Quantitative and Qualitative Disclosures About Market Risk
−Removed: We are exposed to market risk from changes in foreign currency exchange rates and interest rates and, to a lesser extent, commodities.
−Removed: To reduce such risks, we selectively use financial instruments and other proactive management techniques.
−Removed: All hedging transactions are authorized and executed pursuant to clearly defined policies and procedures, which strictly prohibit the use of financial instruments for trading or speculative purposes.
−Removed: A discussion of our accounting policies for derivative financial instruments is included within Note 10, “Derivatives” in the notes to the consolidated financial statements.
+Added: The diverse nature of our business activities necessitates the management of various financial and market risks, including those related to changes in interest rates, foreign currency exchange rates and commodity costs.
+Added: Interest Rate Risk — As of August 31, 2023, long term debt consisted of $ 16 million of borrowings under the revolving line of credit (variable rate debt) and $ 200 million of term loan debt bearing interest on SOFR (variable rate).
+Added: An interest-rate swap effectively converts the SOFR-based rate of $ 60 million of term borrowings under our credit facility to a fixed rate.
+Added: A ten percent increase in the average costs of our variable rate debt would have resulted in a $1 million increase in financing costs for the fiscal year ended August 31, 2023 .
Foreign Currency Risk — We maintain operations in the U.S.
and various foreign countries.
−Removed: operations, the largest of which are located in the Netherlands (and other countries whose functional currency is the Euro), the United Kingdom, Australia, the United Arab Emirates and China, have foreign currency risk relating to receipts from customers, payments to suppliers and intercompany transactions denominated in foreign currencies.
−Removed: Under certain conditions, we enter into hedging transactions, primarily forward foreign currency swaps, that enable us to mitigate the potential adverse impact of foreign currency exchange rate risk (see Note 10, “Derivatives” in the notes to the consolidated financial statements for further information).
+Added: Our more significant non-U.S.
+Added: operations are located in Australia, the Netherlands, the United Kingdom, United Arab Emirates and China, and we have foreign currency risk relating to receipts from customers, payments to suppliers and intercompany transactions denominated in foreign currencies.
+Added: Under certain conditions, we enter into hedging transactions (primarily foreign currency exchange contracts) that enable us to mitigate the potential adverse impact of foreign currency exchange rate risk (see Note 9, “Derivatives” in the notes to the consolidated financial statements for further information).
We do not engage in trading or other speculative activities with these transactions, as established policies require th at these hedging transactions relate to specific currency exposures.
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To illustrate the potential impact of changes in foreign currency exchange rates on the translation of our results of operations, annual sales and operating profit were remeasured assuming a ten percent reduction in foreign exchange rates compared to the U.S.
−Removed: Under this assumption, annual sales would have been $24 million lower and operating profit would have been relatively flat for the twelve months ended August 31, 2022.
+Added: Under this assumption, annual sales would have been $26 million lower and operating profit would have been $2 million lower for the fiscal year ended August 31, 2023.
This sensitivity analysis assumes that each exchange rate would change in the same direction relative to the U.S.
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dollars, our reporting currency.
−Removed: Interest Rate Risk — As of August 31, 2022, long term debt consisted of $ 200 million of borrowings under the revolving line of credit (variable rate debt).
−Removed: A ten percent increase in the average costs of our variable rate debt would have resulted in less than $0.1 million increase in financing costs for the year ended August 31, 2022 .
C ommodity Risk —We source a wide variety of materials and components from a network of global suppliers.
−Removed: While such materials are typically available from numerous suppliers, commodity raw materials, such as steel, aluminum, plastic resin, brass, steel wire and rubber are subject to price fluctuations which could have a negative impact on our results.
+Added: While such materials are typically available from numerous suppliers, commodity raw materials, such as steel and plastic resin are subject to price fluctuations which could have a negative impact on our results.
We strive to timely pass along such commodity price increases to customers to avoid profit margin erosion.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.