Financial Instruments

6 Months Ended

May 31, 2011

Financial Instruments

Financial Instruments

2. 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. The use of derivative financial instruments is monitored through regular communication with senior management and the use of written guidelines.

In May 2011, we entered into $150 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 at least $150 million of fixed rate medium-term notes in 2011. We intend to cash settle these agreements upon issuance of the medium-term notes thereby effectively locking in the U.S. Treasury fixed interest rate in effect at the time the agreements were initiated. The U.S. Treasury locked weighted average fixed rate of these agreements is 3.18%. We have designated these outstanding forward U.S. Treasury rate lock agreements, which expire on July 22, 2011, 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 medium-term notes as a component of interest expense. Hedge ineffectiveness of these agreements was not material in the quarter.

As of May 31, 2011, the maximum time frame for our foreign exchange forward contracts is 18 months. 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 reduction of earnings.

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 nature and maturity.

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

As of May 31, 2011

	Other current		Other current		Other current	Other current		Other current		Other current
	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	$	17.7	Other accrued liabilities	$	150.0	$	0.9
Foreign exchange contracts	Other current assets		187.3		3.5	Other accrued liabilities	$	38.2		2.7
Total				$	21.2				$	3.6

As of May 31, 2010

	Balance Sheet		Balance Sheet		Balance Sheet	Balance Sheet		Balance Sheet		Balance Sheet
	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	$	16.1
Foreign exchange contracts	Other current assets		235.5		3.1	Other accrued liabilities	$	34.4	$	0.7
Total				$	19.2				$	0.7

As of November 30, 2010

	Balance Sheet		Balance Sheet		Balance Sheet	Balance Sheet		Balance Sheet		Balance Sheet
	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	$	19.2
Foreign exchange contracts	Other current assets		4.5		0.2	Other accrued liabilities	$	203.7	$	2.8
Total				$	19.4				$	2.8

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 quarters ending May 31, 2011 and 2010 (in millions):

Fair Value Hedges

	Interest expense		Interest expense		Interest expense		Interest expense		Interest expense
Derivative	Income statement location	Expense
		For the 3 months ended 5/31/11		For the 3 months ended 5/31/10		For the 6 months ended 5/31/11		For the 6 months ended 5/31/10
Interest rate contracts	Interest expense	$	1.3	$	1.3	$	2.5	$	2.5

Cash Flow Hedges – For the 3 months ended May 31,

		Interest expense			Interest expense	Interest expense		Interest expense			Interest expense
Derivative	Gain or (Loss) recognized in OCI					Income statement location	Gain or (Loss) reclassified from AOCI
	2011			2010			2011			2010
Interest rate contracts	$	(0.9	)		—	Interest expense	$	(0.4	)	$	(0.4	)
Foreign exchange contracts		—		$	0.4	Cost of goods sold		(1.0	)		(0.1	)
Total	$	(0.9	)	$	0.4		$	(1.4	)	$	(0.5	)

Cash Flow Hedges – For the 6 months ended May 31,

		Interest expense			Interest expense	Interest expense		Interest expense			Interest expense
Derivative	Gain or (Loss) recognized in OCI					Income statement location	Gain or (Loss) reclassified from AOCI
	2011			2010			2011			2010
Interest rate contracts	$	(0.9	)		—	Interest expense	$	(0.7	)	$	(0.7	)
Foreign exchange contracts		(1.8	)	$	1.7	Cost of goods sold		(1.6	)		0.0
Total	$	(2.7	)	$	1.7		$	(2.3	)	$	(0.7	)

The amount of gain or loss recognized in income on the ineffective portion of derivative instruments was not material. The amounts noted in the tables above for OCI do not include any adjustments for the impact of deferred income taxes.