Derivative Instruments

12 Months Ended

Aug. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Note 14 — Derivative Instruments

Foreign operations give rise to market risks from changes in foreign currency exchange rates. Foreign currency forward exchange contracts with established financial institutions are utilized to hedge a portion of that risk. Interest rate swap agreements are used to reduce the impact of changes in interest rates on certain debt. The Company’s foreign currency forward exchange contracts and interest rate swap agreements are designated as cash flow hedges, and therefore the effective portion of unrealized gains and losses is recorded in accumulated other comprehensive income or loss.

At August 31, 2023 exchange rates, notional amounts of forward exchange contracts for the purchase of Polish Zlotys and the sale of Euros aggregated to $70.9 million. The fair value of the contracts is included on the Consolidated Balance Sheets as Accounts payable and accrued liabilities when in a loss position, or as Accounts receivable, net when in a gain position. As the contracts mature at various dates through June 2025, any such gain or loss remaining will be recognized in manufacturing revenue or cost of revenue along with the related transactions. In the event that the underlying transaction does not occur or does not occur in the period designated at the inception of the hedge, the amount classified in accumulated other comprehensive loss would be reclassified to the results of operations in Interest

and foreign exchange at the time of occurrence. At August 31, 2023 exchange rates, approximately $1.6 million of gain would be reclassified to revenue or cost of revenue in the next year.

At August 31, 2023, interest rate swap agreements maturing from September 2023 through January 2032 had notional amounts that aggregated to $654.0 million. The fair value of the contracts are included on the Consolidated Balance Sheets in Accounts payable and accrued liabilities when in a loss position, or in Accounts receivable, net when in a gain position. As interest expense on the underlying debt is recognized, amounts corresponding to the interest rate swap are reclassified from Accumulated other comprehensive loss and charged or credited to interest expense. At August 31, 2023 interest rates, approximately $15.4 million would be credited to interest expense in the next year.

Fair Values of Derivative Instruments


	Asset Derivatives					Liability Derivatives
		August 31,					August 31,
		2023		2022			2023		2022
(In millions)	Balance sheet caption	Fair Value		Fair Value		Balance sheet caption	Fair Value		Fair Value
Derivatives designated as hedging instruments
Foreign forward exchange contracts	Accounts receivable, net	$	2.5	$	0.6	Accounts payable and accrued liabilities	$	0.1	$	2.9
Interest rate swap contracts	Accounts receivable, net		34.9		20.8	Accounts payable and accrued liabilities		0.1		—
		$	37.4	$	21.4		$	0.2	$	2.9
Derivatives not designated as hedging instruments
Foreign forward exchange contracts	Accounts receivable, net	$	0.5	$	—	Accounts payable and accrued liabilities	$	—	$	0.1

The Effect of Derivative Instruments on the Consolidated Statements of Income


Derivatives in cash flow hedging relationships	Location of gain (loss) recognized in income on derivative	Gain (loss) recognized in income on derivatives Years ended August 31,
		2023		2022
Foreign forward exchange contract	Interest and foreign exchange	$	—	$	(0.3	)


Derivatives in cash flow hedging relationships	Gain (loss) recognized in OCI on derivatives Years ended August 31,					Location of gain (loss) reclassified from accumulated OCI into income	Gain (loss) reclassified from accumulated OCI into income Years ended August 31,						Location of gain (loss) in income on derivative (amount excluded from effectiveness testing)	Gain (loss) recognized on derivative (amount excluded from effectiveness testing) Years ended August 31,
	2023		2022				2023			2022				2023		2022
Foreign forward exchange contracts	$	5.6	$	(4.7	)	Revenue	$	(0.2	)	$	(1.5	)	Revenue	$	2.0	$	0.9
Foreign forward exchange contracts		2.0		0.5		Cost of revenue		2.2			0.3		Cost of revenue		0.6		0.7
Interest rate swap contracts		24.8		26.1		Interest and foreign exchange		10.8			(4.9	)	Interest and foreign exchange	—		—
	$	32.4	$	21.9			$	12.8		$	(6.1	)		$	2.6	$	1.6

The following table presents the amounts in the Consolidated Statements of Income in which the effects of the cash flow hedges are recorded and the effects of the cash flow hedge activity on these line items for the years ended August 31, 2023, 2022 and 2021:


	For the Year Ended August 31,
	2023					2022					2021
(In millions)	Total		Amount of gain (loss) on cash flow hedge activity			Total		Amount of gain (loss) on cash flow hedge activity			Total		Amount of gain (loss) on cash flow hedge activity
Revenue	$	3,944.0	$	(0.2	)	$	2,977.7	$	(1.5	)	$	1,747.9	$	(1.3	)
Cost of revenue	$	3,502.9	$	2.2		$	2,671.7	$	0.3		$	1,516.3	$	(0.1	)
Interest and foreign exchange	$	85.4	$	10.8		$	57.4	$	(4.9	)	$	43.3	$	(5.3	)