UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)



☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~August~~May 31, ~~2019~~2020



☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-14920

McCORMICK & COMPANY, INCORPORATED

(Exact name of registrant as specified in its charter)



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



24 Schilling Road, Suite 1,
Hunt Valley,	MD	21031
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code (~~410~~) (410) 771-7301

Securities registered pursuant to Section 12(b) of the Act:



	Trading
Title of each class	Symbol(s)	Name of each exchange on which registered
Common Stock	MKC-V	New York Stock Exchange
Common Stock Non-Voting	MKC	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-Accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



						Shares Outstanding
						~~August~~May 31, ~~2019~~2020
			Common Stock			~~9,342,240~~9,277,423
			Common Stock Non-Voting			~~123,569,633~~123,945,302

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

ITEM 1

~~PART I –~~ FINANCIAL ~~INFORMATION~~STATEMENTS

ITEM 12

~~FINANCIAL STATEMENTS~~

~~ITEM 2~~

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

3128

ITEM 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

5044

ITEM 4

CONTROLS AND PROCEDURES

5044

PART II - OTHER INFORMATION

ITEM 1

ITEM 1a

ITEM 2

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

5246

ITEM 3

DEFAULTS UPON SENIOR SECURITIES

5346

ITEM 4

MINE SAFETY DISCLOSURES

5346

ITEM 5

OTHER INFORMATION

ITEM 6

PART I - FINANCIAL INFORMATION


~~ITEM 1.~~	~~FINANCIAL STATEMENTS~~

ITEM 1. FINANCIAL STATEMENTS

McCORMICK & COMPANY, INCORPORATED

CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)

(in millions except per share amounts)


	Three months ended August 31,				Nine months ended August 31,						Three months ended May 31,						Six months ended May 31,
	2019		2018		2019		2018				2020		2019		2020		2019
Net sales	$	1,329.2	$	1,318.2	$	3,862.6	$	3,834.9		Net sales	$	1,401.1	$	1,301.9	$	2,613.1	$	2,533.4
Cost of goods sold	789.3		795.7		2,347.3		2,346.6			Cost of goods sold	821.6		793.4		1,563.7		1,558.0
Gross profit	539.9		522.5		1,515.3		1,488.3			Gross profit	579.5		508.5		1,049.4		975.4
Selling, general and administrative expense	278.7		283.7		839.9		852.7			Selling, general and administrative expense	319.2		293.3		593.9		561.2
Transaction and integration expenses (related to RB Foods acquisition)	—		5.6		—		22.1

Special charges	7.7		3.3		16.9		13.9			Special charges	2.9		7.1		3.9		9.2
Operating income	253.5		229.9		658.5		599.6			Operating income	257.4		208.1		451.6		405.0
Interest expense	41.3		44.7		126.7		130.7			Interest expense	34.4		42.4		69.7		85.4

Other income, net	6.9		4.8		19.3		13.5			Other income, net	3.1		6.3		8.6		12.4
Income from consolidated operations before income taxes	219.1		190.0		551.1		482.4			Income from consolidated operations before income taxes	226.1		172.0		390.5		332.0
Income tax expense (benefit)	36.8		24.9		91.0		(213.1		)
Income tax expense										Income tax expense	40.4		32.1		70.5		54.2
Net income from consolidated operations	182.3		165.1		460.1		695.5			Net income from consolidated operations	185.7		139.9		320.0		277.8
Income from unconsolidated operations	9.6		8.4		29.2		23.9			Income from unconsolidated operations	10.2		9.5		20.6		19.6
Net income	$	191.9	$	173.5	$	489.3	$	719.4		Net income	$	195.9	$	149.4	$	340.6	$	297.4
Earnings per share – basic	$	1.45	$	1.32	$	3.69	$	5.47		Earnings per share – basic	$	1.47	$	1.13	$	2.56	$	2.25
Average shares outstanding – basic	132.8		131.6		132.5		131.4			Average shares outstanding – basic	133.1		132.3		133.0		132.3
Earnings per share – diluted	$	1.43	$	1.30	$	3.65	$	5.41		Earnings per share – diluted	$	1.46	$	1.12	$	2.54	$	2.22
Average shares outstanding – diluted	134.2		133.2		134.0		133.0			Average shares outstanding – diluted	134.3		133.9		134.3		133.9
Cash dividends paid per share – voting	$	0.57	$	0.52	$	1.71	$	1.56
Cash dividends paid per share – non-voting	$	0.57	$	0.52	$	1.71	$	1.56
Cash dividends declared per share – voting	$	0.57	$	0.52	$	1.14	$	1.04
Cash dividends declared per share – non-voting	$	0.57	$	0.52	$	1.14	$	1.04
Cash dividends paid per share – voting and non-voting										Cash dividends paid per share – voting and non-voting	$	0.62	$	0.57	$	1.24	$	1.14
Cash dividends declared per share – voting and non-voting										Cash dividends declared per share – voting and non-voting	$	0.62	$	0.57	$	0.62	$	0.57

See notes to condensed consolidated financial statements (unaudited).

Table of Contents

McCORMICK & COMPANY, INCORPORATED

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

(in millions)

Three months ended August 31, Nine months ended August 31,
2019 2018 2019 2018
Net income $ 191.9
$ 173.5
$ 489.3
$ 719.4
Net income attributable to non-controlling interest 0.3
1.6
1.5
3.6
Other comprehensive income (loss):
Unrealized components of pension and postretirement plans (including a curtailment gain of $18.0 for the nine months ended August 31, 2018) (0.7 ) 1.8
(2.8 ) 22.6
Currency translation adjustments (44.9 ) (50.7 ) (66.8 ) (77.1 )
Change in derivative financial instruments (0.1 ) 0.2
(0.1 ) 1.9
Deferred taxes —
(0.1 ) 0.4
(5.4 )
Total other comprehensive loss (45.7 ) (48.8 ) (69.3 ) (58.0 )
Comprehensive income $ 146.5
$ 126.3
$ 421.5
$ 665.0


	Three months ended May 31,						Six months ended May 31,
	2020		2019		2020		2019
Net income	$	195.9	$	149.4	$	340.6	$	297.4
Net income attributable to non-controlling interest	0.6		0.7		1.5		1.2
Other comprehensive income (loss):
Unrealized components of pension and postretirement plans	3.3		0.3		5.7		(2.1)
Currency translation adjustments	(60.9)		(58.6)		(80.9)		(21.9)
Change in derivative financial instruments	1.6		(0.1)		0.9		—
Deferred taxes	(3.1)		2.4		(4.8)		0.4
Total other comprehensive loss	(59.1)		(56.0)		(79.1)		(23.6)
Comprehensive income	$	137.4	$	94.1	$	263.0	$	275.0

See notes to condensed consolidated financial statements (unaudited).

Table of Contents

McCORMICK & COMPANY, INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEET

(in millions)


	August 31, 2019			August 31, 2018			November 30, 2018				May 31, 2020		May 31, 2019		November 30, 2019
	(unaudited)			(unaudited)							(unaudited)		(unaudited)
ASSETS										ASSETS
Current Assets										Current Assets
Cash and cash equivalents	$	162.9		$	73.0		$	96.6		Cash and cash equivalents	$	185.0	$	139.4	$	155.4
Trade accounts receivable, net	494.6			511.7			518.1			Trade accounts receivable, net	494.3		429.0		502.9
Inventories, net										Inventories, net
Finished products	442.5			422.6			406.1			Finished products	381.9		413.0		413.3
Raw materials and work-in-process	404.4			383.7			380.2			Raw materials and work-in-process	449.4		403.5		387.9
	846.9			806.3			786.3				831.3		816.5		801.2
Prepaid expenses and other current assets	85.0			83.2			78.9			Prepaid expenses and other current assets	105.1		88.2		90.7
Total current assets	1,589.4			1,474.2			1,479.9			Total current assets	1,615.7		1,473.1		1,550.2
Property, plant and equipment	2,090.2			2,066.2			2,066.5
Less: accumulated depreciation	(1,120.4		)	(1,105.2		)	(1,081.4		)
Property, plant and equipment, net	969.8			961.0			985.1			Property, plant and equipment, net	927.0		917.4		952.6
Goodwill	4,496.5			4,553.4			4,527.9			Goodwill	4,484.4		4,511.4		4,505.2
Intangible assets, net	2,850.3			2,881.7			2,873.3			Intangible assets, net	2,833.9		2,860.1		2,847.0
Investments and other assets	460.0			407.7			390.2
Other long-term assets										Other long-term assets	715.1		474.7		507.1
Total assets	$	10,366.0		$	10,278.0		$	10,256.4		Total assets	$	10,576.1	$	10,236.7	$	10,362.1
LIABILITIES AND SHAREHOLDERS’ EQUITY										LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities										Current Liabilities
Short-term borrowings	$	683.6		$	639.8		$	560.0		Short-term borrowings	$	84.5	$	605.7	$	600.7
Current portion of long-term debt	119.3			75.5			83.5			Current portion of long-term debt	88.9		87.5		97.7
Trade accounts payable	783.1			646.3			710.0			Trade accounts payable	857.2		706.6		846.9
Other accrued liabilities	444.4			493.5			648.2			Other accrued liabilities	551.7		460.3		609.1
Total current liabilities	2,030.4			1,855.1			2,001.7			Total current liabilities	1,582.3		1,860.1		2,154.4
Long-term debt	3,843.1			4,269.8			4,052.9			Long-term debt	4,113.6		3,977.5		3,625.8
Deferred taxes	701.2			667.7			706.5			Deferred taxes	701.3		706.4		697.6
Other long-term liabilities	310.7			373.4			313.1			Other long-term liabilities	516.6		310.1		427.6
Total liabilities	6,885.4			7,166.0			7,074.2			Total liabilities	6,913.8		6,854.1		6,905.4
Shareholders’ Equity										Shareholders’ Equity
Common stock	441.3			396.9			400.2			Common stock	469.4		425.4		447.6
Common stock non-voting	1,435.9			1,335.2			1,370.4			Common stock non-voting	1,469.5		1,409.6		1,441.0
Retained earnings	2,019.8			1,723.7			1,760.2			Retained earnings	2,288.7		1,918.6		2,055.8
Accumulated other comprehensive loss	(428.3		)	(354.1		)	(359.9		)	Accumulated other comprehensive loss	(577.7)		(382.7)		(500.2)
Total McCormick shareholders' equity										Total McCormick shareholders' equity	3,649.9		3,370.9		3,444.2
Non-controlling interests	11.9			10.3			11.3			Non-controlling interests	12.4		11.7		12.5
Total shareholders’ equity	3,480.6			3,112.0			3,182.2			Total shareholders’ equity	3,662.3		3,382.6		3,456.7
Total liabilities and shareholders’ equity	$	10,366.0		$	10,278.0		$	10,256.4		Total liabilities and shareholders’ equity	$	10,576.1	$	10,236.7	$	10,362.1

See notes to condensed consolidated financial statements (unaudited).

Table of Contents

McCORMICK & COMPANY, INCORPORATED

CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)

(in millions)


	Nine months ended August 31,							Six months ended May 31,
	2019			2018				2020		2019
Operating activities							Operating activities
Net income	$	489.3		$	719.4		Net income	$	340.6	$	297.4
Adjustments to reconcile net income to net cash flow provided by operating activities:							Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation and amortization	118.0			111.6			Depreciation and amortization	81.5		79.0
Stock-based compensation	30.6			21.6			Stock-based compensation	27.1		22.8
Non-cash net income tax benefit (related to enactment of the U.S. Tax Act)	—			(308.2		)
Fixed asset impairment charge	—			3.0

Income from unconsolidated operations	(29.2		)	(23.9		)	Income from unconsolidated operations	(20.6)		(19.6)
Changes in operating assets and liabilities	(139.8		)	(154.5		)	Changes in operating assets and liabilities	(89.2)		(83.6)

Dividends from unconsolidated affiliates	25.7			20.0			Dividends from unconsolidated affiliates	16.1		18.2
Net cash flow provided by operating activities	494.6			389.0			Net cash flow provided by operating activities	355.5		314.2
Investing activities							Investing activities
Acquisition of businesses	—			(4.2		)

Capital expenditures (including software)	(107.1		)	(112.6		)	Capital expenditures (including software)	(87.1)		(54.1)

Other investing activities	2.6			3.4			Other investing activities	1.9		0.1

Net cash flow used in investing activities	(104.5		)	(113.4		)	Net cash flow used in investing activities	(85.2)		(54.0)
Financing activities							Financing activities
Short-term borrowings, net	124.4			386.1			Short-term borrowings, net	(514.5)		45.6
Long-term debt borrowings	—			25.9			Long-term debt borrowings	495.0		—
Payment of debt issuance costs							Payment of debt issuance costs	(1.1)		—
Long-term debt repayments	(214.6		)	(588.6		)	Long-term debt repayments	(41.7)		(93.6)
Proceeds from exercised stock options	84.6			42.1			Proceeds from exercised stock options	26.7		48.0
Taxes withheld and paid on employee stock awards	(10.3		)	(10.8		)	Taxes withheld and paid on employee stock awards	(9.2)		(10.1)
Payment of contingent consideration	—			(2.5		)

Common stock acquired by purchase	(76.9		)	(40.0		)	Common stock acquired by purchase	(20.8)		(59.8)
Dividends paid	(226.4		)	(204.9		)	Dividends paid	(164.9)		(150.8)
Net cash flow used in financing activities	(319.2		)	(392.7		)	Net cash flow used in financing activities	(230.5)		(220.7)
Effect of exchange rate changes on cash and cash equivalents	(4.6		)	3.3			Effect of exchange rate changes on cash and cash equivalents	(10.2)		3.3
Increase in cash and cash equivalents	66.3			(113.8		)	Increase in cash and cash equivalents	29.6		42.8
Cash and cash equivalents at beginning of period	96.6			186.8			Cash and cash equivalents at beginning of period	155.4		96.6
Cash and cash equivalents at end of period	$	162.9		$	73.0		Cash and cash equivalents at end of period	$	185.0	$	139.4

See notes to condensed consolidated financial statements (unaudited).

Table of Contents

McCORMICK & COMPANY, INCORPORATED

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)

(in millions)



(millions)	Common Stock Shares	Common Stock Non-Voting Shares	Common Stock Amount		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Non-controlling Interests		Total Shareholders’ Equity
Three months ended May 31, 2019
Balance, February 28, 2019	9.6	122.4	$	1,780.5	$	1,877.9	$	(327.4)	$	11.7	$	3,342.7
Net income			—		149.4		—		—		149.4
Net income attributable to non-controlling interest			—		—		—		0.7		0.7
Other comprehensive loss, net of tax			—		—		(55.3)		(0.7)		(56.0)
Dividends			—		(75.5)		—		—		(75.5)
Stock-based compensation			16.1		—		—		—		16.1
Shares purchased and retired	(0.1)	(0.2)	(6.2)		(33.2)		—		—		(39.4)
Shares issued	0.8	—	44.6		—		—		—		44.6
Equal exchange	(0.8)	0.8	—		—		—		—		—
Balance, May 31, 2019	9.5	123.0	$	1,835.0	$	1,918.6	$	(382.7)	$	11.7	$	3,382.6

Six months ended May 31, 2019
Balance, November 30, 2018	9.6	122.5	$	1,770.6	$	1,760.2	$	(359.9)	$	11.3	$	3,182.2
Net income			—		297.4		—		—		297.4
Net income attributable to non-controlling interest			—		—		—		1.2		1.2
Other comprehensive loss, net of tax			—		—		(22.8)		(0.8)		(23.6)
Dividends			—		(75.5)		—		—		(75.5)
Stock-based compensation			22.8		—		—		—		22.8
Shares purchased and retired	(0.1)	(0.4)	(10.1)		(63.5)		—		—		(73.6)
Shares issued	0.9	—	51.7		—		—		—		51.7
Equal exchange	(0.9)	0.9	—		—		—		—		—
Balance, May 31, 2019	9.5	123.0	$	1,835.0	$	1,918.6	$	(382.7)	$	11.7	$	3,382.6

Three months ended May 31, 2020
Balance, February 29, 2020	9.3	123.6	$	1,901.5	$	2,179.9	$	(519.5)	$	12.7	$	3,574.6
Net income			—		195.9		—		—		195.9
Net income attributable to non-controlling interest			—		—		—		0.6		0.6
Other comprehensive loss, net of tax			—		—		(58.2)		(0.9)		(59.1)
Dividends			—		(82.4)		—		—		(82.4)

Stock-based compensation			20.7		—		—		—		20.7
Shares purchased and retired	(0.1)	—	(2.5)		(4.7)		—		—		(7.2)
Shares issued	0.4	—	19.2		—		—		—		19.2
Equal exchange	(0.3)	0.3	—		—		—		—		—
Balance, May 31, 2020	9.3	123.9	$	1,938.9	$	2,288.7	$	(577.7)	$	12.4	$	3,662.3

Table of Contents

(millions) Common Stock Shares Common Stock
Non-Voting Shares Common Stock Amount Retained Earnings Accumulated Other Comprehensive (Loss) Income Non-controlling Interests Total Shareholders’ Equity
Three months ended August 31, 2018
Balance, May 31, 2018 10.0
121.3
$ 1,705.3
$ 1,631.6
$ (308.4 ) $ 11.8
$ 3,040.3
Net income —
173.5
—
—
173.5
Net income attributable to non-controlling interest —
—
—
1.6
1.6
Other comprehensive income (loss), net of tax —
—
(45.7 ) (3.1 ) (48.8 )
Dividends —
(68.4 ) —
—
(68.4 )
Stock-based compensation 5.5
—
—
—
5.5
Shares purchased and retired (0.1 ) —
(5.8 ) (13.0 ) —
—
(18.8 )
Shares issued 0.5
—
27.1
—
—
—
27.1
Equal exchange (0.5 ) 0.5
—
—
—
—
—
Balance, August 31, 2018 9.9
121.8
$ 1,732.1
$ 1,723.7
$ (354.1 ) $ 10.3
$ 3,112.0

Nine months ended August 31, 2018
Balance, November 30, 2017 10.0
121.0
$ 1,672.9
$ 1,166.5
$ (279.5 ) $ 11.0
$ 2,570.9
Net income —
719.4
—
—
719.4
Net income attributable to non-controlling interest —
—
—
3.6
3.6
Other comprehensive income (loss), net of tax —
—
(53.7 ) (4.3 ) (58.0 )
Adoption of ASU No. 2018-02 —
20.9
(20.9 ) —
—
Dividends —
(136.7 ) —
—
(136.7 )
Stock-based compensation 21.6
—
—
—
21.6
Shares purchased and retired (0.2 ) (0.2 ) (13.0 ) (46.4 ) —
—
(59.4 )
Shares issued 1.0
0.1
50.6
—
—
—
50.6
Equal exchange (0.9 ) 0.9
—
—
—
—
—
Balance, August 31, 2018 9.9
121.8
$ 1,732.1
$ 1,723.7
$ (354.1 ) $ 10.3
$ 3,112.0

Three months ended August 31, 2019
Balance, May 31, 2019 9.5
123.0
$ 1,835.0
$ 1,918.6
$ (382.7 ) $ 11.7
$ 3,382.6
Net income —
191.9
—
—
191.9
Net income attributable to non-controlling interest —
—
—
0.3
0.3
Other comprehensive income (loss), net of tax —
—
(45.6 ) (0.1 ) (45.7 )
Dividends —
(75.6 ) —
—
(75.6 )
Stock-based compensation 7.8
—
—
—
7.8
Shares purchased and retired (0.1 ) —
(3.2 ) (15.1 ) —
—
(18.3 )

Shares issued 0.5
—
37.6
—
—
—
37.6
Equal exchange (0.6 ) 0.6
—
—
—
—
—
Balance, August 31, 2019 9.3
123.6
$ 1,877.2
$ 2,019.8
$ (428.3 ) $ 11.9
$ 3,480.6

Nine months ended August 31, 2019
Balance, November 30, 2018 9.6
122.5
$ 1,770.6
$ 1,760.2
$ (359.9 ) $ 11.3
$ 3,182.2
Net income —
489.3
—
—
489.3
Net income attributable to non-controlling interest —
—
—
1.5
1.5
Other comprehensive income (loss), net of tax —
—
(68.4 ) (0.9 ) (69.3 )
Dividends —
(151.1 ) —
—
(151.1 )
Stock-based compensation 30.6
—
—
—
30.6
Shares purchased and retired (0.2 ) (0.4 ) (13.3 ) (78.6 ) —
—
(91.9 )
Shares issued 1.4
—
89.3
—
—
—
89.3
Equal exchange (1.5 ) 1.5
—
—
—
—
—
Balance, August 31, 2019 9.3
123.6
$ 1,877.2
$ 2,019.8
$ (428.3 ) $ 11.9
$ 3,480.6



Six months ended May 31, 2020
Balance, November 30, 2019	9.3	123.6	$	1,888.6	$	2,055.8	$	(500.2)	$	12.5	$	3,456.7
Net income			—		340.6		—		—		340.6
Net income attributable to non-controlling interest			—		—		—		1.5		1.5
Other comprehensive loss, net of tax			—		—		(77.5)		(1.6)		(79.1)
Dividends			—		(82.4)		—		—		(82.4)
Stock-based compensation			27.1		—		—		—		27.1
Shares purchased and retired	(0.1)	(0.1)	(5.2)		(25.3)		—		—		(30.5)
Shares issued	0.5	—	28.4		—		—		—		28.4
Equal exchange	(0.4)	0.4	—		—		—		—		—
Balance, May 31, 2020	9.3	123.9	$	1,938.9	$	2,288.7	$	(577.7)	$	12.4	$	3,662.3

See notes to condensed consolidated financial statements (unaudited).

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McCORMICK & COMPANY, INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~(Unaudited)~~(unaudited)


1.	~~ACCOUNTING POLICIES~~

1.ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and notes required by United States generally accepted accounting principles (U.S. GAAP) for complete financial statements. In our opinion, the accompanying condensed consolidated financial statements contain all adjustments, which are of a normal and recurring nature, necessary to present fairly the financial position and the results of operations for the interim periods presented. ~~We made an immaterial adjustment~~The consolidated balance sheet as of May 31, 2019 includes a reclassification of $44.6 million of capitalized software from property, plant and equipment, net, to the accompanying Condensed Consolidated Statement of Comprehensive Income that decreased both currency translation adjustments as well as comprehensive income by $3.1 million and $4.3 million for the three and nine months ended August 31, 2018, respectively,other long-term assets to conform to ~~the presentation included in the Consolidated Statement of Comprehensive Income included in~~ our ~~Annual Report on Form 10-K for the year ended November 30, 2018.~~current presentation.

The results of consolidated operations for the ~~nine-month~~six-month period ended ~~August~~May 31, ~~2019~~2020 are not necessarily indicative of the results to be expected for the full year. Historically, our net sales, net income and cash flow from operations ~~are~~have been lower in the first half of the fiscal year and ~~increase~~higher in the second half. The ~~typical~~historical increase in net sales, net income and cash flow from operations in the second half of the year ishas largely been due to the consumer business cycle in the U.S., where customers typically purchase more products in the fourth quarter due to the Thanksgiving and Christmas holiday seasons.

For further information, refer to the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended November 30, ~~2018~~.2019.

~~Significant Accounting Policies~~Impact of COVID-19

On March 11, 2020, the World Health Organization designated a new coronavirus (“COVID-19”) as a global pandemic. Governments around the world have mandated orders to slow the transmission of the virus. Actions taken to slow the transmission of the virus, include shelter-in-place orders, quarantines, significant restrictions on travel, as well as work restrictions that prohibit many employees from going to work. Uncertainty with respect to the economic effects of the pandemic has introduced significant volatility in the financial markets.

We are partnering with our customers to react to consumer demand changes associated with COVID-19. The ~~following~~effects of COVID-19 on consumer behavior have, on a net basis, favorably impacted the operating results of our consumer segment and unfavorably impacted the operating results of our flavor solutions segment in the three months and six months ended May 31, 2020. The impact of COVID-19 on our consumer segment during those periods resulted in a significant ~~accounting policies~~increase in at-home consumption, and related demand, for our products. The unfavorable impact on our flavor solutions segment during the same periods was principally attributable to sharply decreased demand from certain customers that were ~~updated~~affected by government mandates related to COVID-19 in ~~2019~~many of our markets. Those measures required closures of dine-in restaurants or restricted operations of those restaurants to ~~reflect changes upon~~carry-out or delivery only and also restricted operations of quick service restaurants to drive-through pick-up or delivery. Those negative demand impacts in our ~~adoption of ASU No. 2014-09~~ ~~Revenue~~flavor solutions segment were partially offset by increased at-home consumption from ~~Contracts with Customers (Topic 606)~~ ~~(the “Revenue Recognition ASU”), ASU No. 2017-07~~ ~~Compensation~~ – ~~Retirement Benefits (Topic 715)~~ – ~~Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost~~ ~~(the “Pension ASU”), and ASU No. 2017-12~~ ~~Derivatives and Hedging (Topic 815)~~ – ~~Targeted Improvements to Accounting for Hedging Activities~~.

~~Revenue Recognition~~

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

~~Performance Obligations~~

Our revenues primarily result from contracts or purchase orders with customers, which are generally short-term in nature. The Company assesses the goods and services promised in its customers’ contracts or purchase orders and identifies 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, the Company considers all the goods or services promised, whether explicitly stated or implied based on customary business practices.

~~Significant Judgments~~

Sales are recorded net of trade and sales incentives and estimated product returns. Known or expected pricing or revenue adjustments, such as trade discounts, rebates or returns, are estimated at the time of sale. Where applicable, future

reimbursements are estimated based on a combination of historical patterns and future expectations regarding these programs. Key sales terms, such as pricing and quantities ordered, are established on a frequent basis such that most customer arrangements and related incentives have a one-year or shorter duration. Estimates that affect revenue, such as trade incentives and product returns, are monitored and adjusted each period until the incentives or product returns are realized. The adjustments recognized during the three and nine months ended August 31, 2019 and 2018 resulting from updated estimates of revenue for prior year product sales were not significant. The unsettled portion remaining in accrued liabilities for these activities was $115.7 million, $125.9 million and $142.1 million at August 31, 2019, August 31, 2018 and November 30, 2018, respectively.

~~Other~~

In each of our segments, we produce and sell many individual products which are similar in composition and nature. With their primary attribute being flavor, we regard the products within each of our segments to be fairly homogenous. Our business segments each sell to similar channels and customers. See note 11 for revenues reported by business segment, which is consistent with how we organize and manage our operations, and for revenues reported by geographic region.

~~Practical Expedients~~

As more fully described below, we adopted the Revenue Recognition ASU in the first quarter of 2019 using the full retrospective method, including applying the following policy elections and practical expedients upon that adoption:


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


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


•	~~Incremental cost of obtaining a contract –The Company elected to expense any incremental costs of obtaining a contract if the contract is for a period of one year or less.~~

~~Shipping and Handling~~

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

~~Brand Marketing Support~~

Total brand marketing support costs are included in selling, general and administrative expense in the consolidated income statement. Brand marketing support costs include advertising and promotions but exclude trade funds paid to customers for such activities. All trade funds paid to customers are reflected in the consolidated income statement as a reduction of net sales. Promotion costs include public relations, shopper marketing, social marketing activities, general consumer promotion activities and depreciation of assets used in these promotional activities. Advertising costs include the development, production and communication of advertisements through television, digital, print and radio. Development and production costs are expensed in the period in which the advertisement is first run. All other costs of advertising are expensed as incurred.

~~Derivative Instruments~~

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

~~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 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) to the consolidated income statement on the same line item as the underlying transaction.

~~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 in accumulated other comprehensive income (loss).at-home consumption.

Accounting Pronouncements Adopted in ~~2019~~2020

~~We elected~~

As more fully described in note 1 of notes to consolidated financial statements included in our Form 10-K for the year ended November 30, 2019, we were required to adopt the ~~Revenue Recognition ASU on a full retrospective basis. We adopted the Pension ASU on a retrospective basis as required by the standard. These~~ new accounting ~~standards are summarized below.~~

In May 2014, the FASB issued the Revenue Recognition ASU, which supersedes previously existing revenue recognition guidance. Under this new guidance, companies apply a principles-based five-step model to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the considerationstandard for which the company expects to be entitled to in exchange for those goods or services. The model encompasses the following steps: (1) determination of whether a contract - an agreement between two or more parties that creates legally enforceable rights and obligations - exists; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when (or as) the performance obligation is satisfied. The new revenue recognition guidance allows companies to account for shipping and handling activities that occur before and after the customer has obtained control of a product as fulfillment activities rather than as a promised service; and we applied this accounting policy election. In addition, the new revenue guidance requires that customer payments be accounted for as a reduction in the transaction price unless the payment to a customer is in exchange for a distinct good or service. The adoption of this standard did not have and is not expected to have an effect on the timing of our revenue recognition.

Upon adoption of the Revenue Recognition ASU in fiscal 2019, we made the following changes to our revenue recognition accounting policy and disclosure practices. We classify shipping and handling expenses as a component of cost of goods sold, rather than our prior practice of recording these costs as a component of selling, general and administrative expense. Also, we classify all payments to direct and indirect customers, including certain trade funds used for cooperative advertising and displays, as a reduction of revenue. Prior to our adoption of the Revenue Recognition ASU, we presented certain of those payments as brand marketing support costs and included these payments as a component of selling, general and administrative expense. There was no effect on operating income, net income, or basic and diluted earnings per share upon our adoption of the Revenue Recognition ASU in 2019.

In March 2017, the FASB issued the Pension ASU. This guidance revises how employers that sponsor defined benefit pension and other postretirement plans present the net periodic benefit cost in their income statement and requires that the service cost component of net periodic benefit cost be presented in the same income statement line items as other employee compensation costs from services rendered during the period. Of the components of net periodic benefit cost, only the service cost component is eligible for asset capitalization. The other components of the net periodic benefit cost must be presented separately from the line items that include the service cost and outside of any subtotal of operating income on the income statement. The new standard was adoptedleases, Accounting Standards Codification Topic 842 Leases (ASC 842), as of December 1, ~~2018~~2019 and ~~has been applied on~~we elected to do so using a modified retrospective ~~basis. Adoption of~~transition method. That modified retrospective transition method allowed us to initially apply the new standard ~~solely impacts classification within our consolidated income statement, with no change to net income or basic~~at the adoption date and ~~diluted earnings per share.~~

~~The adoption of the Revenue Recognition ASU and the Pension ASU, on a retrospective basis, impacted our previously reported results for the three and nine months ended August 31, 2018 as follows:~~

Accounting Changes
Previously Reported
Revenue Recognition (1)
Pension
Recast (1)
For the three months ended August 31, 2018:
Net sales $ 1,345.3
$ (27.1 ) $ —
$ 1,318.2
Cost of goods sold 750.4
44.7
0.6
795.7
Gross profit 594.9
(71.8 ) (0.6 ) 522.5
Selling, general and administrative expense 353.0
(71.8 ) 2.5
283.7
Operating income 233.0
—
(3.1 ) 229.9
Other income, net 1.7
—
3.1
4.8

For the nine months ended August 31, 2018:
Net sales $ 3,909.7
$ (74.8 ) $ —
$ 3,834.9
Cost of goods sold 2,219.6
125.2
1.8
2,346.6
Gross profit 1,690.1
(200.0 ) (1.8 ) 1,488.3
Selling, general and administrative expense 1,045.7
(200.0 ) 7.0
852.7
Operating income 608.4
—
(8.8 ) 599.6
Other income, net 4.7
—
8.8
13.5

~~(1)~~

Amounts reflected in these columns for the nine months ended August 31, 2018 have been reclassified from the corresponding amounts included in the Form 8-K that we furnished on March 11, 2019. This reclassification is a revision of the recast of previously reported historical information associated with our retrospective adoption of the Revenue Recognition ASU and Pension ASU in the first quarter of 2019, as follows: (i) decreased cost of goods sold by $4.2 million, with a resultant increase in gross profit by $4.2 million; and (ii) increased selling, general and administrative expense by $4.2 million.

~~We adopted the following new accounting standards in the first nine months of 2019 on a prospective basis:~~

~~In August 2017, the FASB issued ASU No. 2017-12~~ ~~Derivatives and Hedging (Topic 815)~~—~~Targeted Improvements to Accounting for Hedging Activities~~. This guidance eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires, for qualifying hedges, the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The guidance also modifies the accounting for components excluded from the assessment of hedge effectiveness, eases documentation and assessment requirements and modifies certain disclosure requirements. The new standard is effective for the first quarter of our fiscal year ending November 30, 2020, with early adoption permitted in any interim period or fiscal year before the effective date. We have elected to adopt this guidance effective December 1, 2018. There was no material impact to our financial statements upon adoption.

~~In October 2016, the FASB issued ASU No. 2016-16~~ ~~Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory.~~ The ASU eliminates the deferral of the tax effects of intra-entity asset transfers other than inventory. As a result, the tax expense from the intercompany sale of assets, other than inventory, and associated changes to deferred taxes will be recognized when the sale occurs even though the pre-tax effects of the transaction have not been recognized. This new standard was effective beginning in fiscal year 2019 and is required to be applied on a modified retrospective basis throughrecognize a cumulative-effect adjustment to retained earnings in the opening balance sheet in the period of adoption without restating prior periods. ASC 842 revised prior practice related to accounting for leases under Accounting Standards Codification Topic 840 Leases (ASC 840) for both lessees and lessors and requires lessees to recognize most leases on their balance sheets as lease liabilities with corresponding right-of-use ("ROU") assets. Under ASC 842, the lease liability is equal to the present value of lease payments, and the right-of-use asset is based on the lease liability, subject to adjustments, such as for deferred rent and initial direct costs. For income statement purposes, ASC 842 retains a dual model similar to ASC 840, requiring leases to be classified as either operating or finance. For lessees, operating leases will result in straight-line expense (similar to prior accounting by lessees for operating leases under ASC 840) while finance leases will result in a front-loaded expense pattern (similar to prior accounting by lessees for capital leases under ASC 840).

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

Adoption of the new standard resulted in the recording of operating lease ROU assets and lease liabilities of $136.5 million and $140.0 million, respectively, with the difference due to prepaid and deferred rents that were reclassified to the ROU asset value. No cumulative-effect adjustment to opening retained earnings was required as of December 1, ~~2018, the first day of~~2019. The standard did not materially affect our fiscal year 2019. There was no cumulative-effect adjustment upon adoption. As more fully disclosed in note 8, during the nine months ended August 31, 2019, we recognized a discrete tax benefit of $16.2 million under the provisions of this standard. The on-going effect of the adoption of the standard will depend on the nature and amount of future transactions.

~~In January 2017, the FASB issued ASU No. 2017-01~~ ~~Business Combinations (Topic 805)~~—~~Clarifying the Definition of a Business.~~ This guidance changes the definition of a business to assist entities in evaluating when a set of transferred assets and activities constitutes a business. The guidance requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable assetconsolidated net income or ~~a group of similar identifiable assets; if so, the set of transferred assets and activities is not a business. The guidance also requires a business to include at least one substantive process and~~

~~narrows the definition of outputs by more closely aligning it with how outputs are described in the Revenue Recognition ASU~~. ~~The new standard is effective~~cash flows for the ~~first quarter of our fiscal year ending November 30, 2019. There was no material impact to our financial statements upon adoption.~~

~~In August 2018, the U.S. Securities~~three- and ~~Exchange Commission ("SEC") adopted the final rule under SEC Release No. 33-10532~~ ~~Disclosure Update and Simplification~~, to eliminate or modify certain disclosure rules that are redundant, outdated, or duplicative of U.S. GAAP or other regulatory requirements. Among other changes, the amendments eliminated the annual requirement to disclose the high and low trading prices of our common stock. In addition, the amendments provide that disclosure requirements related to the analysis of shareholders' equity are expandedsix-month periods ended May 31, 2020. See note 4 for interim financial statements. An analysis of the changes in each caption of shareholders' equity presented in the balance sheet must be provided in a note or separate statement, as well as the amount of dividends per share for each class of shares, and we have provided this disclosure beginning in the first quarter of 2019.further details.

Recently Issued Accounting Pronouncements — Pending Adoption

In January 2017, the FASB issued ASU No. 2017-04 Intangibles—Goodwill and Other Topics (Topic 350)—Simplifying the Test for Goodwill Impairment. This guidance eliminates the requirement to calculate the implied fair value of goodwill of a reporting unit to measure a goodwill impairment charge. Instead, a company will record an impairment charge based on the excess of a reporting unit's carrying amount over its fair value. The new standard will be effective for the first quarter of our fiscal year ending November 30, 2021. Early adoption is permitted for all entities for annual and interim goodwill impairment testing dates after January 1, 2017. While we are still evaluating the timing of adoption, we currently do not expect this guidance to have a material impact on our financial statements.

In ~~February 2016, the FASB issued ASU No. 2016-02~~ ~~Leases (Topic 842).~~ ~~This guidance revises existing practice related to accounting for leases under Accounting Standards Codification Topic 840~~ ~~Leases~~ (ASC 840) for both lessees and lessors. Our leases principally relate to: (i) certain real estate, including that related to a number of administrative, distribution and manufacturing locations, and, beginning in May 2018, to our new headquarters building; (ii) certain machinery and equipment, including a corporate airplane and automobiles; and (iii) certain software. The new guidance in ASU No. 2016-02 requires lessees to recognize a right-of-use asset and a lease liability for virtually all leases (other than leases that meet the definition of a short-term lease). The lease liability will be equal to the present value of lease payments and the right-of-use asset will be based on the lease liability, subject to adjustment such as for initial direct costs. For income statement purposes, the new standard retains a dual model similar to ASC 840, requiring leases to be classified as either operating or finance. For lessees, operating leases will result in straight-line expense (similar to current accounting by lessees for operating leases under ASC 840) while finance leases will result in a front-loaded expense pattern (similar to current accounting by lessees for capital leases under ASC 840). In July 2018, the FASB issued ASU No. 2018-11 ~~Leases (Topic 842) Targeted Improvements~~ which provides an additional transition method that allows entities to initially apply the new standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption without restating prior periods. The new standard will be effective for the first quarter of our fiscal year ending November 30, 2020. We intend to adopt the requirements of the new standard via a cumulative-effect adjustment without restating prior periods. We are currently in the process of evaluating our existing lease portfolio, including accumulating all of the necessary information required to properly account for leases under the new standard. Additionally, we are implementing new software to assist in the accounting and are evaluating changes to our processes and internal controls to ensure we meet the standard’s reporting and disclosure requirements. Based on our assessment to date, we expect that the adoption of ASU No. 2016-02 will not have a material effect on our results of operations but will result in an increase in lease-related assets and liabilities recognized in our Consolidated Balance Sheets.

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


2.	~~ACQUISITIONS~~

In August 2017, we completed the acquisition of Reckitt Benckiser's Food Division ("RB Foods") from Reckitt Benckiser Group plc. The purchase price was approximately $4.21 billion, net of acquired cash of $24.3 million. During the nine months ended August 31, 2018, we paid an additional $4.2 million associated with the final working capital adjustment.

During the three and nine months ended August 31, 2018, we incurred $5.6 million and $22.1 million, respectively, of transaction and integration expenses related to the RB Foods acquisition. Those costs consisted of outside advisory, service and consulting costs; employee-related costs; and other costs related to the acquisition. The following are the transaction and integration expenses related to the RB Foods acquisition that we have recorded for the three and nine months ended August 31, 2018 (in millions):

Three months ended August 31, 2018 Nine months ended August 31, 2018
Transaction expenses $ 0.1
$ 0.3
Integration expenses 5.5
21.8
Total $ 5.6
$ 22.1

2. SPECIAL CHARGES


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 associated with certain actions undertaken by the Company to reduce fixed costs, simplify or improve processes, and improve our competitiveness and are of such significance in terms of both up-front costs and organizational/structural impact to require advance approval by our Management Committee, comprised of our senior management, including our Chairman, President and Chief Executive Officer. Upon presentation of any such proposed action (generally including details with respect to estimated costs, which typically consist principally of employee severance and related benefits, together with ancillary costs associated with the action that may include a non-cash component or a component which relates to inventory adjustments that are included in cost of goods sold; impacted employees or operations; expected timing; and expected savings) to the Management Committee and the Committee’s advance approval, expenses associated with the approved action are classified as special charges upon recognition and monitored on an on-going basis through completion.

The following is a summary of special charges recognized in the three and ~~nine~~six months ended ~~August~~May 31, ~~2019~~2020 and ~~2018~~2019 (in millions):


	Three months ended May 31,						Six months ended May 31,
	2020		2019		2020		2019
Employee severance and related benefits	$	1.9	$	3.4	$	2.2	$	4.0
Other costs	1.0		3.7		1.7		5.2
Total	$	2.9	$	7.1	$	3.9	$	9.2

Three months ended August 31, Nine months ended August 31,
2019 2018 2019 2018
Employee severance and related benefits $ 1.1
$ 0.6
$ 5.1
$ 1.7
Other costs 6.6
2.7
11.8
12.2
Total $ 7.7
$ 3.3
$ 16.9
$ 13.9

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

In 2017, our Management Committee approved a multi-year initiative during which we expect to execute significant changes to our global processes, capabilities and operating model to provide a scalable platform for future growth. We expect this initiative to enable us to accelerate our ability to work globally and cross-functionally by aligning and simplifying processes throughout

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McCormick, in part building upon our current shared services foundation and expanding the end-to-end processes presently under that foundation. We expect this initiative, which we refer to as Global Enablement ~~(GE)~~("GE"), to enable this scalable platform for future growth while reducing costs, enabling faster decision making, increasing agility and creating capacity within our organization.

~~While we are continuing to fully develop the details of our GE operating model, we~~We expect the cost of the GE initiative—to be recognized as “Special charges” in our consolidated income statement over its expected multi-year course—to range from approximately ~~$55~~$60 million to $65 million. Of that ~~$55~~$60 million to $65 million, we estimate that ~~half will be attributable to~~

~~severance and related benefit payments and half~~approximately sixty percent will be attributable to cash payments associated with the related costs of GE implementation and transition, including outside consulting and other costs, and approximately forty percent will be attributable to severance and related benefit payments, all directly related to the initiative. WeDuring the six months ended May 31, 2020, we incurred ~~$11.5 million and $12.7 million of~~ special charges associated with our GE initiative ~~during 2018 and 2017, respectively.~~of $1.1 million. Prior to this, through November 30, 2019, we have spent a cumulative total of $38.3 million on this initiative.~~The GE initiative is expected to generate annual savings, ranging from approximately $30 million to $40 million, once all actions are implemented.~~

During the three months ended ~~August~~May 31, ~~2019,~~2020, we recorded ~~$7.7~~$2.9 million of special charges consisting primarily of ~~(i) $6.0~~$2.8 million of streamlining actions in our Europe, Middle East and Africa (EMEA) region, including $1.9 million related to severance and related benefits, $0.6 million of third-party expenses, and $0.3 million related to other costs.

During the six months ended May 31, 2020, we recorded $3.9 million of special charges consisting of $2.8 million of streamlining actions in EMEA and $1.1 million related to our GE initiative, including ~~$5.5~~$0.5 million of third-party expenses, $0.3 million related to severance and related benefits, and ~~$0.2~~$0.3 million related to other ~~costs, and (ii) $1.3 million related to streamlining actions in our Europe, Middle East and Africa (EMEA) region.~~costs.

During the ~~nine~~three months ended ~~August~~May 31, 2019, we recorded ~~$16.9~~$7.1 million of special charges, consisting primarily of (i) ~~$12.2~~$4.1 million related to our GE initiative, including ~~$8.9~~$2.5 million of third-party expenses, ~~$2.0~~$1.1 million related to employee severance and related benefits, and ~~$1.3~~$0.5 million related to other costs, (ii) $2.3 million of employee severance and related benefits associated with streamlining actions in the Americas region, and (iii) ~~$1.9~~$0.6 million related to streamlining actions in ~~EMEA.~~our EMEA region.

During the ~~three~~six months ended ~~August~~May 31, ~~2018,~~2019, we recorded ~~$3.3~~$9.2 million of special charges, consisting primarily ~~of:~~of (i) ~~$3.1~~$6.2 million related to our GE initiative, including ~~$2.6~~$3.5 million ~~related to third party~~of third-party expenses, ~~and $0.5~~$1.7 million related to employee severance and related benefits, and ~~(ii) $0.1~~$1.0 million related to other costs, (ii) $2.3 million of employee severance and related benefits ~~and other costs directly~~ associated with streamlining actions in the ~~relocation of our Chinese manufacturing facilities.~~

~~During the nine months ended August 31, 2018, we recorded $13.9 million of special charges, consisting primarily of: (i) $9.8~~Americas region, and (iii) $0.6 million related to streamlining actions in our ~~GE initiative, including $6.1 million~~EMEA region.

As of third party expenses, $3.0 million for a non-cash impairment charge, and $0.7 million related to severance and related benefits, (ii) a one-time payment in the aggregate amount of $2.2 million made to certain U.S. hourly employeesMay 31, 2020, reserves associated with the enactment of the U.S Tax Act; (iii) $0.9 million related to severance and related benefits and other costs directly associated with the relocation of one of our Chinese manufacturing facilities; and (iv) $0.7 million related to severance and related benefits and other costs related to the transfer of certain manufacturing operations in our Asia Pacific region to a new facility then under construction in Thailand.

~~The remaining balance associated with our~~ special charges, which are expected to be paid during the remainder of ~~$4.0 million as of August 31, 2019~~fiscal year 2020, are included in accounts payable and other accrued liabilities in our consolidated balance ~~sheet and are expected to be paid during the remainder of fiscal year 2019.~~sheet.

In addition to the amounts recognized in the first nine months of 2019, we expect to incur additional special charges during the remainder of 2019. We expect total special charges in 2019 of $20.0 million, consisting principally of: (i) approximately $15.0 million associated with our GE initiative comprised of third party expenses, severance and related benefits and other costs; (ii) $2.3 million of severance and related benefits associated with streamlining actions in the Americas, and (iii) $2.2 million related to streamlining actions in EMEA.

The following is a breakdown by business segments of special charges for the three and ~~nine~~six months ended ~~August~~May 31, ~~2019~~2020 and ~~2018~~2019 (in millions):


	Three months ended May 31,						Six months ended May 31,
	2020		2019		2020		2019
Consumer segment	$	2.5	$	4.9	$	3.1	$	6.4
Flavor solutions segment	0.4		2.2		0.8		2.8
Total special charges	$	2.9	$	7.1	$	3.9	$	9.2

Three months ended August 31,
Nine months ended August 31,
2019
2018
2019
2018
Consumer segment $ 4.6

$ 2.2

$ 11.0

$ 8.6
Flavor solutions segment 3.1

1.1

5.9

5.3
Total special charges $ 7.7

$ 3.3

$ 16.9

$ 13.9

4.3. FINANCING ARRANGEMENTS AND FINANCIAL INSTRUMENTS

In April 2020, we issued $500 million of 2.50% notes due April 15, 2030, with cash proceeds received of $495.0 million, net of discounts and underwriters' fees. Interest is payable semiannually in arrears in April and October of each year. The net proceeds from this issuance were used to pay down short-term borrowings and for general corporate purposes.

During each of the ~~nine~~six months ended May 31, 2020 and 2019, we repaid $37.5 million (representing the required quarterly principal payment) of the five-year term loan due August 17, 2022. During the six months ended May 31, 2019, ~~and 2018,~~ we also repaid ~~$100.0~~$50.0 million ~~and $180.0 million, respectively,~~ of the three-year term loan due August 17, 2020. ~~During the nine months ended August 31, 2019 and 2018, we repaid $106.3 million and $156.3 million, respectively,~~

Table of the five-year term loan due August 17, 2022, which included required principal installments of $56.3 million in both periods. During the nine months ended August 31, 2018, we repaid the $250 million, 5.75% notes that matured on December 15, 2017.Contents

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

Foreign currency exchange risk. We are potentially exposed to foreign currency fluctuations affecting net investments in subsidiaries, transactions (both third-party and intercompany) and earnings denominated in foreign currencies. Management assesses foreign currency risk based on transactional cash flows and translational volatility and may enter into forward ~~contracts~~contract and currency swaps to reduce fluctuations in the long or short currency positions.

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

~~For~~At May 31, 2020, we had foreign currency exchange contracts to purchase or sell $371.4 million of foreign currencies as compared to $489.2 million at November 30, 2019. All of these contracts were designated as hedges of anticipated purchases denominated in a foreign currency or hedges of foreign currency denominated assets or liabilities. All foreign currency exchange contracts outstanding at May 31, 2020 have durations of less than 18 months, including $73.8 million of notional contracts that have durations of less than seven days and are used to hedge short-term cash flow ~~and fair value hedges, the assessment of effectiveness is generally based on changes in spot rates.~~funding.

Contracts which are designated as hedges of anticipated purchases denominated in a foreign currency (generally purchases of raw materials in U.S. dollars by operating units outside the U.S.) are considered cash flow hedges. ~~At August 31, 2019,~~The gains and losses on these contracts are deferred in accumulated other comprehensive income until the ~~notional~~hedged item is recognized in cost of goods sold, at which time the net amount deferred in accumulated other comprehensive income is also recognized in cost of goods sold. Gains and losses from contracts that are designated as hedges of assets, liabilities or firm commitments are recognized through income, offsetting the change in fair value of ~~these contracts was $73.8 million.~~ the hedged item.

We also enter into fair value foreign currency exchange contracts to manage both exposure to currency fluctuations in certain intercompany loans between ~~subsidiaries.~~subsidiaries as well as currency exposure to third-party non-functional currency assets or liabilities. At ~~August~~May 31, ~~2019,~~2020, the notional value of these contracts was ~~$381.5~~$295.9 million. During the three months ended ~~August~~May 31, ~~2019~~2020 and ~~2018,~~2019, we recognized ~~(losses)~~ gains of ~~$(5.3)~~$5.7 million and ~~$0.5~~$1.0 million, respectively, on the change in fair value of these contracts and ~~gains (losses)~~losses of ~~$5.2~~$6.2 million and ~~$(1.1)~~$1.4 million, respectively, on the change in the currency component of the underlying loans. During the ~~nine~~six months ended ~~August~~May 31, ~~2019~~2020 and ~~2018,~~2019, we recognized ~~losses~~gains of ~~$(2.6)~~$3.5 million and ~~$(2.1)~~$2.7 million, respectively, on the change in fair value of these contracts and ~~gains~~losses of ~~$2.0~~$4.2 million and ~~$1.1~~$3.2 million, respectively, on the change in the currency component of the underlying loans. Both the gains and the losses were recognized in our consolidated income statement as other income, net.

~~Beginning in the first quarter of 2019, we~~We also ~~utilized~~utilize cross currency interest rate swap contracts that are considered net investment hedges. As of ~~August~~May 31, ~~2019,~~2020, we had ~~notional value of~~ cross currency interest rate swap contracts of (i) $250 million notional value to receive $250 million at three-month U.S. LIBOR plus 0.685% and pay £194.1 million at three-month GBP LIBOR plus 0.740% and (ii) £194.1 million notional value to receive £194.1 million at three-month GBP LIBOR plus 0.740% and pay €221.8 million at three-month Euro EURIBOR plus 0.808%. These cross currency interest rate swap contracts expire in August 2027.

Interest rate risk. We finance a portion of our operations with both fixed and variable rate debt instruments, principally commercial paper, notes and bank loans. We utilize interest rate swap agreements ~~including forward-starting swaps,~~ to ~~reduce interest rate volatility~~minimize worldwide financing costs and ~~funding costs associated with certain debt issues, and~~to achieve a desired mix of variable and fixed rate debt. ~~Fixed-to-variable interest rate swaps are designated and accounted for as fair value hedges and the assessment of effectiveness is based on changes in the fair value of the underlying debt.~~

As of ~~August~~May 31, ~~2019,~~2020, we have outstanding interest rate swap contracts for a notional amount of $350 million. Those interest rate swap contracts include a $100 million notional value of interest rate swap contracts, where we receive interest at 3.25% and pay a variable rate of interest based on three-month LIBOR plus 1.22%, which expire in November 2025, and are designated as fair value hedges of the changes in fair value of $100 million of the $250 million 3.25% medium-term notes due 2025. We also have $250 million notional interest rate swap contracts where we receive interest at 3.40% and pay a variable rate of interest based on three-month LIBOR plus 0.685%, which expire in August 2027, and are designated as fair value

hedges of the changes in fair value of $250 million of the $750 million 3.40% term notes due 2027. Any realized gain or loss on ~~either of~~ these ~~swaps~~swap contracts was offset by a corresponding increase or decrease of the value of the hedged debt.

All derivatives are recognized at fair value in the balance sheet and recorded in either other current assets, ~~or noncurrent~~ other long-term assets, other accrued liabilities or other long-term liabilities, depending upon their nature and maturity. Hedge ineffectiveness was not material.

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



As of August 31, 2019	Asset Derivatives					Liability Derivatives
As of May 31, 2020											As of May 31, 2020	Asset Derivatives								Liability Derivatives
	Balance sheet location	Notional amount		Fair value		Balance sheet location	Notional amount		Fair value			Balance sheet location	Notional amount		Fair value		Balance sheet location	Notional amount		Fair value
Interest rate contracts	Other current assets / Investments and other assets	$	350.0	$	28.2	Other accrued liabilities	$	—	$	—	Interest rate contracts	Other current assets / Other long-term assets	$	350.0	$	47.1	Other accrued liabilities	$	—	$	—
Foreign exchange contracts	Other current assets	104.7		2.2		Other accrued liabilities	350.6		4.6		Foreign exchange contracts	Other current assets	364.0		10.3		Other accrued liabilities	7.4		2.6
Cross currency contracts	Investments and other assets	236.4		14.0		Other long-term liabilities	243.9		13.4		Cross currency contracts	Other current assets / Other long-term assets	238.8		10.9		Other long-term liabilities	246.1		11.7
Total				$	44.4				$	18.0	Total				$	68.3				$	14.3

As of August 31, 2018	Asset Derivatives					Liability Derivatives
As of May 31, 2019											As of May 31, 2019	Asset Derivatives								Liability Derivatives
	Balance sheet location	Notional amount		Fair value		Balance sheet location	Notional amount		Fair value			Balance sheet location	Notional amount		Fair value		Balance sheet location	Notional amount		Fair value
Interest rate contracts	Other current assets	$	—	$	—	Other accrued liabilities	$	100.0	$	6.0	Interest rate contracts	Other current assets / Other long-term assets	$	350.0	$	12.1	Other accrued liabilities	$	—	$	—
Foreign exchange contracts	Other current assets	175.8		2.1		Other accrued liabilities	254.6		5.7		Foreign exchange contracts	Other current assets	425.4		6.9		Other accrued liabilities	102.8		1.6
Cross currency contracts											Cross currency contracts	Other current assets / Other long-term assets	245.1		7.1		Other long-term liabilities	247.5		7.7
Total				$	2.1				$	11.7	Total				$	26.1				$	9.3

As of November 30, 2018	Asset Derivatives					Liability Derivatives
As of November 30, 2019											As of November 30, 2019	Asset Derivatives								Liability Derivatives
	Balance sheet location	Notional amount		Fair value		Balance sheet location	Notional amount		Fair value			Balance sheet location	Notional amount		Fair value		Balance sheet location	Notional amount		Fair value
Interest rate contracts	Other current assets	$	—	$	—	Other accrued liabilities	$	100.0	$	6.4	Interest rate contracts	Other current assets / Other long-term assets	$	350.0	$	20.9	Other accrued liabilities	$	—	$	—
Foreign exchange contracts	Other current assets	199.5		4.4		Other accrued liabilities	295.4		6.4		Foreign exchange contracts	Other current assets	293.1		3.3		Other accrued liabilities	196.1		3.6
Cross currency contracts											Cross currency contracts	Other current assets / Other long-term assets	495.5		3.2		Other long-term liabilities	—		—
Total				$	4.4				$	12.8	Total				$	27.4				$	3.6

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The following tables disclose the impact of derivative instruments on our other comprehensive income ~~(OCI)~~("OCI"), accumulated other comprehensive income ~~(AOCI)~~("AOCI") and our consolidated income statement for the ~~three~~three- and ~~nine-month~~six-month periods ended ~~August~~May 31, ~~2019~~2020 and ~~2018~~2019 (in millions):


Fair Value Hedges

Derivative	Income statement location	Income (expense)
		Three months ended May 31, 2020		Three months ended May 31, 2019		Six months ended May 31, 2020		Six months ended May 31, 2019

Interest rate contracts	Interest expense	$	0.9	$	0.2	$	1.4	$	0.4

Fair Value Hedges
Derivative
Income statement
location
Income (expense)
Three months ended August 31, 2019 Three months ended August 31, 2018 Nine months ended August 31, 2019 Nine months ended August 31, 2018
Interest rate contracts Interest expense $ —
$ (0.1 ) $ (0.3 ) $ 0.1


Three months ended May 31,	Income statement location	Gain (loss) recognized in income						Income statement location		Gain (loss) recognized in income
Derivative		2020		2019		Hedged item		2020		2019
Foreign exchange contracts	Other income, net	$	5.7	$	1.0	Intercompany loans	Other income, net	$	(6.2)	$	(1.4)

Three months ended August 31, Income statement location Gain (loss) recognized in income
Income statement location Gain (loss) recognized in income
Derivative
2019 2018 Hedged item
2019 2018
Foreign exchange contracts Other income, net $ (5.3 ) $ 0.5
Intercompany loans Other income, net $ 5.2
$ (1.1 )

Nine months ended August 31, Income statement location Gain (loss) recognized in income Income statement location Gain (loss) recognized in income
Derivative 2019 2018 Hedged item 2019 2018
Foreign exchange contracts Other income, net $ (2.6 ) $ (2.1 ) Intercompany loans Other income, net $ 2.0
$ 1.1


Six months ended May 31,	Income statement location	Gain (loss) recognized in income						Income statement location		Gain (loss) recognized in income
Derivative		2020		2019		Hedged item		2020		2019
Foreign exchange contracts	Other income, net	$	3.5	$	2.7	Intercompany loans	Other income, net	$	(4.2)	$	(3.2)

The gains (losses) recognized on fair value hedges relating to currency exposure on third-party non-functional currency assets or liabilities were not material during the three- and six-months ended May 31, 2020 and 2019.

Cash Flow Hedges

Three months ended August 31,

Derivative
Gain or (loss)
recognized in OCI
Income
statement
location
Gain or (loss)
reclassified from
AOCI

2019
2018

2019
2018
Interest rate contracts
$ —

$ —

Interest
expense

$ 0.2

$ 0.2
Foreign exchange contracts
(0.3 )
0.1

Cost of goods sold
0.5

(0.8 )
Total
$ (0.3 )
$ 0.1

$ 0.7

$ (0.6 )

Nine months ended August 31,

Derivative
Gain or (Loss)
recognized in OCI
Income
statement
location
Gain or (Loss)
reclassified from
AOCI

2019
2018

2019
2018
Interest rate contracts
$ —

$ —

Interest
expense

$ 0.4

$ 0.4
Foreign exchange contracts
0.3

0.9

Cost of goods
sold

0.9

(3.5 )
Total
$ 0.3

$ 0.9

$ 1.3

$ (3.1 )


Cash Flow Hedges
Three months ended May 31,
Derivative	Gain or (loss) recognized in OCI					Income statement location		Gain or (loss) reclassified from AOCI
	2020		2019			2020		2019
Interest rate contracts	$	—	$	—	Interest expense	$	0.1	$	0.1
Foreign exchange contracts	2.3		1.8		Cost of goods sold	(0.3)		0.1
Total	$	2.3	$	1.8		$	(0.2)	$	0.2

Six months ended May 31,
Derivative	Gain or (Loss) recognized in OCI					Income statement location		Gain or (Loss) reclassified from AOCI
	2020		2019			2020		2019
Interest rate contracts	$	—	$	—	Interest expense	$	0.2	$	0.2
Foreign exchange contracts	2.9		0.6		Cost of goods sold	0.1		0.4
Total	$	2.9	$	0.6		$	0.3	$	0.6

For all cash flow and settled interest rate fair value hedge derivatives, the net amount of accumulated other comprehensive income (loss) expected to be reclassified in the next 12 months is ~~$1.5~~$2.8 million as an increase to earnings.

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Net Investment Hedges
Three months ended May 31,
Derivative	Gain or (loss) recognized in OCI					Income statement location		Gain or (loss) excluded from the assessment of hedge effectiveness
	2020		2019			2020		2019
Cross currency contracts	$	(3.5)	$	6.8	Interest expense	$	1.1	$	1.8

Six months ended May 31,
Derivative	Gain or (loss) recognized in OCI					Income statement location		Gain or (loss) excluded from the assessment of hedge effectiveness
	2020		2019			2020		2019
Cross currency contracts	$	(3.3)	$	(2.7)	Interest expense	$	2.4	$	2.1

Net Investment Hedges
Three months ended August 31,
Derivative Gain or (loss)
recognized in OCI Income
statement
location Gain or (loss)
excluded from the assessment of hedge effectiveness
2019 2018 2019 2018
Cross currency contracts $ 3.0
$ —
Interest
expense $ 1.7
$ —

Nine months ended August 31,
Derivative Gain or (loss)
recognized in OCI Income
statement
location Gain or (loss)
excluded from the assessment of hedge effectiveness
2019 2018 2019 2018
Cross currency contracts $ 0.3
$ —
Interest
expense $ 3.8
$ —

For all net investment hedges, no amounts have been reclassified out of accumulated 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.

4. LEASES

Our lease portfolio primarily consists of (i) certain real estate, including those related to a number of administrative, distribution and manufacturing locations; (ii) certain machinery and equipment, including forklifts; and (iii) automobiles, delivery trucks and other vehicles, including an airplane. When our real estate lease arrangements include lease and non-lease components (for example, common area maintenance), we account for each component separately, based on their relative standalone prices. For all other asset categories, we combine lease components and non-lease components into a single lease commitment. We determine if an agreement is a lease or contains a lease at inception. Leases with an initial term of 12 months or less (short-term leases) are not recorded on the balance sheet.

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

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

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

The following table presents the components of our lease expense (in millions):


	Three months ended May 31, 2020		Six months ended May 31, 2020
Operating lease cost	$	10.5	$	20.6
Finance lease cost:
Amortization of ROU assets	2.3		4.5
Interest on lease liabilities	1.2		2.3
Net lease cost ⁽¹⁾	$	14.0	$	27.4

(1) Net lease cost does not include short-term leases, variable lease costs or sublease income, all of which are immaterial.

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Supplemental balance sheet information related to leases as of May 31, 2020 were as follows (in millions):

Leases

Classification

Assets

Operating lease ROU assets

Other long-term assets

126.7

Finance lease ROU assets

Property, plant and equipment, net

125.2

Total leased assets

251.9

Liabilities

Current

Operating

Other accrued liabilities

34.2

Finance

Current portion of long-term debt

7.2

Non-current

Operating

Other long-term liabilities

96.3

Finance

Long-term debt

128.9

Total lease liabilities

266.6

Information regarding our lease terms and discount rates as of May 31, 2020 were as follows:


	Weighted-average remaining lease term (years)	Weighted-average discount rate
Operating leases	5.8	2.2	%
Finance leases	14.4	3.3	%

The future maturity of our lease liabilities as of May 31, 2020 were as follows (in millions):


	Operating leases		Finance leases		Total
2020 (remainder of year)	$	19.2	$	5.7	$	24.9
2021	32.6		11.4		44.0
2022	24.4		11.4		35.8
2023	17.3		11.4		28.7
2024	11.0		11.5		22.5
Thereafter	33.4		125.9		159.3
Total lease payments	$	137.9	177.3		315.2
Less: Imputed interest	7.4		41.2		48.6
Total lease liabilities	$	130.5	$	136.1	$	266.6

Supplemental cash flow and other information related to leases for the six months ended May 31, 2020 were as follows (in million):

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5.Cash paid for amounts included in the measurements of lease liabilities:	~~FAIR VALUE MEASUREMENTS~~
Operating cash flows used for operating leases	$	19.0
Operating cash flows used for finance leases	2.3
Financing cash flows used for finance leases	3.4

ROU assets obtained in exchange for lease liabilities
Operating leases	$	8.5

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5.FAIR VALUE MEASUREMENTS

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

•Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

•Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

•Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.

At ~~August~~May 31, ~~2019, August~~2020, May 31, ~~2018~~2019 and November 30, ~~2018,~~2019, we had no financial assets or liabilities that were subject to a level 3 fair value measurement. Our population of financial assets and liabilities subject to fair value measurements on a recurring basis are as follows (in millions):


			May 31, 2020
	Fair Value		Level 1		Level 2
Assets
Cash and cash equivalents	$	185.0	$	185.0	$	—
Insurance contracts	111.1		—		111.1
Bonds and other long-term investments	7.3		7.3		—
Interest rate derivatives	47.1		—		47.1
Foreign currency derivatives	10.3		—		10.3
Cross currency contracts	10.9		—		10.9
Total	$	371.7	$	192.3	$	179.4
Liabilities
Foreign currency derivatives	$	2.6	$	—	$	2.6

Cross currency contracts	11.7		—		11.7
Total	$	14.3	$	—	$	14.3

August 31, 2019

Fair Value Level 1 Level 2
Assets
Cash and cash equivalents $ 162.9
$ 162.9
$ —
Insurance contracts 117.2
—
117.2
Bonds and other long-term investments 4.3
4.3
—
Interest rate derivatives 28.2
—
28.2
Foreign currency derivatives 2.2
—
2.2
Cross currency contracts 14.0
—
14.0
Total $ 328.8
$ 167.2
$ 161.6
Liabilities
Foreign currency derivatives $ 4.6
$ —
$ 4.6
Cross currency contracts 13.4
—
13.4
Total $ 18.0
$ —
$ 18.0


			August 31, 2018							May 31, 2019
	Fair Value		Level 1		Level 2			Fair Value		Level 1		Level 2
Assets							Assets
Cash and cash equivalents	$	73.0	$	73.0	$	—	Cash and cash equivalents	$	139.4	$	139.4	$	—
Insurance contracts	123.7		—		123.7		Insurance contracts	111.8		—		111.8
Bonds and other long-term investments	4.4		4.4		—		Bonds and other long-term investments	6.5		6.5		—
Interest rate derivatives							Interest rate derivatives	12.1		—		12.1
Foreign currency derivatives	2.1		—		2.1		Foreign currency derivatives	6.9		—		6.9
Cross currency contracts							Cross currency contracts	7.1		—		7.1
Total	$	203.2	$	77.4	$	125.8	Total	$	283.8	$	145.9	$	137.9
Liabilities							Liabilities
Foreign currency derivatives	$	5.7	$	—	$	5.7	Foreign currency derivatives	$	1.6	$	—	$	1.6
Interest rate derivatives	6.0		—		6.0

Cross currency contracts							Cross currency contracts	7.7		—		7.7
Total	$	11.7	$	—	$	11.7	Total	$	9.3	$	—	$	9.3

Table of Contents

November 30, 2018

Fair Value Level 1 Level 2
Assets
Cash and cash equivalents $ 96.6
$ 96.6
$ —
Insurance contracts 118.0
—
118.0
Bonds and other long-term investments 2.8
2.8
—
Foreign currency derivatives 4.4
—
4.4
Total $ 221.8
$ 99.4
$ 122.4
Liabilities
Foreign currency derivatives $ 6.4
$ —
$ 6.4
Interest rate derivatives 6.4
—
6.4
Total $ 12.8
$ —
$ 12.8


			November 30, 2019
	Fair Value		Level 1		Level 2
Assets
Cash and cash equivalents	$	155.4	$	155.4	$	—
Insurance contracts	121.7		—		121.7
Bonds and other long-term investments	2.7		2.7		—
Interest rate derivatives	20.9		—		20.9
Foreign currency derivatives	3.3		—		3.3
Cross currency contracts	3.2		—		3.2
Total	$	307.2	$	158.1	$	149.1
Liabilities
Foreign currency derivatives	$	3.6	$	—	$	3.6


Total	$	3.6	$	—	$	3.6

Because of their short-term nature, the amounts reported in the balance sheet for cash and cash equivalents, receivables, short-term borrowings and trade accounts payable approximate fair value. The fair values of insurance contracts are based upon the underlying values of the securities in which they are invested and are from quoted market prices from various stock and bond exchanges for similar-type assets. The fair values of bonds and other long-term investments are based on quoted market prices from various stock and bond exchanges. The fair values for interest rate ~~and~~derivatives, foreign currency derivatives, and cross currency contracts are based on values for similar instruments using models with market-based inputs.

The following table sets forth the carrying amounts and fair values of our long-term debt ~~(including~~including the current portion ~~thereof) at August 31, 2019, August 31, 2018 and November 30, 2018~~thereof (in millions):

August 31, 2019 August 31, 2018 November 30, 2018
Carrying amount $ 3,962.4
$ 4,345.3
$ 4,136.4
Fair value 4,153.7
4,294.5
4,039.4

Level 1 valuation techniques $ 3,475.0
$ 3,218.0
$ 3,172.7
Level 2 valuation techniques 678.7
1,076.5
866.7
Total fair value $ 4,153.7
$ 4,294.5
$ 4,039.4


	May 31, 2020		May 31, 2019		November 30, 2019
Carrying amount	$	4,202.5	$	4,065.0	$	3,723.5
Fair value	4,459.1		4,131.8		3,859.0

Level 1 valuation techniques	$	4,080.6	$	3,345.4	$	3,437.5
Level 2 valuation techniques	378.5		786.4		421.5
Total fair value	$	4,459.1	$	4,131.8	$	3,859.0

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


6.	~~EMPLOYEE BENEFIT AND RETIREMENT PLANS~~

~~During the first quarter~~

Table of ~~2018, our Management Committee approved the freezing of benefits under our~~Contents

6.EMPLOYEE BENEFIT AND RETIREMENT PLANS

We sponsor defined benefit pension plans in ~~Canada. The effective date of this freeze is November 30, 2019. Although those~~the U.S. and certain foreign locations. In addition, we sponsor defined contribution plans ~~will be frozen, employees who are participants~~ in the U.S. We also contribute to defined contribution plans ~~will retain~~in locations outside the U.S., including government-sponsored retirement plans. We also currently provide postretirement medical and life insurance benefits ~~accumulated up~~to certain U.S. employees and retirees.As more fully described in the notes to the ~~date of the freeze, based on credited service and eligible earnings, in accordance with the terms of the plans.~~

As a result of this change, we remeasured pension assets and benefit obligations as of the date of the approval (December 1, 2017) and we reduced the Canadian plan benefit obligations by $17.5 million. This remeasurement resulted in non-cash, pre-tax net actuarial gains of $17.5 million for the nine months ended August 31, 2018. This net actuarial gain consists principally of a curtailment gain of $18.0 million and isconsolidated financial statements included in our ~~consolidated statement of comprehensive income~~Annual Report on Form 10-K for the ~~nine months~~year ended ~~August 31,~~November 30, 2019, during fiscal years 2018 ~~as a component~~and 2017, we made significant changes to our employee benefit and retirement plans that froze the accrual of ~~Other comprehensive income (loss) on the line entitled Unrealized components of pension plans. Deferred taxes associated with these actuarial gains, together with other unrealized components of~~future benefits under certain defined benefit pension plans ~~recognized during~~in the ~~nine months ended August 31, 2018, is also included in that statement as a component of Other comprehensive income (loss).~~U.S. and certain foreign locations.

The following table presents the components of our pension expense (income) ~~expense~~ of the defined benefit plans for the three months ended ~~August~~May 31, ~~2019~~2020 and ~~2018~~2019 (in millions):


	United States						International
	2020		2019		2020		2019
Defined benefit plans
Service cost	$	0.8	$	0.5	$	0.3	$	0.9
Interest costs	7.4		8.6		1.8		2.4
Expected return on plan assets	(10.2)		(10.6)		(3.7)		(4.2)
Amortization of prior service costs	0.1		0.1		—		0.1
Amortization of net actuarial losses	1.9		0.6		0.5		0.3
Settlement loss	—		—		0.5		—
Total pension (income)	$	—	$	(0.8)	$	(0.6)	$	(0.5)

United States International
2019 2018 2019 2018
Defined benefit plans
Service cost $ 0.5
$ 4.4
$ 0.9
$ 1.0
Interest costs 8.6
8.0
2.3
2.2
Expected return on plan assets (10.6 ) (10.8 ) (4.0 ) (4.0 )
Amortization of prior service costs 0.1
—
—
—
Amortization of net actuarial losses 0.6
2.4
0.3
0.7
Total pension (income) expense $ (0.8 ) $ 4.0
$ (0.5 ) $ (0.1 )

The following table presents the components of our pension expense (income) ~~expense~~ of the defined benefit plans for the ~~nine~~six months ended ~~August~~May 31, ~~2019~~2020 and ~~2018~~2019 (in millions):


	United States						International
	2020		2019		2020		2019
Defined benefit plans
Service cost	$	1.6	$	1.0	$	0.5	$	1.8
Interest costs	14.7		17.2		3.7		4.8
Expected return on plan assets	(20.3)		(21.2)		(7.5)		(8.3)
Amortization of prior service costs	0.2		0.2		—		0.1
Amortization of net actuarial losses	3.9		1.2		1.0		0.6
Settlement loss	—		—		0.5		—
Total pension expense (income)	$	0.1	$	(1.6)	$	(1.8)	$	(1.0)

United States International
2019 2018 2019 2018
Defined benefit plans
Service cost $ 1.5
$ 13.1
$ 2.7
$ 3.2
Interest costs 25.8
23.8
7.1
6.9
Expected return on plan assets (31.8 ) (32.4 ) (12.3 ) (12.4 )
Amortization of prior service costs 0.3
—
0.1
0.5
Amortization of net actuarial losses 1.8
7.4
0.9
2.1
Total pension (income) expense $ (2.4 ) $ 11.9
$ (1.5 ) $ 0.3

During the ~~nine~~six months ended ~~August~~May 31, ~~2019~~2020 and ~~2018~~,2019, we contributed $~~8.9~~$4.4 million and $~~12.0~~$4.5 million,, respectively, to our pension plans. Total contributions to our pension plans in fiscal year ~~2018~~2019 were $~~13.5 million~~.$11.4 million.

The following table presents the components of our other postretirement benefits expense (income) ~~expense~~ (in millions):


	Three months ended May 31,						Six months ended May 31,
	2020		2019		2020		2019
Other postretirement benefits
Service cost	$	0.4	$	0.5	$	0.9	$	1.0
Interest costs	0.5		0.6		1.0		1.3
Amortization of prior service credits	(1.2)		(2.1)		(2.3)		(4.3)
Amortization of net actuarial gains	—		(0.2)		(0.1)		(0.4)

Total other postretirement benefits (income)	$	(0.3)	$	(1.2)	$	(0.5)	$	(2.4)

Three months ended August 31,
Nine months ended August 31,

2019 2018
2019
2018
Other postretirement benefits

Service cost
$ 0.5

$ 0.6

$ 1.5

$ 1.8
Interest costs
0.7

0.6

2.0

1.8
Amortization of prior service credits
(2.2 )
(2.2 )
(6.5 )
(6.5 )
Amortization of net actuarial gains
(0.1 )
—

(0.5 )
—
Total other postretirement benefits (income) expense
$ (1.1 )
$ (1.0 )
$ (3.5 )
$ (2.9 )

~~In conjunction with our adoption of the Pension ASU, all~~All of the amounts in the tables above for pension expense and other postretirement benefits expense, other than service cost, were included in the income statement caption "Other income, net" within our consolidated income statements. The aggregate amount of pension and other postretirement benefits (income) expenses, excluding service cost components, were ~~$(4.3)~~$(2.4) million

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and ~~$(3.1)~~$(4.4) million for the three months ended ~~August~~May 31, ~~2019~~2020 and ~~2018,~~2019, respectively and ~~$(13.1)~~$(5.2) million and $(8.8) million for the ~~nine~~six months ended ~~August~~May 31, ~~2019~~2020 and ~~2018,~~2019, respectively.


7.	~~STOCK-BASED COMPENSATION~~

7. STOCK-BASED COMPENSATION

We have 3 types of stock-based compensation awards: restricted stock units ~~(RSUs)~~("RSUs"), stock options and company stock awarded as part of our long-term performance plan ~~(LTPP)~~("LTPP"). The following table sets forth the stock-based compensation expense recorded in selling, general and administrative ~~(SG&A)~~("SG&A") expense (in millions):

Three months ended August 31, Nine months ended August 31,
2019 2018 2019 2018
Stock-based compensation expense $ 7.8
$ 5.5
$ 30.6
$ 21.6


	Three months ended May 31,						Six months ended May 31,
	2020		2019		2020		2019
Stock-based compensation expense	$	20.7	$	16.1	$	27.1	$	22.8

Our ~~2019~~2020 annual grant of stock options and RSUs occurred in the second quarter, similar to the ~~2018~~2019 annual grant. The weighted-average grant-date fair value of each stock option granted in 2020 was $26.53 and in 2019 was $27.51 ~~and in 2018 was $20.30~~ as calculated under a lattice pricing model. Substantially all of the stock options and RSUs granted in ~~2019~~2020 vest ratably over a three-year period or, if earlier, upon the retirement eligibility date of the holder. The fair values of stock option grants in the stated periods were computed using the following range of assumptions for our various stock compensation plans:

2019 2018
Risk-free interest rates 2.2 - 2.5% 1.7 - 2.9%
Dividend yield 1.5% 2.0%
Expected volatility 17.4% 18.4%
Expected lives (in years) 7.5 7.6


	2020	2019
Risk-free interest rates	0.0 - 0.6%	2.2 - 2.5%
Dividend yield	1.8%	1.5%
Expected volatility	22.8%	17.4%
Expected lives (in years)	7.9	7.5

The following is a summary of our stock option activity for the ~~nine~~six months ended ~~August~~May 31, ~~2019~~2020 and ~~2018~~:2019:


	2020				2019
(shares in millions)	Number of Shares	Weighted- Average Exercise Price		Number of Shares	Weighted- Average Exercise Price
Outstanding at beginning of period	2.6	$	96.18	3.6	$	82.60
Granted	0.4	138.62		0.3	147.39
Exercised	(0.4)	77.47		(0.7)	67.71
Outstanding at end of the period	2.6	$	104.21	3.2	$	92.39
Exercisable at end of the period	2.0	$	93.66	2.5	$	83.85

2019 2018
(shares in millions)
Number
of
Shares

Weighted-
Average
Exercise
Price

Number
of
Shares

Weighted-
Average
Exercise
Price
Outstanding at beginning of period 3.6
$ 82.60
4.8
$ 71.91
Granted 0.3
147.39
0.4
105.95
Exercised (1.2 ) 70.78
(0.9 ) 51.82
Outstanding at end of the period 2.7
$ 95.50
4.3
$ 79.31
Exercisable at end of the period 2.0
$ 86.08
3.4
$ 73.52

As of ~~August~~May 31, ~~2019~~,2020, the intrinsic value (the difference between the exercise price and the market price) for all options outstanding was ~~$181.2~~$185.5 million and for options currently exercisable was ~~$153.5 million~~.$160.0 million. The total intrinsic value of all options exercised during the ~~nine~~six months ended ~~August~~May 31, ~~2019~~2020 and ~~2018~~2019 was ~~$102.8~~$28.9 million and ~~$56.9~~$59.6 million,, respectively.

The following is a summary of our RSU activity for the ~~nine~~six months ended ~~August~~May 31, ~~2019~~2020 and ~~2018~~:2019:

2019 2018
(shares in thousands)
Number
of
Shares

Weighted-
Average
Grant-Date
Fair Value

Number
of
Shares

Weighted-
Average
Grant-Date
Fair Value
Outstanding at beginning of period 423
$ 103.05
267
$ 86.47
Granted 129
143.15
201
101.17
Vested (134 ) 96.74
(117 ) 88.35
Forfeited (9 ) 112.10
(6 ) 95.68
Outstanding at end of period 409
$ 117.51
345
$ 94.21


	2020				2019
(shares in thousands)	Number of Shares	Weighted- Average Grant-Date Fair Value		Number of Shares	Weighted- Average Grant-Date Fair Value
Outstanding at beginning of period	381	$	115.89	423	$	103.05
Granted	148	134.06		128	143.10
Vested	(137)	109.97		(134)	96.74
Forfeited	(6)	121.99		(5)	99.74
Outstanding at end of period	386	$	124.85	412	$	117.48

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The following is a summary of our LTPP activity for the ~~nine~~six months ended ~~August~~May 31, ~~2019~~2020 and ~~2018:~~2019:


	2020				2019
(shares in thousands)	Number of Shares	Weighted- Average Grant-Date Fair Value		Number of Shares	Weighted- Average Grant-Date Fair Value
Outstanding at beginning of period	196	$	115.96	218	$	83.55
Granted	65	172.28		102	150.51
Vested	(44)	89.96		(57)	86.40
Forfeited	(1)	136.95		—	—
Outstanding at end of period	216	$	138.11	263	$	117.14

2019 2018
(shares in thousands)
Number
of
Shares

Weighted-
Average
Grant-Date
Fair Value

Number
of
Shares

Weighted-
Average
Grant-Date
Fair Value
Outstanding at beginning of period 218
$ 83.55
220
$ 84.31
Granted 102
150.51
86
101.90
Vested (57 ) 86.40
(59 ) 74.02
Forfeited —
—
(2 ) 96.74
Outstanding at end of period 263
$ 117.14
245
$ 92.87


8.	~~INCOME TAXES~~

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8.INCOME TAXES

Income taxes for the three months ended ~~August~~May 31, ~~2019~~2020 included ~~$15.5~~$16.5 million of discrete tax benefits consisting principally of the following: (i) ~~$8.3~~$9.3 million of tax benefits associated with the release of a valuation allowance due to a change in judgment about realizability of deferred tax assets, (ii) $4.0 million of excess tax benefits associated with share-based compensation, and (iii) $3.2 million of tax benefits related to the reversal of unrecognized tax benefits and related interest associated with the expiration of a statute of limitations in a non-U.S. jurisdiction. Income taxes for the six months ended May 31, 2020 included $26.9 million of discrete tax benefits consisting principally of the following: (i) $9.9 million of tax benefits associated with an intra-entity asset transfer that occurred during the first quarter, (ii) ~~$2.4~~$9.3 million of tax benefits associated with the release of a valuation allowance due to a change in judgment about realizability of deferred tax assets, (iii) $5.7 million of excess tax benefits associated with share-based compensation, (iv) $3.4 million of tax benefits related to the reversal of unrecognized tax benefits and related interest associated with the expiration of statutes of ~~limitation~~limitations in ~~several~~non-U.S. jurisdictions, ~~(iii) $2.5~~and (v) $1.4 million of expense related to the revaluation of deferred tax liabilities resulting from enacted legislation ~~and (iv) $2.3 million for an adjustment to a prior year tax accrual based on the final return filed, including $1.5 million associated with the U.S. Tax Act, described below.~~ in certain non-U.S. jurisdictions.

Income taxes for the ~~nine~~three months ended ~~August~~May 31, 2019 included ~~$44.4~~$11.3 million of discrete tax benefits consisting principally of excess tax benefits associated with share-based compensation. Income taxes for the six months ended May 31, 2019 included $28.9 million of discrete tax benefits consisting principally of the following: (i) ~~$21.2 million of excess tax benefits associated with share-based compensation, (ii)~~ $16.2 million of tax benefits associated with an intra-entity asset transfer that occurred during the first quarter, ~~under the provisions~~and (ii) $12.9 million of ~~ASU No. 2016-16, which was adopted on December 1, 2018, (iii) $2.6 million related to~~excess tax benefits associated with share-based compensation.

Other than additions for current year tax positions and the reversal of unrecognized tax benefits and related interest associated with the expiration of statutes of limitation in several jurisdictions, (iv) $2.1 million related to the revaluation of deferred tax liabilities resulting from enacted legislation and (v) $2.3 million for an adjustment to a prior year tax accrual based on the final return filed, including $1.5 million associated with the U.S. Tax Act, described below.

Income taxes for the three months ended August 31, 2018 included $20.6 million of discrete tax benefits consisting of the following: (i) $10.3 million net benefit associated with the U.S. Tax Act, described below, (ii) $7.9 million of excess tax benefits associated with share-based compensation, (iii) $2.0 million related to the reversal of unrecognized tax benefits and related interest associated with the expiration of statutes of limitation in U.S. and non-U.S. jurisdictions, and (iv) $1.4 million for an adjustment to a prior year tax accrual based on the final return filed, less a net detriment of $1.0 million associated with other items. Income taxes for the nine months ended August 31, 2018 included $326.0 million of discrete tax benefits consisting of the following: (i) $308.2 million net benefit associated with the U.S. Tax Act, described below, (ii) $12.4 million of excess tax benefits associated with share-based compensation, (iii) $5.5 million related to the reversal of unrecognized tax benefits and related interest associated with the expiration of statutes of limitation in non-U.S. jurisdictions, and (iv) $1.4 million for an adjustment to a prior year tax accrual based on the final return filed, less a net detriment of $1.5 million, including $0.5 million related to the revaluation of deferred tax assets resulting from legislation enacted in a non-U.S. jurisdiction in our first quarter.

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

The Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 (SAB 118) on December 23, 2017. SAB 118 provided a one-year measurement period from a registrant’s reporting period that includes the U.S. Tax Act’s enactment date to allow registrants sufficient time to obtain, prepare and analyze information to complete the accounting required under ASC 740 ~~Income Taxes~~. As more fully described in note 12 of notes to consolidated financial statements included in our Annual Report on Form 10-K for the year ended November 30, 2018, we recognized a $301.5 million income tax benefit, net, associated with the U.S. Tax Act during the year ended November 30, 2018. The net tax benefit related to the U.S. Tax Act was provisional and changed during the measurement period, which ended in the quarter ended November 30, 2018, as a result of, among other things, changes in interpretations and assumptions we made, guidance issued and other actions taken as a result of the U.S. Tax Act different from that previously assumed. During the third quarter of 2018, we recognized a tax benefit of $10.3 million as a change in the estimate to the $297.9 million provisional net benefit recognized in the first quarter of 2018 related to the U.S. Tax Act, as described below. We also recorded a net income tax benefit of $1.5 million in the three and nine months ended August 31, 2019 associated with a provision-to-return adjustment related to the U.S Tax Act.

Beginning on January 1, 2018, the U.S. Tax Act lowered the U.S. corporate income tax rate from 35% to 21% on our U.S. earnings from that date and beyond. As of August 31, 2018, we estimated that the revaluation of our U.S. deferred tax assets and liabilities to the 21% corporate tax rate reduced our net U.S. deferred income tax liability by $381.4 million and we reflected that amount as a reduction in our income tax expense for the nine months ended August 31, 2018. The U.S. Tax Act imposed a one-time transition tax on post-1986 earnings of non-U.S. affiliates that had not been repatriated for purposes of U.S.

federal income tax, with those earnings taxed at rates of 15.5% for earnings reflected by cash and cash equivalent items and 8% for other assets. As of August 31, 2018, we estimated this transition tax to be $72.3 million. In addition to this transition tax, we incurred additional foreign withholding taxes of $5.2 million associated with previously unremitted prior year earnings of certain foreign subsidiaries that are no longer considered indefinitely reinvested and were subsequently distributed as well as a $4.3 million reduction in our fiscal 2018 income taxes directly resulting from the transition tax that we have recognized as a component of our income tax expense for the nine months ended August 31, 2018, for a net transition tax impact of $73.2 million.

~~Other than additions for current year tax positions,~~noted above, there were no significant changes to unrecognized tax benefits during the ~~three and nine~~six months ended ~~August~~May 31, ~~2019.~~2020.

As of ~~August~~May 31, ~~2019,~~2020, we believe the reasonably possible total amount of unrecognized tax benefits that could increase or decrease in the next 12 months as a result of various statute expirations, audit closures, and/or tax settlements would not be material to our consolidated financial statements.


9.	~~EARNINGS PER SHARE AND STOCK ISSUANCE~~

9.EARNINGS PER SHARE AND STOCK ISSUANCE

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

Three months ended Nine months ended
August 31, 2019 August 31, 2018 August 31, 2019 August 31, 2018
Average shares outstanding – basic 132.8
131.6
132.5
131.4
Effect of dilutive securities:
Stock options/RSUs/LTPP 1.4
1.6
1.5
1.6
Average shares outstanding – diluted 134.2
133.2
134.0
133.0


	Three months ended			Six months ended
	May 31, 2020	May 31, 2019	May 31, 2020	May 31, 2019
Average shares outstanding – basic	133.1	132.3	133.0	132.3
Effect of dilutive securities:
Stock options/RSUs/LTPP	1.2	1.6	1.3	1.6
Average shares outstanding – diluted	134.3	133.9	134.3	133.9

The following table sets forth the stock options and RSUs ~~for the three and~~ ~~nine~~ ~~months ended~~ ~~August 31, 2019~~ ~~and~~ ~~2018~~ that were not considered in our earnings per share calculation since they were anti-dilutive (in millions):

Three months ended

Six months ended

May 31, 2020

May 31, 2019

May 31, 2020

May 31, 2019

Anti-dilutive securities

0.2

0.1

Three months ended Nine months ended
August 31, 2019 August 31, 2018 August 31, 2019 August 31, 2018
Anti-dilutive securities 0.2
0.3
0.1
0.4

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The following table sets forth the common stock activity ~~for the three and~~ ~~nine~~ ~~months ended~~ ~~August 31, 2019~~ ~~and~~ ~~2018~~(in millions):


	Three months ended			Six months ended
	May 31, 2020	May 31, 2019	May 31, 2020	May 31, 2019
Shares issued under stock options, RSUs, LTPP and employee stock purchase plans	0.4	0.8	0.5	0.9
Shares repurchased under the stock repurchase program and shares withheld for taxes under stock options, RSUs, LTPP and employee stock purchase programs	0.1	0.3	0.2	0.5

Three months ended Nine months ended
August 31, 2019 August 31, 2018 August 31, 2019 August 31, 2018
Shares issued, net of shares withheld for taxes, under stock options, RSUs, LTPP and employee stock purchase plans 0.5
0.5
1.3
1.0
Shares repurchased under the stock repurchase program 0.1
0.1
0.5
0.4

As of ~~August~~May 31, ~~2019, $50.1~~2020, $11.1 million remained of the $600 million share repurchase authorization ~~that was authorized~~approved by ~~the~~our Board of Directors in March 2015. An additional $600 million share repurchase program was authorized by our Board of Directors in November 2019, bringing the total remaining share repurchase authorization to $611.1 million as of May 31, 2020.


~~10.~~	~~ACCUMULATED OTHER COMPREHENSIVE LOSS~~

10.ACCUMULATED OTHER COMPREHENSIVE LOSS

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

August 31, 2019 August 31, 2018 November 30, 2018
Foreign currency translation adjustment $ (308.2 ) $ (197.3 ) $ (241.6 )
Unrealized loss on foreign currency exchange contracts (0.8 ) (1.5 ) (1.1 )
Unamortized value of settled interest rate swaps 0.4
0.8
0.6
Pension and other postretirement costs (119.7 ) (156.1 ) (117.8 )
Accumulated other comprehensive loss $ (428.3 ) $ (354.1 ) $ (359.9 )


	May 31, 2020		May 31, 2019		November 30, 2019
Foreign currency translation adjustment ⁽¹⁾	$	(349.9)	$	(263.0)	$	(266.5)
Unrealized loss on foreign currency exchange contracts	1.1		(0.8)		—

Unamortized value of settled interest rate swaps	0.1		0.4		0.3
Pension and other postretirement costs	(229.0)		(119.3)		(234.0)
Accumulated other comprehensive loss	$	(577.7)	$	(382.7)	$	(500.2)

~~In conjunction with the adoption~~(1)The foreign currency translation adjustment of ~~ASU No. 2018-02~~ ~~Income Statement~~ –~~Reporting Comprehensive Income (Topic 220)~~ –~~Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,~~ ~~we reclassified $20.9 million of other comprehensive income, primarily associated with pension and other postretirement plans, from~~ accumulated other comprehensive ~~income to retained earnings effective December 1, 2017.~~loss increased by $83.4 million during the six months ended May 31, 2020. Of that increase, $3.3 million was associated with net investment hedges as more fully described in note 3.

The following table sets forth the amounts reclassified from accumulated other comprehensive income (loss) and into consolidated net income ~~for the three and~~ ~~nine~~ ~~months ended~~ ~~August 31, 2019~~ ~~and~~ ~~2018~~(in millions):


	Three months ended						Six months ended			Affected Line Items in the Condensed Consolidated Income Statement
Accumulated Other Comprehensive Income (Loss) Components	May 31, 2020		May 31, 2019		May 31, 2020		May 31, 2019
(Gains)/losses on cash flow hedges:
Interest rate derivatives	$	(0.1)	$	(0.1)	$	(0.2)	$	(0.2)	Interest expense
Foreign exchange contracts	0.3		(0.1)		(0.1)		(0.4)		Cost of goods sold
Total before tax	0.2		(0.2)		(0.3)		(0.6)
Tax effect	—		—		0.1		0.1		Income taxes
Net, after tax	$	0.2	$	(0.2)	$	(0.2)	$	(0.5)

Amortization of pension and postretirement benefit adjustments:
Amortization of prior service costs (credit) ⁽¹⁾	$	(1.1)	$	(1.9)	$	(2.1)	$	(4.0)	Other income, net
Amortization of net actuarial losses ⁽¹⁾	2.9		0.7		5.3		1.4		Other income, net
Total before tax	1.8		(1.2)		3.2		(2.6)
Tax effect	(0.4)		0.3		(0.7)		0.6		Income taxes
Net, after tax	$	1.4	$	(0.9)	$	2.5	$	(2.0)

Three months ended
Nine months ended
Affected Line Items in the Condensed Consolidated Income Statement
Accumulated Other Comprehensive Income (Loss) Components
August 31, 2019 August 31, 2018 August 31, 2019 August 31, 2018
(Gains)/losses on cash flow hedges:

Interest rate derivatives
$ (0.2 )
$ (0.2 )
$ (0.4 )
$ (0.4 )
Interest expense
Foreign exchange contracts
(0.5 )
0.8

(0.9 )
3.5

Cost of goods sold
Total before tax
(0.7 )
0.6

(1.3 )
3.1

Tax effect
0.1

(0.1 )
0.3

(0.6 )
Income taxes
Net, after tax
$ (0.6 )
$ 0.5

$ (1.0 )
$ 2.5

Amortization of pension and postretirement benefit adjustments:

Amortization of prior service costs (credit) (1)

$ (2.1 )
$ (2.2 )
$ (6.1 )
$ (6.0 )
Other income, net
Amortization of net actuarial losses (1)

0.8

3.1

2.2

9.5

Other income, net
Total before tax
(1.3 )
0.9

(3.9 )
3.5

Tax effect
0.3

(0.2 )
0.9

(0.8 )
Income taxes
Net, after tax
$ (1.0 )
$ 0.7

$ (3.0 )
$ 2.7

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(1) This accumulated other comprehensive income (loss) component, including settlement losses, is included in the computation of total pension expense and other postretirement benefits expense (refer to note 6 for additional details).


~~11.~~	~~BUSINESS SEGMENTS~~

11.BUSINESS SEGMENTS

We operate in 2 business segments: consumer and flavor solutions. The consumer and flavor solutions segments manufacture, market and distribute spices, herbs, seasoning mixes, condiments and other flavorful products throughout the world. Our consumer segment sells to retail ~~outlets,~~channels, including grocery, mass merchandise, warehouse clubs, discount and drug stores, and e-commerce under the “McCormick” brand and a variety of brands around the world, including “French’s”, “Frank’s RedHot”, “Lawry’s”, “Zatarain’s”, “Simply Asia”, “Thai Kitchen”, “Ducros”, “Vahine”, “Schwartz”, “Club House”, “Kamis”, “Kohinoor”, “DaQiao”, ~~“Drogheria & Alimentari”~~“La Drogheria”, “Stubb's”, and “Gourmet Garden”. Our flavor solutions segment sells to food manufacturers and the foodservice industry both directly and indirectly through ~~distributors.~~distributors, with the exception of our businesses in China and India, where foodservice sales are managed by and reported in our consumer segment.

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

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

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


								Consumer		Flavor Solutions		Total
	Consumer		Flavor Solutions		Total					(in millions)
			(in millions)
Three months ended August 31, 2019
Three months ended May 31, 2020							Three months ended May 31, 2020
Net sales	$	794.2	$	535.0	$	1,329.2	Net sales	$	962.6	$	438.5	$	1,401.1
Operating income excluding special charges	176.5		84.7		261.2		Operating income excluding special charges	231.6��		28.7		260.3
Income from unconsolidated operations	7.3		2.3		9.6		Income from unconsolidated operations	8.4		1.8		10.2

Three months ended August 31, 2018
Net sales	$	772.4	$	545.8	$	1,318.2
Operating income excluding special charges and transaction and integration expenses	152.0		86.8		238.8
Income from unconsolidated operations	7.7		0.7		8.4

Nine months ended August 31, 2019
Three months ended May 31, 2019							Three months ended May 31, 2019
Net sales	$	2,303.2	$	1,559.4	$	3,862.6	Net sales	$	764.1	$	537.8	$	1,301.9
Operating income excluding special charges	449.6		225.8		675.4		Operating income excluding special charges	137.8		77.4		215.2
Income from unconsolidated operations	22.7		6.5		29.2		Income from unconsolidated operations	7.5		2.0		9.5

Nine months ended August 31, 2018
Six months ended May 31, 2020							Six months ended May 31, 2020
Net sales	$	2,285.8	$	1,549.1	$	3,834.9	Net sales	$	1,662.1	$	951.0	$	2,613.1
Operating income excluding special charges and transaction and integration expenses	411.6		224.0		635.6
Operating income excluding special charges							Operating income excluding special charges	351.2		104.3		455.5
Income from unconsolidated operations	20.8		3.1		23.9		Income from unconsolidated operations	16.2		4.4		20.6

Six months ended May 31, 2019							Six months ended May 31, 2019
Net sales							Net sales	$	1,509.0	$	1,024.4	$	2,533.4
Operating income excluding special charges							Operating income excluding special charges	273.1		141.1		414.2
Income from unconsolidated operations							Income from unconsolidated operations	15.4		4.2		19.6

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A reconciliation of operating income excluding special charges ~~and, for the three and nine months ended August 31, 2018, transaction and integration expenses,~~ to operating income is as follows (in millions):


	Consumer		Flavor Solutions		Total
Three months ended May 31, 2020
Operating income excluding special charges	$	231.6	$	28.7	$	260.3
Less: Special charges	2.5		0.4		2.9

Operating income	$	229.1	$	28.3	$	257.4

Three months ended May 31, 2019
Operating income excluding special charges	$	137.8	$	77.4	$	215.2

Less: Special charges	4.9		2.2		7.1
Operating income	$	132.9	$	75.2	$	208.1

Six months ended May 31, 2020
Operating income excluding special charges	$	351.2	$	104.3	$	455.5
Less: Special charges	3.1		0.8		3.9
Operating income	$	348.1	$	103.5	$	451.6

Six months ended May 31, 2019
Operating income excluding special charges	$	273.1	$	141.1	$	414.2
Less: Special charges	6.4		2.8		9.2
Operating income	$	266.7	$	138.3	$	405.0

Consumer Flavor Solutions Total
Three months ended August 31, 2019
Operating income excluding special charges $ 176.5
$ 84.7
$ 261.2
Less: Special charges 4.6
3.1
7.7
Operating income $ 171.9
$ 81.6
$ 253.5

Three months ended August 31, 2018
Operating income excluding special charges and transaction and integration expenses $ 152.0
$ 86.8
$ 238.8
Less: Special charges 2.2
1.1
3.3
Less: Transaction and integration expenses 3.8
1.8
5.6
Operating income $ 146.0
$ 83.9
$ 229.9

Nine months ended August 31, 2019
Operating income excluding special charges $ 449.6
$ 225.8
$ 675.4
Less: Special charges 11.0
5.9
16.9
Operating income $ 438.6
$ 219.9
$ 658.5

Nine months ended August 31, 2018
Operating income excluding special charges and transaction and integration expenses $ 411.6
$ 224.0
$ 635.6
Less: Special charges 8.6
5.3
13.9
Less: Transaction and integration expenses 14.8
7.3
22.1
Operating income $ 388.2
$ 211.4
$ 599.6

The following table sets forth our net sales, by geographic area, for the three and ~~nine~~six months ended ~~August~~May 31, ~~2019~~2020 and ~~2018~~2019 (in millions):


	Americas		EMEA		Asia/Pacific		Total

Three months ended May 31, 2020	$	1,025.4	$	243.7	$	132.0	$	1,401.1
Three months ended May 31, 2019	896.1		249.4		156.4		1,301.9

Six months ended May 31, 2020	1,845.0		494.0		274.1		2,613.1
Six months ended May 31, 2019	1,703.1		492.2		338.1		2,533.4

Americas EMEA Asia/Pacific Total

Three months ended August 31, 2019 $ 931.3
$ 234.5
$ 163.4
$ 1,329.2
Three months ended August 31, 2018 918.5
244.2
155.5
1,318.2

Nine months ended August 31, 2019 2,634.4
726.7
501.5
3,862.6
Nine months ended August 31, 2018 2,573.4
755.8
505.7
3,834.9

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~~ITEM 2.~~	~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

ITEM 2.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)~~("MD&A") is intended to help the reader understand McCormick & Company, Incorporated, our operations, and our present business environment. MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and the accompanying notes thereto, included in Item 1 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 management to measure the profitability of our ongoing operations and analyze our business performance and trends. Unless otherwise noted, the dollar and share information in the charts and tables in MD&A are in millions, except per share data.

Business profile

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 the foodservice business. In fiscal year ~~2018,~~2019, approximately 40% of our sales were outside of the ~~United States.~~U.S. 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. We manage our business in two business segments, consumer and flavor solutions.

~~Consumer segment~~

Recent Events and 2020 Outlook

During the three and six months ended May 31, 2020, the effects of a new coronavirus (“COVID-19”) and related actions to attempt to control its spread significantly impacted not only our operating results but also the global economy. On March 11, 2020, the World Health Organization designated COVID-19 as a global pandemic.

–

The impact of COVID-19 on our consolidated operating results for the three months ended February 29, 2020 was limited, in all material respects, to our operations in China where the Chinese government mandated numerous measures, including closures of businesses, limitations on movements of individuals and goods, and the imposition of other restrictive measures, in its efforts to mitigate the spread of COVID-19 within the country. In the first quarter of 2020, sales in our Asia/Pacific region declined by $39.6 million from the corresponding quarter in 2019, driven by the decline in the first quarter of 2020 sales in our China operations, as compared to the corresponding period in 2019, that approximated $43 million. That $43 million decline was driven by government-mandated measures, imposed to mitigate the spread of COVID-19, including measures that caused us to institute work-at-home protocols for many of our employees and to close our manufacturing facilities in our China operations during a portion of the first quarter. Our ~~consumer segment customers span a variety~~plants in China have since resumed operations, with our plants in Shanghai and Guangzhou resuming operations in mid-February 2020 and our Wuhan plant in mid-March 2020.

The pandemic spread outside of ~~retailers that include grocery mass merchandise, warehouse clubs, discount~~China during our second quarter of fiscal year 2020 to impact operations in our Americas and ~~drug stores,~~Europe, Middle East and ~~e-commerce retailers served directly and indirectly through distributors or wholesalers. In~~Africa (“EMEA”) regions in addition to ~~marketing~~elsewhere in our ~~branded~~Asia/Pacific region. In the U.S., many state and local governments, based on local conditions, either recommended or mandated actions to slow the transmission of COVID-19. These measures ranged from limitations on crowd size, together with closures of bars and dine-in restaurants, to mandatory orders for non-essential citizens to shelter in place. Governments in non-U.S. jurisdictions also implemented shelter-in-place orders, quarantines, significant restrictions on travel, as well as restrictions that prohibited many employees from going to work. Borders between countries have been closed to contain the spread of COVID-19 contagion. Uncertainty with respect to the economic effects of the pandemic introduced significant volatility in the financial markets.

We identified three priorities while navigating through the period of volatility and uncertainty associated with various stages of the COVID-19 pandemic:

•First, to ensure the health and safety of our employees and the quality and integrity of our products.

•Second, to keep our brands and our customers' brands in supply and to maintain the financial strength of our business.

•Third, to ensure McCormick emerges strong from this event. The pandemic will come to an end and we believe that we will come out a better company by driving our long-term strategies, responding to changing consumer behavior and capitalizing on opportunities from our relative strength.

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During the three months ended May 31, 2020, we undertook numerous measures to ensure that these priorities were achieved, including: (i) for our manufacturing and distribution employees, who played a critical role in maintaining the supply of our products to ~~these~~our customers and consumers, we ~~are also a leading supplier of private label items, also known as store brands.~~instituted pre-shift temperature checks, increased pay and benefits, and provided time to enable social distancing and even greater sanitation procedures during shift changes; (ii) for our other employees, we instituted work-from-home arrangements; (iii) we maintained close communication with customers and suppliers to enable us to react to changing demand; and (iv) throughout the organization, we empowered global, regional and local crisis response teams that enabled us to react quickly to the challenging environment.

We elected to pause activities related to our global enterprise resource planning ("ERP") replacement program in the balance of fiscal 2020. Current travel restrictions and border closures imposed by governments to mitigate COVID-19 contagion would make it impossible to provide on-the-ground support at the times of pilot go-lives previously planned for fiscal 2020, and we do not have a clear line of sight as to when those restrictions will be lifted. For these reasons, we have chosen to refocus our employees on the three previously described priorities while navigating through this period of volatility and uncertainty.

~~Flavor Solutions segment~~
– In

During the second quarter of 2020, we partnered with our customers to monitor consumer demand changes and address the shift to at-home consumption versus away from home. We estimate that away-from-home consumption has historically represented approximately 20% of our consolidated sales. As we expected, the government-mandated closure of dine-in restaurants in many of our markets reduced demand in our flavor solutions segment ~~we provide a wide range~~in the second quarter of ~~products to multinational food manufacturers and foodservice customers. The~~2020 from our foodservice customers ~~are supplied with branded, packaged products both directly~~as COVID-19 measures eliminated dine-in services and ~~indirectly through distributors. We supply food manufacturers~~limited restaurants to carry-out or delivery only. Also, as we expected in the second quarter of 2020, the effects of COVID-19 measures, including mandatory lock-downs, increased at-home consumption, and ~~foodservice~~related demand, from customers ~~with customized flavor solutions, and many of these customer relationships have been active for decades.~~

~~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 customers and consumers a range of products that meet the increasing demand for certain product attributes such as organic, gluten-free and non-GMO (genetically modified organisms) and that extend from premium to value-priced.

~~Long-term growth objectives~~

~~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%.~~

~~Sales growth:Over time, we expect to grow sales with similar contributions from: 1) our base business~~ – ~~driven by brand marketing support, customer intimacy, expanded distribution and category growth; 2) new products; and 3) acquisitions.~~

~~Base business~~ – We expect to drive sales growth by optimizing our brand marketing investment through improved speed, quality and effectiveness. We measure the return on our brand marketing investment 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 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 solid pipeline of~~from customers in our flavor solutions ~~aligned with~~segment that use our ~~customers’ new product launch plans, many of which include “better-for-you” innovation. With~~products to flavor their own brands for at-home consumption. In the three months ended May 31, 2020, our sales increased by 7.6% over ~~20 product innovation centers around~~ the ~~world, we are supporting the growth~~prior year level. That increase was driven by a 26.0% increase in sales of our ~~brands and those~~consumer segment, partially offset by an 18.5% decline in sales of our flavor solutions ~~customers with products that appeal to local consumers.~~segment.

~~Acquisitions~~

Late in the second quarter of 2020, we saw some loosening of government-mandated COVID-19 restrictions in certain locales as, dependent upon the local extent and severity of COVID-19 infections, efforts to enter the first phase of recovery began. To the extent that COVID-19 continues or worsens, governments may maintain restrictions or impose additional restrictions.– ~~Acquisitions~~We believe that the phasing and steps to COVID-19 recovery will vary among regions, countries or local jurisdictions.

We also believe that the impact, extent and timing of COVID-19 and the recovery from its effects are ~~expected~~highly uncertain and could be far reaching. In light of the evolving health, social, economic, and business environment, governmental regulation or mandates, and business disruptions that could occur, the short-term and long-term impact that COVID-19 could have on our financial condition and operating results remains unknown.

Earlier this year, we withdrew the fiscal 2020 outlook, summarized in Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the year ended November 30, 2019. The environment in which we operate continues to ~~approximate one-third~~evolve, and there remains a high degree of uncertainty about the pace and shape of the COVID-19 recovery as well as the impact and extent of potential resurgences. As a consequence of these uncertainties and the resultant variability that they may introduce to our results during the remainder of this fiscal year, we are not providing a fiscal 2020 financial outlook at this time.

As of the date of this filing, our current expectations with respect to certain factors impacting our operations during the six-month period ending November 30, 2020 include the following: (i) we believe that the increased consumer preference for cooking at home experienced in the second quarter will be sustained, continuing a favorable impact in our consumer segment in the second half of the year, but at a less elevated level than in our second quarter; (ii) we expect demand from our packaged food customers in the flavor solutions segment to return to pre-COVID-19 levels; (iii) we expect the away-from-home component of our ~~long-term sales growth. Since~~flavor solutions segment to gradually and partially recover throughout the ~~beginning~~second half of ~~2015,~~the year, but remain below the prior year level; (iv) we ~~have completed seven acquisitions, which are driving~~anticipate that the significant favorable impact on gross margin from a higher mix of consumer segment sales in ~~both~~the first half of 2020 is unlikely to continue to the same extent in the latter half of the year; and (v) as we did in the second quarter, we expect to incur incremental COVID-19 costs during the second half of the year, with those incremental costs more heavily weighted in the third quarter rather than in the fourth quarter. In addition, our ~~consumer and flavor solutions segments. We focus~~

current expectations with respect to certain factors impacting our operations for the fiscal year ending November 30, 2020 include the following: (i) we continue to project that the impact of COVID-19 on ~~acquisition opportunities that meet the growing demand for flavor and health. Geographically,~~ our ~~focus is on acquisitions that build scale where we currently have presence~~sales in both developed and emerging markets. Our acquisitions have included bolt-on opportunities and the August 17, 2017 acquisition of Reckitt Benckiser's Food Division ("RB Foods") from Reckitt Benckiser Group plc. for approximately $4.2 billion,China will reduce our annual consolidated net ~~of acquired cash.~~

~~The RB Foods acquisition resulted in acquisitions contributing more than one-third of our~~ sales growth in ~~2018~~fiscal 2020 by 1% to 2% as compared to the 2019 level; (ii) we continue to expect mid-single digit percentage inflationary pressures, CCI savings of approximately $105 million, and ~~2017.~~a mid-single digit percentage increase in brand marketing investments for fiscal 2020, all as compared to the 2019 levels; (iii) we anticipate a negative impact from foreign exchange rates on our fiscal 2020 annual results as compared to fiscal 2019; and (iv) we expect a high to mid-single

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digit percentage decline in our income from unconsolidated operations for fiscal year 2020 from that of the prior year as a result of unfavorable foreign currency rates.

~~Cost savings~~

The pace and ~~business transformation:~~ ~~We are fueling our investment in growth with cost savings from our Comprehensive Continuous Improvement (CCI) program, an ongoing initiative to improve productivity and reduce costs throughout~~shape of the ~~organization,~~COVID-19 recovery described above as well as ~~savings from organization~~the impact and ~~streamlining actions described~~extent of potential resurgences is not presently known. These and other uncertainties could result in ~~note 3~~changes to our current expectations in addition to a number of ~~notes~~adverse impacts to our business, including but not limited to additional disruption to the ~~accompanying financial statements. In addition~~economy and consumers’ willingness and ability to ~~funding brand marketing support,~~spend, temporary or permanent closures by businesses that consume our products, such as restaurants, additional work restrictions, and supply chains being interrupted, slowed, or rendered inoperable or, in the case of significant increased demand for our product, ~~innovation~~incapable of fulfilling that increased demand.As a result, it may be challenging to obtain and ~~other growth initiatives, our CCI program helps offset higher material costs and is contributing to higher operating income and earnings per share.~~

We are making investments to build the McCormick of the future, including in our Global Enablement 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. In 2019, we have progressed in our ERP replacement program and as such have accelerated our multi-year ERP replacement program to accelerate the transformation of our ways of working. We expect this acceleration to enable us to realize the benefits of a scalable platform for growth sooner than our earlier plan. We expect that, in total over the course of the ERP replacement program from late 2018 through 2021, we will invest from $90 million to $120 million in capital spending and from $60 million to $80 million in program expenses to enable the anticipated completion of the global roll out of the information systems technology in 2021.

~~Cash flow:~~ We continue to generate strong cash flow. Net cash provided by operating activities reached $821.2 million in 2018, an increase from $815.3 million in 2017. In 2018, we continued to have a balanced use of cash for debt repayment, capital expenditures and the return of cash to shareholders through dividends and share repurchases. We are using our cash to fund shareholder dividends, with annual increases in each of the past 33 years, and to fund capital expenditures, acquisitions and share repurchases. In 2018, we returned $335.7 million of cash to our shareholders through dividends and share repurchases. Due to our increased level of indebtedness because of the RB Foods acquisition, we have curtailed our acquisition and share repurchase activity for a period in order to enable a return to our pre-acquisition credit profile. Although we have curtailed our share repurchase activity, we repurchased shares in 2018 to mitigate the effect of shares issued upon the exercise of stock options and have continued this practice in 2019.

~~On a long-term basis, we expect a combination of acquisitions and share repurchases to add about 2% to earnings per share growth.~~

~~2019 Outlook~~

We project another year of strong financial performance in 2019. As more fully disclosed in note 1 of notes to the accompanying financial statements, we adopted two new accounting standards relating to revenue recognition and income statement classification of the components of pension and other postretirement benefits expenses at the beginning of fiscal 2019. We applied those new accounting standards on a retrospective basis. Our 2019 outlook is calculated from a 2018 base that has been recast for the impacts of adopting those new accounting standards on a retrospective basis. In 2019, we expect to grow sales 1% to 2%, including an estimated 2% unfavorable impact from currency rates, or 3% to 4% on a constant currency basis. That anticipated 2019 sales growth is primarily driven by higher volume and product mix, with some impact of pricing to offset anticipated cost increases, and consists entirely of organic growth as we do not anticipate an incremental sales impact from acquisitions in 2019. We expect our 2019 gross profit margin to be 50 to 75 basis points higher in 2019 than in 2018, in part driven by our CCI-led cost savings.

In 2019, we expect an increase in operating income of 8% to 9%, which includes an estimated 2% unfavorable impact from currency rates. That increase in operating income reflects the impact of special charges, estimated at $20 million in 2019 compared to $16.3 million in 2018, and the absence of $22.5 million of transaction and integration expenses incurred in 2018. Excluding special charges and, in 2018, transaction and integration expenses, we expect 2019’s adjusted operating income to increase 6% to 7%, which includes an estimated 2% unfavorable impact from currency rates, or 8% to 9% on a constant currency basis. Our CCI-led cost savings target in 2019 is approximately $110 million. In 2019, we expectraw materials to support our ~~sales growth with~~business needs, and individuals could become ill, quarantined, or otherwise unable to work and/or travel due to health reasons or governmental restrictions. Also, governments may impose other laws, regulations or taxes which could adversely impact our business, financial condition or results of operations. Further, if our customers’ businesses are similarly affected, they might delay or reduce purchases from us. The potential effects of COVID-19 also could impact us in a ~~brand marketing investment comparable with~~number of other ways including, but not limited to, variations in the ~~2018 level.~~

~~Our underlying effective tax rate is projected to be higher~~level of our profitability, laws and regulations affecting our business, fluctuations in ~~2019 than in 2018 as~~foreign currency markets, the ~~U.S. Tax Act was not fully effective for us, as a non-calendar year end company, in 2018. Absent~~availability of future borrowings, the ~~impact~~cost of ~~discrete tax items, we estimate~~borrowings, valuation of our ~~underlying tax rate to be approximately 24% in 2019. Including the impact~~pension assets and obligations, credit risks of ~~discrete tax items, we estimate that~~ our ~~consolidated effective tax rate~~

~~will approximate 20% in fiscal 2019. In 2018, we recognized a net non-recurring tax benefit of $301.5 million upon the enactment~~customers and counterparties, and potential impairment of the U.S. Tax Act. Excluding that benefit and taxes associated with special charges and transaction and integration expenses, our adjusted effective tax rate was approximately 19.6% in 2018. We expect our adjusted effective tax rate in 2019 to approximate the estimated 20% effective tax rate under accounting principles generally accepted in the U.S. (GAAP).carrying value of goodwill or other indefinite-lived intangible assets.

Diluted earnings per share was $7.00 in 2018. Diluted earnings per share for 2019 are projected to range from $5.20 to $5.25. Excluding the per share impact of the non-recurring benefit from the U.S. Tax Act of $2.26, special charges of $0.10 and transaction and integration expenses of $0.13 in 2018, adjusted diluted earnings per share was $4.97 in 2018. Adjusted diluted earnings per share (excluding an estimated $0.11 per share impact from special charges and an estimated $0.01 per share non-recurring benefit from the U.S. Tax Act) are projected to be $5.30 to $5.35 in 2019. We expect adjusted diluted earnings per share in 2019 to grow 7% to 8%, which includes a 2% unfavorable impact from currency rates, or to grow 9% to 10% in constant currency over adjusted diluted earnings per share of $4.97 in 2018. We expect this growth rate to be mainly driven by increased adjusted operating income which we expect to be partially offset by a higher adjusted effective tax rate in 2019.

RESULTS OF OPERATIONS – COMPANY


	Three months ended									Six months ended
	May 31, 2020			May 31, 2019			May 31, 2020			May 31, 2019
Net sales	$	1,401.1		$	1,301.9		$	2,613.1		$	2,533.4
Percent increase	7.6		%	—		%	3.1		%	0.7		%
Components of percent growth in net sales – increase (decrease):
Volume and product mix	7.4		%	2.1		%	2.6		%	3.1		%
Pricing actions	2.2		%	0.7		%	1.7		%	0.4		%

Foreign exchange	(2.0)		%	(2.8)		%	(1.2)		%	(2.8)		%
Gross profit	$	579.5		$	508.5		$	1,049.4		$	975.4
Gross profit margin	41.4		%	39.1		%	40.2		%	38.5		%

Three months ended Nine months ended
August 31, 2019 August 31, 2018 August 31, 2019 August 31, 2018
Net sales $ 1,329.2
$ 1,318.2
$ 3,862.6
$ 3,834.9
Percent increase 0.8 % 13.6 % 0.7 % 17.3 %
Components of percent growth in net sales – increase (decrease):

               Volume and product mix 2.1 % 3.4 % 2.7 % 2.5 %
               Pricing actions 0.1 % 0.5 % 0.3 % 0.5 %
               Acquisitions — % 9.8 % — % 11.9 %
               Foreign exchange (1.4 )% (0.1 )% (2.3 )% 2.4 %
Gross profit $ 539.9
$ 522.5
$ 1,515.3
$ 1,488.3
Gross profit margin 40.6 % 39.6 % 39.2 % 38.8 %

Sales for the ~~third~~second quarter of ~~2019~~2020 increased by ~~0.8%~~7.6% from the prior year level and by ~~2.2%~~9.6% on a constant currency basis (that is excluding the impact of foreign currency exchange as more fully described under the caption, Non-GAAP Financial Measures). ~~Favorable~~That 7.6% sales increase was driven by higher sales in our consumer segment, which increased by 26.0% over the 2019 level, partially offset by lower sales in our flavor solutions segment, which declined by 18.5% from the prior year level. On a consolidated basis, higher volume and favorable product mix increased sales by ~~2.1%~~7.4% while pricing actions added ~~0.1%~~2.2% to sales. ~~Net sales growth~~That net volume increase and favorable mix was driven by ~~increased volume and product mix in~~sharply higher demand within our consumer ~~segment.~~business, as government-mandated measures, imposed to mitigate the spread of COVID-19 in the second quarter of 2020 and the ensuing change in consumer behavior, resulted in a shift in consumer behavior toward at-home meal preparation that more than offset sharply lower demand within our flavor solutions business principally associated with our quick service restaurant and branded food service customers. Sales were also impacted by unfavorable foreign currency rates that reduced net sales ~~1.4%~~2.0% compared to the year-ago quarter and is excluded from our measure of sales growth of ~~2.2%~~9.6% on a constant currency basis.

Sales for the ~~nine~~six months ended ~~August~~May 31, ~~2019~~2020 increased by ~~0.7%~~3.1% from the prior year level and increased by ~~3.0%~~4.3% on a constant currency basis. Favorable volume and product mix increased sales by ~~2.7%~~2.6% while pricing actions added ~~0.3%~~1.7% to sales. Sales were impacted by unfavorable foreign currency rates that reduced sales by ~~2.3%~~1.2% as compared to the same period in ~~2018~~2019 and is excluded from our measure of sales growth of ~~3.0%~~4.3% on a constant currency basis.

Gross profit for the ~~third~~second quarter of ~~2019~~2020 increased by ~~$17.4~~$71.0 million, or ~~3.3%~~14.0%, over the comparable period in ~~2018.~~2019. Gross profit for the ~~nine~~six months ended ~~August~~May 31, ~~2019~~2020 increased by ~~$27.0~~$74.0 million, or ~~1.8%~~7.6% over the comparable period in ~~2018.~~

2019. Our gross profit margins for the three and ~~nine~~six months ended ~~August~~May 31, ~~2019~~2020 were ~~40.6%~~41.4% and ~~39.2%~~40.2%, respectively, an increase of ~~100~~230 basis points and 40170 basis points, respectively, from the same periods in ~~2018. As~~2019. This improvement was driven by the mix of consumer and flavor solutions sales in both the quarter and year-to-date periods. Also, as a ~~percent~~percentage of sales, the gross margin impact of CCI-led cost savings ~~and favorable product mix~~ were offset, in part, by higher conversion costs and increased material costs in both the ~~quarter-to-date period. The gross margin expansion for~~quarter and year-to-date periods. Increased conversion costs during the ~~nine~~three months ended ~~August~~May 31, ~~2019 was primarily attributable to~~2020 included certain matters associated with COVID-19, such as the impact of ~~CCI-led cost savings which were partially offset~~lower production volumes of flavor solutions inventories, reduced

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productivity related to measures to enable manufacturing and distribution staff to maintain social distancing and permit enhanced cleaning between shifts, and higher inventory provisions in response to lower demand by ~~higher conversion costs, as~~certain customers.


	Three months ended									Six months ended
	May 31, 2020			May 31, 2019			May 31, 2020			May 31, 2019
Selling, general & administrative expense (SG&A)	$	319.2		$	293.3		$	593.9		$	561.2
Percent of net sales	22.8		%	22.6		%	22.8		%	22.2		%

SG&A increased by $25.9 million in the second quarter of 2020 compared to the ~~2018 period.~~

Three months ended Nine months ended
August 31, 2019 August 31, 2018 August 31, 2019 August 31, 2018
Selling, general & administrative expense (SG&A) $ 278.7
$ 283.7
$ 839.9
$ 852.7
Percent of net sales 20.9 % 21.5 % 21.7 % 22.2 %

~~SG&A decreased~~2019 level, driven by ~~$5.0 million in the third quarter of 2019 compared to the 2018 level, as CCI-led cost savings and~~(i) higher performance-based employee incentive expense accruals; (ii) a one-time fiscal 2019 expense reduction from the alignment of an employee benefit plan to our global standard ~~were partially offset by investments~~did not recur in 2020; and (iii) less favorable investment results associated with non-qualified retirement plan assets, all as compared to the ~~implementation of a global ERP platform~~corresponding period in ~~support of our GE business transformation initiative, increased brand marketing and higher share-based compensation expense.~~2019. SG&A as a percent of net sales ~~declined~~increased by 6020 basis points from the prior year ~~level.~~

~~SG&A decreased by $12.8 million in the nine months ended August 31, 2019 compared to the 2018~~ level, primarily as a result of ~~CCI-led cost savings, lower~~the previously mentioned factors, partially offset by the impact of the leverage of fixed and semi-fixed expenses over a higher level of sales during the 2020 quarter.

SG&A increased by $32.7 million in the six months ended May 31, 2020 compared to the 2019 level, primarily as a result of (i) higher performance-based employee incentive expense accrual, (ii) higher expenses associated with efforts related to implementation of a global ERP platform; (iii) increased brand marketing ~~and~~expenses; (iv) a one-time fiscal 2019 expense reduction from the alignment of an employee benefit plan to our global standard ~~partially offset by investments~~did not recur in 2020; and (v) less favorable investment results associated with non-qualified retirement plan assets, all as compared to the ~~implementation of a global ERP platform~~corresponding period in ~~support of our GE business transformation initiative and higher share-based compensation expense.~~2019. SG&A as a percent of net sales for the ~~nine~~six months ended ~~August~~May 31, ~~2019 declined~~2020 increased by 5060 basis points from the prior year ~~level.~~level, primarily as a result of the previously mentioned factors, partially offset by the impact of the leverage of fixed and semi-fixed expenses over a higher level of sales during the 2020 period.


	Three months ended						Six months ended
	May 31, 2020		May 31, 2019		May 31, 2020		May 31, 2019
Total special charges	$	2.9	$	7.1	$	3.9	$	9.2

Three months ended Nine months ended
August 31, 2019 August 31, 2018 Aug 31, 2019 Aug 31, 2018
Total special charges $ 7.7
$ 3.3
$ 16.9
$ 13.9

During the three months ended ~~August~~May 31, 2020, we recorded $2.9 million of special charges consisting primarily of $2.8 million of streamlining actions in EMEA, including $1.9 million related to severance and related benefits, $0.6 million of third-party expenses, and $0.3 million related to other costs.

During the six months ended May 31, 2020, we recorded $3.9 million of special charges consisting of $2.8 million of streamlining actions in EMEA and $1.1 million related to our GE initiative.

During the three months ended May 31, 2019, we recorded ~~$7.7~~$7.1 million of special charges, consisting primarily of (i) ~~$6.0~~$4.1 million related to our GE initiative, including ~~$5.5~~$2.5 million of third-party expenses, ~~$0.3~~$1.1 million ofrelated to employee severance and related benefits, and ~~$0.2 million of other related costs and (ii) $1.3 million related to streamlining actions in our EMEA region.~~

During the nine months ended August 31, 2019, we recorded $16.9 million of special charges, consisting primarily of (i) $12.2 million costs related to our GE initiative, including $8.9 million of third-party expenses, $2.0 million related to severance and related benefits, and $1.3$0.5 million related to other ~~costs;~~costs, (ii) $2.3 million of employee severance and related benefits associated with streamlining actions in the ~~Americas;~~Americas and (iii) ~~$1.9~~$0.6 million ~~related to~~of streamlining actions in ~~our EMEA region.~~EMEA.

During the ~~three~~six months ended ~~August~~May 31, ~~2018,~~2019, we recorded ~~$3.3~~$9.2 million of special charges, consisting primarily of ~~$3.1 million~~(i) costs related to our GE initiative, ~~consisting of $2.6~~including $3.5 million ofrelated to third party expenses, ~~and $0.5 million of severance and related benefits.~~

~~During the nine months ended August 31, 2018, we recorded $13.9 million of special charges, consisting primarily of: (i) $9.8~~$1.7 million related to our GE initiative, consisting of third party expenses of $6.1 million, severance and related benefits of $0.7 million and a non-cash asset impairment charge of $3.0 million, which related to the write-off of certain software assets that were incompatible with the future move to our global ERP platform; (ii) a one-time payment, in the aggregate amount of $2.2 million, made to eligible U.S. hourly employees to distribute a portion of the non-recurring net income tax benefit recognized in connection with the enactment of the U.S. Tax Act; (iii) $0.9 million related to severance and related benefits as well as other costs directly associated with the relocation of one of our Chinese manufacturing facilities; and (iv) $0.7 million related toemployee severance and related benefits, and $1.0 million related to other costs, ~~directly related to the transfer of certain manufacturing operations in our Asia Pacific region to a new facility then under construction in Thailand.~~

Three months ended Nine months ended
August 31, 2019 August 31, 2018 August 31, 2019 August 31, 2018
Transaction and integration expenses $ —
$ 5.6
$ —
$ 22.1

Transaction and integration expenses related to the RB Foods acquisition totaled $22.5 million for the year ended November 30, 2018. These costs primarily consisted of outside advisory, service and consulting costs; employee-related costs, and other costs related to the acquisition. We incurred $5.6 million and $22.1(ii) $2.3 million of ~~transaction~~employee severance and ~~integration expenses~~related benefits associated with streamlining actions in the ~~three~~Americas and ~~nine months ended August 31, 2018, respectively.~~(iii) $0.6 million of streamlining actions in EMEA.


	Three months ended						Six months ended
	May 31, 2020		May 31, 2019		May 31, 2020		May 31, 2019
Interest expense	$	34.4	$	42.4	$	69.7	$	85.4
Other income, net	3.1		6.3		8.6		12.4

Three months ended Nine months ended
August 31, 2019 August 31, 2018 August 31, 2019 August 31, 2018
Interest expense $ 41.3
$ 44.7
$ 126.7
$ 130.7
Other income, net 6.9
4.8
19.3
13.5

Interest expense decreased by ~~$3.4~~$8.0 million in the ~~third~~second quarter of ~~2019,~~2020, compared to the same period in ~~2018,~~2019, due primarily ~~to the favorable impact of cross-currency interest rate swap contracts that we entered into in 2019 and a decline in average total~~

borrowings. Interest expense was $4.0 million lower for the nine months ended August 31, 2019 than the prior year level primarily due to the favorable effects of the cross-currency interest rate swap contracts previously noted as well as to a decline in average total ~~borrowings.~~borrowings and the lower interest rate environment. Interest expense was $15.7 million lower for the six months ended May 31, 2020 than the same period of the prior year. That decline was primarily due to a decrease in average borrowings, a lower interest rate environment and the favorable impact of the cross currency interest rate swap contracts entered into during February 2019. Other income, net for the three and ~~nine~~six months ended ~~August~~May 31, ~~2019 increased~~2020 decreased by ~~$2.1~~$3.2 million and ~~$5.8~~$3.8 million, respectively, from the ~~2018~~2019 levels due principally to ~~higher~~lower non-service cost income associated with our pension and postretirement benefit plans ~~as well as to higher~~and lower interest income in the three and ~~nine~~six months ended ~~August~~May 31, ~~2019, each as compared to the corresponding 2018 periods.~~2020.

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	Three months ended						Nine months ended							Three months ended									Six months ended
	August 31, 2019			August 31, 2018			August 31, 2019			August 31, 2018				May 31, 2020			May 31, 2019			May 31, 2020			May 31, 2019
Income from consolidated operations before income taxes	$	219.1		$	190.0		$	551.1		$	482.4		Income from consolidated operations before income taxes	$	226.1		$	172.0		$	390.5		$	332.0
Income tax expense (benefit)	36.8			24.9			91.0			(213.1		)
Income tax expense													Income tax expense	40.4			32.1			70.5			54.2
Effective tax rate	16.8		%	13.1		%	16.5		%	(44.2		)%	Effective tax rate	17.9		%	18.7		%	18.1		%	16.3		%

The provision for income taxes is based on the then-current estimate of the annual effective tax rate adjusted to reflect the tax impact of items discrete to the fiscal period. We record tax expense or tax benefits that do not relate to ordinary income in the current fiscal year discretely in the period in which such items occur pursuant to the requirements of GAAP. Examples of such types of discrete items not related to ordinary income of the current fiscal year include, but are not limited to, excess tax benefits related to share-based compensation, changes in estimates of the outcome of tax matters related to prior years (including reversals of reserves upon the lapsing of statutes of limitations), provision-to-return adjustments, the settlement of tax audits, ~~and, beginning~~changes in ~~2019,~~the assessment of deferred tax valuation allowances, and the tax effects of intra-entity asset transfers (other than inventory).

Income taxes for the three months ended ~~August~~May 31, ~~2019~~2020 included ~~$15.5~~$16.5 million of discrete tax benefits consisting principally of the following: (i) ~~$8.3~~$9.3 million of tax benefits associated with the release of a valuation allowance due to a change in judgment about realizability of deferred tax assets, (ii) $4.0 million of excess tax benefits associated with share-based ~~compensation;~~compensation, and (iii) $3.2 million of tax benefits related to the reversal of unrecognized tax benefits and related interest associated with the expiration of a statute of limitations in a non-U.S. jurisdiction. Income taxes for the six months ended May 31, 2020 included $26.9 million of discrete tax benefits consisting principally of; (i) $9.9 million of tax benefits associated with an intra-entity asset transfer that occurred during the first quarter; (ii) ~~$2.4~~$9.3 million of tax benefits associated with the release of a valuation allowance due to a change in judgment about realizability of deferred tax assets; (iii) $5.7 million of excess tax benefits associated with share-based compensation, (iv) $3.4 million of tax benefits related to the reversal of unrecognized tax benefits and related interest associated with the expiration of statutes of ~~limitation~~limitations in ~~several~~non-U.S. jurisdictions; ~~(iii) $2.5~~and (v) $1.4 million of expense related to the revaluation of deferred tax liabilities resulting from enacted legislation ~~enacted~~ in acertain non-U.S. ~~jurisdiction; and (iv) $2.3 million for an adjustment to a prior year tax accrual based on the final return filed, including $1.5 million associated with the U.S. Tax Act, described below.~~ jurisdictions.

Income taxes for the ~~nine~~three months ended ~~August~~May 31, 2019 included ~~$44.4~~$11.3 million of discrete tax benefits consisting principally of ~~the following: (i) $21.2 million of~~ excess tax benefits associated with share-based ~~compensation; (ii)~~compensation. Income tax expense for the six months ended May 31, 2019 included $28.9 million of discrete tax benefits consisting principally of $16.2 million of tax benefits associated with an intra-entity asset transfer that occurred during the first quarter, ~~under the provisions of ASU No. 2016-16, which was adopted on December 1, 2018; (iii) $2.6 million related to the reversal of unrecognized tax benefits~~ and related interest associated with the expiration of statutes of limitation in several jurisdictions; (iv) $2.1 million related to the revaluation of deferred tax liabilities resulting from legislation enacted in a non-U.S. jurisdiction; and (v) $2.3 million for an adjustment to a prior year tax accrual based on the final return filed, including $1.5 million associated with the U.S. Tax Act, described below.

Income tax expense for the quarter ended August 31, 2018 included net discrete tax benefits of $20.6 million, including the $10.3 million tax benefit associated with the change in estimate related to the net benefit of the U.S. Tax Act and $7.9 million of excess tax benefits associated with share-based compensation. Income tax expense for the nine months ended August 31, 2018 included net discrete tax benefits of $326.0 million, including the $308.2 million net benefit of the U.S. Tax Act and $12.4$12.9 million of excess tax benefits associated with share-based compensation.

As more fully described in note 8 of notes to the accompanying financial statements, the U.S. Tax Act was enacted in December 2017. The U.S. Tax Act significantly changed U.S. corporate income tax laws by, among other things, reducing the U.S. corporate income tax rate to 21% starting in calendar year 2018 and creating a territorial tax system with a one-time transition tax on previously deferred post-1986 foreign earnings of U.S. subsidiaries. Under GAAP (specifically, ASC Topic 740 ~~Income Taxes~~), the effects of changes in tax rates and laws on deferred tax balances are recognized in the period in which the new legislation is enacted. We recorded a net benefit of $308.2 million associated with the U.S. Tax Act during the nine months ended August 31, 2018. This amount included a $381.4 million benefit from the revaluation of our net U.S. deferred tax liabilities as of January 1, 2018, based on the new lower corporate income tax rate offset, in part, by an estimated net transition tax impact of $73.2 million.


	Three months ended						Six months ended
	May 31, 2020		May 31, 2019		May 31, 2020		May 31, 2019
Income from unconsolidated operations	$	10.2	$	9.5	$	20.6	$	19.6

The Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 (“SAB 118”) on December 23, 2017. SAB 118 provided a one-year measurement period from a registrant’s reporting period that includes the U.S. Tax Act’s enactment date to allow registrants sufficient time to obtain, prepare and analyze information to complete the accounting required under ASC 740. As more fully disclosed in note 8 of notes to the accompanying financial statements, the $308.2 million net benefit recognized during the first nine months of 2018 related to the U.S. Tax Act was provisional and changed during the measurement period, which ended during the quarter ended November 30, 2018, as a result of, among other things, changes in

interpretations and assumptions we made, guidance issued and other actions taken as a result of the U.S. Tax Act different from those previously assumed. As more fully described in note 12 of notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended November 30, 2018, we recognized a $301.5 million income tax benefit, net, associated with the U.S. Tax Act during the fiscal year ended 2018. During the three and nine months ended August 31, 2019, we recorded an additional net benefit of $1.5 million associated with the U.S. Tax Act as part of the adjustment of our fiscal 2018 year-end tax provision to the associated tax return filed in 2019.

Three months ended Nine months ended
August 31, 2019 August 31, 2018 August 31, 2019 August 31, 2018
Income from unconsolidated operations $ 9.6
$ 8.4
$ 29.2
$ 23.9

Income from unconsolidated operations, which is presented net of the elimination of earnings attributable to non-controlling interests, increased by ~~$1.2~~$0.7 million and ~~$5.3~~$1.0 million for the three and ~~nine~~six months ended ~~August~~May 31, ~~2019,~~2020, respectively, as compared to the year-ago periods. The increase for the quarter ended August 31, 2019 was primarily attributable to eliminating a lower level of earnings of our non-controlling interests as compared to the 2018 quarter. The increase for the nine months ended August 31, 2019 was attributable to higher earnings of our unconsolidated affiliates, primarily our largest joint venture, McCormick de Mexico, as well as the impact of eliminating a lower level of earnings of our non-controlling interests, both as compared to the corresponding 2018 periods.period.

The following table outlines the major components of the change in diluted earnings per share from ~~2018~~2019 to ~~2019:~~2020:


	Three months ended May 31,		Six months ended May 31,
2019 Earnings per share – diluted	$	1.12	$	2.22
Increase in operating income	0.27		0.26

Decrease in special charges, net of taxes	0.03		0.03

Decrease in interest expense	0.05		0.10
Decrease in other income	(0.02)		(0.02)
Increase in unconsolidated income	0.01		0.01
Impact of change in effective income tax rate, excluding taxes on special charges	0.01		(0.05)
Impact of higher shares outstanding	(0.01)		(0.01)
2020 Earnings per share – diluted	$	1.46	$	2.54

Three months ended August 31, Nine months ended August 31,
2018 Earnings per share – diluted $ 1.30
$ 5.41
Increase in operating income 0.13
0.24
Impact of net discrete tax benefit recognized as a result of the U.S. Tax Act (0.07 ) (2.31 )
Increase in special charges, net of taxes (0.02 ) (0.02 )
Decrease in transaction and integration expenses attributable to RB Foods acquisition, net of taxes 0.04
0.13
Decrease in interest expense 0.02
0.02
Increase in other income 0.01
0.04
Increase in unconsolidated income 0.01
0.04
Other impact of income taxes 0.02
0.13
Impact of higher shares outstanding (0.01 ) (0.03 )
2019 Earnings per share – diluted $ 1.43
$ 3.65

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RESULTS OF OPERATIONS — SEGMENTS

We measure the performance of our business segments based on operating income, excluding special ~~charges, as well as transaction and integration expenses related to our RB Foods acquisition.~~charges. See note 11 of notes to the accompanying financial statements for additional information on our segment measures as well as for a reconciliation by segment of operating income, excluding special charges, ~~as well as, for 2018, transaction and integration expenses related to our RB Foods acquisition,~~ to consolidated operating income. In the following discussion, we refer to our previously described measure of segment profit as segment operating income.

In fiscal 2019, the Company transferred management responsibility for certain export operations in both its consumer and flavor solutions segments between geographies within each respective segment, shifting from the Americas to the Asia/Pacific regions within each segment, with no change in segment sales or segment operating income for either the consumer or flavor solutions segment in total. The discussion that follows reflects the effect of that realignment of export operations for all periods presented.

CONSUMER SEGMENT


	Three months ended									Six months ended
	May 31, 2020			May 31, 2019			May 31, 2020			May 31, 2019
(in millions)
Net sales	$	962.6		$	764.1		$	1,662.1		$	1,509.0
Percent increase (decrease)	26.0		%	(0.6)		%	10.2		%	(0.3)		%
Segment operating income	$	231.6		$	137.8		$	351.2		$	273.1
Segment operating income margin	24.1		%	18.0		%	21.1		%	18.1		%

Three months ended Nine months ended
August 31, 2019 August 31, 2018 August 31, 2019 August 31, 2018
(in millions)
Net sales $ 794.2
$ 772.4
$ 2,303.2
$ 2,285.8
Percent increase 2.8 % 13.3 % 0.8 % 17.6 %
Segment operating income $ 176.5
$ 152.0
$ 449.6
$ 411.6
Segment operating income margin 22.2 % 19.7 % 19.5 % 18.0 %

In the ~~third~~second quarter of ~~2019,~~2020, sales of our consumer segment increased ~~2.8%~~26.0% as compared to the ~~third~~second quarter of ~~2018~~2019 and ~~rose~~increased by ~~4.0%~~27.8% on a constant currency basis. That 26.0% sales increase was driven by sharply higher sales of our consumer business in the Americas and in EMEA, as government-mandated measures, imposed to mitigate the spread of COVID-19 in the second quarter of 2020, resulted in a shift in consumer behavior toward at-home meal preparation. Favorable volume and product mix increased sales by ~~4.0%~~25.2% in the ~~third~~second quarter of ~~2019~~2020 as compared to the same period last year. That favorable volume and product mix was driven by our consumer operations in the Americas and in EMEA, and was partially offset by reduced volume and unfavorable product mix in the Asia/Pacific region. Pricing actions increased sales by 2.6% as compared to the prior year period. Sales in the quarter reflected an unfavorable impact from foreign currency rates that decreased consumer segment sales by ~~1.2%~~1.8% compared to the year-ago quarter and is excluded from our measure of sales growth of ~~4.0%~~27.8% on a constant currency basis.

In the Americas, consumer sales ~~rose 3.5%~~increased 35.8% in the ~~third~~second quarter of ~~2019~~2020 as compared to the ~~third~~second quarter of ~~2018~~2019 and ~~rose~~increased by ~~3.6%~~36.3% on a constant currency basis. For the ~~third~~second quarter of ~~2019,~~2020, favorable volume and product mix increased sales ~~for the quarter~~ by ~~4.0%~~32.3%, as compared to the corresponding period in ~~2018,~~2019, driven by ~~new product~~increased demand due to the COVID-19 impact on consumer trends toward at-home meal preparation. The increase was broad based with significant growth ~~strong brand marketing, and category management. These improvements were partially offset by~~across the McCormick branded portfolio. In addition, pricing actions, ~~that decreased~~taken in response to increased costs, including tariffs, increased sales by ~~0.4%.~~4.0% as compared to the prior year period. The unfavorable impact of foreign currency rates ~~reduced~~decreased sales by ~~0.1%~~0.5% in the quarter and is excluded from our measure of sales growth of ~~3.6%~~36.3% on a constant currency basis.

In the EMEA region, consumer sales ~~decreased 5.6%~~increased 22.0% in the ~~third~~second quarter of ~~2019~~2020 as compared to the ~~third~~second quarter of ~~2018~~2019 and ~~declined~~increased by ~~2.0%~~26.0% on a constant currency basis. Sales were ~~negatively~~ impacted by ~~unfavorable~~favorable volume and product mix during the quarter that increased sales by 26.4%. This increase was driven by the COVID-19 impact on consumer trends toward at-home meal preparation. The increase was broad based across the region. Pricing actions decreased sales by 1.1%, due in part to unusually warm weather across Europe, which we believe unfavorably impacted consumption, and lower sales of private label products. Pricing actions, which include the impact of payments to our customers for trade promotional activities, decreased sales by 0.9%0.4%. During the ~~third~~second quarter of ~~2019,~~2020, an unfavorable impact from foreign currency rates decreased sales by ~~3.6%~~4.0% compared to the year-ago period and is excluded from our measure of sales ~~decline~~growth of ~~2.0%~~26.0% on a constant currency basis.

In the Asia/Pacific region, consumer sales ~~increased 10.9%~~decreased 17.9% in the ~~third~~second quarter of ~~2019~~2020 and ~~rose~~declined by ~~14.9%~~12.8% on a constant currency basis. For the ~~third~~second quarter of ~~2019, favorable~~2020, unfavorable volume and product mix ~~increased sales for the quarter by 11.6%, which was favorably impacted by the earlier timing of a China national holiday. Pricing actions also increased~~decreased sales by ~~3.3%~~12.5%. The decrease was driven by products related to away from home consumption, mainly due to the COVID-19 disruption in China. An unfavorable impact from foreign currency rates, which decreased sales by ~~4.0%~~5.1% compared to the ~~third~~second quarter of ~~2018,~~2019, is excluded from our measure of sales ~~growth~~decline of ~~14.9%~~12.8% on a constant currency basis.

For the ~~nine~~six months ended ~~August~~May 31, ~~2019,~~2020, our consumer segment sales increased ~~0.8%~~10.2% as compared to the ~~nine~~six months ended ~~August~~May 31, ~~2018~~2019 and increased by ~~3.0%~~11.3% on a constant currency basis. ~~Pricing actions~~That 10.2% sales increase was driven by sharply higher sales of our consumer business in Americas and ~~improved~~EMEA during the three months ended May 31, 2020, as government-mandated measures, imposed to mitigate the spread of COVID-19, resulted in a shift in consumer behavior toward at-home meal preparation. Improved volume and product mix added ~~0.2%~~9.5% to sales and ~~2.8%, respectively,~~pricing actions added 1.8% to sales in the first half of 2020, both in comparison to the prior year levels. An unfavorable impact from foreign currency rates decreased sales by ~~2.2%~~1.1% compared to the prior year and is excluded from our measure of sales growth of ~~3.0%~~11.3% on a constant currency basis.

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Segment operating income for our consumer segment increased by ~~$24.5~~$93.8 million, or ~~16.1%~~68.1%, in the ~~third~~second quarter of ~~2019~~2020 as compared to the ~~third~~second quarter of ~~2018.~~2019. The increase in segment operating income was ~~due~~driven by the higher level of sales, which were primarily associated with the impacts of COVID-19, as previously described, and CCI-led cost savings. Increased conversion costs, distribution expense and higher performance-based employee incentive expense accruals partially offset the increase. On a constant currency basis, segment operating income for our consumer segment increased by 69.8% in the second quarter of 2020 in comparison to the same period in 2019. Segment operating margin for our consumer segment increased by 610 basis points from the second quarter of 2019 to 24.1% in the second quarter of 2020. That increase was principally the result of an increase in consumer gross margin as well as a decrease in SG&A as a percentage of net sales, as compared to the second quarter of 2019. Segment operating margin for the three months ended May 31, 2020 benefited from the leverage of fixed and semi-fixed expenses over a higher sales base than compared to the 2019 level.

We grew segment operating income for our consumer segment by $78.1 million, or 28.6%, for the six months ended May 31, 2020 as compared to the same period in 2019. The increase in segment operating income was driven by the impact of higher sales and CCI-led cost savings. Increased conversion costs, higher distribution expenses, increased brand marketing expenses, increased material costs, higher performance-based employee incentive expense accruals, and higher expenses associated with efforts related to implementation of a global ERP platform partially offset the increase. On a constant currency basis, segment operating income for our consumer segment rose by ~~16.6%~~29.6% in the ~~third quarter of 2019~~six months ended May 31, 2020 in comparison to the same period in 2018. Segment operating margin for our consumer segment improved by 250 basis points from the third quarter of 2018 to 22.2% in the third quarter of 2019, as a result of improvement in gross margin percent and the leverage of fixed and semi-fixed elements of SG&A over the higher sales base in the third quarter of 2019, both as compared to the third quarter of 2018.

Segment operating income for our consumer segment increased by $38.0 million, or 9.2%, for the nine months ended August 31, 2019 as compared to the same period in 2018. The increase in segment operating income was due to CCI-led cost savings and a reduction in advertising and promotion expense as compared to the 2018 period. On a constant currency basis, segment operating income for our consumer segment rose by 10.8% in the nine months ended August 31, 2019 in comparison to the same period in 2018.2019. Segment operating margin for our consumer segment rose by ~~150~~300 basis points in the first ~~nine months~~half of ~~2019~~2020 to ~~19.5%~~21.1%, driven by an ~~improvement~~increase in consumer gross profit margin ~~percent, the previously noted CCI-led cost savings~~ and a ~~reduction~~decrease in ~~advertising and promotion expense, each~~SG&A as a percentage of net sales as compared to the ~~corresponding 2018~~2019 period. Segment operating margin for the six months ended May 31, 2020 benefited from the leverage of fixed and semi-fixed expenses over a higher sales base than compared to the 2019 level.

FLAVOR SOLUTIONS SEGMENT


	Three months ended									Six months ended
	May 31, 2020			May 31, 2019			May 31, 2020			May 31, 2019

Net sales	$	438.5		$	537.8		$	951.0		$	1,024.4
Percent (decrease) increase	(18.5)		%	1.0		%	(7.2)		%	2.1		%
Segment operating income	$	28.7		$	77.4		$	104.3		$	141.1
Segment operating income margin	6.5		%	14.4		%	11.0		%	13.8		%

Three months ended Nine months ended
August 31, 2019 August 31, 2018 August 31, 2019 August 31, 2018

Net sales $ 535.0
$ 545.8
$ 1,559.4
$ 1,549.1
Percent (decrease) increase (2.0 )% 14.0 % 0.7 % 17.0 %
Segment operating income $ 84.7
$ 86.8
$ 225.8
$ 224.0
Segment operating income margin 15.8 % 15.9 % 14.5 % 14.5 %

In the ~~third~~second quarter of ~~2019,~~2020, sales of our flavor solutions segment decreased by ~~2.0%~~18.5% as compared to the ~~third~~second quarter of ~~2018~~2019 and decreased by ~~0.4%~~16.1% on a constant currency basis. Driving that 18.5% decrease in sales was lower demand due to the broad based impact of the COVID-19 disruption on our quick service restaurant and branded food service customers. Unfavorable volume and product mix ~~reduced~~decreased segment sales by ~~0.6%~~17.7% as compared to the ~~third~~second quarter of 2019, while pricing actions during the period increased sales by ~~0.2%~~1.6%. AnThe unfavorable impact ~~from~~of foreign currency rates decreased flavor solutions segment sales by ~~1.6%~~2.4% compared to the year-ago quarter and is excluded from our measure of sales decline of ~~0.4%~~16.1% on a constant currency basis.

In the Americas, flavor solutions sales decreased by ~~1.7%~~15.0% during the ~~third~~second quarter of 2019 from the prior year level on both an actual and constant currency basis. Unfavorable volume and product mix reduced flavor solutions sales in the Americas by 1.6% during the third quarter of 2019, driven primarily by the timing of customer activities, including promotional activities and new product launches, which were more favorable in the third quarter of fiscal 2018 than in the third quarter of fiscal 2019. In addition, sales were impacted by the segment's warehouse expansion activities during the third quarter, which constrained our sales growth in the period. Pricing actions during the quarter ended August 31, 2019 also reduced sales by 0.1%2020 as compared to the prior year ~~period.~~

In the EMEA region, flavor solutions sales in the third quarter of 2019 decreased by 2.0% from the prior year level but increased by 4.3% on a constant currency basis. Improved volume and product mix increased segment sales by 2.8% as compared to the corresponding period in 2018. The growth was attributable to both the base business and new products. In addition, pricing actions increased sales by 1.5% in the third quarter of 2019 over the prior period level. An unfavorable impact from foreign currency rates decreased sales by 6.3% compared to the third quarter of 2018 and is excluded from our measure of sales growth of 4.3% on a constant currency basis.

~~In the Asia/Pacific region, flavor solutions sales decreased 3.9% in the third quarter of 2019 from the prior year~~ level, and decreased ~~0.9%~~by 13.4% on a constant currency basis. Unfavorable volume and product mix decreased flavor solutions sales in the Americas by 15.0% during the second quarter of 2020, driven by lower sales to quick service restaurant and branded food service customers, which ~~included~~was partially offset by increased sales to packaged food companies. Pricing actions during the ~~unfavorable timing of customers' promotional activities and the exit of certain low margin business, decreased~~quarter ended May 31, 2020 increased sales by ~~0.7% and pricing actions decreased sales by 0.2%, both~~1.6% as compared to the prior year period. An unfavorable impact from foreign currency rates decreased sales by ~~3.0%~~1.6% compared to the ~~third~~second quarter of ~~2018~~2019 and is excluded from our measure of sales decline of ~~0.9%~~13.4% on a constant currency basis.

~~For~~

In the ~~nine months ended August 31, 2019,~~EMEA region, flavor solutions ~~segment~~ sales ~~increased 0.7%, as compared to~~in the second quarter of 2020 decreased by 34.3% from the prior year level and ~~increased~~decreased by ~~3.2%~~30.6% on a constant currency basis. ~~Flavor solutions segment sales rose in the first nine months of 2019 due to favorable~~Unfavorable volume and product mix ~~that~~decreased segment sales by 32.8% as compared to the corresponding period in 2019. The decline was primarily attributable to decreased sales to quick service restaurants in addition to lower branded foodservice sales, partially offset by higher demand from packaged food companies. Pricing actions increased sales by ~~2.7%.~~2.2% in the second quarter of 2020 as compared the prior period level. An unfavorable impact from foreign currency rates decreased sales by 3.7% compared to the second quarter of 2019 and is excluded from our measure of sales decline of 30.6% on a constant currency basis.

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In the Asia/Pacific region, flavor solutions sales decreased 11.3% in the second quarter of 2020 from the prior year level and decreased 6.2% on a constant currency basis. Unfavorable volume and product mix reduced sales by 6.5%, driven by the impact of COVID-19 on sales to our flavor solutions customers outside of China during the second quarter of 2020. Pricing actions ~~also~~ increased sales by ~~0.5%~~0.3% as compared to the prior year period. An unfavorable impact from foreign currency rates decreased sales by ~~2.5% from~~5.1% compared to the ~~2018 levels~~second quarter of 2019 and is excluded from our measure of sales ~~growth~~decline of ~~3.2%~~6.2% on a constant currency basis.

For the six months ended May 31, 2020, our flavor solutions sales declined 7.2% compared to the six months ended May 31, 2019 and decreased by 6.0% on a constant currency basis. Driving that 7.2% decrease in sales was lower demand during the second quarter due to the broad based impact of the COVID-19 disruption on our restaurant and branded food service customers. Volume and product mix contributed 7.4% of the decline and was partially offset by pricing actions which added 1.4% to sales for the first half of 2020, both in comparison to the prior year levels. An unfavorable impact from foreign currency rates decreased sales by 1.2% compared to the prior year and is excluded from our measure of sales decline of 6.0% on a constant currency basis.

Segment operating income for our flavor solutions segment decreased by ~~$2.1~~$48.7 million, or ~~2.4%~~62.9%, in the ~~third~~second quarter of ~~2019~~2020 as compared to the ~~third~~second quarter of ~~2018.~~2019. The decrease in segment operating income was driven by lower ~~sales.~~sales and higher conversion costs, including the impact of lower production volumes and inventory provisions, which were partially offset by CCI-led cost savings. On a constant currency basis, segment operating income for our flavor solutions segment decreased by 60.7% in the second quarter of 2020 as compared to the same period in 2019. Segment operating margin for our flavor solutions segment decreased by 790 basis points to 6.5% in the second quarter of 2020, due to a decrease in gross margin and increased SG&A as a percentage of net sales as compared to the prior year period. Segment operating margin for the three months ended May 31, 2020 declined due to the deleveraging impact of fixed and semi-fixed expenses over a lower sales base as compared to the 2019 period.

Segment operating income for our flavor solutions segment decreased by $36.8 million, or 26.1%, for the six months ended May 31, 2020 as compared to the same period of 2019. The decrease in segment operating income was driven by lower sales, increased conversion costs, including the impact of lower production volumes, and increased material costs. On a constant currency basis, segment operating income for our flavor solutions segment declined by ~~0.8%~~24.9% in the ~~third quarter of 2019 as compared~~six months ended May 31, 2020, in comparison to the same period in ~~2018.~~2019. Segment operating margin for our flavor solutions segment ~~declined~~decreased by 10280 basis points ~~to 15.8%~~ in the ~~third quarter~~first half of ~~2019, as a decrease in~~2020 to 11.0%, driven by lower segment gross margin ~~percent was partially offset by reduced~~and an increase in SG&A ~~costs~~ as a percentage of net ~~sales.~~

sales compared to the first six months of 2019. Segment operating ~~income for our flavor solutions segment increased by $1.8 million, or 0.8%,~~margin for the ~~nine~~six months ended ~~August~~May 31, ~~2019~~2020 declined due to the deleveraging impact of fixed and semi-fixed expenses over a lower sales base as compared to the same period of 2018. The increase in segment operating income was driven by higher sales. On a constant currency basis, segment operating income for our flavor solutions segment rose by 3.3% in the nine months ended August 31, 2019 in comparison to the same period in 2018. Segment operating margin of 14.5% for our flavor solutions segment was flat in the first nine months of 2019 as compared to the prior year period, as a decrease in gross margin percent was offset by lower SG&A costs as a percentage of net sales.period.

MARKET RISK SENSITIVITY

We are subject to market risk sensitivities, including those related to foreign exchange, interest rates, commodity risks and credit risks.The uncertainty that exists with respect to the economic impact of the global COVID-19 pandemic has introduced significant volatility in the financial markets during 2020.

Foreign Exchange Risk

We are potentially exposed to foreign currency risk affecting net investments in subsidiaries, transactions (both third-party and intercompany) and earnings denominated in foreign currencies. Management assesses foreign currency risk based on transactional cash flows and translational ~~volatility. We utilize foreign currency exchange~~volatility and may enter into forward contract and currency ~~swap contracts~~swaps with highly-rated financial institutions to ~~enhance our ability to manage foreign~~reduce fluctuations in the long or short currency ~~exchange risk.~~positions. We do not enter into contracts for trading purposes, nor are we a party to any leveraged derivative ~~instruments and all~~instruments. All derivatives are designated as hedges.

The following table sets forth the notional values and unrealized net gain (loss) of the portfolio of our forward foreign currency and cross currency swap contracts:


	May 31, 2020		May 31, 2019		November 30, 2019
Forward foreign currency:
Notional value	$	371.4	$	528.2	$	489.2
Unrealized net gain (loss)	7.7		5.3		(0.3)
Cross currency swaps:
Notional value	484.9		492.6		495.5
Unrealized net (loss) gain	(0.8)		(0.6)		3.2

August 31, 2019 August 31, 2018 November 30, 2018
Forward foreign currency:
  Notional value $ 455.3
$ 430.4
$ 494.9
  Unrealized net gain (loss) (2.4 ) (3.6 ) (2.0 )
Cross currency swaps:
  Notional value 480.3
—
—
  Unrealized net gain (loss) 0.6
—
—

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The outstanding notional value is a result of our decisions on foreign currency exposure coverage, based on our foreign currency and foreign currency translation exposures.

Interest Rate Risk

We manage our interest rate exposure by entering into both fixed and variable rate debt arrangements. We also use interest rate swaps to minimize worldwide financing costs and to achieve a desired mix of fixed and variable rate debt. We do not enter into contracts for trading purposes, nor are we a party to any leveraged derivative instruments and all derivatives are designated as hedges.

The following table sets forth the notional values and fair values of our interest rate swap contracts:


	August 31, 2019		August 31, 2018			November 30, 2018				May 31, 2020		May 31, 2019		November 30, 2019
Notional value	$	350.0	$	100.0		$	100.0		Notional value	$	350.0	$	350.0	$	350.0
Unrealized net gain (loss)	28.2		(6.0		)	(6.4		)
Unrealized net gain									Unrealized net gain	47.1		12.1		20.9

The change in fair values of our interest rate swap contracts is due to changes in interest rates on the notional amounts outstanding as of each date as well as the remaining duration of our interest rate derivatives.

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. Our most significant raw materials are pepper, dairy products, garlic, vanilla, capsicums (red peppers and paprika), onion, wheat flour and rice. 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. To the extent that we have used derivatives for this purpose, it has not been material to our business.

Credit Risk

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. Some of our customers and counterparties are highly leveraged. We continue to closely monitor the credit worthiness of our customers and ~~counterparties.~~counterparties, particularly in light of the evolving financial impact of COVID-19. We believe that our allowance for doubtful accounts properly recognizes trade receivables at realizable value. We consider nonperformance credit risk for other financial instruments to be insignificant.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

As of ~~August~~May 31, ~~2019,~~2020, other than the $500.0 million issuance of long-term debt which is more fully described in note 3 of the notes to condensed consolidated financial statements included in Item 1, there have been no material changes in our contractual obligations and commercial commitments outside the ordinary course of business since November 30, ~~2018, other than the cross currency swap that we entered into during the first quarter of 2019 as described in note 4 of notes to the accompanying financial statements.~~2019.

NON-GAAP FINANCIAL MEASURES

The following table includes financial measures of adjusted operating income, adjusted income ~~taxes,~~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 associated with certain actions undertaken by the Company 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. Upon presentation of any such proposed action (including details with respect to estimated costs, which generally consist principally of employee severance and related benefits, together with ancillary costs associated with the action that may include a non-cash component or a component which relates to inventory adjustments that are included in cost of goods sold; impacted employees or operations; expected timing; and expected savings) to the Management Committee and the Committee’s advance approval, expenses associated with the approved action are classified as special charges upon recognition and monitored on an on-going basis through completion. In 2018, we also included in special charges, as approved by our Management Committee, expense associated with a one-time payment, made to eligible U.S. hourly employees, to distribute a portion of the non-recurring net income tax benefit recognized in connection with the enactment of the U.S. Tax Act as that non-recurring income tax benefit is excluded from our computation of adjusted income taxes, adjusted net income and adjusted diluted earnings per share, each a non-GAAP measure.

•

~~Transaction and integration costs associated with the RB Foods acquisition~~ – We exclude certain costs associated with our acquisition of RB Foods in August 2017 and its subsequent integration into the Company. Such costs, which we refer to as “Transaction and integration costs”, include transaction costs associated with the acquisition, as well as integration costs following the acquisition. The size of this acquisition and related costs, and therefore the impact on the comparability of our results, distinguishes it from our past, recent and smaller acquisitions, the costs of which have not been excluded from our non-GAAP financial measures.

•

~~Income taxes associated with the U.S. Tax Act~~ – In connection with the enactment of the U.S. Tax Act in December 2017, we recorded a net income tax benefit of $10.3 million and $308.2 million during the three and nine months ended August 31, 2018, which included the estimated impact of the tax benefit from revaluation of net U.S. deferred tax liabilities based on the lower corporate income tax rate and the tax expense associated with the one-time transition tax on previously unremitted earnings of non-U.S. subsidiaries. We recorded an additional net income tax benefit of $1.5 million during the three and nine months ended August 31,

•Special charges – Special charges consist of expenses associated with certain actions undertaken by the Company 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. Upon presentation of any such proposed action (including details with respect to estimated costs, which generally consist principally of employee severance and related benefits, together with ancillary costs associated with the action that may include a non-cash component or a component which relates to inventory adjustments that are included in cost of goods sold; impacted employees or operations; expected timing; and expected savings) to the Management Committee and the Committee’s advance approval, expenses associated with the approved action are classified as special charges upon recognition and monitored on an on-going basis through completion.

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•Income taxes associated with the U.S. Tax Act – We recorded a net income tax benefit of $1.5 million during the year ended November 30, 2019 associated with a U.S Tax Act related provision to return adjustment.

Details with respect to the composition of special charges ~~transaction and integration expenses, and income taxes associated with the U.S. Tax Act recorded for the periods and in the amounts~~ set forth below are included in ~~notes~~note 2 ~~3 and 8~~ of notes to the accompanying financial statements and in the financial statements included in our Annual Report on Form 10-K for the year ended November 30, ~~2018.~~

2019.

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 considered 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.

A reconciliation of these non-GAAP financial measures to the related GAAP financial measures follows:


	For the year ended November 30, 2019			For the three months ended												For the six months ended
							May 31, 2020				May 31, 2019				May 31, 2020				May 31, 2019




Operating income	$	957.7		$	257.4			$	208.1			$	451.6			$	405.0

Impact of special charges	20.8			2.9				7.1				3.9				9.2
Adjusted operating income	$	978.5		$	260.3			$	215.2			$	455.5			$	414.2
Adjusted operating income margin ⁽¹⁾	18.3		%	18.6		%		16.5		%		17.4		%		16.3		%





Income tax expense	$	157.4		$	40.4			$	32.1			$	70.5			$	54.2
Impact of special charges	4.7			0.9				1.7				1.2				2.2

Non-recurring benefit, net, of the U.S. Tax Act⁽²⁾	1.5			—				—				—				—
Adjusted income tax expense	$	163.6		$	41.3			$	33.8			$	71.7			$	56.4
Adjusted income tax rate ⁽³⁾	19.5		%	18.0		%		18.9		%		18.2		%		16.5		%

Net income	$	702.7		$	195.9			$	149.4			$	340.6			$	297.4

Impact of special charges	16.1			2.0				5.4				2.7				7.0
Non-recurring benefit, net, of the U.S. Tax Act ⁽²⁾	(1.5)			—				—				—				—

Adjusted net income	$	717.3		$	197.9			$	154.8			$	343.3			$	304.4

Earnings per share – diluted	$	5.24		$	1.46			$	1.12			$	2.54			$	2.22

Impact of special charges	0.12			0.01				0.04				0.02				0.05
Non-recurring benefit, net, of the U.S. Tax Act ⁽²⁾	(0.01)			—				—				—				—

Adjusted earnings per share – diluted	$	5.35		$	1.47			$	1.16			$	2.56			$	2.27

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For the year ended November 30, 2018 For the three months ended For the nine months ended Estimated for the year ending November 30, 2019
August 31, 2019 August 31, 2018 August 31, 2019 August 31, 2018
Operating income $ 891.1
$ 253.5
$ 229.9
$ 658.5
$ 599.6

Impact of transaction and integration expenses 22.5
—
5.6
—
22.1

Impact of special charges
16.3
7.7
3.3
16.9
13.9

Adjusted operating income $ 929.9
$ 261.2
$ 238.8
$ 675.4
$ 635.6

Adjusted operating income margin (1)
17.5 % 19.7 % 18.1 % 17.5 % 16.6 %

Income tax expense (benefit) $ (157.3 ) $ 36.8
$ 24.9
$ 91.0
$ (213.1 )
Non-recurring benefit, net, of the U.S. Tax Act (2)
301.5
1.5
10.3
1.5
308.2

Impact of transaction and integration expenses 4.9
—
1.3
—
4.8

Impact of special charges 3.8
1.6
0.8
3.8
3.3

Adjusted income tax expense $ 152.9
$ 39.9
$ 37.3
$ 96.3
$ 103.2

Adjusted income tax rate (3)
19.6 % 17.6 % 18.8 % 17.0 % 19.9 %

Net income $ 933.4
$ 191.9
$ 173.5
$ 489.3
$ 719.4

Impact of transaction and integration expenses 17.6
—
4.3
—
17.3

Impact of special charges 12.5
6.1
2.5
13.1
10.6

Non-recurring benefit, net, of the U.S. Tax Act (2)
(301.5 ) (1.5 ) (10.3 ) (1.5 ) (308.2 )
Adjusted net income $ 662.0
$ 196.5
$ 170.0
$ 500.9
$ 439.1

Earnings per share – diluted $ 7.00
$ 1.43
$ 1.30
$ 3.65
$ 5.41
$5.20 to $5.25
Impact of transaction and integration expenses 0.13
—
0.04
—
0.13
—
Impact of total special charges 0.10
0.04
0.02
0.10
0.08
0.11
Non-recurring benefit, net, of the U.S. Tax Act (2)
(2.26 ) (0.01 ) (0.08 ) (0.01 ) (2.32 ) (0.01 )
Adjusted earnings per share – diluted $ 4.97
$ 1.46
$ 1.28
$ 3.74
$ 3.30
$5.30 to $5.35




(1)
~~(1)~~	Adjusted operating income margin is calculated as adjusted operating income as a percentage of net sales for each period presented.

(2)		The non-recurring income tax benefit, net, associated with enactment of the U.S. Tax Act of ~~$10.3 million and $308.2 million for the three- and nine-month periods ended August 31, 2018, respectively, of $301.5~~$1.5 million for the year ended November 30, ~~2018, and of $1.5 million for the three- and nine-month periods ended August 31,~~ 2019 is more fully described in ~~note 8 of notes to~~our Annual Report on Form 10-K for the ~~accompanying financial statements.~~ year ended November 30, 2019.

(3)		Adjusted income tax rate is calculated as adjusted income tax expense as a percentage of income from consolidated operations before income taxes excluding special charges ~~and for the 2018 periods, transaction and integration expenses,~~ or ~~$226.8~~$229.0 million and ~~$568.0~~$394.4 million for the three and ~~nine~~six months ended ~~August~~May 31, ~~2019,~~2020, respectively; ~~$198.9~~$179.1 million and ~~$518.4~~$341.2 million for the three and ~~nine~~six months ended ~~August~~May 31, ~~2018,~~2019, respectively; and ~~$780.1~~$840.0 million for the year ended November 30, ~~2018.~~ 2019.

Because we are a multi-national company, we are subject to variability of our reported U.S. dollar results due to changes in foreign currency exchange rates. Those changes have been volatile over the past several years. The exclusion of the effects of foreign currency exchange, or what we refer to as amounts expressed “on a constant currency basis”, is a non-GAAP measure. We believe that this non-GAAP measure provides additional information that enables enhanced comparison to prior periods excluding the translation effects of changes in rates of foreign currency exchange and provides additional insight into the underlying performance of our operations located outside of the U.S. It should be noted that our presentation herein of amounts and percentage 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 period 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 corresponding period of 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 fiscal period and the corresponding period of the prior fiscal year.

Constant currency growth rates follow:


	Three Months Ended May 31, 2020
	Percentage Change as Reported		Impact of Foreign Currency Exchange		Percentage Change on Constant Currency Basis
Net sales:
Consumer segment:
Americas	35.8	%	(0.5)	%	36.3	%
EMEA	22.0	%	(4.0)	%	26.0	%
Asia/Pacific	(17.9)	%	(5.1)	%	(12.8)	%
Total Consumer	26.0	%	(1.8)	%	27.8	%
Flavor Solutions segment:
Americas	(15.0)	%	(1.6)	%	(13.4)	%
EMEA	(34.3)	%	(3.7)	%	(30.6)	%
Asia/Pacific	(11.3)	%	(5.1)	%	(6.2)	%
Total Flavor Solutions	(18.5)	%	(2.4)	%	(16.1)	%
Total net sales	7.6	%	(2.0)	%	9.6	%

Adjusted operating income:
Consumer segment	68.1	%	(1.7)	%	69.8	%
Flavor Solutions segment	(62.9)	%	(2.2)	%	(60.7)	%
Total adjusted operating income	21.0	%	(1.9)	%	22.9	%

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	Three Months Ended August 31, 2019							Six Months Ended May 31, 2020
	Percentage Change as Reported		Impact of Foreign Currency Exchange		Percentage Change on Constant Currency Basis			Percentage Change as Reported		Impact of Foreign Currency Exchange		Percentage Change on Constant Currency Basis
Net sales:							Net sales:
Consumer segment:							Consumer segment:
Americas	3.5	%	(0.1	)%	3.6	%	Americas	18.1	%	(0.2)	%	18.3	%
EMEA	(5.6	)%	(3.6	)%	(2.0	)%	EMEA	10.5	%	(2.7)	%	13.2	%
Asia/Pacific	10.9	%	(4.0	)%	14.9	%	Asia/Pacific	(24.2)	%	(3.0)	%	(21.2)	%
Total Consumer	2.8	%	(1.2	)%	4.0	%	Total Consumer	10.2	%	(1.1)	%	11.3	%
Flavor Solutions segment:							Flavor Solutions segment:
Americas	(1.7	)%	—	%	(1.7	)%	Americas	(5.2)	%	(0.6)	%	(4.6)	%
EMEA	(2.0	)%	(6.3	)%	4.3	%	EMEA	(14.0)	%	(2.2)	%	(11.8)	%
Asia/Pacific	(3.9	)%	(3.0	)%	(0.9	)%	Asia/Pacific	(7.6)	%	(3.3)	%	(4.3)	%
Total Flavor Solutions	(2.0	)%	(1.6	)%	(0.4	)%	Total Flavor Solutions	(7.2)	%	(1.2)	%	(6.0)	%
Total net sales	0.8	%	(1.4	)%	2.2	%	Total net sales	3.1	%	(1.2)	%	4.3	%

Adjusted operating income:							Adjusted operating income:
Consumer segment	16.1	%	(0.5	)%	16.6	%	Consumer segment	28.6	%	(1.0)	%	29.6	%
Flavor Solutions segment	(2.4	)%	(1.6	)%	(0.8	)%	Flavor Solutions segment	(26.1)	%	(1.2)	%	(24.9)	%
Total adjusted operating income	9.4	%	(0.9	)%	10.3	%	Total adjusted operating income	10.0	%	(1.1)	%	11.1	%

Nine Months Ended August 31, 2019
Percentage Change as Reported Impact of Foreign Currency Exchange Percentage Change on Constant Currency Basis
Net sales:
Consumer segment:
Americas 2.6 % (0.3 )% 2.9 %
EMEA (5.9 )% (5.9 )% — %
Asia/Pacific 1.0 % (5.5 )% 6.5 %
Total Consumer 0.8 % (2.2 )% 3.0 %
Flavor Solutions segment:
Americas 2.0 % (0.5 )% 2.5 %
EMEA (1.0 )% (8.3 )% 7.3 %
Asia/Pacific (4.4 )% (4.6 )% 0.2 %
Total Flavor Solutions 0.7 % (2.5 )% 3.2 %
Total net sales 0.7 % (2.3 )% 3.0 %

Adjusted operating income:
Consumer segment 9.2 % (1.6 )% 10.8 %
Flavor Solutions segment 0.8 % (2.5 )% 3.3 %
Total adjusted operating income 6.3 % (1.9 )% 8.2 %

To present “constant currency” information for the fiscal year 2019 projection, projected sales and adjusted operating income for entities reporting in currencies other than the U.S. dollar are translated into U.S. dollars at the company’s budgeted exchange rates for 2019 and are compared to the 2018 results, translated into U.S. dollars using the same 2019 budgeted exchange rates, rather than at the average actual exchange rates in effect during fiscal year 2018. To estimate the percentage change in adjusted earnings per share on a constant currency basis, a similar calculation is performed to arrive at adjusted net income divided by historical shares outstanding for fiscal year 2018 or projected shares outstanding for fiscal year 2019, as

~~appropriate.~~



	~~Projection for Year Ending November 30, 2019~~
~~Percentage change in net sales~~	~~1% to 2%~~
~~Impact of unfavorable foreign currency exchange rates~~	2%
~~Percentage change in net sales in constant currency~~	~~3% to 4%~~



	~~Projection for Year Ending November 30, 2019~~
~~Percentage change in adjusted operating income~~	~~6% to 7%~~
~~Impact of unfavorable foreign currency exchange rates~~	2%
~~Percentage change in adjusted operating income in constant currency~~	~~8% to 9%~~



	~~Projection for Year Ending November 30, 2019~~
~~Percentage change in adjusted earnings per share~~	~~7% to 8%~~
~~Impact of unfavorable foreign currency exchange rates~~	2%
~~Percentage change in adjusted earnings per share in constant currency~~	~~9% to 10%~~

In addition to the preceding non-GAAP financial measures, we use a leverage ratio that is determined using non-GAAP measures. A leverage ratio is a widely-used measure of ability to repay outstanding debt ~~obligations and is a meaningful metric to investors in evaluating financial leverage.~~obligations. We believe that our leverage ratio is a meaningful metric to investors in evaluating our financial leverage and may be different than the method used by other companies to calculate such a leverage ratio. We determine our leverage ratio as net debt (which iswe define as total debt, net of cash in excess of $75.0 million) to adjusted earnings before interest, ~~tax,~~income taxes, depreciation and amortization ~~(Adjusted EBITDA)~~("Adjusted EBITDA"). We define Adjusted EBITDA as net income plus expenses for interest, income taxes, depreciation and amortization, less interest income and as further adjusted for cash and non-cash acquisition-related expenses (which may include the effect of the fair value adjustment of acquired inventory on cost of goods sold), special charges, stock-based compensation expense, and certain gains or losses (which may include third party fees and expenses and integration costs). Adjusted EBITDA and our leverage ratio are both non-GAAP financial measures. Our determination of the leverage ratio is consistent with the terms of our $1.0 billion revolving credit facility and the Term Loan which requires us to maintain our leverage ratio below certain levels. Under those agreements, the applicable leverage ratio is reduced annually on November 30th. As of ~~August~~May 31, ~~2019,~~2020, our capacity under the revolving credit facility is not affected by these covenants. We do not expect that these covenants would limit our access to our revolving credit facility for the foreseeable future; however, the leverage ratio could restrict our ability to utilize this facility. We expect to comply with this financial covenant for the foreseeable future.

The following table reconciles our net income to Adjusted EBITDA for the trailing twelve-month periods ended ~~August~~May 31, ~~2019, August~~2020, May 31, ~~2018~~2019 and November 30, ~~2018:~~2019:


	May 31, 2020		May 31, 2019		November 30, 2019
Net income	$	745.9	$	684.9	$	702.7
Depreciation and amortization	161.3		155.6		158.8
Interest expense	149.5		174.0		165.2
Income tax expense	173.7		134.9		157.4
EBITDA	$	1,230.4	$	1,149.4	$	1,184.1
Adjustments to EBITDA ⁽¹⁾	47.3		44.9		47.9
Adjusted EBITDA	$	1,277.7	$	1,194.3	$	1,232.0

Net debt	$	4,177.0	$	4,606.3	$	4,243.8

Leverage ratio ⁽¹⁾	3.3		3.9		3.4

August 31, 2019 August 31, 2018 November 30, 2018
Net income $ 703.3
$ 895.1
$ 933.4
Depreciation and amortization 157.1
147.2
150.7
Interest expense 170.6
175.5
174.6
Income tax expense (benefit) 146.8
(155.4 ) (157.3 )
EBITDA $ 1,177.8
$ 1,062.4
$ 1,101.4
Adjustments to EBITDA (1)(2)
44.8
96.6
57.3
Adjusted EBITDA $ 1,222.6
$ 1,159.0
$ 1,158.7

Net debt $ 4,558.1
$ 4,985.1
$ 4,674.8

Leverage ratio (1)
3.7
4.3
4.0

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(1)			Adjustments to EBITDA are determined under the leverage ratio covenant in our $1.0 billion revolving credit and term loan agreements and includes special charges, share-based compensation expense, and ~~transaction and integration costs (related to the RB Foods acquisition), including other debt costs.~~ interest income.
~~(2)~~			~~The leverage ratio covenant in our $1.0 billion revolving credit facility and the Term Loan provide that Adjusted EBITDA also includes the pro forma impact of acquisitions.~~

LIQUIDITY AND FINANCIAL CONDITION


	Nine months ended							Six months ended
	August 31, 2019			August 31, 2018				May 31, 2020		May 31, 2019

Net cash provided by operating activities	$	494.6		$	389.0		Net cash provided by operating activities	$	355.5	$	314.2
Net cash used in investing activities	(104.5		)	(113.4		)	Net cash used in investing activities	(85.2)		(54.0)
Net cash used in financing activities	(319.2		)	(392.7		)	Net cash used in financing activities	(230.5)		(220.7)

In the statement of cash flows, 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. Accordingly, the amounts in the statement of cash flows do not agree with changes in the operating assets and liabilities that are presented in the balance sheet.

Due to the cyclical nature of a portion of our business, we generate much of our cash flow in 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.

Operating Cash Flow — Net cash provided by operating activities (“cash flow from operations”) is ~~typically~~historically lower in the first and second quarters and then ~~builds~~has built in the third and fourth quarters of our fiscal year. For the ~~nine~~six months ended ~~August~~May 31, ~~2019,~~2020, cash flow from operations of $355.5 million increased by ~~$105.6~~$41.3 million ~~over~~from the same period of ~~2018.~~2019. The ~~2019~~2020 increase was primarily driven by ~~higher~~an increase of $43.2 million in net income ~~exclusive of the non-cash non-recurring net income tax benefit of $308.2 million related to the U.S. Tax Act recognized~~ in the ~~first nine~~six months ~~of 2018, and a net improvement in other operating assets and liabilities.~~ended May 31, 2020 over the prior year level.

Investing Cash Flow — Cash used in investing activities ~~declined~~increased by ~~$8.9~~$31.2 million to ~~$104.5~~$85.2 million for the ~~nine~~six months ended ~~August~~May 31, ~~2019,~~2020, compared to ~~$113.4~~$54.0 million for the corresponding period in ~~2018. Of that decline, $4.2 million represented a cash payment in the first quarter of 2018 due to a purchase price adjustment related to our acquisition of RB Foods.~~2019. During the first ~~nine~~six months of ~~2019,~~2020, capital expenditures ~~decreased~~increased by ~~$5.5~~$33.0 million from the ~~2018~~2019 level to ~~$107.1~~$87.1 million. ~~Capital~~We expect 2020 capital expenditures ~~for fiscal year 2019 are expected~~ to ~~be approximately $185 million to support our planned growth and other initiatives.~~approximate $215 million.

Financing Cash Flow — Financing activities used cash of ~~$319.2~~$230.5 million for the first ~~nine~~six months of ~~2019,~~2020, as compared to ~~$392.7~~$220.7 million for the corresponding period in ~~2018.~~2019. The primary drivers behind this change were as follows.

In the first ~~nine~~six months of ~~2019,~~2020, our net borrowing activities used cash of ~~$90.2~~$62.3 million as compared to ~~a cash use of $176.6~~$48.0 million in the first ~~nine~~six months of ~~2018.~~2019. In the first ~~nine~~six months of ~~2019,~~2020, we ~~increased~~issued $500 million of long-term debt with net proceeds from the issuance of $495.0 million. We also paid $1.1 million in costs associated with the debt issuance. In the first six months of 2020, we decreased our short-term borrowings, on a net basis, by ~~$124.4~~$514.5 million as compared to ~~a $386.1~~an increase of $45.6 million ~~increase~~ during the comparable ~~2018~~2019 period. During the ~~nine~~six months ended ~~August~~May 31, 2020 and 2019, we repaid ~~$214.6~~$41.7 million and $93.6 million, respectively, of long-term ~~debt, which~~debt. In the 2020 and 2019 periods, those repayments principally consisted of ~~$206.3~~$37.5 million ~~of repayments~~and $87.5 million, respectively, on our ~~$1,500.0 million~~ term loans ~~issued in~~due August ~~2017. During the nine months ended~~2020 and/or August ~~31, 2018, we repaid our $250 million 5.75% notes that matured on December 15, 2017 and repaid $336.3 million of our $1,500.0 million term loans issued in August 2017.~~2022.

We increased dividends paid to ~~$226.4~~$164.9 million in the first ~~nine~~six months of ~~2019~~2020 from ~~$204.9~~$150.8 million of dividends paid in the same period last year. The timing and amount of any future dividends is determined by our Board of Directors.

During the ~~nine~~six months ended ~~August~~May 31, ~~2019,~~2020, we received proceeds of ~~$84.6~~$26.7 million from exercised stock options as compared to ~~$42.1~~$48.6 million received in the corresponding ~~2018~~2019 period. We repurchased ~~$10.3~~$9.2 million and ~~$10.8~~$10.1 million of common stock during the ~~nine~~six months ended ~~August~~May 31, ~~2019~~2020 and ~~2018,~~2019, respectively, in conjunction with employee tax withholding requirements.

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The following table outlines the activity in our share repurchase program for the ~~nine~~six months ended ~~August~~May 31, ~~2019~~2020 and ~~2018:~~2019:


	2019		2018			2020		2019
Number of shares of common stock repurchased	0.5		0.4		Number of shares of common stock repurchased	0.13		0.36
Dollar amount	$	76.9	$	40.0	Dollar amount	$	20.8	$	59.8

As of ~~August~~May 31, ~~2019, $50.1~~2020, $11.1 million remained of the $600 million share repurchase authorization ~~that was authorized~~approved by the Board of Directors in March 2015. An additional $600 million share repurchase program was authorized by our Board of Directors in November 2019, bringing the total remaining share repurchase authorization to $611.1 million as of May 31, 2020. The timing and amount of any shares repurchased is determined by our management based on its evaluation of market conditions and other factors. ~~In conjunction with our August 2017 acquisition of RB Foods, we announced our intention to reduce our leverage ratio by curtailing the repurchases of shares under our share repurchase~~

~~program. Although we have curtailed our share repurchase activity, we repurchased shares in 2019 and 2018 to mitigate the effect of shares issued upon the exercise of stock options.~~

The following table presents our leverage ratio for the trailing twelve-month periods ended ~~August~~May 31, ~~2019, August~~2020, May 31, ~~2018,~~2019, and November 30, ~~2018:~~2019:


	May 31, 2020	May 31, 2019	November 30, 2019
Leverage ratio	3.3	3.9	3.4

August 31, 2019 August 31, 2018 November 30, 2018
Leverage ratio 3.7
4.3
4.0

Our leverage ratio was ~~3.7~~3.3 as of ~~August~~May 31, ~~2019~~2020 as compared to the ratios of ~~4.0~~3.4 and ~~4.3~~3.9 as of November 30, ~~2018~~2019 and ~~August~~May 31, ~~2018,~~2019, respectively. The decrease in the ratio from ~~4.3~~3.9 as of ~~August~~May 31, ~~2018~~2019 to ~~3.7~~3.3 as of ~~August~~May 31, ~~2019~~2020 is due to an increase in our trailing twelve-month adjusted EBITDA and a lower net debt balance. The lower net debt balance is principally the result of our repayment of short term debt and a portion of the term loans used to finance the RB Foods acquisition.

Most of our cash is denominated in foreign currencies. 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. Prior to the enactment of the U.S. Tax Act on December 22, 2017, the repatriation of cash balances from certain of our subsidiaries could have adverse tax consequences; however, those balances are generally available without legal restrictions to fund ordinary business operations, capital projects and any possible future acquisitions. At ~~August~~May 31, ~~2019,~~2020, we temporarily used ~~$253.5~~$118.9 million of cash from our foreign subsidiaries to pay down short-term debt in the U.S. At ~~August~~May 31, ~~2018,~~2019, we temporarily used ~~$124.7~~$239.6 million of cash from our foreign subsidiaries to pay down short-term debt in the U.S. During a quarter, our short-term borrowings vary, but are lower at the end of a quarter. The average short-term borrowings outstanding for the ~~three~~six months ended ~~August~~May 31, 2020 and May 31, 2019 ~~and August 31, 2018~~ were ~~$839.0~~$757.0 million and ~~$681.7~~$826.7 million, respectively. Those average short-term borrowings outstanding for the six months ended May 31, 2020 included average commercial paper outstanding of $691.4 million. Total average debt outstanding for the ~~nine~~six months ended ~~August~~May 31, 2020 and May 31, 2019 ~~and August 31, 2018 was $4,792.0~~were $4,468.9 million and ~~$5,135.4~~$4,804.1 million, respectively.

The reported values of our assets and liabilities are significantly affected by fluctuations in foreign exchange rates between periods. At ~~August~~May 31, ~~2019,~~2020, the exchange rates for the ~~Euro,~~ British pound sterling, Canadian dollar, Australian dollar, Chinese renminbi and Polish zloty were lower than at ~~August~~both May 31, ~~2018.~~2019 and November 30, 2019. At ~~August~~May 31, ~~2019,~~2020, the exchange rate for the Euro ~~British pound sterling, Chinese renminbi, Australian dollar and Polish zloty were~~was lower than at ~~November 30, 2018. At August~~May 31, 2019 ~~the exchange rate for the Canadian dollar was~~and higher than at November 30, ~~2018.~~2019. During 2020, we have seen greater-than-normal fluctuations in foreign exchanges rates as a result of increased market volatility driven by the global COVID-19 pandemic.

Credit and Capital Markets

Cash flows from operating activities are our primary source of liquidity for funding growth, dividends, capital expenditures and share repurchases. We also rely on our revolving credit facility, or borrowings backed by this facility, to fund seasonal working capital needs and other general corporate requirements. In August 2017, we entered into a five-year $1.0 billion revolving credit facility, which supports our commercial paper program and will expire in August 2022. The pricing for the credit facility, on a fully drawn basis, is LIBOR plus 1.25%. The credit facility restricts subsidiary indebtedness and requires us to maintain certain minimum and maximum financial ratios for interest expense coverage and our leverage ratio. We generally use this facility 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 facility. The facility is made available by syndicates 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 would reduce our ability to grow through funding of seasonal working capital.~~impacted.

We engage in regular communication with all banks participating in our revolving credit facility. During these communications, 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.

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We hold investments in equity and debt securities in both our qualified defined benefit pension plans and a rabbi trust for our nonqualified defined benefit pension plan. We estimate total required contributions to our pension plans in ~~2019~~2020 of approximately ~~$12.0~~$12 million. In ~~2018,~~2019, we contributed ~~$13.5~~$11.4 million to our pension plans. Future increases or decreases in pension liabilities and required cash contributions are highly dependent on changes in interest rates and the actual return on plan assets.

We will continue to have cash requirements to support seasonal working capital needs and capital expenditures, to pay interest, to service debt, and to fund acquisitions. To meet these 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, depending on market conditions, to access capital markets, and, depending upon the significance of the cost of a particular 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 cash requirements over the next twelve months.

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RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

New accounting pronouncements are issued periodically that affect our current and future operations. See note 1 of notes to the accompanying financial statements for further details of these impacts.

CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS

In preparing the financial statements, we are required to make estimates and assumptions that have an impact on the assets, liabilities, revenue and expenses reported. These estimates can also affect supplemental information disclosed by us, including information about contingencies, risk and financial condition. We believe, given current facts and circumstances, our estimates and assumptions are reasonable, adhere to U.S. GAAP and are consistently applied. Inherent in the nature of an estimate or assumption is the fact that actual results may differ from estimates, and estimates may vary as new facts and circumstances arise. In preparing the financial statements, we make routine estimates and judgments in determining the net realizable value of accounts receivable, inventory, fixed assets and prepaid allowances. Our most critical accounting estimates and assumptions are included in our Annual Report on Form 10-K for the fiscal year ended November 30, ~~2018.~~2019.

There have been no changes in our critical accounting estimates and assumptions included in our Annual Report on Form 10-K for the fiscal year ended November 30, ~~2018.~~2019.

FORWARD-LOOKING INFORMATION

Certain statements contained in this report, including statements concerning expected performance such as those relating to net sales, earnings, cost savings, special charges, acquisitions, brand marketing support, volume and product mix, and income tax expense are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of ~~1934.~~1934, as amended. These statements may be identified by the use of words such as “may,” “will,” “expect,” "should," "anticipate," "intend," “believe” and “plan.” These statements may relate to: the impact of COVID-19 on our business, suppliers, consumers, customers, and employees; disruptions or inefficiencies in the supply chain, including any impact of COVID-19; the expected results of operations of businesses acquired by the company, including the acquisition of RB Foods; the expected impact of raw material costs and pricing actions on the company's results of operations and gross margins; the expected impact of productivity improvements, including those associated with our Comprehensive Continuous Improvement ~~(CCI)~~("CCI") program and global enablement initiative; expected working capital improvements; expectations regarding growth potential in various geographies and markets, including the impact from customer, channel, category and e-commerce expansion; expected trends in net sales and earnings performance and other financial measures;the expected timing and costs of implementing our business transformation initiative, which includes the implementation of a global enterprise resource planning system; the expected impact of accounting pronouncements; the expected impact of the U.S. Tax Act enacted in December 2017; the expectations of pension and postretirement plan contributions and anticipated charges associated with those plans; the holding period and market risks associated with financial instruments; the impact of foreign exchange fluctuations; the adequacy of internally generated funds and existing sources of liquidity, such as the availability of bank financing; the anticipated sufficiency of future cash flows to enable the payments of interest and repayment of short- and long-term debt as well as quarterly dividends and the ability to issue additional debt or equity securities; and expectations regarding purchasing shares of McCormick's common stock under the existing repurchase ~~authorization.~~authorizations.

These and other forward-looking statements are based on management’s current views and assumptions and involve risks and uncertainties that could significantly affect expected results. Results may be materially affected by factors such as: the company's ability to drive revenue growth; damage to the company's reputation or brand name; loss of brand relevance; increased private label use; product quality, labeling, or safety concerns; negative publicity about our products; ~~business interruptions due to natural disasters or unexpected events;~~ actions by, and the financial condition of, competitors and customers; the ~~company's inability~~longevity of mutually beneficial relationships with our large customers; the ability to ~~achieve expected and/~~identify, interpret and react to changes in consumer preferences and demand; business interruptions due to natural disasters, unexpected events or ~~needed cost savings or margin improvements; negative employee relations; the lack of successful acquisition and integration of new businesses,~~public health crises, including ~~the acquisition of RB Foods;~~COVID-19; issues affecting the company's supply chain and raw materials, including fluctuations in the cost and availability of raw and packaging materials; government regulation, and changes in legal and regulatory requirements and enforcement practices; the lack of successful acquisition and integration of new businesses, including the acquisition of RB Foods; global economic and financial conditions generally, including the impact of the exit of the U.K. from the European Union, availability of financing, interest and inflation rates, and the imposition of tariffs, quotas, trade barriers and other similar ~~restrictions and the pending exit of the U.K. from the European Union (Brexit);~~restrictions; foreign currency fluctuations; the effects of increased level of debt service following the RB Foods acquisition as well as the effects that such increased debt service may have on the company's ability to ~~react to certain economic and industry conditions and ability to~~ borrow or the cost of any such additional ~~borrowing; the interpretations~~borrowing, our credit rating, and ~~assumptions we have made,~~our ability to react to certain economic and ~~guidance that may be issued, regarding the U.S. tax legislation enacted on December 22, 2017;~~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 obligations; ~~foreign currency fluctuations;~~ the stability of

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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;~~laws, including interpretations and assumptions we have made, and guidance that may be issued, regarding the U.S. Tax Act enacted on December 22, 2017 and volatility in our effective tax rate; climate change; infringement of intellectual property rights, and those of customers;

litigation, 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 in the ~~company's~~company’s filings with the Securities and Exchange Commission.

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.


~~ITEM 3.~~	~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For information regarding our exposure to certain market risks, see “Market Risk Sensitivity” in the Management’s Discussion and Analysis of Financial Condition and Results of Operations above and Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in our Annual Report on Form 10-K for the year ended November 30, ~~2018.~~2019. Except as described in Management’s Discussion and Analysis of Financial Condition and Results of Operations above, there have been no significant changes in our financial instrument portfolio or market risk exposures since our November 30, ~~2018~~2019 fiscal year end.


~~ITEM 4.~~	~~CONTROLS AND PROCEDURES~~

ITEM 4.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures: The company’s management, with the participation of the company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report. Based on that evaluation, the company’s Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the company’s disclosure controls and procedures were effective.

Changes in Internal Controls: No change occurred in our “internal control over financial reporting” as defined in Rule 13a-15(f)) during our last fiscal quarter which was identified in connection with the evaluation required by Rule 13a-15a) as materially affecting or reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION


~~ITEM 1.~~	~~LEGAL PROCEEDINGS~~

ITEM 1.LEGAL PROCEEDINGS

There are no material pending legal proceedings in which we or our subsidiaries is a party or in which any of our or their property is the subject.


~~ITEM 1.A~~	~~RISK FACTORS~~

~~There have been no material changes~~ITEM 1.ARISK FACTORS

The following risk factor is in addition to our risk factors ~~from those disclosed~~—included in Part I,1, Item 1AA to our Annual Report on Form 10-K for the year ended November 30, ~~2018, except~~2019 (“our 2019 Form 10-K”)—that could affect our business, financial condition and results of operations. These risk factors should be considered in connection with evaluating the forward-looking statements included in this Quarterly Report on Form 10-Q because these factors could cause the actual results and conditions to differ materially from those projected in forward-looking statements. Before you buy our Common Stock or Common Stock Non-Voting, you should know that making such an investment involves risks, including the risks described in our 2019 Form 10-K and as included below. Additional risks and uncertainties that are not presently known to us or are currently deemed to be immaterial also may materially adversely affect our business, financial condition, or results of operations in the future. If any of the risks actually occur, our business, financial condition or results of operations could be negatively affected. In that case, the trading price of our securities could decline, and you may lose part or all of your investment.

Our operations may be adversely impacted as a result of pandemic outbreaks, including COVID-19.

In December 2019, a strain of novel coronavirus, or COVID-19, was first reported in Wuhan, China, resulting in thousands of confirmed cases of the disease in China. By January, the Chinese government implemented a quarantine protocol for Wuhan and implemented other restrictions for other major Chinese cities, including mandatory business closures, social distancing measures, and various travel restrictions. On March 11, 2020, as COVID-19 spread outside of China, the ~~following updates:~~World Health Organization designated the outbreak as a global pandemic. The effects of COVID-19 and related actions to attempt to control its spread significantly impacted not only our operating results but also the global economy. COVID-19 continues to impact our customers, our operations, consumers and the global economy as discussed below; however, given the evolving health, economic, social, and governmental environments, the breadth and duration of such impact remains uncertain.

The ~~decision~~COVID-19 pandemic has affected, and may continue to affect, our operations, major facilities, and the health of our employees and consumers. The production of certain of our products in the U.S. and Europe are concentrated in a single manufacturing site in each location. To mitigate the spread of COVID-19, many governments implemented quarantines and significant restrictions on travel as well as work restrictions that prohibited many employees from going to work. As a result, we temporarily closed certain manufacturing and other facilities over the past several months. Our results have been and we expect will continue to be adversely impacted by ~~British voters~~these closures and other actions taken to ~~exit~~contain or treat the ~~European Union~~impact of COVID-19, and the extent of such impact will depend upon future developments, which are highly uncertain and cannot be predicted. COVID-19 continues to interfere with general commercial activity related to our supply chain and customer base, which could have a material adverse effect on our business, financial condition, or results of operations. Late in the second quarter of 2020, we saw some loosening of government-mandated COVID-19 restrictions in certain locales; however, to the extent that COVID-19 continues or worsens, governments may ~~negatively~~maintain restrictions or impose additional restrictions. The result of COVID-19 and those restrictions could result in additional businesses being shut down, additional work restrictions and supply chains being interrupted, slowed, or rendered inoperable. As a result, it may be even more challenging to obtain and process raw materials to support our business needs, and more individuals could become ill, quarantined or otherwise unable to work and/or travel due to health reasons or governmental restrictions. Also, governments may impose other laws, regulations or taxes which could adversely impact our ~~operations.~~

~~The U.K. is currently negotiating the terms~~business, financial condition or results of its exit from the European Union (“Brexit”) scheduled for October 31, 2019. In November 2018, the U.K. and the European Union agreed upon a draft Withdrawal Agreement that sets out the terms of the U.K.’s departure, including commitments on citizen rights after Brexit, a financial settlement from the U.K., and a transition period to allow time for a future trade deal to be agreed. After failing to gain the U.K. Parliament’s approval for the Withdrawal Agreement, Prime Minister Theresa May stepped downoperations. Further, as Conservative Party leader in June 2019 and was replaced as Prime Minister and leader of the Conservative Party by Boris Johnson in July 2019. While October 31, 2019 remains the legally scheduled date for the U.K.’s exit from the European Union, recent legislation passed by Parliament requires the Prime Minister to request an extension on October 19, 2019 if, by that date, no agreement regarding the U.K.’s departure from the European Union has been reached by Parliament. Any such extension needs unilateral approval by all members of the European Union. The terms and eventual date of the U.K.’s withdrawal remain highly uncertain.

If the U.K leaves the European Union with no agreement (“hard Brexit”), it will likely have an adverse impact on labor and trade in addition to creating further short-term uncertainty and currency volatility. In the absence of a future trade deal, the U.K.’s trade with the European Union and the rest of the world would be subject to additional tariffs and duties. Additionally, the movement of goods between the U.K. and the remaining member states of the European Union will be subject to additional inspections and documentation checks, leading to likely delays at ports of entry and departure. These changes to the trading relationship between the U.K. and European Union would likely increase import administration costs and increase the cost of goods exported from the U.K and may decrease the profitabilitysome of our U.K. and other operations. Additional currency volatility could drive a weaker British pound, which increases the cost of goods imported into our U.K. operations and may decrease the profitability of our U.K. operations. A weaker British pound versus the U.S. dollar also causes local currency results of our U.K. operations to be translated into fewer U.S. dollars during a reporting period. Furthermore, a hard Brexit,customers’ businesses are similarly affected, they might delay or ~~the withdrawal in general, may result in disruption to and decline of the U.K. and European economies,~~reduce purchases from us, which could adversely affect our ~~business. With a range~~results of ~~outcomes still possible,~~our business, financial condition or results of operations. While we expect the ~~impact from Brexit remains uncertain~~impacts of COVID-19 to continue to have an effect on our business, financial condition and ~~will depend, in part, on the final outcome~~results of ~~tariff, trade, regulatory and other negotiations.~~

Ifoperations, we are unable to predict the extent or nature of these impacts at this time.

The potential effects of COVID-19 also could impact many of our risk factors, included in Part 1, Item A of our 2019 Form 10-K, including, but not ~~able~~limited to ~~successfully implement~~our profitability, laws and regulations affecting our business, fluctuations in foreign currency markets, the availability of future borrowings, the costs of current and future borrowings, valuation of our pension assets and obligations, credit risks of our customers and counterparties, our business transformation initiative and an impairment of the carrying value of goodwill or ~~utilize information technology systems~~other indefinite-lived intangible assets. However, given the evolving health, economic, social, and ~~networks effectively, our ability to conduct our business may be negatively impacted.~~

~~We continue~~governmental environments, the potential impact that COVID-19 could have on our ~~multi-year business transformation initiative to execute significant change to our global processes, capabilities and operating model, including~~risk factors that are further described in our Global Enablement (GE) organization, in order to provide a scalable platform for future growth, while reducing costs. As technology provides the backbone for greater process alignment, information sharing and scalability, we are also making investments in our information systems, including the multi-year program to replace our enterprise resource planning (ERP) system that is currently underway, that include the transformation2019 Form 10-K remain uncertain.

Table of our financial processing systems to enterprise-wide systems solutions. These systems implementations are part of our ongoing business transformation initiative, and we 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, the 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 revenue. In connection with these implementations and resulting business process changes, we continue to enhance the design and documentation of business processes and controls, includingContents

our internal control over financial reporting processes, to maintain effective controls over our financial reporting. To date, this transition has not materially affected, and we do not expect it to materially affect, our internal control over 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 implement our business transformation initiatives. If any of these third-party service providers or vendors do not perform effectively, or if we fail to adequately monitor their performance (including compliance with service level agreements or regulatory or legal requirements), we may not be able to achieve expected cost savings, we may have to incur additional costs to correct errors made by such service providers, our reputation could be harmed or we could be subject to litigation, claims, legal or regulatory proceedings, inquiries or investigations. Depending on the function involved, such errors may also lead to business disruption, processing inefficiencies, the loss of or damage to intellectual property or sensitive data through security breaches or otherwise, incorrect or adverse effects on financial reporting, litigation or remediation costs, or damage to our reputation, which could have a negative impact on employee morale. In addition, the management of multiple third-party service providers increases operational complexity and decreases our control.


~~ITEM 2.~~	~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table summarizes our purchases of our Common Stock (CS) and Common Stock Non-Voting (CSNV) during the ~~third~~second quarter of ~~2019.~~2020.


ISSUER PURCHASES OF EQUITY SECURITIES
Period	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
March 1, 2020 to March 31, 2020	CS – 0	$	—	—	$612 million
	CSNV – 0	$	—	—
April 1, 2020 to April 30, 2020	CS – 5,630 ⁽¹⁾	$	157.08	5,630	$611 million
	CSNV – 0	$	—	—
May 1, 2020 to May 31, 2020	CS – 0	$	—	—	$611 million
	CSNV – 0	$	—	—
Total	CS – 0	$	—	—	$611 million
	CSNV – 0	$	—	—

ISSUER PURCHASES OF EQUITY SECURITIES
Period 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
June 1, 2019 to June 30, 2019
CS – 9,045 (1)
$ 154.97
9,045
$66 million
CSNV – 0 $ —
—

July 1, 2019 to July 31, 2019
CS – 22,124 (2)
$ 158.61
22,124
$62 million
CSNV – 0 $ —
—

August 1, 2019 to August 31, 2019
CS – 18,130 (3)
$ 162.86
18,130
$50 million
CSNV – 56,250 $ 163.92
56,250

Total CS – 49,299 $ 159.51
49,299
$50 million
CSNV – 56,250 $ 163.92
56,250

(1)On April 20, 2020, we purchased 5,630 shares of our common stock from our U.S. defined contribution retirement plan to manage shares, based upon participant activity, in the plan's company stock fund. The price paid per share of $157.08 represented the closing price of the common shares on April 20, 2020.


~~(1)~~	On June 28, 2019, we purchased 9,045 shares of our common stock from our U.S. defined contribution retirement plan to manage shares, based upon participant activity, in the plan's company stock fund. The prices paid per share of $154.97 represented the closing price of the common shares on June 28, 2019.


~~(2)~~	On July 9, 2019 and July 22, 2019, we purchased 10,347 shares and 11,777 shares, respectively, of our common stock from our U.S. defined contribution retirement plan to manage shares, based upon participant activity, in the plan's company stock fund. The prices paid per share of $158.59 and $158.63 represented the closing price of the common shares on July 9, 2019 and July 22, 2019, respectively.

~~(3)~~

On August 7, 2019 and August 13, 2019, we purchased 9,587 shares and 8,543 shares, respectively, of our common stock from our U.S. defined contribution retirement plan to manage shares, based upon participant activity, in the plan's company stock fund. The prices paid per share of $159.39 and $166.76 represented the closing price of the common shares on August 7, 2019 and August 13, 2019, respectively.

As of ~~August~~May 31, ~~2019, $50~~2020, $11 million remained of the $600 million share repurchase authorization approved by the Board of Directors in March 2015. An additional $600 million share repurchase program 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. ~~Due to our increased level of indebtedness because of the RB Foods~~

~~acquisition, we expect to curtail our acquisition and share repurchase activity for a period of time in order to enable a return to our pre-acquisition credit profile.~~

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 or at the request of holders of common stock. 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 the ~~third~~second quarter of ~~2019,~~2020, we issued ~~572,210~~306,960 shares of CSNV in exchange for shares of CS and issued ~~2,042~~2,422 shares of CS in exchange for shares of CSNV.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

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ITEM 5. OTHER INFORMATION

None.


~~ITEM 6.~~	~~EXHIBITS~~

ITEM 6.EXHIBITS

The Stock Purchase Agreement (Exhibit 2(i)) has been filed to provide investors and security holders with information regarding its terms. It is not intended to provide any other information about the Acquired Business, sellers or McCormick. The Agreement contains representations, warranties and covenants of the parties thereto made to and solely for the benefit of each other, and such representations, warranties and covenants may be subject to materiality and other qualifiers applicable to the contracting parties that differ from those that may be viewed as material to investors. The assertions embodied in those representations, warranties and covenants are qualified by information in confidential disclosure schedules that the sellers delivered in connection with the execution of the Agreement and were made only as of the date of the Agreement. Accordingly, investors and security holders should not rely on the representations, warranties and covenants as characterizations of the actual state of facts. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Agreement, which subsequent information may or may not be fully reflected in McCormick’s public disclosures.

The following exhibits are attached or incorporated herein by reference:

Exhibit Number

~~Description~~

~~(2)~~

~~Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession~~

~~(i)~~ DescriptionStock Purchase Agreement, dated July 18, 2017, by and among McCormick & Company, Incorporated, The R.T. French’s Food Group Limited, Reckitt Benckiser LLC, and Reckitt Benckiser Group plc, incorporated by reference from Exhibit 2.1 of McCormick’s Form 8-K dated July 18, 2017, File No. 1-14920, as filed with the Securities and Exchange Commission on July 19, 2017. Disclosure schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Agreement as filed identifies such schedules and exhibits, including the general nature of their contents. McCormick agrees to furnish a copy of any omitted attachment to the Securities and Exchange Commission on a confidential basis upon request.

(3)

(i)

Articles of Incorporation and By-Laws

Restatement of Charter of McCormick & Company, Incorporated dated April 16, 1990

Incorporated by reference from Exhibit 4 of Registration Form S-8, Registration No. 33-39582 as filed with the Securities and Exchange Commission on March 25, 1991.

Articles of Amendment to Charter of McCormick & Company, Incorporated dated April 1, 1992

Incorporated by reference from Exhibit 4 of Registration Form S-8, Registration Statement No. 33-59842 as filed with the Securities and Exchange Commission on March 19, 1993.

Articles of Amendment to Charter of McCormick & Company, Incorporated dated March 27, 2003

Incorporated by reference from Exhibit 4 of Registration Form S-8, Registration Statement No. 333-104084 as filed with the Securities and Exchange Commission on March 28, 2003.

(ii)

By-Laws

By-Laws of McCormick & Company, Incorporated Amended and Restated on November ~~29, 2016~~26, 2019

Incorporated by reference from Exhibit 99.1 of McCormick's Form 8-K dated November ~~29, 2016,~~26, 2019, File No. 1-14920, as filed with the Securities and Exchange Commission on November ~~30, 2016.~~26, 2019.


~~(4)~~	~~Instruments defining the rights of security holders, including indentures~~


~~(i)~~	~~See Exhibit 3 (Restatement of Charter and By-Laws)~~

~~(ii)~~

(4) Instruments defining the rights of security holders, including indentures

(i)See Exhibit 3 (Restatement of Charter and By-Laws)

(ii)Summary of Certain Exchange Rights, incorporated by reference from Exhibit 4.1 of McCormick’s Form 10-Q for the quarter ended August 31, 2001, File No. 0-748, as filed with the Securities and Exchange Commission on October 12, 2001.

(iii)Indenture dated July 8, 2011 between McCormick and U.S. Bank National Association, incorporated by reference from Exhibit 4.1 of McCormick’s Form 8-K dated July 5, 2011, File No. 1-14920, as filed with the Securities and Exchange Commission on July 8, 2011.

(iv)Form of 3.90% Notes due 2021, incorporated by reference from Exhibit 4.2 of McCormick’s Form 8-K dated July 5, 2011, File No. 1-14920, as filed with the Securities and Exchange Commission on July 8, 2011.

(v)Form of 2.70% Notes due 2022, incorporated by reference from Exhibit 4.2 of McCormick’s Form 8-K dated August 7, 2017, File No. 1-14920, as filed with the Securities and Exchange Commission on August 11, 2017.

(vi)Form of 3.50% Notes due 2023, incorporated by reference from Exhibit 4.2 of McCormick's Form 8-K dated August 14, 2013, File No. 1-14920, as filed with the Securities and Exchange Commission on August 19, 2013.

(vii)Form of 3.15% Notes due 2024, incorporated by reference from Exhibit 4.3 of McCormick’s Form 8-K dated August 7, 2017, File No. 1-14920, as filed with the Securities and Exchange Commission on August 11, 2017.

(viii)Form of 3.25% Notes due 2025, incorporated by reference from Exhibit 4.2 of McCormick's Form 8-K dated November 3, 2015, File No. 1-14920, as filed with the Securities and Exchange Commission on November 6, 2015.

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(ix)Form of 3.40% Notes due 2027, incorporated by reference from Exhibit 4.4 of McCormick’s Form 8-K dated August 7, 2017, File No. 1-14920, as filed with the Securities and Exchange Commission on August 11, 2017.

(x)Form of 4.20% Notes due 2047, incorporated by reference from Exhibit 4.5 of McCormick’s Form 8-K dated August 7, 2017, File No. 1-14920, as filed with the Securities and Exchange Commission on August 11, 2017.

(xii)Description of Securities of McCormick & Company, Incorporated, incorporated by reference from Exhibit 4(xi) of McCormick's Form 10-K for the fiscal year ended November 30, 2019, File No. 1-14920, as filed with the Securities and Exchange Commission on January 28, 2020.

(10)Material Contracts

(i)Directors’ Share Ownership Program, provided to members of McCormick’s Board of Directors who are not also employees of McCormick, is set forth on page 28 of McCormick’s definitive Proxy Statement dated February 17, 2004, File No. 1-14920, as filed with the Securities and Exchange Commission on February 17, 2004, and incorporated by reference herein.*

(ii)Deferred Compensation Plan, as restated on January 1, 2000, and amended on August 29, 2000, September 5, 2000 and May 16, 2003, in which directors, officers and certain other management employees participate, a copy of which Plan document and amendments was attached as Exhibit 10(viii) of McCormick’s Form 10-Q for the quarter ended August 31, 2003, File No. 1-14920, as filed with the Securities and Exchange Commission on October 14, 2003, and incorporated by reference herein.*

(iii)Non-Qualified Retirement Savings Plan, with an effective date of February 1, 2017, in which directors, officers and certain other management employees participate, a copy of which Plan document was attached as Exhibit 10(v) of McCormick's Form 10-Q for the quarter ended February 28, 2017, File No. 1-14920, as filed with the Securities and Exchange Commission on March 28, 2017, and incorporated by reference herein.*

(iv)The 2007 Omnibus Incentive Plan, in which directors, officers and certain other management employees participate, is set forth in Exhibit A of McCormick’s definitive Proxy Statement dated February 20, 2008, File No. 1-14920, as filed with the Securities and Exchange Commission on February 20, 2008, and incorporated by reference herein, as amended by Amendment No. 1 thereto, which Amendment is incorporated by reference from Exhibit 10(xi) of McCormick’s 10-K for the ~~quarter ended August 31, 2001, File No. 0-748, as filed with the Securities and Exchange Commission on October 12, 2001.~~


~~(iii)~~	Indenture dated July 8, 2011 between McCormick and U.S. Bank National Association, incorporated by reference from Exhibit 4.1 of McCormick’s Form 8-K dated July 5, 2011, File No. 1-14920, as filed with the Securities and Exchange Commission on July 8, 2011.


~~(iv)~~	Form of 3.90% Notes due 2021, incorporated by reference from Exhibit 4.2 of McCormick’s Form 8-K dated July 5, 2011, File No. 1-14920, as filed with the Securities and Exchange Commission on July 8, 2011.


~~(v)~~	Form of 2.70% Notes due 2022, incorporated by reference from Exhibit 4.2 of McCormick’s Form 8-K dated August 7, 2017, File No. 1-14920, as filed with the Securities and Exchange Commission on August 11, 2017.


~~(vi)~~	Form of 3.50% Notes due 2023, incorporated by reference from Exhibit 4.2 of McCormick's Form 8-K dated August 14, 2013, File No. 1-14920, as filed with the Securities and Exchange Commission on August 19, 2013.


~~(vii)~~	Form of 3.15% Notes due 2024, incorporated by reference from Exhibit 4.3 of McCormick’s Form 8-K dated August 7, 2017, File No. 1-14920, as filed with the Securities and Exchange Commission on August 11, 2017.


~~(viii)~~	Form of 3.25% Notes due 2025, incorporated by reference from Exhibit 4.2 of McCormick's Form 8-K dated November 3, 2015, File No. 1-14920, as filed with the Securities and Exchange Commission on November 6, 2015.


~~(ix)~~	Form of 3.40% Notes due 2027, incorporated by reference from Exhibit 4.4 of McCormick’s Form 8-K dated August 7, 2017, File No. 1-14920, as filed with the Securities and Exchange Commission on August 11, 2017.


~~(x)~~	Form of 4.20% Notes due 2047, incorporated by reference from Exhibit 4.5 of McCormick’s Form 8-K dated August 7, 2017, File No. 1-14920, as filed with the Securities and Exchange Commission on August 11, 2017.


~~(10)~~	~~Material Contracts~~


~~(i)~~	Directors’ Share Ownership Program, provided to members of McCormick’s Board of Directors who are not also employees of McCormick, is set forth on page 28 of McCormick’s definitive Proxy Statement dated February 17, 2004, File No. 1-14920, as filed with the Securities and Exchange Commission on February 17, 2004, and incorporated by reference herein.*

~~(ii)~~

Deferred Compensation Plan, as restated on January 1, 2000, and amended on August 29, 2000, September 5, 2000 and May 16, 2003, in which directors, officers and certain other management employees participate, a copy of which Plan document and amendments was attached as Exhibit 10(viii) of McCormick’s Form 10-Q for the quarter ended August 31, 2003, File No. 1-14920, as filed with the Securities and Exchange Commission on October 14, 2003, and incorporated by reference herein.*

~~(iii)~~

Non-Qualified Retirement Savings Plan, with an effective date of February 1, 2017, in which directors, officers and certain other management employees participate, a copy of which Plan document was attached as Exhibit 10(v) of McCormick's Form 10-Q for the quarter ended February 28, 2017, File No. 1-14920, as filed with the Securities and Exchange Commission on March 28, 2017, and incorporated by reference herein.*

~~(iv)~~

The 2007 Omnibus Incentive Plan, in which directors, officers and certain other management employees participate, is set forth in Exhibit A of McCormick’s definitive Proxy Statement dated February 20, 2008, File No. 1-14920, as filed with the Securities and Exchange Commission on February 20, 2008, and incorporated by reference herein, ~~as amended by~~ ~~Amendment No. 1 thereto, which Amendment is incorporated by reference from Exhibit 10(xi) of McCormick’s 10-K for the~~

fiscal year ended November 30, 2008, File No. 1-14920, as filed with the Securities and Exchange Commission on January 28, 2009.*


~~(v)~~	The Amended and Restated 2013 Omnibus Incentive Plan, in which directors, officers and certain other management employees participate, is incorporated by reference from Exhibit A of McCormick's definitive Proxy Statement dated February 14, 2019, File No. 1-14920, as filed with the Securities and Exchange Commission on February 14, 2019.*


~~(vi)~~	Form of Long-Term Performance Plan Agreement, formerly known as the Mid-Term Incentive Plan, incorporated by reference from Exhibit 10(x) of McCormick's Form 10-Q for the quarter ended May 31, 2013, File No. 1-14920, as filed with the Securities and Exchange Commission on June 28, 2013.


~~(vii)~~	Form of Restricted Stock Units Agreement, incorporated by reference from Exhibit 10(xi) of McCormick's Form 10-Q for the quarter ended May 31, 2013, File No. 1-14920, as filed with the Securities and Exchange Commission on June 28, 2013.


~~(viii)~~	Form of Restricted Stock Units Agreement for Directors, incorporated by reference from Exhibit 10(xii) of McCormick's Form 10-Q for the quarter ended May 31, 2013, File No. 1-14920, as filed with the Securities and Exchange Commission on June 28, 2013.

~~(ix)~~

Form of Non-Qualified Stock Option Agreement, incorporated by reference from Exhibit 10(xiii) of McCormick's Form 10-Q for the quarter ended May 31, 2013, File No. 1-14920, as filed with the Securities and Exchange Commission on June 28, 2013~~, as amended,~~ which Amendment No. 1 is incorporated by reference from Exhibit 10(xv) of McCormick’s Form 10-Q for the quarter ended February 28, 2015, File No. 1-14920, as filed with the Securities and Exchange Commission on March 31, 2015.


~~(x)~~	Form of Non-Qualified Stock Option Agreement for Directors, incorporated by reference from Exhibit 10(xiv) of McCormick's Form 10-Q for the quarter ended May 31, 2013, File No. 1-14920, as filed with the Securities and Exchange Commission on June 28, 2013.


~~(xi)~~	Form of Indemnification Agreement, incorporated by reference from Exhibit 10(xv) of McCormick's Form 10-Q for the quarter ended February 28, 2014, File No. 1-14920, as filed with the Securities and Exchange Commission on March 26, 2014.


~~(xii)~~	Employment Agreement between McCormick (UK) Limited and Malcolm Swift, incorporated by reference from Exhibit 10.1 of McCormick's Form 8-K, File No. 1-14920, as filed with the Securities and Exchange Commission on January 29, 2015.*


~~(xiii)~~	Severance Plan for Executives, incorporated by reference from Exhibit 10(xix) of McCormick's Form 10-Q for the quarter ended February 28, 2015, File No. 1-14920, as filed with the Securities and Exchange Commission on March 31, 2015.*


~~(xiv)~~	Term Loan Agreement, dated August 7, 2017, by among the Company, Bank of America, N.A., as administrative agent, and the lenders party thereto, incorporated by reference from Exhibit 10.1 of McCormick’s Form 8-K dated August 7, 2017, File No. 1-14920, as filed with the Securities and Exchange Commission on August 11, 2017.

(v)The Amended and Restated 2013 Omnibus Incentive Plan, in which directors, officers and certain other management employees participate, is incorporated by reference from Exhibit A of McCormick's definitive Proxy Statement dated February 14, 2019, File No. 1-14920, as filed with the Securities and Exchange Commission on February 14, 2019.*

(vi)Form of Long-Term Performance Plan Agreement, incorporated by reference from Exhibit 10(vi) of McCormick's Form 10-K for the fiscal year ended November 30, 2019, File No. 1-14920, as filed with the Securities and Exchange Commission on January 28, 2020.

(vii)Form of Restricted Stock Units Agreement, incorporated by reference from Exhibit 10(vii) of McCormick's Form 10-K for the fiscal year ended November 30, 2019, File No. 1-14920, as filed with the Securities and Exchange Commission on January 28, 2020.

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(viii)Form of Restricted Stock Units Agreement for Directors, incorporated by reference from Exhibit 10(viii) of McCormick's Form 10-K for the fiscal year ended November 30, 2019, File No. 1-14920, as filed with the Securities and Exchange Commission on January 28, 2020.

(ix)Form of Non-Qualified Stock Option Agreement, incorporated by reference from Exhibit 10(ix) of McCormick's Form 10-K for the fiscal year ended November 30, 2019, File No. 1-14920, as filed with the Securities and Exchange Commission on January 28, 2020.

(x)Form of Non-Qualified Stock Option Agreement for Directors, incorporated by reference from Exhibit 10(x) of McCormick's Form 10-K for the fiscal year ended November 30, 2019, File No. 1-14920, as filed with the Securities and Exchange Commission on January 28, 2020.

(xi)Form of Indemnification Agreement, incorporated by reference from Exhibit 10(xv) of McCormick's Form 10-Q for the quarter ended February 28, 2014, File No. 1-14920, as filed with the Securities and Exchange Commission on March 26, 2014.

(xii)Employment Agreement between McCormick (UK) Limited and Malcolm Swift, incorporated by reference from Exhibit 10.1 of McCormick's Form 8-K, File No. 1-14920, as filed with the Securities and Exchange Commission on January 29, 2015.*

(xiii)Severance Plan for Executives, incorporated by reference from Exhibit 10(xix) of McCormick's Form 10-Q for the quarter ended February 28, 2015, File No. 1-14920, as filed with the Securities and Exchange Commission on March 31, 2015.*

(xiv)Term Loan Agreement, dated August 7, 2017, by among the Company, Bank of America, N.A., as administrative agent, and the lenders party thereto, incorporated by reference from Exhibit 10.1 of McCormick’s Form 8-K dated August 7, 2017, File No. 1-14920, as filed with the Securities and Exchange Commission on August 11, 2017.

(31) Rule 13a-14(a)/15d-14(a) Certifications Filed herewith

~~(i)~~

(i)Certification of Lawrence E. Kurzius, Chairman, President and Chief Executive Officer, pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

(ii)Certification of Michael R. Smith, Executive Vice President and Chief Financial Officer, pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.


~~(ii)~~	Certification of Michael R. Smith, Executive Vice President and Chief Financial Officer, pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

(32) Section 1350 Certifications Filed herewith

~~(i)~~

(i)Certification of Lawrence E. Kurzius, Chairman, President and Chief Executive Officer, pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(ii)Certification of Michael R. Smith, Executive Vice President and Chief Financial Officer, pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


~~(ii)~~	Certification of Michael R. Smith, Executive Vice President and Chief Financial Officer, pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(101) The following financial information from the Quarterly Report on Form 10-Q of McCormick for the quarter ended ~~August~~May 31, ~~2019,~~2020, filed electronically herewith, and formatted in Inline XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheet; (ii) Condensed Consolidated Income Statement; (iii) Condensed Consolidated Statement of Comprehensive Income; (iv) Condensed Consolidated Cash Flow Statement; (v) Condensed Consolidated Statement of Stockholders' Equity; and (vi) Notes to the Condensed Consolidated Financial Statements.

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(104) ~~The~~Inline XBRL for the cover page from the Quarterly Report on Form 10-Q of McCormick for the quarter ended ~~August~~May 31, ~~2019, formatted~~2020, files electronically herewith, included in ~~Inline XBRL.~~the Exhibit 101 inline XBRL Document Set.



*			Management contract or compensatory plan or arrangement.

McCormick hereby undertakes to furnish to the Securities and Exchange Commission, upon its request, copies of additional instruments of McCormick with respect to long-term debt that involve an amount of securities that do not exceed 10 percent of the total assets of McCormick and its subsidiaries on a consolidated basis, pursuant to Regulation S-K, Item 601(b)(4)(iii)(A).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

McCORMICK & COMPANY, INCORPORATED

~~October 1, 2019~~June 25, 2020

By:

/s/ Michael R. Smith

Michael R. Smith

Executive Vice President & Chief Financial Officer

~~October 1, 2019~~June 25, 2020

By:

/s/ Christina M. McMullen

Christina M. McMullen

Vice President & Controller



Shares issued	0.5		—		37.6			—			—			—			37.6
Equal exchange	(0.6	)	0.6		—			—			—			—			—
Balance, August 31, 2019	9.3		123.6		$	1,877.2		$	2,019.8		$	(428.3	)	$	11.9		$	3,480.6

Nine months ended August 31, 2019
Balance, November 30, 2018	9.6		122.5		$	1,770.6		$	1,760.2		$	(359.9	)	$	11.3		$	3,182.2
Net income					—			489.3			—			—			489.3
Net income attributable to non-controlling interest					—			—			—			1.5			1.5
Other comprehensive income (loss), net of tax					—			—			(68.4		)	(0.9		)	(69.3		)
Dividends					—			(151.1		)	—			—			(151.1		)
Stock-based compensation					30.6			—			—			—			30.6
Shares purchased and retired	(0.2	)	(0.4	)	(13.3		)	(78.6		)	—			—			(91.9		)
Shares issued	1.4		—		89.3			—			—			—			89.3
Equal exchange	(1.5	)	1.5		—			—			—			—			—
Balance, August 31, 2019	9.3		123.6		$	1,877.2		$	2,019.8		$	(428.3	)	$	11.9		$	3,480.6



	Accounting Changes
	Previously Reported		Revenue Recognition (1)			Pension			Recast (1)
For the three months ended August 31, 2018:
Net sales	$	1,345.3	$	(27.1	)	$	—		$	1,318.2
Cost of goods sold	750.4		44.7			0.6			795.7
Gross profit	594.9		(71.8		)	(0.6		)	522.5
Selling, general and administrative expense	353.0		(71.8		)	2.5			283.7
Operating income	233.0		—			(3.1		)	229.9
Other income, net	1.7		—			3.1			4.8

For the nine months ended August 31, 2018:
Net sales	$	3,909.7	$	(74.8	)	$	—		$	3,834.9
Cost of goods sold	2,219.6		125.2			1.8			2,346.6
Gross profit	1,690.1		(200.0		)	(1.8		)	1,488.3
Selling, general and administrative expense	1,045.7		(200.0		)	7.0			852.7
Operating income	608.4		—			(8.8		)	599.6
Other income, net	4.7		—			8.8			13.5



	Three months ended August 31, 2018		Nine months ended August 31, 2018
Transaction expenses	$	0.1	$	0.3
Integration expenses	5.5		21.8
Total	$	5.6	$	22.1



	Three months ended August 31,			Nine months ended August 31,
2018 Earnings per share – diluted	$	1.30		$	5.41
Increase in operating income	0.13			0.24
Impact of net discrete tax benefit recognized as a result of the U.S. Tax Act	(0.07		)	(2.31		)
Increase in special charges, net of taxes	(0.02		)	(0.02		)
Decrease in transaction and integration expenses attributable to RB Foods acquisition, net of taxes	0.04			0.13
Decrease in interest expense	0.02			0.02
Increase in other income	0.01			0.04
Increase in unconsolidated income	0.01			0.04
Other impact of income taxes	0.02			0.13
Impact of higher shares outstanding	(0.01		)	(0.03		)
2019 Earnings per share – diluted	$	1.43		$	3.65



	For the year ended November 30, 2018			For the three months ended						For the nine months ended						Estimated for the year ending November 30, 2019
	For the year ended November 30, 2018			August 31, 2019			August 31, 2018			August 31, 2019			August 31, 2018			Estimated for the year ending November 30, 2019
Operating income	$	891.1		$	253.5		$	229.9		$	658.5		$	599.6
Impact of transaction and integration expenses	22.5			—			5.6			—			22.1
Impact of special charges	16.3			7.7			3.3			16.9			13.9
Adjusted operating income	$	929.9		$	261.2		$	238.8		$	675.4		$	635.6
Adjusted operating income margin (1)	17.5		%	19.7		%	18.1		%	17.5		%	16.6		%

Income tax expense (benefit)	$	(157.3	)	$	36.8		$	24.9		$	91.0		$	(213.1	)
Non-recurring benefit, net, of the U.S. Tax Act (2)	301.5			1.5			10.3			1.5			308.2
Impact of transaction and integration expenses	4.9			—			1.3			—			4.8
Impact of special charges	3.8			1.6			0.8			3.8			3.3
Adjusted income tax expense	$	152.9		$	39.9		$	37.3		$	96.3		$	103.2
Adjusted income tax rate (3)	19.6		%	17.6		%	18.8		%	17.0		%	19.9		%

Net income	$	933.4		$	191.9		$	173.5		$	489.3		$	719.4
Impact of transaction and integration expenses	17.6			—			4.3			—			17.3
Impact of special charges	12.5			6.1			2.5			13.1			10.6
Non-recurring benefit, net, of the U.S. Tax Act (2)	(301.5		)	(1.5		)	(10.3		)	(1.5		)	(308.2		)
Adjusted net income	$	662.0		$	196.5		$	170.0		$	500.9		$	439.1

Earnings per share – diluted	$	7.00		$	1.43		$	1.30		$	3.65		$	5.41		$5.20 to $5.25
Impact of transaction and integration expenses	0.13			—			0.04			—			0.13			—
Impact of total special charges	0.10			0.04			0.02			0.10			0.08			0.11
Non-recurring benefit, net, of the U.S. Tax Act (2)	(2.26		)	(0.01		)	(0.08		)	(0.01		)	(2.32		)	(0.01	)
Adjusted earnings per share – diluted	$	4.97		$	1.46		$	1.28		$	3.74		$	3.30		$5.30 to $5.35