Notes to Consolidated Financial Statements

     We have available credit facilities with domestic and foreign banks for various purposes. The amount of unused credit facilities at November 30, 2006 was $499.1 million, of which $400.0 million supports a commercial paper borrowing arrangement. Of these unused facilities, $99.1 million expire in 2007 and $400.0 million expire in 2010. Some credit facilities in support of commercial paper issuance require a commitment fee. Annualized commitment fees at November 30, 2006 and 2005 were $0.3 million.

     Rental expense under operating leases was $25.4 million in 2006, $24.6 million in 2005 and $23.5 million in 2004. Future annual fixed rental payments for the years ending November 30 are as follows (in millions):
          2007 – $19.5
          2008 – $17.2
          2009 – $14.6
          2010 – $12.7
          2011 – $9.6
          Thereafter – $5.1

     At November 30, 2006, we had guarantees outstanding of $3.1 million with terms ranging from one to five years. At November 30, 2006 and 2005, we had outstanding letters of credit of $28.7 million and $12.2 million, respectively. These letters of credit typically act as a guarantee of payment to certain third parties in accordance with specified terms and conditions. The unused portion of our letter of credit facility was $38.3 million at November 30, 2006.

8. FINANCIAL INSTRUMENTS

We use derivative financial instruments to enhance our ability to manage risk, including foreign currency and interest rate exposures, which exists 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. The use of derivative financial instruments is monitored through regular communication with senior management and the use of written guidelines.

     All derivatives are recognized at fair value in the balance sheet and recorded in either other assets or other accrued liabilities. In evaluating the fair value of financial instruments, including derivatives, we use third-party market quotes or calculate an estimated fair value on a discounted cash flow basis using the rates available for instruments with the same remaining maturities.

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 other comprehensive income until the hedged item is recognized in cost of goods sold, at which time the net amount deferred in other comprehensive income is also recognized in cost of goods sold. Gains and losses from hedges of assets, liabilities or firm commitments are recognized through income, offsetting the change in fair value of the hedged item.

     At November 30, 2006, we had foreign currency exchange contracts maturing within one year to purchase or sell $47.9 million of foreign currencies versus $24.0 million at November 30, 2005. All of these contracts were designated as hedges of anticipated purchases denominated in a foreign currency to be completed within one year or hedges of foreign currency denominated assets or liabilities. Hedge ineffectiveness was not material.

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.

     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 .05%. We designated these swaps, which expire on December 15, 2015, as fair value hedges of the changes in fair value of $100 million of the $200 million 5.20% medium term notes due 2015 that we issued in December 2005. Any unrealized gain or loss on theses swaps will be offset by a corresponding increase or decrease in value of the hedged debt. No hedge ineffectiveness is recognized as the interest rate swaps qualify for “shortcut” treatment.