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Financial Instruments | 9 Months Ended
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Aug. 31, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Financial Instruments | FINANCING ARRANGEMENTS AND FINANCIAL INSTRUMENTS During the three months ended August 31, 2022, we entered into a 364-day $500 million revolving credit facility, which will expire in July 2023. The current pricing for the credit facility, on a fully drawn basis, is SOFR + 1.23%. The pricing of the credit facility is based on a credit rating grid that contains a fully drawn maximum pricing of the credit facility equal to SOFR + 1.60%. The provisions of this revolving credit facility restrict subsidiary indebtedness and require us to maintain a minimum interest coverage ratio, consistent with our $1.5 billion five-year revolving credit facility. We do not expect that this covenant would limit our access to this revolving credit facility for the foreseeable future. Also during the three months ended August 31, 2022, we repaid our $750 million, 2.70% notes due in August 2022. 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. For the three and nine months ended August 31, 2022 and 2021, hedge ineffectiveness was not material. 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. 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, 2022, we had foreign currency exchange contracts to purchase or sell $539.5 million of foreign currencies as compared to $583.6 million at November 30, 2021. 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. Hedges of foreign currency denominated assets and liabilities include foreign currency exchange contracts with a notional value of $381.1 million at August 31, 2022. 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. All foreign exchange contracts outstanding at August 31, 2022 have durations of less than 18 months, including $151.9 million of notional contracts that have durations of less than one month and are used to hedge short-term cash flow funding. 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 August 31, 2022 |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts | Other current assets / Other long-term assets |  | $ | — |  |  | $ | — |  |  | Other long-term liabilities |  | $ | 600.0 |  |  | $ | 30.8 |
Foreign exchange contracts | Other current assets |  | 316.3 |  |  | 14.9 |  |  | Other accrued liabilities |  | 223.2 |  |  | 2.3 |
Cross currency contracts | Other current assets / Other long-term assets |  | 439.6 |  |  | 57.5 |  |  | Other long-term liabilities |  | 443.2 |  |  | 7.7 |
Total |  |  |  |  | $ | 72.4 |  |  |  |  |  |  | $ | 40.8 |
As of November 30, 2021 |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts | Other current assets / Other long-term assets |  | $ | 350.0 |  |  | $ | 23.1 |  |  | Other long-term liabilities |  | $ | — |  |  | $ | — |
Foreign exchange contracts | Other current assets |  | 380.8 |  |  | 8.3 |  |  | Other accrued liabilities |  | 202.8 |  |  | 2.8 |
Cross currency contracts | Other current assets / Other long-term assets |  | 251.0 |  |  | 4.4 |  |  | Other long-term liabilities |  | 257.5 |  |  | 8.0 |
Total |  |  |  |  | $ | 35.8 |  |  |  |  |  |  | $ | 10.8 |
In the first quarter of 2022, we entered into $250 million notional value interest rate swap contracts where we receive interest at 2.50% and pay a variable rate of interest based on USD SOFR plus 0.684%, which expire in April 2030, and are designated as fair value hedges of the changes in fair value of $250 million of the $500 million 2.50% term notes due in 2030. The fair value of these interest rate swap contracts is offset by a corresponding increase or decrease in the value of the hedged debt. Also during the first quarter of 2022, we entered into cross currency interest rate swap contracts of (i) $250 million notional value to receive $250 million at USD SOFR plus 0.684% and pay £184.1 million at GBP SONIA plus 0.5740% and (ii) £184.1 million notional value to receive £184.1 million at GBP SONIA plus 0.574% and pay €219.2 million at Euro ESTR plus 0.667%, both of which expire in April 2030. In conjunction with the phase-out of LIBOR, during the first quarter of 2022 we amended our previously existing cross currency swaps which expire in August 2027 such that, effective February 15, 2022, we now pay and receive at GBP SONIA plus 0.859% (previously GBP LIBOR plus 0.740%). 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- and nine-months ended August 31, 2022 and 2021 (in millions):
Fair Value Hedges |  |  |  |  |  |  |  |  |  |
Derivative |  | Income statement location |  | Income (expense)
|  |  |  | Three months ended August 31, 2022 |  | Three months ended August 31, 2021 |  | Nine months ended August 31, 2022 |  | Nine months ended August 31, 2021
Interest rate contracts |  | Interest expense |  | $ | 0.6 |  |  | $ | 2.1 |  |  | $ | 5.4 |  |  | $ | 6.1 |
| Income statement location | Gain (loss) recognized in income |  | Income statement location | Gain (loss) recognized in income
Derivative |  | 2022 |  | 2021 | Hedged item |  | 2022 |  | 2021
Three months ended August 31, |  |  |  |  |  |  |  |  |
Foreign exchange contracts | Other income, net | $ | 3.6 |  |  | $ | 5.6 |  | Intercompany loans | Other income, net | $ | (3.2) |  |  | $ | (5.4) |
Nine months ended August 31, |  |  |  |  |
Foreign exchange contracts | Other income, net | $ | 6.9 |  |  | $ | (0.3) |  | Intercompany loans | Other income, net | $ | (6.1) |  |  | $ | 1.1 |
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 and nine months ended August 31, 2022 and 2021.
Cash Flow Hedges |  |
Derivative |  | Gain (loss) recognized in OCI |  | Income statement location |  | Gain (loss) reclassified from AOCI
|  | 2022 |  | 2021 |  |  |  | 2022 |  | 2021
Three months ended August 31, |  |  |  |  |  |  |  |  |  |
Interest rate contracts |  | $ | 1.8 |  |  | $ | — |  |  | Interest expense/ Other income, net |  | $ | 18.8 |  |  | $ | 0.2 |
Foreign exchange contracts |  | 2.8 |  |  | 1.5 |  |  | Cost of goods sold |  | 0.7 |  |  | (0.3) |
Total |  | $ | 4.6 |  |  | $ | 1.5 |  |  |  |  | $ | 19.5 |  |  | $ | (0.1) |
Nine months ended August 31, |  |  |  |  |  |  |  |  |  |
Interest rate contracts |  | $ | 18.7 |  |  | $ | 0.3 |  |  | Interest expense/ Other income, net |  | $ | 19.1 |  |  | $ | 0.4 |
Foreign exchange contracts |  | 5.2 |  |  | (0.9) |  |  | Cost of goods sold |  | 0.7 |  |  | (0.6) |
Total |  | $ | 23.9 |  |  | $ | (0.6) |  |  |  |  | $ | 19.8 |  |  | $ | (0.2) |
During the three months ended May 31, 2022, we entered into treasury lock arrangements with a notional amount totaling $200 million in order to manage our interest rate risk associated with the anticipated issuance of at least $200 million of fixed rate debt by August 2022. These treasury locks had a maturity date of August 12, 2022 and an average fixed rate of 1.89%. We designated these treasury lock arrangements as cash flow hedges with any unrealized gain, prior to settlement, recognized in accumulated other comprehensive income. During the three months ended August 31, 2022, we settled the $200 million notional treasury locks upon determining we would not issue fixed rate debt but rather enter into the previously described $500 million 364-day revolving credit facility. The proceeds received upon settlement of these treasury lock arrangements were $18.7 million and were recognized in Other income, net in our Condensed consolidated income statements for the three and nine months ended August 31, 2022. For all cash flow and settled interest rate fair value hedge derivatives, the net amount of accumulated other comprehensive loss expected to be reclassified in the next 12 months is $3.6 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
|  | 2022 |  | 2021 |  |  |  | 2022 |  | 2021
Three months ended August 31, |  |  |  |  |  |  |  |  |  |
Cross currency contracts |  | $ | 29.7 |  |  | $ | 8.4 |  |  | Interest expense |  | $ | 2.4 |  |  | $ | 0.4 |
Nine months ended August 31, |  |  |  |  |  |  |  |  |  |
Cross currency contracts |  | $ | 51.8 |  |  | $ | 4.9 |  |  | Interest expense |  | $ | 4.1 |  |  | $ | 1.1 |
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.

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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 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1B -Subparagraph (h) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1C -Subparagraph (c) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1I -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1I -Subparagraph (d) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(c)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1B -Subparagraph (g) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1C -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1C -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1E -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495348-112611 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1I -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -SubTopic 20 -Section 50 -Paragraph 1B -Subparagraph (i) -URI http://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611 + Details
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