Derivative Instruments

9 Months Ended

May 31, 2024

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 current and probable future 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.

At May 31, 2024 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 $126.9 million. The fair value of the contracts is included on the Condensed 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 March 2027, 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, 2024 exchange rates, approximately $2.8 million would be reclassified to revenue or cost of revenue in the next year.

At May 31, 2024, interest rate swap agreements maturing from June 2024 through January 2032 had notional amounts that aggregated to $659.7 million. The fair value of the contracts is included on the Condensed 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, 2024 interest rates, approximately $13.9 million of gain would be reclassified to reduce interest expense in the next year.

Fair Values of Derivative Instruments

(in millions)


	Asset Derivatives					Liability Derivatives
		May 31, 2024		August 31, 2023			May 31, 2024		August 31, 2023
	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	$	5.4	$	2.5	Accounts payable and accrued liabilities	$	0.1	$	0.1
Interest rate swap contracts	Accounts receivable, net		34.8		34.9	Accounts payable and accrued liabilities		0.1		0.1
		$	40.2	$	37.4		$	0.2	$	0.2
Derivatives not designated as hedging instruments
Foreign forward exchange contracts	Accounts receivable, net	$	0.2	$	0.5	Accounts payable and accrued liabilities	$	—	$	—

The Effect of Derivative Instruments on the Statements of Income

(in millions)

Three months ended May 31, 2024 and May 31, 2023


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, 2024		May 31, 2023
Foreign forward exchange contract	Interest and foreign exchange	$	—	$	0.1


Derivatives in cash flow hedging relationships	Gain (loss) recognized in OCI on derivatives three months ended May 31,					Location of gain (loss) reclassified from accumulated OCI into income	Gain (loss) reclassified from accumulated OCI into income three months ended May 31,				Location of gain (loss) on derivatives (amount excluded from effectiveness testing)	Gain (loss) recognized on derivatives (amount excluded from effectiveness testing) three months ended May 31,
	2024		2023				2024		2023			2024		2023
Foreign forward exchange contracts	$	0.9	$	2.7		Revenue	$	0.9	$	—	Revenue	$	0.6	$	0.6
Foreign forward exchange contracts		0.3		0.6		Cost of revenue		0.2		0.5	Cost of revenue		0.2		0.1
Interest rate swap contracts		6.9		(7.2	)	Interest and foreign exchange		4.3		3.4	Interest and foreign exchange		—		—
	$	8.1	$	(3.9	)		$	5.4	$	3.9		$	0.8	$	0.7

The following table presents the amounts in the Condensed 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, 2024 and May 31, 2023:


	Three months ended May 31,
	2024				2023
	Total		Amount of gain (loss) on cash flow hedge activity		Total		Amount of gain (loss) on cash flow hedge activity
Revenue	$	820.2	$	0.9	$	1,038.1	$	—
Cost of revenue	$	696.4	$	0.2	$	910.0	$	0.5
Interest and foreign exchange	$	24.7	$	4.3	$	22.8	$	3.4

The Effect of Derivative Instruments on the Statements of Income

(in millions)

Nine months ended May 31, 2024 and May 31, 2023


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,
		2024		2023
Foreign forward exchange contract	Interest and foreign exchange	$	0.2	$	(0.2	)


Derivatives in cash flow hedging relationships	Gain (loss) recognized in OCI on derivatives nine months ended May 31,				Location of gain (loss) reclassified from accumulated OCI into income	Gain (loss) reclassified from accumulated OCI into income nine months ended May 31,					Location of gain (loss) on derivatives (amount excluded from effectiveness testing)	Gain (loss) recognized on derivatives (amount excluded from effectiveness testing) nine months ended May 31,
	2024		2023			2024		2023				2024		2023
Foreign forward exchange contracts	$	3.8	$	4.7	Revenue	$	1.9	$	(0.9	)	Revenue	$	1.8	$	1.4
Foreign forward exchange contracts		0.3		1.7	Cost of revenue		0.1		1.1		Cost of revenue		0.8		0.5
Interest rate swap contracts		12.9		11.8	Interest and foreign exchange		12.8		6.8		Interest and foreign exchange		—		—
	$	17.0	$	18.2		$	14.8	$	7.0			$	2.6	$	1.9


	Nine months ended May 31,
	2024				2023
	Total		Amount of gain (loss) on cash flow hedge activity		Total		Amount of gain (loss) on cash flow hedge activity
Revenue	$	2,491.7	$	1.9	$	2,926.6	$	(0.9	)
Cost of revenue	$	2,124.4	$	0.1	$	2,612.2	$	1.1
Interest and foreign exchange	$	72.5	$	12.8	$	64.0	$	6.8