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Note 5 - Derivative Financial Instruments

9 Months Ended

Jan. 25, 2020

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 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 Condensed Consolidated Statements of Income and AOCI relative to the cash flow hedge for the three and nine months ended January 25, 2020 and January 26, 2019 (In thousands):

	Three Months Ended						Nine Months Ended
	January 25, 2020			January 26, 2019			January 25, 2020			January 26, 2019
Recognized in AOCI:
(Loss) gain before income taxes	$	(581	)	$	(1,937	)	$	(2,623	)	$	5,487
Less income tax (benefit) provision		(139	)		(463	)		(628	)		1,313
Net		(442	)		(1,474	)		(1,995	)		4,174
Reclassified from AOCI to cost of sales:
(Loss) gain before income taxes		(742	)		(305	)		(3,356	)		13,225
Less income tax (benefit) provision		(177	)		(73	)		(803	)		3,053
Net		(565	)		(232	)		(2,553	)		10,172
Net change to AOCI	$	123		$	(1,242	)	$	558		$	(5,998	)

As of January 25, 2020, the notional amount of our outstanding aluminum swap contracts was $16.5 million and, assuming no change in commodity prices, $1.3 million of unrealized loss before tax will be reclassified from AOCI and recognized in earnings over the next 12 months.

As of January 25, 2020, and April 27, 2019, the fair value of the derivative liability was $1.2 million and $2.0 million, respectively, which was included in accrued liabilities. The 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.