Management's Discussion and Analysis

Financial Condition

In the second quarter of 2004, we issued a total of $50 million in medium-term notes under our existing $375 million shelf registration. The $50 million of medium-term notes mature on April 15, 2009 and pay interest semi-annually at a rate of 3.35%. The proceeds of this issuance were used to pay down short-term debt. In 2005, we purchased 5.4 million shares of common stock for $185.6 million under our share repurchase programs versus 5.1 million shares of common stock for $173.8 million in 2004 and 4.5 million shares of common stock for $119.5 million in 2003. In the fourth quarter of 2005, we completed our $300 million share repurchase authorization and began to buy against our $400 million authorization approved by the Board of Directors in June 2005. As of November 30, 2005, $362 million remained under the $400 million share repurchase program. In the absence of significant acquisition activity, we expect to complete all available purchases under this authorization by the end of 2007. The common stock issued in 2005, 2004 and 2003 relates to our stock compensation plans.

Dividend payments increased to $86.2 million in 2005, up 12.1% compared to $76.9 million in 2004 and up 34.5% compared to $64.1 million in 2003. Dividends paid in 2005 totaled $0.64 per share, up from $0.56 per share in 2004 and $0.46 per share in 2003. In November 2005, the Board of Directors approved a 12.5% increase in the quarterly dividend from $0.16 to $0.18 per share. During the last five years, dividends per share have risen at a compounded annual rate of 12.5%.

Our pension plans had a shortfall of plan assets over accumulated benefit obligations at their 2005 and 2004 measurement dates of $164.6 million and $162.8 million, respectively. These shortfalls were due to the continued low interest rate environment and lower than assumed asset returns in prior years. In 2005 the shortfall increased, leading to a $0.8 million increase in minimum pension liability. This compares to a decrease in minimum pension liability of $7.2 million in 2004. Cash payments to pension plans, including unfunded plans, were $32.8 million in 2005, $30.6 million in 2004 and $27.2 million in 2003. We plan to make 2006 pension plan contributions similar to those made in 2005. Future increases or decreases in pension liabilities and required cash contributions are highly dependent on changes in interest rates and the actual return on plan assets. We base our investment of plan assets, in part, on the duration of each plan's liabilities. Across all plans, 69% of assets are invested in equities and 31% in fixed income investments.

Our ratio of debt-to-total-capital (total capital includes debt, minority interest and shareholders' equity) was 40.7% as of November 30, 2005, a decrease from 40.9% at November 30, 2004 and below our target range of 45-55%. The decrease was primarily the result of a decrease in our total debt of $68.2 million. During the year, the level of our short-term debt varies. It is usually lower, however, at the end of the year. The average short-term borrowings outstanding for the year ended November 30, 2005 and 2004 were $299.3 million and $295.2 million, respectively.

The reported values of our assets and liabilities held in our non-U.S. subsidiaries and affiliates have been significantly affected by fluctuations in foreign exchange rates between periods. During the year ended November 30, 2005, the exchange rates for the Euro and British pound sterling were substantially lower versus the U.S. dollar than in 2004. Exchange rate fluctuations resulted in a decrease in accounts receivable of $22 million, inventory of $11 million, goodwill of $62 million and other comprehensive income of approximately $97 million since November 30, 2004.

In January 2005, we filed a new shelf registration statement with the Securities Exchange Commission to issue up to $500 million of medium-term notes in the U.S. In 2005, we entered into forward starting interest rate swaps to manage the interest rate risk associated with the anticipated issuance of $100 million fixed rate medium-term notes expected to be issued in late 2005 under the new shelf registration statement. Our intention was to cash settle these swaps upon issuance of the medium-term notes thereby effectively locking in the fixed interest rate in effect at the time the swaps were initiated. We have designated these outstanding interest rate swap contracts as hedges of the future cash interest payments. Subsequent to our 2005  fiscal year end, we issued $200 million of 5.20% medium-term notes which are due in 2015. The net proceeds will be used to repay long-term debt maturing in 2006. At November 30, 2005, the loss on these swaps was deferred in other comprehensive income and will be amortized over the ten-year life of the medium-term notes as a component of interest expense. Subsequent to year-end these swaps were settled for a loss of $0.2 million. Hedge ineffectiveness associated with these hedges was not material at November 30, 2005.

We have available credit facilities with domestic and foreign banks for various purposes. The amount of unused credit facilities at November 30, 2005 was $512.0 million. Management believes that internally generated funds and the existing sources of liquidity under our credit facilities are sufficient to meet current liquidity needs and longer-term financing requirements. If an acquisition would require funds in excess of existing sources of liquidity, funding from additional credit facilities or equity issuances would be sought.