Derivatives And Risk Management

3 Months Ended

Nov. 30, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and risk management

NOTE 9. DERIVATIVES AND RISK MANAGEMENT

The Company’s worldwide operations and product lines expose it to risks from fluctuations in metals commodity prices, foreign currency exchange rates, natural gas prices and interest rates. One objective of the Company’s risk management program is to mitigate these risks using derivative instruments. The Company enters into metal commodity futures and forward contracts to mitigate the risk of unanticipated changes in gross margin due to the volatility of the commodities’ prices, enters into foreign currency forward contracts that match the expected settlements for purchases and sales denominated in foreign currencies and enters into natural gas forward contracts to mitigate the risk of unanticipated changes in operating cost due to the volatility of natural gas prices. When sales commitments to customers include a fixed price freight component, the Company occasionally enters into freight forward contracts to reduce the effects of the volatility of ocean freight rates.

At November 30, 2012, the Company's notional value of its foreign currency contract commitments was $233 million.

The following table provides commodity contract commitments as of November 30, 2012:

Commodity	Long/Short	Total
Aluminum	Long	4,675	MT
Aluminum	Short	2,725	MT
Copper	Long	964	MT
Copper	Short	5,602	MT
Natural Gas	Long	40,000	MMBtu

MT = Metric Ton

MMBtu = One million British thermal units

The Company designates only those contracts which closely match the terms of the underlying transaction as hedges for accounting purposes. These hedges resulted in substantially no ineffectiveness in the consolidated statements of operations, and there were no components excluded from the assessment of hedge effectiveness for the three months ended November 30, 2012 and 2011. Certain foreign currency and commodity contracts were not designated as hedges for accounting purposes, although management believes they are essential economic hedges.

The following tables summarize activities related to the Company’s derivative instruments and hedged items recognized within the consolidated statements of operations:

		Three Months Ended November 30,
Derivatives Not Designated as Hedging Instruments (in thousands)	Location	2012			2011
Commodity	Cost of goods sold	$	(411	)	$	3,577
Commodity	SG&A expenses	(588		)	—
Foreign exchange	Net sales	(11		)	(108		)
Foreign exchange	Cost of goods sold	—			(233		)
Foreign exchange	SG&A expenses	(36		)	(7,159		)
Other	Cost of goods sold	15			—
Loss before taxes		$	(1,031	)	$	(3,923	)

The Company’s fair value hedges are designated for accounting purposes with gains and losses on the hedged items offsetting the gain or loss on the related derivative transaction. Hedged items relate to firm commitments on commercial sales and purchases and capital expenditures.

Derivatives Designated as Fair Value Hedging Instruments (in thousands)		Three Months Ended November 30,
	Location	2012			2011
Foreign exchange	SG&A expenses	$	—		$	2,570
Foreign exchange	Cost of goods sold	(229		)	—
Interest rate	Interest expense	—			1,205
Gain (loss) before taxes		$	(229	)	$	3,775

Hedged Items Designated as Fair Value Hedging Instruments (in thousands)		Three Months Ended November 30,
	Location	2012			2011
Foreign exchange	Net sales	$	(23	)	$	—
Foreign exchange	Cost of goods sold	157			—
Foreign exchange	SG&A expenses	—			(2,579		)
Interest rate	Interest expense	—			(1,205		)
Gain (loss) before taxes		$	134		$	(3,784	)

Effective Portion of Derivatives Designated as Cash Flow Hedging Instruments Recognized in Accumulated Other Comprehensive Income (Loss) (in thousands)	Three Months Ended November 30,
	2012		2011
Commodity	$	14	$	(25	)
Foreign exchange	303		(1,161		)
Gain (loss), net of taxes	$	317	$	(1,186	)

Effective Portion of Derivatives Designated as Cash Flow Hedging Instruments Reclassified from Accumulated Other Comprehensive Income (Loss) (in thousands)		Three Months Ended November 30,
	Location	2012			2011
Commodity	Cost of  goods sold	$	—		$	(13	)
Foreign exchange	Net sales	51			(1,157		)
Foreign exchange	Cost of goods sold	(41		)	—
Foreign exchange	SG&A expenses	10			(64		)
Interest rate	Interest expense	102			101
Gain (loss), net of taxes		$	122		$	(1,133	)

The Company’s derivative instruments were recorded at their respective fair values as follows on the consolidated balance sheets:

Derivative Assets (in thousands)	November 30, 2012		August 31, 2012
Commodity — designated for hedge accounting	$	16	$	—
Commodity — not designated for hedge accounting	1,467		407
Foreign exchange — designated for hedge accounting	114		670
Foreign exchange — not designated for hedge accounting	455		798
Derivative assets (other current assets and other assets)*	$	2,052	$	1,875

Derivative Liabilities (in thousands)	November 30, 2012		August 31, 2012
Commodity — designated for hedge accounting	$	—	$	2
Commodity — not designated for hedge accounting	2,051		993
Foreign exchange — designated for hedge accounting	390		1,272
Foreign exchange — not designated for hedge accounting	413		1,248
Other — not designated for hedge accounting	13		32
Derivative liabilities (accrued expenses, other payables and long-term liabilities)*	$	2,867	$	3,547

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* Derivative assets and liabilities do not include the hedged items designated as fair value hedges.

As of November 30, 2012, all of the Company’s derivative instruments designated to hedge exposure to the variability in future cash flows of the forecasted transactions will mature within twelve months.

All of the instruments are highly liquid, and not entered into for trading purposes.