Note 6 - Derivative Financial Instruments

6 Months Ended

Oct. 27, 2012

Derivative Instruments and Hedging Activities Disclosure [Text Block]

6.  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 six months ended October 27, 2012 and October 29, 2011:

	(In thousands)
	Three Months Ended						Six Months Ended
	2012			2011			2012			2011
Recognized in AOCI:
Gain (loss) before income taxes	$	175		$	(3,348	)	$	(2,143	)	$	(3,936	)
Less income tax provision (benefit)		86			(1,215	)		(795	)		(1,434	)
Net	$	89		$	(2,133	)	$	(1,348	)	$	(2,502	)
Reclassified from AOCI to cost of sales:
Gain (loss) before income taxes	$	(644	)	$	576		$	(1,546	)	$	1,719
Less income tax provision (benefit)		(235	)		205			(578	)		612
Net	$	(409	)	$	371		$	(968	)	$	1,107
Net change to AOCI	$	498		$	(2,504	)	$	(380	)	$	(3,609	)

As of October 27, 2012, the notional amount of our outstanding aluminum swap contracts was $12.6 million and, assuming no change in the commodity prices, $1.1 million of unrealized net loss (before tax) will be reclassified from AOCI and recognized in cost of sales over the next seven months.  See Note 1.

As of October 27, 2012 and April 28, 2012, the fair value of the derivative liability was $1.1 million 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.