Note 14 – Derivative Financial Instruments and Hedging Activities

The Company utilizes derivative financial instruments to primarily manage exposure to certain risks related to its ongoing operations. The primary risks managed through the use of derivative financial instruments are commodity price risk, foreign currency exchange risk, and interest rate risk. While certain of the Company’s derivative financial instruments are designated as hedging instruments, the Company also enters 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.

Commodity Price Risk Management – The Company is exposed to changes in the price of certain commodities, including steel, zinc and other raw materials, and the Company’s utility requirements. The Company’s 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, the Company enters into derivative financial instruments to manage the associated price risk.

Interest Rate Risk Management – The Company is exposed to the impact of interest rate changes. The Company’s objective is to manage the impact of interest rate changes on cash flows and the market value of borrowings. The Company utilizes a mix of debt maturities along with both fixed-rate and variable-rate debt to manage changes in interest rates. In addition, the Company enters into interest rate swaps to further manage exposure to interest rate variations related to borrowings and to lower overall borrowing costs.

Foreign Currency Exchange Risk Management – The Company conducts business in several major international currencies and is, therefore, subject to risks associated with changing foreign currency exchange rates. The Company uses various methods to protect against exchange rate movements.

The translation of foreign currencies into U.S. dollars also subjects the Company to exposure related to fluctuating foreign currency exchange rates; however, derivative financial instruments are not used to manage this risk.

The Company is exposed to counterparty credit risk on all of its derivative financial instruments. Accordingly, the Company has established and maintains strict counterparty credit guidelines. The Company has credit support agreements in place with certain counterparties to limit the Company’s 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. The Company does not have significant exposure to any one counterparty, and management believes the overall risk of loss is remote and, in any event, would not be material.

Refer to “Note 15 – Fair Value” for additional information regarding the accounting treatment for the Company’s derivative financial instruments, as well as how fair value is determined.

As allowable under GAAP, the Company’s policy is to record derivative financial instruments, with the exception of cross-currency swaps, on a net basis where the Company has an executed master netting arrangement with counterparties as well as where the right of offset exists. The cross-currency swaps are reflected on a gross basis in the consolidated balance sheet as the Company has not entered into any master netting arrangements. The amounts in the table above reflect the fair value of the derivative financial instruments on a net basis, where allowable under master netting arrangements and/or where the right of offset exists. 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 $2.1 million and $1.6 million at August 31, 2026 and May 31, 2026, respectively.

The fair value of the Company’s interest rate contracts was less than $0.1 million at August 31, 2026 and at May 31, 2026. Accordingly, these were not presented in the table above.

Cash Flow Hedges

The Company enters into derivative financial instruments to hedge its exposure to changes in cash flows attributable to interest rate, foreign currency exchange rates, and commodity price fluctuations associated with certain forecasted transactions. Purchases of commodities are hedged for periods of up to 24 months and certain forecasted foreign currency transactions for periods generally up to 12 months. 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 ineffective portion of the gain or loss on the derivative financial instrument is recognized in earnings immediately.

Net Investment Hedges – Cross-Currency Swaps

The Company uses cross-currency swaps to hedge foreign currency risk on portions of its Euro-denominated net investments in foreign subsidiaries against fluctuations in Euro/U.S. Dollar exchange rates. During the second quarter of fiscal 2026, the Company entered into a cross-currency swap to hedge a portion of its net investment in Sitem Group. During the first quarter of fiscal 2027, the Company entered into an additional cross-currency swap to hedge a portion of its net investment in Kloeckner. As part of the hedge contracts, the Company receives a fixed rate of U.S. dollar interest on a monthly basis.

The Company has elected the spot method for assessing the effectiveness of the contracts. The Company excludes from the assessment of hedge effectiveness the portion of the fair value of the cross-currency swaps attributable to interest rate differentials. The Company recognizes the initial value of the excluded components in earnings within interest expense, net, using a systematic and rational method over the life of the hedging instruments. The change in fair value of the swaps and related income tax is recorded within other comprehensive income, net of tax, on the consolidated statements of comprehensive income and, as net investment hedges, as a component within currency translation adjustments of AOCI. Amounts recorded in AOCI include both (i) changes attributable to spot exchange rates and (ii) amounts related to excluded components that are deferred in other comprehensive income. The Company recognized interest income within interest expense, net, in the consolidated statements of earnings of $2.0 million during the three months ended August 31, 2026. No amounts were recognized during the three months ended August 31, 2025 as the cross-currency swap was executed during the second quarter of fiscal 2026.

During the three months ended August 31, 2026, the Company partially terminated and de-designated €15.0 million of the notional amount of the cross-currency swap entered into in November 2025, reducing the designated notional amount from €75.0 million to €60.0 million. The Company paid $0.2 million to the counterparty in connection with the partial termination. The remaining €60.0 million notional amount continues to be designated as a net investment hedge. The Company did not reclassify material amounts of deferred gains or losses related to the net investment hedges from AOCI into earnings during the three months ended August 31, 2026. The Company did not have any ineffectiveness related to the net investment hedges.

As of August 31, 2026, for the net investment hedges, the Company has recognized amounts in net earnings related to excluded components as described above. Refer to “Note 9 – Other Comprehensive Income (Loss)” for additional information regarding the use of derivative financial instruments and the recognized amounts within OCI and AOCI.

For the cash flow hedges, the estimated net amount of the gains recognized in AOCI at August 31, 2026, expected to be reclassified into net earnings within the succeeding twelve months is $2.6 million (net of tax of $0.7 million). This amount was computed using the fair value of the cash flow hedges at August 31, 2026, and will change before actual reclassification from AOCI to net earnings during the fiscal years ending May 31, 2027 and May 31, 2028. Given the maturity of the net investment hedge is greater than twelve months, no amount is estimated to be reclassified into net earnings within the succeeding twelve months.

Fair Value Hedge – Cross Currency Swap

In June 2026, the Company entered into a €100.0 million to $114.7 million float-for-float cross-currency swap to hedge foreign currency risk associated with a portion of the principal amount of a Euro-denominated loan to Kloeckner against fluctuations in Euro/U.S. Dollar exchange rates. Under the swap, the Company pays Euro-denominated interest at one-month EURIBOR plus 3.000% and receives U.S. dollar-denominated interest at compounded SOFR plus 3.055%, with monthly settlements. The swap matures on December 23, 2027. The cross-currency swap was designated as a fair value hedge of the Company’s foreign currency exposure related to the hedged portion of the loan. Changes in the fair value of the cross-currency swap attributable to the hedged risk and the related foreign currency remeasurement gains and losses on the hedged portion of the loan are recognized in current earnings. The Company excludes interest rate differentials and cross-currency basis spreads from its assessment of hedge effectiveness. Amounts recognized in earnings related to these excluded components were not material during the three months ended August 31, 2026. Under the Company's amortization approach, differences between changes in the fair value of excluded components and amounts recognized in earnings are recorded in other comprehensive income.

Economic (Non-designated) Hedges

The Company enters into foreign currency exchange contracts to manage its foreign currency exchange rate exposure related to inter-company and financing transactions that do not meet the requirements for hedge accounting treatment. The Company also enters into certain commodity contracts that do not qualify for hedge accounting treatment. Accordingly, these derivative financial instruments are adjusted to current market value at the end of each period through earnings.

Foreign currency exchange derivatives for the Kloeckner Acquisition

In January 2026, the Company executed a Euro/U.S. Dollar foreign currency forward contract to hedge a portion of the expected purchase price of the Kloeckner Acquisition. The contract was initially entered into with a notional amount of €550.0 million and was subsequently increased to €570.0 million ($664.6 million as of May 31, 2026), with a maturity date in the second quarter of fiscal 2027. This economic (non-designated) cash flow derivative was entered into to hedge a portion of the expected purchase price of the Kloeckner Acquisition. As the expected closing date of the Kloeckner Acquisition was accelerated, the Company entered into additional foreign currency contracts during May 2026 to effectively accelerate the settlement date of its hedge from the second quarter of fiscal 2027 to the first quarter of fiscal 2027. The Company settled the related foreign currency forward contracts during the first quarter of fiscal 2027. As a result, the Company recognized a loss of $0.9 million in miscellaneous income (expense), net during the three months ended August 31, 2026. For additional information regarding the Kloeckner Acquisition, see “Note 2 – Acquisitions.”