Derivative Instruments

9 Months Ended

May 31, 2021

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Note 12 – Derivative Instruments

Foreign operations give rise to market risks from changes in foreign currency exchange rates. Foreign currency forward exchange contracts with established financial institutions are utilized to hedge a portion of that risk. Interest rate swap agreements are used to reduce the impact of changes in interest rates on certain debt. The Company’s foreign currency forward exchange contracts and interest rate swap agreements are designated as cash flow hedges, and therefore the effective portion of unrealized gains and losses is recorded in accumulated other comprehensive income or loss.

At May 31, 2021 exchange rates, notional amounts of forward exchange contracts for the purchase of Polish Zlotys and the sale of Euros; and the purchase of Mexican Pesos and the sale of U.S. Dollars aggregated to $147.7 million. The fair value of the contracts is included on the Consolidated Balance Sheets as Accounts payable and accrued liabilities when in a loss position, or as Accounts receivable, net when in a gain position. As the contracts mature at various dates through December 2022, any such gain or loss remaining will be recognized in manufacturing revenue or cost of revenue along with the related transactions. In the event that the underlying transaction does not occur or does not occur in the period designated at the inception of the hedge, the amount classified in accumulated other comprehensive loss would be reclassified to the results of operations in Interest and foreign exchange at the time of occurrence. At May 31, 2021 exchange rates, approximately $0.4 million would be reclassified to revenue or cost of revenue in the next year.

At May 31, 2021, an interest rate swap agreement maturing in September 2023 had a notional amount of $102.7 million and an interest rate swap agreement maturing June 2024 had a notional amount of $138.8 million. The fair value of the contracts are included on the Consolidated Balance Sheets in Accounts payable and accrued liabilities when in a loss position, or in Accounts receivable, net when in a gain position. As interest expense on the underlying debt is recognized, amounts corresponding to the interest rate swap are reclassified from Accumulated other comprehensive loss and charged or credited to interest expense. At May 31, 2021 interest rates, approximately $5.0 million would be reclassified to interest expense in the next year.

Fair Values of Derivative Instruments

	Asset Derivatives					Liability Derivatives
		May 31, 2021		August 31, 2020			May 31, 2021		August 31, 2020
(In thousands)	Balance sheet location	Fair Value		Fair Value		Balance sheet location	Fair Value		Fair Value
Derivatives designated as hedging instruments
Foreign forward exchange contracts	Accounts receivable, net	$	606	$	560	Accounts payable and accrued liabilities	$	9	$	3
Interest rate swap contracts	Accounts receivable, net		—		—	Accounts payable and accrued liabilities		11,361		15,904
		$	606	$	560		$	11,370	$	15,907
Derivatives not designated as hedging instruments
Foreign forward exchange contracts	Accounts receivable, net	$	4	$	22	Accounts payable and accrued liabilities	$	47	$	—

The Effect of Derivative Instruments on the Statements of Income

Derivatives in cash flow hedging relationships

Location of gain (loss)

recognized in income

on derivatives

Gain (loss) recognized in income on

derivatives three months ended

May 31,

2021

May 31,

2020

Foreign forward exchange contract

Interest and foreign exchange

154

Derivatives in cash flow hedging relationships	Gain (loss) recognized in OCI on derivatives three months ended,						Location of gain (loss) reclassified from accumulated OCI into income	Gain (loss) reclassified from accumulated OCI into income three months ended						Location of gain (loss) on derivative (amount excluded from effectiveness testing)	Gain (loss) recognized on derivative (amount excluded from effectiveness testing) three months ended
	May 31, 2021			May 31, 2020				May 31, 2021			May 31, 2020				May 31, 2021		May 31, 2020
Foreign forward exchange contracts	$	494		$	(599	)	Revenue	$	(522	)	$	(485	)	Revenue	$	165	$	138
Foreign forward exchange contracts		273			(2,015	)	Cost of revenue		(24	)		(1,226	)	Cost of revenue		32		130
Interest rate swap contracts		(515	)		(5,155	)	Interest and foreign exchange		(1,307	)		(783	)	Interest and foreign exchange		—		281
	$	252		$	(7,769	)		$	(1,853	)	$	(2,494	)		$	197	$	549

The following table presents the amounts in the Consolidated Statements of Income in which the effects of the cash flow hedges are recorded and the effects of the cash flow hedge activity on these line items for the three months ended May 31, 2021 and 2020:

	For The Three Months Ended
	May 31, 2021					May 31, 2020
	Total		Amount of gain (loss) on cash flow hedge activity			Total		Amount of gain (loss) on cash flow hedge activity
Revenue	$	450,143	$	(522	)	$	762,557	$	(485	)
Cost of revenue		375,011		(24	)		655,026		(1,226	)
Interest and foreign exchange		10,204		(1,307	)		7,562		(783	)

Derivatives in cash flow hedging relationships

Location of gain (loss)

recognized in income

on derivatives

Gain (loss) recognized in income on

derivatives nine months ended

May 31,

2021

May 31,

2020

Foreign forward exchange contract

Interest and foreign exchange

(37

)

Derivatives in cash flow hedging relationships	Gain (loss) recognized in OCI on derivatives nine months ended						Location of gain (loss) reclassified from accumulated OCI into income	Gain (loss) reclassified from accumulated OCI into income nine months ended						Location of gain (loss) on derivative amount excluded from effectiveness testing)	Gain (loss) recognized on derivative (amount excluded from effectiveness testing) nine months ended
	May 31, 2021			May 31, 2020				May 31, 2021			May 31, 2020				May 31, 2021		May 31, 2020
Foreign forward exchange contracts	$	(1,118	)	$	164		Revenue	$	(1,145	)	$	(584	)	Revenue	$	467	$	781
Foreign forward exchange contracts		(22	)		(2,198	)	Cost of revenue		(73	)		(1,228	)	Cost of revenue		97		474
Interest rate swap contracts		642			(7,939	)	Interest and foreign exchange		(3,901	)		(1,319	)	Interest and foreign exchange		—		—
	$	(498	)	$	(9,973	)		$	(5,119	)	$	(3,131	)		$	564	$	1,255

	For the Nine Months Ended
	May 31, 2021					May 31, 2020
	Total		Amount of gain (loss) on cash flow hedge activity			Total		Amount of gain (loss) on cash flow hedge activity
Revenue	$	1,148,754	$	(1,145	)	$	2,155,764	$	(584	)
Cost of revenue		1,015,280		(73	)		1,869,708		(1,228	)
Interest and foreign exchange		30,875		(3,901	)		33,023		(1,319	)