Financial Instruments

12 Months Ended

Nov. 30, 2015

Derivative Instrument Detail [Abstract]

Financial Instruments

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 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

We are potentially exposed to foreign currency fluctuations affecting net investments, transactions and earnings denominated in foreign currencies. We selectively hedge the potential effect of these foreign currency fluctuations by entering into foreign currency exchange contracts with highly-rated financial institutions.

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 which are designated as hedges of assets, liabilities or firm commitments are recognized through income, offsetting the change in fair value of the hedged item.

At November 30, 2015, we had foreign currency exchange contracts to purchase or sell $264.5 million of foreign currencies versus $262.7 million at November 30, 2014. 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. At November 30, 2015, we had $140.1 million of notional contracts that have durations of less than seven days that are used to hedge short-term cash flow funding. The remaining contracts have durations of one to twelve months.

Interest Rates

We finance a portion of our operations with both fixed and variable rate debt instruments, primarily 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.

During the year ended November 30, 2015, we entered into a total of $100 million of forward starting interest rate swap agreements to manage our interest rate risk associated with the anticipated issuance of fixed rate notes in November 2015. We cash settled all of these agreements, which were designated as cash flow hedges, for a loss of $1.2 million simultaneous with the issuance of the notes at an all-in effective fixed rate of 3.45% on the full $250 million of debt. The loss on these agreements is deferred in accumulated other comprehensive income and will be amortized to increase interest expense over the life of the notes. Hedge ineffectiveness of these agreements was not material.

In November 2015, we entered into an interest rate swap contract for a notional amount of $100 million to receive interest at 3.25% and pay a variable rate of interest based on three-month LIBOR plus 1.22%. We designated these swaps, which expire in November 2025, as fair value hedges of the changes in fair value of $100 million of the $250 million3.25% medium-term notes due 2025 that we issued in November 2015. Any unrealized gain or loss on these swaps will be offset by a corresponding increase or decrease in the value of the hedged debt. Hedge ineffectiveness was not material.

In March 2006, we entered into interest rate swap contracts for a total notional amount of $100 million to receive interest at 5.20% and pay a variable rate of interest based on three-month LIBOR minus 0.05%. We designated these swaps, which expired in December 2015, as fair value hedges of the changes in fair value of $100 million of the $200 million5.20% medium-term notes due 2015 that we issued in December 2005. Any unrealized gain or loss on these swaps was offset by a corresponding increase or decrease in the value of the hedged debt. Hedge ineffectiveness was not material.

The following tables disclose the derivative instruments on our balance sheet as of November 30, 2015 and 2014, which are all recorded at fair value:

As of November 30, 2015:
(millions)	Asset Derivatives					Liability Derivatives
Derivatives	Balance sheet location	Notional amount		Fair value		Balance sheet location	Notional amount		Fair value
Interest rate contracts	Other current  assets	$	100.0	$	2.5	Other accrued liabilities	$	100.0	$	0.6
Foreign exchange contracts	Other current assets	179.5		3.4		Other accrued liabilities	85.0		0.7
Total				$	5.9				$	1.3
As of November 30, 2014:
(millions)	Asset Derivatives					Liability Derivatives
Derivatives	Balance sheet location	Notional amount		Fair value		Balance sheet location	Notional amount		Fair value
Interest rate contracts	Other current  assets	$	100.0	$	7.4	Other accrued liabilities	—		—
Foreign exchange contracts	Other current assets	106.3		4.9		Other accrued liabilities	$	156.4	$	1.4
Total				$	12.3				$	1.4

The following tables disclose the impact of derivative instruments on other comprehensive income (OCI), accumulated other comprehensive income (AOCI) and our income statement for the years ended November 30, 2015, 2014 and 2013:

Fair value hedges (millions)
	Income statement location	Income (expense)
Derivative		2015		2014		2013
Interest rate contracts	Interest expense	$	5.1	$	5.0	$	5.0

Cash flow hedges (millions)
	Gain (loss) recognized in OCI							Income statement location	Gain (loss)   reclassified from AOCI
Derivative	2015			2014		2013			2015			2014			2013
Interest rate contracts	$	(1.2	)	—		$	9.2	Interest expense	$	(0.2	)	$	(0.2	)	$	(1.3	)
Foreign exchange contracts	6.2			$	4.2	1.0		Cost of goods sold	7.1			(1.1		)	0.3
Total	$	5.0		$	4.2	$	10.2		$	6.9		$	(1.3	)	$	(1.0	)

The amount of gain or loss recognized in income on the ineffective portion of derivative instruments is not material. The net amount of accumulated other comprehensive income expected to be reclassified into income related to these contracts in the next twelve months is a $2.8 million increase to earnings.

Fair Value of Financial Instruments

The carrying amount and fair value of financial instruments at November 30, 2015 and 2014 were as follows:

	2015				2014
(millions)	Carrying amount		Fair value		Carrying amount		Fair value
Long-term investments	$	112.6	$	112.6	$	113.0	$	113.0
Long-term debt (including current portion)	1,256.2		1,325.6		1,015.3		1,109.0
Derivatives related to:
Interest rates (assets)	2.5		2.5		7.4		7.4
Interest rates (liabilities)	0.6		0.6		—		—
Foreign currency (assets)	3.4		3.4		4.9		4.9
Foreign currency (liabilities)	0.7		0.7		1.4		1.4

Because of their short-term nature, the amounts reported in the balance sheet for cash and cash equivalents, receivables, short-term borrowings and trade accounts payable approximate fair value.

Investments in affiliates are not readily marketable, and it is not practicable to estimate their fair value. Long-term investments are comprised of fixed income and equity securities held on behalf of employees in certain employee benefit plans and are stated at fair value on the balance sheet. The cost of these investments was $80.0 million and $80.1 million at November 30, 2015 and 2014, respectively.

Concentrations of Credit Risk

We are potentially exposed to concentrations of credit risk with trade accounts receivable, prepaid allowances and financial instruments. The customers of our consumer segment are predominantly food retailers and food wholesalers. Consolidations in these industries have created larger customers. In addition, competition has increased with the growth in alternative channels including mass merchandisers, dollar stores, warehouse clubs, discount chains and e-commerce. This has caused some customers to be less profitable and increased our exposure to credit risk. We have a large and diverse customer base and, other than with respect to the two customers disclosed in note 16, each of which accounted for greater than 10% of our consolidated sales, there was no material concentration of credit risk in these accounts at November 30, 2015. At November 30, 2015, amounts due from those two customers aggregated approximately 12% of consolidated trade accounts receivable and prepaid allowances. Current credit markets are highly volatile and some of our customers and counterparties are highly leveraged. We continue to closely monitor the credit worthiness of our customers and counterparties and generally do not require collateral. We believe that the allowance for doubtful accounts properly recognized trade receivables at realizable value. We consider nonperformance credit risk for other financial instruments to be insignificant.