Derivative Financial Instruments

12 Months Ended

Aug. 31, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

Foreign Currency Exchange Rate Risk Management

To manage exposure to foreign exchange rate risk, the Company may enter into foreign currency forward contracts to stabilize the U.S. dollar amount of the transaction at settlement. When such contracts are not designated as hedging instruments for accounting purposes, the realized and unrealized gains and losses on settled and unsettled forward contracts measured at fair value are recognized as other income or expense in the Consolidated Statements of Operations.

In fiscal 2014, the Company entered into a series of foreign currency exchange forward contracts to sell U.S. dollars in order to hedge a portion of its exposure to fluctuating rates of exchange on anticipated U.S. dollar-denominated sales by its Canadian subsidiary with a functional currency of the Canadian dollar. The Company utilized intercompany foreign currency derivatives and offsetting derivatives with external counterparties in order to designate the intercompany derivatives as hedging instruments. Once the U.S. dollar-denominated sales have been recognized and the corresponding receivables collected, the Company utilized foreign currency exchange forward contracts to sell Canadian dollars, achieving a result similar to net settling the contracts to sell U.S. dollars. The foreign currency exchange forward contracts to sell Canadian dollars are not designated as hedging instruments.

As of August 31, 2014, the Company had foreign currency exchange forward contracts with external counterparties to buy Canadian dollars for a total notional amount of $22 million, which have various settlement dates through December 31, 2014, and foreign currency exchange forward contracts with external counterparties to sell Canadian dollars for a total notional amount of $6 million, all of which have a settlement date of September 30, 2014. The contracts with external counterparties are reported at fair value in the Consolidated Balance Sheets measured using quoted foreign currency exchange rates. See Note 10 - Fair Value Measurements for further detail.

The fair value of derivative instruments in the Consolidated Balance Sheets are as follows (in thousands):

	Asset (Liability) Derivatives
		Fair Value
	Balance Sheet Location	August 31, 2014			August 31, 2013
Foreign currency exchange forward contracts	Prepaid expenses and other current assets	$	202		$	—
Foreign currency exchange forward contracts	Other accrued liabilities	$	(46	)	$	—

The following tables summarizes the results of foreign currency exchange derivatives for the year ended August 31, 2014 (in thousands):

	Derivative Gain (Loss) Recognized in
	Fiscal 2014
	Other Comprehensive Income		Revenues - Effective Portion		Other Income (Expense), net
Foreign currency exchange forward contracts - designated as cash flow hedges	$	325	$	249	$	112
Foreign currency exchange forward contracts - not designated as cash flow hedges	—		—		(12		)

The Company did not have any material derivatives activity for the years ended August 31, 2013 and 2012.

The Company entered into forward contracts to mitigate exposure to exchange rate fluctuations on Euro-denominated fixed asset purchases, which were designated as qualifying cash flow hedges for accounting purposes. These foreign currency forward contracts are measured using forward exchange rates based on observable exchange rates quoted in an active market and are classified as Level 2 fair value measurements under the fair value hierarchy. In the first quarter of fiscal 2012, the Company determined that certain forecasted transactions were no longer probable, de-designated these contracts as hedges and subsequently terminated the contracts. The nominal amount and fair value of these contracts, the amounts reclassified from accumulated other comprehensive loss and the realized losses recorded in other income, net were not material to the Consolidated Financial Statements.