Note 5 - Derivative Financial Instruments

3 Months Ended

Aug. 01, 2015

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

5

. DERIVATIVE FINANCIAL INSTRUMENTS

From time to time, we enter into aluminum swap contracts to partially mitigate our exposure to changes in the cost of aluminum cans. Such financial instruments are 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 (Loss) (“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 months ended August 1, 2015 and August 2, 2014:

	(In thousands)
	2015			2014
Recognized in AOCI:
(Loss) gain before income taxes	$	(4,970	)	$	605
Less income tax (benefit) provision		(1,844	)		224
Net		(3,126	)		381
Reclassified from AOCI to cost of sales:
(Loss) gain before income taxes		(1,391	)		15
Less income tax (benefit) provision		(516	)		5
Net		(875	)		10
Net change to AOCI	$	(2,251	)	$	371

As of August 1, 2015, the notional amount of our outstanding aluminum swap contracts was $29.3 million and, assuming no change in the commodity prices, $6.1 million of unrealized loss before tax will be reclassified from AOCI and recognized in earnings over the next twelve months. See Note 1.

As of August 1, 2015 and May 2, 2015, the fair value of the derivative liability was $6.1 million and $3 million and the fair value of the derivative long-term liability was $1.2 million and $751,000, which was included in accrued liabilities and other liabilities respectively. Such valuation does not entail a significant amount of judgment and the inputs that are significant to the fair value measurement are Level 2 as defined by the fair value hierarchy as they are observable market based inputs or unobservable inputs that are corroborated by market data.