FINANCING ARRANGEMENTS AND FINANCIAL INSTRUMENTS

In December 2017, we repaid our $250 million, 5.75% notes that matured on December 15, 2017. Also, in February 2018, we repaid $50 million of the three-year term loan due August 17, 2020 and $18.8 million (the required quarterly principal installment) of the five-year term loan due August 17, 2022.

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.

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. As of February 28, 2018, the maximum time frame for our foreign exchange forward contracts is 9 months.

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. From time to time, we enter into fair value foreign currency exchange contracts to manage exposure to currency fluctuations in certain intercompany loans between subsidiaries. At February 28, 2018, the notional value of these contracts was $312.3 million. During the three months ended February 28, 2018 and 2017, we recognized losses of $2.2 million and $2.7 million, respectively, on the change in fair value of these contracts, which was offset by gains of $2.0 million and $2.5 million, respectively, on the change in the currency component of the underlying loans. Both the gains and the losses were recognized in our consolidated income statement as other income, net.

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 achieve a desired mix of variable and fixed rate debt. As of February 28, 2018, we have $100 million notional value of interest rate swap contracts outstanding which expire in November 2025. We receive interest at 3.25% and pay a variable rate of interest based on three-month LIBOR plus 1.22%. These swaps 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. Any realized gain or loss on these swaps was offset by a corresponding increase or decrease of the value of the hedged debt. Hedge ineffectiveness was not material.

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, 2018	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	$	5.7
Foreign exchange contracts	Other current assets	307.4		11.0		Other accrued liabilities	109.7		4.8
Total				$	11.0				$	10.5

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 November 30, 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	$	100.0	$	2.5
Foreign exchange contracts	Other current assets	326.3		12.7		Other accrued liabilities	79.6		4.7
Total				$	12.7				$	7.2

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, 2018 and 2017 (in millions):



Fair Value Hedges
Derivative	Income statement location	Income (expense)
		2018		2017
Interest rate contracts	Interest expense	$	0.1	$	0.3



	Income statement location	Loss recognized in income					Income statement location	Gain recognized in income
Derivative		2018		2017		Hedged item		2018		2017
Foreign exchange contracts	Other income, net	$	2.2	$	2.7	Intercompany loans	Other income, net	$	2.0	$	2.5



Cash Flow Hedges
Derivative	Gain or (loss) recognized in OCI						Income statement location	Gain or (loss) reclassified from AOCI
	2018			2017				2018			2017
Interest rate contracts	$	—		$	(0.2	)	Interest expense	$	0.1		$	(0.1	)
Foreign exchange contracts	(1.2		)	(0.4		)	Cost of goods sold	(1.1		)	1.1
Total	$	(1.2	)	$	(0.6	)		$	(1.0	)	$	1.0

For all derivatives, the net amount of accumulated other comprehensive income (loss) expected to be reclassified in the next 12 months is $4.2 million as a decrease to earnings. 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.