XML 44 R19.htm IDEA: XBRL DOCUMENT v3.24.3
DERIVATIVES
 12 Months Ended
Aug. 31, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVES
NOTE 10. 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 net earnings 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) natural gas and electricity commodity derivatives to mitigate the risk related to price volatility of these commodities.
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 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, 2024 and 2023, the notional values of the Company's commodity contract commitments were $480.1 million and $456.4 million, respectively. At August 31, 2024 and 2023, the notional values of the Company's foreign currency contract commitments were $225.1 million and $221.4 million, respectively.

The following table provides information regarding the Company's commodity contract commitments as of August 31, 2024:
CommodityPositionTotal
AluminumLong1,225  MT
CopperLong624  MT
CopperShort9,321  MT
ElectricityLong3,112,000 MW(h)
Natural GasLong5,190,700 MMBtu
__________________________________
MT = Metric ton
MW(h) = Megawatt hour
MMBtu = Metric Million British thermal unit

The following table summarizes the location and amounts of the fair value of the Company's derivative instruments reported in the consolidated balance sheets:

(in thousands)Primary LocationAugust 31, 2024August 31, 2023
Derivative assets:
CommodityPrepaid and other current assets$9,823 $11,427 
CommodityOther noncurrent assets30,402 184,261 
Foreign exchangePrepaid and other current assets419 1,898 
Derivative liabilities:
CommodityAccrued expenses and other payables$3,445 $2,983 
CommodityOther noncurrent liabilities157 1,085 
Foreign exchangeAccrued expenses and other payables1,885 2,566 

The decrease in fair value of the Company's commodity derivatives reported within other noncurrent assets is primarily due to the decrease in the value of a significant input used to measure the fair value of the Company's Level 3 commodity derivatives at August 31, 2024 as compared to August 31, 2023. See Note 11, Fair Value, for further discussion of the measurement of the fair value of the Company's Level 3 commodity derivatives.

The following table summarizes activities related to the Company's derivatives not designated as hedging instruments recognized in the consolidated statements of earnings. All other activity related to the Company's derivatives not designated as hedging instruments was immaterial for the periods presented.
Year Ended August 31,
Gain (Loss) on Derivatives Not Designated as Hedging Instruments (in thousands)Primary Location202420232022
CommodityCost of goods sold$(10,195)$(3,028)$15,862 
Foreign exchangeSG&A expenses6,974 12,265 (6,547)

The following table summarizes activities related to the Company's derivatives designated as cash flow hedging instruments recognized in the consolidated statements of comprehensive income and consolidated statements of earnings. Amounts presented do not include the effects of foreign currency translation adjustments.
Effective Portion of Derivatives Designated as Cash Flow Hedging Instruments Gain (Loss) Recognized in OCI, Net of Income Taxes (in thousands)Year Ended August 31,
202420232022
Commodity$(129,709)$6,367 $138,534 
Foreign exchange31 28 100 

Gain on Derivatives Designated as Cash Flow Hedging Instruments Reclassified from AOCI into Net Earnings (in thousands)Year Ended August 31,
Primary Location202420232022
CommodityCost of goods sold$2,031 $11,325 $27,267 
Foreign exchangeSG&A expenses250 244 244 
The Company's natural gas commodity derivatives accounted for as cash flow hedging instruments have maturities extending to August 2027. The Company's electricity commodity derivatives accounted for as cash flow hedging instruments have maturities extending to December 2034. Included in the AOCI balance as of August 31, 2024 was an estimated net gain of $4.8 million from cash flow hedging instruments that is expected to be reclassified into net earnings within the twelve months following August 31, 2024. Cash flows associated with the cash flow hedging instruments are recorded as a component of cash flows from operating activities in the consolidated statements of cash flows. See Note 11, Fair Value, for the fair value of the Company's derivative instruments recorded in the consolidated balance sheets.