Note 5 - Derivative Financial Instruments

3 Months Ended

Aug. 02, 2025

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 hedges was immaterial. The following summarizes the gains (losses) recognized in the Condensed Consolidated Statements of Income and AOCI:

	Three Fiscal Months Ended
	August 2, 2025		July 27, 2024
Recognized in AOCI:
Income (loss) before income taxes	$	10,652	$	(7,198	)
Less: income tax provision (benefit)		2,514		(1,704	)
Net		8,138		(5,494	)
Reclassified from AOCI to cost of sales:
Gain before income taxes		5,104		732
Less: income tax provision		1,205		173
Net		3,899		559
Net change to AOCI	$	4,239	$	(6,053	)

As of August 2, 2025, the notional amount of our outstanding aluminum swap contracts was $39.1 million and, assuming no change in commodity prices, $12.0 million of unrealized gain before tax will be reclassified from AOCI and recognized in earnings over the next 12 months. The Company’s policy for the maximum length of time for which it hedges exposure to the variability of future cash flows is three years.

The Company is not subject to any legally enforceable master netting arrangements and does not offset fair value amounts recognized for derivative instruments. As of August 2, 2025, the fair value of the short-term derivative liability was $0.1 million, which was included in accrued liabilities, and the fair value of the derivative asset was $12.1 million, which was included in prepaid and other assets. As of May 3, 2025, the fair value of the derivative asset was $7.4 million, which was included in prepaid and other assets. The fair value of the derivative liability was $1.0 million, which was included in 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.