In designing our hedging approach, we consider several factors, including offsetting exposures, the significance of exposures, the forecasting of risk and the potential effectiveness of the hedge to reduce the volatility of our earnings and cash flows. Factors considered in the decision to hedge an underlying market exposure include the materiality of the risk, the volatility of the market, the duration of the hedge, the degree to which the underlying exposure is committed to, and the availability, effectiveness and cost of derivative instruments. Derivative instruments are only utilized for risk management purposes and are not used for speculative or trading purposes. We limit counterparties to credit-worthy financial institutions. Refer to Note 2, Summary of Significant Accounting Policies - Concentrations of Credit Risk, for further discussion on counterparty credit risk.

We leverage foreign currency forward contracts and interest rate swaps to mitigate certain operational exposures from the impact of changes in foreign currency exchange rates and to manage our interest rate exposure. We have designated and accounted for these derivatives as cash flow hedges with the unrealized gains or losses recorded in Accumulated Other Comprehensive Loss ("AOCL"), net of tax, in the Consolidated Balance Sheets. Realized gains or losses resulting from settlement of our forward contracts and swap agreements are subsequently reclassified into Selling, general and administrative ("SG&A") and Interest expense, net, respectively, in the Consolidated Statements of Income when the hedges are settled.

As we conduct business outside the U.S. in several currencies, we are exposed to movements in foreign currency exchange rates. The gains and losses on foreign currency forward contracts offset the variability in operating expenses associated with currency movements. As of November 30, 2022, we maintained a series of foreign currency forward contracts to hedge a portion of our exposures related to our primary currencies of the British Pound Sterling, Euro, Indian Rupee and Philippine Peso. We entered into these contracts to mitigate our currency exposure ranging from 25% to 75%, over their respective hedged periods, which are set to mature at various points between the second quarter of fiscal 2023 through the first quarter of fiscal 2024.

The following table summarizes the gross notional value of foreign currency forward contracts to purchase British Pound Sterling, Euros, Indian Rupees and Philippine Pesos with U.S. dollars as of November 30, 2022 and August 31, 2022.


	November 30, 2022				August 31, 2022
(in thousands)	Local Currency Amount		Notional Contract Amount (USD)		Local Currency Amount		Notional Contract Amount (USD)
British Pound Sterling	£	48,000	$	57,337	£	44,200	$	55,567
Euro	€	38,000	39,892		€	37,500	40,679
Indian Rupee	Rs	2,739,827	33,600		Rs	2,667,928	33,600
Philippine Peso	₱	1,540,066	27,300		₱	1,462,060	27,000
Total			$	158,129			$	156,846

Refer to Foreign Currency Transaction Risk in Item 3. Quantitative and Qualitative Disclosures About Market Risk of this Quarterly Report on Form 10-Q for further discussion of our exposure to foreign exchange rate fluctuations.

On March 5, 2020, we entered into an interest rate swap agreement ("2020 Swap Agreement") with a notional amount of $287.5 million. The 2020 Swap Agreement hedged a portion of our then outstanding floating LIBOR rate debt with a fixed interest rate of 0.7995% to mitigate our interest rate exposure. On March 1, 2022, we terminated the 2020 Swap Agreement, which resulted in a one-time benefit of $3.5 million recognized in Interest expense, net in the Consolidated Statements of Income during the third quarter of fiscal 2022, based on its fair market value.

On March 1, 2022, we entered into an interest rate swap agreement ("2022 Swap Agreement") with a notional amount of $800.0 million to hedge a portion of our outstanding floating Secured Overnight Financing Rate ("SOFR") rate debt with a fixed

interest rate of 1.162%. The notional amount of the 2022 Swap Agreement declines by $100.0 million on a quarterly basis as of May 31, 2022 and is maturing on February 28, 2024. As of November 30, 2022, the notional amount of the 2022 Swap Agreement was $500.0 million.

Refer to Note 11, Debt, for further discussion of our outstanding floating SOFR rate debt. Refer to Interest Rate Risk in Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk of this Quarterly Report on Form 10-Q for further discussion of our exposure to interest rate risk on our long-term debt outstanding.


(in thousands)	Gross Notional Value
	November 30, 2022		August 31, 2022
Foreign currency forward contracts	$	158,129	$	156,846
Interest rate swap agreement	500,000		600,000
Total cash flow hedges	$	658,129	$	756,846

The following is a summary of the fair values of our derivative instruments:


	Fair Value of Derivative Instruments
(in thousands)	Derivative Assets					Derivative Liabilities
Derivatives designated as hedging instruments	Balance Sheet Classification	November 30, 2022		August 31, 2022		Balance Sheet Classification	November 30, 2022		August 31, 2022
Foreign currency forward contracts	Prepaid expenses and other current assets	$	2,467	$	—	Accounts payable and accrued expenses	$	2,486	$	8,307
Interest rate swap agreement	Prepaid expenses and other current assets	12,162		10,621		Accounts payable and accrued expenses	—		—
	Other assets	781		1,791		Other liabilities	—		—
Total cash flow hedges		$	15,410	$	12,412		$	2,486	$	8,307

The following table provides the pre-tax effect of derivative instruments in cash flow hedging relationships for the three months ended November 30, 2022 and November 30, 2021, respectively:


	Gain (Loss) Recognized in AOCL on Derivatives				Location of Gain (Loss) Reclassified from AOCL into Income	Gain (Loss) Reclassified from AOCL into Income
(in thousands)	November 30,					November 30,
Derivatives in Cash Flow Hedging Relationships	2022		2021			2022		2021
Foreign currency forward contracts	$	3,323	$	(3,542)	SG&A	$	(4,965)	$	(449)
Interest rate swap agreement	3,428		2,583		Interest expense, net	2,897		(516)
Total cash flow hedges	$	6,751	$	(959)		$	(2,068)	$	(965)

As of November 30, 2022, we estimate that net pre-tax derivative gains of $12.1 million included in AOCL will be reclassified into earnings within the next 12 months. As of November 30, 2022, our cash flow hedges were highly effective with no amount of ineffectiveness recorded in the Consolidated Statements of Income for these designated cash flow hedges and all components of each derivative’s gain or loss were included in the assessment of hedge effectiveness. There was no discontinuance of our

cash flow hedges during the three months ended November 30, 2022 or November 30, 2021, and as such, no corresponding gains or losses related to changes in the value of our contracts were reclassified into earnings prior to settlement.