Note 5 - Derivative Financial Instruments

9 Months Ended

Jan. 30, 2016

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 hedges were 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 30, 2016 and January 31, 2015:

	(In thousands)
	Three Months Ended						Nine Months Ended
	2016			2015			2016			2015
Recognized in AOCI:
Gain (loss) before income taxes	$	620		$	(1,096	)	$	(6,444	)	$	152
Less income tax provision (benefit)		230			(407	)		(2,391	)		56
Net	$	390		$	(689	)	$	(4,053	)	$	96
Reclassified from AOCI to cost of sales:
(Loss) gain before income taxes	$	(2,171	)	$	249		$	(6,008	)	$	526
Less income tax (benefit) provision		(806	)		92			(2,229	)		195
Net	$	(1,365	)	$	157		$	(3,779	)	$	331
Net change to AOCI	$	1,755		$	(846	)	$	(274	)	$	(235	)

As of January 30, 2016, the notional amount of our outstanding aluminum swap contracts was $18.6 million and, assuming no change in the commodity prices, $4.2 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 January 30, 2016 and May 2, 2015, the fair value of the derivative liability was $4.2 million and $3 million, respectively, which was included in accrued liabilities. At May 2, 2015, the fair value of the derivative long-term liability was $751,000, which was included in other 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.