, socio-economic, cultural and geopolitical (including the
ongoing conflict between Russia and Ukraine) conditions, as well
as disruptions caused by terrorist activities or otherwise, could also
create additional risks for regulatory compliance. Although we have
adopted rigorous quality assurance and quality control procedures
which are designed to ensure the safety of our imported products, we
cannot provide assurance that such events will not have a negative
impact on our business, financial condition or operating results.
Disruption of our supply chain could adversely affect our
business.
Our ability to make, move, and sell products is critical to our success.
Damage or disruption to raw material supplies or our manufacturing or
distribution capabilities due to weather, climate change, natural disas-
ter, fire, terrorism, cyber-attack, health epidemics, pandemics (such as
the COVID-19 pandemic) or other contagious outbreaks, governmental
restrictions or mandates, strikes, import/export restrictions, or other
factors could impair our ability to manufacture or sell our products.
Many of our product lines are manufactured at a single location. The
failure of third parties on which we rely, including those third parties
who supply our ingredients, packaging, capital equipment and other
necessary operating materials, contract manufacturers, commercial
transport, distributors, contractors, and external business partners, to
meet their obligations to us, or significant disruptions in their ability
to do so, may negatively impact our operations. Our suppliers’ policies
and practices can damage our reputation and the quality and safety of
our products. Disputes with significant suppliers, including disputes
regarding pricing or performance, could adversely affect our ability to
supply products to our customers and could materially and adversely
affect our sales, financial condition, and results of operations. Failure
to take adequate steps to mitigate the likelihood or potential impact
of such events, or to effectively manage such events if they occur,
particularly when a product is manufactured from a single location,
could adversely affect our business and results of operations, as well
as require additional resources to restore our supply chain.
Moreover, short term or sustained increases in consumer demand at
our customers may exceed our production capacity or otherwise strain
our supply chain. Our failure to meet the demand for our products
could adversely affect our business and results of operations.
Our results of operations can be adversely affected by labor
shortages, turnover and labor cost increases.
Labor is a primary component of operating our business. A number of
factors may adversely affect the labor force available to us or increase
labor costs, a shift towards remote work, higher unemployment subsi-
dies, other government regulations and general macroeconomic factors.
We also have experienced and may continue to experience additional
pressure in our supply chain due to labor shortages, increased turnover
rates and absenteeism associated with COVID-19. A sustained labor
shortage or increased turnover rates within our employee base, caused
by COVID-19 or as a result of general macroeconomic factors, could
lead to increased costs, such as increased overtime to meet demand
and increased wage rates and employee benefits costs to attract and
retain employees, and could negatively affect our ability to efficiently
operate our manufacturing and distribution facilities and overall busi-
ness. If we are unable to hire and retain employees capable of perform-
ing at a high-level, or if mitigation measures we may take to respond
to a decrease in labor availability, such as overtime and third-party
outsourcing, have negative effects, our business could be adversely
affected. In addition, we distribute our products and receive raw mate-
rials primarily by truck. Reduced availability of trucking capacity due to
shortages of drivers has caused an increase in the cost of transporta-
tion for us and our suppliers. An overall labor shortage, lack of skilled
labor, increased turnover or labor inflation, caused by COVID-19 or as a
result of general macroeconomic factors, could have a material adverse
impact on our business, financial condition or operating results.
We may not be able to increase prices to fully offset
inflationary pressures on costs, such as raw and packaging
materials, labor and distribution costs, which may impact our
financial condition or results of operations.
As a manufacturer and distributor of flavor products, we rely on raw
materials, packaging materials, plant labor, distribution resources, and
transportation providers. During recent years, we have experienced
significantly elevated commodity and supply chain costs, including
the costs of raw materials, packaging materials, labor, energy, fuel,
transportation and other inputs necessary for the production and
distribution of our products, and we expect elevated levels of inflation
to continue in 2023. In addition, many of these materials and costs are
subject to price fluctuations from a number of factors, including, but
not limited to, market conditions, demand for raw materials, weather,
growing and harvesting conditions, climate change, energy costs, cur-
rency fluctuations, supplier capacities, governmental actions, import
and export requirements (including tariffs), armed hostilities (including
the ongoing conflict between Russia and Ukraine) and other factors
beyond our control.
Our attempts to offset these cost pressures, such as through increases in
the selling prices of some of our products, may not be successful. Higher
product prices may result in reductions in sales volume. Consumers
may be less willing to pay a price differential for our branded products
and may increasingly purchase lower-priced offerings, or may forego
some purchases altogether, during an economic downturn or times of
increased inflationary pressure. To the extent that price increases or
packaging size decreases are not sufficient to offset these increased
costs adequately or in a timely manner, and/or if they result in
significant decreases in sales volume, our business, financial condition
or operating results may be adversely affected. Furthermore, we may
not be able to fully offset any cost increases through our productivity or
efficiency initiatives.
Our profitability may suffer as a result of competition in our
markets.
The food industry is intensely competitive. Competition in our product
categories is based on price, product innovation, product quality, brand
recognition and loyalty, effectiveness of marketing and promotional
activity, and the ability to identify and satisfy consumer preferences.
Weak economic conditions, recessions, significant inflation and other
factors, such as pandemics, could affect consumer preferences and
demand. From time to time, we may need to reduce the prices for
some of our products to respond to competitive and customer pres-
sures, particularly during periods of economic uncertainty or significant
inflation, which may adversely affect our profitability. Such pressures
could reduce our ability to take appropriate remedial action to address
commodity and other cost increases.
The conflict between Russia and Ukraine and the related
implications may negatively impact our operations.
In February 2022, Russia invaded Ukraine. As a result, the U.S. and cer-
tain other countries have imposed sanctions on Russia and could impose
further sanctions that could damage or disrupt international commerce
and the global economy. It is not possible to predict the broader or
longer-term consequences of this conflict or the sanctions imposed to
date, which could include further sanctions, embargoes, regional insta-
bility, geopolitical shifts and adverse effects on macroeconomic
conditions, security conditions, energy and fuel prices, currency
exchange rates and financial markets. Such geopolitical instability and
uncertainty could have a negative impact on our ability to sell to, ship
products to, collect payments from, and support customers in certain
regions based on trade restrictions, embargoes and export control law
restrictions, and logistics restrictions including closures of air space, and
could increase the costs, risks and adverse impacts from supply chain
and logistics challenges.
The potential effects of the ongoing conflict between Russia and
Ukraine also could impact many of the other risk factors described
herein. These potential effects could include, but are not limited to,
variations in the level of our profitability, changes in laws and regula-
tions affecting our business, fluctuations in foreign currency markets,
the availability of future borrowings, the cost of borrowings, credit
risks of our customers and counterparties, and potential impairment
of the carrying value of goodwill or other indefinite-lived intangible
assets. Given the evolving nature of this conflict, the related sanctions,
potential governmental actions and economic impact, such potential
impacts remain uncertain. While we expect the impacts of conflict
between Russia and Ukraine to continue to have an effect on our
business, financial condition and results of operations, we are unable
to predict the extent or nature of these impacts at this time.
Our operations may be impaired as a result of disasters,
business interruptions or similar events.
We could have an interruption in our business, loss of inventory or
data, or be rendered unable to accept and fulfill customer orders as
a result of a natural disaster, catastrophic event, epidemic, computer
system failure, or cyber-attack. Natural disasters could include an
earthquake, fire, flood, tornado or severe storm. A catastrophic event
could include a terrorist attack. A health epidemic, pandemic, or other
contagious outbreak could affect our operations, major facilities or
employees’ and consumers’ health. In addition, some of our inventory
and production facilities are located in areas that are susceptible
to harsh weather; a major storm, wildfires, heavy snowfall or other
similar event could prevent us from delivering products in a timely
manner. Production of certain of our products is concentrated in a
single manufacturing site.
2022 Annual Report 15
We cannot provide assurance that our disaster recovery plan will
address all of the issues we may encounter in the event of a disaster
or other unanticipated issue, and our business interruption insurance
may not adequately compensate us for losses that may occur from any
of the foregoing. In the event that a natural disaster, terrorist attack
or other catastrophic event were to destroy any part of our facilities
or interrupt our operations for any extended period of time, or if harsh
weather or health conditions prevent us from delivering products in a
timely manner, our business, financial condition or operating results
could be adversely affected.
We may not be able to successfully consummate and manage
ongoing acquisition, joint venture and divestiture activities
which could have an impact on our results.
From time to time, we may acquire other businesses and, based on an
evaluation of our business portfolio, divest existing businesses. These
acquisitions, joint ventures and divestitures may present financial,
managerial and operational challenges, including diversion of
management attention from existing businesses, difficulty with
integrating or separating personnel and financial and other systems,
increased expenses and raw material costs, assumption of unknown
liabilities and indemnities, and potential disputes with the buyers or
sellers. In addition, we may be required to incur asset impairment
charges (including charges related to goodwill and other intangible
assets) in connection with acquired businesses, which may reduce
our profitability. If we are unable to consummate such transactions,
or successfully integrate and grow acquisitions and achieve contem-
plated revenue synergies and cost savings, our financial results could
be adversely affected. Additionally, joint ventures inherently involve a
lesser degree of control over business operations, thereby potentially
increasing the financial, legal, operational, and/or compliance risks.
An impairment of the carrying value of goodwill or other
indefinite-lived intangible assets could adversely affect our
results.
As of November 30, 2022, we had approximately $5.2 billion of
goodwill and approximately $3.4 billion of other indefinite-lived intangible
assets. Goodwill and indefinite-lived intangible assets are initially
recorded at fair value and not amortized but are tested for impairment at
least annually or more frequently if impairment indicators arise. We test
goodwill at the reporting unit level by comparing the carrying value of the
net assets of the reporting unit, including goodwill, to the unit’s fair value.
Similarly, we test indefinite-lived intangible assets by comparing the fair
value of those assets to their carrying values. If the carrying values of the
reporting unit or indefinite-lived intangible assets exceed their fair value,
the goodwill or indefinite-lived intangible assets are considered impaired
and reduced to their estimated fair value. Factors that could result in an
impairment include a change in revenue growth rates, operating margins,
weighted average cost of capital, future economic and market conditions,
higher income tax rates, or assumed royalty rates. The impairment of
our goodwill or indefinite-lived intangible assets would have a negative
impact on our consolidated results of operations.
Because indefinite-lived intangible assets are recorded at fair value
at the date of acquisition of the related business, indefinite-lived
intangible assets associated with recent business acquisitions, partic-
ularly those acquired in recent low interest rate environments, such as
Cholula and FONA, are more susceptible to impairment in periods of
rising interest rates than indefinite-lived intangible assets related to
businesses acquired in periods of higher interest rates.
16 McCormick & Company, Inc.
Streamlining actions to reduce fixed costs, simplify or improve
processes, and improve our competitiveness may have a
negative effect on employee relations.
We regularly evaluate whether to implement changes to our organiza-
tion structure to reduce fixed costs, simplify or improve processes, and
improve our competitiveness, and we expect to continue to evaluate
such actions in the future. From time to time, those changes are of such
significance that we may transfer production from one manufacturing
facility to another; transfer certain selling and administrative functions
from one location to another; eliminate certain manufacturing, selling
and administrative positions; and exit certain businesses or lines of
business. These actions may result in a deterioration of employee
relations at the impacted locations or elsewhere in our business.
If we are unable to fully realize the benefits from our CCI
program or streamlining actions to reduce fixed costs, simplify
or improve our competitiveness, our financial results could be
negatively affected.
Our future success depends in part on our ability to be an efficient pro-
ducer in a highly competitive industry, including our plan to eliminate
approximately $125 million of costs during 2023 and 2024 as part of
our Global Operating Effectiveness Program, including $100 million
of supply costs and $25 million of costs across the remainder of the
organization. Any failure by us to achieve our planned cost savings and
efficiencies under our CCI program, an ongoing initiative to improve
productivity and reduce costs throughout the organization, or other
similar programs, could have an adverse effect on our business, results
of operations and financial position.
Fluctuations in foreign currency markets may negatively
impact us.
We are exposed to fluctuations in foreign currency in the following
main areas: cash flows related to raw material purchases; the
translation of foreign currency earnings to U.S. dollars; the effects of
foreign currency on loans between subsidiaries and unconsolidated
affiliates and on cash flows related to repatriation of earnings of
unconsolidated affiliates. We have both translation and transaction
exposures to the fluctuation of exchange rates. Translation exposures
relate to exchange rate impacts of measuring income statements of
foreign subsidiaries that do not use the U.S. dollar as their functional
currency. Transaction exposures relate to the impact from input costs
that are denominated in a currency other than the local reporting
currency and the revaluation of transaction-related working capital
balances or loans between subsidiaries and unconsolidated affiliates
denominated in currencies other than the functional currency.
Historically, weakening of certain foreign currencies versus the U.S.
dollar have resulted in significant foreign exchange impacts leading
to lower net sales, net earnings and cash flows. Primary exposures
include the U.S. dollar versus the Euro, British pound sterling, Chinese
renminbi, Canadian dollar, Australian dollar, Polish zloty, Singapore
dollar, Swiss franc, and Mexican peso, as well as the Euro versus
the British pound sterling and Australian dollar, and Polish zloty, and
finally the Canadian dollar versus British pound sterling. We routinely
enter into foreign currency exchange contracts to facilitate managing
certain of these foreign currency risks. However, these contracts may
not effectively limit or eliminate our exposure to a decline in operating
results due to foreign currency exchange changes. Therefore, we
cannot provide assurance that future exchange rate fluctuations will
not have a negative impact on our business, financial position or
operating results.
We face risks associated with certain pension assets and
obligations.
We hold investments in equity and debt securities in our qualified
defined benefit pension plans and in a rabbi trust for our U.S. non-
qualified pension plan. Deterioration in the value of plan assets
resulting from a general financial downturn or otherwise, or an
increase in the actuarial valuation of the plans’ liability due to a low
interest rate environment, could cause (or increase) an underfunded
status of our defined benefit pension plans, thereby increasing our
obligation to make contributions to the plans. An obligation to make
contributions to pension plans could reduce the cash available for
working capital and other corporate uses, and may have an adverse
impact on our operations, financial condition and liquidity.
Climate change, or legal, regulatory or market measures to
address climate change, may negatively affect our business,
financial condition and results of operations.
Unseasonable or unusual weather or long-term climate changes may
negatively impact the price or availability of spices, herbs and other
raw materials. Scientific consensus shows that greenhouse gases
in the atmosphere have an adverse impact on global temperatures,
weather patterns and the frequency and severity of extreme weather
and natural disasters. In the event that such climate change has a
negative effect on agricultural productivity or practices, we may be
subject to decreased availability or less favorable pricing for certain
commodities that are necessary for our products. As a result of climate
change, we may also be subjected to decreased availability of water,
deteriorated quality of water or less favorable pricing for water, which
could adversely impact our manufacturing and distribution operations.
In addition, such climate change may result in modifications to the eat-
ing preferences of the ultimate consumers of certain of our products,
which may also unfavorably impact our sales and profitability.
There is an increased focus by foreign, federal, state and local regula-
tory and legislative bodies regarding environmental policies relating to
climate change, regulating greenhouse gas emissions, energy policies,
and sustainability. Increased compliance costs and expenses due to the
impacts of climate change and additional legal or regulatory require-
ments regarding climate change or designed to reduce or mitigate the
effects of carbon dioxide and other greenhouse gas emissions on the
environment may cause disruptions in, or an increase in the costs
associated with, the running of our manufacturing facilities and our busi-
ness, as well as increase distribution and supply chain costs. Moreover,
compliance with any such legal or regulatory requirements may require
us to make significant changes in our business operations and strategy,
which will likely require us to devote substantial time and attention to
these matters and cause us to incur additional costs. Even if we make
changes to align ourselves with such legal or regulatory requirements,
we may still be subject to significant penalties or potential litigation if
such laws and regulations are interpreted and applied in a manner
inconsistent with our practices. The effects of climate change and legal
or regulatory initiatives to address climate change could have a
long-term adverse impact on our business and results of operations.
Additionally, we might fail to effectively address increased attention
from the media, stockholders, activists and other stakeholders on
climate change and related environmental sustainability matters.
Such failure, or the perception that we have failed to act responsibly
regarding climate change, whether or not valid, could result in adverse
publicity and negatively affect our business and reputation.
Moreover, from time to time we establish and publicly announce goals
and commitments, including to reduce our impact on the environment.
For example, we established science-based target 2025 – 2030 goals
for Scope 1, 2 and 3 greenhouse gas emissions. Our ability to achieve
any stated goal, target or objective is subject to numerous factors and
conditions, many of which are outside of our control. Examples of such
factors include evolving regulatory requirements affecting sustainabil-
ity standards or disclosures or imposing different requirements, the
pace of changes in technology, the availability of requisite financing
and the availability of suppliers that can meet our sustainability and
other standards. If we fail to achieve, or are perceived to have failed
or been delayed in achieving, or improperly report our progress toward
achieving these goals and commitments, it could negatively affect con-
sumer preference for our products or investor confidence in our stock,
as well as expose us to enforcement actions and litigation
ESG issues, including those related to climate change and
sustainability, may have an adverse effect on our business,
financial condition and results of operations and damage our
reputation.
Companies across all industries are facing increasing scrutiny relating
to their ESG policies. If we are unable to meet our ESG goals or evolv-
ing investor, industry or stakeholder expectations and standards, or if
we are perceived to have not responded appropriately to the growing
concern for ESG issues, customers and consumers may choose to stop
purchasing our products or purchase products from another company
or a competitor, and our reputation, business or financial condition may
be adversely affected. Increased focus and activism on ESG topics may
hinder our access to capital, as investors may reconsider their capital
investment as a result of their assessment of our ESG practices. In
particular, these constituencies are increasingly focusing on environ-
mental issues, including climate change, water use, deforestation,
plastic waste, and other sustainability concerns. Changing consumer
preferences may result in increased demands regarding plastics and
packaging materials, including single-use and non-recyclable plastic
packaging, and other components of our products and their environ-
mental impact on sustainability; a growing demand for natural or
organic products and ingredients; or increased consumer concerns or
perceptions (whether accurate or inaccurate) regarding the effects of
ingredients or substances present in certain consumer products. These
demands could impact the profitability of some of our products or
cause us to incur additional costs, to make changes to our operations
to make additional commitments, set targets or establish additional
goals and take actions to meet them, which could expose us to market,
operational and execution costs or risk.
In addition to environmental issues these constituencies are also focused
on social and other governance issues, including matters such as, but not
limited to, human capital and social issues. We also have established
diversity, equity and inclusion goals as part of our ESG initiative. Our
initiatives also extend from individuals to entire communities, including
those we serve and, just as importantly, those from which we source.
Concern over climate change, including plastics and packaging mate-
rials, in particular, may result in new or increased legal and regulatory
requirements. Increased regulatory requirements related to environ-
mental causes, and related ESG disclosure rules, including the SEC’s
recent disclosure proposal on climate change, may result in increased
compliance costs or increased costs of energy, raw materials or
compliance with emissions standards, which may cause disruptions in
the manufacture of our products or an increase in operating costs. Any
2022 Annual Report 17
failure to achieve our ESG goals or a perception (whether or not valid)
of our failure to act responsibly with respect to the environmental,
human capital, or social issues, or to effectively respond to new, or
changes in, legal or regulatory requirements concerning environmental
or other ESG matters, or increased operating or manufacturing costs
due to increased regulation or environmental causes could adversely
affect our business and reputation and increase risk of litigation.
Risks Relating to Credit and Capital Markets, Our Credit
Rating, Borrowings and Dividends
Increases in interest rates or changes in our credit ratings may
negatively impact us.
On November 30, 2022, we had total outstanding variable rate debt of
approximately $1,295 million, including $1,237 million of short-term
borrowings, at a weighted-average interest rate of approximately
4.2%. The interest rates under our revolving credit facilities can vary
based on our credit ratings. We also regularly access the commercial
paper markets for ongoing funding requirements. A downgrade in our
credit ratings would increase our borrowing costs and could affect our
ability to issue commercial paper. Additionally, disruptions in the com-
mercial paper market or other effects of volatile economic conditions
on the credit markets could also reduce the amount of commercial
paper that we could issue and raise our borrowing costs. Our policy is
to manage our interest rate risk by entering into both fixed and variable
rate debt arrangements. We also use interest rate swaps to minimize
worldwide financing cost and to achieve a desired mix of fixed and
variable rate debt. On November 30, 2022, we had total outstanding
fixed to variable interest rate swaps with a notional value of $600 mil-
lion. We utilize derivative financial instruments to enhance our ability
to manage risk, including interest rate exposures that 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 instru-
ments. Our use of derivative financial instruments is monitored through
regular communication with senior management and the utilization
of written guidelines. However, our use of these instruments may not
effectively limit or eliminate our exposure to changes in interest rates.
Therefore, we cannot provide assurance that future credit rating or
interest rate changes will not have a material negative impact on our
business, financial position or operating results.
Our credit ratings impact the cost and availability of future
borrowings and, accordingly, our cost of capital.
Our credit ratings reflect each rating organization’s opinion of our
financial strength, operating performance and ability to meet our debt
obligations. Any reduction in our credit ratings may limit our ability
to borrow as well as the interest rates that are associated with any
such borrowing. If our credit ratings are downgraded or put on watch
for a potential downgrade, we may not be able to sell additional debt
securities or borrow money in the amounts, at the times or interest
rates, or upon the more favorable terms and conditions that might be
available if our current credit ratings were maintained.
We may incur additional indebtedness to finance our
acquisitions that may limit our ability to, among other matters,
issue additional indebtedness, meet our debt service
requirements, react to rising interest rates, comply with certain
covenants and compete with less highly leveraged competitors.
We have a significant amount of indebtedness outstanding. As of
November 30, 2022, our indebtedness of McCormick and its subsidiar-
ies is approximately $5.1 billion. This substantial level of indebtedness
18 McCormick & Company, Inc.
could have important consequences to our business, including, but not
limited to:
• increasing our debt service obligations, making it more difficult for
us to satisfy our obligations;
• limiting our ability to borrow additional funds;
• increasing our exposure to negative fluctuations in interest rates;
• subjecting us to financial and other restrictive covenants, the
non-compliance with which could result in an event of default;
• increasing our vulnerability to, and reducing our flexibility to
respond to, general adverse economic and industry conditions;
• limiting our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate; and
• placing us at a competitive disadvantage as compared to our
competitors, to the extent that they are not as highly leveraged.
The deterioration of credit and capital markets may adversely
affect our access to sources of funding.
We rely on our revolving credit facilities, or borrowings backed by
these facilities, to fund a portion of our working capital needs and
other general corporate purposes, including funding of acquisitions. If
any of the banks in the syndicates backing these facilities were unable
to perform on its commitments, our liquidity could be impacted, which
could adversely affect funding of seasonal working capital require-
ments. We engage in regular communication with all of the banks
participating in our revolving credit facilities. During these commu-
nications, none of the banks have indicated that they may be unable
to perform on their commitments. In addition, we periodically review
our banking and financing relationships, considering the stability of
the institutions, pricing we receive on services and other aspects of
the relationships. Based on these communications and our monitoring
activities, we believe the likelihood of one of our banks not performing
on its commitment is remote.
In addition, global capital markets have experienced volatility in the
past, including related to recession, financial instability or inflation,
that has tightened access to capital markets and other sources of
funding, and such volatility and tightened access could reoccur in the
future. In the event that we need to access the capital markets or
other sources of financing, there can be no assurance that we will be
able to obtain financing on acceptable terms or within an acceptable
time period. Our inability to obtain financing on acceptable terms or
within an acceptable time period could have an adverse impact on our
operations, financial condition and liquidity.
Uncertain global economic conditions expose us to credit risks
from customers and counterparties.
Consolidations in some of the industries in which our customers
operate have created larger customers, some of which are highly
leveraged. In addition, competition has increased with the growth
in alternative channels through our customer base. These factors
have caused some customers to be less profitable and increased our
exposure to credit risk. Current credit markets are volatile, and some
of our customers and counterparties are highly leveraged. A significant
adverse change in the financial and/or credit position of a customer or
counterparty could require us to assume greater credit risk relating to
that customer or counterparty and could limit our ability to collect
receivables. This could have an adverse impact on our financial condi-
tion and liquidity.
The uncertainty regarding the planned phase-out of LIBOR
may negatively impact our operating results.
The phase out of LIBOR reference rates began on January 1, 2022 and
will occur at different dates. After December 31, 2021, all sterling,
euro, Swiss franc and Japanese yen settings, and the 1-week and
2-month U.S. dollar settings were phased out. We have revised certain
of our agreements to include the new reference rates. However,
LIBOR is the interest rate benchmark used as a reference rate on our
revolving credit facility expiring in July 2026, interest rate swaps ex-
piring in November 2025 and August 2027, and cross currency interest
rate swaps expiring in August 2027. Certain of these agreements
include fallback language, or the contractual provisions that lay out
the process through which a replacement rate can be identified if the
previously identified benchmark is not available, that will facilitate
the transition to a new reference rate. We anticipate that all of our
affected contractual reference rates will be revised by the second
quarter of 2023, in advance of the June 30, 2023 phase out of all of
our remaining U.S. dollar LIBOR settings.
There continue to be many uncertainties regarding a transition from
LIBOR, including but not limited to the need to amend all contracts
with LIBOR as the referenced rate and how this will impact our cost
of variable rate debt and certain derivative financial instruments. The
consequences of these developments with respect to LIBOR cannot
be entirely predicted but could result in an increase in the cost of our
variable rate debt or derivative financial instruments which may be
detrimental to our financial position or operating results.
The declaration, payment and amount of dividends is made at
the discretion of our board of directors and depends on a
number of factors.
The declaration, payment and amount of any dividends is made pur-
suant to our dividend policy and is subject to final determination each
quarter by our board of directors in its discretion based on a number of
factors that it deems relevant, including our financial position, results
of operations, available cash resources, cash requirements and alter-
native uses of cash that our board of directors may conclude would
be in the best interest of the company and our shareholders. Our
dividend payments are subject to solvency conditions established by
the Maryland General Corporation Law. Accordingly, there can be no
assurance that any future dividends will be equal or similar in amount
to any dividends previously paid or that our board of directors will not
decide to reduce, suspend or discontinue the payment of dividends at
any time in the future.
Risks Related to Intellectual Property, Information
Technology, and Cyber-Security
Our intellectual property rights, and those of our customers,
could be infringed, challenged or impaired, and reduce the value
of our products and brands or our business with customers.
We possess intellectual property rights that are important to our
business, and we are provided access by certain customers to partic-
ular intellectual property rights belonging to such customers. These
intellectual property rights include ingredient formulas, trademarks,
copyrights, patents, business processes and other trade secrets which
are important to our business and relate to some of our products,
our packaging, the processes for their production, and the design
and operation of equipment used in our businesses. We protect our
intellectual property rights, and those of certain customers, globally
through a variety of means, including trademarks, copyrights, patents
and trade secrets, third-party assignments and nondisclosure agree-
ments, and monitoring of third-party misuses of intellectual property.
If we fail to obtain or adequately protect our intellectual property (and
the intellectual property of customers to which we have been given
access), the value of our products and brands could be reduced and
there could be an adverse impact on our business, financial condition
and results of operations.
Our operations and reputation may be impaired if our information
technology systems fail to perform adequately or if we are the
subject of a data breach or cyber-attack.
Our information technology systems are critically important to oper-
ating our business. We rely on our information technology systems,
some of which are or may be managed or hosted by or outsourced to
third party service providers, to manage our business data, communi-
cations, supply chain, order entry and fulfillment, and other business
processes. If we do not allocate and effectively manage the resources
necessary to build, sustain, and protect appropriate information tech-
nology systems and infrastructure, or we do not effectively implement
system upgrades or oversee third party service providers, our business
or financial results could be negatively impacted. The failure of our
information technology systems to perform as we anticipate could
disrupt our business and could result in transaction or reporting errors,
processing inefficiencies and the loss of sales and customers, causing
our business and results of operations to suffer.
Furthermore, our information technology systems, and the systems of
our customers, vendors, suppliers, and other third-party service provid-
ers, are subject to cyber-attacks or other security incidents including
computer viruses or other malicious codes, phishing attacks, unautho-
rized access attempts, cyber extortion, business email compromise,
social engineering, denial of service attacks, hacking, ransomware,
or other cyberattacks attempting to exploit vulnerabilities. Continued
geographical turmoil, including the ongoing conflict between Russia
and Ukraine, has heightened the risk of cyberattack. Such incidents
could result in unauthorized access to information including customer,
consumer or other company confidential data as well as disruptions
to operations. We, and the third-parties we do business with, have
experienced in the past, and expect to continue to experience, cyberse-
curity threats and attacks, although to date none has been material. To
address the risks to our information technology systems and data, we
maintain an information security program that includes updating tech-
nology, developing security policies and procedures, implementing and
assessing the effectiveness of controls, monitoring and routine testing
of our information systems, conducting risk assessments of third-party
service providers and designing business processes to mitigate the
risk of such breaches. We believe that these preventative actions
provide adequate measures of protection against security breaches
and generally reduce our cybersecurity risks. However, cyber-threats
are constantly evolving, are becoming more sophisticated and are
being made by groups of individuals with a wide range of expertise
and motives, which increases the difficulty of detecting and success-
fully defending against them. There can be no assurance that these
measures will prevent or limit the impact of a future incident. More-
over, the development and maintenance of these measures requires
continuous monitoring as technologies change and efforts to overcome
security measures evolve. Additionally, we rely on services provided
by third-party vendors for certain information technology processes
and functions, which makes our operations vulnerable to a failure by
any one of these vendors to perform adequately or maintain effective
2022 Annual Report 19
internal controls. If we are unable to prevent or adequately respond
to and resolve an incident, it may have a material, negative impact on
our operations or business reputation, and we may experience other
adverse consequences such as loss of assets, remediation costs, litiga-
tion, regulatory investigations, and the failure by us to retain or attract
customers following such an event.
If we are not able to successfully implement our business
transformation initiative or utilize information technology
systems and networks effectively, our ability to conduct our
business may be negatively impacted.
We continue to implement our multi-year business transformation
initiative to execute significant change to our global processes, capa-
bilities and operating model, including in our Global Enablement (GE)
organization, in order to provide a scalable platform for future growth,
while reducing costs. As technology provides the backbone for
greater process alignment, information sharing and scalability, we
are also making investments in our information systems, including the
multi-year program to replace our enterprise resource planning (ERP)
system currently underway, which includes the transformation of our
financial processing systems to enterprise-wide systems solutions.
These systems implementations are part of our ongoing business
transformation initiative, and we currently plan to implement these
systems throughout all parts of our businesses. If we do not allocate
and effectively manage the resources necessary to build and sustain
the proper information technology infrastructure, or if we fail to achieve
the expected benefits from this initiative, it may impact our ability to
process transactions accurately and efficiently and remain in step with
the changing needs of our business, which could result in the loss of
customers and revenue. In addition, failure to either deliver the appli-
cations on time (due to operational limitations caused by the COVID-19
pandemic or otherwise), or anticipate the necessary readiness and
training needs, could lead to business disruption and loss of customers
and revenue. In connection with these implementations and resulting
business process changes, we continue to enhance the design and
documentation of business processes and controls, including our internal
control over financial reporting processes, to maintain effective controls
over our financial reporting.
We utilize cloud-based services and systems and networks managed
by third-party vendors to process, transmit and store information and
to conduct certain of our business activities and transactions with
employees, customers, vendors and other third parties. Our utiliza-
tion of these cloud-based services and systems will increase as we
implement our business transformation initiatives. If any of these
third-party service providers or vendors do not perform effectively, or if
we fail to adequately monitor their performance (including compliance
with service-level agreements or regulatory or legal requirements),
we may not be able to achieve expected cost savings, we may have to
incur additional costs to correct errors made by such service providers,
our reputation could be harmed or we could be subject to litigation,
claims, legal or regulatory proceedings, inquiries or investigations.
Depending on the function involved, such errors may also lead to
business disruption, processing inefficiencies, the loss of or damage
to intellectual property or sensitive data through security breaches or
otherwise, incorrect or adverse effects on financial reporting, litigation
or remediation costs, or damage to our reputation, which could have a
negative impact on employee morale. In addition, the management of
multiple third-party service providers increases operational complexity
and decreases our control.
20 McCormick & Company, Inc.
Risks Related to Our Global Business, Litigation, Laws and
Regulations
Laws and regulations could adversely affect our business.
Food products are extensively regulated in most of the countries in
which we sell our products. We are subject to numerous laws and
regulations relating to the growing, sourcing, manufacturing, storage,
labeling, marketing, advertising and distribution of food products, as well
as laws and regulations relating to financial reporting requirements, the
environment, consumer protection, competition, anti-corruption, privacy,
relations with distributors and retailers, foreign supplier verification,
customs and trade laws, including the import and export of products and
product ingredients, employment, and health and safety. Enforcement
of existing laws and regulations, changes in legal requirements, and/or
evolving interpretations of existing regulatory requirements may result
in increased compliance costs and create other obligations, financial or
otherwise, that could adversely affect our business, financial condition
or operating results. Increased regulatory scrutiny of, and increased
litigation involving, product claims and concerns regarding the attributes
of food products and ingredients may increase compliance costs and
create other obligations that could adversely affect our business,
financial condition or operating results. Governments may also impose
requirements and restrictions that impact our business, such as labeling
disclosures pertaining to ingredients. For example, “Proposition 65, the
Safe Drinking Water and Toxic Enforcement Act of 1986,” in California
exposes all food companies to the possibility of having to provide warn-
ings on their products in that state. If we were required to add warning
labels to any of our products or place warnings in locations where our
products are sold in order to comply with Proposition 65, the sales of
those products and other products of our company could suffer, not only
in those locations but elsewhere.
In addition, there are various compliance obligations for companies that
process personal data of certain individuals, including such obligations
required by the European Union’s General Data Protection Regulation
(GDPR), which affects all member states of the European Economic
Area, and the California Consumer Privacy Act (CCPA). These types of
data privacy laws create a range of compliance obligations for com-
panies that process personal data of certain individuals and increases
financial penalties for non-compliance. Our efforts to comply with these
privacy and data protection laws may not be successful, or may be per-
ceived to be unsuccessful, which could adversely affect our business in
the United States, the European Union and in other countries.
In the United States, for example, the CCPA imposes requirements on
companies that do business in California and collect personal infor-
mation from certain individuals, including notice, consent and service
provider requirements. The CCPA also provides for civil penalties for
companies that fail to comply with these requirements, as well as a
private right of action for data breaches. Further, the California Privacy
Rights Act (“CPRA”) went into full effect on January 1, 2023 (with
a ‘look-back’ to January 1, 2022). The CPRA builds on the CCPA and
among other things, requires the establishment of a dedicated agency
to regulate privacy issues. In 2021, Virginia, Colorado, Connecticut
and Utah all have adopted laws which will take effect introducing
new privacy obligations, which may require us to develop additional
compliance mechanisms and processes. Many other states are con-
sidering similar legislation. A broad range of legislative measures also
have been introduced at the federal level. There also is a wide range
of enforcement agencies at both the state and federal levels that can
review companies for privacy and data security concerns based on
general consumer protection laws. The Federal Trade Commission and
state Attorneys General all are aggressive in reviewing privacy and
data security protections for consumers. Accordingly, failure to comply
with federal and state laws (both those currently in effect and future
legislation) regarding privacy and security of personal information
could expose us to fines and penalties under such laws. There also
is the threat of consumer class actions related to these laws and the
overall protection of personal data. Even if we are not determined to
have violated these laws, government investigations into these issues
typically require the expenditure of significant resources and generate
negative publicity, which could harm our reputation and our business.
Similarly, outside of the United States, there are various laws and
regulations governing the collection, use, disclosure, transfer, or other
processing of personal data. For instance, the GDPR, which applies to
the processing of personal data of individuals in the European Union,
is wide-ranging in scope and imposes numerous requirements on com-
panies that process personal data, including strict rules on the transfer
of personal data to countries outside the European Union, including
the United States. Beyond GDPR, there are privacy and data security
laws in a growing number of countries around the world (including
in the United Kingdom as a result of Brexit). While many loosely
follow GDPR as a model, other laws contain different or conflicting
provisions. These laws may impact our ability to conduct our business
activities and the costs associated with these activities.
Litigation, legal or administrative proceedings could have an
adverse impact on our business and financial condition or
damage our reputation.
We are party to a variety of legal claims and proceedings in the ordi-
nary course of business. Since litigation is inherently uncertain, there
is no guarantee that we will be successful in defending ourselves
against such claims or proceedings, or that management’s assessment
of the materiality or immateriality of these matters, including any
reserves taken in connection with such matters, will be consistent
with the ultimate outcome of such claims or proceedings. In the event
that management’s assessment of the materiality or immateriality of
current claims and proceedings proves inaccurate, or litigation that is
material arises in the future, there may be a material adverse effect on
our financial condition. Any adverse publicity resulting from allegations
made in litigation claims or legal or administrative proceedings (even
if untrue) may also adversely affect our reputation. These factors and
others could have an adverse impact on our business and financial
condition or damage our reputation.
Our international and cross-border operations are subject to
additional risks.
We operate our business and market our products internationally. In
fiscal year 2022, approximately 38% of our sales were generated in
countries other than the U.S. Our international operations are subject
to additional risks, including fluctuations in currency values, foreign
currency exchange controls, discriminatory fiscal policies, compli-
ance with U.S. and foreign laws, enforcement of remedies in foreign
jurisdictions and other economic or political uncertainties. Several
countries within the European Union continue to experience sovereign
debt and credit issues, which causes more volatility in the economic
environment throughout the European Union and the U.K. Additionally,
sales in countries other than the U.S., together with finished goods
and raw materials imported into the U.S., are subject to risks related
to fundamental changes to tax laws as well as the imposition of
tariffs, quotas, trade barriers and other similar restrictions. All of these
risks could result in increased costs or decreased revenues, which
could adversely affect our profitability.
The global nature of our business, changes in tax legislation
and the resolution of tax uncertainties create volatility in our
effective tax rate.
As a global business, our tax rate from period to period can be
affected by many factors, including changes in tax legislation, our
global mix of earnings, the tax characteristics of our income, acquisi-
tions and dispositions, adjustments to our reserves related to uncer-
tain tax positions, changes in valuation allowances and the portion of
the income of international subsidiaries that we expect to remit to the
U.S. and that will be taxable.
In addition, significant judgment is required in determining our effec-
tive tax rate and in evaluating our tax positions. We establish accruals
for certain tax contingencies when, despite the belief that our tax
return positions are appropriately supported, the positions are uncer-
tain. The tax contingency accruals are adjusted in light of changing
facts and circumstances, such as the progress of tax audits, case
law and emerging legislation. Our effective tax rate includes the
impact of tax contingency accruals and changes to those accruals,
including related interest and penalties, as considered appropriate by
management. When particular matters arise, a number of years may
elapse before such matters are audited and finally resolved. Favorable
resolution of such matters could be recognized as a reduction to our
effective tax rate in the year of resolution. Unfavorable resolution
of any particular issue could increase the effective tax rate and may
require the use of cash in the year of resolution.
2022 Annual Report 21
ITEM 1B. UNRESOLVED STAFF COMMENTS
Italy:
None.
ITEM 2. PROPERTIES
Our principal executive offices and primary research facilities are
leased and owned, respectively, and are located in suburban
Baltimore, Maryland.
The following is a list of our principal manufacturing properties, all
of which are owned except for the facilities in Commerce, California;
Lakewood, New Jersey; Melbourne, Australia; Florence, Italy; and a
portion of the facility in Littleborough, England, which are leased. The
manufacturing facilities that we own in Guangzhou, Shanghai and
Wuhan, China are each located on land subject to long-term leases:
United States:
Hunt Valley, Maryland–consumer and flavor solutions
(3 principal plants)
Gretna, Louisiana–consumer and flavor solutions
South Bend, Indiana–consumer and flavor solutions
Atlanta, Georgia–flavor solutions
Commerce, California–consumer
Irving, Texas–flavor solutions
Lakewood, New Jersey–flavor solutions
Geneva, Illinois–flavor solutions
Springfield, Missouri–consumer and flavor solutions
Canada:
London, Ontario–consumer and flavor solutions
Mexico:
Cuautitlán de Romero Rubio–flavor solutions
United Kingdom:
Haddenham, England–consumer and flavor solutions
Littleborough, England–flavor solutions
Peterborough, England–flavor solutions
France:
Carpentras–consumer and flavor solutions
Monteux–consumer and flavor solutions
Poland:
Stefanowo–consumer
Florence–consumer and flavor solutions (2 principal plants)
China:
Guangzhou–consumer and flavor solutions
Shanghai–consumer and flavor solutions
Wuhan–consumer
Australia:
Melbourne–consumer and flavor solutions
Palmwoods–consumer
Thailand:
Chonburi–consumer and flavor solutions
In addition to distribution facilities and warehouse space available at
our manufacturing facilities, we lease regional distribution facilities as
follows (i) in the U.S.: Baltimore, Belcamp, and Aberdeen, Maryland;
Salinas, California; Byhalia, Mississippi; Irving, Texas; and Springfield,
Missouri; (ii) in Canada: Mississauga and London, Ontario; (iii) in
Heywood, U.K. and (iv) in Compans, France. We also own distribution
facilities in Belcamp, Maryland and Monteux, France. In addition,
we own, lease or contract other properties used for manufacturing
consumer and flavor solutions products and for sales, warehousing,
distribution and administrative functions.
We believe our plants are well maintained and suitable for their
intended use. We further believe that these plants generally have
adequate capacity or the ability to expand, and can accommodate
seasonal demands, changing product mixes and additional growth.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings in which we or any
of our subsidiaries are a party or to which any of our or their property
is the subject.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
22 McCormick & Company, Inc.
PART II.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
Our Common Stock and Common Stock Non-Voting are listed and traded on the New York Stock Exchange (NYSE). Our Common Stock and Common
Stock Non-Voting trade under the ticker symbols MKC.V and MKC, respectively. We have disclosed in note 17 of the accompanying financial state-
ments the information relating to the dividends declared and paid on our classes of common stock. The market price of our common stock at the close
of business on December 30, 2022 was $82.17 per share for the Common Stock and $82.89 per share for the Common Stock Non-Voting.
The approximate number of holders of our common stock based on record ownership as of December 30, 2022 was as follows:
Title of class
Common Stock, par value $0.01 per share
Common Stock Non-Voting, par value $0.01 per share
Approximate number
of record holders
2,100
9,300
The following table summarizes our purchases of Common Stock (CS) and Common Stock Non-Voting (CSNV) during the fourth quarter of 2022:
Period
September 1, 2022 to
September 30, 2022
October 1, 2022 to
October 31, 2022
November 1, 2022 to
November 30, 2022
Total
ISSUER PURCHASES OF EQUITY SECURITIES
Total number of
shares purchased
Average price
paid per share
CS-0
CSNV-0
CS-0
CSNV-0
CS-160,000
CSNV-0
CS-160,000
CSNV-0
—
—
—
—
$79.34
—
$79.34
—
Total number of
shares purchased
as part of publicly
announced plans
or programs
—
—
—
—
160,000
—
160,000
—
Approximate dollar
value of shares that
may yet be purchased
under the plans or
programs
$550 million
$550 million
$537 million
$537 million
As of November 30, 2022, approximately $537 million remained of a $600 million share repurchase authorization approved by the Board of Directors in
November 2019. The timing and amount of any shares repurchased is determined by our management based on its evaluation of market conditions and
other factors.
In certain circumstances, we issue shares of CS in exchange for shares of CSNV, or issue shares of CSNV in exchange for shares of CS, in either case
pursuant to the exemption from registration provided by Section 3(a)(9) of the Securities Act of 1933, as amended. Typically, these exchanges are made
in connection with the administration of our employee benefit plans, executive compensation programs and dividend reinvestment/direct purchase
plans. The number of shares issued in an exchange is generally equal to the number of shares received in the exchange, although the number may
differ slightly to the extent necessary to comply with the requirements of the Employee Retirement Income Security Act of 1974. During fiscal 2022, we
issued 1,168,764 shares of CSNV in exchange for shares of CS and issued 37,024 shares of CS in exchange for shares of CSNV.
ITEM 6. [RESERVED]
2022 Annual Report 23
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The following Management’s Discussion and Analysis of Financial
Condition and Results of Operations (MD&A) is intended to help
the reader understand McCormick & Company, Incorporated, our
operations and our present business environment from the perspec-
tive of management. MD&A is provided as a supplement to, and
should be read in conjunction with, our financial statements and the
accompanying notes thereto contained in Item 8 of this report. We use
certain non-GAAP information—more fully described below under the
caption Non-GAAP Financial Measures—that we believe is import-
ant for purposes of comparison to prior periods and development of
future projections and earnings growth prospects. This information is
also used by management to measure the profitability of our ongoing
operations and analyze our business performance and trends. The
dollar and share information in the charts and tables in MD&A are in
millions, except per share data.
McCormick is a global leader in flavor. We manufacture, market and
distribute spices, seasoning mixes, condiments and other flavorful
products to the entire food and beverage industry—retailers, food
manufacturers and foodservice businesses. We manage our
business in two operating segments, consumer and flavor solutions,
as described in Item 1 of this report.
Our long-term annual growth objectives in constant currency are to
increase sales 4% to 6%, increase adjusted operating income 7% to
9% and increase adjusted earnings per share 9% to 11%. Our actual
results for a year can vary from our long-term growth objectives.
Recent Events
Recent events impacting our business include global economic con-
ditions, inflationary cost environment, disruption in our supply chain,
the COVID-19 pandemic, and the ongoing conflict between Russia and
Ukraine, each of which are further discussed below. Each of these
factors impacted our fiscal 2022 operating results and we expect each
will impact our fiscal 2023 performance. We expect elevated levels of
cost inflation to persist throughout 2023, although at lower levels than
experienced in 2022. We anticipate in 2023 that these headwinds will
be partially mitigated by pricing actions in response to inflation, supply
chain productivity improvements and cost savings initiatives. The effects
of inflation have also resulted in central banks raising short-term interest
rates and, as a result, we expect that our interest expense will increase
in 2023. While we expect the impacts of COVID-19 on our business to
moderate, there still remains uncertainty around the pandemic, its effect
on labor or other macroeconomic factors, its severity and duration, the
continued availability and effectiveness of vaccines and actions taken by
third parties or by government authorities in response, including restric-
tions, laws or regulations, or other responses. Also, the ongoing conflict
between Russia and Ukraine, and the sanctions imposed in response to
this conflict, have increased global economic and political uncertainty.
While the impact of these factors remains uncertain, we continue to
evaluate the extent to which they may impact our business, financial
condition, or results of operations. These and other uncertainties could
result in changes to our current expectations. The potential effects of
these recent events also could impact us in a number of other ways
including, but not limited to, variations in the level of our sales, profit-
ability, cash flows, fluctuations in foreign currency markets, the availabil-
ity of future borrowings, the cost of borrowings, valuation of our pension
24 McCormick & Company, Inc.
assets and obligations, credit risks of our customers and counterparties,
laws and regulations affecting our business, and potential impairment of
the carrying value of goodwill or other indefinite-lived intangible assets.
Global Economic Conditions and Inflationary Cost Environment—During
fiscal 2021 and 2022, we experienced inflationary cost increases in our
commodities, packaging materials and transportation costs. We expect
that these inflationary cost increases will continue but we expect they
will be partially mitigated by our planned 2023 pricing actions, our
organization and streamlining actions, including our Global Operating
Effectiveness Program, and by our Comprehensive Continuous Improve-
ment (CCI) program-led cost savings. There has been, and we expect
there could continue to be, a difference between the timing of when the
impact of cost inflation occurs and when these pricing and other actions
impact our results of operations. Additionally, in some instances the
pricing actions we take have been impacted by price elasticity which
unfavorably impacts our sales volume and mix.
Our interest expense is impacted by the overall global economic and
interest rate environment. The inflationary environment has also resulted
in central banks raising short-term interest rates. On November 30, 2022,
we had total outstanding variable rate debt of approximately $1,295
million. Our policy is to manage our interest rate risk by entering into
both fixed and variable rate debt arrangements. We also use interest
rate swaps to achieve a desired mix of fixed and variable rate debt. As of
November 30, 2022, we had total outstanding fixed to variable interest
rate swaps of $600 million notional. We expect that our interest expense
will increase in 2023 as a result of the higher interest rate environment.
Supply Chain Disruption—Over the past several years, as we have
responded to demand volatility, COVID-19 and overall macroeconomic
conditions, we have experienced pressures in our supply chain, includ-
ing inefficiencies associated with demand volatility. These pressures
are in addition to the inflationary cost environment previously noted
and have included strained availability of raw materials and transpor-
tation capacity, expedited shipping costs, costs incurred in response to
COVID-19, incremental warehouse costs to store increased inventory
associated with maintaining additional safety stock, additional use
of co-manufacturers, and labor shortages and absenteeism, in part,
associated with COVID-19. The severity of those supply chain pressures
varied over 2022, 2021 and 2020.
In response to the general economic conditions, inflationary cost envi-
ronment, and the supply chain pressures and related inefficiencies, we
expect to eliminate approximately $125 million of costs during 2023
and 2024, including $100 million of supply chain costs and $25 million
of costs across the remainder of the organization under our Global
Operating Effectiveness program. The supply chain actions we are
taking, and will continue to evaluate, include returning our manufac-
turing facilities to a more normal shift schedule, reducing headcount,
and stabilizing turnover rates to reduce our labor costs; increasing our
manufacturing capacity and automation to respond to the evaluated
demand as well as reduce the use of co-manufacturers; and executing
and evaluating initiatives to reduce the safety stock levels of our
inventory that were put in place to protect against supply disruptions.
The elimination of other costs across the organization will include a
voluntary retirement program and other streamlining initiatives.
COVID-19—The COVID-19 pandemic has impacted our operating
results. The extent and nature of government actions, customer and
end-consumer demand and the impact on our supply chain varied
during the years ended November 30, 2022, 2021 and 2020 based upon
the then-current extent and severity of the COVID-19 pandemic within
the countries, localities and markets where we do business.
We continue to actively monitor the impact of COVID-19 on all aspects
of our business. However, uncertainty remains with the pandemic and
such impact will ultimately depend on the length and severity of the
pandemic, including new strains and variants of the virus; infection
rates in the markets where we do business; the federal, state, and
local government actions taken in response; vaccine effectiveness; and
the macroeconomic environment. The effects of COVID-19 on consumer
behavior have impacted the relative balance of at-home versus away-
from-home food consumption and demand. While we continue to see
strong levels of at-home consumption compared to pre-pandemic lev-
els, the favorable impact of increased at-home meal preparation was
less significant in the year ended November 30, 2022 as compared to
2021. This change in consumer behavior was due in part to a decrease
in the prevalence and scale of restrictive measures in place to reduce
the spread of COVID-19 in the 2022 period as compared to 2021.
Conversely, we continue to see improvements in away-from-home
demand associated with the COVID-19 recovery. During the year ended
November 30, 2022, our flavor solutions segment sales improved as
away-from-home consumption increased as compared to 2021, in part,
due to the continued easing of restrictive COVID-19 mitigation mea-
sures in many jurisdictions compared to those that were in place during
2021. However, during 2022 the impact of restrictive measures related
to COVID-19 resurgences in China negatively impacted consumer
behavior in China as compared to 2021.
For comparative purposes, the following provides a summary of our
compounded annual growth rate in net sales as reported and on a
constant currency basis for the year ended 2022 as compared to 2019:
Net sales:
Consumer segment
Flavor Solutions segment
Total net sales
The percentage change in our compounded annual growth rate in
reported net sales and the percentage change on a constant currency
basis were favorably impacted by the acquisitions of Cholula and
FONA and unfavorably impacted by the sale of Kitchen Basics. In
aggregate on a net basis, these factors contributed 0.6%, 2.1% and
1.3% to the consumer segment, flavor solutions segment and total
net sales growth rates, respectively, in the preceding table, on both a
reported and constant currency basis.
Conflict Between Russia and Ukraine—The ongoing conflict between
Russia and Ukraine, and the sanctions imposed in response to this
conflict, have increased global economic and political uncertainty. It is
not possible to predict the broader or longer-term consequences of this
conflict, or the sanctions imposed to date, which could include further
sanctions, embargoes, regional instability, geopolitical shifts and adverse
effects on macroeconomic conditions, security conditions, energy and fuel
prices, currency exchange rates and financial markets. We announced
on March 11, 2022, that we were suspending our business operations in
Russia. In May 2022, we made the decision to exit our consumer business
in Russia. Our operations in Ukraine were also temporarily paused in order
to focus on the safety of our employees, but we have resumed, where
appropriate, a reduced level of operating activities. While neither our
operations in Russia nor Ukraine constitute a material portion of our busi-
ness, a significant escalation or expansion of economic disruption or the
conflict’s current scope could disrupt our supply chain, broaden inflationary
costs, and have a material adverse effect on our results of operations.
Sales Growth—Over time, we expect to grow sales with similar con-
tributions from: 1) our base business – driven by brand marketing sup-
port, category management, and differentiated customer engagement;
2) new products; and 3) acquisitions.
Base Business—We expect to drive sales growth by optimizing our
brand marketing investment through improved speed, quality and effec-
tiveness. We measure the return on our brand marketing investment and
For the year ended November 30, 2022 as compared to the year ended
November 30, 2019
Percentage change
as reported
Impact of foreign
currency exchange
Percentage change on
constant currency basis
4.7%
7.7%
5.9%
(0.2)%
(0.4)%
(0.3)%
4.9%
8.1%
6.2%
have identified digital marketing as one of our highest return investments
in brand marketing support. Through digital marketing, we are connecting
with consumers in a personalized way to deliver recipes, provide cooking
advice and help them discover new products.
New Products—For our consumer segment, we believe that scalable
and differentiated innovation continues to be one of the best ways to
distinguish our brands from our competition, including private label.
We are introducing products for every type of cooking occasion, from
gourmet, premium items to convenient and value-priced flavors.
For flavor solutions customers, we are developing seasonings for
snacks and other food products, as well as flavors for new menu items.
We have a strong pipeline of flavor solutions products aligned with our
customers’ new product launch plans, many of which include clean-
label, organic, natural, and “better-for-you” innovation. With over 20
product innovation centers around the world, we are supporting the
growth of our brands and those of our flavor solutions customers with
products that appeal to local consumers.
Acquisitions—Acquisitions are expected to approximate one-third of
our sales growth over time. Since the beginning of 2017, we have com-
pleted four acquisitions, which are driving sales in both our consumer
and flavor solutions segments. We focus on acquisition opportunities
that meet the growing demand for flavor and health. Geographically,
our focus is on acquisitions that build scale where we currently have
presence in both developed and emerging markets. Information with
respect to our two most recent acquisitions is provided below:
• On December 30, 2020, we acquired FONA International, LLC and
certain of its affiliates (FONA), a privately owned company, for
approximately $708 million, net of cash acquired. We financed this
fiscal 2021 acquisition with cash and short-term borrowings. FONA
is a leading manufacturer of clean and natural flavors providing
solutions for a diverse customer base across various applications
2022 Annual Report 25
for the food, beverage and nutritional markets which expands the
breadth of our flavor solutions segment into attractive categories, as
well as extends our technology platform, strengthens our capabili-
ties, and accelerates the strategic migration of our portfolio to more
value-added and technically insulated products.
• On November 30, 2020, we acquired the parent company of Cholula
Hot Sauce® (Cholula) from L Catterton for approximately $801
million, net of cash acquired. Cholula is a strong addition to our
global branded flavor portfolio, which broadens our offerings in
the high growth hot sauce category to consumers and foodservice
operators and accelerates our condiment growth opportunities with
a complementary authentic Mexican flavor hot sauce in both our
consumer and flavor solutions segments.
Cost Savings and Business Transformation—We are fueling our
investment in growth with cost savings from our CCI program, an
ongoing initiative to improve productivity and reduce costs throughout
the organization, as well as savings from the organization and stream-
lining actions described in note 3 of notes to our consolidated finan-
cial statements that includes our expected elimination of
approximately $125 million of costs in 2023 and 2024 as part of our
Global Operating Effectiveness program, including $100 million of sup-
ply costs and $25 million of costs across the remainder of the organi-
zation. Our CCI program funds brand marketing support, product
innovation and other growth initiatives. We expect our CCI program,
Global Operating Effectiveness program, and organization and stream-
lining actions to deliver savings of approximately $75 million in 2023.
We are making investments to build the McCormick of the future,
including in our Global Enablement (GE) organization to transform
McCormick through globally aligned, innovative services to enable
growth. As technology provides the backbone for this greater process
alignment, information sharing and scalability, we are also making
investments in our information systems. We continue to progress our
global enterprise resource planning (ERP) replacement program which
will enable us to accelerate the transformation of our ways of working
and provide a scalable platform for growth.
We expect that, in total over the course of the ERP replacement program
for our major markets, we will invest approximately $400 million,
including expenses related to the go-live activities in our operations,
to enable the anticipated completion of the roll out of our new
information technology platform to those markets in 2025. Of that
projected $400 million, we expect capitalized software to account for
approximately 50% and program expenses to account for approxi-
mately 50%. Of the approximately $200 million of operating expenses
included in our projected total spending, approximately $122 million
has been recognized through November 30, 2022. Of the approximately
$200 million of capitalized software included in our projected total
spending, approximately $137 million has been recognized through
November 30, 2022.
Cash Flow—Net cash provided by operating activities was $651.5
million, $828.3 million and $1,041.3 million in 2022, 2021, and 2020,
respectively. In 2022, we continued to have a balanced use of cash for
debt repayment, capital expenditures and the return of cash to
shareholders through dividends and share repurchases. We are using
our cash to fund shareholder dividends, with annual increases in each
of the past 37 years, and to fund capital expenditures and
acquisitions. In 2022, the return of cash to our shareholders through
dividends and share repurchases was $435.5 million.
26 McCormick & Company, Inc.
Operating Results—On a long-term basis, we expect a combination
of acquisitions, share repurchases and debt repayments, and the
resulting impact on interest expense, to add about 2% to earnings per
share growth.
In 2022, we achieved further growth of our business with net sales
rising 0.5% over the 2021 level due to the following factors:
• Pricing actions, including those taken in response to the inflationary
cost environment, contributed 7.7% of the increase in net sales.
• Volume and product mix unfavorably impacted our net sales growth
by 4.5%, exclusive of acquisitions and divestitures. Our consumer
segment experienced unfavorable volume and product mix of 9.3%
which included the unfavorable impact of price elasticity as well as
the impact of restrictive measures related to COVID-19 resurgences
in China, the exit of our consumer operations in Russia, and the
exit of our rice product line in India which collectively contributed
approximately 1.5% to that decline. Increased volume and product
mix of 3.5% in our flavor solutions segment was principally driven by
the continued strength of sales to packaged food companies and the
continued recovery in away-from-home demand.
• Acquisitions contributed 0.2% of the increase in net sales.
Divestitures negatively impacted our net sales increase by 0.4%.
• Net sales growth was negatively impacted by fluctuations in currency
rates that decreased sales growth by 2.5%. Excluding this impact, we
grew sales by 3.0% over the prior year on a constant currency basis.
Operating income was $863.6 million in 2022 and $1,015.1 million in 2021.
We recorded $51.6 million and $51.1 million of special charges in 2022
and 2021, respectively, related to organization and streamlining actions.
Special charges in 2021 included $4.7 million in cost of goods sold related
the exit of a low margin business. In 2022 and 2021, we also recorded
$2.2 million and $35.3 million of transaction and integration expenses,
respectively, related to our acquisitions of Cholula and FONA that reduced
operating income. In 2022, compared to the year-ago period, the unfavor-
able impact of increased commodity, packaging materials and transpor-
tation costs and higher conversion costs more than offset the favorable
impact of higher sales, which included the impact of pricing actions taken
in response to the inflationary environment, $112 million of cost savings
from our CCI program, including organization and streamlining actions, and
lower incentive-based compensation. Excluding special charges and trans-
action and integration expenses related to our acquisitions of Cholula and
FONA, adjusted operating income was $917.4 million in 2022, a decrease
of 16.7%, compared to $1,101.5 million in the year-ago period. In constant
currency, adjusted operating income declined 15.5%. For further details
and a reconciliation of non-GAAP to reported amounts, see the subsequent
discussion under the heading “Non-GAAP Financial Measures”.
Diluted earnings per share was $2.52 in 2022 and $2.80 in 2021. The
year-on-year decrease in earnings per share was primarily driven by lower
operating income that was partially offset by the favorable
effect of a lower level of special charges and transaction and integration
expenses in 2022 as compared to 2021. Special charges and transaction
and integration expenses lowered earnings per share by $0.15 and $0.30
in 2022 and 2021, respectively. A gain on our sale of a business increased
earnings per share by $0.14 in 2022. A gain on our sale of an unconsoli-
dated operation increased earnings per share by $0.05 in 2021. Excluding
the effects of special charges, transaction and integration expenses, the
gain realized from the sale of a business, and the gain realized from the
sale of an unconsolidated operation, adjusted diluted earnings per share
was $2.53 in 2022 and $3.05 in 2021, or a decrease of 17.0%.
2023 Outlook
In 2023, we expect to grow net sales over the 2022 level by 5% to
7%, which includes a minimal impact of foreign currency rates. We
anticipate that the 2023 sales growth will be driven by pricing actions,
including the completion of those executed in 2022 combined with
new pricing actions we are taking in 2023. We expect volume and
product mix to be impacted by pricing elasticities, although, consistent
with 2022, at a lower level than we have experienced historically. We
anticipate that our volume and product mix will also be impacted by
the combined impact of lapping last year’s COVID-related disruptions
in China, the divestiture of our Kitchen Basics brand in the third quar-
ter of last year, the exit of our consumer business in Russia during the
second quarter of last year, and the pruning of low margin businesses.
We expect our 2023 gross profit margin to range from 25 basis points to
75 basis points higher than our gross profit margin of 35.8% in 2022. The
projected 2023 increase in gross profit margin is principally due to the net
effect of (i) the favorable impact of pricing actions in response to increased
commodity, packaging materials and transportation costs, (ii) the favorable
impact of anticipated Global Operating Effectiveness Program and CCI cost
savings, and (iii) a low to mid-teen percentage impact of inflation in 2023
compared to 2022. As we recover the cost inflation of our pricing that has
lagged in the past two years, we expect cost pressures to be more than
offset by pricing actions and our expected cost savings in 2023.
In 2023, we expect an increase in operating income of 10% to 12%,
which includes a minimal impact from foreign currency rates, over the
2022 level. The projected 2023 change in operating income includes the
effects of cost savings from our Global Operating Effectiveness Program
and lapping the COVID-19 restrictive measures in China during 2022,
which we anticipate will be partially offset by increased employee
incentive compensation and the impact of our Kitchen Basics divestiture.
Our CCI-led cost savings target in 2023 is approximately $85 million. We
expect that the absence of $2.2 million of integration expenses related
to the FONA acquisition in 2022 to favorably impact operating income
in 2023. We also expect approximately $50 million of special charges in
2023 that relate to previously announced organization and streamlining
actions; in 2022, special charges were $51.6 million. Excluding special
charges and transaction and integration expenses, we expect 2023’s
adjusted operating income to increase by 9% to 11%, which includes a
minimal impact from foreign currency rates.
We estimate that our interest expense will range from $200 to $210
million in 2023, with the increase over 2022 being driven by the higher
interest-rate environment which will impact our variable rate debt. In
2023, we will also lap the favorable effects associated with the termina-
tion of interest rate contracts. These contracts were entered into to man-
age the interest rate risk associated with our then anticipated issuance of
fixed rate debt, which favorably impacted other income, net in 2022.
Our underlying effective tax rate is projected to be higher in 2023 than in
2022. We estimate that our 2023 effective tax rate, including the net favor-
able impact of anticipated discrete tax items, will be 22% as compared to
20.7% in 2022. Excluding projected taxes associated with special charges,
we estimate that our adjusted effective tax rate will be approximately 22%
in 2023, as compared to an adjusted effective tax rate of 20.9% in 2022.
Diluted earnings per share was $2.52 in 2022. Diluted earnings per
share for 2023 is projected to range from $2.42 to $2.47. Excluding the
per share impact of (i) special charges of $51.6; (ii) integration expenses
of $2.2 million; and (iii) the gain realized upon our sale of Kitchen
Basics of $49.6 million, adjusted diluted earnings per share was $2.53
in 2022. Adjusted diluted earnings per share, excluding an estimated
per share impact from special charges of $0.14, is projected to range
from $2.56 to $2.61 in 2023. We expect adjusted diluted earnings per
share to grow by 1% to 3% over adjusted diluted earnings per share of
$2.53 in 2022, including a minimal impact from foreign currency rates.
RESULTS OF OPERATIONS—2022 COMPARED TO 2021
Net sales
Percent growth
Components of percent growth in net
sales–increase (decrease):
Volume and product mix
Pricing actions
Acquisitions
Divestiture
Foreign exchange
2022
2021
$6,350.5
$6,317.9
0.5%
12.8%
(4.5)%
7.7%
0.2%
(0.4)%
(2.5)%
5.5%
0.8%
4.1%
—%
2.4%
Sales for 2022 increased by 0.5% from 2021 and by 3.0% on a constant
currency basis (that is, excluding the impact of foreign currency exchange
as more fully described under the caption, Non-GAAP Financial Mea-
sures). Unfavorable volume and product mix decreased sales by 4.5%
with growth in our flavor solutions segment being more than offset by
a decline in our consumer segment. The impact of restrictive measures
related to COVID-19 resurgences in China, the exit of our consumer oper-
ations in Russia, and the exit of our rice product line in India, contributed
approximately 1.0% to that decline as compared to 2021. In addition,
pricing actions, taken in response to the inflationary cost environment,
added 7.7% to sales, as compared to the prior year. Acquisitions and a
divestiture added to and decreased sales by 0.2% and 0.4%, respec-
tively, both as compared to the prior year. Sales were impacted by
unfavorable foreign currency rates that decreased sales by 2.5% in 2022
as compared to the prior year and are excluded from our measure of
sales growth of 3.0% on a constant currency basis.
Gross profit
Gross profit margin
2022
2021
$2,274.5
$2,494.6
35.8%
39.5%
In 2022, gross profit decreased by $220.1 million, or 8.8%, from the
comparable period in 2021. Our gross profit margin for 2022 was 35.8%, a
decrease of 370 basis points from 39.5% in 2021. The decline was driven
by the margin dilutive impact of pricing actions taken in response to the
inflationary cost environment of approximately 240 basis points, increased
commodity, packaging materials and transportation costs, higher con-
version costs and a less favorable product mix both within and between
our segments, each as compared to 2021. These unfavorable impacts
were partially offset by cost savings led by our CCI program. In addition,
our gross profit for 2021 was burdened by (i) $6.3 million of transaction
expense, representing the amortization of the fair value adjustment to the
acquired inventories of Cholula and FONA upon our sale of those acquired
inventories in the first quarter of fiscal 2021 and (ii) a non-cash special
charge of $4.7 million associated with the exit of a low margin business
in our Asia/Pacific region. Excluding those transaction and integration
expenses and special charges, adjusted gross profit margin declined 390
basis points to 35.8% in 2022 from 39.7% in 2021.
Selling, general & administrative expense
Percent of net sales
$1,357.1
$ 1,404.1
21.4%
22.3%
2022
2021
2022 Annual Report 27
Selling, general and administrative (SG&A) expense decreased by
$47.0 million in 2022 as compared to 2021. That decrease in SG&A
expense was primarily a result of lower performance-based employee
incentive expenses and variable selling costs, both as compared to the
prior year. This decrease was partially offset by (i) higher distribution
costs; (ii) unfavorable investment results associated with non-qualified
retirement plan assets; and (iii) higher investment associated with
the implementation of our global enterprise resource planning (ERP)
platform. SG&A as a percent of net sales for 2022 decreased by 90
basis points from the prior year level, due primarily to the net impact
of the previously mentioned factors.
Special charges included in cost of
goods sold
Other special charges
Total special charges
2022
2021
$ —
51.6
$ 51.6
$ 4.7
46.4
$ 51.1
We regularly evaluate whether to implement changes to our organiza-
tion structure to reduce fixed costs, simplify or improve processes, and
improve our competitiveness, and we expect to continue to evaluate
such actions in the future. From time to time, those changes are of
such significance in terms of both up-front costs and organizational/
structural impact that we obtain advance approval from our Manage-
ment Committee and classify expenses related to those changes as
special charges in our financial statements.
During 2022, we recorded $51.6 million of special charges, consisting
principally of (i) $23.3 million associated with the exit of our consumer
business in Russia, (ii) $21.5 million associated with the transition of
a manufacturing facility in EMEA, and (iii) streamlining actions of $8.0
million in the Americas region, $7.1 million in the EMEA region, and (iv)
$5.6 million associated with a U.S. voluntary retirement program. As more
fully described in note 3 of our notes of consolidated financial statements,
these charges were partially offset by a $13.6 million gain on the sale of
our Kohinoor brand that was associated with the rice product line in India
that we exited in the fourth quarter of fiscal 2021, as well as a reversal of
$2.2 million of estimated costs associated with that rice product line exit
upon settlement of a supply agreement related to that product line.
During 2021, we recorded $51.1 million of special charges, consisting
principally of (i) $19.5 million associated with our exit of our rice
product line in India (ii) $6.2 million associated with the transition of
a manufacturing facility in EMEA, (iii) streamlining actions of $10.3
million in the Americas region and $4.8 million in the EMEA region,
and (iv) a non-cash asset impairment charge of $6.0 million associat-
ed with an administrative site that was sold in conjunction with our
decision to employ a hybrid work environment.
Details with respect to the composition of special charges are includ-
ing the accompanying notes to our financial statements contained in
Item 8 of this report.
Transaction expenses included in cost of
goods sold
Other transaction and integration expenses
Total transaction and integration expenses
2022
2021
$ —
2.2
$ 2.2
$ 6.3
29.0
$ 35.3
During 2022, we recorded $2.2 million of integration expenses related
to our acquisition of FONA. During 2021, we recorded transaction and
28 McCormick & Company, Inc.
integration expenses of $35.3 million related to our acquisitions of
Cholula and FONA. These costs consisted of (i) $6.3 million of amorti-
zation of the acquisition-date fair value adjustment of inventories that
is included in Cost of goods sold, (ii) $13.8 million of other transaction
expenses primarily related to outside advisory, service and consulting
costs, and (iii) $15.2 million of integration expenses.
Operating income
Percent of net sales
2022
2021
$ 863.6
$1,015.1
13.6%
16.1%
Operating income decreased by $151.5 million, or 14.9%, from
$1,015.1 million in 2021 to $863.6 million in 2022. Special charges and
transaction and integration expenses decreased by $32.6 million in
2022, as compared to 2021, and positively impacted operating income.
Operating income as a percentage of net sales declined by 250 basis
points in 2022, to 13.6% in 2022 from 16.1% in 2021 as a result of the
factors previously described. Excluding the effect of special charges
and transaction and integration expenses previously described,
adjusted operating income was $917.4 million in 2022 as compared
to $1,101.5 million in 2021, a decrease of $184.1 million or 16.7%
from the 2021 level. Adjusted operating income as a percentage of
net sales declined by 300 basis points in 2022, to 14.4% in 2022 from
17.4% in 2021.
Interest expense
Other income, net
2022
$ 149.1
98.3
2021
$ 136.6
17.3
Interest expense was $12.5 million higher in 2022 as compared to the
prior year as an increase in interest rates during the latter part of 2022
was partially offset by a decrease in average total borrowings. Other
income, net for 2022 increased by $81.0 million, including the impact
of a $49.6 million gain on the sale of our Kitchen Basics business
and $18.7 million associated with the settlement of treasury lock
arrangements, both of which are more fully described in the notes to
the accompanying financial statements. The remaining increase was
principally driven by an increase in interest income, as compared to the
prior year.
Income from consolidated operations
before income taxes
Income tax expense
Effective tax rate
2022
2021
$ 812.8
168.6
20.7%
$ 895.8
192.7
21.5%
The provision for income taxes is based on the estimate of the annual
effective tax rate adjusted to reflect the tax impact of items discrete
to the fiscal period. We record tax expense or tax benefits that do not
relate to ordinary income in the current fiscal year discretely in the
period in which such items occur pursuant to the requirements of U.S.
GAAP. Examples of such types of discrete items not related to ordinary
income include, but are not limited to, excess tax benefits associated
with stock-based compensation, changes in estimates of the outcome
of tax matters related to prior years, including reversals of reserves
upon the lapsing of statutes of limitations, provision-to-return adjust-
ments, the settlement of tax audits, changes in enacted tax rates,
changes in the assessment of deferred tax valuation allowances,
acquisition related deferred tax adjustments, and the tax effects of
certain intra-entity asset transfers (other than inventory).
The effective tax rate was 20.7% in 2022 as compared to 21.5% in
2021. The decrease in our effective tax rate was principally attributable
to the effects of the lower level of income before income taxes and the
higher level of net discrete tax benefits in 2022 as compared to 2021.
Net discrete tax benefits were $27.6 million in 2022, an increase of
$1.0 million from $26.6 million in 2021. Discrete tax benefits in both
the 2022 and 2021 periods included excess tax benefits associated
with stock-based compensation ($9.1 million and $4.3 million in 2022
and 2021, respectively), the reversal of reserves for unrecognized tax
benefits ($6.9 million and $22.5 million in 2022 and 2021, respectively)
due to, in 2021, the partial release of certain reserves for an unrecog-
nized tax benefit and related interest in a non-U.S. jurisdiction based
on a change in our assessment of the technical merits of that position
associated with the availability of new information, and in both years
due to the expiration of the statutes of limitations, the release of
valuation allowances due to a change in judgment about realizability
of deferred tax assets ($4.6 million and $4.4 million in 2022 and 2021,
respectively), tax benefits related to the revaluation of deferred taxes
resulting from enacted legislation ($3.9 million and $4.0 million in
2022 and 2021, respectively), and other discrete items. In 2022, other
discrete tax items included $2.3 million of tax benefits related to the
sale of an asset associated with a previously exited line of business.
In 2021, other discrete tax items included $10.4 million of deferred
state tax expense directly related to our December 2020 acquisition of
FONA. See note 13 of notes to our consolidated financial statements
for a more detailed reconciliation of the U.S. federal tax rate with the
effective tax rate.
Income from unconsolidated operations
2022
$37.8
2021
$52.2
Income from unconsolidated operations, which is presented net of
the elimination of earnings attributable to non-controlling interests,
decreased $14.4 million in 2022 from the prior year. We own 50% of
most of our unconsolidated joint ventures, including our largest joint
venture, McCormick de Mexico, that comprised 84% and 62% of the
income of our unconsolidated operations in 2022 and 2021, respectively.
The decrease for 2022 as compared to 2021 was primarily driven by
the after-tax gain of $13.4 million on the sale of an unconsolidated
operation that occurred in 2021.
We reported diluted earnings per share of $2.52 in 2022, compared to
$2.80 in 2021. The table below outlines the major components of the
change in diluted earnings per share from 2021 to 2022. The decrease
in operating income in the table below includes the impact from
unfavorable currency exchange rates in 2022.
2021 Earnings per share—diluted
Decrease in operating income
Decrease in special charges, net of taxes
Decrease in transaction and integration expenses, including
impact of net discrete tax item related to FONA acquisition
Gain on the sale of a business, net of taxes
Increase in other income, excluding gain on the sale of a business
Decrease in income from unconsolidated operations, including
the after-tax gain on sale of unconsolidated operation of
$0.05 per diluted share in 2021
Impact of change in effective income tax rate, excluding taxes
on special charges, transaction and integration expenses, and
the sale of a business
Increase in interest expense
2022 Earnings per share—diluted
$ 2.80
(0.54)
0.02
0.13
0.14
0.09
(0.05)
(0.03)
(0.04)
$ 2.52
Results of Operations—Segments
We measure the performance of our business segments based on
operating income, excluding special charges and transaction and
integration expenses related to our acquisitions. See note 16 of notes
to our consolidated financial statements for additional information
on our segment measures as well as for a reconciliation by segment
of operating income, excluding special charges and transaction and
integration expenses related to our acquisitions. In the following
discussion, we refer to our previously described measure of segment
profit as “Segment operating income.”
Consumer Segment
Net sales
Percent – (decline) increase
Components of percent change in net
sales – (decrease) increase:
Volume and product mix
Pricing actions
Acquisitions
Divestitures
Foreign exchange
2022
2021
$3,757.9
$3,937.5
(4.6)%
9.5%
(9.3)%
7.4%
—%
(0.6)%
(2.1)%
4.3%
0.6%
2.4%
—%
2.2%
Segment operating income
$ 710.7
$ 804.9
Segment operating income margin
18.9%
20.4%
Sales of our consumer segment in 2022 decreased by 4.6% as com-
pared to 2021 and decreased by 2.5% on a constant currency basis.
The sales decrease was driven by lower sales of our consumer busi-
ness in the Americas, EMEA and Asia/Pacific regions. Lower volume
and unfavorable product mix decreased sales by 9.3%. The impact
of restrictive measures related to COVID-19 resurgences in China,
the exit of our consumer operations in Russia, and the exit of our rice
product line in India, contributed approximately 1.5% to that decline
as compared to 2021. Pricing actions, taken in response to inflationary
cost pressures, increased sales by 7.4% in 2022 as compared to the
prior year level. The divestiture of our Kitchen Basics business unfa-
vorably impacted sales by 0.6% as compared to 2021. An unfavorable
impact from foreign currency rates decreased sales by 2.1% compared
to the prior year and is excluded from our measure of sales decline of
2.5% on a constant currency basis.
In the Americas region, consumer sales decreased 1.1% in 2022 as
compared to 2021 and decreased by 0.9% on a constant currency
basis. Unfavorable volume and product mix decreased sales by 8.6%
as compared to the corresponding period in 2021, including the unfa-
vorable impact of price elasticity. Pricing actions, taken in response to
higher costs, increased sales by 8.6% as compared to the prior year.
The sale of our Kitchen Basics business unfavorably impacted sales by
0.9% as compared to 2021. The unfavorable impact of foreign currency
rates decreased sales by 0.2% in the year and is excluded from our
measure of sales decline of 0.9% on a constant currency basis.
In the EMEA region, consumer sales decreased 14.7% in 2022 as
compared to 2021 and decreased by 5.1% on a constant currency
basis. Unfavorable volume and product mix decreased sales by 10.5%
as compared to the corresponding period of 2021. The decrease was
driven by lower sales of our consumer business in France as compared
to the prior year. The exit of our consumer operations in Russia also
contributed approximately 2.1% to the region’s decline in volume
and mix. Pricing actions, taken in response to the inflationary cost
2022 Annual Report 29
environment, increased sales by 5.4% as compared to the 2021 period.
The unfavorable impact of foreign currency exchange rates decreased
sales by 9.6% compared to 2021 and is excluded from our measure of
sales decline of 5.1% on a constant currency basis.
In the Asia/Pacific region, consumer sales decreased 10.1% in 2022
as compared to 2021 and decreased by 8.1% on a constant currency
basis. Lower volume and unfavorable product mix decreased sales by
11.5% as compared to the corresponding period in 2021. The impact of
restrictive measures related to COVID-19 resurgences in China and the
exit of our rice product line in India, contributed approximately 9.5%
to that decline as compared to 2021. Pricing actions, taken in response
to the inflationary cost environment, increased sales by 3.4% as com-
pared to the prior year. The unfavorable impact from foreign currency
rates decreased sales by 2.0% compared to the year-ago period and
is excluded from our measure of sales decline of 8.1% on a constant
currency basis.
Segment operating income for our consumer segment decreased by
$94.2 million, or 11.7%, in 2022 as compared to 2021. The decrease
in segment operating income was driven by lower sales and increased
commodity, transportation and conversion costs, partially offset by
pricing actions in response to increased costs, CCI-led cost savings
and lower performance-based employee incentive expenses, all as
compared to the prior year. Segment operating margin for our consumer
segment decreased by 150 basis points in 2022 to 18.9%, driven by a
decrease in consumer gross profit margin, including the margin dilutive
impact of pricing actions, the impact of the inflationary cost environ-
ment, and higher conversion costs, which was partially offset by the
impact of CCI-led cost savings, all as compared to the 2021 level. On a
constant currency basis, segment operating income for our consumer
segment decreased by 10.9% in 2022, as compared to 2021.
Flavor Solutions Segment
Net sales
Percent growth
Components of percent growth in net sales–
increase (decrease):
Volume and product mix
Pricing actions
Acquisitions
Foreign exchange
2022
2021
$2,592.6
$2,380.4
8.9%
18.7%
3.5%
8.2%
0.4%
(3.2)%
7.2%
1.4%
7.3%
2.8%
Segment operating income
Segment operating income margin
$ 206.7
$ 296.6
8.0%
12.5%
Sales of our flavor solutions segment increased 8.9% in 2022 as com-
pared to 2021 and increased by 12.1% on a constant currency basis.
Volume and product mix contributed 3.5% of the increase in addition
to pricing actions which added 8.2% to sales for 2022, both in compar-
ison to the prior year levels. The incremental impact of our acquisition
of FONA added 0.4% to segment sales for 2022. An unfavorable
impact from foreign currency rates decreased sales by 3.2% compared
to the prior year and is excluded from our measure of sales growth of
12.1% on a constant currency basis.
In the Americas region, flavor solutions sales increased by 11.4%
during 2022 as compared to 2021 and increased by 11.7% on a
constant currency basis. Favorable volume and product mix increased
flavor solutions sales in the Americas by 2.2% during 2022, as growth
30 McCormick & Company, Inc.
in sales to packaged food and beverage companies was partially offset
by lower sales to quick service restaurants, both as compared to the
year ago period. Pricing actions, taken in response to the inflationary
cost environment, favorably impacted sales by 8.9% during 2022 as
compared to the prior year. The incremental impact of our acquisition
of FONA added 0.6% to segment sales for 2022. An unfavorable
impact from foreign currency rates decreased sales by 0.3% compared
to 2021 and is excluded from our measure of sales growth of 11.7% on
a constant currency basis.
In the EMEA region, flavor solutions sales in 2022 increased by 5.5%
as compared to 2021 and increased by 17.2% on a constant currency
basis. Favorable volume and product mix increased segment sales
by 9.5% in 2022 as compared to 2021. The increase was driven by
higher sales to quick service restaurants, branded foodservice and
package food and beverage company customers. Pricing actions, taken
in response to the inflationary cost environment, favorably impacted
sales by 7.7% in 2022 as compared to the prior period level. An unfa-
vorable impact from foreign currency rates decreased sales by 11.7%
compared to 2021 and is excluded from our measure of sales growth
of 17.2% on a constant currency basis.
In the Asia/Pacific region, flavor solutions sales decreased 0.2% in
2022 as compared to 2021 and increased by 5.2% on a constant
currency basis. Favorable volume and product mix increased sales by
0.3%, driven by higher sales to quick service restaurant customers,
partially impacted by the timing of customers’ promotional activities.
Pricing actions, taken in response to the inflationary cost environment,
favorably impacted sales by 4.9% as compared to the prior year. An
unfavorable impact from foreign currency rates decreased sales by
5.4% compared to 2021 and is excluded from our measure of sales
growth of 5.2% on a constant currency basis.
Segment operating income for our flavor solutions segment decreased
by $89.9 million, or 30.3%, in 2022 as compared to 2021. The decrease
in segment operating income was driven by increased commodity,
transportation and conversion costs, as well as costs related to supply
chain investments, which were partially offset by a higher level of
sales, including pricing actions in response to the inflationary cost
environment, and CCI-led cost savings, all as compared to the prior year.
Segment operating margin for our flavor solutions segment decreased
by 450 basis points in 2022 to 8.0% driven by a lower segment gross
margin, including the margin dilutive impact of pricing actions, the
impact of the inflationary cost environment, and higher conversion costs,
including the costs related to our supply chain investments, partially
offset by CCI-led cost savings and a decrease in SG&A as percentage
of sales associated with the favorable impact of fixed and semi-fixed
expenses over a higher sales base, all as compared to the 2021 level.
On a constant currency basis, segment operating income for our flavor
solutions segment decreased by 27.9% in 2022, as compared to 2021.
RESULTS OF OPERATIONS—2021 COMPARED TO 2020
Net sales
Percent growth
Components of percent growth in net
sales–increase (decrease):
Volume and product mix
Pricing actions
Acquisitions
Foreign exchange
2021
2020
$6,317.9
$5,601.3
12.8%
4.7%
5.5%
0.8%
4.1%
2.4%
3.7%
1.6%
—%
(0.6)%
Sales for 2021 increased by 12.8% from 2020 and by 10.4% on a
constant currency basis. That 12.8% sales increase was driven by
higher sales in both our consumer and flavor solutions segments. On a
consolidated basis, higher volume and favorable product mix increased
sales by 5.5% while pricing actions, which were primarily taken in
the fourth quarter, added 0.8% to sales. That net volume increase and
favorable mix was driven by continued levels of strong demand within
our consumer segment, as the shift in consumer behavior toward
at-home meal preparation, first seen in 2020 as a response to actions
taken to mitigate the spread of COVID-19, has persisted. In addition,
our flavor solutions segment volume increased principally due to a
recovery in demand for away-from-home products, including higher
sales to our branded food service customers, as compared to 2020.
Sales were also impacted by favorable foreign currency rates that
increased net sales 2.4% compared to 2020 and is excluded from our
measure of sales growth of 10.4% on a constant currency basis.
Gross profit
Gross profit margin
2021
2020
$2,494.6
$2,300.4
39.5%
41.1%
In 2021, our gross profit margin decreased 160 basis points to 39.5%
from 41.1% in 2020. The decline was driven by the impact of increased
commodity, packaging materials and transportation costs, higher
conversion costs, which includes costs associated with COVID-19,
and a less favorable mix in sales between our consumer and flavor
solutions segments as compared to 2020. These unfavorable impacts
were partially offset by savings from our CCI program, pricing actions,
improved product mix and the accretive impact of the Cholula and
FONA acquisitions, each as compared to the prior year. In addition, our
2021 gross profit margin was burdened by (i) $6.3 million of transac-
tion expense, representing the amortization of the fair value adjust-
ment to the acquired inventories of Cholula and FONA upon our sale of
those acquired inventories, and (ii) a non-cash special charge of $4.7
million associated with the exit of a low margin business in our Asia/
Pacific region. Excluding the transaction expense and special charges,
adjusted gross profit margin decreased by 140 basis points from 41.1%
in 2020 to 39.7% for the year ended November 30, 2021.
Selling, general & administrative expense
Percent of net sales
$1,404.1
$1,281.6
22.3%
22.9%
2021
2020
Selling, general and administrative (SG&A) expense was $1,404.1
million in 2021 compared to $1,281.6 million in 2020, an increase
of $122.5 million. That increase in SG&A expense was primarily a
result of (i) SG&A associated with the Cholula and FONA acquisitions;
(ii) greater selling and distribution expenses associated with the
higher sales volume; and (iii) increased brand marketing costs, all as
compared to the corresponding period in 2020. Those increases were
partially offset by lower performance-based employee incentive
expenses, as compared to the prior year. SG&A as a percent of net
sales for 2021 decreased by 60 basis points from the prior year level,
driven by the impact of the leverage of fixed and semi-fixed expenses
over a higher level of sales during the 2021 period.
Special charges included in cost of goods sold
Other special charges
Total special charges
2021
2020
$ 4.7
46.4
$ 51.1
$ —
6.9
$ 6.9
We regularly evaluate whether to implement changes to our organiza-
tion structure to reduce fixed costs, simplify and/or improve processes,
and improve our competitiveness, and we expect to continue to eval-
uate such actions in the future. From time to time, those changes are
of such significance in terms of both up-front costs and organizational/
structural impact that we obtain advance approval from our Manage-
ment Committee and classify expenses related to those changes as
special charges in our financial statements.
During 2021, we recorded $51.1 million of special charges, consisting
principally of (i) $19.5 million associated with our exit of our rice
product line in India, as more fully described below, (ii) $6.2 million
associated with the transition of a manufacturing facility in EMEA,
(iii) streamlining actions of $10.3 million in the Americas region and
$4.8 million in the EMEA region, and (iv) a non-cash asset impairment
charge of $6.0 million associated with an administrative site that was
sold in conjunction with our decision to employ a hybrid work environ-
ment. As more fully described in note 3 of our notes of consolidated
financial statements, the $19.5 million special charge associated with
the exit of our rice product line in India consisted of an $11.2 million
non-cash impairment charge associated with the impairment of certain
intangible assets, $3.6 million of employee severance and other
related exit costs, and a $4.7 million charge in cost of goods sold
which represents a provision for the excess of the carrying value of
rice inventories over the estimated net realizable value and a contrac-
tual obligation associated with terminating a rice supply agreement.
During 2020, we recorded $6.9 million of special charges, consisting
of $5.3 million related to streamlining actions in our EMEA region and
$1.6 million related to our GE initiative.
Transaction expenses included in cost of
goods sold
Other transaction and integration expenses
Total transaction and integration expenses
2021
2020
$ 6.3
29.0
$ 35.3
$ —
12.4
$12.4
During 2021, we recorded transaction and integration expenses of
$35.3 million related to our acquisitions of Cholula and FONA. These
costs consisted of (i) $6.3 million of amortization of the acquisi-
tion-date fair value adjustment of inventories that is included in Cost
of goods sold, (ii) $13.8 million of other transaction expenses primarily
related to outside advisory, service and consulting costs, and (iii) $15.2
million of integration expenses. Transaction and integration expenses
related to our acquisitions of Cholula and FONA of $11.2 million and
$1.2 million, respectively, were incurred late in fiscal 2020.
Operating income
Percent of net sales
2021
2020
$1,015.1
16.1%
$999.5
17.8%
Operating income increased by $15.6 million, or 1.6%, from $999.5
million in 2020 to $1,015.1 million in 2021. Special charges and
transaction and integration expenses increased by $67.1 million
in 2021, as compared to 2020, and negatively impacted operating
income. Operating income as a percentage of net sales declined by
170 basis points in 2021, to 16.1% in 2021 from 17.8% in 2020 as
a result of the factors previously described. Excluding the effect of
special charges and transaction and integration expenses previously
described, adjusted operating income was $1,101.5 million in 2021 as
compared to $1,018.8 million in 2020, an increase of $82.7 million or
2022 Annual Report 31
8.1% over the 2020 level. Adjusted operating income as a percentage
of net sales declined by 80 basis points in 2021, to 17.4% in 2021 from
18.2% in 2020.
Interest expense
Other income, net
2021
$ 136.6
17.3
2020
$135.6
17.6
Interest expense was $1.0 million higher for 2021 as compared to
the prior year as an increase in average total borrowings was largely
offset by a decrease in interest rates. Other income, net for 2021
decreased by $0.3 million as lower non-service cost income associated
with our pension and postretirement benefit plans was partially offset
by higher interest income, as compared to 2020. The decrease was
also impacted by non-operating foreign currency transaction gains
in 2021, as compared to non-operating foreign currency transaction
losses in the prior period.
Income from consolidated operations before
income taxes
Income tax expense
Effective tax rate
2021
2020
$895.8
192.7
21.5%
$881.5
174.9
19.8%
The provision for income taxes is based on the estimate of the annual
effective tax rate adjusted to reflect the tax impact of items discrete
to the fiscal period. We record tax expense or tax benefits that do not
relate to ordinary income in the current fiscal year discretely in the
period in which such items occur pursuant to the requirements of U.S.
GAAP. Examples of such types of discrete items not related to ordinary
income include, but are not limited to, excess tax benefits associated
with stock-based compensation, changes in estimates of the outcome
of tax matters related to prior years, including reversals of reserves
upon the lapsing of statutes of limitations, provision-to-return adjust-
ments, the settlement of tax audits, changes in enacted tax rates,
changes in the assessment of deferred tax valuation allowances,
acquisition related deferred tax adjustments, and the tax effects of
certain intra-entity asset transfers (other than inventory).
The effective tax rate was 21.5% in 2021 as compared to 19.8% in 2020.
The increase in our effective tax rate was principally attributable to the
lower level of net discrete tax benefits in 2021 as compared to 2020.
Net discrete tax benefits were $26.6 million in 2021, a decrease of $16.8
million from $43.4 million in 2020. Discrete tax benefits in both the 2021
and 2020 periods included excess tax benefits associated with stock-
based compensation ($4.3 million and $14.2 million in 2021 and 2020,
respectively), the reversal of reserves for unrecognized tax benefits
($22.5 million and $4.9 million in 2021 and 2020, respectively) due to,
in 2021, the partial release of certain reserves for an unrecognized tax
benefit and related interest in a non-U.S. jurisdiction based on a change
in our assessment of the technical merits of that position associated
with the availability of new information, and in both years due to
the expiration of the statutes of limitations, the release of valuation
allowances due to a change in judgment about realizability of deferred
tax assets ($4.4 million and $11.9 million in 2021 and 2020, respec-
tively) and other discrete items. In 2021, discrete tax items included
$4.0 million of tax benefits related to the revaluation of deferred taxes
resulting from enacted legislation and $10.4 million of deferred state tax
expense directly related to our December 2020 acquisition of FONA. In
2020, discrete tax items included $9.9 million of tax benefits associated
with intra-entity asset transfers that occurred. See note 13 of notes to
32 McCormick & Company, Inc.
our consolidated financial statements for a more detailed reconciliation
of the U.S. federal tax rate with the effective tax rate.
Income from unconsolidated operations
2021
$52.2
2020
$40.8
Income from unconsolidated operations, which is presented net of the
elimination of earnings attributable to non-controlling interests, increased
$11.4 million in 2021 from the prior year, driven by an after-tax gain of
$13.4 million on the sale of our 26% interest in Eastern Condiments
Private Ltd. (Eastern), an unconsolidated operation, during our second
quarter of 2021, as more fully described in note 5 of the notes to the
accompanying financial statements. We own 50% of most of our uncon-
solidated joint ventures, including our largest joint venture, McCormick
de Mexico, that comprised 62% and 75% of the income of our unconsol-
idated operations in 2021 and 2020, respectively. The relative impact of
McCormick de Mexico on income from unconsolidated operations in 2021
was impacted by the gain on our sale of an unconsolidated operation.
We reported diluted earnings per share of $2.80 in 2021, compared to
$2.78 in 2020. The table below outlines the major components of the
change in diluted earnings per share from 2020 to 2021. The increase
in operating income in the table below includes the impact from favor-
able currency exchange rates in 2021.
2020 Earnings per share—diluted
Increase in operating income
Increase in special charges
Increase in transaction and integration expenses, including
impact of net discrete tax item related to FONA acquisition
Impact of income taxes, excluding taxes on special charges and
transaction and integration expenses
Increase in income from unconsolidated operations, including the
after-tax gain on sale of unconsolidated operation of $0.05 per
diluted share
Impact of higher shares
2021 Earnings per share—diluted
$ 2.78
0.25
(0.15)
(0.10)
(0.01)
0.04
(0.01)
$ 2.80
Results of Operations—Segments
Consumer Segment
Net sales
Percent growth
Components of percent growth in net
sales—increase (decrease):
Volume and product mix
Pricing actions
Acquisitions
Foreign exchange
2021
2020
$3,937.5
$3,596.7
9.5%
10.0%
4.3%
0.6%
2.4%
2.2%
8.8%
1.5%
—%
(0.3)%
Segment operating income
Segment operating income margin
$ 804.9
$ 780.9
20.4%
21.7%
Sales of our consumer segment in 2021 grew by 9.5% as compared
to 2020 and grew by 7.3% on a constant currency basis. This increase
included higher sales of our consumer business in each of our three
regions. Higher volume and product mix increased sales 4.3% while
pricing actions added 0.6% to sales, both as compared to the prior
year. The incremental impact of the Cholula acquisition added 2.4% to
segment sales during 2021. The favorable impact of foreign currency
exchange rates increased consumer segment sales by 2.2% compared
to 2020 and is excluded from our measure of sales growth of 7.3% on
a constant currency basis.
Flavor Solutions Segment
In the Americas region, consumer sales increased 7.3% in 2021 as
compared to 2020, which experienced a 13.9% increase in sales from
the 2019 level as a result of exceptionally strong demand for our
products in the early stages of the COVID-19 pandemic, and increased
by 6.7% on a constant currency basis. Favorable volume and product
mix increased sales by 3.0% as compared to the corresponding period
in 2020, as demand continues to be driven by consumers’ sustained
preference for eating more at home. In addition, pricing actions, taken
in response to higher costs, increased sales by 0.4% as compared
to the prior year. The incremental impact of the Cholula acquisition
added 3.3% to sales in 2021. The favorable impact of foreign currency
exchange rates increased sales by 0.6% compared to 2020 and is
excluded from our measure of sales growth of 6.7% on a constant
currency basis.
In the EMEA region, consumer sales increased 5.8% in 2021 as
compared to 2020, which experienced a 14.5% increase in sales from
the 2019 level driven by the COVID-19 impact on greater consumer
at-home meal preparation, and increased by 0.9% on a constant
currency basis. Favorable volume and product mix increased sales by
0.3% as compared to the corresponding period of 2020. The impact of
pricing actions increased sales by 0.6% as compared to the prior year.
The favorable impact of foreign currency exchange rates increased
sales by 4.9% compared to 2020 and is excluded from our measure of
sales growth of 0.9% on a constant currency basis.
In the Asia/Pacific region, consumer sales increased 31.6% in 2021 as
compared to 2020, which reflected a 16.6% decrease in sales from the
2019 level due mainly to COVID-19 disruption on foodservice sales in
China, and increased by 22.9% on a constant currency basis. Higher
volume and favorable product mix increased sales by 21.5% as com-
pared to the corresponding period in 2020. The increase was driven by
sales related to the recovery of demand in away-from-home consump-
tion in China. Pricing actions increased sales by 1.4% as compared
to 2020. The favorable impact from foreign currency exchange rates
increased sales by 8.7% compared to 2020 and is excluded from our
measure of sales growth of 22.9% on a constant currency basis.
Segment operating income for our consumer segment increased by
$24.0 million, or 3.1%, in 2021 as compared to 2020. The increase in
segment operating income was driven by higher sales, including the
impact of acquisitions, CCI-led cost savings and lower incentive-based
compensation accruals which were partially offset by increased
commodities, packaging materials and transportation costs, increased
conversion costs, which include incremental expenses related to
COVID-19, and higher brand marketing investment, all as compared to
the prior year. The impact of COVID-19 on segment operating income
during 2021 reflected actions, including the incremental impact of
temporary arrangements to utilize co-manufacturing, that increased
our cost to produce certain products and measures to enable manufac-
turing and distribution staff to maintain social distancing and permit
enhanced cleaning that reduced productivity. Segment operating
margin for our consumer segment decreased by 130 basis points in
2021 to 20.4%, driven by a decrease in segment gross profit margin,
including the impact of the inflationary cost environment, which was
partially offset by the benefit from the leverage of fixed and semi-fixed
expenses over a higher sales base as compared to the 2020 level. On
a constant currency basis, segment operating income for our consumer
segment increased by 1.3% in 2021, as compared to 2020.
Net sales
Percent growth (decline)
Components of percent change in net
sales–increase (decrease):
Volume and product mix
Pricing actions
Acquisitions
Foreign exchange
2021
2020
$2,380.4
$2,004.6
18.7%
(3.5)%
7.2%
1.4%
7.3%
2.8%
(4.2)%
1.8%
—%
(1.1)%
Segment operating income
Segment operating income margin
$ 296.6
$ 237.9
12.5%
11.9%
Sales of our flavor solutions segment increased 18.7% in 2021 as
compared to 2020 and increased by 15.9% on a constant currency
basis. Sales were favorably impacted by the recovery of demand as
compared to the lower level of demand in 2020 due to the impact of
the COVID-19 disruption on our quick service restaurant and branded
food service customers, particularly in the Americas and EMEA
regions. Favorable volume and product mix increased segment sales
by 7.2% as compared to 2020, while pricing actions taken in response
to increased costs during the period increased sales by 1.4%. The
incremental impact of the Cholula and FONA acquisitions increased
sales by 7.3% in 2021. The favorable impact of foreign currency rates
increased flavor solutions segment sales by 2.8% as compared to
2020 and is excluded from our measure of sales growth of 15.9% on a
constant currency basis.
In the Americas region, flavor solutions sales increased by 16.6%
during 2021 as compared to 2020, which experienced a sales decline
of 3.5% from the 2019 level driven by lower sales to quick service
restaurant and branded food service customers as a result of COVID-19
restrictions imposed in the early stages of the pandemic, and increased
by 15.4% on a constant currency basis. Favorable volume and improved
product mix increased flavor solutions sales in the Americas by 3.2%
during 2021, driven primarily by increased sales to branded foodservice
and quick service restaurant customers. Pricing actions increased sales
by 1.7% as compared to the prior year. The incremental impact of the
Cholula and FONA acquisitions increased sales by 10.5% in 2021. A
favorable impact from foreign currency rates increased sales by 1.2%
compared to 2020 and is excluded from our measure of sales growth of
15.4% on a constant currency basis.
In the EMEA region, flavor solutions sales in 2021 increased by 27.3%
as compared to 2020, which experienced a sales decline of 5.5% from
the 2019 level primarily as a result of decreased sales to quick service
restaurants and lower branded food service sales that were partially
offset by higher demand from packaged food service companies in
response to COVID-19 restrictions implemented in 2020, and increased
by 21.5% on a constant currency basis. Favorable volume and product
mix increased segment sales by 19.8% in 2021 as compared to 2020.
The increase was primarily attributable to higher sales to branded
foodservice, packaged food and quick service restaurant customers.
Pricing actions increased sales by 1.7% in 2021 as compared the prior
year level. A favorable impact from foreign currency rates increased
sales by 5.8% compared to 2020 and is excluded from our measure of
sales growth of 21.5% on a constant currency basis.
2022 Annual Report 33
In the Asia/Pacific region, flavor solutions sales increased 16.9%
in 2021 as compared to 2020, which experienced a sales increase
of 0.4% from the 2019 level driven by higher sales to quick service
restaurant customers, and increased by 9.4% on a constant currency
basis. Favorable volume and product mix increased sales by 10.6%,
driven by higher sales to quick service restaurant customers. Pricing
actions decreased sales by 1.2% as compared to the prior year.
A favorable impact from foreign currency rates increased sales by
7.5% compared to 2020 and is excluded from our measure of sales
growth of 9.4% on a constant currency basis.
Segment operating income for our flavor solutions segment increased
by $58.7 million, or 24.7%, in 2021 as compared to 2020. The increase
in segment operating income was driven by higher sales, including the
impact of acquisitions, CCI-led cost savings, lower incentive-based
compensation accruals and favorable product mix, which was partially
offset by increased commodities, packaging materials and transporta-
tion costs. Segment operating margin for our flavor solutions segment
increased by 60 basis points in 2021 to 12.5% as the benefits from the
leverage of fixed and semi-fixed expenses over a higher sales base
as compared to the 2020 level, together with the accretive impact of
the Cholula and FONA acquisitions on gross margins, were partially
offset by the impact of the inflationary cost environment as compared
to 2020. On a constant currency basis, segment operating income for
our flavor solutions segment increased by 22.5% in 2021, as compared
to 2020.
NON-GAAP FINANCIAL MEASURES
The following tables include financial measures of adjusted gross
profit, adjusted gross profit margin, adjusted operating income,
adjusted operating income margin, adjusted income tax expense,
adjusted income tax rate, adjusted net income and adjusted diluted
earnings per share. These represent non-GAAP financial measures
which are prepared as a complement to our financial results prepared
in accordance with United States generally accepted accounting
principles. These financial measures exclude the impact, as applicable,
of the following:
• Special charges—Special charges consist of expenses and income
associated with certain actions undertaken by us to reduce fixed
costs, simplify or improve processes, and improve our competitive-
ness and are of such significance in terms of both up-front costs and
organizational/structural impact to require advance approval by our
Management Committee. 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 ongoing basis through completion. Special
charges for the year ended November 30, 2022 include a $13.6 million
gain associated with the sale of the Kohinoor brand name. We exited
our Kohinoor rice product line in India in the fourth quarter of fiscal
year 2021.
• Transaction and integration expenses associated with the Cholula and
FONA acquisitions—We exclude certain costs associated with our
acquisitions of Cholula and FONA in November and December 2020,
respectively, and their subsequent integration into the Company. Such
costs, which we refer to as “Transaction and integration expenses,”
include transaction costs associated with each acquisition, as well as
integration costs following the respective acquisition, including the
impact of the acquisition date fair value adjustment for inventories,
together with the impact of discrete tax items, if any, directly related
to each acquisition.
• Income from sale of unconsolidated operations—We exclude
the gain realized upon our sale of an unconsolidated operation in
March 2021. As more fully described in note 5 of the notes to the
accompanying financial statements, the sale of our 26% interest in
Eastern Condiments resulted in a gain of $13.4 million, net of tax
of $5.7 million. The gain is included in Income from unconsolidated
operations in our consolidated income statement for the year ended
November 30, 2021.
• Gain on sale of Kitchen Basics—We exclude the gain realized upon
our sale of the Kitchen Basics business in August 2022. As more fully
described in note 17 of the notes to the accompanying financial state-
ments, the pre-tax gain associated with the sale was $49.6 million
and is included in Other income, net in our consolidated income
statement for the year ended November 30, 2022.
Details with respect to the composition of transaction and integration
expenses, special charges, income from the sale of unconsolidated
operations, and gain on sale of Kitchen Basics for the years and in the
amounts set forth below are included in notes 2, 3, and 5, of notes to
our consolidated financial statements.
We believe that these non-GAAP financial measures are important.
The exclusion of the items noted above provides additional information
that enables enhanced comparisons to prior periods and, accordingly,
facilitates the development of future projections and earnings growth
prospects. This information is also used by management to measure
the profitability of our ongoing operations and analyze our business
performance and trends.
These non-GAAP financial measures may be considered in addition to
results prepared in accordance with GAAP, but they should not be con-
sidered a substitute for, or superior to, GAAP results. In addition, these
non-GAAP financial measures may not be comparable to similarly
titled measures of other companies because other companies may not
calculate them in the same manner that we do. We intend to continue
to provide these non-GAAP financial measures as part of our future
earnings discussions and, therefore, the inclusion of these non-GAAP
financial measures will provide consistency in our financial reporting.
34 McCormick & Company, Inc.
A reconciliation of these non-GAAP financial measures to GAAP financial results is provided below:
Gross profit
Impact of transaction and integration expenses included in cost of goods sold (1)
Impact of special charges included in cost of goods sold (2)
Adjusted gross profit
Adjusted gross profit margin (3)
Operating income
Impact of transaction and integration expenses included in cost of goods sold (1)
Impact of other transaction and integration expenses (1)
Impact of special charges included in cost of goods sold (2)
Impact of other special charges (2)
Adjusted operating income
% (decrease) increase versus prior year
Adjusted operating income margin (3)
Income tax expense
Impact of transaction and integration expenses (1)
Impact of special charges (2)
Impact of sale of Kitchen Basics
Adjusted income tax expense
Adjusted income tax rate (4)
Net income
Impact of transaction and integration expenses (1)
Impact of special charges (2)
Impact of after-tax gain on sale of Kitchen Basics
Impact of after-tax gain on sale of unconsolidated operations
Adjusted net income
% (decrease) increase versus prior year
Earnings per share—diluted
Impact of transaction and integration expenses (1)
Impact of special charges (2)
Impact of after-tax gain on sale of Kitchen Basics
Impact of after-tax gain on sale of unconsolidated operations
Adjusted earnings per share—diluted
2022
$ 2,274.5
—
—
$ 2,274.5
2021
$ 2,494.6
6.3
4.7
$ 2,505.6
2020
$ 2,300.4
—
—
$ 2,300.4
35.8 %
39.7 %
41.1 %
$ 863.6
—
2.2
—
51.6
$ 917.4
(16.7 )%
14.4 %
$ 168.6
0.6
13.3
(11.6)
$ 170.9
$ 1,015.1
6.3
29.0
4.7
46.4
$ 1,101.5
8.1 %
17.4 %
$ 192.7
(2.7)
7.1
—
$ 197.1
$ 999.5
—
12.4
—
6.9
$ 1,018.8
4.1 %
18.2 %
$ 174.9
1.9
2.1
—
$ 178.9
20.9 %
20.1 %
19.9 %
$ 682.0
1.6
38.3
(38.0)
—
$ 683.9
$ 755.3
38.0
44.0
—
(13.4)
$ 823.9
$ 747.4
10.5
4.8
—
—
$ 762.7
(17.0)%
8.0 %
6.3 %
$ 2.52
0.01
0.14
(0.14)
—
$ 2.53
$ 2.80
0.14
0.16
$ 2.78
0.04
0.01
(0.05 )
—
$ 3.05
$ 2.83
(1) Transaction and integration expenses are more fully described in note 2 of notes to our consolidated financial statements and include transaction and
integration expenses associated with our acquisitions of Cholula and FONA. These expenses include the effect of the fair value adjustment to acquired
inventories on cost of goods sold and the impact of a discrete deferred state income tax expense item, directly related to our December 2020 acquisition of
FONA. The discrete tax item had an unfavorable impact of $10.4 million or $0.04 per diluted share for the year ended November 30, 2021.
(2) Special charges are more fully described in note 3 of notes to our accompanying consolidated financial statements. Special charges for the year ended November 30,
2022 include a $10.0 million non-cash intangible asset impairment charge associated with our exit of our business operations in Russia. We exited our Kohinoor rice
product line in India in the fourth quarter of fiscal 2021. Special charges for the year ended November 30, 2022 include a $13.6 million gain associated with the sale of
the Kohinoor brand name. Special charges for the year ended November 30, 2021 include $4.7 million which is reflected in Cost of goods sold and an $11.2 million non-
cash impairment charge associated with the impairment of certain intangible assets.
(3) Adjusted gross profit margin is calculated as adjusted gross profit as a percent of net sales for each period presented. Adjusted operating income margin is
calculated as adjusted operating income as a percent of net sales for each period presented.
(4) Adjusted income tax rate is calculated as adjusted income tax expense as a percentage of income from consolidated operations before income taxes, excluding
transaction and integration expenses and special charges, or $817.0 million, $982.2 million, and $900.8 million for the years ended November 30, 2022, 2021,
and 2020, respectively.
Estimate for the year ending
November 30, 2023
Earnings per share—diluted
Impact of special charges
Adjusted earnings per share—diluted
$2.42 to $2.47
0.14
$2.56 to $2.61
Because we are a multi-national company, we are subject to variability
of our reported U.S. dollar results due to changes in foreign currency
exchange rates. Those changes have been volatile over the past several
years. The exclusion of the effects of foreign currency exchange, or
what we refer to as amounts expressed “on a constant currency basis,”
is a non-GAAP measure. We believe that this non-GAAP measure
provides additional information that enables enhanced comparison
to prior periods excluding the translation effects of changes in rates
of foreign currency exchange and provides additional insight into the
underlying performance of our operations located outside of the U.S. It
should be noted that our presentation herein of amounts and percent-
age changes on a constant currency basis does not exclude the impact
of foreign currency transaction gains and losses (that is, the impact of
transactions denominated in other than the local currency of any of our
subsidiaries in their local currency reported results).
2022 Annual Report 35
Percentage changes in sales and adjusted operating income expressed
on a constant currency basis are presented excluding the impact of
foreign currency exchange. To present this information for historical
periods, current year results for entities reporting in currencies other
than the U.S. dollar are translated into U.S. dollars at the average
exchange rates in effect during the prior fiscal year, rather than at the
actual average exchange rates in effect during the current fiscal year.
As a result, the foreign currency impact is equal to the current year
results in local currencies multiplied by the change in the average
foreign currency exchange rate between the current year and the prior
fiscal year. The tables set forth below present our growth in net sales
and adjusted operating income on a constant currency basis as follows:
(1) to present our growth in net sales and adjusted operating income
for 2022 on a constant currency basis, net sales and adjusted operating
income for 2022 for entities reporting in currencies other than the U.S.
dollar have been translated using the average foreign exchange rates
in effect for 2021 and compared to the reported results for 2021; and
(2) to present our growth in net sales and adjusted operating income
for 2021 on a constant currency basis, net sales and operating income
for 2021 for entities reporting in currencies other than the U.S. dollar
have been translated using the average foreign exchange rates in
effect for 2020 and compared to the reported results for 2020.
For the year ended November 30, 2022
Percentage
change
as reported
Impact of
foreign
currency
exchange
Percentage
change on
constant
currency basis
(1.1)%
(14.7)%
(10.1)%
(0.2)%
(9.6)%
(2.0)%
(0.9)%
(5.1)%
(8.1)%
(4.6)%
(2.1 )%
(2.5)%
11.4%
5.5%
(0.2)%
8.9%
0.5%
(11.7)%
(30.3)%
(16.7)%
(0.3)%
(11.7)%
(5.4)%
11.7%
17.2%
5.2%
(3.2)%
12.1%
(2.5)%
3.0%
(0.8)%
(2.4)%
(10.9)%
(27.9)%
(1.2)%
(15.5)%
For the year ended November 30, 2021
Percentage
change
as reported
Impact of
foreign
currency
exchange
Percentage
change on
constant
currency basis
7.3 %
5.8 %
31.6%
9.5 %
16.6%
27.3%
16.9%
18.7%
12.8%
3.1%
24.7%
8.1%
0.6%
4.9%
8.7%
2.2%
1.2%
5.8%
7.5%
2.8%
2.4%
1.8%
2.2%
1.9%
6.7%
0.9%
22.9%
7.3%
15.4%
21.5%
9.4 %
15.9%
10.4 %
1.3 %
22.5%
6.2 %
Net sales:
Consumer segment:
Americas
EMEA
Asia/Pacific
Total Consumer
Flavor Solutions segment:
Americas
EMEA
Asia/Pacific
Total Flavor Solutions
Total net sales
Adjusted operating income:
Consumer segment
Flavor Solutions segment
Total adjusted operating income
Net sales:
Consumer segment:
Americas
EMEA
Asia/Pacific
Total Consumer
Flavor Solutions segment:
Americas
EMEA
Asia/Pacific
Total Flavor Solutions
Total net sales
Adjusted operating income:
Consumer segment
Flavor Solutions segment
Total adjusted operating income
36 McCormick & Company, Inc.
To present the percentage change in projected 2023 net sales, adjusted
operating income and adjusted earnings per share—diluted on a con-
stant currency basis, 2023 projected local currency net sales, adjusted
operating income, and adjusted net income for entities reporting in
currencies other than the U.S. dollar are translated into U.S. dollars at
currently prevailing exchange rates and are compared to those 2023
local currency projected results, translated into U.S. dollars at the aver-
age actual exchange rates in effect during the corresponding months in
fiscal year 2022 to determine what the 2023 consolidated U.S. dollar net
sales, adjusted operating income and adjusted earnings per share—
diluted would have been if the relevant currency exchange rates had not
changed from those of the comparable 2022 periods.
LIQUIDITY AND FINANCIAL CONDITION
Net cash provided by operating
activities
Net cash used in investing
activities
Net cash (used in) provided by
financing activities
2022
2021
2020
$ 651.5
$828.3
$1,041.3
(146.4)
(908.6)
(1,025.6)
(487.2 )
22.0
220.9
The primary objective of our financing strategy is to maintain a prudent
capital structure that provides us flexibility to pursue our growth objec-
tives. We use a combination of equity and short- and long-term debt.
We use short-term debt, comprised primarily of commercial paper,
principally to finance ongoing operations, including our requirements
for working capital (accounts receivable, prepaid expenses and other
current assets, and inventories, less accounts payable, accrued payroll,
and other accrued liabilities). We are committed to maintaining invest-
ment grade credit ratings.
Our cash flows from operations enable us to fund operating projects
and investments that are designed to meet our growth objectives,
service our debt, fund or increase our quarterly dividends, fund capital
projects and other investments, and make share repurchases when
appropriate. Due to the cyclical nature of a portion of our business, our
cash flow from operations has historically been the strongest during
the fourth quarter of our fiscal year. Due to the timing of the interest
payments on our debt, interest payments are higher in the first and
third quarter of our fiscal year.
We believe that our sources of liquidity, which include existing cash
balances, cash flows from operations, existing credit facilities, our
commercial paper program, and access to capital markets, will provide
sufficient liquidity to meet our debt obligations, including any repay-
ment of debt or refinancing of debt, working capital needs, planned
capital expenditures, and payment of anticipated quarterly dividends
for at least the next twelve months.
In the cash flow statement, the changes in operating assets and
liabilities are presented excluding the translation effects of changes
in foreign currency exchange rates, as these do not reflect actual cash
flows. In addition, in the cash flow statement, the changes in operating
assets and liabilities are presented excluding the effect of acquired or
disposed operating assets and liabilities, as the cash flows associated
with acquisition or dispositions of businesses is presented as an
investing activity. Accordingly, the amounts in the cash flow statement
do not agree with changes in the operating assets and liabilities that
are presented in the balance sheet.
The reported values of our assets and liabilities held in our non-U.S.
subsidiaries and affiliates can be significantly affected by fluctuations
in foreign exchange rates between periods. At November 30, 2022, the
exchange rates for the Euro, British pound sterling, Canadian dollar,
Chinese renminbi, Australian dollar, and Polish zloty were lower than
the U.S. dollar than at November 30, 2021.
Operating Cash Flow—Operating cash flow was $651.5 million in
2022, $828.3 million in 2021, and $1,041.3 million in 2020. Net income
as well as our working capital management, as more fully described
below, impacted operating cash flow. In 2022, the decrease was pri-
marily driven by lower net income, including the effect of net income
associated with the gain on sale of our Kitchen Basics business and an
intangible asset that are reflected as investing cash flows as well as
the timing of certain employee incentive payments. In 2021, the reduc-
tion in operating cash flow was the result of increased inventory levels
to protect against supply disruption, employee incentive payments,
and the payment of transaction and integration costs related to our
recent acquisitions. In 2020, the increase in operating cash flow was
the result of a significantly lower use of cash associated with other
assets and liabilities, including the timing of certain employee incen-
tive and customer related payments, which was partially offset by the
use of cash associated with working capital, driven by the increased
level of inventory to meet demand.
Our working capital management—principally related to inventory,
trade accounts receivable, and accounts payable—impacts our oper-
ating cash flow. The change in inventory was a significant use of cash
from operations in 2022, 2021, and 2020. The change in trade accounts
receivable was a use of cash in 2022 and 2021 but a source of cash in
2020. The change in accounts payable was a significant source of cash
in 2022 and 2020 and a more moderate source of cash in 2021.
In addition to operating cash flow, we also use cash conversion cycle
(CCC) to measure our working capital management. This metric is
different than operating cash flow in that it uses average balances
instead of specific point in time measures. CCC is a calculation of the
number of days, on average, that it takes us to convert a cash outlay
for resources, such as raw materials, to a cash inflow from collection
of accounts receivable. Our goal is to lower our CCC over time. We
calculate CCC as follows:
Days sales outstanding (average trade accounts receivable divided
by average daily net sales) plus days in inventory (average inven-
tory divided by average daily cost of goods sold) less days payable
outstanding (average trade accounts payable divided by average
daily cost of goods sold plus the average daily change in inventory).
The following table outlines our cash conversion cycle (in days) over
the last three years:
Cash Conversion Cycle
2022
51
2021
46
2020
39
The increase in CCC in 2022 from 2021 was due primarily to an
increase in our days in inventory as a result of cost inflation, strategic
purchases to avoid shipping challenges, and lower than forecasted
sales. The increase in CCC in 2021 from 2020 was due primarily to
an increase in our days in inventory as a result of efforts to protect
against supply chain disruption and to meet increased demand. During
both periods, the increase in days in inventory was partially offset by
an increase in our days payable outstanding.
2022 Annual Report 37
We offer certain suppliers access to a third-party Supply Chain Finance
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. These participating suppliers negotiate their
receivables sales arrangements directly with the respective SCF Bank.
While we are not party to those agreements, the SCF Banks allow the
participating suppliers to utilize our creditworthiness in establishing
credit spreads and associated costs. This generally provides the
suppliers with more favorable terms than they would be able to secure
on their own. We have no economic interest in a supplier’s decision to
sell a receivable. Once a qualifying supplier elects to participate in the
SCF and reaches an agreement with a SCF Bank, the supplier elects
which of our individual invoices they sell to the SCF bank. However, all
of our payments to participating suppliers are paid to the SCF Bank on
the invoice due date, regardless of whether the individual invoice is
sold by the supplier to the SCF Bank. The SCF Bank pays the supplier
on the invoice due date for any invoices that were not previously
sold by the supplier to the SCF Bank. The program has been in place
for over five years and commenced near the same time we began an
initiative to negotiate extended payment terms with our suppliers in
response to evolving market practices.
The terms of our payment obligation are not impacted by a supplier’s
participation in the SCF. Our payment terms with our suppliers for
similar materials within individual markets are consistent between
those suppliers that elect to participate in the SCF and those suppliers
that do not participate. Accordingly, our average days outstanding are
not significantly impacted by the portion of suppliers or related input
costs that are included in the SCF. For our participating suppliers, we
believe substantially all of their receivables with us are sold to the
SCF Banks. Accordingly, we would expect that at each balance sheet
date, a similar proportion of amounts originally due to suppliers would
instead be payable to SCF Banks. All outstanding amounts related to
suppliers participating in the SCF are recorded within the line entitled
“Trade accounts payable” in our consolidated balance sheets, and the
associated payments are included in operating activities within our
consolidated statements of cash flows. As of November 30, 2022 and
2021, the amount due to suppliers participating in the SCF and included
in “Trade accounts payable” were approximately $347.0 million and
$274.3 million, respectively.
Future changes in our suppliers’ financing policies or economic devel-
opments, such as changes in interest rates, general market liquidity or
our creditworthiness relative to participating suppliers could impact
those suppliers’ participation in the SCF and/or our ability to negotiate
extended payment terms with our suppliers. However, any such
impacts are difficult to predict.
Investing Cash Flow—Net cash used in investing activities was $146.4
million in 2022, $908.6 million in 2021, and $1,025.6 million in 2020. Our
primary investing cash flows include the usage of cash associated with
acquisition of businesses and capital expenditures as well as cash pro-
vided by sale of businesses, unconsolidated operations, or other assets.
Cash usage related to our acquisition of businesses was $706.4 million
and $803.0 million in 2021 and 2020, respectively. Capital expenditures,
including expenditures for capitalized software, were $262.0 million
in 2022, $278.0 million in 2021, and $225.3 million in 2020. We expect
2023 capital expenditures to approximate $280 million to support our
planned growth. In 2022, we received $95.2 million net cash proceeds
received from the sale of our Kitchen Basics business and $13.6 million
net cash proceeds received on the sale of the Kohinoor brand name
38 McCormick & Company, Inc.
which are more fully discussed in notes 2 and 3, respectively, of notes
to our consolidated financial statements. Our primary investing cash
inflow in 2021 was the $65.4 million of proceeds received from the sale
of an unconsolidated operation, as more fully discussed in note 5 of
notes to our consolidated financial statements.
Financing Cash Flow—Net cash associated with financing activities was
a use of cash of $487.2 million in 2022 and a source of cash of $22.0
million and $220.9 million in 2021 and 2020, respectively. The variability
between years is principally a result of changes in our net borrowings,
share repurchase activity and dividends, all as described below.
The following table outlines our net borrowing activities:
Net increase (decrease) in short-term
borrowings
Proceeds from issuance of long-term
debt, net of debt issuance costs
Repayments of long-term debt
Net cash (used in) provided from
net borrowing activities
2022
2021
2020
$ 698.3
$(346.7)
$ 286.5
—
(772.0)
999.6
(257.1)
525.9
(257.7)
$ (73.7 )
$ 395.8
$ 554.7
In 2022, we repaid $772.0 million of long-term debt, including the $750
million, 2.70% notes that matured on August 15, 2022.
In 2021, we borrowed $1,001.5 million under long-term borrowing
arrangements, including net proceeds of $495.7 million of 0.9% notes
due February 2026 and net proceeds of $492.8 million of 1.85% notes
due February 2031. The net proceeds from these issuances were used
to pay down short-term borrowings, including a portion of the $1,443.0
million of commercial paper issued to fund our acquisitions of Cholula
and FONA, and for general corporate purposes. We also repaid $257.1
million of long-term debt, including the $250 million, 3.90% notes that
matured in July 2021.
In 2020, we borrowed $527.0 million under long-term borrowing
arrangements, including net proceeds of $495.0 million of 2.5% notes
due April 2030. We also repaid $257.7 million of long-term debt,
including $250.0 million associated with our term loans due in
August 2022.
The following table outlines the activity in our share repurchase
programs:
Number of shares of common stock
Dollar amount
2022
0.4
$ 38.8
2021
2020
0.1
$ 8.6
0.5
$ 47.3
As of November 30, 2022, $537 million remained of a $600 million
share repurchase program that was authorized by our Board of
Directors in November 2019. The timing and amount of any shares
repurchased is determined by our management based on its evaluation
of market conditions and other factors. Our share repurchase activity
in 2022, 2021, and 2020 has principally been executed in order to
mitigate the effect of shares issued upon the exercise of stock options.
During 2022, 2021 and 2020, we received proceeds of $41.4 million,
$13.5 million and $56.6 million, respectively, from exercised stock
options. We repurchased $19.4 million, $15.4 million and $13.0 million
of common stock during 2022, 2021 and 2020, respectively, in
conjunction with employee tax withholding requirements associated
with our stock compensation plans.
Our dividend history over the past three years is as follows:
Total dividends paid
Dividends paid per share
Percentage increase per share
2022
2021
2020
$396.7
1.48
8.8%
$363.3
1.36
9.7%
$330.1
1.24
8.8%
In November 2022, the Board of Directors approved a 5.4% increase in
the quarterly dividend from $0.37 to $0.39 per share.
Most of our cash is in our subsidiaries outside of the U.S. We
manage our worldwide cash requirements by considering available
funds among the many subsidiaries through which we conduct our
business and the cost effectiveness with which those funds can
be accessed. Those balances are generally available without legal
restrictions to fund ordinary business operations, capital projects and
future acquisitions. As of November 30, 2022, we have $1.4 billion of
earnings from our non-U.S. subsidiaries and joint ventures that are
considered indefinitely reinvested. We have not provided any deferred
taxes with respect to items such as foreign withholding taxes, other
income taxes, or foreign exchange gains or losses. It is not practicable
for us to determine the amount of unrecognized tax expense on these
reinvested international earnings.
At November 30, 2022, we temporarily used $191.0 million of cash
from our non-U.S. subsidiaries to pay down short-term debt in the U.S.
During the year, our short-term borrowings vary, but are lower at the
end of a year or quarter. The average short-term borrowings outstand-
ing for the years ended November 30, 2022 and 2021 were $1,117.0
million and $1,029.9 million, respectively. Those average short-term
borrowings outstanding for the year ended November 30, 2022
included average commercial paper borrowings of $1,080.4 million.
The total average debt outstanding for the years ended November 30,
2022 and 2021 was $5,422.0 million and $5,574.5 million, respectively.
Credit and Capital Markets—The following summarizes the more
significant impacts of credit and capital markets on our business:
CREDIT FACILITIES—Cash flows from operating activities are our
primary source of liquidity for funding growth, share repurchases, divi-
dends and capital expenditures. We also rely on our revolving credit
facilities, or borrowings backed by these facilities, to fund working
capital needs and other general corporate requirements.
Our committed revolving credit facilities include a five-year $1.5 billion
revolving credit facility, which will expire in June 2026 and a 364-day
$500 million revolving credit facility, which was entered into in July
2022 and will expire in July 2023. The current pricing for the five-year
credit facility, on a fully drawn basis, is LIBOR plus 1.25%. The pricing
of that credit facility is based on a credit rating grid that contains a
fully drawn maximum pricing of the credit facility equal to LIBOR plus
1.75%. The current pricing for the 364-day credit facility, on a fully
drawn basis, is SOFR plus 1.23%. The pricing of that credit facility
is based on a credit rating grid that contains a fully drawn maximum
pricing of the credit facility equal to SOFR plus 1.60%.
The provisions of each revolving credit facility restrict subsidiary
indebtedness and require us to maintain a minimum interest coverage
ratio. We do not expect that this covenant would limit our access to
either revolving credit facilities for the foreseeable future. The terms
of those revolving credit facilities are more fully described in note 6 of
the notes to the consolidated financial statements.
We generally use our revolving credit facilities to support our issuance
of commercial paper. If the commercial paper market is not available
or viable, we could borrow directly under our revolving credit facilities.
These facilities are made available by a syndicate of banks, with
various commitments per bank. If any of the banks in these syndicates
are unable to perform on their commitments, our liquidity could be
impacted, which could reduce our ability to grow through funding of
seasonal working capital. We engage in regular communication with
all banks participating in our credit facilities. During these commu-
nications, none of the banks have indicated that they may be unable
to perform on their commitments. In addition, we periodically review
our banking and financing relationships, considering the stability of
the institutions and other aspects of the relationships. Based on these
communications and our monitoring activities, we believe our banks
will perform on their commitments. In addition to our committed
revolving credit facilities, we have uncommitted facilities of $302.5
million as of November 30, 2022 that can be withdrawn based upon
the lenders’ discretion. See note 6 of notes to our consolidated finan-
cial statements for more details on our financing arrangements.
We will continue to have cash requirements to support seasonal work-
ing capital needs and capital expenditures, to pay interest, to service
debt, and to fund acquisitions. As part of our ongoing operations, we
enter into contractual arrangements that obligate us to make future
cash payments. Our primary obligations include principal and interest
payments on our outstanding short-term borrowings and long-term
debt. In the next year, our most significant debt service obligation is
the maturity of our $250.0 million, 3.50% notes due in September
2023. Also in July 2023, our $500 million, 364-day revolving credit
facility matures. Detail on these contractual obligations follows:
MATERIAL CASH REQUIREMENTS
The following table reflects a summary of our future material cash
requirements as of November 30, 2022:
Less than
1 year
1–3
years
3–5
years
More than
5 years
Total
Short-term borrowings $1,236.7 $1,236.7 $ — $ — $ —
Long-term debt,
including finance
leases
Interest payments (a)
Total contractual cash
obligations
3,981.1
724.5
270.6
110.0
1,066.6
176.9
1,268.8
156.3
1,375.1
281.3
$5,942.3 $1,617.3 $1,243.5 $1,425.1
$ 1,656.4
(a) Interest payments include interest payments on long-term debt. Our
short-term borrowings, principally consisting of commercial paper, have
short-term maturities. We anticipate total interest expense for the year
ending November 30, 2023 to approximate $200 million to $210 million,
which we expect will also approximate cash interest payments for the
same period. See note 6 of notes to our consolidated financial statements
for additional information.
2022 Annual Report 39
Our other cash requirements at year end include raw material
purchases, lease payments, income taxes, and pension and post-
retirement benefits. We acquire various raw materials to satisfy
our obligations to our customers, and these outstanding purchase
obligations can fluctuate throughout the year based on our response
to varying raw material cycles; however, these commitments generally
do not extend past one year. In addition, we also have a series of
commercial commitments, largely consisting of standby letters of
credit. Our standby letters of credit, leases, and pension and other
post retirement obligations are more fully described in notes 6, 7 and
11, respectively, of notes to our consolidated financial statements.
These obligations impact our liquidity and capital resource needs. To
meet those cash requirements, we intend to use our existing cash,
cash equivalents and internally generated funds, to borrow under our
existing credit facilities or under other short-term borrowing facilities,
and depending on market conditions and upon the significance of the
cost of a particular debt maturity or acquisition to our then-available
sources of funds, to obtain additional short- and long-term financing.
We believe that cash provided from these sources will be adequate to
meet our future cash requirements.
PENSION ASSETS AND OTHER INVESTMENTS—We hold
investments in equity and debt securities in both our qualified defined
benefit pension plans and through a rabbi trust for our nonqualified
defined benefit pension plan. Cash contributions to pension plans,
including unfunded plans, were $11.4 million in 2022, $15.0 million in
2021, and $11.9 million in 2020. It is expected that the 2023 total pen-
sion plan contributions will be approximately $13 million. Future
increases or decreases in pension liabilities and required cash contri-
butions are highly dependent upon changes in interest rates and the
actual return on plan assets. We base our investment of plan assets,
in part, on the duration of each plan’s liabilities. Across all of our
qualified defined benefit pension plans, approximately 55% of assets
are invested in equities, 32% in fixed income investments and 13% in
other investments. Assets associated with our nonqualified defined
benefit pension plan are primarily invested in corporate-owned life
insurance, the value of which approximates an investment mix of 60%
in equities and 40% in fixed income investments. See note 11 of
notes to our consolidated financial statements, which provides details
on our pension funding.
CUSTOMERS AND COUNTERPARTIES—See the subsequent
section of this discussion under the heading “Market Risk Sensitivity—
Credit Risk.”
ACQUISITIONS
Acquisitions are part of our strategy to increase sales and profits.
On December 30, 2020, we purchased FONA. The purchase price was
approximately $708 million, net of cash acquired. 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. Our acquisition of FONA expands the
breadth of our flavor solutions segment into attractive categories, as
well as extends our technology platform and strengthens our capabili-
ties. The acquisition was funded with cash and short-term borrowings.
The results of FONA’s operations have been included in our financial
statements as a component of our flavor solutions segment from the
date of acquisition.
40 McCormick & Company, Inc.
On November 30, 2020, we purchased Cholula for approximately $801
million, net of cash acquired. The acquisition was funded with cash
and short-term borrowings. Cholula, a premium Mexican hot sauce
brand, is a strong addition to our global branded flavor portfolio,
which broadens our offerings in the high growth hot sauce category to
consumers and foodservice operators and accelerates our condiment
growth opportunities with a complementary authentic Mexican flavor
hot sauce. 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.
See note 2 of notes to our consolidated financial statements for further
details regarding these acquisitions.
PERFORMANCE GRAPH—SHAREHOLDER RETURN
The following line graph compares the yearly change in McCormick’s
cumulative total shareholder return (stock price appreciation plus
reinvestment of dividends) on McCormick’s Non-Voting Common Stock
with (1) the cumulative total return of the Standard & Poor’s 500 Stock
Price Index, assuming reinvestment of dividends, and (2) the cumu-
lative total return of the Standard & Poor’s Packaged Foods & Meats
Index, assuming reinvestment of dividends.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among McCormick & Co., Inc., the S&P 500 Index
and the S&P Packaged Foods & Meats Index
$250
$200
$150
$100
$50
$0
11/17
11/18
11/19
11/20
11/21
11/22
McCormick & Co., Inc.
S&P 500
S&P Packaged Foods & Meats
*$100 invested on 11/30/17 in stock or index, including reinvestment of dividends.
Fiscal year ending November 30.
Copyright© 2022 Standard & Poor’s, a division of S&P Global. All rights reserved.
MARKET RISK SENSITIVITY
We utilize derivative financial instruments to enhance our ability to
manage risk, including foreign exchange and interest rate exposures,
which exist as part of our ongoing business operations. We do not
enter into contracts for trading purposes, nor are we a party to any
leveraged derivative instrument. The use of derivative financial
instruments is monitored through regular communication with senior
management and the utilization of written guidelines. The information
presented below should be read in conjunction with notes 6 and 8 of
notes to our consolidated financial statements.
Foreign Exchange Risk—We are exposed to fluctuations in foreign
currency in the following main areas: cash flows related to raw material
purchases; the translation of foreign currency earnings to U.S. dollars;
the effects of foreign currency on loans between subsidiaries and uncon-
solidated affiliates and on cash flows related to repatriation of earnings
of unconsolidated affiliates. Primary exposures include the U.S. dollar
versus the Euro, British pound sterling, Chinese renminbi, Canadian
dollar, Australian dollar, Polish zloty, Singapore dollar, Swiss franc, and
Mexican peso, as well as the Euro versus the British pound sterling,
Australian dollar, and Polish zloty, and finally the Canadian dollar versus
British pound sterling. We routinely enter into foreign currency exchange
contracts to manage certain of these foreign currency risks.
During 2022, the foreign currency translation component in other com-
prehensive income was principally related to the impact of exchange
rate fluctuations on our net investments in our subsidiaries with a
functional currency of the British pound sterling, Euro, Polish zloty,
Chinese renminbi, Australian dollar, Canadian dollar and Mexican peso.
We also utilize cross currency interest rate swap contracts, which
are designated as net investment hedges, to manage the impact of
exchange rate fluctuations on our net investments in subsidiaries with
a functional currency of the British pound sterling and Euro. Gains and
losses on these instruments are included in foreign currency transla-
tion adjustments in accumulated other comprehensive income (loss).
The following table summarizes the foreign currency exchange
contracts held at November 30, 2022. All contracts are valued in U.S.
dollars using year-end 2022 exchange rates and have been designated
as hedges of foreign currency transactional exposures, firm commit-
ments or anticipated transactions.
FOREIGN CURRENCY EXCHANGE CONTRACTS AT
NOVEMBER 30, 2022
Currency sold
Currency received
Average
contractual
exchange
rate
Notional
value
British pound sterling
Swiss franc
Canadian dollar
Euro
Polish zloty
U.S. dollar
U.S. dollar
U.S. dollar
U.S. dollar
Australian dollar
Polish zloty
Canadian dollar
British pound sterling
U.S. dollar
U.S. dollar
U.S. dollar
U.S. dollar
U.S. dollar
U.S. dollar
Australian dollar
Singapore dollar
British pound sterling
Euro
Euro
Euro
British pound sterling
Euro
Thai baht
$89.9
69.6
70.4
49.0
9.8
55.2
44.5
30.4
34.0
22.2
14.1
28.8
23.9
7.2
1.28
0.93
1.33
1.05
4.67
0.67
1.38
1.20
1.04
1.49
4.89
1.54
0.86
36.71
Fair
value
$ 6.0
(0.2)
1.1
0.2
(0.1)
—
0.2
(0.3)
(0.3)
0.8
(0.1)
1.5
0.3
0.4
We had a number of smaller contracts at November 30, 2022 with an
aggregate notional value of $11.5 million to purchase or sell other cur-
rencies, such as the Romanian leu. The aggregate fair value of these
contracts was insignificant at November 30, 2022.
At November 30, 2021, we had foreign currency exchange contracts
for the Euro, British pound sterling, Canadian dollar, Australian dollar,
Polish zloty, Swiss franc and other currencies, with a notional value of
$583.6 million. The aggregate fair value of these contracts was a gain
of $5.5 million at November 30, 2021.
We also utilized cross currency interest rate swap contracts that are
considered net investment hedges.
As of November 30, 2022 and 2021, 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 SONIA plus 0.859% and (ii) £194.1 million
notional value to receive £194.1 million at three-month GBP SONIA
plus 0.859% and pay €221.8 million at three-month Euro EURIBOR
plus 0.808%. These cross-currency interest rate swap contracts expire
in August 2027. In conjunction with the phase-out of LIBOR, during
2022 we amended the terms of this cross currency swaps such that,
effective February 15, 2022, we now pay and receive at GBP SONIA
plus 0.859% (previously GBP LIBOR plus 0.740%).
As of November 30, 2022, we also had cross currency interest rate
swap contracts of (i) $250 million notional value to receive $250
million at USD SOFR plus 0.684% and pay £184.1 million at GBP
SONIA plus 0.5740% and (ii) £184.1 million notional value to receive
£184.1 million at GBP SONIA plus 0.574% and pay €219.2 million at
Euro ESTR plus 0.667%. These contracts expire in April 2030.
Interest Rate Risk—Our policy is to manage interest rate risk by
entering into both fixed and variable rate debt arrangements. We are
exposed to interest rate volatility, with primary exposures related to
movements in U.S. Treasury rates, London Interbank Offered Rates
(LIBOR), Secured Overnight Financing Rate (SOFR), and commercial
paper rates. The phase out of LIBOR reference rates will occur at
different dates and began on January 1, 2022. Arrangements that
were entered into during the year ended November 30, 2022, including
our $500 million 364-day revolving credit facility expiring in July
2023, fixed to variable interest rate swaps expiring in April 2030, and
cross-currency interest rate swaps expiring in April 2030, no longer
use LIBOR as a reference rate. However, LIBOR continues to be the
reference rate for our variable rate debt, including our $1.5 billion
five-year revolving credit facility expiring in July 2026, interest rate
swaps expiring in November 2025 and August 2027, and the cross-
currency interest rate swaps expiring in August 2027. Through the year
ended November 30, 2022, there was no material impact to our con-
solidated financial statements as a result of the LIBOR phase-out, nor
do we expect it to have a material impact on our consolidated financial
statements during the duration of the LIBOR transition period.
We also use interest rate swaps to minimize financing costs and
to achieve a desired mix of fixed and variable rate debt. The table
that follows provides principal cash flows and related interest rates,
excluding the effect of interest rate swaps and the amortization of
any discounts or fees, by fiscal year of maturity at November 30,
2022. For foreign currency-denominated debt, the information is
presented in U.S. dollar equivalents. Variable interest rates are based
on the weighted-average rates of the portfolio at the end of the year
presented.
2022 Annual Report 41
YEARS OF MATURITY AT NOVEMBER 30, 2022
Debt
Fixed rate
Average interest rate
Variable rate
Average interest rate
2023
2024
2025
2026
Thereafter
Total
Fair value
$ 257.4
3.50%
$1,249.9
4.20%
$763.1
3.50%
$ 33.8
1.85%
$258.7
3.25%
$ 11.0
1.84%
$509.2
0.94%
$ —
—
$2,134.7
1.74%
$ 3,923.1
—
$ — $ 1,294.7
—
—
$3,542.9
$1,294.7
The table above displays the debt, including finance leases, by the terms of the original debt instrument without consideration of fair value, interest rate swaps and
any loan discounts or origination fees. Interest rate swaps have the following effects:
• We issued $250 million of 3.50% notes due in 2023 in August 2013. Forward treasury lock agreements settled upon issuance of these notes effectively set the
interest rate on these notes at a weighted-average fixed rate of 3.30%.
• We issued $250 million of 3.25% notes due in 2025 in November 2015. Forward treasury lock agreements settled upon issuance of these notes effectively set
the interest rate on these notes at a weighted-average fixed rate of 3.45%. The fixed interest rate on $100 million of the 3.25% notes due in December 2025
was effectively converted to a variable rate by interest rate swaps through the notes maturity in 2025. Net interest payments are based on 3-month LIBOR plus
1.22% with an effective variable rate of 5.83% as of November 30, 2022.
• We issued $750 million of 3.40% notes due August 15, 2027 in August 2017. Forward treasury lock agreements settled upon issuance of these notes effectively
set the interest rate on these $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
August 2027 was effectively converted to a variable rate by interest rate swaps through the notes maturity in 2027. Net interest payments are based on 3-month
LIBOR plus 0.685% with an effective variable rate of 5.29% as of November 30, 2022.
• We issued $500 million of 2.50% notes due April 15, 2030. Forward treasury lock agreements settled upon issuance of these notes effectively set the interest
rate on these $500 million notes at a weighted-average fixed rate of 2.62%. The fixed interest rate on $250 million of the 2.50% notes due in April 2030 was
effectively converted to a variable rate by interest rate swaps through the notes maturity in 2030. Net interest payments are based on USD SOFR plus 0.684%
with an effective variable rate of 4.94% as of November 30, 2022.
Commodity Risk—We purchase certain raw materials which are
subject to price volatility caused by weather, market conditions,
growing and harvesting conditions, governmental actions and other
factors beyond our control. In 2022, our most significant raw materials
were dairy products, pepper, onion, capsicums (red peppers and
paprika), garlic, wheat products, vegetable oils, and vanilla. While
future movements of raw material costs are uncertain, we respond to
this volatility in a number of ways, including strategic raw material
purchases, purchases of raw material for future delivery and customer
price adjustments. We generally have not used derivatives to manage
the volatility related to this risk.
Credit Risk—The customers of our consumer segment are predom-
inantly food retailers and food wholesalers. Consolidations in these
industries have created larger customers. In addition, competition
has increased with the growth in alternative channels including mass
merchandisers, dollar stores, warehouse clubs, discount chains and
e-commerce. This has caused some customers to be less profitable
and increased our exposure to credit risk. Some of our customers and
counterparties are highly leveraged. We continue to closely monitor
the credit worthiness of our customers and counterparties. We feel
that the allowance for doubtful accounts properly recognizes trade
receivables at realizable value. We consider nonperformance credit
risk for other financial instruments to be insignificant.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
New accounting pronouncements are issued periodically that affect
our current and future operations. See note 1 of notes to our consoli-
dated financial statements for further details of these impacts.
CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
In preparing the financial statements, we are required to make estimates
and assumptions that have an impact on the assets, liabilities, revenue
and expenses reported. These estimates can also affect supplemental
information disclosed by us, including information about contingencies,
risk and financial condition. We believe, given current facts and
circumstances, our estimates and assumptions are reasonable, adhere
to U.S. GAAP and are consistently applied. Inherent in the nature of an
estimate or assumption is the fact that actual results may differ from
estimates, and estimates may vary as new facts and circumstances
arise. In preparing the financial statements, we make routine estimates
and judgments in determining the net realizable value of accounts
receivable, inventory, fixed assets and prepaid allowances. Our most
critical accounting estimates and assumptions, which are those that
have or are reasonably likely to have a material impact on our financial
condition or results of operations, are in the following areas:
Customer Contracts
In several of our major geographic markets, the consumer segment
sells our products by entering into annual or multi-year customer
arrangements. 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 current
expectations regarding what was earned through these programs as of
the balance sheet date. 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. Certain of our customer arrangements are
annual arrangements such that the degree of estimates that affects
revenue reduces as a year progresses. We do not believe that there will
be significant changes to our estimates of customer consideration when
any uncertainties are resolved with customers.
Business Combinations, Goodwill and Intangible Asset
Valuation
We use the acquisition method in accounting for acquired businesses.
Under the acquisition method, our financial statements reflect the
operations of an acquired business starting from the closing of the
acquisition. The assets acquired and liabilities assumed are recorded at
42 McCormick & Company, Inc.
their respective estimated fair values at the date of the acquisition. Any
excess of the purchase price over the estimated fair values of the identi-
fiable net assets acquired is recorded as goodwill. Significant judgment
is often required in estimating the fair value of assets acquired,
particularly intangible assets. We generally obtain the assistance of
a third-party valuation specialist in estimating fair values of tangible
and intangible assets. The fair value estimates are based on available
historical information and on expectations and assumptions about
the future, considering the perspective of marketplace participants.
While management believes those expectations and assumptions are
reasonable, they are inherently uncertain. Unanticipated market or
macroeconomic events and circumstances may occur, which could affect
the accuracy or validity of the estimates and assumptions.
Determining the useful lives of intangible assets also requires
judgment. Certain brand intangibles are expected to have indefinite
lives based on their history and our plans to continue to support and
build the acquired brands, while other acquired intangible assets (e.g.,
customer relationships) are expected to have determinable useful lives.
Our estimates of the useful lives of definite-lived intangible assets
are primarily based upon historical experience, the competitive and
macroeconomic environment, and our operating plans. The costs of
definite-lived intangibles are amortized to expense over their estimated
life. We review the carrying value of goodwill and non-amortizable
intangible assets and conduct tests of impairment on an annual
basis as described below. We also test 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. We test indefinite-lived
intangible assets for impairment if events or changes in circumstances
indicate that the asset might be impaired.
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, as more fully described
in note 1 of notes to our consolidated financial statements. While we
believe those estimates and assumptions are reasonable, they are
inherently uncertain. Unanticipated market or macroeconomic events
and circumstances may occur, which could affect the accuracy or
validity of the estimates and assumptions.
Goodwill Impairment
Our reporting units are the same as our operating segments. Deter-
mining the fair value of a reporting unit is judgmental in nature and
involves the use of significant estimates and assumptions, as more
fully described in note 1 to our consolidated financial statements. We
estimate the fair value of a reporting unit by using a discounted cash
flow model. Our discounted cash flow model calculates fair value by
present valuing future expected cash flows of our reporting units using
a market-based discount rate. We then compare this fair value to the
carrying amount of the reporting unit, including intangible assets and
goodwill. An impairment charge would be recognized to the extent that
the carrying amount of the reporting unit exceeds the estimated fair
value of the reporting unit. The quantitative goodwill impairment test
requires an entity to compare the fair value of each reporting unit with
its carrying amount. As of November 30, 2022, we had $5,212.9 million
of goodwill recorded in our balance sheet ($3,568.2 million in the con-
sumer segment and $1,644.7 million in the flavor solutions segment).
Our fiscal year 2022 impairment testing indicated that the estimated
fair values of our reporting units were significantly in excess of their
carrying values. Accordingly, we believe that only significant changes in
the cash flow assumptions would result in an impairment of goodwill.
However, variances between the actual performance of the businesses
and the assumptions that were used in developing the estimates of fair
value could result in impairment charges in future periods.
Indefinite-lived Intangible Asset Impairment
Our indefinite-lived intangible assets consist of brand names and
trademarks. We estimate fair values through the use of the relief-
from-royalty method and then compare those fair values to the related
carrying amounts of the indefinite-lived intangible asset. In the event
that the fair value of any of the brand names or trademarks are less
than their related carrying amounts, a non-cash impairment loss would
be recognized in an amount equal to the difference.
The estimation of fair values of our brand names and trademarks
requires us to make significant assumptions, including expectations
with respect to sales and profits of the respective brands and trade-
marks, related royalty rates, income tax rates and appropriate discount
rates, which are based, in part, upon current interest rates adjusted
for our view of reasonable country- and brand-specific risks based
upon the past and anticipated future performance of the related brand
names and trademarks. The assumptions used to assess impairment
consider historical trends, macroeconomic conditions, and projections
consistent with our operating strategy. Changes in these estimates can
have a significant impact on the assessment of fair value which could
result in material impairment losses.
As of November 30, 2022, we had $3,043.4 million of brand names
assets and trademarks recognized in our consolidated balance sheet,
and none of the balances exceeded their estimated fair values at that
date. Of the $3,043.4 million of brand names assets and trademarks as
of November 30, 2022: (i) $2,320.0 million relates to the French’s, Frank’s
RedHot and Cattlemen’s brand names and trademarks, recognized as
part of our acquisition of RB Foods in August 2017, that we group for
purposes of our impairment analysis; (ii) $380.0 million relates to the
Cholula brand names and trademarks associated with the acquisition of
Cholula in November 2020, (iii) $49.0 million relates to the FONA brand
names and trademarks associated with the acquisition of FONA in
December 2020 and (iv) the remaining $294.4 million represents a num-
ber of other brand name assets and trademarks with individual carrying
values ranging from $0.2 million to $106.4 million. Except for four brand
names assets and trademarks with a carrying value of approximately
$460 million, including our recent acquisitions of Cholula and FONA, the
percentage excess of estimated fair value over respective book values
for each of our brand names and trademarks, was 20% or more as of
our fourth quarter annual impairment assessment.
The brand names and trademarks related to recent acquisitions,
including our recent acquisitions of Cholula and FONA, may be more
susceptible to future impairment as their carrying values represent
recently determined fair values. A change in assumptions with
respect to recently acquired businesses, including those affected by
rising interest rates or a deterioration in expectations of future sales,
profitability or royalty rates as well as future economic and market
conditions, or higher income tax rates, could result in non-cash
impairment losses in the future.
2022 Annual Report 43
Income Taxes
We estimate income taxes and file tax returns in each of the taxing
jurisdictions in which we operate and are required to file a tax return.
At the end of each year, an estimate for income taxes is recorded in
the financial statements. Tax returns are generally filed in the third or
fourth quarter of the subsequent year. A reconciliation of the estimate
to the final tax return is done at that time, which will result in changes
to the original estimate. We believe that our tax return positions are
appropriately supported, but tax authorities can challenge certain
of our tax positions. We evaluate our uncertain tax positions in
accordance with the GAAP guidance for uncertainty in income taxes.
We recognize a tax benefit when it is more likely than not the position
will be sustained upon examination, based on its technical merits.
The tax position is then measured at the largest amount of benefit
that is greater than 50 percent likely of being realized upon ultimate
settlement. A change in judgment related to the expected ultimate
resolution of uncertain tax positions will be recognized in earnings in
the quarter of such change. We believe that our reserve for uncertain
tax positions, including related interest and penalties, is adequate. As
of November 30, 2022, the Company had $29.6 million of unrecognized
tax benefits, including interest and penalties, recorded in Other long-
term liabilities. The amounts ultimately paid upon resolution of audits
could be materially different from the amounts previously included in
our income tax expense and, therefore, could have a material impact
on our tax provision, net income and cash flows. We have recorded
valuation allowances to reduce our deferred tax assets to the amount
that is more likely than not to be realized. In doing so, we have consid-
ered future taxable income and tax planning strategies in assessing
the need for a valuation allowance. Both future taxable income and
tax planning strategies include a number of estimates, as more fully
described in note 1 of notes to our consolidated financial statements.
Pension Benefits
Pension plans’ costs require the use of assumptions for discount rates,
investment returns, projected salary increases, and mortality rates. The
actuarial assumptions used in our pension benefit reporting are reviewed
annually and compared with external benchmarks to ensure that they
appropriately account for our future pension benefit obligations. While
we believe that the assumptions used are appropriate, changes in
various assumptions and differences between the actual returns on plan
assets and the expected returns on plan assets and changes to projected
future rates of return on plan assets will affect the amount of pension
expense or income ultimately recognized. A 1% increase or decrease
in the actuarial assumption for the discount rate would impact 2023
pension benefit expense by approximately $0.4 million. A 1% increase
or decrease in the expected return on plan assets would impact 2023
pension expense by approximately $9.8 million.
We will continue to evaluate the appropriateness of the assump-
tions used in the measurement of our pension benefit obligations. In
addition, see note 11 of notes to our consolidated financial statements
for a discussion of these assumptions and the effects on the financial
statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
This information is set forth in the “Market Risk Sensitivity” section
of “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” and in note 8 of our notes to consolidated
financial statements.
44 McCormick & Company, Inc.
Our internal control over financial reporting as of November 30, 2022
has been audited by Ernst & Young LLP.
Lawrence E. Kurzius
Chairman &
Chief Executive Officer
Michael R. Smith
Executive Vice President &
Chief Financial Officer
Gregory P. Repas
Vice President & Controller
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF MANAGEMENT
We are responsible for the preparation and integrity of the consol-
idated 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, evalua-
tion 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, 2022.
2022 Annual Report 45
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, 2022, 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, 2022, 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, 2022
and 2021, 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, 2022, and the related notes and the financial statement
schedule listed in the Index at item 15(2) and our report dated January
26, 2023 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 account-
ing principles. A company’s internal control over financial report-
ing 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 detec-
tion 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 26, 2023
46 McCormick & Company, Inc.
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, 2022 and 2021, 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, 2022, 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, 2022
and 2021, and the results of its operations and its cash flows for each
of the three years in the period ended November 30, 2022, in conformi-
ty 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,
2022, 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 26, 2023 expressed an unqualified opinion thereon.
Basis for Opinion
These 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 Matter
The critical audit matter communicated below is a matter arising from
the current period audit of the financial statements that was communi-
cated or required to be communicated to the audit committee and that:
(1) relates to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective or
complex judgments. The communication of the critical audit matter
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 matter below, providing a separate opinion on the critical
audit matter or on the account or disclosures to which it relates.
2022 Annual Report 47
Valuation of Indefinite-lived Intangible Assets
Description of
the Matter
At November 30, 2022, the Company’s indefinite-lived intangible assets consist of brand names and trademarks with an aggregate
carrying value of approximately $3.0 billion. As explained in Note 1 to the consolidated financial statements, these assets
are assessed for impairment at least annually using the relief-from-royalty methodology to determine their fair values. If the fair
value of any brand name or trademark is less than its carrying amount, an impairment loss is recognized in an amount equal to the
difference.
Auditing the Company’s impairment assessments is 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 impairment assessment, 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 method-
ologies, 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 net sales by comparing the current year actual net sales for certain brand names or trademarks to the estimates made in
the Company’s prior year impairment assessment. We also performed sensitivity analyses of certain significant assumptions to
evaluate the potential change in the fair values of the brand names and trademarks resulting from hypothetical changes in under-
lying assumptions. We used an internal valuation specialist to assist in our evaluation of the methodologies used and significant
assumptions and inputs used by the Company to determine the estimated fair value of certain brand names and trademarks.
We have served as the Company’s auditor since 1982.
Baltimore, Maryland
January 26, 2023
48 McCormick & Company, Inc.
CONSOLIDATED INCOME STATEMENTS
for the year ended November 30 (millions except per share data)
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expense
Transaction and integration expenses
Special charges
Operating income
Interest expense
Other income, net
Income from consolidated operations before income taxes
Income tax expense
Net income from consolidated operations
Income from unconsolidated operations
Net income
Earnings per share–basic
Earnings per share–diluted
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
for the year ended November 30 (millions)
Net income
Net income attributable to non-controlling interest
Other comprehensive income (loss):
Unrealized components of pension and other postretirement plans
Currency translation adjustments
Change in derivative financial instruments
Deferred taxes
Total other comprehensive income (loss)
Comprehensive income
See Notes to Consolidated Financial Statements.
2022
$ 6,350.5
4,076.0
2,274.5
1,357.1
2.2
51.6
863.6
149.1
98.3
812.8
168.6
644.2
37.8
$ 682.0
$ 2.54
$ 2.52
2022
$ 682.0
6.2
149.2
(161.8)
3.3
(46.8)
(56.1)
2021
$ 6,317.9
3,823.3
2,494.6
1,404.1
29.0
46.4
1,015.1
136.6
17.3
895.8
192.7
703.1
52.2
$ 755.3
$ 2.83
$ 2.80
2021
$ 755.3
8.0
134.8
(68.8)
1.1
(30.2)
36.9
2020
$ 5,601.3
3,300.9
2,300.4
1,281.6
12.4
6.9
999.5
135.6
17.6
881.5
174.9
706.6
40.8
$ 747.4
$ 2.80
$ 2.78
2020
$ 747.4
4.3
(80.4)
89.7
(0.9)
18.1
26.5
$ 632.1
$ 800.2
$ 778.2
2022 Annual Report 49
CONSOLIDATED BALANCE SHEETS
at November 30 (millions)
Assets
Cash and cash equivalents
Trade accounts receivable, net of allowances
Inventories
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net
Goodwill
Intangible assets, net
Other long-term assets
Total assets
Liabilities
Short-term borrowings
Current portion of long-term debt
Trade accounts payable
Other accrued liabilities
Total current liabilities
Long-term debt
Deferred taxes
Other long-term liabilities
Total liabilities
Shareholders’ equity
Common stock; authorized 640.0 shares; issued and outstanding:
2022–17.4 shares, 2021–17.8 shares
Common stock non-voting; authorized 640.0 shares; issued and outstanding:
2022–250.6 shares, 2021–249.5 shares
Retained earnings
Accumulated other comprehensive loss
Total McCormick shareholders’ equity
Non-controlling interests
Total shareholders’ equity
Total liabilities and shareholders’ equity
See Notes to Consolidated Financial Statements.
2022
2021
$ 334.0
573.7
1,340.1
138.9
2,386.7
1,198.0
5,212.9
3,387.9
939.4
$ 351.7
549.5
1,182.3
112.3
2,195.8
1,140.3
5,335.8
3,452.5
781.4
$13,124.9
$12,905.8
$ 1,236.7
270.6
1,171.0
754.1
3,432.4
3,642.3
866.3
484.7
8,425.7
$ 539.1
770.3
1,064.2
850.2
3,223.8
3,973.3
792.3
490.9
8,480.3
568.6
530.0
1,570.0
3,022.5
(480.6)
4,680.5
18.7
4,699.2
1,525.1
2,782.4
(426.5)
4,411.0
14.5
4,425.5
$13,124.9
$12,905.8
50 McCormick & Company, Inc.
CONSOLIDATED CASH FLOW STATEMENTS
for the year ended November 30 (millions)
2022
2021
2020
Operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Stock-based compensation
Gain on the sale of a business and intangible asset
Asset impairments included in special charges
Amortization of inventory fair value adjustments associated with acquisitions
(Gain) loss on sale of assets
Deferred income tax expense (benefit)
Income from unconsolidated operations
Changes in operating assets and liabilities (net of effect of businesses
acquired and disposed):
Trade accounts receivable
Inventories
Trade accounts payable
Other assets and liabilities
Dividends received from unconsolidated affiliates
Net cash provided by operating activities
Investing activities
Acquisitions of businesses (net of cash acquired)
Proceeds from sale of business
Proceeds from sale of unconsolidated operation
Proceeds from sale of intangible asset
Capital expenditures (including expenditures for capitalized software)
Other investing activities
Net cash used in investing activities
Financing activities
Short-term borrowings (repayments), net
Proceeds from issuances of long-term debt
Payment of debt issuance costs
Long-term debt repayments
Proceeds from exercised stock options
Taxes withheld and paid on employee stock awards
Common stock acquired by purchase
Dividends paid
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
See Notes to Consolidated Financial Statements.
$ 682.0
$ 755.3
$ 747.4
200.6
60.3
(63.2)
10.0
—
(0.5)
21.8
(37.8)
(45.8)
(205.3)
125.3
(129.9)
34.0
651.5
—
95.2
—
13.6
(262.0)
6.8
(146.4)
698.3
—
—
(772.0)
41.4
(19.4)
(38.8)
(396.7)
(487.2)
(35.6)
(17.7)
351.7
186.3
66.6
—
17.2
6.3
0.2
36.0
(52.2)
(22.6)
(153.7)
34.9
(81.4)
35.4
828.3
(706.4)
—
65.4
—
(278.0)
10.4
(908.6)
(346.7)
1,001.5
(1.9)
(257.1)
13.5
(15.4)
(8.6)
(363.3)
22.0
(13.6)
(71.9)
423.6
165.0
46.0
—
—
—
3.0
(11.2)
(40.8)
4.8
(200.2)
164.2
133.8
29.3
1,041.3
(803.0)
—
—
—
(225.3)
2.7
(1,025.6)
286.5
527.0
(1.1)
(257.7)
56.6
(13.0)
(47.3)
(330.1)
220.9
31.6
268.2
155.4
$ 334.0
$ 351.7
$ 423.6
2022 Annual Report 51
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Common
Stock
Shares
Common
Stock
Non-Voting
Shares
Common
Stock
Amount
18.6
247.2
$1,888.6
Accumulated
Other
Comprehensive
(Loss) Income
Non-controlling
Interests
Total
Shareholders’
Equity
Retained
Earnings
$2,055.8
747.4
—
—
(338.5)
—
(49.1)
—
—
$2,415.6
755.3
—
—
(371.5)
—
(17.0)
—
—
—
—
—
—
46.0
(13.6)
60.3
—
$1,981.3
—
—
—
—
66.6
(7.8)
15.0
—
$ (500.2)
—
—
29.4
—
—
—
—
—
$ (470.8)
—
—
44.3
—
—
—
—
—
249.5
$2,055.1
$2,782.4
$ (426.5)
—
—
—
60.3
(20.0)
43.2
—
682.0
—
—
(402.3)
—
(39.6)
—
—
—
—
(54.1)
—
—
—
—
—
—
—
1.1
(0.3)
1.6
(1.9)
18.0
(0.2)
—
1.9
248.9
—
—
0.6
(0.3)
0.7
(0.6)
17.8
(0.7)
1.4
(1.1)
17.4
$ 12.5
—
4.3
(2.9)
—
—
—
—
—
$ 13.9
—
8.0
(7.4)
—
—
—
—
—
$ 14.5
—
6.2
(2.0)
—
—
—
—
—
$ 3,456.7
747.4
4.3
26.5
(338.5)
46.0
(62.7)
60.3
—
$ 3,940.0
755.3
8.0
36.9
(371.5)
66.6
(24.8)
15.0
—
$ 4,425.5
682.0
6.2
(56.1)
(402.3)
60.3
(59.6)
43.2
—
250.6
$2,138.6
$3,022.5
$ (480.6)
$ 18.7
$ 4,699.2
(millions)
Balance, November 30, 2019
Net income
Net income attributable to non-controlling interest
Other comprehensive income (loss), net of tax
Dividends
Stock-based compensation
Shares purchased and retired
Shares issued
Equal exchange
Balance, November 30, 2020
Net income
Net income attributable to non-controlling interest
Other comprehensive income (loss), net of tax
Dividends
Stock-based compensation
Shares purchased and retired
Shares issued
Equal exchange
Balance, November 30, 2021
Net income
Net income attributable to non-controlling interest
Other comprehensive loss, net of tax
Dividends
Stock-based compensation
Shares purchased and retired
Shares issued
Equal exchange
Balance, November 30, 2022
See Notes to Consolidated Financial Statements.
52 McCormick & Company, Inc.
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
from 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 income.
Our unconsolidated affiliates located outside the U.S. generally use
their local currencies as their functional currencies. The asset and lia-
bility accounts of those unconsolidated affiliates are translated at the
rates of exchange at the balance sheet date, with the resultant transla-
tion 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 comprehen-
sive 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, or
a gain or loss associated with the sale of our ownership interest in 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 state-
ments 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 depreci-
ated 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 15 years for machinery, equipment and other
assets. Assets leased under finance leases are depreciated over the
shorter of the lease term or their estimated 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 $160.6 million and
$141.1 million at November 30, 2022 and 2021, respectively. Capitalized
software is classified within “Other long-term assets” in the consol-
idated balance sheet. Software is amortized using the straight-line
method over estimated useful lives ranging from 3 to 13 years, but not
exceeding the expected life of the product.
Goodwill and Other Intangible Assets
We review the carrying value of goodwill and indefinite-lived intan-
gible 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 estimate the 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. An impairment charge would be
recognized to the extent that the carrying amount of the reporting unit
exceeds the estimated fair value of the reporting unit.
Indefinite-lived Intangible Asset Impairment
Our indefinite-lived intangible assets consist of acquired brand names
and trademarks. We estimate 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 estimated fair value, an
impairment charge would be recorded to the extent the recorded
indefinite-lived intangible asset exceeds the fair value.
2022 Annual Report 53
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.
sales, value added and other excise taxes are excluded from net sales.
We account for product shipping and handling activities that occur
before the customer has obtained control of a good as fulfillment activ-
ities (i.e., an expense) rather than as a promised service with costs for
these activities recorded within Cost of goods sold. We expense any
incremental costs of obtaining a contract when the contract is for a
period of one year or less.
Leases
We determine whether a contract is or contains a lease at contract
inception based on the presence of identified assets and our right
to obtain substantially all the economic benefit from or to direct the
use of such assets. When we determine a lease exists, we record a
right-of-use (“ROU”) asset and corresponding lease liability on our
consolidated balance sheet. ROU assets represent our right to use
an underlying asset for the lease term. Lease liabilities represent our
obligation to make lease payments arising from the lease. ROU assets
are recognized at the lease commencement date at the value of the
lease liability and are adjusted for any prepayments, lease incentives
received, and initial direct costs incurred. Lease liabilities are recog-
nized at the lease commencement date based on the present value of
remaining lease payments over the lease term. As the discount rate
implicit in the lease is not readily determinable in most of our leases,
we use our incremental borrowing rate based on the information
available at the lease commencement date in determining the present
value of lease payments. Our lease terms include options to extend
or terminate the lease when it is reasonably certain that we will
exercise that option. We do not record lease contracts with a term of
12 months or less on our consolidated balance sheets.
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 recognize fixed lease expense for operating leases on a straight-
line basis over the lease term. For finance leases, we recognize
amortization expense over the shorter of the estimated useful life of
the underlying assets or the lease term. In instances of title transfer,
expense is recognized over the useful life. Interest expense on a
finance lease is recognized using the effective interest method over
the lease term.
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. Our revenue
arrangements generally include a single performance obligation
relating to the fulfillment of a customer order, which in some cases
are governed by a master sales agreement, for the purchase of our
products. We recognize revenue at a point in time when control of
the ordered products passes to the customer, which principally occurs
either upon shipment or delivery to the customer or upon pick-up
by the customer, depending upon terms included in the particular
customer arrangement. 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. All taxes assessed by a governmen-
tal authority that are both imposed on and concurrent with a specific
revenue-producing transaction and collected by us from a customer for
5 4 McCormick & Company, Inc.
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)
2022
Net sales
2021
Net sales
2020
Net sales
Americas
EMEA
APAC
Total
$4,551.7
$1,116.4
$682.4
$6,350.5
$4,396.1
$1,191.3
$730.5
$6,317.9
$3,974.9
$1,046.7
$579.7
$5,601.3
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 cus-
tomers. 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 the Company’s then-current
expectations regarding what was earned through these programs as of
the balance sheet date. 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, 2022, 2021 and 2020 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 $181.0 million and $189.3 million at
November 30, 2022 and 2021, respectively.
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 consoli-
dated income statement in the line entitled “Selling, general and
administrative expense”, were $240.4 million, $237.8 million and
$230.3 million for 2022, 2021 and 2020, 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 pro-
motion 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 $187.2 million,
$182.6 million and $174.8 million for 2022, 2021 and 2020, 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 develop-
ment expense was $87.5 million, $87.3 million and $68.6 million for
2022, 2021 and 2020, respectively.
Income Taxes
Income taxes are recognized in accordance with the liability meth-
od of accounting. Deferred taxes are recognized for the estimated
taxes ultimately payable or recoverable based on enacted tax law.
Inherent in determining our annual tax rate are judgments regarding
business plans, planning opportunities, and expectations about future
outcomes. Realization of certain deferred tax assets, primarily net
operating loss and other carryforwards, is dependent upon generating
sufficient taxable income in the appropriate jurisdiction prior to the
expiration of the carryforward periods. Changes in enacted tax rates
are reflected in the tax provision as they occur.
We record valuation allowances to reduce deferred tax assets to the
amount that is more likely than not to be realized. When assessing the
need for valuation allowances, we consider future taxable income and
ongoing prudent and feasible tax planning strategies. Should a change
in circumstances lead to a change in judgment about the realizabil-
ity of deferred tax assets in future years, we would adjust related
valuation allowances in the period that the change in circumstances
occurs, along with a corresponding adjustment to our provision for
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. The resolution of tax
reserves and changes in valuation allowances could be material to our
results of operations for any period but is not expected to be material to
our financial position.
We are subject to a U.S. tax 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. 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.
Stock-Based 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 associ-
ated 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 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 becoming retirement eligible.
We estimate forfeitures associated with all stock-based compensation
at the time of grant based on historical experience and revise this
estimate in subsequent periods if actual forfeitures differ.
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”
depending on their fair value and maturity. Gains and losses repre-
senting 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 finan-
cial instruments are accounted for as net investment hedges when the
hedged item is a nonfunctional currency investment in a subsidiary.
2022 Annual Report 55
Gains and losses on these instruments are included in foreign currency
translation adjustments, a component of “Accumulated other compre-
hensive 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 comprehen-
sive 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 2022
In December 2019, the FASB issued ASU No. 2019-12 Income Taxes
(Topic 740): Simplifying 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 was
adopted effective December 1, 2021. There was no material impact to
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 relation-
ships, and other transactions affected by the London Interbank Offered
Rate (LIBOR) or other reference rates expected to be discontinued.
These optional expedients can be applied from March 2020 through
December 31, 2022. In December 2022, the FASB issued ASU No.
2022-06 Reference Rate Reform (Topic 848): Deferral of the Sunset
Date of Topic 848 which deferred the sunset date of Topic 848 from
December 31, 2022 to December 31, 2024. Arrangements that were
entered into during the year ended November 30, 2022, including our
new revolving credit facility expiring in July 2023, fixed to variable
interest rate swaps expiring in April 2030, and cross-currency interest
rate swaps expiring in April 2030, no longer use LIBOR as a reference
rate. LIBOR continues to be the reference rate for our variable rate
debt, including our revolving credit facility expiring in July 2026,
interest rate swaps expiring in November 2025 and August 2027, and
56 McCormick & Company, Inc.
the cross-currency interest rate swaps expiring in August 2027. The
phase out of LIBOR reference rates will occur at different dates and
began on January 1, 2022. Our adoption of this new standard occurred
during the year ended November 30, 2022, in conjunction with the first
phase-out of a LIBOR reference rate. There was no material impact to
our consolidated financial statements, nor do we expect the adoption
of this standard to have a material impact on our consolidated financial
statements during the LIBOR transition period.
Recently Issued Accounting Pronouncements—Pending
Adoption
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 ser-
vices 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. The new standard’s require-
ments to disclose the key terms of the programs and information about
obligations outstanding are effective for all interim and annual periods
of our fiscal year ending November 30, 2024. The new standard’s
requirement to disclose a roll forward of obligations outstanding will
be effective for our fiscal year ending November 30, 2025. Early adop-
tion is permitted. We are currently evaluating the impact that this new
guidance will have on our consolidated financial statements.
2. ACQUISITIONS AND DISPOSITIONS
Acquisitions are part of our strategy to increase sales and profits.
Acquisition of FONA International, LLC
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 $708.2 million, net of cash acquired.
That purchase price includes the payment of $2.6 million during 2021
associated with the final working capital adjustment. 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 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. At the time of the acquisition, annual sales of FONA were
approximately $114 million. The results of FONA’s operations have
been included in our financial statements as a component of our flavor
solutions segment from the date of acquisition.
We valued finished goods and work-in-process inventory using a net
realizable value approach, which resulted in a step-up of $1.4 million
that was recognized in Cost of goods sold during 2021, as the related
inventory was sold. Raw materials and packaging inventory were
valued using the replacement cost approach.
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 $801.2 million, net of cash acquired.
That purchase price is also net of $1.5 million received during 2021
associated with the final working capital adjustment. 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 accelerates 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.
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 was recognized in cost of goods sold in 2021 as the related
inventory was sold. Raw materials and packaging inventory was
valued using the replacement cost approach.
Transaction and Integration Expenses Associated with the Cholula and
FONA Acquisitions
The following are the transaction and integration expenses recognized
related to the Cholula and FONA acquisitions for the years ended
November 30 (in millions):
Transaction-related expenses included
in cost of goods sold
Other transaction expenses
Integration expenses
Total transaction and integration
2022
2021
2020
$ —
—
2.2
$ 6.3
13.8
15.2
$ —
12.4
—
expenses
$2.2
$35.3
$12.4
Disposal of Kitchen Basics
On August 3, 2022, we sold the Kitchen Basics business for $95.2 million
in cash, net of transaction expenses of $3.8 million. Assets disposed
of principally included inventory, intangible assets ($6.3 million) and
goodwill ($21.5 million). The sale of Kitchen Basics resulted in a pre-
tax gain of $49.6 million.
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 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 sever-
ance 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 Manage-
ment Committee and the Committee’s advance approval, expenses
associated with the approved action are classified as special charges
upon recognition and monitored on an ongoing 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.
The following is a summary of special charges recognized for the years
ended November 30 (in millions):
Employee severance and related benefits in the
income statement
Other costs in the income statement
Cash
Non-Cash
Total special charges
Gain on sale of exited brand
Special charges included in Cost of goods sold
2022
2021
2020
$ 33.8
$10.5
$4.1
7.4
24.0
18.7
17.2
$ 65.2 $46.4
—
4.7
(13.6)
—
2.8
—
$6.9
—
—
$6.9
Total special charges
$ 51.6 $51.1
The following is a summary of special charges by business segments
for the years ended November 30 (in millions):
Consumer segment
Flavor solutions segment
Total special charges
2022
2021
2020
$ 23.9 $36.3
14.8
27.7
$ 51.6 $51.1
$5.5
1.4
$6.9
We continue to evaluate changes to our organization structure to
reduce fixed costs, simplify or improve processes, and improve our
competitiveness.
During 2022, we recorded $51.6 million of special charges, consisting
principally of $23.3 million associated with the exit of our consumer busi-
ness in Russia, as more fully described below, $21.5 million associated
with the transition of a manufacturing facility in EMEA, as more fully
described below, and streamlining actions of $8.0 million in the Americas
region, and $7.1 million in the EMEA region, and $5.6 million associated
with a U.S. voluntary retirement program, as more fully described below.
These charges were partially offset by a $13.6 million gain on the sale
of our Kohinoor brand, discussed below, as well as a reversal of $2.2
million of estimated costs associated with the exit of our rice product
line in India upon settlement of a supply agreement related to that
product line. As of November 30, 2022, reserves associated with special
charges of $26.7 million are included in “Other accrued liabilities” in our
consolidated balance sheet.
In 2022, our Management Committee approved 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. Upon our receipt of notification from participants
through November 30, 2022 that they accepted this plan, we accrued
special charges of $5.6 million, consisting of employee severance and
related benefits. Upon all eligible employees submitting their notifica-
tions by the end of December 2022, the total employee severance and
related benefits will total approximately $24 million with the remain-
der to be recognized during the first quarter of fiscal year 2023. All
related payments will be made in fiscal year 2023 as all of the affected
employees will leave the company in 2023. The voluntary retirement
plan is part of our Global Operating Effectiveness Program.
In 2022, our Management Committee approved the exit of our con-
sumer business in Russia. As a result, during the year, we recognized
$23.3 million of special charges. These special charges included a
2022 Annual Report 57
non-cash impairment charge of $10.0 million associated with the
Kamis brand name to reduce its carrying value to its estimated fair
value, $3.3 million of employee severance and $2.1 million of other
related exit costs directly associated with the exit plan, and a non-
cash $7.9 million reclassification of the cumulative translation adjust-
ment previously reflected in accumulated other comprehensive income
(loss) to earnings associated with the exit of our business in Russia.
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 operating model initiative. Of
the $6.9 million in special charges recorded during 2020, approximately
$4.8 million were paid in cash, with the remaining accrual paid in 2021.
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 expand-
ing 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 2023. Of that $40 million, we expect the
costs to include employee severance and related benefits, non-cash
accelerated depreciation, equipment relocation costs, decommission-
ing and other property related lease exit costs, all directly related to
the initiative. During 2022, we recognized $12.6 million in severance
and related benefits costs, $6.2 million in accelerated depreciation and
$2.7 million in third party expenses and other costs.
During 2021, we recorded $51.1 million of special charges, of which
$46.4 million was recognized in Special charges and $4.7 million was
recognized in Cost of goods sold on our consolidated income statement.
Special charges in 2021 consisted principally of $19.5 million associat-
ed with our exit of our rice product line in India, as more fully described
below, $6.2 million associated with the transition of a manufacturing
facility in EMEA, streamlining actions of $10.3 million in the Americas
region, $4.8 million in the EMEA region and $0.8 million in the APAC
region, and $0.8 million related to our Global Enablement (GE) operat-
ing model initiative, together with a non-cash asset impairment charge
of $6.0 million associated with an administrative site that was sold in
conjunction with our decision to employ a hybrid work environment.
In 2021, we recorded a total of $19.5 million of special charges related
to the exit of our Kohinoor rice product line in India. This action princi-
pally relates to the discontinuance of Kohinoor’s rice business consis-
tent with our focus on higher margin products to enable the business
to focus on both its flavor solutions and non-rice consumer business.
As a result of the Kohinoor rice product line exit, we determined that
an impairment of the Kohinoor brand name had occurred in 2021 and
recorded a non-cash impairment charge of $7.4 million reducing its car-
rying value to zero. Also, as a result of this action, we determined that
the value of our customer relationship asset in India was also impaired
as a result of the lower level of anticipated sales and recorded a non-
cash impairment charge of $3.8 million. We also recorded $3.6 million
of employee severance and other related exit costs associated directly
associated with the exit plan. In addition, as a result of the Kohinoor
product line discontinuance in 2021, we recognized a $4.7 million
charge in cost of goods sold, which represents a provision for the
excess of the carrying value of rice inventories over the estimated net
realizable value of such discontinued inventories and a contractual
obligation associated with terminating a rice supply agreement. During
2022, we sold the Kohinoor brand name for $13.6 million, net of costs
associated with the sale of $1.4 million, and reflected the gain of
$13.6 million associated with this sale within special charges.
58 McCormick & Company, Inc.
4. GOODWILL AND INTANGIBLE ASSETS
The following table displays intangible assets as of November 30:
2022
2021
Gross
carrying
amount
Accumulated
amortization
Gross
carrying
amount
Accumulated
amortization
(millions)
Definite-lived
intangible assets
$ 536.6
$192.1
$ 549.6
$164.5
Indefinite-lived
intangible assets:
Goodwill
Brand names and
trademarks
Total goodwill and
intangible assets
5,212.9
3,043.4
8,256.3
—
—
—
5,335.8
3,067.4
8,403.2
—
—
—
$8,792.9
$192.1
$8,952.8
$164.5
As more fully described in note 3, in 2022, we exited our consumer
business in Russia and recognized a non-cash impairment charge of
$10.0 million associated with the Kamis brand name to reduce its
carrying value to its estimated fair value. Also as more fully described
in note 3, we exited our Kohinoor rice product line in India in 2021 and
recorded non-cash impairment charges of $7.4 million and $3.8 million
associated with the Kohinoor brand name and customer relationship
asset in India, respectively.
Intangible asset amortization expense was $35.1 million, $35.6 million
and $20.2 million for 2022, 2021 and 2020, respectively. At November
30, 2022, definite-lived intangible assets had a weighted-average
remaining life of approximately 11 years.
The changes in the carrying amount of goodwill by segment for the
years ended November 30 were as follows:
2022
2021
(millions)
Consumer
Flavor
Solutions
Consumer
Flavor
Solutions
Beginning of year
Increase from
acquisition
Changes in preliminary
purchase price
allocation
Decrease from sale of
business(1)
Foreign currency
fluctuations
$3,674.7
$1,661.1
$3,711.2
$1,275.1
—
—
(21.5)
—
—
—
—
389.7
0.5
—
0.3
—
(85.0)
(16.4)
(37.0)
(4.0)
End of year
$3,568.2
$1,644.7
$3,674.7
$1,661.1
(1) The sale of Kitchen basics is further described in note 2.
The December 2020 FONA acquisition resulted in the allocation of
$389.7 million of goodwill to the flavor solutions segment.
5. INVESTMENTS IN AFFILIATES
Income from unconsolidated operations was $37.8 million, $52.2 million,
and $40.8 million in 2022, 2021 and 2020, respectively. Income from
unconsolidated operations in 2021 includes a gain on a sale of uncon-
solidated operations of $13.4 million as described below. Our principal
earnings from unconsolidated affiliates are from our 50% interest in
McCormick de Mexico, S.A. de C.V. Profit from this joint venture repre-
sented 84% of income from unconsolidated operations in 2022, 62% in
2021 and 75% in 2020. The relative impact of McCormick de Mexico,
S.A. de C.V. on income from unconsolidated operations in 2021 was
impacted by the gain on our sale of an
unconsolidated operation.
Summarized annual and year-end information from the financial
statements of unconsolidated affiliates representing 100% of the
businesses follows:
(millions)
Net sales
Gross profit
Net income
Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities
2022
2021
2020
$998.1
338.1
86.5
$494.8
109.7
257.7
8.4
$925.1
328.8
95.8
$464.2
105.8
218.5
9.0
$870.3
318.0
93.7
$421.7
126.2
192.3
12.2
Royalty income from unconsolidated affiliates was $27.3 million, $22.8
million and $19.5 million for 2022, 2021 and 2020, respectively.
Sale of Unconsolidated Operation
On March 1, 2021, we sold our 26% interest in Eastern Condiments
Private Ltd (Eastern) for $65.4 million in cash, net of transaction
expenses of $1.4 million. Eastern was accounted for as an equity
method investment with our proportionate share of earnings, prior to
the sale, reflected in Income from unconsolidated operations before
income taxes in our consolidated income statement. The sale of
Eastern resulted in a gain of $13.4 million, net of tax of $5.7 million.
That gain is included in Income from unconsolidated operations before
income taxes in our consolidated income statement. That gain also
reflects a write-off of $1.4 million of foreign currency translation
adjustment, a component of Accumulated other comprehensive loss.
6. FINANCING ARRANGEMENTS
Our outstanding debt, including finance leases, was as follows at
November 30:
(millions)
Short-term borrowings
Commercial paper
Other
2022
2021
$1,224.6
12.1
$530.8
8.3
$1,236.7
$539.1
Weighted-average interest rate of short-term
borrowings at year-end
4.2%
0.2%
(millions)
2022
2021
Long-term debt
2.70% notes due 8/15/2022
3.50% notes due 9/1/2023(1)
3.15% notes due 8/15/2024
3.25% notes due 11/15/2025(2)
0.90% notes due 2/15/2026
3.40% notes due 8/15/2027(3)
2.50% notes due 4/15/2030(4)
1.85% notes due 2/15/2031
4.20% notes due 8/15/2047
7.63%–8.12% notes due 2024
Other, including finance leases
Unamortized discounts, premiums, debt issuance
costs and fair value adjustments(5)
Less current portion
$ — $ 750.0
250.0
700.0
250.0
500.0
750.0
500.0
500.0
300.0
55.0
199.2
250.0
700.0
250.0
500.0
750.0
500.0
500.0
300.0
55.0
176.1
(68.2)
(10.6)
3,912.9
270.6
4,743.6
770.3
$3,642.3 $3,973.3
(1) Interest rate swaps, settled upon the issuance of these notes, effectively set the
interest rate on the $250 million notes at a weighted-average fixed rate of 3.30%.
(2) Interest rate swaps, settled upon the issuance of these notes, 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% with an effective variable rate of 5.83% as of November 30, 2022.
(3) Interest rate swaps, settled upon the issuance of these notes, effectively set the inter-
est 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 con-
verted to a variable rate by interest rate swaps through 2027. Net interest payments
are based on 3-month LIBOR plus 0.685% with an effective rate of 5.29% as of
November 30, 2022.
(4) Interest rate swaps, settled upon the issuance of these notes, effectively set the inter-
est rate on the $500 million notes at a weighted-average fixed rate of 2.62%. The fixed
interest rate on $250 million of the 2.50% notes due in 2030 is effectively converted to
a variable rate by interest rate swaps through 2030. Net interest payments are based
on USD SOFR plus 0.684% with an effective rate of 4.94% as of November 30, 2022.
(5) Includes unamortized discounts, premiums and debt issuance costs of $(25.9) million
and $(31.8) million as of November 30, 2022 and 2021, respectively. Includes fair value
adjustment associated with interest rate swaps designated as fair value hedges of
$(42.3) million and $21.2 million as of November 30, 2022 and 2021, respectively.
Maturities of long-term debt, including finance leases, during the fiscal
years subsequent to November 30, 2022 are as follows (in millions):
2023
2024
2025
2026
2027
Thereafter
$ 270.6
796.9
269.7
509.2
759.6
1,375.1
In February 2021, we issued $500.0 million of 0.90% notes due
February 15, 2026, with cash proceeds received of $495.7 million,
net of discounts and underwriters’ fees. Also in February 2021, we
issued $500.0 million of 1.85% notes due February 15, 2031, with cash
proceeds received of $492.8 million, net of discounts and underwriters’
fees. The net proceeds from these issuances were used to pay down
short-term borrowings, including a portion of the $1,443.0 million of
commercial paper issued to finance our acquisitions of Cholula and
FONA, and for general corporate purposes.
2022 Annual Report 59
Supplemental balance sheet information related to leases as of
November 30 were as follows (in millions):
Leases
Assets:
Classification
2022
2021
Operating lease ROU
assets
Finance lease ROU
assets
Other long-term assets
Property, plant and
equipment, net
$ 218.9
$136.8
103.0
112.1
$ 321.9
$248.9
Total leased assets
Liabilities:
Current
Operating
Finance
Non-current
Operating
Finance
Other accrued liabilities
Current portion of
long-term debt
$ 54.4
$ 34.3
7.8
7.5
Other long-term liabilities
Long-term debt
176.1
110.5
106.1
118.2
Total lease liabilities
$ 348.8
$266.1
In October 2020, we entered into a non-cancellable synthetic lease
to consolidate as well as expand our distribution footprint in the
mid-Atlantic region. We began to utilize this facility in September
2022. The five-year lease term will expire in November 2027. As of
November 30, 2022, the total ROU asset associated with this building
was $78.9 million with a related lease obligation of $83.4 million,
of which $18.7 million was included in the other accrued liabilities
and $64.7 million was included in other long-term liabilities. Rental
payments include both a fixed and a variable component. The variable
component is based on SOFR plus a margin, based on our credit
rating. During the year ended November 30, 2022, we recognized rent
expense of $5.2 million related to the leased asset. The lease contains
options to negotiate a renewal of the lease or to purchase or request
the lessor to sell the facility at the end of the lease term. The lease
arrangement contains a residual value guarantee of 76.5% of the
lessor’s total construction cost, which approximated $310 million. We
do not believe it is probable that any material amounts will be owed
under these guarantees. Therefore, no material amounts related to
the residual value guarantees are included in the lease payments used
to measure the right-of-use assets and lease liabilities. The lease
also contains covenants that are consistent with our revolving credit
facilities, as disclosed in note 6.
Our Corporate functions, Americas’ leadership, and U.S. staff operate
out of our Hunt Valley, Maryland headquarters office building. The
15-year lease for that building began in April 2019 and is recognized as
a finance lease. During each of the years ended November 30, 2022,
2021 and 2020, we recognized amortization expense of $8.7 million
related to the leased asset. As of November 30, 2022, the total lease
obligation associated with this building was $116.4 million, of
which $7.6 million was included in the current portion of long-term
debt and $108.8 million was included in long-term debt. As of
November 30, 2021, the total lease obligation was $123.8 million, of
which $7.3 million was included in the current portion of long-term
debt and $116.5 million was included in long-term debt.
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. Our
committed lines include a five-year $1.5 billion revolving credit facility,
which will expire in June 2026 and a 364-day $500 million revolving
credit facility, which was entered into in July 2022 and will expire in
July 2023. The current pricing for the five-year credit facility, on a fully
drawn basis, is LIBOR plus 1.25%. The pricing of that credit facility is
based on a credit rating grid that contains a fully drawn maximum pric-
ing of the credit facility equal to LIBOR plus 1.75%. The current pricing
for the 364-day credit facility, on a fully drawn basis, is Secured
Overnight Financing Rate (SOFR) plus 1.23%. The pricing of that credit
facility is based on a credit rating grid that contains a fully drawn
maximum pricing of the credit facility equal to SOFR plus 1.60%. These
credit facilities require a fee, and commitment fees were $2.1 million,
$2.0 million and $1.3 million for 2022, 2021, and 2020, respectively.
These credit facilities support our commercial paper program and, after
$1,224.6 million was used to support issued commercial paper, we have
$775.4 million of capacity at November 30, 2022. The provisions of these
revolving credit facilities restrict subsidiary indebtedness and require us
to maintain a minimum interest coverage ratio. As of November 30, 2022,
our capacity under both revolving credit facilities 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.
In addition, we have several uncommitted lines totaling $302.5 million,
which have a total unused capacity at November 30, 2022 of $232.6
million. These lines, by their nature, can be withdrawn based on the
lenders’ discretion.
At November 30, 2022, we had no outstanding guarantees with terms
of one year or less. As of November 30, 2022 and 2021, we had out-
standing letters of credit of $60.8 million and $63.7 million, respectively.
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 $13.6 million at
November 30, 2022.
7. LEASES
Our lease portfolio primarily consists of (i) certain real estate, including
those related to a number of administrative, distribution and manufac-
turing locations; (ii) certain machinery and equipment, including forklifts;
and (iii) automobiles, delivery trucks and other vehicles, including an
airplane. 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
years ended November 30 (in millions):
Operating lease cost
Finance lease cost:
Amortization of ROU assets
Interest on lease liabilities
2022
$47.0
9.0
4.1
2021
$45.0
9.0
4.3
2020
$ 41.2
9.0
4.5
Net lease cost
$ 60.1
$58.3
$54.7
(1) Net lease cost does not include short-term leases, variable lease costs or
sublease income, all of which are immaterial.
60 McCormick & Company, Inc.
Information regarding our lease terms and discount rates as of November 30 were as follows:
Operating leases
Finance leases
2022
2021
Weighted-average
remaining lease term
(years)
Weighted-average
discount rate
Weighted-average
remaining lease term
(years)
Weighted-average
discount rate
5.8
11.9
3.7%
3.3%
6.8
12.9
1.9%
3.3%
The future maturity of our lease liabilities as of November 30, 2022
were as follows (in millions):
2023
2024
2025
2026
2027
Thereafter
Total lease payments
Less: Imputed interest
Operating
leases
$ 58.3
50.9
43.3
39.0
34.1
31.8
257.4
26.9
Finance
leases
$ 11.3
11.5
11.7
11.9
12.2
89.9
148.5
30.2
Total
$ 69.6
62.4
55.0
50.9
46.3
121.7
405.9
57.1
Total lease liabilities
$230.5
$118.3
$ 348.8
Supplemental cash flow and other information related to leases for the
years ended November 30 were as follows (in millions):
Cash paid for amounts included in the measurements
of lease liabilities:
Operating cash flows used for operating leases
Operating cash flows used for finance leases
Financing cash flows used for finance leases
ROU assets obtained in exchange for lease liabilities
Operating leases
2022
2021
$ 41.4
4.1
7.3
$45.4
4.3
7.1
$133.8
$47.8
8. FINANCIAL INSTRUMENTS
We use derivative financial instruments to enhance our ability to man-
age 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, 2022, we had foreign currency exchange contracts
to purchase or sell $560.5 million of foreign currencies as compared
to $583.6 million at November 30, 2021. 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, 2022 have durations
of less than 18 months, including $150.9 million of notional contracts
that have durations of less than one month and are used to hedge
short-term cash flow funding.
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.
Hedges of foreign currency denominated assets and liabilities include
contracts with a notional value of $355.5 million and $449.3 million at
November 30, 2022 and 2021, respectively. We enter into these fair
value foreign currency exchange contracts to manage exposure to cur-
rency 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 designat-
ed as hedges of assets, liabilities or firm commitments are recognized
through income, offsetting the change in fair value of the hedged item.
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 adjust-
ments in accumulated other comprehensive loss.
As of November 30, 2022 and 2021, 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 SONIA plus 0.859% and (ii) £194.1 million notional value
to receive £194.1 million at three-month GBP SONIA plus 0.859% and
pay €221.8 million at three-month Euro EURIBOR plus 0.808%. These
cross-currency interest rate swap contracts expire in August 2027. In
conjunction with the phase-out of LIBOR, during 2022 we amended
the terms of this cross currency swap such that, effective February 15,
2022, we now pay and receive at GBP SONIA plus 0.859% (previously
GBP LIBOR plus 0.740%).
As of November 30, 2022, we also had cross currency interest rate
swap contracts of $250 million notional value to receive $250 million
at USD SOFR plus 0.684% and pay £184.1 million at GBP SONIA plus
2022 Annual Report 61
0.574% and (ii) £184.1 million notional value to receive £184.1 million
at GBP SONIA plus 0.574% and pay €219.2 million at Euro ESTR plus
0.667%, both of which expire in April 2030.
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 world-
wide financing costs and to achieve a desired mix of variable and fixed
rate debt.
As of November 30, 2022 and 2021, we have outstanding interest
rate swap contracts for a notional amount of $600 million and
$350 million, respectively. The following is a summary of our
outstanding interest rate swaps as of November 30, 2022 and 2021
($ amounts in millions).
Notional
Receive rate
Pay rate
Expiration
Fair value hedge of changes in fair value of:
$250 3.25% notes due 2025
$750 3.40% notes due 2027
$500 2.50% notes due 2030(1)
$100.0
3.25%
Three-month LIBOR + 1.22%
$250.0
3.40%
Three-month LIBOR + 0.685%
November 2025
August 2027
$250.0
2.50%
SOFR + 0.684%
April 2030
(1) The $250 million notional swap that expires in April 2030 was entered into during 2022.
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.
The following tables disclose the notional amount and fair values of derivative instruments on our consolidated balance sheet:
As of November 30, 2022:
(millions)
Asset Derivatives
Liability Derivatives
Derivatives
Balance sheet location
Notional amount
Fair value Balance sheet location Notional amount
Fair value
$ —
344.9
$ —
Other accrued liabilities
11.0
Other accrued liabilities
$600.0
215.6
680.0
44.5
Other long-term liabilities
226.1
$55.5
$42.4
1.5
8.3
$52.2
Interest rate contracts
Other current assets/
Other long-term assets
Foreign exchange contracts Other current assets
Cross currency contracts
Other current assets/
Other long-term assets
Total
As of November 30, 2021:
(millions)
Derivatives
Interest rate contracts
Other current assets/
Other long-term assets
Foreign exchange contracts
Other current assets
Cross currency contracts
Other current assets/
Other long-term assets
Asset Derivatives
Liability Derivatives
Balance sheet location
Notional amount
Fair value
Balance sheet location
Notional amount
Fair value
$350.0
380.8
$ 23.1
Other accrued liabilities
8.3
Other accrued liabilities
$ —
202.8
251.0
4.4
Other long-term liabilities
257.5
$ —
2.8
8.0
$10.8
Total
$ 35.8
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, 2022, 2021 and 2020:
Fair value hedges (millions)
Derivative
Interest rate contracts
Income statement
location
Interest expense
Income (expense)
2022
$ 4.0
2021
$8.2
2020
$ 5.2
Derivative
Income statement
location
Foreign exchange contracts
Other income, net
Gain (loss) recognized in income
Gain (loss) recognized in income
2022
$6.6
2021
2020
Hedged Item
Income statement
location
2022
$(1.9)
$(4.0)
Intercompany loans
Other income, net
$(6.3)
2021
$ 2.9
2020
$ 3.0
62 McCormick & Company, Inc.
Cash flow hedges (millions)
Derivative
Interest rate contracts
Foreign exchange contracts
Total
Gain (loss)
recognized in OCI
2022
$18.7
5.3
$24.0
2021
$ 0.3
(2.0)
$(1.7)
2020
$ —
1.9
$ 1.9
Income statement location
Interest expense, Other income, net
Cost of goods sold
Gain (loss)
reclassified from AOCI
2022
$19.2
1.6
$20.8
2021
2020
$ 0.5
(0.7)
$(0.2)
$ 0.5
1.6
$ 2.1
In March 2022, we entered into treasury lock arrangements with a
notional amount totaling $200 million in order to manage our interest rate
risk associated with the anticipated issuance of at least $200 million of
fixed rate debt by August 2022. These treasury locks had a maturity
date of August 12, 2022 and an average fixed rate of 1.89%. We
designated these treasury lock arrangements as cash flow hedges with
any unrealized gain, prior to settlement, recognized in accumulated other
comprehensive income. In July 2022, we settled the $200 million notional
treasury locks upon determining we would not issue fixed rate debt but
rather enter into the previously described $500 million 364-day revolving
credit facility. The proceeds received upon settlement of these treasury
Net investment hedges (millions)
lock arrangements were $18.7 million and were recognized in Other
income, net in our consolidated income statements for the year ended
November 30, 2022.
The amount of gain or loss recognized in income on the ineffective
portion of derivative instruments is not material. For all cash flow and
settled interest rate fair value hedge derivatives, 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
$3.3 million increase to earnings.
Derivative
Cross currency contracts
Gain (loss)
recognized in OCI
2022
$37.6
2021
$15.5
2020
$(20.8)
Income statement location
Interest expense
Gain (loss)
excluded from the assessment of hedge
effectiveness
2022
$7.3
2021
$1.5
2020
$3.1
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.
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 wholesal-
ers. 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, 2022, 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.
2022 Annual Report 63
Our population of assets and liabilities subject to fair value measurements on a recurring basis are as follows:
(millions)
Assets:
Cash and cash equivalents
Insurance contracts
Bonds and other long-term investments
Foreign currency derivatives
Cross currency contracts
Total
Liabilities:
Interest rate derivatives
Foreign currency derivatives
Cross currency contracts
Total
(millions)
Assets:
Cash and cash equivalents
Insurance contracts
Bonds and other long-term investments
Interest rate derivatives
Foreign currency derivatives
Cross currency contracts
Total
Liabilities:
Foreign currency derivatives
Cross currency contracts
Total
Fair value measurements
using fair value hierarchy as
of November 30, 2022
Fair value
Level 1
Level 2
$334.0
110.0
5.1
11.0
44.5
$504.6
$ 42.4
1.5
8.3
$ 52.2
$334.0
—
5.1
—
—
$339.1
$ —
—
—
$ —
$ —
110.0
—
11.0
44.5
$165.5
$ 42.4
1.5
8.3
$ 52.2
Fair value measurements
using fair value hierarchy as of
November 30, 2021
Fair value
Level 1
Level 2
$351.7
132.2
5.1
23.1
8.3
4.4
$524.8
2.8
8.0
$ 10.8
$351.7
—
5.1
—
—
—
$356.8
—
—
$ —
132.2
—
23.1
8.3
4.4
$168.0
2.8
8.0
$ —
$ 10.8
At November 30, 2022 and 2021, we had no financial assets or liabili-
ties that were subject to a level 3 fair value measurement.
At November 30, 2022 and 2021, the carrying amount of interest rate
derivatives, foreign currency derivatives, cross currency contracts,
insurance contracts, and bond and other long-term investments are
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.
The carrying amount and fair value of long-term debt, including the current portion, as of November 30 were as follows:
(millions)
Long-term debt (including current portion)
Level 1 valuation techniques
Level 2 valuation techniques
2022
2021
Carrying amount
Fair value
Carrying amount
Fair value
$3,912.9
$3,600.9
3,424.8
176.1
$4,743.6
$4,921.5
4,722.3
199.2
The fair value for Level 2 long-term debt is determined by using quoted prices for similar debt instruments.
64 McCormick & Company, Inc.
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):
Accumulated other comprehensive loss, net of tax where applicable
Foreign currency translation adjustment(1)
Unrealized net gain on foreign currency exchange contracts
Unamortized value of settled interest rate swaps
Pension and other postretirement costs
2022
2021
$ (405.3)
3.8
(0.6)
(78.5)
$ (233.3)
0.6
(0.2)
(193.6)
$ (480.6)
$ (426.5)
(1) During the year ended November 30, 2022, the foreign currency translation adjustment of accumulated other comprehensive loss increased on a net basis by
$172.0 million, inclusive of $37.6 million of unrealized gains associated with net investment hedges. During the year ended November 30, 2021, the foreign
currency translation adjustment of accumulated other comprehensive loss increased on a net basis by $59.3 million, inclusive of $15.5 million of unrealized gains
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)
Accumulated other comprehensive income (loss) components
2022
2021
2020
Affected line items in the consolidated
income statement
(Gains)/losses on cash flow hedges:
Interest rate derivatives
Treasury lock contracts(1)
Foreign exchange contracts
Total before taxes
Tax effect
Net, after tax
Amortization of pension and postretirement benefit adjustments:
Amortization of prior service (credits) costs(2)
Amortization of net actuarial losses(2)
Total before taxes
Tax effect
Net, after tax
$ (0.5)
(18.7)
(1.6)
(20.8)
4.9
$ (0.5)
—
0.7
0.2
—
$ (0.5)
—
(1.6)
(2.1)
0.5
$ (15.9 )
$ 0.2
$ (1.6)
$ 0.3
9.9
10.2
(2.4)
$ 0.3
13.9
14.2
(3.3)
$ (4.0)
11.0
7.0
(1.6 )
$ 7.8
$10.9
$ 5.4
Interest expense
Other income, net
Cost of goods sold
Income taxes
Other income, net
Other income, net
Income taxes
(1) The settlement of these treasury locks is further described in note 8.
(2) 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.
We previously froze the accrual of certain defined benefit pension
plans in the U.S. and the United Kingdom with effective dates of
the plan being frozen occurring between December 31, 2016 and
November 30, 2018. Also, we previously froze the accrual of future
benefits under our pension plans in Canada with an effective date of
November 30, 2019. Although those plans have been frozen, employ-
ees 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.
Included in our consolidated balance sheet as of November 30, 2022
on the line entitled “Accumulated other comprehensive loss” was
$98.8 million ($78.5 million net of tax) related to net unrecognized
actuarial losses that have not yet been recognized in net periodic
pension or postretirement benefit cost.
Defined Benefit Pension Plans
The significant assumptions used to determine benefit obligations are as follows as of November 30:
Discount rate—funded plans
Discount rate—unfunded plan
Salary scale
United States
International
2022
2021
2022
2021
5.4%
5.4%
2.9%
2.8%
4.5%
2.1%
—% —%
—% —%
2.9%
2.9%
2022 Annual Report 65
The significant assumptions used to determine pension expense for the years ended November 30 are as follows:
Discount rate—funded plans
Discount rate—unfunded plan
Salary scale
Expected return on plan assets
United States
International
2022
2.9%
2.8%
—%
6.8%
2021
2.8%
2.7%
—%
6.8%
2020
3.4%
3.3%
—%
6.8%
2022
2021
2020
2.1%
—%
2.9%
3.7%
1.9%
—%
2.9%
4.1%
2.2%
—%
2.9%
4.9%
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 (income) for the years ended November 30 was as follows:
(millions)
Service cost
Interest costs
Expected return on plan assets
Amortization of prior service costs
Amortization of net actuarial loss
Settlement loss
Total pension expense (income)
United States
International
2022
2021
2020
2022
2021
2020
$ 3.6
26.3
(42.8)
0.5
8.6
—
$ 3.7
25.9
(41.1)
0.5
11.0
—
$ 3.2
29.3
(40.6)
0.5
7.8
—
$ 0.9
7.0
(12.3)
0.1
1.3
0.3
$ 1.1
7.1
(14.0)
0.1
2.2
0.7
$ 1.3
7.5
(15.3)
0.1
2.0
1.3
$ (3.8)
$ —
$ 0.2
$ (2.7)
$ (2.8)
$ (3.1)
A roll forward 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
2022
2021
2022
2021
$ 921.5
3.6
26.3
—
(221.2)
(42.7)
—
$ 958.0
3.7
25.9
—
(21.9)
(44.2)
—
$ 687.5
$ 921.5
$ 754.0
(64.0)
10.4
(42.7)
—
$ 688.2
96.6
13.4
(44.2)
—
$ 657.7
$ 754.0
$ (29.8)
$(167.5 )
$ 120.3
116.1
35.0
$ 921.5
912.3
754.0
$ 354.7
0.9
7.0
—
(101.7)
(15.7)
(25.1)
$ 220.1
$ 398.4
(79.0)
1.0
(15.7)
(29.6)
$ 275.1
$ 55.0
$ 14.6
12.4
1.5
$371.7
1.1
7.1
0.5
(7.4)
(16.6)
(1.7)
$354.7
$368.7
47.1
1.6
(16.6)
(2.4)
$398.4
$ 43.7
$ 19.7
16.3
1.8
(millions)
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest costs
Plan amendments
Actuarial (gain) loss
Benefits paid
Foreign currency impact
Benefit obligation at end of year
Change in fair value of plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contributions
Benefits paid
Foreign currency impact
Fair value of plan assets at end of year
Funded status
Pension plans in which accumulated benefit obligation exceeded plan assets
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
66 McCormick & Company, Inc.
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 obliga-
tion differs from the projected benefit obligation in that it includes no
assumption about future compensation or service levels. The accumu-
lated benefit obligation for the U.S. pension plans was $683.2 million
and $912.3 million as of November 30, 2022 and 2021, respectively.
The accumulated benefit obligation for the international pension plans
was $217.9 million and $351.3 million as of November 30, 2022 and
2021, respectively.
Included in the U.S. in the preceding table is a benefit obligation of
$80.1 million and $104.2 million for 2022 and 2021, respectively,
related to our Supplemental Executive Retirement Plan (SERP). The
assets related to this plan, which totaled $74.1 million and $90.3
million as of November 30, 2022 and 2021, 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:
(millions)
Non-current pension asset
Accrued pension liability
Deferred income tax assets
Accumulated other comprehensive loss, net of tax
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 invest-
ment 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 evalu-
ated 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:
United States
International
2022
2021
2022
$ 55.4
85.2
23.9
73.2
$ — $ 68.1
13.1
0.7
20.7
167.5
52.9
167.8
2021
$ 61.6
18.0
3.9
32.2
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, 2022
United States
(millions)
Cash and cash equivalents
Equity securities:
U.S. equity securities(a)
International equity securities(b)
Fixed income securities:
U.S. government/corporate bonds(c)
High yield bonds(d)
Insurance contracts(f)
Other types of investments:
Real estate(g)
Natural resources(h)
Total
fair value
Level 1
Level 2
$ 22.5
$ 22.5
$ —
251.2
147.0
136.1
136.2
115.1
10.8
72.1
37.4
1.1
27.6
18.0
69.8
—
—
23.1
—
2.3
37.4
1.1
4.5
18.0
Total
$576.9
$387.7
$189.2
Asset Category
Equity securities
Fixed income securities
Other
Total
Actual
2022
2021
61.6%
20.4%
18.0%
62.2%
20.9%
16.9%
2022
Target
59.0%
23.2%
17.8%
Investments measured at net
asset value(i)
Hedge funds(j)
Private equity funds(k)
Private debt funds(l)
100.0% 100.0%
100.0%
Total investments
50.1
7.3
23.4
$657.7
The allocations of the international pension plans’ assets as of
November 30, by asset category, were as follows:
Asset Category
Equity securities
Fixed income securities
Other
Total
Actual
2022
2021
41.0%
58.6%
0.4%
40.5%
59.1%
0.4%
2022
Target
42.9%
57.1%
—%
100.0%
100.0%
100.0%
As of November 30, 2022
International
(millions)
Cash and cash equivalents
International equity securities(b)
Fixed income securities:
International/government/
corporate bonds(e)
Insurance contracts(f)
Total investments
Total
fair value
Level 1
Level 2
$ 1.2
112.6
$ 1.2
—
$ —
112.6
147.7
13.6
—
—
147.7
13.6
$275.1
$ 1.2
$273.9
2022 Annual Report 67
(k) This category comprises private equity, venture capital and limited part-
nerships. 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 valua-
tion 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 observ-
able 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 $46.2 million (0.6 million shares and 7.0% of total
U.S. pension plan assets) and $47.7 million (0.6 million shares and
6.3% of total U.S. pension plan assets) at November 30, 2022 and
2021, respectively. Dividends paid on these shares were $0.8 million
and $0.7 million in 2022 and 2021, respectively.
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)
2023
2024
2025
2026
2027
2028–2032
United States
International
$ 46.2
46.7
48.2
49.3
50.6
254.2
$11.1
11.4
12.2
12.2
12.8
67.0
U.S. Defined Contribution Retirement Plans
For our U.S. qualified and non-qualified defined contribution retire-
ment plans, we match 100% of a participant’s contribution up to the
first 3% of the participant’s eligible compensation, and 66.7% of the
next 3% of the participant’s salary. In addition, we make contributions
of 3% of the participant’s eligible compensation for all U.S. employ-
ees who are employed on December 31 of each year. Some of our
smaller subsidiaries sponsor separate 401(k) retirement plans. Our
contributions charged to expense under all U.S. defined contribution
retirement plans were $30.5 million, $29.8 million and $30.8 million
in 2022, 2021 and 2020, respectively.
As of November 30, 2021
United States
(millions)
Cash and cash equivalents
Equity securities:
U.S. equity securities(a)
International equity securities(b)
Fixed income securities:
U.S./government/ corporate bonds(c)
High yield bonds(d)
Insurance contracts(f)
Other types of investments:
Real estate(g)
Natural resources(h)
Total
fair value
Level 1
Level 2
$ 34.4
$ 34.4
$ —
290.7
170.2
147.5
161.7
143.2
8.5
86.9
41.0
1.1
31.4
13.3
84.4
—
—
27.1
—
2.5
41.0
1.1
4.3
13.3
Total
$669.0
$455.1
$213.9
Investments measured at net asset value(i)
Hedge funds(j)
Private equity funds(k)
Private debt funds(l)
Total investments
48.0
8.3
28.7
$754.0
As of November 30, 2021
International
(millions)
Cash and cash equivalents
International equity securities(b)
Fixed income securities:
International/government/
corporate bonds(e)
Insurance contracts(f)
Total investments
Total
fair value
Level 1
Level 2
$ 1.6
161.3
$ 1.6
—
$ —
161.3
214.1
21.4
—
—
214.1
21.4
$398.4
$ 1.6
$396.8
(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 bench-
mark indices.
(c) This category comprises funds consisting of U.S. government and U.S.
corporate bonds and other fixed income securities. An appropriate bench-
mark is the Barclays Capital Aggregate Bond Index.
(d) This category comprises funds consisting of real estate related debt secu-
rities 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 bench-
mark 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.
68 McCormick & Company, Inc.
At the participants’ election, 401(k) retirement plans held 2.6 million
shares of McCormick stock, with a fair value of $215.4 million, at
November 30, 2022. Dividends paid on the shares held in the 401(k)
retirement plans in 2022 and 2021 were $3.9 million 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 expense (income) for the years ended
November 30 follows:
(millions)
Service cost
Interest costs
Amortization of prior service credits
Amortization of actuarial gains
2022
2021
2020
$ 1.9
$ 2.0
$ 1.8
2.0
1.6
1.7
(4.6)
(0.3)
(0.3)
(0.3) — (0.1)
Postretirement benefit expense (income)
$ 2.9
$ 3.3
$ (0.8)
Roll forwards 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)
2022
2021
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest costs
Participant contributions
Actuarial (gain) loss
Benefits paid
Benefit obligation at end of year
Change in fair value of plan assets:
Fair value of plan assets at beginning
of year
Employer contributions
Participant contributions
Benefits paid
Fair value of plan assets at end of year
Other postretirement benefit liability
$ 65.9
1.8
1.7
2.1
(12.5)
(6.1)
$ 52.9
$ —
4.0
2.1
(6.1)
$ —
$ 52.9
$70.7
2.0
1.6
2.0
(4.3)
(6.1)
$65.9
$ —
4.1
2.0
(6.1)
$ —
$65.9
Estimated future benefit payments (net of employee contributions) for
the next 10 fiscal years are as follows:
(millions)
2023
2024
2025
2026
2027
2028–2032
Retiree
medical
Retiree life
insurance
$ 3.4
3.5
3.6
3.6
3.6
16.3
$ 1.7
1.6
1.5
1.5
1.4
6.3
Total
$ 5.1
5.1
5.1
5.1
5.0
22.6
The assumed discount rate in determining the benefit obligation was
5.0% and 2.7% for 2022 and 2021, respectively.
For 2022, the assumed annual rate of increase in the cost of covered
health care benefits is 7.5% (6.3% last year). It is assumed to de-
crease gradually to 4.5% in the year 2034 (4.5% in 2032 last year) and
remain at that level thereafter.
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 2022, 2021
and 2020 was $60.3 million, $66.6 million and $46.0 million, respectively.
Total unrecognized stock-based compensation expense related to our
RSUs and stock options at November 30, 2022 was $20.1 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, 2022 was $6.4 million
and the weighted-average period over which this will be recognized is
1.0 year. 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, 2022, we have 5.9 million
shares remaining available for future issuance under our RSUs, stock
option and LTPP award programs.
The following summarizes the key terms, a summary of activity, and the
methods of valuation 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)
2022
2021
2020
Beginning of year
Granted
Vested
Forfeited
Outstanding—end of year
Shares
Weighted-average
price
Shares
Weighted-average
price
Shares
Weighted-average
price
563
208
(251)
(40)
480
$69.52
94.21
71.86
85.42
$77.62
714
219
(336)
(34)
563
$61.74
86.86
63.69
75.49
$69.52
762
296
(325)
(19)
714
$57.95
67.03
57.56
62.96
$61.74
2022 Annual Report 69
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
$22.08, $18.36 and $13.27 in 2022, 2021 and 2020, respectively. These
fair values were computed using the following range of assumptions
for the years ended November 30:
Risk-free interest rates
Dividend yield
Expected volatility
Expected lives
2022
2021
2020
0.2–2.5%
1.5%
21.2%
7.6 years
0.0–1.8%
1.5%
21.3%
7.9 years
0.0–0.6%
1.8%
22.8%
7.9 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)
2022
2021
2020
Beginning of year
Granted
Exercised
Forfeited
Outstanding—end of year
Exercisable—end of year
Shares
Weighted-average
exercise price
Shares
Weighted-average
exercise price
Shares
Weighted-average
exercise price
5.0
0.7
(0.8)
(0.1)
4.8
3.5
$59.71
97.26
47.58
88.40
67.08
$58.03
4.5
0.8
(0.3)
—
5.0
3.6
$53.56
89.16
45.93
—
59.71
$51.51
5.2
0.7
(1.4)
—
4.5
3.2
$48.09
69.31
41.01
—
53.56
$47.76
As of November 30, 2022, the intrinsic value (the difference between the exercise price and the market price) for all options currently outstanding was
$98.7 million and for options currently exercisable was $96.0 million. At November 30, 2022 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 mate-
rial. The total intrinsic value of all options exercised during the years ended November 30, 2022, 2021 and 2020 was $41.0 million, $10.7 million and
$68.4 million, respectively. A summary of our stock options outstanding and exercisable at November 30, 2022 follows:
(shares in millions)
Options outstanding
Options exercisable
Range of
exercise price
$27.00–$51.00
$51.01–$75.00
$75.01–$99.00
Shares
Weighted-average
remaining life (yrs.)
Weighted-average
exercise price
Shares
Weighted-average
remaining life (yrs.)
Weighted-average
exercise price
1.7
1.6
1.5
4.8
3.4
6.4
8.8
6.1
$46.49
65.39
92.85
$67.08
1.7
1.4
0.4
3.5
3.4
6.3
8.4
5.9
$46.49
64.93
89.48
$65.89
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 retire 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
Dividend yield
Expected volatility
Expected lives
0.85%
1.5%
21.2%
5.6–6.2 years
70 McCormick & Company, Inc.
The following is a summary of our Price-Vested Stock Options activity for the years ended November 30:
(shares in thousands)
2022
2021
2020
Beginning of year
Granted
Forfeited
Outstanding—end of year
Number of
Shares
Weighted-Average
Grant-Date Fair
Value
Number of
Shares
Weighted-Average
Grant-Date Fair
Value
Number
of Shares
Weighted-Average
Grant-Date Fair
Value
2,193
—
(86)
2,107
$9.40
9.40
$9.40
2,482
15
(304)
2,193
$9.40
9.66
9.41
$ 9.40
—
2,482
—
2,482
$ —
9.40
—
$ 9.40
As of November 30, 2022, 2021, and 2020, the outstanding options are divided equally between the three appreciation thresholds.
LTPP
LTPP awards granted in 2022, 2021 and 2020 will be delivered in company stock, with the award attainment calculated as a percentage of target based
on a combination of a performance-based component and a market-based total shareholder return. 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)
Beginning of year
Granted
Vested
Performance adjustment
Forfeited
Outstanding—end of year
13. INCOME TAXES
The provision for income taxes for the years ended November 30
consists of the following:
(millions)
Income taxes
Current
Federal
State
International
Deferred
Federal
State
International
Total income tax expense (benefit)
2022
2021
2020
$ 62.8
14.8
69.2
146.8
37.1
(3.2)
(12.1)
21.8
$168.6
$ 71.7
14.0
71.0
156.7
$ 98.3
14.8
73.0
186.1
23.5
16.8
(4.3)
36.0
4.6
0.5
(16.3)
(11.2)
$ 192.7
$ 174.9
The components of income from consolidated operations before
income taxes for the years ended November 30 follow:
(millions)
Pretax income
United States
International
2022
2021
2020
$600.7
212.1
$588.1
307.7
$624.3
257.2
$812.8
$895.8
$881.5
2022
2021
2020
Shares
Weighted-
average price
497
152
(251)
59
(6)
451
$ 83.74
95.00
75.26
86.14
95.37
$106.32
Shares
382
141
(124)
126
(28)
497
Weighted-
average price
Shares
Weighted-
average price
$71.20
98.30
51.73
75.26
90.32
$83.74
392
130
(88)
(44)
(8)
382
$57.98
86.14
44.98
50.95
65.68
$71.20
A reconciliation of the U.S. federal statutory rate with the effective tax
rate for the years ended November 30 follows:
Federal statutory tax rate
State income taxes, net of federal benefits
International tax at different effective rates
U.S. tax on remitted and unremitted earnings
Stock compensation expense
Changes in prior year tax contingencies
Acquisition-related state tax rate change,
net of federal benefits
Valuation allowance release
Intra-entity asset transfer
Other, net
Total
2022
2021
2020
21.0% 21.0% 21.0%
1.6
1.2
0.8
(0.1)
0.1
0.6
(0.4)
(1.1)
(2.5)
(0.8)
1.5
1.3
0.8
(1.5)
(0.3)
—
(0.6)
—
0.5
1.2
—
(0.5)
(1.4)
— (1.1)
(0.5)
0.2
20.7% 21.5% 19.8%
2022 Annual Report 7 1
Deferred tax assets and liabilities are comprised of the following as of
November 30:
(millions)
Deferred tax assets
Employee benefit liabilities
Other accrued liabilities
Inventory
Tax loss and credit carryforwards
Lease liabilities
Other
Valuation allowance
Deferred tax liabilities
Depreciation
Intangible assets
Lease ROU assets
Other
Net deferred tax liability
2022
2021
$ 49.9
36.1
17.4
59.7
18.1
22.7
(26.4)
$ 91.2
39.8
12.9
56.6
33.3
21.7
(32.7)
177.5
222.8
93.0
847.4
12.3
18.6
971.3
97.5
841.3
3.3
5.9
948.0
$(793.8)
$(725.2)
At November 30, 2022, we have tax loss carryforwards of $162.6 million.
Of these carryforwards, $5.1 million expire in 2023, $16.1 million from 2024
through 2025, $54.6 million from 2026 through 2039, and $86.8 million
may be carried forward indefinitely. At November 30, 2022, we also have
U.S. foreign tax credit carryforwards of $7.0 million, $3.9 million, and
$5.3 million which expire in 2030, 2031, and 2032, respectively.
A valuation allowance has been provided to cover deferred tax assets
that are not more likely than not realizable. The net decrease of
$6.3 million in the valuation allowance from November 30, 2021 to
November 30, 2022 resulted primarily from the net decrease of valuation
allowances for net operating losses and other tax attributes in the U.S.
and certain non-U.S. jurisdictions.
Our intent is to continue to reinvest undistributed earnings of our non-
U.S. subsidiaries and joint ventures indefinitely. As of November 30,
2022, we have $1.4 billion of earnings that are considered indefinitely
reinvested. We have not provided any deferred taxes with respect to
items such as foreign withholding taxes, other income taxes, 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)
Balance at beginning of year
Additions for current year tax positions
Additions for prior year tax positions
Reductions of prior year tax positions
Statute expirations
Settlements
Foreign currency translation
2022
2021
2020
$26.8
4.7
0.1
(0.8)
(5.0)
—
(0.7)
$ 39.3
4.8
0.1
(11.6)
(6.0)
(0.2)
0.4
$ 32.0
7.8
2.5
—
(4.2)
—
1.2
Balance at November 30
$25.1
$ 26.8
$ 39.3
As of November 30, 2022, 2021, and 2020, if recognized, $25.1 million,
$26.8 million, and $39.3 million, respectively, of the unrecognized tax
benefits would affect the effective rate.
72 McCormick & Company, Inc.
We record interest and penalties on income taxes in income tax
expense. We recognized interest and penalty expense (benefit) of
$0.2 million, $(3.7) million, and $0.8 million in 2022, 2021, and 2020,
respectively. As of November 30, 2022 and 2021, we had accrued
$4.7 million and $4.7 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,
2022 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 2019. In other major jurisdictions, we are no longer sub-
ject 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
On April 5, 2021, following approval by the Company’s shareholders
on March 31, 2021, amendments to the Company’s Charter became
effective that increased the number of authorized shares of each class
of common stock from 320,000,000 to 640,000,000 and established the
par value of each class of common stock at $0.01 per share. The par
value and additional paid in capital associated with each class of com-
mon stock is recorded in Common stock and Common stock non-voting
in our consolidated balance sheet.
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.
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 secu-
rities or property, dissolution of the company and the sale of substan-
tially 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)
Average shares outstanding—basic
Effect of dilutive securities:
Stock options/RSUs/LTPP
2022
2021
2020
268.2
267.3
266.5
2.0
2.6
2.6
Average shares outstanding—diluted
270.2
269.9
269.1
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)
Antidilutive securities
2022
0.9
2021
0.6
2020
0.1
15. COMMITMENTS AND CONTINGENCIES
During the normal course of our business, we are occasionally involved
with various claims and litigation. Reserves are established in connec-
tion with such matters when a loss is probable and the amount of such
loss can be reasonably estimated. At November 30, 2022 and 2021,
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 pend-
ing 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, dis-
count 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,”
“DaQiao,” “La Drogheria,” “Stubb’s,” “OLD BAY” and “Gourmet Gar-
den.” 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, prior to 2022, 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, including the recent acquisitions
of Cholula and FONA, 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 warehous-
ing 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%, 11% and 12% of consolidated sales in 2022,
2021, and 2020, respectively. Sales to one of our flavor solutions
segment customers, PepsiCo, Inc., accounted for approximately 11% of
consolidated sales in 2022, 2021, and 2020.
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.
2022 Annual Report 73
Business Segment Results
(millions)
2022
Net sales
Operating income excluding special charges and transaction and
integration expenses
Income from unconsolidated operations
Assets
Capital expenditures
Depreciation and amortization
2021
Net sales
Operating income excluding special charges and transaction and integration expenses
Income from unconsolidated operations
Assets
Capital expenditures
Depreciation and amortization
2020
Net sales
Operating income excluding special charges and transaction and integration expenses
Income from unconsolidated operations
Assets
Capital expenditures
Depreciation and amortization
Consumer
Flavor
Solutions
Total
segments
Corporate
& other
Total
$3,757.9
$2,592.6
$ 6,350.5
$ —
$ 6,350.5
710.7
33.1
—
—
—
$3,937.5
804.9
47.8
—
—
—
$3,596.7
780.9
34.1
—
—
—
206.7
4.7
—
—
—
$2,380.4
296.6
4.4
—
—
—
$2,004.6
237.9
6.7
—
—
—
917.4
37.8
12,332.9
220.1
153.4
$ 6,317.9
1,101.5
52.2
12,185.1
227.6
147.0
$ 5,601.3
1,018.8
40.8
11,339.2
150.1
123.9
—
—
792.0
41.9
47.2
$ —
—
—
720.7
50.4
39.3
$ —
—
—
750.5
75.2
41.1
917.4
37.8
13,124.9
262.0
200.6
$ 6,317.9
1,101.5
52.2
12,905.8
278.0
186.3
$ 5,601.3
1,018.8
40.8
12,089.7
225.3
165.0
A reconciliation of operating income excluding special charges and transaction and integration expenses, to operating income for 2022, 2021 and 2020
is as follows:
(millions)
2022
Operating income excluding special charges and transaction and integration expenses
Less: Special charges
Less: Transaction and integration expenses
Operating income
2021
Operating income excluding special charges and transaction and integration expenses
Less: Special charges and transaction-related expenses included in cost of goods sold
Less: Other special charges
Less: Other transaction and integration expenses
Operating income
2020
Operating income excluding special charges and transaction and integration expenses
Less: Special charges
Less: Transaction and integration expenses
Operating income
Geographic Areas
We have net sales and long-lived assets in the following geographic areas:
(millions)
2022
Net sales
Long-lived assets
2021
Net sales
Long-lived assets
2020
Net sales
Long-lived assets
Consumer
Flavor
Solutions
$710.7
23.9
—
$686.8
$804.9
8.7
31.5
7.8
$756.9
$780.9
5.5
7.5
$767.9
$206.7
27.7
2.2
$176.8
$296.6
2.3
14.9
21.2
$258.2
$237.9
1.4
4.9
$231.6
Total
$ 917.4
51.6
2.2
$ 863.6
$1,101.5
11.0
46.4
29.0
$1,015.1
$1,018.8
6.9
12.4
$ 999.5
United States
EMEA
Other countries
Total
$3,921.3
7,892.5
$3,817.5
7,872.2
$3,445.9
7,202.0
$1,116.4
1,051.7
$1,191.3
1,146.6
$1,046.7
1,135.6
$1,312.8
854.6
$1,309.1
909.8
$1,108.7
916.5
$6,350.5
9,798.8
$6,317.9
9,928.6
$5,601.3
9,254.1
Long-lived assets include property, plant and equipment, goodwill and intangible assets, net of accumulated depreciation and amortization.
74 McCormick & Company, Inc.
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)
2022
2021
2020
Other income, net
Gain on sale of business(1)
Gain on settlement of treasury locks(2)
Pension and other postretirement
benefit income
Interest income
Other
$49.6
18.7
9.6
17.8
2.6
$98.3
$ —
—
$ —
—
6.4
9.3
1.6
$17.3
10.0
7.8
(0.2)
$17.6
For the year ended November 30 (millions)
2022
2021
2020
Depreciation
Software amortization
Interest paid
Income taxes paid
$136.3 $124.6
12.6
135.7
179.3
18.9
148.8
192.4
$121.1
12.4
134.1
183.3
Dividends paid per share were $1.48 in 2022, $1.36 in 2021 and $1.24
in 2020. Dividends declared per share were $1.50 in 2022, $1.39 in
2021, and $1.27 in 2020.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
(1) The sale of Kitchen Basics is further described in note 2.
(2) The settlement of these treasury locks is further described in note 8.
None.
At November 30 (millions)
2022
2021
Disclosure Controls and Procedures
ITEM 9A. CONTROLS AND PROCEDURES
Our management, with the participation of our Chief Executive Officer
and Chief Financial Officer, has evaluated the effectiveness of our
disclosure controls and procedures, as defined in Rule 13a-15(e) of the
Securities Exchange Act of 1934, as of the end of the period covered
by this report. Based on that evaluation, our Chief Executive Officer
and Chief Financial Officer concluded that, as of the end of the period
covered by this report, our disclosure controls and procedures were
effective.
Internal Control over Financial Reporting
Management’s report on our internal control over financial reporting
and the report of our Independent Registered Public Accounting Firm
on internal control over financial reporting are included in our 2022
financial statements in Item 8 of this Report under the captions enti-
tled “Report of Management” and “Report of Independent Registered
Public Accounting Firm.”
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN
JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
Trade accounts receivable allowance for doubtful
accounts
$ 7.3
$ 5.2
Inventories
Finished products
Raw materials and work-in-process
Prepaid expenses
Other current assets
Property, plant and equipment
Land and improvements
Buildings (including finance leases)
Machinery, equipment and other
Construction-in-progress
Accumulated depreciation
Other long-term assets
Investments in affiliates
Long-term investments
Right of use asset
Software, net of accumulated amortization of
$251.6 for 2022 and $248.5 for 2021
Pension asset
Other
Other accrued liabilities
Payroll and employee benefits
Sales allowances
Dividends payable
Other
Other long-term liabilities
Pension
Postretirement benefits
Operating lease liability
Unrecognized tax benefits
Other
$ 649.0 $ 556.2
626.1
691.1
$ 1,340.1 $1,182.3
$ 61.7 $ 41.7
70.6
77.2
$ 138.9
$ 112.3
$ 90.1 $ 95.1
694.7
1,200.5
211.9
(1,061.9)
738.8
1,265.4
238.7
(1,135.0)
$ 1,198.0 $1,140.3
$ 167.9 $ 164.0
137.3
136.8
115.1
218.9
160.6
123.5
153.4
141.1
61.6
140.6
$ 939.4 $ 781.4
$ 141.9 $ 229.4
189.3
99.0
332.5
181.0
104.6
326.6
$ 754.1 $ 850.2
$ 92.0 $ 179.4
60.8
106.1
31.0
113.6
47.6
176.1
29.6
139.4
$ 484.7 $ 490.9
2022 Annual Report 75
PART III.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND
CORPORATE GOVERNANCE
Information responsive to this item is set forth in the sections titled
“Corporate Governance” and “Election of Directors” in our 2023 Proxy
Statement, incorporated by reference herein, to be filed within 120 days
after the end of our fiscal year.
We have adopted a code of ethics that applies to all employees,
including our principal executive officer, principal financial officer,
principal accounting officer, and our Board of Directors. A copy of
the code of ethics is available on our internet website at
www.mccormickcorporation.com. We will satisfy the disclosure
requirement under Item 5.05 of Form 8-K regarding any material
amendment to our code of ethics, and any waiver from a provision of
our code of ethics that applies to our principal executive officer, princi-
pal financial officer, principal accounting officer, or persons performing
similar functions, by posting such information on our website at the
internet website address set forth above.
ITEM 11. EXECUTIVE COMPENSATION
Information responsive to this item is incorporated herein by reference
to the sections titled “Compensation of Directors,” “Compensation
Discussion and Analysis,” “Compensation and Human Capital
Committee Report,” “Summary Compensation Table,” “Grants of
Plan-Based Awards,” “Narrative to the Summary Compensation
Table,” “Outstanding Equity Awards at Fiscal Year-End,” “Option
Exercises and Stock Vested in Last Fiscal Year,” “Retirement Benefits,”
PART IV.
“Non-Qualified Deferred Compensation,” “Potential Payments Upon
Termination or Change in Control,” “Compensation and Human Capital
Committee Interlocks and Insider Participation” and “Equity Compen-
sation Plan Information” in the 2023 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Information responsive to this item is incorporated herein by
reference to the sections titled “Principal Stockholders,” “Election of
Directors” and “Equity Compensation Plan Information” in the 2023
Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information responsive to this item is incorporated herein by reference
to the section entitled “Corporate Governance” in the 2023 Proxy
Statement.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Our independent registered public accounting firm is Ernst & Young
LLP, Baltimore, Maryland, PCAOB ID: 00042.
Information responsive to this item is incorporated herein by reference
to the section titled “Report of Audit Committee” and “Fees of
Independent Registered Public Accounting Firm” in the 2023 Proxy
Statement.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
2. Consolidated Financial Statement Schedule
List of documents filed as part of this Report.
Supplemental Financial Schedule:
1. Consolidated Financial Statements
II–Valuation and Qualifying Accounts
The Consolidated Financial Statements for McCormick & Company,
Incorporated and related notes, together with the Report of
Management, and the Reports of Ernst & Young LLP dated January 26,
2023, are included herein in Part II, Item 8.
Schedules other than that listed above are omitted because of the
absence of the conditions under which they are required or because
the information called for is included in the consolidated financial
statements or notes thereto.
3. Exhibits required to be filed by Item 601 of Regulation S-K
The information called for by this item is incorporated herein by
reference from the Exhibit Index included in this Report.
76 McCormick & Company, Inc.
The following exhibits are attached or incorporated herein by reference:
Exhibit Number
Description
EXHIBIT INDEX
(3)
(i)
Articles of Incorporation and By-Laws
Restatement of Charter of McCormick & Company,
Incorporated dated April 16, 1990
Articles of Amendment to Charter of McCormick & Company,
Incorporated dated April 1, 1992
Articles of Amendment to Charter of McCormick & Company,
Incorporated dated March 27, 2003
Articles of Amendment to Charter of McCormick & Company,
Incorporated dated April 2, 2021
Incorporated by reference from Exhibit 4 of Registration
Form S-8, Registration No. 33-39582 as filed with the
Securities and Exchange Commission on March 25, 1991.
Incorporated by reference from Exhibit 4 of Registration
Form S-8, Registration Statement No. 33-59842 as filed with
the Securities and Exchange Commission on March 19, 1993.
Incorporated by reference from Exhibit 4 of Registration Form
S-8, Registration Statement No. 333-104084 as filed with the
Securities and Exchange Commission on March 28, 2003.
Incorporated by reference from Exhibit 3(i) of McCormick’s
Form 10-Q for the quarter ended May 31, 2021,
File No. 1-14920, as filed with the Securities and Exchange
Commission on July 1, 2021.
(ii)
By-Laws
By-Laws of McCormick & Company, Incorporated Amended
and Restated on November 26, 2019
Incorporated by reference from Exhibit 99.1 of McCormick’s
Form 8-K dated November 26 2019, File No. 1-14920, as filed with
the Securities and Exchange Commission on November 26, 2019.
(4)
Instruments defining the rights of security holders, including indentures
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
(xi)
(xii)
See Exhibit 3 (Restatement of Charter and By-Laws)
Summary of Certain Exchange Rights, incorporated by reference from Exhibit 4.1 of McCormick’s Form 10-Q for the quarter ended
August 31, 2001, File No. 1-14920, as filed with the Securities and Exchange Commission on October 12, 2001.
Indenture dated July 8, 2011 between McCormick and U.S. Bank National Association, incorporated by reference from Exhibit 4.1 of
McCormick’s Form 8-K dated July 5, 2011, File No. 1-14920, as filed with the Securities and Exchange Commission on July 8, 2011.
Form of 3.50% notes due 2023, incorporated by reference from Exhibit 4.2 of McCormick’s Form 8-K dated August 14, 2013,
File No. 1-14920, as filed with the Securities and Exchange Commission on August 19, 2013.
Form of 3.15% notes due 2024, incorporated by reference from Exhibit 4.3 of McCormick’s Form 8-K dated August 7, 2017,
File No. 1-14920, as filed with the Securities and Exchange Commission on August 11, 2017.
Form of 3.25% notes due 2025, incorporated by reference from Exhibit 4.2 of McCormick’s Form 8-K dated November 3, 2015,
File No. 1-14920, as filed with the Securities and Exchange Commission on November 6, 2015.
Form of 3.40% notes due 2027, incorporated by reference from Exhibit 4.4 of McCormick’s Form 8-K dated August 7, 2017,
File No. 1-14920, as filed with the Securities and Exchange Commission on August 11, 2017.
Form of 4.20% notes due 2047, incorporated by reference from Exhibit 4.5 of McCormick’s Form 8-K dated August 7, 2017,
File No. 1-14920, as filed with the Securities and Exchange Commission on August 11, 2017.
Form of 2.50% Notes due 2030, incorporated by reference from Exhibit 4.2 of McCormick’s Form 8-K dated April 13, 2020,
File No. 1-14920, as filed with the Securities and Exchange Commission on April 16, 2020.
Form of 0.90% Notes due 2026, incorporated by reference from Exhibit 4.2 of McCormick’s Form 8-K dated February 11, 2021,
File No. 1-14920, as filed with the Securities and Exchange Commission on February 11, 2021.
Form of 1.85% Notes due 2031, incorporated by reference from Exhibit 4.3 of McCormick’s Form 8-K dated February 11, 2021,
File No. 1-14920, as filed with the Securities and Exchange Commission on February 11, 2021.
Description of Securities of McCormick & Company, Incorporated, incorporated by reference from Exhibit 4(xiii) of McCormick’s
Form 10-K for the fiscal year ended November 30, 2021, File No. 1-14920, as filed with the Securities and Exchange Commission on
January 27, 2022.
(10)
Material contracts
(i)
(ii)
Deferred Compensation Plan, as restated on January 1, 2000, and amended on August 29, 2000, September 5, 2000 and
May 16, 2003, in which directors, officers and certain other management employees participate, a copy of which Plan document and
amendments was attached as Exhibit 10(viii) of McCormick’s Form 10-Q for the quarter ended August 31, 2003, File No. 1-14920, as
filed with the Securities and Exchange Commission on October 14, 2003, and incorporated by reference herein.*
2004 Long-Term Incentive Plan, in which officers and certain other management employees participate, is set forth in Exhibit A
of McCormick’s definitive Proxy Statement dated February 17, 2004, File No. 1-14920, as filed with the Securities and Exchange
Commission on February 17, 2004, and incorporated by reference herein.*
2022 Annual Report 7 7
Exhibit Number
Description
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
(xi)
(xii)
(xiii)
(xiv)
(xv)
(xvi)
(i)
(ii)
(i)
(ii)
Non-Qualified Retirement Savings Plan, with an effective date of February 1, 2017, in which directors, officers and certain other
management employees participate, a copy of which Plan document was attached as Exhibit 10(v) of McCormick’s Form 10-Q for the
quarter ended February 28, 2017, File No. 1-14920, as filed with the Securities and Exchange Commission on March 28, 2017, and
incorporated by reference herein.*
The 2007 Omnibus Incentive Plan, in which directors, officers and certain other management employees participate, is set forth
in Exhibit A of McCormick’s definitive Proxy Statement dated February 20, 2008, File No. 1-14920, as filed with the Securities and
Exchange Commission on February 20, 2008, and incorporated by reference herein, as amended by Amendment No. 1 thereto, which
Amendment is incorporated by reference from Exhibit 10(xi) of McCormick’s 10-K for the fiscal year ended November 30, 2008,
File No. 1-14920, as filed with the Securities and Exchange Commission on January 28, 2009.*
The Amended and Restated 2013 Omnibus Incentive Plan, in which directors, officers and certain other management employees
participate, is incorporated by reference from Exhibit A of McCormick’s definitive Proxy Statement dated February 14, 2019,
File No. 1-14920, as filed with the Securities and Exchange Commission on February 14, 2019.*
The 2022 Omnibus Incentive Plan, in which directors, officers and certain other management employees participate, is incorporated
by reference from Exhibit A of McCormick’s definitive Proxy Statement dated February 17, 2022, File No. 1-14920, as filed with the
Securities and Exchange Commission on February 17, 2022.*
Amendment No. 1 to the 2022 Omnibus Incentive Plan is incorporated by reference from Exhibit 10(vii) of McCormick’s Form 10-Q for
the quarter ended May 31, 2022, File No. 1-14920, as filed with the Securities and Exchange Commission on June 29, 2022.*
Form of Long-Term Performance Plan Agreement, incorporated by reference from Exhibit 10(i) of McCormick’s Form 8-K/A, as
amended, dated March 30, 2022, File No. 1-14920, as filed with the Securities and Exchange Commission on April 5, 2022.*
Form of Restricted Stock Units Agreement, incorporated by reference from Exhibit 10(ii) of McCormick’s Form 8-K/A, as amended,
dated March 30, 2022, File No. 1-14920, as filed with the Securities and Exchange Commission on April 5, 2022.*
Form of Restricted Stock Units Agreement for Directors, incorporated by reference from Exhibit 10(iii) of McCormick’s Form 8-K/A, as
amended, dated March 30, 2022, File No. 1-14920, as filed with the Securities and Exchange Commission on April 5, 2022.*
Form of Non-Qualified Stock Option Agreement, incorporated by reference from Exhibit 10(iv) of McCormick’s Form 8-K/A, as
amended, dated March 30, 2022, File No. 1-14920, as filed with the Securities and Exchange Commission on April 5, 2022.*
Form of Non-Qualified Stock Option Agreement for Directors, incorporated by reference from Exhibit 10(v) of McCormick’s
Form 8-K/A, as amended, March 30, 2022, File No. 1-14920, as filed with the Securities and Exchange Commission on April 5, 2022.*
Form of Stock Option Agreement for the Value Creation Acceleration Program, incorporated by reference from Exhibit 99.1 of
McCormick’s Form 8-K, File No. 1-14920, as filed with the Securities and Exchange Commission on December 3, 2020.*
Form of Indemnification Agreement, incorporated by reference from Exhibit 10(xv) of McCormick’s Form 10-Q for the quarter ended
February 28, 2014, File No. 1-14920, as filed with the Securities and Exchange Commission on March 26, 2014.*
Employment Agreement between McCormick (UK) Limited and Malcolm Swift, incorporated by reference from Exhibit 10.1 of
McCormick’s Form 8-K, File No. 1-14920, as filed with the Securities and Exchange Commission on January 29, 2015.*
Severance Plan for Executives, incorporated by reference from Exhibit 10(xix) of McCormick’s Form 10-Q for the quarter ended
February 28, 2015, File No. 1-14920, as filed with the Securities and Exchange Commission on March 31, 2015.*
Subsidiaries of McCormick
Consents of experts and counsel
Rule 13a-14(a)/15d-14(a) Certifications
Filed herewith
Filed herewith
Filed herewith
Certification of Lawrence E. Kurzius, Chairman and Chief Executive Officer, pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the
Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Michael R. Smith, Executive Vice President and Chief Financial Officer, pursuant to Rule 13a-14(a) or Rule 15d-14(a)
under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Section 1350 Certifications
Filed herewith
Certification of Lawrence E. Kurzius, Chairman and Chief Executive Officer, pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the
Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Michael R. Smith, Executive Vice President and Chief Financial Officer, pursuant to Rule 13a-14(b) or Rule 15d-14(b) under
the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
The following financial information from the Annual Report on Form 10-K of McCormick for the year ended November 30, 2022, filed
electronically herewith, and formatted in Inline XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets;
(ii) Consolidated Income Statements; (iii) Consolidated Statements of Comprehensive Income; (iv) Consolidated Statements of
Shareholders’ Equity; (v) Consolidated Cash Flow Statements; and (vi) Notes to Consolidated Financial Statements.
Inline XBRL for the cover page of this Annual Report on Form 10-K of McCormick for the year ended November 30, 2022, filed
electronically herewith, included in the Exhibit 101 Inline XBRL Document Set.
(21)
(23)
(31)
(32)
(101)
(104)
*
Management contract or compensatory plan or arrangement.
McCormick hereby undertakes to furnish to the Securities and Exchange Commission, upon its request, copies of additional
instruments of McCormick with respect to long-term debt that involve an amount of securities that do not exceed 10% of the total
assets of McCormick and its subsidiaries on a consolidated basis, pursuant to Regulation S-K, Item 601(b)(4)(iii)(A).
78 McCormick & Company, Inc.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, McCormick has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SIGNATURES
McCORMICK & COMPANY, INCORPORATED
By:
/s/ Lawrence e. Kurzius
Lawrence E. Kurzius
Chairman & Chief Executive Officer
January 26, 2023
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of
McCormick and in the capacities and on the dates indicated.
Principal Executive Officer:
By:
/s/ Lawrence e. Kurzius
Lawrence E. Kurzius
Principal Financial Officer:
By:
/s/ MichaeL r. sMith
Michael R. Smith
Principal Accounting Officer:
By:
/s/ GreGory P. rePas
Gregory P. Repas
Chairman & Chief Executive Officer
January 26, 2023
Executive Vice President & Chief Financial Officer
January 26, 2023
Vice President & Controller
Principal Accounting Officer
January 26, 2023
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons, being a majority
of the Board of Directors of McCormick & Company, Incorporated, on the date indicated:
THE BOARD OF DIRECTORS:
/s/ anne L. BraMMan
Anne L. Bramman
/s/ MichaeL a. conway
Michael A. Conway
/s/ FreeMan a. hraBowsKi, iii
Freeman A. Hrabowski, III
/s/ Lawrence e. Kurzius
Lawrence E. Kurzius
/s/ Patricia LittLe
Patricia Little
/s/ MichaeL D. ManGan
Michael D. Mangan
/s/ Maritza G. MontieL
Maritza G. Montiel
/s/ MarGaret M.V. Preston
Margaret M.V. Preston
/s/ Gary M. roDKin
Gary M. Rodkin
/s/ Jacques taPiero
Jacques Tapiero
/s/ w. anthony Vernon
W. Anthony Vernon
DATE:
January 26, 2023
January 26, 2023
January 26, 2023
January 26, 2023
January 26, 2023
January 26, 2023
January 26, 2023
January 26, 2023
January 26, 2023
January 26, 2023
January 26, 2023
2022 Annual Report 79
Supplemental Financial Schedule II Consolidated
McCORMICK & COMPANY, INCORPORATED
VALUATION AND QUALIFYING ACCOUNTS
(IN MILLIONS)
Column A
Description
Deducted from asset accounts:
Year ended November 30, 2022:
Allowance for doubtful receivables
Valuation allowance on net deferred tax assets
Deducted from asset accounts:
Year ended November 30, 2021:
Allowance for doubtful receivables
Valuation allowance on net deferred tax assets
Deducted from asset accounts:
Year ended November 30, 2020:
Allowance for doubtful receivables
Valuation allowance on net deferred tax assets
(1) Includes the impact of foreign currency exchange.
Column B
Column C Additions
Column D
Column E
Balance at
beginning of
period
Charged to
costs and
expenses
Charged to
other
accounts
Deductions (1)
Balance at
end of period
$ 5.2
32.7
$ 37.9
$ 5.2
31.5
$ 36.7
$ 5.6
32.4
$ 38.0
$ 2.2
3.2
$ 5.4
$ 1.2
6.6
$ 7.8
$ 0.8
11.8
$12.6
$ (0.9)
(1.7)
$ (2.6)
$ (1.1)
(0.4)
$ (1.5)
$ (1.4)
(0.1)
$ (1.5)
$ 0.8
(7.8)
$ (7.0)
$ (0.1)
(5.0)
$ (5.1)
$ 0.2
(12.6)
$(12.4)
$ 7.3
26.4
$33.7
$ 5.2
32.7
$ 37.9
$ 5.2
31.5
$ 36.7
80 McCormick & Company, Inc.
I N V E S T O R I N F O R M A T I O N
GLOBAL HEADQUARTERS
McCormick & Company, Incorporated
24 Schilling Road
Hunt Valley, MD 21031 USA
(410) 771-7301
mccormickcorporation.com
STOCK LISTING
New York Stock Exchange
Symbols: MKC, MKC.V
ANTICIPATED DIVIDEND DATES—2023
Payment Date
Record Date
4/24/23
4/10/23
7/24/23
7/10/23
10/24/23
10/10/23
12/29/23
1/8/24
McCormick has paid dividends every year since 1925.
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Ernst & Young LLP
1201 Wills Street, Suite 310
Baltimore, MD 21231
REGISTERED SHAREHOLDER INQUIRIES
For questions about your account, statements, dividend
payments, reinvestment and direct deposit, and for address
changes, lost certificates, stock transfers, ownership changes
or other administrative matters, contact our transfer agent.
TRANSFER AGENT AND REGISTRAR
EQ Shareowner Services
1110 Centre Pointe Curve, Suite 101
Mendota Heights, MN 55120-4100
(877) 778-6784 or (651) 450-4064
shareowneronline.com
ANNUAL MEETING
The annual meeting of shareholders will be conducted
exclusively online. The meeting will be held Wednesday,
March 29, 2023, at 10 a.m. EST. Details can be found at
ir.mccormick.com.
ELECTRONIC DELIVERY OF ANNUAL REPORT AND
PROXY STATEMENT
If you would like to receive next year’s annual report and proxy
statement electronically, you may enroll on the website below:
enroll.icsdelivery.com/mkc
INVESTOR INQUIRIES
Our investor website, ir.mccormick.com, contains our
annual reports, Securities & Exchange Commission (SEC)
filings, press releases, webcasts, corporate governance
principles, and other information.
TRADEMARKS
Use of ® or ™ in this annual report indicates trademarks
including those owned or used by McCormick & Company,
Incorporated and its subsidiaries and affiliates. All marks are
the property of their respective owners.
To obtain without cost a copy of the annual report filed
with the SEC on Form 10-K or for general questions
about McCormick or the information in our reports, press
releases and other filings, contact Investor Relations at
the global headquarters address, investor website or
telephone (800) 424-5855 or (410) 771-7537.
INVESTOR SERVICES PLAN (DIVIDEND
REINVESTMENT AND DIRECT PURCHASE PLAN)
We offer an Investor Services Plan which provides
shareholders of record the opportunity to automatically
reinvest dividends, make optional cash purchases of stock,
place stock certificates into safekeeping and sell shares.
Individuals who are not current shareholders may purchase
their initial shares directly through the Plan.
All transactions are subject to the limitations set forth in
the Plan prospectus, which may be obtained by contacting
our transfer agent.
Visit our company and brands on:
McCormick has offset 10,000 lbs. of paper used for the
production of this report by planting 120 trees
in Madagascar.
CERTIFIED REFORESTED
BX_75E089B26F1E
Please visit printreleaf.com to learn more.
M c C O R M I C K & C O M PA N Y , I N C O R P O R AT E D
24 Schilling Road, Hunt Valley, MD 21031 USA
mccormickcorporation.com