McCormick & Company Inc.
06/25/2026 | Press release | Distributed by Public on 06/25/2026 14:37
Quarterly Report for Quarter Ending May 31, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 condensed consolidated financial statements and the accompanying notes thereto, included in Item 1 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. Unless otherwise noted, the dollar and share information in the charts and tables in MD&A are in millions, except per share data.
Business profile
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 the foodservice business. In fiscal year 2025, approximately 39% of our sales were generated outside of the U.S. We also are partners in a number of joint ventures involved in the manufacture and sale of flavorful products. We manage our business in two business segments, Consumer and Flavor Solutions.
Recent Events
On January 2, 2026, we acquired an additional 25% ownership interest in McCormick de Mexico for a purchase price of $750.0 million, which increased our ownership to a 75% controlling interest. We believe the acquisition creates opportunities for further growth in the Mexican market and provides a strategic platform for further expansion in Latin America. McCormick de Mexico is a prominent food company in Mexico, with a broad portfolio, including mayonnaise, spices, marmalades, mustard, hot sauce, and tea, sold under McCormick brands. The acquisition is described in detail in Note 2 of the notes to our accompanying condensed consolidated financial statements.
On February 20, 2026, the U.S. Supreme Court ruled that certain tariffs imposed under IEEPA by the executive branch are not lawful. On March 4, 2026, the CIT ordered CBP to begin the refund process for all importers who were subject to IEEPA tariffs. On April 20, 2026, CBP established an online portal through which companies can submit IEEPA tariff refund requests. We submitted our refund request on April 28, 2026, which is described in Note 1 of the notes to our accompanying condensed consolidated financial statements. The CIT order has been appealed and we will continue to monitor U.S. tariff-related developments for further updates and any associated impacts on our consolidated financial statements.
On March 31, 2026, we entered into the Merger Agreement with Unilever, pursuant to which Unilever will separate its Unilever Foods business, excluding its foods businesses in India, Nepal and Portugal, as well as its Lifestyle & Nutrition business, Buavita business and Lipton Ready-to-Drink business, and Unilever Foods will merge with a wholly owned subsidiary of McCormick in a transaction intended to qualify as a Reverse Morris Trust transaction. The transaction is generally expected to be tax-free to Unilever's shareholders for U.S. federal income tax purposes, except to the extent that cash is paid to Unilever's shareholders in lieu of fractional shares and provided that Unilever does not make the U.S. Asset Sale Election.
Under the terms of the Merger Agreement, we will issue voting and non-voting securities to Unilever shareholders and Unilever in the same proportion as is currently held by our shareholders. The transactions contemplated by the Merger Agreement are expected to result in current Unilever shareholders owning approximately 55.1% of the combined company, our current shareholders owning approximately 35.0% of the combined company, and Unilever retaining up to approximately 9.9% of the total outstanding equity of the combined company, assuming Unilever does not elect under the Merger Agreement to dispose of such interest. Unilever will also receive a one-time $15.7 billion cash payment, subject to certain adjustments. The pending transaction is subject to the satisfaction or waiver of certain customary closing conditions, including shareholder and regulatory approvals. For additional information regarding the pending transaction, see Note 2 of the notes to our accompanying condensed consolidated financial statements.
Executive Summary
In the second quarter of 2026, we achieved net sales growth of 16.7% as compared to the same quarter of 2025, due to the following factors:
•Volume and product mix unfavorably impacted net sales by 0.5%. The Consumer segment experienced unfavorable volume and product mix of 1.9% and the Flavor Solutions segment experienced favorable volume and product mix of 1.4%.
•Pricing favorably impacted net sales by 2.2%. The Consumer segment experienced favorable pricing of 2.7% and the Flavor Solutions segment experienced favorable pricing of 1.5%.
•The impact of our acquisition of McCormick de Mexico contributed 12.3% of our net sales growth.
•Fluctuations in currency rates positively impacted net sales by 2.7%. Fluctuations in currency rates positively impacted our Consumer segment sales growth by 2.4% and our Flavor Solutions segment sales growth by 3.0%.
Operating income was $276.4 million in the second quarter of 2026, compared to $245.8 million in the same period of 2025, reflecting an increase of 12.4%. Our gross profit margin increased by 270 basis points driven by the impacts of the McCormick de Mexico acquisition, favorable pricing, the IEEPA tariff refund, and cost savings from the Company's Comprehensive Continuous Improvement (CCI) program, partially offset by increased commodity costs and higher freight costs due to the conflict in the Middle East. Selling, general, and administrative (SG&A) expense as a percentage of sales increased by 90 basis points, primarily driven by the impact of the McCormick de Mexico acquisition and increased investments in technology. Excluding special charges, adjusted operating income was $336.4 million in the second quarter of 2026, reflecting an increase of 30.1% compared to $258.6 million in the 2025 period, primarily driven by the impact of the McCormick de Mexico acquisition and the IEEPA tariff refund. In constant currency, adjusted operating income increased by 27.3%.
Diluted earnings per share was $0.56 and $0.65 in the second quarters of 2026 and 2025, respectively. Special charges, including transaction and integration costs, lowered diluted earnings per share by $0.24 and $0.04 in the second quarters of 2026 and 2025, respectively. Excluding the effects of special charges, adjusted diluted earnings per share was $0.80 and $0.69 in the second quarters of 2026 and 2025, respectively. The increase in adjusted diluted earnings per share was driven by favorable operating income and a decrease in the effective tax rate, partially offset by lower income from unconsolidated operations, higher income attributable to noncontrolling interests, an increase in interest expense, and a decrease in other income.
A detailed review of our second quarter 2026 performance compared to the second quarter of fiscal 2025 appears in the section titled "Results of Operations - Company" and "Results of Operations - Segments." For a reconciliation of non-GAAP to reported amounts, see the subsequent discussion under the heading "Non-GAAP Financial Measures."
2026 Outlook
Our fiscal 2026 outlook continues to reflect prioritized investments in key categories to sustain our volume trends and drive long-term profitable growth while appreciating the uncertainty of the consumer and macro environment, including global trade policies and the conflict in the Middle East. Our CCI program is continuing to fuel growth investments while also driving operating margin expansion. Our fiscal 2026 outlook also reflects meaningful contributions from the acquisition of a controlling interest in McCormick de Mexico, which closed on January 2, 2026.
Our outlook for 2026 adjusted operating income and adjusted earnings per share are non-GAAP financial measures that exclude or otherwise adjust for items impacting comparability of financial results. We do not provide guidance on a GAAP basis as we cannot predict certain items included in GAAP results such as special charges, including transaction and integration expenses.
In 2026, we expect net sales to grow between 13% and 17% compared to 2025, including an 11% to 13% increase as a result of the acquisition of a controlling interest in McCormick de Mexico and a 1% favorable impact from foreign currency rates, or to grow from 1% to 3% on an organic basis. We anticipate that net sales will benefit from favorable volume and product mix and pricing.
In 2026, we expect an increase in adjusted operating income of 16% to 20% compared to 2025, including a 1% favorable impact from foreign currency rates, or to increase by 15% to 19% on a constant currency basis. This anticipated increase in adjusted operating income reflects adjusted gross margin expansion, accretion from the acquisition of the controlling interest in McCormick de Mexico and cost savings from our CCI program, partially offset by an increase in SG&A expense, including increased investments in technology, performance-based employee compensation expenses and investments aimed at driving volume growth, particularly in brand marketing. We project our brand marketing investments in 2026 to rise by low to mid-teens digits, including the impact from the acquisition of the controlling interest in McCormick de Mexico, compared to 2025. The benefit of the IEEPA tariff refund is expected to be offset by increased inflation, including costs related to the Middle East conflict, and continued investments in business growth.
We estimate that our 2026 adjusted effective tax rate, including the net favorable impact of anticipated discrete tax items, although at a lower amount than in 2025, will be 24.0% as compared to 21.5% in 2025.
Adjusted diluted earnings per share was $3.00 in 2025. Adjusted diluted earnings per share is projected to range from $3.05 to $3.13 in 2026. We expect adjusted diluted earnings per share to increase by 2% to 5%, which includes a 1% favorable impact from currency rates, or to increase by 1% to 4% on a constant currency basis.
RESULTS OF OPERATIONS - COMPANY
| Three months ended May 31, | Six months ended May 31, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Net sales | $ | 1,936.6 | $ | 1,659.5 | $ | 3,810.5 | $ | 3,265.0 | |||||||||||||||
| Percent increase | 16.7 | % | 1.0 | % | 16.7 | % | 0.6 | % | |||||||||||||||
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Components of percent change in net sales - increase (decrease):
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| Pricing actions | 2.2 | % | 0.3 | % | 2.1 | % | 0.1 | % | |||||||||||||||
| Volume and product mix | (0.5) | % | 1.3 | % | (0.7) | % | 1.7 | % | |||||||||||||||
| Acquisition | 12.3 | % | - | % | 12.4 | % | - | % | |||||||||||||||
| Foreign exchange | 2.7 | % | (0.6) | % | 2.9 | % | (1.2) | % | |||||||||||||||
| Gross profit | $ | 778.2 | $ | 622.8 | $ | 1,487.1 | $ | 1,226.8 | |||||||||||||||
| Gross profit margin | 40.2 | % | 37.5 | % | 39.0 | % | 37.6 | % | |||||||||||||||
Sales for the second quarter of 2026 increased by 16.7% from the same period in 2025 and increased by 1.7% on an organic basis (that is, excluding the impact of acquisitions and foreign currency exchange as more fully described under the caption, Non-GAAP Financial Measures). The acquisition of McCormick de Mexico added 12.3% to net sales. Pricing favorably impacted sales by 2.2% with favorable pricing from our Consumer and Flavor Solutions segments of 2.7% and 1.5%, respectively. Unfavorable volume and product mix decreased sales by 0.5% with unfavorable volume and product mix from our Consumer segment of 1.9% partially offset by favorable volume and product mix from our Flavor Solutions segment of 1.4%. Foreign currency rates increased sales by 2.7%.
Sales for the six months ended May 31, 2026 increased by 16.7% from the same period in 2025 and increased by 1.4% on an organic basis. The acquisition of McCormick de Mexico added 12.4% to net sales. Pricing favorably impacted sales by 2.1% with favorable pricing from our Consumer and Flavor Solutions segments of 2.5% and 1.5%, respectively. Unfavorable volume and product mix decreased sales by 0.7% with unfavorable volume and product mix from our Consumer segment of 1.2% partially offset by favorable volume and product mix from our Flavor Solutions segment of 0.2%. Foreign currency rates increased sales by 2.9%.
Gross profit for the second quarter of 2026 increased by $155.4 million, or 25.0%, from the same period of 2025. Our gross profit margin was 40.2%, an increase of 270 basis points, driven by the impacts of the McCormick de Mexico acquisition, favorable pricing, the IEEPA tariff refund, and cost savings from the Company's CCI program, partially offset by increased commodity costs and higher freight costs due to the conflict in the Middle East.
Gross profit for the six months ended May 31, 2026 increased by $260.3 million, or 21.2%, from the same period in 2025. Our gross profit margin was 39.0%, an increase of 140 basis points, driven by the impact of the McCormick de Mexico acquisition, which included a step-up of acquired inventory recognized as special charges in Cost of goods sold as the related inventory was sold, favorable pricing, the impact of the IEEPA tariff refund, and cost savings from the Company's CCI program, partially offset by increased commodity costs and higher freight costs due to the conflict in the Middle East. Excluding the impact of special charges included in Cost of goods sold, adjusted gross margin was 39.4%, or an increase of 180 basis points.
| Three months ended May 31, | Six months ended May 31, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 |
2025
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| Selling, general & administrative (SG&A) expense | $ | 441.8 | $ | 364.2 | $ | 898.1 | $ | 743.0 | |||||||||||||||
| Percent of net sales | 22.8 | % | 21.9 | % | 23.5 | % | 22.8 | % | |||||||||||||||
SG&A expense increased by $77.6 million in the second quarter of 2026 as compared to the same period in 2025, driven primarily by the impact of the McCormick de Mexico acquisition, increased brand marketing expense, and increased investments in technology. SG&A as a percentage of net sales increased by 90 basis points.
SG&A expense increased by $155.1 million in the six months ended May 31, 2026 as compared to the same period in 2025, driven primarily by the impact of the McCormick de Mexico acquisition, increased brand marketing expense, and increased investments in technology. SG&A as a percentage of net sales increased by 70 basis points.
| Three months ended May 31, | Six months ended May 31, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 |
2025
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| Special charges | $ | 60.0 | $ | 12.8 | $ | 85.1 | $ | 12.8 | |||||||||||||||
During the three months ended May 31, 2026, we recorded $60.0 million of special charges, including transaction and integration expenses. Those expenses consisted of $57.6 million of transaction and integration costs, $1.8 million associated with employee severance and related benefits associated with our SG&A streamlining actions and $0.6 million associated with other actions.
During the six months ended May 31, 2026, we recorded $85.1 million of special charges, including transaction and integration expenses. Those expenses consisted of $65.5 million of transaction and integration costs, $18.0 million associated with employee severance and related benefits associated with our SG&A streamlining actions and $1.6 million associated with other actions.
During the three and six months ended May 31, 2025, we recorded $12.8 million of special charges, including transaction and integration expenses. Those expenses principally consisted of $11.4 million associated with employee severance and related benefits associated with our SG&A streamlining actions, $0.8 million of transaction and integration costs, and $0.6 million associated with other actions.
Details with respect to the composition of special charges, including transaction and integration expenses, are included in Note 3 of the notes to the accompanying condensed consolidated financial statements.
| Three months ended May 31, | Six months ended May 31, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Interest expense | $ | 62.7 | $ | 51.0 | $ | 110.0 | $ | 99.5 | |||||||||||||||
| Other income, net | 6.5 | 9.8 | 11.3 | 19.6 | |||||||||||||||||||
Interest expense increased by $11.7 million and $10.5 million for the three and six months ended May 31, 2026, respectively, compared to the same period in 2025, driven by $6.8 million of amortization of debt financing fees related to our pending merger with Unilever Foods, the effects of higher interest rates and the impact of higher average borrowing levels.
Other income, net, decreased by $3.3 million and $8.3 million for the three and six months ended May 31, 2026, respectively, compared to the same period in 2025 due to a lower level of interest income driven primarily by the impact of the acquisition of McCormick de Mexico on our average cash balance during the period.
| Three months ended May 31, | Six months ended May 31, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Income from consolidated operations before income taxes | $ | 220.2 | $ | 204.6 | $ | 405.2 | $ | 391.1 | |||||||||||||||
| Income tax expense | 63.5 | 49.3 | 112.2 | 90.9 | |||||||||||||||||||
| Effective tax rate | 28.8 | % | 24.1 | % | 27.7 | % | 23.2 | % | |||||||||||||||
The effective tax rate for the three months ended May 31, 2026 increased by 4.7% compared to the same periods in 2025 primarily driven by the unfavorable impact of acquisition related costs partially offset by the impact of discrete tax items which are described in more detail in Note 8 of the notes to our accompanying condensed consolidated financial statements.
The effective tax rate for the six months ended May 31, 2026 increased by 4.5% compared to the same periods in 2025 primarily driven by the unfavorable impact of acquisition related costs.
| Three months ended May 31, | Six months ended May 31, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Income from unconsolidated operations | $ | 3.5 | $ | 20.7 | $ | 889.5 | $ | 39.2 | |||||||||||||||
Income from unconsolidated operations decreased $17.2 million for the three months ended May 31, 2026 compared to the same period of 2025. This decrease was primarily driven by the acquisition of an additional 25% ownership interest in McCormick de Mexico which resulted in the consolidation of McCormick de Mexico's financial results, which is described in more detail in Note 2 of the notes to our accompanying condensed consolidated financial statements.
Income from unconsolidated operations increased by $850.3 million for the six months ended May 31, 2026 compared to the same period of 2025. This increase was primarily driven by a gain of $866.8 million on the remeasurement of our previously held equity interest in McCormick de Mexico, which is described in more detail in Note 2 of the notes to our accompanying condensed consolidated financial statements.
| Three months ended May 31, | Six months ended May 31, | ||||||||||||||||||||||
| 2026 |
2025
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2026
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2025
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| Net income attributable to noncontrolling interests | $ | 10.1 | $ | 1.0 | $ | 16.2 | $ | 2.1 | |||||||||||||||
Net income attributable to noncontrolling interests increased by $9.1 million for the three months ended May 31, 2026 and $14.1 million for the six months ended May 31, 2026 compared to the same periods in 2025. This increase was driven by the net income attributable to our noncontrolling interest in McCormick de Mexico upon its consolidation in 2026.
The following table outlines the major components of the change in diluted earnings per share from 2025 to 2026:
| Three months ended May 31, | Six months ended May 31, | ||||||||||
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2025 Earnings per share - diluted
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$ | 0.65 | $ | 1.25 | |||||||
| Impact of change in operating income | 0.22 | 0.34 | |||||||||
| Increase in special charges | (0.20) | (0.32) | |||||||||
| Increase in interest expense | (0.02) | (0.01) | |||||||||
| Decrease in other income, net | (0.01) | (0.02) | |||||||||
| After tax gain on remeasurement of a previously held equity interest in McCormick de Mexico | - | 3.22 | |||||||||
| Impact of change in effective income tax rate, excluding taxes on special charges | 0.02 | (0.02) | |||||||||
| Impact of net income attributable to noncontrolling interest | (0.03) | (0.05) | |||||||||
| Decrease in unconsolidated income | $ | (0.07) | $ | (0.06) | |||||||
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2026 Earnings per share - diluted
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$ | 0.56 | $ | 4.33 | |||||||
RESULTS OF OPERATIONS - SEGMENTS
We measure the performance of our business segments based on operating income, excluding special charges for the periods presented. See Note 11 of the notes to our accompanying condensed consolidated financial statements for additional information on our segment measures as well as for a reconciliation by segment of operating income, excluding special charges, to consolidated operating income. In the following discussion, we refer to our previously described measure of segment profit as segment operating income.
CONSUMER SEGMENT
| Three months ended May 31, | Six months ended May 31, | ||||||||||||||||||||||
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2026
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2025
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2026
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2025
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| Net sales | $ | 1,142.7 | $ | 930.6 | $ | 2,287.7 | $ | 1,849.8 | |||||||||||||||
| Percent increase | 22.8 | % | 2.9 | % | 23.7 | % | 1.3 | % | |||||||||||||||
| Segment operating income | $ | 216.9 | $ | 163.6 | $ | 396.5 | $ | 310.3 | |||||||||||||||
| Segment operating income margin | 19.0 | % | 17.6 | % | 17.3 | % | 16.8 | % | |||||||||||||||
In the second quarter of 2026, sales of our Consumer segment increased by 22.8% compared to the second quarter of 2025 and increased by 0.8% on an organic basis. The acquisition of McCormick de Mexico increased sales by 19.6%. Unfavorable volume and product mix decreased sales by 1.9%, driven by declines in the Americas region which were partially offset by growth in the EMEA and APAC regions. Favorable pricing impacted sales by 2.7% primarily driven by the Americas region. The favorable impact of foreign currency rates increased sales by 2.4%.
In the Americas region, Consumer segment sales increased by 28.0% in the second quarter of 2026 compared to the same quarter of 2025 and decreased by 0.2% on an organic basis. The acquisition of McCormick de Mexico increased sales by 27.9%. Unfavorable volume and product mix decreased sales by 3.6%, which included the unfavorable impact of price elasticity. Favorable pricing impacted sales by 3.4%. The favorable impact of foreign currency rates increased sales by 0.3%.
In the EMEA region, Consumer segment sales increased by 10.7% in the second quarter of 2026 compared to the same quarter of 2025 and increased by 3.3% on an organic basis. Favorable volume and product mix increased sales by 1.9%, driven by higher sales in France and the UK. Favorable pricing impacted sales by 1.4%. The favorable impact from foreign currency rates increased sales by 7.4%.
In the APAC region, Consumer segment sales increased by 10.0% in the second quarter of 2026 compared to the same quarter of 2025 and increased by 2.9% on an organic basis. Favorable volume and product mix increased sales by 2.4%, driven by higher sales in China. Favorable pricing impacted sales by 0.5%. The favorable impact from foreign currency rates increased sales by 7.1%.
For the six months ended May 31, 2026, sales of our Consumer segment increased 23.7% as compared to the same period in 2025 and increased by 1.3% on an organic basis. The acquisition of McCormick de Mexico increased sales by 19.7%. Unfavorable volume and product mix decreased sales by 1.2% driven by declines in the Americas region which were partially offset by growth in the EMEA and APAC regions. Favorable pricing impacted sales by 2.5% driven by the Americas region. The favorable impact from foreign currency rates increased sales by 2.7% .
Segment operating income for our Consumer segment for the second quarter of 2026 increased by $53.3 million, or 32.6%, as compared to the same period of 2025 driven by an increase in gross profit, partially offset by an increase in SG&A expense. The increase in gross profit was driven by the impacts of our acquisition of McCormick de Mexico, favorable pricing, the IEEPA tariff refund, and CCI-led cost savings, partially offset by increased commodity costs and higher freight costs due to the conflict in the Middle East. The increase in SG&A expense was driven by the items described in the consolidated discussion. Segment operating margin increased by 140 basis points to 19.0%. On a constant currency basis, segment operating income increased by 30.7%.
Segment operating income for our Consumer segment for the six months ended May 31, 2026 increased by $86.2 million, or 27.8%, as compared to the same period in 2025, driven by the effects of an increase in gross profit partially offset by an increase in SG&A expense. The increase in gross profit was driven by the impacts of our acquisition of McCormick de Mexico, the IEEPA tariff refund, favorable pricing, and CCI-led cost savings, partially offset by increased commodity costs and higher freight costs due to the conflict in the Middle East. Segment operating margin increased by 50 basis points to 17.3%. On a constant currency basis, segment operating income increased by 25.9%.
FLAVOR SOLUTIONS SEGMENT
| Three months ended May 31, | Six months ended May 31, | ||||||||||||||||||||||
| 2026 | 2025 |
2026
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2025
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| Net sales | $ | 793.9 | $ | 728.9 | $ | 1,522.8 | $ | 1,415.2 | |||||||||||||||
| Percent increase | 8.9 | % | (1.3) | % | 7.6 | % | (0.3) | % | |||||||||||||||
| Segment operating income | $ | 119.5 | $ | 95.0 | $ | 207.5 | $ | 173.5 | |||||||||||||||
| Segment operating income margin | 15.1 | % | 13.0 | % | 13.6 | % | 12.3 | % | |||||||||||||||
In the second quarter of 2026, sales of our Flavor Solutions segment increased by 8.9% as compared to the second quarter of 2025 and increased by 2.9% on an organic basis. The acquisition of McCormick de Mexico increased sales by 3.0%. Favorable volume and product mix increased sales by 1.4% driven by the Americas and APAC regions, partially offset by lower sales in the EMEA region. Favorable pricing increased sales by 1.5% driven by the Americas and EMEA regions. The favorable impact of foreign currency rates increased sales by 3.0%.
In the Americas region, Flavor Solutions sales increased by 10.0% in the second quarter of 2026 compared to the second quarter of 2025 and increased by 3.9% on an organic basis. The acquisition of McCormick de Mexico increased sales by 4.2%. Favorable volume and product mix increased sales by 2.1% driven by the effect of higher sales to packaged food customers. Favorable pricing impacted sales by 1.8%. The favorable impact from foreign currency rates increased sales by 1.9%.
In the EMEA region, Flavor Solutions sales increased by 5.4% in the second quarter of 2026 compared to the second quarter of 2025 and increased by 0.4% on an organic basis. Unfavorable volume and product mix decreased sales by 1.2% driven by the effect of lower sales to quick-service restaurant customers. Favorable pricing impacted sales by 1.6%. The favorable impact from foreign currency rates increased sales by 5.0%.
In the APAC region, Flavor Solutions sales increased by 7.5% in the second quarter of 2026 compared to the second quarter of 2025, and increased by 0.2% on an organic basis. Favorable volume and product mix increased sales by 0.8%, primarily driven by growth in China. Pricing unfavorably impacted sales by 0.6%. The favorable impact from foreign currency rates increased sales by 7.3%.
For the six months ended May 31, 2026, sales of our Flavor Solutions segment increased 7.6% as compared to the same period in 2025 and increased by 1.7% on an organic basis. The acquisition of McCormick de Mexico increased sales by 2.7%. Favorable volume and product mix increased sales by 0.2% driven primarily by growth in the APAC region partially offset by lower sales in the EMEA region. Favorable pricing increased sales by 1.5%, driven by the Americas and EMEA regions partially offset by unfavorable pricing in the APAC region. The favorable impact of foreign currency rates increased segment sales by 3.2%.
Segment operating income for our Flavor Solutions segment for the second quarter of 2026 increased by $24.5 million, or 25.8%, compared to the same period of 2025 driven by an increase in gross profit partially offset by an increase in SG&A expense. The increase in gross profit was driven by favorable pricing, the impact of our acquisition of McCormick de Mexico, and CCI-led cost savings. The increase in SG&A expense was driven by the impact of the McCormick de Mexico acquisition and increased investments in technology. Segment operating margin increased by 210 basis points to 15.1%. On a constant currency basis, segment operating income increased by 21.4%.
Segment operating income for our Flavor Solutions segment for the six months ended May 31, 2026 increased by $34.0 million, or 19.6%, compared to the same period in 2025, driven by the effects of an increase in gross profit partially offset by an increase in SG&A expense. The increase in gross profit was driven by favorable pricing, the impact of our acquisition of McCormick de Mexico, and CCI-led cost savings. The increase in SG&A expense was driven by the impact of the McCormick de Mexico acquisition and increased investments in technology. Segment operating margin increased by 130 basis points to 13.6%. On a constant currency basis, segment operating income increased by 15.1%.
MARKET RISK SENSITIVITY
We utilize derivative financial instruments to enhance our ability to manage risk, including foreign exchange, interest rate, and commodity 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.
Foreign Exchange Risk
We are exposed to foreign currency risk 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. All derivatives are designated as hedges.
The following table sets forth the notional values and unrealized net gains (losses) of the portfolio of our forward foreign currency and cross currency swap contracts:
| May 31, 2026 | November 30, 2025 | ||||||||||
| Forward foreign currency: | |||||||||||
| Notional value | $ | 928.9 | $ | 1,018.2 | |||||||
| Unrealized net (loss) gain | 0.5 | 5.8 | |||||||||
| Cross currency swaps: | |||||||||||
| Notional value | 1,024.0 | 1,011.9 | |||||||||
| Unrealized net loss | (15.3) | (9.6) | |||||||||
The outstanding notional value is a result of our decisions on foreign currency exposure coverage, based on our foreign currency and foreign currency translation exposures.
Interest Rate Risk
We manage our interest rate exposure by entering into both fixed and variable rate debt arrangements. We use interest rate swaps to minimize worldwide financing costs and to achieve a desired mix of fixed and variable rate debt. We do not enter into contracts for trading purposes, nor are we a party to any leveraged derivative instruments, and all derivatives are designated as hedges.
The following table sets forth the notional values and unrealized net gains (losses) of our interest rate swap contracts:
| May 31, 2026 | November 30, 2025 | ||||||||||
| Notional value | $ | 500.0 | $ | 500.0 | |||||||
| Unrealized net (loss) gain | (23.7) | (20.8) | |||||||||
The change in fair values of our interest rate swap contracts is due to changes in interest rates on the notional amounts outstanding as of each date as well as the remaining duration of our interest rate derivative contracts.
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. Our most significant raw materials are dairy products, pepper, onion, garlic, capsicums (red peppers and paprika), salt, tomato products, sugar, and soybean oil. 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, customer price adjustments, and the use of derivative instruments. Our use of commodity derivatives is currently limited to swaps, futures, and options to reduce our exposure to the price volatility of soybean oil.
The following table sets forth the notional values and unrealized net gains (losses) of our commodity contracts:
| May 31, 2026 | November 30, 2025 | ||||||||||
| Notional value | $ | 301.8 | $ | - | |||||||
| Unrealized net gain | 55.9 | - | |||||||||
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 believe that our allowance for credit losses properly recognizes trade receivables at realizable value. We consider nonperformance credit risk for other financial instruments to be insignificant.
NON-GAAP FINANCIAL MEASURES
The following tables include financial measures of organic net sales, 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. Expenses associated with the approved actions are classified as special charges upon recognition and monitored on an ongoing basis through completion. Included in special charges are transaction and integration costs incurred in conjunction with acquisitions.
•Gain on remeasurement of previously held equity interest - On January 2, 2026, we completed the acquisition of an additional 25% ownership interest in McCormick de Mexico which increased our ownership to a 75% controlling interest. Prior to the acquisition of the additional ownership interest, we accounted for our 50% ownership interest as an equity method investment. The acquisition of the additional ownership interest resulted in the consolidation of McCormick de Mexico's financial results. As a result of the consolidation, the carrying value of our previously held 50% ownership interest was remeasured to fair value resulting in a gain.
Details with respect to the composition of special charges, including transaction and integration expenses, set forth below are included in Note 3 of the notes to our accompanying condensed consolidated financial statements. Details with respect to our gain on the revaluation of a previously held equity interest in McCormick de Mexico are included in Note 2 of the notes to our accompanying condensed consolidated financial statements.
Details with respect to the composition of special charges, including transaction and integration expenses, for the year ended November 30, 2025 are included in Note 2 of the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended November 30, 2025.
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; however, they should not be viewed as a substitute for, or superior to, GAAP results. Furthermore, these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, as they may calculate them differently than we do. We intend to continue providing these non-GAAP financial measures as part of our future earnings discussions, ensuring consistency in our financial reporting.
A reconciliation of these non-GAAP financial measures to the related GAAP financial measures follows:
|
For the year ended November 30, 2025
|
Three months ended May 31, | Six months ended May 31, | |||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||
| Gross profit | $ | 2,592.2 | $ | 778.2 | $ | 622.8 | $ | 1,487.1 | $ | 1,226.8 | |||||||||||||||||||
|
Impact of Special charges included in cost of goods sold
|
2.1 | - | - | 15.0 | - | ||||||||||||||||||||||||
| Adjusted gross profit | $ | 2,594.3 | $ | 778.2 | $ | 622.8 | $ | 1,502.1 | $ | 1,226.8 | |||||||||||||||||||
|
Gross profit margin(1)
|
37.9 | % | 40.2 | % | 37.5 | % | 39.0 | % | 37.6 | % | |||||||||||||||||||
|
Impact of Special charges(1)
|
- | % | - | % | - | % | 0.4 | % | - | % | |||||||||||||||||||
|
Adjusted gross profit margin(1)
|
37.9 | % | 40.2 | % | 37.5 | % | 39.4 | % | 37.6 | % | |||||||||||||||||||
| Operating income | $ | 1,070.8 | $ | 276.4 | $ | 245.8 | $ | 503.9 | $ | 471.0 | |||||||||||||||||||
|
Impact of Special charges
|
23.2 | 60.0 | 12.8 | 100.1 | 12.8 | ||||||||||||||||||||||||
| Adjusted operating income | $ | 1,094.0 | $ | 336.4 | $ | 258.6 | $ | 604.0 | $ | 483.8 | |||||||||||||||||||
|
Operating income margin(2)
|
15.7 | % | 14.3 | % | 14.8 | % | 13.2 | % | 14.4 | % | |||||||||||||||||||
|
Impact of Special charges(2)
|
0.3 | % | 3.1 | % | 0.8 | % | 2.7 | % | 0.4 | % | |||||||||||||||||||
|
Adjusted operating income margin(2)
|
16.0 | % | 17.4 | % | 15.6 | % | 15.9 | % | 14.8 | % | |||||||||||||||||||
| Income tax expense | $ | 195.8 | $ | 63.5 | $ | 49.3 | $ | 112.2 | $ | 90.9 | |||||||||||||||||||
|
Impact of Special charges
|
5.5 | 1.0 | 3.0 | 10.9 | 3.0 | ||||||||||||||||||||||||
| Adjusted income tax expense | $ | 201.3 | $ | 64.5 | $ | 52.3 | $ | 123.1 | $ | 93.9 | |||||||||||||||||||
|
Income tax rate(3)
|
21.4 | % | 28.8 | % | 24.1 | % | 27.7 | % | 23.2 | % | |||||||||||||||||||
|
Impact of Special charges
|
0.1 | % | (6.3) | % | - | % | (3.7) | % | - | % | |||||||||||||||||||
|
Adjusted income tax rate(3)
|
21.5 | % | 22.5 | % | 24.1 | % | 24.0 | % | 23.2 | % | |||||||||||||||||||
| Net income attributable to McCormick & Company | $ | 789.4 | $ | 150.1 | $ | 175.0 | $ | 1,166.3 | $ | 337.3 | |||||||||||||||||||
|
Impact of Special charges, net of non-controlling interest(4)(5)
|
17.7 | 65.8 | 9.8 | 93.3 | 9.8 | ||||||||||||||||||||||||
| Gain on remeasurement of previously held equity interest | - | - | - | (866.8) | - | ||||||||||||||||||||||||
| Adjusted net income | $ | 807.1 | $ | 215.9 | $ | 184.8 | $ | 392.8 | $ | 347.1 | |||||||||||||||||||
| Earnings per share - diluted | $ | 2.93 | $ | 0.56 | $ | 0.65 | $ | 4.33 | $ | 1.25 | |||||||||||||||||||
| Impact of Special charges | 0.07 | 0.24 | 0.04 | 0.35 | 0.04 | ||||||||||||||||||||||||
| Gain on remeasurement of previously held equity interest | - | - | - | (3.22) | - | ||||||||||||||||||||||||
| Adjusted earnings per share - diluted | $ | 3.00 | $ | 0.80 | $ | 0.69 | $ | 1.46 | $ | 1.29 | |||||||||||||||||||
| (1) | Gross profit margin, impact of special charges, and adjusted gross profit margin are calculated as gross profit, impact of special charges, and adjusted gross profit as a percentage of net sales for each period presented. The impact of special charges included in cost of goods sold represents the step-up of acquired inventory recognized in cost of goods sold as the related inventory was sold. | ||||||||||||||||
| (2) | Operating income margin, impact of special charges, and adjusted operating income margin are calculated as operating income, impact of special charges, and adjusted operating income as a percentage of net sales for each period presented. | ||||||||||||||||
| (3) | Income tax rate is calculated as income tax expense as a percentage of income from consolidated operations before income taxes. Adjusted income tax rate is calculated as adjusted income tax expense as a percentage of income from consolidated operations before income taxes excluding special charges of $287.0 million and $217.4 million for the three months ended May 31, 2026 and 2025, respectively, and $512.1 million and $403.9 million for the six months ended May 31, 2026 and 2025, respectively. Adjusted income tax rate is calculated as adjusted income tax expense as a percentage of income from consolidated operations before income taxes excluding special charges of $936.2 million for the year ended November 30, 2025. | ||||||||||||||||
| (4) | The impact of special charges, net of noncontrolling interests, for six months ended May 31, 2026 includes a $2.6 million non-controlling interest effect associated with the step-up of acquired inventory recognized in cost of goods sold as the related inventory was sold. | ||||||||||||||||
| (5) | The impact of special charges, net of noncontrolling interests, for three and six months ended May 31, 2026 includes a net income impact of $5.2 million related to transaction expenses included in interest expense. | ||||||||||||||||
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 can be volatile. 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).
We provide organic net sales growth rates for our consolidated net sales and segment net sales. We believe that organic net sales growth rates provide useful information to investors because they provide transparency to underlying performance in our net sales by excluding the effect that foreign currency exchange rate fluctuations, acquisitions, and divestitures, as applicable, have on year-to-year comparability. A reconciliation of these measures from reported net sales growth rates, the relevant GAAP measures, are included in the tables set forth below.
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 period 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 corresponding period of the comparative year, rather than at the actual average exchange rates in effect during the current fiscal year. As a result, the foreign currency impact is equal to the current year results in local currencies multiplied by the change in the average foreign currency exchange rate between the current fiscal period and the corresponding period of the comparative year.
Rates of constant currency and organic growth (decline) follow:
| Three months ended May 31, 2026 | |||||||||||||||||
| Percentage change as reported | Impact of foreign currency exchange | Percentage change on constant currency basis | Impact of acquisition | Percentage change on an organic basis | |||||||||||||
| Net sales: | |||||||||||||||||
| Consumer segment: | |||||||||||||||||
| Americas | 28.0 | % | 0.3 | % | 27.7 | % | 27.9 | % | (0.2) | % | |||||||
| EMEA | 10.7 | % | 7.4 | % | 3.3 | % | - | % | 3.3 | % | |||||||
| APAC | 10.0 | % | 7.1 | % | 2.9 | % | - | % | 2.9 | % | |||||||
| Total Consumer | 22.8 | % | 2.4 | % | 20.4 | % | 19.6 | % | 0.8 | % | |||||||
| Flavor Solutions segment: | |||||||||||||||||
| Americas | 10.0 | % | 1.9 | % | 8.1 | % | 4.2 | % | 3.9 | % | |||||||
| EMEA | 5.4 | % | 5.0 | % | 0.4 | % | - | % | 0.4 | % | |||||||
| APAC | 7.5 | % | 7.3 | % | 0.2 | % | - | % | 0.2 | % | |||||||
| Total Flavor Solutions | 8.9 | % | 3.0 | % | 5.9 | % | 3.0 | % | 2.9 | % | |||||||
| Total net sales | 16.7 | % | 2.7 | % | 14.0 | % | 12.3 | % | 1.7 | % | |||||||
| Six months ended May 31, 2026 | |||||||||||||||||
| Percentage change as reported | Impact of foreign currency exchange | Percentage change on constant currency basis | Impact of acquisition | Percentage change on an organic basis | |||||||||||||
| Net sales: | |||||||||||||||||
| Consumer segment: | |||||||||||||||||
| Americas | 29.1 | % | 0.3 | % | 28.8 | % | 28.4 | % | 0.4 | % | |||||||
| EMEA | 13.1 | % | 9.6 | % | 3.5 | % | - | % | 3.5 | % | |||||||
| APAC | 8.0 | % | 5.5 | % | 2.5 | % | - | % | 2.5 | % | |||||||
| Total Consumer | 23.7 | % | 2.7 | % | 21.0 | % | 19.7 | % | 1.3 | % | |||||||
| Flavor Solutions segment: | |||||||||||||||||
| Americas | 8.1 | % | 1.9 | % | 6.2 | % | 3.8 | % | 2.4 | % | |||||||
| EMEA | 6.3 | % | 6.4 | % | (0.1) | % | - | % | (0.1) | % | |||||||
| APAC | 6.3 | % | 6.0 | % | 0.3 | % | - | % | 0.3 | % | |||||||
| Total Flavor Solutions | 7.6 | % | 3.2 | % | 4.4 | % | 2.7 | % | 1.7 | % | |||||||
| Total net sales | 16.7 | % | 2.9 | % | 13.8 | % | 12.4 | % | 1.4 | % | |||||||
| Three months ended May 31, 2026 | |||||||||||
| Percentage change as reported | Impact of foreign currency exchange | Percentage change on constant currency basis | |||||||||
| Adjusted operating income: | |||||||||||
| Consumer segment | 32.6 | % | 1.9 | % | 30.7 | % | |||||
| Flavor Solutions segment | 25.8 | % | 4.4 | % | 21.4 | % | |||||
| Total adjusted operating income | 30.1 | % | 2.8 | % | 27.3 | % | |||||
| Six months ended May 31, 2026 | |||||||||||
| Percentage change as reported | Impact of foreign currency exchange | Percentage change on constant currency basis | |||||||||
| Adjusted operating income: | |||||||||||
| Consumer segment | 27.8 | % | 1.9 | % | 25.9 | % | |||||
| Flavor Solutions segment | 19.6 | % | 4.5 | % | 15.1 | % | |||||
| Total adjusted operating income | 24.8 | % | 2.8 | % | 22.0 | % | |||||
To present the percentage change in projected 2026 net sales, adjusted operating income, and adjusted earnings per share (diluted) on a constant currency basis, the 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 forecasted exchange rates. These figures are then compared to the 2025 local currency projected results, which are translated into U.S. dollars at the average actual exchange rates in effect during the corresponding months of fiscal year 2025. This comparison determines what the 2025 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 2025 periods.
|
Projections for the Year Ending November 30, 2026
|
|||||||||||
| Percentage change in net sales |
13% to 17%
|
||||||||||
| Impact of favorable foreign currency exchange |
1%
|
||||||||||
| Percentage change in net sales in constant currency |
12% to 16%
|
||||||||||
| Impact of acquisition |
11% to 13%
|
||||||||||
| Percentage change in organic net sales |
1% to 3%
|
||||||||||
| Percentage change in adjusted operating income |
16% to 20%
|
||||||||||
| Impact of favorable foreign currency exchange |
1%
|
||||||||||
| Percentage change in adjusted operating income in constant currency |
15% to 19%
|
||||||||||
| Percentage change in adjusted earnings per share - diluted |
2% to 5%
|
||||||||||
| Impact of favorable foreign currency exchange |
1%
|
||||||||||
| Percentage change in adjusted earnings per share in constant currency - diluted |
1% to 4%
|
||||||||||
LIQUIDITY AND FINANCIAL CONDITION
| Six months ended May 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Net cash provided by operating activities | $ | 430.7 | $ | 161.4 | |||||||
| Net cash used in investing activities | (805.1) | (105.2) | |||||||||
| Net cash used in financing activities | 602.7 | (142.9) | |||||||||
The primary objective of our financing strategy is to maintain a prudent capital structure that provides us with 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 flow from operations enables 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 long-term debt, interest payments are higher in the first and third quarters of our fiscal year.
We expect that the pending combination with Unilever Foods is likely to result in a material increase in our debt and liquidity needs that will impact our capital needs prior to and after the closing of such transaction. Under the terms of the Merger Agreement, we will issue voting and non-voting securities to Unilever and its shareholders and make a one-time cash payment of $15.7 billion to Unilever, subject to certain adjustments, which we intend to fund through the Bridge Facility, the Term Loan Facility, and, to the extent available, the Permanent Financing. See Note 4 of the notes to the condensed consolidated financial statements for further discussion. We believe that our sources of liquidity, which include existing cash balances, cash flows from operations, existing credit facilities, our commercial paper program, access to capital markets and the committed debt financing related to the pending transaction with Unilever Foods, will provide sufficient liquidity to meet our debt obligations, including any repayment of debt or refinancing of debt, working capital needs, planned capital expenditures, the one-time cash
payment to Unilever in connection with the pending transaction, the payment associated with an acquisition and payment of anticipated quarterly dividends for at least the next twelve months.
In the consolidated 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 flow associated with acquisition or disposition 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.
Operating Cash Flow - Net cash provided by operating activities of $430.7 million for the six months ended May 31, 2026 increased $269.3 million as compared to $161.4 million for the corresponding 2025 period. The increase in operating cash flow was primarily driven by lower cash used for working capital. The lower use of cash associated with working capital, net of effect of businesses acquired, was driven by a decreased use of cash associated with accounts payable and increased source of cash from accounts receivables in 2026 compared to the 2025 period.
Investing Cash Flow - Cash used in investing activities of $805.1 million for the six months ended May 31, 2026 increased by $699.9 million as compared to $105.2 million for the corresponding period in 2025. Our primary investing cash flows included cash used in the acquisition of a business and cash used for capital expenditures. Capital expenditures, including expenditures for capitalized software decreased from the 2025 level of $85.4 million to $75.2 million. Cash used for the acquisition of a business, net of cash acquired for the six months ended May 31, 2026 was $729.9 million as compared to $19.8 million for the six months ended May 31, 2025. We expect 2026 capital expenditures to approximate $250 million.
Financing Cash Flow - Financing activities provided cash of $602.7 million for the six months ended May 31, 2026 as compared to a use of cash of $142.9 million for the corresponding period in 2025. The year-over-year change was primarily driven by fluctuations in net borrowings, share repurchase activity, and dividend payments, as further described below.
The following table outlines our net borrowing activities:
| Six months ended May 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Net increase in short-term borrowings (repayments), net | $ | 945.2 | $ | 116.0 | |||||||
| Repayments of long-term debt | (504.4) | (13.6) | |||||||||
| Debt financing fees paid | (51.0) | - | |||||||||
|
Long-term debt borrowings (net of debt issuance costs of $1.1)
|
497.7 | 0.9 | |||||||||
| Net cash provided by borrowing activities | $ | 887.5 | $ | 103.3 | |||||||
During the six months ended May 31, 2026, the increase in short-term borrowings was principally to fund investing cash requirements. During the six months ended May 31, 2026, we repaid $504.4 million of long-term debt, including the $500 million, 0.90% notes that matured in February 2026. In the second quarter of 2026, we paid $51.0 million of aggregate debt financing fees related to the pending merger with Unilever Foods which were deferred in Other assets and are being amortized to Interest expense. During the six months ended May 31, 2026, we issued $500 million of 4.15% notes due 2029, with net proceeds received of $497.1 million.
The following table outlines the activity in our share repurchase program:
| Six months ended May 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Number of shares of common stock repurchased (in thousands) | 154 | 345 | |||||||||
| Dollar amount (in millions) | $ | 10.9 | $ | 26.5 | |||||||
As of May 31, 2026, approximately $402.6 million remained of the $600.0 million share repurchase program that was authorized by the Board of Directors in November 2019. The timing and amount of any shares repurchased is determined by our management based on its evaluation of market conditions and other factors.
During the six months ended May 31, 2026, we received proceeds of $13.6 million from exercised stock options as compared to $13.3 million received in the corresponding 2025 period. We repurchased $11.9 million and $12.6 million of common stock during the six months ended May 31, 2026 and 2025, respectively, in conjunction with employee tax withholding requirements associated with our stock compensation plans.
Dividends paid increased to $257.9 million, or a per share quarterly dividend of $0.48, in the first six months of 2026 from $241.5 million, or a per share quarterly dividend of $0.45, of dividends paid in the same period last year. The timing and amount of any future dividends is determined by our Board of Directors. We paid dividends to our joint venture partner of $8.4 million in the first six months of 2026.
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 any possible future acquisitions.
At May 31, 2026 and 2025, we temporarily used $449.4 million and $614.2 million, respectively, of cash from our non-U.S. subsidiaries to pay down short-term debt in the U.S. During a quarter, our short-term borrowings vary, but are typically lower at the end of a quarter. The average short-term borrowings outstanding for the six months ended May 31, 2026 and 2025 were $1,519.4 million and $1,073.5 million, respectively. Total average debt outstanding for the six months ended May 31, 2026 and 2025 was $5,111.1 million and $4,873.5 million, respectively.
The reported values of our assets and liabilities are significantly affected by fluctuations in foreign exchange rates between periods. At May 31, 2026, the exchange rate for the British pound sterling, Euro, Canadian dollar, Mexican peso, Chinese renminbi, Australian dollar, and Polish zloty were higher than the U.S. dollar at November 30, 2025.
Credit and Capital Markets
Cash flows from operating activities are our primary source of liquidity for funding growth, dividends, capital expenditures and share repurchases. We also rely on our revolving credit facilities, or borrowings backed by these facilities, to fund working capital needs and other general corporate requirements.
In February 2026, we issued $500 million aggregate principal amount of 4.15% unsecured senior notes due 2029. Interest is payable semiannually in February and August of each year, beginning in August 2026. The net proceeds received from the issuances of these notes of $497.1 million were used to repay a portion of the outstanding $500 million 0.90% notes due in February 2026.
In March 2026, we entered into the Bridge Commitment Letter in connection with the financing of the pending transaction with Unilever, pursuant to which the Commitment Parties committed to provide, subject to the terms and conditions set forth therein, the Bridge Facility an aggregate principal amount of up to $15.7 billion to fund the cash consideration and related fees and expenses at closing of the pending transaction. Effective April 28, 2026, we terminated $2.0 billion of the commitments under the Bridge Facility and entered into a term loan agreement as described below, subject to customary closing conditions for similar facilities.
In April 2026, we entered into the Term Loan Agreement by and among us, the lenders party thereto and Citibank, N.A., as the Administrative Agent. The Term Loan Agreement provides us with the Term Loan Facility at the the Closing Date, subject to satisfaction of customary closing conditions for similar facilities, for the purpose of financing a portion of the cash consideration to be paid in the pending transaction and paying related fees and expenses in connection therewith. The Term Loan Facility may be funded on the Closing Date or, subject to compliance with certain conditions, on the preceding business day, and matures three years after the Closing Date. Under the Term Loan Agreement, borrowings will bear interest on the principal amount outstanding at a floating rate based on, at our election, (i) Term SOFR (as defined in the Term Loan Agreement) plus an applicable margin based on the credit ratings of our senior unsecured long term debt ranging from 0.75% to 1.50% or (ii) Base Rate (as defined in the Term Loan Agreement) plus an applicable margin based on the credit ratings of our senior unsecured long term debt ranging from 0.00% to 0.50%. The Term Loan Agreement contains a financial covenant requiring us to maintain a minimum interest coverage ratio as well as other non-financial covenants and certain customary events of default.
Our committed revolving credit facilities include a five-year $2.0 billion revolving credit facility expiring in May 2030 and a 364-day $500 million revolving credit facility expiring in January 2027. Pricing for both facilities, on a fully drawn basis, is currently Term SOFR plus 1.125% and is based on a credit rating grid, with a maximum fully drawn rate of Term SOFR plus 1.50%. The provisions of our revolving credit facilities 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 our revolving credit facilities for the foreseeable future.
We generally use our revolving credit facilities to support our issuance of commercial paper. If the commercial paper market is not available or viable, we could borrow directly under our revolving credit facility. This facility is made available by a syndicate of banks, with various commitments per bank. If any of the banks in this syndicate are unable to perform on their commitments, our liquidity could be impacted, which could reduce our ability to grow through funding of our working capital. We periodically review our banking and financing relationships, considering the stability of the institutions and other aspects of
the relationships. In addition, we engage in regular communication with all banks participating in our credit facility. During these communications, none of the banks have indicated that they may be unable to perform on their commitments. Based on these communications and our monitoring activities, we believe our banks will perform on their commitments.
Material Cash Requirements
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. Our other cash requirements include raw material purchases, lease payments, income taxes, anticipated quarterly dividends, and pension and postretirement benefits, as well as other contractual obligations. In addition, in connection with the pending transaction with Unilever Foods, we will be obligated to make a one-time cash payment of $15.7 billion to Unilever, subject to certain adjustments.
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, to utilize the committed debt financing we have obtained in connection with the pending transaction, and depending on market conditions and upon the significance of the cost of a particular debt maturity to our then-available sources of funds, to obtain additional short- and long-term financing. We believe that the cash provided from these sources will be adequate to meet our future cash requirements.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
New accounting pronouncements are issued periodically that affect our current and future operations. See Note 1 of notes to the accompanying condensed 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 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 are included in our Annual Report on Form 10-K for the fiscal year ended November 30, 2025.
There have been no changes in our critical accounting estimates and assumptions included in our Annual Report on Form 10-K for the fiscal year ended November 30, 2025 except as follows.
Business Combinations
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. The fair value of any noncontrolling interest is estimated based on the implied value derived from the consideration transferred adjusted for any control premium. Any excess of the purchase consideration 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, and noncontrolling interest. We generally obtain the assistance of a third-party valuation specialist in estimating fair values of tangible and intangible assets as well as estimating the fair value of any noncontrolling interest. 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 intangibles are expected to have indefinite lives, including brand intangibles based on their history and our plans to continue to support and build the acquired brands, and reacquired rights based on their ability to contribute cash flows for the foreseeable future without substantive limiting factors. Other acquired intangible assets such as 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.
FORWARD-LOOKING INFORMATION
Certain statements contained in this report, including statements concerning expected performance such as those relating to net sales, gross margin, earnings, cost savings, special charges, including transaction and integration expenses, mergers, acquisitions, brand marketing support, volume and product mix, income tax expense, tariff-related matters, and the impact of foreign currency rates are "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These statements may be identified by the use of words such as "may," "will," "expect," "should," "anticipate," "intend," "believe," "plan," and similar expressions. These statements may relate to: the anticipated benefits and timing of, and our plans, strategies and objectives relating to, the pending transaction with Unilever Foods, including: due to the parties' ability to meet expectations regarding the timing, completion and accounting and tax treatments of the pending transaction, including changes in relevant tax and other applicable laws; the failure to obtain necessary regulatory approvals, approval of our shareholders, anticipated tax treatment or any required financing, or to satisfy any of the other conditions to the pending transaction; the possibility that unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, synergies, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies could impact the value or expected benefit of, timing or pursuit of the pending transaction; the risks and costs of the pursuit and/or implementation of the anticipated separation of Unilever Foods business prior to closing, including the anticipated timing required to complete the separation, any adjustment to the terms of the separation and any changes to the configuration of the businesses included in the separation if implemented; the financing of the pending transaction, including with respect to the Bridge Facility, the Term Loan Facility, and any other subsequent financing; the effectiveness of a registration statement on Form S-4 and our receipt of shareholder approval for the pending transaction and certain related matters; the anticipated ownership percentages of McCormick shareholders, Unilever shareholders and Unilever following the closing of the pending transaction; the effect of the announcement or pendency of the pending transaction on Unilever Foods' or McCormick's business relationships, competition, business, financial condition and operating results; the ability of McCormick to successfully integrate Unilever Foods' operations and implement its plans, forecasts and other expectations with respect to Unilever Foods' business or the combined business after the closing of the pending transaction; the ability of McCormick to manage additional debt and successfully de-lever following the transaction; general economic and industry conditions, including consumer spending rates, recessions, interest rates, and availability of capital; expectations regarding sales growth potential in various geographies and markets, including the impact of brand marketing support, product innovation, and customer, channel, category, heat platform, and e-commerce expansion; the expected results of operations of businesses acquired, including the additional 25% ownership interest in McCormick de Mexico; expected trends in net sales, earnings performance, and other financial measures; the expected impact of pricing actions on the Company's results of operations, including our sales volume and mix as well as gross margins; the expected impact of the inflationary cost environment on our business; the anticipated effects of factors affecting our supply chain, including the availability and prices of commodities and other supply chain resources such as raw materials, packaging, labor, and transportation; the potential impact of trade policies, including tariffs; the potential impact of legal challenges to U.S. tariffs, tariff refunds, and the timing and anticipated benefits thereof; the expected impact of productivity improvements, including those associated with our CCI program and the Global Business Services operating model initiative; the ability to identify, attract, hire, retain, and develop qualified personnel and the next generation of leaders; the impact of ongoing or future geopolitical conflicts, including those between Russia and Ukraine and the war/conflict in the Middle East, including the potential for broader economic disruption, in particular related to fuel and freight prices; expected working capital improvements; the anticipated timing and costs of implementing our business transformation initiative, which includes the implementation of a global enterprise resource planning (ERP) system; the expected impact of accounting pronouncements; expectations regarding pension and postretirement plan contributions and anticipated charges associated with those plans; the holding period and market risks associated with financial instruments; the impact of foreign exchange fluctuations; the adequacy of internally generated funds and existing sources of liquidity, such as the availability of bank financing; the anticipated sufficiency of future cash flows to enable payments of interest, repayment of short- and long-term debt, working capital needs, planned capital expenditures, quarterly dividends, and our ability to obtain additional short- and long-term financing or issue additional debt securities; and expectations regarding purchasing shares of McCormick's common stock under the existing repurchase authorization.
These and other forward-looking statements are based on management's current views and assumptions and involve risks and uncertainties that could significantly affect expected results. Results may be materially affected by factors such as: the Company's ability to drive revenue growth; the Company's ability to increase pricing to offset, or partially offset, inflationary pressures on the cost of our products; damage to the Company's reputation or brand name; loss of brand relevance; increased private label use; the Company's ability to offset cost pressures or business impacts related to trade policies such as tariffs, including relating to tariff refunds; the Company's ability to drive productivity improvements, including those related to our CCI program and other streamlining actions; product quality, labeling, or safety concerns; negative publicity about our products; actions by, and the financial condition of, competitors and customers; the longevity of mutually beneficial
relationships with our large customers; the ability to identify, interpret and react to changes in consumer preference and demand; business interruptions due to natural disasters, unexpected events or public health crises; issues affecting the Company's supply chain and procurement of raw materials, including fluctuations in the cost and availability of raw and packaging materials; labor shortage, turnover and labor cost increases; the impact of changing political and geopolitical conditions, including the ongoing conflicts between Russia and Ukraine and the war/conflict in the Middle East, including the potential for broader economic disruption; government regulation, and changes in legal and regulatory requirements and enforcement practices; the lack of successful acquisition and integration of new businesses; global economic and financial conditions generally, availability of financing, interest and inflation rates, and the imposition of tariffs, quotas, trade barriers and other similar restrictions; foreign currency fluctuations; the effects of our amount of outstanding indebtedness and related level of debt service as well as the effects that such debt service may have on the Company's ability to borrow or the cost of any such additional borrowing, our credit rating, and our ability to react to certain economic and industry conditions; impairments of indefinite-lived intangible assets; assumptions we have made regarding the investment return on retirement plan assets, and the costs associated with pension obligations; the stability of credit and capital markets; risks associated with the Company's information technology systems, including the threat of data breaches and cyber-attacks; the Company's inability to successfully implement our business transformation initiative; fundamental changes in tax laws; including interpretations and assumptions we have made, and guidance that may be issued, and volatility in our effective tax rate; climate change; Environmental, Social and Governance (ESG) matters; infringement of intellectual property rights, and those of customers; litigation, legal and administrative proceedings; the Company's inability to achieve expected and/or needed cost savings or margin improvements; negative employee relations; risks related to the pending transaction with Unilever Foods, including: direct transaction costs and substantial transition and integration-related costs associated with the pending transaction; the parties' ability to meet expectations regarding the timing, completion and accounting and tax treatments of the transaction, and the occurrence of any event, change or other circumstance that could give rise to the termination of the transaction agreement; the failure to obtain necessary regulatory approvals, anticipated tax treatment or any required financing, or to satisfy any of the other conditions to the transaction; the possibility that unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, synergies, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies could adversely impact the value or expected benefit of, timing or pursuit of the transaction; the risks and costs of the pursuit and/or implementation of the anticipated separation of Unilever Foods' business prior to closing; uncertainties as to access to available financing to consummate the transaction upon acceptable terms and on a timely basis or at all; the failure to obtain the effectiveness of a registration statement on Form S-4 or our receipt of shareholder approval for the transaction; the effect of the announcement or pendency of the transaction on Unilever Foods' or McCormick's business relationships, competition, business, financial condition and operating results, including risks that the transaction disrupts current plans and operations of Unilever Foods or McCormick; the ability of Unilever Foods or McCormick to retain and hire key personnel, risks related to diverting either management team's attention from ongoing business operations, and risks associated with third-party contracts containing consent and/or other provisions that may be triggered by the transaction; the ability of McCormick to successfully integrate Unilever Foods' operations and implement its plans, forecasts and other expectations with respect to Unilever Foods' business or the combined business after the closing of the transaction; the ability of McCormick to manage additional debt and successfully de-lever following the transaction; the outcome of any legal proceedings that may be instituted against Unilever Foods or McCormick related to the transaction; and other risks as described herein under Part II, Item 1A "Risk Factors-Risks Relating to the Proposed Transaction"; and other risks described in the Company's filings with the Securities and Exchange Commission.
Actual results could differ materially from those projected in the forward-looking statements. The Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.
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