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DERIVATIVES

9 Months Ended

May 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

NOTE 9. DERIVATIVES

The Company's global operations and product lines expose it to risks from fluctuations in metal commodity prices, foreign currency exchange rates, interest rates and natural gas, electricity and other energy prices. 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, (ii) foreign currency forward contracts that match the expected settlements for purchases and sales denominated in foreign currencies and (iii) energy derivatives to mitigate the risk related to price volatility of electricity and natural gas.

At May 31, 2020, the notional values of the Company's foreign currency and commodity commitments were $80.6 million and $45.3 million, respectively. 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.

The following table provides information regarding the Company's commodity contract commitments at May 31, 2020:

Commodity

Long/Short

Total

Aluminum

Long

2,300

MT

Aluminum

Short

1,100

MT

Copper

Long

318

MT

Copper

Short

4,990

MT

Electricity

Long

2,000,000

MW(h)

_________________

MT = Metric Ton

MW(h) = Megawatt hour

The Company designates only those contracts which closely match the terms of the underlying transaction as hedges for accounting purposes. Certain foreign currency and commodity contracts were not designated as hedges for accounting purposes, although management believes they are essential economic hedges.

The following table summarizes activity related to the Company's derivative instruments not designated as hedging instruments recognized in the condensed consolidated statements of earnings. All other activity related to the Company's derivative instruments and hedged items was immaterial for the periods presented. 

												Three Months Ended May 31,																		Nine Months Ended May 31,
Derivatives Not Designated as Hedging Instruments (in thousands)						Location						2020						2019						2020						2019
Commodity						Cost of goods sold						$	1,465					$	3,408					$	1,881					$	143
Foreign exchange						SG&A expenses						(890)						(72)						(870)						(472)
Gain (loss) before income taxes												$	575					$	3,336					$	1,011					$	(329)

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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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