10 unchanged sentences
Our actual results for a year can vary from our long-term growth objectives.
−Removed: Recent Events
−Removed: Recent events impacting our business include global economic conditions, inflationary cost environment, disruption in our supply chain, the COVID-19 pandemic, and the ongoing conflict between Russia and Ukraine, each of which are further discussed below.
−Removed: Each of these factors impacted our fiscal 2022 operating results and we expect each will impact our fiscal 2023 performance.
−Removed: We expect elevated levels of cost inflation to persist throughout 2023, although at lower levels than experienced in 2022.
−Removed: We anticipate in 2023 that these headwinds will be partially mitigated by pricing actions in response to inflation, supply chain productivity improvements and cost savings initiatives.
−Removed: The effects of inflation have also resulted in central banks raising short-term interest rates and, as a result, we expect that our interest expense will increase in 2023.
−Removed: While we expect the impacts of COVID-19 on our business to moderate, there still remains uncertainty around the pandemic, its effect on labor or other macroeconomic factors, its severity and duration, the continued availability and effectiveness of vaccines and actions taken by third parties or by government authorities in response, including restrictions, laws or regulations, or other responses.
−Removed: Also, the ongoing conflict between Russia and Ukraine, and the sanctions imposed in response to this conflict, have increased global economic and political uncertainty.
−Removed: While the impact of these factors remains uncertain, we continue to evaluate the extent to which they may impact our business, financial condition, or results of operations.
−Removed: These and other uncertainties could result in changes to our current expectations.
−Removed: The potential effects of these recent events also could impact us in a number of other ways including, but not limited to, variations in the level of our sales, profitability, cash flows, 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, laws and regulations affecting our business, and potential impairment of the carrying value of goodwill or other indefinite-lived intangible assets.
−Removed: Global Economic Conditions and Inflationary Cost Environment – During fiscal 2021 and 2022, we experienced inflationary cost increases in our commodities, packaging materials and transportation costs.
−Removed: We expect that these inflationary cost increases will continue but we expect they will be partially mitigated by our planned 2023 pricing actions, our organization and streamlining actions, including our Global Operating Effectiveness Program, and by our Comprehensive Continuous Improvement (CCI) program-led cost savings.
−Removed: There has been, and we expect there could continue to be, a difference between the timing of when the impact of cost inflation occurs and when these pricing and other actions impact our results of operations.
−Removed: Additionally, in some instances the pricing actions we take have been impacted by price elasticity which unfavorably impacts our sales volume and mix.
−Removed: Our interest expense is impacted by the overall global economic and interest rate environment.
−Removed: The inflationary environment has also resulted in central banks raising short-term interest rates.
−Removed: On November 30, 2022, we had total outstanding variable rate debt of approximately $1,295 million.
−Removed: Our policy is to manage our interest rate risk by entering into both fixed and variable rate debt arrangements.
−Removed: We also use interest rate swaps to achieve a desired mix of fixed and variable rate debt.
−Removed: As of November 30, 2022, we had total outstanding fixed to variable interest rate swaps of $600 million notional.
−Removed: We expect that our interest expense will increase in 2023 as a result of the higher interest rate environment.
−Removed: Supply Chain Disruptio n – Over the past several years, as we have responded to demand volatility, COVID-19 and overall macroeconomic conditions, we have experienced pressures in our supply chain, including inefficiencies associated with demand volatility.
−Removed: These pressures are in addition to the inflationary cost environment previously noted and have included strained availability of raw materials and transportation capacity, expedited shipping costs, costs incurred in response to COVID-19, incremental warehouse costs to store increased inventory associated with maintaining additional safety stock, additional use of co-manufacturers, and labor shortages and absenteeism, in part, associated with COVID-19.
−Removed: The severity of those supply chain pressures varied over 2022, 2021 and 2020.
−Removed: In response to the general economic conditions, inflationary cost environment, and the supply chain pressures and related inefficiencies, we expect to eliminate approximately $125 million of costs during 2023 and 2024, including $100 million of supply chain costs and $25 million of costs across the remainder of the organization under our Global Operating Effectiveness program.
−Removed: The supply chain actions we are taking, and will continue to evaluate, include returning our manufacturing facilities to a more normal shift schedule, reducing headcount, and stabilizing turnover rates to reduce our labor costs;
−Removed: increasing our manufacturing capacity and automation to respond to the evaluated demand as well as reduce the use of co-manufacturers;
−Removed: and executing and evaluating initiatives to reduce the safety stock levels of our inventory that were put in place to protect against supply disruptions.
−Removed: elimination of other costs across the organization will include a voluntary retirement program and other streamlining initiatives.
−Removed: COVID-19 – T he COVID-19 pandemic has impacted our operating results.
−Removed: The extent and nature of government actions, customer and end-consumer demand and the impact on our supply chain varied during the years ended November 30, 2022, 2021 and 2020 based upon the then-current extent and severity of the COVID-19 pandemic within the countries, localities and markets where we do business.
−Removed: We continue to actively monitor the impact of COVID-19 on all aspects of our business.
−Removed: However, uncertainty remains with the pandemic and such impact will ultimately depend on the length and severity of the pandemic, including new strains and variants of the virus;
−Removed: infection rates in the markets where we do business;
−Removed: the federal, state, and local government actions taken in response;
−Removed: vaccine effectiveness;
−Removed: and the macroeconomic environment.
−Removed: The effects of COVID-19 on consumer behavior have impacted the relative balance of at-home versus away-from-home food consumption and demand.
−Removed: While we continue to see strong levels of at-home consumption compared to pre-pandemic levels, the favorable impact of increased at-home meal preparation was less significant in the year ended November 30, 2022 as compared to 2021.
−Removed: This change in consumer behavior was due in part to a decrease in the prevalence and scale of restrictive measures in place to reduce the spread of COVID-19 in the 2022 period as compared to 2021.
−Removed: Conversely, we continue to see improvements in away-from-home demand associated with the COVID-19 recovery.
−Removed: During the year ended November 30, 2022, our flavor solutions segment sales improved as away-from-home consumption increased as compared to 2021, in part, due to the continued easing of restrictive COVID-19 mitigation measures in many jurisdictions compared to those that were in place during 2021.
−Removed: However, during 2022 the impact of restrictive measures related to COVID-19 resurgences in China negatively impacted consumer behavior in China as compared to 2021.
−Removed: For comparative purposes, the following provides a summary of our compounded annual growth rate in net sales as reported and on a constant currency basis for the year ended 2022 as compared to 2019:
−Removed: For the year ended November 30, 2022 as compared to the year ended November 30, 2019
−Removed: Percentage change
−Removed: as reported Impact of foreign currency exchange Percentage change on constant currency basis
−Removed: Consumer segment 4.7 % (0.2) % 4.9 %
−Removed: Flavor Solutions segment 7.7 % (0.4) % 8.1 %
−Removed: Total net sales 5.9 % (0.3) % 6.2 %
−Removed: The percentage change in our compounded annual growth rate in reported net sales and the percentage change on a constant currency basis were favorably impacted by the acquisitions of Cholula and FONA and unfavorably impacted by the sale of Kitchen Basics.
−Removed: In aggregate on a net basis, these factors contributed 0.6%, 2.1% and 1.3% 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.
−Removed: Conflict Between Russia and Ukraine – The ongoing conflict between Russia and Ukraine, and the sanctions imposed in response to this conflict, have increased global economic and political uncertainty.
−Removed: It is not possible to predict the broader or longer-term consequences of this conflict, or the sanctions imposed to date, which could include further sanctions, embargoes, regional instability, geopolitical shifts and adverse effects on macroeconomic conditions, security conditions, energy and fuel prices, currency exchange rates and financial markets.
−Removed: We announced on March 11, 2022, that we were suspending our business operations in Russia.
−Removed: In May 2022, we made the decision to exit our consumer business in Russia.
−Removed: Our operations in Ukraine were also temporarily paused in order to focus on the safety of our employees, but we have resumed, where appropriate, a reduced level of operating activities.
−Removed: While neither our operations in Russia nor Ukraine constitute a material portion of our business, a significant escalation or expansion of economic disruption or the conflict's current scope could disrupt our supply chain, broaden inflationary costs, and have a material adverse effect on our results of operations.
−Removed: Sales Growth – Over time, we expect to grow sales with similar contributions from:
+Added: 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 unchanged sentences
Base Business – We expect to drive sales growth by optimizing our brand marketing investment through improved speed, quality, and effectiveness.
−Removed: We measure the return on our brand marketing investment and have identified
−Removed: digital marketing as one of our highest return investments in brand marketing support.
+Added: 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.
5 unchanged sentences
Acquisitions – Acquisitions are expected to approximate one-third of our sales growth over time.
−Removed: Since the beginning of 2017, we have completed four acquisitions, which are driving sales in both our consumer and flavor solutions segments.
+Added: Since the beginning of 2018, we have completed two acquisitions, including our December 20, 2020 acquisition of FONA International, LLC and certain of its affiliates (FONA) and our November 30, 2020 acquisition of the parent company of Cholula Hot Sauce ® (Cholula) from L Catterton.
+Added: These acquisitions 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.
−Removed: Information with respect to our two most recent acquisitions is provided below:
−Removed: • 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.
−Removed: We financed this fiscal 2021 acquisition with cash and short-term borrowings.
−Removed: 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.
−Removed: • 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.
−Removed: Cholula is a strong addition to our global branded flavor portfolio, which 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 in both our consumer and flavor solutions segments.
−Removed: 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, as well as savings from the organization and streamlining actions described in note 3 of notes to our consolidated financial statements that includes our expected elimination of approximately $125 million of costs in 2023 and 2024 as part of our Global Operating Effectiveness program, including $100 million of supply costs and $25 million of costs across the remainder of the organization.
−Removed: Our CCI program funds brand marketing support, product innovation and other growth initiatives.
−Removed: We expect our CCI program, Global Operating Effectiveness program, and organization and streamlining actions to deliver savings of approximately $75 million in 2023.
−Removed: 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.
−Removed: As technology provides the backbone for this greater process alignment, information sharing and scalability, we are also making investments in our information systems.
−Removed: We continue to progress our global enterprise resource planning (ERP) replacement program which will enable us to accelerate the transformation of our ways of working and provide a scalable platform for growth.
−Removed: We expect that, in total over the course of the ERP replacement program for our major markets, we will invest approximately $400 million, including expenses related to the go-live activities in our operations, to enable the anticipated completion of the roll out of our new information technology platform to those markets in 2025.
−Removed: Of that projected $400 million, we expect capitalized software to account for approximately 50% and program expenses to account for approximately 50%.
−Removed: Of the approximately $200 million of operating expenses included in our projected total spending, approximately $122 million has been recognized through November 30, 2022.
−Removed: Of the approximately $200 million of capitalized software included in our projected total spending, approximately $137 million has been recognized through November 30, 2022.
−Removed: Cash Flow – Net cash provided by operating activities was $651.5 million, $828.3 million and $1,041.3 million in 2022, 2021, and 2020, respectively.
−Removed: In 2022, we continued to have a balanced use of cash for debt repayment,
−Removed: capital expenditures and the return of cash to shareholders through dividends and share repurchases.
−Removed: We are using our cash to fund shareholder dividends, with annual increases in each of the past 37 years, and to fund capital expenditures and acquisitions.
−Removed: In 2022, the return of cash to our shareholders through dividends and share repurchases was $435.5 million.
−Removed: 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.
−Removed: In 2022, we achieved further growth of our business with net sales rising 0.5% over the 2021 level due to the following factors:
−Removed: • Pricing actions, including those taken in response to the inflationary cost environment, contributed 7.7% of the increase in net s ales.
−Removed: • Volume and product mix unfavorably impacted our net sales growth by 4.5%, exclusive of acquisitions and divestitures.
−Removed: Our consumer segment experienced unfavorable volume and product mix of 9.3% which included the unfavorable impact of price elasticity as well as the impact of restrictive measures related to COVID-19 resurgences in China, the exit of our consumer operations in Russia, and the exit of our rice product line in India which collectively contributed approximately 1.5% to that decline.
−Removed: Increased volume and product mix of 3.5% in our flavor solutions segment was principally driven by the continued strength of sales to packaged food companies and the continued recovery in away-from-home demand.
−Removed: • Acquisitions contributed 0.2% of the increase in net sales.
+Added: Executive Summary
+Added: In 2023, we achieved net sales growth of 4.9% over the 2022 level due to the following factors:
+Added: • Pricing actions, taken in response to the inflationary cost environment, contributed 8.5% to the increase in net sales.
+Added: • Volume and product mix unfavorably impacted our net sales growth by 2.6%, exclusive of divestitures.
+Added: Both our consumer and flavor solutions segments experienced unfavorable volume and product mix of 3.9% and 1.0%, respectively, including the impact of price elasticity.
+Added: Our decisions to exit our consumer operations in Russia and certain low margin businesses contributed approximately 0.9% to the unfavorable impact of volume and product mix.
• Divestitures negatively impacted our net sales increase by 0.4%.
3 unchanged sentences
We recorded $61.2 million and $51.6 million of special charges in 2023 and 2022, respectively, related to organization and streamlining actions.
−Removed: Special charges in 2021 included $4.7 million in cost of goods sold related the exit of a low margin business.
−Removed: In 2022 and 2021, we also recorded $2.2 million and $35.3 million of transaction and integration expenses, respectively, related to our acquisitions of Cholula and FONA that reduced operating income.
−Removed: In 2022, compared to the year-ago period, the unfavorable impact of increased commodity, packaging materials and transportation costs and higher conversion costs more than offset the favorable impact of higher sales, which included the impact of pricing actions taken in response to the inflationary environment, $112 million of cost savings from our CCI program, including organization and streamlining actions, and lower incentive-based compensation.
−Removed: Excluding special charges and transaction and integration expenses related to our acquisitions of Cholula and FONA, adjusted operating income was $917.4 million in 2022, a decrease of 16.7%, compared to $1,101.5 million in the year-ago period.
−Removed: In constant currency, adjusted operating income declined 15.5%.
+Added: In 2022, we also recorded $2.2 million of transaction and integration expenses related to our acquisition of FONA that reduced operating income.
+Added: In 2023, the effects of pricing actions taken in response to increased costs and cost savings from our GOE and CCI programs during 2022 were partially offset by increased employee incentive compensation and higher distribution costs.
+Added: Excluding special charges and transaction and integration expenses related to our acquisition of FONA, adjusted operating income was $1,024.2 million in 2023, an increase of 11.6%, compared to $917.4 million in the year-ago period.
+Added: In constant currency, adjusted operating income increased 12.0%.
For further details and a reconciliation of non-GAAP to reported amounts, see the subsequent discussion under the heading "Non-GAAP Financial Measures".
−Removed: Diluted earnings per share was $2.52 in 2022 and $2.80 in 2021.
−Removed: The year-on-year decrease in earnings per share was primarily driven by lower operating income that was partially offset by the favorable effect of a lower level of special charges and transaction and integration expenses in 2022 as compared to 2021.
+Added: Diluted earnings per share was $2.52 in 2023 and 2022.
+Added: In 2023, diluted earnings per share was driven primarily by the impact of higher operating income, an increase in interest expense, the unfavorable effects of a decrease in other income, and an increase in income from unconsolidated operations.
Special charges and transaction and integration expenses lowered earnings per share by $0.18 and $0.15 in 2023 and 2022, respectively.
−Removed: A gain on our sale of a business increased earnings per share by $0.14 in 2022.
−Removed: A gain on our sale of an unconsolidated operation increased earnings per share by $0.05 in 2021.
−Removed: Excluding the effects of special charges, transaction and integration expenses, the gain realized from the sale of a business, and the gain realized from the sale of an unconsolidated operation, adjusted diluted earnings per share was $2.53 in 2022 and $3.05 in 2021, or a decrease of 17.0%.
−Removed: In 2023, we expect to grow net sales over the 2022 level by 5% to 7%, which includes a minimal impact of foreign currency rates.
−Removed: We anticipate that the 2023 sales growth will be driven by pricing actions, including the completion of those executed in 2022 combined with new pricing actions we are taking in 2023.
−Removed: We expect volume and product mix to be impacted by pricing elasticities, although, consistent with 2022, at a lower level than we have experienced historically.
−Removed: We anticipate that our volume and product mix will also be impacted by the combined impact of lapping last year’s COVID-related disruptions in China, the divestiture of our Kitchen Basics brand in the third quarter of last year, the exit of our consumer business in Russia during the second quarter of last year, and the pruning of low margin businesses.
+Added: A gain on our
+Added: sale of a business increased earnings per share by $0.14 in 2022.
+Added: Excluding the effects of special charges, transaction and integration expenses, and the gain realized from the sale of a business, adjusted diluted earnings per share was $2.70 in 2023 and $2.53 in 2022, or an increase of 6.7%.
+Added: Net cash provided by operating activities was $1,237.3 million, $651.5 million and $828.3 million in 2023, 2022, and 2021, respectively.
+Added: In 2023, 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.
+Added: We are using our cash to fund shareholder dividends, with annual increases in each of the past 38 years, and to fund capital expenditures and acquisitions.
+Added: In 2023, the return of cash to our shareholders through dividends and share repurchases was $454.2 million.
+Added: A detailed review of our fiscal 2023 performance compared to fiscal 2002 appears in the section titled “Results of Operations – 2023 Compared to 2022”.
+Added: Recent Events
+Added: During fiscal 2022 and fiscal 2023, we experienced inflationary cost increases in our commodities, packaging materials and transportation costs.
+Added: While we continued to experience significant input cost inflation throughout fiscal 2023, our pricing actions, combined with cost savings from our Global Operating Effectiveness (GOE) program and our Comprehensive Continuous Improvement (CCI) program assisted in a 180-basis point recovery to gross margin.
+Added: Additionally, in some instances, the pricing actions we take have been impacted by consumer behavior, or price elasticity, which unfavorably impacts our sales volume and mix.
+Added: While we are seeing moderation in input cost inflation, we do expect inflationary pressures to persist into fiscal 2024.
+Added: However, we anticipate GOE program and CCI program-led cost savings as well as previously implemented pricing actions to mitigate those inflationary pressures.
+Added: We will also be lapping 2023 price increases and anticipate favorable net price realization in 2024.
+Added: We are fueling our investment in growth with cost savings from our CCI program, an ongoing initiative to improve productivity and reduce costs throughout the organization, as well as savings from the organization and streamlining actions described in note 3 of notes to our consolidated financial statements that includes our GOE program.
+Added: Our CCI and GOE programs both delivered cost savings in 2023.
+Added: Our CCI program funds brand marketing support, product innovation and other growth initiatives.
+Added: We expect our CCI program, GOE program, and organization and streamlining actions to deliver additional savings in 2024.
+Added: We are making investments to build the McCormick of the future, including in our Global Business Services (GBS) organization, to transform McCormick through globally aligned, innovative services to enable growth.
+Added: As technology provides the backbone for this greater process alignment, information sharing and scalability, we are also making investments in our information systems.
+Added: We continue to progress our global enterprise resource planning (ERP) replacement program which will enable us to accelerate the transformation of our ways of working and provide a scalable platform for growth.
+Added: We will concentrate our global ERP focus on our operations in the U.S.
+Added: over the next several years, or through 2027.
+Added: We expect that our annual capital expenditures, including the capitalized software associated with our ERP program, over the next several years will continue to approximate 4% of our sales.
+Added: We expect that our operating expenses associated with our global ERP program through 2027 will approximate $35 million to $50 million annually.
+Added: In 2024, we expect net sales to range from a decline of 2% to 0% from our net sales in 2023 including a 1% unfavorable impact of foreign currency rates, or to range from a decline of 1% to an increase of 1% on a constant currency basis.
+Added: We anticipate that the 2024 sales change will include a favorable impact from previously implemented pricing actions.
+Added: We anticipate that our volume and product mix will be impacted by the divestiture of our Giotti canning business in the third quarter of last year, and the pruning of low margin businesses.
We expect our 2024 gross profit margin to range from 50 basis points to 100 basis points higher than our gross profit margin of 37.6% in 2023.
−Removed: The projected 2023 increase in gross profit margin is principally due to the net effect of (i) the favorable impact of pricing actions in response to increased commodity, packaging materials and transportation costs, (ii) the favorable impact of anticipated Global Operating Effectiveness Program and CCI cost savings, and (iii) a low to mid-teen percentage impact of inflation in 2023 compared to 2022.
−Removed: As we recover the cost inflation of our pricing that has lagged in the past two years, we expect cost pressures to be more than offset by pricing actions and our expected cost savings in 2023.
−Removed: In 2023, we expect an increase in operating income of 10% to 12%, which includes a minimal impact from foreign currency rates, over the 2022 level.
−Removed: The projected 2023 change in operating income includes the effects of cost savings from our Global Operating Effectiveness Program and lapping the COVID-19 restrictive measures in China during 2022, which we anticipate will be partially offset by increased employee incentive compensation and the impact of our Kitchen Basics divestiture.
−Removed: Our CCI-led cost savings target in 2023 is approximately $85 million.
−Removed: We expect that the absence of $2.2 million of integration expenses related to the FONA acquisition in 2022 to favorably impact operating income in 2023.
+Added: The projected 2024 increase in gross profit margin is principally due to the net effect of (i) the favorable impact of pricing actions, (ii) the favorable impacts of product mix, (iii) the favorable impact of anticipated Global Operating Effectiveness Program and CCI cost savings, and (iv) a low single-digit percentage impact of inflation in 2024 compared to 2023.
+Added: In 2024, we expect an increase in operating income of 8% to 10%, which includes a 1% unfavorable impact from foreign currency rates, over the 2023 level.
+Added: The projected 2024 change in operating income includes the effects of
+Added: the anticipated increase in our gross profit margin as well as SG&A cost savings from our CCI and GOE programs, which will be partially offset by our investments to drive volume growth, including brand marketing.
+Added: We expect our brand marketing investments in 2024 to increase in the high-single digits over the 2023 level.
We also expect approximately $15 million of special charges in 2024 that relate to previously announced organization and streamlining actions;
in 2023, special charges were $61.2 million.
−Removed: Excluding special charges and transaction and integration expenses, we expect 2023’s adjusted operating income to increase by 9% to 11%, which includes a minimal impact from foreign currency rates.
−Removed: We estimate that our interest expense will range from $200 to $210 million in 2023, with the increase over 2022 being driven by the higher interest-rate environment which will impact our variable rate debt.
−Removed: In 2023, we will also lap the favorable effects associated with the termination of interest rate contracts.
−Removed: These contracts were entered into to manage the interest rate risk associated with our then anticipated issuance of fixed rate debt, which favorably impacted other income, net in 2022.
−Removed: Our underlying effective tax rate is projected to be higher in 2023 than in 2022.
+Added: Excluding special charges, we expect 2024’s adjusted operating income to increase by 3% to 5%, which includes a 1% unfavorable impact from foreign currency rates, or to increase by 4% to 6% on a constant currency basis.
We estimate that our 2024 effective tax rate, including the net favorable impact of anticipated discrete tax items, will be 22% as compared to 21.8% in 2023.
−Removed: Excluding projected taxes associated with special charges, we estimate that our adjusted effective tax rate will be approximately 22% in 2023, as compared to an adjusted effective tax rate of 20.9% in 2022.
+Added: Excluding projected taxes associated with special charges, we estimate that our adjusted effective tax rate will be approximately 22% in 2024, or comparable to an adjusted effective tax rate of 22.0% in 2023.
+Added: We also expect that our income from unconsolidated operations, including the performance of our largest joint venture, McCormick de Mexico, will increase by a mid-teens percentage rate over the 2023 level.
Diluted earnings per share was $2.52 in 2023.
Diluted earnings per share for 2024 is projected to range from $2.76 to $2.81.
−Removed: Excluding the per share impact of (i) special charges of $51.6;
−Removed: (ii) integration expenses of $2.2 million;
−Removed: and (iii) the gain realized upon our sale of Kitchen Basics of $49.6 million, adjusted diluted earnings per share was $2.53 in 2022.
−Removed: Adjusted diluted earnings per share, excluding an estimated per share impact from special charges of $0.14, is projected to range from $2.56 to $2.61 in 2023.
−Removed: We expect adjusted diluted earnings per share to grow by 1% to 3% over adjusted diluted earnings per share of $2.53 in 2022, including a minimal impact from foreign currency rates.
+Added: Excluding the per share impact of special charges of $61.2 million adjusted diluted earnings per share was $2.70 in 2023.
+Added: Adjusted diluted earnings per share, excluding an estimated per share impact from special charges of $0.04, is projected to range from $2.80 to $2.85 in 2024, or an increase of 4% to 6% over adjusted diluted earnings per share of $2.70 in 2023.
RESULTS OF OPERATIONS—2023 COMPARED TO 2022
2 unchanged sentences
Components of percent growth in net sales – increase (decrease):
+Added: Pricing actions 8.5 % 7.7 %
Volume and product mix (2.6) % (4.5) %
+Added: Acquisitions — % 0.2 %
+Added: Divestiture (0.4) % (0.4) %
+Added: Foreign exchange (0.6) % (2.5) %
+Added: Sales for 2023 increased by 4.9% from 2022 and by 5.5% on a constant currency basis (that is, excluding the impact of foreign currency exchange as more fully described under the caption, Non-GAAP Financial Measures).
+Added: Pricing actions, taken in response to the inflationary cost environment, increased sales by 8.5% compared to the prior year period.
+Added: Unfavorable volume and product mix decreased sales by 2.6% with declines in both our consumer and flavor solutions segments.
+Added: Our decisions to exit our consumer operations in Russia and discontinue certain low margin businesses contributed approximately 0.9% to the unfavorable impact of volume and product mix.
+Added: The divestiture of our Kitchen Basics business and the Giotti canning business unfavorably impacted sales by 0.4% as compared to the prior year.
+Added: Sales were impacted by unfavorable foreign currency rates that decreased sales by 0.6% in 2023 as compared to the prior year and are excluded from our measure of sales growth of 5.5% on a constant currency basis.
+Added: Gross profit $ 2,502.5 $ 2,274.5
+Added: Gross profit margin 37.6 % 35.8 %
+Added: In 2023, gross profit increased by $228.0 million, or 10.0%, from 2022.
+Added: Our gross profit margin for 2023 was 37.6%, an increase of 180 basis points from 35.8% in 2022.
+Added: The increase was driven by the favorable impact of our pricing actions taken in response to increased costs, favorable product mix within our segments, and cost savings led by our CCI and GOE programs.
+Added: These favorable impacts were partially offset by increased commodity costs, higher conversion costs, and unfavorable segment mix, all as compared to the 2022 period.
+Added: Selling, general & administrative expense $ 1,478.3 $ 1,357.1
+Added: Percent of net sales 22.2 % 21.4 %
+Added: Selling, general and administrative (SG&A) expense increased by $121.2 million in 2023 as compared to 2022.
+Added: That increase in SG&A expense was primarily a result of higher performance-based employee incentive expense, increased distribution costs, increased selling and marketing costs, and higher advertising and promotional spend which were partially offset by CCI-led and GOE cost savings and favorable investment results associated with non-qualified retirement plan assets, all as compared to 2022.
+Added: SG&A as a percent of net sales for 2023 increased by 80 basis points from the prior year level, as the net impact of the previously mentioned factors was partially offset by the impact of the higher sales base.
+Added: Total special charges $ 61.2 $ 51.6
+Added: 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.
+Added: 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.
+Added: During 2023, we recorded $61.2 million of special charges, consisting principally of (i) $42.8 million associated with the GOE program, (ii) $8.7 million associated with the transition of a manufacturing facility in EMEA, and (iii) streamlining actions of $8.8 million in the Americas region and $0.9 million in the EMEA region.
+Added: During 2022, we recorded $51.6 million of special charges, consisting principally of (i) $23.3 million associated with the exit of our consumer business in Russia, (ii) $21.5 million associated with the transition of a manufacturing facility in EMEA, and (iii) streamlining actions of $8.0 million in the Americas region and $7.1 million in the EMEA region, and (iv) $5.6 million associated with a U.S.
+Added: voluntary retirement program.
+Added: As more fully described in note 3 of our notes of consolidated financial statements, these charges were partially offset by a $13.6 million gain on the sale of our Kohinoor brand that was associated with the rice product line in India that we exited in the fourth quarter of fiscal 2021, as well as a reversal of $2.2 million of estimated costs associated with that rice product line exit upon settlement of a supply agreement related to that product line.
+Added: Details with respect to the composition of special charges are included in the accompanying notes to our financial statements contained in Item 8 of this report.
+Added: Total transaction and integration expenses $ — $ 2.2
+Added: During 2022, we recorded integration expenses of $2.2 million related to our acquisition of FONA.
+Added: Operating income $ 963.0 $ 863.6
+Added: Percent of net sales 14.5 % 13.6 %
+Added: Operating income increased by $99.4 million, or 11.5%, from $863.6 million in 2022 to $963.0 million in 2023.
+Added: Special charges and transaction and integration expenses increased by $7.4 million in 2023, as compared to 2022, and negatively impacted operating income.
+Added: Operating income as a percentage of net sales increased by 90 basis points in 2023, to 14.5% in 2023 from 13.6% in 2022 as a result of the factors previously described.
+Added: Excluding the effect of special charges and transaction and integration expenses previously described, adjusted operating income was $1,024.2 million in 2023 as compared to $917.4 million in 2022, an increase of $106.8 million or 11.6% from the 2022 level.
+Added: Adjusted operating income as a percentage of net sales increased by 100 basis points in 2023, to 15.4% in 2023 from 14.4% in 2022.
+Added: Interest expense $ 208.2 $ 149.1
+Added: Other income, net 43.9 98.3
+Added: Interest expense was $59.1 million higher in 2023 as compared to the prior year as the effects of the higher interest rate environment more than offset lower average borrowing levels.
+Added: Other income, net for 2022 included a $49.6 million gain on the sale of our Kitchen Basics business and $18.7 million associated with the settlement of treasury lock arrangements both of which are more fully described in the notes to the accompanying condensed
+Added: consolidated financial statements.
+Added: These were partially offset by higher interest income in 2023, also principally associated with the higher interest rate environment.
+Added: Income from consolidated operations before income taxes $ 798.7 $ 812.8
+Added: Income tax expense 174.5 168.6
+Added: Effective tax rate 21.8 % 20.7 %
+Added: The effective tax rate was 21.8% in 2023 as compared to 20.7% in 2022.
+Added: The increase in our effective tax rate was principally attributable to the effects of the lower level of net discrete tax benefits in 2023 as compared to 2022.
+Added: Net discrete tax benefits were $9.6 million in 2023, a decrease of $18.0 million from $27.6 million in 2022.
+Added: Discrete tax benefits in both the 2023 and 2022 periods included excess tax benefits associated with stock-based compensation ($0.8 million and $9.1 million in 2023 and 2022, respectively), the reversal of reserves for unrecognized tax benefits ($5.6 million and $6.9 million in 2023 and 2022, respectively) due to, in 2023 the net reversal of reserves for unrecognized tax benefits and related interest in non-U.S.
+Added: jurisdictions and tax benefits related to a tax settlement, and in both years due to the expiration of the statutes of limitations, the release of valuation allowances due to a change in judgment about realizability of deferred tax assets ($3.2 million and $4.6 million in 2023 and 2022, respectively), and other discrete items.
+Added: In 2023, other discrete tax benefits included $0.9 million of tax benefits resulting from an adjustment to a prior year tax accrual, and related deferred taxes, based on the final returns filed and $1.8 million of tax expense related to certain unremitted prior year earnings.
+Added: In 2022, other discrete tax benefits included $3.9 million related to the revaluation of deferred taxes resulting from enacted legislation and $2.3 million of tax benefits related to the sale of an asset associated with a previously exited line of business.
+Added: See note 13 of notes to our consolidated financial statements for a more detailed reconciliation of the U.S.
+Added: federal tax rate with the effective tax rate.
+Added: Income from unconsolidated operations $ 56.4 $ 37.8
+Added: Income from unconsolidated operations, which is presented net of the elimination of earnings attributable to non-controlling interests, increased by $18.6 million in 2023 from the prior year.
+Added: The increase for 2023 as compared to 2022 was primarily driven by higher earnings of McCormick de Mexico.
+Added: We own 50% of most of our unconsolidated joint ventures, including our largest joint venture, McCormick de Mexico, that comprised 95% and 84% of the income of our unconsolidated operations in 2023 and 2022, respectively.
+Added: We reported diluted earnings per share of $2.52 in 2023 and 2022.
+Added: The table below outlines the major components of the change in diluted earnings per share from 2022 to 2023.
+Added: 2022 Earnings per share—diluted $ 2.52
+Added: Increase in operating income 0.31
+Added: Increase in special charges, net of taxes (0.04)
+Added: Decrease in transaction and integration expenses, net of taxes 0.01
+Added: Impact from gain on the sale of a business, net of taxes (0.14)
+Added: Decrease in other income, excluding gain on the sale of a business (0.01)
+Added: Increase in interest expense (0.17)
+Added: Increase in income from unconsolidated operations 0.07
+Added: Impact of change in effective income tax rate, excluding taxes on special charges, transaction and integration expenses, and the sale of a business (0.03)
+Added: 2023 Earnings per share—diluted $ 2.52
+Added: Results of Operations—Segments
+Added: We measure the performance of our business segments based on operating income, excluding special charges and transaction and integration expenses related to our acquisitions.
+Added: 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.
+Added: the following discussion, we refer to our previously described measure of segment profit as "Segment operating income."
+Added: Consumer Segment
+Added: Net sales $ 3,807.3 $ 3,757.9
+Added: Percent - increase (decline) 1.3 % (4.6) %
+Added: Components of percent change in net sales - increase (decrease):
Pricing actions 6.5 % 7.4 %
+Added: Volume and product mix (3.9) % (9.3) %
+Added: Divestiture (0.5) % (0.6) %
+Added: Foreign exchange (0.8) % (2.1) %
+Added: Segment operating income $ 735.5 $ 710.7
+Added: Segment operating income margin 19.3 % 18.9 %
+Added: Sales of our consumer segment in 2023 increased by 1.3% as compared to 2022 and increased by 2.1% on a constant currency basis.
+Added: Pricing actions taken in our consumer business in all regions increased sales by 6.5% in 2023 as compared to 2022.
+Added: Lower volume and unfavorable product mix decreased sales by 3.9%, driven primarily by the impact of price elasticity.
+Added: Volume and product mix includes the unfavorable impact of our decisions to exit our consumer business in Russia and discontinue certain low margin businesses of 1.3%.
+Added: The divestiture of our Kitchen Basics business unfavorably impacted sales by 0.5% as compared to 2022.
+Added: An unfavorable impact from foreign currency rates decreased sales by 0.8% compared to the prior year and is excluded from our measure of sales increase of 2.1% on a constant currency basis.
+Added: In the Americas region, consumer sales increased 0.4% in 2023 as compared to 2022 and increased by 0.8% on a constant currency basis.
+Added: Pricing actions, taken in response to inflationary cost environment, increased sales by 5.8% as compared to the prior year period.
+Added: Unfavorable volume and product mix decreased sales by 4.3% as compared to the corresponding period in 2022, including the unfavorable impact of price elasticity and the effects of the inflationary environment impacting consumer spending.
+Added: This reduction included an approximately 1.2% impact of our decision to discontinue a low margin business.
+Added: The sale of our Kitchen Basics business unfavorably impacted sales by 0.7% as compared to 2022.
+Added: The unfavorable impact of foreign currency rates decreased sales by 0.4% in the year and is excluded from our measure of sales increase of 0.8% on a constant currency basis.
+Added: In the EMEA region, consumer sales increased 7.1% in 2023 as compared to 2022 and increased by 6.2% on a constant currency basis.
+Added: Pricing actions, taken in response to the inflationary cost environment, increased sales by 11.1% as compared to 2022.
+Added: Sales were impacted by unfavorable volume and product mix that decreased sales by 4.9% from the prior year level, including a 2.0% impact associated with the exit of our consumer operations in Russia.
+Added: The favorable impact of foreign currency exchange rates increased sales by 0.9% compared to 2022 and is excluded from our measure of sales increase of 6.2% on a constant currency basis.
+Added: In the APAC region, consumer sales decreased 1.1% in 2023 as compared to 2022 and increased by 5.1% on a constant currency basis.
+Added: Pricing actions, taken in response to the inflationary cost environment, increased sales by 5.1% as compared to the prior year period.
+Added: Volume and product mix were comparable to 2022.
+Added: The unfavorable impact from foreign currency rates decreased sales by 6.2% compared to the year-ago period and is excluded from our measure of sales increase of 5.1% on a constant currency basis.
+Added: Segment operating income for our consumer segment increased by $24.8 million, or 3.5%, in 2023 as compared to 2022.
+Added: The increase in segment operating income was driven by the effects of an increase in gross profit primarily driven by the higher level of sales, favorable pricing actions in response to increased costs, favorable product mix within the segment, and CCI-led and GOE cost savings, which were partially offset by higher commodity costs and higher SG&A expenses, including higher performance-based employee incentive expenses, increased distribution costs, and increased advertising and promotional expenses, all as compared to the prior year.
+Added: Segment operating margin for our consumer segment increased by 40 basis points in 2023 to 19.3%, driven by an increase in consumer gross profit margin as previously discussed which was partially offset by a higher level of SG&A as a percentage of sales, principally due to the factors previously described, all as compared to the 2022 level.
+Added: On a constant currency basis, segment operating income for our consumer segment increased by 4.4% in 2023, as compared to 2022.
+Added: Flavor Solutions Segment
+Added: Net sales $ 2,854.9 $ 2,592.6
+Added: Percent growth 10.1 % 8.9 %
+Added: Components of percent growth in net sales – increase (decrease):
+Added: Pricing actions 11.4 % 8.2 %
+Added: Volume and product mix (1.0) % 3.5 %
+Added: Acquisition — % 0.4 %
+Added: Divestiture (0.1) % — %
+Added: Foreign exchange (0.2) % (3.2) %
+Added: Segment operating income $ 288.7 $ 206.7
+Added: Segment operating income margin 10.1 % 8.0 %
+Added: Sales of our flavor solutions segment increased 10.1% in 2023 as compared to 2022 and increased by 10.3% on a constant currency basis.
+Added: Pricing actions, taken in response to increased costs, across all regions increased sales by 11.4% in 2023 and was partially offset by 1.0% of unfavorable volume and product mix, both in comparison to the prior year levels.
+Added: The divestiture of our Giotti canning business unfavorably impacted sales by 0.1% as compared to the prior year.
+Added: An unfavorable impact from foreign currency rates decreased sales by 0.2% compared to the prior year and is excluded from our measure of sales growth of 10.3% on a constant currency basis.
+Added: In the Americas region, flavor solutions sales increased by 10.7% during 2023 as compared to 2022 and increased by 9.6% on a constant currency basis.
+Added: Pricing actions, taken in response to the inflationary cost environment, favorably impacted sales by 9.8% during 2023, as compared to the prior year.
+Added: Unfavorable volume and product mix decreased flavor solutions sales in the Americas by 0.2% during 2023, including the effects of growth in sales to packaged food and beverage and nutrition and healthcare companies, as compared to the prior year.
+Added: A favorable impact from foreign currency rates increased sales by 1.1% compared to 2022 and is excluded from our measure of sales growth of 9.6% on a constant currency basis.
+Added: In the EMEA region, flavor solutions sales in 2023 increased by 10.3% as compared to 2022 and increased by 12.2% on a constant currency basis.
+Added: Pricing actions, taken in response to the inflationary cost environment, favorably impacted sales by 18.8% in 2023 as compared to the prior period level.
+Added: Unfavorable volume and product mix decreased segment sales by 5.9% in 2023 as compared to 2022, including the effects of the inflationary environment impacting consumer spending at quick service restaurants and packaged food and beverage companies and approximately 1.3% impact of our decision to discontinue a low margin business.
+Added: The divestiture of our Giotti canning business unfavorably impacted sales by 0.7% as compared to the prior year.
+Added: An unfavorable impact from foreign currency rates decreased sales by 1.9% compared to 2022 and is excluded from our measure of sales growth of 12.2% on a constant currency basis.
+Added: In the APAC region, flavor solutions sales increased 5.6% in 2023 as compared to 2022 and increased by 11.0% on a constant currency basis.
+Added: Pricing actions, taken in response to the inflationary cost environment, favorably impacted sales by 7.0% as compared to the prior year period.
+Added: Favorable volume and product mix increased sales by 4.0%, driven by higher sales to quick service restaurant customers, partially impacted by the timing of customers' promotional activities.
+Added: An unfavorable impact from foreign currency rates decreased sales by 5.4% compared to 2022 and is excluded from our measure of sales growth of 11.0% on a constant currency basis.
+Added: Segment operating income for our flavor solutions segment increased by $82.0 million, or 39.7%, in 2023 as compared to 2022.
+Added: The increase in segment operating income was driven by the effects of an increase in gross profit primarily due to the higher level of sales, favorable pricing in response to increased costs, favorable product mix within the segment, and CCI-led and GOE cost savings which more than offset increased commodity and conversion costs and the higher level of SG&A expenses, including higher performance-based employee incentive expense and increased distribution costs, all as compared to the prior year.
+Added: Segment operating margin for our flavor solutions segment increased by 210 basis points in 2023 to 10.1%, driven by a higher segment gross margin, as previously described.
+Added: On a constant currency basis, segment operating income for our flavor solutions segment increased by 38.5% in 2023, as compared to 2022.
+Added: RESULTS OF OPERATIONS—2022 COMPARED TO 2021
+Added: Net sales $ 6,350.5 $ 6,317.9
+Added: Percent growth 0.5 % 12.8 %
+Added: Components of percent growth in net sales – increase (decrease):
+Added: Volume and product mix (4.5) % 5.5 %
+Added: Pricing actions 7.7 % 0.8 %
Acquisitions 0.2 % 4.1 %
9 unchanged sentences
Gross profit margin 35.8 % 39.5 %
−Removed: In 2022, gross profit decreased by $220.1 million, or 8.8%, from the comparable period in 2021.
+Added: In 2022, gross profit decreased by $220.1 million, or 8.8%, from 2021.
Our gross profit margin for 2022 was 35.8%, a decrease of 370 basis points from 39.5% in 2021.
1 unchanged sentence
These unfavorable impacts were partially offset by cost savings led by our CCI program.
−Removed: In addition, our gross profit for 2021 was burdened by (i) $6.3 million of transaction expense, representing the amortization of the fair value adjustment to the acquired inventories of Cholula and FONA upon our sale of those acquired inventories in the first quarter of fiscal 2021 and (ii) a non-cash special charge of $4.7 million associated with the exit of a low margin business in our Asia/Pacific region.
+Added: In addition, our gross profit for 2021 was burdened by (i) $6.3 million of transaction expense, representing the amortization of the fair value adjustment to the acquired inventories of Cholula and FONA upon our sale of those acquired inventories in the first quarter of fiscal 2021 and (ii) a non-cash special charge of $4.7 million associated with the exit of a low margin business in our APAC region.
Excluding those transaction and integration expenses and special charges, adjusted gross profit margin declined 390 basis points to 35.8% in 2022 from 39.7% in 2021.
10 unchanged sentences
Total special charges $ 51.6 $ 51.1
−Removed: 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.
+Added: 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
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.
−Removed: During 2022, we recorded $51.6 million of special charges, consisting principally of (i) $23.3 million associated with the exit of our consumer business in Russia, (ii) $21.5 million associated with the transition of a manufacturing facility in EMEA, and (iii) streamlining actions of $8.0 million in the Americas region, $7.1 million in the EMEA region, and (iv) $5.6 million associated with a U.S.
+Added: During 2022, we recorded $51.6 million of special charges, consisting principally of (i) $23.3 million associated with the exit of our consumer business in Russia, (ii) $21.5 million associated with the transition of a manufacturing facility in EMEA, and (iii) streamlining actions of $8.0 million in the Americas region and $7.1 million in the EMEA region, and (iv) $5.6 million associated with a U.S.
voluntary retirement program.
23 unchanged sentences
Effective tax rate 20.7 % 21.5 %
−Removed: 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.
−Removed: 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.
−Removed: Examples of such types of discrete items not related to ordinary income include, but are not limited to, excess tax benefits associated with stock-based compensation, changes in estimates of the outcome of tax matters related to prior years, including reversals of reserves upon the lapsing of statutes of limitations, provision-to-return adjustments, the settlement of tax audits, changes in enacted tax rates, changes in the assessment of deferred tax valuation allowances, acquisition related deferred tax adjustments, and the tax effects of certain intra-entity asset transfers (other than inventory).
The effective tax rate was 20.7% in 2022 as compared to 21.5% in 2021.
25 unchanged sentences
Results of Operations—Segments
−Removed: We measure the performance of our business segments based on operating income, excluding special charges and transaction and integration expenses related to our acquisitions.
−Removed: 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.
−Removed: In the following discussion, we refer to our previously described measure of segment profit as "Segment operating income."
Consumer Segment
4 unchanged sentences
Pricing actions 7.4 % 0.6 %
−Removed: Acquisitions — % 2.4 %
−Removed: Divestitures (0.6) % — %
+Added: Acquisition — % 2.4 %
+Added: Divestiture (0.6) % — %
Foreign exchange (2.1) % 2.2 %
2 unchanged sentences
Sales of our consumer segment in 2022 decreased by 4.6% as compared to 2021 and decreased by 2.5% on a constant currency basis.
−Removed: The sales decrease was driven by lower sales of our consumer business in the Americas, EMEA and Asia/Pacific regions.
+Added: The sales decrease was driven by lower sales of our consumer business in the Americas, EMEA and APAC regions.
Lower volume and unfavorable product mix decreased sales by 9.3%.
14 unchanged sentences
The unfavorable impact of foreign currency exchange rates decreased sales by 9.6% compared to 2021 and is excluded from our measure of sales decline of 5.1% on a constant currency basis.
−Removed: In the Asia/Pacific region, consumer sales decreased 10.1% in 2022 as compared to 2021 and decreased by 8.1% on a constant currency basis.
+Added: In the APAC region, consumer sales decreased 10.1% in 2022 as compared to 2021 and decreased by 8.1% on a constant currency basis.
Lower volume and unfavorable product mix decreased sales by 11.5% as compared to the corresponding period in 2021.
9 unchanged sentences
Percent growth 8.9 % 18.7 %
−Removed: Components of percent growth in net sales – increase (decrease):
+Added: Components of percent change in net sales – increase (decrease):
Volume and product mix 3.5 % 7.2 %
18 unchanged sentences
An unfavorable impact from foreign currency rates decreased sales by 11.7% compared to 2021 and is excluded from our measure of sales growth of 17.2% on a constant currency basis.
−Removed: In the Asia/Pacific region, flavor solutions sales decreased 0.2% in 2022 as compared to 2021 and increased by 5.2% on a constant currency basis.
+Added: In the APAC region, flavor solutions sales decreased 0.2% in 2022 as compared to 2021 and increased by 5.2% on a constant currency basis.
Favorable volume and product mix increased sales by 0.3%, driven by higher sales to quick service restaurant customers, partially impacted by the timing of customers' promotional activities.
3 unchanged sentences
The decrease in segment operating income was driven by increased commodity, transportation and conversion costs, as well as costs related to supply chain investments, which were partially offset by a higher level of sales, including pricing actions in response to the inflationary cost environment, and CCI-led cost savings, all as compared to the prior year.
−Removed: Segment operating margin for our flavor solutions segment decreased by 450
−Removed: basis points in 2022 to 8.0% driven by a lower segment gross margin, including the margin dilutive impact of pricing actions, the impact of the inflationary cost environment, and higher conversion costs, including the costs related to our supply chain investments, partially offset by CCI-led cost savings and a decrease in SG&A as percentage of sales associated with the favorable impact of fixed and semi-fixed expenses over a higher sales base, all as compared to the 2021 level.
+Added: Segment operating margin for our flavor solutions segment decreased by 450 basis points in 2022 to 8.0% driven by a lower segment gross margin, including the margin dilutive impact of pricing actions, the impact of the inflationary cost environment, and higher conversion costs, including the costs related to our supply chain investments, partially offset by CCI-led cost savings and a decrease in SG&A as percentage of sales associated with the favorable impact of fixed and semi-fixed expenses over a higher sales base, all as compared to the 2021 level.
On a constant currency basis, segment operating income for our flavor solutions segment decreased by 27.9% in 2022, as compared to 2021.
−Removed: RESULTS OF OPERATIONS—2021 COMPARED TO 2020
−Removed: Net sales $ 6,317.9 $ 5,601.3
−Removed: Percent growth 12.8 % 4.7 %
−Removed: Components of percent growth in net sales – increase (decrease):
−Removed: Volume and product mix 5.5 % 3.7 %
−Removed: Pricing actions 0.8 % 1.6 %
−Removed: Acquisitions 4.1 % — %
−Removed: Foreign exchange 2.4 % (0.6) %
−Removed: Sales for 2021 increased by 12.8% from 2020 and by 10.4% on a constant currency basis.
−Removed: That 12.8% sales increase was driven by higher sales in both our consumer and flavor solutions segments.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: Gross profit $ 2,494.6 $ 2,300.4
−Removed: Gross profit margin 39.5 % 41.1 %
−Removed: In 2021, our gross profit margin decreased 160 basis points to 39.5% from 41.1% in 2020.
−Removed: 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.
−Removed: 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.
−Removed: 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 associated with the exit of a low margin business in our Asia/Pacific region.
−Removed: 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.
−Removed: Selling, general & administrative expense $ 1,404.1 $ 1,281.6
−Removed: Percent of net sales 22.3 % 22.9 %
−Removed: 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.
−Removed: That increase in SG&A expense was primarily a result of (i) SG&A associated with the Cholula and FONA acquisitions;
−Removed: (ii) greater selling and distribution expenses associated with the higher sales volume;
−Removed: and (iii) increased brand marketing costs, all as compared to the corresponding period in 2020.
−Removed: Those increases were partially offset by lower performance-based employee incentive expenses, as compared to the prior year.
−Removed: 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.
−Removed: Special charges included in cost of goods sold $ 4.7 $ —
−Removed: Other special charges 46.4 6.9
−Removed: Total special charges $ 51.1 $ 6.9
−Removed: We regularly evaluate whether to implement changes to our organization structure to reduce fixed costs, simplify and/or improve processes, and improve our competitiveness, and we expect to continue to evaluate such actions in the future.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: Transaction expenses included in cost of goods sold $ 6.3 $ —
−Removed: Other transaction and integration expenses 29.0 12.4
−Removed: Total transaction and integration expenses $ 35.3 $ 12.4
−Removed: During 2021, we recorded transaction and integration expenses of $35.3 million related to our acquisitions of Cholula and FONA.
−Removed: 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.
−Removed: Transaction and integration expenses related to our acquisitions of Cholula and FONA of $11.2 million and $1.2 million, respectively, were incurred late in fiscal 2020.
−Removed: Operating income $ 1,015.1 $ 999.5
−Removed: Percent of net sales 16.1 % 17.8 %
−Removed: Operating income increased by $15.6 million, or 1.6%, from $999.5 million in 2020 to $1,015.1 million in 2021.
−Removed: Special charges and transaction and integration expenses increased by $67.1 million in 2021, as compared to 2020, and negatively impacted operating income.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: Interest expense $ 136.6 $ 135.6
−Removed: Other income, net 17.3 17.6
−Removed: 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.
−Removed: Other income, net for 2021 decreased by $0.3 million
−Removed: 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.
−Removed: 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.
−Removed: Income from consolidated operations before income taxes $ 895.8 $ 881.5
−Removed: Income tax expense 192.7 174.9
−Removed: Effective tax rate 21.5 % 19.8 %
−Removed: 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.
−Removed: 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.
−Removed: Examples of such types of discrete items not related to ordinary income include, but are not limited to, excess tax benefits associated with stock-based compensation, changes in estimates of the outcome of tax matters related to prior years, including reversals of reserves upon the lapsing of statutes of limitations, provision-to-return adjustments, the settlement of tax audits, changes in enacted tax rates, changes in the assessment of deferred tax valuation allowances, acquisition related deferred tax adjustments, and the tax effects of certain intra-entity asset transfers (other than inventory).
−Removed: The effective tax rate was 21.5% in 2021 as compared to 19.8% in 2020.
−Removed: 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.
−Removed: Net discrete tax benefits were $26.6 million in 2021, a decrease of $16.8 million from $43.4 million in 2020.
−Removed: Discrete tax benefits in both the 2021 and 2020 periods included excess tax benefits associated with stock-based compensation ($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.
−Removed: jurisdiction based on a change in our assessment of the technical merits of that position associated with the availability of new information, and in both years due to the expiration of the statutes of limitations, the release of valuation allowances due to a change in judgment about realizability of deferred tax assets ($4.4 million and $11.9 million in 2021 and 2020, respectively) and other discrete items.
−Removed: 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.
−Removed: In 2020, discrete tax items included $9.9 million of tax benefits associated with intra-entity asset transfers that occurred.
−Removed: See note 13 of notes to our consolidated financial statements for a more detailed reconciliation of the U.S.
−Removed: federal tax rate with the effective tax rate.
−Removed: Income from unconsolidated operations $ 52.2 $ 40.8
−Removed: 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.
−Removed: (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.
−Removed: We own 50% of most of our unconsolidated joint ventures, including our largest joint venture, McCormick de Mexico, that comprised 62% and 75% of the income of our unconsolidated operations in 2021 and 2020, respectively.
−Removed: 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.
−Removed: We reported diluted earnings per share of $2.80 in 2021, compared to $2.78 in 2020.
−Removed: The table below outlines the major components of the change in diluted earnings per share from 2020 to 2021.
−Removed: The increase in operating income in the table below includes the impact from favorable currency exchange rates in 2021.
−Removed: 2020 Earnings per share—diluted $ 2.78
−Removed: Increase in operating income 0.25
−Removed: Increase in special charges (0.15)
−Removed: Increase in transaction and integration expenses, including impact of net discrete tax item related to FONA acquisition (0.10)
−Removed: Impact of income taxes, excluding taxes on special charges and transaction and integration expenses (0.01)
−Removed: Increase in income from unconsolidated operations, including the after-tax gain on sale of unconsolidated operation of
−Removed: $0.05 per diluted share 0.04
−Removed: Impact of higher shares (0.01)
−Removed: 2021 Earnings per share—diluted $ 2.80
−Removed: Results of Operations—Segments
−Removed: Consumer Segment
−Removed: Net sales $ 3,937.5 $ 3,596.7
−Removed: Percent growth 9.5 % 10.0 %
−Removed: Components of percent growth in net sales – increase (decrease):
−Removed: Volume and product mix 4.3 % 8.8 %
−Removed: Pricing actions 0.6 % 1.5 %
−Removed: Acquisitions 2.4 % — %
−Removed: Foreign exchange 2.2 % (0.3) %
−Removed: Segment operating income $ 804.9 $ 780.9
−Removed: Segment operating income margin 20.4 % 21.7 %
−Removed: 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.
−Removed: This increase included higher sales of our consumer business in each of our three regions.
−Removed: Higher volume and product mix increased sales 4.3% while pricing actions added 0.6% to sales, both as compared to the prior year.
−Removed: The incremental impact of the Cholula acquisition added 2.4% to segment sales during 2021.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: In addition, pricing actions, taken in response to higher costs, increased sales by 0.4% as compared to the prior year.
−Removed: The incremental impact of the Cholula acquisition added 3.3% to sales in 2021.
−Removed: 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.
−Removed: 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 preparation, and increased by 0.9% on a constant currency basis.
−Removed: Favorable volume and product mix increased sales by 0.3% as compared to the corresponding period of 2020.
−Removed: The impact of pricing actions increased sales by 0.6% as compared to the prior year.
−Removed: 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.
−Removed: 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.
−Removed: Higher volume and favorable product mix increased sales by 21.5% as compared to the corresponding period in 2020.
−Removed: The increase was driven by sales related to the recovery of demand in away-from-home consumption in China.
−Removed: Pricing actions increased sales by 1.4% as compared to 2020.
−Removed: 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.
−Removed: Segment operating income for our consumer segment increased by $24.0 million, or 3.1%, in 2021 as compared to 2020.
−Removed: The increase in segment operating income was driven by higher sales, including the impact of acquisitions,
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: On a constant currency basis, segment operating income for our consumer segment increased by 1.3% in 2021, as compared to 2020.
−Removed: Flavor Solutions Segment
−Removed: Net sales $ 2,380.4 $ 2,004.6
−Removed: Percent growth (decline) 18.7 % (3.5) %
−Removed: Components of percent change in net sales – increase (decrease):
−Removed: Volume and product mix 7.2 % (4.2) %
−Removed: Pricing actions 1.4 % 1.8 %
−Removed: Acquisitions 7.3 % — %
−Removed: Foreign exchange 2.8 % (1.1) %
−Removed: Segment operating income $ 296.6 $ 237.9
−Removed: Segment operating income margin 12.5 % 11.9 %
−Removed: 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.
−Removed: 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.
−Removed: 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%.
−Removed: The incremental impact of the Cholula and FONA acquisitions increased sales by 7.3% in 2021.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: Pricing actions increased sales by 1.7% as compared to the prior year.
−Removed: The incremental impact of the Cholula and FONA acquisitions increased sales by 10.5% in 2021.
−Removed: 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.
−Removed: 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.
−Removed: Favorable volume and product mix increased segment sales by 19.8% in 2021 as compared to 2020.
−Removed: The increase was primarily attributable to higher sales to branded foodservice, packaged food and quick service restaurant customers.
−Removed: Pricing actions increased sales by 1.7% in 2021 as compared the prior year level.
−Removed: 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.
−Removed: 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.
−Removed: Favorable volume and product mix increased sales by 10.6%,
−Removed: driven by higher sales to quick service restaurant customers.
−Removed: Pricing actions decreased sales by 1.2% as compared to the prior year.
−Removed: 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.
−Removed: Segment operating income for our flavor solutions segment increased by $58.7 million, or 24.7%, in 2021 as compared to 2020.
−Removed: 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.
−Removed: 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.
−Removed: On a constant currency basis, segment operating income for our flavor solutions segment increased by 22.5% in 2021, as compared to 2020.
NON-GAAP FINANCIAL MEASURES
9 unchanged sentences
We exited our Kohinoor rice product line in India in the fourth quarter of fiscal year 2021.
+Added: Special charges are more fully described in note 3 of notes to our accompanying consolidated financial statements.
• Transaction and integration expenses associated with the Cholula and FONA acquisitions – We exclude certain costs associated with our acquisitions of Cholula and FONA in November and December 2020, respectively, and their subsequent integration into the Company.
18 unchanged sentences
Adjusted gross profit $ 2,502.5 $ 2,274.5 $ 2,505.6
+Added: Gross profit margin (3)
+Added: 37.6 % 35.8 % 39.5 %
+Added: Impact of transaction and integration expenses and special charges (3)
+Added: — % — % 0.2 %
Adjusted gross profit margin (3)
4 unchanged sentences
Impact of other transaction and integration expenses (1)
−Removed: 2.2 29.0 12.4
Impact of special charges included in cost of goods sold (2)
3 unchanged sentences
% (decrease) increase versus prior year 11.6 % (16.7) % 8.1 %
+Added: Operating income margin (3)
+Added: 14.5 % 13.6 % 16.1 %
+Added: Impact of transaction and integration expenses and special charges (3)
+Added: 0.9 % 0.8 % 1.3 %
Adjusted operating income margin (3)
2 unchanged sentences
Impact of transaction and integration expenses (1)
−Removed: 0.6 (2.7) 1.9
Impact of special charges (2)
+Added: 14.5 13.3 7.1
Impact of sale of Kitchen Basics — (11.6) —
Adjusted income tax expense $ 189.0 $ 170.9 $ 197.1
+Added: Income tax rate (4)
+Added: 21.8 % 20.7 % 21.5 %
+Added: Impact of transaction and integration expenses, special charges, and sale of Kitchen Basics (4)
+Added: 0.2 % 0.2 % (1.4) %
Adjusted income tax rate (4)
2 unchanged sentences
Impact of transaction and integration expenses (1)
−Removed: 1.6 38.0 10.5
Impact of special charges (2)
6 unchanged sentences
Impact of transaction and integration expenses (1)
−Removed: 0.01 0.14 0.04
Impact of special charges (2)
11 unchanged sentences
Special charges for the year ended November 30, 2021 include $4.7 million which is reflected in Cost of goods sold and an $11.2 million non-cash impairment charge associated with the impairment of certain intangible assets.
−Removed: (3) Adjusted gross profit margin is calculated as adjusted gross profit as a percent of net sales for each period presented.
−Removed: Adjusted operating income margin is calculated as adjusted operating income as a percent of net sales for each period presented.
−Removed: (4) Adjusted income tax rate is calculated as adjusted income tax expense as a percentage of income from consolidated operations before income taxes, excluding transaction and integration expenses and special charges, or $817.0 million, $982.2 million, and $900.8 million for the years ended November 30, 2022, 2021, and 2020, respectively.
+Added: (3) Gross profit margin, impact of transaction and integration expenses and special charges, and adjusted gross profit margin are calculated as gross profit, impact of transaction and integration expenses and special charges, and adjusted gross profit as a percentage of net sales for each period presented.
+Added: Similarly, operating income margin, impact of transaction and integration expenses and special charges, and adjusted operating income margin are calculated as operating income, impact of transaction and integration expenses and special charges, and adjusted operating income as a percentage of net sales for each period presented.
+Added: (4) Income tax rate is calculated as income tax expense as a percentage of income from consolidated operations before income taxes.
+Added: Adjusted income tax rate is calculated as adjusted income tax expense as a percentage of income from consolidated operations before income taxes excluding transaction and integration expenses, special charges and gain on the sale of Kitchen Basics or $859.9 million, $817.0 million, and $982.2 million for the years ended November 30, 2023, 2022 and 2021, respectively.
Estimate for the year ending November 30, 2024
24 unchanged sentences
EMEA 7.1 % 0.9 % 6.2 %
−Removed: Asia/Pacific (10.1) % (2.0) % (8.1) %
+Added: APAC (1.1) % (6.2) % 5.1 %
Total Consumer 1.3 % (0.8) % 2.1 %
2 unchanged sentences
EMEA 10.3 % (1.9) % 12.2 %
−Removed: Asia/Pacific (0.2) % (5.4) % 5.2 %
+Added: APAC 5.6 % (5.4) % 11.0 %
Total Flavor Solutions 10.1 % (0.2) % 10.3 %
10 unchanged sentences
EMEA (14.7) % (9.6) % (5.1) %
−Removed: Asia/Pacific 31.6 % 8.7 % 22.9 %
+Added: APAC (10.1) % (2.0) % (8.1) %
Total Consumer (4.6) % (2.1) % (2.5) %
2 unchanged sentences
EMEA 5.5 % (11.7) % 17.2 %
−Removed: Asia/Pacific 16.9 % 7.5 % 9.4 %
+Added: APAC (0.2) % (5.4) % 5.2 %
Total Flavor Solutions 8.9 % (3.2) % 12.1 %
9 unchanged sentences
dollar net sales, adjusted operating income and adjusted earnings per share — diluted would have been if the relevant currency exchange rates had not changed from those of the comparable 2023 periods.
+Added: Projections for the Year Ending November 30, 2024
+Added: Percentage change in net sales (2)% to 0%
+Added: Impact of unfavorable foreign currency exchange 1 %
+Added: Percentage change in net sales in constant currency (1)% to 1%
+Added: Percentage change in adjusted operating income 3% to 5%
+Added: Impact of unfavorable foreign currency exchange 1 %
+Added: Percentage change in adjusted operating income in constant currency 4% to 6%
LIQUIDITY AND FINANCIAL CONDITION
16 unchanged sentences
subsidiaries and affiliates can be significantly affected by fluctuations in foreign exchange rates between periods.
−Removed: At November 30, 2022, the exchange rates for the Euro, British pound sterling, Canadian dollar, Chinese renminbi, Australian dollar, and Polish zloty were lower than the U.S.
+Added: At November 30, 2023, the exchange rates for the Euro, British pound sterling, Mexican peso, and Polish zloty were higher than the U.S.
dollar than at November 30, 2022.
+Added: At November 30, 2023, the exchange rates for the Canadian dollar, Chinese renminbi, and Australian dollar were lower than the U.S.
+Added: dollar than at November 30, 2022.
Operating Cash Flow – Operating cash flow was $1,237.3 million in 2023, $651.5 million in 2022, and $828.3 million in 2021.
Net income as well as our working capital management, as more fully described below, impacted operating cash flow.
−Removed: In 2022, the decrease was primarily driven by lower net income, including the effect of net income associated with the gain on sale of our Kitchen Basics business and an intangible asset that are reflected as investing cash flows as well as the timing of certain employee incentive payments.
−Removed: 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.
−Removed: In 2020, the increase in operating cash flow was 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.
+Added: In 2023, the increase was primarily driven by an improvement in cash provided by working capital, which was driven by the lower inventory levels and the lower amount of employee incentive payments associated with the prior year as well as an increase in dividends received from unconsolidated affiliates.
+Added: This was partially offset by an increased use of cash associated with accounts payable which partially resulted from our lower level of inventory.
+Added: In 2022, the decrease in operating cash flow was primarily driven by lower net income, including the effect of net income associated with the gain on sale of our Kitchen Basics business and an intangible asset that are reflected as investing cash flows as well as the higher amount of employee incentive payments associated with the prior year.
+Added: 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 acquisitions.
Our working capital management – principally related to inventory, trade accounts receivable, and accounts payable – impacts our operating cash flow.
−Removed: The change in inventory was a significant use of cash from operations in 2022, 2021, and 2020.
−Removed: The change in trade accounts receivable was a use of cash in 2022 and 2021 but a source of cash in 2020.
−Removed: The change in accounts payable was a significant source of cash in 2022 and 2020 and a more moderate source of cash in 2021.
+Added: The change in inventory was a significant source of cash from operations in 2023 and a significant use of cash from operations in 2022 and 2021.
+Added: The change in trade accounts receivable was a moderate source of cash in 2023 and a use of cash in 2022 and 2021.
+Added: The change in accounts payable was a use of cash in 2023, a significant source of cash in 2022, and a more moderate source of cash in 2021.
In addition to operating cash flow, we also use cash conversion cycle (CCC) to measure our working capital management.
7 unchanged sentences
Cash Conversion Cycle 40 51 46
+Added: The decrease in CCC in 2023 from 2022 was due primarily to a reduction in our days in inventory as a result of reducing our inventory based on demand planning and elimination of excess safety stock utilized to remedy service issues associated with the COVID-19 pandemic.
The increase in CCC in 2022 from 2021 was due primarily to an increase in our days in inventory as a result of cost inflation, strategic purchases to avoid shipping challenges, and lower than forecasted sales.
−Removed: 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.
During both periods, the increase in days in inventory was partially offset by an increase in our days payable outstanding.
−Removed: We offer certain suppliers access to a third-party Supply Chain Finance program (SCF) with several global financial institutions (SCF Banks).
−Removed: Under the SCF, qualifying suppliers may elect to sell their receivables from us to an SCF Bank.
−Removed: These participating suppliers negotiate their receivables sales arrangements directly with the respective SCF Bank.
−Removed: 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.
−Removed: This generally provides the suppliers with more favorable terms than they would be able to secure on their own.
−Removed: We have no economic interest in a supplier’s decision to sell a receivable.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: The program has been in place for over five years and commenced near the same time we began an initiative to negotiate extended payment terms with our suppliers in response to evolving market practices.
−Removed: The terms of our payment obligation are not impacted by a supplier’s participation in the SCF.
+Added: As more fully described in note 1 of notes to our consolidated financial statements, we participate in a Supply Chain Financing program (SCF) with several global financial institutions (SCF Banks).
+Added: Under the SCF, qualifying suppliers may elect to sell their receivables from us to an SCF Bank, enabling participating suppliers to negotiate their receivables sales arrangements directly with the respective SCF Bank.
+Added: We are not party to those agreements and have no economic interest in a supplier’s decision to sell a receivable.
+Added: All outstanding amounts related to suppliers participating in the SCF are recorded within the line entitled Trade accounts payable in our condensed consolidated balance sheets, and the associated payments are included in operating activities within our consolidated statements of cash flows.
+Added: As of November 30, 2023 and 2022, the amounts due to suppliers participating in the SCF and included in trade accounts payable were approximately $300.5 million and $347.0 million, respectively.
+Added: The terms of our payment obligations 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.
−Removed: Accordingly, our average days outstanding are not significantly impacted by the portion of suppliers or related input costs that are included in the SCF.
−Removed: For our participating suppliers, we believe substantially all of their receivables with us are sold to the SCF Banks.
−Removed: 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.
−Removed: 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.
−Removed: As of November 30, 2022 and 2021, the amount due to suppliers participating in the SCF and included in "Trade accounts payable" were approximately $347.0 million and $274.3 million, respectively.
+Added: Accordingly, our average days outstanding are not significantly impacted by the portion of the suppliers that are included in the SCF.
Future changes in our suppliers’ financing policies or 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.
2 unchanged sentences
Our primary investing cash flows include the usage of cash associated with acquisition of businesses and capital expenditures as well as cash provided by sale of businesses, unconsolidated operations, or other assets.
−Removed: Cash usage related to our acquisition of businesses was $706.4 million and $803.0 million in 2021 and 2020, respectively.
+Added: Cash usage related to our acquisition of businesses was $706.4 million in 2021.
Capital expenditures, including expenditures for capitalized software, were $263.9 million in 2023, $262.0 million in 2022, and $278.0 million in 2021.
−Removed: We expect 2023 capital expenditures to approximate $280 million to support our planned growth.
−Removed: In 2022, we received $95.2 million net cash proceeds received from the sale of our Kitchen Basics business and $13.6 million net cash proceeds received on the sale of the Kohinoor brand name which are more fully discussed in notes 2 and 3, respectively, of notes to our consolidated financial statements.
+Added: We expect 2024 capital expenditures to approximate $290 million.
+Added: In 2022, we received $95.2 million net cash proceeds from the sale of our Kitchen Basics business and $13.6 million net cash proceeds received on the sale of the Kohinoor brand name which are more fully discussed in notes 2 and 3, respectively, of notes to our consolidated financial statements.
Our primary investing cash inflow in 2021 was the $65.4 million of proceeds received from the sale of an unconsolidated operation, as more fully discussed in note 5 of notes to our consolidated financial statements.
−Removed: Financing Cash Flow – Net cash associated with financing activities was a use of cash of $487.2 million in 2022 and a source of cash of $22.0 million and $220.9 million in 2021 and 2020, respectively.
+Added: Financing Cash Flow – Net cash associated with financing activities was a use of cash of $1,184.2 million and $487.2 million in 2023 and 2022, respectively, and a source of cash of $22.0 million in 2021.
The variability between years is principally a result of changes in our net borrowings, share repurchase activity and dividends, all as described below.
5 unchanged sentences
Net cash (used in) provided from net borrowing activities $ (737.4) $ (73.7) $ 395.8
+Added: In 2023, we repaid $268.1 million of long-term debt, including $250.0 million, 3.50% notes that matured September 1, 2023.
+Added: We also issued $500.0 million of 4.95% notes due 2033, with net cash proceeds received of $496.4 million.
In 2022, we repaid $772.0 million of long-term debt, including the $750 million, 2.70% notes that matured on August 15, 2022.
2 unchanged sentences
We also repaid $257.1 million of long-term debt, including the $250 million, 3.90% notes that matured in July 2021.
−Removed: 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.
−Removed: We also repaid $257.7 million of long-term debt, including $250.0 million associated with our term loans due in August 2022.
The following table outlines the activity in our share repurchase programs:
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We also rely on our revolving credit facilities, or borrowings backed by these facilities, to fund working capital needs and other general corporate requirements.
−Removed: Our committed revolving credit facilities include a five-year $1.5 billion revolving credit facility, which will expire in June 2026 and a 364-day $500 million revolving credit facility, which was entered into in July 2022 and will expire in July 2023.
−Removed: The current pricing for the five-year credit facility, on a fully drawn basis, is LIBOR plus 1.25%.
−Removed: The pricing of that credit facility is based on a credit rating grid that contains a fully drawn maximum pricing of the credit facility equal to LIBOR plus 1.75%.
−Removed: The current pricing for the 364-day credit facility, on a fully drawn basis, is SOFR plus 1.23%.
−Removed: The pricing of that credit facility is based on a credit rating grid that contains a fully drawn maximum pricing of the credit facility equal to SOFR plus 1.60%.
+Added: Our committed revolving credit facilities include a five-year $1.5 billion revolving credit facility, which will expire in June 2026 and a 364-day $500 million revolving credit facility, which was entered into in June 2023 and will expire in June 2024.
+Added: The current pricing for the five-year credit facility, on a fully drawn basis, is Term SOFR plus 1.25%.
+Added: The pricing of that credit facility is based on a credit rating grid that contains a fully drawn maximum pricing of the credit facility equal to Term SOFR plus 1.75%.
+Added: The current pricing for the 364-day credit facility, on a fully drawn basis, is Term SOFR plus 1.23%.
+Added: The pricing of that credit facility is based on a credit rating grid that contains a fully drawn maximum pricing of the credit facility equal to Term SOFR plus 1.60%.
The provisions of each revolving credit facility restrict subsidiary indebtedness and require us to maintain a minimum interest coverage ratio.
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Our primary obligations include principal and interest payments on our outstanding short-term borrowings and long-term debt.
−Removed: In the next year, our most significant debt service obligation is the maturity of our $250.0 million, 3.50% notes due in September 2023.
−Removed: Also in July 2023, our $500 million, 364-day revolving credit facility matures.
+Added: In the next year, our most significant debt service obligation is the maturity of our $700.0 million, 3.15% notes due in August 2024.
Detail on these contractual obligations follows:
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Total contractual cash obligations $ 5,340.8 $ 1,201.8 $ 966.9 $ 913.8 $ 2,258.3
−Removed: (a) Interest payments include interest payments on long-term debt.
+Added: (a) Interest payments include expected interest payments on long-term debt.
Our short-term borrowings, principally consisting of commercial paper, have short-term maturities.
−Removed: We anticipate total interest expense for the year ending November 30, 2023 to approximate $200 million to $210 million, which we expect will also approximate cash interest payments for the same period.
See note 6 of notes to our consolidated financial statements for additional information.
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CUSTOMERS AND COUNTERPARTIES – See the subsequent section of this discussion under the heading "Market Risk Sensitivity–Credit Risk."
−Removed: Acquisitions are part of our strategy to increase sales and profits.
−Removed: On December 30, 2020, we purchased FONA.
−Removed: The purchase price was approximately $708 million, net of cash acquired.
−Removed: 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.
−Removed: Our acquisition of FONA expands the breadth of our flavor solutions segment into attractive categories, as well as extends our technology platform and strengthens our capabilities.
−Removed: The acquisition was funded with cash and short-term borrowings.
−Removed: The results of FONA's operations have been included in our financial statements as a component of our flavor solutions segment from the date of acquisition.
−Removed: On November 30, 2020, we purchased Cholula for approximately $801 million, net of cash acquired.
−Removed: The acquisition was funded with cash and short-term borrowings.
−Removed: Cholula, a premium Mexican hot sauce brand, is a strong addition to our global branded flavor portfolio, which 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.
−Removed: 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.
−Removed: See note 2 of notes to our consolidated financial statements for further details regarding these acquisitions.
PERFORMANCE GRAPH — SHAREHOLDER RETURN
−Removed: The following line graph compares the yearly change in McCormick’s cumulative total shareholder return (stock price appreciation plus reinvestment of dividends) on McCormick’s Non-Voting Common Stock with (1) the cumulative total return of the Standard & Poor’s 500 Stock Price Index, assuming reinvestment of dividends, and
−Removed: (2) the cumulative total return of the Standard & Poor’s Packaged Foods & Meats Index, assuming reinvestment of dividends.
+Added: The following line graph compares the yearly change in McCormick’s cumulative total shareholder return (stock price appreciation plus reinvestment of dividends) on McCormick’s Non-Voting Common Stock with (1) the cumulative total return of the Standard & Poor’s 500 Stock Price Index, assuming reinvestment of dividends, and (2) the cumulative total return of the Standard & Poor’s Packaged Foods & Meats Index, assuming reinvestment of dividends.
MARKET RISK SENSITIVITY
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We routinely enter into foreign currency exchange contracts to manage certain of these foreign currency risks.
−Removed: During 2022, the foreign currency translation component in other comprehensive income was principally related to the impact of exchange rate fluctuations on our net investments in our subsidiaries with a functional currency of the British pound sterling, Euro, Polish zloty, Chinese renminbi, Australian dollar, Canadian dollar and Mexican peso.
+Added: During 2023, the foreign currency translation component in other comprehensive income was principally related to the impact of exchange rate fluctuations on our net investments in our subsidiaries with a functional currency of the British pound sterling, Euro, Polish zloty, Chinese renminbi, Australian dollar, Singapore dollar, and Mexican peso.
We also utilize cross currency interest rate swap contracts, which are designated as net investment hedges, to manage the impact of exchange rate fluctuations on our net investments in subsidiaries with a functional currency of the British pound sterling and Euro.
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dollar Australian dollar 65.0 0.66 (0.2)
+Added: Chinese renminbi U.S.
+Added: dollar 245.4 6.75 (11.5)
dollar Singapore dollar 34.4 1.33 (0.2)
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British pound sterling Euro 45.4 0.87 (0.2)
+Added: dollar Peso 10.5 17.88 —
dollar Thai baht 9.6 34.79 —
−Removed: We had a number of smaller contracts at November 30, 2022 with an aggregate notional value of $11.5 million to purchase or sell other currencies, such as the Romanian leu.
−Removed: The aggregate fair value of these contracts was insignificant at November 30, 2022.
+Added: We had a number of smaller contracts at November 30, 2023 with an aggregate notional value of $24.0 million to purchase or sell other currencies.
+Added: The aggregate fair value of these contracts was $0.6 million at November 30, 2023.
At November 30, 2022, we had foreign currency exchange contracts for the Euro, British pound sterling, Canadian dollar, Australian dollar, Polish zloty, Swiss franc and other currencies, with a notional value of $560.5 million.
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We also utilized cross currency interest rate swap contracts that are considered net investment hedges.
−Removed: As of November 30, 2022 and 2021, we had cross currency interest rate swap contracts of (i) $250 million notional value to receive $250 million at three-month U.S.
−Removed: LIBOR plus 0.685% and pay £194.1 million at three-month GBP SONIA plus 0.859% and (ii) £194.1 million notional value to receive £194.1 million at three-month GBP SONIA plus 0.859% and pay €221.8 million at three-month Euro EURIBOR plus 0.808%.
+Added: As of November 30, 2023 and 2022, we had cross currency interest rate swap contracts of (i) $250 million notional value to receive $250 million at USD Secured Overnight Financing Rate (SOFR) plus 0.907% and pay £194.1 million at three-month GBP SONIA plus 0.859% and (ii) £194.1 million notional value to receive £194.1 million at three-month GBP SONIA plus 0.859% and pay €221.8 million at three-month Euro EURIBOR plus 0.808%.
These cross-currency interest rate swap contracts expire in August 2027.
−Removed: In conjunction with the phase-out of LIBOR, during 2022 we amended the terms of this cross currency swaps such that, effective February 15, 2022, we now pay and receive at GBP SONIA plus 0.859% (previously GBP LIBOR plus 0.740%).
−Removed: As of November 30, 2022, we also had cross currency interest rate swap contracts of (i) $250 million notional value to receive $250 million at USD SOFR plus 0.684% and pay £184.1 million at GBP SONIA plus 0.5740% 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%.
+Added: In conjunction with the phase out of the London Interbank Offered Rate (LIBOR), in 2023 we amended the terms of this cross currency swap such that, effective February 15, 2023, we now pay and receive at USD SOFR plus 0.907% (previously three-month U.S.
+Added: LIBOR plus 0.685%).
+Added: As of November 30, 2023 and 2022, we also had cross currency interest rate swap contracts of (i) $250 million notional value to receive $250 million at USD SOFR plus 0.684% and pay £184.1 million at GBP SONIA plus 0.574% and (ii) £184.1 million notional value to receive £184.1 million at GBP SONIA plus 0.574% and pay €219.2 million at Euro ESTR plus 0.667%.
These contracts expire in April 2030.
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We are exposed to interest rate volatility, with primary exposures related to movements in U.S.
−Removed: Treasury rates, London Interbank Offered Rates (LIBOR), Secured Overnight Financing Rate (SOFR), and commercial paper rates.
−Removed: The phase out of LIBOR reference rates will occur at different dates and began on January 1, 2022.
−Removed: Arrangements that were entered into during the year ended November 30, 2022, including our $500 million
−Removed: 364-day revolving credit facility expiring in July 2023, fixed to variable interest rate swaps expiring in April 2030, and cross-currency interest rate swaps expiring in April 2030, no longer use LIBOR as a reference rate.
−Removed: However, LIBOR continues to be the reference rate for our variable rate debt, including our $1.5 billion five-year revolving credit facility expiring in July 2026, interest rate swaps expiring in November 2025 and August 2027, and the cross-currency interest rate swaps expiring in August 2027.
−Removed: Through the year ended November 30, 2022, there was no material impact to our consolidated financial statements as a result of the LIBOR phase-out, nor do we expect it to have a material impact on our consolidated financial statements during the duration of the LIBOR transition period.
+Added: Treasury rates, Secured Overnight Financing Rate (SOFR), and commercial paper rates.
+Added: Certain of our variable rate debt arrangements previously used LIBOR.
+Added: The phase out of LIBOR reference rates occurred at different dates and began on January 1, 2022.
+Added: As more fully disclosed in notes 1 and 8 of notes to our consolidated financial statements, during 2023 and 2022, we amended existing arrangements and entered into new arrangements that no longer use LIBOR as a reference rate.
+Added: There was no material impact to our consolidated financial statements as a result of the LIBOR phase-out.
We also use interest rate swaps to minimize financing costs and to achieve a desired mix of fixed and variable rate debt.
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Interest rate swaps have the following effects:
−Removed: • We issued $250 million of 3.50% notes due in 2023 in August 2013.
−Removed: Forward treasury lock agreements settled upon issuance of these notes effectively set the interest rate on these notes at a weighted-average fixed rate of 3.30%.
• We issued $250 million of 3.25% notes due in 2025 in November 2015.
Forward treasury lock agreements settled upon issuance of these notes effectively set the interest rate on these notes at a weighted-average fixed rate of 3.45%.
−Removed: The fixed interest rate on $100 million of the 3.25% notes due in December 2025 was effectively converted to a variable rate by interest rate swaps through the notes maturity in 2025.
−Removed: Net interest payments are based on 3-month LIBOR plus 1.22% with an effective variable rate of 5.83% as of November 30, 2022.
+Added: Separately, the fixed interest rate on $100 million of the 3.25% notes due in December 2025 was effectively converted to a variable rate by interest rate swaps through the notes maturity in 2025.
+Added: In 2023, we amended our $100 million interest rate swaps such that, effective February 15, 2023, we now pay and receive at USD SOFR plus 1.487% (previously U.S.
+Added: three-month LIBOR plus 1.22%).
+Added: The effective variable rate was 6.94% as of November 30, 2023.
• We issued $750 million of 3.40% notes due August 15, 2027 in August 2017.
Forward treasury lock agreements settled upon issuance of these notes effectively set the interest rate on these $750 million notes at a weighted-average fixed rate of 3.44%.
−Removed: The fixed interest rate on $250 million of the 3.40% notes due in August 2027 was effectively converted to a variable rate by interest rate swaps through the notes maturity in 2027.
−Removed: Net interest payments are based on 3-month LIBOR plus 0.685% with an effective variable rate of 5.29% as of November 30, 2022.
+Added: Separately, the fixed interest rate on $250 million of the 3.40% notes due in August 2027 was effectively converted to a variable rate by interest rate swaps through the notes maturity in 2027.
+Added: In 2023, we amended our $250 million interest rate swaps such that, effective February 15, 2023, we now pay and receive at USD SOFR plus 0.907% (previously U.S.
+Added: three-month LIBOR plus 0.685%).
+Added: The effective variable rate was 6.32% as of November 30, 2023.
• We issued $500 million of 2.50% notes due April 15, 2030.
Forward treasury lock agreements settled upon issuance of these notes effectively set the interest rate on these $500 million notes at a weighted-average fixed rate of 2.62%.
−Removed: The fixed interest rate on $250 million of the 2.50% notes due in April 2030 was effectively converted to a variable rate by interest rate swaps through the notes maturity in 2030.
+Added: Separately, the fixed interest rate on $250 million of the 2.50% notes due in April 2030 was effectively converted to a variable rate by interest rate swaps through the notes maturity in 2030.
Net interest payments are based on USD SOFR plus 0.684% with an effective variable rate of 6.13% as of November 30, 2023.
+Added: • We issued $500 million of 4.95% notes due April 15, 2033.
+Added: Forward treasury lock agreements settled upon issuance of these notes effectively set the interest rate on these $500 million notes at a weighted-average fixed rate of 5.00%.
Commodity Risk – We purchase certain raw materials which are subject to price volatility caused by weather, market conditions, growing and harvesting conditions, governmental actions and other factors beyond our control.
−Removed: I n 2022, our most significant raw materials were dairy products, pepper, onion, capsicums (red peppers and paprika), garlic, wheat products, vegetable oils, and vanilla.
+Added: In 2023, our most significant raw materials were dairy products, pepper, onion, garlic, capsicums (red peppers and
+Added: paprika), tomato products, salts, and wheat products.
While future movements of raw material costs are uncertain, we respond to this volatility in a number of ways, including strategic raw material purchases, purchases of raw material for future delivery and customer price adjustments.
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We do not believe that there will be significant changes to our estimates of customer consideration when any uncertainties are resolved with customers.
−Removed: Business Combinations, Goodwill and Intangible Asset Valuation
−Removed: We use the acquisition method in accounting for acquired businesses.
−Removed: Under the acquisition method, our financial statements reflect the operations of an acquired business starting from the closing of the acquisition.
−Removed: The assets acquired and liabilities assumed are recorded at their respective estimated fair values at the date of the acquisition.
−Removed: Any excess of the purchase price over the estimated fair values of the identifiable net assets acquired is recorded as goodwill.
−Removed: Significant judgment is often required in estimating the fair value of assets acquired, particularly intangible assets.
−Removed: We generally obtain the assistance of a third-party valuation specialist in estimating fair values of tangible and intangible assets.
−Removed: The fair value estimates are based on available historical information and on expectations and assumptions about the future, considering the perspective of marketplace participants.
−Removed: While management believes those expectations and assumptions are reasonable, they are inherently uncertain.
−Removed: Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions.
−Removed: Determining the useful lives of intangible assets also requires judgment.
−Removed: Certain brand intangibles are expected to have indefinite lives based on their history and our plans to continue to support and build the acquired brands, while other acquired intangible assets (e.g., customer relationships) are expected to have determinable useful lives.
−Removed: Our estimates of the useful lives of definite-lived intangible assets are primarily based upon historical experience, the competitive and macroeconomic environment, and our operating plans.
−Removed: The costs of definite-lived intangibles are amortized to expense over their estimated life.
−Removed: We review the carrying value of goodwill and non-amortizable intangible assets and conduct tests of impairment on an annual basis as described below.
−Removed: We also test for impairment if events or circumstances indicate it is more likely than not that the fair value of a reporting unit is below its carrying amount.
−Removed: We test indefinite-lived intangible assets for impairment if events or changes in circumstances indicate that the asset might be impaired.
−Removed: Determining the fair value of a reporting unit or an indefinite-lived purchased intangible asset is judgmental in nature and involves the use of significant estimates and assumptions, as more fully described in note 1 of notes to our consolidated financial statements.
−Removed: While we believe those estimates and assumptions are reasonable, they are inherently uncertain.
−Removed: Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions.
Goodwill Impairment
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We believe that our tax return positions are appropriately supported, but tax authorities can challenge certain of our tax positions.
−Removed: We evaluate our uncertain tax positions in accordance with the GAAP guidance for uncertainty in income
+Added: We evaluate our uncertain tax positions in accordance with the GAAP guidance for uncertainty in income taxes.
We recognize a tax benefit when it is more likely than not the position will be sustained upon examination, based on its technical merits.
18 unchanged sentences
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.