Financial Instruments

12 Months Ended

Nov. 30, 2012

Derivative Instrument Detail [Abstract]

Financial Instruments

FINANCIAL INSTRUMENTS

We use derivative financial instruments to enhance our ability to manage risk, including foreign currency 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 and all derivatives are designated as hedges. The use of derivative financial instruments is monitored through regular communication with senior management and the use of written guidelines.

Foreign Currency

We are potentially exposed to foreign currency fluctuations affecting net investments, transactions and earnings denominated in foreign currencies. We selectively hedge the potential effect of these foreign currency fluctuations by entering into foreign currency exchange contracts with highly-rated financial institutions.

Contracts which are designated as hedges of anticipated purchases denominated in a foreign currency (generally purchases of raw materials in U.S. dollars by operating units outside the U.S.) are considered cash flow hedges. The gains and losses on these contracts are deferred in other comprehensive income until the hedged item is recognized in cost of goods sold, at which time the net amount deferred in other comprehensive income is also recognized in cost of goods sold. Gains and losses from hedges of assets, liabilities or firm commitments are recognized through income, offsetting the change in fair value of the hedged item.

At November 30, 2012, we had foreign currency exchange contracts to purchase or sell $188.8 million of foreign currencies versus $127.6 million at November 30, 2011. All of these contracts were designated as hedges of anticipated purchases denominated in a foreign currency or hedges of foreign currency denominated assets or liabilities. Hedge ineffectiveness was not material. At November 30, 2012, we had $84.9 million of notional contracts that have durations of less than seven days that are used to hedge short-term cash flow funding. The remaining contracts have durations of one to twelve months.

Interest Rates

We finance a portion of our operations with both fixed and variable rate debt instruments, primarily commercial paper, notes and bank loans. We utilize interest rate swap agreements to minimize worldwide financing costs and to achieve a desired mix of variable and fixed rate debt.

In November 2012, we entered into a total of $50 million of forward starting interest rate swap agreements to manage our interest rate risk associated with the anticipated issuance of at least $50 million of fixed rates notes by August 2013. We intend to cash settle these agreements upon issuance of the fixed rate notes thereby effectively locking in the fixed interest rate in effect at the time the swap agreements were initiated. The fixed rate of these agreements is 1.90%. We have designated these forward starting interest rate swap agreements, which expire on August 28, 2013, as cash flow hedges. The gain or loss on these agreements is deferred in other comprehensive income and will be amortized over the life of the fixed rate notes as a component of interest expense. Hedge ineffectiveness of these agreements was not material in the year.

In May and June 2011, we entered into a total of $200 million of forward U.S. Treasury rate lock agreements to manage the U.S. Treasury portion of our interest rate risk associated with the anticipated issuance of fixed rate notes in July 2011. We cash settled all of these agreements, which were designated as cash flow hedges, for a loss of $0.2 million simultaneous with the issuance of the notes at an effective fixed rate of 4.01% on the full $250 million of debt. The loss on these agreements is deferred in other comprehensive income and will be amortized to interest expense over the 10-year life of the notes. Hedge ineffectiveness of these agreements was not material.

In March 2006, we entered into interest rate swap contracts for a total notional amount of $100 million to receive interest at 5.20% and pay a variable rate of interest based on three-month LIBOR minus .05%. We designated these swaps, which expire in December 2015, as fair value hedges of the changes in fair value of $100 million of the $200 million5.20% medium-term notes due 2015 that we issued in December 2005. Any unrealized gain or loss on these swaps will be offset by a corresponding increase or decrease in the value of the hedged debt. No hedge ineffectiveness is recognized as the interest rate swaps qualify for the “shortcut” treatment as defined under U.S. Generally Accepted Accounting Principles.

The following tables disclose the derivative instruments on our balance sheet as of November 30, 2012 and 2011, which are all recorded at fair value:

As of November 30, 2012:
(millions)	Asset Derivatives					Liability Derivatives
Derivatives	Balance sheet location	Notional amount		Fair value		Balance sheet location	Notional amount		Fair value
Interest rate contracts	Other current  assets	$	100.0	$	16.7	Other accrued liabilities	$	50.0	$	0.1
Foreign exchange contracts	Other current assets	123.1		0.9		Other accrued liabilities	65.7		1.9
Total				$	17.6				$	2.0
As of November 30, 2011:
(millions)	Asset Derivatives					Liability Derivatives
Derivatives	Balance sheet location	Notional amount		Fair value		Balance sheet location	Notional amount		Fair value
Interest rate contracts	Other current  assets	$	100.0	$	18.9	—	—		—
Foreign exchange contracts	Other current assets	97.4		2.7		Other accrued liabilities	$	30.2	$	0.4
Total				$	21.6				$	0.4

The following tables disclose the impact of derivative instruments on other comprehensive income (OCI), accumulated other comprehensive income (AOCI) and our income statement for the years ended November 30, 2012, 2011 and 2010:

Fair value hedges (millions)
	Income statement location	Income (expense)
Derivative		2012		2011		2010
Interest rate contracts	Interest expense	$	4.7	$	4.9	$	4.9

Cash flow hedges (millions)
	Gain (loss) recognized in OCI									Income statement location	Gain (loss)   reclassified from AOCI
Derivative	2012			2011			2010				2012			2011			2010
Interest rate contracts	$	(0.1	)	—			—			Interest expense	$	(1.4	)	$	(1.4	)	$	(1.4	)
Foreign exchange contracts	(2.4		)	$	(0.4	)	$	(0.9	)	Cost of goods sold	0.6			(3.4		)	(0.1		)
Total	$	(2.5	)	$	(0.4	)	$	(0.9	)		$	(0.8	)	$	(4.8	)	$	(1.5	)

The amount of gain or loss recognized in income on the ineffective portion of derivative instruments is not material. The net amount of other comprehensive income expected to be reclassified into income related to these contracts in the next twelve months is a $2.8 million decrease to earnings.

Fair Value of Financial Instruments

The carrying amount and fair value of financial instruments at November 30, 2012 and 2011 were as follows:

	2012				2011
(millions)	Carrying amount		Fair value		Carrying amount		Fair value
Long-term investments	$	86.1	$	86.1	$	71.4	$	71.4
Long-term debt	1,031.5		1,168.5		1,035.1		1,136.6
Derivatives related to:
Interest rates (assets)	16.7		16.7		18.9		18.9
Interest rates (liabilities)	0.1		0.1		—		—
Foreign currency (assets)	0.9		0.9		2.7		2.7
Foreign currency (liabilities)	1.9		1.9		0.4		0.4

Because of their short-term nature, the amounts reported in the balance sheet for cash and cash equivalents, receivables, short-term borrowings and trade accounts payable approximate fair value.

Investments in affiliates are not readily marketable, and it is not practicable to estimate their fair value. Long-term investments are comprised of fixed income and equity securities held on behalf of employees in certain employee benefit plans and are stated at fair value on the balance sheet. The cost of these investments was $69.6 million and $59.7 million at November 30, 2012 and 2011, respectively.

Concentrations of Credit Risk

We are potentially exposed to concentrations of credit risk with trade accounts receivable, prepaid allowances and financial instruments. The customers of our consumer business 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 and discount chains. This has caused some customers to be less profitable and increased our exposure to credit risk. Because we have a large and diverse customer base with no single customer accounting for a significant percentage of trade accounts receivable, there was no material concentration of credit risk in these accounts at November 30, 2012. Current credit markets are highly volatile and some of our customers and counterparties are highly leveraged. We continue to closely monitor the credit worthiness of our customers and counterparties. We believe that the allowance for doubtful accounts properly recognized trade receivables at realizable value. We consider nonperformance credit risk for other financial instruments to be insignificant.