v3.25.2
Derivative Financial Instruments
9 Months Ended
May 31, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments

Note 8 - Derivative Financial Instruments

Interest Rate Swaps

The Company is exposed to interest rate risk on its debt and may enter interest rate swap contracts to effectively manage the impact of interest rate changes on its outstanding debt, which has predominantly floating interest rates. The Company does not enter interest rate swap transactions for trading or speculative purposes.

In fiscal 2023, the Company entered three pay-fixed interest rate swap transactions, each with a different major financial institution counterparty and designated as a cash flow hedge, to hedge the variability in interest cash flows associated with the Company’s variable-rate loans under its bank revolving credit facilities. The interest rate swaps involve the receipt of variable-rate amounts from the counterparty in exchange for the Company making fixed-rate payments over the life of the agreement without exchange of the underlying

notional amount. These contracts mature in August 2026. As of both May 31, 2025 and August 31, 2024, the total notional amount of these interest rate swaps was $150 million. The fair values of the interest rate swaps are based upon inputs corroborated by observable market data which is considered Level 2 of the fair value hierarchy.

The fair value of derivative instruments in the Unaudited Condensed Consolidated Balance Sheet as of May 31, 2025 and August 31, 2024 is as follows (in thousands):

 

 

Balance Sheet Location

 

May 31, 2025

 

 

August 31, 2024

 

Interest rate swap contracts

Other accrued liabilities

 

$

497

 

 

$

174

 

Interest rate swap contracts

Other long-term liabilities

 

$

363

 

 

$

1,667

 

See Note 5 - Accumulated Other Comprehensive Income (Loss) for tabular presentation of the effects of interest rate swap derivative cash flow hedges on other comprehensive income. All related cash flow hedge amounts reclassified from accumulated other comprehensive income (“AOCI”) were recorded in interest expense on the Unaudited Condensed Consolidated Statement of Operations for the three and nine months ended May 31, 2025, which reclassified amounts totaled less than $1 million for each period. For the three and nine months ended May 31, 2024, such reclassified amounts totaled less than $1 million and $1 million, respectively. Total interest expense was $9 million and $27 million, respectively, for the third quarter and first nine months of fiscal 2025, compared to $7 million and $18 million, respectively, for the same periods in the prior year. There was no hedge ineffectiveness with respect to the Company’s interest rate swap cash flow hedges for the three and nine months ended May 31, 2025 and 2024.