ITEM 7. 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 financial statements and the accompanying notes thereto contained in Item 8 of this report. We use certain non-GAAP information—more fully described below under the caption Non-GAAP Financial Measures—that we believe is important for purposes of comparison to prior periods and development of future projections and earnings growth prospects. This information is also used by management to measure the profitability of our ongoing operations and analyze our business performance and trends. The dollar and share information in the charts and tables in MD&A are in millions, except per share data.
McCormick is a global leader in flavor. We manufacture, market, and distribute spices, seasoning mixes, condiments, and other flavorful products to the entire food and beverage industry–retailers, food manufacturers, and foodservice businesses. We manage our business in two operating segments, Consumer and Flavor Solutions, as described in Item 1 of this report.
Our long-term annual growth objectives in constant currency are to increase sales 4% to 6%, increase adjusted operating income 7% to 9%, and increase adjusted earnings per share 9% to 11%. Our actual annual results can vary from our long-term growth objectives.
Over time, we expect to grow sales with similar contributions from: 1) our base business – driven by brand marketing support, category management, and differentiated customer engagement; 2) new products; and 3) acquisitions.
Base Business – We expect to drive sales growth by optimizing our brand marketing investment through improved speed, quality, and effectiveness. We measure the return on our brand marketing investment and identify digital marketing as one of our highest return investments in brand marketing support. Through digital marketing, we are connecting with consumers in a personalized way to deliver recipes, provide cooking advice, and help them discover new products.
New Products – For our Consumer segment, we believe that scalable and differentiated innovation continues to be one of the best ways to distinguish our brands from our competition, including private label. We are introducing products for every type of cooking occasion, from gourmet, premium items to convenient and value-priced flavors.
For Flavor Solutions customers, we are developing seasonings for snacks and other food products, as well as flavors for new menu items. We have a strong pipeline of Flavor Solutions products aligned with our customers’ new product launch plans, many of which include clean-label, organic, natural, and “better-for-you” innovation. With over 20 product innovation centers around the world, we are supporting the growth of our brands and those of our Flavor Solutions customers with products that appeal to local consumers.
Acquisitions – Acquisitions are expected to approximate one-third of our sales growth over time. We focus on acquisition opportunities that meet the growing demand for flavor and health. Geographically, our focus is on acquisitions that build scale where we currently have presence in both developed and emerging markets.
Recent Event
On January 2, 2026 we acquired an additional 25% ownership interest in McCormick de Mexico for a purchase price of $750 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.
Executive Summary
In 2025, we achieved net sales growth of 1.7% as compared to 2024 due to the following factors:
• Volume and product mix favorably impacted net sales growth by 1.2%. The Consumer segment experienced favorable volume and product mix of 2.1% and the Flavor Solutions segment experienced unfavorable volume and product mix of 0.2%.
• Pricing favorably impacted net sales by 0.7%.
• Fluctuations in currency rates negatively impacted net sales by 0.2%, Fluctuations in currency rates positively impacted our Consumer segment sales growth by 0.2% and negatively impacted our Flavor Solutions segment sales growth by 0.6%.
Operating income was $1,070.8 million in 2025, compared to $1,060.3 million in 2024, reflecting an increase of 1.0%. Our gross profit margin decreased by 60 basis points primarily driven by increased commodity costs including the impact of tariffs, unfavorable product mix, and increased conversion costs including costs to support capacity for future growth, partially offset by pricing actions and CCI-led cost savings. Selling, general, and administrative (SG&A) expense as a percentage of sales decreased by 70 basis points, primarily driven by lower performance-based employee compensation expense, lower distribution expense, and CCI-led cost savings including SG&A streamlining initiatives, partially offset by increased brand marketing expense. Excluding special charges, adjusted operating income was $1,094.0 million in 2025, reflecting an increase of 2.3% compared to $1,069.8 million in 2024. In constant currency, adjusted operating income increased 2.8%. For further details and a reconciliation of non-GAAP to reported amounts, see the subsequent discussion under the heading "Non-GAAP Financial Measures".
Diluted earnings per share was $2.93 in 2025 and $2.92 in 2024, driven by higher operating income and decreased interest expense, partially offset by an increase in the effective tax rate, higher special charges, a decrease in other income, and a decrease in income from unconsolidated operations. Special charges lowered earnings per share by $0.07 and $0.03 in 2025 and 2024, respectively. Excluding the effects of special charges, adjusted diluted earnings per share was $3.00 in 2025, compared to $2.95 in 2024, representing an increase of 1.7%.
Net cash provided by operating activities was $962.2 million, $921.9 million, and $1,237.3 million in 2025, 2024, and 2023, respectively. In 2025, we continued to have a balanced use of cash for debt repayment, capital expenditures, and the return of cash to shareholders through dividends and share repurchases. We are using our cash to fund shareholder dividends, with annual increases in each of the past 40 years, and to fund capital expenditures and acquisitions. In 2025, the return of cash to our shareholders through dividends and share repurchases was $517.8 million.
A detailed review of our fiscal 2025 performance compared to fiscal 2024 appears in the section titled “Results of Operations – 2025 Compared to 2024.” A detailed review of our fiscal 2024 performance compared to our fiscal 2023 performance is set forth in Part II, Item 7 of our Form 10-K for the fiscal year ended November 30, 2024 under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations – 2024 Compared to 2023,” which is incorporated herein by reference.
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. 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. Amounts are rounded with percentages calculated from the underlying amounts.
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 are unable to reconcile projected adjusted operating income to projected reported operating income because we cannot reasonably predict the amount of special charges, including transaction and integration expenses, during this time period. We expect 2026 transaction and integration expenses to include a step-up in inventory to fair value related to the recent acquisition of an additional 25% ownership interest in McCormick de Mexico. This step-up will be recognized in cost of goods sold as the related inventory is sold.
We are unable to reconcile projected adjusted earnings per share to projected reported earnings per share due to the same factors affecting reported operating income, and because we cannot reasonably predict the amount of the anticipated non-cash gain from remeasuring the previously held equity interest in McCormick de Mexico to fair value.
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 recovery of adjusted gross margin, accretion from the acquisition of the controlling interest in McCormick de Mexico and cost savings from our CCI program, partially offset by increased commodity costs and an increase in SG&A expense, including 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.
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.
Excluding the per share impact of special charges, 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—2025 COMPARED TO 2024
Net sales
Percent growth
Components of percent change in net sales:
Volume and product mix
Pricing actions
Divestiture
Foreign exchange
Sales for 2025 increased by 1.7% from 2024 and by 1.9% on an organic basis (that is, excluding the impact of foreign currency exchange as more fully described under the caption, Non-GAAP Financial Measures). Pricing actions favorably impacted sales by 0.7%. Favorable volume and product mix increased sales by 1.2% driven by favorable volume and product mix from our Consumer segment of 2.1% offset by unfavorable volume and product mix from our Flavor Solutions segment of 0.2%. Foreign currency rates decreased sales by 0.2%.
Gross profit
Gross profit margin
Gross profit for 2025 increased by $1.2 million, which is comparable to 2024. Our gross profit margin was 37.9%, a decrease of 60 basis points, driven by increased commodity costs including the impact of tariffs, unfavorable product mix, and increased conversion cost including costs to support capacity for future growth, partially offset by pricing actions and CCI program-led cost savings. Excluding the impact of special charges related to the step up of acquired inventory included in cost of goods sold, adjusted gross margin was 37.9% for 2025.
Selling, general & administrative expense
Percent of net sales
SG&A expense decreased by $20.9 million in 2025 as compared to 2024, driven primarily by lower performance-based employee compensation expense, lower distribution expense, and CCI-led cost savings including the impact of SG&A streamlining actions, partially offset by increased brand marketing expense and higher selling and marketing costs. SG&A as a percent of net sales decreased by 70 basis points.
Special charges
We regularly evaluate whether to implement changes to our organization structure to reduce fixed costs, simplify or improve processes, and improve our competitiveness, and we expect to continue to evaluate such actions in the future. From time to time, those changes are of such significance in terms of both up-front costs and organizational/structural impact that we obtain advance approval from our Management Committee and classify expenses related to those changes as special charges in our financial statements.
During 2025, we recorded $21.1 million of special charges, including transaction and integration expenses. Those expenses consisted principally of $15.9 million of employee severance and related benefits associated with our SG&A streamlining actions, $3.3 million associated with other actions and $1.9 million of transaction and integration costs.
During 2024, we recorded $9.5 million of special charges, consisting principally of $4.5 million associated with the Global Operating Effectiveness program and $5.0 million associated with the transition of a manufacturing facility in EMEA.
Details with respect to the composition of special charges, including transaction and integration expenses, are included in the accompanying notes to our financial statements contained in Item 8 of this report.
Interest expense
Other income, net
Interest expense decreased by $13.2 million in 2025 compared to the prior year, due to a reduction in average borrowing levels and lower interest rates on borrowings.
Other income, net, decreased by $9.0 million compared to the prior year primarily due to a lower level of interest income driven by lower interest rates and lower non-service cost income associated with our pension and postretirement benefit plans.
Income from consolidated operations before income taxes
Income tax expense
Effective tax rate
The effective tax rate for 2025 was 21.4%, compared to 20.5% in 2024, primarily driven by the lower level of net discrete tax benefits recorded for 2025. Specifically, net discrete tax benefits amounted to $27.6 million in 2025, a decrease of $4.1 million from $31.7 million in 2024.
The $27.6 million of net discrete tax benefits for 2025 principally included (i) $10.1 million of tax benefits from the reversal of certain reserves for unrecognized tax benefits and related interest, including $5.9 million associated with the expiration of statutes of limitations, (ii) $7.9 million of tax benefits resulting from state tax matters, and related deferred taxes, (iii) a $5.0 million tax benefit resulting from the revaluation of deferred taxes associated with enacted legislation, (iv) $3.6 million of tax benefits resulting from an adjustment to a prior year tax accrual, and related deferred taxes, based on the final return filed, and (v) $1.1 million of excess tax benefits associated with stock compensation.
The $31.7 million of net discrete tax benefits for 2024 principally included (i) $19.4 million of tax benefits associated with the recognition of a deferred tax asset related to an international legal entity reorganization, (ii) $12.3 million of tax benefit from the reversal of certain reserves for unrecognized tax benefits and related interest associated with both the effective settlement from the conclusion of a tax examination and the expiration of statutes of limitations, (iii) $6.0 million of tax benefits resulting from state tax matters, and related deferred taxes, (iv) $1.8 million of tax benefit from an adjustment to a prior year tax accrual and related deferred taxes based on final returns filed, (v) $6.2 million of tax expense associated with the adjustment of valuation allowances due to changes in judgment about the realizability of deferred tax assets, and (vi) $1.8 million of tax expense related to certain unremitted prior year earnings.
On July 4, 2025, legislation known as the One Big Beautiful Bill Act (OBBBA) was signed into law. The OBBBA makes changes to the United States corporate income tax system, including, among other provisions, the immediate expensing of research and development expenditures, and 100 percent bonus depreciation on qualified property. While we expect certain provisions of the OBBBA to change the timing of cash tax payments related to the current fiscal year and future year periods, we do not expect the legislation to have a material impact on our consolidated financial statements.
See Note 12 of notes to our consolidated financial statements for a more detailed reconciliation of the U.S. federal tax rate with the effective tax rate.
Income from unconsolidated operations
Income from unconsolidated operations, which is presented net of the elimination of earnings attributable to non-controlling interests, decreased $2.0 million in 2025, driven by the results of our largest joint venture, McCormick de Mexico, where unfavorable impacts from foreign exchange rates were partially offset by improved operating results. We own 50% of most of our unconsolidated joint ventures. McCormick de Mexico comprised 93% and 95% of the income of our unconsolidated operations in 2025 and 2024, respectively.
The following table outlines the major components of the change in diluted earnings per share from 2024 to 2025.
2024 Earnings per share—diluted
Increase in operating income
Increase in special charges, net of taxes
Decrease in other income
Decrease in income from unconsolidated operations
Decrease in interest expense
Impact of change in effective income tax rate, excluding taxes on special charges
2025 Earnings per share—diluted
Results of Operations—Segments
We measure the performance of our business segments based on operating income, excluding special charges. See Note 15 of notes to our consolidated financial statements for additional information on our segment measures as well as for a reconciliation by segment of operating income, excluding special charges. In the following discussion, we refer to our previously described measure of segment profit as "Segment operating income."
Consumer Segment
Net sales
Percent growth
Components of percent change in net sales:
Pricing actions
Volume and product mix
Foreign exchange
Segment operating income
Segment operating income margin
In 2025, sales of our Consumer segment increased by 2.6% as compared to 2024 and increased by 2.4% on an organic basis. Favorable volume and product mix increased sales by 2.1%, driven by growth across all regions. Favorable pricing increased sales by 0.3%. The favorable impact of foreign currency rates increased sales by 0.2% and is excluded from our measure of sales growth of 2.4% on an organic basis.
In the Americas region, Consumer segment sales increased 2.0% in 2025 as compared to 2024 and increased by 2.3% on an organic basis. Unfavorable pricing decreased sales by 0.1%. Favorable volume and product mix increased sales by 2.4% driven by growth across core categories. The unfavorable impact of foreign currency rates decreased sales by 0.3% and is excluded from our measure of sales growth of 2.3% on an organic basis.
In the EMEA region, Consumer segment sales increased 6.0% in 2025 as compared to 2024 and increased by 3.5% on an organic basis. Favorable pricing impacted sales by 2.1%. Favorable volume and product mix increased sales by 1.4% driven by growth in France and Poland. The favorable impact of foreign currency exchange rates increased sales by 2.5% and is excluded from our measure of sales growth of 3.5% on an organic basis.
In the APAC region, Consumer segment sales increased 1.0% in 2025 as compared to 2024 and increased by 1.9% on an organic basis. Favorable pricing impacted sales by 0.2%. Favorable volume and product mix increased sales by 1.7% driven by higher sales to foodservice customers in China. The unfavorable impact from foreign currency rates decreased sales by 0.9% and is excluded from our measure of sales growth of 1.9% on an organic basis.
Segment operating income for our Consumer segment decreased by $5.4 million, or 0.7%, in 2025 as compared to 2024, driven by a decrease in gross profit, partially offset by a decrease in SG&A expense. The decrease in gross profit was driven by unfavorable product mix, increased commodity costs including the impact of tariffs, and increased conversion costs including costs to support increased capacity for future growth, partially offset by higher sales volume, the favorable impact of pricing actions, and CCI-led cost savings. The decrease in SG&A expense was driven by the items described in the consolidated discussion. Segment operating margin decreased by 60 basis points to 18.6%. On a constant currency basis, segment operating income decreased by 0.6%.
Flavor Solutions Segment
Net sales
Percent growth
Components of percent change in net sales:
Pricing actions
Volume and product mix
Divestiture
Foreign exchange
Segment operating income
Segment operating income margin
Sales of our Flavor Solutions segment increased 0.5% in 2025 as compared to 2024 and increased by 1.1% on an organic basis. Favorable pricing increased sales by 1.3% in 2025 driven by pricing actions in the Americas region. Unfavorable volume and product mix decreased sales by 0.2% driven by the Americas and EMEA regions partially offset by growth in the APAC region. The unfavorable impact of foreign currency rates decreased sales by 0.6% and is excluded from our measure of sales growth of 1.1% on an organic basis.
In the Americas region, Flavor Solutions segment sales increased by 0.5% during 2025 as compared to 2024 and increased by 1.9% on an organic basis. Favorable pricing impacted sales by 2.6%. Unfavorable volume and product mix decreased sales by 0.7%. The unfavorable impact of foreign currency rates decreased sales by 1.4% and is excluded from our measure of sales growth of 1.9% on an organic basis.
In the EMEA region, Flavor Solutions segment sales in 2025 decreased by 2.2% as compared to 2024 and decreased by 4.3% on an organic basis. Unfavorable pricing impacted sales by 2.1%. Unfavorable volume and product mix decreased segment sales by 2.2% driven by the effects of lower sales to packaged food customers. The favorable impact of foreign currency rates increased sales by 2.1% and is excluded from our measure of sales decline of 4.3% on an organic basis.
In the APAC region, Flavor Solutions segment sales increased 6.2% in 2025 as compared to 2024 and increased by 6.7% on an organic basis. Unfavorable pricing impacted sales by 1.9%. Favorable volume and product mix increased sales by 8.6%, driven by growth in China. The unfavorable impact of foreign currency rates decreased sales by 0.5% and is excluded from our measure of sales growth of 6.7% on an organic basis.
Segment operating income for our Flavor Solutions segment increased by $29.6 million, or 9.0%, in 2025 as compared to 2024 driven by an increase in gross profit and lower SG&A expense. The increase in gross profit was driven by the impacts of favorable pricing and CCI-led cost savings, partially offset by increased commodity costs including the impact of tariffs, and conversion costs including costs to support increased capacity for future growth. The decrease in SG&A expense was driven primarily by lower performance-based employee compensation expense, lower distribution expense, and CCI-led cost savings, partially offset by higher selling and marketing costs. Segment operating margin increased by 90 basis points to 12.4%. On a constant currency basis, segment operating income increased by 10.7%.
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.
Details with respect to the composition of special charges, including transaction and integration expenses, set forth below are included in Note 2 of the notes to our accompanying consolidated financial statements.
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 GAAP financial results is provided below:
Gross profit
Impact of special charges included in cost of goods sold
Adjusted gross profit
Gross profit margin (1)
Impact of special charges (1)
Adjusted gross profit margin (1)
Operating income
Impact of special charges
Adjusted operating income
% increase versus prior year
Operating income margin (2)
Impact of special charges (2)
Adjusted operating income margin (2)
Income tax expense
Impact of special charges
Adjusted income tax expense
Income tax rate (3)
Impact of special charges
Adjusted income tax rate (3)
Net income
Impact of special charges
Adjusted net income
% increase versus prior year
Earnings per share—diluted
Impact of special charges
Adjusted earnings per share—diluted
% increase versus prior year
Gross 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.
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.
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 $936.2 million, $907.8 million, and $859.9 million for the years ended November 30, 2025, 2024, and 2023, respectively.
We are unable to reconcile projected adjusted earnings per share to projected reported earnings per share because our 2026 adjusted earnings per share is a non-GAAP measure that excludes certain elements that will be included in fiscal 2026 GAAP results that cannot be reasonably predicted. Given the recent acquisition date of an additional 25% ownership in McCormick de Mexico on January 2, 2026, we cannot reasonably predict the amount of special charges, including transaction and integration expenses, or the expected non-cash gain associated with remeasuring our previously held equity interest in McCormick de Mexico to fair value.
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 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 organic sales and adjusted operating income expressed on a constant currency basis are presented excluding the impact of foreign currency exchange. To present this information for historical periods, current year results for entities reporting in currencies other than the U.S. dollar are translated into U.S. dollars at the average exchange rates in effect during the prior fiscal year, rather than at the actual average exchange rates in effect during the current fiscal year. As a result, the foreign currency impact is equal to the current year results in local currencies multiplied by the change in the average foreign currency exchange rate between the current year and the prior fiscal year.
Rates of constant currency and organic growth (decline) follow:
For the year ended November 30, 2025
Percentage change
as reported
Impact of foreign currency exchange
Percentage change on both a constant currency and organic basis
Net sales:
Consumer segment:
Americas
EMEA
APAC
Total Consumer
Flavor Solutions segment:
Americas
EMEA
APAC
Total Flavor Solutions
Total net sales
For the year ended November 30, 2025
Percentage change
as reported
Impact of foreign currency exchange
Percentage change on constant currency basis
Adjusted operating income:
Consumer segment
Flavor Solutions segment
Total adjusted operating income
For the year ended November 30, 2024
Percentage change
as reported
Impact of foreign currency exchange
Percentage change on constant currency basis
Impact of Acquisitions & Divestitures
Percentage change on organic basis
Net sales:
Consumer segment:
Americas
EMEA
APAC
Total Consumer
Flavor Solutions segment:
Americas
EMEA
APAC
Total Flavor Solutions
Total net sales
For the year ended November 30, 2024
Percentage change
as reported
Impact of foreign currency exchange
Percentage change on constant currency basis
Adjusted operating income:
Consumer segment
Flavor Solutions segment
Total adjusted operating income
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 2026 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 2026 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
Impact of favorable foreign currency exchange
Percentage change in net sales in constant currency
Impact of acquisition
Percentage change in organic net sales
Percentage change in adjusted operating income
Impact of favorable foreign currency exchange
Percentage change in adjusted operating income in constant currency
Percentage change in adjusted earnings per share - diluted
Impact of favorable foreign currency exchange
Percentage change in adjusted earnings per share - diluted
LIQUIDITY AND FINANCIAL CONDITION
Net cash flow provided by operating activities
Net cash flow used in investing activities
Net cash flow used in financing activities
The primary objective of our financing strategy is to maintain a prudent capital structure that provides the flexibility to pursue our growth objectives. We use a combination of equity and short- and long-term debt. We use short-term debt, primarily in the form 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 debt, interest payments are higher in the first and third quarters of our fiscal year.
We believe that our sources of liquidity, which include existing cash balances, cash flows from operations, existing credit facilities, our commercial paper program, and access to capital markets, will provide sufficient liquidity to meet our debt obligations, including any repayment or refinancing of debt, working capital needs, planned capital expenditures, 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.
The reported values of our assets and liabilities held in non-U.S. subsidiaries and affiliates can be significantly affected by fluctuations in foreign exchange rates between periods. As of November 30, 2025, the exchange rates for the Euro, British pound sterling, Canadian dollar, Mexican peso, Chinese renminbi, Polish zloty, and Australian dollar were higher against the U.S. dollar than on November 30, 2024.
Operating Cash Flow – Operating cash flow was $962.2 million in 2025, $921.9 million in 2024, and $1,237.3 million in 2023. Net income as well as our working capital management, as more fully described below, impacted operating cash flow. In 2025, working capital was impacted by a decreased use of cash associated with inventory offset by a lower source of cash associated with accounts payable. In 2024, the decrease in operating cash flow was primarily driven by higher cash used for working capital, including higher inventory levels and higher employee incentive payments related to the prior year, and the timing of income tax payments partially offset by higher net income. In 2023, the increase was primarily driven by an improvement in cash provided by working capital, which was driven by the lower inventory levels and the lower amount of employee incentive payments associated with the prior year, as well as an increase in dividends received from unconsolidated affiliates. This was partially offset by an increased use of cash associated with accounts payable which partially resulted from our lower level of inventory.
Our working capital management – principally related to inventory, trade accounts receivable, and accounts payable – impacts our operating cash flow. The change in inventory was a moderate source of cash from operations in 2025, a significant use of cash in 2024, and a significant source of cash from operations in 2023. The change in trade accounts receivable was a moderate use of cash in 2025 and 2024, and a source of cash in 2023. The change in accounts payable was a source of cash in 2025, significant source of cash in 2024, and a use of cash in 2023.
In addition to operating cash flow, we also use a cash conversion cycle (CCC) to measure our working capital management. This metric is different than operating cash flow in that it uses average balances instead of specific point in time measures. CCC is a calculation of the number of days, on average, that it takes us to convert a cash outlay for resources, such as raw materials, to a cash inflow from collection of accounts receivable. Our goal is to lower our CCC over time. We calculate CCC as follows:
Days sales outstanding (average trade accounts receivable divided by average daily net sales) plus days in inventory (average inventory divided by average daily cost of goods sold) less days payable outstanding (average trade accounts payable divided by average daily cost of goods sold plus the average daily change in inventory).
The following table outlines our cash conversion cycle (in days) over the last three years:
Cash Conversion Cycle
The increase in CCC in 2025 from 2024 was primarily due to an increase in our days in inventory as a result of inventory management including the impacts of strategic forward purchases and inventory acquired in conjunction with the Jurado acquisition. The decrease in CCC in 2024 from 2023 was primarily due to a reduction in our days in inventory as a result of inventory management based on demand planning.
As more fully described in Note 1 of notes to our consolidated financial statements, we participate in a Supply Chain Financing program (SCF) with several global financial institutions (SCF Banks). Under the SCF, qualifying suppliers may elect to sell their receivables from us to an SCF Bank, enabling participating suppliers to negotiate their receivables sales arrangements directly with the respective SCF Bank. We are not party to those agreements and have no economic interest in a supplier’s decision to sell a receivable. All outstanding amounts related to suppliers participating in the SCF are recorded within the line item 'Trade accounts payable' in our consolidated balance sheets, and the associated payments are included in operating activities in our consolidated cash flow statement. As of November 30, 2025, 2024, and 2023 the amounts due to suppliers participating in the SCF and included in trade accounts payable were approximately $332.1 million, $417.4 million, and $300.5 million, respectively.
The terms of our payment obligations are not impacted by a supplier's participation in the SCF. Our payment terms with our suppliers for similar materials within individual markets are consistent between those suppliers that elect to participate in the SCF and those suppliers that do not participate. Accordingly, our average days outstanding are not significantly impacted by the portion of suppliers included in the SCF. Future changes in our suppliers’ financing policies or economic developments, such as shifts in interest rates, general market liquidity, or our creditworthiness relative to participating suppliers, could affect those suppliers’ participation in the SCF and/or our ability to negotiate extended payment terms with them. However, any such impacts are difficult to predict.
Investing Cash Flow – Net cash used in investing activities was $255.2 million in 2025, $269.0 million in 2024, and $260.5 million in 2023. Our primary investing cash flows include cash used for capital expenditures as well as cash used in the acquisition of a business. Capital expenditures, including expenditures for capitalized software, were $221.8 million in 2025, $274.9 million in 2024, and $263.9 million in 2023. Cash used for the acquisition of a business was $34.1 million in 2025. We expect 2026 capital expenditures to approximate $275 million.
Financing Cash Flow – Net cash associated with financing activities was a use of cash of $840.9 million in 2025, $583.1 million in 2024, and $1,184.2 million in 2023. The variability between years is principally a result of changes in our net borrowings, share repurchase activity, and dividends, all as described below.
The following table outlines our net borrowing activities:
Net (decrease) increase in short-term borrowings
Proceeds from issuance of long-term debt, net of debt issuance costs
Repayments of long-term debt
Net cash (used in) net borrowing activities
In 2025, we repaid $267.9 million of long-term debt, including the $250.0 million, 3.25% notes that matured in November 2025.
In 2024, we repaid $801.1 million of long-term debt, including the $700.0 million, 3.15% notes that matured in August 2024 as well as $55.0 million, 7.63% to 8.12% notes that matured in August and October 2024. We also issued $500.0 million of 4.70% notes due 2034, with net cash proceeds received of $495.5 million.
In 2023, we repaid $268.1 million of long-term debt, including the $250.0 million, 3.50% notes that matured on September 1, 2023. We also issued $500.0 million of 4.95% notes due 2033, with net cash proceeds received of $496.4 million.
The following table outlines the activity in our share repurchase program:
Number of shares of common stock
Dollar amount
As of November 30, 2025, $414 million remained of a $600 million share repurchase program that was authorized by our Board of Directors in November 2019. The timing and amount of any shares repurchased is determined by our management based on its evaluation of market conditions and other factors.
During 2025, 2024, and 2023, we received proceeds from exercised stock options of $20.9 million, $17.5 million, and $16.6 million, respectively. We repurchased $13.2 million, $9.0 million, and $10.8 million of common stock during 2025, 2024, and 2023, respectively, in conjunction with employee tax withholding requirements associated with our stock compensation plans.
Our dividend history over the past three years is as follows:
Total dividends paid
Dividends paid per share
Percentage increase per share
In November 2025, the Board of Directors approved a 6.7% increase in the quarterly dividend from $0.45 to $0.48 per share.
Most of our cash is in our subsidiaries outside of the U.S. We manage our worldwide cash requirements by considering available funds among our subsidiaries through which we conduct our business and the cost effectiveness with which those funds can be accessed. Those balances are generally available without legal restrictions to fund ordinary business operations, capital projects, and future acquisitions. As of November 30, 2025, we have $1.7 billion of earnings from our non-U.S. subsidiaries and joint ventures that are considered indefinitely reinvested. We have not provided any deferred taxes with respect to items such as foreign withholding taxes, other income taxes, or foreign exchange gains or losses with respect to these earnings. It is not practicable for us to determine the amount of unrecognized tax expense on these reinvested international earnings.
At November 30, 2025 and 2024, we temporarily used $592.5 million and $509.2 million, respectively, of cash from our non-U.S. subsidiaries to pay down short-term debt in the U.S. During the year, our short-term borrowings vary, but are lower at the end of a year or quarter. The average short-term borrowings outstanding for the years ended November 30, 2025, 2024, and 2023 were $1,089.7 million, $1,043.1 million, and $1,121.9 million, respectively. Those average short-term borrowings outstanding for the years ended November 30, 2025, 2024, and 2023 included average commercial paper borrowings of $1,087.2 million, $1,033.8 million, and $1,098.4 respectively. The total average debt outstanding for the years ended November 30, 2025, 2024, and 2023 was $4,878.6 million, $4,966.4 million, and $5,197.8 million, respectively.
Credit and Capital Markets – The following summarizes the more significant impacts of credit and capital markets on our business:
CREDIT FACILITIES – Cash flows from operating activities are our primary source of liquidity for funding growth, share repurchases, dividends, and capital expenditures. We also rely on our revolving credit facilities, or borrowings backed by these facilities, to fund working capital needs and other general corporate requirements.
Our committed revolving credit facilities include a five-year $2.0 billion revolving credit facility, which will expire in May 2030. The current pricing for the five-year credit facility, on a fully drawn basis, is Term SOFR plus 1.125%. The pricing of that credit facility is based on a credit rating grid that contains a fully drawn maximum pricing of the credit facility equal to Term SOFR plus 1.50%. Also, in January 2026, we entered into a 364-day $500 million revolving credit facility, which will expire in January 2027. The current pricing for the 364-day credit facility, on a fully drawn basis, is Term SOFR plus 1.125%. The pricing of the credit facility is based on a credit rating grid that contains a fully drawn maximum pricing of the credit facility equal to Term SOFR plus 1.50%.
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. The terms of those revolving credit facilities are more fully described in Note 5 of the notes to the consolidated financial statements.
We generally use our revolving credit facilities to support our issuance of commercial paper. If the commercial paper market is not available or viable, we could borrow directly under our revolving credit facilities. These facilities are made available by a syndicate of banks, with various commitments per bank. If any of the banks in these syndicates are unable to perform on their commitments, our liquidity could be impacted, which could reduce our ability to grow through funding of seasonal working capital. We engage in regular communication with all banks participating in our credit facilities. During these communications, none of the banks have indicated that they may be unable to perform on their commitments. In addition, we periodically review our banking and financing relationships, considering the stability of the institutions and other aspects of the relationships. Based on these communications and our monitoring activities, we believe our banks will perform on their commitments. In addition to our committed revolving credit facilities, we have uncommitted facilities of $346.9 million as of November 30, 2025 that can be withdrawn based upon the lenders' discretion. See Note 5 of notes to our consolidated financial statements for more details on our financing arrangements.
We will continue to have cash requirements to support seasonal working capital needs and capital expenditures, to pay interest, to service debt, and to fund acquisitions. As part of our ongoing operations, we enter into contractual arrangements that obligate us to make future cash payments. Our primary obligations include principal and interest payments on our outstanding short-term borrowings and long-term debt. In the next year, our most significant debt service obligation is the maturity of our $500.0 million, 0.90% notes due in February 2026. Detail on these contractual obligations follows:
MATERIAL CASH REQUIREMENTS
The following table reflects a summary of our future material cash requirements as of November 30, 2025:
Total
Less than
1 year
years
years
More than
5 years
Short-term borrowings
Long-term debt, including finance leases
Interest payments (a)
Total contractual cash obligations
(a) Interest payments include expected interest payments on long-term debt. Our short-term borrowings, principally consisting of commercial paper, have short-term maturities. See Note 5 of notes to our consolidated financial statements for additional information.
Our other cash requirements at November 30, 2025, include raw material purchases, lease payments, income taxes, and pension and postretirement benefits. We acquire various raw materials to satisfy our obligations to our customers, and these outstanding purchase obligations can fluctuate throughout the year based on our response to varying raw material cycles; however, these commitments generally do not extend past one year. In addition, we also have a series of commercial commitments, largely consisting of standby letters of credit. Our standby letters of credit, leases, and pension and other post-retirement obligations are more fully described in Notes 5, 6, and 10, respectively, of notes to our consolidated financial statements.
On January 2, 2026, we acquired an additional 25% ownership interest in McCormick de Mexico from Grupo Herdez, for $750 million which increased our ownership interest to a 75% controlling interest. The purchase of the additional 25% ownership interest was funded through a combination of cash on hand and commercial paper.
These obligations impact our liquidity and capital resource needs. To meet those cash requirements, we intend to use our existing cash, cash equivalents and internally generated funds, to borrow under our existing credit facilities or under other short-term borrowing facilities, and depending on market conditions and upon the significance of the cost of a particular debt maturity or acquisition to our then-available sources of funds, to obtain additional short- and long-term financing. We believe that cash provided from these sources will be adequate to meet our future cash requirements.
PENSION ASSETS AND OTHER INVESTMENTS – We hold investments in equity and debt securities in both our qualified defined benefit pension plans and through a rabbi trust for our nonqualified defined benefit pension plan. Cash contributions to pension plans, including unfunded plans, were $9.2 million in 2025, $10.0 million in 2024, and $9.2 million in 2023. It is expected that the 2026 total pension plan contributions will be approximately $13.0 million. Future increases or decreases in pension liabilities and required cash contributions are highly dependent upon changes in interest rates and the actual return on plan assets. We base our investment of plan assets, in part, on the duration of each plan’s liabilities. Across all of our qualified defined benefit pension plans, approximately 16% of assets are invested in equities, 77% in fixed income investments and 7% in other investments. Assets associated
with our nonqualified defined benefit pension plan are primarily invested in corporate-owned life insurance, the value of which approximates an investment mix of 40% in equities and 60% in fixed income investments. See Note 10 of notes to our consolidated financial statements, which provides details on our pension funding.
CUSTOMERS AND COUNTERPARTIES – See the subsequent section of this discussion under the heading "Market Risk Sensitivity–Credit Risk."
PERFORMANCE GRAPH — SHAREHOLDER RETURN
The following line graph compares the yearly change in McCormick’s cumulative total shareholder return (stock price appreciation plus reinvestment of dividends) on McCormick’s Non-Voting Common Stock with (1) the cumulative total return of the Standard & Poor’s 500 Stock Price Index, assuming reinvestment of dividends, and (2) the cumulative total return of the Standard & Poor’s Packaged Foods & Meats Index, assuming reinvestment of dividends.
MARKET RISK SENSITIVITY
We utilize derivative financial instruments to enhance our ability to manage risk, including foreign exchange and interest rate exposures, which exist as part of our ongoing business operations. We do not enter into contracts for trading purposes, nor are we a party to any leveraged derivative instrument. The use of derivative financial instruments is monitored through regular communication with senior management and the utilization of written guidelines. The information presented below should be read in conjunction with Notes 5 and 7 of notes to our consolidated financial statements.
Foreign Exchange Risk – We are exposed to fluctuations in foreign currency in the following main areas: cash flows related to raw material purchases; the translation of foreign currency earnings to U.S. dollars; the effects of foreign currency on loans between subsidiaries and unconsolidated affiliates; and cash flows related to repatriation of earnings from unconsolidated affiliates. Primary exposures include the U.S. dollar versus the Euro, British pound sterling, Chinese renminbi, Canadian dollar, Australian dollar, Polish zloty, Singapore dollar, Swiss franc, and Mexican peso, as well as the Euro versus the British pound sterling, Australian dollar, and Polish zloty, and finally the Canadian dollar versus the British pound sterling. We routinely enter into foreign currency exchange contracts to manage certain of these foreign currency risks.
During 2025, the foreign currency translation component in other comprehensive income was principally related to the impact of exchange rate fluctuations on our net investments in our subsidiaries with a functional currency of the Mexican peso, Euro, British pound sterling, Swiss franc, Polish zloty, and Chinese renminbi.
We also utilize cross currency interest rate swap contracts, which are designated as net investment hedges, to manage the impact of exchange rate fluctuations on our net investments in subsidiaries with a functional currency of the British pound sterling and Euro. Gains and losses on these instruments are included in foreign currency translation adjustments in accumulated other comprehensive income (loss).
The following table summarizes the foreign currency exchange contracts held at November 30, 2025. All contracts are valued in U.S. dollars using year-end 2025 exchange rates and have been designated as hedges of foreign currency transactional exposures, firm commitments, or anticipated transactions.
FOREIGN CURRENCY EXCHANGE CONTRACTS AT November 30, 2025
Currency sold
Currency received
Notional
value
Average
contractual
exchange
rate
Fair
value
British pound sterling
U.S. dollar
Canadian dollar
U.S. dollar
Euro
U.S. dollar
Polish zloty
U.S. dollar
U.S. dollar
Australian dollar
Swiss franc
U.S. dollar
U.S. dollar
British pound sterling
U.S. dollar
Euro
U.S. dollar
Chinese renminbi
Polish zloty
Euro
British pound sterling
Euro
We had a number of smaller contracts at November 30, 2025 with an aggregate notional value of $11.6 million to purchase or sell other currencies. The aggregate fair value of these contracts was $(0.1) million at November 30, 2025.
At November 30, 2024, we had foreign currency exchange contracts with an aggregate notional value of $1,034.2 million to purchase or sell other currencies. The aggregate fair value of these contracts was $(7.3) million at November 30, 2024.
We also utilized cross currency interest rate swap contracts that are considered net investment hedges.
As of November 30, 2025 and 2024, we had cross currency interest rate swap contracts of (i) $250 million notional value to receive $250 million at USD Secured Overnight Financing Rate (SOFR) plus 0.907% and pay £194.1 million at three-month GBP SONIA plus 0.859% and (ii) £194.1 million notional value to receive £194.1 million at three-month GBP SONIA plus 0.859% and pay €221.8 million at three-month Euro EURIBOR plus 0.808%. These cross-currency interest rate swap contracts expire in August 2027.
As of November 30, 2025 and 2024, we also had cross currency interest rate swap contracts of (i) $250 million notional value to receive $250 million at USD SOFR plus 0.684% and pay £184.1 million at GBP SONIA plus 0.574% and (ii) £184.1 million notional value to receive £184.1 million at GBP SONIA plus 0.574% and pay €219.2 million at Euro ESTR plus 0.667%. These contracts expire in April 2030.
Interest Rate Risk – Our policy is to manage interest rate risk by entering i nto both fixed and variable rate debt arrangements. We are exposed to interest rate volatility, with primary exposures related to movements in U.S. Treasury rates, Secured Overnight Financing Rate (SOFR), and commercial paper rates.
We also use interest rate swaps to minimize financing costs and to achieve a desired mix of fixed and variable rate debt. As of November 30, 2025 and 2024, we had interest rate swap contracts of $500 million and $600 million notional value outstanding, respectively, to receive fixed rate interest and pay variable rate interest. The table that follows provides principal cash flows and related interest rates, excluding the effect of interest rate swaps and the amortization of any discounts or fees, by fiscal year of maturity at November 30, 2025. For foreign currency-denominated debt, the information is presented in U.S. dollar equivalents. Variable interest rates are based on the weighted-average rates of the portfolio at the end of the year presented.
YEARS OF MATURITY AT November 30, 2025
Thereafter
Total
Fair value
Debt
Fixed rate
Average interest rate
Variable rate
Average interest rate
The table above displays the debt, including finance leases, by the terms of the original debt instrument without consideration of fair value, interest rate swaps, and any loan discounts or origination fees. Interest rate swaps have the following effects:
• We issued $750 million of 3.40% notes due in 2027 in August 2017. Forward treasury lock agreements settled upon issuance of these notes effectively set the interest rate on these $750 million notes at a weighted-average fixed rate of 3.44%. Separately, the fixed interest rate on $250 million of the 3.40% notes due in August 2027 was effectively converted to a variable rate by interest rate swaps through the notes maturity in 2027. Net interest payments are based on USD SOFR plus 0.907% with an effective variable rate of 4.98% as of November 30, 2025.
• We issued $500 million of 2.50% notes due April 15, 2030. Forward treasury lock agreements settled upon issuance of these notes effectively set the interest rate on these $500 million notes at a weighted-average fixed rate of 2.62%. Separately, the fixed interest rate on $250 million of the 2.50% notes due in April 2030 was effectively converted to a variable rate by interest rate swaps through the notes maturity in 2030. Net interest payments are based on USD SOFR plus 0.684% with an effective variable rate of 4.53% as of November 30, 2025.
• We issued $500 million of 4.95% notes due April 15, 2033. Forward treasury lock agreements settled upon issuance of these notes effectively set the interest rate on these $500 million notes at a weighted-average fixed rate of 5.00%.
• We issued $500 million of 4.70% notes due October 15, 2034. Forward treasury lock agreements settled upon issuance of these notes effectively set the interest rate on these $500 million notes at a weighted-average fixed rate of 4.68%.
Commodity Risk – We purchase certain raw materials which are subject to price volatility caused by weather, market conditions, growing and harvesting conditions, governmental actions, and other factors beyond our control. In 2025, our most significant raw materials were dairy products, pepper, garlic, onion, 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, and customer price adjustments. Other than soybean oil hedging transactions used by McCormick de Mexico, we generally have not used derivatives to manage the volatility related to this risk.
Credit Risk – The customers of our Consumer segment are predominantly food retailers and food wholesalers. Consolidations in these industries have created larger customers. In addition, competition has increased with the growth in alternative channels including mass merchandisers, dollar stores, warehouse clubs, discount chains and e-commerce. This has caused some customers to be less profitable and increased our exposure to credit risk. Some of our customers and counterparties are highly leveraged. We continue to closely monitor the credit worthiness of our customers and counterparties. We feel that the allowance for doubtful accounts properly recognizes trade receivables at realizable value. We consider nonperformance credit risk for other financial instruments to be insignificant.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
New accounting pronouncements are issued periodically that affect our current and future operations. See Note 1 of notes to our consolidated financial statements for further details of these impacts.
CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
In preparing the financial statements, we are required to make estimates and assumptions that have an impact on the assets, liabilities, revenue, and expenses reported. These estimates can also affect supplemental information disclosed by us, including information about contingencies, risk, and financial condition. We believe, given current facts and circumstances, our estimates and assumptions are reasonable, adhere to U.S. GAAP and are consistently applied. Inherent in the nature of an estimate or assumption is the fact that actual results may differ from estimates, and estimates may vary as new facts and circumstances arise. In preparing the financial statements, we make routine estimates and judgments in determining the net realizable value of accounts receivable, inventory, fixed assets and prepaid allowances. Our most critical accounting estimates and assumptions, which are those that have or are reasonably likely to have a material impact on our financial condition or results of operations, are in the following areas:
Customer Contracts
In several of our major geographic markets, the Consumer segment sells our products by entering into annual or multi-year customer arrangements. Known or expected pricing or revenue adjustments, such as trade discounts, rebates, or returns, are estimated at the time of sale. Where applicable, future reimbursements are estimated based on current expectations regarding what was earned through these programs as of the balance sheet date. Key sales terms, such as pricing and quantities ordered, are established on a frequent basis such that most customer arrangements and related incentives have a one-year or shorter duration. Estimates that affect revenue, such as trade incentives and product returns, are monitored and adjusted each period until the incentives or product returns are realized. Certain of our customer arrangements are annual arrangements such that the degree of estimates that affects revenue reduces as a year progresses. We do not believe that there will be significant changes to our estimates of customer consideration when any uncertainties are resolved with customers.
Goodwill Impairment
Our reporting units are aligned with our operating segments. Determining the fair value of a reporting unit involves significant judgment and the use of estimates and assumptions, as detailed in Note 1 of our consolidated financial statements. We estimate fair value using a discounted cash flow model, which calculates this value by present valuing the future expected cash flows of our reporting units with a market-based discount rate. As required by the quantitative goodwill impairment test, we then compare the calculated estimated fair value of each reporting unit to its carrying amount, including intangible assets and goodwill. If the carrying amount exceeds the estimated fair value, an impairment charge is recognized.
As of November 30, 2025, we had $5,301.3 million of goodwill recorded in our balance sheet ($3,645.6 million in the Consumer segment and $1,655.7 million in the Flavor Solutions segment). Our fiscal year 2025 impairment testing indicated that the estimated fair values of our reporting units were significantly in excess of their carrying values. Accordingly, we believe that only significant changes in the cash flow assumptions would result in an impairment of goodwill. However, variances between the actual performance of the businesses and the assumptions that were used in developing the estimates of fair value could result in impairment charges in future periods.
Indefinite-lived Intangible Asset Impairment
Our indefinite-lived intangible assets consist of brand names and trademarks. We estimate fair values through the use of the relief-from-royalty method and then compare those fair values to the related carrying amounts of the indefinite-lived intangible asset. In the event that the fair value of any of the brand names or trademarks are less than their related carrying amounts, a non-cash impairment loss would be recognized in an amount equal to the difference.
The estimation of fair values of our brand names and trademarks requires us to make significant assumptions, including expectations regarding sales and profits of the respective brands and trademarks, related royalty rates, income tax rates, and appropriate discount rates. These discount rates are based, in part, on current interest rates, adjusted for our assessment of reasonable country- and brand - specific risks, considering both past performance and anticipated future performance of the related brand names and trademarks . The assumptions used to assess impairment consider historical trends, macroeconomic conditions, and projections consistent with our operating strategy. Changes in these estimates can have a significant impact on the assessment of fair value which could result in material impairment losses.
As of November 30, 2025, we had $3,048.8 million of brand name assets and trademarks recognized in our consolidated balance sheet, and none of the balances exceeded their estimated fair values at that date. Of the $3,048.8 million in brand name assets and trademarks as of November 30, 2025: (i) $2,320.0 million relates to the
French’s, Frank’s RedHot, and Cattlemen’s brand names and trademarks which we group for purposes of our impairment analysis; (ii) $380.0 million relates to the Cholula brand names and trademarks associated with the acquisition of Cholula in November 2020; and (iii) $348.8 million represents various other brand name assets and trademarks with individual carrying values ranging from $0.2 million to $106.4 million. The percentage excess of estimated fair value over respective book values for each of our brand names and trademarks exceeded 20% as of our fourth quarter annual impairment assessment except for three brand names that have an aggregate carrying value of $45.0 million.
Income Taxes
We estimate income taxes and file tax returns in each taxing jurisdiction where we operate and are required to do so. At the end of each year, we record an estimate for income taxes in our financial statements. Tax returns are typically filed in the third or fourth quarter of the subsequent year. At that time, we perform a reconciliation of the estimate to the final tax return, which may result in changes to the original estimate. While we believe our tax return positions are appropriately supported, tax authorities may challenge certain positions. We evaluate our uncertain tax positions in accordance with GAAP guidance for uncertainty in income taxes. We recognize a tax benefit when it is more likely than not that the position will be sustained upon examination, based on its technical merits. The tax position is measured at the largest amount of benefit that is greater than 50 percent likely to be realized upon ultimate settlement. Any change in judgment regarding the expected resolution of uncertain tax positions is recognized in earnings in the quarter of such change. We believe our reserve for uncertain tax positions, including related interest and penalties, is adequate.
As of November 30, 2025, the Company had $14.4 million of unrecognized tax benefits, including interest and penalties, recorded in Other long-term liabilities. The amounts ultimately paid upon resolution of audits could differ materially from those previously included in our income tax expense, potentially impacting our tax provision, net income, and cash flows. We have also recorded valuation allowances to reduce our deferred tax assets to the amount that is more likely than not to be realized. In making this assessment, we have considered future taxable income and tax planning strategies, both of which involve a number of estimates, as more fully described in Note 1 of notes to our consolidated financial statements.
Pension Benefits
Pension plan costs require the use of assumptions regarding discount rates, investment returns, projected salary increases, and mortality rates. We review the actuarial assumptions used in our pension benefit reporting annually and compare them with external benchmarks to ensure they accurately reflect our future pension benefit obligations. While we believe these assumptions are appropriate, changes in various factors—such as actual returns on plan assets versus expected returns, as well as projected future rates of return—can affect the pension expense or income recognized. Specifically, a 1% increase or decrease in the actuarial assumption for the discount rate would impact our 2026 pension benefit expense by approximately $0.1 million. Similarly, a 1% increase or decrease in the expected return on plan assets would affect the 2026 pension expense by approximately $9.4 million.
We will continue to evaluate the appropriateness of the assumptions used in the measurement of our pension benefit obligations. In addition, see Note 10 of notes to our consolidated financial statements for a discussion of these assumptions and the effects on the financial statements.
