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Our operations are exposed to market risks from adverse changes in commodity prices affecting the cost of raw materials and energy, foreign currency exchange rates, and interest rates.
−Removed: In the normal course of business, we may periodically enter into derivatives to minimize these risks, but not for trading purposes.
+Added: In the normal course of business, we may periodically enter into derivative contracts to mitigate these risks, but not for trading purposes.
The disruptions in the global economy caused by the war in Ukraine have resulted in volatility and uncertainty in the markets in which we operate.
At the time of this filing, we are unable to predict or determine the impacts that these events may continue to have on our exposure to market risk from commodity prices, foreign currency exchange rates, and interest rates, among other factors.
−Removed: Based on our open commodity contract hedge positions as of August 28, 2022 and August 29, 2021, a hypothetical 10 percent decline in market prices applied to the fair value of the instruments would result in a charge to “Cost of sales” of approximately $5.1 million ($4.0 million after-tax) and $5.7 million ($4.4 million after-tax), respectively.
−Removed: Additionally, based on our LWM joint venture’s open commodity contract hedge positions as of August 28, 2022 and August 29, 2021, a hypothetical 10 percent decline in market prices applied to the fair value of the instruments would result in a charge to “Equity method investment earnings” of approximately $26.3 million ($19.5 million after-tax) and $1.7 million ($1.3 million after-tax), respectively.
−Removed: It should be noted that any change in the fair value of these contracts, real or hypothetical, would be substantially offset by an inverse change in the value of the underlying hedged item.
−Removed: We transact business in multiple currencies and are subject to currency exchange rate risk through investments and businesses owned and operated in foreign countries.
−Removed: At August 28, 2022, we had no financial instruments to hedge foreign currency risk.
−Removed: At August 28, 2022, we had $2,170.0 million of fixed-rate and $587.6 million of variable-rate debt outstanding.
−Removed: At August 29, 2021, we had $2,166.0 million of fixed-rate and $578.8 million of variable-rate debt outstanding.
+Added: For more information, refer to “Item 7A.
+Added: Quantitative and Qualitative Disclosures About Market Risk” included in the Form 10-K.
+Added: Commodity Price Risk
+Added: Based on our open commodity contract hedge positions as of November 27, 2022, a hypothetical 10 percent decline in market prices applied to the fair value of the instruments would result in a charge to “Cost of sales” of $5.4 million ($4.1 million after-tax).
+Added: Additionally, based on our LWM joint venture’s open commodity contract hedge positions as of November 27, 2022, a hypothetical 10 percent decline in market prices applied to the fair value of the instruments would result in a charge to “Equity method investment earnings (loss)” of $8.5 million ($6.3 million after-tax).
+Added: Any change in the fair value of these contracts, real or hypothetical, would be substantially offset by an inverse change in the value of the underlying hedged item.
+Added: Foreign Currency Exchange Rate Risk
+Added: Substantially all of our revenue is transacted in U.S.
+Added: However, a portion of our operating expenditures and capital purchases are incurred in other currencies, including the Chinese yuan, and our joint ventures outside the U.S.
+Added: transact in euros and Argentine pesos.
+Added: From time to time, we may economically hedge currency risk with foreign currency contracts, such as forward contracts.
+Added: Based on monetary assets and liabilities denominated in foreign currencies, we estimate that a hypothetical 10 percent adverse change in exchange rates versus the U.S.
+Added: dollar would result in losses of $41.8 million ($31.7 million after-tax) and $6.5 million ($5.0 million after-tax) as of November 27, 2022 and May 29, 2022, respectively.
+Added: The increased hypothetical risk from May 29, 2022 is primarily related to actions taken to mitigate the effect of changes in currency rates on the pending purchase of the remaining ownership interest in LWM discussed in “Part I, Item 2.
+Added: Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this report.
+Added: Interest Rate Risk
+Added: At November 27, 2022, we had $2,170.0 million of fixed-rate and $588.0 million of variable-rate debt outstanding.
We have interest rate risk associated with our variable-rate debt.
−Removed: A one percent increase in interest rates related to variable-rate debt would have resulted in an increase in interest expense and a corresponding decrease in income before taxes of approximately $6.0 million annually ($4.6 million after-tax) and $5.9 million annually ($4.5 million after-tax) at August 28, 2022 and August 29, 2021, respectively.
+Added: A one percent increase in interest rates related to variable-rate debt would have resulted in an increase in interest expense and a corresponding decrease in income before taxes of $6.0 million annually ($4.6 million after-tax) at November 27, 2022.
For more information about our market risks, see Note 9, Debt and Financing Obligations, of the Condensed Notes to Consolidated Financial Statements in “Part I, Item 1.
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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.