Note 5 - Derivative Financial Instruments

9 Months Ended

Jan. 27, 2024

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 containers. 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 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
	January 27, 2024			January 28, 2023			January 27, 2024			January 28, 2023
Recognized in AOCI:
Gain (loss) before income taxes	$	1,465		$	10,918		$	(4,916	)	$	(14,419	)
Less: income tax provision (benefit)		350			2,612			(1,176	)		(3,449	)
Net		1,115			8,306			(3,740	)		(10,970	)
Reclassified from AOCI to cost of sales:
Loss before income taxes		(2,126	)		(2,036	)		(9,353	)		(5,750	)
Less: income tax benefit		(509	)		(486	)		(2,237	)		(1,374	)
Net		(1,617	)		(1,550	)		(7,116	)		(4,376	)
Net change to AOCI	$	2,732		$	9,856		$	3,376		$	(6,594	)

As of January 27, 2024, the notional amount of our outstanding aluminum swap contracts was $70.4 million and, assuming no change in commodity prices, $0.6 million of unrealized loss before tax will be reclassified from AOCI and recognized in earnings over the next 12 months.

As of January 27, 2024 and April 29, 2023 the fair value of the derivative liability, which was included in accrued liabilities, was $1.4 million and $4.6 million, respectively. As of January 27, 2024, the fair value of the derivative asset was $0.8 million, which was included in prepaid and other assets and the fair value of the long-term derivative asset was $0.4 million, which was included in other assets. 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.