Note 7 - Derivative Financial Instruments

12 Months Ended

May 02, 2020

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

7.      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 attributable to the effective portion of the cash flow hedges 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 Consolidated Statements of Income and AOCI relative to the cash flow hedges for Fiscal 2020, Fiscal 2019 and Fiscal 2018:

	(In thousands)
	Fiscal			Fiscal			Fiscal
	2020			2019			2018
Recognized in AOCI-
(Loss) gain before income taxes	$	(9,613	)	$	(6,138	)	$	9,498
Less income tax (benefit) provision		(2,299	)		(1,468	)		3,085
Net		(7,314	)		(4,670	)		6,413
Reclassified from AOCI to cost of sales-
Gain (loss) before income taxes		(4,786	)		2,100			2,569
Less income tax provision (benefit)		(1,145	)		452			1,383
Net		(3,641	)		1,648			1,186
Net change to AOCI	$	(3,673	)	$	(6,318	)	$	5,227

As of May 2, 2020, the notional amount of our outstanding aluminum swap contracts was $49.3 million and, assuming no change in the commodity prices, $6.7 million of unrealized loss before tax will be reclassified from AOCI and recognized in cost of sales over the next 12 months.

As of May 2, 2020, and April 27, 2019, the fair value of the derivative liability was $6.9 million and $2.0 million, respectively, which was included as a component of 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.