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 31, 2021~~February 28, 2022


☐			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) 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, Par Value $0.01 per share	~~MKC-V~~MKC.V	New York Stock Exchange
Common Stock Non-Voting, Par Value $0.01 per share	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 such 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, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “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 31, 2021~~February 28, 2022
			Common Stock			~~17,965,491~~17,850,968
			Common Stock Non-Voting			~~249,352,103~~250,225,522

TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION			4

	ITEM 1	FINANCIAL STATEMENTS	4

	ITEM 2	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2820

	ITEM 3	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	4836

	ITEM 4	CONTROLS AND PROCEDURES	4836

PART II - OTHER INFORMATION			4937

	ITEM 1	LEGAL PROCEEDINGS	4937

	ITEM 1a	RISK FACTORS	4937

	ITEM 2	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	5037

	ITEM 3	DEFAULTS UPON SENIOR SECURITIES	5138

	ITEM 4	MINE SAFETY DISCLOSURES	5138

	ITEM 5	OTHER INFORMATION	5239

	ITEM 6	EXHIBITS	5239

Table of Contents

PART I - FINANCIAL INFORMATION

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 February 28,
		2021		2020		2021		2020			2022		2021
Net sales	Net sales	$	1,549.4	$	1,430.3	$	4,587.6	$	4,043.4	Net sales	$	1,522.4	$	1,481.5
Cost of goods sold	Cost of goods sold	949.8		840.0		2,795.9		2,403.7		Cost of goods sold	962.0		904.0
Gross profit	Gross profit	599.6		590.3		1,791.7		1,639.7		Gross profit	560.4		577.5
Selling, general and administrative expense	Selling, general and administrative expense	327.3		317.2		1,005.2		911.1		Selling, general and administrative expense	333.3		321.3
Transaction and integration expenses	Transaction and integration expenses	1.3		—		27.0		—		Transaction and integration expenses	0.7		18.8
Special charges	Special charges	5.8		0.1		20.6		4.0		Special charges	19.5		1.1
Operating income	Operating income	265.2		273.0		738.9		724.6		Operating income	206.9		236.3
Interest expense	Interest expense	33.9		33.5		103.3		103.2		Interest expense	33.1		33.8

Other income, net	Other income, net	3.5		3.9		12.0		12.5		Other income, net	6.2		4.6
Income from consolidated operations before income taxes	Income from consolidated operations before income taxes	234.8		243.4		647.6		633.9		Income from consolidated operations before income taxes	180.0		207.1
Income tax expense	Income tax expense	31.5		46.9		135.5		117.4		Income tax expense	34.4		58.6
Net income from consolidated operations	Net income from consolidated operations	203.3		196.5		512.1		516.5		Net income from consolidated operations	145.6		148.5
Income from unconsolidated operations (including, for the nine months ended August 31, 2021, after-tax gain on sale of unconsolidated operation of $13.4)		9.1		9.6		45.8		30.2
Income from unconsolidated operations										Income from unconsolidated operations	9.3		13.3
Net income	Net income	$	212.4	$	206.1	$	557.9	$	546.7	Net income	$	154.9	$	161.8
Earnings per share – basic	Earnings per share – basic	$	0.79	$	0.77	$	2.09	$	2.05	Earnings per share – basic	$	0.58	$	0.61
Earnings per share – diluted	Earnings per share – diluted	$	0.79	$	0.76	$	2.07	$	2.03	Earnings per share – diluted	$	0.57	$	0.60
Average shares outstanding – basic	Average shares outstanding – basic	267.4		266.7		267.2		266.3		Average shares outstanding – basic	267.8		267.1
Average shares outstanding – diluted	Average shares outstanding – diluted	270.0		269.6		270.0		269.0		Average shares outstanding – diluted	270.5		269.9
Cash dividends paid per share – voting and non-voting	Cash dividends paid per share – voting and non-voting	$	0.34	$	0.31	$	1.02	$	0.93	Cash dividends paid per share – voting and non-voting	$	0.37	$	0.34
Cash dividends declared per share – voting and non-voting		$	0.34	$	0.31	$	0.68	$	0.62

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,					Three months ended February 28,
		2021		2020		2021		2020			2022		2021
Net income	Net income	$	212.4	$	206.1	$	557.9	$	546.7	Net income	$	154.9	$	161.8
Net income attributable to non-controlling interest	Net income attributable to non-controlling interest	0.7		1.6		3.5		3.1		Net income attributable to non-controlling interest	2.5		0.8
Other comprehensive income (loss):	Other comprehensive income (loss):									Other comprehensive income (loss):
Unrealized components of pension and postretirement plans		5.8		(2.1)		8.4		3.6
Unrealized components of pension and other postretirement plans										Unrealized components of pension and other postretirement plans	2.2		1.1
Currency translation adjustments	Currency translation adjustments	(78.4)		146.7		21.5		65.8		Currency translation adjustments	3.7		45.7
Change in derivative financial instruments	Change in derivative financial instruments	2.5		(0.7)		3.1		0.2		Change in derivative financial instruments	5.1		(1.0)
Deferred taxes	Deferred taxes	(2.8)		3.2		1.4		(1.6)		Deferred taxes	(1.0)		3.0
Total other comprehensive income (loss)		(72.9)		147.1		34.4		68.0
Total other comprehensive income										Total other comprehensive income	10.0		48.8
Comprehensive income	Comprehensive income	$	140.2	$	354.8	$	595.8	$	617.8	Comprehensive income	$	167.4	$	211.4

See notes to condensed consolidated financial statements (unaudited).

Table of Contents

McCORMICK & COMPANY, INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEET

(in millions)


		August 31, 2021		November 30, 2020			February 28, 2022		November 30, 2021
		(unaudited)					(unaudited)
ASSETS	ASSETS					ASSETS
Current Assets

Cash and cash equivalents	Cash and cash equivalents	$	312.6	$	423.6	Cash and cash equivalents	$	338.4	$	351.7
Trade accounts receivable, net		541.0		528.5
Trade accounts receivable, net of allowances						Trade accounts receivable, net of allowances	516.7		549.5
Inventories, net	Inventories, net					Inventories, net
Finished products	Finished products	606.9		499.3		Finished products	571.5		556.2
Raw materials and work-in-process	Raw materials and work-in-process	595.5		533.3		Raw materials and work-in-process	672.7		626.1
		1,202.4		1,032.6			1,244.2		1,182.3
Prepaid expenses and other current assets	Prepaid expenses and other current assets	104.9		98.9		Prepaid expenses and other current assets	139.7		112.3
Total current assets	Total current assets	2,160.9		2,083.6		Total current assets	2,239.0		2,195.8
Property, plant and equipment, net	Property, plant and equipment, net	1,113.5		1,028.4		Property, plant and equipment, net	1,135.9		1,140.3
Goodwill	Goodwill	5,379.5		4,986.3		Goodwill	5,333.4		5,335.8
Intangible assets, net	Intangible assets, net	3,478.3		3,239.4		Intangible assets, net	3,443.7		3,452.5
Other long-term assets	Other long-term assets	752.2		752.0		Other long-term assets	788.8		781.4
Total assets	Total assets	$	12,884.4	$	12,089.7	Total assets	$	12,940.8	$	12,905.8
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities

Short-term borrowings	Short-term borrowings	$	767.4	$	886.7	Short-term borrowings	$	636.7	$	539.1
Current portion of long-term debt	Current portion of long-term debt	768.5		263.9		Current portion of long-term debt	770.8		770.3
Trade accounts payable	Trade accounts payable	1,023.1		1,032.3		Trade accounts payable	1,072.6		1,064.2
Other accrued liabilities	Other accrued liabilities	602.3		863.6		Other accrued liabilities	596.6		850.2
Total current liabilities	Total current liabilities	3,161.3		3,046.5		Total current liabilities	3,076.7		3,223.8
Long-term debt	Long-term debt	3,985.0		3,753.8		Long-term debt	3,964.5		3,973.3
Deferred taxes	Deferred taxes	752.6		727.2		Deferred taxes	796.5		792.3
Other long-term liabilities	Other long-term liabilities	582.4		622.2		Other long-term liabilities	488.9		490.9
Total liabilities	Total liabilities	8,481.3		8,149.7		Total liabilities	8,326.6		8,480.3
Shareholders’ Equity	Shareholders’ Equity					Shareholders’ Equity
Common stock	Common stock	523.0		484.0		Common stock	542.1		530.0
Common stock non-voting	Common stock non-voting	1,519.1		1,497.3		Common stock non-voting	1,549.2		1,525.1
Retained earnings	Retained earnings	2,780.0		2,415.6		Retained earnings	2,922.4		2,782.4
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(435.6)		(470.8)		Accumulated other comprehensive loss	(416.0)		(426.5)
Total McCormick shareholders' equity	Total McCormick shareholders' equity	4,386.5		3,926.1		Total McCormick shareholders' equity	4,597.7		4,411.0
Non-controlling interests	Non-controlling interests	16.6		13.9		Non-controlling interests	16.5		14.5
Total shareholders’ equity	Total shareholders’ equity	4,403.1		3,940.0		Total shareholders’ equity	4,614.2		4,425.5
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	12,884.4	$	12,089.7	Total liabilities and shareholders’ equity	$	12,940.8	$	12,905.8

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,					Three months ended February 28,
		2021		2020			2022		2021
Operating activities	Operating activities					Operating activities
Net income	Net income	$	557.9	$	546.7	Net income	$	154.9	$	161.8
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:					Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation and amortization	Depreciation and amortization	139.1		123.9		Depreciation and amortization	49.0		48.1
Stock-based compensation	Stock-based compensation	54.2		37.8		Stock-based compensation	11.1		14.2
Fixed asset impairment charge		6.5		—

Amortization of inventory fair value adjustments associated with acquisitions	Amortization of inventory fair value adjustments associated with acquisitions	6.3		—		Amortization of inventory fair value adjustments associated with acquisitions	—		6.3
Income from unconsolidated operations	Income from unconsolidated operations	(45.8)		(30.2)		Income from unconsolidated operations	(9.3)		(13.3)
Changes in operating assets and liabilities (net of businesses acquired)	Changes in operating assets and liabilities (net of businesses acquired)					Changes in operating assets and liabilities (net of businesses acquired)

Trade accounts receivable	Trade accounts receivable	1.3		18.4		Trade accounts receivable	33.2		31.0
Inventories	Inventories	(156.5)		(129.4)		Inventories	(49.9)		(21.5)
Trade accounts payable	Trade accounts payable	(16.7)		47.4		Trade accounts payable	5.2		(73.6)
Other assets and liabilities	Other assets and liabilities	(195.2)		(11.3)		Other assets and liabilities	(185.5)		(192.2)
Dividends from unconsolidated affiliates	Dividends from unconsolidated affiliates	21.8		23.4		Dividends from unconsolidated affiliates	9.2		7.0
Net cash flow provided by operating activities		372.9		626.7
Net cash flow provided by (used in) operating activities						Net cash flow provided by (used in) operating activities	17.9		(32.2)
Investing activities	Investing activities					Investing activities
Acquisition of businesses (net of cash acquired)	Acquisition of businesses (net of cash acquired)	(706.4)		—		Acquisition of businesses (net of cash acquired)	—		(706.6)
Proceeds from sale of unconsolidated operation		65.4		—

Capital expenditures (including software)	Capital expenditures (including software)	(189.9)		(145.6)		Capital expenditures (including software)	(43.7)		(48.6)

Other investing activities		0.3		2.3

Net cash flow used in investing activities	Net cash flow used in investing activities	(830.6)		(143.3)		Net cash flow used in investing activities	(43.7)		(755.2)
Financing activities	Financing activities					Financing activities
Short-term borrowings, net	Short-term borrowings, net	(118.9)		(432.0)		Short-term borrowings, net	97.3		(292.4)
Long-term debt borrowings	Long-term debt borrowings	1,001.5		506.4		Long-term debt borrowings	—		1,000.4
Payment of debt issuance costs	Payment of debt issuance costs	(1.9)		(1.1)		Payment of debt issuance costs	—		(1.1)
Long-term debt repayments	Long-term debt repayments	(255.3)		(256.0)		Long-term debt repayments	(3.5)		(1.8)
Proceeds from exercised stock options	Proceeds from exercised stock options	10.5		54.1		Proceeds from exercised stock options	30.3		3.6
Taxes withheld and paid on employee stock awards	Taxes withheld and paid on employee stock awards	(13.3)		(10.7)		Taxes withheld and paid on employee stock awards	(12.0)		(5.1)

Common stock acquired by purchase	Common stock acquired by purchase	(3.2)		(46.0)		Common stock acquired by purchase	(8.7)		(0.1)
Dividends paid	Dividends paid	(272.4)		(247.4)		Dividends paid	(99.0)		(90.8)
Net cash flow provided by (used in) financing activities		347.0		(432.7)
Net cash flow provided by financing activities						Net cash flow provided by financing activities	4.4		612.7
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(0.3)		14.9		Effect of exchange rate changes on cash and cash equivalents	8.1		7.2
(Decrease) increase in cash and cash equivalents		(111.0)		65.6
Decrease in cash and cash equivalents						Decrease in cash and cash equivalents	(13.3)		(167.5)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	423.6		155.4		Cash and cash equivalents at beginning of period	351.7		423.6
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	312.6	$	221.0	Cash and cash equivalents at end of period	$	338.4	$	256.1

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 August 31, 2021
Balance, May 31, 2021 18.1 249.2 $ 2,027.1 $ 2,660.5 $ (362.3) $ 15.5 $ 4,340.8
Net income — 212.4 — — 212.4
Net income attributable to non-controlling interest — — — 0.7 0.7
Other comprehensive income (loss), net of tax — — (73.3) 0.4 (72.9)
Dividends — (90.9) — — (90.9)
Stock-based compensation 11.6 — — — 11.6
Shares purchased and retired (0.1) — (0.9) (2.0) — — (2.9)
Shares issued 0.1 — 4.3 — — — 4.3
Equal exchange (0.1) 0.1 — — — — —
Balance, August 31, 2021 18.0 249.3 $ 2,042.1 $ 2,780.0 $ (435.6) $ 16.6 $ 4,403.1
Nine months ended August 31, 2021
Balance, November 30, 2020 18.0 248.9 $ 1,981.3 $ 2,415.6 $ (470.8) $ 13.9 $ 3,940.0
Net income — 557.9 — — 557.9
Net income attributable to non-controlling interest — — — 3.5 3.5
Other comprehensive income (loss), net of tax — — 35.2 (0.8) 34.4
Dividends — (181.7) — — (181.7)
Stock-based compensation 54.2 — — — 54.2
Shares purchased and retired (0.2) — (5.3) (11.8) — — (17.1)
Shares issued 0.6 — 11.9 — — — 11.9
Equal exchange (0.4) 0.4 — — — — —
Balance, August 31, 2021 18.0 249.3 $ 2,042.1 $ 2,780.0 $ (435.6) $ 16.6 $ 4,403.1
Three months ended August 31, 2020
Balance, May 31, 2020 18.6 247.9 $ 1,938.9 $ 2,288.7 $ (577.7) $ 12.4 $ 3,662.3
Net income — 206.1 — — 206.1
Net income attributable to non-controlling interest — — — 1.6 1.6
Other comprehensive loss, net of tax — — 147.8 (0.7) 147.1
Dividends — (82.6) — — (82.6)
Stock-based compensation 10.7 — — — 10.7
Shares purchased and retired (0.4) — (7.4) (21.2) — — (28.6)
Shares issued 0.7 — 29.4 — — — 29.4
Equal exchange (0.8) 0.8 — — — — —
Balance, August 31, 2020 18.1 248.7 $ 1,971.6 $ 2,391.0 $ (429.9) $ 13.3 $ 3,946.0

~~Table of Contents~~


Nine months ended August 31, 2020
Balance, November 30, 2019		18.6	247.2	$	1,888.6	$	2,055.8	$	(500.2)	$	12.5	$	3,456.7
(millions)														(millions)	Common Stock Shares	Common Stock Non-Voting Shares	Common Stock Amount		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Non-controlling Interests		Total Shareholders’ Equity
Three months ended February 28, 2022														Three months ended February 28, 2022
Balance, November 30, 2021														Balance, November 30, 2021	17.8	249.5	$	2,055.1	$	2,782.4	$	(426.5)	$	14.5	$	4,425.5
Net income	Net income			—		546.7		—		—		546.7		Net income			—		154.9		—		—		154.9
Net income attributable to non-controlling interest	Net income attributable to non-controlling interest			—		—		—		3.1		3.1		Net income attributable to non-controlling interest			—		—		—		2.5		2.5
Other comprehensive loss, net of tax				—		—		70.3		(2.3)		68.0
Dividends				—		(165.0)		—		—		(165.0)
Other comprehensive income (loss), net of tax														Other comprehensive income (loss), net of tax			—		—		10.5		(0.5)		10.0

Stock-based compensation	Stock-based compensation			37.8		—		—		—		37.8		Stock-based compensation			11.1		—		—		—		11.1
Shares purchased and retired	Shares purchased and retired	(0.5)	(0.2)	(12.6)		(46.5)		—		—		(59.1)		Shares purchased and retired	(0.2)	—	(6.5)		(14.9)		—		—		(21.4)
Shares issued	Shares issued	1.7	—	57.8		—		—		—		57.8		Shares issued	0.9	—	31.6		—		—		—		31.6
Equal exchange	Equal exchange	(1.7)	1.7	—		—		—		—		—		Equal exchange	(0.7)	0.7	—		—		—		—		—
Balance, August 31, 2020		18.1	248.7	$	1,971.6	$	2,391.0	$	(429.9)	$	13.3	$	3,946.0
Balance, February 28, 2022														Balance, February 28, 2022	17.8	250.2	$	2,091.3	$	2,922.4	$	(416.0)	$	16.5	$	4,614.2

Three months ended February 28, 2021														Three months ended February 28, 2021
Balance, November 30, 2020														Balance, November 30, 2020	18.0	248.9	$	1,981.3	$	2,415.6	$	(470.8)	$	13.9	$	3,940.0
Net income														Net income			—		161.8		—		—		161.8
Net income attributable to non-controlling interest														Net income attributable to non-controlling interest			—		—		—		0.8		0.8
Other comprehensive income, net of tax														Other comprehensive income, net of tax			—		—		48.3		0.5		48.8

Stock-based compensation														Stock-based compensation			14.2		—		—		—		14.2
Shares purchased and retired														Shares purchased and retired	(0.1)	—	(1.6)		(3.8)		—		—		(5.4)
Shares issued														Shares issued	0.2	—	4.5		—		—		—		4.5
Equal exchange														Equal exchange	(0.1)	0.1	—		—		—		—		—
Balance, February 28, 2021														Balance, February 28, 2021	18.0	249.0	$	1,998.4	$	2,573.6	$	(422.5)	$	15.2	$	4,164.7

See notes to condensed consolidated financial statements (unaudited).

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McCORMICK & COMPANY, INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1.ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and notes required by United States generally accepted accounting principles (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. In September 2020, our Board of Directors approved a 2-for-1 stock split in the form of a stock dividend on all shares of the Company's two classes of stock, Common stock and Common stock non-voting. Trading of the Company's common stock began on a split-adjusted basis on December 1, 2020. All common stock and per-share data prior to that date have been retroactively adjusted for the impact of the stock split.

The results of consolidated operations for the ~~nine-month~~three-month period ended ~~August 31, 2021~~February 28, 2022 are not necessarily indicative of the results to be expected for the full year. Historically, our ~~Net~~net sales, ~~Net~~net income and ~~Cash~~cash flow from operations have been lower in the first half of the fiscal year and higher in the second half. The historical increase in ~~Net~~net sales, ~~Net~~net income and ~~Cash~~cash flow from operations in the second half of the year has largely been due to the consumer business cycle in the U.S., where customers typically purchase more products in the fourth quarter due to the Thanksgiving and Christmas holiday seasons.

For further information, refer to the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended November 30, ~~2020.~~

~~Recent Events~~

Recent events impacting our business include COVID-19, the acquisitions of Cholula and FONA, the inflationary cost environment and supply chain disruption, each of which are further discussed in these notes to condensed consolidated financial statements. As more fully described below, we expect the largest factors impacting our fiscal 2021 performance to be the relative balance of at-home versus away-from-home consumption and the inflationary cost environment, both which remain uncertain.

~~COVID-19:~~On March 11, 2020, the World Health Organization designated a new coronavirus (“COVID-19”) as a global pandemic. Governments around the world either recommended or mandated actions to slow the transmission of the virus that included shelter-in-place orders, quarantines, limitations on crowd size, closures of dine-in restaurants and bars, and significant restrictions on travel, as well as work restrictions that prohibited many employees from going to work. Uncertainty with respect to the economic effects of the pandemic has significantly impacted not only our operating results but also the global economy. The extent and nature of government actions varied during the three and nine-months ended August 31, 2021 and 2020, based upon the then-current extent and severity of the COVID-19 pandemic within their respective countries and localities.

We are actively monitoring the impact of COVID-19 on all aspects of our business. The effects of COVID-19 on consumer behavior have impacted the relative balance of at-home versus away-from-home food demand. The impact of COVID-19, since the onset of the pandemic, has resulted in net sales growth as the increase in at-home consumption has more than offset declines in away-from-home demand. The impact of COVID-19 on our consumer segment since the beginning of the COVID-19 pandemic has resulted in a significant increase in at-home consumption and related demand for our products. The impact of COVID-19 on our flavor solutions segment has been two-fold, including both (i) an unfavorable impact attributable to decreased demand from certain customers that were affected by government measures related to COVID-19 mitigation in many of our markets that reduced away-from-home food demand; and (ii) a favorable impact attributable to increased at-home consumption from certain customers that use our products to flavor their own brands for at-home consumption. The COVID-19 mitigation measures impacting certain of our flavor solutions customers included the following: (i) with respect to dine-in restaurants, closures, limitations on dine-in capacity, or restrictions on the operations of those restaurants to carry-out or delivery only; and (ii) with respect to quick service restaurants, limitations on operations to drive-through pick-up or delivery.

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~~pandemic.~~We continue to see recovery in away-from-home demand associated with the COVID-19 recovery. During the three months ended August 31, 2021 our flavor solutions sales and operating results improved as away-from-home consumption increased as compared to the comparable quarter in 2020, in part, due to the lifting of much more restrictive COVID-19 mitigation measures that were in place in the early stages of the pandemic.The impact of the COVID-19 pandemic on our consolidated operating results during 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.

~~The pace and shape of the COVID-19 recovery as well as the impact and extent of COVID-19 variants or potential resurgences is not presently known.~~

~~Inflationary Cost Environment and Supply Chain Disruption:During fiscal 2021, we have experienced inflationary cost increases in our commodities, packaging materials and transportation costs.We expect that these inflationary cost increases will be partially mitigated by pricing actions we expect to implement in the fourth quarter of fiscal 2021 and by our CCI-led cost savings.~~We are also experiencing additional pressure in our supply chain due to strained transportation capacity, as well as due to labor shortages and absenteeism associated with COVID-19, together with the impact of the continued elevated demand.

~~Revenue Recognition~~

The following supplements the description of our accounting policies with respect to revenue recognition contained in note 1 of the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended November 30, 2020: Our revenue arrangements generally include a single performance obligation relating to the fulfillment of a customer order, which in some cases are governed by a master sales agreement, for the purchase of our products. We recognize revenue at a point in time when control of the ordered products passes to the customer, which principally occurs either upon shipment or delivery to the customer or upon pick-up by the customer, depending upon terms included in the particular customer arrangement.2021.

Accounting Pronouncements Adopted in ~~2021~~

~~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. This new standard was adopted effective December 1, 2020 and will be applied upon recognition of any future goodwill impairment charge. We do not expect this ASU to have a material impact on our financial statements.

~~In June 2016, the FASB issued ASU No. 2016-13~~ ~~Financial Instruments~~—~~Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~, which instituted a new model for recognizing credit losses on financial instruments that are not measured at fair value. This standard was adopted by the Company on December 1, 2020. As this ASU did not have a material impact on our consolidated financial statements upon adoption, a cumulative-effect adjustment to retained earnings was not necessary.

~~Recently Issued Accounting Pronouncements — Pending Adoption~~2022

In December 2019, the FASB issued ASU No. 2019-12 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The new guidance removes certain exceptions to the general principles for income taxes and also improves consistent application of accounting by clarifying or amending existing guidance. The new standard iswas adopted effective ~~for the first quarter of our fiscal year ending November 30, 2022, and interim periods within those years. We are currently evaluating the~~December 1, 2021. There was no material impact ~~that the new guidance will have on~~to our consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04 Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting that provides optional expedients for a limited period of time for accounting for contracts, hedging ~~relationship,~~relationships, and other transactions affected by the London Interbank Offered Rate (LIBOR) or other reference rates expected to be discontinued. These optional expedients can be applied from March 2020 through December 31, 2022. ~~We are currently evaluating~~LIBOR is used as a reference rate on our variable rate debt, including our revolving credit facility, synthetic lease, interest rate swaps, and cross currency interest rate swaps.The phase out of LIBOR reference rates will occur at different dates and began on January 1, 2022. Our adoption of this new standard occurred during the three months ended February 28, 2022, in conjunction with the first phase-out of a LIBOR reference rate. There was no material impact ~~that~~to our consolidated financial statements during the ~~new guidance will~~three months ended February 28, 2022, nor do we expect the adoption of this standard to have a material impact on our consolidated financial ~~statements.~~statements during the LIBOR transition period.

2. ~~ACQUISITIONS~~SPECIAL CHARGES AND ~~DISPOSITIONS~~

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~~Acquisitions are part of our strategy to increase sales and profits. Dispositions are made when deemed in our strategic interest.~~

~~Acquisition of Cholula Hot Sauce~~

~~On November 30, 2020, we completed the acquisition of the parent company of Cholula Hot Sauce~~® ~~(Cholula) from~~ L Catterton. The purchase price was approximately $801.2 million, net of cash acquired. That purchase price is also net of $1.5 million received during the second quarter of 2021 associated with the final working capital adjustment. The acquisition was funded with cash and short-term borrowings. Cholula, a premium Mexican hot sauce brand, is a strong addition to McCormick’s global branded flavor portfolio, which we believe broadens our offerings in the high growth hot sauce category to consumers and foodservice operators and accelerates our condiment growth opportunities with a complementary authentic Mexican flavor hot sauce. At the time of the acquisition, annual sales of Cholula were approximately $96 million. The results of Cholula’s operations have been included in our financial statements as a component of our consumer and flavor solutions segments from the date of acquisition.TRANSACTION AND INTEGRATION EXPENSES

The purchase price of Cholula was preliminarily allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition as further described in note 2 of the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended November 30, 2020. We valued finished goods and work-in-process inventory using a net realizable value approach, which resulted in a step-up of $4.9 million that was recognized in Cost of goods sold during the nine months ended August 31, 2021, as the related inventory was sold.

During the nine months ended August 31, 2021, we completed the Cholula purchase price allocation which resulted in an increase in goodwill of $0.8 million. The final purchase price allocation for Cholula resulted in the following fair value allocations, net of cash acquired (in millions):


~~Trade accounts receivable~~	$	~~15.0~~
~~Inventories~~	~~16.5~~
~~Goodwill~~	~~411.3~~
~~Intangible assets~~	~~401.0~~
~~Other assets~~	~~10.5~~
~~Trade accounts payable~~	~~(7.0)~~
~~Other accrued liabilities~~	~~(8.1)~~
~~Deferred taxes~~	~~(35.1)~~
~~Other long-term liabilities~~	~~(2.9)~~
~~Total~~	$	~~801.2~~

~~Acquisition of FONA International, LLC~~

On December 30, 2020, we purchased FONA International, LLC and certain of its affiliates (FONA), a privately held company, for a purchase price of approximately $708.2 million, net of cash acquired. That purchase price includes the payment of $2.6 million during the second quarter 2021 associated with the final working capital adjustment. FONA is a leading manufacturer of clean and natural flavors providing solutions for a diverse customer base across various applications for the food, beverage and nutritional markets. The acquisition of FONA in fiscal 2021 expands the breadth of our flavor solutions segment into attractive categories, as well as extends our technology platform and strengthens our capabilities. The acquisition was funded with cash and commercial paper. At the time of the acquisition, annual sales of FONA were approximately $114 million. The results of FONA’s operations have been included in our financial statements as a component of our flavor solutions segments from the date of acquisition.

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

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~~Trade accounts receivable~~	$	~~12.4~~
~~Inventories~~	~~10.3~~
~~Goodwill~~	~~389.4~~
~~Intangible assets~~	~~266.0~~
~~Property, plant and equipment~~	~~36.3~~
~~Other assets~~	~~5.5~~
~~Trade accounts payable~~	~~(3.7)~~
~~Other accrued liabilities~~	~~(8.0)~~


~~Total~~	$	~~708.2~~

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

We used carrying values to value trade receivables and payables, as well as certain other current and non-current assets and liabilities, as we determined that they represented the fair value of those items. We valued finished goods and work-in-process inventory using a net realizable value approach, which resulted in a step-up of $1.4 million that was recognized in Cost of goods sold during the nine months ended August 31, 2021, as the related inventory was sold. Raw materials and packaging inventory was valued using the replacement cost approach.

The preliminary valuation of the acquired net assets of FONA includes $49.0 million allocated to indefinite-lived brand assets, $173.0 million allocated to customer relationships with a weighted-average life of 15 years and $44.0 million allocated to intellectual property with a weighted-average life of 12 years. As a result of the acquisition, we recognized a total of $389.4 million of goodwill. That goodwill primarily represents the intangible assets that do not qualify for separate recognition, such as the value of leveraging our brand building expertise, our insights in demand from customers for value-added flavor solutions, and our supply chain capabilities, as well as expected synergies from the combined operations and assembled workforce. Our aggregate income tax basis in the acquired intangible assets and goodwill approximates their aggregate book value at the acquisition date. The final allocation of the fair value of the acquired net assets of FONA, including the residual amount of goodwill, was not complete as of August 31, 2021, but will be finalized within the allowable measurement period.

~~Transaction and Integration Expenses Associated with the Cholula and FONA Acquisitions~~

We expect Transaction and integration expenses related to our acquisitions of Cholula and FONA to total approximately $30 million and $25 million, respectively. Of the total expected Transaction and integration expenses, transaction expenses of $12.4 million were incurred in 2020. We incurred an additional $1.3 million and $33.3 million of Transaction and integration costs related to Cholula and FONA during the three and nine months ended August 31, 2021, respectively. We anticipate incurring the remainder of those Transaction and integration expenses by May 31, 2022.

~~The following are the Transaction and integration expenses recognized during the three and nine months ended August 31, 2021 relating to the Cholula and FONA acquisitions (in millions):~~
Three months ended August 31, 2021 Nine months ended August 31, 2021
Transaction-related expenses included in cost of goods sold $ — $ 6.3
Other transaction expenses — 13.8
Integration expenses 1.3 13.2
Total transaction and integration expenses $ 1.3 $ 33.3

~~Sale of Unconsolidated Operation~~

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On March 1, 2021, we sold our 26% interest in Eastern Condiments Private Ltd (Eastern) for $65.4 million in cash, net of transaction expenses of $1.4 million. Eastern was accounted for as an equity method investment with our proportionate share of earnings, prior to the sale, reflected in Income from unconsolidated operations before income taxes in our consolidated income statement. The sale of Eastern resulted in a gain of $13.4 million, net of tax of $5.7 million. That gain is included in Income from unconsolidated operations before income taxes in our consolidated income statement. That gain also reflects a write-off of $1.4 million of foreign currency translation adjustment, a component of Accumulated other comprehensive loss.

~~3. SPECIAL CHARGES~~

Special Charges

In our consolidated income statement, we include a separate line item captioned ~~Special charges~~"Special charges" in arriving at our consolidated operating income. Special charges consist of expenses, including related impairment charges, 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, such as an asset impairment, or a component which relates to inventory adjustments that are included in ~~Cost~~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~~special charges upon recognition and monitored on an on-going basis through completion.

~~The following is a summary~~ Certain ancillary expenses related to these actions approved by our Management Committee do not qualify for accrual upon approval but are included as special charges as incurred during the course of ~~Special charges recognized in~~ the ~~three and nine months ended August 31, 2021 and 2020~~

~~(in millions):~~

Three months ended August 31, Nine months ended August 31,
2021 2020 2021 2020
Employee severance and related benefits $ 2.8 $ — $ 7.6 $ 2.2
Other costs 3.0 0.1 13.0 1.8
Total $ 5.8 $ 0.1 $ 20.6 $ 4.0
actions.

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

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The following is a summary of special charges recognized in the three months ended February 28, 2022 and 2021

(in millions):


	Three months ended February 28,
	2022		2021
Employee severance and related benefits	$	14.2	$	0.3
Other costs (1)	5.3		0.8
Total	$	19.5	$	1.1

(1) Included in other costs for 2022 is non-cash accelerated depreciation of $1.4 million.

During the three months ended February 28, 2022, we recorded $19.5 million of special charges, consisting principally of $14.9 million associated with the transition of a manufacturing facility in Europe, Middle East, and Africa (EMEA), as more fully described below, streamlining actions of $2.1 million in the Americas region, and $1.5 million in the EMEA region.

In 2022, our Management Committee approved an initiative to consolidate our manufacturing operations into a net-zero carbon condiments manufacturing and distribution center facility with state-of-the-art technology in the United Kingdom. We expect to execute these changes to our supply chain operations and improve profitability, from a combination of lower headcount and non-headcount costs, by consolidating our operations into a scalable platform while expanding our capacity. We expect the cost of the initiative to approximate $30 million—to be recognized as special charges in our consolidated income statement through 2023. Of that $30 million, we expect the costs to include employee severance and related benefits, non-cash accelerated depreciation, decommissioning and other property related lease exit costs, all directly related to the initiative. During the three months ended February 28, 2022, we recorded $12.5 million in severance and related benefits costs, $1.4 million in accelerated depreciation and $1.0 million in third party expenses and other costs.

During the three months ended February 28, 2021, we recorded $1.1 million of special charges, consisting principally of streamlining actions of $0.6 million in the EMEA region and $0.5 million in the Americas region.

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

WeWhile we are continuing to fully develop the details of our GE operating model, we expect the cost of the GE initiative—to be recognized as ~~Special~~special charges in our consolidated income statement over its expected multi-year course—to range from approximately $60 million to $65 million. Of that $60 million to $65 million, we estimate that approximately sixty percent will be attributable to cash payments associated with the related costs of the 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~~this initiative. We have spent a cumulative total of ~~$41.1~~$40.7 million on this initiative through ~~August 31, 2021.~~February 28, 2022.

During the three months ended August 31, 2021, we recorded $5.8 million of Special charges, consisting principally of streamlining actions of $1.8 million in the Americas region, $1.7 million in the Europe, Middle East, and Africa (EMEA) region and $0.8 million in the Asia Pacific (APAC) region, and $0.7 million related to our GE initiative.

During the nine months ended August 31, 2021, we recorded $20.6 million of Special charges, consisting principally of streamlining actions of $7.0 million in the Americas region, $3.0 million in the EMEA region and $0.8 million in the APAC region, and $0.7 million related to our GE initiative, together with a non-cash asset impairment charge of $6.5 million associated with an administrative site that will be exited in conjunction with our decision to employ a hybrid work environment.

~~During the three months ended August 31, 2020, we recorded $0.1 million of Special charges, consisting primarily of streamlining actions in the EMEA region.~~

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During the nine months ended August 31, 2020, we recorded $4.0 million of Special charges, consisting of $2.9 million of streamlining actions in the EMEA region and $1.1 million related to our GE initiative.

As of ~~August 31, 2021,~~February 28, 2022, reserves associated with ~~Special~~special charges, which are expected to be paid during the next ~~six~~twelve months, are included in ~~Trade~~trade accounts payable and ~~Other~~other accrued liabilities in our consolidated balance sheet.

The following is a breakdown by business segment of ~~Special~~special charges for the three ~~and nine~~ months ended ~~August 31,~~February 28, 2022 and 2021 ~~and 2020~~ (in millions):


		Three months ended August 31,				Nine months ended August 31,					Three months ended February 28,
		2021		2020		2021		2020			2022		2021
Consumer segment	Consumer segment	$	3.5	$	—	$	13.1	$	3.1	Consumer segment	$	3.6	$	0.8
Flavor solutions segment	Flavor solutions segment	2.3		0.1		7.5		0.9		Flavor solutions segment	15.9		0.3
Total special charges	Total special charges	$	5.8	$	0.1	$	20.6	$	4.0	Total special charges	$	19.5	$	1.1

Transaction and Integration Expenses

The following are the transaction and integration expenses recognized during the three months ended February 28, 2022 and 2021 relating to the acquisitions of Cholula Hot Sauce ("Cholula") and FONA International, LLC ("FONA") (in millions):

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	2022		2021
Transaction-related expenses included in cost of goods sold	$	—	$	6.3
Other transaction expenses	—		13.8
Integration expenses	0.7		5.0
Total transaction and integration expenses	$	0.7	$	25.1

We expect transaction and integration expenses related to our acquisition of FONA to total approximately $3 million in 2022.

~~4. GOODWILL~~

~~The changes in the carrying amount of goodwill by business segment for the nine months ended August 31, 2021 are as follows (in millions):~~

Consumer Flavor Solutions
Beginning of the year $ 3,711.2 $ 1,275.1
Increases in goodwill from acquisition — 389.4
Changes in preliminary purchase price allocation 0.5 0.3
Foreign currency fluctuations 0.3 2.7
Balance as of the end of period $ 3,712.0 $ 1,667.5

During the nine months ended August 31, 2021, a preliminary valuation of the net assets of FONA acquired in December 2020, resulted in the assignment of $389.4 million of goodwill to the flavor solutions segment. During the nine months ended August 31, 2021, we finalized the allocation of the purchase price of Cholula, which resulted in an increase in goodwill of $0.5 million to the consumer segment and $0.3 million to the flavor solutions segment.

~~5. FINANCING ARRANGEMENTS AND~~3. FINANCIAL INSTRUMENTS

In February 2021, we issued $500.0 million of 0.90% notes due February 15, 2026, with cash proceeds received of $495.7 million, net of discounts and underwriters' fees. Also, in February 2021, we issued $500.0 million of 1.85% notes due February 15, 2031, with cash proceeds received of $492.8 million, net of discounts and underwriters' fees. Interest is payable semiannually on both of these notes in arrears in February and August of each year. The net proceeds from these issuances were used to pay down short-term borrowings, including a portion of the $1,443.0 million of commercial paper issued to finance our acquisitions of Cholula and FONA, and for general corporate purposes.

~~During the three months ended August 31, 2021, we repaid our $250 million, 3.90% notes that matured on July 8, 2021.~~

~~In June 2021, we entered into a~~ ~~five~~-year $1.5 billion revolving credit facility, which will expire in June 2026. The current pricing for the credit facility, on a fully drawn basis, is LIBOR plus 1.25%. The pricing of the credit facility is based on a credit rating grid that contains a fully drawn maximum pricing of the credit facility equal to LIBOR plus 1.75%. The provisions of this new revolving credit facility restrict subsidiary indebtedness and require us to maintain a minimum interest coverage ratio. We do not expect that this covenant would limit our access to this revolving credit facility for the foreseeable future. This facility replaced the following prior revolving credit facilities: (i) a ~~five~~-year $1.0 billion revolving credit facility that was due to expire in August 2022, and (ii) a 364-day $1.0 billion revolving facility, which we entered into in the first quarter of 2021 and that was due to expire in December 2021. The terms of those revolving credit facilities are more fully described in note 6 of the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended November 30, 2020.

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

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purposes, nor are we a party to any leveraged derivative instrument, and all derivatives are designated as hedges. For the three months ended February 28, 2022 and 2021, hedge ineffectiveness was not material. 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~~We assess foreign currency risk based on transactional cash flows and translational volatility and may enter into forward contract and currency swaps with highly-rated financial institutions to reduce fluctuations in the long or short currency positions. Forward contracts are generally less than 18 months duration. Currency swap agreements are established in conjunction with the terms of the underlying debt issues.

At ~~August 31, 2021,~~February 28, 2022, we had foreign currency exchange contracts to purchase or sell ~~$598.1~~$636.5 million of foreign currencies as compared to ~~$383.8~~$583.6 million at November 30, ~~2020.~~2021. All of these contracts were designated as hedges of anticipated purchases denominated in a foreign currency or hedges of foreign currency denominated assets or liabilities. All foreign currency exchange contracts outstanding at ~~August 31, 2021~~February 28, 2022 have durations of less than 18 months, including ~~$232.9~~$242.1 million of notional contracts that have durations of less than one month and are used to hedge short-term cash flow funding.

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

We also enter into fair value foreign currency exchange contracts to manage both exposure to currency fluctuations in certain intercompany loans between subsidiaries as well as currency exposure to third-party non-functional currency assets or liabilities. At ~~August 31, 2021,~~February 28, 2022, the notional value of these contracts was ~~$391.7~~$413.4 million. Any gains or losses recorded based on both the change in fair value of these contracts and the change in the currency component of the underlying loans are recognized in our consolidated income statement as Other income, net.

We also utilize cross currency interest rate swap contracts that are designated as net investment hedges. As of August 31, 2021, we had cross currency interest rate swap contracts of (i) $250 million notional value to receive $250 million at three-month U.S. LIBOR plus 0.685% and pay £194.1 million at three-month GBP 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. Any gains or losses on net investment hedges are included in foreign currency translation adjustments in ~~Accumulated~~accumulated other comprehensive loss.

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 to minimize worldwide financing costs and to achieve a desired mix of variable and fixed rate debt.

As of August 31, 2021, 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. The fair value of these swap contracts is offset by a corresponding increase or decrease of the value of the hedged debt.

All derivatives are recognized at fair value in our consolidated balance sheet and recorded in either Prepaid expenses and other current assets, 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, 2021		Asset Derivatives					Liability Derivatives
As of February 28, 2022												As of February 28, 2022	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	Interest rate contracts	Other current assets / Other long-term assets	$	350.0	$	30.0	Other accrued liabilities	$	—	$	—	Interest rate contracts	Other current assets / Other long-term assets	$	600.0	$	14.6	Other accrued liabilities	$	—	$	—
Foreign exchange contracts	Foreign exchange contracts	Other current assets	444.0		6.2		Other accrued liabilities	154.1		1.6		Foreign exchange contracts	Other current assets	444.5		7.7		Other accrued liabilities	192.0		2.8
Cross currency contracts	Cross currency contracts	Other current assets / Other long-term assets	261.9		2.8		Other long-term liabilities	266.8		17.2		Cross currency contracts	Other current assets / Other long-term assets	495.3		10.9		Other long-term liabilities	505.7		14.1
Total	Total				$	39.0				$	18.8	Total				$	33.2				$	16.9

As of November 30, 2020		Asset Derivatives					Liability Derivatives
As of November 30, 2021												As of November 30, 2021	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	Interest rate contracts	Other current assets / Other long-term assets	$	350.0	$	43.1	Other accrued liabilities	$	—	$	—	Interest rate contracts	Other current assets / Other long-term assets	$	350.0	$	23.1	Other accrued liabilities	$	—	$	—
Foreign exchange contracts	Foreign exchange contracts	Other current assets	27.5		1.4		Other accrued liabilities	356.3		8.2		Foreign exchange contracts	Other current assets	380.8		8.3		Other accrued liabilities	202.8		2.8
Cross currency contracts	Cross currency contracts	Other current assets / Other long-term assets	—		—		Other long-term liabilities	524.4		18.8		Cross currency contracts	Other current assets / Other long-term assets	251.0		4.4		Other long-term liabilities	257.5		8.0
Total	Total				$	44.5				$	27.0	Total				$	35.8				$	10.8

During the first quarter of 2022, we entered into $250 million notional value interest rate swap contracts where we receive interest at 2.50% and pay a variable rate of interest based on USD SOFR plus 0.745%, which expire in April 2030, and are designated as fair value hedges of the changes in fair value of $250 million of the $500 million 2.50% term notes due in 2030.The fair value of these interest rate swap contracts is offset by a corresponding increase or decrease in the value of the hedged debt. Also during the first quarter of 2022, we entered into cross currency interest rate swap contracts of (i) $250 million notional value to receive $250 million at USD SOFR plus 0.745% and pay £184.1 million at GBP SONIA plus 0.5740% and (ii) £184.1 million notional value to receive £184.1 million at GBP SONIA plus 0.574% and pay €219.2 million at Euro ESTR plus 0.667%, both of which expire in April 2030. In conjunction with the phase-out of LIBOR, during the first quarter of 2022 we amended our previously existing cross currency swaps which expire in August 2027 such that, effective February 15, 2022, we now pay and receive at GBP SONIA plus 0.859% (previously GBP LIBOR plus 0.740%).

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The following tables disclose the impact of derivative instruments on our ~~Other~~other comprehensive income (OCI), ~~Accumulated~~accumulated other comprehensive loss (AOCI) and our consolidated income statement for the ~~three-~~three-months ended February 28, 2022 and ~~nine-months ended August 31,~~ 2021 ~~and 2020~~ (in millions):


Fair Value Hedges	Fair Value Hedges										Fair Value Hedges

Three months ended February 28,											Three months ended February 28,
Derivative	Derivative	Income statement location	Income (expense)								Derivative	Income statement location	Income (expense)
			Three months ended August 31, 2021		Three months ended August 31, 2020		Nine months ended August 31, 2021		Nine months ended August 31, 2020				2022		2021

Interest rate contracts	Interest rate contracts	Interest expense	$	2.1	$	1.8	$	6.1	$	3.2	Interest rate contracts	Interest expense	$	2.2	$	2.0


Three months ended August 31,		Income statement location	Gain (loss) recognized in income					Income statement location	Gain (loss) recognized in income
														Income statement location	Gain (loss) recognized in income					Income statement location	Gain (loss) recognized in income
Derivative	Derivative		2021		2020		Hedged item		2021		2020		Derivative		2022		2021		Hedged item		2022		2021
Foreign exchange contracts	Foreign exchange contracts	Other income, net	$	5.6	$	(7.6)	Intercompany loans	Other income, net	$	(5.4)	$	7.3	Foreign exchange contracts	Other income, net	$	(0.4)	$	(2.1)	Intercompany loans	Other income, net	$	0.4	$	2.4

Nine months ended August 31, Income statement location Gain (loss) recognized in income Income statement location Gain (loss) recognized in income
Derivative 2021 2020 Hedged item 2021 2020
Foreign exchange contracts Other income, net $ (0.3) $ (4.1) Intercompany loans Other income, net $ 1.1 $ 3.1

The gains (losses) recognized on fair value hedges relating to currency exposure on third-party non-functional currency assets or liabilities were not material during the ~~three-~~three-months ended February 28, 2022 and ~~nine-months ended August 31, 2021 and 2020.~~2021.

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Cash Flow Hedges	Cash Flow Hedges										Cash Flow Hedges
Three months ended August 31,
Three months ended February 28,											Three months ended February 28,
Derivative	Derivative	Gain (loss) recognized in OCI				Income statement location	Gain (loss) reclassified from AOCI				Derivative	Gain (loss) recognized in OCI				Income statement location	Gain (loss) reclassified from AOCI
		2021		2020			2021		2020			2022		2021			2022		2021
Interest rate contracts	Interest rate contracts	$	—	$	—	Interest expense	$	0.2	$	0.2	Interest rate contracts	$	—	$	0.3	Interest expense	$	0.1	$	0.1
Foreign exchange contracts	Foreign exchange contracts	1.5		(0.6)		Cost of goods sold	(0.3)		1.1		Foreign exchange contracts	2.9		(1.6)		Cost of goods sold	(0.2)		0.3
Total	Total	$	1.5	$	(0.6)		$	(0.1)	$	1.3	Total	$	2.9	$	(1.3)		$	(0.1)	$	0.4

Nine months ended August 31,
Derivative		Gain (loss) recognized in OCI				Income statement location	Gain (loss) reclassified from AOCI
		2021		2020			2021		2020
Interest rate contracts		$	0.3	$	—	Interest expense	$	0.4	$	0.4
Foreign exchange contracts		(0.9)		2.3		Cost of goods sold	(0.6)		1.2
Total		$	(0.6)	$	2.3		$	(0.2)	$	1.6

For all cash flow and settled interest rate fair value hedge derivatives, the net amount of ~~Accumulated~~accumulated other comprehensive loss expected to be reclassified in the next 12 months is ~~$0.7~~$2.8 million as an increase to earnings.


Net Investment Hedges	Net Investment Hedges										Net Investment Hedges
Three months ended August 31,
Three months ended February 28,											Three months ended February 28,
Derivative	Derivative	Gain (loss) recognized in OCI				Income statement location	Gain (loss) excluded from the assessment of hedge effectiveness				Derivative	Gain (loss) recognized in OCI				Income statement location	Gain (loss) excluded from the assessment of hedge effectiveness
		2021		2020			2021		2020			2022		2021			2022		2021
Cross currency contracts	Cross currency contracts	$	8.4	$	(17.4)	Interest expense	$	0.4	$	0.3	Cross currency contracts	$	0.7	$	(2.0)	Interest expense	$	0.5	$	0.4

Nine months ended August 31,
Derivative		Gain (loss) recognized in OCI				Income statement location	Gain (loss) excluded from the assessment of hedge effectiveness
		2021		2020			2021		2020
Cross currency contracts		$	4.9	$	(20.7)	Interest expense	$	1.1	$	2.7

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

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6.4. 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 31, 2021~~February 28, 2022 and November 30, ~~2020,~~2021, 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):


				August 31, 2021					February 28, 2022
		Fair Value		Level 1		Level 2			Fair Value		Level 1		Level 2
Assets	Assets							Assets
Cash and cash equivalents	Cash and cash equivalents	$	312.6	$	312.6	$	—	Cash and cash equivalents	$	338.4	$	338.4	$	—
Insurance contracts	Insurance contracts	138.8		—		138.8		Insurance contracts	126.8		—		126.8
Bonds and other long-term investments	Bonds and other long-term investments	2.0		2.0		—		Bonds and other long-term investments	4.1		4.1		—
Interest rate derivatives	Interest rate derivatives	30.0		—		30.0		Interest rate derivatives	14.6		—		14.6
Foreign currency derivatives	Foreign currency derivatives	6.2		—		6.2		Foreign currency derivatives	7.7		—		7.7
Cross currency contracts	Cross currency contracts	2.8		—		2.8		Cross currency contracts	10.9		—		10.9
Total	Total	$	492.4	$	314.6	$	177.8	Total	$	502.5	$	342.5	$	160.0
Liabilities	Liabilities							Liabilities
Foreign currency derivatives	Foreign currency derivatives	$	1.6	$	—	$	1.6	Foreign currency derivatives	$	2.8	$	—	$	2.8

Cross currency contracts	Cross currency contracts	17.2		—		17.2		Cross currency contracts	14.1		—		14.1
Total	Total	$	18.8	$	—	$	18.8	Total	$	16.9	$	—	$	16.9


				November 30, 2020					November 30, 2021
		Fair Value		Level 1		Level 2			Fair Value		Level 1		Level 2
Assets	Assets							Assets
Cash and cash equivalents	Cash and cash equivalents	$	423.6	$	423.6	$	—	Cash and cash equivalents	$	351.7	$	351.7	$	—
Insurance contracts	Insurance contracts	126.0		—		126.0		Insurance contracts	132.2		—		132.2
Bonds and other long-term investments	Bonds and other long-term investments	3.9		3.9		—		Bonds and other long-term investments	5.1		5.1		—
Interest rate derivatives	Interest rate derivatives	43.1		—		43.1		Interest rate derivatives	23.1		—		23.1
Foreign currency derivatives	Foreign currency derivatives	1.4		—		1.4		Foreign currency derivatives	8.3		—		8.3

Cross currency contracts								Cross currency contracts	4.4		—		4.4
Total	Total	$	598.0	$	427.5	$	170.5	Total	$	524.8	$	356.8	$	168.0
Liabilities	Liabilities							Liabilities
Foreign currency derivatives	Foreign currency derivatives	$	8.2	$	—	$	8.2	Foreign currency derivatives	$	2.8	$	—	$	2.8

Cross currency contracts	Cross currency contracts	18.8		—		18.8		Cross currency contracts	8.0		—		8.0
Total	Total	$	27.0	$	—	$	27.0	Total	$	10.8	$	—	$	10.8

At February 28, 2022 and November 30, 2021, the carrying amounts of interest rate derivatives, foreign currency derivatives, cross currency contracts, insurance contracts, and bond and other long-term investments are equal to their respective fair values. Because of their short-term nature, the amounts reported in ~~our consolidated~~the balance sheet for ~~Cash~~cash and cash equivalents, ~~Trade accounts receivable, Short-term~~receivables, short-

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term borrowings and ~~Trade~~trade accounts payable approximate fair value. Investments in affiliates are not readily marketable, and it is not practicable to estimate their fair value.

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

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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 the current portion thereof (in millions):


		August 31, 2021		November 30, 2020			February 28, 2022		November 30, 2021
Carrying amount	Carrying amount	$	4,753.5	$	4,017.7	Carrying amount	$	4,735.3	$	4,743.6
Fair value		5,009.5		4,357.1

Level 1 valuation techniques	Level 1 valuation techniques	$	4,807.4	$	4,161.3	Level 1 valuation techniques	$	4,571.8	$	4,722.3
Level 2 valuation techniques	Level 2 valuation techniques	202.1		195.8		Level 2 valuation techniques	196.3		199.2
Total fair value	Total fair value	$	5,009.5	$	4,357.1	Total fair value	$	4,768.1	$	4,921.5

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

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7.5. EMPLOYEE BENEFIT AND RETIREMENT PLANS

We sponsor defined benefit pension plans in the U.S. and certain foreign locations. In addition, we sponsor defined contribution plans in the U.S. We also contribute to defined contribution plans in locations outside the U.S., including government-sponsored retirement plans. We also currently provide postretirement medical and life insurance benefits to certain U.S. employees and retirees.D~~uring~~ ~~fiscal years 2018 and 2017, we made significant changes to our employee benefit and retirement plans that~~ We previously froze the accrual of future benefits under certain defined benefit pension plans in the U.S. and certain foreign locations. Although our defined benefit plans in the U.S., United Kingdom and Canada have generally been frozen, employees who are participants in the plans retained benefits accumulated up to the date of the freeze, based on credited service and eligible earnings, in accordance with the terms of the plans.

The following table presents the components of our pension ~~expense~~ (income) ~~of the defined benefit plans~~and other postretirement benefits expense for the three months ended ~~August 31,~~February 28, 2022 and 2021 ~~and 2020~~ (in millions):


		United States				International					United States pension				International pension				Other postretirement benefits
		2021		2020		2021		2020			2022		2021		2022		2021		2022		2021
Defined benefit plans

Service cost	Service cost	$	0.9	$	0.8	$	0.3	$	0.2	Service cost	$	0.9	$	0.9	$	0.2	$	0.3	$	0.4	$	0.5
Interest costs	Interest costs	6.5		7.3		1.8		1.9		Interest costs	6.6		6.5		1.8		1.7		0.4		0.4
Expected return on plan assets	Expected return on plan assets	(10.3)		(10.2)		(3.5)		(3.7)		Expected return on plan assets	(10.7)		(10.3)		(3.2)		(3.5)		—		—
Amortization of prior service costs	Amortization of prior service costs	0.2		0.2		—		0.1		Amortization of prior service costs	0.1		0.1		—		—		(0.1)		(0.1)
Amortization of net actuarial losses	Amortization of net actuarial losses	2.7		2.0		0.6		0.5		Amortization of net actuarial losses	2.2		2.8		0.4		0.6		—		—
Settlement loss		—		—		0.2		0.7
Total pension expense (income)		$	—	$	0.1	$	(0.6)	$	(0.3)

Total (income) expense										Total (income) expense	$	(0.9)	$	—	$	(0.8)	$	(0.9)	$	0.7	$	0.8

~~The following table presents the components of our pension expense (income) of the defined benefit plans for the nine months ended August 31, 2021 and 2020 (in millions):~~

United States International
2021 2020 2021 2020
Defined benefit plans
Service cost $ 2.8 $ 2.4 $ 0.8 $ 0.7
Interest costs 19.5 22.0 5.3 5.6
Expected return on plan assets (30.9) (30.5) (10.5) (11.2)
Amortization of prior service costs 0.4 0.4 0.1 0.1
Amortization of net actuarial losses 8.2 5.9 1.7 1.5
Settlement loss — — 0.6 1.2
Total pension expense (income) $ — $ 0.2 $ (2.0) $ (2.1)

During the ~~nine~~three months ended ~~August 31,~~February 28, 2022 and 2021, ~~and 2020,~~ we contributed ~~$7.5~~$2.0 million and ~~$9.3~~$2.3 million, respectively, to our pension plans. Total contributions to our pension plans in fiscal year ~~2020~~2021 were ~~$11.9~~$15.0 million.

~~The following table presents the components of our other postretirement benefits expense (income) (in millions):~~
Three months ended August 31, Nine months ended August 31,
2021 2020 2021 2020
Other postretirement benefits
Service cost $ 0.5 $ 0.5 $ 1.5 $ 1.4
Interest costs 0.4 0.5 1.2 1.5
Amortization of prior service credits (0.1) (1.2) (0.3) (3.5)
Amortization of net actuarial gains — — — (0.1)
Total other postretirement benefits expense (income) $ 0.8 $ (0.2) $ 2.4 $ (0.7)

All of the amounts in the tables above for pension ~~expense~~(income) and other postretirement benefits expense, other than service cost, were included in ~~Other~~other income, net within our consolidated income statements. The net aggregate amount of pension and other

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postretirement benefits (income) ~~expenses,~~, excluding service cost components, ~~were $(1.5)~~was $(2.5) million and ~~$(1.9)~~$(1.8) million for the three months ended ~~August 31,~~February 28, 2022 and 2021, ~~and 2020, respectively and $(4.7) million and $(7.1) million for the nine months ended August 31, 2021 and 2020,~~ respectively.

8.6. STOCK-BASED COMPENSATION

We have 4 types of stock-based compensation awards: restricted stock units ("RSUs"), stock options, company stock

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awarded as part of our long-term performance plan ("LTPP") and ~~beginning in the fourth quarter of 2020,~~ price-vested stock options. The following table sets forth the stock-based compensation expense recorded in ~~Selling,~~selling, general and administrative ("SG&A") expense (in millions):
Three months ended August 31, Nine months ended August 31,
2021 2020 2021 2020
Stock-based compensation expense $ 11.6 $ 10.7 $ 54.2 $ 37.8


	Three months ended February 28,
	2022		2021
Stock-based compensation expense	$	11.1	$	14.2

Our ~~2021~~2022 annual grant of stock options and RSUs ~~occurred~~is expected to occur in the second quarter, similar to the ~~2020~~2021 annual grant. The weighted-average grant-date fair value of each stock option granted in 2021 was $18.36 and in 2020 was $13.26 as calculated under a lattice pricing model. Substantially all of the stock options and RSUs granted in 2021 and 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:

2021 2020
Risk-free interest rates 0.0 - 1.8% 0.0 - 0.6%
Dividend yield 1.5% 1.8%
Expected volatility 21.3% 22.8%
Expected lives (in years) 7.9 7.9

The following is a summary of our stock option activity for the ~~nine~~three months ended ~~August 31, 2021~~February 28, 2022 and ~~2020:~~2021:


		2021			2020				2022			2021
(shares in millions)	(shares in millions)	Number of Shares	Weighted- Average Exercise Price		Number of Shares	Weighted- Average Exercise Price		(shares in millions)	Number of Shares	Weighted- Average Exercise Price		Number of Shares	Weighted- Average Exercise Price
Outstanding at beginning of period	Outstanding at beginning of period	4.5	$	53.56	5.2	$	48.09	Outstanding at beginning of period	5.0	$	59.71	4.5	$	53.56
Granted		0.8	89.16		0.8	69.31

Exercised	Exercised	(0.2)	48.60		(1.4)	40.94		Exercised	(0.6)	45.25		(0.1)	39.30
Outstanding at end of the period	Outstanding at end of the period	5.1	$	59.44	4.6	$	53.44	Outstanding at end of the period	4.4	$	61.72	4.4	$	53.62
Exercisable at end of the period	Exercisable at end of the period	3.7	$	51.19	3.2	$	47.67	Exercisable at end of the period	3.0	$	53.17	3.2	$	47.95

As of ~~August 31, 2021,~~February 28, 2022, the intrinsic value (the difference between the exercise price and the market price) for all options outstanding was ~~$138.9~~$145.5 million and for options currently exercisable was ~~$130.1~~$128.0 million. The total intrinsic value of all options exercised during the ~~nine~~three months ended ~~August 31,~~February 28, 2022 and 2021 ~~and 2020~~ was ~~$7.3~~$32.6 million and ~~$65.3~~$2.2 million, respectively.

The following is a summary of our RSU activity for the ~~nine~~three months ended ~~August 31, 2021~~February 28, 2022 and ~~2020:~~2021:


		2021			2020				2022			2021
(shares in thousands)	(shares in thousands)	Number of Shares	Weighted- Average Grant-Date Fair Value		Number of Shares	Weighted- Average Grant-Date Fair Value		(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	Outstanding at beginning of period	714	$	61.74	762	$	57.95	Outstanding at beginning of period	563	$	69.52	714	$	61.74
Granted	Granted	219	86.86		296	67.03		Granted	6	92.47		10	91.85
Vested	Vested	(284)	62.31		(274)	54.99		Vested	(24)	54.02		(10)	47.70
Forfeited	Forfeited	(28)	75.02		(14)	62.15		Forfeited	(8)	78.51		(6)	65.74
Outstanding at end of period	Outstanding at end of period	621	$	69.75	770	$	62.41	Outstanding at end of period	537	$	70.31	708	$	62.34

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The following is a summary of our ~~Price-Vested Stock Options~~price-vested stock options activity for the ~~nine~~three months ended ~~August 31,~~February 28, 2022 and 2021:


					2022		2021
(shares in thousands)	(shares in thousands)	Number of Shares	Weighted- Average Grant-Date Fair Value			(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	Outstanding at beginning of period	2,482	$	9.40		Outstanding at beginning of period	2,193	$	9.40	2,482	$	9.40
Granted	Granted	15	9.66			Granted	—	—		15	9.66

Forfeited	Forfeited	(245)	9.42			Forfeited	(27)	9.40		(13)	9.40
Outstanding at end of period	Outstanding at end of period	2,252	$	9.40		Outstanding at end of period	2,166	$	9.40	2,484	$	9.40

The following is a summary of our LTPP activity for the ~~nine~~three months ended ~~August 31, 2021~~February 28, 2022 and ~~2020:~~2021:


		2021			2020				2022			2021
(shares in thousands)	(shares in thousands)	Number of Shares	Weighted- Average Grant-Date Fair Value		Number of Shares	Weighted- Average Grant-Date Fair Value		(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	Outstanding at beginning of period	382	$	71.20	392	$	57.98	Outstanding at beginning of period	497	$	83.74	382	$	71.20
Granted	Granted	141	98.30		130	86.14		Granted	151	95.00		141	98.30
Vested	Vested	(124)	51.73		(88)	44.98		Vested	(251)	75.26		(121)	50.95
Forfeited	Forfeited	(23)	89.44		(6)	63.73		Forfeited	(2)	96.03		(5)	82.59
Outstanding at end of period	Outstanding at end of period	376	$	86.73	428	$	69.13	Outstanding at end of period	395	$	93.42	397	$	86.89

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9.7. INCOME TAXES

Income tax expense for the three months ended ~~August 31, 2021~~February 28, 2022 included ~~$22.9~~$10.3 million of net discrete tax benefits consisting principally of the following: (i) ~~$13.3~~$7.6 million of excess tax benefits due to the partial release of certain reserves for an unrecognized tax benefit and related interest in a non-U.S. jurisdiction based on a change in our assessment of the technical merits of that position associated with ~~the availability of new information,~~stock-based compensation, and (ii) $4.3 million of tax benefits from the resolution of other tax uncertainties, including the reversal of certain reserves for unrecognized tax benefits and related interest associated with the expiration of statutes of limitations, (iii) $2.4$2.5 million of tax benefits related to the revaluation of deferred taxes resulting from enacted legislation, (iv) $1.1 million of tax benefits resulting from an adjustment to a prior year tax accrual based on the final return filed, and (v) $1.0 million of tax benefits resulting from a refinement of deferred state taxes directly related to our December 2020 acquisition of FONA.

legislation.

Income tax expense for the ~~nine~~three months ended ~~August 31,~~February 28, 2021 included ~~$22.9~~$5.3 million of net discrete tax ~~benefits~~expense consisting ~~primarily~~principally of the following: (i) $13.3 million of tax benefits due to the partial release of certain reserves for an unrecognized tax benefit and related interest in a non-U.S. jurisdiction based on a change in our assessment of the technical merits of that position associated with the availability of new information, (ii) $9.2 million of tax benefits from the resolution of other tax uncertainties, including the reversal of certain reserves for unrecognized tax benefits and related interest associated with the expiration of statutes of limitations, (iii) $10.4$11.4 million of deferred state tax expense directly related to our December 2020 acquisition of FONA, ~~(iv)~~(ii) $4.5 million of tax benefits associated with the release of a valuation allowance due to a change in judgment about realizability of deferred tax assets, ~~(v) $2.2 million of excess tax benefits associated with share-based compensation, (vi) $2.5~~and (iii) $1.2 million of tax benefits ~~related to the revaluation of deferred taxes resulting~~ from ~~enacted legislation, and (vii) $1.1 million of tax benefits resulting from an adjustment to a prior year tax accrual based on the final return filed.~~

Income taxes for the three months ended August 31, 2020 included $13.2 million of discrete tax benefits consisting principally of the following: (i) $7.3 million of excess tax benefits associated with share-based compensation, (ii) $2.1 million of tax benefits related to the reversal of ~~unrecognized tax benefits and related interest associated with the expiration of statutes of limitations, (iii) $2.0 million~~certain reserves for ~~an adjustment to a prior year tax accrual based on the final return filed, and (iv) $1.1 million related to the revaluation of deferred taxes resulting from enacted legislation.~~

Income taxes for the nine months ended August 31, 2020 included $40.1 million of discrete tax benefits consisting principally of the following: (i) $13.0 million of excess tax benefits associated with share-based compensation, (ii) $9.9 million of tax benefits associated with an intra-entity asset transfer that occurred during the first quarter, (iii) $9.3 million ofunrecognized tax benefits associated with the ~~release of a valuation allowance due to a change in judgment about realizability of deferred tax assets, (iv) $5.5 million~~resolution of tax benefits related to the reversal of unrecognized tax benefits and related interest associated with the expiration of statutes of limitations in various jurisdictions, and (v) $2.0 million for an adjustment to a prior year tax accrual based on the final return filed.uncertainties.

Other than additions for current year tax positions, ~~and the reversal of unrecognized tax benefits and related interest noted above,~~ there were no significant changes to unrecognized tax benefits during the ~~nine~~three months ended ~~August 31, 2021.~~February 28, 2022.

As of ~~August 31, 2021,~~February 28, 2022, 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.

~~10.~~8. CAPITAL STOCK AND EARNINGS PER SHARE

On April 5, 2021, following approval by the Company’s shareholders on March 31, 2021, amendments to the Company’s Charter became effective that increased the number of authorized shares of each class of common stock from 320,000,000 to 640,000,000 and established the par value of each class of common stock at $0.01 per share. The par value and additional paid in capital associated with each class of common stock is recorded in Common stock and Common stock non-voting in our consolidated balance sheet.

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


	Three months ended February 28,
	2022	2021
Average shares outstanding – basic	267.8	267.1
Effect of dilutive securities:
Stock options/RSUs/LTPP	2.7	2.8
Average shares outstanding – diluted	270.5	269.9

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Three months ended August 31, Nine months ended August 31,
2021 2020 2021 2020
Average shares outstanding – basic 267.4 266.7 267.2 266.3
Effect of dilutive securities:
Stock options/RSUs/LTPP 2.6 2.9 2.8 2.7
Average shares outstanding – diluted 270.0 269.6 270.0 269.0

The following table sets forth the stock options and RSUs that were not considered in our earnings per share calculation since they were anti-dilutive (in millions):
Three months ended August 31, Nine months ended August 31,
2021 2020 2021 2020
Anti-dilutive securities 0.8 — 0.6 0.2


	Three months ended February 28,
	2022	2021
Anti-dilutive securities	0.2	—

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


		Three months ended August 31,		Nine months ended August 31,			Three months ended February 28,
		2021	2020	2021	2020		2022	2021
Shares issued under stock options, RSUs, LTPP and employee stock purchase plans	Shares issued under stock options, RSUs, LTPP and employee stock purchase plans	0.1	0.7	0.6	1.7	Shares issued under stock options, RSUs, LTPP and employee stock purchase plans	0.9	0.2
Shares repurchased under the stock repurchase program and shares withheld for taxes under stock options, RSUs, LTPP and employee stock purchase plans		0.1	0.4	0.2	0.7
Shares repurchased under the stock repurchase program and shares withheld for taxes under stock options, RSUs, and LTPP						Shares repurchased under the stock repurchase program and shares withheld for taxes under stock options, RSUs, and LTPP	0.2	0.1

As of ~~August 31, 2021, $581.4~~February 28, 2022, $567.4 million remained of the $600 million share repurchase program authorization approved by our Board of Directors in November 2019.

~~11.~~9. ACCUMULATED OTHER COMPREHENSIVE LOSS

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


		August 31, 2021		November 30, 2020			February 28, 2022		November 30, 2021
Foreign currency translation adjustment (1)	Foreign currency translation adjustment (1)	$	(147.0)	$	(174.0)	Foreign currency translation adjustment (1)	$	(228.7)	$	(233.3)
Unrealized gain (loss) on foreign currency exchange contracts	Unrealized gain (loss) on foreign currency exchange contracts	1.9		(0.4)		Unrealized gain (loss) on foreign currency exchange contracts	5.1		0.6

Unamortized value of settled interest rate swaps	Unamortized value of settled interest rate swaps	(0.2)		(0.1)		Unamortized value of settled interest rate swaps	(0.4)		(0.2)
Pension and other postretirement costs	Pension and other postretirement costs	(290.3)		(296.3)		Pension and other postretirement costs	(192.0)		(193.6)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	$	(435.6)	$	(470.8)	Accumulated other comprehensive loss	$	(416.0)	$	(426.5)

(1)During the ~~nine~~three months ended ~~August 31, 2021,~~February 28, 2022, the foreign currency translation adjustment of ~~Accumulated~~accumulated other comprehensive loss decreased on a net basis by ~~$27.0~~$4.6 million, including the impact of a ~~$4.9~~$0.7 million ~~decrease~~increase associated with net investment hedges. These net investment hedges are more fully described in note 5.3.

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


	Three months ended				Affected Line Items in the Condensed Consolidated Income Statement
	February 28, 2022		February 28, 2021
(Gains)/losses on cash flow hedges:
Interest rate derivatives	$	(0.1)	$	(0.1)		Interest expense
Foreign exchange contracts	0.2		(0.3)			Cost of goods sold
Total before tax	0.1		(0.4)
Tax effect	—		0.1			Income tax expense
Net, after tax	$	0.1	$	(0.3)

Amortization of pension and postretirement benefit adjustments:

Amortization of net actuarial losses (1)	$	2.6	$	3.4		Other income, net
Total before tax	2.6		3.4
Tax effect	(0.6)		(0.8)			Income tax expense
Net, after tax	$	2.0	$	2.6

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Three months ended Nine months ended Affected Line Items in the Condensed Consolidated Income Statement
Accumulated other comprehensive income (loss) components August 31, 2021 August 31, 2020 August 31, 2021 August 31, 2020
(Gains)/losses on cash flow hedges:
Interest rate derivatives $ (0.2) $ (0.2) $ (0.4) $ (0.4) Interest expense
Foreign exchange contracts 0.3 (1.1) 0.6 (1.2) Cost of goods sold
Total before tax 0.1 (1.3) 0.2 (1.6)
Tax effect — 0.3 — 0.4 Income tax expense
Net, after tax $ 0.1 $ (1.0) $ 0.2 $ (1.2)
Amortization of pension and postretirement benefit adjustments:
Amortization of prior service costs (credit) (1)
$ 0.1 $ (0.9) $ 0.2 $ (3.0) Other income, net
Amortization of net actuarial losses (1)
3.5 3.2 10.5 8.5 Other income, net
Total before tax 3.6 2.3 10.7 5.5
Tax effect (0.8) (0.6) (2.5) (1.3) Income tax expense
Net, after tax $ 2.8 $ 1.7 $ 8.2 $ 4.2

(1)This ~~Accumulated~~accumulated other comprehensive income (loss) component is included in the computation of total pension ~~expense~~(income) and other postretirement benefits expense (refer to note 75 for additional details). Amortization of net actuarial losses includes settlement losses.

~~12.~~10. 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 channels, including grocery, mass merchandise, warehouse clubs, discount and drug stores, and e-commerce under the “McCormick” brand and a variety of brands around the world, including “French’s”, “Frank’s RedHot”, “OLD BAY”, “Lawry’s”, “Zatarain’s”, “Simply Asia”, “Thai Kitchen”, “Ducros”, “Vahine”, “Cholula”, “Schwartz”, “Club House”, “Kamis”~~, “Kohinoor”~~, “DaQiao”, “La Drogheria”, “Stubb's”, and “Gourmet Garden”. Our flavor solutions segment sells to food manufacturers and the foodservice industry both directly and indirectly through distributors, with the exception of our 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. We also exclude transaction and integration expenses related to our acquisitions, including the recent acquisitions of Cholula and FONA from our measure of segment performance as these expenses are similarly managed separately from the business segments. These transaction and integration expenses excluded from our segment performance measure include the amortization of the acquisition-date fair value adjustment of inventories that is included in ~~Cost~~cost of goods sold, costs directly associated with that acquisition and costs associated with integrating the businesses.

Although the segments are managed separately due to their distinct distribution channels and marketing strategies, manufacturing and warehousing are often integrated to maximize cost efficiencies. We do not segregate jointly utilized assets by individual segment for 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.

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		Consumer		Flavor Solutions		Total			Consumer		Flavor Solutions		Total
				(in millions)							(in millions)
Three months ended August 31, 2021
Three months ended February 28, 2022								Three months ended February 28, 2022
Net sales	Net sales	$	921.9	$	627.5	$	1,549.4	Net sales	$	926.1	$	596.3	$	1,522.4
Operating income excluding special charges and transaction and integration expenses	Operating income excluding special charges and transaction and integration expenses	187.8		84.5		272.3		Operating income excluding special charges and transaction and integration expenses	167.0		60.1		227.1
Income from unconsolidated operations	Income from unconsolidated operations	6.7		2.4		9.1		Income from unconsolidated operations	8.4		0.9		9.3

Three months ended August 31, 2020
Net sales		$	910.9	$	519.4	$	1,430.3
Operating income excluding special charges		209.0		64.1		273.1
Income from unconsolidated operations		8.5		1.1		9.6

Nine months ended August 31, 2021
Three months ended February 28, 2021								Three months ended February 28, 2021
Net sales	Net sales	$	2,813.9	$	1,773.7	$	4,587.6	Net sales	$	946.8	$	534.7	$	1,481.5
Operating income excluding special charges and transaction and integration expenses	Operating income excluding special charges and transaction and integration expenses	554.5		238.3		792.8		Operating income excluding special charges and transaction and integration expenses	189.9		72.6		262.5
Income from unconsolidated operations	Income from unconsolidated operations	39.7		6.1		45.8		Income from unconsolidated operations	10.8		2.5		13.3

Nine months ended August 31, 2020
Net sales		$	2,573.0	$	1,470.4	$	4,043.4
Operating income excluding special charges		560.2		168.4		728.6
Income from unconsolidated operations		24.7		5.5		30.2

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A reconciliation of operating income excluding special charges and ~~for 2021,~~ transaction and integration expenses, to operating income is as follows (in millions):


		Consumer		Flavor Solutions		Total			Consumer		Flavor Solutions		Total
Three months ended August 31, 2021
Three months ended February 28, 2022								Three months ended February 28, 2022
Operating income excluding special charges and transaction and integration expenses	Operating income excluding special charges and transaction and integration expenses	$	187.8	$	84.5	$	272.3	Operating income excluding special charges and transaction and integration expenses	$	167.0	$	60.1	$	227.1
Less: Special charges	Less: Special charges	3.5		2.3		5.8		Less: Special charges	3.6		15.9		19.5

Less: Other transaction and integration expenses		0.2		1.1		1.3
Less: Transaction and integration expenses								Less: Transaction and integration expenses	—		0.7		0.7
Operating income	Operating income	$	184.1	$	81.1	$	265.2	Operating income	$	163.4	$	43.5	$	206.9

Three months ended August 31, 2020
Operating income excluding special charges		$	209.0	$	64.1	$	273.1

Less: Special charges		—		0.1		0.1
Operating income		$	209.0	$	64.0	$	273.0

Nine months ended August 31, 2021
Three months ended February 28, 2021								Three months ended February 28, 2021
Operating income excluding special charges and transaction and integration expenses	Operating income excluding special charges and transaction and integration expenses	$	554.5	$	238.3	$	792.8	Operating income excluding special charges and transaction and integration expenses	$	189.9	$	72.6	$	262.5
Less: Special charges	Less: Special charges	13.1		7.5		20.6		Less: Special charges	0.8		0.3		1.1
Less: Transaction-related expenses included in cost of goods sold	Less: Transaction-related expenses included in cost of goods sold	4.0		2.3		6.3		Less: Transaction-related expenses included in cost of goods sold	4.0		2.3		6.3
Less: Other transaction and integration expenses	Less: Other transaction and integration expenses	7.5		19.5		27.0		Less: Other transaction and integration expenses	4.2		14.6		18.8
Operating income	Operating income	$	529.9	$	209.0	$	738.9	Operating income	$	180.9	$	55.4	$	236.3

Nine months ended August 31, 2020
Operating income excluding special charges		$	560.2	$	168.4	$	728.6
Less: Special charges		3.1		0.9		4.0
Operating income		$	557.1	$	167.5	$	724.6

The following table sets forth our net sales, by geographic area, for the three ~~and nine~~ months ended ~~August 31,~~February 28, 2022 and 2021 ~~and 2020~~ (in millions):
Americas EMEA Asia/Pacific Total
Three months ended August 31, 2021 $ 1,084.5 $ 283.4 $ 181.5 $ 1,549.4
Three months ended August 31, 2020 1,010.5 262.7 157.1 1,430.3
Nine months ended August 31, 2021 3,130.7 890.7 566.2 4,587.6
Nine months ended August 31, 2020 2,855.5 756.7 431.2 4,043.4


	Americas		EMEA		Asia/Pacific		Total

Three months ended February 28, 2022	$	1,022.5	$	290.5	$	209.4	$	1,522.4
Three months ended February 28, 2021	964.8		302.4		214.3		1,481.5

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") 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. On November 30, 2020, the Company effected a two-for-one stock split in the form of a stock dividend on all shares of the Company’s two classes of common stock. On November 30, 2020, one like share was issued for each share outstanding to shareholders of record as of November 20, 2020. All common stock and per share data have been retroactively adjusted to reflect the stock split.

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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 ~~2020,~~2021, approximately 40% of our sales were outside of the 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.

R~~ecent~~Recent Events

Recent events impacting our business include COVID-19, ~~the acquisitions of Cholula and FONA,~~ the inflationary cost environment and disruption in our supply chain, and Russia’s invasion of Ukraine, each of which are further discussed below. As more fully described below, we expect ~~the largest~~each of these factors ~~impacting~~will impact our fiscal ~~2021 performance~~2022 performance. We anticipate that fiscal 2022 will continue to be a dynamic macroeconomic environment. While we expect the ~~relative balance of at-home versus away-from-home consumption and the inflationary cost environment, including escalating transportation costs, both which remain uncertain.~~

~~COVID-19:~~ On March 11, 2020, the World Health Organization designated a new coronavirus (“COVID-19”) as a global pandemic. Governments around the world either recommended or mandated actions to slow the transmission of the virus that included shelter-in-place orders, quarantines, limitations on crowd size, closures of dine-in restaurants and bars, and significant restrictions on travel, as well as work restrictions that prohibited many employees from going to work. Uncertainty with respect to the economic effects of the pandemic has significantly impacted not only our operating results but also the global economy. The extent and nature of government actions varied during the three and nine-months ended August 31, 2021 and 2020 based upon the then-current extent and severity of the COVID-19 pandemic within their respective countries and localities.

We are actively monitoring the impact of COVID-19 on all aspects of our business. The effects of COVID-19 on consumer behavior have impacted the relative balance of at-home versus away-from-home food demand. The impact of COVID-19, since the onset of the pandemic, has resulted in net sales growth as the increase in at-home consumption has more than offset declines in away-from-home demand. The impactimpacts of COVID-19 on our ~~consumer segment since~~business to moderate, there still remains uncertainty around the ~~beginning~~pandemic, its effect on labor or other macroeconomic factors, the severity and duration of ~~COVID-19~~the pandemic, ~~has resulted in a significant increase in at-home consumption~~the continued availability and ~~related demand for our products. The impact~~effectiveness of ~~COVID-19 on our flavor solutions segment has been two-fold, including both (i) an unfavorable impact attributable to decreased demand from certain customers that were affected~~vaccines and actions taken by government ~~measures related to COVID-19 mitigation~~authorities, including restrictions, laws or regulations, and other third parties in many of our markets that reduced away-from-home food demand; and (ii) a favorable impact attributable to increased at-home consumption from certain customers that use our products to flavor their own brands for at-home consumption. The COVID-19 mitigation measures impacting certain of our flavor solutions customers included the following: (i) with respect to dine-in restaurants, closures, limitations on dine-in capacity, or restrictions on the operations of those restaurants to carry-out or delivery only; and (ii) with respect to quick service restaurants, limitations on operations to drive-through pick-up or delivery. For comparative purposes, the following provides a summary of growth in net sales as reported and on a constant currency basis for the third quarter of 2021 as comparedresponse to the ~~third quarter~~pandemic. We expect elevated levels of ~~2019:~~

Three Months Ended August 31, 2021 as compared to
Three Months Ended August 31, 2019
Percentage Change
as Reported Impact of Foreign Currency Exchange Percentage Change on Constant Currency Basis
Net sales:
Consumer segment 16.1 % 2.3 % 13.8 %
Flavor solutions segment 17.3 % 1.7 % 15.6 %
Total net sales 16.6 % 2.0 % 14.6 %

~~The percentage change~~cost inflation to persist throughout 2022. We anticipate that these headwinds will be partially mitigated by pricing actions in ~~reported net sales~~response to inflation, supply chain productivity improvements and cost savings initiatives. Also, the invasion of Ukraine by Russia and the percentage change on a constant currency basis were favorably impacted by the acquisitions of Cholula and FONA, which, in aggregate, contributed 2.9%, 7.8% and 4.8% to the consumer segment, flavor solutions segment and total net sales growth rates, respectively, in the preceding table, on both a reported and constant currency basis.

The extent of the at-home consumption and away-from-home demand has varied during the pandemic and has impacted our results, as compared to the prior year results, at different levels in each individual quarter. While we continue to see strong levels of consumer demand compared to the pre-pandemic levels, during the three months ended August 31, 2021 retail demand declined when compared to the comparable quarter of the prior year based on strong consumer demand at the beginning of the pandemic.We continue to see recovery in away-from-home demand associated with the COVID-19 recovery. During the three months ended August 31, 2021 our flavor solutions segment sales and operating results improved as away-from-homesanctions

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~~consumption~~imposed in response to this conflict have increased ~~as compared to~~global economic and political uncertainty. While the ~~corresponding quarter in 2020, in part, due to the lifting of much more restrictive COVID-19 mitigation measures that were in place during the early stages of the pandemic. The~~ impact of these factors remains uncertain, we will continue to evaluate the ~~COVID-19 pandemic on our consolidated operating results during the three months ended February 29, 2020 was limited, in all material respects,~~extent 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. Our operations in China saw a sharp drop in sales during the three months ended February 29, 2020, with sales declining by $43 million from the corresponding period in fiscal 2019.

~~In early fiscal 2021, vaccines effective in combating COVID-19 were approved by health agencies in certain countries/regions in~~ which we operate (including the U.S., U.K., European Union, Canada and Mexico) and began to be administered. The availability of COVID-19 vaccines and their acceptance by individuals is difficult to predict, and vaccination levels vary across jurisdictions. The pace and shape of the COVID-19 recovery as well as the impact and extent of COVID-19 variants or potential resurgences is not presently known. These and other uncertainties with respect to COVID-19 could result in changes to our current expectations in addition to a number of adverse impacts to our business, including but not limited to additional disruption to the economy and consumers’ willingness and ability to 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, we may be unable to fulfill that increased demand. As a result, it may be challenging to obtain and process raw materials to support our 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 related to COVID-19 which could adverselythese factors will impact our business, financial condition, or results of operations. ~~Further, if~~These and other uncertainties with respect to these recent events could result in changes to our ~~customers’ businesses are similarly affected, they might delay or reduce purchases from us.~~current expectations. The potential effects of ~~COVID-19~~these recent events also could impact us in a number of other ways including, but not limited to, variations in the level of our profitability, laws and regulations affecting our business, fluctuations in foreign currency markets, the availability of future borrowings, the cost of borrowings, valuation of our pension assets and obligations, credit risks of our customers and counterparties, and potential impairment of the carrying value of goodwill or other indefinite-lived intangible assets.

COVID-19: As a result of the COVID-19 pandemic, uncertainty with respect to its economic effects has impacted not only our operating results but also the global economy. The extent and nature of government actions varied during the quarters ended February 28, 2022 and 2021 based upon the then-current extent and severity of the COVID-19 pandemic within their respective countries and localities.

We continue to actively monitor the impact of COVID-19 on all aspects of our business. The effects of COVID-19 on consumer behavior have impacted the relative balance of at-home versus away-from-home food demand. While we continue to see strong levels of at-home consumption compared to pre-pandemic levels, the favorable impact of increased at-home meal preparation was less significant in the three months ended February 28, 2022 as compared to the comparable period of 2021. This change in consumer behavior was due in part to a decrease in the prevalence and scale of restrictive measures in place to reduce the spread of COVID-19 in the 2022 period as compared to 2021. Conversely, we continue to see improvements in away-from-home demand associated with the COVID-19 recovery. During the three months ended February 28, 2022 our flavor solutions segment sales improved as away-from-home consumption increased as compared to the corresponding quarter in 2021, in part, due to the continued easing of restrictive COVID-19 mitigation measures that were in place during the first quarter of 2021.

Inflationary Cost Environment and Supply Chain ~~Disruption:~~Disruption – During fiscal 2021, we ~~have~~ experienced inflationary cost increases in our commodities, packaging materials and transportation costs. ~~We expect that these~~These inflationary cost increases have continued in 2022, but we expect they will be partially mitigated by pricing actions ~~we expect to implement~~implemented in the fourth quarter of fiscal 2021, those that we plan to implement in fiscal 2022 and by our Comprehensive Continuous Improvement (CCI) program-led cost savings. ~~We are~~During fiscal 2021, we also ~~experiencing~~experienced additional pressure in our supply chain due to strained transportation capacity, as well as due to labor shortages and absenteeism associated with COVID-19, together with the impact of the continued elevated demand. In response to these supply chain pressures, we have taken actions to build capacity as well as increase our supply chain related resources. We expect these pressures to continue throughout 2022.

~~Acquisitions:~~ Russia’s Invasion of Ukraine:~~Acquisitions are expected~~ The invasion of Ukraine by Russia and the sanctions imposed in response to ~~approximate one-third~~this conflict have increased global economic and political uncertainty. As we announced on March 11, 2022, we suspended our business operations in Russia. Our operations in Ukraine have been paused to focus on the safety of our ~~sales growth over time. Since~~employees. While neither Russia nor Ukraine constitutes a material portion of our business, a significant escalation or expansion of economic disruption or the ~~beginning~~conflict's current scope could disrupt our supply chain, broaden inflationary costs, and have a material adverse effect on our results of 2015, we have completed nine acquisitions, which are driving sales in both our consumer and flavor solutions segments. We focus on acquisition opportunities that meet the growing demand for flavor and health. Geographically, our focus is on acquisitions that build scale where we currently have presence in both developed and emerging markets. Information with respect to our recent acquisitions is provided below:operations.

•On December 30, 2020, we acquired FONA International, LLC and certain of its affiliates (FONA), a privately owned company, for approximately $708 million, net of cash acquired. We financed this fiscal 2021 acquisition with cash and commercial paper. FONA is a leading manufacturer of clean and natural flavors providing solutions for a diverse customer base across various applications for the food, beverage and nutritional markets which expands the breadth of our flavor solutions segment into attractive categories, as well as extends our technology platform, strengthens our capabilities, and accelerates the strategic migration of our portfolio to more value-added and technically insulated products.

•~~On November 30, 2020, we acquired the parent company of Cholula Hot Sauce® (Cholula) from~~ L Catterton for approximately $801 million, net of cash acquired. We financed this fiscal 2020 acquisition with cash and commercial paper. Cholula is a strong addition to McCormick’s global branded flavor portfolio, which broadens the Company’s offering in the high growth hot sauce category to consumers and foodservice operators and accelerates our condiment growth opportunities with a complementary authentic Mexican flavor hot sauce in both our consumer and flavor solutions segments.

•In February 2021, we issued $500.0 million of 0.90% notes due February 15, 2026, with net cash proceeds received of $495.7 million. At the same time, we issued $500.0 million of 1.85% notes due February 15, 2031, with net cash proceeds received of $492.8 million. The net proceeds from these issuances were used to pay down short-term borrowings, including a portion of the $1,443.0 million of commercial paper issued to finance our acquisitions of

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~~FONA and Cholula, and for general corporate purposes. For further information regarding our issuance of these notes, see note 5 of the notes to the accompanying financial statements.~~

~~As described below under the caption 2021 Outlook, the FONA and Cholula acquisitions are expected to contribute more than one-third of our sales growth in 2021.~~

~~2021~~2022 Outlook

In ~~2021,~~2022, we expect to grow net sales over the ~~2020~~2021 level by ~~12%~~3% to ~~13%~~5%, ~~including~~which includes an estimated ~~3% favorable~~1% unfavorable impact from currency rates, or 9% to 10% on a constant currency basis. The 2021 sales growth forecast includes the estimated incremental impact of the Cholula and FONA acquisitions, which we expect to comprise 4.0% of the expected 12% to 13% sales growth, and higher volume and product mix driven by our brand marketing, new product, category management, and differentiated customer engagement growth plans. That sales growth forecast also includes the expected impact of pricing actions taken to partially offset an anticipated increase in costs. We expect to have organic sales growth in both our consumer and flavor solutions segments.

We expect our 2021 gross profit margin to decline 160 to 180 basis points from our gross profit margin of 41.1% in 2020. The projected 2021 decline in gross profit margin is principally due to the net effect of (i) an anticipated mid-single-digit level of inflation in 2021 compared to 2020, (ii) anticipated unfavorable sales mix in 2021 between our consumer and flavor solutions segments as compared to 2020, (iii) expected accretion from our acquisitions of Cholula and FONA, net of transaction and integration expenses of $6.3 million related to the amortization of the step-up of the acquired inventories of Cholula and FONA to fair value, and (iv) an expected increase in COVID-19 related expenses of approximately $10 million in 2021 over the 2020 level. Excluding the $6.3 million of transaction and integration expenses related to our acquisitions of Cholula and FONA included in our projected range of gross profit margin anticipated in 2021, we expect our adjusted gross profit margin to be 150 to 170 basis points lower than our 2020 gross profit margin of 41.1%.

In 2021, we expect an increase in operating income of 2% to 4%, which includes an estimated 2% favorable impact from currency rates, over the 2020 level. The projected range of change in operating income in 2021 reflects an expected increase of approximately $25 million in expense related to our global ERP replacement program over the fiscal 2020 level. Our CCI-led cost savings target in 2021 is approximately $110 million and approximates the $113 million of CCI-led cost savings realized in 2020. We anticipate transaction and integration expenses related to the Cholula and FONA acquisitions of approximately $38 million to negatively impact operating income in 2021, as compared to $12.4 million of transaction and integration expenses in 2020. We also expect approximately $26 million of special charges in 2021 that relate to previously announced organization and streamlining actions; in 2020, special charges were $6.9 million. Excluding special charges and transaction and integration expenses, we expect 2021’s adjusted operating income to increase by 6% to 8%, which includes an estimated 2% favorable impact from currency rates, or to increase by 4% to 6% ~~on a constant currency basis over the 2020 level.~~

Our underlying effective tax rate is projected to be higher in 2021 than in 2020. We estimate our effective tax rate, including the net favorable impact of anticipated discrete tax items, to approximate 22.0% in 2021 as compared to 19.8% in 2020. Excluding projected taxes associated with special charges and transaction and integration expenses, including the unfavorable impact in the first nine months of 2021 of a deferred state tax discrete tax item directly related to our acquisition of FONA that increased tax expense by $10.4 million, we also estimate that our adjusted effective tax rate will approximate 21.0% in fiscal 2021, as compared to an adjusted effective tax rate of 19.9% in 2020.

Diluted earnings per share was $2.78 in 2020. Diluted earnings per share for 2021 is projected to range from $2.80 to $2.85. Excluding the per share impact of special charges and transaction and integration expenses of $0.01 and $0.04, respectively, adjusted diluted earnings per share was $2.83 in 2020. Adjusted diluted earnings per share (excluding an estimated per share impact of $0.07 from special charges, $0.15 from transaction and integration expenses, including the unfavorable impact of a discrete tax item of $0.04 related to our acquisition of FONA, and $0.05 gain from the sale of an unconsolidated operation) is projected to range from $2.97 to $3.02 in 2021. We expect adjusted diluted earnings per share to grow by 5% to 7%, which includes a 2% favorable impact from currency rates, over adjusted diluted earnings per share of $2.83 in 2020.

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~~RESULTS OF OPERATIONS – COMPANY~~
Three months ended Nine months ended
August 31, 2021 August 31, 2020 August 31, 2021 August 31, 2020
Net sales $ 1,549.4 $ 1,430.3 $ 4,587.6 $ 4,043.4
Percent increase 8.3 % 7.6 % 13.5 % 4.7 %
Components of percent growth in net sales – increase (decrease):
               Volume and product mix 0.7 % 6.8 % 6.0 % 4.1 %
               Pricing actions 0.1 % 1.8 % 0.2 % 1.7 %
               Acquisitions 4.5 % — % 4.3 % — %
               Foreign exchange 3.0 % (1.0) % 3.0 % (1.1) %
Gross profit $ 599.6 $ 590.3 $ 1,791.7 $ 1,639.7
Gross profit margin 38.7 % 41.3 % 39.1 % 40.6 %

~~Sales for the third quarter of 2021 increased by 8.3% from the prior year level and by 5.3%~~ 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). ~~Higher~~That anticipated 2022 sales growth includes the impact of pricing actions, including those taken in 2021, to partially offset cost increases. We expect the impact of pricing to be a significant driver of our sales growth. We expect volume and ~~favorable~~ product mix to be impacted by pricing elasticities, although at a lower level than we have experienced historically. We also anticipate that our volume and product mix will be negatively impacted by the exit of a lower margin product line in late 2021.

We expect our 2022 gross profit margin to range from an increase of 20 basis points to a decline of 30 basis points from our gross profit margin of 39.5% in 2021. The projected 2022 change in gross profit margin is principally due to the net effect of (i) a mid-to-high-teen percentage impact of inflation in 2022 compared to 2021, (ii) the favorable impact of pricing actions in response to increased commodity, packaging materials and transportation costs, (iii) anticipated unfavorable sales mix in 2022 between our consumer and flavor solutions segments as compared to 2021, (iv) the favorable impact of anticipated CCI cost savings, and (v) the absence of $11.0 million of transaction and integration expenses and special charges reflected in cost of goods sold in 2021. We expect our 2022 gross profit margin, excluding the $11.0 million of transaction and integration expenses and special charges in 2021, to range from comparable to a decline of 50 basis points from our 2021 adjusted gross profit margin of 39.7%.

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In 2022, we expect an increase in operating income of 13% to 15%, which includes an estimated 1% unfavorable impact from currency rates, over the 2021 level. Our CCI-led cost savings target in 2022 is approximately $85 million. We anticipate integration expenses related to the FONA acquisition of approximately $3 million to unfavorably impact operating income in 2022, as compared to $35.3 million of transaction and integration expenses in 2021. We also expect approximately $30 million of special charges in 2022 that relate to previously announced organization and streamlining actions; in 2021, special charges were $51.1 million. Excluding special charges and transaction and integration expenses, we expect 2022’s adjusted operating income to increase by 7% to 9%, which includes an estimated 1% unfavorable impact from currency rates, or to increase by 8% to 10% on a constant currency basis over the 2021 level.

Our underlying effective tax rate is projected to be higher in 2022 than in 2021. We estimate that our 2022 effective tax rate, including the net favorable impact of anticipated discrete tax items, will be 22% to 23% as compared to 21.5% in 2021. Excluding projected taxes associated with special charges and transaction and integration expenses, we estimate that our adjusted effective tax rate will be 22% to 23% in 2022, as compared to an adjusted effective tax rate of 20.1% in 2021.

Diluted earnings per share was $2.80 in 2021. Diluted earnings per share for 2022 is projected to range from $3.07 to $3.12. Excluding the per share impact of (i) special charges of $0.16; (ii) transaction and integration expenses, including the unfavorable impact of a discrete tax item of $0.04 related to our acquisition of FONA, of $0.14; and (iii) the gain realized upon our sale of an unconsolidated operation of $0.05, adjusted diluted earnings per share was $3.05 in 2021. Adjusted diluted earnings per share, excluding an estimated per share impact from special charges of $0.09 and from integration expenses of $0.01, is projected to range from $3.17 to $3.22 in 2022. We expect adjusted diluted earnings per share to grow by 4% to 6%, which includes a 1% unfavorable impact from currency rates, or to grow by 5% to 7% on a constant currency basis over adjusted diluted earnings per share of $3.05 in 2021.

RESULTS OF OPERATIONS – COMPANY


	Three months ended
	February 28, 2022			February 28, 2021
Net sales	$	1,522.4		$	1,481.5
Percent increase	2.8		%	22.2		%
Components of percent growth in net sales – increase (decrease):
Volume and product mix	(1.5)		%	15.2		%
Pricing actions	4.8		%	0.8		%
Acquisitions	0.7		%	4.0		%
Foreign exchange	(1.2)		%	2.2		%
Gross profit	$	560.4		$	577.5
Gross profit margin	36.8		%	39.0		%

Sales for the first quarter of 2022 increased by 2.8% from the prior year level and by 4.0% on a constant currency basis (that is, excluding the impact of foreign currency exchange as more fully described under the caption, Non-GAAP Financial Measures). Unfavorable volume and product mix decreased sales by ~~0.7%~~1.5%. ~~This increase~~That decrease was driven by ~~increased~~our consumer segment as compared to the first quarter of 2021 which experienced a 35.4% increase in sales, including a 28.6% increase from favorable volume and product mix, from the 2020 level. The decrease in consumer segment sales was partially offset by higher sales of our flavor solutions segment across all regions, as demand was elevated as compared to the corresponding period in ~~2020~~2021 when away-from-home sales were ~~negatively~~more impacted by measures imposed to mitigate the spread of COVID-19. Pricing actions, taken in response to the inflationary cost environment, increased sales by ~~0.1%, while the~~4.8%. The incremental impact of the ~~Cholula and~~ FONA ~~acquisitions~~acquisition added ~~4.5%~~0.7% to sales in the ~~third~~first quarter of ~~2021.~~2022. Sales were also impacted by ~~favorable~~unfavorable foreign currency rates that ~~increased~~decreased net sales by ~~3.0%~~1.2% in the ~~third~~first quarter of ~~2021~~2022 compared to the year-ago quarter and is excluded from our measure of sales growth of ~~5.3% on a constant currency basis.~~

Sales for the nine months ended August 31, 2021 increased by 13.5% from the prior year level and increased by 10.5% on a constant currency basis. Favorable volume and product mix increased sales by 6.0% with growth from both the consumer and flavor solutions segments. In addition, pricing actions added 0.2% and acquisitions added 4.3% to sales, both as compared to the prior year period. Sales were impacted by favorable foreign currency rates that increased sales by 3.0% as compared to the same period in 2020 and is excluded from our measure of sales growth of 10.5%4.0% on a constant currency basis.

Gross profit for the ~~third~~first quarter of ~~2021 increased~~2022 decreased by ~~$9.3~~$17.1 million, or ~~1.6%~~3.0%, ~~over~~from the comparable period in ~~2020.~~2021. Our gross profit margin for the three months ended ~~August 31, 2021~~February 28, 2022 was ~~38.7%~~36.8%, a decrease of ~~260~~220 basis points from the comparable period in ~~2020.~~2021. The decrease in gross profit margin in the quarter ended ~~August 31, 2021~~February 28, 2022 was driven by the margin dilutive impact of pricing actions taken in response to the inflationary cost environment, increased commodity, packaging materials and transportation costs, higher conversion costs and a less favorable mix in sales between our consumer and flavor solutions segments, ~~which was~~each as compared to the 2021 period. These unfavorable impacts were partially offset by cost savings led by our

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Comprehensive Continuous Improvement ("CCI") program ~~and the accretive impact of the Cholula and FONA acquisitions,~~ as ~~compared to the corresponding quarter~~well as a reduction in ~~2020.~~

Gross profit for the nine months ended August 31, 2021 increased by $152.0 million, or 9.3% over the comparable period in 2020. Our gross profit margin for the nine months ended August 31, 2021 was 39.1%, a decrease of 150 basis points from the same period in 2020. The decrease in gross profit margin in the nine months ended August 31, 2021 was driven by increased commodity, packaging materials and transportation costs, higher conversion costs, which includes costs associated with COVID-19 and a less favorable mix in sales between our consumer and flavor solutions segments, which were partially offset by savings from our CCI program, improved product mix and the accretive impact of the Cholula and FONA acquisitions, each as compared to the prior year period.related costs. In addition, our gross profit for the ~~nine~~three months ended ~~August 31,~~February 28 2021 was burdened by $6.3 million of transaction expense, representing the amortization of the fair value adjustment to the acquired inventories of Cholula and FONA upon our sale of those acquired inventories in the first quarter of fiscal 2021. Excluding those transaction and integration expenses, adjusted gross profit margin ~~for the nine months ended August 31, 2021 decreased by 140~~declined 260 basis points to 36.8% from ~~40.6% in the nine months ended August 31, 2020 to 39.2% in the corresponding period~~39.4% in 2021.

Three months ended Nine months ended
August 31, 2021 August 31, 2020 August 31, 2021 August 31, 2020
Selling, general & administrative expense (SG&A) $ 327.3 $ 317.2 $ 1,005.2 $ 911.1
Percent of net sales 21.1 % 22.2 % 21.9 % 22.6 %


	Three months ended
	February 28, 2022			February 28, 2021
Selling, general & administrative expense (SG&A)	$	333.3		$	321.3
Percent of net sales	21.9		%	21.7		%

SG&A increased by ~~$10.1~~$12.0 million in the ~~third~~first quarter of ~~2021~~2022 compared to the ~~2020~~2021 level, driven by ~~(i)~~ SG&A associated with the acquired ~~Cholula~~FONA business, increased distribution costs, and ~~FONA businesses; (ii) greater selling and distribution expenses associated with the~~ higher ~~sales~~

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~~volume; and (iii) higher investments~~investment associated with the implementation of aour global ~~ERP~~enterprise resource planning (ERP) platform, that was paused in 2020 as a response to the inherent operational limitations caused by the onset of the COVID-19 pandemic. Those increases were partially offset by lower performance-based employee incentive expenses,all as compared to the ~~prior year~~2021 period. SG&A as a percentage of net sales ~~decreased~~increased by ~~110~~20 basis points from the prior year level, asdue primarily to the net impact of the previously mentioned ~~factors were more than offset by the impact of the leverage of fixed and semi-fixed expenses over a higher level of sales during the 2021 period.~~factors.

SG&A increased by $94.1 million in the nine months ended August 31, 2021 compared to the 2020 level, primarily as a result of (i) SG&A associated with the Cholula and FONA acquisitions, (ii) increased brand marketing costs, and (iii) greater selling and distribution expenses associated with the higher sales volume, all as compared to the corresponding period in 2020. Those increases were partially offset by lower performance-based employee incentive expenses, as compared to the prior year period. SG&A as a percent of net sales for the nine months ended August 31, 2021 decreased by 70 basis points from the prior year level, driven by the impact of the leverage of fixed and semi-fixed expenses over a higher level of sales during the 2021 period, which was partially offset by the net impact of the aforementioned factors.
Three months ended Nine months ended
August 31, 2021 August 31, 2020 Aug 31, 2021 Aug 31, 2020
Total special charges $ 5.8 $ 0.1 $ 20.6 $ 4.0


	Three months ended
	February 28, 2022		February 28, 2021
Total special charges	$	19.5	$	1.1

During the three months ended ~~August 31,~~February 28, 2022, we recorded $19.5 million of special charges, consisting principally of $14.9 million associated with the transition of a manufacturing facility in Europe, Middle East, and Africa (EMEA), streamlining actions of $2.1 million in the Americas region, and $1.5 million in the EMEA region. During the three months ended February 28, 2021, we recorded ~~$5.8~~$1.1 million of special charges, consisting principally of streamlining actions of $1.8 million in the Americas region, $1.7 million in the Europe, Middle East, and Africa (EMEA) region and $0.8 million in the Asia Pacific (APAC) region, and $0.7 million related to our GE initiative.

~~During the nine months ended August 31, 2021, we recorded $20.6 million of special charges, consisting principally of streamlining actions of $7.0 million in the Americas region, $3.0~~$0.6 million in the EMEA region and ~~$0.8~~$0.5 million in the ~~Asia Pacific (APAC) region, and $0.7 million related~~Americas region. Details with respect to ~~our GE initiative, together with a non-cash asset impairment charge~~the composition of ~~$6.5 million associated with an administrative site that will be exited~~special charges are included in ~~conjunction with our decision~~note 2 of the notes to ~~employ a hybrid work environment.~~the accompanying financial statements.


	Three months ended
	February 28, 2022		February 28, 2021
Transaction expenses included in cost of goods sold	$	—	$	6.3
Other transaction and integration expenses	0.7		18.8
Total transaction and integration expenses	$	0.7	$	25.1

During the three months ended ~~August 31, 2020,~~February 28, 2022, we recorded $0.1 million of special charges related to streamlining actions in our EMEA region. During the nine months ended August 31, 2020, we recorded $4.0 million of special charges, consisting of $2.9 million related to streamlining actions in our EMEA region together with $1.1 million related to our GE initiative.

Three months ended Nine months ended
August 31, 2021 August 31, 2020 Aug 31, 2021 Aug 31, 2020
Transaction expenses included in cost of goods sold $ — $ — $ 6.3 $ —
Other transaction and integration expenses 1.3 — 27.0 —
Total transaction and integration expenses $ 1.3 $ — $ 33.3 $ —

~~During the three months ended August 31, 2021, we recorded $1.3~~$0.7 million of integration expenses related to our ~~acquisitions~~acquisition of ~~Cholula and FONA.~~

~~During the nine months ended August 31, 2021, we recorded $33.3~~FONA, as compared to $25.1 million of transaction and integration ~~expense~~expenses in the 2021 period related to our acquisitions of Cholula and FONA. ~~These~~The 2021 costs consisted of (i) $6.3 million of amortization of the acquisition-date fair value adjustment of inventories that is included in ~~Cost~~cost of goods sold, (ii) $13.8 million of other transaction ~~expenses~~costs primarily related to outside advisory, service and consulting costs, and (iii) ~~$13.2~~$5.0 million of integration expenses.

~~We expect transaction and integration expenses related to our acquisitions of Cholula and FONA to negatively impact operating income in the fourth quarter of fiscal 2021 by approximately $5 million.~~


		Three months ended				Nine months ended					Three months ended
		August 31, 2021		August 31, 2020		August 31, 2021		August 31, 2020			February 28, 2022		February 28, 2021
Interest expense	Interest expense	$	33.9	$	33.5	$	103.3	$	103.2	Interest expense	$	33.1	$	33.8
Other income, net	Other income, net	3.5		3.9		12.0		12.5		Other income, net	6.2		4.6

Interest expense ~~increased~~decreased by ~~$0.4 million and $0.1~~$0.7 million in the three ~~and nine~~ months ended ~~August 31, 2021, respectively, both~~February 28, 2022, as compared to the prior year ~~periods, as an increase in average total borrowings was largely offset by a decrease in~~

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~~interest rates.~~period. Other income, net for the three ~~and nine~~ months ended ~~August 31, 2021 decreased~~February 28, 2022 increased by ~~$0.4~~$1.6 million, ~~and $0.5 million, both~~ as compared to the prior year ~~periods. Decreases in the quarter and year-to-date periods were~~period, driven ~~by lower non-service cost income associated with our pension and postretirement benefit plans, which was partially offset~~ by higher interest ~~income, as compared to the corresponding periods in 2020.~~income.


		Three months ended						Nine months ended							Three months ended
		August 31, 2021			August 31, 2020			August 31, 2021			August 31, 2020				February 28, 2022			February 28, 2021
Income from consolidated operations before income taxes	Income from consolidated operations before income taxes	$	234.8		$	243.4		$	647.6		$	633.9		Income from consolidated operations before income taxes	$	180.0		$	207.1
Income tax expense	Income tax expense	31.5			46.9			135.5			117.4			Income tax expense	34.4			58.6
Effective tax rate	Effective tax rate	13.4		%	19.3		%	20.9		%	18.5		%	Effective tax rate	19.1		%	28.3		%

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 U.S. GAAP. Examples of such

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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~~associated with stock-based compensation, changes in estimates of the outcome of tax matters related to prior years, ~~(including~~including reversals of reserves upon the lapsing of statutes of ~~limitations),~~limitations, provision-to-return adjustments, the settlement of tax audits, changes in enacted tax rates, changes in the assessment of deferred tax valuation allowances, acquisition related deferred tax adjustments and the tax effects of certain intra-entity asset transfers (other than inventory).

Income tax expense for the three months ended ~~August 31, 2021~~February 28, 2022 included ~~$22.9~~$10.3 million of net discrete tax benefits consisting primarily of ~~the following: (i) $13.3~~$7.6 million of excess tax benefits due to the partial release of certain reserves for an unrecognized tax benefit and related interest in a non-U.S. jurisdiction based on a change in our assessment of the technical merits of that position associated with ~~the availability of new information, (ii) $4.3 million of tax benefits from the resolution of other tax uncertainties, including the reversal of certain reserves for unrecognized tax benefits~~stock-based compensation and ~~related interest associated with the expiration of statutes of limitations, (iii) $2.4~~$2.5 million of tax benefits related to the revaluation of deferred taxes resulting from legislation enacted ~~legislation, (iv) $1.1 million of tax benefits resulting from an adjustment to a prior year tax accrual based on~~during the ~~final return filed, and (v) $1.0 million of tax benefits resulting from a refinement of deferred state taxes directly related to our December 2020 acquisition of FONA.~~period.

Income ~~tax expense~~taxes for the ~~nine~~three months ended ~~August 31,~~February 28, 2021 included ~~$22.9~~$5.3 million of net discrete tax ~~benefits~~expense consisting ~~primarily~~

principally of the following: (i) $13.3 million of tax benefits due to the partial release of certain reserves for an unrecognized tax benefit and related interest in a non-U.S. jurisdiction based on a change in our assessment of the technical merits of that position associated with the availability of new information, (ii) $9.2 million of tax benefits from the resolution of other tax uncertainties, including the reversal of certain reserves for unrecognized tax benefits and related interest associated with the expiration of statutes of limitations, (iii) $10.4$11.4 million of deferred state tax expense directly related to our December 2020 acquisition of

FONA, ~~(iv)~~partially offset by (ii) $4.5 million of tax benefits associated with the release of a valuation allowance due to a change

in judgment about realizability of deferred tax assets ~~(v) $2.2 million of excess tax benefits associated with share-based compensation, (vi) $2.5~~and (iii) $1.2 million of tax benefits ~~related to the revaluation of deferred taxes resulting~~ from ~~enacted legislation, and (vii) $1.1 million of tax benefits resulting from an adjustment to a prior year tax accrual based on the final return filed.~~

for ~~an adjustment to a prior year tax accrual based on the final return filed, and (iv) $1.1 million related to the revaluation of deferred taxes resulting from enacted legislation.~~

Three months ended Nine months ended
August 31, 2021 August 31, 2020 August 31, 2021 August 31, 2020
Income from unconsolidated operations $ 9.1 $ 9.6 $ 45.8 $ 30.2


	Three months ended
	February 28, 2022		February 28, 2021
Income from unconsolidated operations	$	9.3	$	13.3

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Income from unconsolidated operations, which is presented net of the elimination of earnings attributable to non-controlling interests, decreased by ~~$0.5~~$4.0 million for the three months ended ~~August 31, 2021,~~February 28, 2022, as compared to the year ago period. The decrease was driven by lower earnings of our largest joint venture, McCormick de ~~Mexico.~~

InMexico, as well as the ~~nine months ended August 31, 2021, income from unconsolidated operations increased by $15.6 million,~~impact of eliminating a higher level of earnings of our non-controlling interests, both as compared to the ~~prior year period, driven by an after-tax gain of $13.4 million on the sale of our 26% interest in Eastern Condiments Private Ltd. (Eastern), an unconsolidated operation, during our second quarter of~~ 2021 ~~as more fully described in note 2 of the notes to the accompanying financial statements.~~periods.

The following table outlines the major components of the change in diluted earnings per share from ~~2020~~2021 to ~~2021:~~2022:
Three months ended August 31, Nine months ended August 31,
2020 Earnings per share – diluted $ 0.76 $ 2.03
Impact of change in operating income — 0.20
Increase in special charges, net of taxes (0.01) (0.04)
Increase in transaction and integration expenses, including impact of net discrete tax item related to FONA acquisition — (0.14)
Increase in income from unconsolidated operations, including, for the nine months ended August 31, 2021, an after-tax gain on sale of unconsolidated operation of $0.05 per diluted share — 0.06
Impact of change in effective income tax rate, excluding taxes on special charges and transaction and integration expenses 0.04 (0.03)
Impact of higher shares outstanding — (0.01)
2021 Earnings per share – diluted $ 0.79 $ 2.07


	Three months ended February 28,
2021 Earnings per share – diluted	$	0.60
Impact of change in operating income	(0.10)
Increase in special charges, net of taxes	(0.05)
Decrease in transaction and integration expenses, including impact of net discrete tax item related to FONA acquisition	0.11


Decrease in income from unconsolidated operations	(0.01)

Impact of change in effective income tax rate, excluding taxes on special charges and transaction and integration expenses	0.02

2022 Earnings per share – diluted	$	0.57

RESULTS OF OPERATIONS — SEGMENTS

We measure the performance of our business segments based on operating income, excluding special charges. We also exclude transaction and integration expenses related to our acquisitions of Cholula and FONA from our measure of segment performance as these expenses are similarly managed separately from the business segments. These transaction and integration expenses excluded from our segment performance measure include the amortization of the acquisition-date fair value adjustment of inventories that is included in ~~Cost~~cost of goods sold, costs directly associated with that acquisition and costs associated with integrating the businesses. See note 1210 of the 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 and transaction and integration expenses, to consolidated operating income. In the following discussion, we refer to our previously described measure of segment profit as segment operating income.

CONSUMER SEGMENT

Three months ended Nine months ended
August 31, 2021 August 31, 2020 August 31, 2021 August 31, 2020

Net sales $ 921.9 $ 910.9 $ 2,813.9 $ 2,573.0
Percent increase 1.2 % 14.7 % 9.4 % 11.7 %
Segment operating income $ 187.8 $ 209.0 $ 554.5 $ 560.2
Segment operating income margin 20.4 % 22.9 % 19.7 % 21.8 %

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	Three months ended
	February 28, 2022			February 28, 2021

Net sales	$	926.1		$	946.8
Percent (decrease) increase	(2.2)		%	35.4		%
Segment operating income	$	167.0		$	189.9
Segment operating income margin	18.0		%	20.1		%

In the ~~third~~first quarter of ~~2021,~~2022, sales of our consumer segment ~~increased 1.2%~~decreased 2.2% as compared to the ~~third~~first quarter of ~~2020,~~2021, which experienced a ~~14.7%~~35.4% increase in sales from the ~~2019~~2020 level, ~~as a result of government-mandated measures—imposed in 2020 to mitigate the spread of COVID-19—resulted in a shift in consumer behavior toward at-home meal preparation,~~ and decreasedby ~~1.2%~~1.5% on a constant currency basis. That ~~1.2% increase~~2.2% decrease was driven by ~~higher~~lower sales of our consumer business in ~~our~~the EMEA and Asia/Pacific ~~region,~~regions, which was partially offset by ~~lower sales~~growth in ~~our EMEA~~the Americas region, ~~both~~ as compared to the prior year quarter. Unfavorable volume and product mix decreased consumer segment sales by ~~3.3%~~5.9% in the ~~third~~first quarter of ~~2021~~2022 as compared to the same period last year, as the exceptionally ~~strong~~high demand that existed ~~in the early stages of the pandemic~~ in the year ago period has eased but ~~remains strong.~~continues to reflect strong at-home consumption. Pricing actions, ~~decreased~~taken in response to increased costs, favorably impacted sales by ~~0.4%~~4.4% as compared to the prior year ~~period, while the incremental~~

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~~impact of the Cholula acquisition added 2.5% to sales.~~period. Sales in the ~~third~~first quarter of ~~2021~~2022 reflected ~~a favorable~~an unfavorable impact from foreign currency rates that ~~increased~~decreased consumer segment sales by ~~2.4%~~0.7% compared to the year-ago quarter and is excluded from our measure of sales decline of ~~1.2%~~1.5% on a constant currency basis.

In the Americas region, consumer sales increased ~~0.2%~~2.3% in the ~~third~~first quarter of ~~2021~~2022 as compared to the ~~third~~first quarter of ~~2020,~~2021, which experienced a ~~17.2%~~29.8% increase in sales from the ~~2019~~2020 level, ~~as a result of exceptionally strong demand for our products in the early stages of the COVID-19 pandemic,~~ and ~~decreased~~increased by ~~0.6%~~2.2% on a constant currency basis. For the ~~third~~first quarter of ~~2021,~~2022, unfavorable volume and product mix decreased sales by ~~3.2%~~3.3% as compared to the corresponding period in ~~2020,~~2021, as lower private label sales and unfavorable trade replenishment were partially offset by improved branded product sales, all as compared to the ~~exceptionally strong demand that existed~~prior year period. Pricing actions, taken in ~~the early stages of the pandemic in the year ago period has eased but remains strong. The incremental impact of the Cholula acquisition added 3.4%~~response to ~~sales in the quarter ended August 31, 2021 and pricing actions decreased~~higher costs, increased sales by ~~0.8%~~5.5% as compared to the prior year period. The favorable impact of foreign currency rates increased sales by ~~0.8%~~0.1% in the quarter and is excluded from our measure of sales ~~decline~~growth of ~~0.6%~~2.2% on a constant currency basis.

In the EMEA region, consumer sales decreased ~~6.0%~~14.2% in the ~~third~~first quarter of ~~2021~~2022 as compared to the ~~third~~first quarter of ~~2020,~~2021, which experienced a ~~23.0%~~34.6% increase in sales from the ~~2019~~2020 level, ~~driven by the COVID-19 impact on greater consumer at-home meal preparation,~~ and decreased by ~~10.6%~~9.4% on a constant currency basis. Sales were impacted by unfavorable volume and product mix during the ~~third~~first quarter of ~~2021~~2022 that decreased sales by ~~11.0%~~11.2% from the prior year level. The decrease was driven by ~~a shift in the relative balance~~an easing of at-home ~~and away-from-home eating, as~~ consumption ~~eased from the level of at-home eating seen in 2020. Pricing actions increased sales by 0.4%~~ as compared to the ~~2020~~three months ended February 28, 2021. Lower sales of our homemade dessert products in France contributed to the sales decrease from the year ago quarter. Pricing actions, taken in response to the inflationary cost environment, increased sales by 1.8% as compared to the 2021 period. During the ~~third~~first quarter of ~~2021, a favorable~~2022, an unfavorable impact from foreign currency rates ~~increased~~decreased sales by ~~4.6%~~4.8% compared to the year-ago period and is excluded from our measure of sales decline of ~~10.6%~~9.4% on a constant currency basis.

In the Asia/Pacific region, consumer sales ~~increased 20.2%~~decreased 4.3% in the ~~third~~first quarter of ~~2021~~2022 as compared to the ~~third~~first quarter of ~~2020,~~2021, which reflected ~~an 8.7% decrease~~a 64.7% increase in sales from the ~~2019~~2020 level, ~~due mainly to COVID-19 disruption on foodservice sales in China,~~ and ~~increased~~decreased by ~~10.6%~~6.0% on a constant currency basis. For the quarter ended ~~August 31, 2021, favorable~~February 28, 2022, lower volume and unfavorable product mix decreased sales by 9.7%, driven by the exit of our rice product line in India as well as the effect of more restrictive measures relating to COVID-19 resurgences impacting Chinese new year related sales. Pricing actions, taken in response to the inflationary cost environment, increased sales by 9.9%. The increase was driven by sharply higher sales in the foodservice component of our China business in the quarter ended August 31, 2021, as compared to a 2020 period that was slowly recovering from the unfavorable impacts of COVID-19 on away-from-home consumption. Partially offsetting this increase were sales declines of cooking at-home products across the region from the elevated demand in the year-ago period. Pricing actions increased sales by 0.7%3.7% as compared to the prior year period. A favorable impact from foreign currency rates, which increased sales by ~~9.6%~~1.7% compared to the ~~third~~first quarter of ~~2020,~~2021, is excluded from our measure of sales ~~growth~~decline of ~~10.6% on a constant currency basis.~~

For the nine months ended August 31, 2021, our consumer segment sales increased 9.4% as compared to the nine months ended August 31, 2020 and increased by 6.6% on a constant currency basis. That 9.4% sales increase was driven by higher sales of our consumer business in all regions during the nine months ended August 31, 2021 and is in comparison to a 11.7% increase in sales during the nine months ended August 31, 2020 as compared to the corresponding period in 2019. Improved volume and product mix added 4.2% to sales and pricing actions reduced sales by 0.2% in the first nine months of 2021, both in comparison to the prior year levels. The incremental impact of the Cholula acquisition added 2.6% to segment sales for the nine months ended August 31, 2021. A favorable impact from foreign currency rates increased sales by 2.8% compared to the prior year and is excluded from our measure of sales growth of 6.6%6.0% on a constant currency basis.

Segment operating income for our consumer segment decreased by ~~$21.2~~$22.9 million, or ~~10.1%~~12.1%, in the ~~third~~first quarter of ~~2021~~2022 as compared to the ~~third~~first quarter of ~~2020.~~2021. The decrease in segment operating income was driven by ~~the impact of~~ increased commodity, ~~costs, including~~ transportation and conversion costs, partially offset by ~~the sales impact of the Cholula acquisition, lower incentive-based compensation accruals and~~pricing actions in response to increased costs, CCI-led cost savings as well as a reduction in COVID-19 related costs, all as compared to the prior year period. Segment operating margin for our consumer segment decreased by ~~250~~210 basis points from the ~~third~~first quarter of ~~2020~~2021 to ~~20.4%~~18.0% in the ~~third~~first quarter of ~~2021.~~2022. That decrease was principally the result of a decrease in gross margin, including the margin dilutive impact of pricing actions and the impact of the inflationary cost environment, ~~that~~which was partially offset by ~~a decrease in~~CCI-led cost savings. Higher SG&A as a percentage of net sales, including increased distribution costs, also contributed to the decrease as compared to the ~~third quarter of 2020.~~2021 period. On a constant currency basis, segment operating income for our consumer segment decreased by ~~11.6%~~11.9% in the ~~third~~first quarter of ~~2021~~2022 in comparison to the same period in ~~2020.~~

Segment operating income for our consumer segment decreased by $5.7 million, or 1.0%, for the nine months ended August 31, 2021 as compared to the same period in 2020. The decrease in segment operating income was driven by the impact of increased commodities, packaging materials and transportation costs, increased conversion costs, which include incremental expenses related to COVID-19, and higher brand marketing investment, partially offset by higher sales, CCI-led cost savings and lower incentive-based compensation accruals, all as compared to the prior year period. The impact of COVID-19 on operating income during the nine months ended August 31, 2021 reflected actions, including the incremental impact of temporary arrangements to utilize co-manufacturing, that increased our cost to produce certain products and measures to enable manufacturing and distribution staff to maintain social distancing and permit enhanced cleaning that reduced productivity. Segment operating margin for our consumer segment decreased by 210 basis points in the first nine months of 2021 to 19.7%, driven by a decrease in segment gross profit margin, including the impact of the inflationary cost environment, which was partially offset by the2021.

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benefit from the leverage of fixed and semi-fixed expenses over a higher sales base as compared to the 2020 level. On a constant currency basis, segment operating income for our consumer segment declined by 3.4% in the nine months ended August 31, 2021 in comparison to the same period in 2020.

FLAVOR SOLUTIONS SEGMENT


		Three months ended						Nine months ended							Three months ended
		August 31, 2021			August 31, 2020			August 31, 2021			August 31, 2020				February 28, 2022			February 28, 2021

Net sales	Net sales	$	627.5		$	519.4		$	1,773.7		$	1,470.4		Net sales	$	596.3		$	534.7
Percent increase (decrease)		20.8		%	(2.9)		%	20.6		%	(5.7)		%
Percent increase														Percent increase	11.5		%	4.3		%
Segment operating income	Segment operating income	$	84.5		$	64.1		$	238.3		$	168.4		Segment operating income	$	60.1		$	72.6
Segment operating income margin	Segment operating income margin	13.5		%	12.3		%	13.4		%	11.5		%	Segment operating income margin	10.1		%	13.6		%

In the ~~third~~first quarter of ~~2021,~~2022, sales of our flavor solutions segment increased by ~~20.8%~~11.5% as compared to the ~~third~~first quarter of 2020, which experienced a 2.9% decrease in sales from the 2019 level due to lower demand resulting from the broad-based impact of COVID-19 disruption on our quick service restaurant and branded food service customers in the early stages of the pandemic,2021, and increased by ~~16.6%~~13.7% on a constant currency basis. The sales increase in the ~~third~~first quarter of ~~2021~~2022 included growth in all regions. The incremental impact of our ~~Cholula and~~ FONA ~~acquisitions~~acquisition added ~~8.0%~~1.9% to sales in the quarter ended ~~August 31, 2021.~~February 28, 2022. Favorable volume and product mix increased segment sales by ~~7.5%~~6.4% in the ~~third~~first quarter of ~~2021~~2022 as compared to the same period in ~~2020, as away-from-home consumption improved,~~2021, due, in part, ~~due~~ to ~~less restrictive COVID-19 measures that were in place in~~ the ~~third quarter~~continued recovery of ~~2021 as compared to those in the early stages of the pandemic.~~away-from-home demand. Pricing actions during the ~~third~~first quarter of ~~2021~~2022 also increased sales by ~~1.1%~~5.4%. The ~~favorable~~unfavorable impact of foreign currency rates ~~increased~~decreased flavor solutions segment sales by ~~4.2%~~2.2% compared to the year-ago quarter and is excluded from our measure of sales growth of ~~16.6%~~13.7% on a constant currency basis.

In the Americas region, flavor solutions sales increased by ~~20.8% during~~12.1% in the ~~third~~first quarter of ~~2021~~2022 as compared to the ~~third~~first quarter of 2020, which experienced a sales decline of 4.7% from the 2019 level driven by lower sales to quick service restaurant and branded food service customers as a result of COVID-19 restrictions imposed in the early stages of the pandemic,2021 and increased by ~~18.6%~~12.4% on a constant currency basis. Favorable volume and product mix increased flavor solutions sales in the Americas by ~~5.4%~~4.3% during the ~~third~~first quarter of ~~2021,~~2022, driven by growth in ~~branded foodservice that benefited from an increase in away-from-home eating that resulted from the easing of measures taken in the early stages of the pandemic~~sales to ~~address COVID-19, and growth with~~ packaged food and beverage companies and branded foodservice customers that benefited from the continued recovery of away-from-home demand, each as compared to the year ago period. The incremental impact of the ~~Cholula and~~ FONA ~~acquisitions~~acquisition increased sales by ~~11.8%~~2.7% during the ~~third~~first quarter of ~~2021.~~2022. Pricing actions, taken in response to the inflationary cost environment, favorably impacted sales by 5.4% during the quarter ended ~~August 31, 2021 increased sales by 1.4%~~February 28, 2022 as compared to the prior year period. ~~A favorable~~An unfavorable impact from foreign currency rates ~~increased~~decreased sales by ~~2.2%~~0.3% compared to the ~~third~~first quarter of ~~2020~~2021 and is excluded from our measure of sales growth of ~~18.6%~~12.4% on a constant currency basis.

In the EMEA region, flavor solutions sales increased by 15.2% in the ~~third~~first quarter of ~~2021 increased by 28.1%~~2022 as compared to the ~~third~~first quarter of 2020, which experienced a sales decline of 1.0% from the 2019 level primarily as a result of decreased sales to quick service restaurants and lower branded food service sales that were partially offset by higher demand from packaged food service companies in response to COVID-19 restrictions implemented in 2020,2021 and increased by ~~19.4%~~24.2% on a constant currency basis. Favorable volume and product mix increased segment sales in the EMEA region by ~~18.5%~~17.0% as compared to the corresponding period in ~~2020.~~2021. The increase was driven by higher sales to quick service restaurants and branded foodservice customers ~~combined with strong growth with packaged food companies.~~due, in part, to the continued recovery of away-from-home demand. Pricing actions, ~~increased~~taken in response to the inflationary cost environment, favorably impacted sales by ~~0.9%~~7.2% in the ~~third~~first quarter of ~~2021~~2022 as compared to the prior period level. ~~A favorable~~An unfavorable impact from foreign currency rates ~~increased~~decreased sales by ~~8.7%~~9.0% compared to the ~~third~~first quarter of ~~2020~~2021 and is excluded from our measure of sales growth of ~~19.4%~~24.2% on a constant currency basis.

In the Asia/Pacific region, flavor solutions sales increased ~~8.4%~~2.5% in the ~~third~~first quarter of ~~2021~~2022 as compared to the ~~third~~first quarter of ~~2020, which experienced a sales increase of 4.9% from the 2019 level driven by higher sales to quick service restaurant customers in China and Australia,~~2021, and increased by ~~0.8%~~4.3% on a constant currency basis. Favorable volume and product mix increased sales by ~~1.6%~~1.7% in the ~~third~~first quarter of ~~2021.~~2022 driven by higher sales to quick service restaurants. Pricing actions, ~~decreased~~taken in response to the inflationary cost environment, favorably impacted sales by ~~0.8%~~2.6% as compared to the prior year period. ~~A favorable~~An unfavorable impact from foreign currency rates ~~increased~~decreased sales by ~~7.6%~~1.8% compared to the ~~third~~first quarter of ~~2020~~2021 and is excluded from our measure of sales growth of ~~0.8% on a constant currency basis.~~

For the nine months ended August 31, 2021, our flavor solutions sales increased 20.6% as compared to the nine months ended August 31, 2020 and is in contrast to a 5.7% decline in segment sales during the nine months ended August 31, 2020 from the 2019 level and increased by 17.3% on a constant currency basis. Driving that increase in sales was higher demand during the

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2021 period due to the aforementioned improvement in away-from-home eating. Volume and product mix contributed 9.0% of the increase in addition to pricing actions which added 1.0% to sales for the first nine months of 2021, both in comparison to the prior year levels. The incremental impact of our acquisitions of Cholula and FONA added 7.3% to segment sales for the nine months ended August 31, 2021. A favorable impact from foreign currency rates increased sales by 3.3% compared to the prior year and is excluded from our measure of sales growth of 17.3%4.3% on a constant currency basis.

Segment operating income for our flavor solutions segment ~~increased~~decreased by ~~$20.4~~$12.5 million, or ~~31.8%~~17.2%, in the ~~third~~first quarter of ~~2021~~2022 as compared to the ~~third~~first quarter of ~~2020.~~2021. The ~~increase~~decrease in segment operating income was driven by ~~sharply~~increased commodity, transportation and conversion costs, an unfavorable shift in product mix, as well as costs related to supply chain investments, which was partially offset by a higher level of sales, including pricing actions in response to the ~~impact of acquisitions, favorable product mix, lower incentive-based compensation accruals~~inflationary cost environment, and CCI-led cost savings, ~~which were partially offset by increased commodities, packaging materials and transportation costs.~~all as compared to the prior year period. Segment operating margin for our flavor solutions segment ~~increased~~decreased by ~~120~~350 basis points from the prior year level to ~~13.5%~~10.1% in the ~~third~~first quarter of ~~2021, as~~2022. That decrease was principally the ~~benefit from~~result of a decrease in gross margin, including the ~~leverage of fixed and semi-fixed expenses over a higher sales base as compared to the 2020 level, together with the accretive~~margin dilutive impact of pricing actions and the ~~Cholula and FONA acquisitions on gross margins, were~~impact of an inflationary cost environment, partially offset by ~~higher commodities costs.~~CCI-led cost savings. On a constant currency basis, segment operating income for our flavor solutions segment ~~increased~~decreased by ~~26.6%~~10.6% in the ~~third~~first quarter of ~~2021~~2022 as compared to the same period in ~~2020.~~2021.

Segment operating income for our flavor solutions segment increased by $69.9 million, or 41.5%, for the nine months ended August 31, 2021 as compared to the same period of 2020. The increase in segment operating income was driven by higher sales, including the impact of acquisitions, CCI-led cost savings and favorable product mix, which was partially offset by increased commodities, packaging materials and transportation costs. Segment operating margin for our flavor solutions segment increased by 190 basis points in the first nine months of 2021 to 13.4% as the benefits from the leverage of fixed and semi-fixed expenses over a higher sales base as compared to the 2020 level, together with the accretive impact of the Cholula and FONA acquisitions on gross margins, were partially offset by the impact of the inflationary cost environment as compared to the first nine months of 2020. On a constant currency basis, segment operating income for our flavor solutions segment increased by 38.1% in the nine months ended August 31, 2021, in comparison to the same period in 2020.

MARKET RISK SENSITIVITY

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We ~~are subject~~utilize derivative financial instruments to ~~market~~enhance our ability to manage risk, ~~sensitivities,~~ including ~~those related to~~ foreign exchange and interest ~~rates, commodity risks~~rate exposures, which exist as part of our ongoing business operations. We do not enter into contracts for trading purposes, nor are we a party to any leveraged derivative instrument. The use of derivative financial instruments is monitored through regular communication with senior management and ~~credit risks.The uncertainty that exists with respect to~~ the ~~economic impact~~utilization of ~~the global COVID-19 pandemic introduced significant volatility in the financial markets during 2020 and has continued, to a lesser extent, in 2021.~~written guidelines.

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 and may enter into forward contract and currency swaps with highly-rated financial institutions to reduce fluctuations in the long or short currency positions. We do not enter into contracts for trading purposes, nor are we a party to any leveraged derivative 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:


		August 31, 2021		November 30, 2020			February 28, 2022		November 30, 2021
Forward foreign currency:	Forward foreign currency:					Forward foreign currency:
Notional value	Notional value	$	598.1	$	383.8	Notional value	$	636.5	$	583.6
Unrealized net gain (loss)		4.6		(6.8)
Unrealized net gain						Unrealized net gain	4.9		5.5
Cross currency swaps:	Cross currency swaps:					Cross currency swaps:
Notional value	Notional value	528.7		524.4		Notional value	1,001.0		508.5
Unrealized net loss	Unrealized net loss	(14.4)		(18.8)		Unrealized net loss	(3.2)		(3.6)

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.

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The following table sets forth the notional values and ~~fair values~~unrealized net gain (loss) of our interest rate swap contracts:


		August 31, 2021		November 30, 2020			February 28, 2022		November 30, 2021
Notional value	Notional value	$	350.0	$	350.0	Notional value	$	600.0	$	350.0
Unrealized net gain	Unrealized net gain	30.0		43.1		Unrealized net gain	14.6		23.1

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 dairy products, pepper, ~~vanilla,~~ capsicums (red peppers and paprika), onion, vanilla, garlic ~~onion, rice~~ and ~~wheat flour.~~salt. 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, particularly in light of the evolving financial impact of COVID-19.~~counterparties. 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~~

AsTable of August 31, 2021, there have been no material changes in our contractual obligations and commercial commitments outside the ordinary course of business since November 30, 2020 other than the following, which are more fully described in note 5 of the notes to the accompanying financial statements included in Part I, Item 1 of this report: (i) in February 2021, we issued $500.0 million of 0.90% notes due February 15, 2026; (ii) in February 2021, we issued $500.0 million of 1.85% notes due February 15, 2031; and (iii) in June 2021, we entered into a $1.5 billion five-year revolving credit facility, which will expire in June 2026 and which replaced both our prior five-year $1.0 billion revolving credit facility that was due to expire in August 2022 and our 364-day revolving credit facility that was due to expire in December 2021.Contents

NON-GAAP FINANCIAL MEASURES

The following table includes financial measures of adjusted gross profit, adjusted gross profit margin, adjusted operating income, adjusted operating income margin, adjusted income tax expense, adjusted income tax rate, adjusted net income and adjusted diluted earnings per share. These represent non-GAAP financial measures, which are prepared as a complement to our financial results prepared in accordance with United States generally accepted accounting principles. These financial measures exclude the impact, as applicable, of the following:

•Special charges – Special charges consist of expenses 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 (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.

•Transaction and integration expenses associated with the Cholula and FONA acquisitions – We exclude certain costs associated with our acquisitions of Cholula and FONA in November and December 2020, respectively, and their subsequent integration into the Company. Such costs, which we refer to as Transaction and integration expenses,

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include transaction costs associated with each acquisition, as well as integration costs following the respective acquisition, including the impact of the acquisition date fair value adjustment for inventories, together with the impact of discrete tax items, if any, directly related to each acquisition.

•Income from sale of unconsolidated operations — We exclude the gain realized upon our sale of an unconsolidated operation in March 2021. As more fully described in note ~~2 of~~5 in our Annual Report on Form 10-K for the ~~notes to the accompanying financial statements included in Part I, Item 1 of this report,~~year ended November 30, 2021, the sale of our 26% interest in Eastern in resulted in a gain of $13.4 million, net of tax of $5.7 million. The gain is included in Income from unconsolidated operations in our consolidated income ~~statement.~~statement for the year ended November 30, 2021.

Details with respect to the composition of transaction and integration expenses and special charges set forth below are included in ~~notes~~note 2 ~~3 and 9~~ of the notes to the accompanying financial ~~statements~~statements. Details with respect to the composition of transaction and integration expenses, special charges and income from the sale of unconsolidated operations for the year ended November 30, 2021 are included in notes 2, 3 and 5, respectively, of the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended November 30, ~~2020.~~2021.

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.

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


		For the year ended November 30, 2020					For the three months ended										For the nine months ended										Estimated for the year ending November 30, 2021		For the year ended November 30, 2021				For the three months ended								Estimated for the year ending November 30, 2022
					August 31, 2021					August 31, 2020					August 31, 2021					August 31, 2020								February 28, 2022					February 28, 2021
Gross profit	Gross profit				$	2,300.4				$	599.6				$	590.3				$	1,791.7				$	1,639.7						Gross profit	$	2,494.6		$	560.4		$	577.5
Impact of transaction and integration expenses included in cost of goods sold (1)	Impact of transaction and integration expenses included in cost of goods sold (1)	—					—					—					6.3					—						Impact of transaction and integration expenses included in cost of goods sold (1)	6.3				—			6.3
Impact of special charges included in cost of goods sold (2)																												Impact of special charges included in cost of goods sold (2)	4.7				—			—
Adjusted gross profit	Adjusted gross profit	$	2,300.4				$	599.6				$	590.3				$	1,798.0				$	1,639.7					Adjusted gross profit	$	2,505.6			$	560.4		$	583.8
Adjusted gross profit margin (2)		41.1		%			38.7		%			41.3		%			39.2		%			40.6		%
Adjusted gross profit margin (3)																												Adjusted gross profit margin (3)	39.7		%		36.8		%	39.4		%

Operating income	Operating income	$	999.5				$	265.2				$	273.0				$	738.9				$	724.6					Operating income	$	1,015.1			$	206.9		$	236.3
Impact of transaction and integration expenses included in cost of goods sold (1)	Impact of transaction and integration expenses included in cost of goods sold (1)	—					—					—					6.3					—						Impact of transaction and integration expenses included in cost of goods sold (1)	6.3				—			6.3
Impact of other transaction and integration expenses (1)	Impact of other transaction and integration expenses (1)	12.4					1.3					—					27.0					—						Impact of other transaction and integration expenses (1)	29.0				0.7			18.8
Impact of special charges		6.9					5.8					0.1					20.6					4.0
Impact of special charges included in cost of goods sold (2)																												Impact of special charges included in cost of goods sold (2)	4.7				—			—
Impact of other special charges (2)																												Impact of other special charges (2)	46.4				19.5			1.1
Adjusted operating income	Adjusted operating income	$	1,018.8				$	272.3				$	273.1				$	792.8				$	728.6					Adjusted operating income	$	1,101.5			$	227.1		$	262.5
Adjusted operating income margin (3)		18.2		%			17.6		%			19.1		%			17.3		%			18.0		%
Adjusted operating income margin (4)																												Adjusted operating income margin (4)	17.4		%		14.9		%	17.7		%

Income tax expense	Income tax expense	$	174.9				$	31.5				$	46.9				$	135.5				$	117.4					Income tax expense	$	192.7			$	34.4		$	58.6
Impact of transaction and integration expenses (1)	Impact of transaction and integration expenses (1)	1.9					1.2					—					(3.1)					—						Impact of transaction and integration expenses (1)	(2.7)				0.2			(5.9)
Impact of special charges	Impact of special charges	2.1					1.4					—					4.9					1.2						Impact of special charges	7.1				4.9			0.3
Adjusted income tax expense	Adjusted income tax expense	$	178.9				$	34.1				$	46.9				$	137.3				$	118.6					Adjusted income tax expense	$	197.1			$	39.5		$	53.0
Adjusted income tax rate (4)		19.9		%			14.1		%			19.3		%			19.6		%			18.6		%
Adjusted income tax rate (5)																												Adjusted income tax rate (5)	20.1		%		19.7		%	22.7		%

Net income	Net income	$	747.4				$	212.4				$	206.1				$	557.9				$	546.7					Net income	$	755.3			$	154.9		$	161.8
Impact of transaction and integration expenses (1)	Impact of transaction and integration expenses (1)	10.5					0.1					—					36.4					—						Impact of transaction and integration expenses (1)	38.0				0.5			31.0
Impact of special charges		4.8					4.4					0.1					15.7					2.8
Impact of special charges (2)																												Impact of special charges (2)	44.0				14.6			0.8
Impact of after-tax gain on sale of unconsolidated operation	Impact of after-tax gain on sale of unconsolidated operation	—					—					—					(13.4)					—						Impact of after-tax gain on sale of unconsolidated operation	(13.4)				—			—
Adjusted net income	Adjusted net income	$	762.7				$	216.9				$	206.2				$	596.6				$	549.5					Adjusted net income	$	823.9			$	170.0		$	193.6

Earnings per share – diluted	Earnings per share – diluted	$	2.78				$	0.79				$	0.76				$	2.07				$	2.03				$2.80 to $2.85	Earnings per share – diluted	$	2.80			$	0.57		$	0.60					$3.07 to $3.12
Impact of transaction and integration expenses (1)	Impact of transaction and integration expenses (1)	0.04					—					—					0.14					—					0.15	Impact of transaction and integration expenses (1)	0.14				—			0.12						0.01
Impact of special charges		0.01					0.01					—					0.05					0.01					0.07
Impact of special charges (2)																												Impact of special charges (2)	0.16				0.06			—						0.09
Impact of after-tax gain on sale of unconsolidated operation	Impact of after-tax gain on sale of unconsolidated operation	—					—					—					(0.05)					—					(0.05)	Impact of after-tax gain on sale of unconsolidated operation	(0.05)				—			—						—
Adjusted earnings per share – diluted	Adjusted earnings per share – diluted	$	2.83				$	0.80				$	0.76				$	2.21				$	2.04				$2.97 to $3.02	Adjusted earnings per share – diluted	$	3.05			$	0.63		$	0.72					$3.17 to $3.22

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(1)

Transaction and integration expenses include transaction and integration expenses associated with our acquisitions of Cholula and FONA. These expenses include ~~transaction expenses, integration expenses, including~~ the effect of the fair value adjustment to acquired inventories on ~~Cost~~cost of goods sold and the unfavorable impact of a discrete deferred state income tax expense item, directly related to our December 2020 acquisition of ~~FONA. This discrete tax item had a favorable impact~~FONA, of ~~$1.0~~$11.4 million or $0.04 per diluted share for the three months ended ~~August 31,~~February 28, 2021, and ~~a net unfavorable impact of~~ $10.4 million or $0.04 per diluted share for the ~~nine months~~year ended ~~August 31,~~November 30, 2021.

(2)

Special charges are more fully described in note 2 of notes to our accompanying consolidated financial statements. Special charges for the year ended November 30, 2021 include $4.7 million which is reflected in Cost of goods sold and an $11.2 million non-cash impairment charge associated with the impairment of certain intangible assets.

(3)

Adjusted gross profit margin is calculated as adjusted gross profit as a percentage of net sales for each period presented.

~~(3)~~(4)

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

~~(4)~~(5)

Adjusted income tax rate is calculated as adjusted income tax expense as a percentage of income from consolidated operations before income taxes excluding transaction and integration expenses and special charges of ~~$241.9~~$200.2 million and ~~$701.5~~$233.3 million for the three ~~and nine~~ months ended ~~August 31,~~February 28, 2022 and 2021, respectively, ~~$243.5 million~~ and ~~$637.9 million for the three and nine months ended August 31, 2020, respectively, and $900.8~~$982.2 million for the year ended November 30, ~~2020.~~2021.

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 comparative 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 comparative year.

~~Rates of constant currency growth (decline) follow:~~
Three Months Ended August 31, 2021
Percentage Change
as Reported Impact of Foreign Currency Exchange Percentage Change on Constant Currency Basis
Net sales:
Consumer segment:
Americas 0.2 % 0.8 % (0.6) %
EMEA (6.0) % 4.6 % (10.6) %
Asia/Pacific 20.2 % 9.6 % 10.6 %
Total Consumer 1.2 % 2.4 % (1.2) %
Flavor Solutions segment:
Americas 20.8 % 2.2 % 18.6 %
EMEA 28.1 % 8.7 % 19.4 %
Asia/Pacific 8.4 % 7.6 % 0.8 %
Total Flavor Solutions 20.8 % 4.2 % 16.6 %
Total net sales 8.3 % 3.0 % 5.3 %
Adjusted operating income:
Consumer segment (10.1) % 1.5 % (11.6) %
Flavor Solutions segment 31.8 % 5.2 % 26.6 %
Total adjusted operating income (0.3) % 2.4 % (2.7) %

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Nine Months Ended August 31, 2021
Percentage Change
as Reported Impact of Foreign Currency Exchange Percentage Change on Constant Currency Basis
Net sales:
Consumer segment:
Americas 5.1 % 0.7 % 4.4 %
EMEA 10.0 % 6.9 % 3.1 %
Asia/Pacific 36.8 % 9.9 % 26.9 %
Total Consumer 9.4 % 2.8 % 6.6 %
Flavor Solutions segment:
Americas 17.7 % 1.3 % 16.4 %
EMEA 30.7 % 7.1 % 23.6 %
Asia/Pacific 22.0 % 9.4 % 12.6 %
Total Flavor Solutions 20.6 % 3.3 % 17.3 %
Total net sales 13.5 % 3.0 % 10.5 %
Adjusted operating income:
Consumer segment (1.0) % 2.4 % (3.4) %
Flavor Solutions segment 41.5 % 3.4 % 38.1 %
Total adjusted operating income 8.8 % 2.6 % 6.2 %

~~In addition, the following provides a summary~~Rates of ~~growth in net sales as reported and on a~~ constant currency ~~basis for the third quarter of 2021 as compared to the third quarter of 2019:~~growth (decline) follow:


		Three Months Ended August 31, 2021 as compared to Three Months Ended August 31, 2019							Three Months Ended February 28, 2022
		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:							Net sales:
Consumer segment:								Consumer segment:
Americas								Americas	2.3	%	0.1	%	2.2	%
EMEA								EMEA	(14.2)	%	(4.8)	%	(9.4)	%
Asia/Pacific								Asia/Pacific	(4.3)	%	1.7	%	(6.0)	%
Total Consumer								Total Consumer	(2.2)	%	(0.7)	%	(1.5)	%
Flavor Solutions segment:								Flavor Solutions segment:
Americas								Americas	12.1	%	(0.3)	%	12.4	%
EMEA								EMEA	15.2	%	(9.0)	%	24.2	%
Asia/Pacific								Asia/Pacific	2.5	%	(1.8)	%	4.3	%
Total Flavor Solutions								Total Flavor Solutions	11.5	%	(2.2)	%	13.7	%
Total net sales								Total net sales	2.8	%	(1.2)	%	4.0	%

Adjusted operating income:								Adjusted operating income:
Consumer segment	Consumer segment	16.1	%	2.3	%	13.8	%	Consumer segment	(12.1)	%	(0.2)	%	(11.9)	%
Flavor solutions segment		17.3	%	1.7	%	15.6	%
Total net sales		16.6	%	2.0	%	14.6	%
Flavor Solutions segment								Flavor Solutions segment	(17.2)	%	(6.6)	%	(10.6)	%
Total adjusted operating income								Total adjusted operating income	(13.5)	%	(2.0)	%	(11.5)	%

To present “constant currency” information for the fiscal year ~~2021~~2022 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 ~~2021~~2022 and are compared to the ~~2020~~2021 results, translated into U.S. dollars using the same ~~2021~~2022 budgeted exchange rates, rather than at the average actual exchange rates in effect during fiscal year ~~2020.~~2021. 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 ~~2020~~2021 or projected shares outstanding for fiscal year ~~2021,~~2022, as appropriate.


	Projections for the Year Ending November 30, ~~2021~~2022
Percentage change in net sales	~~12%~~3% to ~~13%~~5%
Impact of ~~favorable~~unfavorable foreign currency exchange	31	%
Percentage change in net sales ~~in constant currency~~	~~9% to 10%~~


~~Percentage change in adjusted operating income~~	~~6% to 8%~~
~~Impact of favorable foreign currency exchange~~	2	%
~~Percentage change in adjusted operating income~~ in constant currency	4% to 6%


Percentage change in adjusted operating income	7% to 9%
Impact of unfavorable foreign currency exchange	1	%
Percentage change in adjusted operating income in constant currency	8% to 10%


Percentage change in adjusted earnings per share — diluted	5%4% to 7%6%
Impact of ~~favorable~~unfavorable foreign currency exchange	21	%
Percentage change in adjusted earnings per share in constant currency — diluted	3%5% to 5%7%

LIQUIDITY AND FINANCIAL CONDITION


	Three months ended
	February 28, 2022		February 28, 2021

Net cash provided by (used in) operating activities	$	17.9	$	(32.2)
Net cash used in investing activities	(43.7)		(755.2)
Net cash provided by financing activities	4.4		612.7

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~~LIQUIDITY AND FINANCIAL CONDITION~~
Nine months ended
August 31, 2021 August 31, 2020

Net cash provided by operating activities $ 372.9 $ 626.7
Net cash used in investing activities (830.6) (143.3)
Net cash provided by (used in) financing activities 347.0 (432.7)

The primary objective of our financing strategy is to maintain a prudent capital structure that provides us flexibility to pursue our growth objectives. We use a combination of equity and short- and long-term debt. We use short-term debt, comprised primarily of commercial paper, principally to finance ongoing operations, including our requirements for working capital (accounts receivable, prepaid expenses and other current assets, and inventories, less accounts payable, accrued payroll, and other accrued liabilities). We are committed to maintaining investment grade credit ratings.

Our cash flows from operations enable us to fund operating projects and investments that are designed to meet our growth objectives, service our debt, fund or increase our quarterly dividends, fund capital projects and other investments, and make share repurchases when appropriate. Due to the cyclical nature of a portion of our business, our cash flow from operations has historically been the strongest during the fourth quarter of our fiscal year. Due to the timing of the interest payments on our debt, interest payments are higher in the first and third quarter of our fiscal year.

We believe that our sources of liquidity, which include existing cash balances, cash flows from operations, existing credit facilities, our commercial paper program, and access to capital markets, will provide sufficient liquidity to meet our debt obligations, including any repayment of debt or refinancing of debt, working capital needs, planned capital expenditures, and payment of anticipated quarterly dividends for at least the next twelve months.

In the condensed consolidated cash flow statement, the changes in operating assets and liabilities are presented excluding the translation effects of changes in foreign currency exchange rates as these do not reflect actual cash flows. In addition, in the cash flow statement, the changes in operating assets and liabilities are presented excluding the effect of acquired operating assets and liabilities, as the cash flow associated with acquisitions of businesses is presented as an investing activity. Accordingly, the amounts in the cash flow statement do not agree with changes in the operating assets and liabilities that are presented in the balance sheet.

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 historically lowest in~~of $17.9 million for the ~~first quarter and highest in the fourth quarter of our fiscal year. For the nine~~three months ended ~~August 31, 2021 cash flow from operations of $372.9 million decreased $253.8~~February 28, 2022, increased $50.1 million from the same period of ~~2020.~~2021. This ~~decrease~~increase was primarily driven by a ~~higher~~lower use of cash associated with operating assets and liabilities, including the impact of ~~higher~~lower cash used by working capital which included the ~~higher amount~~impact of ~~certain employee benefits accrued as of the prior year-end and paid in the first quarter of the subsequent fiscal year, and~~ the payment of transaction and integration costs ~~associated with our recent acquisitions, each as compared to~~in the ~~prior year.~~2021 period.

As more fully described in our Annual Report on Form 10-K for the year ended November 30, ~~2020,~~2021, we participate in a Supply Chain Financing program (SCF) with several global financial institutions (SCF Banks). Under the SCF, qualifying suppliers may elect to sell their receivables from us to an SCF Bank, enabling participating suppliers to negotiate their receivables sales arrangements directly with the respective SCF Bank. We are not party to those agreements and have no economic interest in a supplier’s decision to sell a receivable.

All outstanding amounts related to suppliers participating in the SCF are recorded within the line entitled Trade accounts payable in our condensed consolidated balance sheets, and the associated payments are included in operating activities within our consolidated statements of cash flows. As of ~~August 31, 2021~~February 28, 2022 and November 30, ~~2020,~~2021, the ~~amount~~amounts due to suppliers participating in the SCF and included in ~~Trade~~trade accounts payable ~~was~~were approximately ~~$291.1~~$311.0 million and ~~$273.6~~$274.3 million, respectively.

Investing Cash Flow — Cash used in investing activities of ~~$830.6~~$43.7 million for the ~~nine~~three months ended ~~August 31, 2021 increased~~February 28, 2022 decreased by ~~$687.3~~$711.5 million as compared to ~~$143.3~~$755.2 million for the corresponding period in ~~2020.~~2021. Our primary investing cash flows include the usage of cash associated with our acquisition of businesses and capital expenditures. Our primary investing cash inflow in the nine months ended August 31, 2021 was the $65.4 million of proceeds received from the sale of an unconsolidated operation, as more fully discussed in note 2 of the notes to the accompanying financial statements. Cash usage related to the acquisition of businesses was ~~$706.4~~$706.6 million during the ~~nine~~three months ended ~~August 31,~~February 28, 2021, principally related to our acquisition of FONA. During the first ~~nine~~three months of ~~2021,~~2022, capital expenditures ~~increased~~decreased by ~~$44.3~~$4.9 million from the ~~2020~~2021 level to ~~$189.9~~$43.7 million. We expect ~~2021~~2022 capital expenditures to approximate ~~$275~~$320 million to support our planned growth, including the multi-year program to replace our global enterprise resource planning (ERP) system and other initiatives.

Financing Cash Flow — Financing activities provided cash of ~~$347.0~~$4.4 million for the first ~~nine~~three months of ~~2021,~~2022, as compared to the corresponding period in ~~2020~~2021 when financing activities ~~used~~provided cash of ~~$432.7~~$612.7 million. The variability between years is principally a result of changes in our net borrowings, share repurchase activity, and dividends, all as described below.

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The following table outlines our net borrowing activities:


		Nine months ended					Three months ended
		August 31, 2021		August 31, 2020			February 28, 2022		February 28, 2021

Net decrease in short-term borrowings		$	(118.9)	$	(432.0)
Net increase (decrease) in short-term borrowings						Net increase (decrease) in short-term borrowings	$	97.3	$	(292.4)
Proceeds from issuance of long-term debt, net of debt issuance costs	Proceeds from issuance of long-term debt, net of debt issuance costs	999.6		505.3		Proceeds from issuance of long-term debt, net of debt issuance costs	—		999.3
Repayments of long-term debt	Repayments of long-term debt	(255.3)		(256.0)		Repayments of long-term debt	(3.5)		(1.8)
Net cash provided from (used in) borrowing activities		$	625.4	$	(182.7)
Net cash provided from borrowing activities						Net cash provided from borrowing activities	$	93.8	$	705.1

During the ~~nine~~three months ended ~~August 31,~~February 28 2021, we issued $500.0 million of 0.90% notes due February 15, 2026, with net cash proceeds received of $495.7 million. We also issued $500.0 million of 1.85% notes due February 15, 2031, with net cash proceeds received of $492.8 million. The net proceeds from these issuances were used to pay down short-term borrowings, including a portion of the $1,443.0 million of commercial paper issued to fund our acquisitions of Cholula and FONA, and for general corporate purposes. ~~During the three months ended August 31, 2021, we repaid the $250 million, 3.90% notes that matured on July 8, 2021.~~

In the first nine months of 2020, we issued $500 million of long-term debt with net proceeds from the issuance of $495.0 million. We also repaid $256.0 million of long-term debt which consisted primarily of $250.0 million on our term loans due August 2022.

The following table outlines the activity in our share repurchase program for the ~~nine~~three months ended ~~August 31,~~February 28, 2022 and 2021 ~~and 2020~~ (in millions):


		2021		2020			2022		2021
Number of shares of common stock repurchased	Number of shares of common stock repurchased	0.04		0.52		Number of shares of common stock repurchased	0.10		—
Dollar amount	Dollar amount	$	3.2	$	46.0	Dollar amount	$	8.7	$	0.1

As of ~~August 31, 2021, $581.4~~February 28, 2022, $567.4 million remained of the $600 million share repurchase authorization approved by the Board of Directors in November 2019. The timing and amount of any shares repurchased is determined by our management based on its evaluation of market conditions and other factors.

During the ~~nine~~three months ended ~~August 31, 2021,~~February 28, 2022, we received proceeds of ~~$10.5~~$30.3 million from exercised stock options as compared to ~~$54.1~~$3.6 million received in the corresponding ~~2020~~2021 period. We repurchased ~~$13.3~~$12.0 million and ~~$10.7~~$5.1 million of common stock during the ~~nine~~three months ended ~~August 31,~~February 28, 2022 and 2021, ~~and August 31, 2020,~~ respectively, in conjunction with employee tax withholding requirements.

We increased dividends paid to ~~$272.4~~$99.0 million, or a per share dividend of $0.37, in the first ~~nine~~three months of ~~2021~~2022 from ~~$247.4~~$90.8 million, or a per share dividend of $0.34, of dividends paid in the same period last year. The timing and amount of any future dividends is determined by our Board of Directors.

Most of our cash is in our subsidiaries outside of the U.S. We manage our worldwide cash requirements by considering available funds among the many subsidiaries through which we conduct our business and the cost effectiveness with which those funds can be accessed. Prior to the enactment of the U.S. Tax Act in December 2017, the permanent 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 31,~~February 28, 2022 and 2021, ~~and August 31, 2020,~~ we temporarily used ~~$329.3~~$325.4 million and ~~$184.6~~$221.2 million, respectively, of cash from our non-U.S. 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 ~~nine~~three months ended ~~August 31,~~February 28, 2022 and 2021 ~~and August 31, 2020~~ were ~~$1,023.7~~$883.4 million and ~~$567.3~~$1,287.1 million, respectively. Those average short-term borrowings outstanding for the ~~nine~~three months ended ~~August 31, 2021~~February 28, 2022 included average commercial paper outstanding of ~~$963.8~~$842.0 million. Total average debt outstanding for the ~~nine~~three months ended ~~August 31,~~February 28, 2022 and 2021 ~~and August 31, 2020~~ was ~~$5,564.8~~$5,438.4 million and ~~$4,378.0~~$5,425.5 million, respectively.

The reported values of our assets and liabilities are significantly affected by fluctuations in foreign exchange rates between periods. At ~~August 31, 2021,~~February 28, 2022, the exchange rates for the British pound sterling, Canadian dollar, ~~and~~ Chinese renminbi, and Australian dollar were higher than the U.S. dollar at November 30, ~~2020.~~2021. At ~~August 31, 2021,~~February 28, 2022, the exchange rates for Euro and Polish zloty ~~and Australian dollar~~ were lower than the U.S. dollar at November 30, ~~2020.~~2021.

Credit and Capital Markets

~~Table of Contents~~

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.

Table of Contents

In June 2021, we entered into a five-year $1.5 billion revolving credit facility, which will expire in June 2026. The current pricing for the credit facility, on a fully drawn basis, is LIBOR plus 1.25%. The pricing of the credit facility is based on a credit rating grid that contains a fully drawn maximum pricing of the credit facility equal to LIBOR plus 1.75%. The provisions of this ~~new~~ revolving credit facility restrict subsidiary indebtedness and require us to maintain a minimum interest coverage ratio. We do not expect that this covenant would limit our access to this revolving credit facility for the foreseeable future. ~~This facility replaced the following prior revolving credit facilities: (i) a five-year $1.0 billion~~

We generally use our revolving credit facility ~~that was due~~ to ~~expire in August 2022, and (ii) a 364-day $1.0 billion revolving facility, which~~support our issuance of commercial paper. If the commercial paper market is not available or viable, we ~~entered into in the first quarter of 2021 and that was due to expire in December 2021. The terms of those~~could borrow directly under our revolving credit ~~facilities are more fully described in note 6~~facility. This facility is made available by a syndicate of banks, with various commitments per bank. If any of the ~~notes~~banks in this syndicate are unable to ~~the consolidated financial statements included in~~perform on their commitments, our ~~Annual Report on Form 10-K for the year ended November 30, 2020.~~

liquidity could be impacted, which could reduce our ability to grow through funding of our working capital. 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~~will perform on ~~its commitment is remote.~~their commitments.

Material Cash Requirements

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 2021 of approximately $15 million. In 2020, we contributed $11.9 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. As part of our ongoing operations, we enter into contractual arrangements that obligate us to make future cash payments. Our primary obligations include principal and interest payments on our outstanding short-term borrowings and long-term debt. In the next year, our most significant debt service obligation is the maturity of our $750.0 million, 2.70% notes due in August 2022. Our other cash requirements include raw material purchases, lease payments, income taxes, and pension and postretirement benefits.

These obligations impact our liquidity and capital resource needs. To meet ~~these~~those cash requirements, we intend to use our existing cash, cash equivalents and internally generated funds, to borrow under our existing credit ~~facilities~~facility or under other short-term borrowing facilities, and depending on market conditions and upon the significance of the cost of a particular debt maturity or acquisition to our then-available sources of funds, to obtain additional short- and long-term financing. We believe that cash provided from these sources will be adequate to meet our future cash ~~requirements over the next twelve months.~~requirements.

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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, ~~2020.~~2021.

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, ~~2020.~~

2021.

FORWARD-LOOKING INFORMATION

Certain statements contained in this report, including statements concerning expected performance such as those relating to net sales, gross margin, earnings, cost savings, transaction and integration expenses, special charges, acquisitions, brand marketing support, volume and product mix, income tax expense, and the impact of foreign currency rates are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These statements may be identified by the use of words such as “may,” “will,” “expect,” "should," "anticipate," "intend," “believe” and “plan.” These statements may relate to: the impact of the COVID-19 pandemic on our business, suppliers, consumers, customers, and employees; disruptions or inefficiencies in the supply chain, including any impact of COVID-19; the expected results of operations of businesses acquired by the company, including the acquisitions of Cholula and FONA; the expected impact of the inflationary cost environment, including commodity, packaging materials and transportation costs on our business; the expected impact of pricing actions on the company's results of operations and gross margins; the expected impact of factors affecting our supply chain, including transportation capacity, labor shortages, and absenteeism; the expected impact of productivity improvements, including those associated with our Comprehensive Continuous Improvement (CCI) program and global enablement initiative; the impact of the Russia-Ukraine conflict, including the potential for broader economic disruption; expected working capital improvements; expectations regarding growth potential in various geographies and markets, including the impact from customer, channel, category, and e-commerce expansion; expected trends in net sales and earnings performance and other financial measures; the expected timing and costs of implementing our business transformation initiative, which includes the implementation of a global enterprise resource planning (ERP) system; the expected impact of accounting pronouncements; the expectations of pension and postretirement plan contributions and anticipated charges associated with those plans; the holding period and market risks associated with financial instruments; the impact of foreign exchange fluctuations; the adequacy of internally generated funds and existing sources of liquidity, such as the availability of bank financing; the anticipated sufficiency of future cash flows to enable the payments of interest and repayment of short- and long-term debt 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.

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; the company's ability to increase pricing to offset, or partially offset, inflationary pressures on the cost of our products; damage to the company's reputation or brand name; loss of brand relevance; increased private label use; product quality, labeling, or safety concerns; negative publicity about our products; actions by, and the financial condition of, competitors and customers; the longevity of mutually beneficial relationships with our large customers; the ability to identify, interpret and react to changes in consumer preference and demand; business interruptions due to natural disasters, unexpected events or public health ~~crisis,~~crises, including COVID-19; issues affecting the company's supply chain and procurement of raw materials, including fluctuations in the cost and availability of raw and packaging materials; labor shortage, turnover and labor cost increases; the impact of the Russia-Ukraine conflict, including the potential for broader economic disruption; government regulation, and changes in legal and regulatory requirements and enforcement practices; the lack of successful acquisition and integration of new ~~businesses, including the acquisitions of Cholula and FONA;~~businesses; global economic and financial conditions generally, including the on-going impact of the exit of the United Kingdom (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; foreign currency

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fluctuations; the effects of increased level of debt service following the Cholula and FONA acquisitions as well as the effects that such

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increased debt service may have on the company's ability to borrow or the cost of any such additional borrowing, our credit rating, and our ability to react to certain economic and industry conditions; risks associated with the phase-out of LIBOR; impairments of indefinite-lived intangible assets; assumptions we have made regarding the investment return on retirement plan assets, and the costs associated with pension obligations; the stability of credit and capital markets; risks associated with the company's information technology systems, including the threat of data breaches and cyber-attacks; the company's inability to successfully implement our business transformation initiative; fundamental changes in tax laws; including interpretations and assumptions we have made, and guidance that may be issued, and volatility in our effective tax rate; climate change; Environmental, Social and Governance (ESG) matters; infringement of intellectual property rights, and those of customers; 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 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

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, ~~2020.~~2021. 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, ~~2020~~2021 fiscal year end.

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

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.ARISK FACTORS

There have been no material changes in our risk factors from those disclosed in Part I, Item 1A to our Annual Report on Form 10-K for the fiscal year ended November 30, ~~2020,~~2021, except ~~for the following update:~~

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

In December 2019, COVID-19, a strain of novel coronavirus, was first reported in Wuhan, China, resulting in thousands of confirmed cases of the disease in China. By January 2020, the Chinese government implemented a quarantine protocol for Wuhan and implemented other restrictions for other major Chinese cities, includingmandatory business closures, social distancing measures, and various travel restrictions. In March 2020, as COVID-19 spread outside of China, significantly impacting the rest of the world, the 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 has impacted and 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.follows.

The ~~COVID-19 pandemic has affected,~~conflict between Russia and ~~continues to affect, our operations, major facilities,~~Ukraine and the ~~health of~~related implications may negatively impact our employees and consumers. The production of certain of our products in our Americas, EMEA, and Asia/Pacific geographic regions are concentrated in a single manufacturing site within each region. To mitigate the spread of COVID-19, many governments have implemented quarantines and significant restrictions on travel as well as work restrictions that prohibited many employees from going to work.operations.

In February 2022, Russia invaded Ukraine. As a result, ~~we temporarily closed~~the U.S. and certain ~~manufacturing~~other countries have imposed sanctions on Russia and ~~other facilities for limited periods in 2020. Our results have been and we expect will continue to be adversely impacted by these closures and other actions taken to contain~~could impose further sanctions that could damage or ~~treat the impact of COVID-19,~~disrupt international commerce and the ~~extent~~global economy. It is not possible to predict the broader or longer-term consequences of ~~such~~this conflict or the sanctions imposed to date, which could include further sanctions, embargoes, regional instability, geopolitical shifts and adverse effects on macroeconomic conditions, security conditions, currency exchange rates and financial markets. Such geopolitical instability and uncertainty could have a negative impact ~~will depend upon future developments, which are highly uncertain~~on our ability to sell to, ship products to, collect payments from, and ~~cannot be predicted. COVID-19 continues to interfere with general commercial activity related to our~~support customers in certain regions based on trade restrictions, embargoes and export control law restrictions, and logistics restrictions including closures of air space, and could increase the costs, risks and adverse impacts from supply chain and customer base, which could have a material adverse effect on our business, financial condition, or results of operations. In mid-2020, we saw some loosening of government-mandated COVID-19 restrictions in certain locales in response to improved COVID-19 infection levels. However, upon worsening COVID-19 infection levels in certain localities in late fiscal 2020 and in fiscal 2021, local governmental authorities have either re-imposed some or all of earlier restrictions or imposed other restrictions, all in an effort to prevent the spread of COVID-19.logistics challenges.

In early fiscal 2021, vaccines for combatting COVID-19 were approved by health agencies in certain countries/regions in which we operate (including the U.S., U.K., European Union, Canada and Mexico) and began to be administered. The availability of COVID-19 vaccines and their take-up by individuals is difficult to predict and vaccination levels vary across jurisdictions. The pace and shape of the COVID-19 recovery as well as the impact and extent of COVID-19 variants or potential resurgences is not presently known. The impact of COVID-19, including the impact of restrictions imposed to combat its spread, could result in additional businesses being shut down, additional work restrictions, an increasingly competitive labor market, 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 related to COVID-19 which could adversely impact our business, financial condition or results of operations. Further, as some of our customers’ businesses are similarly affected, they might delay or reduce purchases from us, which could adversely affect our results of our business, financial condition or results of operations. The potential effects of ~~COVID-19~~the conflict between Russia and Ukraine also could impact many of the other risk factors described ~~herein,~~in Item 1A, Risk Factors, in our Annual Report on Form 10-K for the fiscal year ended November 30, 2021. These potential effects could include but ~~given~~are not limited to variations in the level of our profitability, changes in laws and regulations affecting our business, fluctuations in foreign currency markets, the availability of future borrowings, the cost of borrowings, credit risks of our customers and counterparties, and potential impairment of the carrying value of goodwill or other indefinite-lived intangible assets. Given the evolving ~~health,~~nature of this conflict, the related sanctions, potential governmental actions and economic ~~social and governmental environments,~~impact, such potential ~~impact remains~~impacts remain uncertain. While we expect the impacts of ~~COVID-19~~conflict between Russia and Ukraine to continue to have an effect on our business, financial condition and results of operations, we are unable to predict the extent or nature of these impacts at this time.

~~The uncertainty regarding the potential phase-out of LIBOR may negatively impact our operating results.~~

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LIBOR, the interest rate benchmark used as a reference rate on our variable rate debt, including our revolving credit facility, synthetic lease, interest rate swaps, and cross currency interest rate swaps is expected to be phased out beginning after December 31, 2021 when private-sector banks are no longer required to report the information used to set the rate. Without this data, LIBOR may no longer be published, or the lack of quality and quantity of data may cause the rate to no longer be representative of the market. On March 5, 2021, the U.K. Financial Conduct Authority (FCA) published a statement confirming that all LIBOR settings will either cease to be provided or no longer be representative (i) immediately after December 31, 2021, in the case of all sterling, euro, Swiss franc and Japanese yen settings, and the 1-week and 2-month US dollar settings, and (ii) immediately after June 30, 2023, in the case of all remaining US dollar settings.The International Swaps and Derivative Association (ISDA) or Alternative Reference Rates Committee (ARRC) fallback spread adjustments were fixed as of the FCA announcement date and are expected to be implemented at the point each relevant reference rate ceases or becomes non-representative.

There continue to be many uncertainties regarding a transition from LIBOR, including but not limited to the need to amend all contracts with LIBOR as the referenced rate and how this will impact the Company’s cost of variable rate debt and certain derivative financial instruments. The Company will also need to consider new contracts and if they should reference an alternative benchmark rate or include suggested fallback language, as published by the ARRC. The consequences of these developments with respect to LIBOR cannot be entirely predicted and span multiple future periods but could result in an increase in the cost of our variable rate debt or derivative financial instruments which may be detrimental to our financial position or operating results.

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~~first quarter of ~~2021.~~2022.


ISSUER PURCHASES OF EQUITY SECURITIES	ISSUER PURCHASES OF EQUITY SECURITIES						ISSUER PURCHASES OF EQUITY SECURITIES
Period	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	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, 2021 to June 30, 2021		CS – 13,217 (1)	$	89.08	13,217	$583 million
December 1, 2021 to December 31, 2021							December 1, 2021 to December 31, 2021	CS – 34,457 (1)	$	90.48	34,457	$573 million
		CSNV – 0	$	—	—	$583 million		CSNV – 0	$	—	—
July 1, 2021 to July 31, 2021		CS – 0	$	—	—
January 1, 2022 to January 31, 2022							January 1, 2022 to January 31, 2022	CS – 19,074 (2)	$	97.86	19,074	$571 million
		CSNV – 0	$	—	—	$583 million		CSNV – 0	$	—	—
August 1, 2021 to August 31, 2021		CS – 18,667 (2)	$	85.94	18,667
February 1, 2022 to February 28, 2022							February 1, 2022 to February 28, 2022	CS – 36,681 (3)	$	100.54	36,681	$567 million
		CSNV – 0	$	—	—	$581 million		CSNV – 0	$	—	—
Total	Total	CS – 0	$	87.24	31,884		Total	CS – 90,212	$	96.13	90,212	$567 million
		CSNV – 0	$	—	—	$581 million		CSNV – 0	$	—	—

(1)On ~~June 15,~~December 8, 2021 and December 14, 2021, we purchased ~~13,217~~17,394 shares and 17,063 shares, respectively, of our CS from our U.S. defined contribution retirement plan to manage shares, based upon participant activity, in the plan's company

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stock fund. The prices paid per share represented the closing price of the common shares on December 8, 2021 and December 14, 2021, respectively.

(2)On January 28, 2022, we purchased 19,074 shares of our CS 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 represented the closing price of the common shares on ~~June 15, 2021.~~January 28, 2022.

~~(2)~~(3)On ~~August 11, 2021,~~February 4, 2022 and February 17, 2022, we purchased ~~18,667~~17,980 shares and 16,701 shares, respectively, of our CS 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 represented the closing price of the common shares on ~~August 11, 2021.~~February 4, 2022 and February 17, 2022, respectively.

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,

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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~~first quarter of ~~2021,~~2022, we issued ~~165,695~~703,996 shares of CSNV in exchange for shares of CS and issued ~~8,740~~27,362 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

The following exhibits are attached or incorporated herein by reference:

Exhibit Number

Description

(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.

Articles of Amendment to Charter of McCormick & Company, Incorporated dated April 2, 2021

Incorporated by reference from Exhibit 3(i) of McCormick's Form 10-Q for the quarter ended May 31, 2021, File No. 1-14920, as filed with the Securities and Exchange Commission on July 1, 2021.

(ii)

By-Laws

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

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

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

(i)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. 1 -~~149~~20 ,1-14920, 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 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.

(v)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.

(vi)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.

(vii)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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(viii)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.

(ix)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.

(x)Form of 2.50% Notes due 2030, incorporated by reference from Exhibit 4.2 of McCormick’s Form 8-K dated April 13, 2020, File No. 1-14920, as filed with the Securities and Exchange Commission on April 16, 2020.

(xi)Form of 0.90% Notes due 2026, incorporated by reference from Exhibit 4.2 of McCormick’s Form 8-K dated February 11, 2021, File No. 1-14920, as filed with the Securities and Exchange Commission on February 11, 2021.

(xii)Form of 1.85% Notes due 2031, incorporated by reference from Exhibit 4.3 of McCormick’s Form 8-K dated February 11, 2021, File No. 1-14920, as filed with the Securities and Exchange Commission on February 11, 2021.

(xiii)Description of Securities of McCormick & Company, Incorporated, incorporated by reference from Exhibit ~~4(xi)~~4(xi ii ) of McCormick's Form 10-K for the fiscal year ended November 30, ~~2019,~~20 21 , File No. 1-14920, as filed with the Securities and Exchange Commission on January ~~28, 2020.~~2 7 , 202 2.

(10)Material Contracts

(i)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.*

(ii)2004 Long-Term Incentive Plan, in which officers and certain other management employees participate, is set forth in Exhibit A of McCormick’s definitive Proxy Statement dated February 17, 2004, File No. 1-14920, as filed with the Securities and Exchange Commission on February 17, 2004, and incorporated by reference herein.*

(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.*

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(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.*

(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 Stock Option Agreement for the Value Creation Acceleration Program, incorporated by reference from Exhibit 99.1 of McCormick's Form 8-K, File No. 1-14920, as filed with the Securities and Exchange Commission on December 3, 2020.*

(xii)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.*

(xiii)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.*

(xiv)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.*

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

(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.

(32) Section 1350 Certifications Filed herewith

(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.

(101) The following financial information from the Quarterly Report on Form 10-Q of McCormick for the quarter ended ~~August 31, 2021,~~February 28, 2022, filed electronically herewith, and formatted in Inline XBRL (Extensible Business Reporting Language):

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(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.

(104) Inline XBRL for the cover page from the Quarterly Report on Form 10-Q of McCormick for the quarter ended ~~August 31, 2021,~~February 28, 2022, files electronically herewith, included in 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

~~September 30, 2021~~March 29, 2022	By:	/s/ Michael R. Smith
	Michael R. Smith
	Executive Vice President & Chief Financial Officer

~~September 30, 2021~~March 29, 2022	By:	/s/ Gregory P. Repas
	Gregory P. Repas
	Vice President & Controller
	Principal Accounting Officer

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	Consumer		Flavor Solutions
Beginning of the year	$	3,711.2	$	1,275.1

Increases in goodwill from acquisition	—		389.4
Changes in preliminary purchase price allocation	0.5		0.3
Foreign currency fluctuations	0.3		2.7
Balance as of the end of period	$	3,712.0	$	1,667.5


	2021	2020
Risk-free interest rates	0.0 - 1.8%	0.0 - 0.6%
Dividend yield	1.5%	1.8%
Expected volatility	21.3%	22.8%
Expected lives (in years)	7.9	7.9


	Three months ended August 31,		Nine months ended August 31,
2020 Earnings per share – diluted	$	0.76	$	2.03
Impact of change in operating income	—		0.20
Increase in special charges, net of taxes	(0.01)		(0.04)
Increase in transaction and integration expenses, including impact of net discrete tax item related to FONA acquisition	—		(0.14)


Increase in income from unconsolidated operations, including, for the nine months ended August 31, 2021, an after-tax gain on sale of unconsolidated operation of $0.05 per diluted share	—		0.06

Impact of change in effective income tax rate, excluding taxes on special charges and transaction and integration expenses	0.04		(0.03)
Impact of higher shares outstanding	—		(0.01)
2021 Earnings per share – diluted	$	0.79	$	2.07