Note 11 - Financial Instruments

12 Months Ended

Nov. 28, 2015

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note 11: Financial Instruments

Foreign Currency Derivative Instruments

As a result of being a global enterprise, our earnings, cash flows and financial position are exposed to foreign currency risk from foreign currency denominated receivables and payables. These items are denominated in various foreign currencies, including the Euro, British pound sterling, Canadian dollar, Chinese renminbi, Japanese yen, Australian dollar, Argentine peso, Brazilian real, Colombian peso, Mexican peso, Turkish lira, Egyptian pound, Indian rupee, and Malaysian ringgit.

Our objective is to balance, where possible, local currency denominated assets to local currency denominated liabilities to have a natural hedge and minimize foreign exchange impacts. We take steps to minimize risks from foreign currency exchange rate fluctuations through normal operating and financing activities and, when deemed appropriate, through the use of derivative instruments. We do not enter into any speculative positions with regard to derivative instruments.

We enter into derivative contracts with a group of investment grade multinational commercial banks. We evaluate the credit quality of each of these banks on a periodic basis as warranted.

Effective October 7, 2015, we entered into three cross-currency swap agreements to convert a notional amount of $134,736 of foreign currency denominated intercompany loans into US dollars. The first swap matures in 2017, the second swap matures in 2018 and the third swap matures in 2019. As of November 28, 2015, the combined fair value of the swaps was an asset of $5,384 and was included in other assets in the Consolidated Balance Sheets. The swaps were designated as cash-flow hedges for accounting treatment. The lesser amount between the cumulative change in the fair value of the actual swaps and the cumulative change in the fair value of hypothetical swaps is recorded in accumulated other comprehensive income (loss) in the Consolidated Balance Sheets. The difference between the cumulative change in the fair value of the actual swaps and the cumulative change in the fair value of hypothetical swaps are recorded as other income (expense), net in the Consolidated Statements of Income. In a perfectly effective hedge relationship, the two fair value calculations would exactly offset each other. Any difference in the calculation represents hedge ineffectiveness. The ineffectiveness calculations as of November 28, 2015 resulted in additional pre-tax loss of $53 year-to-date as the change in fair value of the cross-currency swaps was less than the change in the fair value of the hypothetical swaps. The amount in accumulated other comprehensive income (loss) related to cross-currency swaps was a loss of $1,317 as of November 28, 2015. The estimated net amount of the existing loss that is reported in accumulated other comprehensive income (loss) as of November 28, 2015 that is expected to be reclassified into earnings within the next twelve months is $785. As of November 28, 2015, we do not believe any gains or losses will be reclassified into earnings as a result of the discontinuance of these cash flow hedges because the original forecasted transaction will not occur.

The following table summarizes the cross-currency swaps outstanding as of November 28, 2015:

	Fiscal Year of Expiration	Interest Rate		Notional Value		Fair Value
Pay EUR	2017		3.05%	$	44,912	$	2,055
Receive USD			3.9145%
Pay EUR	2018		3.45%		44,912		1,772
Receive USD			4.5374%
Pay EUR	2019		3.80%		44,912		1,557
Receive USD			5.0530%
Total				$	134,736	$	5,384

Except for the cross-currency swap agreements listed above, foreign currency derivative instruments outstanding are not designated as hedges for accounting purposes. The gains and losses related to mark-to-market adjustments are recognized as other income or expense in the Consolidated Statements of Income during the periods in which the derivative instruments are outstanding. See Note 13 for fair value amounts of these derivative instruments.

As of November 28, 2015, we had forward foreign currency contracts maturing between December 15, 2015 and October 7, 2016. The mark-to-market effect associated with these contracts, on a net basis, at each year end was a gain of $10,442, a gain of $574 and a loss of $856 in 2015, 2014 and 2013, respectively. These gains and losses were largely offset by the underlying transaction gains and losses resulting from the foreign currency exposures for which these contracts relate.

Interest Rate Swaps

We have interest rate swap agreements to convert $75,000 of our Senior Notes to variable interest rates. See Note 7 for additional information. The change in fair value of the Senior Notes, attributable to the change in the risk being hedged, was a liability of $3,356 at November 28, 2015 and $4,735 at November 29, 2014 and were included in long-term debt in the Consolidated Balance Sheets. The fair value of the swaps in total was an asset of $3,395 at November 28, 2015 and $4,726 at November 29, 2014 and were included in other assets in the Consolidated Balance Sheets. The swaps were designated for hedge accounting treatment as fair value hedges.

The changes in the fair value of the swap and the fair value of the Senior Notes attributable to the change in the risk being hedged are recorded as other income (expense), net in the Consolidated Statements of Income. In a perfectly effective hedge relationship, the two fair value calculations would exactly offset each other. Any difference in the calculation represents hedge ineffectiveness. The calculation as of November 28, 2015, resulted in additional year-to-date pre-tax gain of $48 as the fair value of the interest rate swaps decreased by less than the change in the fair value of the Senior Notes attributable to the change in the risk being hedged. The calculations as of November 29, 2014 and November 30, 2013 resulted in an additional year-to-date pre-tax gain of $126 and pre-tax loss of $746, respectively.

Concentrations of credit risk with respect to trade accounts receivable are limited due to the large number of entities in the customer base and their dispersion across many different industries and countries. As of November 28, 2015, there were no significant concentrations of credit risk.