Derivative Instruments

6 Months Ended

Feb. 29, 2020

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Note 12 – 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 February 29, 2020 exchange rates, notional amounts of forward exchange contracts for the purchase of Polish Zlotys and the sale of Euros and Pound Sterling; and the purchase of Mexican Pesos and the sale of U.S. Dollars aggregated to $54.1 million. The fair value of the contracts is included on the Consolidated Balance Sheets as Accounts payable and accrued liabilities when there is a loss, or as Accounts receivable, net when there is a gain. As the contracts mature at various dates through May 2022, 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 February 29, 2020 exchange rates, approximately $0.5 million would be reclassified to revenue or cost of revenue in the next year.

At February 29, 2020, an interest rate swap agreement maturing in September 2023 had a notional amount of $107.6 million and an interest rate swap agreement maturing June 2024 had a notional amount of $148.1 million. The fair value of the contracts are included on the Consolidated Balance Sheets in Accounts payable and accrued liabilities when there is a loss, or in Accounts receivable, net when there is a gain. 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 February 29, 2020 interest rates, approximately $2.9 million would be reclassified to interest expense in the next year.

Fair Values of Derivative Instruments

	Asset Derivatives					Liability Derivatives
		February 29, 2020		August 31, 2019			February 29, 2020		August 31, 2019
(In thousands)	Balance sheet location	Fair Value		Fair Value		Balance sheet location	Fair Value		Fair Value
Derivatives designated as hedging instruments
Foreign forward exchange contracts	Accounts receivable, net	$	488	$	64	Accounts payable and accrued liabilities	$	194	$	437
Interest rate swap contracts	Accounts receivable, net		—		—	Accounts payable and accrued liabilities		12,504		10,255
		$	488	$	64		$	12,698	$	10,692
Derivatives not designated as hedging instruments
Foreign forward exchange contracts	Accounts receivable, net	$	39	$	—	Accounts payable and accrued liabilities	$	281	$	587

The Effect of Derivative Instruments on the Statements of Income

Three Months Ended February 29, 2020 and February 28, 2019

Derivatives in cash flow hedging relationships

Location of gain (loss)

recognized in income

on derivatives

Gain (loss) recognized in income on

derivatives three months ended

February 29,

2020

February 28,

2019

Foreign forward exchange contract

Interest and foreign exchange

(165

)

115

Derivatives in cash flow hedging relationships	Gain (loss) recognized in OCI on derivatives three months ended,						Location of gain (loss) reclassified from accumulated OCI into income	Gain (loss) reclassified from accumulated OCI into income three months ended						Location of gain (loss) on derivative (amount excluded from effectiveness testing)	Gain (loss) recognized on derivative (amount excluded from effectiveness testing) three months ended
	February 29, 2020			February 28, 2019				February 29, 2020			February 28, 2019				February 29, 2020			February 28, 2019
Foreign forward exchange contracts	$	190		$	(418	)	Revenue	$	67		$	(411	)	Revenue	$	190		$	638
Foreign forward exchange contracts		411			1,100		Cost of revenue		73			(358	)	Cost of revenue		210			289
Interest rate swap contracts		(5,503	)		(1,916	)	Interest and foreign exchange		(369	)		(151	)	Interest and foreign exchange		(116	)		25
	$	(4,902	)	$	(1,234	)		$	(229	)	$	(920	)		$	284		$	952

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 three months ended February 29, 2020 and February 28, 2019:

	For The Three Months Ended
	February 29, 2020					February 28, 2019
	Total		Amount of gain (loss) on cash flow hedge activity			Total		Amount of gain (loss) on cash flow hedge activity
Revenue	$	623,848	$	67		$	658,671	$	(411	)
Cost of revenue		537,512		73			604,827		(358	)
Interest and foreign exchange		12,609		(369	)		9,237		(151	)

Six Months Ended February 29, 2020 and February 28, 2019