Financial Instruments

9 Months Ended

Aug. 31, 2017

Derivative Instruments and Hedging Activities Disclosure [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 instruments. The use of derivative financial instruments is monitored through regular communication with senior management and the use of written guidelines.

From time to time, we enter into fair value foreign currency exchange contracts to manage exposure to currency fluctuations in certain intercompany loans between subsidiaries. At August 31, 2017, the notional value of these contracts was $117.0 million. During the three and nine months ended August 31, 2017, we recognized gains of $2.9 million and $5.2 million, respectively, on the change in fair value of these contracts, which was offset by losses of $3.1 million and $6.0 million, respectively, on the change in the currency component of the underlying loans. Both the gains and the losses were recognized in our consolidated income statement as other income, net.

During the nine months ended August 31, 2017, we entered into a total of $150 million of forward starting interest rate swap agreements to manage our interest rate risk associated with the anticipated issuance of at least $150 million of fixed rate notes by December 2017. The weighted average fixed rate of these agreements was 2.45% and was based upon the applicable U.S. LIBOR swap rate at the inception of each agreement. We cash settled these agreements upon issuance of the 3.40% fixed rate notes issued in August 2017 and made a one-time cash payment to the counterparties of $2.9 million. We designated these forward starting interest rate swap agreements as cash flow hedges. Amounts associated with these agreements, including the related mark-to-market prior to settlement were deferred in other comprehensive income. Upon settlement, the loss realized was recognized in other comprehensive and will be amortized over the life of the 3.40% fixed rate notes due August 15, 2027 as a component of interest expense. Ineffectiveness associated with these hedges was not material.

As of August 31, 2017, the maximum time frame for our foreign exchange forward contracts is 15 months.

All derivatives are recognized at fair value in the balance sheet and recorded in either current or noncurrent other assets or other accrued liabilities or other long-term liabilities depending upon their nature and maturity.

The following table discloses the fair values of derivative instruments on our balance sheet (in millions):

As of August 31, 2017	Asset Derivatives					Liability Derivatives
	Balance sheet location	Notional amount		Fair value		Balance sheet location	Notional amount		Fair value
Interest rate contracts	Other current assets	$	100.0	$	0.3	Other accrued liabilities	$	—	$	—
Foreign exchange contracts	Other current assets	116.1		5.5		Other accrued liabilities	358.9		9.1
Total				$	5.8				$	9.1
As of August 31, 2016	Asset Derivatives					Liability Derivatives
	Balance sheet location	Notional amount		Fair value		Balance sheet location	Notional amount		Fair value
Interest rate contracts	Other current assets	$	100.0	$	5.5	Other accrued liabilities	$	—	$	—
Foreign exchange contracts	Other current assets	153.8		3.4		Other accrued liabilities	236.4		2.3
Total				$	8.9				$	2.3
As of November 30, 2016	Asset Derivatives					Liability Derivatives
	Balance sheet location	Notional amount		Fair value		Balance sheet location	Notional amount		Fair value
Interest rate contracts	Other current assets	$	—	$	—	Other accrued liabilities	$	100.0	$	1.2
Foreign exchange contracts	Other current assets	204.3		4.9		Other accrued liabilities	244.9		5.4
Total				$	4.9				$	6.6

The following tables disclose the impact of derivative instruments on our other comprehensive income (OCI), accumulated other comprehensive income (AOCI) and our income statement for the three and nine month periods ended August 31, 2017 and 2016 (in millions):

Fair Value Hedges
Derivative	Income statement location	Income (expense)
		Three months ended August 31, 2017		Three months ended August 31, 2016		Nine months ended August 31, 2017		Nine months ended August 31, 2016
Interest rate contracts	Interest expense	$	0.2	$	0.4	$	0.7	$	1.3

Three months ended August 31,	Income statement location	Gain (loss) recognized in income					Income statement location	Gain (loss) recognized in income
Derivative		2017		2016		Hedged item		2017			2016
Foreign exchange contracts	Other income, net	$	2.9	$	—	Intercompany loans	Other income, net	$	(3.1	)	$	—

Nine months ended August 31,	Income statement location	Gain (loss) recognized in income					Income statement location	Gain (loss) recognized in income
Derivative		2017		2016		Hedged item		2017			2016
Foreign exchange contracts	Other income, net	$	5.2	$	—	Intercompany loans	Other income, net	$	(6.0	)	$	—

Cash Flow Hedges
Three months ended August 31,
Derivative	Gain or (loss) recognized in OCI					Income statement location	Gain or (loss) reclassified from AOCI
	2017			2016			2017			2016
Interest rate contracts	$	0.3		$	—	Interest expense	$	(0.1	)	$	(0.1	)
Foreign exchange contracts	(4.7		)	1.8		Cost of goods sold	0.3			—
Total	$	(4.4	)	$	1.8		$	0.2		$	(0.1	)
Nine months ended August 31,
Derivative	Gain or (Loss) recognized in OCI					Income statement location	Gain or (Loss) reclassified from AOCI
	2017			2016			2017			2016
Interest rate contracts	$	(2.9	)	$	—	Interest expense	$	(0.2	)	$	(0.2	)
Foreign exchange contracts	(6.5		)	1.7		Cost of goods sold	2.1			3.1
Total	$	(9.4	)	$	1.7		$	1.9		$	2.9

For all derivatives, the net amount of accumulated other comprehensive income expected to be reclassified in the next 12 months is $3.4 million as a decrease to earnings. The amount of gain or loss recognized in income on the ineffective portion of derivative instruments is not material. The amounts noted in the tables above for OCI do not include any adjustments for the impact of deferred income taxes.