Business Segments

3 Months Ended

Feb. 28, 2023

Segment Reporting [Abstract]

Business Segments

BUSINESS SEGMENTS

We operate in two business segments: consumer and flavor solutions. The consumer and flavor solutions segments manufacture, market and distribute spices, herbs, seasoning mixes, condiments and other flavorful products throughout the world. Our consumer segment sells to retail channels, including grocery, mass merchandise, warehouse clubs, discount and drug stores, and e-commerce under the “McCormick” brand and a variety of brands around the world, including “French’s”, “Frank’s RedHot”, “OLD BAY”, “Lawry’s”, “Zatarain’s”, “Simply Asia”, “Thai Kitchen”, “Ducros”, “Vahine”, “Cholula”, “Schwartz”, “Club House”, “Kamis”, “DaQiao”, “La Drogheria”, “Stubb's”, and “Gourmet Garden”. Our flavor solutions segment sells to food manufacturers and the foodservice industry both directly and indirectly through distributors, with the exception of our business in China, where foodservice sales are managed by and reported in our consumer segment.

In each of our segments, we produce and sell many individual products which are similar in composition and nature. With their primary attribute being flavor, the products within each of our segments are regarded as fairly homogenous. It is impracticable to segregate and identify sales and profits for each of these individual product lines.

We measure segment performance based on operating income excluding special charges, as this activity is managed separately from the business segments. We also exclude transaction and integration expenses related to our acquisitions from our measure of segment performance as these expenses are similarly managed separately from the business segments. These transaction and integration expenses excluded from our segment performance measure include the amortization of the acquisition-date fair value adjustment of inventories that is included in cost of goods sold, costs directly associated with that acquisition and costs associated with integrating the businesses.

Although the segments are managed separately due to their distinct distribution channels and marketing strategies, manufacturing and warehousing are often integrated to maximize cost efficiencies. We do not segregate jointly utilized assets by individual segment for purposes of internal reporting, performance evaluation, or capital allocation. Because of manufacturing integration for certain products within the segments, products are not sold from one segment to another but rather inventory is transferred at cost. Intersegment sales are not material.

 

	Consumer		Flavor Solutions		Total
			(in millions)
Three months ended February 28, 2023
Net sales	$	909.5	$	656.0	$	1,565.5
Operating income excluding special charges	173.4		53.4		226.8
Income from unconsolidated operations	13.8		0.2		14.0
Three months ended February 28, 2022
Net sales	$	926.1	$	596.3	$	1,522.4
Operating income excluding special charges and transaction and integration expenses	167.0		60.1		227.1
Income from unconsolidated operations	8.4		0.9		9.3

A reconciliation of operating income excluding special charges and transaction and integration expenses, to operating income is as follows (in millions):

	Consumer		Flavor Solutions		Total
Three months ended February 28, 2023
Operating income excluding special charges	$	173.4	$	53.4	$	226.8
Less: Special charges	19.0		8.8		27.8
Operating income	$	154.4	$	44.6	$	199.0
Three months ended February 28, 2022
Operating income excluding special charges and transaction and integration expenses	$	167.0	$	60.1	$	227.1
Less: Special charges	3.6		15.9		19.5
Less: Transaction and integration expenses	—		0.7		0.7
Operating income	$	163.4	$	43.5	$	206.9

The following table sets forth our net sales, by geographic area, for the three and three months ended February 28, 2023 and 2022 (in millions):

	Americas		EMEA		Asia/Pacific		Total
Three months ended February 28, 2023	$	1,094.7	$	283.9	$	186.9	$	1,565.5
Three months ended February 28, 2022	1,022.5		290.5		209.4		1,522.4