Financial Derivatives | 6 Months Ended |
Feb. 28, 2015 |
Financial Derivatives [Abstract] | |
Financial Derivatives | Note 8 – Financial Derivatives |
The Company uses certain financial derivatives to mitigate its exposure to volatility in foreign currency exchange rates. The Company uses these derivative instruments to hedge exposures in the ordinary course of business and does not invest in derivative instruments for speculative purposes. The Company manages market and credit risks associated with its derivative instruments by establishing and monitoring limits as to the types and degree of risk that may be undertaken, and by entering into transactions with high-quality counterparties. As of February 28, 2015, the Company’s derivative counterparty had investment grade credit ratings. Financial derivatives consist of the following: |
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| | Fair Values of Derivative Instruments | | | |
| | Asset (Liability) | | | |
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| | | | February 28, | | February 28, | | August 31, | | | |
($ in thousands) | | Balance Sheet Classification | | 2015 | | 2014 | | 2014 | | | |
Derivatives designated as hedging instruments: | | | | | | | | | | | | | | |
Foreign currency forward contracts | | Other current assets | | $ | 3,230 | | $ | 59 | | $ | 900 | | | |
Foreign currency forward contracts | | Other current liabilities | | | -278 | | | -172 | | | -240 | | | |
Total derivatives designated as hedging instruments | | | | $ | 2,952 | | $ | -113 | | $ | 660 | | | |
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Derivatives not designated as hedging instruments: | | | | | | | | | | | | | | |
Foreign currency forward contracts | | Other current assets | | $ | 181 | | $ | - | | $ | - | | | |
Foreign currency forward contracts | | Other current liabilities | | | -115 | | | -106 | | | -160 | | | |
Total derivatives not designated as hedging instruments | | | | $ | 66 | | $ | -106 | | $ | -160 | | | |
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Accumulated other comprehensive income included realized and unrealized after-tax gains of $5.2 million, $1.1 million and $2.0 million at February 28, 2015 and 2014 and August 31, 2014, respectively, related to derivative contracts designated as hedging instruments. |
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Net Investment Hedging Relationships |
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| | | | Amount of Gain/(Loss) Recognized |
in OCI on Derivatives |
| | | | Three months ended | | Six months ended |
| | | | February 28, | | February 28, | | February 28, | | February 28, |
($ in thousands) | | | | 2015 | | 2014 | | 2015 | | 2014 |
Foreign currency forward contracts, net of tax expense | | $ | 2,068 | | $ | -245 | | $ | 3,213 | | $ | -940 |
(benefit) of $1,315, ($196), $2,048 and ($599) |
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For the three months ended February 28, 2015 and 2014, the Company settled foreign currency forward contracts resulting in an after-tax net gain (loss) of $0.9 million and ($0.4 million), which were included in other comprehensive income as part of a currency translation adjustment. For the six months ended February 28, 2015 and 2014, the Company settled foreign currency forward contracts resulting in an after-tax net gain (loss) of $1.8 million and ($0.9 million), which were included in other comprehensive income as part of a currency translation adjustment. There were no amounts recorded in the condensed consolidated statement of operations related to ineffectiveness of foreign currency forward contracts related to net investment hedges for the three and six months ended February 28, 2015 and 2014. |
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At February 28, 2015 and 2014 and August 31, 2014, the Company had outstanding Euro foreign currency forward contracts to sell 29.0 million Euro, 28.9 million Euro and 28.9 million Euro, respectively, at fixed prices to settle during the next fiscal quarter. At February 28, 2015 and 2014 and August 31, 2014, the Company had an outstanding South African Rand foreign currency forward contract to sell 43.0 million South African Rand at fixed prices to settle during the next fiscal quarter. The Company’s foreign currency forward contracts qualify as hedges of a net investment in foreign operations. |
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Derivatives Not Designated as Hedging Instruments |
For derivative contracts in which the Company does not elect hedge accounting treatment, the Company carries the derivative at its fair value in the condensed consolidated balance sheet and recognizes any subsequent changes in its fair value through earnings in the condensed consolidated statement of operations. The Company generally does not elect hedge accounting treatment for derivative contracts related to future settlements of foreign denominated intercompany receivables and payables. At February 28, 2015 and 2014 and August 31, 2014, the Company had $5.8 million, $5.2 million and $4.9 million respectively, of U.S. dollar equivalent of foreign currency forward contracts outstanding that are not designated as hedging instruments. |
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