Note 5 - Derivative Financial Instruments

9 Months Ended

Jan. 28, 2023

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 hedges. 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:

	(In thousands)
	Three Months Ended					Nine Months Ended
	2023			2022		2023			2022
Recognized in AOCI:
Gain (loss) before income taxes	$	10,918		$	11,007	$	(14,419	)	$	11,980
Less income tax provision		2,612			2,633		(3,449	)		2,866
Net	$	8,306		$	8,374	$	(10,970	)	$	9,114
Reclassified from AOCI to cost of sales:
(Loss) gain before income taxes	$	(2,036	)	$	512	$	(5,750	)	$	5,052
Less income tax (benefit) provision		(486	)		122		(1,374	)		,1,209
Net	$	(1,550	)	$	390	$	(4,376	)	$	3,843
Net change to AOCI	$	9,856		$	7,984	$	(6,594	)	$	5,271

As of January 28, 2023, the notional amount of our outstanding aluminum swap contracts was $61.0 million and, assuming no change in commodity prices, $395,000 of unrealized gain before tax will be reclassified from AOCI and recognized in earnings over the next 12 months.

As of January 28, 2023, the fair value of the derivative asset was $1.2 million, which was included in prepaid and other assets and the fair value of the derivative liability was $1.6 million, which was included in accrued liabilities.  At April 30, 2022, the fair value of the derivative asset was $8.8 million, which was included in prepaid and other assets.  Such valuation does not entail a significant amount of judgment as the significant inputs to the fair value measurement are Level 2 as defined by the fair value hierarchy in that they are observable market based inputs or unobservable inputs that are corroborated by market data.