McCormick & Company MKC · USD

BUSINESS SEGMENTS AND GEOGRAPHIC AREASBusiness SegmentsWe operate in two business segments: Consumer and Flavor Solutions. The Consumer and Flavor Solutions segments manufacture, market and distribute herbs, spices, seasoning mixes, condiments and other flavorful products throughout the world. Our Consumer segment sells to retail channels, including grocery, mass merchandise, warehouse clubs, discount and drug stores, and e-commerce under the “McCormick” brand and a variety of brands around the world, including “French's,” “Frank's RedHot,” “Lawry’s,” “Zatarain’s,” “Simply Asia,” “Thai Kitchen,” “Ducros,” “Vahiné,” "Cholula," “Schwartz,” “Club House,” “Kamis,” "DaQiao," "La Drogheria," "Stubb's," "OLD BAY," and "Gourmet Garden." Our Flavor Solutions segment sells to food manufacturers and the foodservice industry both directly and indirectly through distributors, with the exception of our businesses in China where foodservice sales are managed by and reported in our Consumer segment.Our CODM is our Chairman, President & Chief Executive Officer. Our CODM uses operating income excluding special charges and transaction and integration expenses related to our acquisitions to manage segment performance and allocate resources across segments and considers variances of actual performance to our annual budget and periodic forecasts as well as year over year performance when making decisions. Special charges and transaction and integration expenses are excluded from operating income in our internal reporting to the CODM as this activity is managed separately from the business segments. Activity related to special charges, including transaction and integration expenses, is described in Note 2. Transaction and integration expenses include the amortization of the acquisition-date fair value adjustment of inventories included in cost of goods sold, costs directly associated with that acquisition and costs associated with integrating the businessesAlthough the segments are managed separately due to their distinct distribution channels and marketing strategies, manufacturing and warehousing are often integrated to maximize cost efficiencies. As a result, jointly utilized assets, including fixed assets, and depreciation and amortization expense are not maintained by individual segment. Depreciation and amortization expense is allocated to the segments except for amounts that are recognized in interest.We have a large number of customers for our products.

COMMITMENTS AND CONTINGENCIESDuring the normal course of our business, we are involved with various claims and litigation. Reserves are established in connection with such matters when a loss is probable and the amount of such loss can be reasonably estimated. At November 30, 2025 and 2024, no material reserves were recorded. The determination of probability and the estimation of the actual amount of any such loss are inherently unpredictable, and it is therefore possible that the eventual outcome of such claims and litigation could exceed the estimated reserves, if any. However, we do not expect the outcome of the matters currently pending will have a material adverse effect on our financial statements.

INCOME TAXESThe provision for income taxes for the years ended November 30 consists of the following:(millions)202520242023Income taxesCurrentFederal$76.6 $103.0 $82.4 State17.0 16.6 15.1 International108.7 94.7 82.4 202.3 214.3 179.9 DeferredFederal2.6 (15.2)(2.2)State(9.6)(6.3)2.7 International0.5 (8.8)(5.9) (6.5)(30.3)(5.4)Total income tax expense$195.8 $184.0 $174.5 The components of income from consolidated operations before income taxes for the years ended November 30 follow:(millions)202520242023Pretax incomeUnited States$620.4 $634.8 $569.6 International292.6 263.5 229.1 $913.0 $898.3 $798.7 A reconciliation of the U.S. federal statutory rate with the effective tax rate for the years ended November 30 follows:202520242023Federal statutory tax rate21.0 %21.0 %21.0 %State income taxes, net of federal benefits0.7 0.9 1.9 International tax at different effective rates0.7 0.6 0.3 U.S. tax on remitted and unremitted earnings2.1 1.8 0.9 Changes in prior year tax contingencies(1.1)(1.4)(0.8)Legal entity reorganization— (2.3)— Valuation allowances— 0.7 (0.4)U.S. research credits(1.4)(1.3)(1.5)Other, net(0.6)0.5 0.4 Total21.4 %20.5 %21.8 %Deferred tax assets and liabilities are comprised of the following as of November 30:(millions)20252024Deferred tax assetsEmployee benefit liabilities$39.4 $48.9 Other accrued liabilities37.9 36.0 Inventory17.9 18.3 Tax loss and credit carryforwards76.4 69.0 Lease liabilities10.9 10.6 Research expenditures86.3 64.0 Other27.8 28.0 Valuation allowance(41.1)(33.5) 255.5 241.3 Deferred tax liabilitiesDepreciation107.7 96.8 Intangible assets852.1 849.5 Lease ROU assets20.0 16.1 Other12.6 19.7 992.4 982.1 Net deferred tax liability$(736.9)$(740.8)At November 30, 2025, we have tax loss carryforwards of $166.5 million. Of these carryforwards, $4.9 million expire in 2026, $13.8 million from 2027 through 2028, $35.5 million from 2029 through 2042, and $112.3 million may be carried forward indefinitely. At November 30, 2025, we also have U.S. foreign tax credit carryforwards of $32.5 million. Of these carryforwards, $6.4 million expires in 2030, $8.1 million from 2031 through 2032, and $18.0 million from 2033 through 2035.A valuation allowance has been provided to cover deferred tax assets that are not more likely than not realizable. The net increase of $7.

STOCK-BASED COMPENSATIONWe have four types of stock-based compensation awards: restricted stock units (RSUs), stock options, and company stock awarded as part of our long-term performance plan (LTPP) and price-vested stock options. Total stock-based compensation expense for 2025, 2024, and 2023 was $46.2 million, $47.4 million and $63.4 million, respectively. Total unrecognized stock-based compensation expense related to our RSUs and stock options at November 30, 2025 was $26.9 million and the weighted-average period over which this will be recognized is 1.8 years. Total unrecognized stock-based compensation expense related to our LTPP is variable in nature and is dependent on the Company's execution against established performance metrics under performance cycles related to this plan. All stock-based compensation expense related to our price-vested stock options was fully recognized as of November 30, 2023. As of November 30, 2025, we have 4.6 million shares of common stock remaining available for future issuance under our stock-based compensation programs.The following summarizes the key terms, a summary of activity, and the methods of valuation for each of our stock-based compensation awards.RSUsRSUs are valued at the market price of the underlying stock, discounted by foregone dividends, on the date of grant. Substantially all of the RSUs granted vest over a three-year term or, if earlier, upon the retirement eligibilitydate of the holder. A summary of our RSU activity for the years ended November 30 follows:(shares in thousands)202520242023 SharesWeighted- average price SharesWeighted-averagepriceSharesWeighted-averagepriceBeginning of year533 $73.68 494 $76.94 480 $77.62 Granted543 74.56 282 72.77 264 77.53 Vested(250)77.11 (214)79.13 (225)78.16 Forfeited(55)74.63 (29)79.73 (25)85.21 Outstanding—end of year771 $73.11 533 $73.68 494 $76.94 Stock Options (Other than Price-Vested Stock Options)Stock options are granted with an exercise price equal to the market price of the stock on the date of grant. Substantially all of the options, with the exception of price-vested options detailed below, vest ratably over a three-year period or, if earlier, upon the retirement-eligibility dates of the holders and are exercisable over a 10-year period. Upon exercise of the option, shares are issued from our authorized and unissued shares.The fair value of the options is estimated with a lattice option pricing model which uses the assumptions in the following table.

LEASESOur lease portfolio primarily consists of (i) certain real estate, including those related to a number of administrative, distribution and manufacturing locations; (ii) certain machinery and equipment, including forklifts; and (iii) automobiles, delivery trucks and other vehicles. A limited number of our lease agreements include rental payments that are adjusted periodically based on a market rate or index. Our lease agreements generally do not contain residual value guarantees or material restrictive covenants, with the exception of the non-cancellable synthetic lease discussed below. The following presents the components of our lease expense for the years ended November 30 (in millions):202520242023Operating lease cost$77.0 $75.7 $74.6 Finance lease cost:Amortization of ROU assets9.1 9.0 9.0 Interest on lease liabilities3.4 3.7 3.9 Net lease cost (1)$89.5 $88.4 $87.5 (1) Net lease cost does not include short-term leases or sublease income, both of which are immaterial.Supplemental balance sheet information related to leases as of November 30 were as follows (in millions):LeasesClassification20252024Assets:Operating lease ROU assetsOther long-term assets$216.8 $211.0 Finance lease ROU assetsProperty, plant and equipment, net77.5 86.1 Total leased assets$294.3 $297.1 Liabilities:CurrentOperating Other accrued liabilities $58.9 $55.7 FinanceCurrent portion of long-term debt9.3 8.8 Non-currentOperating Other long-term liabilities167.7 166.6 FinanceLong-term debt85.7 94.5 Total lease liabilities$321.6 $325.6 In October 2020, we entered into a non-cancellable synthetic lease to consolidate, as well as expand, our distribution footprint in the mid-Atlantic region. We began to utilize this facility in September 2022. The five-year lease term will expire in November 2027. As of November 30, 2025, the total ROU asset associated with this facility was $34.5 million with a related lease obligation of $35.6 million, of which $17.5 million was included in the other accrued liabilities and $18.1 million was included in other long-term liabilities. As of November 30, 2024, the total ROU asset associated with this building was $50.6 million with a related lease obligation of $52.5 million, of which $16.9 million was included in other accrued liabilities and $35.6 million was included in other long-term liabilities. Rental payments include both a fixed and a variable component. The variable component is based on SOFR plus a margin, based on our credit rating.

Risk Management and StrategyCybersecurity risk management is overseen both as a critical component of our overall Enterprise Risk Management program and as a standalone program. We have implemented a risk-based, multilayered approach to assessing, identifying, and managing cybersecurity threats and incidents, while also implementing controls and procedures that provide for the prompt escalation of certain cybersecurity incidents.The team devotes significant resources to our cybersecurity risk management, which focuses on developing and implementing strategies and processes to protect the confidentiality, integrity, and availability of our assets and those of our consumers, customers and employees and seeks to continually improve our policies and practices to protect our platforms, adapt to changes in regulations, identify potential and emerging security risks such as those due to the increased availability of artificial intelligence and develop mitigation strategies for those risks. As part of this effort, the team periodically benchmarks our practices against the NIST Cyber Security and Privacy Frameworks, and other good practice control methods, which include updating technology, developing data privacy and security policies and procedures, implementing and assessing the effectiveness of controls, monitoring and routine testing of our information systems, conducting risk assessments of third-party service providers, providing data privacy and cybersecurity awareness training to employees and designing business processes to protect private data and mitigate the risk of cybersecurity incidents. We periodically conduct tests on our systems to help discover potential vulnerabilities, which enable improved decision-making and prioritization and promote monitoring and reporting across compliance functions. We believe that these actions provide adequate measures of protection against security breaches and generally reduce our cybersecurity risks, and we have not had a material cybersecurity threat or attack to date.Our processes also address cybersecurity risks associated with our use of third-party service providers including suppliers, and software and cloud-based service providers.

SPECIAL CHARGESThe following is a summary of special charges, including transaction and integration expenses, recognized for the years ended November 30 (in millions): 202520242023Employee severance and related benefits$15.9 $2.7 $34.4 Other costs3.3 6.8 26.8 Transaction and integration expenses1.9 — — Special charges$21.1 $9.5 $61.2 Transaction and integration expenses included in cost of goods sold2.1 — — Total special charges$23.2 $9.5 $61.2 Special ChargesIn our consolidated income statement, we include a separate line item captioned “Special charges” in arriving at our consolidated operating income. Special charges consist of expenses associated with certain actions undertaken to reduce fixed costs, simplify or improve processes, and improve our competitiveness. These charges are of such significance in terms of both up-front costs and organizational/structural impact to require advance approval by our Management Committee, comprised of our senior management, including our Chairman, President and Chief Executive Officer. Expenses associated with the approved action are classified as special charges upon recognition and monitored on an ongoing basis through completion. Certain ancillary expenses related to these actions approved by our Management Committee do not qualify for accrual upon approval but are included as special charges as incurred during the course of the actions.We continue to evaluate changes to our organizational structure to reduce fixed costs, simplify or improve processes, and improve our competitiveness. During 2025, we recognized $19.2 million of special charges, consisting of $15.9 million in employee severance and related benefit costs related to global selling, general and administrative streamlining actions approved by our Management Committee and $3.3 million associated with other actions.During 2024, we recognized $9.5 million of special charges, consisting of $4.5 million associated with our GOE program, as more fully described below, and $5.0 million associated with the transition of a manufacturing facility in EMEA, as more fully described below.During 2023, we recognized $61.2 million of special charges, consisting principally of $42.8 million associated with our GOE program, as more fully described below, $8.7 million associated with the transition of a manufacturing facility in EMEA, as more fully described below, and streamlining actions of $8.8 million in the Americas region, and $0.9 million in the EMEA region.

FINANCIAL INSTRUMENTSWe use derivative financial instruments to enhance our ability to manage risk, including foreign currency and interest rate exposures, which exist as part of our ongoing business operations. We do not enter into contracts for trading purposes, nor are we a party to any leveraged derivative instrument and all derivatives are designated as hedges. We are not a party to master netting arrangements, and we do not offset the fair value of derivative contracts with the same counterparty in our financial statement disclosures. The use of derivative financial instruments is monitored through regular communication with senior management and the use of written guidelines.Foreign CurrencyWe are potentially exposed to foreign currency fluctuations affecting net investments in subsidiaries, transactions (both third-party and intercompany) and earnings denominated in foreign currencies. Management assesses foreign currency risk based on transactional cash flows and translational volatility and may enter into forward contract and currency swaps with highly-rated financial institutions to reduce fluctuations in the long or short currency positions. Forward contracts are generally less than 18 months duration. Currency swap agreements are established in conjunction with the terms of the underlying debt issues. The following is a summary of the notional amounts of outstanding foreign currency exchange contracts as of November 30, 2025 and 2024:(millions)20252024 Fair value hedges$877.3 $818.1 Cash flow hedges140.9 216.1 Total$1,018.2 $1,034.2 All of these contracts were designated as hedges of anticipated purchases denominated in a foreign currency or hedges of foreign currency denominated assets or liabilities. Hedge ineffectiveness was not material. All foreign currency exchange contracts outstanding at November 30, 2025 have durations of less than 12 months, including $250.2 million of notional contracts that have durations of less than one month and are used to hedge short-term cash flow funding.Contracts which are designated as hedges of foreign currency denominated assets are considered fair value hedges. These foreign currency exchange contracts manage both exposure to currency fluctuations in certain intercompany loans between subsidiaries as well as currency exposure to third-party non-functional currency assets or liabilities.