Enerpac Tool Group Corp. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Derivatives

Derivatives

9 Months Ended

May 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Note 10. Derivatives

All derivatives are recognized in the balance sheet at their estimated fair value. The Company does not enter into derivatives for speculative purposes. Changes in the fair value of derivatives (not designated as hedges) are recorded in earnings along with the gain or loss on the hedged asset or liability.

The Company is exposed to market risk for changes in foreign currency exchange rates due to the global nature of its operations. In order to manage this risk, the Company utilizes foreign currency exchange contracts to reduce the exchange rate risk associated with recognized non-functional currency balances. The effects of changes in exchange rates are reflected concurrently in earnings for both the fair value of the foreign currency exchange contracts and the related non-functional currency asset or liability. These derivative gains and losses offset foreign currency gains and losses from the related revaluation of non-functional currency assets and liabilities (amounts included in "Other (income) expense" in the Condensed Consolidated Statements of Operations). The U.S. dollar equivalent notional value of these short-duration foreign currency exchange contracts was $15.2 million and $16.0 million at May 31, 2022 and August 31, 2021, respectively. The fair value of outstanding foreign currency exchange contracts was a net liability of less than $0.1 million at both May 31, 2022 and August 31, 2021. Net foreign currency (loss) gain (included in "Other (income) expense" in the Condensed Consolidated Statements of Operations) related to these derivative instruments were as follows (in thousands):


	Three Months Ended May 31,				Nine Months Ended May 31,
	2022		2021		2022		2021
Foreign currency (loss) gain, net	$	(196)	$	7	$	(324)	$	67

The Company was a fixed-rate payor on an interest rate swap contract that fixed the LIBOR-based index used to determine the interest rates charged on a total of $100.0 million of the Company's LIBOR-based variable rate borrowings on the revolving line of credit. The contract carried a fixed rate of 0.259% and expired in August 2021. The swap agreement qualified as a hedging instrument and was designated as a cash flow hedge of forecasted LIBOR-based interest payments. The change in the fair value of the interest rate swap, a gain of less than $0.1 million in both the three and nine months ended May 31, 2021 was recorded in other comprehensive income (loss).