McCormick & Company Annual Report 2023

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FY2023 Annual Report · McCormick & Company

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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

ADVANCING

OUR L E A D E R S H I P AND
D I F F E R E N T I AT I O N

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C I N N A M O N

Cinnamon is one of McCormick’s five iconic ingredients. This rich, versatile

spice is used to bring a deep warm sweetness and savory richness and heat

to many dishes. Our cinnamon is primarily sourced from the Sumatra region

of Indonesia. Today, almost 90% of McCormick cinnamon is sustainably

sourced. Cinnamon’s sweet and flavorful aroma was used to scent this year’s

annual report.

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I N V E S T O R I N F O R M A T I O N O N I N S I D E B A C K C O V E R

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INVESTOR INFORMATION

For the latest investor information including annual
reports, press releases, presentations and webcasts,
corporate governance principles, and SEC filings,
please visit 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: enroll.icsdelivery.com/mkc.

INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

Ernst & Young LLP
1201 Wills Street, Suite 310
Baltimore, MD 21231

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.

Visit our company and brands on:

McCormick has offset 10,000 pounds
of paper used for the production
of this report by planting 120 trees
in Tanzania.

CERTIFIED REFORESTED

BX_F10C9350D64A

Please visit printreleaf.com
to learn more.

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

ANNUAL MEETING

The annual meeting of shareholders will
be conducted exclusively online at
www.virtualshareholdermeeting.com/MKC2024
at 8:30 a.m., Eastern Time, Wednesday,
March 27, 2024. Please refer to the Proxy
Statement for information concerning the meeting.

TRANSFER AGENT AND REGISTRAR

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 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

DIVIDENDS

McCormick has paid dividends every year
since 1925. Dividends are normally paid quarterly
in January, April, July and October.

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.

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As I begin my first full year as Chief Executive Officer, I am committed

to harnessing the collective expertise of our talented McCormick team

with a renewed sense of urgency and speed to deliver on five key priorities.

We are confident these priorities will drive long-term profitable growth that

is differentiated and will build shareholder value.”

O U R K E Y P R I O R I T I E S T O A D V A N C E O U R

L E A D E R S H I P A N D D I F F E R E N T I A T I O N

1. STRENGTHEN OUR GLOBAL LEADERSHIP in our core categories

by growing volume and market share, as well as expanding our heat
platform and increasing our global scale.

2. DRIVE PROFITABLE GROWTH and higher returns on investments
and we will fuel sales growth while also restoring our operating
margin to historical levels.

3. ACCELERATE OUR DIGITAL TRANSFORMATION to enhance

how we serve consumers and customers, to work faster and more
efficiently, and strengthen decision making by further leveraging
data and insights.

4. ELEVATE OUR POWER OF PEOPLE CULTURE and build the next
generation of leaders and capabilities that will drive McCormick’s
long-term success.

5. STRENGTHEN AND EXPAND OUR SYSTEM OF COMPETITIVE
ADVANTAGES to make McCormick even more effective in the
marketplace and ensure we deliver long-term sustainable growth.

M A N A G E M E N T C O M M I T T E E

BRENDAN M. FOLEY
President & Chief Executive Officer

MIKE SMITH
Executive Vice President
& Chief Financial Officer

SARAH PIPER
Chief Human Relations Officer

KASEY JENKINS
Chief Growth Officer

ANDREW FOUST
President - Americas

ANA SANCHEZ
President - EMEA

D E A R S H A R E H O L D E R S ,

It is a great privilege for me to send you my first shareholder letter as Chief Executive Officer. I am honored and

excited to lead this great company with its rich history and promising future. As I reflect on 2023, I am proud of the

progress we have made in advancing our business. I am energized by our strong fundamentals and underlying business

trends, which reinforce our competitive advantages and leadership in flavor. Looking ahead to 2024, I am thrilled to

continue to build on our solid foundation, execute on our proven strategies, and further influence our growth plans,

which reflect my commitment to advance our leadership and differentiation.

B U I L D I N G M O M E N T U M I N 2 0 2 3

The global demand for flavor is the foundation of our sales growth. In 2023, despite an economically pressured
consumer environment, we grew net sales for the year by 6%1 led by pricing actions to offset inflation. In our Flavor
Solutions segment, sales increased by 10%1, while sales in our Consumer segment rose by 2%1. The Consumer

segment was impacted by the Kitchen Basics divestiture, exits of low-margin businesses, and our Consumer

business in Russia.

Adjusted operating income1 grew 12% versus 2022, driven by strong gross margin improvement, which reflects

the continued recovery of cost inflation that our pricing lagged over the past two years, as well as cost savings from

our Comprehensive Continuous Improvement (CCI) and Global Operating Effectiveness (GOE) programs. Our CCI

and GOE programs have delivered in line with our expectations for 2023 and have been important contributors to the
improvement in our operating margin. On the bottom line, adjusted earnings per share1 increased 7% to $2.70,

driven by adjusted operating income growth, partially offset by increased interest expense.

Cash flow from operations in 2023 was strong, reaching $1.2 billion, which was nearly double the prior year.

Our priority remains to have a balanced use of cash, funding investments to drive profitable growth, returning

a significant portion to shareholders through dividends, and paying down debt. We remain committed to our long

history of returning cash to our shareholders; with our 2024 dividend, we have increased our dividend for the

past 38 years.

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

W I N N I N G W I T H C O N S U M E R S

A N D C U S T O M E R S

McCormick is a global leader in flavor. The breadth and reach of our strong portfolio

uniquely positions us to capitalize on the consumer demand for flavor in every sip and

bite through our products and our customers’ products. Our two segments, Consumer

and Flavor Solutions, complement each other and reinforce our differentiation. The scale,

insights, and technology that we leverage from both segments are meaningful in driving

sustainable growth.

In our Consumer segment, we will continue to use our powerful brands as the basis for

our growth investments in category management, new products, and brand marketing.

In 2023, we continued the global rollout of our consumer-preferred packaging for our

core spices and seasonings portfolio. Our performance in Europe, Middle East, and Africa

(EMEA) has benefited from this new packaging, and in 2023, we began the transition in the

Americas as well as in Asia/Pacific (APAC). We are pleased with our results to date and are

looking forward to the strong growth contribution this initiative will deliver in 2024. We

accelerated our growth with new products in 2023 and expect the momentum to continue

with our 2024 launches. Lastly, our innovative brand marketing campaigns are resonating with

consumers, and we will continue to increase our investments in 2024.

In our Flavor Solutions segment, we are collaborating with a broad customer base and

leveraging our proprietary technologies and unique capabilities to drive our leadership

and profitable growth across our portfolio. In Flavors, we are targeting opportunities

to grow in attractive, high-growth categories, such as savory snacks, beverages,

and performance nutrition. We are creating preferred flavors, enabling our customers

to continue to win in the marketplace. In branded foodservice, we are driving growth

by increasing restaurant menu penetration, leveraging our culinary partnerships, and

delivering on-trend new products. Our 2023 Flavor Solutions growth momentum was

strong, and we plan to continue to drive growth in 2024 with our culinary-inspired

innovation and differentiated customer engagement approach.

2023 ANNUAL REPORT | ADVANCING OUR LEADERSHIP & DIFFERENTIATIONAcross our entire portfolio, we continue to leverage our competitive advantages to advance our heat platform.

Heat is not just a trend; it is a sustainable, fast-growing flavor profile, and the elevated consumer interest in heat

is clear across many categories and channels. We are uniquely positioned to win in heat with our global iconic brands,

our unrivaled consumer insights, science and technology advantages, and our sourcing and manufacturing expertise.

Our heat platform is a growth accelerator for our entire portfolio, both in Consumer and in Flavor Solutions, and

is another reason to believe in our long-term growth objectives.

Overall for 2024 we are optimistic about our plans across both segments, which will build throughout the year.

We are intently focusing on categories where we have a right to continue to win and dedicating more resources

to drive healthy sales growth. We are seeing momentum and solid results in areas where we focused our efforts

and resources. With our flavor leadership and continued investments, we are committed to vigorously fuel category

growth with our differentiated portfolio. Importantly, we believe the execution of our plans will be a win for our

consumers, customers, categories, and McCormick, which will differentiate and strengthen our leadership.

W I N N I N G W I T H P U R P O S E - L E D P E R F O R M A N C E

We are committed to delivering industry-leading financial performance while doing what’s right for people,

communities, and the planet. We are confident our growth plans will drive sustainable, volume-led sales growth

and we are optimizing our cost structure. We plan to continue increasing our profitability, balanced with reinvesting

a portion of our cost savings to fuel sales growth that will drive sustainable profit for years to come. This balanced

approach has proven effective, as demonstrated by the total shareholder return of 8% we have driven over the past

decade, which exceeds the packaged food index and outpaces our flavor house peers.

Additionally, we remain dedicated to our Purpose-led Performance commitment, and we continue to be recognized

for our achievements. As a global citizen, we understand our role in ensuring a sustainable future and look forward

to continuing our Purpose-led Performance journey. We will share more about our journey in our upcoming 2023

Purpose-led Performance report.

W I N N I N G W I T H T A L E N T A N D E N G A G E M E N T

Our employees are the cornerstone of our success, embodying our Power of People principle. I value our

global team’s commitment, dedication, and engagement to enable McCormick to bring joy to millions of consumers around

the world. They inspire me every day to lead boldly so we can together build upon the accomplishments of those before

us and to continue McCormick’s legacy and achieve extraordinary results. I am proud of our people-first culture,

which is rooted in respect for the contributions of every employee. We will continue to further elevate this culture,

build our next generation of leaders and capabilities, and ensure McCormick is a great place to work.

This past year we had several changes within our executive leadership team. Malcolm Swift, President Global Flavor

Solutions and Chief Administrative Officer, retired from the company after 19 years of distinguished service.

I thank Malcolm for his many contributions. In addition, we welcomed Ana Sanchez, President-EMEA; Andrew Foust,

President-Americas; and Kasey Jenkins, Chief Growth Officer, to our Management Committee. Their leadership,

energy, and perspective are already making a big difference in how we align and inspire our teams for the future.

We have also recently had changes within our Board of Directors. Freeman Hrabowski, who has served as Director

since 1997, will be retiring, as of the date of our Annual Meeting. I am grateful for his contributions and service.

His strategic leadership and knowledge have significantly benefited McCormick over the years, and I will personally

miss him. In addition, I’d like to welcome Terry Thomas, who brings extensive global consumer product industry expertise.

He is currently the Chief Growth Officer for Flowers Foods and prior to that he served as Global Chief Customer

Officer for Unilever. I look forward to working with Terry and the rest of the Board to direct our strategy and set our

course for growth.

A D V A N C I N G O U R L E A D E R S H I P
A N D D I F F E R E N T I A T I O N

In summary, I am optimistic for the year ahead, I plan to drive an ambitious agenda

that capitalizes on our strong business fundamentals as well as the value of our brands

and capabilities that have driven our past success. McCormick is a growth company,

a global leader in flavor with a long-term orientation and a strong culture, and we will

continue advancing our leadership and our differentiation. On behalf of the McCormick

Board of Directors and the executive team, I would like to thank you for your support

and confidence.

Brendan M. Foley

President & Chief Executive Officer

2023 ANNUAL REPORT | ADVANCING OUR LEADERSHIP & DIFFERENTIATIONA T R I B U T E T O

L A W R E N C E K U R Z I U S

In 2023, Lawrence Kurzius transitioned to Executive Chairman

of the Board after leading the Company for more than seven

years as Chief Executive Officer. Lawrence is widely credited

with driving a tremendous period of growth, performance and

expansion – including the acquisitions of iconic brands like

Frank’s RedHot®, French’s®, and Cholula® in addition to FONA.

During Lawrence’s tenure as CEO, sales grew by 50% and

market capitalization more than doubled. One of Lawrence’s

enduring legacies will be embedding Purpose-led

Performance and Sustainability into McCormick’s culture.

Lawrence, employees around the world would like

to express our deepest gratitude for your unwavering

dedication and exceptional contributions to the Company.

Your visionary approach, entrepreneurial spirit, and innovative

thinking propelled us to new heights, as you helped

transform McCormick into a global leader in flavor.

Thank you for your contributions and we look forward

to stewarding your legacy.

O U R T R U S T E D B R A N D S

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

W E A R E E N D - T O - E N D F L A V O R

SALES BY PRODUCT CATEGORY

Consumer Segment

Spices & Seasonings

Recipe Mixes

Condiments & Sauces

Regional Leaders

Flavor Solutions Segment

Flavors

Branded Foodservice

Custom Condiments

Coatings, Bulk Spices & Herbs

SALES BY REGION

Consumer Segment

Americas

Europe, Middle East & Africa

Asia/Pacific

Flavor Solutions Segment

Americas

Europe, Middle East & Africa

Asia/Pacific

2023 ANNUAL REPORT | ADVANCING OUR LEADERSHIP & DIFFERENTIATIONB O A R D O F D I R E C T O R S

ANNE L. BRAMMAN

Age: 56
Chief Financial & Growth Officer,
Circana Inc., Director since 2020
Audit Committee

MICHAEL A. CONWAY

Age: 57
Group President International & Channel
Development, Starbucks Corporation,
Director since 2015

Nominating & Corporate Governance Committee

BRENDAN M. FOLEY

Age: 58
President & Chief Executive Officer,
McCormick & Company Inc.,
Director since 2023

LAWRENCE E. KURZIUS

PATRICIA LITTLE

Age: 65
Executive Chairman of the Board &
Former Chief Executive Officer, McCormick
& Company Inc., Director since 2015

Age: 63
Former Senior Vice President & Chief
Financial Officer, The Hershey Company,
Director since 2010

Nominating & Corporate Governance Committee

MICHAEL D. MANGAN

Age: 67
Former President, Worldwide Power
Tools & Accessories, The Black & Decker
Corporation, Director since 2007

Compensation & Human Capital Committee, Nominating
& Corporate Governance Committee, Lead Director

MARITZA G. MONTIEL

MARGARET M.V. PRESTON

GARY M. RODKIN

Age: 72
Former Deputy Chief Executive
Officer & Vice Chairman, Deloitte LLP,
Director since 2015

Audit Committee

Age: 66
Managing Director, Cohen Klingenstein, LLC,
Director since 2003

Age: 71
Former Chief Executive Officer, ConAgra
Foods, Inc., Director since 2017

Compensation & Human Capital Committee

Audit Committee

JACQUES TAPIERO

TERRY S. THOMAS

Age: 65
Former Senior Vice President & President,
Emerging Markets, Eli Lilly & Company,
Director since 2012

Compensation & Human Capital Committee

Age: 54
Chief Growth Officer, Flowers Foods,
Director since 2024

Audit Committee

W. ANTHONY VERNON

FREEMAN A. HRABOWSKI, III

Age: 67
Former Chief Executive Officer, Kraft Foods
Group Inc., Director since 2017

Compensation & Human Capital Committee

Age: 73
Former President, University of Maryland
Baltimore County, Director since 1997

Nominating & Corporate Governance Committee

Retiring from our Board as of our Annual Meeting
on March 27, 2024

E X E C U T I V E O F F I C E R S

BRENDAN M. FOLEY
President & Chief Executive Officer

MIKE SMITH
Executive Vice President
& Chief Financial Officer

SARAH PIPER
Chief Human Relations Officer

KASEY JENKINS
Chief Growth Officer

ANDREW FOUST
President - Americas

ANA SANCHEZ
President - EMEA

JEFFERY SCHWARTZ
Vice President, General Counsel
& Corporate Secretary

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

Item 7A

Item 8

Item 9

Item 9A

Item 9B

Item 9C

PART III

Item 10

Item 11

Item 12

Item 13

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

Quantitative and Qualitative Disclosures About Market Risk

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

47
47
48
51
51
52
53
54
55

2023 Annual Report 9

THIS PAGE LEFT INTENTIONALLY BLANK

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
Q ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

OF 1934

For the fiscal year ended November 30, 2023

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

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 Q 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 Q

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 Q No £

2023 Annual Report 1 1

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 Q 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 Q
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. Q

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the
registrant included in the filing reflect the correction of an error to previously issued financial statements. £

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). £

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £ No Q

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, 2023: $1,449,790,965

The aggregate market value of the Non-Voting Common Stock held by non-affiliates at May 31, 2023: $21,526,477,162

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

16,796,438
251,440,730

December 29, 2023
December 29, 2023

DOCUMENTS INCORPORATED BY REFERENCE

Document

Proxy Statement for
McCormick’s March 27, 2024
Annual Meeting of Stockholders
(the “2024 Proxy Statement”)

Part of 10-K into Which Incorporated

Part III

12 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.

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 seg-
ment. In 2023, the consumer segment contributed approximately 57%
of consolidated net sales and 73% of consolidated operating income,
and the flavor solutions segment contributed approximately 43% of
consolidated net sales and 27% of consolidated operating income.

Consumer Segment. From locations around the world, our brands
reach consumers in approximately 170 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 the Asia/Pacific
(APAC) region, we market our products under the McCormick and
DaQiao® brands. In China, 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.
In Australia and elsewhere in the APAC region, we market our prod-
ucts 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
numerous competitive brands of spices and seasonings, and

condiments and sauces in the U.S. and additional brands in interna-
tional markets. Some are owned by large food manufacturers, while
others are supplied by small privately-owned companies. In this com-
petitive environment, we are leading with innovation and brand mar-
keting, 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 wholesalers.
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 foodser-
vice customers with customized flavor solutions, and many of these
customer relationships have been active for decades. Our range of fla-
vor 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 effective-
ness 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, garlic, capsicums (red peppers and papri-
ka), tomato products, salts, and wheat products. 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 avail-
ability caused by weather, growing and harvesting conditions, market
conditions, including 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

2023 Annual Report 13

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. There has
been, and there could continue to be, reduced availability of transporta-
tion capacity due to labor shortages and higher fuel costs that has and
may continue to cause 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.

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 2023 and 2022, and
11% of consolidated sales in 2021. Sales to one of our flavor solutions
segment customers, PepsiCo, Inc., accounted for approximately 13% of
consolidated sales in 2023 and 11% of consolidated sales in 2022 and
2021. In 2023, 2022 and 2021, the top three customers in our flavor
solutions segment represented between 47% and 49% 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.

14 McCormick & Company, Inc.

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 work-
force. 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 commitment to ethical business conduct.

We had approximately 13,800 full-time employees worldwide as of
November 30, 2023. Our operations have not been affected significantly
by work stoppages, 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 2,450 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 2024 Proxy State-
ment incorporated by reference in Part III, Item 10 of this Report, the
other executive officers of McCormick are Andrew D. Foust, Katherine
A. Jenkins, and Ana G. Sanchez.

Mr. Foust is 43 years old and, during the last five years, has held the
following positions with McCormick: December 2021 to present –
President, Americas; February 2020 to November 2021 – President,
U.S. Consumer Products Group; and July 2018 to January 2020 – Vice
President Marketing, U.S. Consumer Products Group.

Ms. Jenkins is 55 years old and, during the last five years, has held
the following positions with McCormick: June 2023 to present – Chief
Growth Officer; June 2022 to May 2023 – Chief Strategy Officer &
Senior Vice President, Investor Relations; and January 2017 to June
2022, Vice President, Investor Relations.

Ms. Sanchez is 48 years old and, during the last five years, has held
the following positions with McCormick: February 2022 to present –
President, EMEA; February 2020 to January 2022 – Vice President
Consumer, EMEA, and November 2018 to January 2020 – Vice Presi-
dent Marketing, EMEA.

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 conditions,
exchange rate fluctuations, and restrictions on investments, royalties
and dividends. In fiscal year 2023, approximately 39% 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 “Manage-
ment’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, special charges, acquisitions,
brand marketing support, volume and product mix, income tax expense,
and the impact of foreign currency rates are “forward-looking state-
ments” 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,” “antici-
pate,” “intend,” “believe” and “plan” and similar expressions. These
statements may relate to: general economic and industry conditions,
including consumer spending rates, recessions, interest rates, and
availability of capital; expectations regarding sales growth poten-
tial in various geographies and markets, including the impact from
brand marketing support, product innovation, and customer, channel,
category, heat platform and e-commerce expansion; expected trends
in net sales and earnings performance and other financial measures;
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 the inflationary cost
environment on our business; the expected impact of factors affecting
our supply chain, including the availability and prices of commodities
and other supply chain resources including raw materials, packaging,
labor energy, and transportation; the expected impact of productivity
improvements, including those associated with our CCI and GOE
programs and Global Business Services operating model initiative; the
ability to identify, attract, hire, retain and develop qualified personnel
and develop the next generation of leaders; the impact of the ongoing
conflicts between Russia and Ukraine and Israel and Hamas, including
the potential for broader economic disruption; expected working capi-
tal improvements; 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 im-
pact 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 liquidi-
ty, 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, quarterly dividends and 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.

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; dam-
age 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 stream-
lining actions, including our GOE program; 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; 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 conflicts
between Russia and Ukraine and Israel and Hamas, including the poten-
tial for broader economic disruption; government regulation, and chang-
es in legal and regulatory requirements and enforcement practices; the

2023 Annual Report 15

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 our amount of outstanding indebtedness and related level
of debt service as well as the effects that such 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; impairments of indefinite-lived intangible
assets; assumptions we have made regarding the investment return on
retirement plan assets, and the costs associated with pension obliga-
tions; 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
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
regarding McCormick. Our website also includes our Corporate Gov-
ernance Guidelines, Business Ethics Policy and charters of the Audit
Committee, Compensation & Human Capital Committee, and Nominat-
ing/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 state-
ments contained in this Annual Report on Form 10-K because these
factors could cause the actual results and conditions to differ materi-
ally 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. It is not possible for management to predict all such
risks, nor can management assess the impact of all such risks on our
business or the extent to which any risk, or combination of risks, may
cause actual results to differ materially from those contained in any
forward-looking statements. Additional risks and uncertainties that are

16 McCormick & Company, Inc.

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 or slow growth, 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 conditions
including inflation, changes in prevailing interest rates, bank failures,
the impact of any potential U.S. federal government shutdown, changes
in governmental rules and approaches to taxation, fluctuations in
foreign currency interest rates, availability of capital markets, consumer
spending rates, energy availability and costs, the negative impacts
caused by pandemics and public health crises, as well as the potential
impacts of geopolitical uncertainties and international conflicts,
including the ongoing conflicts between Russia and Ukraine and Israel
and Hamas, 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, pandemics
and public health crises, 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 products. 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.

Damage to our reputation or brand name, loss of brand rele-
vance, 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, finan-
cial condition 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.

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 relation-
ships 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 produc-
tion or distribution of our products and adversely affect 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 gener-
ate adverse publicity that could damage our reputation or brands.

Customer consolidation, consumer behaviors, and competi-
tive, 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 products.
The economic and competitive landscape for our customers is con-
stantly 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 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 25% of consoli-
dated sales in 2023. 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
outbreaks of illnesses, pandemics (such as the COVID-19 pandemic) or
other local or global health issues. The most significant raw materials
used by us in our business are dairy products, pepper, onion, garlic,
capsicums (red peppers and paprika), tomato products, salts, and
wheat products. 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 volatility 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.

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,
government 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.

2023 Annual Report 17

Political, socio-economic, cultural, and geopolitical (including instabil-
ity and international conflicts such as the ongoing conflicts between
Russia and Ukraine and Israel and Hamas) conditions, as well as dis-
ruptions 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
disaster, fire, terrorism, cyber-attack, health epidemics, pandemics 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 ingredi-
ents, 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 dam-
age 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 or any failure to
effectively manage changes in our workforce.

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 such as the shift towards hybrid or remote work arrange-
ments, higher unemployment subsidies, other government regulations
and general macroeconomic factors. A sustained labor shortage or
increased turnover rates within our employee base 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 business. If
we are unable to hire and retain employees capable of performing at a
high-level, or if mitigation measures we may take to respond to a de-
crease in labor availability, such as overtime and third-party outsourc-
ing, have negative effects, our business could be adversely affected.
In addition, we distribute our products and receive raw materials

18 McCormick & Company, Inc.

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 could have a material ad-
verse 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 distri-
bution of our products, and we expect inflation to continue in 2024 but
at a more modest rate than experienced in 2023 and 2022. 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, currency fluctuations, supplier capacities,
governmental actions, import and export requirements (including tariffs),
armed hostilities (including the ongoing conflicts between Russia and
Ukraine and Israel and Hamas) 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 brand-
ed 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.

Ongoing political conflicts and the related implications may
negatively impact our operations.

In February 2022, Russia invaded Ukraine. As a result, the U.S. and
certain 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 instability, geopolitical shifts and adverse effects on mac-
roeconomic 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, as well as other conflicts, including between Israel and
Hamas and in the Red Sea, could also 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, chang-
es in laws and regulations 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 these
conflicts, the related sanctions, potential governmental actions and
economic impact, such potential impacts remain uncertain. While we
expect the impacts of these conflicts 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, floods, 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 fa-
cilities are located in areas that are susceptible to harsh weather; a ma-
jor storm, flood, wildfires, heavy snowfall or other similar event could
prevent us from delivering products in a timely manner and negatively
impact consumer spending and demand in affected areas. Production of
certain of our products is concentrated in a single manufacturing site.

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 man-
agement 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 addi-
tion, 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 contemplated 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, 2023, we had approximately $5.3 billion of good-
will and approximately $3.0 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 intan-
gible 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 intan-
gible assets associated with recent business acquisitions, particularly
those acquired in 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.

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 organi-
zation 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 admin-
istrative 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 deterio-
ration of employee relations at the impacted locations or elsewhere in
our business.

2023 Annual Report 19

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
producer in a highly competitive industry, including our plan to elim-
inate costs under our CCI and Global Operating Effectiveness (GOE)
programs. 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, including our GOE program, 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 follow-
ing 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. Histor-
ically, 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 in-
clude 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 oper-
ating 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.

20 McCormick & Company, Inc.

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 eating preferences of the ulti-
mate consumers of certain of our products, which may also unfavorably
impact our sales and profitability. The physical effects and transitional
costs of climate change and the legal, regulatory or market initiatives to
address climate change could have a negative impact on our business,
financial condition, and results of operations.

There is an increased focus by foreign, federal, state and local
regulatory and legislative bodies regarding environmental policies
relating to climate change, regulating greenhouse gas emissions
(including carbon pricing, cap and trade systems, or carbon taxes),
energy policies, and sustainability. Increased compliance costs and
expenses due to the impacts of climate change and additional legal or
regulatory requirements regarding climate change that are 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 business, 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 inter-
preted 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 condi-
tions, many of which are outside of our control. Examples of such factors
include evolving regulatory requirements affecting sustainability 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 and chang-
ing business dynamics including acquisitions. Furthermore, standards for
tracking and reporting such matters continue to evolve. Our selection of
voluntary disclosure frameworks and standards, and the interpretation or
application of those frameworks and standards, may change from time
to time or differ from those of others. Methodologies for reporting these
data may be updated and previously reported data may be adjusted to
reflect improvement in availability and quality of third-party data, changing
assumptions, changes in the nature and scope of our operations (including
from acquisitions and divestitures), and other changes in circumstances,
which could result in significant revisions to our current goals, reported
progress in achieving such goals, or ability to achieve such goals in the
future. 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 consumer or
customer preference for our products or investor confidence in our stock,
as well as expose us to enforcement actions and litigation.

In addition, we could be criticized by ESG detractors for the scope or nature
of our ESG initiatives or goals or for any revisions to these goals. We could
also be subjected to negative responses by governmental actors (such as
anti-ESG legislation or retaliatory legislative treatment) or consumers (such
as boycotts or negative publicity campaigns) that could adversely affect
our reputation, business, financial performance and growth.

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 fo-
cused on social and other governance issues, including matters such as,
but not limited to, human capital and social issues. We have established
diversity, equity and inclusion goals as part of our ESG initiative. Our ini-
tiatives extend from individuals to entire communities, including those
we serve and, just as importantly, those from which we source. Failure
to attract, hire, develop, motivate and retain highly qualified and diverse

employee talent, especially in light of changing worker expectations and
talent marketplace variability regarding flexible and hybrid work models,
to meet our goals relating to fostering a diverse and inclusive culture
or to adequately address potential increased scrutiny of our diversity,
equity and inclusion initiatives could impact our ability to achieve our
business objectives and adversely affect our future success.

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
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, 2023, we had total outstanding variable rate debt of
approximately $320 million, including $272 million of short-term borrow-
ings, at a weighted-average interest rate of approximately 5.5%. 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 commercial paper mar-
ket 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, 2023, we had total outstanding fixed to variable interest rate swaps
with a notional value of $600 million. 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 instruments. 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

2023 Annual Report 21

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, 2023, our indebtedness of McCormick and its subsidiar-
ies is approximately $4.4 billion. This substantial level of indebtedness
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 com-

petitors, 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.

22 McCormick & Company, Inc.

Uncertain global economic conditions expose us to credit risks
from customers and counterparties.

Consolidations in some of the industries in which our customers oper-
ate 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 condition and liquidity.

The declaration, payment and amount of dividends is made at
the discretion of our board of directors and depends on a num-
ber of factors.

The declaration, payment and amount of any dividends is made pursuant
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 opera-
tions, available cash resources, cash requirements and alternative uses
of cash that our board of directors may conclude would be in the best
interest of the company and our stockholders. 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 oper-
ation 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 agreements, and
monitoring of third-party misuses of intellectual property in traditional
retail and digital environments. If we fail to obtain or adequately
protect our intellectual property (and the intellectual property of cus-
tomers 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 informa-
tion 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
providers, are subject to cyber-attacks or other security incidents
including computer viruses or other malicious codes, phishing attacks,
unauthorized access attempts, cyber extortion, business email com-
promise, deepfake or social engineering schemes, denial of service
attacks, hacking, ransomware, or other cyberattacks attempting to
exploit vulnerabilities. Cybercriminals have increasingly demonstrated
advanced capabilities, such as use of zero-day vulnerabilities, and
rapid integration of new technology such as generative artificial intelli-
gence. Continued geographical turmoil, including the ongoing conflicts
between Russia and Ukraine and Israel and Hamas, 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, cybersecurity threats and attacks,
although to date none had a material impact on our operations or
business. To address the risks to our information technology systems
and data, we maintain an information security program that includes
updating technology, developing security policies and procedures,
implementing and assessing the effectiveness of controls, monitor-
ing 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 successfully defending against them. There can be
no assurance that these measures will prevent or limit the impact of a
future incident. Moreover, 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 vul-
nerable to a failure by any one of these vendors to perform adequately
or maintain effective 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, litigation, 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 Business Services
(GBS) operating model initiative, 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 scal-
ability, 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 transfor-
mation 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
applications on time or anticipate the necessary readiness and training
needs, could lead to business disruption and loss of customers and rev-
enue. In connection with these implementations and resulting business
process changes, we continue to enhance the design and documenta-
tion 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 utilization
of these cloud-based services and systems will increase as we imple-
ment 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
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 investi-
gations. 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.

2023 Annual Report 23

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, product design,
competition, anti-corruption, privacy, machine learning and artificial
intelligence, 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, including
changes in the enforcement priorities of regulators, 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 reg-
ulatory 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 ingredi-
ents. 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 warnings 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 companies 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 perceived 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 adopted laws which have now taken effect introducing new
privacy obligations, which have required us to develop additional
compliance mechanisms and processes. Many other states are con-

24 McCormick & Company, Inc.

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 2023, approximately 39% 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, acquisitions and
dispositions, adjustments to our reserves related to uncertain 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.

2023 Annual Report 25

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 and flavor solutions

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, 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 a distribution facility in 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 ade-
quate 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.

26 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 29, 2023 was $68.00 per share for the Common Stock and $68.42 per share for the Common Stock Non-Voting.

The approximate number of holders of our common stock based on record ownership as of December 29, 2023 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
9,000

The following table summarizes our purchases of Common Stock (CS) and Common Stock Non-Voting (CSNV) during the fourth quarter of 2023:

Period

September 1, 2023 to

September 30, 2023

October 1, 2023 to

October 31, 2023

November 1, 2023 to

November 30, 2023

Total

ISSUER PURCHASES OF EQUITY SECURITIES

Total number of
shares purchased

Average price
paid per share

Total number of
shares purchased
as part of publicly
announced plans
or programs

Approximate dollar
value of shares that
may yet be purchased
under the plans or
programs

CS-0

CSNV-0

CS-130,254

CSNV-0

CS-15,435

CSNV-0

CS-145,689
CSNV-0

—

$ 61.48

—

$64.50

—

$ 61.80

—

130,254

—

15,435

—

145,689
—

$ 511 million

$502 million

$501 million

As of November 30, 2023, approximately $501 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 2023, we
issued 671,229 shares of CSNV in exchange for shares of CS and issued 11,160 shares of CS in exchange for shares of CSNV.

ITEM 6. [RESERVED]

2023 Annual Report 27

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 perspective of man-
agement. 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 important for purposes of
comparison to prior periods and development of future projections and
earnings growth prospects. This information is also used by manage-
ment 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 man-
ufacturers 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.

Over time, we expect to grow sales with similar contributions from:
1) our base business—driven by brand marketing support, category
management, and differentiated customer engagement; 2) new prod-
ucts; and 3) acquisitions.

Base Business—We expect to drive sales growth by optimizing our
brand marketing investment through improved speed, quality, and
effectiveness. We measure the return on our brand marketing invest-
ment and 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 2018, we have com-
pleted two acquisitions, including our December 20, 2020 acquisition

28 McCormick & Company, Inc.

of FONA International, LLC and certain of its affiliates (FONA) and our
November 30, 2020 acquisition of the parent company of Cholula Hot
Sauce® (Cholula) from L Catterton. These acquisitions are driving sales
in both our consumer and flavor solutions segments. We focus on acqui-
sition 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.

Executive Summary
In 2023, we achieved net sales growth of 4.9% over the 2022 level due
to the following factors:

• Pricing actions, taken in response to the inflationary cost environ-

ment, contributed 8.5% to the increase in net sales.

• Volume and product mix unfavorably impacted our net sales growth
by 2.6%, exclusive of divestitures. Both our consumer and flavor
solutions segments experienced unfavorable volume and product
mix of 3.9% and 1.0%, respectively, including the impact of price
elasticity. Our decisions to exit our consumer operations in Russia
and certain low margin businesses contributed approximately 0.9%
to the unfavorable impact of volume and product mix.

• 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 0.6%. Excluding this
impact, we grew sales by 5.5% over the prior year on a constant
currency basis.

Operating income was $963.0 million in 2023 and $863.6 million in
2022. We recorded $61.2 million and $51.6 million of special charges
in 2023 and 2022, respectively, related to organization and streamlin-
ing actions. In 2022, we also recorded $2.2 million of transaction and
integration expenses related to our acquisition of FONA that reduced
operating income. In 2023, the effects of pricing actions taken in
response to increased costs and cost savings from our GOE and CCI
programs during 2022 were partially offset by increased employee
incentive compensation and higher distribution costs. Excluding
special charges and transaction and integration expenses related to
our acquisition of FONA, adjusted operating income was $1,024.2
million in 2023, an increase of 11.6%, compared to $917.4 million in
the year-ago period. In constant currency, adjusted operating income
increased 12.0%. 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 2023 and 2022. In 2023,
diluted earnings per share was driven primarily by the impact of higher
operating income, an increase in interest expense, the unfavorable
effects of a decrease in other income, and an increase in income
from unconsolidated operations. Special charges and transaction
and integration expenses lowered earnings per share by $0.18 and
$0.15 in 2023 and 2022, respectively. A gain on our sale of a business
increased earnings per share by $0.14 in 2022. Excluding the effects
of special charges, transaction and integration expenses, and the gain
realized from the sale of a business, adjusted diluted earnings per
share was $2.70 in 2023 and $2.53 in 2022, or an increase of 6.7%.

Net cash provided by operating activities was $1,237.3 million, $651.5
million and $828.3 million in 2023, 2022, and 2021, respectively. In
2023, we continued to have a balanced use of cash for debt repay-
ment, 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

38 years, and to fund capital expenditures and acquisitions. In 2023,
the return of cash to our shareholders through dividends and share
repurchases was $454.2 million.

product mix will be impacted by the divestiture of our Giotti canning
business in the third quarter of last year, and the pruning of low
margin businesses.

A detailed review of our fiscal 2023 performance compared to fiscal
2002 appears in the section titled “Results of Operations—2023
Compared to 2022”.

Recent Events
During fiscal 2022 and fiscal 2023, we experienced inflationary cost
increases in our commodities, packaging materials and transporta-
tion costs. While we continued to experience significant input cost
inflation throughout fiscal 2023, our pricing actions, combined with
cost savings from our Global Operating Effectiveness (GOE) program
and our Comprehensive Continuous Improvement (CCI) program
assisted in a 180-basis point recovery to gross margin. Additionally,
in some instances, the pricing actions we take have been impacted
by consumer behavior, or price elasticity, which unfavorably impacts
our sales volume and mix. While we are seeing moderation in
input cost inflation, we do expect inflationary pressures to persist
into fiscal 2024. However, we anticipate GOE program and CCI
program-led cost savings as well as previously implemented pricing
actions to mitigate those inflationary pressures. We will also be
lapping 2023 price increases and anticipate favorable net price
realization in 2024.

We are fueling our investment in growth with cost savings from
our CCI program, an ongoing initiative to improve productivity and
reduce costs throughout the organization, as well as savings from the
organization and streamlining actions described in note 3 of notes to
our consolidated financial statements that includes our GOE program.
Our CCI and GOE programs both delivered cost savings in 2023. Our
CCI program funds brand marketing support, product innovation and
other growth initiatives. We expect our CCI program, GOE program,
and organization and streamlining actions to deliver additional
savings in 2024.

We are making investments to build the McCormick of the future,
including in our Global Business Services (GBS) 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 will concentrate our global ERP focus on our operations in the U.S.
over the next several years, or through 2027. We expect that our annu-
al capital expenditures, including the capitalized software associated
with our ERP program, over the next several years will continue to
approximate 4% of our sales. We expect that our operating expenses
associated with our global ERP program through 2027 will approximate
$35 million to $50 million annually.

2024 Outlook
In 2024, we expect net sales to range from a decline of 2% to
0% from our net sales in 2023 including a 1% unfavorable impact
of foreign currency rates, or to range from a decline of 1% to an
increase of 1% on a constant currency basis. We anticipate that the
2024 sales change will include a favorable impact from previously
implemented pricing actions. We anticipate that our volume and

We expect our 2024 gross profit margin to range from 50 basis points
to 100 basis points higher than our gross profit margin of 37.6% in
2023. The projected 2024 increase in gross profit margin is principally
due to the net effect of (i) the favorable impact of pricing actions,
(ii) the favorable impacts of product mix, (iii) the favorable impact
of anticipated Global Operating Effectiveness program and CCI cost
savings, and (iv) a low single-digit percentage impact of inflation in
2024 compared to 2023.

In 2024, we expect an increase in operating income of 8% to 10%,
which includes a 1% unfavorable impact from foreign currency rates,
over the 2023 level. The projected 2024 change in operating income
includes the effects of the anticipated increase in our gross profit
margin as well as SG&A cost savings from our CCI and GOE programs,
which will be partially offset by our investments to drive volume
growth, including brand marketing. We expect our brand marketing
investments in 2024 to increase in the high-single digits over the 2023
level. We also expect approximately $15 million of special charges in
2024 that relate to previously announced organization and stream-
lining actions; in 2023, special charges were $61.2 million. Excluding
special charges, we expect 2024’s adjusted operating income to
increase by 3% to 5%, which includes a 1% unfavorable impact from
foreign currency rates, or to increase by 4% to 6% on a constant
currency basis.

We estimate that our 2024 effective tax rate, including the net
favorable impact of anticipated discrete tax items, will be 22% as
compared to 21.8% in 2023. Excluding projected taxes associated
with special charges, we estimate that our adjusted effective tax
rate will be approximately 22% in 2024, or comparable to an adjust-
ed effective tax rate of 22.0% in 2023.

We also expect that our income from unconsolidated operations,
including the performance of our largest joint venture, McCormick
de Mexico, will increase by a mid-teens percentage rate over the
2023 level.

Diluted earnings per share was $2.52 in 2023. Diluted earnings per
share for 2024 is projected to range from $2.76 to $2.81. Excluding
the per share impact of special charges of $61.2 million adjusted
diluted earnings per share was $2.70 in 2023. Adjusted diluted
earnings per share, excluding an estimated per share impact from
special charges of $0.04, is projected to range from $2.80 to $2.85 in
2024, or an increase of 4% to 6% over adjusted diluted earnings per
share of $2.70 in 2023.

RESULTS OF OPERATIONS—2023 COMPARED TO 2022

Net sales
Percent growth
Components of percent growth in net sales–

increase (decrease):

Pricing actions
Volume and product mix
Acquisitions
Divestiture
Foreign exchange

2023

2022

$6,662.2

$6,350.5

4.9%

0.5%

8.5%
(2.6)%
—%
(0.4)%
(0.6)%

7.7%
(4.5)%
0.2%
(0.4)%
(2.5)%

2023 Annual Report 29

Sales for 2023 increased by 4.9% from 2022 and by 5.5% on a con-
stant currency basis (that is, excluding the impact of foreign currency
exchange as more fully described under the caption, Non-GAAP Finan-
cial Measures). Pricing actions, taken in response to the inflationary
cost environment, increased sales by 8.5% compared to the prior year
period. Unfavorable volume and product mix decreased sales by 2.6%
with declines in both our consumer and flavor solutions segments. Our
decisions to exit our consumer operations in Russia and discontinue
certain low margin businesses contributed approximately 0.9% to the
unfavorable impact of volume and product mix. The divestiture of our
Kitchen Basics business and the Giotti canning business unfavorably
impacted sales by 0.4% as compared to the prior year. Sales were
impacted by unfavorable foreign currency rates that decreased sales
by 0.6% in 2023 as compared to the prior year and are excluded from
our measure of sales growth of 5.5% on a constant currency basis.

Gross profit
Gross profit margin

2023

2022

$ 2,502.5

$2,274.5

37.6%

35.8%

In 2023, gross profit increased by $228.0 million, or 10.0%, from 2022.
Our gross profit margin for 2023 was 37.6%, an increase of 180 basis
points from 35.8% in 2022. The increase was driven by the favorable
impact of our pricing actions taken in response to increased costs,
favorable product mix within our segments, and cost savings led by our
CCI and GOE programs. These favorable impacts were partially offset
by increased commodity costs, higher conversion costs, and unfavor-
able segment mix, all as compared to the 2022 period.

Selling, general & administrative expense
Percent of net sales

$ 1,478.3

$1,357.1

22.2%

21.4%

2023

2022

Selling, general and administrative (SG&A) expense increased by
$121.2 million in 2023 as compared to 2022. That increase in SG&A
expense was primarily a result of higher performance-based employee
incentive expense, increased distribution costs, increased selling and
marketing costs, and higher advertising and promotional spend which
were partially offset by CCI-led and GOE cost savings and favorable
investment results associated with non-qualified retirement plan
assets, all as compared to 2022. SG&A as a percent of net sales for
2023 increased by 80 basis points from the prior year level, as the net
impact of the previously mentioned factors was partially offset by the
impact of the higher sales base.

Total special charges

2023

$61.2

2022

$51.6

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.

30 McCormick & Company, Inc.

During 2023, we recorded $61.2 million of special charges, consisting
principally of (i) $42.8 million associated with the GOE program,
(ii) $8.7 million associated with the transition of a manufacturing
facility in EMEA, and (iii) streamlining actions of $8.8 million in the
Americas region and $0.9 million in the EMEA region.

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 and $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.

Details with respect to the composition of special charges are included
in the accompanying notes to our financial statements contained in
Item 8 of this report.

Total transaction and integration expenses

2023

$ —

2022

$ 2.2

During 2022, we recorded integration expenses of $2.2 million related
to our acquisition of FONA.

Operating income
Percent of net sales

2023

2022

$963.0

14.5%

$863.6

13.6%

Operating income increased by $99.4 million, or 11.5%, from $863.6
million in 2022 to $963.0 million in 2023. Special charges and trans-
action and integration expenses increased by $7.4 million in 2023, as
compared to 2022, and negatively impacted operating income. Operat-
ing income as a percentage of net sales increased by 90 basis points
in 2023, to 14.5% in 2023 from 13.6% in 2022 as a result of the factors
previously described. Excluding the effect of special charges and trans-
action and integration expenses previously described, adjusted operat-
ing income was $1,024.2 million in 2023 as compared to $917.4 million
in 2022, an increase of $106.8 million or 11.6% from the 2022 level.
Adjusted operating income as a percentage of net sales increased by
100 basis points in 2023, to 15.4% in 2023 from 14.4% in 2022.

Interest expense
Other income, net

2023

$208.2
43.9

2022

$149.1
98.3

Interest expense was $59.1 million higher in 2023 as compared to the
prior year as the effects of the higher interest rate environment more
than offset lower average borrowing levels. Other income, net for
2022 included 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 condensed consolidated financial statements.
These were partially offset by higher interest income in 2023, also
principally associated with the higher interest rate environment.

Income from consolidated operations
before income taxes
Income tax expense

Effective tax rate

2023

2022

$798.7
174.5
21.8%

$812.8
168.6
20.7%

The effective tax rate was 21.8% in 2023 as compared to 20.7% in
2022. The increase in our effective tax rate was principally attributable
to the effects of the lower level of net discrete tax benefits in 2023
as compared to 2022. Net discrete tax benefits were $9.6 million in
2023, a decrease of $18.0 million from $27.6 million in 2022. Discrete
tax benefits in both the 2023 and 2022 periods included excess tax
benefits associated with stock-based compensation ($0.8 million and
$9.1 million in 2023 and 2022, respectively), the reversal of reserves
for unrecognized tax benefits ($5.6 million and $6.9 million in 2023
and 2022, respectively) due to, in 2023 the net reversal of reserves for
unrecognized tax benefits and related interest in non-U.S. jurisdictions
and tax benefits related to a tax settlement, 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 ($3.2 million and $4.6 million in 2023 and 2022, respec-
tively), and other discrete items. In 2023, other discrete tax benefits
included $0.9 million of tax benefits resulting from an adjustment to
a prior year tax accrual, and related deferred taxes, based on the final
returns filed and $1.8 million of tax expense related to certain unremit-
ted prior year earnings. In 2022, other discrete tax benefits included
$3.9 million related to the revaluation of deferred taxes resulting from
enacted legislation and $2.3 million of tax benefits related to the sale
of an asset associated with a previously exited line of business. 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

2023

$56.4

2022

$37.8

Income from unconsolidated operations, which is presented net of
the elimination of earnings attributable to non-controlling interests,
increased by $18.6 million in 2023 from the prior year. The increase for
2023 as compared to 2022 was primarily driven by higher earnings of
McCormick de Mexico. We own 50% of most of our unconsolidated
joint ventures, including our largest joint venture, McCormick de Mex-
ico, that comprised 95% and 84% of the income of our unconsolidated
operations in 2023 and 2022, respectively.

We reported diluted earnings per share of $2.52 in 2023 and 2022. The
table below outlines the major components of the change in diluted
earnings per share from 2022 to 2023.

2022 Earnings per share—diluted
Increase in operating income
Increase in special charges, net of taxes
Decrease in transaction and integration expenses, net of taxes
Impact from gain on the sale of a business, net of taxes
Decrease in other income, excluding gain on the sale of
a business
Increase in interest expense
Increase in income from unconsolidated operations
Impact of change in effective income tax rate, excluding taxes on
special charges, transaction and integration expenses, and the
sale of a business

2023 Earnings per share—diluted

$ 2.52
0.31
(0.04)
0.01
(0.14)

(0.01)
(0.17)
0.07

(0.03)

$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—increase (decline)

Components of percent change in net
sales—increase (decrease):

Pricing actions
Volume and product mix
Divestiture
Foreign exchange

2023

2022

$3,807.3

$3,757.9

1.3%

(4.6)%

6.5%
(3.9)%
(0.5)%
(0.8)%

7.4%
(9.3)%
(0.6)%
(2.1)%

Segment operating income

Segment operating income margin

$735.5

19.3%

$710.7

18.9%

Sales of our consumer segment in 2023 increased by 1.3% as
compared to 2022 and increased by 2.1% on a constant currency
basis. Pricing actions taken in our consumer business in all regions
increased sales by 6.5% in 2023 as compared to 2022. Lower volume
and unfavorable product mix decreased sales by 3.9%, driven primarily
by the impact of price elasticity. Volume and product mix includes the
unfavorable impact of our decisions to exit our consumer business in
Russia and discontinue certain low margin businesses of 1.3%. The
divestiture of our Kitchen Basics business unfavorably impacted sales
by 0.5% as compared to 2022. An unfavorable impact from foreign
currency rates decreased sales by 0.8% compared to the prior year and
is excluded from our measure of sales increase of 2.1% on a constant
currency basis.

In the Americas region, consumer sales increased 0.4% in 2023 as
compared to 2022 and increased by 0.8% on a constant currency basis.
Pricing actions, taken in response to inflationary cost environment,
increased sales by 5.8% as compared to the prior year period. Unfavor-
able volume and product mix decreased sales by 4.3% as compared to
the corresponding period in 2022, including the unfavorable impact of
price elasticity and the effects of the inflationary environment impact-
ing consumer spending. This reduction included an approximately 1.2%
impact of our decision to discontinue a low margin business. The sale
of our Kitchen Basics business unfavorably impacted sales by 0.7% as
compared to 2022. The unfavorable impact of foreign currency rates
decreased sales by 0.4% in the year and is excluded from our measure
of sales increase of 0.8% on a constant currency basis.

In the EMEA region, consumer sales increased 7.1% in 2023 as
compared to 2022 and increased by 6.2% on a constant currency basis.
Pricing actions, taken in response to the inflationary cost environment,
increased sales by 11.1% as compared to 2022. Sales were impacted
by unfavorable volume and product mix that decreased sales by 4.9%
from the prior year level, including a 2.0% impact associated with the
exit of our consumer operations in Russia. The favorable impact of
foreign currency exchange rates increased sales by 0.9% compared to
2022 and is excluded from our measure of sales increase of 6.2% on a

2023 Annual Report 31

constant currency basis.

In the APAC region, consumer sales decreased 1.1% in 2023 as
compared to 2022 and increased by 5.1% on a constant currency basis.
Pricing actions, taken in response to the inflationary cost environment,
increased sales by 5.1% as compared to the prior year period. Volume
and product mix were comparable to 2022. The unfavorable impact
from foreign currency rates decreased sales by 6.2% compared to the
year-ago period and is excluded from our measure of sales increase of
5.1% on a constant currency basis.

Segment operating income for our consumer segment increased by
$24.8 million, or 3.5%, in 2023 as compared to 2022. The increase in
segment operating income was driven by the effects of an increase in
gross profit primarily driven by the higher level of sales, favorable pricing
actions in response to increased costs, favorable product mix within the
segment, and CCI-led and GOE cost savings, which were partially offset
by higher commodity costs and higher SG&A expenses, including higher
performance-based employee incentive expenses, increased distribu-
tion costs, and increased advertising and promotional expenses, all as
compared to the prior year. Segment operating margin for our consumer
segment increased by 40 basis points in 2023 to 19.3%, driven by an
increase in consumer gross profit margin as previously discussed which
was partially offset by a higher level of SG&A as a percentage of sales,
principally due to the factors previously described, all as compared to the
2022 level. On a constant currency basis, segment operating income for
our consumer segment increased by 4.4% in 2023, as compared to 2022.

Flavor Solutions Segment

Net sales

Percent growth

Components of percent growth in net
sales—increase (decrease):

Pricing actions
Volume and product mix
Acquisition
Divestiture

Foreign exchange

2023

2022

$2,854.9

$2,592.6

10.1%

8.9%

11.4%
(1.0)%
—%
(0.1)%
(0.2)%

8.2%
3.5%
0.4%
—%
(3.2)%

Segment operating income

Segment operating income margin

$ 288.7

$ 206.7

10.1%

8.0%

Sales of our flavor solutions segment increased 10.1% in 2023 as com-
pared to 2022 and increased by 10.3% on a constant currency basis.
Pricing actions, taken in response to increased costs, across all regions
increased sales by 11.4% in 2023 and was partially offset by 1.0% of
unfavorable volume and product mix, both in comparison to the prior
year levels. The divestiture of our Giotti canning business unfavorably
impacted sales by 0.1% as compared to the prior year. An unfavorable
impact from foreign currency rates decreased sales by 0.2% compared
to the prior year and is excluded from our measure of sales growth of
10.3% on a constant currency basis.

In the Americas region, flavor solutions sales increased by 10.7%
during 2023 as compared to 2022 and increased by 9.6% on a constant
currency basis. Pricing actions, taken in response to the inflationary
cost environment, favorably impacted sales by 9.8% during 2023,
as compared to the prior year. Unfavorable volume and product mix
decreased flavor solutions sales in the Americas by 0.2% during 2023,
including the effects of growth in sales to packaged food and beverage

32 McCormick & Company, Inc.

and nutrition and healthcare companies, as compared to the prior
year. A favorable impact from foreign currency rates increased sales
by 1.1% compared to 2022 and is excluded from our measure of sales
growth of 9.6% on a constant currency basis.

In the EMEA region, flavor solutions sales in 2023 increased by 10.3%
as compared to 2022 and increased by 12.2% on a constant currency
basis. Pricing actions, taken in response to the inflationary cost envi-
ronment, favorably impacted sales by 18.8% in 2023 as compared to
the prior period level. Unfavorable volume and product mix decreased
segment sales by 5.9% in 2023 as compared to 2022, including the
effects of the inflationary environment impacting consumer spending
at quick service restaurants and packaged food and beverage compa-
nies and approximately 1.3% impact of our decision to discontinue a
low margin business. The divestiture of our Giotti canning business
unfavorably impacted sales by 0.7% as compared to the prior year.
An unfavorable impact from foreign currency rates decreased sales
by 1.9% compared to 2022 and is excluded from our measure of sales
growth of 12.2% on a constant currency basis.

In the APAC region, flavor solutions sales increased 5.6% in 2023
as compared to 2022 and increased by 11.0% on a constant curren-
cy basis. Pricing actions, taken in response to the inflationary cost
environment, favorably impacted sales by 7.0% as compared to the
prior year period. Favorable volume and product mix increased sales
by 4.0%, driven by higher sales to quick service restaurant customers,
partially impacted by the timing of customers’ promotional activities.
An unfavorable impact from foreign currency rates decreased sales
by 5.4% compared to 2022 and is excluded from our measure of sales
growth of 11.0% on a constant currency basis.

Segment operating income for our flavor solutions segment increased
by $82.0 million, or 39.7%, in 2023 as compared to 2022. The increase
in segment operating income was driven by the effects of an increase in
gross profit primarily due to the higher level of sales, favorable pricing in
response to increased costs, favorable product mix within the segment,
and CCI-led and GOE cost savings which more than offset increased
commodity and conversion costs and the higher level of SG&A expenses,
including higher performance-based employee incentive expense and
increased distribution costs, all as compared to the prior year. Segment
operating margin for our flavor solutions segment increased by 210 ba-
sis points in 2023 to 10.1%, driven by a higher segment gross margin, as
previously described. On a constant currency basis, segment operating
income for our flavor solutions segment increased by 38.5% in 2023, as
compared to 2022.

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 con-
stant currency basis (that is, excluding the impact of foreign currency
exchange as more fully described under the caption, Non-GAAP

Financial Measures). 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 operations 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 com-
pared to the prior year. Acquisitions and a divestiture added to and
decreased sales by 0.2% and 0.4%, respectively, 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 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 inflation-
ary cost environment of approximately 240 basis points, increased
commodity, packaging materials and transportation costs, higher
conversion costs and a less favorable product mix both within and be-
tween 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 APAC 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

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

$ —
51.6

$51.6

2021

$ 4.7
46.4

$51.1

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 (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 associ-
ated 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
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

2023 Annual Report 33

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 in-
come, 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 accompany-
ing 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 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 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
($4.6 million and $4.4 million in 2022 and 2021, respectively), tax bene-
fits 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.

34 McCormick & Company, Inc.

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

Consumer Segment

Net sales

Percent—(decline) increase

Components of percent change in net
sales—(decrease) increase:
Volume and product mix
Pricing actions
Acquisition
Divestiture
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

Segment operating income margin

$ 710.7

$ 804.9

18.9%

20.4%

Sales of our consumer segment in 2022 decreased by 4.6% as
compared to 2021 and decreased by 2.5% on a constant currency
basis. The sales decrease was driven by lower sales of our consumer
business in the Americas, EMEA and APAC 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 com-
pared 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 unfavorably
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
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 APAC 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 compared
to the prior year. The unfavorable impact from foreign currency rates de-
creased 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 com-
pared 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 change 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
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 APAC 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.

2023 Annual Report 35

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.

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 includ-
ed 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 ap-
proved 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. Special charges are more fully described in note 3 of notes to
our accompanying consolidated financial statements.

• 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
statements, 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.

36 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

Gross profit margin(3)
Impact of transaction and integration expenses and special charges(3)

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

Operating income margin(3)
Impact of transaction and integration expenses and special charges(3)

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

Income tax rate(4)
Impact of transaction and integration expenses, special charges, and sale of Kitchen Basics(4)

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

2023

$ 2,502.5
—
—

$ 2,502.5

37.6%
—%

37.6%

$ 963.0
—
—
—
61.2

$1,024.2

11.6%

14.5%
0.9%

15.4%

$ 174.5
—
14.5
—

$ 189.0

21.8%
0.2%

22.0%

$ 680.6
—
46.7
—
—
$ 727.3

2022

$2,274.5
—
—

$2,274.5

35.8%
—%

35.8%

$ 863.6
—
2.2
—
51.6

$ 917.4

(16.7)%

13.6%
0.8%

14.4%

$ 168.6
0.6
13.3
(11.6)

$ 170.9

20.7%
0.2%

20.9%

$ 682.0
1.6
38.3
(38.0)
—
$ 683.9

2021

$2,494.6
6.3
4.7

$2,505.6

39.5%
0.2%

39.7%

$ 1,015.1
6.3
29.0
4.7
46.4

$ 1,101.5

8.1%

16.1%
1.3%

17.4%

$ 192.7
(2.7)
7.1
—

$ 197.1

21.5%
(1.4)%

20.1%

$ 755.3
38.0
44.0
—
(13.4)
$ 823.9

6.3%

(17.0)%

8.0%

$ 2.52
—
0.18
—
—

$ 2.70

$ 2.52
0.01
0.14
(0.14)
—

$ 2.53

$ 2.80
0.14
0.16
—
(0.05)

$ 3.05

(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) Gross profit margin, impact of transaction and integration expenses and special charges, and adjusted gross profit margin are calculated as gross profit, impact of

transaction and integration expenses and special charges, and adjusted gross profit as a percentage of net sales for each period presented. Similarly, operating income
margin, impact of transaction and integration expenses and special charges, and adjusted operating income margin are calculated as operating income, impact of
transaction and integration expenses and special charges, and adjusted operating income as a percentage of net sales for each period presented.

(4) Income tax rate is calculated as income tax expense as a percentage of income from consolidated operations before income taxes. Adjusted income tax rate is
calculated as adjusted income tax expense as a percentage of income from consolidated operations before income taxes excluding transaction and integration
expenses, special charges and gain on the sale of Kitchen Basics or $859.9 million, $817.0 million, and $982.2 million for the years ended November 30, 2023, 2022 and
2021, respectively.

2023 Annual Report 37

Estimate for the year ending
November 30, 2024

Earnings per share—diluted
Impact of special charges

Adjusted earnings per share—diluted

$2.76 to $2.81
0.04

$2.80 to $2.85

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 sever-
al 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).

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 2023 on a constant currency basis, net sales and adjusted operating
income for 2023 for entities reporting in currencies other than the U.S.
dollar have been translated using the average foreign exchange rates
in effect for 2022 and compared to the reported results for 2022; and
(2) to present our growth in net sales and adjusted operating income
for 2022 on a constant currency basis, net sales and 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.

For the year ended November 30, 2023

Percentage
change
as reported

Impact of
foreign
currency
exchange

Percentage
change on
constant
currency basis

0.4%
7.1%
(1.1)%

1.3%

10.7%
10.3%
5.6%

10.1%

4.9%

3.5%
39.7%

11.6%

(0.4)%
0.9%
(6.2)%

(0.8)%

1.1%
(1.9)%
(5.4)%

(0.2)%

(0.6)%

(0.9)%
1.2%

(0.4)%

0.8%
6.2%
5.1%

2.1%

9.6%
12.2%
11.0%

10.3%

5.5%

4.4%
38.5%

12.0%

Net sales:
Consumer segment:
Americas
EMEA
APAC

Total Consumer

Flavor Solutions segment:

Americas
EMEA
APAC

Total Flavor Solutions

Total net sales

Adjusted operating income:
Consumer segment
Flavor Solutions segment

Total adjusted operating income

38 McCormick & Company, Inc.

Net sales:
Consumer segment:
Americas
EMEA
APAC

Total Consumer

Flavor Solutions segment:

Americas
EMEA
APAC

Total Flavor Solutions

Total net sales

Adjusted operating income:
Consumer segment

Flavor Solutions segment

Total adjusted operating income

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)%

(4.6)%

11.4%
5.5%
(0.2)%

8.9%

0.5%

(11.7)%
(30.3)%

(16.7)%

(0.2)%
(9.6)%
(2.0)%

(2.1)%

(0.3)%
(11.7)%
(5.4)%

(3.2)%

(2.5)%

(0.8)%
(2.4)%

(1.2)%

(0.9)%
(5.1)%
(8.1)%

(2.5)%

11.7%
17.2%
5.2%

12.1%

3.0%

(10.9)%
(27.9)%

(15.5)%

To present the percentage change in projected 2024 net sales, adjusted
operating income and adjusted earnings per share—diluted on a con-
stant currency basis, 2024 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
2024 local currency projected results, translated into U.S. dollars at
the average actual exchange rates in effect during the corresponding
months in fiscal year 2023 to determine what the 2024 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 2023 periods.

Projections for the
Year Ending
November 30, 2024

(2)% to 0%
1%

(1)% to 1%

3% to 5%
1%

4% to 6%

Percentage change in net sales
Impact of unfavorable foreign currency exchange

Percentage change in net sales in constant currency

Percentage change in adjusted operating income
Impact of unfavorable foreign currency exchange

Percentage change in adjusted operating income in

constant currency

LIQUIDITY AND FINANCIAL CONDITION

Net cash provided by operating
activities
Net cash used in investing activities
Net cash (used in) provided by

2023

2022

2021

$1,237.3
(260.5)

$ 651.5
(146.4)

$ 828.3
(908.6)

financing activities

(1,184.2)

(487.2)

22.0

The primary objective of our financing strategy is to maintain a pru-
dent capital structure that provides us flexibility to pursue our growth

objectives. We use a combination of equity and short- and long-term
debt. We use short-term debt, comprised primarily of commercial
paper, principally to finance ongoing operations, including our require-
ments 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 maintain-
ing investment grade credit ratings.

Our cash flows from operations enable us to fund operating projects
and investments that are designed to meet our growth objectives,
service our debt, fund or increase our quarterly dividends, fund capital
projects and other investments, and make share repurchases when
appropriate. Due to the cyclical nature of a portion of our business, our
cash flow from operations has historically been the strongest during
the fourth quarter of our fiscal year. Due to the timing of the interest
payments on our 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 operat-
ing assets and liabilities are presented excluding the effect of acquired
or disposed operating assets and liabilities, as the cash flows associ-
ated 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.

2023 Annual Report 39

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, 2023,
the exchange rates for the Euro, British pound sterling, Mexican peso,
and Polish zloty were higher than the U.S. dollar than at November
30, 2022. At November 30, 2023, the exchange rates for the Canadian
dollar, Chinese renminbi, and Australian dollar were lower than the
U.S. dollar than at November 30, 2022.

Operating Cash Flow—Operating cash flow was $1,237.3 million in
2023, $651.5 million in 2022, and $828.3 million in 2021. Net income
as well as our working capital management, as more fully described
below, impacted operating cash flow. In 2023, the increase was pri-
marily driven by an improvement in cash provided by working capital,
which was driven by the lower inventory levels and the lower amount
of employee incentive payments associated with the prior year as well
as an increase in dividends received from unconsolidated affiliates.
This was partially offset by an increased use of cash associated with
accounts payable which partially resulted from our lower level of
inventory. In 2022, the decrease in operating cash flow was primar-
ily 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 higher amount of employee incentive payments associated with
the prior year. In 2021, the reduction in operating cash flow was the re-
sult of increased inventory levels to protect against supply disruption,
employee incentive payments, and the payment of transaction and
integration costs related to our acquisitions.

Our working capital management—principally related to inventory,
trade accounts receivable, and accounts payable—impacts our operat-
ing cash flow. The change in inventory was a significant source of cash
from operations in 2023 and a significant use of cash from operations
in 2022 and 2021. The change in trade accounts receivable was a mod-
erate source of cash in 2023 and a use of cash in 2022 and 2021. The
change in accounts payable was a use of cash in 2023, a significant
source of cash in 2022, 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 differ-
ent 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

2023

2022

2021

The decrease in CCC in 2023 from 2022 was due primarily to a reduc-
tion in our days in inventory as a result of reducing our inventory based

40 McCormick & Company, Inc.

on demand planning and elimination of excess safety stock utilized to
remedy service issues associated with the COVID-19 pandemic. 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. During
both periods, the increase in days in inventory was partially offset by
an increase in our days payable outstanding.

As more fully described in note 1 of notes to our consolidated financial
statements, we participate in a Supply Chain Financing program (SCF)
with several global financial institutions (SCF Banks). Under the SCF,
qualifying suppliers may elect to sell their receivables from us to an SCF
Bank, enabling participating suppliers to negotiate their receivables
sales arrangements directly with the respective SCF Bank. We are not
party to those agreements and have no economic interest in a supplier’s
decision to sell a receivable. All outstanding amounts related to suppli-
ers participating in the SCF are recorded within the line entitled Trade
accounts payable in our condensed consolidated balance sheets, and
the associated payments are included in operating activities within our
consolidated statements of cash flows. As of November 30, 2023 and
2022, the amounts due to suppliers participating in the SCF and included
in trade accounts payable were approximately $300.5 million and $347.0
million, respectively.

The terms of our payment obligations are not impacted by a supplier’s
participation in the SCF. Our payment terms with our suppliers for sim-
ilar 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 the suppliers that are included
in the SCF. Future changes in our suppliers’ financing policies or eco-
nomic developments, 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 $260.5
million in 2023, $146.4 million in 2022, and $908.6 million in 2021.
Our primary investing cash flows include the usage of cash associated
with acquisition of businesses and capital expenditures as well as
cash provided by sale of businesses, unconsolidated operations, or
other assets. Cash usage related to our acquisition of businesses was
$706.4 million in 2021. Capital expenditures, including expenditures
for capitalized software, were $263.9 million in 2023, $262.0 million in
2022, and $278.0 million in 2021. We expect 2024 capital expenditures
to approximate $290 million. In 2022, we received $95.2 million net
cash proceeds from the sale of our Kitchen Basics business and $13.6
million net cash proceeds received on the sale of the Kohinoor brand
name 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 $1,184.2 million and $487.2 million in 2023 and
2022, respectively, and a source of cash of $22.0 million in 2021. 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

2023

2022

2021

$(964.6)

$698.3

$(346.7)

495.3
(268.1)

—
(772.0)

999.6
(257.1)

$(737.4)

$ (73.7)

$ 395.8

In 2023, we repaid $268.1 million of long-term debt, including $250.0
million, 3.50% notes that matured September 1, 2023. We also issued
$500.0 million of 4.95% notes due 2033, with net cash proceeds
received of $496.4 million.

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.

The following table outlines the activity in our share repurchase
programs:

Number of shares of common stock
Dollar amount

2023

0.5
$35.7

2022

0.4
$38.8

2021

0.1
$8.6

As of November 30, 2023, $501 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 2023, 2022, and 2021 has principally been executed in order to
mitigate the effect of shares issued upon the exercise of stock options.

During 2023, 2022 and 2021, we received proceeds of $16.6 million,
$41.4 million and $13.5 million, respectively, from exercised stock
options. We repurchased $10.8 million, $19.4 million and $15.4 million
of common stock during 2023, 2022 and 2021, respectively, in conjunc-
tion 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

2023

2022

2021

$418.5
1.56
5.4%

$396.7
1.48
8.8%

$363.3
1.36
9.7%

In November 2023, the Board of Directors approved a 7.7% increase in
the quarterly dividend from $0.39 to $0.42 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, 2023, we have $1.5 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, 2023, we temporarily used $531.4 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, 2023 and 2022 were $1,121.9
million and $1,117.0 million, respectively. Those average short-term
borrowings outstanding for the year ended November 30, 2023 includ-
ed average commercial paper borrowings of $1,098.4 million. The total
average debt outstanding for the years ended November 30, 2023 and
2022 was $5,197.8 million and $5,422.0 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 June
2023 and will expire in June 2024. The current pricing for the five-year
credit facility, on a fully drawn basis, is Term SOFR plus 1.25%. The
pricing of that credit facility is based on a credit rating grid that con-
tains a fully drawn maximum pricing of the credit facility equal to Term
SOFR plus 1.75%. The current pricing for the 364-day credit facility, on
a fully drawn basis, is Term SOFR plus 1.23%. The pricing of that credit
facility is based on a credit rating grid that contains a fully drawn
maximum pricing of the credit facility equal to Term SOFR plus 1.60%.

The provisions of each revolving credit facility restrict subsidiary
indebtedness and require us to maintain a minimum interest coverage
ratio. We do not expect that this covenant would limit our access to
either revolving credit facilities for the foreseeable future. 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

2023 Annual Report 41

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 $284.8
million as of November 30, 2023 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 $700.0 million, 3.15% notes due in August 2024.
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, 2023:

Less than
1 year

1–3
years

3–5
years

More than
5 years

Total

Short-term borrowings $ 272.2 $ 272.2
Long-term debt,

$ — $ — $ —

4,214.1
854.5

799.3
130.3

779.1
187.8

770.1
143.7

1,865.6
392.7

including finance
leases

Interest payments(a)

Total contractual cash
obligations

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 $9.2 million in 2023, $11.4 million in
2022, and $15.0 million in 2021. It is expected that the 2024 total pen-
sion plan contributions will be approximately $12 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 qual-
ified defined benefit pension plans, approximately 27% of assets are
invested in equities, 62% in fixed income investments and 11% 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 63%
in equities and 37% 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.”

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.

$5,340.8 $1,201.8

$966.9

$913.8

$2,258.3

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among McCormick & Co., Inc., the S&P 500 Index
and the S&P 500 Packaged Foods & Meats Index

(a) Interest payments include expected interest payments on long-term debt.

Our short-term borrowings, principally consisting of commercial paper, have
short-term maturities. See note 6 of notes to our consolidated financial
statements for additional information.

Our other cash requirements at year end include raw material purchas-
es, lease payments, income taxes, and pension and postretirement
benefits. We acquire various raw materials to satisfy our obligations to
our customers, and these outstanding purchase obligations can fluctu-
ate 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.

$200

$180

$160

$140

$120

$100

$80

$60

$40

$20

11/18

11/19

11/20

11/21

11/22

11/23

McCormick & Co., Inc.

S&P 500

S&P 500 Packaged Foods & Meats

*$100 invested on 11/30/18 in stock or index, including reinvestment of dividends.
Fiscal year ending November 30.

MARKET RISK SENSITIVITY

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.

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.

42 McCormick & Company, Inc.

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 unconsolidated 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 2023, 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, Chi-
nese renminbi, Australian dollar, Singapore 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, 2023. All contracts are valued in U.S.
dollars using year-end 2023 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, 2023

Currency sold

Currency received

Average
contractual
exchange
rate

Notional
value

British pound sterling
Swiss franc
Canadian dollar
Euro
Polish zloty
U.S. dollar
Chinese renminbi
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
U.S. dollar
Australian dollar
U.S. dollar
Singapore dollar
British pound sterling
Euro
Euro
Euro
British pound sterling
Euro
Peso
Thai baht

$221.6
75.7
63.5
37.6
5.7
65.0
245.4
34.4
40.4
59.9
21.9
11.1
28.7
45.4
10.5
9.6

1.26
0.87
1.33
1.10
4.15
0.66
6.75
1.33
1.27
1.10
1.68
4.54
1.70
0.87
17.88
34.79

Fair
value

$(0.5)
(1.2)
1.1
0.1
(0.2)
(0.2)
(11.5)
(0.2)
(0.2)
(0.5)
(0.4)
(0.3)
0.1
(0.2)
—
—

We had a number of smaller contracts at November 30, 2023 with an
aggregate notional value of $24.0 million to purchase or sell other cur-
rencies. The aggregate fair value of these contracts was $0.6 million
at November 30, 2023.

At November 30, 2022, 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
$560.5 million. The aggregate fair value of these contracts was a gain
of $9.5 million at November 30, 2022.

We also utilized cross currency interest rate swap contracts that are
considered net investment hedges.

As of November 30, 2023 and 2022, we had cross currency interest
rate swap contracts of (i) $250 million notional value to receive $250
million at USD Secured Overnight Financing Rate (SOFR) plus 0.907%
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
the London Interbank Offered Rate (LIBOR), in 2023 we amended the
terms of this cross currency swap such that, effective February 15,
2023, we now pay and receive at USD SOFR plus 0.907% (previously
three-month U.S. LIBOR plus 0.685%).

As of November 30, 2023 and 2022, we also had cross currency inter-
est 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 0.574% 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%. 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, Secured Overnight Financing Rate
(SOFR), and commercial paper rates. Certain of our variable rate debt
arrangements previously used LIBOR. The phase out of LIBOR refer-
ence rates occurred at different dates and began on January 1, 2022.
As more fully disclosed in notes 1 and 8 of notes to our consolidated
financial statements, during 2023 and 2022, we amended existing
arrangements and entered into new arrangements that no longer use
LIBOR as a reference rate. There was no material impact to our consol-
idated financial statements as a result of the LIBOR phase-out.

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,
2023. 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.

2023 Annual Report 43

YEARS OF MATURITY AT NOVEMBER 30, 2023

Debt
Fixed rate
Average interest rate

Variable rate
Average interest rate

2024

2025

2026

2027

Thereafter

Total

Fair value

$ 762.6

$258.8

$509.3

$759.7

$1,876.0

$4,166.4

$3,793.3

3.50%

3.26%

0.95%

3.40%

3.32%

$308.9

$ 11.0

$ —

5.16%

2.06%

—%

$ —
—

$ — $ 319.9

$ 319.9

—

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 3.25% 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%. Separately, 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. In 2023,
we amended our $100 million interest rate swaps such that, effective February 15, 2023, we now pay and receive at USD SOFR plus 1.487% (previ-
ously U.S. three-month LIBOR plus 1.22%). The effective variable rate was 6.94% as of November 30, 2023.

• 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%. Separately, 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.
In 2023, we amended our $250 million interest rate swaps such that, effective February 15, 2023, we now pay and receive at USD SOFR plus 0.907%
(previously U.S. three-month LIBOR plus 0.685%). The effective variable rate was 6.32% as of November 30, 2023.

• 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%. Separately, 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 6.13% as of November 30, 2023.

• We issued $500 million of 4.95% notes due April 15, 2033. 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 5.00%.

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 2023, our most significant raw materials
were dairy products, pepper, onion, garlic, capsicums (red peppers
and paprika), tomato products, salts, and wheat products. While
future movements of raw material costs are uncertain, we respond to
this volatility in a number of ways, including strategic raw material
purchases, purchases of raw material for future delivery and customer
price adjustments. We generally have not used derivatives to manage
the volatility related to this risk.

Credit Risk—The customers of our consumer segment are 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 esti-
mates 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 reason-
able, 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 circum-
stances arise. In preparing the financial statements, we make routine
estimates and judgments in determining the net realizable value of ac-
counts 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.

44 McCormick & Company, Inc.

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.

Goodwill Impairment
Our reporting units are the same as our operating segments.
Determining 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, 2023, we had $5,260.1
million of goodwill recorded in our balance sheet ($3,609.6 million
in the consumer segment and $1,650.5 million in the flavor solutions
segment). Our fiscal year 2023 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 re-
quires us to make significant assumptions, including expectations with
respect to sales and profits of the respective brands and trademarks,
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, 2023, we had $3,045.6 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 $3,045.6 million of brand names assets and trademarks
as of November 30, 2023: (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 acquisi-
tion of FONA in December 2020 and (iv) the remaining $296.6 million
represents a number 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 $446 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 trade-
marks, 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 re-
cently 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.

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, 2023, the Company had $27.7 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 considered 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

2023 Annual Report 45

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 2024 pension benefit expense
by approximately $1.1 million. A 1% increase or decrease in the
expected return on plan assets would impact 2024 pension expense by
approximately $9.7 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.

46 McCormick & Company, Inc.

Our internal control over financial reporting as of November 30, 2023
has been audited by Ernst & Young LLP.

Brendan M. Foley

President &
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 condi-
tions 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 audi-
tors 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 Sponsor-
ing 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, 2023.

2023 Annual Report 47

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, 2023, 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, 2023, 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 con-
solidated balance sheets of the Company as of November 30, 2023 and
2022, the related consolidated income statements, statements of compre-
hensive income, cash flow statements and statements of shareholders’
equity for each of the three years in the period ended November 30, 2023,
and the related notes and the financial statement schedule listed in the
Index at item 15(2) and our report dated January 25, 2024 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 25, 2024

48 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,
2023 and 2022, the related consolidated income statements, state-
ments of comprehensive income, cash flow statements and statements
of shareholders’ equity for each of the three years in the period ended
November 30, 2023, 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, 2023 and 2022, and the
results of its operations and its cash flows for each of the three years in
the period ended November 30, 2023, in conformity with U.S. generally
accepted accounting principles.

We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States) (PCAOB), the Com-
pany’s internal control over financial reporting as of November 30, 2023,
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 25, 2024
expressed an unqualified opinion thereon.

Basis for Opinion
These financial statements are the responsibility of the Company’s man-
agement. 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.

2023 Annual Report 49

Valuation of Indefinite-lived Intangible Assets

Description of
the Matter

At November 30, 2023, the Company’s indefinite-lived intangible assets consist of brand names and trademarks with an aggre-
gate 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 pro-
jected 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 assessments, 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 assessments, assessing the meth-
odologies, 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 assessments. 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 25, 2024

50 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.

2023

$6,662.2
4,159.7

2,502.5
1,478.3
—
61.2

963.0
208.2
43.9

798.7
174.5

624.2
56.4

$ 680.6

$ 2.54
$ 2.52

2023

$ 680.6
5.5

(3.1)
92.5
(6.8)
8.0

90.6

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

$ 776.7

$ 632.1

$ 800.2

2023 Annual Report 51

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:
2023–16.8 shares, 2022–17.4 shares
Common stock non-voting; authorized 640.0 shares; issued and outstanding:
2023–251.3 shares, 2022–250.6 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.

2023

2022

$ 166.6
587.5
1,126.5
121.0

2,001.6

1,324.7
5,260.1
3,356.7
919.2

$ 334.0
573.7
1,340.1
138.9

2,386.7

1,198.0
5,212.9
3,387.9
939.4

$12,862.3

$13,124.9

$ 272.2
799.3
1,119.3
908.1

3,098.9

3,339.9
861.2
478.8

7,778.8

$ 1,236.7
270.6
1,171.0
754.1

3,432.4

3,642.3
866.3
484.7

8,425.7

597.1

568.6

1,602.5
3,249.7
(388.6)

5,060.7
22.8

5,083.5

1,570.0
3,022.5
(480.6)

4,680.5
18.7

4,699.2

$12,862.3

$13,124.9

52 McCormick & Company, Inc.

CONSOLIDATED CASH FLOW STATEMENTS

for the year ended November 30 (millions)

2023

2022

2021

Operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Stock-based compensation
Loss (gain) on the sale of businesses and intangible assets
Asset impairments included in special charges
Amortization of inventory fair value adjustments associated with acquisitions
Loss (gain) 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
Other financing activities

Net cash (used in) provided by financing activities

Effect of exchange rate changes on cash and cash equivalents
Decrease 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.

$ 680.6

$ 682.0

$ 755.3

199.3
63.4
1.2
—
—
0.2
(5.4)
(56.4)

3.4
225.0
(68.1)
109.0
85.1

1,237.3

—
1.0
—
—
(263.9)
2.4

(260.5)

(964.6)
496.4
(1.1)
(268.1)
16.6
(10.8)
(35.7)
(418.5)
1.6

(1,184.2)

40.0
(167.4)
334.0

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

$ 166.6

$ 334.0

$ 351.7

2023 Annual Report 53

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Common
Stock
Shares

Common
Stock
Non-Voting
Shares

18.0

248.9

(0.3)
0.7
(0.6)

17.8

—
—
0.6

249.5

Common
Stock Amount

Retained
Earnings

Accumulated
Other
Comprehensive
(Loss) Income

Non-controlling
Interests

Total
Shareholders’
Equity

$1,981.3
—
—
—
—
66.6
(7.8)
15.0
—

$2,055.1
—
—
—
—
60.3
(20.0)
43.2
—

$2,415.6
755.3
—
—
(371.5)
—
(17.0)
—
—

$2,782.4
682.0
—
—
(402.3)
—
(39.6)
—
—

—
—
1.1

250.6

$2,138.6

$3,022.5

—
—
—
63.4
(20.6)
18.2
—

680.6
—
—
(426.6)
—
(26.8)
—
—

—
—
0.7

$(470.8)
—
—
44.3
—
—
—
—
—

$(426.5)
—
—
(54.1)
—
—
—
—
—

$(480.6)

—
—
92.0
—
—
—
—
—

$13.9
—
8.0
(7.4)
—
—
—
—
—

$14.5
—
6.2
(2.0)
—
—
—
—
—

$18.7

—
5.5
(1.4)
—
—
—
—
—

$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
—

$4,699.2

680.6
5.5
90.6
(426.6)
63.4
(47.4)
18.2
—

251.3

$2,199.6

$3,249.7

$(388.6)

$22.8

$5,083.5

(0.7)
1.4
(1.1)

17.4

(0.6)
0.7
(0.7)

16.8

(millions)

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 income (loss), net of tax
Dividends
Stock-based compensation
Shares purchased and retired
Shares issued
Equal exchange

Balance, November 30, 2022

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, 2023

See Notes to Consolidated Financial Statements.

5 4 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 depreciated
over its estimated useful life using the straight-line method for financial
reporting and both accelerated and straight-line methods for tax report-
ing. 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 develop-
ing the software. Capitalization of these costs stops, and amortization
begins, when the project is substantially complete and ready for use.

The net book value of capitalized software totaled $159.9 million and
$160.6 million at November 30, 2023 and 2022, respectively. Capi-
talized software is classified within “Other long-term assets” in the
consolidated 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.

2023 Annual Report 55

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. Undis-
counted 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.

Accounts Payable—Supplier Finance Program
In order to manage our cash flow and related liquidity, we work with
our suppliers to optimize our terms and conditions, which include the
extension of payment terms. We offer certain suppliers access to a
third-party Supply Chain Finance program (SCF) with several global
financial institutions (SCF Banks). The terms of our payment obligation
are not impacted by a supplier’s participation in the SCF. 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 partici-
pating 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.

Our current payment terms with our suppliers, which we deem to
be commercially reasonable, generally range from zero to 180 days
dependent upon their respective industry and geography. 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,
2023 and 2022, the amount due to suppliers participating in the SCF and
included in “Trade accounts payable” were approximately $300.5 million
and $347.0 million, respectively.

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

56 McCormick & Company, Inc.

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
is 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
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 ac-
tivities (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.

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, Mid-
dle East and Africa (EMEA) and Asia/Pacific (APAC) geographic regions:

(millions)

2023
Net sales

2022
Net sales
2021
Net sales

Americas

EMEA

APAC

Total

$4,756.9

$1,212.8

$692.5

$6,662.2

$4,551.7

$1,116.4

$682.4

$6,350.5

$4,396.1

$1,191.3

$730.5

$6,317.9

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

Significant Judgments. Sales are recorded net of trade and sales
incentives and estimated product returns. Known or expected pricing
or revenue adjustments, such as trade discounts, rebates or returns,
are estimated at the time of sale. Where applicable, future reimburse-
ments 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 years ended November 30, 2023,
2022 and 2021 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 $195.3 million and $181.0
million at November 30, 2023 and 2022, 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 consol-
idated income statement in the line entitled “Selling, general and ad-
ministrative expense”, were $247.1 million, $240.4 million and $237.8
million for 2023, 2022 and 2021, respectively. Brand marketing support
costs include advertising and promotions but exclude trade funds paid
to customers for such activities. All trade funds paid to customers are
reflected in the consolidated income statement as a reduction of net
sales. Promotion costs include public relations, shopper marketing,
social marketing activities, general consumer promotion activities and
depreciation of assets used in these promotional activities. Advertis-
ing costs include the development, production and communication of
advertisements through television, digital, print and radio. Develop-
ment 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 $198.1 million, $187.2 million
and $182.6 million for 2023, 2022 and 2021, 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 $94.9 million, $87.5 million and $87.3 million for
2023, 2022 and 2021, 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 examina-
tion based on the technical merits of the position. That position is then
measured at the largest amount of benefit that is greater than 50 per-
cent 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 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.

2023 Annual Report 57

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

Employee Benefit and Retirement Plans
We sponsor defined benefit pension plans in the U.S. and certain
foreign locations. In addition, we sponsor defined contribution plans
in the U.S. We contribute to defined contribution plans in locations
outside the U.S., including government-sponsored retirement plans.
We also currently provide postretirement medical and life insurance
benefits to certain U.S. employees and retirees.

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

We use the corridor approach in the valuation of defined benefit pen-
sion 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 expectan-
cy 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 and 2023
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. The phase out of LIBOR ref-
erence rates occurred at different times and began on January 1, 2022.
During 2022 and 2023, we amended our interest rate swaps expiring
in November 2025 and August 2027, the cross-currency interest rate
swap expiring in August 2027, and our five-year revolving credit facil-
ity expiring in July 2026 to no longer use LIBOR. Our adoption of this
standard was completed during 2023. There was no material impact
to our consolidated financial statements associated with adopting this
new standard.

Accounting Pronouncements Partially Adopted in 2023
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 rec-
ognition, measurement or financial statement presentation of supplier
finance program obligations. The new standard’s requirements to dis-
close 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. We include disclosure regarding the
key terms of the program and information about obligations outstanding
at the end of the reporting period in Note 1. The standard’s requirement
to disclose a roll forward of obligations outstanding will be effective
for our fiscal year ending November 30, 2025. We have not adopted the
disclosure requirements regarding the roll forward of the obligation.
The partial adoption of this standard did not have a material impact on
our consolidated financial statements. We do not expect the adoption
of the future disclosure requirements will have a material impact on our
consolidated financial statements.

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.

Recently Issued Accounting Pronouncements—Pending
Adoption
In November 2023, the FASB issued ASU No. 2024-07: Segment
Reporting (Topic 280): Improvements to Reportable Segment Disclo-
sures that requires entities to report incremental information about

58 McCormick & Company, Inc.

significant segment expenses included in a segment’s profit or loss
measure as well as the name and title of the chief operating decision
maker. The guidance also requires interim disclosures related to
reportable segment profit or loss and assets that had previously only
been disclosed annually. The new standard is effective for our annual
period ending November 30, 2025 and our interim periods during the
fiscal year ending November 30, 2026. The guidance does not affect
recognition or measurement in our consolidated financial statements.

In December 2023, the FASB issued ASU No. 2024-09: Income Taxes
(Topic 740): Improvements to Income Tax Disclosures that requires
entities to disclose additional information about federal, state, and
foreign income taxes primarily related to the income tax rate reconcili-
ation and income taxes paid. The new standard also eliminates certain
existing disclosure requirements related to uncertain tax positions and
unrecognized deferred tax liabilities. The guidance is effective for our
fiscal year ending November 30, 2026. The guidance does not affect
recognition or measurement in our consolidated financial statements.

2. ACQUISITIONS AND DISPOSITIONS

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 pur-
chase price includes the payment of $2.6 million during 2021 associated
with the final working capital adjustment. FONA is a leading manu-
facturer 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.

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):

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 President and Chief Executive Officer. Upon presentation
of any such proposed action (generally including details with respect to
estimated costs, which typically consist principally of employee 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 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. 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

2023

2022

2021

$34.4

$33.8

$10.5

24.6
2.2

7.4
24.0

$61.2 $65.2
— (13.6)
—
—

18.7
17.2

$46.4
—
4.7

$61.2 $51.6

$51.1

2023

2022

2021

Total special charges

Transaction-related expenses included

in cost of goods sold
Other transaction expenses
Integration expenses

Total transaction and integration

expenses

$—
—
—

$—

$ —
—
2.2

$ 6.3
13.8
15.2

$2.2

$35.3

We valued finished goods and work-in-process inventory associated
with our December 30, 2020, purchase of FONA International, LLC
and certain of its affiliates (FONA) and our November 30, 2020
acquisition of Cholula using a net realizable value approach, which
resulted in total a step-up of $6.3 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.

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

2023

2022

2021

$35.8 $23.9
27.7
25.4

$36.3
14.8

$61.2 $51.6

$51.1

As of November 30, 2023 and 2022, reserves associated with special
charges of $25.2 million and $26.7 million respectively, are included in
“Other accrued liabilities” in our consolidated balance sheet.

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

2023 Annual Report 59

During 2023, we recorded $61.2 million of special charges, consisting
principally of $42.8 million associated with our GOE program, as more
fully described below, $8.7 million associated with the transition of
a manufacturing facility in EMEA, as more fully described below,
and streamlining actions of $8.8 million in the Americas region, and
$0.9 million in the EMEA region.

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.

In 2022, our Management Committee approved the GOE program. The
GOE program included a voluntary retirement plan, which included
enhanced separation benefits to certain U.S. employees aged 55 years
or older with at least ten years of service to the company. This volun-
tary retirement plan commenced in November 2022 and participants
were required to submit their notifications by December 30, 2022. As
of November 30, 2022, we had accrued special charges of $5.6 million
consisting of employee severance and related benefits. Upon all eligi-
ble employees submitting their notifications by the end of December
2022, we accrued an additional $19.7 million during the first quarter of
2023. All related payments were made in fiscal year 2023 as all of the
affected employees retired from the company in 2023. Other special
charges recognized during the year ended November 30, 2023, under
our GOE program included $13.4 million in severance and related
benefits costs and $9.7 million of third-party expenses and other costs.

In 2022, our Management Committee approved the exit of our consumer
business in Russia. As a result, during the year ended November 30,
2022, we recognized $23.3 million of special charges. These special
charges included 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, $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.

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 con-
solidating our operations into a scalable platform while expanding our
capacity. We expect the cost of the initiative to approximate $40 mil-
lion—to be recognized as special charges in our consolidated income
statement through 2024. Of that $40 million, we expect the costs to in-
clude employee severance and related benefits, non-cash accelerated
depreciation, equipment relocation costs, decommissioning and other
property related lease exit costs, all directly related to the initiative.
During 2023, we recognized $1.6 million in accelerated depreciation
and $7.1 million in third party expenses and other costs. During 2022,
we recognized $12.6 million in severance and related benefits costs,

60 McCormick & Company, Inc.

$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 associated
with our exit of our rice product line in India, as more fully described be-
low, $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 Business Services (GBS) operating
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 recognized $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.

4. GOODWILL AND INTANGIBLE ASSETS

The following table displays intangible assets as of November 30:

2023

2022

Gross
carrying
amount

Accumulated
amortization

Gross
carrying
amount

Accumulated
amortization

(millions)

Definite-lived

intangible assets

$ 540.4

$229.3

$ 536.6

$192.1

Indefinite-lived

intangible assets:

Goodwill

Brand names and
trademarks

Total goodwill and
intangible assets

5,260.1

3,045.6

8,305.7

—

5,212.9

3,043.4

8,256.3

—

$8,846.1

$229.3

$8,792.9

$192.1

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.

Intangible asset amortization expense was $34.9 million, $35.1 million
and $35.6 million for 2023, 2022 and 2021, respectively. At November 30,
2023, definite-lived intangible assets had a weighted-average remaining
life of approximately 10 years.

6. FINANCING ARRANGEMENTS

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

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

2023

2022

(millions)

Consumer

Flavor
Solutions

Consumer

Flavor
Solutions

Beginning of year
Decrease from sale of
business(1)
Foreign currency
fluctuations

$3,568.2

$1,644.7

$3,674.7

$1,661.1

—

41.4

(0.4)

6.2

(21.5)

—

(85.0)

(16.4)

End of year

$3,609.6

$1,650.5

$3,568.2

$1,644.7

(1) The 2022 sale of Kitchen Basics is further described in note 2.

5. INVESTMENTS IN AFFILIATES

Income from unconsolidated operations was $56.4 million, $37.8
million, and $52.2 million in 2023, 2022 and 2021, respectively. Income
from unconsolidated operations in 2021 includes a gain on a sale of
unconsolidated 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 represented 95% of income from unconsolidated opera-
tions in 2023, 84% in 2022 and 62% in 2021. 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 uncon-
solidated 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

2023

2022

2021

$1,193.2
446.9
124.3

$ 522.1
122.4
336.5
7.6

$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

Royalty income from unconsolidated affiliates was $35.1 million, $27.3
million and $22.8 million for 2023, 2022 and 2021, 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.

(millions)

Short-term borrowings
Commercial paper
Other

Weighted-average interest rate of short-term
borrowings at year-end

Long-term debt
3.50% notes due 9/1/2023
3.15% notes due 8/15/2024
3.25% notes due 11/15/2025(1)
0.90% notes due 2/15/2026
3.40% notes due 8/15/2027(2)
2.50% notes due 4/15/2030(3)
1.85% notes due 2/15/2031
4.95% notes due 4/15/2033(4)
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

2023

2022

$ 269.4 $1,224.6
12.1

2.8

$ 272.2 $1,236.7

5.5%

4.2%

—

700.0
250.0
500.0
750.0
500.0
500.0
500.0
300.0
55.0
159.1

250.0
700.0
250.0
500.0
750.0
500.0
500.0
—
300.0
55.0
176.1

(74.9)

(68.2)

4,139.2
799.3

3,912.9
270.6

$3,339.9 $3,642.3

(1) Interest rate swaps, settled upon the issuance of these notes, effectively set the inter-

est rate on the $250 million notes at a weighted-average fixed rate of 3.45%.
Separately, 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 inter-
est payments are based on USD SOFR plus 1.487% (previously U.S. three-month LIBOR
plus 1.22%) with an effective variable rate of 6.94% as of November 30, 2023.

(2) 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%.
Separately, the fixed interest rate on $250 million of the 3.40% notes due in 2027 is
effectively converted to a variable rate by interest rate swaps through 2027. Net inter-
est payments are based on USD SOFR plus 0.907% (previously U.S. three-month LIBOR
plus 0.685%) with an effective rate of 6.32% as of November 30, 2023.

(3) 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%.
Separately, 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 inter-
est payments are based on USD SOFR plus 0.684% with an effective rate of 6.13% as
of November 30, 2023.

(4) 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 5.00%.
(5) Includes unamortized discounts, premiums and debt issuance costs of $(25.4) million

and $(25.9) million as of November 30, 2023 and 2022, respectively. Includes fair value
adjustment associated with interest rate swaps designated as fair value hedges of
$(49.5) million and $(42.3) million as of November 30, 2023 and 2022, respectively.

Maturities of long-term debt, including finance leases, during the fiscal
years subsequent to November 30, 2023 are as follows (in millions):

2024
2025
2026
2027
2028
Thereafter

$ 799.3
269.8
509.3
759.7
10.4
1,865.6

2023 Annual Report 61

In April 2023, we issued $500 million aggregate principal amount
of 4.950% unsecured senior notes due 2033. Interest is payable
semi-annually in April and October of each year, beginning on October
15, 2023. As part of the issuance of new debt, we entered and settled
treasury locks in a notional amount of $250.0 million to manage
our interest rate risk associated with the issuance of the unsecured
senior notes. We designated the treasury lock arrangements as cash
flow hedges with the realized loss of $2.6 million to be amortized to
interest expense over the life of the underlying 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 June 2023 and
will expire in June 2024. Upon entering into the June 2023 364-day
$500 million revolving credit facility, we simultaneously cancelled the
364-day $500 million revolving credit facility which was set to expire
in July 2023. In the second quarter of 2023, we amended our five-year
revolving credit facility expiring in June 2026 to no longer use LIBOR.
The current pricing for the five-year credit facility, on a fully drawn
basis, is SOFR plus 1.25% (previously 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 SOFR
plus 1.75% (previously 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%. These credit facilities require a fee, and commitment
fees were $2.4 million, $2.1 million and $2.0 million for 2023, 2022,
and 2021, respectively.

These credit facilities support our commercial paper program and,
after $269.4 million was used to support issued commercial paper,
we have $1,730.6 million of capacity at November 30, 2023. The
provisions of these revolving credit facilities restrict subsidiary indebt-
edness and require us to maintain a minimum interest coverage ratio.
As of November 30, 2023, 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 $284.8 million,
which have a total unused capacity at November 30, 2023 of $234.3
million. These lines, by their nature, can be withdrawn based on the
lenders’ discretion.

In 2023, we executed a nonrecourse accounts receivable sale program
whereby certain eligible U.S. receivables are sold to third party financial
institution in exchange for cash. The program provides us with an addi-
tional means for managing liquidity. Under the terms of the arrangement,
we act as the collecting agent on behalf of the financial institution. We
account for the transfer of receivables as a sale at the point control is
transferred through derecognition of the receivable on our consolidated
balance sheet. The outstanding amount of receivables sold under this
program were approximately $19.6 million at November 30, 2023. The
incremental costs of factoring receivables under this arrangement were
insignificant in 2023. The proceeds from the sales of receivables are
included in cash flows from operating activities on the consolidated cash
flow statement. As collecting agent on the sold receivables, we had

62 McCormick & Company, Inc.

$1.6 million of cash collected that was not yet remitted to the third party
financial institution as of November 30, 2023. This obligation is reported
within other accrued liabilities on the consolidated balance sheet as of
November 30, 2023 and within cash flows from financing activities on
the consolidated cash flow statement.

At November 30, 2023, we had no outstanding guarantees with
terms of one year or less. As of November 30, 2023 and 2022, we had
outstanding letters of credit of $62.4 million and $60.8 million, respec-
tively. 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 $13.7 million at
November 30, 2023.

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

2023

$74.6

9.0
3.9

2022

$47.0

9.0
4.1

2021

$45.0

9.0
4.3

Net lease cost(1)

$87.5

$60.1

$58.3

(1) Net lease cost does not include short-term leases or sublease income, both of which

are immaterial.

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

Leases

Assets:

Classification

2023

2022

Operating lease ROU
assets
Finance lease ROU
assets

Other long-term assets

Property, plant and
equipment, net

$220.0

$218.9

94.8

103.0

$314.8

$321.9

Total leased assets

Liabilities:
Current

Operating
Finance

Non-current

Operating
Finance

Other accrued liabilities
Current portion of
long-term debt

$ 53.3

$ 54.4

8.3

7.8

Other long-term liabilities
Long-term debt

179.9
103.0

176.1
110.5

Total lease liabilities

$344.5

$348.8

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,
2023, the total ROU asset associated with this facility was $64.9 million
with a related lease obligation of $68.0 million, of which $16.2 million was
included in the other accrued liabilities and $51.8 million was included
in other long-term liabilities. 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 other
accrued liabilities and $64.7 million was included in other long-term liabil-
ities. 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 years ended November 30, 2023 and 2022, we recog-
nized $27.9 million and $5.2 million, respectively, of rent expense 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, 2023, 2022 and 2021,
we recognized amortization expense of $8.7 million related to the leased
asset. As of November 30, 2023, the total lease obligation associated
with this building was $108.9 million, of which $8.0 million was included
in the current portion of long-term debt and $100.9 million was included in
long-term debt. As of November 30, 2022, the total lease obligation 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.

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

Operating leases
Finance leases

2023

2022

Weighted-average
remaining lease term
(years)

Weighted-average
discount rate

Weighted-average
remaining lease term
(years)

Weighted-average
discount rate

5.7
11.2

3.9%
3.4%

5.8
11.9

3.7%
3.3%

The future maturity of our lease liabilities as of November 30, 2023
were as follows (in millions):

Operating
leases

Finance
leases

2024
2025
2026
2027
2028
Thereafter

Total lease payments
Less: Imputed interest

Total lease liabilities

$ 61.3
54.5
47.4
41.5
13.2
43.8

261.7
28.5

$233.2

Total

$ 72.9
66.3
59.4
53.7
25.7
125.5

403.5
59.0

$ 11.6
11.8
12.0
12.2
12.5
81.7

141.8
30.5

$111.3

$344.5

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

2023

2022

$64.5
3.9
7.6

$ 41.4
4.1
7.3

$52.1

$133.8

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 inter-
company) 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 estab-
lished in conjunction with the terms of the underlying debt issues.

At November 30, 2023, we had foreign currency exchange contracts to pur-
chase or sell $1,000.4 million of foreign currencies as compared to $560.5
million at November 30, 2022. 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, 2023 have durations of less than 18 months,
including $189.0 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 purchas-
es 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.

2023 Annual Report 63

Hedges of foreign currency denominated assets and liabilities include
contracts with a notional value of $765.4 million and $355.5 million
at November 30, 2023 and 2022, respectively. We enter into these
fair value foreign currency exchange contracts to manage exposure to
currency fluctuations in certain intercompany loans between subsidiar-
ies 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, 2023 and 2022, we had cross currency interest
rate swap contracts of (i) $250 million notional value to receive
$250 million at USD SOFR plus 0.907% 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 2023 we amended
the terms of this cross currency swap such that, effective February 15,
2023, we pay and receive at USD SOFR plus 0.907% (previously USD
LIBOR plus 0.685%).

As of November 30, 2023, 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
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 worldwide financing
costs and to achieve a desired mix of variable and fixed rate debt.

As of November 30, 2023 and 2022, we have outstanding interest rate
swap contracts for a notional amount of $600 million. The following is
a summary of our outstanding interest rate swaps as of November 30,
2023 and 2022 ($ amounts in millions).

Notional
Receive rate
Pay rate

Expiration

$250 3.25% notes due 2025

$750 3.40% notes due 2027

$500 2.50% notes due 2030

Fair value hedge of changes in fair value of:

$100.0

3.25%
SOFR + 1.487%(1)

November 2025

$250.0

3.40%
SOFR + 0.907%(2)

August 2027

$250.0

2.50%
SOFR + 0.684%

April 2030

(1) We amended our $100 million interest rate swaps which expire in November 2025 such that, effective February 15, 2023, we pay and receive at USD SOFR plus 1.487% (previously U.S.

three-month LIBOR plus 1.22%).

(2) We amended our $250 million interest rate swaps which expire in August 2027 such that, effective February 15, 2023, we pay and receive at USD SOFR plus 0.907% (previously U.S.

three-month LIBOR plus 0.685%).

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, 2023:
(millions)

Asset Derivatives

Liability Derivatives

Derivatives

Balance sheet location

Notional amount

Fair value Balance sheet location Notional amount

Fair value

$ —

161.3

$ —

Other accrued liabilities

2.5

Other accrued liabilities

$600.0

839.1

719.6

24.6

Other long-term liabilities

238.9

$27.1

$52.8

16.0

7.5

$76.3

Asset Derivatives

Liability Derivatives

Balance sheet location

Notional amount

Fair value

Balance sheet location

Notional amount

Fair value

$ —

344.9

680.0

$ —

11.0

44.5

$55.5

Other accrued liabilities

$ 600.0

215.6

Other long-term liabilities

226.1

$ 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, 2022:
(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

Total

64 McCormick & Company, Inc.

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, 2023, 2022 and 2021:

Fair value hedges (millions)

Derivative

Interest rate contracts

Gain (loss) recognized in income

Derivative

Income statement
location

2023

Foreign exchange contracts

Other income, net

$(16.2)

2022

$6.6

Income statement
location

Income (expense)

2023

2022

Interest expense

$(17.7)

$ 4.0

2021

$ 8.2

Income statement
location

Gain (loss) recognized in income

2023

2022

2021

Hedged Item

$(1.9)

Intercompany loans

Other income, net

$ 15.6

$ (6.3)

$ 2.9

Cash flow hedges (millions)

Derivative

Interest rate contracts
Foreign exchange contracts

Total

Gain (loss)
recognized in OCI

2023

$(2.6)
(0.7)

$(3.3)

2022

2021

$ 18.7
5.3

$ 0.3
(2.0)

$24.0

$ (1.7)

Gain (loss)
reclassified from AOCI

Income statement location

2023

2022

2021

Interest expense, Other income, net
Cost of goods sold

$ 0.1
0.2

$ 0.3

$19.2
1.6

$ 20.8

$ 0.5
(0.7)

$ (0.2)

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 mil-
lion of fixed rate debt by August 2022. These treasury locks had a ma-
turity 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

Net investment hedges (millions)

of these treasury 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
$1.5 million increase to earnings.

Derivative

Cross currency contracts

Gain (loss)
recognized in OCI

2023

$(18.4)

2022

$37.6

2021

$15.5

Income statement location

Interest expense

Gain (loss)
excluded from the assessment of hedge
effectiveness

2023

$11.2

2022

$7.3

2021

$1.5

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
wholesalers. Consolidations in these industries have created larger
customers. In addition, competition has increased with the growth
in alternative channels including mass merchandisers, dollar stores,

warehouse clubs, discount chains and e-commerce. This has caused
some customers to be less profitable and increased our exposure
to credit risk. We generally have a large and diverse customer base
which limits our concentration of credit risk. At November 30, 2023,
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 col-
lateral. We believe that the allowance for doubtful accounts properly
recognized trade receivables at realizable value. We consider nonper-
formance credit risk for other financial instruments to be insignificant.

2023 Annual Report 65

9. FAIR VALUE MEASUREMENTS

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

• Level 1: Observable inputs such as quoted prices (unadjusted) in

active markets for identical assets or liabilities.

• Level 2: Inputs other than quoted prices that are observable for the

asset or liability, either directly or indirectly. These include quoted prices
for similar assets or liabilities in active markets and quoted prices for
identical or similar assets or liabilities in markets that are not active.

• Level 3: Unobservable inputs that reflect management’s own

assumptions.

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

(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
Foreign currency derivatives
Cross currency contracts

Total

Liabilities:

Interest rate derivatives
Foreign currency derivatives
Cross currency contracts

Total

Fair value measurements
using fair value hierarchy as
of November 30, 2023

Fair value

Level 1

Level 2

$166.6
114.7
0.3
2.5
24.6

$308.7

$ 52.8
16.0
7.5

$ 76.3

$ 166.6
—
0.3
—
—

$ 166.9

$ —
—
—

$ —

$ —
114.7
—
2.5
24.6

$141.8

$ 52.8
16.0
7.5

$ 76.3

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

At November 30, 2023 and 2022, we had no financial assets or liabili-
ties that were subject to a level 3 fair value measurement.

At November 30, 2023 and 2022, 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 com-
prised 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 underly-
ing values of the securities in which they are invested and are from quot-
ed 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.

66 McCormick & Company, Inc.

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

2023

2022

Carrying amount

Fair value

Carrying amount

Fair value

$4,139.2

$3,841.0
3,682.0
159.0

$3,912.9

$3,600.9
3,424.8
176.1

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

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

2023

2022

$(305.7)
0.8
(2.7)
(81.0)

$(405.3)
3.8
(0.6)
(78.5)

$(388.6)

$(480.6)

(1) During the year ended November 30, 2023, the foreign currency translation adjustment of accumulated other comprehensive loss decreased on a net basis by
$(99.6) million, inclusive of $(18.4) million of unrealized losses associated with net investment hedges. 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. 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

2023

2022

2021

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 costs(2)
Amortization of net actuarial (gains) losses(2)

Total before taxes
Tax effect

Net, after tax

$(0.1)
—
(0.2)

(0.3)
0.1

$ (0.5)
(18.7)
(1.6)

(20.8)
4.9

$ (0.5)
—
0.7

0.2
—

$(0.2)

$(15.9)

$ 0.2

$ 0.3
(2.1)

(1.8)
0.4

$ 0.3
9.9

10.2
(2.4)

$ 0.3
13.9

14.2
(3.3)

$(1.4)

$ 7.8

$10.9

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, employees who are participants
in the plans retained benefits accumulated up to the date of the freeze,
based on credited service and eligible earnings, in accordance with the
terms of the plans.

Included in our consolidated balance sheet as of November 30, 2023
on the line entitled “Accumulated other comprehensive loss” was
$102.6 million ($81.0 million net of tax) related to net unrecognized
actuarial losses that have not yet been recognized in net periodic
pension or postretirement benefit cost.

2023 Annual Report 67

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

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

United States

International

2023

2022

2023

2022

6.0%

5.4%

5.1%

4.5%

—% —%

2.9%

Discount rate—funded plans
Discount rate—unfunded plan
Salary scale
Expected return on plan assets

United States

International

2023

2022

2021

5.4%
5.4%
—%
6.8%

2.9%
2.8%
—%
6.8%

2.8%
2.7%
—%
6.8%

2023

4.5%
—%
2.9%
4.9%

2022

2.1%
—%
2.9%
3.7%

2021

1.9%
—%
2.9%
4.1%

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 (gain)
Settlement loss

Total pension expense (income)

United States

International

2023

$ 2.0
36.1
(42.3)
0.5
0.2
—

$ (3.5)

2022

$ 3.6
26.3
(42.8)
0.5
8.6
—

$ (3.8)

2021

$ 3.7
25.9
(41.1)
0.5
11.0
—

$ —

2023

$ 0.6
9.9
(15.1)
0.1
(0.1)
—

$ (4.6)

2022

$ 0.9
7.0
(12.3)
0.1
1.3
0.3

$ (2.7)

2021

$ 1.1
7.1
(14.0)
0.1
2.2
0.7

$ (2.8)

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:

(millions)

Change in benefit obligation:
Benefit obligation at beginning of year

Service cost
Interest costs
Plan settlements
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

68 McCormick & Company, Inc.

United States

International

2023

2022

2023

2022

$ 687.5
2.0
36.1
—
(34.7)
(45.6)
—

$ 921.5
3.6
26.3
—
(221.2)
(42.7)
—

$ 220.1
0.6
9.9
(0.1)
(11.1)
(13.3)
7.9

$ 354.7
0.9
7.0
—
(101.7)
(15.7)
(25.1)

$ 645.3

$ 687.5

$ 214.0

$ 220.1

$ 657.7
10.3
8.3
(45.6)
—

$ 754.0
(64.0)
10.4
(42.7)
—

$ 275.1
(5.3)
0.9
(13.3)
9.6

$ 398.4
(79.0)
1.0
(15.7)
(29.6)

$ 630.7

$ 657.7

$ 267.0

$ 275.1

$ (14.6)

$ (29.8)

$ 53.0

$ 55.0

$ 109.1
105.5
32.7

$ 120.3
116.1
35.0

$ 14.0
11.7
1.6

$ 14.6
12.4
1.5

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 $641.8 million
and $683.2 million as of November 30, 2023 and 2022, respectively.
The accumulated benefit obligation for the international pension plans
was $211.8 million and $217.9 million as of November 30, 2023 and
2022, respectively.

(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 evaluated
quarterly against specific benchmark indices and against a peer group
of funds of the same asset classification.

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

Asset Category

Equity securities
Fixed income securities
Other

Total

Actual

2023

34.3%
53.0%
12.7%

2022

61.6%
20.4%
18.0%

2023
Target

37.6%
52.9%
9.5%

100.0% 100.0%

100.0%

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

2023

11.3%
83.0%
5.7%

2022

41.0%
58.6%
0.4%

2023
Target

9.5%
84.4%
6.1%

100.0% 100.0%

100.0%

Included in the U.S. in the preceding table is a benefit obligation of
$72.7 million and $80.1 million for 2023 and 2022, respectively, related
to our Supplemental Executive Retirement Plan (SERP). The assets
related to this plan, which totaled $70.2 million and $74.1 million as
of November 30, 2023 and 2022, respectively, are held in a rabbi trust
and accordingly have not been included in the preceding table.

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

United States

International

2023

$61.7
76.4
23.3
70.4

2022

$55.4
85.2
23.9
73.2

2023

$65.3
12.4
3.3
28.6

2022

$68.1
13.1
0.7
20.7

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, 2023

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

Investments measured at net
asset value(i)
Hedge funds(j)
Private equity funds(k)
Private debt funds(l)
Real estate(m)

Total investments

Total
fair value

Level 1

Level 2

$ 14.2

$ —

35.5
—

88.6
—
—

—
—
$138.3

73.0
87.5

186.6
49.5
1.1

1.6
0.4
$399.7

108.5
87.5

275.2
49.5
1.1

1.6
0.4
$538.0

49.3
8.2
20.4
14.8

$630.7

As of November 30, 2023

International

(millions)

Cash and cash equivalents
International equity securities(b)
Fixed income securities:

International/government/
corporate bonds(e)
Insurance contracts(f)

Real estate(g)

Total investments

Total
fair value

Level 1

Level 2

$ 10.6
30.2

$ 10.6
—

$ —
30.2

207.7
13.9
4.6

—
—
—

207.7
13.9
4.6

$267.0

$ 10.6

$256.4

2023 Annual Report 69

(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 des-
ignee. These valuation models include unobservable inputs that cannot be
corroborated using verifiable observable market data. These funds typi-
cally have redemption periods of approximately 10 years.

(l) This category comprises limited partnerships funds investing in senior

loans, mezzanine and distressed debt. The net asset is based on valuation
models of the underlying securities as determined by the general partner
or general partner’s designee. These valuation models include unobserv-
able inputs that cannot be corroborated using verifiable observable mar-
ket data. These funds typically have redemption periods of approximately
10 years.

(m) This category comprises private real estate funds. 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 have no redemption restrictions.

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 $35.5 million (0.6 million shares and 5.4% of total
U.S. pension plan assets) and $46.2 million (0.6 million shares and
7.0% of total U.S. pension plan assets) at November 30, 2023 and
2022, respectively. Dividends paid on these shares were $0.9 million
and $0.8 million in 2023 and 2022, 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)

2024
2025
2026
2027
2028
2029–2033

United States

International

$ 47.2
48.3
49.3
50.4
50.8
254.1

$12.2
11.9
12.3
13.0
12.7
71.7

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 contribu-
tions of 3% of the participant’s eligible compensation for all U.S.
employees 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 $29.7 million, $30.5 million and $29.8 million in
2023, 2022 and 2021, respectively.

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

$ —

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

Investments measured at net asset value(i)
Hedge funds(j)
Private equity funds(k)
Private debt funds(l)

Total investments

50.1
7.3
23.4

$ 657.7

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

(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.

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 a variety of fixed income

securities with varying benchmark indices.

(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). Appropriate benchmarks are the MSCI U.S. REIT Index and the
MSCI REALPAC Canada Property Index, for the U.S. and International
holdings, respectively.

(h) This category comprises funds investing in natural resources. An appropri-
ate 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.

70 McCormick & Company, Inc.

At the participants’ election, 401(k) retirement plans held 2.3 million
shares of McCormick stock, with a fair value of $147.0 million, at
November 30, 2023. Dividends paid on the shares held in the 401(k)
retirement plans in 2023 and 2022 were $3.8 million and $3.9 million,
respectively.

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 for the years ended
November 30 follows:

(millions)

Service cost
Interest costs
Amortization of prior service credits
Amortization of actuarial gains

Postretirement benefit expense

2023

2022

2021

$ 1.3
2.6
(0.3)
(2.2)

$ 2.0
$ 1.8
1.6
1.7
(0.3)
(0.3)
(0.3) —

$ 1.4

$ 2.9

$ 3.3

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)

2023

2022

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