Financial Instruments

3 Months Ended

Feb. 29, 2024

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, net investment 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. We are not a party to master netting arrangements, and we do not offset the fair value of derivative contracts with the same counterparty in our financial statement disclosures. The use of derivative financial instruments is monitored through regular communication with senior management and the use of written guidelines.

Foreign currency exchange risk. We are potentially exposed to foreign currency fluctuations affecting net investments in subsidiaries, transactions (both third-party and intercompany) and earnings denominated in foreign currencies. We assess foreign currency risk based on transactional cash flows and translational volatility and may enter into forward contract and currency swaps with highly-rated financial institutions to reduce fluctuations in the long or short currency positions. Currency swap agreements are established in conjunction with the terms of the underlying debt issues.

The following is a summary of the notional amounts of outstanding foreign currency exchange contracts as of February 29, 2024 and November 30, 2023 (in millions):

	February 29, 2024		November 30, 2023
Fair value hedges	$	787.0	$	765.4
Cash flow hedge	166.7		235.0
Total	$	953.7	$	1,000.4

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. All foreign currency exchange contracts outstanding at February 29, 2024 have durations of less than 18 months, including $208.5 million of notional contracts that have an initial duration of less than one month and are used to hedge short-term cash flow funding.

Contracts which are designated as hedges of foreign currency denominated assets are considered fair value hedges. These foreign currency exchange contracts manage both exposure to currency fluctuations in certain intercompany loans between subsidiaries as well as currency exposure to third-party non-functional currency assets or liabilities. Gains and losses from contracts that are designated as hedges of assets, liabilities or firm commitments are recognized through income, offsetting the change in fair value of the hedged item. Contracts which are designated as hedges of anticipated purchases denominated in a foreign currency (generally purchases of inventory 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 accumulated other comprehensive income until the hedged item is recognized in cost of goods sold, at which time the net amount deferred in accumulated other comprehensive income is also recognized in cost of goods sold.

We also utilize cross currency interest rate swap contracts that are designated as net investment hedges. Any gains or losses on net investment hedges are included in foreign currency translation adjustments in accumulated other comprehensive loss.

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

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

	Asset Derivatives					Liability Derivatives
	Balance sheet location	Notional amount		Fair value		Balance sheet location	Notional amount		Fair value
As of February 29, 2024
Interest rate contracts	Other current assets / Other long-term assets	$	—	$	—	Other long-term liabilities	$	600.0	$	51.9
Foreign exchange contracts	Other current assets	286.9		2.6		Other accrued liabilities	666.8		18.1
Cross currency contracts	Other current assets / Other long-term assets	716.8		27.9		Other long-term liabilities	236.7		4.9
Total				$	30.5				$	74.9
As of November 30, 2023
Interest rate contracts	Other current assets / Other long-term assets	$	—	$	—	Other long-term liabilities	$	600.0	$	52.8
Foreign exchange contracts	Other current assets	161.3		2.5		Other accrued liabilities	839.1		16.0
Cross currency contracts	Other current assets / Other long-term assets	719.6		24.6		Other long-term liabilities	238.9		7.5
Total				$	27.1				$	76.3

The following tables disclose the impact of derivative instruments on our other comprehensive income (OCI), accumulated other comprehensive loss (AOCI) and our consolidated income statement for the three months ended February 29, 2024 and February 28, 2023 (in millions):

Fair Value Hedges
Derivative	Income statement location	(Expense) income
		Three months ended February 29, 2024		Three months ended February 28, 2023
Interest rate contracts	Interest expense	$	(5.1)	$	(3.7)

	Income statement location	Gain (loss) recognized in income					Income statement location	Gain (loss) recognized in income
Derivative		Three months ended February 29, 2024		Three months ended February 28, 2023		Hedged item		Three months ended February 29, 2024		Three months ended February 28, 2023
Foreign exchange contracts	Other income, net	$	(2.9)	$	1.0	Intercompany loans	Other income, net	$	1.4	$	(0.1)

The gains (losses) recognized on fair value hedges relating to currency exposure on third-party non-functional currency assets or liabilities were not material during the three months ended February 29, 2024 and February 28, 2023.

Cash Flow Hedges
Derivative	Gain (loss) recognized in OCI				Income statement location	Gain (loss) reclassified from AOCI
	Three months ended February 29, 2024		Three months ended February 28, 2023			Three months ended February 29, 2024		Three months ended February 28, 2023
Interest rate contracts	$	—	$	—	Interest expense	$	(0.2)	$	0.1
Foreign exchange contracts	(0.2)		(1.1)		Cost of goods sold	1.3		1.2
Total	$	(0.2)	$	(1.1)		$	1.1	$	1.3

As of February 29, 2024, the net amount of accumulated other comprehensive loss associated with all cash flow and settled interest rate cash flow hedge derivatives expected to be reclassified in the next 12 months is $0.1 million as an increase to earnings.

Net Investment Hedges
Derivative	Gain (loss) recognized in OCI				Income statement location	Gain (loss) excluded from the assessment of hedge effectiveness
	Three months ended February 29, 2024		Three months ended February 28, 2023			Three months ended February 29, 2024		Three months ended February 28, 2023
Cross currency contracts	$	(5.9)	$	(5.8)	Interest expense	$	2.2	$	3.3

For all net investment hedges, no amounts have been reclassified out of accumulated other comprehensive loss. The amounts noted in the tables above for OCI do not include any adjustments for the impact of deferred income taxes.

Since the third quarter of 2023, we have maintained a nonrecourse accounts receivable sale program whereby certain eligible U.S. receivables are sold to a third-party financial institution in exchange for cash. The program provides us with an additional means for managing liquidity. Under the terms of the arrangement, we act as the collecting agent on behalf of the financial institution. We account for the transfer of receivables as a sale at the point control is transferred through derecognition of the receivable on our condensed consolidated balance sheet. The outstanding amount of receivables sold under this program were $19.2 million as of February 29, 2024. As collecting agent on the sold receivables, we had $4.2 million of cash collected that was not yet remitted to the third-party financial institution as of February 29, 2024. The incremental costs of selling receivables under this arrangement were insignificant for the three months ended February 29, 2024.