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 P – 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 November 30, 2024 and May 31, 2024:


	Fair Value of Assets					Fair Value of Liabilities
	Balance					Balance
	Sheet	November 30,		May 31,		Sheet	November 30,		May 31,
	Location	2024		2024		Location	2024		2024
Derivatives designated as hedging instruments:
Commodity contracts	Receivables	$	762	$	601	Accounts payable	$	44	$	83
Commodity contracts	Other assets		41		-	Other liabilities		-		21
Subtotal			803		601			44		104

Derivatives not designated as hedging instruments:
Commodity contracts	Receivables	$	74	$	319	Accounts payable	$	45	$	69
Foreign currency exchange contracts	Receivables		-		-	Accounts payable		689		1,248
Subtotal			74		319			734		1,317

Total derivative financial instruments		$	877	$	920		$	778	$	1,421

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 $616 and $391 at November 30, 2024 and May 31, 2024, 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 following table summarizes our cash flow hedges outstanding at November 30, 2024:

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 November 30, 2024:
Commodity contracts	$	(360	)	Cost of goods sold	$	(357	)
Interest rate contracts		-		Interest expense, net		51
Total	$	(360	)		$	(306	)

For the three months ended November 30, 2023:
Commodity contracts	$	2,019		Cost of goods sold	$	(1,583	)
Interest rate contracts		-		Interest expense		52
Foreign currency exchange contracts		(34	)	Miscellaneous income, net		(97	)
Total	$	1,985			$	(1,628	)

For the six months ended November 30, 2024:
Commodity contracts	$	(758	)	Cost of goods sold	$	(742	)
Interest rate contracts		-		Interest expense		103
Total	$	(758	)		$	(639	)

For the six months ended November 30, 2023:
Commodity contracts	$	1,608		Cost of goods sold	$	(2,252	)
Interest rate contracts		-		Loss on extinguishment of debt		(641	)
Interest rate contracts		-		Interest expense		83
Foreign currency exchange contracts		(11	)	Miscellaneous income, net		(44	)
Total	$	1,597			$	(2,854	)

The estimated amount of net gains recognized in AOCI at November 30, 2024, expected to be reclassified into net earnings within the succeeding 12 months is $380 (net of tax of $157). This amount was computed using the fair value of the cash flow hedges at November 30, 2024, and will change before actual reclassification from OCI to net earnings during the fiscal years ending May 31, 2025 and May 31, 2026.

We have 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. Accordingly, the foreign currency effects resulting from the remeasurement of this debt have been deferred in AOCI as an offset to the translation of our net investment in Portugal. A remeasurement gain of $4,329 and $2,494 was deferred in AOCI during the three months and six months ended November 30, 2024. There was no foreign currency gain (loss) recognized in AOCI for the non-derivative instruments designated as net investment hedges in the prior year.

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 gain (loss) recognized in earnings.

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


		Gain (Loss)
		Recognized in Earnings
		Three Months Ended
	Location of Gain (Loss)	November 30,
	Recognized in Earnings	2024			2023
Commodity contracts	Cost of goods sold	$	398		$	571
Foreign currency exchange contracts	Miscellaneous income, net		(489	)		-
Total		$	(91	)	$	571


		Gain
		Recognized in Earnings
		Six Months Ended
	Location of Gain	November 30,
	Recognized in Earnings	2024		2023
Commodity contracts	Cost of goods sold	$	371	$	1,414
Foreign currency exchange contracts	Miscellaneous income, net		558		-
Total		$	929	$	1,414

Maturity Date(s)

Commodity contracts

December 2024 - December 2025