Financial Instruments

3 Months Ended

Feb. 28, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

FINANCIAL INSTRUMENTS

FINANCING ARRANGEMENTS AND FINANCIAL INSTRUMENTS

In July 2016, we entered into a 15-year lease for a headquarters building in Hunt Valley, Maryland. The lease, which is expected to commence upon completion of building construction and fit-out, currently scheduled for the second half of 2018, requires monthly lease payments of approximately $0.9 million beginning six months after lease commencement. The $0.9 million monthly lease payment is subject to adjustment after an initial 60-month period and thereafter on an annual basis as specified in the lease agreement. In addition, the initial $0.9 million monthly lease payment is subject to increase in the event of agreed-upon changes to specifications related to the headquarters building. We expect to consolidate our Corporate staff and certain non-manufacturing U.S. employees, currently housed in four locations in the Hunt Valley, Maryland area, to the new headquarters building.

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

During fiscal year 2016, we entered into multiple fair value foreign currency exchange contracts to hedge the currency component of certain intercompany loans between our subsidiaries. At February 28, 2017, the notional value of these contracts was $113.0 million. During the three months ended February 28, 2017, we recognized a $2.7 million loss on the change in fair value of these contracts, which was offset by a $2.5 million gain on the change in the currency component of the underlying loans. Both the loss and the gain were recognized in our consolidated income statement as other income, net.

During the three months ended February 28, 2017, we entered into a total of $75 million of forward starting interest rate swap agreements to manage our interest rate risk associated with the anticipated issuance of at least $75 million of fixed rate notes by December 2017. The weighted average fixed rate of these agreements is 2.49% and is based upon the applicable U.S. LIBOR swap rate at the inception of each agreement. We intend to cash settle these agreements upon issuance of the notes. If the applicable U.S. LIBOR swap rate increases at the time of settlement of the agreements, we will receive a one-time cash payment from the counterparties. If the applicable U.S. LIBOR swap rate decreases at the time of settlement of the agreements, we will make a one-time cash payment to the counterparties.We have designated these forward starting interest rate swap agreements, which expire on December 15, 2017, as cash flow hedges. Amounts associated with these agreements, including the related mark-to-market prior to settlement, will be deferred in other comprehensive income; upon settlement, any gain or loss realized will be amortized over the life of the fixed rate notes as a component of interest expense.

As of February 28, 2017, the maximum time frame for our foreign exchange forward contracts is 9 months.

For all derivatives, the net amount of accumulated other comprehensive income expected to be reclassified in the next 12 months is $2.1 million as an increase to 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 their nature and maturity.

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

As of February 28, 2017	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 accrued liabilities	$	175.0	$	2.1
Foreign exchange contracts	Other current assets	111.3		3.5		Other accrued liabilities	$	284.5	8.5
Total				$	3.5				$	10.6
As of February 29, 2016	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	$	4.5	Other accrued liabilities	$	—	$	—
Foreign exchange contracts	Other current assets	150.5		4.4		Other accrued liabilities	119.8		1.8
Total				$	8.9				$	1.8
As of November 30, 2016	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 accrued liabilities	$	100.0	$	1.2
Foreign exchange contracts	Other current assets	204.3		4.9		Other accrued liabilities	244.9		5.4
Total				$	4.9				$	6.6

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 three month periods ended February 28, 2017 and February 29, 2016 (in millions):

Fair Value Hedges
Derivative	Income statement location	Income (expense)
		2017		2016
Interest rate contracts	Interest expense	$	0.3	$	0.6

	Income statement location	Gain (loss) recognized in income						Income statement location	Gain (loss) recognized in income
Derivative		2017			2016		Hedged item		2017		2016
Foreign exchange contracts	Other income, net	$	(2.7	)	$	—	Intercompany loans	Other income, net	$	2.5	$	—

Cash Flow Hedges
Derivative	Gain or (loss) recognized in OCI					Income statement location	Gain or (loss) reclassified from AOCI
	2017			2016			2017			2016
Interest rate contracts	$	(0.2	)	$	—	Interest expense	$	(0.1	)	$	(0.1	)
Foreign exchange contracts	(0.4		)	2.1		Cost of goods sold	1.1			1.3
Total	$	(0.6	)	$	2.1		$	1.0		$	1.2

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