We utilize derivative financial instruments to primarily 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 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. Our net position with these counterparties fell below the predefined threshold in fiscal 2024, fiscal 2023 and fiscal 2022. 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 S – 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 our consolidated balance sheet at May 31, 2024 and 2023:


	Fair Value of Assets					Fair Value of Liabilities
	Balance					Balance
	Sheet					Sheet
	Location	2024		2023		Location	2024		2023
Derivatives designated as hedging instruments:
Commodity contracts	Receivables	$	601	$	20	Accounts payable	$	83	$	4,069
Commodity contracts	Other assets		-		-	Other liabilities		21		237
Foreign currency exchange contracts	Receivables		-		-	Accounts payable		-		33
Subtotal			601		20			104		4,339

Derivatives not designated as hedging instruments:
Commodity contracts	Receivables	$	319	$	294	Accounts payable	$	69	$	1,609
Foreign currency exchange contracts	Receivables		-		-	Accounts payable		1,248		-
Subtotal			319		294			1,317		1,609

Total		$	920	$	314		$	1,421	$	5,948

The amounts in the table above reflect the fair value of our derivative financial instruments on a net basis where allowable 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 $391 and $272 at May 31, 2024 and 2023, respectively.

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 ineffective portion of the gain or loss on the derivative financial instrument is recognized in earnings immediately.

The following table summarizes our cash flow hedges outstanding at May 31, 2024:


	Notional
	Amount		Maturity Date
Commodity contracts	$	5,870	June 2024 - December 2025

The following table summarizes the gain (loss) recognized in OCI and the gain (loss) reclassified from AOCI into earnings for derivative financial instruments designated as cash flow hedges during fiscal 2024 and fiscal 2023:


				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 fiscal year ended May 31, 2024:
Commodity contracts	$	3,382		Cost of goods sold	$	(549	)
Interest rate contracts		-		Loss on extinguishment of debt		(642	)
Interest rate contracts		-		Interest expense		188
Foreign currency exchange contracts		(11	)	Miscellaneous income, net		(44	)
Totals	$	3,371			$	(1,047	)

For the fiscal year ended May 31, 2023:
Commodity contracts	$	(12,990	)	Cost of goods sold	$	(11,007	)
Interest rate contracts		-		Interest expense		(27	)
Foreign currency exchange contracts		195		Miscellaneous income, net		142
Totals	$	(12,795	)		$	(10,892	)

The estimated net amount of the gains recognized in AOCI at May 31, 2024, expected to be reclassified into net earnings within the succeeding twelve months is $386 (net of tax of $95). This amount was computed using the fair value of the cash flow hedges at May 31, 2024, and will change before actual reclassification from other comprehensive income to net earnings during fiscal 2025.

We have designated our foreign-denominated debt as a non-derivative net investment hedge. This hedge is used to protect the value of our net investments in certain foreign operations. The foreign currency transaction gains or losses on the carrying value of our foreign-denominated debt are remeasured based on spot exchange rates at the balance sheet date. Any gains and losses attributable to the translation of the foreign-denominated debt designated as a net investment hedge are recognized as a component of the cumulative translation adjustment within AOCI. To the extent the foreign currency-denominated notes designated as net investment hedges become ineffective, changes in the carrying value attributable to the change in spot exchange rates will be recognized in earnings immediately.

At May 31, 2024, we designated the New Senior Notes as a non-derivative net investment hedge with a total outstanding principal amount of €91,700. The full principal amount was designated as a net investment hedge and 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 foreign currency gain (loss) recognized in OCI for the non-derivative instruments designated as net investment hedges during fiscal 2024 was $1,676. There were no foreign currency gain (loss) recognized in OCI for the non-derivative instruments designated as net investment hedges during fiscal 2023 and fiscal 2022.

We enter into foreign currency exchange contracts to manage our foreign currency exchange rate exposure related to inter-company and financing transactions that do not meet the requirements for hedge accounting treatment. We also enter 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.

The following table summarizes the gain (loss) recognized in earnings for economic (non-designated) derivative financial instruments during fiscal 2024 and fiscal 2023:


		Loss
		Recognized in Earnings
		Fiscal Year Ended
	Location of Loss	May 31,
	Recognized in Earnings	2024			2023
Commodity contracts	Cost of goods sold	$	(349	)	$	(4,778	)
Foreign currency exchange contracts	Miscellaneous income, net		(1,247	)		-
Total		$	(1,596	)	$	(4,778	)