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DERIVATIVES AND RISK MANAGEMENT | 6 Months Ended
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Feb. 28, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives and risk management | NOTE 10. 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 the volatility of the commodities' prices, and (ii) foreign currency forward contracts that match the expected settlements for purchases and sales denominated in foreign currencies. At February 28, 2019, the notional values of the Company's foreign currency contract commitments and its commodity contract commitments were $125.9 million and $56.2 million, respectively. At February 28, 2018, the notional values of the Company's foreign currency contract commitments and its commodity contract commitments were $300.9 million and $55.3 million, respectively. The following table provides information regarding the Company's commodity contract commitments as of February 28, 2019:
Commodity |  | Long/Short |  | Total
Aluminum |  | Long |  | 5,175 |  | MT
Aluminum |  | Short |  | 2,425 |  | MT
Copper |  | Long |  | 601 |  | MT
Copper |  | Short |  | 6,146 |  | 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 unaudited condensed consolidated statements of earnings, and there were no components excluded from the assessment of hedge effectiveness for the three and six months ended February 28, 2019 and 2018. 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 unaudited condensed consolidated statements of earnings (amounts in thousands):
|  |  |  | Three Months Ended February 28, |  | Six Months Ended February 28,
Derivatives Not Designated as Hedging Instruments |  | Location |  | 2019 |  | 2018 |  | 2019 |  | 2018
Commodity |  | Cost of goods sold |  | $ | (2,425 | ) |  | $ | (2 | ) |  | $ | (3,265 | ) |  | $ | 573 |
Foreign exchange |  | Cost of goods sold |  | — |  |  | (31 | ) |  | — |  |  | (50 | )
Foreign exchange |  | SG&A expenses |  | (526 | ) |  | (1,729 | ) |  | (400 | ) |  | 651 |
Gain (loss) before income taxes |  |  |  | $ | (2,951 | ) |  | $ | (1,762 | ) |  | $ | (3,665 | ) |  | $ | 1,174 |
The Company's fair value hedges are designated for accounting purposes with the gains or losses on the hedged items offsetting the gains or losses on the related derivative transactions. Hedged items relate to firm commitments on commercial sales and purchases and capital expenditures.
|  | Location of Gain (Loss) Recognized in Income on Derivatives |  | Amount of Gain (Loss) Recognized in Income on Derivatives for the Three Months Ended February 28, |  | Location of Gain (Loss) Recognized in Income on Related Hedged Items |  | Amount of Gain (Loss) Recognized in Income on Related Hedge Items for the Three Months Ended February 28,
|  | 2019 |  | 2018 |  |  | 2019 |  | 2018
Foreign exchange |  | Net sales |  | $ | — |  |  | $ | 8 |  |  | Net sales |  | $ | — |  |  | $ | (8 | )
Foreign exchange |  | Cost of goods sold |  | — |  |  | (1,323 | ) |  | Cost of goods sold |  | — |  |  | 1,323 |
Gain (loss) before income taxes |  |  |  | $ | — |  |  | $ | (1,315 | ) |  |  |  | $ | — |  |  | $ | 1,315 |
|  | Location of Gain (Loss) Recognized in Income on Derivatives |  | Amount of Gain (Loss) Recognized in Income on Derivatives for the Six Months Ended February 28, |  | Location of Gain (Loss) Recognized in Income on Related Hedged Items |  | Amount of Gain (Loss) Recognized in Income on Related Hedge Items for the Six Months Ended February 28,
|  | 2019 |  | 2018 |  |  | 2019 |  | 2018
Foreign exchange |  | Net sales |  | $ | — |  |  | $ | (229 | ) |  | Net sales |  | $ | — |  |  | $ | 229 |
Foreign exchange |  | Cost of goods sold |  | — |  |  | 2,025 |  |  | Cost of goods sold |  | — |  |  | (2,025 | )
Gain (loss) before income taxes |  |  |  | $ | — |  |  | $ | 1,796 |  |  |  |  | $ | — |  |  | $ | (1,796 | )
Effective Portion of Derivatives Designated as Cash Flow Hedging Instruments Recognized in AOCI |  | Three Months Ended February 28, |  | Six Months Ended February 28,
| 2019 |  | 2018 |  | 2019 |  | 2018
Foreign exchange, net of income taxes |  | $ | (86 | ) |  | $ | 14 |  |  | $ | (121 | ) |  | $ | 25 |
The Company enters into derivative agreements that include provisions to allow the set-off of certain amounts. Derivative instruments are presented on a gross basis on the Company's unaudited condensed consolidated balance sheets. The asset and liability balances in the tables below reflect the gross amounts of derivative instruments at February 28, 2019 and August 31, 2018. The fair value of the Company's derivative instruments on the unaudited condensed consolidated balance sheets was as follows:
Derivative Assets (in thousands) |  | February 28, 2019 |  | August 31, 2018
Commodity — not designated for hedge accounting |  | $ | 162 |  |  | $ | 1,881 |
Foreign exchange — designated for hedge accounting |  | — |  |  | — |
Foreign exchange — not designated for hedge accounting |  | 141 |  |  | 407 |
Derivative assets (other current assets)* |  | $ | 303 |  |  | $ | 2,288 |
Derivative Liabilities (in thousands) |  | February 28, 2019 |  | August 31, 2018
Commodity — not designated for hedge accounting |  | $ | 2,335 |  |  | $ | 301 |
Foreign exchange — designated for hedge accounting |  | 179 |  |  | — |
Foreign exchange — not designated for hedge accounting |  | 450 |  |  | 1,095 |
Derivative liabilities (accrued expenses and other payables)* |  | $ | 2,964 |  |  | $ | 1,396 |
_________________ * Derivative assets and liabilities do not include the hedged items designated as fair value hedges. As of February 28, 2019, most of the Company's derivative instruments designated to hedge exposure to the variability in future cash flows of the forecasted transactions will mature within twelve months. All of the instruments are highly liquid and were not entered into for trading purposes.

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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 + Details
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