MCCORMICK & CO INC
For the period ended Nov 30, 2024. Filed Jan 23, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Jan 23, 2025
MKC-V$48.77-2.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-11-30; filed 2024-01-25.
0000063754-24-000027
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-K
Period ended 2024-11-30; filed 2025-01-23.
0000063754-25-000005
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 41 previous paragraphs and 154 current paragraphs.
10 unchanged; 20 reworded; 122 added; 11 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 7 previous and 27 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (122)
Current report
•Volume and product mix favorably impacted our net sales growth by 0.3%, exclusive of divestitures. The consumer segment experienced favorable volume and product mix of 0.8% and the flavor solutions segment experienced unfavorable volume and product mix of 0.3%.
Current report
•Pricing actions contributed 0.5% to the increase in net sales, driven by the favorable impact of pricing actions in our flavor solutions segment.
Current report
•Excluding the impact of divestitures and fluctuations in currency rates, we grew sales, on an organic basis, by 0.8% over the prior year.
Current report
Operating income was $1,060.3 million in 2024 and $963.0 million in 2023. We recognized $9.5 million and $61.2 million of special charges in 2024 and 2023, respectively, related to organization and streamlining actions. In 2024, operating income was positively impacted by the higher level of sales and an improvement in our gross profit margin as a percentage of sales of 90 basis points as compared to the prior year. The gross profit margin improvement was driven by the effects of favorable pricing actions, favorable product and customer mix, less scrapped inventory, and cost savings led by our CCI and Global Operating Effectiveness (GOE) programs which were partially offset by higher conversion costs, all as compared to the prior year. A higher level of SG&A expenses resulted in a 40 basis point increase in SG&A as a percentage of sales with approximately half of that basis point increase attributable to an increase in advertising and promotion spend. In addition, the higher level of SG&A expenses was driven by increased selling and marketing costs and a higher level of research and development expenses that were partially offset by, lower performance-based employee and stock based compensation expense and cost savings led by our CCI and GOE programs, all as compared to the prior year. Excluding special charges, adjusted operating income was $1,069.8 million in 2024, representing a 4.5% increase compared to $1,024.2 million in 2023. In constant currency, adjusted operating income increased 4.6%. For further details and a reconciliation of non-GAAP to reported amounts, see the subsequent discussion under the heading "Non-GAAP Financial Measures".
Current report
Interest expense was $1.2 million higher in 2024 as compared to the prior year, as a reduction in average borrowing levels was more than offset by the effects of higher interest rates on borrowings. Other income increased $3.5 million as compared to the prior period, driven by an increase in interest income, partially offset by a higher level of foreign currency exchange losses.
Current report
The effective tax rate for 2024 was 20.5%, compared to 21.8% in 2023. This reduction in our effective tax rate is primarily due to a higher level of net discrete tax benefits recorded for 2024. Specifically, net discrete tax benefits amounted to $31.7 million in 2024, an increase of $22.1 million from $9.6 million in 2023.
Current report
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.
Current report
The $9.6 million of net discrete tax benefits for 2023 principally included (i) $5.6 million of tax benefit from the reversal of certain reserves for unrecognized tax benefits and related interest associated with both the settlement and the expiration of statutes of limitation, (ii) $3.2 million of tax benefit associated with the release of valuation allowances due to changes in judgment regarding the realizability of deferred tax assets, (iii) $0.9 million of tax benefit from an adjustment to a prior year tax accrual and related deferred taxes based on final returns filed, and (iv) $1.8 million of tax expense related to certain unremitted prior year earnings.
Current report
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.
Current report
Numerous countries have enacted the Organization of Economic Corporation and Development’s framework on a global 15% minimum tax, referred to as Pillar 2, which are generally effective for our fiscal year ending November 30, 2025. We do not expect a material increase to our effective tax rate associated with the adoption of these model rules in the countries in which we operate.
Current report
Income from unconsolidated operations, which is presented net of the elimination of earnings attributable to non-controlling interests, increased $17.8 million in 2024 from the prior year. The increase was driven by higher earnings of our largest joint venture, McCormick de Mexico. We own 50% of most of our unconsolidated joint ventures, including McCormick de Mexico, that comprised 95% of the income of our unconsolidated operations for both 2024 and 2023.
Current report
We reported diluted earnings per share of $2.92 in 2024, compared to $2.52 in 2023. The table below outlines the major components of the change in diluted earnings per share from 2023 to 2024.
Current report
We measure the performance of our business segments based on operating income, excluding special charges and transaction and integration expenses related to our acquisitions, as applicable. 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 and transaction and integration expenses related to our acquisitions. In the following discussion, we refer to our previously described measure of segment profit as "Segment operating income."
Current report
Consumer Segment
Current report
Sales of our consumer segment in 2024 increased by 1.1% as compared to 2023 and increased by 0.8% on an organic basis. This increase was driven by higher sales of our consumer business in EMEA and the Americas, with a partial offset from a sales decline in the Asia-Pacific region. Asia-Pacific region sales declines were principally attributable to the macro environment in China. Higher volume and product mix added 0.8% to net sales, as compared to 2023. Volume and product mix includes a 0.2% unfavorable impact associated with our decision during 2023 to exit certain low margin business. A favorable impact from foreign currency rates increased sales by 0.3% compared to the prior year and is excluded from our measure of sales growth of 0.8% on an organic basis.
Current report
In the Americas region, consumer sales increased 0.6% in 2024 as compared to 2023 and increased by 0.7% on an organic basis. Pricing actions, including actions taken in response to price gap management as well as promotional activities, decreased sales by 0.3% as compared to the prior year period. Favorable volume and product mix, driven by growth across core categories, increased sales by 1.0% as compared to the corresponding period in 2023. Volume and product mix includes a 0.3% unfavorable impact of our decision to discontinue certain low margin business. The unfavorable impact of foreign currency rates decreased sales by 0.1% in the year and is excluded from our measure of sales growth of 0.7% on an organic basis.
Current report
In the EMEA region, consumer sales increased 7.3% in 2024 as compared to 2023 and increased by 4.3% on an organic basis. Pricing actions, principally implemented in the prior year, increased sales by 0.6% as compared to 2023. Favorable volume and product mix increased sales by 3.7% from the prior year level, driven by growth in our major markets across their product categories. The favorable impact of foreign currency exchange rates increased sales by 3.0% compared to 2023 and is excluded from our measure of sales growth of 4.3% on an organic basis.
Current report
In the APAC region, consumer sales decreased 5.1% in 2024 as compared to 2023 and decreased by 4.1% on an organic basis. Pricing actions, principally implemented in the prior year, increased sales by 0.8% as compared to 2023. Unfavorable volume and product mix decreased sales by 4.9% from the prior year, as slower demand in China was partially mitigated by growth in other parts of the region. The unfavorable impact from foreign currency rates decreased sales by 1.0% compared to the year-ago period and is excluded from our measure of sales decline of 4.1% on an organic basis.
Current report
Segment operating income for our consumer segment increased by $4.8 million, or 0.7%, in 2024 as compared to 2023. The increase in segment operating income was driven by the effects of an increase in gross profit, as a higher level of sales volume, CCI-led and GOE cost savings and lower scrapped inventory was partially offset by higher conversion costs. Segment operating income was also impacted by higher SG&A expenses, including increased advertising and promotional spend, partially offset by lower performance-based employee incentive expenses and lower distribution costs, all as compared to the prior year. Segment operating margin for our consumer segment decreased by 10 basis points in 2024 to 19.2%, as a decrease in consumer gross profit margin was partially offset by a lower level of SG&A as a percentage of net sales, all as compared to the 2023 level. On a constant currency basis, segment operating income for our consumer segment increased by 0.7% in 2024, as compared to 2023.
Current report
Flavor Solutions Segment
Current report
Sales of our flavor solutions segment increased 0.7% in 2024 as compared to 2023 and increased by 0.9% on an organic basis. Pricing actions, principally implemented in the prior year, increased sales by 1.2% in 2024 and were partially offset by 0.3% of unfavorable volume and product mix, both in comparison to the prior year levels. In 2024, the divestiture of our Giotti canning business unfavorably impacted sales by 0.5% and a favorable impact from foreign currency rates increased sales by 0.3%, both as compared to the prior year, and are excluded from our flavor solutions segment organic sales growth of 0.9%.
Current report
In the Americas region, flavor solutions sales increased by 1.4% during 2024 as compared to 2023 and increased by 1.5% on an organic basis. Pricing actions, principally implemented in the prior year, favorably impacted sales by 1.6% during 2024. Unfavorable volume and product mix decreased flavor solutions sales in the Americas by 0.1% during 2024, as compared to the prior year. An unfavorable impact from foreign currency rates decreased sales by 0.1% compared to 2023 and is excluded from our measure of sales growth of 1.5% on an organic basis.
Current report
In the EMEA region, flavor solutions sales in 2024 decreased by 3.5% as compared to 2023 and decreased by 3.6% on an organic basis. Pricing actions unfavorably impacted sales by 0.3% in 2024 as compared to the prior period level. Unfavorable volume and product mix decreased segment sales by 3.3% in 2024 as compared to 2023, including the effects of lower sales at quick service restaurants, and a 1.2% unfavorable impact of our decision to exit a low margin business. The divestiture of our Giotti canning business unfavorably impacted sales by 2.3% and a favorable impact from foreign currency rates increased sales by 2.4%, both as compared to 2023 and are excluded from our measure of sales decline of 3.6% on an organic basis.
Current report
In the APAC region, flavor solutions sales increased 4.1% in 2024 as compared to 2023 and increased by 5.1% on an organic basis. Pricing actions, principally implemented in the prior year, favorably impacted sales by 0.9% as compared to the prior year period. Favorable volume and product mix increased sales by 4.2%, driven by higher sales to quick service restaurant customers in China. An unfavorable impact from foreign currency rates decreased sales by 1.0% compared to 2023 and is excluded from our measure of sales growth of 5.1% on an organic basis.
Current report
Segment operating income for our flavor solutions segment increased by $40.8 million, or 14.1%, in 2024 as compared to 2023. The increase in segment operating income was driven by the effects of an increase in gross profit primarily due to the impacts of pricing actions, product mix and CCI-led and GOE cost savings which more than offset increased conversion costs and the higher level of SG&A expenses, all as compared to the prior year. Segment operating margin for our flavor solutions segment increased by 140 basis points in 2024 to 11.5%, driven by a higher segment gross margin, as previously described, which was partially offset by a higher level of SG&A as a percentage of net sales, as compared to 2023. On a constant currency basis, segment operating income for our flavor solutions segment increased by 14.5% in 2024, as compared to 2023.
Current report
NON-GAAP FINANCIAL MEASURES
Current report
The following tables include financial measures of organic net sales, 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:
Current report
•Special charges – Special charges consist of expenses and income associated with certain actions undertaken to reduce fixed costs, simplify or improve processes, and improve competitiveness and are of such significance in terms of both up-front costs and organizational/structural impact to require advance approval by our Management Committee. Upon presentation of any such proposed action (generally including details with respect to estimated costs, which typically consist principally of employee severance and related benefits, together with ancillary costs associated with the action that may include a non-cash component, such as an asset impairment, or a component which relates to inventory adjustments that are included in cost of goods sold; impacted employees or operations; expected timing; and expected savings) to the Management Committee and the Committee’s advance approval, expenses associated with the approved action are classified as special charges upon recognition and monitored on an ongoing basis through completion. Special charges for the year ended November 30, 2022 include a $13.6 million gain associated with the sale of the Kohinoor brand name. We exited our Kohinoor rice product line in India in the fourth quarter of fiscal year 2021. Special charges are more fully described in Note 2 of notes to our accompanying consolidated financial statements.
Current report
•Transaction and integration expenses associated with acquisitions – We exclude certain costs associated with our acquisitions, including our acquisition of FONA in December 2020, and the subsequent integration into the Company. Such costs, which we refer to as “Transaction and integration expenses,” include transaction costs associated with the acquisition, as well as integration costs following the acquisition, including the impact of the acquisition date fair value adjustment for inventories, together with the impact of discrete tax items, if any, directly related to the acquisition.
Current report
•Gain on sale of Kitchen Basics – We exclude the gain realized upon our sale of the Kitchen Basics business in August 2022. As more fully described in Note 16 of the notes to the accompanying financial statements, the pre-tax gain associated with the sale was $49.6 million and is included in Other income, net in our consolidated income statement for the year ended November 30, 2022.
Current report
Details with respect to the special charges and gain on sale of Kitchen Basics for the years and in the amounts set forth below are included in Notes 2 and 16 of notes to our consolidated financial statements.
Current report
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.
Current report
A reconciliation of these non-GAAP financial measures to GAAP financial results is provided below:
Current report
Because we are a multi-national company, we are subject to variability of our reported U.S. dollar results due to changes in foreign currency exchange rates. Those changes have been volatile over the past several years. The exclusion of the effects of foreign currency exchange, or what we refer to as amounts expressed “on a constant currency basis,” is a non-GAAP measure. We believe that this non-GAAP measure provides additional information that enables enhanced comparison to prior periods excluding the translation effects of changes in rates of foreign currency exchange and provides additional insight into the underlying performance of our operations located outside 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).
Current report
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.
Current report
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. The tables set forth below present our growth in net sales and adjusted operating income on a constant currency basis as follows: (1) to present our growth in net sales and adjusted operating income for 2024 on a constant currency basis, net sales and adjusted operating income for 2024 for entities reporting in currencies other than the U.S. dollar have been translated using the average foreign exchange rates in effect for 2023 and compared to the reported results for 2023; and (2) to present our growth in net sales and adjusted operating income for 2023 on a constant currency basis, net sales and operating income for 2023 for entities reporting in currencies other than the U.S. dollar have been translated using the average foreign exchange rates in effect for 2022 and compared to the reported results for 2022.
Current report
To present the percentage change in projected 2025 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 2024. 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 2024 periods.
Current report
LIQUIDITY AND FINANCIAL CONDITION
Current report
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. This includes our requirements for working capital, which encompasses accounts receivable, prepaid expenses, other current assets, and inventories, less accounts payable, accrued payroll, and other accrued liabilities. We are committed to maintaining investment grade credit ratings.
Current report
Our cash flows from operations enable us to fund operating projects and investments that are designed to meet our growth objectives, service our debt, fund or increase our quarterly dividends, fund capital projects and other investments, and make share repurchases, when appropriate. Due to the cyclical nature of a portion of our business, our cash flow from operations has historically been the strongest during the fourth quarter of our fiscal year. Due to the timing of the interest payments on our debt, interest payments are higher in the first and third quarter of our fiscal year.
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Removed paragraphs (11)
Previous report
•Pricing actions, taken in response to the inflationary cost environment, contributed 8.5% to the increase in net sales.
Previous report
•Volume and product mix unfavorably impacted our net sales growth by 2.6%, exclusive of divestitures. Both our consumer and flavor solutions segments experienced unfavorable volume and product mix of 3.9% and 1.0%, respectively, including the impact of price elasticity. Our decisions to exit our consumer operations in Russia and certain low margin businesses contributed approximately 0.9% to the unfavorable impact of volume and product mix.
Previous report
Operating income was $963.0 million in 2023 and $863.6 million in 2022. We recorded $61.2 million and $51.6 million of special charges in 2023 and 2022, respectively, related to organization and streamlining actions. In 2022, we also recorded $2.2 million of transaction and integration expenses related to our acquisition of FONA that reduced operating income. In 2023, the effects of pricing actions taken in response to increased costs and cost savings from our GOE and CCI programs during 2022 were partially offset by increased employee incentive compensation and higher distribution costs. Excluding special charges and transaction and integration expenses related to our acquisition of FONA, adjusted operating income was $1,024.2 million in 2023, an increase of 11.6%, compared to $917.4 million in the year-ago period. In constant currency, adjusted operating income increased 12.0%. For further details and a reconciliation of non-GAAP to reported amounts, see the subsequent discussion under the heading "Non-GAAP Financial Measures".
Previous report
Recent Events
Previous report
During fiscal 2022 and fiscal 2023, we experienced inflationary cost increases in our commodities, packaging materials and transportation costs. While we continued to experience significant input cost inflation throughout fiscal 2023, our pricing actions, combined with cost savings from our Global Operating Effectiveness (GOE) program and our Comprehensive Continuous Improvement (CCI) program assisted in a 180-basis point recovery to gross margin. Additionally, in some instances, the pricing actions we take have been impacted by consumer behavior, or price elasticity, which unfavorably impacts our sales volume and mix. While we are seeing moderation in input cost inflation, we do expect inflationary pressures to persist into fiscal 2024. However, we anticipate GOE program and CCI program-led cost savings as well as previously implemented pricing actions to mitigate those inflationary pressures. We will also be lapping 2023 price increases and anticipate favorable net price realization in 2024.
Previous report
We are fueling our investment in growth with cost savings from our CCI program, an ongoing initiative to improve productivity and reduce costs throughout the organization, as well as savings from the organization and streamlining actions described in note 3 of notes to our consolidated financial statements that includes our GOE program. Our CCI and GOE programs both delivered cost savings in 2023. Our CCI program funds brand marketing support, product innovation and other growth initiatives. We expect our CCI program, GOE program, and organization and streamlining actions to deliver additional savings in 2024.
Previous report
We are making investments to build the McCormick of the future, including in our Global Business Services (GBS) organization, to transform McCormick through globally aligned, innovative services to enable growth. As technology provides the backbone for this greater process alignment, information sharing and scalability, we are also making investments in our information systems. We continue to progress our global enterprise resource planning (ERP) replacement program which will enable us to accelerate the transformation of our ways of working and provide a scalable platform for growth.
Previous report
We will concentrate our global ERP focus on our operations in the U.S. over the next several years, or through 2027. We expect that our annual capital expenditures, including the capitalized software associated with our ERP program, over the next several years will continue to approximate 4% of our sales. We expect that our operating expenses associated with our global ERP program through 2027 will approximate $35 million to $50 million annually.
Previous report
During 2022, we recorded $51.6 million of special charges, consisting principally of (i) $23.3 million associated with the exit of our consumer business in Russia, (ii) $21.5 million associated with the transition of a manufacturing facility in EMEA, and (iii) streamlining actions of $8.0 million in the Americas region and $7.1 million in the EMEA region, and (iv) $5.6 million associated with a U.S. voluntary retirement program. As more fully described in note 3 of our notes of consolidated financial statements, these charges were partially offset by a $13.6 million gain on the sale of our Kohinoor brand that was associated with the rice product line in India that we exited in the fourth quarter of fiscal 2021, as well as a reversal of $2.2 million of estimated costs associated with that rice product line exit upon settlement of a supply agreement related to that product line.
Previous report
During 2022, we recorded integration expenses of $2.2 million related to our acquisition of FONA.
Previous report
Interest expense was $59.1 million higher in 2023 as compared to the prior year as the effects of the higher interest rate environment more than offset lower average borrowing levels. Other income, net for 2022 included a $49.6 million gain on the sale of our Kitchen Basics business and $18.7 million associated with the settlement of treasury lock arrangements both of which are more fully described in the notes to the accompanying condensed
Reworded paragraphs (20)
Previous wording
Our long-term annual growth objectives in constant currency are to increase sales 4% to 6%, increase adjusted operating income 7% to 9% and increase adjusted earnings per share 9% to 11%. Our actual results for a year can vary from our long-term growth objectives.
Current wording
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.
Previous wording
Base Business– We expect to drive sales growth by optimizing our brand marketing investment through improved speed, quality, and effectiveness. We measure the return on our brand marketing investment and have identified 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.
Current wording
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.
Previous wording
Acquisitions– Acquisitions are expected to approximate one-third of our sales growth over time. Since the beginning of 2018, we have completed two acquisitions, including our December 20, 2020 acquisition of FONA International, LLC and certain of its affiliates (FONA) and our November 30, 2020 acquisition of the parent company of Cholula Hot Sauce ® (Cholula) from L Catterton. These acquisitions are driving sales in both our consumer and flavor solutions segments. We focus on acquisition opportunities that meet the growing demand for flavor and health. Geographically, our focus is on acquisitions that build scale where we currently have presence in both developed and emerging markets.
Current wording
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.
Previous wording
In 2023, we achieved net sales growth of 4.9% over the 2022 level due to the following factors:
Current wording
In 2024, we achieved net sales growth of 0.9% over the 2023 level due to the following factors:
Previous wording
•Divestitures negatively impacted our net sales increase by 0.4%.
Current wording
•Divestitures negatively impacted our net sales by 0.2%.
Previous wording
•Net sales growth was negatively impacted by fluctuations in currency rates that decreased sales growth by 0.6%. Excluding this impact, we grew sales by 5.5% over the prior year on a constant currency basis.
Current wording
•Net sales were favorably impacted by fluctuations in currency rates by 0.3%.
Previous wording
Diluted earnings per share was $2.52 in 2023 and 2022. In 2023, diluted earnings per share was driven primarily by the impact of higher operating income, an increase in interest expense, the unfavorable effects of a decrease in other income, and an increase in income from unconsolidated operations. Special charges and transaction and integration expenses lowered earnings per share by $0.18 and $0.15 in 2023 and 2022, respectively. A gain on our sale of a business increased earnings per share by $0.14 in 2022. Excluding the effects of special charges, transaction and integration expenses, and the gain realized from the sale of a business, adjusted diluted earnings per share was $2.70 in 2023 and $2.53 in 2022, or an increase of 6.7%.
Current wording
Diluted earnings per share was $2.92 in 2024 and $2.52 in 2023. In 2024, diluted earnings per share growth was driven primarily by higher operating income, which included the effects of lower special charges, an increase in income from unconsolidated operations and a decrease in the effective tax rate. Special charges lowered earnings per share by $0.03 and $0.18 in 2024 and 2023, respectively. Excluding the effects of special charges, adjusted diluted earnings per share was $2.95 in 2024, compared to $2.70 in 2023, representing an increase of 9.3%.
Previous wording
Net cash provided by operating activities was $1,237.3 million, $651.5 million and $828.3 million in 2023, 2022, and 2021, respectively. In 2023, 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 38 years, and to fund capital expenditures and acquisitions. In 2023, the return of cash to our shareholders through dividends and share repurchases was $454.2 million.
Current wording
Net cash provided by operating activities was $921.9 million, $1,237.3 million, and $651.5 million in 2024, 2023, and 2022, respectively. In 2024, 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 39 years, and to fund capital expenditures and acquisitions. In 2024, the return of cash to our shareholders through dividends and share repurchases was $504.1 million.
Previous wording
A detailed review of our fiscal 2023 performance compared to fiscal 2002 appears in the section titled “Results of Operations – 2023 Compared to 2022”.
Current wording
A detailed review of our fiscal 2024 performance compared to fiscal 2023 appears in the section titled “Results of Operations – 2024 Compared to 2023.” A detailed review of our fiscal 2023 performance compared to our fiscal 2022 performance is set forth in Part II, Item 7 of our Form 10-K for the fiscal year ended November 30, 2023 under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations – 2023 Compared to 2022,” which is incorporated herein by reference.
Previous wording
In 2024, we expect net sales to range from a decline of 2% to 0% from our net sales in 2023 including a 1% unfavorable impact of foreign currency rates, or to range from a decline of 1% to an increase of 1% on a constant currency basis. We anticipate that the 2024 sales change will include a favorable impact from previously implemented pricing actions. We anticipate that our volume and product mix will be impacted by the divestiture of our Giotti canning business in the third quarter of last year, and the pruning of low margin businesses.
Current wording
In 2025, we expect net sales to grow between 0% and 2% compared to our 2024 net sales, including a 1% unfavorable impact from foreign currency rates, or to grow from 1% to 3% on an organic basis. We anticipate that sales in 2025 will benefit from favorable volume and product mix.
Previous wording
We expect our 2024 gross profit margin to range from 50 basis points to 100 basis points higher than our gross profit margin of 37.6% in 2023. The projected 2024 increase in gross profit margin is principally due to the net effect of (i) the favorable impact of pricing actions, (ii) the favorable impacts of product mix, (iii) the favorable impact of anticipated Global Operating Effectiveness Program and CCI cost savings, and (iv) a low single-digit percentage impact of inflation in 2024 compared to 2023.
Current wording
We expect our 2025 gross profit margin to improve by 50 to 100 basis points from the 38.5% gross profit margin reported in 2024. This projected increase is primarily driven by (i) positive effects from product mix changes, (ii) anticipated cost savings from our Comprehensive Continuous Improvement (CCI) program, and (iii) a low single-digit percentage impact of inflation in 2025 compared to 2024.
Previous wording
In 2024, we expect an increase in operating income of 8% to 10%, which includes a 1% unfavorable impact from foreign currency rates, over the 2023 level. The projected 2024 change in operating income includes the effects of the anticipated increase in our gross profit margin as well as SG&A cost savings from our CCI and GOE programs, which will be partially offset by our investments to drive volume growth, including brand marketing. We expect our brand marketing investments in 2024 to increase in the high-single digits over the 2023 level. We also expect approximately $15 million of special charges in 2024 that relate to previously announced organization and streamlining actions; in 2023, special charges were $61.2 million. Excluding special charges, we expect 2024’s adjusted operating income to increase by 3% to 5%, which includes a 1% unfavorable impact from foreign currency rates, or to increase by 4% to 6% on a constant currency basis.
Current wording
For 2025, we anticipate an increase in operating income of 3% to 5% over the 2024 level, including a 1% unfavorable impact from foreign currency rates. This anticipated increase in operating income reflects the expected rise in our gross profit margin and SG&A cost savings from our CCI program, although these will be partially offset by investments aimed at driving volume growth, particularly in brand marketing. We project our brand marketing investments in 2025 to rise by high-single digits compared to 2024. Additionally, we expect approximately $15 million in special charges related to previously announced organizational and streamlining actions; in 2024, special charges totaled $9.5 million. Excluding these special charges, we expect adjusted operating income in 2025 to increase by 3% to 5%, which includes a 1% unfavorable impact from foreign currency rates, or to increase by 4% to 6% on a constant currency basis.
Previous wording
We estimate that our 2024 effective tax rate, including the net favorable impact of anticipated discrete tax items, will be 22% as compared to 21.8% in 2023. Excluding projected taxes associated with special charges, we estimate that our adjusted effective tax rate will be approximately 22% in 2024, or comparable to an adjusted effective tax rate of 22.0% in 2023.
Current wording
We estimate that our 2025 effective tax rate, including the net favorable impact of anticipated discrete tax items, although at a lower amount than in 2024, will be 22.0% as compared to 20.5% in 2024. Excluding projected taxes associated with special charges, we estimate that our adjusted effective tax rate will be approximately 22.0% in 2025, as compared to an adjusted effective tax rate of 20.5% in 2024.
Previous wording
We also expect that our income from unconsolidated operations, including the performance of our largest joint venture, McCormick de Mexico, will increase by a mid-teens percentage rate over the 2023 level.
Current wording
We also expect that our income from unconsolidated operations, including the performance of our largest joint venture, McCormick de Mexico, will decline by a mid-teen percentage rate from the 2024 level, reflecting the strengthening of the U.S. dollar against the Mexican peso.
Previous wording
Diluted earnings per share was $2.52 in 2023. Diluted earnings per share for 2024 is projected to range from $2.76 to $2.81. Excluding the per share impact of special charges of $61.2 million adjusted diluted earnings per share was $2.70 in 2023. Adjusted diluted earnings per share, excluding an estimated per share impact from special charges of $0.04, is projected to range from $2.80 to $2.85 in 2024, or an increase of 4% to 6% over adjusted diluted earnings per share of $2.70 in 2023.
Current wording
Diluted earnings per share was $2.92 in 2024. Diluted earnings per share for 2025 is projected to range from $2.99 to $3.04. Excluding the per share impact of special charges, adjusted diluted earnings per share was $2.95 in 2024. Adjusted diluted earnings per share, excluding an estimated per share impact from special charges of $0.04, is projected to range from $3.03 to $3.08 in 2025. We expect adjusted diluted earnings per share to increase by 3% to 5%, which includes a 2% unfavorable impact from currency rates, or to increase by 5% to 7% on a constant currency basis over adjusted diluted earnings per share of $2.95 in 2024.
Previous wording
Sales for 2023 increased by 4.9% from 2022 and by 5.5% on a constant currency basis (that is, excluding the impact of foreign currency exchange as more fully described under the caption, Non-GAAP Financial Measures). Pricing actions, taken in response to the inflationary cost environment, increased sales by 8.5% compared to the prior year period. Unfavorable volume and product mix decreased sales by 2.6% with declines in both our consumer and flavor solutions segments. Our decisions to exit our consumer operations in Russia and discontinue certain low margin businesses contributed approximately 0.9% to the unfavorable impact of volume and product mix. The divestiture of our Kitchen Basics business and the Giotti canning business unfavorably impacted sales by 0.4% as compared to the prior year. Sales were impacted by unfavorable foreign currency rates that decreased sales by 0.6% in 2023 as compared to the prior year and are excluded from our measure of sales growth of 5.5% on a constant currency basis.
Current wording
Sales for 2024 increased by 0.9% from 2023 and by 0.8% on an organic basis (that is, excluding the impact of divestitures and foreign currency exchange as more fully described under the caption, Non-GAAP Financial Measures). Pricing actions, primarily implemented during the prior year, increased sales by 0.5% as compared to 2023. Favorable volume and product mix increased sales by 0.3%. The divestiture of our Giotti canning business unfavorably impacted sales by 0.2% as compared to the prior year. Sales were impacted by favorable foreign currency rates that increased sales by 0.3% in 2024 as compared to the prior year. Excluding divestitures and the impact of foreign currency rates, our organic sales growth was 0.8%, as compared to 2023.
Previous wording
In 2023, gross profit increased by $228.0 million, or 10.0%, from 2022. Our gross profit margin for 2023 was 37.6%, an increase of 180 basis points from 35.8% in 2022. The increase was driven by the favorable impact of our pricing actions taken in response to increased costs, favorable product mix within our segments, and cost savings led by our CCI and GOE programs. These favorable impacts were partially offset by increased commodity costs, higher conversion costs, and unfavorable segment mix, all as compared to the 2022 period.
Current wording
In 2024, gross profit increased by $88.5 million, or 3.5%, from 2023. Our gross profit margin for 2024 was 38.5%, an increase of 90 basis points from 37.6% in 2023. The increase was driven by the favorable impact of our pricing actions, favorable product and customer mix, less scrapped inventory and cost savings led by our CCI and GOE programs. These favorable impacts were partially offset by higher conversion costs, as compared to 2023.
Previous wording
Selling, general and administrative (SG&A) expense increased by $121.2 million in 2023 as compared to 2022. That increase in SG&A expense was primarily a result of higher performance-based employee incentive expense, increased distribution costs, increased selling and marketing costs, and higher advertising and promotional spend which were partially offset by CCI-led and GOE cost savings and favorable investment results associated with non-qualified retirement plan assets, all as compared to 2022. SG&A as a percent of net sales for 2023 increased by 80 basis points from the prior year level, as the net impact of the previously mentioned factors was partially offset by the impact of the higher sales base.
Current wording
Selling, general and administrative (SG&A) expense increased by $42.9 million in 2024 as compared to 2023. That increase in SG&A expense was primarily a result of increased advertising and promotional spend, increased selling and marketing costs and a higher level of research and development expenses which were partially offset by lower performance-based employee and stock-based compensation expense, all as compared to 2023. SG&A as a percent of net sales for 2024 increased by 40 basis points from the prior year level, as the net impact of the previously mentioned factors was partially offset by the impact of the higher sales base.
Previous wording
During 2023, we recorded $61.2 million of special charges, consisting principally of (i) $42.8 million associated with the GOE program, (ii) $8.7 million associated with the transition of a manufacturing facility in EMEA, and (iii) streamlining actions of $8.8 million in the Americas region and $0.9 million in the EMEA region.
Current wording
During 2023, we recorded $61.2 million of special charges, consisting principally of $42.8 million associated with the GOE program, $8.7 million associated with the transition of a manufacturing facility in EMEA, and streamlining actions of $8.8 million in the Americas region and $0.9 million in the EMEA region.
Previous wording
Operating income increased by $99.4 million, or 11.5%, from $863.6 million in 2022 to $963.0 million in 2023. Special charges and transaction and integration expenses increased by $7.4 million in 2023, as compared to 2022, and negatively impacted operating income. Operating income as a percentage of net sales increased by 90 basis points in 2023, to 14.5% in 2023 from 13.6% in 2022 as a result of the factors previously described. Excluding the effect of special charges and transaction and integration expenses previously described, adjusted operating income was $1,024.2 million in 2023 as compared to $917.4 million in 2022, an increase of $106.8 million or 11.6% from the 2022 level. Adjusted operating income as a percentage of net sales increased by 100 basis points in 2023, to 15.4% in 2023 from 14.4% in 2022.
Current wording
Operating income increased by $97.3 million, or 10.1%, from $963.0 million in 2023 to $1,060.3 million in 2024. Special charges decreased by $51.7 million in 2024, as compared to 2023, positively impacting operating income. Operating income as a percentage of net sales increased by 130 basis points in 2024, to 15.8% in 2024 from 14.5% in 2023 as a result of the factors previously described. Excluding the effect of special charges, adjusted operating income was $1,069.8 million in 2024 as compared to $1,024.2 million in 2023, an increase of $45.6 million or 4.5% from the 2023 level. Adjusted operating income as a percentage of net sales increased by 50 basis points in 2024, to 15.9% in 2024 from 15.4% in 2023.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
During 2024, we recorded $9.5 million of special charges, consisting principally of $4.5 million associated with the GOE program and $5.0 million associated with the transition of a manufacturing facility in EMEA.
Current report — wording carried from elsewhere
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.