UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______________ to _______________
Commission file number
NATIONAL BEVERAGE CORP.
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.)
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(Address of principal executive offices including zip code)
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(Registrant’s telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (Exchange Act) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer ☐ | Non-accelerated filer ☐ |
Smaller reporting company
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Emerging growth company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The number of shares of registrant’s common stock outstanding as of February 28, 2020 was
Form 10Q – QUARTERLY REPORT
For the Quarter Ended January 25, 2020
Table of Contents
| CONDENSED CONSOLIDATED BALANCE SHEETS |
| (In thousands, except number of shares and par value) |
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(Unaudited) |
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January 25, |
April 27, |
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2020 |
2019 |
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Assets |
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Current assets: |
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Cash and equivalents |
$ |
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$ |
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Trade receivables - net |
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Inventory |
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Prepaid and other assets |
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Total current assets |
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Property, plant and equipment - net |
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| Right of use assets, net |
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Goodwill |
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Intangible assets |
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Other assets |
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Total assets |
$ |
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$ |
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Liabilities and Equity |
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Current liabilities: |
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Accounts payable |
$ |
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$ |
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Accrued liabilities |
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| Operating lease liability |
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Income taxes payable |
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Total current liabilities |
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Deferred income taxes - net |
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| Operating lease liability - non-current |
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Other liabilities |
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| Total liabilities |
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Shareholders' equity: |
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Preferred stock: $1 par value - 1,000,000 shares authorized: Series C - 150,000 shares issued at each period end |
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Common stock: $.01 par value - 200,000,000 shares authorized; 50,754,884 shares issued (50,678,084 shares issued at April 27, 2019) |
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Additional paid-in capital |
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| Accumulated other comprehensive (loss) |
(
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) |
(
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) | ||||
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Retained earnings |
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Treasury stock at cost: |
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Series C preferred stock - 150,000 shares at each period end |
(
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) |
(
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) | ||||
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Common stock - 4,139,405 and 4,032,544 shares at each period end, respectively |
(
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) |
(
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) | ||||
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Total shareholders' equity |
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Total liabilities and shareholders' equity |
$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
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(In thousands, except per share amounts) |
| (Unaudited) |
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Three Months Ended |
Nine Months Ended |
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January 25, |
January 26, |
January 25, |
January 26, |
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2020 |
2019 |
2020 |
2019 |
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Net sales |
$ |
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$ |
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$ |
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$ |
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Cost of sales |
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Gross profit |
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Selling, general and administrative expenses |
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| Operating income |
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Interest expense |
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Other income - net |
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Income before provision for income taxes |
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Provision for income taxes |
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Net income |
$ |
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$ |
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$ |
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$ |
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Earnings per common share: |
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Basic |
$ |
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$ |
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$ |
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$ |
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Diluted |
$ |
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$ |
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$ |
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$ |
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Weighted average common shares outstanding: |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
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(In thousands) |
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| (Unaudited) |
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Three Months Ended |
Nine Months Ended |
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January 25, |
January 26, |
January 25, |
January 26, |
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2020 |
2019 |
2020 |
2019 |
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Net income |
$ |
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$ |
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$ |
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$ |
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Other comprehensive income (loss), net of tax: |
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Cash flow hedges |
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(
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) |
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(
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) | ||||||||||
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Comprehensive income |
$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY |
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(In thousands except share amounts) |
| (Unaudited) |
| Three Months Ended | Nine Months Ended | |||||||||||||||
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January 25, |
January 26, |
January 25, |
January 26, |
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2020 |
2019 |
2020 |
2019 |
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Series C Preferred Stock Par Value |
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Beginning and end of period |
$ |
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$ |
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$ |
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$ |
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Common Stock Par Value |
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Beginning and end of period |
$ |
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$ |
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$ |
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$ |
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Additional Paid-In Capital |
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Beginning of period |
$ |
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$ |
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$ |
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$ |
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Stock options exercised |
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Stock-based compensation |
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End of period |
$ |
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$ |
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$ |
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$ |
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Accumulated Other Comprehensive (Loss) |
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Beginning of period |
$ |
(
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) |
$ |
(
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) |
$ |
(
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) |
$ |
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Cash flow hedges, net of tax |
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(
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) |
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(
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) |
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End of period |
$ |
(
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) |
$ |
(
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) |
$ |
(
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) |
$ |
(
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) |
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Retained Earnings |
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Beginning of period |
$ |
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$ |
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$ |
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$ |
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Net income |
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Common stock cash dividend |
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(
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) |
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(
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End of period |
$ |
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$ |
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$ |
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$ |
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Treasury Stock - Series C Preferred Cost |
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Beginning and end of period |
$ |
(
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) |
$ |
(
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) |
$ |
(
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) |
$ |
(
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) |
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Treasury Stock - Common Cost |
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Beginning of period |
$ |
(
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) |
$ |
(
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) |
$ |
(
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) | $ |
(
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) |
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Repurchase of common shares |
(
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) |
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(
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) |
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End of period |
$ |
(
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) |
$ |
(
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) |
$ |
(
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) |
$ |
(
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) | ||||
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Total Shareholders' Equity |
$ |
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$ |
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$ |
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$ |
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Common Stock Shares Outstanding |
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Beginning of period |
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Stock option exercises |
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Repurchase of common shares |
(
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(
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End of period |
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Treasury Stock - Series C Preferred Shares |
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Beginning and end of period |
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Treasury Stock - Common Shares |
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Beginning of period |
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Repurchase of common shares |
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End of period |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
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CONSOLIDATED STATEMENTS OF CASH FLOWS |
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(In thousands) |
| (Unaudited) |
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Nine Months Ended |
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January 25, |
January 26, |
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2020 |
2019 |
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Cash Flows from Operating Activities: |
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Net income |
$ |
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$ |
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Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
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Depreciation and amortization |
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Deferred income tax provision |
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(Gain) Loss on sale of property, net |
(
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) |
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Stock-based compensation |
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Changes in assets and liabilities: |
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Trade receivables |
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Inventories |
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(
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Prepaid and other assets |
(
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) |
(
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) |
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Accounts payable |
(
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) |
(
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) |
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Accrued and other liabilities |
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(
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) |
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Net cash provided by operating activities |
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Cash Flows from Investing Activities: |
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Additions to property, plant and equipment |
(
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) |
(
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) |
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Proceeds from sale of property, plant and equipment |
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Net cash used in investing activities |
(
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(
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) |
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Cash Flows from Financing Activities: |
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Proceeds from stock options exercised |
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| Repurchase of common shares |
(
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) |
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Net cash (used in) provided by financing activities |
(
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) |
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Net Increase in Cash and Equivalents |
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Cash and Equivalents - Beginning of Period |
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Cash and Equivalents - End of Period |
$ |
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$ |
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Supplemental disclosure of cash flow information: |
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Interest paid |
$ |
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$ |
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Income taxes paid, net of refunds |
$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
National Beverage Corp. innovatively develops, produces, markets and sells a diverse portfolio of sparkling waters, juices, energy drinks and carbonated soft drinks primarily in the United States and Canada. Incorporated in Delaware in 1985, National Beverage Corp. is a holding company for various operating subsidiaries. When used in this report, the terms “we,” “us,” “our,” “Company” and “National Beverage” mean National Beverage Corp. and its subsidiaries.
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The condensed consolidated financial statements include the accounts of National Beverage Corp. and its subsidiaries. Significant intercompany transactions and accounts have been eliminated.
The condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and rules and regulations of the Securities and Exchange Commission for interim financial reporting. Accordingly, they do not include all information and notes presented in the annual consolidated financial statements. The condensed consolidated financial statements should be read in conjunction with the annual consolidated financial statements and accompanying notes included in our Annual Report on Form 10 -K for the fiscal year ended April 27, 2019. Excluding the adoption of the recently issued accounting pronouncements disclosed in Note 6, the accounting policies used in these interim condensed consolidated financial statements are consistent with those used in the annual consolidated financial statements.
The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Results for the interim periods presented are not necessarily indicative of results which might be expected for the entire fiscal year.
Derivative Financial Instruments
We use derivative financial instruments to partially mitigate our exposure to changes in raw material costs. All derivative financial instruments are recorded at fair value in our Condensed Consolidated Balance Sheets. The estimated fair value of derivative financial instruments is calculated based on market rates to settle the instruments. We do not use derivative financial instruments for trading or speculative purposes. Credit risk related to derivative financial instruments is managed by requiring high credit standards for counterparties and frequent cash settlements. See Note 5.
Inventories
Inventories are stated at the lower of
first
-in,
first
-out cost or market. Inventories at
January
25,
2020
were comprised of finished goods of $
Recently Adopted Accounting Pronouncements
As of April 28, 2019, the Company adopted ASU 2016 - 02 "Leases", which superseded the prior lease accounting guidance in its entirety. See Note 6
2 . PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, net, consisted of the following in thousands:
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January 25, |
April 27, |
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2020 |
2019 |
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Land |
$ |
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$ |
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Buildings and improvements |
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Machinery and equipment |
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Total |
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Less accumulated depreciation |
(
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) |
(
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) |
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Property, plant and equipment – net |
$ |
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$ |
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Depreciation expense was $
3 . DEBT
At
January 25, 2020,
a subsidiary of the Company maintained unsecured revolving credit facilities with banks aggregating $
The Credit Facilities require the subsidiary to maintain certain financial ratios, including debt to net worth and debt to EBITDA (as defined in the Credit Facilities), and contain other restrictions, none of which are expected to have a material effect on the Company’s operations or financial position. At January 25, 2020, the Company was in compliance with all loan covenants.
4 . STOCK-BASED COMPENSATION
During the
nine
months ended
January 25, 2020,
options to purchase
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 hedge. 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 relative to the cash flow hedge for the three and nine months ended January 25, 2020 and January 26, 2019 ( In thousands):
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Three Months Ended |
Nine Months Ended |
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January 25, 2020 |
January 26, 2019 |
January 25, 2020 |
January 26, 2019 |
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Recognized in AOCI: |
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(Loss) gain before income taxes |
$ |
(
|
) | $ |
(
|
) |
$ |
(
|
) | $ |
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|||||
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Less income tax (benefit) provision |
(
|
) |
(
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) |
(
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) |
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Net |
(
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) |
(
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) |
(
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) |
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Reclassified from AOCI to cost of sales: |
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(Loss) gain before income taxes |
(
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) |
(
|
) |
(
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) |
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Less income tax (benefit) provision |
(
|
) |
(
|
) |
(
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) |
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Net |
(
|
) |
(
|
) |
(
|
) |
|
|||||||||
|
Net change to AOCI |
$ |
|
$ |
(
|
) |
$ |
|
$ |
(
|
) |
||||||
As of
January 25, 2020,
the notional amount of our outstanding aluminum swap contracts was $
As of
January 25, 2020,
and
April 27, 2019,
the fair value of the derivative liability was $
6. LEASES
The Company leases
two
manufacturing facilities, warehouse and office space (“real estate”), and machinery and other equipment, including delivery vehicles, under non-cancellable operating lease agreements. These leases expire at various dates through
2030.
In
February 2016,
the Financial Accounting Standards Board issued ASU
2016
-
02,
“Leases” (the “lease standard”). The lease standard requires lessees to recognize a right-to-use asset and a lease liability for virtually all leases (other than leases meeting the definition of a short-term lease). The new guidance is effective for fiscal years after
December 15, 2018
and interim periods beginning the following fiscal year. The Company adopted the new lease standard as of
April 28, 2019
using the modified retrospective method and has elected to adopt the available practical expedient as accounting policy on the initial adoption of the lease standard. Upon adoption of the lease standard on
April 28, 2019,
the Company recorded a right-of-use asset for operating leases and lease liabilities of $
The Company has used the following policies and assumptions in evaluating its population of leases:
|
● |
Determining a lease – The Company assesses contracts at inception to determine whether an arrangement is or includes a lease which conveys the Company’s right to control the use of an identified asset for a period of time in exchange for consideration. Operating lease right-of-use assets and associated liabilities are recognized at the commencement date and initially measured at the present value of the lease payments over the defined lease term. |
|
● |
Allocating lease and non-lease components – The Company has elected the practical expedient to not separate lease and non-lease components for certain classes of underlying assets, including certain equipment and vehicle lease agreements which generally have the lease and associated non-lease components accounted for as a single lease component. Additionally, real estate lease agreements with lease and non-lease components are generally accounted for separately where applicable. |
|
● |
Discount rate – The Company calculates the discount rate based on the Company’s incremental borrowing rate using the contractual lease term. |
|
● |
Lease term – The Company does not recognize leases with an original contractual term of less than 12 months on the balance sheet. Lease expense for these short term leases is expensed on a straight-line basis over the lease term. |
|
● |
Rent increases or escalation clauses – Certain leases contain scheduled rent increases or escalation clauses. The Company assesses each contract individually and calculates variable payments based on the terms of the individual agreement. |
|
● |
Renewal options and / or purchase options – Certain leases include renewal options to extend the lease term and / or purchase options to purchase the leased asset. The Company assesses these options using a threshold of reasonably certain, which is a high threshold and, therefore, the majority of the Company’s leases do not include renewal periods or purchase options in the measurement of the right-of-use asset and the associated lease liability. |
|
● |
Option to terminate – Certain leases include the option to terminate the lease prior to its scheduled expiration. This allows a contractually bound party to terminate its obligation under the lease contract, typically in return for an agreed upon financial consideration. The terms and conditions of the termination options vary by contract; such options are not included in the measurement of the right-to-use assets and associated lease liability. |
The Company’s weighted average remaining lease term was
|
Remainder of Fiscal 2020 (4th quarter 2020) |
$ |
|
||
|
Fiscal 2021 |
|
|||
|
Fiscal 2022 |
|
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|
Fiscal 2023 |
|
|||
|
Fiscal 2024 |
|
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Thereafter |
|
|||
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Total minimum lease payments including interest |
|
|||
|
Less: Amounts representing interest |
(
|
) | ||
|
Present value of minimum lease payments |
|
|||
|
Less: Current portion of lease liabilities |
(
|
) | ||
|
Non-Current portion of operating lease liabilities |
$ |
|
Lease expense for the
three
and
nine
months ended
January 25, 2020
was $
Our minimum lease payments under non-cancelable operating leases as of April 27, 2019 were as follows (In thousands):
|
Fiscal 2020 |
$ |
|
||
|
Fiscal 2021 |
|
|||
|
Fiscal 2022 |
|
|||
|
Fiscal 2023 |
|
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Fiscal 2024 |
|
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|
Thereafter |
|
|||
|
Total minimum lease payments including interest |
$ |
|
7. COMMON STOCK
The Company is authorized under its stock buy back program to repurchase
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
National Beverage Corp. innovatively refreshes America with a distinctive portfolio of sparkling waters, juices, energy drinks and, to a lesser degree, carbonated soft drinks brands. Our carbonated soft drink brands continue to be modified as we endeavor to make them more adaptable to changing consumer preferences. We believe our creative product designs, innovative packaging and imaginative flavors, along with our corporate culture and philosophy, make National Beverage unique as a stand-alone entity in the beverage industry.
Our strategy seeks the profitable growth of our products by (i) developing healthier beverages in response to the global shift in consumer buying habits and tailoring our beverage portfolio to the preferences of a diverse mix of ‘crossover consumers’ – a growing group desiring a healthier alternative to artificially sweetened and high-caloric beverages; (ii) emphasizing unique flavor development and variety throughout our brands that appeal to multiple demographic groups; (iii) maintaining points of difference through innovative marketing, packaging and consumer engagement and (iv) responding faster and more creatively to changing consumer trends that larger competitors who are burdened by legacy production, distribution complexity and costs cannot quickly adapt to.
Our brands consist of beverages geared to the active and health-conscious consumer (“Power+ Brands”) including sparkling waters, energy drinks, and juices. Our portfolio of Power+Brands includes LaCroix®, LaCroix Curate®, LaCroix NiCola® and Shasta® Sparkling Water products; Rip It® energy drinks and shots; and Everfresh®, Everfresh Premier Varietals™ and Mr. Pure® 100% juice and juice-based products. Additionally, we produce and distribute carbonated soft drinks including Shasta® and Faygo®, iconic brands whose consumer loyalty spans more than 125 years.
Presently, our primary market focus is the United States and Canada. Certain of our products are also distributed on a limited basis in other countries and options to expand distribution to other regions are being considered. To service a diverse customer base that includes numerous national retailers, as well as thousands of smaller “up-and-down-the-street” accounts, we utilize a hybrid distribution system consisting of warehouse and direct-store delivery. The warehouse delivery system allows our retail partners to maximize their assets by utilizing their ability to pick up product at our warehouses, further lowering their/our product costs.
Our operating results are affected by numerous factors, including fluctuations in the costs of raw materials, holiday and seasonal programming and weather conditions. While prior years witnessed more seasonality, higher sales are realized during the summer when outdoor activities are more prevalent. In addition, seasonal promotional packaging and the development of beverages for selective holidays and ceremonial dates further impact quarter-to-quarter comparisons.
We believe our highly innovative business should not be analyzed solely on the common three-month (quarterly) periods, traditionally found acceptable. Traditional and typical are not a part of an innovator’s vocabulary.
National Beverage Corp. is incorporated in Delaware and began trading as a public company on the NASDAQ Stock Market in 1991. In this report, the terms “we,” “us,” “our,” “Company” and “National Beverage” mean National Beverage Corp. and its subsidiaries unless indicated otherwise.
Corporate Information
Our principal executive offices are located at 8100 SW Tenth Street, Suite 4000, Fort Lauderdale, FL 33324. Our telephone number is (954) 581-0922. We maintain a website at www.nationalbeverage.com . The reference to our website address does not constitute incorporation by reference of the information contained on this website. We own numerous trademarks for our brands that are significant to our business. We intend to continue to maintain all registrations of our significant trademarks and use the trademarks in the operations of our businesses. Unless specified otherwise, the financial results in this Quarterly Report are those of the Company and its subsidiaries on a consolidated basis.
RESULTS OF OPERATIONS
Three Months Ended January 25, 2020 (third quarter of fiscal 2020) compared to Three Months Ended January 26, 2019 (third quarter of fiscal 2019)
Net sales for the third quarter of fiscal 2020 increased $1.9 million or .9% to $222.8 million compared to $220.9 million for the third quarter of fiscal 2019. The increase in sales resulted primarily from a 2.4% increase in case volume and a 1.5% decline in average selling price. The volume increase includes growth of 1.4% in Power+ Brands and 3.2% growth in Carbonated Soft Drinks. The volume growth was attributable to increased velocity while product mix impacted average price per case.
Gross profit for the third quarter of fiscal 2020 increased 1.8% to $82.0 million compared to $80.6 million for the third quarter of fiscal 2019. The increase in gross profit is primarily due to increased volume and reflects a 2.1% decline in cost of sales per case. Gross margin increased to 36.8% of sales from 36.5% for the third
quarter of fiscal 2019.
Selling, general and administrative expenses for the third quarter of fiscal 2020 were $48.9 million and $49.5 million for the third quarter of fiscal 2019. The decrease was primarily due to lower distribution, marketing and administrative costs partially offset by increased selling expenses. As a percent of net sales, selling, general and administrative expenses declined to 21.9% compared to 22.4% for the third quarter of fiscal 2019.
Other income,net includes interest income of $1.0 million for the third quarter of fiscal 2020 and $1.2 million for the third quarter of fiscal 2019. The decrease in interest income is due to lower investment yields.
The Company’s effective income tax rate, based upon estimated annual income tax rates, was 22.3% for the third quarter of fiscal 2020 and 23.0% for the third quarter of fiscal 2019. The difference between the effective rate and the federal statutory rate of 21% was primarily due to the effects of state income taxes.
Nine Months Ended January 25.2020 (first nine months of fiscal 2020) compared to Nine Months Ended January 26, 2019 (first nine months of fiscal 2019)
Net sales for the first nine months of fiscal 2020 decreased 4.7% to $738.0 million compared to $774.2 million for the first nine months of fiscal 2019. The decrease in sales resulted primarily from a 4.1% decline in case volume and, to a lesser extent, a lower average selling price. The volume decline includes an 7.8% decline in Power+ Brands, partially offset by a 4.4% increase in Carbonated Soft Drinks. Average selling price per case declined .6% primarily due to changes in product mix.
Gross profit for the first nine months of fiscal 2020 decreased 9.5% to $271.4 million compared to $299.8 million for the first nine months of fiscal 2019. The decrease in gross profit is due to decreased volume and increased manufacturing costs. The cost of sales per case increased 2.5% and gross margin declined to 36.8% of sales compared to 38.7% for the first nine months of fiscal 2019.
Selling, general and administrative expenses for the first nine months of fiscal 2020 decreased $1.6 million to $152.0 million from $153.6 million for the first nine months of fiscal 2019. The change in selling, general and administrative expenses was primarily due to increased marketing which was more than offset by decreased distribution and administration expenses. As a percent of net sales, selling, general and administrative expenses increased to 20.6% from 19.8%.
Other income,net includes interest income of $2.9 million for the first nine months of fiscal 2020 and $3.3 million for the first nine months of fiscal 2019. The decrease in interest income is due to changes in average investment balances and lower investment yields.
The Company’s effective income tax rate, based on estimated annual income tax rates, was 23.3% for the first nine months of fiscal 2020 and 23.2% for the first nine months of fiscal 2019. The difference between the effective rate and the federal statutory rate of 21% was primarily due to the effects of state income taxes.
LIQUIDITY AND FINANCIAL CONDITION
Liquidity and Capital Resources
Our principal source of funds is cash generated from operations. At January 25, 2020, we maintained $100 million unsecured revolving credit facilities, under which no borrowings were outstanding and $3.1 million of the credit facility was reserved for standby letters of credit. We believe existing capital resources will be sufficient to meet our liquidity and capital requirements for the next twelve months.
Cash Flows
The Company’s cash and equivalents position increased $105.5 million for the nine months ended January 25, 2020, which compares to an increase of $80.0 million for the nine months ended January 26, 2019.
Operating Activities
Net cash provided by operating activities for the first nine months of fiscal 2020 amounted to $125.2 million compared to $107.0 million for the first nine months of fiscal 2019. For the first nine months of fiscal 2020, cash flow was principally provided by net income of $93.8 million, a decrease in accounts receivable of $12.3 million, depreciation and amortization aggregating $13.4 million, and a decrease in inventory of $9.5 million offset by decreases in accounts payable and accruals of $4.0 million. For the first nine months of fiscal 2019, cash flow was primarily provided by net income of $114.7 million, a decrease in accounts receivable of $8.0 million, and depreciation and amortization aggregating $11.5 million offset by an increase in inventory of $11.2 million and decrease in accounts payable and accruals of $17.0 million.
Investing Activities
Net cash used in investing activities for the first nine months of fiscal 2020 reflects capital expenditures of $15.8 million compared to capital expenditures of $27.5 million for the first nine months of fiscal 2019. We intend to continue production capacity and efficiency improvement projects in fiscal 2020 but expect capital expenditures will decline from fiscal 2019 levels.
Financing Activities
Net cash used in financing activities for the first nine months of fiscal 2020 primarily reflects the repurchase of common shares of $4.3 million.
Financial Position
During the first nine months of fiscal 2020, our working capital increased to $297.8 million from $224.4 million at April 27, 2019. The increase in working capital was due to an increase in cash generated by operations, seasonal reduction in accounts receivable, and in inventory offset by an increase in liabilities mainly related to the adoption of the new lease accounting standard ASU 842 “Leases”. Trade receivables declined, with days sales outstanding improving from 30.6 days to 29.6 days. Inventories decreased $9.5 million and inventory turnover improved to 8.8 from 9.3 times. At January 25, 2020, the current ratio was to 3.7 to 1 compared to 3.3 to 1 at April 27, 2019, primarily due to the increase in cash of $105.5 million partially offset by the $13.8 million lease liability recognized in conjunction with the adoption of the new lease standard. .
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in market risks from those reported in our Annual Report on Form 10-K for the fiscal year ended April 27, 2019.
ITEM 4. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of the Company’s management, including our Chief Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective to ensure information required to be disclosed by us in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (2) accumulated and communicated to our management, including our Chief Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosure.
There were no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
FORWARD-LOOKING STATEMENTS
National Beverage Corp. and its representatives may make written or oral statements relating to future events or results relative to our financial, operational and business performance, achievements, objectives and strategies. These statements are “forward-looking” within the meaning of the Private Securities Litigation Reform Act of 1995 and include statements contained in this report and other filings with the Securities and Exchange Commission and in reports to our stockholders. Certain statements including, without limitation, statements containing the words “believes,” “anticipates,” “intends,” “plans,” “expects,” and “estimates” constitute “forward-looking statements” and involve known and unknown risk, uncertainties and other factors that may cause the actual results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to, the following: general economic and business conditions, pricing of competitive products, success of new product and flavor introductions, fluctuations in the costs of raw materials and packaging supplies, ability to pass along cost increases to our customers, labor strikes or work stoppages or other interruptions in the employment of labor, continued retailer support for our products, changes in brand image, consumer preferences and our success in creating products geared toward consumers’ tastes, success in implementing business strategies, changes in business strategy or development plans, government regulations, taxes or fees imposed on the sale of our products, unfavorable weather conditions and other factors referenced in this report, filings with the Securities and Exchange Commission and other reports to our stockholders. We disclaim an obligation to update any such factors or to publicly announce the results of any revisions to any forward-looking statements contained herein to reflect future events or developments.
There have been no material changes in risk factors from those reported in our Annual Report on Form 10-K for the fiscal year ended April 27, 2019.
| Exhibit No. | Description | |
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31.1 |
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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31.2 |
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32.1 |
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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32.2 |
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101 |
The following financial information from National Beverage Corp. Quarterly Report on Form 10-Q for the quarterly period ended January 25, 2020, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Income; (iii) Consolidated Statements of Comprehensive Income; (iv) Consolidated Statements of Shareholders’ Equity; (v) Consolidated Statements of Cash Flows; and (vi) the Notes to Consolidated Financial Statements. |
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| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: March 5, 2020
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National Beverage Corp. (Registrant) |
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By: /s/ George R. Bracken George R. Bracken Executive Vice President – Finance (Principal Financial Officer) |
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