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DERIVATIVES AND RISK MANAGEMENT

12 Months Ended

Aug. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVES AND RISK MANAGEMENT

NOTE 12. DERIVATIVES AND RISK MANAGEMENT

The Company's global operations and product lines expose it to risks from fluctuations in metal commodity prices, foreign currency exchange rates, natural gas prices and interest rates. One objective of the Company's risk management program is to mitigate these risks using derivative instruments. The Company enters into (i) metal commodity futures and forward contracts to mitigate the risk of unanticipated changes in gross margin due to price volatility in these commodities and (ii) foreign currency forward contracts that match the expected settlements for purchases and sales denominated in foreign currencies.

The Company considers the total notional value of its futures and forward contracts as the best measure of the volume of derivative transactions. At August 31, 2019, the notional values of the Company's foreign currency and commodity contract commitments were $94.1 million and $42.6 million, respectively. At August 31, 2018, the notional values of the Company's foreign currency contract commitments and its commodity contract commitments were $119.5 million and $55.2 million, respectively.

The following table provides information regarding the Company's commodity contract commitments as of August 31, 2019:

Commodity		Long/Short		Total
Aluminum		Long		2,125			MT
Copper		Long		510			MT
Copper		Short		6,158			MT

 _________________

MT = Metric Ton

The Company designates only those contracts which closely match the terms of the underlying transaction as hedges for accounting purposes. These hedges resulted in substantially no ineffectiveness in the Company's consolidated statements of earnings, and there were no components excluded from the assessment of hedge effectiveness for the years ended August 31, 2019, 2018 and

2017. Certain foreign currency and commodity contracts were not designated as hedges for accounting purposes, although management believes they are essential economic hedges.

The following tables summarize activities related to the Company's derivative instruments and hedged items recognized in the consolidated statements of earnings: 

				Year Ended August 31,
Derivatives Not Designated as Hedging Instruments (in thousands)		Location		2019				2018				2017
Commodity		Cost of goods sold		$	1,716			$	7,043			$	(9,095	)
Foreign exchange		Cost of goods sold		—				(50		)		(47		)
Foreign exchange		SG&A expenses		(543		)		110				(5,400		)
Gain (loss) before income taxes				$	1,173			$	7,103			$	(14,542	)

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- References

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- Definition

The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-URI http://asc.fasb.org/topic&trid=2229140

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