DERIVATIVES

12 Months Ended

Aug. 31, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVES

NOTE 10. DERIVATIVES

The Company's global operations and product lines expose it to risks from fluctuations in metal commodity prices, foreign currency exchange rates, interest rates and natural gas, electricity and other energy prices. One objective of the Company's risk management program is to mitigate these risks using derivative instruments. The Company enters into (i) metal commodity futures and forward contracts to mitigate the risk of unanticipated changes in gross margin due to price volatility in these commodities, (ii) foreign currency forward contracts that match the expected settlements for purchases and sales denominated in foreign currencies and (iii) energy derivatives to mitigate the risk related to price volatility of electricity and natural gas.

The Company considers the total notional value of its futures and forward contracts as the best measure of the volume of derivative transactions. At August 31, 2021, the notional values of the Company's foreign currency and commodity contract commitments were $389.5 million and $213.4 million, respectively. At August 31, 2020, the notional values of the Company's foreign currency contract commitments and its commodity contract commitments were $138.5 million and $195.8 million, respectively.

The following table provides information regarding the Company's commodity contract commitments as of August 31, 2021:

Commodity	Long/Short	Total
Aluminum	Long	1,900	MT
Copper	Long	578	MT
Copper	Short	8,244	MT
Electricity	Long	1,867,000	MW(h)

__________________________________

MT = Metric Ton

MW(h) = Megawatt hour

The Company designates only those contracts which closely match the terms of the underlying transaction as hedges for accounting purposes. Certain foreign currency and commodity contracts were not designated as hedges for accounting purposes, although management believes they are essential economic hedges.

Commodity derivatives not designated as hedging instruments resulted in a loss, before income taxes, of $18.0 million and $6.0 million in 2021 and 2020, respectively, and a gain, before income taxes, of $1.7 million in 2019, recorded in cost of goods sold within the consolidated statements of earnings. Commodity derivatives accounted for as cash flow hedging instruments resulted in a net gain of $35.4 million and a net loss of $12.1 million recognized in the consolidated statements of comprehensive income in 2021 and 2020, respectively. As these derivatives were new in 2020 and did not begin to settle until 2021, there were no amounts recognized in the consolidated statements of comprehensive income in 2019. See Note 11, Fair Value, for the fair value of the Company's derivative instruments recorded in the consolidated balance sheets.