Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Foreign Currency Exchange Risks
We transact business in various foreign countries and are, therefore, subject to the risk of foreign currency exchange rate fluctuations. We enter into forward foreign exchange contracts to economically hedge transactional exposure associated with commitments arising from trade accounts receivable, trade accounts payable, intercompany transactions, and fixed purchase obligations denominated in a currency other than the functional currency of the respective operating entity. We do not, and do not intend to use, derivative financial instruments for speculative or trading purposes. All derivative instruments are recorded on our Consolidated Balance Sheets at their respective fair values.
Forward foreign exchange contracts will generally expire in less than three months and are primarily denominated in Chinese yuan renminbi, Euro, Indian Rupee, Malaysian Ringgit, and Mexican peso. The change in fair value related to contracts designated as accounting cash flow hedging instruments is initially reported as a component of accumulated other comprehensive income (“AOCI”) and subsequently reclassified to the revenue or expense line in which the underlying transaction occurs within our Consolidated Statements of Operations. The change in fair value related to contracts designated as accounting net investment hedging instruments is included in change in foreign currency translation in OCI to offset the change in the carrying value of the net investment being hedged until the complete or substantially complete liquidation of the hedged foreign operation. The change in fair value related to contracts not designated as accounting hedging instruments will be reflected in cost of revenue within our Consolidated Statements of Operations.
Based on our overall currency rate exposures as of August 31, 2025 and August 31, 2024, respectively, including the derivative financial instruments intended to hedge the nonfunctional currency-denominated monetary assets and liabilities, an immediate 10% hypothetical change of foreign currency exchange rates would not have a material effect on our Consolidated Financial Statements. See Note 11 – “Derivative Financial Instruments and Hedging Activities” to the Consolidated Financial Statements for additional information.
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Interest Rate Risk
Our exposure to market risk includes changes in interest rates that could affect the Consolidated Balance Sheet, Consolidated Statements of Operations, and the Consolidated Statements of Cash Flows. We are exposed to interest rate risk primarily on intra-quarter variable rate borrowings under the Credit Facility and our commercial paper program. There were no borrowings outstanding under debt facilities with variable interest rates as of August 31, 2025 and August 31, 2024, respectively.
We utilize valuation models to estimate the effects of sudden interest rate changes. A hypothetical 100-basis-point change in the interest rates under the Credit Facility and our commercial paper program would not have a material effect on our Consolidated Financial Statements . See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” and Note 7 – “Notes Payable and Long-Term Debt” to the Consolidated Financial Statements for additional information regarding our outstanding debt obligations.
The Company periodically enters into interest rate swaps to manage interest rate risk associated with the Company’s borrowings or anticipated debt issuances. As of August 31, 2025, we have forward interest rate swaps with an aggregate notional amount of $100 million, which are scheduled to expire on July 31, 2026. As of August 31, 2024, there were no outstanding interest rate swaps. See Note 11 – “Derivative Financial Instruments and Hedging Activities” for additional information regarding interest rate risk management.