Overview


The following Management's Discussion and Analysis of Financial Condition and
Results of Operations (MD&A) is intended to help the reader understand
McCormick & Company, Incorporated, our operations and our present business
environment from the perspective of management. MD&A is provided as a supplement
to, and should be read in conjunction with, our financial statements and the
accompanying notes thereto contained in Item 8 of this report. We use certain
non-GAAP information - more fully described below under the caption Non-GAAP
Financial Measures - that we believe is important for purposes of comparison to
prior periods and development of future projections and earnings growth
prospects. This information is also used by management to measure the
profitability of our ongoing operations and analyze our business performance and
trends. The dollar and share information in the charts and tables in MD&A are in
millions, except per share data.

McCormick is a global leader in flavor. We manufacture, market and distribute
spices, seasoning mixes, condiments and other flavorful products to the entire
food and beverage industry-retailers, food manufacturers and foodservice
businesses. We manage our business in two operating segments, consumer and
flavor solutions, as described in Item 1 of this report.
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Our long-term annual growth objectives in constant currency are to increase sales 4% to 6%, increase adjusted operating income 7% to 9% and increase adjusted earnings per share 9% to 11%. Our actual results for a year can vary from our long-term growth objectives.

Recent Events



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. Each of these factors impacted our fiscal 2022
operating results and we expect each will impact our fiscal 2023 performance. We
expect elevated levels of cost inflation to persist throughout 2023, although at
lower levels than experienced in 2022. 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.
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. 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. Also, the ongoing conflict between Russia and
Ukraine, and the sanctions imposed in response to this conflict, have increased
global economic and political uncertainty.

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. These and other uncertainties could result in changes to our current
expectations. 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.

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. 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. 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. Additionally, in some instances the pricing actions
we take have been impacted by price elasticity which unfavorably impacts our
sales volume and mix.

Our interest expense is impacted by the overall global economic and interest
rate environment. The inflationary environment has also resulted in central
banks raising short-term interest rates. On November 30, 2022, we had total
outstanding variable rate debt of approximately $1,295 million. Our policy is to
manage our interest rate risk by entering into both fixed and variable rate debt
arrangements. We also use interest rate swaps to achieve a desired mix of fixed
and variable rate debt. As of November 30, 2022, we had total outstanding fixed
to variable interest rate swaps of $600 million notional. We expect that our
interest expense will increase in 2023 as a result of the higher interest rate
environment.

Supply Chain Disruption - 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. 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. The severity of those supply chain pressures varied over 2022, 2021
and 2020.

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. 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; increasing
our manufacturing capacity and automation to respond to the evaluated demand as
well as reduce the use of co-manufacturers; and executing and evaluating
initiatives to reduce the safety stock levels of our inventory that were put in
place to protect against supply disruptions. The
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elimination of other costs across the organization will include a voluntary retirement program and other streamlining initiatives.



COVID-19 - The COVID-19 pandemic has impacted our operating results. 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.

We continue to actively monitor the impact of COVID-19 on all aspects of our
business. 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; infection rates in the markets where we do
business; the federal, state, and local government actions taken in response;
vaccine effectiveness; and the macroeconomic environment. The effects of
COVID-19 on consumer behavior have impacted the relative balance of at-home
versus away-from-home food consumption and demand. While we continue to see
strong levels of at-home consumption compared to pre-pandemic levels, the
favorable impact of increased at-home meal preparation was less significant in
the year ended November 30, 2022 as compared to 2021. This change in consumer
behavior was due in part to a decrease in the prevalence and scale of
restrictive measures in place to reduce the spread of COVID-19 in the 2022
period as compared to 2021. Conversely, we continue to see improvements in
away-from-home demand associated with the COVID-19 recovery. During the 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. 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.

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:

                                                          For the year 

ended November 30, 2022 as compared to the year ended


                                                                                  November 30, 2019
                                                          Percentage change       Impact of foreign      Percentage change on
                                                             as reported          currency exchange     constant currency basis
Net sales:
Consumer segment                                                         4.7  %                (0.2) %                    4.9  %
Flavor Solutions segment                                                 7.7  %                (0.4) %                    8.1  %
Total net sales                                                          5.9  %                (0.3) %                    6.2  %




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. 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.

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. 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. We announced on March 11, 2022, that we were suspending our business
operations in Russia. In May 2022, we made the decision to exit our consumer
business in Russia. 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. 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.

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

Base Business - We expect to drive sales growth by optimizing our brand marketing investment through improved speed, quality and effectiveness. We measure the return on our brand marketing investment and have identified


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digital marketing as one of our highest return investments in brand marketing support. Through digital marketing, we are connecting with consumers in a personalized way to deliver recipes, provide cooking advice and help them discover new products.



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

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

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

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

•On November 30, 2020, we acquired the parent company of Cholula Hot Sauce®
(Cholula) from L Catterton for approximately $801 million, net of cash acquired.
Cholula is a strong addition to 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.

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. Our CCI program funds
brand marketing support, product innovation and other growth initiatives. We
expect our CCI program, Global Operating Effectiveness program, and organization
and streamlining actions to deliver savings of approximately $75 million in
2023.

We are making investments to build the McCormick of the future, including in our
Global Enablement (GE) organization to transform McCormick through globally
aligned, innovative services to enable growth. As technology provides the
backbone for this greater process alignment, information sharing and
scalability, we are also making investments in our information systems. 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.

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. Of that projected $400 million, we expect capitalized software
to account for approximately 50% and program expenses to account for
approximately 50%. Of the approximately $200 million of operating expenses
included in our projected total spending, approximately $122 million has been
recognized through November 30, 2022. Of the approximately $200 million of
capitalized software included in our projected total spending, approximately
$137 million has been recognized through November 30, 2022.

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. In 2022, we
continued to have a balanced use of cash for debt repayment,
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capital expenditures and the return of cash to shareholders through dividends
and share repurchases. We are using our cash to fund shareholder dividends, with
annual increases in each of the past 37 years, and to fund capital expenditures
and acquisitions. In 2022, the return of cash to our shareholders through
dividends and share repurchases was $435.5 million.

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

In 2022, we achieved further growth of our business with net sales rising 0.5% over the 2021 level due to the following factors:

•Pricing actions, including those taken in response to the inflationary cost environment, contributed 7.7% of the increase in net sales.



•Volume and product mix unfavorably impacted our net sales growth by 4.5%,
exclusive of acquisitions and divestitures. 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. 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.

•Acquisitions contributed 0.2% of the increase in net sales. Divestitures negatively impacted our net sales increase by 0.4%.



•Net sales growth was negatively impacted by fluctuations in currency rates that
decreased sales growth by 2.5%. Excluding this impact, we grew sales by 3.0%
over the prior year on a constant currency basis.

Operating income was $863.6 million in 2022 and $1,015.1 million in 2021. We
recorded $51.6 million and $51.1 million of special charges in 2022 and 2021,
respectively, related to organization and streamlining actions. Special charges
in 2021 included $4.7 million in cost of goods sold related the exit of a low
margin business. In 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. 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. 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. In constant currency,
adjusted operating income declined 15.5%. For further details and a
reconciliation of non-GAAP to reported amounts, see the subsequent discussion
under the heading "Non-GAAP Financial Measures".

Diluted earnings per share was $2.52 in 2022 and $2.80 in 2021. 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.
Special charges and transaction and integration expenses lowered earnings per
share by $0.15 and $0.30 in 2022 and 2021, respectively. A gain on our sale of a
business increased earnings per share by $0.14 in 2022. A gain on our sale of an
unconsolidated operation increased earnings per share by $0.05 in 2021.
Excluding the effects of special charges, transaction and integration expenses,
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%.
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2023 Outlook



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. 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.
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. 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.

We expect our 2023 gross profit margin to range from 25 basis points to 75 basis
points higher than our gross profit margin of 35.8% in 2022. 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.
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.

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. 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. Our CCI-led cost savings target in 2023 is approximately $85
million. 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. We also expect approximately $50 million of special charges in 2023 that
relate to previously announced organization and streamlining actions; in 2022,
special charges were $51.6 million. 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.

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. In 2023, we will also lap
the favorable effects associated with the termination of interest rate
contracts. 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.

Our underlying effective tax rate is projected to be higher in 2023 than in
2022. We estimate that our 2023 effective tax rate, including the net favorable
impact of anticipated discrete tax items, will be 22% as compared to 20.7% in
2022. 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.

Diluted earnings per share was $2.52 in 2022. Diluted earnings per share for
2023 is projected to range from $2.42 to $2.47. Excluding the per share impact
of (i) special charges of $51.6; (ii) integration expenses of $2.2 million; 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. 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. 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.
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RESULTS OF OPERATIONS-2022 COMPARED TO 2021


                                                                       2022            2021
Net sales                                                         $    6,350.5    $    6,317.9
Percent growth                                                             0.5  %         12.8  %
Components of percent growth in net sales-increase (decrease):
Volume and product mix                                                    (4.5) %          5.5  %
Pricing actions                                                            7.7  %          0.8  %
Acquisitions                                                               0.2  %          4.1  %
Divestiture                                                               (0.4) %            -  %
Foreign exchange                                                          (2.5) %          2.4  %


Sales for 2022 increased by 0.5% from 2021 and by 3.0% 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 4.5% with growth in our flavor solutions
segment being more than offset by a decline in our consumer segment. 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, contributed approximately 1.0% to that decline as compared to 2021. In
addition, pricing actions, taken in response to the inflationary cost
environment, added 7.7% to sales, as compared to the prior year. Acquisitions
and a divestiture added to and decreased sales by 0.2% and 0.4%, respectively,
both as compared to the prior year. Sales were impacted by unfavorable foreign
currency rates that decreased sales by 2.5% in 2022 as compared to the prior
year and are excluded from our measure of sales growth of 3.0% on a constant
currency basis.

                            2022         2021
Gross profit            $ 2,274.5    $ 2,494.6
Gross profit margin          35.8  %      39.5  %


In 2022, gross profit decreased by $220.1 million, or 8.8%, from the comparable
period in 2021. Our gross profit margin for 2022 was 35.8%, a decrease of 370
basis points from 39.5% in 2021. The decline was driven by the margin dilutive
impact of pricing actions taken in response to the inflationary cost environment
of approximately 240 basis points, increased commodity, packaging materials and
transportation costs, higher conversion costs and a less favorable product mix
both within and between our segments, each as compared to 2021. These
unfavorable impacts were partially offset by cost savings led by our CCI
program. 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. 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.

                                                 2022         2021

Selling, general & administrative expense $ 1,357.1 $ 1,404.1 Percent of net sales

                              21.4  %      22.3  %


Selling, general and administrative (SG&A) expense decreased by $47.0 million in
2022 as compared to 2021. That decrease in SG&A expense was primarily a result
of lower performance-based employee incentive expenses and variable selling
costs, both as compared to the prior year. This decrease was partially offset by
(i) higher distribution costs; (ii) unfavorable investment results associated
with non-qualified retirement plan assets; and (iii) higher investment
associated with the implementation of our global enterprise resource planning
(ERP) platform. SG&A as a percent of net sales for 2022 decreased by 90 basis
points from the prior year level, due primarily to the net impact of the
previously mentioned factors.

                                                     2022     2021
Special charges included in cost of goods sold     $    -   $  4.7
Other special charges                                51.6     46.4
Total special charges                              $ 51.6   $ 51.1


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

During 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. voluntary retirement program. 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.

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 (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.

Details with respect to the composition of special charges are including the accompanying notes to our financial statements contained in Item 8 of this report.



                                                       2022     2021

Transaction expenses included in cost of goods sold $ - $ 6.3 Other transaction and integration expenses

              2.2     29.0
Total transaction and integration expenses            $ 2.2   $ 35.3


During 2022, we recorded $2.2 million of integration expenses related to our
acquisition of FONA. During 2021, we recorded transaction and integration
expenses of $35.3 million related to our acquisitions of Cholula and FONA. These
costs consisted of (i) $6.3 million of amortization of the acquisition-date fair
value adjustment of inventories that is included in Cost of goods sold, (ii)
$13.8 million of other transaction expenses primarily related to outside
advisory, service and consulting costs, and (iii) $15.2 million of integration
expenses.

                          2022        2021
Operating income       $ 863.6    $ 1,015.1
Percent of net sales      13.6  %      16.1  %


Operating income decreased by $151.5 million, or 14.9%, from $1,015.1 million in
2021 to $863.6 million in 2022. Special charges and transaction and integration
expenses decreased by $32.6 million in 2022, as compared to 2021, and positively
impacted operating income. Operating income as a percentage of net sales
declined by 250 basis points in 2022, to 13.6% in 2022 from 16.1% in 2021 as a
result of the factors previously described. Excluding the effect of special
charges and transaction and integration expenses previously described, adjusted
operating income was $917.4 million in 2022 as compared to $1,101.5 million in
2021, a decrease of $184.1 million or 16.7% from the 2021 level. Adjusted
operating income as a percentage of net sales declined by 300 basis points in
2022, to 14.4% in 2022 from 17.4% in 2021.

                       2022      2021
Interest expense     $ 149.1   $ 136.6
Other income, net       98.3      17.3


Interest expense was $12.5 million higher in 2022 as compared to the prior year
as an increase in interest rates during the latter part of 2022 was partially
offset by a decrease in average total borrowings. Other income, net for 2022
increased by $81.0 million, including the impact of 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 financial statements. The remaining increase
was principally driven by an increase in interest income, as compared to the
prior year.

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                                                               2022       

2021


Income from consolidated operations before income taxes     $ 812.8    $ 895.8
Income tax expense                                            168.6      192.7
Effective tax rate                                             20.7  %    21.5  %


The provision for income taxes is based on the estimate of the annual effective
tax rate adjusted to reflect the tax impact of items discrete to the fiscal
period. We record tax expense or tax benefits that do not relate to ordinary
income in the current fiscal year discretely in the period in which such items
occur pursuant to the requirements of U.S. GAAP. Examples of such types of
discrete items not related to ordinary income include, but are not limited to,
excess tax benefits associated with 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. The
decrease in our effective tax rate was principally attributable to the effects
of the lower level of income before income taxes and the higher level of net
discrete tax benefits in 2022 as compared to 2021. Net discrete tax benefits
were $27.6 million in 2022, an increase of $1.0 million from $26.6 million in
2021. Discrete tax benefits in both the 2022 and 2021 periods included excess
tax benefits associated with stock-based compensation ($9.1 million and $4.3
million in 2022 and 2021, respectively), the reversal of reserves for
unrecognized tax benefits ($6.9 million and $22.5 million in 2022 and 2021,
respectively) due to, in 2021, the partial release of certain reserves for an
unrecognized tax benefit and related interest in a non-U.S. jurisdiction based
on a change in our assessment of the technical merits of that position
associated with the availability of new information, and in both years due to
the expiration of the statutes of limitations, the release of valuation
allowances due to a change in judgment about realizability of deferred tax
assets ($4.6 million and $4.4 million in 2022 and 2021, respectively), tax
benefits related to the revaluation of deferred taxes resulting from enacted
legislation ($3.9 million and $4.0 million in 2022 and 2021, respectively), and
other discrete items. In 2022, other discrete tax items included $2.3 million of
tax benefits related to the sale of an asset associated with a previously exited
line of business. In 2021, other discrete tax items included $10.4 million of
deferred state tax expense directly related to our December 2020 acquisition of
FONA. See note 13 of notes to our consolidated financial statements for a more
detailed reconciliation of the U.S. federal tax rate with the effective tax
rate.

                                            2022     2021

Income from unconsolidated operations $ 37.8 $ 52.2




Income from unconsolidated operations, which is presented net of the elimination
of earnings attributable to non-controlling interests, decreased $14.4 million
in 2022 from the prior year. We own 50% of most of our unconsolidated joint
ventures, including our largest joint venture, McCormick de Mexico, that
comprised 84% and 62% of the income of our unconsolidated operations in 2022 and
2021, respectively. The decrease for 2022 as compared to 2021 was primarily
driven by the after-tax gain of $13.4 million on the sale of an unconsolidated
operation that occurred in 2021.

We reported diluted earnings per share of $2.52 in 2022, compared to $2.80 in
2021. The table below outlines the major components of the change in diluted
earnings per share from 2021 to 2022. The decrease in operating income in the
table below includes the impact from unfavorable currency exchange rates in
2022.
2021 Earnings per share-diluted                                               $       2.80
Decrease in operating income                                                

(0.54)


Decrease in special charges, net of taxes                                   

0.02

Decrease in transaction and integration expenses, including impact of net discrete tax item related to FONA acquisition

0.13


Gain on the sale of a business, net of taxes                                

0.14

Increase in other income, excluding gain on the sale of a business

0.09

Decrease in income from unconsolidated operations, including the after-tax gain on sale of unconsolidated operation of $0.05 per diluted share in 2021

(0.05)

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)


Increase in interest expense                                                

(0.04)


2022 Earnings per share-diluted                                             

$ 2.52


                                       29
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Results of Operations-Segments



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

Consumer Segment

                                                                           2022          2021
Net sales                                                              $  3,757.9    $  3,937.5
Percent - (decline) increase                                                 (4.6) %        9.5  %
Components of percent change in net sales-(decrease) increase:
Volume and product mix                                                       (9.3) %        4.3  %
Pricing actions                                                               7.4  %        0.6  %
Acquisitions                                                                    -  %        2.4  %
Divestitures                                                                 (0.6) %          -  %
Foreign exchange                                                             (2.1) %        2.2  %

Segment operating income                                               $    710.7    $    804.9
Segment operating income margin                                             

18.9 % 20.4 %




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. The sales decrease was driven by
lower sales of our consumer business in the Americas, EMEA and Asia/Pacific
regions. Lower volume and unfavorable product mix decreased sales by 9.3%. 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, contributed approximately 1.5% to that decline as compared to 2021.
Pricing actions, taken in response to inflationary cost pressures, increased
sales by 7.4% in 2022 as compared to the prior year level. The divestiture of
our Kitchen Basics business unfavorably impacted sales by 0.6% as compared to
2021. An unfavorable impact from foreign currency rates decreased sales by 2.1%
compared to the prior year and is excluded from our measure of sales decline of
2.5% on a constant currency basis.

In the Americas region, consumer sales decreased 1.1% in 2022 as compared to
2021 and decreased by 0.9% on a constant currency basis. Unfavorable volume and
product mix decreased sales by 8.6% as compared to the corresponding period in
2021, including the unfavorable impact of price elasticity. Pricing actions,
taken in response to higher costs, increased sales by 8.6% as compared to the
prior year. The sale of our Kitchen Basics business unfavorably impacted sales
by 0.9% as compared to 2021. The unfavorable impact of foreign currency rates
decreased sales by 0.2% in the year and is excluded from our measure of sales
decline of 0.9% on a constant currency basis.

In the EMEA region, consumer sales decreased 14.7% in 2022 as compared to 2021
and decreased by 5.1% on a constant currency basis. Unfavorable volume and
product mix decreased sales by 10.5% as compared to the corresponding period of
2021. The decrease was driven by lower sales of our consumer business in France
as compared to the prior year. The exit of our consumer operations in Russia
also contributed approximately 2.1% to the region's decline in volume and mix.
Pricing actions, taken in response to the inflationary cost environment,
increased sales by 5.4% as compared to the 2021 period. 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.

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. Lower volume and
unfavorable product mix decreased sales by 11.5% as compared to the
corresponding period in 2021. The impact of restrictive measures related to
COVID-19 resurgences in China and the exit of our rice product line in India,
contributed approximately 9.5% to that decline as compared to 2021. Pricing
actions, taken in response to the inflationary cost environment, increased sales
by 3.4% as compared to the prior year. The 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 8.1% on a constant currency basis.
                                       30
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Segment operating income for our consumer segment decreased by $94.2 million, or
11.7%, in 2022 as compared to 2021. The decrease in segment operating income was
driven by lower sales and increased commodity, transportation and conversion
costs, partially offset by pricing actions in response to increased costs,
CCI-led cost savings and lower performance-based employee incentive expenses,
all as compared to the prior year. Segment operating margin for our consumer
segment decreased by 150 basis points in 2022 to 18.9%, driven by a decrease in
consumer gross profit margin, including the margin dilutive impact of pricing
actions, the impact of the inflationary cost environment, and higher conversion
costs, which was partially offset by the impact of CCI-led cost savings, all as
compared to the 2021 level. On a constant currency basis, segment operating
income for our consumer segment decreased by 10.9% in 2022, as compared to 2021.

Flavor Solutions Segment

                                                                         2022          2021
Net sales                                                            $  2,592.6    $  2,380.4
Percent growth                                                              8.9  %       18.7  %
Components of percent growth in net sales-increase (decrease):
Volume and product mix                                                      3.5  %        7.2  %
Pricing actions                                                             8.2  %        1.4  %
Acquisitions                                                                0.4  %        7.3  %
Foreign exchange                                                           (3.2) %        2.8  %

Segment operating income                                             $    206.7    $    296.6
Segment operating income margin                                             

8.0 % 12.5 %




Sales of our flavor solutions segment increased 8.9% in 2022 as compared to 2021
and increased by 12.1% on a constant currency basis. Volume and product mix
contributed 3.5% of the increase in addition to pricing actions which added 8.2%
to sales for 2022, both in comparison to the prior year levels. The incremental
impact of our acquisition of FONA added 0.4% to segment sales for 2022. An
unfavorable impact from foreign currency rates decreased sales by 3.2% compared
to the prior year and is excluded from our measure of sales growth of 12.1% on a
constant currency basis.

In the Americas region, flavor solutions sales increased by 11.4% during 2022 as
compared to 2021 and increased by 11.7% on a constant currency basis. Favorable
volume and product mix increased flavor solutions sales in the Americas by 2.2%
during 2022, as growth in sales to packaged food and beverage companies was
partially offset by lower sales to quick service restaurants, both as compared
to the year ago period. Pricing actions, taken in response to the inflationary
cost environment, favorably impacted sales by 8.9% during 2022 as compared to
the prior year. The incremental impact of our acquisition of FONA added 0.6% to
segment sales for 2022. An unfavorable impact from foreign currency rates
decreased sales by 0.3% compared to 2021 and is excluded from our measure of
sales growth of 11.7% on a constant currency basis.

In the EMEA region, flavor solutions sales in 2022 increased by 5.5% as compared
to 2021 and increased by 17.2% on a constant currency basis. Favorable volume
and product mix increased segment sales by 9.5% in 2022 as compared to 2021. The
increase was driven by higher sales to quick service restaurants, branded
foodservice and package food and beverage company customers. Pricing actions,
taken in response to the inflationary cost environment, favorably impacted sales
by 7.7% in 2022 as compared to the prior period level. 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.

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. 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. Pricing actions, taken in response to the inflationary
cost environment, favorably impacted sales by 4.9% as compared to the prior
year. An unfavorable impact from foreign currency rates decreased sales by 5.4%
compared to 2021 and is excluded from our measure of sales growth of 5.2% on a
constant currency basis.

Segment operating income for our flavor solutions segment decreased by $89.9
million, or 30.3%, in 2022 as compared to 2021. 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. Segment operating margin for our flavor solutions
segment decreased by 450
                                       31
--------------------------------------------------------------------------------

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.

RESULTS OF OPERATIONS-2021 COMPARED TO 2020


                                                                       2021            2020
Net sales                                                         $    6,317.9    $    5,601.3
Percent growth                                                            12.8  %          4.7  %
Components of percent growth in net sales-increase (decrease):
Volume and product mix                                                     5.5  %          3.7  %
Pricing actions                                                            0.8  %          1.6  %
Acquisitions                                                               4.1  %            -  %
Foreign exchange                                                           2.4  %         (0.6) %



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

                            2021         2020
Gross profit            $ 2,494.6    $ 2,300.4
Gross profit margin          39.5  %      41.1  %


In 2021, our gross profit margin decreased 160 basis points to 39.5% from 41.1%
in 2020. The decline was driven by the impact of increased commodity, packaging
materials and transportation costs, higher conversion costs, which includes
costs associated with COVID-19, and a less favorable mix in sales between our
consumer and flavor solutions segments as compared to 2020. These unfavorable
impacts were partially offset by savings from our CCI program, pricing actions,
improved product mix and the accretive impact of the Cholula and FONA
acquisitions, each as compared to the prior year. 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. 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.

                                                 2021         2020

Selling, general & administrative expense $ 1,404.1 $ 1,281.6 Percent of net sales

                              22.3  %      22.9  %



Selling, general and administrative (SG&A) expense was $1,404.1 million in 2021
compared to $1,281.6 million in 2020, an increase of $122.5 million. That
increase in SG&A expense was primarily a result of (i) SG&A associated with the
Cholula and FONA acquisitions; (ii) greater selling and distribution expenses
associated with the higher sales volume; and (iii) increased brand marketing
costs, all as compared to the corresponding period in 2020. Those increases were
partially offset by lower performance-based employee incentive expenses, as
compared to the prior year. 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.
                                       32
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                                                     2021    2020

Special charges included in cost of goods sold $ 4.7 $ - Other special charges

                                  46.4     6.9
Total special charges                              $ 51.1   $ 6.9


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

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

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



                                                                2021     2020
        Transaction expenses included in cost of goods sold   $  6.3   $    -
        Other transaction and integration expenses                29.0     12.4
        Total transaction and integration expenses            $ 35.3   $ 12.4



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

                           2021        2020
Operating income       $ 1,015.1    $ 999.5
Percent of net sales        16.1  %    17.8  %


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

                       2021      2020
Interest expense     $ 136.6   $ 135.6
Other income, net       17.3      17.6


Interest expense was $1.0 million higher for 2021 as compared to the prior year
as an increase in average total borrowings was largely offset by a decrease in
interest rates. Other income, net for 2021 decreased by $0.3 million
                                       33
--------------------------------------------------------------------------------

as lower non-service cost income associated with our pension and postretirement
benefit plans was partially offset by higher interest income, as compared to
2020. The decrease was also impacted by non-operating foreign currency
transaction gains in 2021, as compared to non-operating foreign currency
transaction losses in the prior period.

                                                               2021       

2020


Income from consolidated operations before income taxes     $ 895.8    $ 881.5
Income tax expense                                            192.7      174.9
Effective tax rate                                             21.5  %    19.8  %


The provision for income taxes is based on the estimate of the annual effective
tax rate adjusted to reflect the tax impact of items discrete to the fiscal
period. We record tax expense or tax benefits that do not relate to ordinary
income in the current fiscal year discretely in the period in which such items
occur pursuant to the requirements of U.S. GAAP. Examples of such types of
discrete items not related to ordinary income include, but are not limited to,
excess tax benefits associated with 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 21.5% in 2021 as compared to 19.8% in 2020. The
increase in our effective tax rate was principally attributable to the lower
level of net discrete tax benefits in 2021 as compared to 2020. Net discrete tax
benefits were $26.6 million in 2021, a decrease of $16.8 million from $43.4
million in 2020. Discrete tax benefits in both the 2021 and 2020 periods
included excess tax benefits associated with 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. 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. In 2021, discrete tax items included $4.0 million of tax
benefits related to the revaluation of deferred taxes resulting from enacted
legislation and $10.4 million of deferred state tax expense directly related to
our December 2020 acquisition of FONA. In 2020, discrete tax items included $9.9
million of tax benefits associated with intra-entity asset transfers that
occurred. See note 13 of notes to our consolidated financial statements for a
more detailed reconciliation of the U.S. federal tax rate with the effective tax
rate.

                                            2021     2020

Income from unconsolidated operations $ 52.2 $ 40.8




Income from unconsolidated operations, which is presented net of the elimination
of earnings attributable to non-controlling interests, increased $11.4 million
in 2021 from the prior year, driven by an after-tax gain of $13.4 million on the
sale of our 26% interest in Eastern Condiments Private Ltd. (Eastern), an
unconsolidated operation, during our second quarter of 2021, as more fully
described in note 5 of the notes to the accompanying financial statements. We
own 50% of most of our unconsolidated joint ventures, including our largest
joint venture, McCormick de Mexico, that comprised 62% and 75% of the income of
our unconsolidated operations in 2021 and 2020, respectively. The relative
impact of McCormick de Mexico on income from unconsolidated operations in 2021
was impacted by the gain on our sale of an unconsolidated operation.

We reported diluted earnings per share of $2.80 in 2021, compared to $2.78 in
2020. The table below outlines the major components of the change in diluted
earnings per share from 2020 to 2021. The increase in operating income in the
table below includes the impact from favorable currency exchange rates in 2021.
                                       34
--------------------------------------------------------------------------------

2020 Earnings per share-diluted                                               $       2.78
Increase in operating income                                                          0.25
Increase in special charges                                                          (0.15)

Increase in transaction and integration expenses, including impact of net discrete tax item related to FONA acquisition

(0.10)

Impact of income taxes, excluding taxes on special charges and transaction and integration expenses

(0.01)

Increase in income from unconsolidated operations, including the after-tax gain on sale of unconsolidated operation of

$0.05 per diluted share                                                  

0.04


Impact of higher shares                                                     

(0.01)


2021 Earnings per share-diluted                                             

$ 2.80

Results of Operations-Segments



Consumer Segment

                                                                         2021          2020
Net sales                                                            $  3,937.5    $  3,596.7
Percent growth                                                              9.5  %       10.0  %
Components of percent growth in net sales-increase (decrease):
Volume and product mix                                                      4.3  %        8.8  %
Pricing actions                                                             0.6  %        1.5  %
Acquisitions                                                                2.4  %          -  %
Foreign exchange                                                            2.2  %       (0.3) %

Segment operating income                                             $    804.9    $    780.9
Segment operating income margin                                            

20.4 % 21.7 %




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

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

In the EMEA region, consumer sales increased 5.8% in 2021 as compared to 2020,
which experienced a 14.5% increase in sales from the 2019 level driven by the
COVID-19 impact on greater consumer at-home meal preparation, and increased by
0.9% on a constant currency basis. Favorable volume and product mix increased
sales by 0.3% as compared to the corresponding period of 2020. The impact of
pricing actions increased sales by 0.6% as compared to the prior year. The
favorable impact of foreign currency exchange rates increased sales by 4.9%
compared to 2020 and is excluded from our measure of sales growth of 0.9% on a
constant currency basis.

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

Segment operating income for our consumer segment increased by $24.0 million, or
3.1%, in 2021 as compared to 2020. The increase in segment operating income was
driven by higher sales, including the impact of acquisitions,
                                       35
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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. The impact of COVID-19 on segment operating income
during 2021 reflected actions, including the incremental impact of temporary
arrangements to utilize co-manufacturing, that increased our cost to produce
certain products and measures to enable manufacturing and distribution staff to
maintain social distancing and permit enhanced cleaning that reduced
productivity. Segment operating margin for our consumer segment decreased by 130
basis points in 2021 to 20.4%, driven by a decrease in segment gross profit
margin, including the impact of the inflationary cost environment, which was
partially offset by the benefit from the leverage of fixed and semi-fixed
expenses over a higher sales base as compared to the 2020 level. On a constant
currency basis, segment operating income for our consumer segment increased by
1.3% in 2021, as compared to 2020.

Flavor Solutions Segment

                                                                         2021          2020
Net sales                                                            $  2,380.4    $  2,004.6
Percent growth (decline)                                                   18.7  %       (3.5) %
Components of percent change in net sales-increase (decrease):
Volume and product mix                                                      7.2  %       (4.2) %
Pricing actions                                                             1.4  %        1.8  %
Acquisitions                                                                7.3  %          -  %
Foreign exchange                                                            2.8  %       (1.1) %

Segment operating income                                             $    296.6    $    237.9
Segment operating income margin                                            

12.5 % 11.9 %





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

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

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

In the Asia/Pacific region, flavor solutions sales increased 16.9% in 2021 as
compared to 2020, which experienced a sales increase of 0.4% from the 2019 level
driven by higher sales to quick service restaurant customers, and increased by
9.4% on a constant currency basis. Favorable volume and product mix increased
sales by 10.6%,
                                       36
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driven by higher sales to quick service restaurant customers. Pricing actions
decreased sales by 1.2% as compared to the prior year. A favorable impact from
foreign currency rates increased sales by 7.5% compared to 2020 and is excluded
from our measure of sales growth of 9.4% on a constant currency basis.

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

NON-GAAP FINANCIAL MEASURES



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

•Special charges - Special charges consist of expenses and income associated
with certain actions undertaken by us to reduce fixed costs, simplify or improve
processes, and improve our competitiveness and are of such significance in terms
of both up-front costs and organizational/structural impact to require advance
approval by our Management Committee. Upon presentation of any such proposed
action (generally including details with respect to estimated costs, which
typically consist principally of employee severance and related benefits,
together with ancillary costs associated with the action that may include a
non-cash component, such as an asset impairment, or a component which relates to
inventory adjustments that are included in cost of goods sold; impacted
employees or operations; expected timing; and expected savings) to the
Management Committee and the Committee's advance approval, expenses associated
with the approved action are classified as special charges upon recognition and
monitored on an ongoing basis through completion. Special charges for the year
ended November 30, 2022 include a $13.6 million gain associated with the sale of
the Kohinoor brand name. We exited our Kohinoor rice product line in India in
the fourth quarter of fiscal year 2021.

•Transaction and integration expenses associated with the Cholula and FONA
acquisitions - We exclude certain costs associated with our acquisitions of
Cholula and FONA in November and December 2020, respectively, and their
subsequent integration into the Company. Such costs, which we refer to as
"Transaction and integration expenses," include transaction costs associated
with each acquisition, as well as integration costs following the respective
acquisition, including the impact of the acquisition date fair value adjustment
for inventories, together with the impact of discrete tax items, if any,
directly related to each acquisition.

•Income from sale of unconsolidated operations - We exclude the gain realized
upon our sale of an unconsolidated operation in March 2021. As more fully
described in note 5 of the notes to the accompanying financial statements, the
sale of our 26% interest in Eastern Condiments resulted in a gain of $13.4
million, net of tax of $5.7 million. The gain is included in Income from
unconsolidated operations in our consolidated income statement for the year
ended November 30, 2021.

•Gain on sale of Kitchen Basics - We exclude the gain realized upon our sale of
the Kitchen Basics business in August 2022. As more fully described in note 17
of the notes to the accompanying financial statements, the pre-tax gain
associated with the sale was $49.6 million and is included in Other income, net
in our consolidated income statement for the year ended November 30, 2022.

Details with respect to the composition of transaction and integration expenses,
special charges, income from the sale of unconsolidated operations, and gain on
sale of Kitchen Basics for the years and in the amounts set forth below are
included in notes 2, 3, and 5, of notes to our consolidated financial
statements.
                                       37
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We believe that these non-GAAP financial measures are important. The exclusion
of the items noted above provides additional information that enables enhanced
comparisons to prior periods and, accordingly, facilitates the development of
future projections and earnings growth prospects. This information is also used
by management to measure the profitability of our ongoing operations and analyze
our business performance and trends.

These non-GAAP financial measures may be considered in addition to results
prepared in accordance with GAAP, but they should not be considered a substitute
for, or superior to, GAAP results. In addition, these non-GAAP financial
measures may not be comparable to similarly titled measures of other companies
because other companies may not calculate them in the same manner that we do. We
intend to continue to provide these non-GAAP financial measures as part of our
future earnings discussions and, therefore, the inclusion of these non-GAAP
financial measures will provide consistency in our financial reporting.

A reconciliation of these non-GAAP financial measures to GAAP financial results
is provided below:
                                                             2022           2021           2020
Gross profit                                            $   2,274.5    $  

2,494.6 $ 2,300.4 Impact of transaction and integration expenses included in cost of goods sold (1)

                                         -            6.3              -

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

                                                           -            4.7              -
Adjusted gross profit                                   $   2,274.5    $   2,505.6    $   2,300.4
Adjusted gross profit margin (3)                               35.8  %        39.7  %        41.1  %
Operating income                                        $     863.6    $   

1,015.1 $ 999.5 Impact of transaction and integration expenses included in cost of goods sold (1)

                                         -            6.3              -

Impact of other transaction and integration expenses (1)

                                                             2.2           29.0           12.4

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

                                                           -            4.7              -
Impact of other special charges(2)                             51.6           46.4            6.9
Adjusted operating income                               $     917.4    $   1,101.5    $   1,018.8
% (decrease) increase versus prior year                       (16.7) %         8.1  %         4.1  %
Adjusted operating income margin (3)                           14.4  %        17.4  %        18.2  %
Income tax expense                                      $     168.6    $     192.7    $     174.9
Impact of transaction and integration expenses(1)               0.6           (2.7)           1.9
Impact of special charges(2)                                   13.3            7.1            2.1
Impact of sale of Kitchen Basics                              (11.6)             -              -
Adjusted income tax expense                             $     170.9    $     197.1    $     178.9
Adjusted income tax rate(4)                                    20.9  %        20.1  %        19.9  %
Net income                                              $     682.0    $     755.3    $     747.4
Impact of transaction and integration expenses(1)               1.6           38.0           10.5
Impact of special charges(2)                                   38.3           44.0            4.8
Impact of after-tax gain on sale of Kitchen Basics            (38.0)             -              -

Impact of after-tax gain on sale of unconsolidated operations

                                                        -          (13.4)             -
Adjusted net income                                     $     683.9    $     823.9    $     762.7
% (decrease) increase versus prior year                       (17.0) %         8.0  %         6.3  %
Earnings per share-diluted                              $      2.52    $      2.80    $      2.78
Impact of transaction and integration expenses(1)              0.01           0.14           0.04
Impact of special charges(2)                                   0.14           0.16           0.01
Impact of after-tax gain on sale of Kitchen Basics            (0.14)

Impact of after-tax gain on sale of unconsolidated operations

                                                        -          (0.05)             -

Adjusted earnings per share-diluted                     $      2.53    $    

3.05 $ 2.83


                                       38
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(1) Transaction and integration expenses are more fully described in note 2 of notes to our

consolidated financial statements and include transaction and integration expenses

associated with our acquisitions of Cholula and FONA. These expenses include the effect of

the fair value adjustment to acquired inventories on cost of goods sold and the impact of

a discrete deferred state income tax expense item, directly related to our December 2020

acquisition of FONA. The discrete tax item had an unfavorable impact of $10.4 million or

$0.04 per diluted share for the year ended November 30, 2021.

(2) Special charges are more fully described in note 3 of notes to our accompanying

consolidated financial statements. Special charges for the year ended November 30, 2022

include a $10.0 million non-cash intangible asset impairment charge associated with our

exit of our business operations in Russia. We exited our Kohinoor rice product line in

India in the fourth quarter of fiscal 2021. Special charges for the year ended November

30, 2022 include a $13.6 million gain associated with the sale of the Kohinoor brand name.

Special charges for the year ended November 30, 2021 include $4.7 million which is

reflected in Cost of goods sold and an $11.2 million non-cash impairment charge associated

with the impairment of certain intangible assets.

(3) Adjusted gross profit margin is calculated as adjusted gross profit as a percent of net

sales for each period presented. Adjusted operating income margin is calculated as

adjusted operating income as a percent of net sales for each period presented.

(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.




                                                                                      Estimate for the year ending
                                                                                           November 30, 2023

Earnings per share - diluted                                                                        $2.42 to $2.47
Impact of special charges                                                                                     0.14
Adjusted earnings per share - diluted                                                               $2.56 to $2.61




Because we are a multi-national company, we are subject to variability of our
reported U.S. dollar results due to changes in foreign currency exchange rates.
Those changes have been volatile over the past several years. The exclusion of
the effects of foreign currency exchange, or what we refer to as amounts
expressed "on a constant currency basis," is a non-GAAP measure. We believe that
this non-GAAP measure provides additional information that enables enhanced
comparison to prior periods excluding the translation effects of changes in
rates of foreign currency exchange and provides additional insight into the
underlying performance of our operations located outside of the U.S. It should
be noted that our presentation herein of amounts and percentage changes on a
constant currency basis does not exclude the impact of foreign currency
transaction gains and losses (that is, the impact of transactions denominated in
other than the local currency of any of our subsidiaries in their local currency
reported results).

Percentage changes in sales and adjusted operating income expressed on a
constant currency basis are presented excluding the impact of foreign currency
exchange. To present this information for historical periods, current year
results for entities reporting in currencies other than the U.S. dollar are
translated into U.S. dollars at the average exchange rates in effect during the
prior fiscal year, rather than at the actual average exchange rates in effect
during the current fiscal year. As a result, the foreign currency impact is
equal to the current year results in local currencies multiplied by the change
in the average foreign currency exchange rate between the current year and the
prior fiscal year. The tables set forth below present our growth in net sales
and adjusted operating income on a constant currency basis as follows: (1) to
present our growth in net sales and adjusted operating income for 2022 on a
constant currency basis, net sales and adjusted operating income for 2022 for
entities reporting in currencies other than the U.S. dollar have been translated
using the average foreign exchange rates in effect for 2021 and compared to the
reported results for 2021; and (2) to present our growth in net sales and
adjusted operating income for 2021 on a constant currency basis, net sales and
operating income for 2021 for entities reporting in currencies other than the
U.S. dollar have been translated using the average foreign exchange rates in
effect for 2020 and compared to the reported results for 2020.
                                       39
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                                                                 For the 

year ended November 30, 2022


                                                  Percentage change       Impact of foreign      Percentage change on
                                                     as reported          currency exchange     constant currency basis
Net sales:
Consumer segment:
Americas                                                        (1.1) %                (0.2) %                   (0.9) %
EMEA                                                           (14.7) %                (9.6) %                   (5.1) %
Asia/Pacific                                                   (10.1) %                (2.0) %                   (8.1) %
Total Consumer                                                  (4.6) %                (2.1) %                   (2.5) %
Flavor Solutions segment:
Americas                                                        11.4  %                (0.3) %                   11.7  %
EMEA                                                             5.5  %               (11.7) %                   17.2  %
Asia/Pacific                                                    (0.2) %                (5.4) %                    5.2  %
Total Flavor Solutions                                           8.9  %                (3.2) %                   12.1  %
Total net sales                                                  0.5  %                (2.5) %                    3.0  %

Adjusted operating income:
Consumer segment                                               (11.7) %                (0.8) %                  (10.9) %
Flavor Solutions segment                                       (30.3) %                (2.4) %                  (27.9) %
Total adjusted operating income                                (16.7) %                (1.2) %                  (15.5) %


                                                                 For the year ended November 30, 2021
                                                  Percentage change       Impact of foreign      Percentage change on
                                                     as reported          currency exchange     constant currency basis
Net sales:
Consumer segment:
Americas                                                         7.3  %                 0.6  %                    6.7  %
EMEA                                                             5.8  %                 4.9  %                    0.9  %
Asia/Pacific                                                    31.6  %                 8.7  %                   22.9  %
Total Consumer                                                   9.5  %                 2.2  %                    7.3  %
Flavor Solutions segment:
Americas                                                        16.6  %                 1.2  %                   15.4  %
EMEA                                                            27.3  %                 5.8  %                   21.5  %
Asia/Pacific                                                    16.9  %                 7.5  %                    9.4  %
Total Flavor Solutions                                          18.7  %                 2.8  %                   15.9  %
Total net sales                                                 12.8  %                 2.4  %                   10.4  %

Adjusted operating income:
Consumer segment                                                 3.1  %                 1.8  %                    1.3  %
Flavor Solutions segment                                        24.7  %                 2.2  %                   22.5  %
Total adjusted operating income                                  8.1  %                 1.9  %                    6.2  %


To present the percentage change in projected 2023 net sales, adjusted operating
income and adjusted earnings per share - diluted on a constant currency basis,
2023 projected local currency net sales, adjusted operating income, and adjusted
net income for entities reporting in currencies other than the U.S. dollar are
translated into U.S. dollars at currently prevailing exchange rates and are
compared to those 2023 local currency projected results, translated into U.S.
dollars at the average actual exchange rates in effect during the corresponding
months in fiscal year 2022 to determine what the 2023 consolidated U.S. dollar
net sales, adjusted operating income and adjusted earnings per share - diluted
would have been if the relevant currency exchange rates had not changed from
those of the comparable 2022 periods.
                                       40
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LIQUIDITY AND FINANCIAL CONDITION


                                                        2022      2021      

2020


Net cash provided by operating activities             $ 651.5   $ 828.3   $ 

1,041.3


Net cash used in investing activities                  (146.4)   (908.6)   

(1,025.6)

Net cash (used in) provided by financing activities (487.2) 22.0

220.9




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

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

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

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

The reported values of our assets and liabilities held in our non-U.S.
subsidiaries and affiliates can be significantly affected by fluctuations in
foreign exchange rates between periods. At November 30, 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. dollar than at
November 30, 2021.

Operating Cash Flow - Operating cash flow was $651.5 million in 2022, $828.3
million in 2021, and $1,041.3 million in 2020. Net income as well as our working
capital management, as more fully described below, impacted operating cash flow.
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. In 2021, the
reduction in operating cash flow was the result of increased inventory levels to
protect against supply disruption, employee incentive payments, and the payment
of transaction and integration costs related to our recent acquisitions. In
2020, the 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.

Our working capital management - principally related to inventory, trade
accounts receivable, and accounts payable - impacts our operating cash flow. The
change in inventory was a significant use of cash from operations in 2022, 2021,
and 2020. The change in trade accounts receivable was a use of cash in 2022 and
2021 but a source of cash in 2020. The change in accounts payable was a
significant source of cash in 2022 and 2020 and a more moderate source of cash
in 2021.

In addition to operating cash flow, we also use cash conversion cycle (CCC) to
measure our working capital management. This metric is different than operating
cash flow in that it uses average balances instead of specific point in time
measures. CCC is a calculation of the number of days, on average, that it takes
us to convert a cash outlay for resources, such as raw materials, to a cash
inflow from collection of accounts receivable. Our goal is to lower our CCC over
time. We calculate CCC as follows:
                                       41
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Days sales outstanding (average trade accounts receivable divided by average
daily net sales) plus days in inventory (average inventory divided by average
daily cost of goods sold) less days payable outstanding (average trade accounts
payable divided by average daily cost of goods sold plus the average daily
change in inventory).

The following table outlines our cash conversion cycle (in days) over the last
three years:
                         2022   2021   2020
Cash Conversion Cycle     51     46     39



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. 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.

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

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

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

Investing Cash Flow - Net cash used in investing activities was $146.4 million
in 2022, $908.6 million in 2021, and $1,025.6 million in 2020. 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. Cash usage related to
our acquisition of businesses was $706.4 million and $803.0 million in 2021 and
2020, respectively. Capital expenditures, including expenditures for capitalized
software, were $262.0 million in 2022, $278.0 million in 2021, and $225.3
million in 2020. We expect 2023 capital expenditures to approximate $280 million
to support our planned growth. 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. 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.
                                       42
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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. The variability between years is
principally a result of changes in our net borrowings, share repurchase activity
and dividends, all as described below.

The following table outlines our net borrowing activities:


                                                             2022          2021          2020
Net increase (decrease) in short-term borrowings         $    698.3    $   (346.7)   $    286.5
Proceeds from issuance of long-term debt, net of debt
issuance costs                                                    -         999.6         525.9
Repayments of long-term debt                                 (772.0)       (257.1)       (257.7)
Net cash (used in) provided from net borrowing
activities                                               $    (73.7)   $    

395.8 $ 554.7

In 2022, we repaid $772.0 million of long-term debt, including the $750 million, 2.70% notes that matured on August 15, 2022.



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

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

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


                                      2022    2021     2020

Number of shares of common stock 0.4 0.1 0.5 Dollar amount

$ 38.8   $ 8.6   $ 47.3


As of November 30, 2022, $537 million remained of a $600 million share
repurchase program that was authorized by our Board of Directors in November
2019. The timing and amount of any shares repurchased is determined by our
management based on its evaluation of market conditions and other factors. Our
share repurchase activity in 2022, 2021, and 2020 has principally been executed
in order to mitigate the effect of shares issued upon the exercise of stock
options.

During 2022, 2021 and 2020, we received proceeds of $41.4 million, $13.5 million
and $56.6 million, respectively, from exercised stock options. We repurchased
$19.4 million, $15.4 million and $13.0 million of common stock during 2022, 2021
and 2020, respectively, in conjunction with employee tax withholding
requirements associated with our stock compensation plans.

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


                                    2022       2021       2020
Total dividends paid             $ 396.7    $ 363.3    $ 330.1
Dividends paid per share            1.48       1.36       1.24

Percentage increase per share 8.8 % 9.7 % 8.8 %

In November 2022, the Board of Directors approved a 5.4% increase in the quarterly dividend from $0.37 to $0.39 per share.



Most of our cash is in our subsidiaries outside of the U.S. We manage our
worldwide cash requirements by considering available funds among the many
subsidiaries through which we conduct our business and the cost effectiveness
with which those funds can be accessed. Those balances are generally available
without legal restrictions to fund ordinary business operations, capital
projects and future acquisitions. As of November 30, 2022, we have $1.4 billion
of earnings from our non-U.S. subsidiaries and joint ventures that are
considered indefinitely reinvested. We have not provided any deferred taxes with
respect to items such as foreign withholding taxes, other income taxes, or
foreign exchange gains or losses. It is not practicable for us to determine the
amount of unrecognized tax expense on these reinvested international earnings.
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At November 30, 2022, we temporarily used $191.0 million of cash from our
non-U.S. subsidiaries to pay down short-term debt in the U.S. During the year,
our short-term borrowings vary, but are lower at the end of a year or quarter.
The average short-term borrowings outstanding for the years ended November 30,
2022 and 2021 were $1,117.0 million and $1,029.9 million, respectively. Those
average short-term borrowings outstanding for the year ended November 30, 2022
included average commercial paper borrowings of $1,080.4 million. The total
average debt outstanding for the years ended November 30, 2022 and 2021 was
$5,422.0 million and $5,574.5 million, respectively.

Credit and Capital Markets - The following summarizes the more significant impacts of credit and capital markets on our business:



CREDIT FACILITIES - Cash flows from operating activities are our primary source
of liquidity for funding growth, share repurchases, dividends and capital
expenditures. 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 July 2022 and will
expire in July 2023. The current pricing for the five-year credit facility, on a
fully drawn basis, is LIBOR 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 LIBOR plus 1.75%. The current pricing for the 364-day
credit facility, on a fully drawn basis, is 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 SOFR plus 1.60%.

The provisions of each 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. The terms of those revolving credit
facilities are more fully described in note 6 of the notes to the consolidated
financial statements.

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 any of the banks in these syndicates are unable to perform on their
commitments, our liquidity could be impacted, which could reduce our ability to
grow through funding of seasonal working capital. We engage in regular
communication with all banks participating in our credit facilities. During
these communications, none of the banks have indicated that they may be unable
to perform on their commitments. In addition, we periodically review our banking
and financing relationships, considering the stability of the institutions and
other aspects of the relationships. Based on these communications and our
monitoring activities, we believe our banks will perform on their commitments.
In addition to our committed revolving credit facilities, we have uncommitted
facilities of $302.5 million as of November 30, 2022 that can be withdrawn based
upon the lenders' discretion. See note 6 of notes to our consolidated financial
statements for more details on our financing arrangements.

We will continue to have cash requirements to support seasonal working capital
needs and capital expenditures, to pay interest, to service debt, and to fund
acquisitions. As part of our ongoing operations, we enter into contractual
arrangements that obligate us to make future cash payments. Our primary
obligations include principal and interest payments on our outstanding
short-term borrowings and long-term debt. In the next year, our most significant
debt service obligation is the maturity of our $250.0 million, 3.50% notes due
in September 2023. Also in July 2023, our $500 million, 364-day revolving credit
facility matures. Detail on these contractual obligations follows:

MATERIAL CASH REQUIREMENTS
The following table reflects a summary of our future material cash requirements
as of November 30, 2022:

                                                         Less than       1-3          3-5       More than
                                              Total       1 year        years        years       5 years
Short-term borrowings                      $ 1,236.7    $ 1,236.7    $       -    $       -    $       -
Long-term debt, including finance leases     3,981.1        270.6      1,066.6      1,268.8      1,375.1
Interest payments(a)                           724.5        110.0        

176.9 156.3 281.3 Total contractual cash obligations $ 5,942.3 $ 1,617.3 $ 1,243.5 $ 1,425.1 $ 1,656.4


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(a)Interest payments include interest payments on long-term debt. Our short-term
borrowings, principally consisting of commercial paper, have short-term
maturities. 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.

Our other cash requirements at year end include raw material purchases, lease
payments, income taxes, and pension and postretirement benefits. We acquire
various raw materials to satisfy our obligations to our customers, and these
outstanding purchase obligations can fluctuate throughout the year based on our
response to varying raw material cycles; however, these commitments generally do
not extend past one year. In addition, we also have a series of commercial
commitments, largely consisting of standby letters of credit. Our standby
letters of credit, leases, and pension and other post retirement obligations are
more fully described in notes 6, 7 and 11, respectively, of notes to our
consolidated financial statements.

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 or
acquisition to our then-available sources of funds, to obtain additional short-
and long-term financing. We believe that cash provided from these sources will
be adequate to meet our future cash requirements.

PENSION ASSETS AND OTHER INVESTMENTS - We hold investments in equity and debt
securities in both our qualified defined benefit pension plans and through a
rabbi trust for our nonqualified defined benefit pension plan. Cash
contributions to pension plans, including unfunded plans, were $11.4 million in
2022, $15.0 million in 2021, and $11.9 million in 2020. It is expected that the
2023 total pension plan contributions will be approximately $13 million. Future
increases or decreases in pension liabilities and required cash contributions
are highly dependent upon changes in interest rates and the actual return on
plan assets. We base our investment of plan assets, in part, on the duration of
each plan's liabilities. Across all of our qualified defined benefit pension
plans, approximately 55% of assets are invested in equities, 32% in fixed income
investments and 13% in other investments. Assets associated with our
nonqualified defined benefit pension plan are primarily invested in
corporate-owned life insurance, the value of which approximates an investment
mix of 60% in equities and 40% in fixed income investments. See note 11 of notes
to our consolidated financial statements, which provides details on our pension
funding.

CUSTOMERS AND COUNTERPARTIES - See the subsequent section of this discussion under the heading "Market Risk Sensitivity-Credit Risk."

ACQUISITIONS

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



On December 30, 2020, we purchased FONA. The purchase price was approximately
$708 million, net of cash acquired. 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. 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. The acquisition was funded with cash and short-term borrowings.
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.

On November 30, 2020, we purchased Cholula for approximately $801 million, net
of cash acquired. The acquisition was funded with cash and short-term
borrowings. 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. 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.

See note 2 of notes to our consolidated financial statements for further details regarding these acquisitions.

PERFORMANCE GRAPH - SHAREHOLDER RETURN



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
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(2) the cumulative total return of the Standard & Poor's Packaged Foods & Meats Index, assuming reinvestment of dividends.

[[Image Removed: mkc-20221130_g1.jpg]]

MARKET RISK SENSITIVITY



We utilize derivative financial instruments to enhance our ability to manage
risk, including foreign exchange and interest rate exposures, which exist as
part of our ongoing business operations. We do not enter into contracts for
trading purposes, nor are we a party to any leveraged derivative instrument. The
use of derivative financial instruments is monitored through regular
communication with senior management and the utilization of written guidelines.
The information presented below should be read in conjunction with notes 6 and 8
of notes to our consolidated financial statements.

Foreign Exchange Risk - We are exposed to fluctuations in foreign currency in
the following main areas: cash flows related to raw material purchases; the
translation of foreign currency earnings to U.S. dollars; the effects of foreign
currency on loans between subsidiaries and unconsolidated affiliates and on cash
flows related to repatriation of earnings of unconsolidated affiliates. Primary
exposures include the U.S. dollar versus the Euro, British pound sterling,
Chinese renminbi, Canadian dollar, Australian dollar, Polish zloty, Singapore
dollar, Swiss franc, and Mexican peso, as well as the Euro versus the British
pound sterling, Australian dollar, and Polish zloty, and finally the Canadian
dollar versus British pound sterling. We routinely enter into foreign currency
exchange contracts to manage certain of these foreign currency risks.
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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.

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. Gains and losses on these instruments
are included in foreign currency translation adjustments in accumulated other
comprehensive income (loss).

The following table summarizes the foreign currency exchange contracts held at
November 30, 2022. All contracts are valued in U.S. dollars using year-end 2022
exchange rates and have been designated as hedges of foreign currency
transactional exposures, firm commitments or anticipated transactions.

FOREIGN CURRENCY EXCHANGE CONTRACTS AT NOVEMBER 30, 2022


                                                                   Average
                                                                 contractual
                                                     Notional      exchange     Fair
Currency sold              Currency received           value         rate       value
British pound sterling     U.S. dollar              $    89.9       1.28       $  6.0
Swiss franc                U.S. dollar                   69.6       0.93         (0.2)
Canadian dollar            U.S. dollar                   70.4       1.33          1.1
Euro                       U.S. dollar                   49.0       1.05          0.2
Polish zloty               U.S. dollar                    9.8       4.67         (0.1)
U.S. dollar                Australian dollar             55.2       0.67            -
U.S. dollar                Singapore dollar              44.5       1.38          0.2
U.S. dollar                British pound sterling        30.4       1.20         (0.3)
U.S. dollar                Euro                          34.0       1.04         (0.3)
Australian dollar          Euro                          22.2       1.49          0.8
Polish zloty               Euro                          14.1       4.89         (0.1)
Canadian dollar            British pound sterling        28.8       1.54          1.5
British pound sterling     Euro                          23.9       0.86          0.3
U.S. dollar                Thai baht                      7.2      36.71          0.4


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. The aggregate fair value of these contracts was insignificant
at November 30, 2022.

At November 30, 2021, 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 $583.6 million. The
aggregate fair value of these contracts was a gain of $5.5 million at November
30, 2021.

We also utilized cross currency interest rate swap contracts that are considered net investment hedges.



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

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%. These contracts expire in April 2030.

Interest Rate Risk - Our policy is to manage interest rate risk by entering into
both fixed and variable rate debt arrangements. We are exposed to interest rate
volatility, with primary exposures related to movements in U.S. Treasury rates,
London Interbank Offered Rates (LIBOR), Secured Overnight Financing Rate (SOFR),
and commercial paper rates. The phase out of LIBOR reference rates will occur at
different dates and began on January 1, 2022. Arrangements that were entered
into during the year ended November 30, 2022, including our $500 million
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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. 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. 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.

We also use interest rate swaps to minimize financing costs and to achieve a
desired mix of fixed and variable rate debt. The table that follows provides
principal cash flows and related interest rates, excluding the effect of
interest rate swaps and the amortization of any discounts or fees, by fiscal
year of maturity at November 30, 2022. For foreign currency-denominated debt,
the information is presented in U.S. dollar equivalents. Variable interest rates
are based on the weighted-average rates of the portfolio at the end of the year
presented.

YEARS OF MATURITY AT NOVEMBER 30, 2022


                                      2023        2024       2025       2026     Thereafter     Total      Fair value
Debt
Fixed rate                        $   257.4    $ 763.1    $ 258.7    $ 509.2    $ 2,134.7    $ 3,923.1    $  3,542.9
Average interest rate                  3.50  %    3.50  %    3.25  %    0.94  %      1.74  %         -
Variable rate                     $ 1,249.9    $  33.8    $  11.0    $     -    $       -    $ 1,294.7    $  1,294.7
Average interest rate                  4.20  %    1.85  %    1.84  %       -            -            -


The table above displays the debt, including finance leases, by the terms of the
original debt instrument without consideration of fair value, interest rate
swaps and any loan discounts or origination fees. Interest rate swaps have the
following effects:

•We issued $250 million of 3.50% notes due in 2023 in August 2013. 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%. 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. 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.

•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%. 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. 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.

•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%. 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 4.94% as of November 30, 2022.

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. In 2022,
our most significant raw materials were dairy products, pepper, onion, capsicums
(red peppers and paprika), garlic, wheat products, vegetable oils, and vanilla.
While future movements of raw material costs are uncertain, we respond to this
volatility in a number of ways, including strategic raw material purchases,
purchases of raw material for future delivery and customer price adjustments. We
generally have not used derivatives to manage the volatility related to this
risk.

Credit Risk - The customers of our consumer segment are predominantly food
retailers and food wholesalers. Consolidations in these industries have created
larger customers. In addition, competition has increased with the growth in
alternative channels including mass merchandisers, dollar stores, warehouse
clubs, discount chains and e-commerce. This has caused some customers to be less
profitable and increased our exposure to credit risk. Some of our customers and
counterparties are highly leveraged. We continue to closely monitor the credit
worthiness of our customers and counterparties. We feel that the allowance for
doubtful accounts properly recognizes trade receivables at realizable value. We
consider nonperformance credit risk for other financial instruments to be
insignificant.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS


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New accounting pronouncements are issued periodically that affect our current and future operations. See note 1 of notes to our consolidated financial statements for further details of these impacts.



CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
In preparing the financial statements, we are required to make estimates and
assumptions that have an impact on the assets, liabilities, revenue and expenses
reported. These estimates can also affect supplemental information disclosed by
us, including information about contingencies, risk and financial condition. We
believe, given current facts and circumstances, our estimates and assumptions
are reasonable, adhere to U.S. GAAP and are consistently applied. Inherent in
the nature of an estimate or assumption is the fact that actual results may
differ from estimates, and estimates may vary as new facts and circumstances
arise. In preparing the financial statements, we make routine estimates and
judgments in determining the net realizable value of accounts receivable,
inventory, fixed assets and prepaid allowances. Our most critical accounting
estimates and assumptions, which are those that have or are reasonably likely to
have a material impact on our financial condition or results of operations, are
in the following areas:

Customer Contracts
In several of our major geographic markets, the consumer segment sells our
products by entering into annual or multi-year customer arrangements. Known or
expected pricing or revenue adjustments, such as trade discounts, rebates or
returns, are estimated at the time of sale. Where applicable, future
reimbursements are estimated based on current expectations regarding what was
earned through these programs as of the balance sheet date. Key sales terms,
such as pricing and quantities ordered, are established on a frequent basis such
that most customer arrangements and related incentives have a one-year or
shorter duration. Estimates that affect revenue, such as trade incentives and
product returns, are monitored and adjusted each period until the incentives or
product returns are realized. Certain of our customer arrangements are annual
arrangements such that the degree of estimates that affects revenue reduces as a
year progresses. We do not believe that there will be significant changes to our
estimates of customer consideration when any uncertainties are resolved with
customers.

Business Combinations, Goodwill and Intangible Asset Valuation
We use the acquisition method in accounting for acquired businesses. Under the
acquisition method, our financial statements reflect the operations of an
acquired business starting from the closing of the acquisition. The assets
acquired and liabilities assumed are recorded at their respective estimated fair
values at the date of the acquisition. Any excess of the purchase price over the
estimated fair values of the identifiable net assets acquired is recorded as
goodwill. Significant judgment is often required in estimating the fair value of
assets acquired, particularly intangible assets. We generally obtain the
assistance of a third-party valuation specialist in estimating fair values of
tangible and intangible assets. The fair value estimates are based on available
historical information and on expectations and assumptions about the future,
considering the perspective of marketplace participants. While management
believes those expectations and assumptions are reasonable, they are inherently
uncertain. Unanticipated market or macroeconomic events and circumstances may
occur, which could affect the accuracy or validity of the estimates and
assumptions.

Determining the useful lives of intangible assets also requires judgment.
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. 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. The
costs of definite-lived intangibles are amortized to expense over their
estimated life. We review the carrying value of goodwill and non-amortizable
intangible assets and conduct tests of impairment on an annual basis as
described below. 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. We test indefinite-lived intangible assets for impairment if
events or changes in circumstances indicate that the asset might be impaired.

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. While we believe those estimates and
assumptions are reasonable, they are inherently uncertain. Unanticipated market
or macroeconomic events and circumstances may occur, which could affect the
accuracy or validity of the estimates and assumptions.

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Goodwill Impairment
Our reporting units are the same as our operating segments. Determining the fair
value of a reporting unit is judgmental in nature and involves the use of
significant estimates and assumptions, as more fully described in note 1 to our
consolidated financial statements. We estimate the fair value of a reporting
unit by using a discounted cash flow model. Our discounted cash flow model
calculates fair value by present valuing future expected cash flows of our
reporting units using a market-based discount rate. We then compare this fair
value to the carrying amount of the reporting unit, including intangible assets
and goodwill. An impairment charge would be recognized to the extent that the
carrying amount of the reporting unit exceeds the estimated fair value of the
reporting unit. The quantitative goodwill impairment test requires an entity to
compare the fair value of each reporting unit with its carrying amount. As of
November 30, 2022, we had $5,212.9 million of goodwill recorded in our balance
sheet ($3,568.2 million in the consumer segment and $1,644.7 million in the
flavor solutions segment). Our fiscal year 2022 impairment testing indicated
that the estimated fair values of our reporting units were significantly in
excess of their carrying values. Accordingly, we believe that only significant
changes in the cash flow assumptions would result in an impairment of goodwill.
However, variances between the actual performance of the businesses and the
assumptions that were used in developing the estimates of fair value could
result in impairment charges in future periods.

Indefinite-lived Intangible Asset Impairment
Our indefinite-lived intangible assets consist of brand names and trademarks. We
estimate fair values through the use of the relief-from-royalty method and then
compare those fair values to the related carrying amounts of the
indefinite-lived intangible asset. In the event that the fair value of any of
the brand names or trademarks are less than their related carrying amounts, a
non-cash impairment loss would be recognized in an amount equal to the
difference.

The estimation of fair values of our brand names and trademarks requires us to
make significant assumptions, including expectations with respect to sales and
profits of the respective brands and trademarks, related royalty rates, income
tax rates and appropriate discount rates, which are based, in part, upon current
interest rates adjusted for our view of reasonable country- and brand-specific
risks based upon the past and anticipated future performance of the related
brand names and trademarks. The assumptions used to assess impairment consider
historical trends, macroeconomic conditions, and projections consistent with our
operating strategy. Changes in these estimates can have a significant impact on
the assessment of fair value which could result in material impairment losses.

As of November 30, 2022, we had $3,043.4 million of brand names assets and
trademarks recognized in our consolidated balance sheet, and none of the
balances exceeded their estimated fair values at that date. Of the $3,043.4
million of brand names assets and trademarks as of November 30, 2022: (i)
$2,320.0 million relates to the French's, Frank's RedHot and Cattlemen's brand
names and trademarks, recognized as part of our acquisition of RB Foods in
August 2017, that we group for purposes of our impairment analysis; (ii) $380.0
million relates to the Cholula brand names and trademarks associated with the
acquisition of Cholula in November 2020, (iii) $49.0 million relates to the FONA
brand names and trademarks associated with the acquisition of FONA in December
2020 and (iv) the remaining $294.4 million represents a number of other brand
name assets and trademarks with individual carrying values ranging from
$0.2 million to $106.4 million. Except for four brand names assets and
trademarks with a carrying value of approximately $460 million, including our
recent acquisitions of Cholula and FONA, the percentage excess of estimated fair
value over respective book values for each of our brand names and trademarks,
was 20% or more as of our fourth quarter annual impairment assessment.

The brand names and trademarks related to recent acquisitions, including our
recent acquisitions of Cholula and FONA, may be more susceptible to future
impairment as their carrying values represent recently determined fair values. A
change in assumptions with respect to recently acquired businesses, including
those affected by rising interest rates or a deterioration in expectations of
future sales, profitability or royalty rates as well as future economic and
market conditions, or higher income tax rates, could result in non-cash
impairment losses in the future.

Income Taxes
We estimate income taxes and file tax returns in each of the taxing
jurisdictions in which we operate and are required to file a tax return. At the
end of each year, an estimate for income taxes is recorded in the financial
statements. Tax returns are generally filed in the third or fourth quarter of
the subsequent year. A reconciliation of the estimate to the final tax return is
done at that time, which will result in changes to the original estimate. We
believe that our tax return positions are appropriately supported, but tax
authorities can challenge certain of our tax positions. We evaluate our
uncertain tax positions in accordance with the GAAP guidance for uncertainty in
income
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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. The tax
position is then measured at the largest amount of benefit that is greater than
50 percent likely of being realized upon ultimate settlement. A change in
judgment related to the expected ultimate resolution of uncertain tax positions
will be recognized in earnings in the quarter of such change. We believe that
our reserve for uncertain tax positions, including related interest and
penalties, is adequate. As of November 30, 2022, the Company had $29.6 million
of unrecognized tax benefits, including interest and penalties, recorded in
Other long-term liabilities. The amounts ultimately paid upon resolution of
audits could be materially different from the amounts previously included in our
income tax expense and, therefore, could have a material impact on our tax
provision, net income and cash flows. We have recorded valuation allowances to
reduce our deferred tax assets to the amount that is more likely than not to be
realized. In doing so, we have considered future taxable income and tax planning
strategies in assessing the need for a valuation allowance. Both future taxable
income and tax planning strategies include a number of estimates, as more fully
described in note 1 of notes to our consolidated financial statements.

Pension Benefits
Pension plans' costs require the use of assumptions for discount rates,
investment returns, projected salary increases, and mortality rates. The
actuarial assumptions used in our pension benefit reporting are reviewed
annually and compared with external benchmarks to ensure that they appropriately
account for our future pension benefit obligations. While we believe that the
assumptions used are appropriate, changes in various assumptions and differences
between the actual returns on plan assets and the expected returns on plan
assets and changes to projected future rates of return on plan assets will
affect the amount of pension expense or income ultimately recognized. A 1%
increase or decrease in the actuarial assumption for the discount rate would
impact 2023 pension benefit expense by approximately $0.4 million. A 1% increase
or decrease in the expected return on plan assets would impact 2023 pension
expense by approximately $9.8 million.

We will continue to evaluate the appropriateness of the assumptions used in the measurement of our pension benefit obligations. In addition, see note 11 of notes to our consolidated financial statements for a discussion of these assumptions and the effects on the financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

This information is set forth in the "Market Risk Sensitivity" section of "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in note 8 of our notes to consolidated financial statements.


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