Note 5 - Derivative Financial Instruments

3 Months Ended

Jul. 29, 2023

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

5. DERIVATIVE FINANCIAL INSTRUMENTS

From time to time, the Company enters 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 cash flow hedges. Accordingly, gains or losses are reported in accumulated other comprehensive income (loss) (“AOCI”) and reclassified into cost of sales in the period in which the hedged transaction affects earnings. The following summarizes the gains (losses) recognized in the consolidated statements of Income and AOCI for the quarters ended July 29, 2023 and July 30, 2022:

	(In thousands)
	2023			2022
Recognized in AOCI:
Loss before income taxes	$	(4,040	)	$	(15,010	)
Less income tax benefit		(966	)		(3,590	)
Net		(3,074	)		(11,420	)
Reclassified from AOCI to cost of sales:
Loss before income taxes		(3,763	)		(608	)
Less income tax benefit		(900	)		(144	)
Net		(2,863	)		(464	)
Net change to AOCI	$	(211	)	$	(10,956	)

As of July 29, 2023, the notional amount of our outstanding aluminum swap contracts was $49.5 million and, assuming no change in commodity prices, $4.9 million of unrealized loss before tax will be reclassified from AOCI and recognized in earnings over the next 12 months.

As of July 29, 2023, the fair value of the derivative liability was $4.9 million, which was included in accrued liabilities. At April 29, 2023, the fair value of the derivative liability was $4.6 million, 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 as defined by the fair value hierarchy as they are observable market based inputs or unobservable inputs that are corroborated by market data.