Derivatives And Risk Management

3 Months Ended

Nov. 30, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and risk management

NOTE 8. DERIVATIVES AND RISK MANAGEMENT

The Company's global operations and product lines expose it to risks from fluctuations in metal 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, 2013, the notional value of the Company's foreign currency contract commitments and its commodity contract commitments was $433.3 million and $54.9 million, respectively.

The following table provides information regarding the Company's commodity contract commitments as of November 30, 2013:

Commodity	Long/Short	Total
Aluminum	Long	4,945	MT
Aluminum	Short	1,800	MT
Copper	Long	476	MT
Copper	Short	5,443	MT
Zinc	Long	7	MT

MT = Metric Ton

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 Company's consolidated statements of operations, and there were no components excluded from the assessment of hedge effectiveness for the three months ended November 30, 2013 and 2012. 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 in the consolidated statements of operations:

		Three Months Ended November 30,
Derivatives Not Designated as Hedging Instruments (in thousands)	Location	2013			2012
Commodity	Cost of goods sold	$	510		$	(411	)
Commodity	SG&A expenses	—			(588		)
Foreign exchange	Net sales	(159		)	(11		)
Foreign exchange	Cost of goods sold	(121		)	—
Foreign exchange	SG&A expenses	(4,693		)	(36		)
Other	Cost of goods sold	—			15
Loss before income taxes		$	(4,463	)	$	(1,031	)

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	2013			2012
Foreign exchange	Net sales	$	(113	)	$	—
Foreign exchange	Cost of goods sold	(127		)	(229		)
Loss before income taxes		$	(240	)	$	(229	)

Hedged Items Designated as Fair Value Hedging Instruments (in thousands)		Three Months Ended November 30,
	Location	2013		2012
Foreign exchange	Net sales	$	93	$	(23	)
Foreign exchange	Cost of goods sold	125		157
Gain before income taxes		$	218	$	134

Effective Portion of Derivatives Designated as Cash Flow Hedging Instruments Recognized in Accumulated Other Comprehensive Income (Loss) (in thousands)	Three Months Ended November 30,
	2013			2012
Commodity	$	(89	)	$	14
Foreign exchange	(1,528		)	303
Gain (loss), net of income taxes	$	(1,617	)	$	317

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	2013			2012
Commodity	Cost of  goods sold	$	(89	)	$	—
Foreign exchange	Net sales	(231		)	51
Foreign exchange	Cost of goods sold	(758		)	(41		)
Foreign exchange	SG&A expenses	12			10
Interest rate	Interest expense	86			102
Gain (loss), net of income taxes		$	(980	)	$	122

The Company enters into derivative agreements that include provisions to allow the set-off of certain amounts. Derivative instruments are presented on a gross basis on the Company's consolidated balance sheets. The asset and liability balances in the tables below reflect the gross amounts of derivative instruments at November 30, 2013 and August 31, 2013. The fair value of the Company's derivative instruments on the consolidated balance sheets was as follows:

Derivative Assets (in thousands)	November 30, 2013		August 31, 2013
Commodity — not designated for hedge accounting	$	1,357	$	1,066
Foreign exchange — designated for hedge accounting	1,414		1,626
Foreign exchange — not designated for hedge accounting	1,971		1,238
Derivative assets (other current assets and other assets)*	$	4,742	$	3,930

Derivative Liabilities (in thousands)	November 30, 2013		August 31, 2013
Commodity — designated for hedge accounting	$	39	$	129
Commodity — not designated for hedge accounting	1,302		1,268
Foreign exchange — designated for hedge accounting	889		432
Foreign exchange — not designated for hedge accounting	1,633		1,738
Derivative liabilities (accrued expenses, other payables and long-term liabilities)*	$	3,863	$	3,567

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

As of November 30, 2013, 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.