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Item 2. Management’s Discussion and Analysis

2024-06-27 compared with 2024-03-26 · 204 added, 150 removed, 327 unchanged (52% of the section changed)

12 unchanged sentences

Executive Summary

In the first quarter of 2024, we achieved net sales growth of 2.4% over the first quarter 2023 level, including impact from the following factors:

• Pricing actions, principally implemented in the prior year, contributed 2.7% to the increase in net sales.

In the second quarter of 2024, our sales declined by 1.0% from the second quarter 2023 level, including impact from the following factors:

• Volume and product mix unfavorably impacted our net sales growth by 0.7%, exclusive of divestitures.

Our decisions to exit certain low margin businesses contributed approximately 0.6% to the unfavorable impact of volume and product mix.

The consumer segment experienced unfavorable volume and product mix of 2.2% and the flavor solutions segment experienced favorable product and mix of 0.7%.

• Divestitures negatively impacted our net sales increase by 0.2%.

• Net sales growth was positively impacted by fluctuations in currency rates that increased sales growth by 0.9%.

Excluding this impact, we grew sales by 1.5% over the prior year quarter on a constant currency basis.

Operating income was $233.5 million in the first quarter of 2024 and $199.0 million in the comparable 2023 period.

We recorded $4.2 million and $27.8 million of special charges in the first quarter of 2024 and 2023, respectively, related to organization and streamlining actions.

In the first quarter of 2024, the effects of a 140 basis points improvement in our gross profit margin, primarily associated with the effects of favorable product mix, pricing actions that were implemented in the prior year and cost savings from our GOE and CCI programs, that were partially offset by commodity inflation.

Also, in the first quarter of 2024, selling, general and administrative expenses as a percentage of sales increased 110 basis points, including a 90 basis points impact associated with the higher level of advertising and promotion expenses.

Excluding special charges, adjusted operating income was $237.7 million in the first quarter of 2024, an increase of 4.8%, compared to $226.8 million in the year-ago period.

The flavor solutions segment experienced unfavorable volume and product mix of 1.8% and the consumer segment experienced favorable volume and product mix of 0.3%.

• Divestitures negatively impacted our net sales by 0.3%.

• Net sales in our flavor solutions segment were positively impacted by fluctuations in currency rates which were offset by the negative impact of fluctuations in currency rates for our consumer segment.

Operating income was $234.1 million in the second quarter of 2024 and $221.8 million in the comparable 2023 period, an increase of 5.5%.

We recorded $1.8 million and $13.2 million of special charges in the second quarter of 2024 and 2023, respectively, related to organization and streamlining actions.

In the second quarter of 2024, the effects of a 60 basis points improvement in our gross profit margin, primarily associated with the effects of cost savings from our GOE and CCI programs, were partially offset by increased conversion costs.

Also, in the second quarter of 2024, selling, general and administrative expenses as a percentage of sales increased 40 basis points, which was driven by the higher level of advertising and promotion expenses.

Excluding special charges, adjusted operating income was $235.9 million in the second quarter of 2024, an increase of 0.3%, compared to $235.0 million in the year-ago period.

In constant currency, adjusted operating income increased 0.4%.

Diluted earnings per share was $0.62 and $0.52 in the first quarter of 2024 and 2023, respectively.

The increase in diluted earnings per share for the first quarter of 2024 was driven primarily by the impact of higher operating income, including the effects of lower special charges, the unfavorable effects of an increase in the effective tax rate, and the favorable effects of an increase in income from unconsolidated operations.

Special charges lowered earnings per share by $0.01 and $0.07 in the first quarter of 2024 and 2023, respectively.

Excluding the effects of special charges, adjusted diluted earnings per share was $0.63 in the first quarter of 2024 and $0.59 in the first quarter of 2023, or an increase of 6.8%.

A detailed review of our first quarter 2024 performance compared to the first quarter of fiscal 2023 appears in the section titled “Results of Operations – Company” and “Results of Operations – Segments”.

Diluted earnings per share was $0.68 and $0.56 in the second quarter of 2024 and 2023, respectively.

The increase in diluted earnings per share for the second quarter of 2024 was driven primarily by the impact of higher operating income, including the effects of lower special charges, the favorable effects of a decrease in the effective tax rate, including the effects of a favorable discrete income tax benefit, and the favorable effects of an increase in income from unconsolidated operations.

Special charges lowered earnings per share by $0.01 and $0.04 in the second quarter of 2024 and 2023, respectively.

Excluding the effects of special charges, adjusted diluted earnings per share was $0.69 in the second quarter of 2024 and $0.60 in the second quarter of 2023, or an increase of 15.0%.

A detailed review of our second quarter 2024 performance compared to the second quarter of fiscal 2023 and our performance for the six months ended May 31, 2024 compared to the prior year period appears in the section titled “Results of Operations – Company” and “Results of Operations – Segments”.

For a reconciliation of non-GAAP to reported amounts, see the subsequent discussion under the heading "Non-GAAP Financial Measures".

4 unchanged sentences

We will also be lapping 2023 price increases and anticipate favorable net price realization in 2024.

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.

Additionally, in some instances, price elasticity, or the negative consumer response to the pricing actions we take, unfavorably impacts our sales volume and mix.

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 2 of notes to our consolidated financial statements that includes our GOE program.

3 unchanged sentences

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.

We anticipate that the 2024 sales change will include a favorable impact from previously implemented pricing actions.

We anticipate that the 2024 sales change will include a favorable impact from prior year pricing actions, which will be partially reduced by current year pricing actions taken in response to price gap management as well as promotional activities.

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.

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.

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 GOE program and CCI cost savings, and (iv) a low single-digit percentage impact of inflation in 2024 compared to 2023.

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.

12 unchanged sentences

RESULTS OF OPERATIONS – COMPANY

Three months ended

February 29, 2024 February 28, 2023

Three months ended Six months ended

May 31, 2024 May 31, 2023 May 31, 2024 May 31, 2023

Net sales $ 1,643.2 $ 1,659.2 $ 3,245.9 $ 3,224.7

Percent increase 2.4 % 2.8 %

Percent (decrease) increase (1.0) % 8.0 % 0.7 % 5.4 %

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

5 unchanged sentences

Gross profit margin 37.7 % 37.1 % 37.6 % 36.5 %

Sales for the first quarter of 2024 increased by 2.4% from the prior year level and increased by 1.5% 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).

Sales for the second quarter of 2024 decreased by 1.0% from the prior year level and decreased by 1.0% on a constant currency basis (that is, excluding the impact of foreign currency exchange as more fully described under the caption, Non-GAAP Financial Measures).

Unfavorable volume and product mix decreased sales by 0.7%.

Unfavorable volume and product mix in our flavor solutions segment, including the effects of the lower quick service restaurant and packaged food customer demand, exceeded the favorable volume and product mix in our consumer segment.

Also, the divestiture of our Giotti canning business unfavorably impacted sales by 0.3% as compared to the prior year period.

Foreign currency rates had a neutral impact on sales for the quarter.

Sales for the six months ended May 31, 2024 increased by 0.7% from the prior year level and increased by 0.3% on a constant currency basis.

Pricing actions increased sales by 1.3% as compared to the prior year period principally due to pricing actions implemented in the prior year.

Unfavorable volume and product mix decreased sales by 1.0%, including the impact of price elasticity.

Unfavorable volume and product mix in our consumer segment exceeded the favorable volume and product mix in our flavor solutions segment.

Unfavorable volume and product mix from both our consumer and flavor solutions segments collectively decreased sales by 0.7%.

Our decisions to discontinue certain low margin businesses contributed approximately 0.3% to the unfavorable impact of volume and product mix.

Also, the divestiture of our Giotti canning business unfavorably impacted sales by 0.3% as compared to the prior year period.

Sales were also impacted by favorable foreign currency rates that increased net sales by 0.9% in the first quarter of 2024 compared to the year-ago quarter and is excluded from our measure of sales growth of 1.5% on a constant currency basis.

Gross profit for the first quarter of 2024 increased by $36.4 million, or 6.5%, from the comparable period in 2023.

Our gross profit margin for the three months ended February 29, 2024 was 37.4%, an increase of 140 basis points from the comparable period in 2023.

The increase in gross profit margin in the quarter ended February 29, 2024 was driven by the favorable impact of our pricing actions, as previously described, favorable product and customer mix, and cost savings led by our CCI and GOE programs.

These favorable impacts were partially offset by increased commodity costs as compared to the 2023 period.

Three months ended

February 29, 2024 February 28, 2023

Sales were also impacted by favorable foreign currency rates that increased net sales by 0.4% in the six months ended May 31, 2024 compared to the year-ago period and is excluded from our measure of sales growth of 0.3% on a constant currency basis.

Gross profit for the second quarter of 2024 increased by $4.1 million, or 0.7%, from the comparable period in 2023.

Our gross profit margin for the three months ended May 31, 2024 was 37.7%, an increase of 60 basis points from the comparable period in 2023.

The increase in gross profit margin in the quarter ended May 31, 2024 was driven by our cost savings led by our CCI and GOE programs, which were partially offset by increased conversion costs as compared to the 2023 period.

Gross profit for the six months ended May 31, 2024 increased by $40.5 million, or 3.4%, from the comparable period in 2023.

Our gross profit margin for the six months ended May 31, 2024 was 37.6%, an increase of 110 basis points from the comparable period in 2023.

The increase in gross profit margin in the six months ended May 31, 2024 was driven by the favorable impact of our pricing actions, favorable product and customer mix, and cost savings led by our CCI and GOE programs.

These favorable impacts were partially offset by increased commodity and conversion costs as compared to the 2023 period.

Three months ended Six months ended

May 31, 2024 May 31, 2023 May 31, 2024 May 31, 2023

Selling, general & administrative expense (SG&A) $ 383.7 $ 380.5 $ 745.3 $ 716.6

Percent of net sales 23.3 % 22.9 % 23.0 % 22.2 %

SG&A increased by $25.5 million in the first quarter of 2024 as compared to the 2023 level, driven primarily by advertising and promotional spend, increased selling and market costs and a higher investment in research and development.

These costs were partially offset by CCI-led and GOE cost savings, as compared to the 2023 period.

SG&A increased by $3.2 million in the second quarter of 2024 as compared to the 2023 level, driven primarily by advertising and promotional spend and increased selling and marketing costs.

These costs were partially offset by CCI-led cost savings as well as a lower stock-based compensation expense, all as compared to the 2023 period.

SG&A as a percentage of net sales increased by 40 basis points from the prior year levels due to the factors described above.

SG&A increased by $28.7 million in the six months ended May 31, 2024 as compared to the 2023 period, driven primarily by advertising and promotional spend, increased selling and marketing costs and a higher investment in research and development.

These costs were partially offset by CCI-led and GOE cost savings as well as lower stock-based compensation expense, all as

compared to the 2023 period.

SG&A as a percentage of net sales increased by 80 basis points from the prior year levels due primarily to a 60 basis point increase in advertising and promotional expenses as compared to the prior year period.

Three months ended

February 29, 2024 February 28, 2023

Three months ended Six months ended

May 31, 2024 May 31, 2023 May 31, 2024 May 31, 2023

Total special charges $ 1.8 $ 13.2 $ 6.0 $ 41.0

During the three months ended February 29, 2024, we recorded $4.2 million of special charges.

Those special charges principally consisted of $2.8 million associated with the GOE program and $1.4 million associated with the transition of a manufacturing facility in Europe, Middle East, and Africa (EMEA).

During the three months ended February 28, 2023, we recorded $27.8 million of special charges.

Those special charges principally consisted of $24.8 million associated with the GOE program, including $19.7 million under our voluntary retirement program, $0.9 million associated with the transition of a manufacturing facility in EMEA, and streamlining actions of $1.3 million in the Americas region and $0.8 million in the EMEA region.

During the three months ended May 31, 2024, we recorded $1.8 million of special charges.

Those special charges principally consisted of $1.8 million associated with our GOE program.

During the six months ended May 31, 2024, we recorded $6.0 million of special charges.

Those special charges principally consisted of $4.6 million associated with the GOE program and $1.4 million associated with the transition of a manufacturing facility in EMEA.

During the three months ended May 31, 2023, we recorded $13.2 million of special charges.

Those special charges principally consisted of $8.6 million associated with our GOE program, $1.3 million associated with the transition of a manufacturing facility in EMEA, and streamlining actions of $3.2 million in the Americas region.

During the six months ended May 31, 2023, we recorded $41.0 million of special charges.

Those special charges principally consisted of $33.4 million associated with our GOE program, $2.2 million associated with the transition of a manufacturing facility in EMEA, and streamlining actions of $4.5 million in the Americas region, and $0.9 million in the EMEA region.

Details with respect to the composition of special charges are included in note 2 of the notes to the accompanying condensed consolidated financial statements.

Three months ended

February 29, 2024 February 28, 2023

Three months ended Six months ended

May 31, 2024 May 31, 2023 May 31, 2024 May 31, 2023

Interest expense $ 52.9 $ 52.2 $ 103.2 $ 102.8

Other income, net 12.4 12.5 23.5 23.6

Interest expense decreased slightly in the three months ended February 29, 2024, as compared to the prior year period, driven by the effects of a reduction in average borrowing levels which were partially offset by higher short-term interest rates.

Other income, net for the three months ended February 29, 2024 remained consistent, as compared to the prior year period.

Three months ended

February 29, 2024 February 28, 2023

Interest expense increased slightly in the three and six months ended May 31, 2024, as compared to the prior year periods, driven by the effects of a reduction in average borrowing levels which were more than offset by higher short-term interest rates.

Other income, net for the three and six months ended May 31, 2024 remained consistent, as compared to the prior year periods.

Three months ended Six months ended

May 31, 2024 May 31, 2023 May 31, 2024 May 31, 2023

Income from consolidated operations before income taxes $ 193.6 $ 182.1 $ 387.9 $ 341.6

2 unchanged sentences

The provision for income taxes is based on the estimate of the annual effective tax rate adjusted to reflect the tax impact of items discrete to the fiscal period.

We record tax expense or tax benefits that do not relate to ordinary income in the current fiscal year discretely in the period in which such items occur pursuant to the requirements of U.S.

Examples of such types of discrete items not related to ordinary income include, but are not limited to, excess tax benefits or expense 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, and changes in the assessment of deferred tax valuation allowances.

Income tax expense for the three months ended February 29, 2024 included $1.6 million of discrete tax expense consisting principally of $1.1 million of tax expense resulting from a state tax matter, and $0.5 million of tax expense associated with stock-based compensation.

Income tax expense for the three months ended February 28, 2023 included $3.8 million of net discrete tax benefits consisting principally of $3.2 million of tax benefits associated with the adjustment of a valuation allowance due to changes in judgment about the realizability of the deferred tax asset, $0.8 million of tax benefits related to the revaluation of deferred taxes resulting from changes in tax rates, and $0.2 million of tax expense associated with stock-based compensation.

Three months ended

February 29, 2024 February 28, 2023

We record tax expense or tax benefits that do not relate to ordinary income in the current fiscal year discretely in the period in which such items occur pursuant to the requirements of GAAP.

Examples of such types of discrete items not related to ordinary income include, but are not limited to, excess tax benefits or expense 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, and the tax effects of intra-entity asset transfers (other than inventory).

Income tax expense for the three months ended May 31, 2024 included $20.2 million of net discrete tax benefits consisting principally of the following:

(i) $19.4 million of tax benefits associated with the recognition of a deferred tax asset related to an international legal entity reorganization, (ii) $1.3 million of tax benefit from the reversal of certain reserves for unrecognized tax benefits and related interest associated with the expiration of statutes of limitations in a non-U.S.

jurisdiction, (iii) $0.3 million of excess tax benefits associated with stock-based compensation, and (iv) $0.8 million of tax expense resulting from a state tax matter.

Income tax expense for the six months ended May 31, 2024 included $18.6 million of net discrete tax benefits consisting principally of the following:

jurisdiction, (iii) $1.9 million of tax expense resulting from state tax matters, and (iv) $0.2 million of tax expense associated with stock-based compensation.

Income tax expense for the three months ended May 31, 2023 included $3.0 million of net discrete tax benefits consisting principally of the following:

(i) $1.2 million of tax benefits from the reversal of certain reserves for unrecognized tax benefits and related interest associated with the expiration of statutes of limitations in a non-U.S.

jurisdiction, (ii) $1.2 million of tax benefit related to a tax settlement, and (iii) $0.6 million of excess tax benefits associated with stock-based compensation.

Income tax expense for the six months ended May 31, 2023 included $6.8 million of net discrete tax benefits consisting principally of the following:

(i) $3.2 million of tax benefits associated with the adjustment of a valuation allowance due to changes in judgment about the realizability of the deferred tax asset, (ii) $1.2 million of tax benefits from the reversal of certain reserves for unrecognized tax benefits and related interest associated with the expiration of statutes of limitations in a non-U.S.

jurisdiction, (iii) $1.2 million of tax benefit related to a tax settlement (iv) $0.8 million of tax benefits related to the revaluation of deferred taxes resulting from changes in tax rates, and (v) $0.4 million of excess tax benefits associated with stock-based compensation.

Three months ended Six months ended

May 31, 2024 May 31, 2023 May 31, 2024 May 31, 2023

Income from unconsolidated operations $ 16.8 $ 10.3 $ 38.1 $ 24.3

Income from unconsolidated operations, which is presented net of the elimination of earnings attributable to non-controlling interests, increased by $7.3 million for the three months ended February 29, 2024, as compared to the year ago period.

Income from unconsolidated operations, which is presented net of the elimination of earnings attributable to non-controlling interests, increased by $6.5 million and $13.8 million for the three and six months ended May 31, 2024, respectively, each as compared to the year ago period.

The increase was driven by higher earnings of our largest joint venture, McCormick de Mexico.

The following table outlines the major components of the change in diluted earnings per share from 2023 to 2024:

Three months ended February 28, 2023 and February 29, 2024

Three months ended May 31,

Six months ended May 31,

2023 Earnings per share – diluted $ 0.56 $ 1.08

9 unchanged sentences

CONSUMER SEGMENT

Three months ended

February 29, 2024 February 28, 2023

Three months ended Six months ended

May 31, 2024 May 31, 2023 May 31, 2024 May 31, 2023

Net sales $ 904.5 $ 912.1 $ 1,826.0 $ 1,821.6

2 unchanged sentences

Segment operating income margin 16.5 % 16.8 % 17.8 % 18.0 %

In the first quarter of 2024, sales of our consumer segment increased by 1.3% as compared to the first quarter of 2023 and increased by 0.7% on a constant currency basis.

The 1.3% increase was driven primarily by EMEA partially offset by lower sales in the APAC region, all as compared to the prior year quarter.

Pricing actions favorably impacted sales by 2.9% as compared to the prior year period principally due to pricing actions implemented in the prior year.

Unfavorable volume and product mix decreased consumer segment sales by 2.2% in the first quarter of 2024 as compared to the same period last year, including the impact of price elasticity.

Our decision to discontinue certain low margin businesses also contributed 0.8% to the unfavorable impact of volume and product mix.

Sales in the first quarter of 2024 reflected a favorable impact from foreign currency rates that increased consumer segment sales by 0.6% compared to the year-ago quarter and is excluded from our measure of sales growth of 0.7% on a constant currency basis.

In the Americas region, consumer sales increased 0.1% in the first quarter of 2024 as compared to the same quarter of 2023 and increased by 0.1% on a constant currency basis.

Pricing actions, principally implemented in the prior year, increased sales by 2.7% as compared to the prior year period.

For the first quarter of 2024, unfavorable volume and product mix decreased sales by 2.6% as compared to the corresponding period in 2023.

This reduction included a 1.1% impact of our decision to discontinue a low margin business.

In the second quarter of 2024, sales of our consumer segment decreased by 0.8% as compared to the second quarter of 2023 and decreased by 0.5% on a constant currency basis.

The 0.8% decrease was driven by the Americas and APAC regions, partially offset by higher sales in the EMEA region, all as compared to the prior year quarter.

Pricing, including actions taken in response to price gap management as well as promotional activities, unfavorably impacted sales by 0.8% as compared to the prior year period.

Favorable volume and product mix increased consumer segment sales by 0.3% in the second quarter of 2024 as compared to the same period last year.

Sales in the second quarter of 2024 reflected an unfavorable impact from foreign currency rates that decreased consumer segment sales by 0.3% compared to the year-ago quarter and is excluded from our measure of sales decline of 0.5% on a constant currency basis.

In the Americas region, consumer sales decreased 1.6% in the second quarter of 2024 as compared to the same quarter of 2023 and decreased by 1.6% on a constant currency basis.

Pricing, including actions taken in response to price gap management as well as promotional activities decreased sales by 1.3% as compared to the prior year period.

For the second quarter of 2024, unfavorable volume and product mix decreased sales by 0.3% as compared to the corresponding period in 2023.

Foreign currency rates did not have a significant impact on sales in the quarter.

Our sales growth on a constant currency basis was 0.1% for the quarter.

In the EMEA region, consumer sales increased 13.3% in the first quarter of 2024 as compared to the same quarter of 2023 and increased by 8.2% on a constant currency basis.

Our sales decline on a constant currency basis was 1.6% for the quarter.

In the EMEA region, consumer sales increased 5.0% in the second quarter of 2024 as compared to the same quarter of 2023 and increased by 3.9% on a constant currency basis.

Favorable volume and product mix during the second quarter of 2024 increased sales by 3.7% from the prior year level, which was driven by growth in our major markets across their product categories.

Pricing actions, principally implemented in the prior year, increased sales by 0.2% as compared to the 2023 period.

Sales were favorably impacted by volume and product mix during the first quarter of 2024 and increased sales by 2.9% from the prior year level.

During the first quarter of 2024, a favorable impact from foreign currency rates increased sales by 5.1% compared to the year-ago period and is excluded from our measure of sales growth of 8.2% on a constant currency basis.

In the APAC region, consumer sales decreased 7.4% in the first quarter of 2024 as compared to the first quarter of 2023 and decreased by 5.4% on a constant currency basis.

During the second quarter of 2024, a favorable impact from foreign currency rates increased sales by 1.1% compared to the year-ago period and is excluded from our measure of sales growth of 3.9% on a constant currency basis.

In the APAC region, consumer sales decreased 4.8% in the second quarter of 2024 as compared to the second quarter of 2023 and decreased by 0.9% on a constant currency basis.

For the quarter ended May 31, 2024, unfavorable volume and product mix decreased sales by 1.5%, which was primarily driven by slower demand in China.

Pricing actions, principally implemented in the prior year, increased sales by 0.6% as compared to the prior year period.

For the quarter ended February 29, 2024, unfavorable volume and product mix decreased sales by 6.3%, which included the effects of customer inventory reductions.

During the first quarter of 2024, an unfavorable impact from foreign currency rates decreased sales by 2.0% compared to the year-ago period and is excluded from our measure of sales decline of 5.4% on a constant currency basis.

Segment operating income for our consumer segment increased by $2.9 million, or 1.7%, in the first quarter of 2024 from the first quarter of 2023.

The increase in segment operating income was driven by the effects of an increase in gross profit primarily due to favorable pricing actions and CCI-led and GOE cost savings more than offsetting increased commodity costs and SG&A expenses, that was primarily driven by higher advertising and promotion expenses, all as compared to the prior year period.

Segment operating margin for our consumer segment in the first quarter of 2024 was 19.1% and was comparable to the first quarter of 2023 as an increase in gross margin was offset by an increase in SG&A as a percentage of sales, driven by an increase in advertising and promotion spend, all as compared to the prior year period.

On a constant currency basis, segment operating income for our consumer segment increased by 1.4% in the first quarter of 2024 in comparison to the same period in 2023.

During the second quarter of 2024, an unfavorable impact from foreign currency rates decreased sales by 3.9% compared to the year-ago period and is excluded from our measure of sales decline of 0.9% on a constant currency basis.

For the six months ended May 31, 2024, sales of our consumer segment increased 0.2% as compared to the six months ended May 31, 2023 and were flat on a constant currency basis.

The favorable impacts of pricing in all regions, including both actions implemented in the prior year as well as those taken in the current year in response to price gap management and promotional activities, increased sales by 1.0% during the six months ended May 31, 2024 as compared to the prior year period.

Lower volume and unfavorable product mix decreased sales by 1.0% as compared to the prior year period.

Volume and product mix includes a 0.4% unfavorable impact from the prior year associated with our decision to discontinue certain low margin businesses.

A favorable impact from foreign currency rates increased sales by 0.2% compared to the prior year and is excluded from our measure of sales growth of 0.0% on a constant currency basis.

Segment operating income for our consumer segment decreased by $4.3 million, or 2.8%, in the second quarter of 2024 from the second quarter of 2023.

The decrease in segment operating income was driven by the effects of a decrease in gross profit primarily due to unfavorable pricing actions and higher conversion costs, which more than offset the favorable impacts of product mix and CCI-led and GOE cost savings, all as compared to the prior year period.

Segment operating margin for our consumer segment decreased in the second quarter of 2024 by 30 basis points from 2023 to 16.5% and was driven primarily by the decrease in gross margin as compared to the prior year period.

On a constant currency basis, segment operating income for our consumer segment decreased by 2.4% in the second quarter of 2024 in comparison to the same period in 2023.

Segment operating income for our consumer segment decreased by $1.4 million, or 0.4%, for the six months ended May 31, 2024 as compared to the same period in 2023.

The decrease in segment operating income was driven by the effects of an

increase in gross profit that was more than offset by an increase in SG&A expenses, primarily driven by higher advertising and promotion expenses, all as compared to the prior year period.

The increase in gross profit was primarily due to favorable pricing actions and CCI-led and GOE costs savings, which were partially offset by increased commodity costs, all as compared to the prior year.

Segment operating margin for our consumer segment for the six months ended May 31, 2024 was 17.8%, a reduction of 20 basis points from the 2023 level as an increase in gross margin was offset by an increase in SG&A as a percentage of sales, driven by an increase in advertising and promotion spend, all as compared to the prior year period.

On a constant currency basis, segment operating income for our consumer segment decreased by 0.4% in the six months ended May 31, 2024 in comparison to the same period in 2023.

FLAVOR SOLUTIONS SEGMENT

Three months ended

February 29, 2024 February 28, 2023

Three months ended Six months ended

May 31, 2024 May 31, 2023 May 31, 2024 May 31, 2023

Net sales $ 738.7 $ 747.1 $ 1,419.9 $ 1,403.1

2 unchanged sentences

Segment operating income margin 11.7 % 10.9 % 10.4 % 9.6 %

In the first quarter of 2024, sales of our flavor solutions segment increased by 3.8% as compared to the first quarter of 2023 and increased by 2.5% on a constant currency basis.

Pricing actions across all regions increased sales by 2.4% in the first quarter of 2024 as compared to the prior year period principally due to pricing actions implemented in the prior year.

Favorable volume and product mix increased segment sales by 0.7% as compared to the prior period as growth in the Americas and APAC regions were partially offset by lower volume and product mix in the EMEA region.

In the second quarter of 2024, sales of our flavor solutions segment decreased by 1.1% as compared to the second quarter of 2023 and decreased by 1.4% on a constant currency basis.

Favorable pricing in the Americas and APAC regions more than offset unfavorable pricing in the EMEA region and increased sales by 1.0% in the second quarter of 2024 as compared to the prior year period principally due to pricing actions implemented in the prior year.

Unfavorable volume and product mix decreased segment sales by 1.8% as compared to the prior period as growth in the APAC region was more than offset by lower volume and product mix in the Americas and EMEA regions.

Volume and product mix includes a 0.2% unfavorable impact from the prior year associated with our decision to discontinue certain low margin businesses.

The divestiture of our Giotti canning business unfavorably impacted sales by 0.6% as compared to the prior year period.

The favorable impact of foreign currency rates increased flavor solutions segment sales by 1.3% compared to the year-ago quarter and is excluded from our measure of sales growth of 2.5% on a constant currency basis.

In the Americas region, flavor solutions sales increased by 4.7% in the first quarter of 2024 as compared to the first quarter of 2023 and increased by 3.4% on a constant currency basis.

Pricing actions, principally due to those implemented in the prior year, favorably impacted sales by 1.9% during the quarter ended February 29, 2024, as compared to the prior year period.

Favorable volume and product mix increased flavor solutions sales in the Americas by 1.5% during the first quarter of 2024, including the effects of growth in sales to packaged food and nutrition and healthcare companies, as compared to the prior year period.

A favorable impact from foreign currency rates increased sales by 1.3% compared to the first quarter of 2023 and is excluded from our measure of sales growth of 3.4% on a constant currency basis.

In the EMEA region, flavor solutions sales increased by 1.8% in the first quarter of 2024 as compared to the first quarter of 2023 and declined by 1.4% on a constant currency basis.

Pricing actions, principally due to those implemented in the prior year, favorably impacted sales by 4.0% in the first quarter of 2024 as compared to the prior period level.

Unfavorable volume and product mix decreased segment sales in the EMEA region by 2.5% as compared to the corresponding period in 2023 including the effects of consumer spending at quick service restaurants and packaged food and beverage companies and a 1.8% impact of our decision to discontinue a low margin business.

The favorable impact of foreign currency rates increased flavor solutions segment sales by 0.3% compared to the year-ago quarter and is excluded from our measure of sales decline of 1.4% on a constant currency basis.

In the Americas region, flavor solutions sales decreased by 0.2% in the second quarter of 2024 as compared to the second quarter of 2023 and decreased by 0.9% on a constant currency basis.

Pricing actions, principally due to those implemented in the prior year, favorably impacted sales by 1.5% during the quarter ended May 31, 2024, as compared to the prior year period.

Unfavorable volume and product mix decreased flavor solutions sales in the Americas by 2.4% during the second quarter of 2024, as compared to the prior year period primarily as a result of softness in quick service restaurants and packaged food companies, including the timing of customer promotional and other activities.

A favorable impact from foreign currency rates increased sales by 0.7% compared to the second quarter of 2023 and is excluded from our measure of sales decline of 0.9% on a constant currency basis.

In the EMEA region, flavor solutions sales decreased by 7.3% in the second quarter of 2024 as compared to the second quarter of 2023 and declined by 8.2% on a constant currency basis.

Pricing actions unfavorably impacted sales by 1.0% in the second quarter of 2024 as compared to the prior period level.

Unfavorable volume and product mix decreased segment sales in the EMEA region by 4.1% as compared to the corresponding period in 2023 including the effects of lower consumer spending at quick service restaurants and packaged food and beverage companies, including the timing of promotional activities, and a 0.9% impact of our decision to discontinue a low margin business.

The divestiture of our Giotti canning business unfavorably impacted sales by 3.1% as compared to the prior year period.

A favorable impact from foreign currency rates increased sales by 3.2% compared to the first quarter of 2023 and is excluded from our measure of sales decline of 1.4% on a constant currency basis.

In the APAC region, flavor solutions sales increased 1.5% in the first quarter of 2024 as compared to the first quarter of 2023 and increased by 4.5% on a constant currency basis.

A favorable impact from foreign currency rates increased sales by 0.9% compared to the second quarter of 2023 and is excluded from our measure of sales decline of 8.2% on a constant currency basis.

In the APAC region, flavor solutions sales increased 5.9% in the second quarter of 2024 as compared to the second quarter of 2023 and increased by 10.3% on a constant currency basis.

Pricing actions, principally due to those implemented in the prior year, favorably impacted sales by 1.1% as compared to the prior year period.

Favorable volume and product mix increased segment sales by 1.0% in the first quarter of 2024.

An unfavorable impact from foreign currency rates decreased sales by 3.0% compared to the first quarter of 2023 and is excluded from our measure of sales growth of 4.5% on a constant currency basis.

Segment operating income for our flavor solutions segment increased by $8.0 million, or 15.0%, in the first quarter of 2024 as compared to the first quarter of 2023.

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 driven by favorable pricing, product and customer mix, and CCI-led and GOE cost savings which more than offset increased commodity and conversion costs and the higher level of SG&A expenses.

Segment operating margin for our flavor solutions segment increased by 90 basis points from the prior year level to 9.0% in the first quarter of 2024.

That increase was principally the result of an increase in gross margin, as previously described, which was partially offset by a higher level of SG&A as a percentage of sales, all as compared to 2023.

On a constant currency basis, segment operating income for our flavor solutions segment increased by 13.7% in the first quarter of 2024 as compared to the same period in 2023.

Favorable volume and product mix increased segment sales by 9.2% in the second quarter of 2024 which was principally driven by new products as well as the timing of customer promotions.

An unfavorable impact from foreign currency rates decreased sales by 4.4% compared to the second quarter of 2023 and is excluded from our measure of sales growth of 10.3% on a constant currency basis.

For the six months ended May 31, 2024, our flavor solutions sales increased 1.2% as compared to the six months ended May 31, 2023 and increased by 0.5% on a constant currency basis.

Pricing actions, principally due to those implemented in the prior

year, across all regions increased sales by 1.7% during the six months ended May 31, 2024 and were partially offset by 0.6% of unfavorable volume and product mix, both as compared to the prior year period.

Volume and product mix includes a 0.3% unfavorable impact from the prior year associated with our decision to discontinue certain low margin businesses.

The divestiture of our Giotti canning business unfavorably impacted sales by 0.6% as compared to the prior year period.

The favorable impact of foreign currency rates increased flavor solutions segment sales by 0.7% compared to the year-ago period and is excluded from our measure of sales growth of 0.5% on a constant currency basis.

Segment operating income for our flavor solutions segment increased by $5.2 million, or 6.3%, in the second quarter of 2024 as compared to the second quarter of 2023.

The increase in segment operating income was driven by the effects of an increase in gross profit primarily due to the favorable impact of pricing as well as CCI-led and GOE cost savings which more than offset the lower level of sales and the higher level of SG&A expenses.

Segment operating margin for our flavor solutions segment increased by 80 basis points from the prior year level to 11.7% in the second quarter of 2024.

That increase was the result of an increase in gross margin, as previously described, which was partially offset by a higher level of SG&A as a percentage of sales, all as compared to 2023.

On a constant currency basis, segment operating income for our flavor solutions segment increased by 5.9% in the second quarter of 2024 as compared to the same period in 2023.

Segment operating income for our flavor solutions segment increased by $13.2 million, or 9.8%, in the six months ended May 31, 2024 as compared to the same period in 2023.

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, the favorable impacts of pricing actions, product mix, and CCI-led and GOE cost savings which more than offset increased commodity and conversion costs and the higher level of SG&A expenses.

Segment operating margin for our flavor solutions segment increased by 80 basis points from the prior year level to 10.4% in the six months ended May 31, 2024.

That increase was the result of an increase in gross margin, as previously described, which was partially offset by a higher level of SG&A as a percentage of sales, all as compared to 2023.

On a constant currency basis, segment operating income for our flavor solutions segment increased by 9.0% in the six months ended May 31, 2024 as compared to the same period in 2023.

MARKET RISK SENSITIVITY

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

February 29, 2024 November 30, 2023

May 31, 2024 November 30, 2023

Forward foreign currency:

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

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

We do not enter into

contracts for trading purposes, nor are we a party to any leveraged derivative instruments, and all derivatives are designated as hedges.

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

February 29, 2024 November 30, 2023

May 31, 2024 November 30, 2023

Notional value $ 600.0 $ 600.0

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This information is also used by management to measure the profitability of our ongoing operations and analyze our business performance and trends.

These non-GAAP financial measures may be considered in addition to results prepared in accordance with GAAP, but they should not be considered a substitute for, or superior to, U.S.

GAAP results.

These non-GAAP financial measures may be considered in addition to results prepared in accordance with GAAP, but they should not be considered a substitute for, or superior to, GAAP results.

In addition, these non-GAAP financial measures may not be comparable to similarly titled measures of other companies because other companies may not calculate them in the same manner that we do.

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

For the year ended November 30, 2023 For the three months ended Estimated for the year ending November 30, 2024

February 29, 2024 February 28, 2023

For the year ended November 30, 2023 For the three months ended For the six months ended Estimated for the year ending November 30, 2024

May 31, 2024 May 31, 2023 May 31, 2024 May 31, 2023

Operating income $ 963.0 $ 234.1 $ 221.8 $ 467.6 $ 420.8

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(2) Income tax rate is calculated as income tax expense as a percentage of income from consolidated operations before income taxes.

Adjusted income tax rate is calculated as adjusted income tax expense as a percentage of income from consolidated operations before income taxes excluding special charges of $198.5 million and $187.3 million for the three months ended February 29, 2024, and February 28, 2023 respectively.

Adjusted income tax rate is calculated as adjusted income tax expense as a percentage of income from consolidated operations before income taxes excluding special charges of $195.4 million and $195.3 million for the three months ended May 31, 2024, and 2023 respectively, and $393.9 million and $382.6 million for the six months ended May 31, 2024 and 2023, respectively.

Adjusted income tax rate is calculated as adjusted income tax expense as a percentage of income from consolidated operations before income taxes excluding special charges of $859.9 million for the year ended November 30, 2023.

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dollars at the average exchange rates in effect during the corresponding period of the comparative year, rather than at the actual average exchange rates in effect during the current fiscal year.

As a result, the foreign currency impact is equal to the current year results in local currencies multiplied by the

change in the average foreign currency exchange rate between the current fiscal period and the corresponding period of the comparative year.

As a result, the foreign currency impact is equal to the current year results in local currencies multiplied by the change in the average foreign currency exchange rate between the current fiscal period and the corresponding period of the comparative year.

Rates of constant currency growth (decline) follow:

Three months ended February 29, 2024

Three months ended May 31, 2024

Percentage Change

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Total adjusted operating income 0.3 % (0.1) % 0.4 %

Six months ended May 31, 2024

Percentage Change

as Reported Impact of Foreign Currency Exchange Percentage Change on Constant Currency Basis

Consumer segment:

Americas (0.8) % — % (0.8) %

EMEA 9.1 % 3.1 % 6.0 %

APAC (6.2) % (2.9) % (3.3) %

Total Consumer segment 0.2 % 0.2 % — %

Flavor Solutions segment:

Americas 2.1 % 1.0 % 1.1 %

EMEA (3.2) % 1.9 % (5.1) %

APAC 3.8 % (3.7) % 7.5 %

Total Flavor Solutions segment 1.2 % 0.7 % 0.5 %

Total net sales 0.7 % 0.4 % 0.3 %

Adjusted operating income:

Consumer segment (0.4) % — % (0.4) %

Flavor Solutions segment 9.8 % 0.8 % 9.0 %

Total adjusted operating income 2.6 % 0.2 % 2.4 %

To present constant currency information for the fiscal year 2024 projection, projected sales and adjusted operating income for entities reporting in currencies other than the U.S.

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LIQUIDITY AND FINANCIAL CONDITION

Three months ended

February 29, 2024 February 28, 2023

Six months ended

May 31, 2024 May 31, 2023

Net cash provided by operating activities $ 301.5 $ 394.2

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We use a combination of equity and short- and long-term debt.

We use short-term debt, comprised

primarily of commercial paper, principally to finance ongoing operations, including our requirements for working capital (accounts receivable, prepaid expenses and other current assets, and inventories, less accounts payable, accrued payroll, and other accrued liabilities).

We use short-term debt, comprised primarily of commercial paper, principally to finance ongoing operations, including our requirements for working capital (accounts receivable, prepaid expenses and other current assets, and inventories, less accounts payable, accrued payroll, and other accrued liabilities).

We are committed to maintaining investment grade credit ratings.

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

Operating Cash Flow — Net cash provided by operating activities of $138.4 million for the three months ended February 29, 2024, increased $35.0 million from the same period of 2023.

This increase was primarily driven by an increase in net income, as well as the improvement in cash provided by accounts payable.

This was partially offset by the higher amount of certain employee benefits accrued as of the prior year-end and paid in the subsequent fiscal year.

Investing Cash Flow — Cash used in investing activities of $61.8 million for the three months ended February 29, 2024 increased by $0.3 million as compared to $61.5 million for the corresponding period in 2023.

Operating Cash Flow — Net cash provided by operating activities of $301.5 million for the six months ended May 31, 2024, decreased $92.7 million from the same period of 2023.

The effects of the increase in earnings was more than offset by the higher cash used for certain employee incentive compensation arrangements accrued as of the prior year-end and paid in the subsequent fiscal year as well as the timing of income tax payments.

Investing Cash Flow — Cash used in investing activities of $130.1 million for the six months ended May 31, 2024 increased by $14.0 million as compared to $116.1 million for the corresponding period in 2023.

Capital expenditures increased from the 2023 level of $118.6 million to $130.3 million.

We expect 2024 capital expenditures to approximate $290 million.

Financing Cash Flow — Financing activities used cash of $67.7 million for the first three months of 2024 and increased $23.0 million as compared to $44.7 million for the corresponding period in 2023.

Financing Cash Flow — Financing activities used cash of $172.2 million for the first six months of 2024 and decreased $345.9 million as compared to $518.1 million for the corresponding period in 2023.

The increase is a result of changes in our net borrowings, share issuance activity associated with the exercise of stock options, share repurchase activity, and dividends, all as described below.

The following table outlines our net borrowing activities:

Three months ended

February 29, 2024 February 28, 2023

Net increase in short-term borrowings $ 57.3 $ 67.9

Six months ended

May 31, 2024 May 31, 2023

Net increase (decrease) in short-term borrowings $ 80.3 $ (776.8)

Proceeds of issuance of long-term debt, net of debt issuance costs — 495.3

Repayments of long-term debt (28.0) (9.1)

Net cash provided by borrowing activities $ 43.2 $ 64.3

The following table outlines the activity in our share repurchase program for the three months ended February 29, 2024 and February 28, 2023:

Net cash provided by (used in) borrowing activities $ 52.3 $ (290.6)

The following table outlines the activity in our share repurchase program for the six months ended May 31, 2024 and 2023:

Number of shares of common stock repurchased (in thousands) 64 227

Dollar amount (in millions) $ 4.5 $ 18.6

As of February 29, 2024, $501 million remained of the $600 million share repurchase program that was authorized by the Board of Directors in November 2019.

As of May 31, 2024, $497 million remained of the $600 million share repurchase program that was authorized by the Board of Directors in November 2019.

The timing and amount of any shares repurchased is determined by our management based on its evaluation of market conditions and other factors.

During the three months ended February 29, 2024, we received proceeds of $4.4 million from exercised stock options as compared to $5.2 million received in the corresponding 2023 period.

We repurchased $4.9 million and $6.1 million of common stock during the three months ended February 29, 2024 and February 28, 2023, respectively, in conjunction with employee tax withholding requirements associated with our stock compensation plans.

We increased dividends paid to $112.7 million, or a per share quarterly dividend of $0.42, in the first three months of 2024 from $104.6 million, or a per share quarterly dividend of $0.39, of dividends paid in the same period last year.

During the six months ended May 31, 2024, we received proceeds of $10.4 million from exercised stock options as compared to $11.1 million received in the corresponding 2023 period.

We repurchased $8.9 million and $10.8 million of common stock during the six months ended May 31, 2024 and 2023, respectively, in conjunction with employee tax withholding requirements associated with our stock compensation plans.

We increased dividends paid to $225.5 million, or a per share quarterly dividend of $0.42, in the first six months of 2024 from $209.2 million, or a per share quarterly dividend of $0.39, of dividends paid in the same period last year.

The timing and amount of any future dividends is determined by our Board of Directors.

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Those balances are generally available without legal restrictions to fund ordinary business operations, capital projects and any possible future acquisitions.

At February 29, 2024 and February 28, 2023, we temporarily used $539.3 million and $150.1 million, respectively, of cash from our non-U.S.

At May 31, 2024 and 2023, we temporarily used $585.8 million and $372.7 million, respectively, of cash from our non-U.S.

subsidiaries to pay down short-term debt in the U.S.

During a quarter, our short-term borrowings vary, but are typically lower at the end of a quarter.

The average short-term borrowings outstanding for the three months ended February 29, 2024 and February 28, 2023 were $828.9 million and $1,460.0 million, respectively.

Total average debt outstanding for the three months ended February 29, 2024 and February 28, 2023 was $4,883.9 million and $5,265.0 million, respectively.

The average short-term borrowings outstanding for the three months ended May 31, 2024 and 2023 were $886.6 million and $1,315.9 million, respectively.

Total average debt outstanding for the three months ended May 31, 2024 and 2023 was $4,941.6 million and $5,287.5 million, respectively.

The reported values of our assets and liabilities are significantly affected by fluctuations in foreign exchange rates between periods.

At February 29, 2024, the exchange rate for the Mexican peso was higher than the U.S.

At May 31, 2024, the exchange rates for the British pound sterling, Mexican peso, Polish zloty, and Australian dollar were higher than the U.S.

dollar at November 30, 2023.

At February 29, 2024, the exchange rate for the Euro, British pound sterling, Canadian dollar, Chinese renminbi, Polish zloty, South African rand, and Australian dollar were lower than the U.S.

At May 31, 2024, the exchange rates for the Euro, Canadian dollar, and Chinese renminbi were lower than the U.S.

dollar at November 30, 2023.

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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.

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.

We previously maintained a 364-day $500 million revolving credit facility, which was entered into in June 2023 and expired in June 2024.

We continue to maintain a committed five-year $1.5 billion revolving credit facility, which will expire in June 2026.

The current pricing for the five-year credit facility, on a fully drawn basis, is Term SOFR plus 1.25%.

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%.

The current pricing for the 364-day credit facility, on a fully drawn basis, is Term SOFR plus 1.23%.

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.

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

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

We generally use our revolving credit facilities to support our issuance of commercial paper.

If the commercial paper market is not available or viable, we could borrow directly under our revolving credit facilities.

These facilities are made available by a syndicate of banks, with various commitments per bank.

If the commercial paper market is not available or viable, we could borrow directly under our revolving credit facility.

This facility is made available by a syndicate of banks, with various commitments per bank.

If any of the banks in this syndicate are unable to perform on their commitments, our liquidity could be impacted, which could reduce our ability to grow through funding of our working capital.

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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.

Also in June 2024, our $500 million, 364-day revolving credit facility matures.

Our other cash requirements include raw material purchases, lease payments, income taxes, anticipated quarterly dividends, and pension and postretirement benefits, as well as other contractual obligations.

These obligations impact our liquidity and capital resource needs.

To meet those cash requirements, we intend to use our existing cash, cash equivalents and internally generated funds, to borrow under our existing credit facilities or under other short-

term borrowing facilities and depending on market conditions and upon the significance of the cost of a particular debt maturity to our then-available sources of funds, to obtain additional short- and long-term financing.

To meet those cash requirements, we intend to use our existing cash, cash equivalents and internally generated funds, to borrow under our existing credit facilities or under other short-term borrowing facilities and depending on market conditions and upon the significance of the cost of a particular debt maturity to our then-available sources of funds, to obtain additional short- and long-term financing.

We believe that cash provided from these sources will be adequate to meet our future cash requirements.

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These estimates can also affect supplemental information disclosed by us, including information about contingencies, risk and financial condition.

We believe, given current facts and circumstances, our estimates and assumptions are reasonable, adhere to U.S.

GAAP and are consistently applied.

We believe, given current facts and circumstances, our estimates and assumptions are reasonable, adhere to GAAP and are consistently applied.

Inherent in the nature of an estimate or assumption is the fact that actual results may differ from estimates, and estimates may vary as new facts and circumstances arise.

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expected trends in net sales and earnings performance and other financial measures;

the expected impact of pricing actions on the Company's results of operations and gross margins;

the impact of price elasticity on our sales volume and mix;

the expected impact of pricing actions on the Company's results of operations, including our sales volume and mix as well as gross margins;

the expected impact of the inflationary cost environment on our business;

the expected impact of factors affecting our supply chain, including the availability and prices of commodities and other supply chain resources including raw materials, packaging, labor energy, and transportation;

the expected impact of factors affecting our supply chain, including the availability and prices of commodities and other supply chain resources including raw materials, packaging, labor, energy, and

transportation;

the expected impact of productivity improvements, and cost savings, including those associated with our CCI and GOE programs and Global Business Services operating model initiative;

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labor shortage, turnover and labor cost increases;

the impact of the ongoing conflicts between Russia and

Ukraine, Israel and Hamas, and in the Red Sea, including the potential for broader economic disruption;

the impact of the ongoing conflicts between Russia and Ukraine, Israel and Hamas, and in the Red Sea, including the potential for broader economic disruption;

government regulation, and changes in legal and regulatory requirements and enforcement practices;

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis