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Special Charges And Transaction And Integration Expenses | 3 Months Ended
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Feb. 28, 2022
Special Charges [Abstract] |
Special Charges And Transaction And Integration Expenses | SPECIAL CHARGES AND TRANSACTION AND INTEGRATION EXPENSES Special Charges In our consolidated income statement, we include a separate line item captioned "Special charges" in arriving at our consolidated operating income. Special charges consist of expenses, including related impairment charges, associated with certain actions undertaken 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, comprised of our senior management, including our Chairman, President and Chief Executive Officer. 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 on-going basis through completion. Certain ancillary expenses related to these actions approved by our Management Committee do not qualify for accrual upon approval but are included as special charges as incurred during the course of the actions. We continue to evaluate changes to our organization structure to enable us to reduce fixed costs, simplify or improve processes, and improve our competitiveness. The following is a summary of special charges recognized in the three months ended February 28, 2022 and 2021 (in millions):
| Three months ended February 28, |  |
| 2022 |  | 2021 |  |  |  |
Employee severance and related benefits | $ | 14.2 |  |  | $ | 0.3 |  |  |  |  |
Other costs (1) | 5.3 |  |  | 0.8 |  |  |  |  |
Total | $ | 19.5 |  |  | $ | 1.1 |  |  |  |  |
(1) Included in other costs for 2022 is non-cash accelerated depreciation of $1.4 million. During the three months ended February 28, 2022, we recorded $19.5 million of special charges, consisting principally of $14.9 million associated with the transition of a manufacturing facility in Europe, Middle East, and Africa (EMEA), as more fully described below, streamlining actions of $2.1 million in the Americas region, and $1.5 million in the EMEA region. In 2022, our Management Committee approved an initiative to consolidate our manufacturing operations into a net-zero carbon condiments manufacturing and distribution center facility with state-of-the-art technology in the United Kingdom. We expect to execute these changes to our supply chain operations and improve profitability, from a combination of lower headcount and non-headcount costs, by consolidating our operations into a scalable platform while expanding our capacity. We expect the cost of the initiative to approximate $30 million—to be recognized as special charges in our consolidated income statement through 2023. Of that $30 million, we expect the costs to include employee severance and related benefits, non-cash accelerated depreciation, decommissioning and other property related lease exit costs, all directly related to the initiative. During the three months ended February 28, 2022, we recorded $12.5 million in severance and related benefits costs, $1.4 million in accelerated depreciation and $1.0 million in third party expenses and other costs. During the three months ended February 28, 2021, we recorded $1.1 million of special charges, consisting principally of streamlining actions of $0.6 million in the EMEA region and $0.5 million in the Americas region. In 2017, our Management Committee approved a multi-year initiative during which we expect to execute significant changes to our global processes, capabilities and operating model to provide a scalable platform for future growth. We expect this initiative to enable us to accelerate our ability to work globally and cross-functionally by aligning and simplifying processes throughout McCormick, in part building upon our current shared services foundation and expanding the end-to-end processes presently under that foundation. We expect this initiative, which we refer to as Global Enablement ("GE"), to enable this scalable platform for future growth while reducing costs, enabling faster decision making, increasing agility and creating capacity within our organization. While we are continuing to fully develop the details of our GE operating model, we expect the cost of the GE initiative—to be recognized as special charges in our consolidated income statement over its expected multi-year course—to range from approximately $60 million to $65 million. Of that $60 million to $65 million, we estimate that approximately sixty percent will be attributable to cash payments associated with the related costs of the GE implementation and transition, including outside consulting and other costs, and approximately forty percent will be attributable to severance and related benefit payments, all directly related to this initiative. We have spent a cumulative total of $40.7 million on this initiative through February 28, 2022. As of February 28, 2022, reserves associated with special charges, which are expected to be paid during the next twelve months, are included in trade accounts payable and other accrued liabilities in our consolidated balance sheet. The following is a breakdown by business segment of special charges for the three months ended February 28, 2022 and 2021 (in millions):
| Three months ended February 28, |  |
| 2022 |  | 2021 |  |  |  |
Consumer segment | $ | 3.6 |  |  | $ | 0.8 |  |  |  |  |
Flavor solutions segment | 15.9 |  |  | 0.3 |  |  |  |  |
Total special charges | $ | 19.5 |  |  | $ | 1.1 |  |  |  |  |
Transaction and Integration Expenses The following are the transaction and integration expenses recognized during the three months ended February 28, 2022 and 2021 relating to the acquisitions of Cholula Hot Sauce ("Cholula") and FONA International, LLC ("FONA") (in millions):
| 2022 |  | 2021
Transaction-related expenses included in cost of goods sold | $ | — |  |  | $ | 6.3 |
Other transaction expenses | — |  |  | 13.8 |
Integration expenses | 0.7 |  |  | 5.0 |
Total transaction and integration expenses | $ | 0.7 |  |  | $ | 25.1 |
We expect transaction and integration expenses related to our acquisition of FONA to total approximately $3 million in 2022.

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