v3.26.1
Derivative Financial Instruments and Hedging Activities
 9 Months Ended
Feb. 28, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments and Hedging Activities

Note N – Derivative Financial Instruments and Hedging Activities

 

We primarily utilize derivative financial instruments to manage exposure to certain risks related to our ongoing operations. The primary risks managed through the use of derivative financial instruments include interest rate risk, foreign currency exchange risk and commodity price risk. While certain of our derivative financial instruments are designated as hedging instruments, we also enter into derivative financial instruments that are designed to hedge a risk, but are not designated as hedging instruments and therefore do not qualify for hedge accounting. These derivative financial instruments are adjusted to current fair value through earnings at the end of each period.

 

Interest Rate Risk Management – We are exposed to the impact of interest rate changes. Our objective is to manage the impact of interest rate changes on cash flows and the market value of our borrowings. We utilize a mix of debt maturities along with both fixed-rate and variable-rate debt to manage changes in interest rates. In addition, we enter into interest rate swaps to further manage our exposure to interest rate variations related to our borrowings and to lower our overall borrowing costs.

 

Foreign Currency Exchange Rate Risk Management – We conduct business in several major international currencies and are, therefore, subject to risks associated with changing foreign currency exchange rates. We enter into various contracts that change in value as foreign currency exchange rates change to manage this exposure. Such contracts limit exposure to both favorable and unfavorable foreign currency exchange rate fluctuations. The translation of foreign currencies into U.S. dollars also subjects us to exposure related to fluctuating foreign currency exchange rates; however, derivative financial instruments are not used to manage this risk.

 

Commodity Price Risk Management – We are exposed to changes in the price of certain commodities, including steel, natural gas, copper, zinc, aluminum and other raw materials, and our utility requirements. Our objective is to reduce earnings and cash flow volatility associated with forecasted purchases and sales of these commodities to allow management to focus its attention on business operations. Accordingly, we enter into derivative financial instruments to manage the associated price risk.

 

We are exposed to counterparty credit risk on all of our derivative financial instruments. Accordingly, we have established and maintain strict counterparty credit guidelines. We have credit support agreements in place with certain counterparties to limit our credit exposure. These agreements require either party to post cash collateral if its cumulative market position exceeds a predefined liability threshold. Amounts posted to the margin accounts accrue interest at market rates and are required to be refunded in the period in which the cumulative market position falls below the required threshold. We do not have significant exposure to any one counterparty and management believes the risk of loss is remote and, in any event, would not be material.

 

Refer to “Note O – Fair Value Measurements” for additional information regarding the accounting treatment for our derivative financial instruments, as well as how fair value is determined. The following table summarizes the fair value of our derivative financial instruments and the respective lines in which they were recorded in the consolidated balance sheet at February 28, 2026 and May 31, 2025:

 

 

Fair Value of Assets

 

 

Fair Value of Liabilities

 

 

Balance

 

 

 

 

 

 

 

Balance

 

 

 

 

 

 

 

Sheet

 

February 28,

 

 

May 31,

 

 

Sheet

 

February 28,

 

 

May 31,

 

 

Location

 

2026

 

 

2025

 

 

Location

 

2026

 

 

2025

 

Derivatives designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts

Receivables

 

$

757

 

 

$

478

 

 

Accounts payable

 

$

285

 

 

$

51

 

Commodity contracts

Other assets

 

 

-

 

 

 

-

 

 

Other liabilities

 

 

6

 

 

 

35

 

Foreign currency exchange contracts

Receivables

 

 

184

 

 

 

483

 

 

Accounts payable

 

 

-

 

 

 

-

 

Subtotal

 

 

$

941

 

 

$

961

 

 

 

 

$

291

 

 

$

86

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives not designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts

Receivables

 

$

62

 

 

$

81

 

 

Accounts payable

 

$

153

 

 

$

15

 

Foreign currency exchange contracts

Receivables

 

 

-

 

 

 

-

 

 

Accounts payable

 

 

339

 

 

 

7,360

 

Subtotal

 

 

 

62

 

 

 

81

 

 

 

 

 

492

 

 

 

7,375

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total derivative financial instruments

 

 

$

1,003

 

 

$

1,042

 

 

 

 

$

783

 

 

$

7,461

 

 

The amounts in the table above reflect the fair value of our derivative financial instruments on a net basis where allowed under master netting arrangements. Had these amounts been recognized on a gross basis, the impact would have been an increase in receivables with a corresponding increase in accounts payable of $365 and $356 at February 28, 2026 and May 31, 2025, respectively.

 

Cash Flow Hedges

 

We enter into derivative financial instruments to hedge our exposure to changes in cash flows attributable to interest rate and commodity price fluctuations associated with certain forecasted transactions. These derivative financial instruments are designated and qualify as cash flow hedges. Accordingly, the effective portion of the gain or loss on each of these derivative financial instruments is reported as a component of OCI and reclassified into earnings in the same line associated with the forecasted transaction and in the same period during which the hedged transaction affects earnings.

 

The following table summarizes the net notional positions of our cash flow hedges at February 28, 2026:

 

 

 

Notional

 

 

 

 

 

Amount

 

 

Maturity Date(s)

Commodity contracts

 

$

15,277

 

 

March 2026 - December 2027

Foreign currency exchange contracts

 

 

8,490

 

 

March 2026 - July 2026

 

The following table summarizes the gain (loss) recognized in OCI and the gain (loss) reclassified from AOCI into net earnings for derivative financial instruments designated as cash flow hedges for the periods presented:

 

 

 

 

 

Location of

 

Gain (Loss)

 

 

Gain (Loss)

 

 

Gain (Loss)

 

Reclassified

 

 

Recognized

 

 

Reclassified from AOCI

 

from AOCI

 

 

in OCI

 

 

into Net Earnings

 

into Net Earnings

 

For the three months ended February 28, 2026

 

 

 

 

 

 

 

Commodity contracts

$

1,343

 

 

Cost of goods sold

 

$

150

 

Foreign currency exchange contracts

 

140

 

 

Interest expense, net / Miscellaneous income (expense), net

 

 

111

 

Interest rate contracts

 

-

 

 

Miscellaneous income (expense), net

 

 

65

 

Total

$

1,483

 

 

 

 

$

326

 

 

 

 

 

 

 

 

 

For the three months ended February 28, 2025

 

 

 

 

 

 

 

Commodity contracts

$

1,039

 

 

Cost of goods sold

 

$

219

 

Interest rate contracts

 

-

 

 

Interest expense, net

 

 

52

 

Foreign currency exchange contracts

 

(74

)

 

Miscellaneous income (expense), net

 

 

-

 

Total

$

965

 

 

 

 

$

271

 

 

 

 

 

 

 

 

 

For the nine months ended February 28, 2026

 

 

 

 

 

 

 

Commodity contracts

$

555

 

 

Cost of goods sold

 

$

490

 

Foreign currency exchange contracts

 

101

 

 

Cost of goods sold

 

 

332

 

Foreign currency exchange contracts

 

341

 

 

Interest expense

 

 

150

 

Interest rate contracts

 

-

 

 

Interest expense

 

 

169

 

Total

$

997

 

 

 

 

$

1,141

 

 

 

 

 

 

 

 

 

For the nine months ended February 28, 2025

 

 

 

 

 

 

 

Commodity contracts

$

281

 

 

Cost of goods sold

 

$

(523

)

Interest rate contracts

 

-

 

 

Interest expense

 

 

155

 

Foreign currency exchange contracts

 

(74

)

 

Miscellaneous income (expense), net

 

 

-

 

Total

$

207

 

 

 

 

$

(368

)

 

The estimated amount of net losses recognized in AOCI at February 28, 2026, expected to be reclassified into net earnings within the succeeding 12 months is $714 (net of tax of $202). This amount was computed using the fair value of the cash flow hedges at February 28, 2026, and will change before actual reclassification from OCI to net earnings during the fiscal years ending May 31, 2026 and May 31, 2027.

 

Net Investment Hedges

 

At February 28, 2026, we designated our Euro-denominated debt held in the U.S. with an initial notional amount of €91,700 ($99,479) as a non-derivative net investment hedge of our foreign operations in Portugal. The full principal amount is considered fully effective. We did not reclassify any gains or losses related to the net investment hedge from AOCI into earnings during any of the fiscal years

presented. The following table summarizes the foreign currency gain (loss) recognized in OCI for the non-derivative instruments designated as net investment hedges for the periods presented.

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

February 28,

 

 

February 28,

 

 

2026

 

 

2025

 

 

2026

 

 

2025

 

Net gain (loss) recognized in OCI

$

(1,960

)

 

$

1,842

 

 

$

(4,265

)

 

$

4,335

 

 

Economic (Non-designated) Hedges

 

The following table summarizes the net notional positions of our economic (non-designated) derivative financial instruments outstanding at February 28, 2026:

 

 

 

Notional

 

 

 

 

 

Amount

 

 

Maturity Date(s)

Commodity contracts

 

$

3,323

 

 

March 2026 - November 2026

Foreign currency exchange contracts

 

 

37,226

 

 

March 2026 - May 2026

 

The following table summarizes the gain (loss) recognized in earnings for economic (non-designated) derivative financial instruments for the periods presented:

 

 

 

 

Three Months Ended

 

 

Location of Gain (Loss)

 

February 28,

 

 

Recognized in Earnings

 

2026

 

 

2025

 

Commodity contracts

Cost of goods sold

 

$

268

 

 

$

108

 

Foreign currency exchange contracts

Miscellaneous income, net

 

 

6,944

 

 

 

(531

)

Total

 

 

$

7,212

 

 

$

(423

)

 

 

 

 

Nine Months Ended

 

 

Location of Gain (Loss)

 

February 28,

 

 

Recognized in Earnings

 

2026

 

 

2025

 

Commodity contracts

Cost of goods sold

 

$

276

 

 

$

479

 

Foreign currency exchange contracts

Miscellaneous income, net

 

 

7,618

 

 

 

27

 

Total

 

 

$

7,894

 

 

$

506