What changed in this filing

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Item 1. Financial Statements

2022-03-29 compared with 2021-09-30 · 128 added, 373 removed, 380 unchanged (57% of the section changed)

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(in millions except per share amounts)

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

2021 2020 2021 2020

Three months ended February 28,

Net sales $ 1,522.4 $ 1,481.5

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Net income from consolidated operations 145.6 148.5

Income from unconsolidated operations (including, for the nine months ended August 31, 2021, after-tax gain on sale of unconsolidated operation of $13.4)

9.1 9.6 45.8 30.2

Income from unconsolidated operations

Net income $ 154.9 $ 161.8

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Cash dividends paid per share – voting and non-voting $ 0.37 $ 0.34

Cash dividends declared per share – voting and non-voting $ 0.34 $ 0.31 $ 0.68 $ 0.62

See notes to condensed consolidated financial statements (unaudited).

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(in millions)

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

2021 2020 2021 2020

Three months ended February 28,

Net income $ 154.9 $ 161.8

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Other comprehensive income (loss):

Unrealized components of pension and postretirement plans 5.8 ( 2.1 ) 8.4 3.6

Unrealized components of pension and other postretirement plans 2.2 1.1

Currency translation adjustments 3.7 45.7

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Deferred taxes ( 1.0 ) 3.0

Total other comprehensive income (loss) ( 72.9 ) 147.1 34.4 68.0

Total other comprehensive income 10.0 48.8

Comprehensive income $ 167.4 $ 211.4

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2022 November 30,

Current Assets

Cash and cash equivalents $ 338.4 $ 351.7

Trade accounts receivable, net 541.0 528.5

Trade accounts receivable, net of allowances 516.7 549.5

Inventories, net

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LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities

Short-term borrowings $ 636.7 $ 539.1

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(in millions)

Nine months ended August 31,

Three months ended February 28,

Operating activities

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Stock-based compensation 11.1 14.2

Fixed asset impairment charge 6.5 —

Amortization of inventory fair value adjustments associated with acquisitions — 6.3

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Dividends from unconsolidated affiliates 9.2 7.0

Net cash flow provided by operating activities 372.9 626.7

Net cash flow provided by (used in) operating activities 17.9 ( 32.2 )

Investing activities

Acquisition of businesses (net of cash acquired) — ( 706.6 )

Proceeds from sale of unconsolidated operation 65.4 —

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

Other investing activities 0.3 2.3

Net cash flow used in investing activities ( 43.7 ) ( 755.2 )

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Dividends paid ( 99.0 ) ( 90.8 )

Net cash flow provided by (used in) financing activities 347.0 ( 432.7 )

Net cash flow provided by financing activities 4.4 612.7

Effect of exchange rate changes on cash and cash equivalents 8.1 7.2

(Decrease) increase in cash and cash equivalents ( 111.0 ) 65.6

Decrease in cash and cash equivalents ( 13.3 ) ( 167.5 )

Cash and cash equivalents at beginning of period 351.7 423.6

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Non-Voting Shares Common Stock Amount Retained Earnings Accumulated Other Comprehensive (Loss) Income Non-controlling Interests Total Shareholders’ Equity

Three months ended August 31, 2021

Balance, May 31, 2021 18.1 249.2 $ 2,027.1 $ 2,660.5 $ ( 362.3 ) $ 15.5 $ 4,340.8

Net income — 212.4 — — 212.4

Net income attributable to non-controlling interest — — — 0.7 0.7

Other comprehensive income (loss), net of tax — — ( 73.3 ) 0.4 ( 72.9 )

Dividends — ( 90.9 ) — — ( 90.9 )

Stock-based compensation 11.6 — — — 11.6

Shares purchased and retired ( 0.1 ) — ( 0.9 ) ( 2.0 ) — — ( 2.9 )

Shares issued 0.1 — 4.3 — — — 4.3

Equal exchange ( 0.1 ) 0.1 — — — — —

Balance, August 31, 2021 18.0 249.3 $ 2,042.1 $ 2,780.0 $ ( 435.6 ) $ 16.6 $ 4,403.1

Nine months ended August 31, 2021

Three months ended February 28, 2022

Balance, November 30, 2021 17.8 249.5 $ 2,055.1 $ 2,782.4 $ ( 426.5 ) $ 14.5 $ 4,425.5

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Other comprehensive income (loss), net of tax — — 10.5 ( 0.5 ) 10.0

Dividends — ( 181.7 ) — — ( 181.7 )

Stock-based compensation 11.1 — — — 11.1

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Equal exchange ( 0.7 ) 0.7 — — — — —

Balance, August 31, 2021 18.0 249.3 $ 2,042.1 $ 2,780.0 $ ( 435.6 ) $ 16.6 $ 4,403.1

Three months ended August 31, 2020

Balance, May 31, 2020 18.6 247.9 $ 1,938.9 $ 2,288.7 $ ( 577.7 ) $ 12.4 $ 3,662.3

Net income — 206.1 — — 206.1

Net income attributable to non-controlling interest — — — 1.6 1.6

Other comprehensive loss, net of tax — — 147.8 ( 0.7 ) 147.1

Dividends — ( 82.6 ) — — ( 82.6 )

Stock-based compensation 10.7 — — — 10.7

Shares purchased and retired ( 0.4 ) — ( 7.4 ) ( 21.2 ) — — ( 28.6 )

Shares issued 0.7 — 29.4 — — — 29.4

Equal exchange ( 0.8 ) 0.8 — — — — —

Balance, August 31, 2020 18.1 248.7 $ 1,971.6 $ 2,391.0 $ ( 429.9 ) $ 13.3 $ 3,946.0

Nine months ended August 31, 2020

Balance, February 28, 2022 17.8 250.2 $ 2,091.3 $ 2,922.4 $ ( 416.0 ) $ 16.5 $ 4,614.2

Three months ended February 28, 2021

Balance, November 30, 2020 18.0 248.9 $ 1,981.3 $ 2,415.6 $ ( 470.8 ) $ 13.9 $ 3,940.0

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Net income attributable to non-controlling interest — — — 0.8 0.8

Other comprehensive loss, net of tax — — 70.3 ( 2.3 ) 68.0

Dividends — ( 165.0 ) — — ( 165.0 )

Other comprehensive income, net of tax — — 48.3 0.5 48.8

Stock-based compensation 14.2 — — — 14.2

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Equal exchange ( 0.1 ) 0.1 — — — — —

Balance, August 31, 2020 18.1 248.7 $ 1,971.6 $ 2,391.0 $ ( 429.9 ) $ 13.3 $ 3,946.0

Balance, February 28, 2021 18.0 249.0 $ 1,998.4 $ 2,573.6 $ ( 422.5 ) $ 15.2 $ 4,164.7

See notes to condensed consolidated financial statements (unaudited).

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In our opinion, the accompanying condensed consolidated financial statements contain all adjustments, which are of a normal and recurring nature, necessary to present fairly the financial position and the results of operations for the interim periods presented.

In September 2020, our Board of Directors approved a 2-for-1 stock split in the form of a stock dividend on all shares of the Company's two classes of stock, Common stock and Common stock non-voting.

Trading of the Company's common stock began on a split-adjusted basis on December 1, 2020.

All common stock and per-share data prior to that date have been retroactively adjusted for the impact of the stock split.

The results of consolidated operations for the nine-month period ended August 31, 2021 are not necessarily indicative of the results to be expected for the full year.

The results of consolidated operations for the three-month period ended February 28, 2022 are not necessarily indicative of the results to be expected for the full year.

Historically, our net sales, net income and cash flow from operations have been lower in the first half of the fiscal year and higher in the second half.

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For further information, refer to the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended November 30, 2021.

Recent Events

Recent events impacting our business include COVID-19, the acquisitions of Cholula and FONA, the inflationary cost environment and supply chain disruption, each of which are further discussed in these notes to condensed consolidated financial statements.

As more fully described below, we expect the largest factors impacting our fiscal 2021 performance to be the relative balance of at-home versus away-from-home consumption and the inflationary cost environment, both which remain uncertain.

On March 11, 2020, the World Health Organization designated a new coronavirus (“COVID-19”) as a global pandemic.

Governments around the world either recommended or mandated actions to slow the transmission of the virus that included shelter-in-place orders, quarantines, limitations on crowd size, closures of dine-in restaurants and bars, and significant restrictions on travel, as well as work restrictions that prohibited many employees from going to work.

Uncertainty with respect to the economic effects of the pandemic has significantly impacted not only our operating results but also the global economy.

The extent and nature of government actions varied during the three and nine-months ended August 31, 2021 and 2020, based upon the then-current extent and severity of the COVID-19 pandemic within their respective countries and localities.

We are actively monitoring the impact of COVID-19 on all aspects of our business.

The effects of COVID-19 on consumer behavior have impacted the relative balance of at-home versus away-from-home food demand.

The impact of COVID-19, since the onset of the pandemic, has resulted in net sales growth as the increase in at-home consumption has more than offset declines in away-from-home demand.

The impact of COVID-19 on our consumer segment since the beginning of the COVID-19 pandemic has resulted in a significant increase in at-home consumption and related demand for our products.

The impact of COVID-19 on our flavor solutions segment has been two-fold, including both (i) an unfavorable impact attributable to decreased demand from certain customers that were affected by government measures related to COVID-19 mitigation in many of our markets that reduced away-from-home food demand;

and (ii) a favorable impact attributable to increased at-home consumption from certain customers that use our products to flavor their own brands for at-home consumption.

The COVID-19 mitigation measures impacting certain of our flavor solutions customers included the following:

(i) with respect to dine-in restaurants, closures, limitations on dine-in capacity, or restrictions on the operations of those restaurants to carry-out or delivery only;

and (ii) with respect to quick service restaurants, limitations on operations to drive-through pick-up or delivery.

The extent of the at-home consumption and away-from-home demand has varied during the pandemic and has impacted our results, as compared to the prior year results, at different levels in any individual quarter.

While we continue to see strong levels of consumer demand compared to the pre-pandemic levels, during the three months ended August 31, 2021 retail demand declined when compared to the comparable quarter of the prior year based on strong consumer demand at the beginning of the

We continue to see recovery in away-from-home demand associated with the COVID-19 recovery.

During the three months ended August 31, 2021 our flavor solutions sales and operating results improved as away-from-home consumption increased as compared to the comparable quarter in 2020, in part, due to the lifting of much more restrictive COVID-19 mitigation measures that were in place in the early stages of the pandemic.

The impact of the COVID-19 pandemic on our consolidated operating results during the three months ended February 29, 2020 was limited, in all material respects, to our operations in China where the Chinese government mandated numerous measures, including closures of businesses, limitations on movements of individuals and goods, and the imposition of other restrictive measures, in its efforts to mitigate the spread of COVID-19 within the country.

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

Inflationary Cost Environment and Supply Chain Disruption:

During fiscal 2021, we have experienced inflationary cost increases in our commodities, packaging materials and transportation costs.

We expect that these inflationary cost increases will be partially mitigated by pricing actions we expect to implement in the fourth quarter of fiscal 2021 and by our CCI-led cost savings.

We are also experiencing additional pressure in our supply chain due to strained transportation capacity, as well as due to labor shortages and absenteeism associated with COVID-19, together with the impact of the continued elevated demand.

Revenue Recognition

The following supplements the description of our accounting policies with respect to revenue recognition contained in note 1 of the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended November 30, 2020:

Our revenue arrangements generally include a single performance obligation relating to the fulfillment of a customer order, which in some cases are governed by a master sales agreement, for the purchase of our products.

We recognize revenue at a point in time when control of the ordered products passes to the customer, which principally occurs either upon shipment or delivery to the customer or upon pick-up by the customer, depending upon terms included in the particular customer arrangement.

Accounting Pronouncements Adopted in 2022

In January 2017, the FASB issued ASU No.

2017-04 Intangibles — Goodwill and Other Topics (Topic 350) — Simplifying the Test for Goodwill Impairment.

This guidance eliminates the requirement to calculate the implied fair value of goodwill of a reporting unit to measure a goodwill impairment charge.

Instead, a company will record an impairment charge based on the excess of a reporting unit's carrying amount over its fair value.

This new standard was adopted effective December 1, 2020 and will be applied upon recognition of any future goodwill impairment charge.

We do not expect this ASU to have a material impact on our financial statements.

In June 2016, the FASB issued ASU No.

2016-13 Financial Instruments — Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments , which instituted a new model for recognizing credit losses on financial instruments that are not measured at fair value.

This standard was adopted by the Company on December 1, 2020.

As this ASU did not have a material impact on our consolidated financial statements upon adoption, a cumulative-effect adjustment to retained earnings was not necessary.

Recently Issued Accounting Pronouncements — Pending Adoption

In December 2019, the FASB issued ASU No.

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The new guidance removes certain exceptions to the general principles for income taxes and also improves consistent application of accounting by clarifying or amending existing guidance.

The new standard is effective for the first quarter of our fiscal year ending November 30, 2022, and interim periods within those years.

We are currently evaluating the impact that the new guidance will have on our consolidated financial statements.

The new standard was adopted effective December 1, 2021.

There was no material impact to our consolidated financial statements.

In March 2020, the FASB issued ASU No.

2020-04 Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting that provides optional expedients for a limited period of time for accounting for contracts, hedging relationship, and other transactions affected by the London Interbank Offered Rate (LIBOR) or other reference rates expected to be discontinued.

Facilitation of the Effects of Reference Rate Reform on Financial Reporting that provides optional expedients for a limited period of time for accounting for contracts, hedging relationships, and other transactions affected by the London Interbank Offered Rate (LIBOR) or other reference rates expected to be discontinued.

These optional expedients can be applied from March 2020 through December 31, 2022.

We are currently evaluating the impact that the new guidance will have on our consolidated financial statements.

ACQUISITIONS AND DISPOSITIONS

Acquisitions are part of our strategy to increase sales and profits.

Dispositions are made when deemed in our strategic interest.

Acquisition of Cholula Hot Sauce

On November 30, 2020, we completed the acquisition of the parent company of Cholula Hot Sauce ® (Cholula) from L Catterton.

The purchase price was approximately $ 801.2 million, net of cash acquired.

That purchase price is also net of $ 1.5 million received during the second quarter of 2021 associated with the final working capital adjustment.

The acquisition was funded with cash and short-term borrowings.

Cholula, a premium Mexican hot sauce brand, is a strong addition to McCormick’s global branded flavor portfolio, which we believe broadens our offerings in the high growth hot sauce category to consumers and foodservice operators and accelerates our condiment growth opportunities with a complementary authentic Mexican flavor hot sauce.

At the time of the acquisition, annual sales of Cholula were approximately $ 96 million.

The results of Cholula’s operations have been included in our financial statements as a component of our consumer and flavor solutions segments from the date of acquisition.

The purchase price of Cholula was preliminarily allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition as further described in note 2 of the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended November 30, 2020.

We valued finished goods and work-in-process inventory using a net realizable value approach, which resulted in a step-up of $ 4.9 million that was recognized in Cost of goods sold during the nine months ended August 31, 2021, as the related inventory was sold.

During the nine months ended August 31, 2021, we completed the Cholula purchase price allocation which resulted in an increase in goodwill of $ 0.8 million.

The final purchase price allocation for Cholula resulted in the following fair value allocations, net of cash acquired (in millions):

Trade accounts receivable $ 15.0

Inventories 16.5

Goodwill 411.3

Intangible assets 401.0

Other assets 10.5

Trade accounts payable ( 7.0 )

Other accrued liabilities ( 8.1 )

Deferred taxes ( 35.1 )

Other long-term liabilities ( 2.9 )

Total $ 801.2

Acquisition of FONA International, LLC

On December 30, 2020, we purchased FONA International, LLC and certain of its affiliates (FONA), a privately held company, for a purchase price of approximately $ 708.2 million, net of cash acquired.

That purchase price includes the payment of $ 2.6 million during the second quarter 2021 associated with the final working capital adjustment.

FONA is a leading manufacturer of clean and natural flavors providing solutions for a diverse customer base across various applications for the food, beverage and nutritional markets.

The acquisition of FONA in fiscal 2021 expands the breadth of our flavor solutions segment into attractive categories, as well as extends our technology platform and strengthens our capabilities.

The acquisition was funded with cash and commercial paper.

At the time of the acquisition, annual sales of FONA were approximately $ 114 million.

The results of FONA’s operations have been included in our financial statements as a component of our flavor solutions segments from the date of acquisition.

The purchase price of FONA was preliminarily allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition.

We estimated the fair values based on in-process independent valuations, discounted cash flow analyses, quoted market prices, and estimates made by management, a number of which are subject to finalization.

The preliminary allocation, net of cash acquired, of the fair value of the FONA acquisition is summarized in the table below (in millions):

Trade accounts receivable $ 12.4

Inventories 10.3

Goodwill 389.4

Intangible assets 266.0

Property, plant and equipment 36.3

Other assets 5.5

Trade accounts payable ( 3.7 )

Other accrued liabilities ( 8.0 )

Total $ 708.2

We determined the preliminary fair value of intangible assets using the following methodologies.

We valued the acquired brand names and trademarks and intellectual property using the relief from royalty method, an income approach.

We valued the acquired customer relationships using the excess earnings method, an income approach.

Some of the more significant assumptions inherent in developing the preliminary valuations included the estimated annual net cash flows for each indefinite-lived or definite-lived intangible asset (including net sales, operating profit margin, and working capital/contributory asset charges), royalty rates, the discount rate that appropriately reflects the risk inherent in each future cash flow stream, the assessment of each asset’s life cycle, and competitive trends, as well as other factors.

We determined the assumptions used in the financial forecasts using historical data, supplemented by current and anticipated market conditions, estimated product category growth rates, management plans, and market comparables.

We used carrying values to value trade receivables and payables, as well as certain other current and non-current assets and liabilities, as we determined that they represented the fair value of those items.

We valued finished goods and work-in-process inventory using a net realizable value approach, which resulted in a step-up of $ 1.4 million that was recognized in Cost of goods sold during the nine months ended August 31, 2021, as the related inventory was sold.

Raw materials and packaging inventory was valued using the replacement cost approach.

The preliminary valuation of the acquired net assets of FONA includes $ 49.0 million allocated to indefinite-lived brand assets, $ 173.0 million allocated to customer relationships with a weighted-average life of 15 years and $ 44.0 million allocated to intellectual property with a weighted-average life of 12 years.

As a result of the acquisition, we recognized a total of $ 389.4 million of goodwill.

That goodwill primarily represents the intangible assets that do not qualify for separate recognition, such as the value of leveraging our brand building expertise, our insights in demand from customers for value-added flavor solutions, and our supply chain capabilities, as well as expected synergies from the combined operations and assembled workforce.

Our aggregate income tax basis in the acquired intangible assets and goodwill approximates their aggregate book value at the acquisition date.

The final allocation of the fair value of the acquired net assets of FONA, including the residual amount of goodwill, was not complete as of August 31, 2021, but will be finalized within the allowable measurement period.

Transaction and Integration Expenses Associated with the Cholula and FONA Acquisitions

We expect Transaction and integration expenses related to our acquisitions of Cholula and FONA to total approximately $ 30 million and $ 25 million, respectively.

Of the total expected Transaction and integration expenses, transaction expenses of $ 12.4 million were incurred in 2020.

We incurred an additional $ 1.3 million and $ 33.3 million of Transaction and integration costs related to Cholula and FONA during the three and nine months ended August 31, 2021, respectively.

We anticipate incurring the remainder of those Transaction and integration expenses by May 31, 2022.

The following are the Transaction and integration expenses recognized during the three and nine months ended August 31, 2021 relating to the Cholula and FONA acquisitions (in millions):

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

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

Other transaction expenses — 13.8

Integration expenses 1.3 13.2

Total transaction and integration expenses $ 1.3 $ 33.3

Sale of Unconsolidated Operation

On March 1, 2021, we sold our 26 % interest in Eastern Condiments Private Ltd (Eastern) for $ 65.4 million in cash, net of transaction expenses of $ 1.4 million.

Eastern was accounted for as an equity method investment with our proportionate share of earnings, prior to the sale, reflected in Income from unconsolidated operations before income taxes in our consolidated income statement.

The sale of Eastern resulted in a gain of $ 13.4 million, net of tax of $ 5.7 million.

That gain is included in Income from unconsolidated operations before income taxes in our consolidated income statement.

That gain also reflects a write-off of $ 1.4 million of foreign currency translation adjustment, a component of Accumulated other comprehensive loss.

LIBOR is used as a reference rate on our variable rate debt, including our revolving credit facility, synthetic lease, interest rate swaps, and cross currency interest rate swaps.

The phase out of LIBOR reference rates will occur at different dates and began on January 1, 2022.

Our adoption of this new standard occurred during the three months ended February 28, 2022, in conjunction with the first phase-out of a LIBOR reference rate.

There was no material impact to our consolidated financial statements during the three months ended February 28, 2022, nor do we expect the adoption of this standard to have a material impact on our consolidated financial statements during the LIBOR transition period.

SPECIAL CHARGES AND TRANSACTION AND INTEGRATION EXPENSES

Special Charges

In our consolidated income statement, we include a separate line item captioned "Special charges" in arriving at our consolidated operating income.

Special charges consist of expenses associated with certain actions undertaken by the Company to reduce fixed costs, simplify or improve processes, and improve our competitiveness and are of such significance in terms of both up-front costs and organizational/structural impact to require advance approval by our Management Committee, comprised of our senior management, including our Chairman, President and Chief Executive Officer.

Upon presentation of any such proposed action (generally including details with respect to estimated costs, which typically consist principally of employee severance and related benefits, together with ancillary costs associated with the action that may include a non-cash component or a component which relates to inventory adjustments that are included in Cost of goods sold;

Special charges consist of expenses, including related impairment charges, associated with certain actions undertaken to reduce fixed costs, simplify or improve processes, and improve our competitiveness and are of such significance in terms of both up-front costs and organizational/structural impact to require advance approval by our Management Committee, comprised of our senior management, including our Chairman, President and Chief Executive Officer.

Upon presentation of any such proposed action (generally including details with respect to estimated costs, which typically consist principally of employee severance and related benefits, together with ancillary costs associated with the action that may include a non-cash component, such as an asset impairment, or a component which relates to inventory adjustments that are included in cost of goods sold;

impacted employees or operations;

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and expected savings) to the Management Committee and the Committee’s advance approval, expenses associated with the approved action are classified as special charges upon recognition and monitored on an on-going basis through completion.

The following is a summary of Special charges recognized in the three and nine months ended August 31, 2021 and 2020

Certain ancillary expenses related to these actions approved by our Management Committee do not qualify for accrual upon approval but are included as special charges as incurred during the course of the actions.

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

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

(in millions):

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

2021 2020 2021 2020

Three months ended February 28,

Employee severance and related benefits $ 14.2 $ 0.3

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Total $ 19.5 $ 1.1

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

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

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

In 2022, our Management Committee approved an initiative to consolidate our manufacturing operations into a net-zero carbon condiments manufacturing and distribution center facility with state-of-the-art technology in the United Kingdom.

We expect to execute these changes to our supply chain operations and improve profitability, from a combination of lower headcount and non-headcount costs, by consolidating our operations into a scalable platform while expanding our capacity.

We expect the cost of the initiative to approximate $ 30 million—to be recognized as special charges in our consolidated income statement through 2023.

Of that $ 30 million, we expect the costs to include employee severance and related benefits, non-cash accelerated depreciation, decommissioning and other property related lease exit costs, all directly related to the initiative.

During the three months ended February 28, 2022, we recorded $ 12.5 million in severance and related benefits costs, $ 1.4 million in accelerated depreciation and $ 1.0 million in third party expenses and other costs.

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

In 2017, our Management Committee approved a multi-year initiative during which we expect to execute significant changes to our global processes, capabilities and operating model to provide a scalable platform for future growth.

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We expect this initiative, which we refer to as Global Enablement ("GE"), to enable this scalable platform for future growth while reducing costs, enabling faster decision making, increasing agility and creating capacity within our organization.

We expect the cost of the GE initiative — to be recognized as Special charges in our consolidated income statement over its expected multi-year course — to range from approximately $ 60 million to $ 65 million.

Of that $ 60 million to $ 65 million, we estimate that approximately sixty percent will be attributable to cash payments associated with the related costs of GE implementation and transition, including outside consulting and other costs, and approximately forty percent will be attributable to severance and related benefit payments, all directly related to the initiative.

We have spent a cumulative total of $ 41.1 million on this initiative through August 31, 2021.

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

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

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

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

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

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

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

2021 2020 2021 2020

While we are continuing to fully develop the details of our GE operating model, we expect the cost of the GE initiative — to be recognized as special charges in our consolidated income statement over its expected multi-year course — to range from approximately $ 60 million to $ 65 million.

Of that $ 60 million to $ 65 million, we estimate that approximately sixty percent will be attributable to cash payments associated with the related costs of the GE implementation and transition, including outside consulting and other costs, and approximately forty percent will be attributable to severance and related benefit payments, all directly related to this initiative.

We have spent a cumulative total of $ 40.7 million on this initiative through February 28, 2022.

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

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

Three months ended February 28,

Consumer segment $ 3.6 $ 0.8

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Total special charges $ 19.5 $ 1.1

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

Consumer Flavor Solutions

Beginning of the year $ 3,711.2 $ 1,275.1

Increases in goodwill from acquisition — 389.4

Changes in preliminary purchase price allocation 0.5 0.3

Foreign currency fluctuations 0.3 2.7

Balance as of the end of period $ 3,712.0 $ 1,667.5

During the nine months ended August 31, 2021, a preliminary valuation of the net assets of FONA acquired in December 2020, resulted in the assignment of $ 389.4 million of goodwill to the flavor solutions segment.

During the nine months ended August 31, 2021, we finalized the allocation of the purchase price of Cholula, which resulted in an increase in goodwill of $ 0.5 million to the consumer segment and $ 0.3 million to the flavor solutions segment.

FINANCING ARRANGEMENTS AND FINANCIAL INSTRUMENTS

In February 2021, we issued $ 500.0 million of 0.90 % notes due February 15, 2026, with cash proceeds received of $ 495.7 million, net of discounts and underwriters' fees.

Also, in February 2021, we issued $ 500.0 million of 1.85 % notes due February 15, 2031, with cash proceeds received of $ 492.8 million, net of discounts and underwriters' fees.

Interest is payable semiannually on both of these notes in arrears in February and August of each year.

The net proceeds from these issuances were used to pay down short-term borrowings, including a portion of the $ 1,443.0 million of commercial paper issued to finance our acquisitions of Cholula and FONA, and for general corporate purposes.

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

In June 2021, we entered into a five -year $ 1.5 billion revolving credit facility, which will expire in June 2026.

The current pricing for the credit facility, on a fully drawn basis, is LIBOR plus 1.25 %.

The pricing of the credit facility is based on a credit rating grid that contains a fully drawn maximum pricing of the credit facility equal to LIBOR plus 1.75 %.

The provisions of this new revolving credit facility restrict subsidiary indebtedness and require us to maintain a minimum interest coverage ratio.

We do not expect that this covenant would limit our access to this revolving credit facility for the foreseeable future.

This facility replaced the following prior revolving credit facilities:

(i) a five -year $ 1.0 billion revolving credit facility that was due to expire in August 2022, and (ii) a 364 -day $ 1.0 billion revolving facility, which we entered into in the first quarter of 2021 and that was due to expire in December 2021.

The terms of those revolving credit facilities are more fully described in note 6 of the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended November 30, 2020.

Transaction and Integration Expenses

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

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

Other transaction expenses — 13.8

Integration expenses 0.7 5.0

Total transaction and integration expenses $ 0.7 $ 25.1

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

FINANCIAL INSTRUMENTS

We use derivative financial instruments to enhance our ability to manage risk, including foreign currency, net investment and interest rate exposures, which exist as part of our ongoing business operations.

We do not enter into contracts for trading

purposes, nor are we a party to any leveraged derivative instrument, and all derivatives are designated as hedges.

We do not enter into contracts for trading purposes, nor are we a party to any leveraged derivative instrument, and all derivatives are designated as hedges.

For the three months ended February 28, 2022 and 2021, hedge ineffectiveness was not material.

We are not a party to master netting arrangements, and we do not offset the fair value of derivative contracts with the same counterparty in our financial statement disclosures.

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We are potentially exposed to foreign currency fluctuations affecting net investments in subsidiaries, transactions (both third-party and intercompany) and earnings denominated in foreign currencies.

Management assesses foreign currency risk based on transactional cash flows and translational volatility and may enter into forward contract and currency swaps to reduce fluctuations in the long or short currency positions.

We assess foreign currency risk based on transactional cash flows and translational volatility and may enter into forward contract and currency swaps with highly-rated financial institutions to reduce fluctuations in the long or short currency positions.

Forward contracts are generally less than 18 months duration.

At August 31, 2021, we had foreign currency exchange contracts to purchase or sell $ 598.1 million of foreign currencies as compared to $ 383.8 million at November 30, 2020.

Currency swap agreements are established in conjunction with the terms of the underlying debt issues.

At February 28, 2022, we had foreign currency exchange contracts to purchase or sell $ 636.5 million of foreign currencies as compared to $ 583.6 million at November 30, 2021.

All of these contracts were designated as hedges of anticipated purchases denominated in a foreign currency or hedges of foreign currency denominated assets or liabilities.

All foreign currency exchange contracts outstanding at August 31, 2021 have durations of less than 18 months, including $ 232.9 million of notional contracts that have durations of less than one month and are used to hedge short-term cash flow funding .

All foreign currency exchange contracts outstanding at February 28, 2022 have durations of less than 18 months, including $ 242.1 million of notional contracts that have durations of less than one month and are used to hedge short-term cash flow funding .

Contracts which are designated as hedges of anticipated purchases denominated in a foreign currency (generally purchases of raw materials in U.S.

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We also enter into fair value foreign currency exchange contracts to manage both exposure to currency fluctuations in certain intercompany loans between subsidiaries as well as currency exposure to third-party non-functional currency assets or liabilities.

At August 31, 2021, the notional value of these contracts was $ 391.7 million.

At February 28, 2022, the notional value of these contracts was $ 413.4 million.

Any gains or losses recorded based on both the change in fair value of these contracts and the change in the currency component of the underlying loans are recognized in our consolidated income statement as Other income, net.

We also utilize cross currency interest rate swap contracts that are designated as net investment hedges.

As of August 31, 2021, we had cross currency interest rate swap contracts of (i) $ 250 million notional value to receive $ 250 million at three-month U.S.

LIBOR plus 0.685 % and pay £ 194.1 million at three-month GBP LIBOR plus 0.740 % and (ii) £ 194.1 million notional value to receive £ 194.1 million at three-month GBP LIBOR plus 0.740 % and pay € 221.8 million at three-month Euro EURIBOR plus 0.808 %.

These cross currency interest rate swap contracts expire in August 2027.

Any gains or losses on net investment hedges are included in foreign currency translation adjustments in accumulated other comprehensive loss.

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We utilize interest rate swap agreements to minimize worldwide financing costs and to achieve a desired mix of variable and fixed rate debt.

As of August 31, 2021, we have outstanding interest rate swap contracts for a notional amount of $ 350 million.

Those interest rate swap contracts include a $ 100 million notional value of interest rate swap contracts, where we receive interest at 3.25 % and pay a variable rate of interest based on three-month LIBOR plus 1.22 %, which expire in November 2025, and are designated as fair value hedges of the changes in fair value of $ 100 million of the $ 250 million 3.25 % medium-term notes due 2025.

We also have $ 250 million notional interest rate swap contracts where we receive interest at 3.40 % and pay a variable rate of interest based on three-month LIBOR plus 0.685 %, which expire in August 2027, and are designated as fair value hedges of the changes in fair value of $ 250 million of the $ 750 million 3.40 % term notes due 2027.

The fair value of these swap contracts is offset by a corresponding increase or decrease of the value of the hedged debt.

All derivatives are recognized at fair value in our consolidated balance sheet and recorded in either Prepaid expenses and other current assets, Other long-term assets, Other accrued liabilities or Other long-term liabilities, depending upon their nature and maturity.

Hedge ineffectiveness was not material.

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

As of August 31, 2021 Asset Derivatives Liability Derivatives

As of February 28, 2022 Asset Derivatives Liability Derivatives

Balance sheet

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Total $ 35.8 $ 10.8

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

During the first quarter of 2022, we entered into $ 250 million notional value interest rate swap contracts where we receive interest at 2.50 % and pay a variable rate of interest based on USD SOFR plus 0.745 %, which expire in April 2030, and are designated as fair value hedges of the changes in fair value of $ 250 million of the $ 500 million 2.50 % term notes due in 2030.The fair value of these interest rate swap contracts is offset by a corresponding increase or decrease in the value of the hedged debt.

Also during the first quarter of 2022, we entered into cross currency interest rate swap contracts of (i) $ 250 million notional value to receive $ 250 million at USD SOFR plus 0.745 % and pay £ 184.1 million at GBP SONIA plus 0.5740 % and (ii) £ 184.1 million notional value to receive £ 184.1 million at GBP SONIA plus 0.574 % and pay € 219.2 million at Euro ESTR plus 0.667 %, both of which expire in April 2030.

In conjunction with the phase-out of LIBOR, during the first quarter of 2022 we amended our previously existing cross currency swaps which expire in August 2027 such that, effective February 15, 2022, we now pay and receive at GBP SONIA plus 0.859 % (previously GBP LIBOR plus 0.740 %).

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

Fair Value Hedges

Three months ended February 28,

Derivative Income statement

location Income (expense)

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

Interest rate contracts Interest expense $ 2.2 $ 2.0

Three months ended August 31, Income statement location Gain (loss) recognized in income Income statement location Gain (loss) recognized in income

Derivative 2021 2020 Hedged item 2021 2020

Foreign exchange contracts Other income, net $ 5.6 $ ( 7.6 ) Intercompany loans Other income, net $ ( 5.4 ) $ 7.3

Nine months ended August 31, Income statement location Gain (loss) recognized in income Income statement location Gain (loss) recognized in income

Income statement location Gain (loss) recognized in income Income statement location Gain (loss) recognized in income

Derivative 2022 2021 Hedged item 2022 2021

Foreign exchange contracts Other income, net $ ( 0.4 ) $ ( 2.1 ) Intercompany loans Other income, net $ 0.4 $ 2.4

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

Cash Flow Hedges

Three months ended August 31,

Three months ended February 28,

Derivative Gain (loss)

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Total $ 2.9 $ ( 1.3 ) $ ( 0.1 ) $ 0.4

Nine months ended August 31,

Derivative Gain (loss)

recognized in OCI Income

location Gain (loss)

reclassified from

2021 2020 2021 2020

Interest rate contracts $ 0.3 $ — Interest

expense $ 0.4 $ 0.4

Foreign exchange contracts ( 0.9 ) 2.3 Cost of goods

sold ( 0.6 ) 1.2

Total $ ( 0.6 ) $ 2.3 $ ( 0.2 ) $ 1.6

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

Net Investment Hedges

Three months ended August 31,

Derivative Gain (loss)

recognized in OCI Income

location Gain (loss)

excluded from the assessment of hedge effectiveness

2021 2020 2021 2020

Cross currency contracts $ 8.4 $ ( 17.4 ) Interest

expense $ 0.4 $ 0.3

Nine months ended August 31,

Three months ended February 28,

Derivative Gain (loss)

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Unobservable inputs that reflect the reporting entity’s own assumptions.

At August 31, 2021 and November 30, 2020, we had no financial assets or liabilities that were subject to a level 3 fair value measurement.

At February 28, 2022 and November 30, 2021, we had no financial assets or liabilities that were subject to a level 3 fair value measurement.

Our population of financial assets and liabilities subject to fair value measurements on a recurring basis are as follows (in millions):

August 31, 2021

February 28, 2022

Fair Value Level 1 Level 2

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Foreign currency derivatives 8.3 — 8.3

Cross currency contracts 4.4 — 4.4

Total $ 524.8 $ 356.8 $ 168.0

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Total $ 10.8 $ — $ 10.8

Because of their short-term nature, the amounts reported in our consolidated balance sheet for Cash and cash equivalents, Trade accounts receivable, Short-term borrowings and Trade accounts payable approximate fair value.

At February 28, 2022 and November 30, 2021, the carrying amounts of interest rate derivatives, foreign currency derivatives, cross currency contracts, insurance contracts, and bond and other long-term investments are equal to their respective fair values.

Because of their short-term nature, the amounts reported in the balance sheet for cash and cash equivalents, receivables, short-

term borrowings and trade accounts payable approximate fair value.

Investments in affiliates are not readily marketable, and it is not practicable to estimate their fair value.

Insurance contracts, bonds, and other long-term investments are comprised of fixed income and equity securities held for certain non-qualified U.S.

employee benefit plans and are stated at fair value on the balance sheet.

The fair values of insurance contracts are based upon the underlying values of the securities in which they are invested and are from quoted market prices from various stock and bond exchanges for similar type assets.

The fair values of bonds and other long-term investments are based on quoted market prices from various stock and bond exchanges.

The fair values for interest rate derivatives, foreign

currency derivatives, and cross currency contracts are based on values for similar instruments using models with market-based inputs.

The fair values for interest rate derivatives, foreign currency derivatives, and cross currency contracts are based on values for similar instruments using models with market-based inputs.

The following table sets forth the carrying amounts and fair values of our long-term debt including the current portion thereof (in millions):

August 31, 2021 November 30, 2020

February 28, 2022 November 30, 2021

Carrying amount $ 4,735.3 $ 4,743.6

Fair value 5,009.5 4,357.1

Level 1 valuation techniques $ 4,571.8 $ 4,722.3

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employees and retirees.

D uring fiscal years 2018 and 2017, we made significant changes to our employee benefit and retirement plans that froze the accrual of future benefits under certain defined benefit pension plans in the U.S.

We previously froze the accrual of future benefits under certain defined benefit pension plans in the U.S.

and certain foreign locations.

Although our defined benefit plans in the U.S., United Kingdom and Canada have been frozen, employees who are participants in the plans retained benefits accumulated up to the date of the freeze, based on credited service and eligible earnings, in accordance with the terms of the plans.

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

United States International

2021 2020 2021 2020

Defined benefit plans

Service cost $ 0.9 $ 0.8 $ 0.3 $ 0.2

Interest costs 6.5 7.3 1.8 1.9

Expected return on plan assets ( 10.3 ) ( 10.2 ) ( 3.5 ) ( 3.7 )

Amortization of prior service costs 0.2 0.2 — 0.1

Amortization of net actuarial losses 2.7 2.0 0.6 0.5

Settlement loss — — 0.2 0.7

Total pension expense (income) $ — $ 0.1 $ ( 0.6 ) $ ( 0.3 )

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

United States International

Although our defined benefit plans in the U.S., United Kingdom and Canada have generally been frozen, employees who are participants in the plans retained benefits accumulated up to the date of the freeze, based on credited service and eligible earnings, in accordance with the terms of the plans.

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

United States pension International pension Other postretirement benefits

2022 2021 2022 2021 2022 2021

Defined benefit plans

Service cost $ 0.9 $ 0.9 $ 0.2 $ 0.3 $ 0.4 $ 0.5

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Amortization of net actuarial losses 2.2 2.8 0.4 0.6 — —

Settlement loss — — 0.6 1.2

Total pension expense (income) $ — $ 0.2 $ ( 2.0 ) $ ( 2.1 )

During the nine months ended August 31, 2021 and 2020, we contributed $ 7.5 million and $ 9.3 million, respectively, to our pension plans.

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

During the three months ended February 28, 2022 and 2021, we contributed $ 2.0 million and $ 2.3 million, respectively, to our pension plans.

Total contributions to our pension plans in fiscal year 2021 were $ 15.0 million.

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

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

2021 2020 2021 2020

Other postretirement benefits

Service cost $ 0.5 $ 0.5 $ 1.5 $ 1.4

Interest costs 0.4 0.5 1.2 1.5

Amortization of prior service credits ( 0.1 ) ( 1.2 ) ( 0.3 ) ( 3.5 )

Amortization of net actuarial gains — — — ( 0.1 )

Total other postretirement benefits expense (income) $ 0.8 $ ( 0.2 ) $ 2.4 $ ( 0.7 )

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

The aggregate amount of pension and other

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

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

The net aggregate amount of pension and other postretirement benefits (income), excluding service cost components, was $( 2.5 ) million and $( 1.8 ) million for the three months ended February 28, 2022 and 2021, respectively.

STOCK-BASED COMPENSATION

We have four types of stock-based compensation awards:

restricted stock units ("RSUs"), stock options, company stock awarded as part of our long-term performance plan ("LTPP") and, beginning in the fourth quarter of 2020, price-vested stock options.

restricted stock units ("RSUs"), stock options, company stock

awarded as part of our long-term performance plan ("LTPP") and price-vested stock options.

The following table sets forth the stock-based compensation expense recorded in selling, general and administrative ("SG&A") expense (in millions):

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

2021 2020 2021 2020

Three months ended February 28,

Stock-based compensation expense $ 11.1 $ 14.2

Our 2021 annual grant of stock options and RSUs occurred in the second quarter, similar to the 2020 annual grant.

The weighted-average grant-date fair value of each stock option granted in 2021 was $ 18.36 and in 2020 was $ 13.26 as calculated under a lattice pricing model.

Substantially all of the stock options and RSUs granted in 2021 and 2020 vest ratably over a three-year period or, if earlier, upon the retirement eligibility date of the holder.

The fair values of stock option grants in the stated periods were computed using the following range of assumptions for our various stock compensation plans:

Risk-free interest rates 0.0 - 1.8% 0.0 - 0.6%

Dividend yield 1.5 % 1.8 %

Expected volatility 21.3 % 22.8 %

Expected lives (in years) 7.9 7.9

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

Our 2022 annual grant of stock options and RSUs is expected to occur in the second quarter, similar to the 2021 annual grant.

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

(shares in millions) Number

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Outstanding at beginning of period 5.0 $ 59.71 4.5 $ 53.56

Granted 0.8 89.16 0.8 69.31

Exercised ( 0.6 ) 45.25 ( 0.1 ) 39.30

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Exercisable at end of the period 3.0 $ 53.17 3.2 $ 47.95

As of August 31, 2021, the intrinsic value (the difference between the exercise price and the market price) for all options outstanding was $ 138.9 million and for options currently exercisable was $ 130.1 million.

The total intrinsic value of all options exercised during the nine months ended August 31, 2021 and 2020 was $ 7.3 million and $ 65.3 million, respectively.

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

As of February 28, 2022, the intrinsic value (the difference between the exercise price and the market price) for all options outstanding was $ 145.5 million and for options currently exercisable was $ 128.0 million.

The total intrinsic value of all options exercised during the three months ended February 28, 2022 and 2021 was $ 32.6 million and $ 2.2 million, respectively.

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

(shares in thousands) Number

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Outstanding at end of period 537 $ 70.31 708 $ 62.34

The following is a summary of our Price-Vested Stock Options activity for the nine months ended August 31, 2021:

The following is a summary of our price-vested stock options activity for the three months ended February 28, 2022 and 2021:

(shares in thousands) Number

Shares Weighted-

Grant-Date Fair Value

Grant-Date Fair Value Number

Shares Weighted-

Outstanding at beginning of period 2,193 $ 9.40 2,482 $ 9.40

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Outstanding at end of period 2,166 $ 9.40 2,484 $ 9.40

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

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

(shares in thousands) Number

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Outstanding at end of period 395 $ 93.42 397 $ 86.89

Income tax expense for the three months ended August 31, 2021 included $ 22.9 million of net discrete tax benefits consisting principally of the following:

(i) $ 13.3 million of tax benefits due to the partial release of certain reserves for an unrecognized tax benefit and related interest in a non-U.S.

jurisdiction based on a change in our assessment of the technical merits of that position associated with the availability of new information, (ii) $ 4.3 million of tax benefits from the resolution of other tax uncertainties, including the reversal of certain reserves for unrecognized tax benefits and related interest associated with the expiration of statutes of limitations, (iii) $ 2.4 million of tax benefits related to the revaluation of deferred taxes resulting from enacted legislation, (iv) $ 1.1 million of tax benefits resulting from an adjustment to a prior year tax accrual based on the final return filed, and (v) $ 1.0 million of tax benefits resulting from a refinement of deferred state taxes directly related to our December 2020 acquisition of FONA.

Income tax expense for the nine months ended August 31, 2021 included $ 22.9 million of net discrete tax benefits consisting primarily of the following:

(i) $ 13.3 million of tax benefits due to the partial release of certain reserves for an unrecognized tax benefit and related interest in a non-U.S.

jurisdiction based on a change in our assessment of the technical merits of that position associated with the availability of new information, (ii) $ 9.2 million of tax benefits from the resolution of other tax uncertainties, including the reversal of certain reserves for unrecognized tax benefits and related interest associated with the expiration of statutes of limitations, (iii) $ 10.4 million of deferred state tax expense directly related to our December 2020 acquisition of FONA, (iv) $ 4.5 million of tax benefits associated with the release of a valuation allowance due to a change in judgment about realizability of deferred tax assets, (v) $ 2.2 million of excess tax benefits associated with share-based compensation, (vi) $ 2.5 million of tax benefits related to the revaluation of deferred taxes resulting from enacted legislation, and (vii) $ 1.1 million of tax benefits resulting from an adjustment to a prior year tax accrual based on the final return filed.

Income taxes for the three months ended August 31, 2020 included $ 13.2 million of discrete tax benefits consisting principally of the following:

(i) $ 7.3 million of excess tax benefits associated with share-based compensation, (ii) $ 2.1 million of tax benefits related to the reversal of unrecognized tax benefits and related interest associated with the expiration of statutes of limitations, (iii) $ 2.0 million for an adjustment to a prior year tax accrual based on the final return filed, and (iv) $ 1.1 million related to the revaluation of deferred taxes resulting from enacted legislation.

Income taxes for the nine months ended August 31, 2020 included $ 40.1 million of discrete tax benefits consisting principally of the following:

(i) $ 13.0 million of excess tax benefits associated with share-based compensation, (ii) $ 9.9 million of tax benefits associated with an intra-entity asset transfer that occurred during the first quarter, (iii) $ 9.3 million of tax benefits associated with the release of a valuation allowance due to a change in judgment about realizability of deferred tax assets, (iv) $ 5.5 million of tax benefits related to the reversal of unrecognized tax benefits and related interest associated with the expiration of statutes of limitations in various jurisdictions, and (v) $ 2.0 million for an adjustment to a prior year tax accrual based on the final return filed.

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

As of August 31, 2021, we believe the reasonably possible total amount of unrecognized tax benefits that could increase or decrease in the next 12 months as a result of various statute expirations, audit closures, and/or tax settlements would not be material to our consolidated financial statements.

Income tax expense for the three months ended February 28, 2022 included $ 10.3 million of net discrete tax benefits consisting principally of the following:

(i) $ 7.6 million of excess tax benefits associated with stock-based compensation, and (ii) $ 2.5 million of tax benefits related to the revaluation of deferred taxes resulting from enacted legislation.

Income tax expense for the three months ended February 28, 2021 included $ 5.3 million of net discrete tax expense consisting principally of the following:

(i) $ 11.4 million of deferred state tax expense directly related to our December 2020 acquisition of FONA, (ii) $ 4.5 million of tax benefits associated with the release of a valuation allowance due to a change in judgment about realizability of deferred tax assets, and (iii) $ 1.2 million of tax benefits from the reversal of certain reserves for unrecognized tax benefits associated with the resolution of tax uncertainties.

Other than additions for current year tax positions, there were no significant changes to unrecognized tax benefits during the three months ended February 28, 2022.

As of February 28, 2022, we believe the reasonably possible total amount of unrecognized tax benefits that could increase or decrease in the next 12 months as a result of various statute expirations, audit closures, and/or tax settlements would not be material to our consolidated financial statements.

CAPITAL STOCK AND EARNINGS PER SHARE

On April 5, 2021, following approval by the Company’s shareholders on March 31, 2021, amendments to the Company’s Charter became effective that increased the number of authorized shares of each class of common stock from 320,000,000 to 640,000,000 and established the par value of each class of common stock at $ 0.01 per share.

The par value and additional paid in capital associated with each class of common stock is recorded in Common stock and Common stock non-voting in our consolidated balance sheet.

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

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

2021 2020 2021 2020

Three months ended February 28,

Average shares outstanding – basic 267.8 267.1

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The following table sets forth the stock options and RSUs that were not considered in our earnings per share calculation since they were anti-dilutive (in millions):

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

2021 2020 2021 2020

Three months ended February 28,

Anti-dilutive securities 0.2 —

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

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

2021 2020 2021 2020

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

Three months ended February 28,

Shares issued under stock options, RSUs, LTPP and employee stock purchase plans 0.9 0.2

Shares repurchased under the stock repurchase program and shares withheld for taxes under stock options, RSUs, LTPP and employee stock purchase plans 0.1 0.4 0.2 0.7

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

Shares repurchased under the stock repurchase program and shares withheld for taxes under stock options, RSUs, and LTPP 0.2 0.1

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

ACCUMULATED OTHER COMPREHENSIVE LOSS

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

August 31, 2021 November 30, 2020

February 28, 2022 November 30, 2021

Foreign currency translation adjustment (1)

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Accumulated other comprehensive loss $ ( 416.0 ) $ ( 426.5 )

(1) During the nine months ended August 31, 2021, the foreign currency translation adjustment of Accumulated other comprehensive loss decreased on a net basis by $ 27.0 million, including the impact of a $ 4.9 million decrease associated with net investment hedges.

(1) During the three months ended February 28, 2022, the foreign currency translation adjustment of accumulated other comprehensive loss decreased on a net basis by $ 4.6 million, including the impact of a $ 0.7 million increase associated with net investment hedges.

These net investment hedges are more fully described in note 3.

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

Three months ended Nine months ended Affected Line Items in the Condensed Consolidated Income Statement

Accumulated other comprehensive income (loss) components August 31, 2021 August 31, 2020 August 31, 2021 August 31, 2020

Three months ended Affected Line Items in the Condensed Consolidated Income Statement

February 28, 2022 February 28, 2021

(Gains)/losses on cash flow hedges:

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Amortization of pension and postretirement benefit adjustments:

Amortization of prior service costs (credit) (1)

$ 0.1 $ ( 0.9 ) $ 0.2 $ ( 3.0 ) Other income, net

Amortization of net actuarial losses (1)

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Net, after tax $ 2.0 $ 2.6

(1) This Accumulated other comprehensive income (loss) component is included in the computation of total pension expense and other postretirement benefits expense (refer to note 7 for additional details).

(1) This accumulated other comprehensive income (loss) component is included in the computation of total pension (income) and other postretirement benefits expense (refer to note 5 for additional details).

Amortization of net actuarial losses includes settlement losses.

3 unchanged sentences

The consumer and flavor solutions segments manufacture, market and distribute spices, herbs, seasoning mixes, condiments and other flavorful products throughout the world.

Our consumer segment sells to retail channels, including grocery, mass merchandise, warehouse clubs, discount and drug stores, and e-commerce under the “McCormick” brand and a variety of brands around the world, including “French’s”, “Frank’s RedHot”, “OLD BAY”, “Lawry’s”, “Zatarain’s”, “Simply Asia”, “Thai Kitchen”, “Ducros”, “Vahine”, “Cholula”, “Schwartz”, “Club House”, “Kamis”, “Kohinoor”, “DaQiao”, “La Drogheria”, “Stubb's”, and “Gourmet Garden”.

Our consumer segment sells to retail channels, including grocery, mass merchandise, warehouse clubs, discount and drug stores, and e-commerce under the “McCormick” brand and a variety of brands around the world, including “French’s”, “Frank’s RedHot”, “OLD BAY”, “Lawry’s”, “Zatarain’s”, “Simply Asia”, “Thai Kitchen”, “Ducros”, “Vahine”, “Cholula”, “Schwartz”, “Club House”, “Kamis”, “DaQiao”, “La Drogheria”, “Stubb's”, and “Gourmet Garden”.

Our flavor solutions segment sells to food manufacturers and the foodservice industry both directly and indirectly through distributors, with the exception of our businesses in China and India, where foodservice sales are managed by and reported in our consumer segment.

3 unchanged sentences

We measure segment performance based on operating income excluding special charges, as this activity is managed separately from the business segments.

We also exclude transaction and integration expenses related to our acquisitions of Cholula and FONA from our measure of segment performance as these expenses are similarly managed separately from the business segments.

We also exclude transaction and integration expenses related to our acquisitions, including the recent acquisitions of Cholula and FONA from our measure of segment performance as these expenses are similarly managed separately from the business segments.

These transaction and integration expenses excluded from our segment performance measure include the amortization of the acquisition-date fair value adjustment of inventories that is included in cost of goods sold, costs directly associated with that acquisition and costs associated with integrating the businesses.

5 unchanged sentences

(in millions)

Three months ended August 31, 2021

Three months ended February 28, 2022

Net sales $ 926.1 $ 596.3 $ 1,522.4

1 unchanged sentence

Income from unconsolidated operations 8.4 0.9 9.3

Three months ended August 31, 2020

Net sales $ 910.9 $ 519.4 $ 1,430.3

Operating income excluding special charges 209.0 64.1 273.1

Income from unconsolidated operations 8.5 1.1 9.6

Nine months ended August 31, 2021

Three months ended February 28, 2021

Net sales $ 946.8 $ 534.7 $ 1,481.5

1 unchanged sentence

Income from unconsolidated operations 10.8 2.5 13.3

Nine months ended August 31, 2020

Net sales $ 2,573.0 $ 1,470.4 $ 4,043.4

Operating income excluding special charges 560.2 168.4 728.6

Income from unconsolidated operations 24.7 5.5 30.2

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

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

Consumer Flavor Solutions Total

Three months ended August 31, 2021

Three months ended February 28, 2022

Operating income excluding special charges and transaction and integration expenses $ 167.0 $ 60.1 $ 227.1

Special charges 3.6 15.9 19.5

Other transaction and integration expenses 0.2 1.1 1.3

Operating income $ 184.1 $ 81.1 $ 265.2

Three months ended August 31, 2020

Operating income excluding special charges $ 209.0 $ 64.1 $ 273.1

Special charges — 0.1 0.1

Transaction and integration expenses — 0.7 0.7

Operating income $ 163.4 $ 43.5 $ 206.9

Nine months ended August 31, 2021

Three months ended February 28, 2021

Operating income excluding special charges and transaction and integration expenses $ 189.9 $ 72.6 $ 262.5

3 unchanged sentences

Operating income $ 180.9 $ 55.4 $ 236.3

Nine months ended August 31, 2020

Operating income excluding special charges $ 560.2 $ 168.4 $ 728.6

Special charges 3.1 0.9 4.0

Operating income $ 557.1 $ 167.5 $ 724.6

The following table sets forth our net sales, by geographic area, for the three and nine months ended August 31, 2021 and 2020 (in millions):

The following table sets forth our net sales, by geographic area, for the three months ended February 28, 2022 and 2021 (in millions):

Americas EMEA Asia/Pacific Total

Three months ended August 31, 2021 $ 1,084.5 $ 283.4 $ 181.5 $ 1,549.4

Three months ended August 31, 2020 1,010.5 262.7 157.1 1,430.3

Nine months ended August 31, 2021 3,130.7 890.7 566.2 4,587.6

Nine months ended August 31, 2020 2,855.5 756.7 431.2 4,043.4

Three months ended February 28, 2022 $ 1,022.5 $ 290.5 $ 209.4 $ 1,522.4

Three months ended February 28, 2021 964.8 302.4 214.3 1,481.5

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements