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Financial Instruments | 9 Months Ended
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Aug. 31, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Financing Arrangements and Financial Instruments | FINANCING ARRANGEMENTS AND FINANCIAL INSTRUMENTS In April 2020, we issued $500.0 million of 2.50% notes due April 15, 2030, with cash proceeds received of $495.0 million, net of discounts and underwriters' fees. Interest is payable semiannually in arrears in April and October of each year. The net proceeds from this issuance were used to pay down borrowings and for general corporate purposes. During the nine months ended August 31, 2020 and 2019, we repaid $250.0 million and $106.3 million, respectively, of the five-year term loan due August 17, 2022, which included $56.3 million of aggregate quarterly principal payments required in each nine-month period. During the nine months ended August 31, 2019, we also repaid $100.0 million of the three-year term loan due August 17, 2020. 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. Management assesses foreign currency risk based on transactional cash flows and translational volatility and may enter into forward contract and currency swaps to reduce fluctuations in the long or short currency positions. Forward contracts are generally less than 18 months duration. Currency swap agreements are established in conjunction with the terms of the underlying debt issues. At August 31, 2020, we had foreign currency exchange contracts to purchase or sell $363.4 million of foreign currencies as compared to $489.2 million at November 30, 2019. 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. All foreign currency exchange contracts outstanding at August 31, 2020 have durations of less than 18 months, including $107.0 million of notional contracts that have durations of less than seven days and are used to hedge short-term cash flow funding. 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 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. 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. We also enter into fair value foreign currency exchange contracts to 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. At August 31, 2020, the notional value of these contracts was $291.0 million. Any gains or losses recorded based on both the change in fair value of these contracts and the change in the currency component of the underlying loans are recognized in our consolidated income statement as other income, net. We also utilize cross currency interest rate swap contracts that are considered net investment hedges. As of August 31, 2020, we had cross currency interest rate swap contracts of (i) $250 million notional value to receive $250 million at three-month U.S. LIBOR plus 0.685% and pay £194.1 million at three-month GBP LIBOR plus 0.740% and (ii) £194.1 million notional value to receive £194.1 million at three-month GBP LIBOR plus 0.740% and pay €221.8 million at three-month Euro EURIBOR plus 0.808%. These cross currency interest rate swap contracts expire in August 2027. 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 swap agreements to minimize worldwide financing costs and to achieve a desired mix of variable and fixed rate debt. As of August 31, 2020, we have outstanding interest rate swap contracts for a notional amount of $350 million. Those interest rate swap contracts include a $100 million notional value of interest rate swap contracts, where we receive interest at 3.25% and pay a variable rate of interest based on three-month LIBOR plus 1.22%, which expire in November 2025, and are designated as fair value hedges of the changes in fair value of $100 million of the $250 million 3.25% medium-term notes due 2025. We also have $250 million notional interest rate swap contracts where we receive interest at 3.40% and pay a variable rate of interest based on three-month LIBOR plus 0.685%, which expire in August 2027, and are designated as fair value hedges of the changes in fair value of $250 million of the $750 million 3.40% term notes due 2027. Any realized gain or loss on these swap contracts was offset by a corresponding increase or decrease of the value of the hedged debt. All derivatives are recognized at fair value in the balance sheet and recorded in either other current assets, other long-term assets, other accrued liabilities or other long-term liabilities, depending upon their nature and maturity. Hedge ineffectiveness was not material. The following table discloses the notional amount and fair values of derivative instruments on our balance sheet (in millions):
As of August 31, 2020 | 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 long-term assets |  | $ | 350.0 |  |  | $ | 45.6 |  |  | Other accrued liabilities |  | $ | — |  |  | $ | — |
Foreign exchange contracts | Other current assets |  | 156.5 |  |  | 18.1 |  |  | Other accrued liabilities |  | 206.9 |  |  | 21.3 |
Cross currency contracts | Other current assets / Other long-term assets |  | — |  |  | — |  |  | Other long-term liabilities |  | 524.5 |  |  | 19.3 |
Total |  |  |  |  | $ | 63.7 |  |  |  |  |  |  | $ | 40.6 |
As of August 31, 2019 | 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 long-term assets |  | $ | 350.0 |  |  | $ | 28.2 |  |  | Other accrued liabilities |  | $ | — |  |  | $ | — |
Foreign exchange contracts | Other current assets |  | 104.7 |  |  | 2.2 |  |  | Other accrued liabilities |  | 350.6 |  |  | 4.6 |
Cross currency contracts | Other current assets / Other long-term assets |  | 236.4 |  |  | 14.0 |  |  | Other long-term liabilities |  | 243.9 |  |  | 13.4 |
Total |  |  |  |  | $ | 44.4 |  |  |  |  |  |  | $ | 18.0 |
As of November 30, 2019 | 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 long-term assets |  | $ | 350.0 |  |  | $ | 20.9 |  |  | Other accrued liabilities |  | $ | — |  |  | $ | — |
Foreign exchange contracts | Other current assets |  | 293.1 |  |  | 3.3 |  |  | Other accrued liabilities |  | 196.1 |  |  | 3.6 |
Cross currency contracts | Other current assets / Other long-term assets |  | 495.5 |  |  | 3.2 |  |  | Other long-term liabilities |  | — |  |  | — |
Total |  |  |  |  | $ | 27.4 |  |  |  |  |  |  | $ | 3.6 |
The following tables disclose the impact of derivative instruments on our other comprehensive income ("OCI"), accumulated other comprehensive income ("AOCI") and our consolidated income statement for the three- and nine-month periods ended August 31, 2020 and 2019 (in millions):
Fair Value Hedges |  |  |  |  |  |  |  |  |  |
Derivative |  | Income statement location |  | Income (expense) |  |  |  |  |  |
|  |  |  | Three months ended August 31, 2020 |  | Three months ended August 31, 2019 |  | Nine months ended August 31, 2020 |  | Nine months ended August 31, 2019
Interest rate contracts |  | Interest expense |  | $ | 1.8 |  |  | $ | — |  |  | $ | 3.2 |  |  | $ | (0.3) |
Three months ended August 31, | Income statement location | Gain (loss) recognized in income |  |  | Income statement location | Gain (loss) recognized in income |
Derivative |  | 2020 | 2019 | Hedged item |  | 2020 | 2019
Foreign exchange contracts | Other income, net | $ | (7.6) |  | $ | (5.3) |  | Intercompany loans | Other income, net | $ | 7.3 |  | $ | 5.2 |
Nine months ended August 31, | Income statement location | Gain (loss) recognized in income |  |  | Income statement location | Gain (loss) recognized in income |
Derivative |  | 2020 | 2019 | Hedged item |  | 2020 | 2019
Foreign exchange contracts | Other income, net | $ | (4.1) |  | $ | (2.6) |  | Intercompany loans | Other income, net | $ | 3.1 |  | $ | 2.0 |
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- and nine-months ended August 31, 2020 and 2019.
Cash Flow Hedges |  |  |  |  |  |  |  |  |  |
Three months ended August 31, |  |  |  |  |  |  |  |  |  |
Derivative |  | Gain (loss) recognized in OCI |  |  |  | Income statement location |  | Gain (loss) reclassified from AOCI |  |
|  | 2020 |  | 2019 |  |  |  | 2020 |  | 2019
Interest rate contracts |  | $ | — |  |  | $ | — |  |  | Interest expense |  | $ | 0.2 |  |  | $ | 0.2 |
Foreign exchange contracts |  | (0.6) |  |  | (0.3) |  |  | Cost of goods sold |  | 1.1 |  |  | 0.5 |
Total |  | $ | (0.6) |  |  | $ | (0.3) |  |  |  |  | $ | 1.3 |  |  | $ | 0.7 |
Nine months ended August 31, |  |  |  |  |  |  |  |  |  |
Derivative |  | Gain (loss) recognized in OCI |  |  |  | Income statement location |  | Gain (loss) reclassified from AOCI |  |
|  | 2020 |  | 2019 |  |  |  | 2020 |  | 2019
Interest rate contracts |  | $ | — |  |  | $ | — |  |  | Interest expense |  | $ | 0.4 |  |  | $ | 0.4 |
Foreign exchange contracts |  | 2.3 |  |  | 0.3 |  |  | Cost of goods sold |  | 1.2 |  |  | 0.9 |
Total |  | $ | 2.3 |  |  | $ | 0.3 |  |  |  |  | $ | 1.6 |  |  | $ | 1.3 |
For all cash flow and settled interest rate fair value hedge derivatives, the net amount of accumulated other comprehensive income (loss) expected to be reclassified in the next 12 months is $1.3 million as an increase to earnings.
Net Investment Hedges |  |  |  |  |  |  |  |  |  |
Three months ended August 31, |  |  |  |  |  |  |  |  |  |
Derivative |  | Gain (loss) recognized in OCI |  |  |  | Income statement location |  | Gain (loss) excluded from the assessment of hedge effectiveness |  |
|  | 2020 |  | 2019 |  |  |  | 2020 |  | 2019
Cross currency contracts |  | $ | (17.4) |  |  | $ | 3.0 |  |  | Interest expense |  | $ | 0.3 |  |  | $ | 1.7 |
Nine months ended August 31, |  |  |  |  |  |  |  |  |  |
Derivative |  | Gain (loss) recognized in OCI |  |  |  | Income statement location |  | Gain (loss) excluded from the assessment of hedge effectiveness |  |
|  | 2020 |  | 2019 |  |  |  | 2020 |  | 2019
Cross currency contracts |  | $ | (20.7) |  |  | $ | 0.3 |  |  | Interest expense |  | $ | 2.7 |  |  | $ | 3.8 |
For all net investment hedges, no amounts have been reclassified out of accumulated other comprehensive income (loss). The amounts noted in the tables above for OCI do not include any adjustments for the impact of deferred income taxes.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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