Note 7 - Derivative Financial Instruments

9 Months Ended

Jan. 26, 2013

Derivative Instruments and Hedging Activities Disclosure [Text Block]

7.  DERIVATIVE FINANCIAL INSTRUMENTS

We have entered into various aluminum swap contracts to partially mitigate our exposure to changes in the cost of aluminum cans through April 2013.  The financial instruments were designated and accounted for as a cash flow hedge.  Accordingly, gains or losses attributable to the effective portion of the cash flow hedge are reported in Accumulated Other Comprehensive Income (“AOCI”) and reclassified into earnings through cost of sales in the period in which the hedged transaction affects earnings.  The ineffective portion of the change in fair value of our cash flow hedge was immaterial.  The following summarizes the gains (losses) recognized in the Consolidated Statements of Income and AOCI relative to cash flow hedges for the three and nine months ended January 26, 2013 and January 28, 2012:

	(In thousands)
	Three Months Ended				Nine Months Ended
	2013		2012		2013			2012
Recognized in AOCI:
Gain (loss) before income taxes	$	735	$	697	$	(1,408	)	$	(3,239	)
Less income tax provision (benefit)		272		265		(523	)		(1,169	)
Net	$	463	$	432	$	(885	)	$	(2,070	)

Reclassified from AOCI to cost of sales:
Gain (loss) before income taxes	$	(242	)	$	(711	)	$	(1,788	)	$	1,008
Less income tax provision (benefit)		(90	)		(270	)		(668	)		342
Net	$	(152	)	$	(441	)	$	(1,120	)	$	666
Net change to AOCI	$	615		$	873		$	235		$	(2,736	)

As of January 26, 2013, the notional amount of our outstanding aluminum swap contracts was $7.5 million and, assuming no change in the commodity prices, $123,000 of unrealized net loss (before tax) will be reclassified from AOCI and recognized in cost of sales over the next three months.  See Note 1.

As of January 26, 2013 and April 28, 2012, the fair value of the derivative liability was $123,000 and $503,000, respectively, which was included in Accrued liabilities.  Such valuation does not entail a significant amount of judgment and the inputs that are significant to the fair value measurement are Level 2 in the fair value hierarchy as they are observable market based inputs or unobservable inputs that are corroborated by market data.