Business context and reporting period
McCormick & Company, Incorporated filed this unaudited Form 10-Q for the quarter and nine months ended August 31, 2026. It operates Consumer and Flavor Solutions businesses globally. The company notes that sales, earnings and operating cash flow are historically stronger in the second half, particularly the holiday-season fourth quarter.
Financial results and key metrics
All amounts are in millions of dollars, except per-share data and percentages.
| Metric | Three months ended August 31, 2026 | Comparable 2025 period | Nine months ended August 31, 2026 | Comparable 2025 period |
|---|---|---|---|---|
| Net sales | $2,024.8 | $1,724.9 | $5,835.3 | $4,989.9 |
| Gross profit margin | 39.3% | 37.4% | 39.1% | 37.5% |
| Operating income | $217.0 | $288.7 | $720.9 | $759.7 |
| Net income attributable to McCormick | $97.6 | $225.5 | $1,263.9 | $562.8 |
| Diluted EPS | $0.36 | $0.84 | $4.69 | $2.09 |
| Operating cash flow | Not presented for the quarter | Not presented for the quarter | $598.8 | $420.2 |
Third-quarter sales grew 17.4%; acquisition of the controlling interest in McCormick de Mexico contributed 14.6 percentage points, currency 0.9 points, pricing 2.2 points, while volume and mix reduced growth by 0.3 points. Organic sales growth was 1.9%. Nine-month sales increased 16.9%, with 13.1 points from the acquisition; organic growth was 1.6%.
Reported third-quarter operating income fell 24.8%, primarily reflecting $141.5 million of special charges. Excluding special charges, adjusted operating income was $358.5 million, up 22.1%, and adjusted diluted EPS was $0.86 versus $0.85. Nine-month GAAP net income and EPS include an $866.8 million pre-tax gain from remeasuring McCormick’s previously held Mexico investment; adjusted diluted EPS was $2.32 versus $2.14.
Segment results: Consumer third-quarter sales were $1,215.4 million, with segment operating income of $241.1 million and margin of 19.8%; Flavor Solutions sales were $809.4 million, operating income was $117.4 million and margin was 14.5%. Segment operating income excludes special charges. Consumer volume and mix was weak, especially in the Americas; Flavor Solutions benefited from volume growth, particularly in APAC.
Liquidity, debt and capital resources
- At August 31, 2026, cash was $331.1 million. Short-term borrowings were $1,340.2 million, current long-term debt $771.9 million and long-term debt $2,906.1 million.
- Operating cash flow for nine months was $598.8 million; investing cash outflow was $861.1 million, including $729.9 million for acquisitions and $131.2 million of capital expenditures. Financing activities provided $490.3 million, including a $958.8 million net increase in short-term borrowings.
- Cash dividends paid were $387.0 million for the nine months; the quarterly dividend was $0.48 per share. The company expects fiscal 2026 capital expenditures of approximately $250 million.
- The company reported compliance with debt covenants and believes available liquidity is sufficient for at least the next 12 months. It has a $2.0 billion revolving facility expiring in 2030 and a $500 million facility expiring in January 2027.
Material changes, outlook and notable items
- McCormick de Mexico: On January 2, 2026, McCormick paid $750 million for an additional 25% stake, increasing ownership to 75% and bringing the business into consolidation. The resulting $866.8 million remeasurement gain materially increased nine-month reported earnings. Purchase-price allocation remains preliminary.
- Unilever Foods transaction: The proposed combination remains pending. McCormick expects to pay Unilever $15.7 billion in cash, subject to adjustments. On the stated assumptions, current Unilever shareholders would own approximately 55.1% of the combined company, current McCormick shareholders approximately 35.0%, and Unilever could retain up to 9.9%. Closing requires customary shareholder, regulatory and other approvals. A $15.7 billion bridge facility has been committed, with $2.0 billion of commitments replaced by a term loan facility; permanent financing is also contemplated. Financing is not a closing condition. Specified termination circumstances may trigger a $420 million fee or expense reimbursement of up to $75 million.
- Special charges and tariffs: Nine-month special charges were $226.6 million, including $160.8 million of transaction and integration expenses and a $43.1 million non-cash impairment after the company decided to exit its Malaysia pepper sourcing and agricultural technology project. Merger-related financing-fee amortization added $19.2 million to interest expense. The company submitted a $30.8 million IEEPA tariff refund request, recognized a $27.6 million cost-of-goods-sold benefit, received $29.2 million and reported $1.6 million still receivable.
- Fiscal 2026 outlook: Management projects net sales growth of 13%–17%, including 11%–13% from the Mexico acquisition and about 1% from currency; organic sales growth is projected at 1%–3%, with pricing gains and flat volume expected. Adjusted operating income growth is projected at 16%–20% (15%–19% in constant currency). Adjusted diluted EPS is projected at $3.05–$3.13, or growth of 2%–5% (1%–4% in constant currency). The outlook is non-GAAP; the company does not provide GAAP guidance because certain items, including special charges, cannot be predicted.
- Management cites CCI cost savings and pricing as margin supports, partly offset by commodity and freight inflation, including costs associated with the Middle East conflict, higher technology and brand investments, and increased interest expense. It expects the tariff refund benefit to be offset by inflation and growth investment. The adjusted tax-rate outlook is 24.0%.
- Other disclosed risks include transaction approval, execution, integration and financing uncertainty; potential post-transaction leverage, dilution and reduced financial flexibility; geopolitical and supply-chain disruption; and customer credit risk. The company reported no material pending legal proceedings and no material changes to other risk factors beyond those described.
Important facts for investors to verify
- Progress toward Unilever Foods closing conditions, final transaction terms, permanent financing, and the combined company’s expected debt and deleveraging plan.
- Underlying sales and volume trends, especially Consumer performance in the Americas, separate from acquisition and currency contributions.
- Whether adjusted operating income, EPS and organic-growth targets are achieved, and how special charges and merger-related costs evolve.
- Final McCormick de Mexico purchase accounting, including acquired intangible-asset valuations, goodwill and related-party arrangements with Grupo Herdez.
- Collection of the remaining $1.6 million tariff refund and the effect of evolving tariffs, Middle East-related freight and input costs, and other macroeconomic developments.
- Liquidity and borrowing needs as seasonal working capital changes and the proposed transaction advances; reported cash flow reflects a nine-month period and is not necessarily indicative of the full year.