Note 5 - Derivative Financial Instruments |
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Aug. 01, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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:
As of August 1, 2026, the notional amount of our outstanding aluminum swap contracts was $108.2 million and, assuming no change in commodity prices, $2.3 million of unrealized gain before tax will be reclassified from AOCI and recognized in earnings over the next 12 months. As of May 2, 2026, the notional amount of our outstanding aluminum swap contracts was $129.7 million. 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 1, 2026, the fair value of the derivative asset was $3.2 million, which was included in prepaid and other current assets, and the fair value of the derivative liability was $0.9 million which was included in accrued liabilities. As of May 2, 2026, the fair value of the derivative asset was $16.5 million, of which $16.0 million was included in prepaid and other current assets and $0.5 million 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.
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