MKC US Equity☆

ITEM 1A. RISK FACTORS

The following are certain risk factors that could affect our business, financial condition and results of operations. These risk factors should be considered in connection with evaluating the forward-looking statements contained in this Annual Report on Form 10-K because these factors could cause the actual results and conditions to differ materially from those projected in forward-looking statements. Before you buy our Common Stock or Common Stock Non-Voting, you should know that making such an investment involves risks, including the risks described below. Additional risks and uncertainties that are not presently known to us or are currently deemed to be immaterial also may materially adversely affect our business, financial condition, or results of operations in the future. If any of the risks actually occur, our business, financial condition or results of operations could be negatively affected. In that case, the trading price of our securities could decline, and you may lose part or all of your investment.

Risks Related to Our Company, Business and Operations

A pandemic, including COVID-19, could have an adverse impact on our business, financial condition, and results of operations.

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The COVID-19 pandemic has had, and could continue to have, a negative impact on financial markets, economic conditions, and portions of our industry as a result of changes in consumer behavior, retailer inventory levels, cost inflation, manufacturing and supply chain disruption, and overall macroeconomic conditions. The extent and nature of government actions, including 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, varied during fiscal 2020 and 2021 based upon the then-current extent and severity of the COVID-19 pandemic within the respective countries and localities. Although our consumer business has benefited from increased at-home consumption due to restrictions related to COVID-19, our ability to sustain heightened sales is dependent on consumer purchasing behavior. The COVID-19 mitigation measures impacting certain of our flavor solutions customers have 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. The continued availability and effectiveness of vaccines and treatments may partially mitigate the risks around the continued spread of COVID-19, however, with the spread of the COVID-19 variants, the ongoing implications of the COVID-19 pandemic could adversely impact our business and results of operations in a number of ways, including but not limited to:

•Significant reductions in demand or significant volatility in demand for one or more of our products, which may be caused by, among other things: the temporary inability of consumers to purchase our products due to illness, quarantine or other travel restrictions, or financial hardship, shifts in demand away from one or more of our more discretionary or higher priced products to lower priced products, or stockpiling or similar activity. If prolonged, such impacts can further increase the difficulty of business or operations planning and may adversely impact our results of operations and cash flows;

•Inability to meet our customers’ needs and achieve cost targets due to disruptions in our manufacturing and supply arrangements caused by constrained workforce capacity or the loss or disruption of other essential manufacturing and supply elements such as raw materials or other finished product components, transportation, enhanced cleaning and sanitation protocols, or other manufacturing and distribution capability;

•Failure of third parties on which we rely, including our suppliers, contract manufacturers, distributors, contractors, commercial banks, joint venture partners and external business partners, to meet their obligations to the Company, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties and may adversely impact our operations; or

•Significant changes in the political conditions in markets in which we manufacture, sell or distribute our products, including quarantines, import/export restrictions, price controls, or governmental or regulatory actions, closures or other restrictions that limit or close our operating and manufacturing facilities, restrict our employees’ ability to travel or perform necessary business functions, or otherwise prevent our third-party partners, suppliers, or customers from sufficiently staffing operations, including operations necessary for the production, distribution, sale, and support of our products, which could adversely impact our results of operations and cash flows.

The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannotbe accurately predicted at this time, such as the severity and transmission rate of the virus, the emergence and spread of variants, infection rates in areas where we operate, the extent and effectiveness of containment actions, including the continued availability and effectiveness of vaccines in the markets where we operate, the impact of actions taken by governmental authorities and other third parties in response to the pandemic, each of which is uncertain, rapidly changing and difficult to predict, and the impact of these and other factors on our employees, customers, and suppliers. Should these conditions persist for a prolonged period, including any of the above factors and others that are currently unknown, the COVID-19 pandemic could have a material adverse effect on our business, financial condition, and results of operations. The impact of the COVID-19 pandemic may also exacerbate other risks discussed in this Item 1A, Risk Factors, any of which could have a material effect on us.

Damage to our reputation or brand name, loss of brand relevance, increase in use of private label or other competitive brands by customers or consumers, or product quality or safety concerns could negatively impact our business, financial condition or results of operations.

We have many iconic brands with long-standing consumer recognition. Our success depends on our ability to maintain our brand image for our existing products, extend our brands to new platforms, and expand our brand image with new product offerings.

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We continually make efforts to maintain and improve relationships with our customers and consumers and to increase awareness and relevance of our brands through effective marketing and other measures. From time to time, our customers reevaluate their mix of product offerings, and consumers have the option to purchase private label or other competitive products instead of our branded products. In the event that we are unable to supply our products to customers in the time frame and quantities that they desire, whether due to increased demand or other factors, our customers may discontinue all or a portion of their purchases from us and source competitive brands. If a significant portion of our branded business was switched to private label or competitive products, it could have a material negative impact on our consumer segment.

Our reputation for manufacturing high-quality products is widely recognized. In order to safeguard that reputation, we have adopted rigorous quality assurance and quality control procedures which are designed to ensure the safety of our products. A serious breach of our quality assurance or quality control procedures, deterioration of our quality image, impairment of our customer or consumer relationships or failure to adequately protect the relevance of our brands may lead to litigation, customers purchasing from our competitors or consumers purchasing other brands or private label items that may or may not be manufactured by us, any of which could have a material negative impact on our business, financial condition or results of operations.

The food industry generally is subject to risks posed by food spoilage and contamination, product tampering, product recall, import alerts and consumer product liability claims. For instance, we may be required to recall certain of our products should they be mislabeled, contaminated or damaged. Additionally, certain of our raw materials could be blocked from entering the country if they were subject to government-imposed actions. We have and may continue to become involved in lawsuits and legal proceedings if it is alleged that the consumption of any of our products could cause injury or illness, or that any of our products are mislabeled or fail to meet applicable legal requirements (even if the allegation is untrue). A product recall, import alert or an adverse result in any such litigation, or negative perceptions regarding food products and ingredients, could result in our having to pay fines or damages, incur additional costs or cause customers and consumers in our principal markets to lose confidence in the safety and quality of certain products or ingredients, any of which could have a negative effect on our business or financial results and, depending upon the significance of the affected product, that negative effect could be material to our business or financial results. Negative publicity about these concerns, whether or not valid, may discourage customers and consumers from buying our products or cause disruptions in production or distribution of our products and adversely affect our business, financial condition or results of operations.

The rising popularity of social networking and other consumer-oriented technologies has increased the speed and accessibility of information dissemination (whether or not accurate), and, as a result, negative, inaccurate, or misleading posts or comments on websites may generate adverse publicity that could damage our reputation or brands.

Customer consolidation, consumer behaviors, and competitive, economic and other pressures facing our customers, may impact our financial condition or results of operations.

A number of our customers, such as supermarkets, warehouse clubs and food distributors, have consolidated in recent years and consolidation could continue. Such consolidation could present a challenge to margin growth and profitability in that it has produced large, sophisticated customers with increased buying power who are more capable of operating with reduced inventories; resisting price increases; demanding lower pricing, increased promotional programs and specifically tailored products; and shifting shelf space currently used for our products to private label and other competitive products. The economic and competitive landscape for our customers is constantly changing, such as the emergence of new sales channels like e-commerce, and our customers' responses to those changes could impact our business. The trend towards e-commerce and its impact of consumer habits and preferences has accelerated since the onset of the COVID-19 pandemic in many of the markets we serve and our financial results may be impacted if we are unable to adapt to changing consumer preferences and market dynamics. In addition, our flavor solutions segment may be impacted if the reputation or perception of the customers of our flavor solutions segment declines. These factors could have an adverse impact on our business, financial condition or results of operations.

The inability to maintain mutually beneficial relationships with large customers could adversely affect our business, financial condition and results of operations.

We have a number of major customers, including two large customers that, in the aggregate, constituted approximately 22% of our consolidated sales in 2021. The loss of either of these large customers due to events beyond our control, or a material negative change in our relationship with these large customers or other major customers could have an adverse effect on our business, financial condition and results of operations.

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Issues regarding procurement of raw materials may negatively impact us.

Our purchases of raw materials are subject to fluctuations in market price and availability caused by weather, growing and harvesting conditions, climate change, market conditions, governmental actions and other factors beyond our control, including the COVID-19 pandemic. The most significant raw materials used by us in our business are dairy products, pepper, capsicums (red peppers and paprika), onion, vanilla, garlic, and salt. While future price movements of raw material costs are uncertain, we seek to mitigate the market price risk in a number of ways, including strategic raw material purchases, purchases of raw material for future delivery, customer price adjustments and cost savings from our CCI program. We generally have not used derivatives to manage the volatility related to this risk. To the extent that we have used derivatives for this purpose, it has not been material to our business. Any actions we take in response to market price fluctuations may not effectively limit or eliminate our exposure to changes in raw material prices. Therefore, we cannot provide assurance that future raw material price fluctuations will not have a negative impact on our business, financial condition or operating results.

In addition, we may have very little opportunity to mitigate the risk of availability of certain raw materials due to the effect of weather on crop yield, government actions, political unrest in producing countries, action or inaction by suppliers in response to laws and regulations, changes in agricultural programs and other factors beyond our control. Therefore, we cannot provide assurance that future raw material availability will not have a negative impact on our business, financial condition or operating results.

Political, socio-economic and cultural conditions, as well as disruptions caused by terrorist activities or otherwise, could also create additional risks for regulatory compliance. Although we have adopted rigorous quality assurance and quality control procedures which are designed to ensure the safety of our imported products, we cannot provide assurance that such events will not have a negative impact on our business, financial condition or operating results.

Disruption of our supply chain could adversely affect our business.

Our ability to make, move, and sell products is critical to our success. Damage or disruption to raw material supplies or our manufacturing or distribution capabilities due to weather, climate change, natural disaster, fire, terrorism, cyber-attack, pandemics (such as the COVID-19 pandemic), governmental restrictions or mandates, strikes, import/export restrictions, or other factors could impair our ability to manufacture or sell our products. Many of our product lines are manufactured at a single location. The failure of third parties on which we rely, including those third parties who supply our ingredients, packaging, capital equipment and other necessary operating materials, contract manufacturers, commercial transport, distributors, contractors, and external business partners, to meet their obligations to us, or significant disruptions in their ability to do so, may negatively impact our operations. Our suppliers’ policies and practices can damage our reputation and the quality and safety of our products. Disputes with significant suppliers, including disputes regarding pricing or performance, could adversely affect our ability to supply products to our customers and could materially and adversely affect our sales, financial condition, and results of operations. Failure to take adequate steps to mitigate the likelihood or potential impact of such events, or to effectively manage such events if they occur, particularly when a product is manufactured from a single location, could adversely affect our business and results of operations, as well as require additional resources to restore our supply chain.

Moreover, short term or sustained increases in consumer demand at our customers may exceed our production capacity or otherwise strain our supply chain. Our failure to meet the demand for our products could adversely affect our business and results of operations.

Our results of operations can be adversely affected by labor shortages, turnover and labor cost increases.

Labor is a primary component of operating our business. A number of factors may adversely affect the labor force available to us or increase labor costs, including high unemployment levels, federal unemployment subsidies, including unemployment benefits offered in response to the COVID-19 pandemic, and other government regulations. We are also experiencing and may continue to experience additional pressure in our supply chain due to labor shortages and absenteeism associated with COVID-19, together with the impact of the continued elevated demand.A sustained labor shortage or increased turnover rates within our employee base, caused by COVID-19 or as a result of general macroeconomic factors, could lead to increased costs, such as increased overtime to meet demand and increased wage rates to attract and retain employees, and could negatively affect our ability to efficiently operate our manufacturing and distribution facilities and overall business. If we are unable to hire and retain employees capable of performing at a high-level, or if mitigation measures we may take to respond to a decrease in labor availability, such as overtime and third-party outsourcing, have negative effects, our business could be adversely affected. In addition, we distribute our products and receive raw materials primarily by truck. Reduced availability of trucking capacity due to shortages of drivers, primarily as a result of the COVID-19 pandemic, has caused an increase in the cost of transportation for us and our suppliers.An overall labor shortage,

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lack of skilled labor, increased turnover or labor inflation, caused by COVID-19 or as a result of general macroeconomic factors, could have a material adverse impact on our business, financial condition or operating results.

We may not be able to increase prices to fully offset inflationary pressures on costs, such as raw and packaging materials, labor and distribution costs, which may impact our financial condition or results of operations.

As a manufacturer and distributor of flavor products, we rely on raw materials, packaging materials, plant labor, distribution resources, and transportation providers. In 2021 and the early part of 2022, the costs of raw materials, packaging materials, labor, energy, fuel, transportation and other inputs necessary for the production and distribution of our products have rapidly increased. In addition, many of these materials are subject to price fluctuations from a number of factors, including, but not limited to, market conditions, demand for raw materials, weather, growing and harvesting conditions, climate change,energy costs, currency fluctuations, supplier capacities, governmental actions, import and export requirements (including tariffs), and other factors beyond our control. Although we are unable to predict the impact on our ability to source materials in the future, we expect these supply pressures to continue into 2022. We also expect the pressures of input cost inflation to continue into 2022.

Our attempts to offset these cost pressures, such as through increases in the selling prices of some of our products, may not be successful. Higher product prices may result in reductions in sales volume. Consumers may be less willing to pay a price differential for our branded products and may increasingly purchase lower-priced offerings, or may forego some purchases altogether, during an economic downturn. To the extent that price increases or packaging size decreases are not sufficient to offset these increased costs adequately or in a timely manner, and/or if they result in significant decreases in sales volume, our business, financial condition or operating results may be adversely affected. Furthermore, we may not be able to offset any cost increases through productivity initiatives or through our commodity hedging activity.

Our profitability may suffer as a result of competition in our markets.

The food industry is intensely competitive. Competition in our product categories is based on price, product innovation, product quality, brand recognition and loyalty, effectiveness of marketing and promotional activity, and the ability to identify and satisfy consumer preferences. From time to time, we may need to reduce the prices for some of our products to respond to competitive and customer pressures, which may adversely affect our profitability. Such pressures could reduce our ability to take appropriate remedial action to address commodity and other cost increases.

Our operations may be impaired as a result of disasters, business interruptions or similar events.

We could have an interruption in our business, loss of inventory or data, or be rendered unable to accept and fulfill customer orders as a result of a natural disaster, catastrophic event, epidemic or computer system failure. Natural disasters could include an earthquake, fire, flood, tornado or severe storm. A catastrophic event could include a terrorist attack. An epidemic or pandemic could affect our operations, major facilities or employees’ and consumers’ health. In addition, some of our inventory and production facilities are located in areas that are susceptible to harsh weather; a major storm, heavy snowfall or other similar event could prevent us from delivering products in a timely manner. Production of certain of our products is concentrated in a single manufacturing site.

We cannot provide assurance that our disaster recovery plan will address all of the issues we may encounter in the event of a disaster or other unanticipated issue, and our business interruption insurance may not adequately compensate us for losses that may occur from any of the foregoing. In the event that a natural disaster, terrorist attack or other catastrophic event were to destroy any part of our facilities or interrupt our operations for any extended period of time, or if harsh weather or health conditions prevent us from delivering products in a timely manner, our business, financial condition or operating results could be adversely affected.

We may not be able to successfully consummate and manage ongoing acquisition, joint venture and divestiture activities which could have an impact on our results.

From time to time, we may acquire other businesses and, based on an evaluation of our business portfolio, divest existing businesses. These acquisitions, joint ventures and divestitures may present financial, managerial and operational challenges, including diversion of management attention from existing businesses, difficulty with integrating or separating personnel and financial and other systems, increased expenses and raw material costs, assumption of unknown liabilities and indemnities, and potential disputes with the buyers or sellers. In addition, we

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may be required to incur asset impairment charges (including charges related to goodwill and other intangible assets) in connection with acquired businesses, which may reduce our profitability. If we are unable to consummate such transactions, or successfully integrate and grow acquisitions and achieve contemplated revenue synergies and cost savings, our financial results could be adversely affected. Additionally, joint ventures inherently involve a lesser degree of control over business operations, thereby potentially increasing the financial, legal, operational, and/or compliance risks.

An impairment of the carrying value of goodwill or other indefinite-lived intangible assets could adversely affect our results.

As of November 30, 2021, we had approximately $5.3 billion of goodwill and approximately $3.5 billion of other indefinite-lived intangible assets. Goodwill and indefinite-lived intangible assets are initially recorded at fair value and not amortized but are tested for impairment at least annually or more frequently if impairment indicators arise. We test goodwill at the reporting unit level by comparing the carrying value of the net assets of the reporting unit, including goodwill, to the unit's fair value. Similarly, we test indefinite-lived intangible assets by comparing the fair value of those assets to their carrying values. If the carrying values of the reporting unit or indefinite-lived intangible assets exceed their fair value, the goodwill or indefinite-lived intangible assets are considered impaired and reduced to their implied fair value or fair value, respectively. Factors that could result in an impairment include a change in revenue growth rates, operating margins, weighted average cost of capital, future economic and market conditions, higher income tax rates, or assumed royalty rates. The impairment of our goodwill or indefinite-lived intangible assets would have a negative impact on our consolidated results of operations.

Because indefinite-lived intangible assets are recorded at fair value at the date of acquisition of the related business, indefinite-lived intangible assets associated with recent business acquisitions, particularly those acquired in recent low interest rate environments, such as Cholula and FONA, are more susceptible to impairment in periods of rising interest rates than indefinite-lived intangible assets related to businesses acquired in periods of higher interest rates.

Streamlining actions to reduce fixed costs, simplify or improve processes, and improve our competitiveness may have a negative effect on employee relations.

We regularly evaluate whether to implement changes to our organization structure to reduce fixed costs, simplify or improve processes, and improve our competitiveness, and we expect to continue to evaluate such actions in the future. From time to time, those changes are of such significance that we may transfer production from one manufacturing facility to another; transfer certain selling and administrative functions from one location to another; eliminate certain manufacturing, selling and administrative positions; and exit certain businesses or lines of business. These actions may result in a deterioration of employee relations at the impacted locations or elsewhere in McCormick.

If we are unable to fully realize the benefits from our CCI program, our financial results could be negatively affected.

Our future success depends in part on our ability to be an efficient producer in a highly competitive industry. Any failure by us to achieve our planned cost savings and efficiencies under our CCI program, an ongoing initiative to improve productivity and reduce costs throughout the organization, or other similar programs, could have an adverse effect on our business, results of operations and financial position.

Fluctuations in foreign currency markets may negatively impact us.

We are exposed to fluctuations in foreign currency in the following main areas: cash flows related to raw material purchases; the translation of foreign currency earnings to U.S. dollars; the effects of foreign currency on loans between subsidiaries and unconsolidated affiliates and on cash flows related to repatriation of earnings of unconsolidated affiliates. Primary exposures include the U.S. dollar versus the Euro, British pound sterling, Chinese renminbi, Canadian dollar, Australian dollar, Polish zloty, and Mexican peso, as well as the Euro versus the British pound sterling and Australian dollar, and finally the Canadian dollar versus British pound sterling. We routinely enter into foreign currency exchange contracts to facilitate managing certain of these foreign currency risks. However, these contracts may not effectively limit or eliminate our exposure to a decline in operating results due to foreign currency exchange changes. Therefore, we cannot provide assurance that future exchange rate fluctuations will not have a negative impact on our business, financial position or operating results.

The on-going effects of the decision by British voters to exit the European Union may negatively impact our operations.

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On January 1, 2021, the EU-UK Trade and Cooperation Agreement (the EU-UK trade deal) took effect. The EU-UK trade deal was formally approved by the European Union legislature on April 28, 2021. While the EU-UK trade deal has removed uncertainty and a significant amount of financial risk associated with the U.K.’s exit from the European Union, we are still assessing its details and related impact on our U.K business and other operations. We believe that the new trading relationship between the U.K and the European Union will result in increased costs of goods imported into the U.K. from the European Union and exported from the U.K. into the European Union. The movement of goods between the U.K. and the European Union will continue to be subject to additional inspections and documentation checks, leading to possible delays at ports of entry and departure. Also, there will be additional costs related to goods that are deemed to originate outside of the U.K. or European Union, and for which the originating country has no trade agreement with the U.K. Our ability to increase pricing of our products in light of increased costs is uncertain and, to the extent we are unable to fully do so, our profitability will decline.

We face risks associated with certain pension assets and obligations.

We hold investments in equity and debt securities in our qualified defined benefit pension plans and in a rabbi trust for our U.S. non-qualified pension plan. Deterioration in the value of plan assets resulting from a general financial downturn or otherwise, or an increase in the actuarial valuation of the plans' liability due to a low interest rate environment, could cause (or increase) an underfunded status of our defined benefit pension plans, thereby increasing our obligation to make contributions to the plans. An obligation to make contributions to pension plans could reduce the cash available for working capital and other corporate uses, and may have an adverse impact on our operations, financial condition and liquidity.

Climate change may negatively affect our business, financial condition and results of operations.

Unseasonable or unusual weather or long-term climate changes may negatively impact the price or availability of spices, herbs and other raw materials. Scientific consensus shows that greenhouse gases in the atmosphere have an adverse impact on global temperatures, weather patterns and the frequency and severity of extreme weather and natural disasters. In the event that such climate change has a negative effect on agricultural productivity or practices, we may be subject to decreased availability or less favorable pricing for certain commodities that are necessary for our products. As a result of climate change, we may also be subjected to decreased availability of water, deteriorated quality of water or less favorable pricing for water, which could adversely impact our manufacturing and distribution operations. In addition, such climate change may result in modifications to the eating preferences of the ultimate consumers of certain of our products, which may also unfavorably impact our sales and profitability.

ESG issues, including those related to climate change and sustainability, may have an adverse effect on our business, financial condition and results of operations and damage our reputation.

Companies across all industries are facing increasing scrutiny relating to their ESG policies. If we are unable to meet our ESG goals or evolving investor, industry or stakeholder expectations and standards, or if we are perceived to have not responded appropriately to the growing concern for ESG issues, customers and consumers may choose to stop purchasing our products or purchase products from another company or a competitor, and our reputation, business or financial condition may be adversely affected. Increased focus and activism on ESG topics may hinder our access to capital, as investors may reconsider their capital investment as a result of their assessment of our ESG practices. In particular, these constituencies are increasingly focusing on environmental issues, including climate change, water use, deforestation, plastic waste, and other sustainability concerns. Changing consumer preferences may result in increased demands regarding plastics and packaging materials, including single-use and non-recyclable plastic packaging, and other components of our products and their environmental impact on sustainability; a growing demand for natural or organic products and ingredients; or increased consumer concerns or perceptions (whether accurate or inaccurate) regarding the effects of ingredients or substances present in certain consumer products. These demands could cause us to incur additional costs or to make changes to our operations to comply with such demands.

In addition to environmental issues these constituencies are also focused on social and other governance issues, including matters such as, but not limited to, human capital and social issues. We also have established diversity, equity and inclusion goals as part of our ESG initiative. Our initiatives also extend from individuals to entire communities, including those we serve and, just as importantly, those from which we source.

Concern over climate change, including plastics and packaging materials, in particular, may result in new or increased legal and regulatory requirements. Increased regulatory requirements related to environmental causes, and related ESG disclosure rules, may result in increased compliance costs or increased costs of energy, raw materials or compliance with emissions standards, which may cause disruptions in the manufacture of our products

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or an increase in operating costs. Any failure to achieve our ESG goals or a perception (whether or not valid) of our failure to act responsibly with respect to the environmental, human capital, or social issues, or to effectively respond to new, or changes in, legal or regulatory requirements concerning environmental or other ESG matters, or increased operating or manufacturing costs due to increased regulation or environmental causes could adversely affect our business and reputation and increase risk of litigation.

Risks Relating to Credit and Capital Markets, Our Credit Rating, Borrowings and Dividends

Increases in interest rates or changes in our credit ratings may negatively impact us.

On November 30, 2021, we had total outstanding variable rate debt of approximately $613 million, including $539 million of short-term borrowings, at a weighted-average interest rate of approximately 0.2%. The interest rates under our revolving credit facility can vary based on our credit ratings. Our policy is to manage our interest rate risk by entering into both fixed and variable rate debt arrangements. We also use interest rate swaps to minimize worldwide financing cost and to achieve a desired mix of fixed and variable rate debt. We utilize derivative financial instruments to enhance our ability to manage risk, including interest rate exposures that exist as part of our ongoing business operations. We do not enter into contracts for trading purposes, nor are we a party to any leveraged derivative instruments. Our use of derivative financial instruments is monitored through regular communication with senior management and the utilization of written guidelines. However, our use of these instruments may not effectively limit or eliminate our exposure to changes in interest rates. Therefore, we cannot provide assurance that future credit rating or interest rate changes will not have a material negative impact on our business, financial position or operating results.

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

Consolidations in some of the industries in which our customers operate have created larger customers, some of which are highly leveraged. In addition, competition has increased with the growth in alternative channels through our customer base. These factors have caused some customers to be less profitable and increased our exposure to credit risk. Current credit markets are volatile, and some of our customers and counterparties are highly leveraged. A significant adverse change in the financial and/or credit position of a customer or counterparty could require us to assume greater credit risk relating to that customer or counterparty and could limit our ability to collect receivables. This could have an adverse impact on our financial condition and liquidity.

Our credit ratings impact the cost and availability of future borrowings and, accordingly, our cost of capital.

Our credit ratings reflect each rating organization's opinion of our financial strength, operating performance and ability to meet our debt obligations. Our credit ratings were downgraded following our financing of the acquisition of RB Foods in August 2017 and any reduction in our credit ratings may limit our ability to borrow at interest rates consistent with the interest rates that were available to us prior to that acquisition and the related financing transactions. If our credit ratings are downgraded or put on watch for a potential downgrade, we may not be able to sell additional debt securities or borrow money in the amounts, at the times or interest rates, or upon the more favorable terms and conditions that might be available if our current credit ratings were maintained.

We may incur additional indebtedness to finance our acquisitions that may limit our ability to, among other matters, issue additional indebtedness, meet our debt service requirements, react to rising interest rates, comply with certain covenants and compete with less highly leveraged competitors.

We have a significant amount of indebtedness outstanding. As of November 30, 2021, the indebtedness of McCormick and its subsidiaries is approximately $5.3 billion. This substantial level of indebtedness could have important consequences to our business, including, but not limited to:

•increasing our debt service obligations, making it more difficult for us to satisfy our obligations;

•limiting our ability to borrow additional funds;

•increasing our exposure to negative fluctuations in interest rates;

•subjecting us to financial and other restrictive covenants, the non-compliance with which could result in an event of default;

•increasing our vulnerability to, and reducing our flexibility to respond to, general adverse economic and industry conditions;

•limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and

•placing us at a competitive disadvantage as compared to our competitors, to the extent that they are not as highly leveraged.

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The deterioration of credit and capital markets may adversely affect our access to sources of funding.

We rely on our revolving credit facility, or borrowings backed by this facility, to fund a portion of our seasonal working capital needs and other general corporate purposes, including funding of acquisitions. If any of the banks in the syndicates backing these facilities were unable to perform on its commitments, our liquidity could be impacted, which could adversely affect funding of seasonal working capital requirements. We engage in regular communication with all of the banks participating in our revolving credit facility. During these communications, none of the banks have indicated that they may be unable to perform on their commitments. In addition, we periodically review our banking and financing relationships, considering the stability of the institutions, pricing we receive on services and other aspects of the relationships. Based on these communications and our monitoring activities, we believe the likelihood of one of our banks not performing on its commitment is remote.

In addition, global capital markets have experienced volatility in the past that has tightened access to capital markets and other sources of funding, and such volatility and tightened access could reoccur in the future. In the event that we need to access the capital markets or other sources of financing, there can be no assurance that we will be able to obtain financing on acceptable terms or within an acceptable time period. Our inability to obtain financing on acceptable terms or within an acceptable time period could have an adverse impact on our operations, financial condition and liquidity.

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

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.

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

The declaration, payment and amount of any dividends is made pursuant to our dividend policy and is subject to final determination each quarter by our board of directors in its discretion based on a number of factors that it deems relevant, including our financial position, results of operations, available cash resources, cash requirements and alternative uses of cash that our board of directors may conclude would be in the best interest of the company and our shareholders. Our dividend payments are subject to solvency conditions established by the Maryland General Corporation Law. Accordingly, there can be no assurance that any future dividends will be equal or similar in amount to any dividends previously paid or that our board of directors will not decide to reduce, suspend or discontinue the payment of dividends at any time in the future.

Risks Related to Intellectual Property, Information Technology, and Cyber-Security

Our intellectual property rights, and those of our customers, could be infringed, challenged or impaired, and reduce the value of our products and brands or our business with customers.

We possess intellectual property rights that are important to our business, and we are provided access by certain customers to particular intellectual property rights belonging to such customers.These intellectual property rights include ingredient formulas, trademarks, copyrights, patents, business processes and other trade secrets which are important to our business and relate to some of our products, our packaging, the processes for their production, and

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the design and operation of equipment used in our businesses. We protect our intellectual property rights, and those of certain customers, globally through a variety of means, including trademarks, copyrights, patents and trade secrets, third-party assignments and nondisclosure agreements, and monitoring of third-party misuses of intellectual property. If we fail to obtain or adequately protect our intellectual property (and the intellectual property of customers to which we have been given access), the value of our products and brands could be reduced and there could be an adverse impact on our business, financial condition and results of operations.

Our operations and reputation may be impaired if our information technology systems fail to perform adequately or if we are the subject of a data breach or cyber-attack.

Our information technology systems are critically important to operating our business. We rely on our information technology systems, some of which are or may be managed or hosted by or out-sourced to third party service providers, to manage our business data, communications, supply chain, order entry and fulfillment, and other business processes. If we do not allocate and effectively manage the resources necessary to build, sustain, and protect appropriate information technology systems and infrastructure, or we do not effectively implement system upgrades or oversee third party service providers, our business or financial results could be negatively impacted. The failure of our information technology systems to perform as we anticipate could disrupt our business and could result in transaction or reporting errors, processing inefficiencies and the loss of sales and customers, causing our business and results of operations to suffer.

Furthermore, our information technology systems, and the systems of our customers, vendors, suppliers, and other third-party service providers, are subject to cyber-attacks or other security incidents including computer viruses or other malicious codes, phishing attacks, ransomware, or other service disruptions, or other system or process failures.Such incidents could result in unauthorized access to information including customer, consumer or other company confidential data as well as disruptions to operations.We, and the third-parties we do business with, have experienced in the past, and expect to continue to experience, cybersecurity threats and attacks, although to date none has been material.To address the risks to our information technology systems and data, we maintain an information security program that includes updating technology, developing security policies and procedures, implementing and assessing the effectiveness of controls, monitoring and routine testing of our information systems, conducting risk assessments of third party service providers and designing business processes to mitigate the risk of such breaches.We believe that these preventative actions provide adequate measures of protection against security breaches and generally reduce our cybersecurity risks. However, cyber-threats are constantly evolving, are becoming more sophisticated and are being made by groups of individuals with a wide range of expertise and motives, which increases the difficulty of detecting and successfully defending against them.There can be no assurance that these measures will prevent or limit the impact of a future incident.Moreover, the development and maintenance of these measures requires continuous monitoring as technologies change and efforts to overcome security measures evolve.Additionally, we rely on services provided by third-party vendors for certain information technology processes and functions, which makes our operations vulnerable to a failure by any one of these vendors to perform adequately or maintain effective internal controls.If we are unable to prevent or adequately respond to and resolve an incident, it may have a material, negative impact on our operations or business reputation, and we may experience other adverse consequences such as loss of assets, remediation costs, litigation, regulatory investigations, and the failure by us to retain or attract customers following such an event.

If we are not able to successfully implement our business transformation initiative or utilize information technology systems and networks effectively, our ability to conduct our business may be negatively impacted.

We continue to implement our multi-year business transformation initiative to execute significant change to our global processes, capabilities and operating model, including in our Global Enablement (GE) organization, in order to provide a scalable platform for future growth, while reducing costs. As technology provides the backbone for greater process alignment, information sharing and scalability, we are also making investments in our information systems, including the multi-year program to replace our enterprise resource planning (ERP) system currently underway, which includes the transformation of our financial processing systems to enterprise-wide systems solutions. These systems implementations are part of our ongoing business transformation initiative, and we plan to implement these systems throughout all parts of our businesses. If we do not allocate and effectively manage the resources necessary to build and sustain the proper information technology infrastructure, or if we fail to achieve the expected benefits from this initiative, it may impact our ability to process transactions accurately and efficiently and remain in step with the changing needs of our business, which could result in the loss of customers and revenue. In

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addition, failure to either deliver the applications on time (due to operational limitations caused by COVID-19 or otherwise), or anticipate the necessary readiness and training needs, could lead to business disruption and loss of customers and revenue. In connection with these implementations and resulting business process changes, we continue to enhance the design and documentation of business processes and controls, including our internal control over financial reporting processes, to maintain effective controls over our financial reporting.

We utilize cloud-based services and systems and networks managed by third-party vendors to process, transmit and store information and to conduct certain of our business activities and transactions with employees, customers, vendors and other third parties. Our utilization of these cloud-based services and systems will increase as we implement our business transformation initiatives. If any of these third-party service providers or vendors do not perform effectively, or if we fail to adequately monitor their performance (including compliance with service-level agreements or regulatory or legal requirements), we may not be able to achieve expected cost savings, we may have to incur additional costs to correct errors made by such service providers, our reputation could be harmed or we could be subject to litigation, claims, legal or regulatory proceedings, inquiries or investigations. Depending on the function involved, such errors may also lead to business disruption, processing inefficiencies, the loss of or damage to intellectual property or sensitive data through security breaches or otherwise, incorrect or adverse effects on financial reporting, litigation or remediation costs, or damage to our reputation, which could have a negative impact on employee morale. In addition, the management of multiple third-party service providers increases operational complexity and decreases our control.

Risks Related to Our Global Business, Litigation, Laws and Regulations

Laws and regulations could adversely affect our business.

Food products are extensively regulated in most of the countries in which we sell our products. We are subject to numerous laws and regulations relating to the growing, sourcing, manufacturing, storage, labeling, marketing, advertising and distribution of food products, as well as laws and regulations relating to financial reporting requirements, the environment, consumer protection, competition, anti-corruption, privacy, relations with distributors and retailers, foreign supplier verification, customs and trade laws, including the import and export of products and product ingredients, employment, and health and safety. Enforcement of existing laws and regulations, changes in legal requirements, and/or evolving interpretations of existing regulatory requirements may result in increased compliance costs and create other obligations, financial or otherwise, that could adversely affect our business, financial condition or operating results.Increased regulatory scrutiny of, and increased litigation involving, product claims and concerns regarding the attributes of food products and ingredients may increase compliance costs and create other obligations that could adversely affect our business, financial condition or operating results. Governments may also impose requirements and restrictions that impact our business, such as labeling disclosures pertaining to ingredients. For example, "Proposition 65, the Safe Drinking Water and Toxic Enforcement Act of 1986," in California exposes all food companies to the possibility of having to provide warnings on their products in that state. If we were required to add warning labels to any of our products or place warnings in locations where our products are sold in order to comply with Proposition 65, the sales of those products and other products of our company could suffer, not only in those locations but elsewhere.

In addition, there are various compliance obligations for companies that process personal data of certain individuals, including such obligations required by the European Union’s General Data Protection Regulation (GDPR), which came into effect in May 2018, and the California Consumer Privacy Act (CCPA), which came into effect in January 2020. These types of data privacy laws create a range of compliance obligations for companies that process personal data of certain individuals and increases financial penalties for non-compliance. For example, the CCPA imposes requirements on companies that do business in California and collect personal information from customers, including notice, consent and service provider requirements. The CCPA also provides for civil penalties for companies that fail to comply with these requirements, as well as a private right of action for data breaches. Further, in November 2020, the California Privacy Rights Act (“CPRA”) was passed into law and goes into full effect on January 1, 2023 (with a ‘look-back’ to January 1, 2022). The CPRA builds on the CCPA and among other things, requires the establishment of a dedicated agency to regulate privacy issues. In 2021, Virginia and Colorado adopted laws which will take effect on January 1, 2023, and July 1, 2023, respectively, introducing new privacy obligations, which may require us to develop additional compliance mechanisms and processes. As a company that is subject to data privacy laws, we bear the costs of compliance with them, including the GDPR and U.S. state laws, and are subject to the potential for fines and penalties in the event of a breach of these laws, which continue to evolve. These factors and others could have an adverse impact on our business, financial condition or results of operations.

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Litigation, legal or administrative proceedings could have an adverse impact on our business and financial condition or damage our reputation.

We are party to a variety of legal claims and proceedings in the ordinary course of business. Since litigation is inherently uncertain, there is no guarantee that we will be successful in defending ourselves against such claims or proceedings, or that management’s assessment of the materiality or immateriality of these matters, including any reserves taken in connection with such matters, will be consistent with the ultimate outcome of such claims or proceedings. In the event that management’s assessment of the materiality or immateriality of current claims and proceedings proves inaccurate, or litigation that is material arises in the future, there may be a material adverse effect on our financial condition. Any adverse publicity resulting from allegations made in litigation claims or legal or administrative proceedings (even if untrue) may also adversely affect our reputation. These factors and others could have an adverse impact on our business and financial condition or damage our reputation.

Our international and cross-border operations are subject to additional risks.

We operate our business and market our products internationally. In fiscal year 2021, approximately 40% of our sales were generated in countries other than the U.S. Our international operations are subject to additional risks, including fluctuations in currency values, foreign currency exchange controls, discriminatory fiscal policies, compliance with U.S. and foreign laws, enforcement of remedies in foreign jurisdictions and other economic or political uncertainties. Several countries within the European Union continue to experience sovereign debt and credit issues, which causes more volatility in the economic environment throughout the European Union and the U.K. Additionally, sales in countries other than the U.S., together with finished goods and raw materials imported into the U.S., are subject to risks related to fundamental changes to tax laws as well as the imposition of tariffs, quotas, trade barriers and other similar restrictions. All of these risks could result in increased costs or decreased revenues, which could adversely affect our profitability.

The global nature of our business, changes in tax legislation and the resolution of tax uncertainties create volatility in our effective tax rate.

As a global business, our tax rate from period to period can be affected by many factors, including changes in tax

legislation, our global mix of earnings, the tax characteristics of our income, the timing and recognition of goodwill

impairments, acquisitions and dispositions, adjustments to our reserves related to uncertain tax positions, changes in valuation allowances and the portion of the income of international subsidiaries that we expect to remit to the U.S. and that will be taxable.

In addition, significant judgment is required in determining our effective tax rate and in evaluating our tax positions. We establish accruals for certain tax contingencies when, despite the belief that our tax return positions are appropriately supported, the positions are uncertain. The tax contingency accruals are adjusted in light of changing facts and circumstances, such as the progress of tax audits, case law and emerging legislation. Our effective tax rate includes the impact of tax contingency accruals and changes to those accruals, including related interest and penalties, as considered appropriate by management. When particular matters arise, a number of years may elapse before such matters are audited and finally resolved. Favorable resolution of such matters could be recognized as a reduction to our effective tax rate in the year of resolution. Unfavorable resolution of any particular issue could increase the effective tax rate and may require the use of cash in the year of resolution.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our principal executive offices and primary research facilities are leased and owned, respectively, and are located in suburban Baltimore, Maryland.

The following is a list of our principal manufacturing properties, all of which are owned except for the facilities in Commerce, California; Lakewood, New Jersey; Melbourne, Australia; Florence, Italy; and a portion of the facility in Littleborough, England, which are leased. The manufacturing facilities that we own in Guangzhou, Shanghai and Wuhan, China are each located on land subject to long-term leases:

United States:

Hunt Valley, Maryland–consumer and flavor solutions

(3 principal plants)

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Gretna, Louisiana–consumer and flavor solutions

South Bend, Indiana–consumer and flavor solutions

Atlanta, Georgia–flavor solutions

Commerce, California–consumer

Irving, Texas–flavor solutions

Lakewood, New Jersey–flavor solutions

Springfield, Missouri–consumer and flavor solutions

Canada:

London, Ontario–consumer and flavor solutions

Mexico:

Cuautitlan de Romero Rubio–flavor solutions

United Kingdom:

Haddenham, England–consumer and flavor solutions

Littleborough, England–flavor solutions

Peterborough, England–flavor solutions

France:

Carpentras–consumer and flavor solutions

Monteux–consumer and flavor solutions

Poland:

Stefanowo–consumer

Italy:

Florence–consumer and flavor solutions (2 principal plants)

China:

Guangzhou–consumer and flavor solutions

Shanghai–consumer and flavor solutions

Wuhan–consumer

Australia:

Melbourne–consumer and flavor solutions

Palmwoods–consumer

Thailand:

Chonburi–consumer and flavor solutions

In addition to distribution facilities and warehouse space available at our manufacturing facilities, we lease regional distribution facilities as follows (i) in the U.S.: Belcamp and Aberdeen, Maryland; Salinas, California; Byhalia, Mississippi; Irving, Texas; and Springfield, Missouri; (ii) in Canada: Mississauga and London, Ontario; (iii) in Heywood, U.K. and (iv) in Compans, France. We also own distribution facilities in Belcamp, Maryland and Monteux, France. In addition, we own, lease or contract other properties used for manufacturing consumer and flavor solutions products and for sales, warehousing, distribution and administrative functions.

We believe our plants are well maintained and suitable for their intended use. We further believe that these plants generally have adequate capacity or the ability to expand, and can accommodate seasonal demands, changing product mixes and additional growth.

ITEM 3. LEGAL PROCEEDINGS

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

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

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PART II.

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our Common Stock and Common Stock Non-Voting are listed and traded on the New York Stock Exchange (NYSE). Our Common Stock and Common Stock Non-Voting trade under the ticker symbols MKC.V and MKC, respectively. We have disclosed in note 17 of the accompanying financial statements the information relating to the dividends declared and paid on our classes of common stock. The market price of our common stock at the close of business on December 31, 2021 was $95.39 per share for the Common Stock and $96.61 per share for the Common Stock Non-Voting.

The approximate number of holders of our common stock based on record ownership as of December 31, 2021 was as follows:

Title of class Approximate number of record holders

Common Stock, par value $0.01 per share 2,100

Common Stock Non-Voting, par value $0.01 per share 9,400

The following table summarizes our purchases of Common Stock (CS) and Common Stock Non-Voting (CSNV) during the fourth quarter of 2021:

ISSUER PURCHASES OF EQUITY SECURITIES

(1)On September 1, 2021 and September 29, 2021, we purchased 15,870 shares and 17,321 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 September 1, 2021 and September 29, 2021, respectively.

(2)On November 23, 2021, we purchased 18,007 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 November 23, 2021.

As of November 30, 2021, approximately $576 million remained of a $600 million share repurchase authorization approved by the Board of Directors in November 2019. The timing and amount of any shares repurchased is determined by our management based on its evaluation of market conditions and other factors.

In certain circumstances, we issue shares of CS in exchange for shares of CSNV, or issue shares of CSNV in exchange for shares of CS, in either case pursuant to the exemption from registration provided by Section 3(a)(9) of the Securities Act of 1933, as amended. Typically, these exchanges are made in connection with the administration of our employee benefit plans, executive compensation programs and dividend reinvestment/direct purchase plans. The number of shares issued in an exchange is generally equal to the number of shares received in the exchange, although the number may differ slightly to the extent necessary to comply with the requirements of the Employee Retirement Income Security Act of 1974. During fiscal 2021, we issued 617,155 shares of CSNV in exchange for shares of CS and issued 14,262 shares of CS in exchange for shares of CSNV.

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ITEM 6. [RESERVED]

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the reader understand McCormick & Company, Incorporated, our operations and our present business environment from the perspective of management. MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and the accompanying notes thereto contained in Item 8 of this report. We use certain non-GAAP information — more fully described below under the caption Non-GAAP Financial Measures — that we believe is 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. The dollar and share information in the charts and tables in the 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.

McCormick is a global leader in flavor. We manufacture, market and distribute spices, seasoning mixes, condiments and other flavorful products to the entire food and beverage industry–retailers, food manufacturers and foodservice businesses. We manage our business in two operating segments, consumer and flavor solutions, as described in Item 1 of this report.

Our long-term annual growth objectives in constant currency are to increase sales 4% to 6%, increase adjusted operating income 7% to 9% and increase adjusted earnings per share 9% to 11%.

COVID-19 – As a result of the COVID-19 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 years ended November 30, 2021 and 2020 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. The impact of COVID-19 on our consumer segment since the beginning of the pandemic has resulted in a significant increase in at-home consumption and related demand for our products. In 2021, our flavor solutions segment benefited from a recovery in away-from-home eating that more than offset the net sales declines experienced in 2020 as a result of restrictions imposed to reduce the spread of COVID-19. The COVID-19 mitigation measures in 2020 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. Although certain restrictive measures were reinstated during certain periods of 2021, the prevalence and scale of closures and operating limitations were less severe as compared to 2020. For comparative purposes, the following provides a summary of growth in net sales as reported and on a constant currency basis for the year ended 2021 as compared to 2019:

Net sales:

Flavor Solutions segment 14.6 % 0.8 % 13.8 %

The percentage change in reported net sales and the percentage change on a constant currency basis were

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favorably impacted by the acquisitions of Cholula and FONA, which, in aggregate, contributed 2.6%, 7.1% and 4.3% to the consumer segment, flavor solutions segment and total net sales growth rates, respectively, in the preceding table, on both a reported and constant currency basis.

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 adversely impact our business, financial condition, or results of operations. Further, if our customers’ businesses are similarly affected, they might delay or reduce purchases from us. The potential effects of COVID-19 also could impact us in a 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.

Inflationary Cost Environment and Supply Chain Disruption – During fiscal 2021, we experienced inflationary cost increases in our commodities, packaging materials and transportation costs. We expect that these inflationary cost increases will continue but we expect they will be partially mitigated by pricing actions 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. During fiscal 2021, we also 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 build capacity as well as increase our supply chain related resources. We expect these pressures to continue in 2022.

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

Base business – We expect to drive sales growth by optimizing our brand marketing investment through improved speed, quality and effectiveness. We measure the return on our brand marketing investment and have identified digital marketing as one of our highest return investments in brand marketing support. Through digital marketing, we are connecting with consumers in a personalized way to deliver recipes, provide cooking advice and help them discover new products.

New Products – For our consumer segment, we believe that scalable and differentiated innovation continues to be one of the best ways to distinguish our brands from our competition, including private label. We are introducing products for every type of cooking occasion, from gourmet, premium items to convenient and value-priced flavors.

For flavor solutions customers, we are developing seasonings for snacks and other food products, as well as flavors for new menu items. We have a solid pipeline of flavor solutions products aligned with our customers’ new product launch plans, many of which include clean-label, organic, natural, and “better-for-you” innovation. With over 20 product innovation centers around the world, we are supporting the growth of our brands and those of our flavor solutions customers with products that appeal to local consumers.

Acquisitions – Acquisitions are expected to approximate one-third of our sales growth over time. Since the beginning of 2017, we have completed four acquisitions, which are driving sales in both our consumer and flavor solutions segments. We focus on acquisition opportunities that meet the growing demand for flavor and health. Geographically, our focus is on acquisitions that build scale where we currently have presence in both developed and emerging markets. Information with respect to our three most recent acquisitions is provided below:

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•On December 30, 2020, we acquired FONA International, LLC and certain of its affiliates (FONA), a privately owned company, for approximately $708 million, net of cash acquired. We financed this fiscal 2021 acquisition with cash and short-term borrowings. FONA is a leading manufacturer of clean and natural flavors providing solutions for a diverse customer base across various applications 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. 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.

•On August 17, 2017, we acquired Reckitt Benckiser's Food Division (RB Foods) for approximately $4.2 billion. The acquired iconic brands of RB Foods included French’s®, Frank’s RedHot® and Cattlemen’s®, which are a natural strategic fit with our robust global branded flavor portfolio. We believe that these additions moved us to a leading position in the attractive U.S. condiments category and provide significant international growth opportunities for our consumer and flavor solutions segments.

The FONA and Cholula acquisitions contributed approximately one-third of our sales growth in 2021.

Cost savings and business transformation: We are fueling our investment in growth with cost savings from our CCI program, an ongoing initiative to improve productivity and reduce costs throughout the organization, that also includes savings from the organization and streamlining actions described in note 3 of notes to our consolidated financial statements. In addition to funding brand marketing support, product innovation and other growth initiatives, our CCI program helps offset higher costs and is contributing to higher operating income and earnings per share.

We are making investments to build the McCormick of the future, including in our Global Enablement (GE) organization to transform McCormick through globally aligned, innovative services to enable growth. As more fully described in note 3 of notes to our consolidated financial statements, we expect to incur special charges of approximately $60 million to $65 million associated with our GE initiative of which approximately $40.7 million have been recognized through November 30, 2021. As technology provides the backbone for this greater process alignment, information sharing and scalability, we are also making investments in our information systems.From late 2018 through early 2020, we progressed in implementing our global enterprise resource planning (ERP) replacement program which will enable us to accelerate the transformation of our ways of working and provide a scalable platform for growth. In the second quarter of fiscal 2020, we elected to pause activity related to our ERP for the balance of fiscal 2020 due, in part, to COVID-19 restrictions that restricted necessary travel by internal and external ERP team members and made it difficult for local McCormick personnel to actively participate in the ERP development, data cleansing, and testing prior to then scheduled pilots later in fiscal 2020. During fiscal 2021, we resumed activities related to our ERP replacement program.

We expect that, in total over the course of the ERP replacement program from late 2018 through 2025, we will invest approximately $400 million, including expenses related to the go-live activities in our operations, to enable the anticipated completion of the global roll out of our new information technology platform in 2024. Of that projected $400 million, we expect capitalized software to account for approximately 50% and program expenses to account for approximately 50%. Of the approximately $200 million of operating expenses included in our projected total spending related to our ERP replacement program, approximately $85 million has been recognized through November 30, 2021. Of the approximately $200 million of capitalized software included in our projected total spending related to our ERP program, approximately $115 million has been recognized through November 30, 2021.

The GE initiative is expected to generate annual savings, ranging from approximately $45 million to $55 million, once all actions are implemented, including those that are dependent on the replacement of our global ERP platform.

Cash flow: We continue to generate strong cash flow. Net cash provided by operating activities was $828.3 million, $1,041.3 million and $946.8 million in 2021, 2020, and 2019, respectively. In 2021, we continued to have a balanced use of cash for debt repayment, capital expenditures and the return of cash to shareholders through dividends and share repurchases. We are using our cash to fund shareholder dividends, with annual increases in each of the past 36 years, and to fund capital expenditures and acquisitions. In 2021, the return of cash to our shareholders through dividends and share repurchases was $371.9 million.

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Operating Results: On a long-term basis, we expect a combination of acquisitions, share repurchases and debt repayments, and the resulting impact on interest expense, to add about 2% to earnings per share growth.

In 2021, we achieved further growth of our business with net sales rising 12.8% over the 2020 level due to the following factors:

•We grew volume and product mix, which added 5.5% of sales growth, exclusive of acquisitions. This growth was driven by increases in both our consumer and flavor solutions segments. Increased net sales within our consumer segment was driven by strong demand due to a sustained shift in consumer behavior toward at-home meal preparation, which was first seen in 2020 as a response to actions taken to mitigate the spread of COVID-19. Increased net sales within our flavor solutions segment was principally driven by sales of away-from-home products as compared to 2020, when actions taken to mitigate the spread of COVID-19 significantly impacted demand.

•Pricing actions contributed 0.8% of the increase in net sales.

•Acquisitions contributed 4.1% of the increase in net sales.

•Net sales growth was positively impacted by fluctuations in currency rates that increased sales growth by 2.4%. Excluding this impact, we grew sales by 10.4% over the prior year on a constant currency basis.

Operating income was $1,015.1 million in 2021 and $999.5 million in 2020. We recorded $51.1 million and $6.9 million of special charges in 2021 and 2020, respectively, related to organization and streamlining actions. Special charges in 2021 included $4.7 million in cost of goods sold related the exit of a low margin business. In 2021 and 2020, we also recorded $35.3 million and $12.4 million of transaction and integration expenses, respectively, related to our acquisitions of Cholula and FONA that reduced operating income. In 2021, compared to the year-ago period, the favorable impact of higher sales, $117.0 million of cost savings from our CCI program, including organization and streamlining actions, and lower incentive-based compensation more than offset the impact of increased commodity, packaging materials and transportation costs, higher conversion costs, which include costs associated with COVID-19, and increased brand marketing costs. Excluding special charges and transaction and integration expenses related to our acquisitions of Cholula and FONA, adjusted operating income was $1,101.5 million in 2021, an increase of 8.1%, compared to $1,018.8 million in the year-ago period. In constant currency, adjusted operating income rose 6.2%. For further details and a reconciliation of non-GAAP to reported amounts, see the subsequent discussion under the heading "Non-GAAP Financial Measures".

Diluted earnings per share was $2.80 in 2021 and $2.78 in 2020. The year-on-year increase in earnings per share was primarily driven by higher operating income. Special charges and transaction and integration expenses lowered earnings per share by $0.30 and $0.05 in 2021 and 2020, respectively. A gain on our sale of an unconsolidated operation increased earnings per share by $0.05 in 2021. Excluding the effects of special charges, transaction and integration expenses, and the gain realized from the sale of an unconsolidated operation, adjusted diluted earnings per share was $3.05 in 2021 and $2.83 in 2020, or an increase of 7.8%.

2022 Outlook

In 2022, we expect to grow net sales over the 2021 level by 3% to 5%, which includes an estimated 1% unfavorable impact from currency rates, or 4% to 6% on a constant currency basis. 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 product mix to be impacted by pricing elasticities, although at a lower level than we have experienced historically. We anticipate that our volume and product mix will also be 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-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 lack 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 favorably 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—2021 COMPARED TO 2020

Percent growth 12.8 % 4.7 %

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

Volume and product mix 5.5 % 3.7 %

Pricing actions 0.8 % 1.6 %

Acquisitions 4.1 % — %

Foreign exchange 2.4 % (0.6) %

Sales for 2021 increased by 12.8% from 2020 and by 10.4% on a constant currency basis. That 12.8% sales increase was driven by higher sales in both our consumer and flavor solutions segments. On a consolidated basis, higher volume and favorable product mix increased sales by 5.5% while pricing actions, which were primarily taken in the fourth quarter, added 0.8% to sales. That net volume increase and favorable mix was driven by continued levels of strong demand within our consumer segment, as the shift in consumer behavior toward at-home meal preparation, first seen in 2020 as a response to actions taken to mitigate the spread of COVID-19, has persisted. In addition, our flavor solutions segment volume increased principally due to a recovery in demand for away-from-home products, including higher sales to our branded food service customers, as compared to 2020. Sales were also impacted by favorable foreign currency rates that increased net sales 2.4% compared to 2020 and is excluded from our measure of sales growth of 10.4% on a constant currency basis.

Gross profit margin 39.5 % 41.1 %

In 2021, our gross profit margin decreased 160 basis points to 39.5% from 41.1% in 2020. The decline was driven by the impact of increased commodity, packaging materials and transportation costs, higher conversion costs, which includes costs associated with COVID-19, and a less favorable mix in sales between our consumer and flavor solutions segments as compared to 2020. These unfavorable impacts were partially offset by savings from our CCI program, pricing actions, improved product mix and the accretive impact of the Cholula and FONA acquisitions, each as compared to the prior year period. In addition, our 2021 gross profit margin was burdened by (i) $6.3 million of transaction expense, representing the amortization of the fair value adjustment to the acquired inventories of Cholula and FONA upon our sale of those acquired inventories, and (ii) a non-cash special charge of $4.7 million

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associated with the exit of a low margin business in our Asia/Pacific region. Excluding the transaction expense and special charges, adjusted gross profit margin decreased by 140 basis points from 41.1% in 2020 to 39.7% for the year ended November 30, 2021.

Selling, general & administrative expense $ 1,404.1 $ 1,281.6

Percent of net sales 22.3 % 22.9 %

Selling, general and administrative (SG&A) expense was $1,404.1 million in 2021 compared to $1,281.6 million in 2020, an increase of $122.5 million. That increase in SG&A expense was primarily a result of (i) SG&A associated with the Cholula and FONA acquisitions; (ii) greater selling and distribution expenses associated with the higher sales volume; and (iii) increased brand marketing costs, all as compared to the corresponding period in 2020. Those increases were partially offset by lower performance-based employee incentive expenses, as compared to the prior year period. SG&A as a percent of net sales for 2021 decreased by 60 basis points from the prior year level, driven by the impact of the leverage of fixed and semi-fixed expenses over a higher level of sales during the 2021 period.

Special charges included in cost of goods sold $ 4.7 $ —

Other special charges 46.4 6.9

Total special charges $ 51.1 $ 6.9

We regularly evaluate whether to implement changes to our organization structure to reduce fixed costs, simplify or improve processes, and improve our competitiveness, and we expect to continue to evaluate such actions in the future. From time to time, those changes are of such significance in terms of both up-front costs and organizational/ structural impact that we obtain advance approval from our Management Committee and classify expenses related to those changes as special charges in our financial statements.

During 2021, we recorded $51.1 million of special charges, consisting principally of (i) $19.5 million associated with our exit of our rice product line in India, as more fully described below, (ii) $6.2 million associated with the transition of a manufacturing facility in EMEA, (iii) streamlining actions of $10.3 million in the Americas region and $4.8 million in the EMEA region, and (iv) a non-cash asset impairment charge of $6.0 million associated with an administrative site that was sold in conjunction with our decision to employ a hybrid work environment.As more fully described in note 3 of our notes of consolidated financial statements, the $19.5 million special charge associated with the exit of our rice product line in India consisted of an $11.2 million non-cash impairment charge associated with the impairment of certain intangible assets, $3.6 million of employee severance and other related exit costs, and a $4.7 million charge in cost of goods sold which represents a provision for the excess of the carrying value of rice inventories over the estimated net realizable value and a contractual obligation associated with terminating a rice supply agreement.

During 2020, we recorded $6.9 million of special charges, consisting of $5.3 million related to streamlining actions in our EMEA region and $1.6 million related to our GE initiative.

Transaction expenses included in cost of goods sold $ 6.3 $ —

Other transaction and integration expenses 29.0 12.4

Total transaction and integration expenses $ 35.3 $ 12.4

During 2021, we recorded transaction and integration expenses of $35.3 million related to our acquisitions of Cholula and FONA. These costs consisted of (i) $6.3 million of amortization of the acquisition-date fair value adjustment of inventories that is included in Cost of goods sold, (ii) $13.8 million of other transaction expenses primarily related to outside advisory, service and consulting costs, and (iii) $15.2 million of integration expenses. Transaction and integration expenses related to our acquisitions of Cholula andFONA of $11.2 million and $1.2 million, respectively, were incurred late in fiscal 2020.

Percent of net sales 16.1 % 17.8 %

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Operating income increased by $15.6 million, or 1.6%, from $999.5 million in 2020 to $1,015.1 million in 2021. Special charges and transaction and integration expenses increased by $67.1 million in 2021, as compared to 2020, and negatively impacted operating income. Operating income as a percentage of net sales declined by 170 basis points in 2021, to 16.1% in 2021 from 17.8% in 2020 as a result of the factors previously described. Excluding the effect of special charges and transaction and integration expenses previously described, adjusted operating income was $1,101.5 million in 2021 as compared to $1,018.8 million in 2020, an increase of $82.7 million or 8.1% over the 2020 level. Adjusted operating income as a percentage of net sales declined by 80 basis points in 2021, to 17.4% in 2021 from 18.2% in 2020.

Interest expense was $1.0 million higher for 2021 as compared to the prior year as an increase in average total borrowings was largely offset by a decrease in interest rates. Other income, net for 2021 decreased by $0.3 million as lower non-service cost income associated with our pension and postretirement benefit plans was partially offset by higher interest income, as compared to 2020. The decrease was also impacted by non-operating foreign currency transaction gains in 2021, as compared to non-operating foreign currency transaction losses in the prior period.

Income from consolidated operations before income taxes $ 895.8 $ 881.5

Effective tax rate 21.5 % 19.8 %

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

The effective tax rate was 21.5% in 2021 as compared to 19.8% in 2020. The increase in our effective tax rate was principally attributable to the lower level of net discrete tax benefits in 2021 as compared to 2020. Net discrete tax benefits were $26.6 million in 2021, a decrease of $16.8 million from $43.4 million in 2020. Discrete tax benefits in both the 2021 and 2020 periods included excess tax benefits associated with share-based payments to employees ($4.3 million and $14.2 million in 2021 and 2020, respectively), the reversal of reserves for unrecognized tax benefits ($22.5 million and $4.9 million in 2021 and 2020, respectively) due to, in 2021, the partial release of certain reserves for an unrecognized tax benefit and related interest in a non-U.S. jurisdiction based on a change in our assessment of the technical merits of that position associated with the availability of new information, and in both years due to the expiration of the statues of limitations, the release of valuation allowances due to a change in judgment about realizability of deferred tax assets ($4.4 million and $11.9 million in 2021 and 2020, respectively) and other discrete items. In 2021, discrete tax items included $4.0 million of tax benefits related to the revaluation of deferred taxes resulting from enacted legislation and $10.4 million of deferred state tax expense directly related to our December 2020 acquisition of FONA. In 2020, discrete tax items included $9.9 million of tax benefits associated with intra-entity asset transfers that occurred. See note 13 of notes to our consolidated financial statements for a more detailed reconciliation of the U.S. federal tax rate with the effective tax rate.

Income from unconsolidated operations $ 52.2 $ 40.8

Income from unconsolidated operations, which is presented net of the elimination of earnings attributable to non-controlling interests, increased $11.4 million in 2021 from the prior year, driven by an after-tax gain of $13.4 million on the sale of our 26% interest in Eastern Condiments Private Ltd. (Eastern), an unconsolidated operation, during our second quarter of 2021, as more fully described in note 5 of the notes to the accompanying financial statements. We own 50% of most of our unconsolidated joint ventures, including our largest joint venture,

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McCormick de Mexico, that comprised 62% and 75% of the income of our unconsolidated operations in 2021 and 2020, respectively. The relative impact of McCormick de Mexico on income from unconsolidated operations in 2021 was impacted by the gain on our sale of an unconsolidated operation.

We reported diluted earnings per share of $2.80 in 2021, compared to $2.78 in 2020. The table below outlines the major components of the change in diluted earnings per share from 2020 to 2021. The increase in adjusted operating income in the table below includes the impact from favorable currency exchange rates in 2021.

2020 Earnings per share—diluted $ 2.78

Increase in operating income 0.25

Increase in special charges (0.15)

Impact of higher shares (0.01)

2021 Earnings per share—diluted $ 2.80

Results of Operations—Segments

We measure the performance of our business segments based on operating income, excluding special charges and transaction and integration expenses related to our acquisitions. See note 16 of notes to our consolidated financial statements for additional information on our segment measures as well as for a reconciliation by segment of operating income, excluding special charges and transaction and integration expenses related to our acquisitions. In the following discussion, we refer to our previously described measure of segment profit as "Segment operating income".

Consumer Segment

Percent growth 9.5 % 10.0 %

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

Volume and product mix 4.3 % 8.8 %

Pricing actions 0.6 % 1.5 %

Acquisitions 2.4 % — %

Foreign exchange 2.2 % (0.3) %

Segment operating income margin 20.4 % 21.7 %

Sales of our consumer segment in 2021 grew by 9.5% as compared to 2020 and grew by 7.3% on a constant currency basis. This increase included higher sales of our consumer business in each of our three regions. Higher volume and product mix increased sales 4.3% while pricing actions added 0.6% to sales, both as compared to the prior year period. The incremental impact of the Cholula acquisition added 2.4% to segment sales during 2021. The favorable impact of foreign currency exchange rates increased consumer segment sales by 2.2% compared to 2020 and is excluded from our measure of sales growth of 7.3% on a constant currency basis.

In the Americas region, consumer sales increased 7.3% in 2021 as compared to 2020, which experienced a 13.9% increase in sales from the 2019 level as a result of exceptionally strong demand for our products in the early stages of the COVID-19 pandemic, and increased by 6.7% on a constant currency basis. Favorable volume and product mix increased sales by 3.0% as compared to the corresponding period in 2020, as demand continues to be driven by consumers' sustained preference for eating more at home. In addition, pricing actions, taken in response to higher costs, increased sales by 0.4% as compared to the prior year period. The incremental impact of the Cholula acquisition added 3.3% to sales in 2021. The favorable impact of foreign currency exchange rates increased sales by 0.6% compared to 2020 and is excluded from our measure of sales growth of 6.7% on a constant currency basis.

In the EMEA region, consumer sales increased 5.8% in 2021 as compared to 2020, which experienced a 14.5% increase in sales from the 2019 level driven by the COVID-19 impact on greater consumer at-home meal

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preparation, and increased by 0.9% on a constant currency basis. Favorable volume and product mix increased sales by 0.3% as compared to the corresponding period of 2020. The impact of pricing actions increased sales by 0.6% as compared to the prior year period. The favorable impact of foreign currency exchange rates increased sales by 4.9% compared to 2020 and is excluded from our measure of sales growth of 0.9% on a constant currency basis.

In the Asia/Pacific region, consumer sales increased 31.6% in 2021 as compared to 2020, which reflected a 16.6% decrease in sales from the 2019 level due mainly to COVID-19 disruption on foodservice sales in China, and increased by 22.9% on a constant currency basis. Higher volume and favorable product mix increased sales by 21.5% as compared to the corresponding period in 2020. The increase was driven by sales related to the recovery of demand in away-from-home consumption in China. Pricing actions increased sales by 1.4% as compared to 2020. The favorable impact from foreign currency exchange rates increased sales by 8.7% compared to 2020 and is excluded from our measure of sales growth of 22.9% on a constant currency basis.

Segment operating income for our consumer segment increased by $24.0 million, or 3.1%, in 2021 as compared to 2020. The increase in segment operating income was driven by higher sales, including the impact of acquisitions, CCI-led cost savings and lower incentive-based compensation accruals which were partially offset by increased commodities, packaging materials and transportation costs, increased conversion costs, which include incremental expenses related to COVID-19, and higher brand marketing investment, all as compared to the prior year period. The impact of COVID-19 on segment operating income during 2021 reflected actions, including the incremental impact of temporary arrangements to utilize co-manufacturing, that increased our cost to produce certain products and measures to enable manufacturing and distribution staff to maintain social distancing and permit enhanced cleaning that reduced productivity. Segment operating margin for our consumer segment decreased by 130 basis points in 2021 to 20.4%, driven by a decrease in segment gross profit margin, including the impact of the inflationary cost environment, which was partially offset by the benefit from the leverage of fixed and semi-fixed expenses over a higher sales base as compared to the 2020 level. On a constant currency basis, segment operating income for our consumer segment increased by 1.3% in 2021, as compared to 2020.

Flavor Solutions Segment

Percent growth (decline) 18.7 % (3.5) %

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

Volume and product mix 7.2 % (4.2) %

Pricing actions 1.4 % 1.8 %

Acquisitions 7.3 % — %

Foreign exchange 2.8 % (1.1) %

Segment operating income margin 12.5 % 11.9 %

Sales of our flavor solutions segment increased 18.7% in 2021 as compared to 2020 and increased by 15.9% on a constant currency basis. Sales were favorably impacted by the recovery of demand as compared to the lower level of demand in 2020 due to the impact of the COVID-19 disruption on our quick service restaurant and branded food service customers, particularly in the Americas and EMEA regions. Favorable volume and product mix increased segment sales by 7.2% as compared to 2020, while pricing actions taken in response to increased costs during the period increased sales by 1.4%. The incremental impact of the Cholula and FONA acquisitions increased sales by 7.3% in 2021. The favorable impact of foreign currency rates increased flavor solutions segment sales by 2.8% as compared to 2020 and is excluded from our measure of sales growth of 15.9% on a constant currency basis.

In the Americas region, flavor solutions sales increased by 16.6% during 2021 as compared to 2020, which experienced a sales decline of 3.5% from the 2019 level driven by lower sales to quick service restaurant and branded food service customers as a result of COVID-19 restrictions imposed in the early stages of the pandemic, and increased by 15.4% on a constant currency basis. Favorable volume and improved product mix increased flavor solutions sales in the Americas by 3.2% during 2021, driven primarily by increased sales to branded foodservice and quick service restaurant customers. Pricing actions increased sales by 1.7% as compared to the prior year period. The incremental impact of the Cholula and FONA acquisitions increased sales by 10.5% in 2021. A favorable impact from foreign currency rates increased sales by 1.2% compared to 2020 and is excluded from our measure of sales growth of 15.4% on a constant currency basis.

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In the EMEA region, flavor solutions sales in 2021 increased by 27.3% as compared to 2020, which experienced a sales decline of 5.5% from the 2019 level primarily as a result of decreased sales to quick service restaurants and lower branded food service sales that were partially offset by higher demand from packaged food service companies in response to COVID-19 restrictions implemented in 2020, and increased by 21.5% on a constant currency basis. Favorable volume and product mix increased segment sales by 19.8% in 2021 as compared to 2020. The increase was primarily attributable to higher sales to branded foodservice, packaged food and quick service restaurant customers. Pricing actions increased sales by 1.7% in 2021 as compared the prior year level. A favorable impact from foreign currency rates increased sales by 5.8% compared to 2020 and is excluded from our measure of sales growth of 21.5% on a constant currency basis.

In the Asia/Pacific region, flavor solutions sales increased 16.9% in 2021 as compared to 2020, which experienced a sales increase of 0.4% from the 2019 level driven by higher sales to quick service restaurant customers, and increased by 9.4% on a constant currency basis. Favorable volume and product mix increased sales by 10.6%, driven by higher sales to quick service restaurant customers. Pricing actions decreased sales by 1.2% as compared to the prior year period. A favorable impact from foreign currency rates increased sales by 7.5% compared to 2020 and is excluded from our measure of sales growth of 9.4% on a constant currency basis.

Segment operating income for our flavor solutions segment increased by $58.7 million, or 24.7%, in 2021 as compared to 2020. The increase in segment operating income was driven by higher sales, including the impact of acquisitions, CCI-led cost savings, lower incentive-based compensation accruals and favorable product mix, which was partially offset by increased commodities, packaging materials and transportation costs. Segment operating margin for our flavor solutions segment increased by 60 basis points in 2021 to 12.5% as the benefits from the leverage of fixed and semi-fixed expenses over a higher sales base as compared to the 2020 level, together with the accretive impact of the Cholula and FONA acquisitions on gross margins, were partially offset by the impact of the inflationary cost environment as compared to 2020. On a constant currency basis, segment operating income for our flavor solutions segment increased by 22.5% in 2021, as compared to 2020.

RESULTS OF OPERATIONS—2020 COMPARED TO 2019

Percent growth 4.7 % 0.8 %

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

Volume and product mix 3.7 % 2.5 %

Pricing actions 1.6 % 0.2 %

Foreign exchange (0.6) % (1.9) %

Sales for 2020 increased by 4.7% from 2019 and by 5.3% on a constant currency basis. That 4.7% sales increase was driven by higher sales in our consumer segment, which increased by 10.0% over the 2019 level, partially offset by lower sales in our flavor solutions segment, which declined by 3.5% from the prior year level. On a consolidated basis, higher volume and favorable product mix increased sales by 3.7% while pricing actions added 1.6% to sales. That net volume increase and favorable mix was driven by higher demand within our consumer segment, as measures imposed to mitigate the spread of COVID-19 and the related change in consumer behavior, resulted in a shift in consumer behavior toward at-home meal preparation that more than offset lower demand within our flavor solutions segment principally associated with our restaurant and branded food service customers. Sales were also impacted by unfavorable foreign currency rates that decreased net sales 0.6% compared to 2019 and is excluded from our measure of sales growth of 5.3% on a constant currency basis.

Gross profit margin 41.1 % 40.1 %

In 2020, our gross profit margin increased 100 basis points to 41.1% from 40.1% in 2019. This improvement was driven by the favorable impact of CCI-led cost savings, favorable pricing actions and the mix of consumer and flavor solutions sales, partially offset by unfavorable conversion costs and increased material costs. Higher conversion costs during 2020 reflected certain matters associated with COVID-19, including the impact of temporary arrangements that increased salaries and benefits paid to our manufacturing employees, measures to enable manufacturing and distribution staff to maintain social distancing and permit enhanced cleaning between shifts that reduced productivity, and the impact of lower production volumes of flavor solutions inventories.

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Selling, general & administrative expense $ 1,281.6 $ 1,166.8

Percent of net sales 22.9 % 21.8 %

SG&A expense was $1,281.6 million in 2020 compared to $1,166.8 million in 2019, an increase of $114.8 million. That increase in SG&A expense was primarily a result of (i) higher performance-based employee incentive expense accruals, (ii) higher distribution expenses associated with the higher sales volume, (iii) increased brand marketing costs and (iv) a one-time fiscal 2019 expense reduction from the alignment of an employee benefit plan to our global standard that did not recur in 2020, all as compared to 2019. SG&A expense as a percent of net sales increased by 110 basis points from the prior year level, primarily as a result of the previously mentioned factors, partially offset by the impact of the leverage of fixed and semi-fixed expenses over a higher level of sales during the 2020 period.

Total special charges $ 6.9 $ 20.8

During 2020, we recorded $6.9 million of special charges, consisting of $5.3 million related to streamlining actions in our EMEA region and $1.6 million related to our GE initiative.

During 2019, we recorded $20.8 million of special charges, consisting primarily of (i) $14.1 million of costs related to our multi-year GE business transformation initiative, including $10.6 million of third-party expenses, $2.1 million related to severance and related benefits, and $1.4 million related to other costs; (ii) $2.3 million of severance and related benefits associated with streamlining actions in the Americas; and (iii) $3.9 million related to streamlining actions in our EMEA region.

Transaction and integration expenses $ 12.4 $ —

Transaction and integration expenses related to our acquisitions of Cholula andFONA of $11.2 million and $1.2 million, respectively, were incurred late in fiscal 2020.

Percent of net sales 17.8 % 17.9 %

Operating income increased by $41.8 million, or 4.4%, from $957.7 million in 2019 to $999.5 million in 2020. Operating income as a percent of net sales declined by 10 basis points in 2020, to 17.8% in 2020 from 17.9% in 2019 as a result of the factors previously described. Excluding the effect of special charges and transaction and integration expenses previously described, adjusted operating income was $1,018.8 million in 2020 as compared to $978.5 million in 2019, an increase of $40.3 million or 4.1% over the 2019 level. Adjusted operating income as a percent of net sales declined by 10 basis points in 2020, to 18.2% in 2020 from 18.3% in 2019.

Interest expense was $29.6 million lower for 2020 as compared to the prior year primarily due to a decline in average total borrowings and a lower interest rate environment. Other income, net for 2020 decreased by $9.1 million from the 2019 level due principally to lower non-service cost income associated with our pension and postretirement benefit plans that declined by $7.6 million in 2020 from the prior year level.

Income from consolidated operations before income taxes $ 881.5 $ 819.2

Effective tax rate 19.8 % 19.2 %

The effective tax rate was 19.8% in 2020 as compared to 19.2% in 2019. The effective tax rate of 19.2% in 2019 includes a non-recurring net tax benefit of $1.5 million associated with the U.S. Tax Act. Net discrete tax benefits were $43.4 million in 2020, which is a decrease of $0.3 million from $43.7 million in 2019, including the $1.5 million

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non-recurring benefit of the U.S. Tax Act in 2019. Discrete tax benefits in both the 2020 and 2019 periods include excess tax benefits associated with share-based payments to employees ($14.2 million and $22.4 million in 2020 and 2019, respectively), the tax benefits associated with intra-entity asset transfers that occurred ($9.9 million and $15.2 million in 2020 and 2019, respectively), the reversal of reserves for unrecognized tax benefits for the expiration of the statues of limitations and other discrete items. In 2020, discrete tax benefits included $11.9 million associated with the release of valuation allowances due to a change in judgment about realizability of deferred tax assets. See note 13 of notes to our consolidated financial statements for a more detailed reconciliation of the U.S. federal tax rate with the effective tax rate.

Income from unconsolidated operations $ 40.8 $ 40.9

Income from unconsolidated operations decreased $0.1 million in 2020 from the prior year. We own 50% of most of our unconsolidated joint ventures, including our largest joint venture, McCormick de Mexico, that comprised 75% and 72% of the income of our unconsolidated operations in 2020 and 2019, respectively.

We reported diluted earnings per share of $2.78 in 2020, compared to $2.62 in 2019. The table below outlines the major components of the change in diluted earnings per share from 2019 to 2020. The increase in adjusted operating income in the table below includes the impact from unfavorable currency exchange rates in 2020.

2019 Earnings per share—diluted $ 2.62

Increase in operating income 0.12

Decrease in special charges 0.05

Increase in transaction and integration expenses (0.04)

Decrease in interest expense 0.09

Decrease in other income (0.03)

Impact of income taxes (0.02)

Impact of higher shares outstanding (0.01)

2020 Earnings per share—diluted $ 2.78

Results of Operations—Segments

Consumer Segment

Percent growth 10.0 % 0.7 %

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

Volume and product mix 8.8 % 2.4 %

Pricing actions 1.5 % 0.1 %

Foreign exchange (0.3) % (1.8) %

Segment operating income margin 21.7 % 20.7 %

Sales of our consumer segment in 2020 grew by 10.0% as compared to 2019 and grew by 10.3% on a constant currency basis. This increase was driven by sharply higher sales of our consumer business in the Americas and in EMEA, with a partial offset from a sales decline in the Asia/Pacific region. Asia/Pacific region sales declines were driven by lower sales in China, which includes the impact of away-from-home products included in its consumer portfolio. Higher volume and product mix added 8.8% to sales as measures imposed to mitigate the spread of COVID-19 resulted in a shift in consumer behavior toward at-home meal preparation. Pricing actions added 1.5% to sales as compared to the prior year period. The unfavorable impact of foreign currency exchange rates decreased consumer segment sales by 0.3% compared to 2019 and is excluded from our measure of sales growth of 10.3% on a constant currency basis.

In the Americas, consumer sales rose 13.9% in 2020 as compared to 2019 and rose by 14.0% on a constant currency basis. Higher volume and product mix added 11.9% to sales driven by significant growth across the McCormick branded portfolio. In addition, pricing actions, taken in response to higher costs, increased sales by 2.1% as compared to the prior year period. The unfavorable impact of foreign currency exchange rates decreased

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sales by 0.1% compared to 2019 and is excluded from our measure of sales growth of 14.0% on a constant currency basis.

In the EMEA region, consumer sales increased 14.5% in 2020 as compared to 2019 and rose by 14.3% on a constant currency basis. Volume and product mix increased sales by 13.9%. The increase was broad based across the region with particular strength in branded spices and seasonings and homemade dessert products in France. The impact of pricing actions increased sales by 0.4%. The favorable impact of foreign currency exchange rates increased sales by 0.2% compared to 2019 and is excluded from our measure of sales growth of 14.3% on a constant currency basis.

In the Asia/Pacific region, consumer sales decreased 16.6% as compared to 2019 and decreased 15.1% on a constant currency basis. Lower volume and product mix reduced sales by 15.0%. The decrease was driven by products related to away-from-home consumption in China. Partially offsetting this decline was growth in cooking-at-home products, particularly in Australia. Pricing actions reduced sales by 0.1% as compared to 2019. The unfavorable impact from foreign currency exchange rates decreased sales by 1.5% compared to 2019 and is excluded from our measure of sales decline of 15.1% on a constant currency basis.

We grew segment operating income for our consumer segment by $104.6 million, or 15.5%, in 2020 as compared to 2019. The increase in segment operating income was driven by the impact of higher sales, as previously described, and CCI-led cost savings, partially offset by higher conversion costs, increased material costs, increased brand marketing costs and higher performance-based employee incentive expense accruals. Higher conversion costs during 2020 reflected certain matters associated with COVID-19, including the impact of temporary arrangements that increased salaries and benefits paid to our manufacturing employees as well as measures to enable manufacturing and distribution staff to maintain social distancing and permit enhanced cleaning between shifts that reduced productivity. Segment operating margin for our consumer segment rose by 100 basis points in 2020 to 21.7%, driven by an increase in consumer gross profit margin that was partially offset by an increase in SG&A expense as a percentage of net sales as compared to the 2019 period. Segment operating margin in 2020 benefited from the leverage of fixed and semi-fixed expenses over a higher sales base than compared to the 2019 level. On a constant currency basis, segment operating income for our consumer segment rose by 15.7% in 2020 in comparison to the same period in 2019.

Flavor Solutions Segment

Percent (decline) growth (3.5) % 1.1 %

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

Volume and product mix (4.2) % 2.9 %

Pricing actions 1.8 % 0.3 %

Foreign exchange (1.1) % (2.1) %

Segment operating income margin 11.9 % 14.5 %

Sales of our flavor solutions segment decreased 3.5% in 2020 as compared to 2019 and decreased by 2.4% on a constant currency basis. Driving that decrease in sales was lower demand due to the impact of the COVID-19 disruption on our restaurant and branded food service customers, particularly in the Americas and EMEA regions. Unfavorable volume and product mix decreased segment sales by 4.2% as compared to 2019, while pricing actions, taken in response to increased costs, during the period increased sales by 1.8%. The unfavorable impact of foreign currency rates decreased flavor solutions segment sales by 1.1% as compared to 2019 and is excluded from our measure of sales decline of 2.4% on a constant currency basis.

In the Americas, flavor solutions sales decreased by 3.5% in 2020 as compared to the prior year level and decreased by 2.5% on a constant currency basis. Unfavorable volume and product mix decreased flavor solutions sales in the Americas by 4.4% during 2020, driven by lower sales to branded foodservice and quick service restaurant customers, but was partially offset by higher sales to packaged food companies. Pricing actions increased sales by 1.9% as compared to the prior year period. An unfavorable impact from foreign currency rates decreased sales by 1.0% compared to 2019 and is excluded from our measure of sales decline of 2.5% on a constant currency basis.

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In the EMEA region, flavor solutions sales in 2020 decreased by 5.5% from the prior year level and decreased by 4.2% on a constant currency basis. Unfavorable volume and product mix decreased segment sales by 7.0% as compared to 2019. The decline was primarily attributable to lower sales to branded foodservice and quick service restaurant customers, partially offset by higher demand from packaged food companies. Pricing actions increased sales by 2.8% in 2020 as compared the prior year level. An unfavorable impact from foreign currency rates decreased sales by 1.3% compared to 2019 and is excluded from our measure of sales decline of 4.2% on a constant currency basis.

In the Asia/Pacific region, flavor solutions sales increased 0.4% in 2020 from the prior year level and increased by 1.6% on a constant currency basis. Favorable volume and product mix increased sales by 2.2%, driven by higher sales to quick service restaurant customers. Pricing actions decreased sales by 0.6% as compared to the prior year period. An unfavorable impact from foreign currency rates decreased sales by 1.2% compared to 2019 and is excluded from our measure of sales growth of 1.6% on a constant currency basis.

Segment operating income for our flavor solutions segment decreased by $64.3 million, or 21.3%, in 2020 as compared to 2019. The decrease in segment operating income was driven by lower sales, increased conversion costs, the impact of lower production volumes, increased material costs and higher performance-based employee incentive expense accruals that were partially offset by CCI-led cost savings. Higher conversion costs during 2020 reflected certain matters associated with COVID-19, including the impact of temporary arrangements that increased salaries and benefits paid to our manufacturing employees as well as measures to enable manufacturing and distribution staff to maintain social distancing and permit enhanced cleaning between shifts that reduced productivity, and the impact of lower production volumes of flavor solutions inventories. Segment operating margin for our flavor solutions segment decreased by 260 basis points from the prior year level to 11.9% in 2020, driven by lower flavor solutions segment gross profit margin and an increase in SG&A expense as a percent of net sales. Segment operating margin in 2020 also declined due to the deleveraging impact of fixed and semi-fixed expenses over a lower sales base as compared to the 2019 period. On a constant currency basis, segment operating income for our flavor solutions segment declined by 19.7% in 2020, as compared to the same period in 2019.

NON-GAAP FINANCIAL MEASURES

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

•Special charges – Special charges consist of expenses associated with certain actions undertaken by the Company to reduce fixed costs, simplify or improve processes, and improve our competitiveness and are of such significance in terms of both up-front costs and organizational/structural impact to require advance approval by our Management Committee. Upon presentation of any such proposed action (including details with respect to estimated costs, which generally consist principally of employee severance and related benefits, together with ancillary costs associated with the action that may include a non-cash component or a component which relates to inventory adjustments that are included in cost of goods sold; impacted employees or operations; expected timing; and expected savings) to the Management Committee and the Committee’s advance approval, expenses associated with the approved action are classified as special charges upon recognition and monitored on an ongoing 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”, 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 inventory, together with the impact of discrete tax items, if any, directly related to each acquisition.

•Income from sale of unconsolidated operations – We exclude the gain realized upon our sale of an unconsolidated operation in March 2021. As more fully described in note 5 of the notes to the accompanying financial statements, the sale of our 26% interest in Eastern resulted in a gain of $13.4

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million, net of tax of $5.7 million. The gain is included in Income from unconsolidated operations in our consolidated income statement.

•Income taxes associated with the U.S. Tax Act – We recorded a net income tax benefit of $1.5 million during the year ended November 30, 2019 associated with the U.S. Tax Act enacted in December 2017 related provision to return adjustment.

Details with respect to the composition of transaction and integration expenses, special charges and income from the sale of unconsolidated operations recorded for the years and in the amounts set forth below are included in notes 2, 3 and 5, respectively, of notes to our consolidated financial statements.

We believe that these non-GAAP financial measures are important. The exclusion of the items noted above provides additional information that enables enhanced comparisons to prior periods and, accordingly, facilitates the development of future projections and earnings growth prospects. This information is also used by management to measure the profitability of our ongoing operations and analyze our business performance and trends.

These non-GAAP financial measures may be considered in addition to results prepared in accordance with GAAP, but they should not be 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 GAAP financial results is provided below:

Impact of special charges included in cost of goods sold(2) 4.7 — —

Adjusted gross profit margin (3) 39.7 % 41.1 % 40.1 %

Impact of other transaction and integration expenses (1) 29.0 12.4 —

Impact of special charges included in cost of goods sold(2) 4.7 — —

Impact of other special charges(2) 46.4 6.9 20.8

% increase versus prior year 8.1 % 4.1 % 5.2 %

Adjusted operating income margin (3) 17.4 % 18.2 % 18.3 %

Non-recurring benefit, net, of the U.S. Tax Act — — 1.5

Impact of transaction and integration expenses(1) (2.7) 1.9 —

Impact of special charges(2) 7.1 2.1 4.7

Impact of transaction and integration expenses(1) 38.0 10.5 —

Impact of after-tax gain on sale of unconsolidated operations (13.4) — —

Non-recurring benefit, net, of the U.S. Tax Act — — (1.5)

% increase versus prior year 8.0 % 6.3 % 8.4 %

Earnings per share—diluted $ 2.80 $ 2.78 $ 2.62

Impact of transaction and integration expenses(1) 0.14 0.04 —

Impact of after-tax gain on sale of unconsolidated operations (0.05) — —

Adjusted earnings per share—diluted $ 3.05 $ 2.83 $ 2.68

Estimate for the year ending November 30, 2022

Earnings per share – diluted $3.07 to $3.12

Impact of integration expenses 0.01

Impact of special charges 0.09

Adjusted earnings per share – diluted $3.17 to $3.22

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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 year results for entities reporting in currencies other than the U.S. dollar are translated into U.S. dollars at the average exchange rates in effect during the prior fiscal year, rather than at the actual average exchange rates in effect during the current fiscal year. As a result, the foreign currency impact is equal to the current year results in local currencies multiplied by the change in the average foreign currency exchange rate between the current year and the prior fiscal year. The tables set forth below present our growth in net sales and adjusted operating income on a constant currency basis as follows: (1) to present our growth in net sales and adjusted operating income for 2021 on a constant currency basis, net sales and adjusted operating income for 2021 for entities reporting in currencies other than the U.S. dollar have been translated using the average foreign exchange rates in effect for 2020 and compared to the reported results for 2020; and (2) to present our growth in net sales and adjusted operating income for 2020 on a constant currency basis, net sales and operating income for 2020 for entities reporting in currencies other than the U.S. dollar have been translated using the average foreign exchange rates in effect for 2019 and compared to the reported results for 2019.

For the year ended November 30, 2021

Net sales:

Consumer segment:

Total Consumer 9.5 % 2.2 % 7.3 %

Flavor Solutions segment:

Total Flavor Solutions 18.7 % 2.8 % 15.9 %

Adjusted operating income:

Consumer segment 3.1 % 1.8 % 1.3 %

Flavor Solutions segment 24.7 % 2.2 % 22.5 %

Total adjusted operating income 8.1 % 1.9 % 6.2 %

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For the year ended November 30, 2020

Net sales:

Consumer segment:

Flavor Solutions segment:

Americas (3.5) % (1.0) % (2.5) %

Asia/Pacific 0.4 % (1.2) % 1.6 %

Total Flavor Solutions (3.5) % (1.1) % (2.4) %

Total net sales 4.7 % (0.6) % 5.3 %

Adjusted operating income:

Flavor Solutions segment (21.3) % (1.6) % (19.7) %

Total adjusted operating income 4.1 % (0.7) % 4.8 %

To present the percentage change in projected 2022 net sales, adjusted operating income and adjusted earnings per share — diluted on a constant currency basis, 2022 projected local currency net sales, adjusted operating income, and adjusted net income for entities reporting in currencies other than the U.S. dollar are translated into U.S. dollars at currently prevailing exchange rates and are compared to those 2022 local currency projected results, translated into U.S. dollars at the average actual exchange rates in effect during the corresponding months in fiscal year 2021 to determine what the 2022 consolidated U.S. dollar net sales, adjusted operating income and adjusted earnings per share — diluted would have been if the relevant currency exchange rates had not changed from those of the comparable 2021 periods.

Projections for the Year Ending November 30, 2022

Percentage change in net sales 3% to 5%

Impact of unfavorable foreign currency exchange 1 %

Percentage change in net sales 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 4% to 6%

Impact of unfavorable foreign currency exchange 1 %

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LIQUIDITY AND FINANCIAL CONDITION

Net cash provided by operating activities $ 828.3 $ 1,041.3 $ 946.8

Net cash provided by (used in) financing activities 22.0 220.9 (725.8)

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 cash flow statement, the changes in operating assets and liabilities are presented excluding the 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 flows associated with acquisition of businesses is presented as an investing activity. Accordingly, the amounts in the cash flow statement do not agree with changes in the operating assets and liabilities that are presented in the balance sheet.

The reported values of our assets and liabilities held in our non-U.S. subsidiaries and affiliates can be significantly affected by fluctuations in foreign exchange rates between periods. At November 30, 2021, the exchange rates for the Canadian dollar and Chinese renminbi were higher versus the U.S. dollar than at November 30, 2020. At November 30, 2021, the exchange rates for the Euro, British pound sterling, Australian dollar, and Polish zloty were lower versus the U.S. dollar than at November 30, 2020.

Operating Cash Flow – Operating cash flow was $828.3 million in 2021, $1,041.3 million in 2020, and $946.8 million in 2019. Net income as well as our working capital management, as more fully described below, impacted operating cash flow. In 2021, the reduction in operating cash flow was the result of increased inventory levels to protect against supply disruption, employee incentive payments, and the payment of transaction and integration costs related to our recent acquisitions. In 2020, the increases to operating cash flow were the result of a significantly lower use of cash associated with other assets and liabilities, including the timing of certain employee incentive and customer related payments, which was partially offset by the use of cash associated with working capital, driven by the increased level of inventory to meet demand. In 2019, our working capital management favorably impacted operating cash flow. In 2019, those increases were partially offset by a use of cash associated with other assets and liabilities, totaling $81.5 million.

Our working capital management – principally related to inventory, trade accounts receivable, and accounts payable – impacts our operating cash flow. The change in inventory had a significant impact on the variability in cash flow from operations. It was a significant use of cash in 2021 and 2020 and a moderate use of cash in 2019. The change in trade accounts receivable was a use of cash in 2021 but a source of cash in 2020 and 2019. The change in accounts payable was a significant source of cash in 2020 and 2019 and a more moderate source of cash in 2021.

In addition to operating cash flow, we also use cash conversion cycle (CCC) to measure our working capital management. This metric is different than operating cash flow in that it uses average balances instead of specific point in time measures. CCC is a calculation of the number of days, on average, that it takes us to convert a cash outlay for resources, such as raw materials, to a cash inflow from collection of accounts receivable. Our goal is to lower our CCC over time. We calculate CCC as follows:

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Days sales outstanding (average trade accounts receivable divided by average daily net sales) plus days in inventory (average inventory divided by average daily cost of goods sold) less days payable outstanding (average trade accounts payable divided by average daily cost of goods sold plus the average daily change in inventory).

The following table outlines our cash conversion cycle (in days) over the last three years:

The increase in CCC in 2021 from 2020 was due primarily to an increase in our days in inventory as a result of efforts to protect against supply chain disruption and to meet increased demand. This was partially offset by an increase in our days payable outstanding. The decrease in CCC in 2020 from 2019 was due to an increase in our days payable outstanding as a result of extending our payment terms to suppliers, as more fully described below, which was partially offset by an increase in our days in inventory due to maintaining higher levels of inventory.

Prior to fiscal 2019, in response to evolving market practices, we began a program to negotiate extended payment terms with our suppliers. We also initiated a Supply Chain Finance program (SCF) with several global financial institutions (SCF Banks). Under the SCF, qualifying suppliers may elect to sell their receivables from us to an SCF Bank. These participating suppliers negotiate their receivables sales arrangements directly with the respective SCF Bank. While we are not party to those agreements, the SCF Banks allow the participating suppliers to utilize our creditworthiness in establishing credit spreads and associated costs. This generally provides the suppliers with more favorable terms than they would be able to secure on their own. We have no economic interest in a supplier’s decision to sell a receivable. Once a qualifying supplier elects to participate in the SCF and reaches an agreement with a SCF Bank, the supplier elects which of our individual invoices they sell to the SCF bank. However, all of our payments to participating suppliers are paid to the SCF Bank on the invoice due date, regardless of whether the individual invoice is sold by the supplier to the SCF Bank. The SCF Bank pays the supplier on the invoice due date for any invoices that were not previously sold by the supplier to the SCF Bank.

The terms of our payment obligation are not impacted by a supplier’s participation in the SCF. Our payment terms with our suppliers for similar materials within individual markets are consistent between those suppliers that elect to participate in the SCF and those suppliers that do not participate. Accordingly, our average days outstanding are not significantly impacted by the portion of suppliers or related input costs that are included in the SCF. For our participating suppliers, we believe substantially all of their receivables with us are sold to the SCF Banks. Accordingly, we would expect that at each balance sheet date, a similar proportion of amounts originally due to suppliers would instead be payable to SCF Banks. All outstanding amounts related to suppliers participating in the SCF are recorded within the line entitled "Trade accounts payable" in our consolidated balance sheets, and the associated payments are included in operating activities within our consolidated statements of cash flows. As of November 30, 2021 and 2020, the amount due to suppliers participating in the SCF and included in "Trade accounts payable" were approximately $274.3 million and $273.6 million, respectively.

Future changes in our suppliers’ financing policies or economic developments, such as changes in interest rates, general market liquidity or our creditworthiness relative to participating suppliers could impact those suppliers’ participation in the SCF and/or our ability to negotiate extended payment terms with our suppliers. However, any such impacts are difficult to predict.

Investing Cash Flow – Net cash used in investing activities was $908.6 million in 2021, $1,025.6 million in 2020, and $171.0 million in 2019. Our primary investing cash flows include the usage of cash associated with acquisition of businesses and capital expenditures. Cash usage related to our acquisition of businesses was $706.4 million in 2021 and $803.0 million in 2020. Capital expenditures, including expenditures for capitalized software, were $278.0 million in 2021, $225.3 million in 2020, and $173.7 million in 2019. We expect 2022 capital expenditures to approximate $320 million to support our planned growth, including the multi-year program to replace our ERP system and other initiatives. Our primary investing cash inflow in 2021 was the $65.4 million of proceeds received from the sale of an unconsolidated operation, as more fully discussed in note 5 of notes to our consolidated financial statements.

Financing Cash Flow – Net cash associated with financing activities was a source of cash of $22.0 million in 2021 and $220.9 million in 2020. Net cash used in financing activities was $725.8 million in 2019. 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:

Net (decrease) increase in short-term borrowings $ (346.7) $ 286.5 $ 41.0

Net cash provided from (used in) borrowing activities $ 395.8 $ 554.7 $ (406.7)

In 2021, we borrowed $1,001.5 million under long-term borrowing arrangements, including net proceeds of $495.7 million of 0.9% notes due February 2026 and net proceeds of $492.8 million of 1.85% notes due February 2031. The net proceeds from these issuances were used to pay down short-term borrowings, including a portion of the $1,443.0 million of commercial paper issued to fund our acquisitions of Cholula and FONA, and for general corporate purposes. We also repaid $257.1 million of long-term debt, including the $250 million, 3.90% notes that matured in July 2021.

In 2020, we borrowed $527.0 million under long-term borrowing arrangements, including net proceeds of $495.0 million of 2.5% notes due April 2030. We also repaid $257.7 million of long-term debt, including $250.0 million associated with our term loans due in August 2022.

In 2019, we repaid $447.7 million of long-term debt, including $436.3 million of our $1,500.0 million term loans issued in August 2017.

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

Number of shares of common stock 0.1 0.5 1.3

As of November 30, 2021, $576 million remained of a $600 million share repurchase program that was authorized by our Board of Directors in November 2019. The timing and amount of any shares repurchased is determined by our management based on its evaluation of market conditions and other factors. Our share repurchase activity in 2021, 2020, and 2019 has principally been executed in order to mitigate the effect of shares issued upon the exercise of stock options.

During 2021, 2020 and 2019, we received proceeds of $13.5 million, $56.6 million and $90.9 million, respectively, from exercised stock options. We repurchased $15.4 million, $13.0 million and $12.7 million of common stock during 2021, 2020 and 2019, respectively, in conjunction with employee tax withholding requirements associated with our stock compensation plans.

Our dividend history over the past three years is as follows:

Percentage increase per share 9.7 % 8.8 % 9.6 %

In November 2021, the Board of Directors approved an 8.8% increase in the quarterly dividend from $0.34 to $0.37 per share.