UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended
or
Commission file number
NATIONAL BEVERAGE CORP.
(Exact name of registrant as specified in its charter)
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| (State of incorporation) | (I.R.S. Employer Identification No.) |
(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:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
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The
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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 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 (§232.405 of this chapter) 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.
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 March 7, 2022 was
QUARTERLY REPORT ON FORM 10-Q
INDEX
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PART I - FINANCIAL INFORMATION |
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NATIONAL BEVERAGE CORP. AND SUBSIDIARIES |
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CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) |
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(In thousands, except share data) |
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January 29, |
May 1, |
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2022 |
2021 |
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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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Inventories |
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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 |
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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 Shareholders' 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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Short-term lease obligations |
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Income taxes payable |
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Total current liabilities |
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Long-term debt |
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Deferred income taxes - net |
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Long-term lease obligations |
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Other liabilities |
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Total liabilities |
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Shareholders' equity: |
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Preferred stock, $ par value - shares authorized: Series C - shares issued |
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Common stock, $ par value - shares authorized; shares issued ( shares at May 1) |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive income |
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Treasury stock - at cost: |
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Series C preferred stock - shares |
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(
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Common stock - shares |
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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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See accompanying Notes to Condensed Consolidated Financial Statements. |
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) |
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(In thousands, except per share amounts) |
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Three Months Ended |
Nine Months Ended |
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January 29, |
January 30, |
January 29, |
January 30, |
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2022 |
2021 |
2022 |
2021 |
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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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Other income (expense)- net |
(
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(
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Income before 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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Diluted |
$ | $ | $ |
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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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See accompanying Notes to Condensed Consolidated Financial Statements. |
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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) |
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(In thousands) |
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Three Months Ended |
Nine Months Ended |
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January 29, |
January 30, |
January 29, |
January 30, |
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2022 |
2021 |
2022 |
2021 |
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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, net of tax: |
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Cash flow hedges |
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Comprehensive income |
$ |
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$ |
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$ |
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$ |
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See accompanying Notes to Condensed Consolidated Financial Statements. |
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CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED) |
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(In thousands) |
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Three Months Ended |
Nine Months Ended |
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January 29, 2022 |
January 30, 2021 |
January 29, 2022 |
January 30, 2021 |
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Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
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Series C Preferred Stock |
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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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Common Stock |
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Beginning of period |
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Stock options exercised |
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33 |
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68 |
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End of Period |
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Additional Paid-In Capital |
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Beginning of period |
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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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Retained Earnings |
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Beginning of period |
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Net income |
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Common stock cash dividend |
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(
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End of period |
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Accumulated Other Comprehensive Income |
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Beginning of period |
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Cash flow hedges, net of tax |
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End of period |
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Treasury Stock - Series C Preferred |
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Beginning and end of period |
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(
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(
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Treasury Stock - Common |
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Beginning of period |
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(
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(
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(
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Stock repurchase |
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End of period |
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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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See accompanying Notes to Condensed Consolidated Financial Statements. |
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) |
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(In thousands) |
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Nine Months Ended |
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January 29, |
January 30, |
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2022 |
2021 |
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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 (benefit) provision |
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Loss on sale of property, net |
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Stock-based compensation |
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Amortization of operating right of use assets |
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Changes in assets and liabilities: |
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Trade receivables |
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Inventories |
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Operating lease right of use assets |
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Prepaid and other assets |
(
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(
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Accounts payable |
(
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Accrued and other liabilities |
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Operating lease liabilities |
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Net cash provided by operating activities |
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Investing Activities: |
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Additions to property, plant and equipment |
(
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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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Financing Activities: |
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Borrowing under loan facility |
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Proceeds from stock options exercised |
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Dividend paid |
(
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(
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Net cash used in financing activities |
(
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(
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Net Decrease in Cash and Equivalents |
(
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(
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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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Other Cash Flow Information: |
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Interest paid |
$ |
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$ |
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Income taxes paid |
$ |
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$ |
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See accompanying Notes to Condensed Consolidated Financial Statements. |
NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
National Beverage Corp. develops, produces, markets and sells a distinctive 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 accompanying interim unaudited 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 May 1, 2021. The accounting policies used in these interim unaudited 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 interim unaudited 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.
Inventories
Inventories are stated at the lower of
first
-in,
first
-out cost or net realizable market. Inventories at
January 29, 2022
were comprised of finished goods of $
Marketing Costs
The Company utilizes a variety of marketing programs, including cooperative advertising programs with customers, to advertise and promote its products to consumers. Marketing costs are expensed when incurred, except for prepaid advertising and production costs, which are expensed when the advertising takes place. Marketing costs, which are included in selling, general and administrative expenses, totaled $
Shipping and Handling Costs
Shipping and handling costs are reported in selling, general and administrative expenses in the accompanying condensed consolidated statements of income. Such costs totaled $
2. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
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(In thousands) |
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January 29, 2022 |
May 1, 2021 |
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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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Property, plant and equipment – net |
$ |
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$ |
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Depreciation expense was $
3. DEBT
At
January 29, 2022,
a subsidiary of the Company maintained unsecured revolving credit facilities with banks aggregating $
On
December 21, 2021,
a subsidiary of the Company entered into an unsecured revolving term loan facility with a national bank aggregating $
The Credit Facilities and Loan Facility require the subsidiary to maintain certain financial ratios, including debt to net worth and debt to EBITDA (as defined in the agreements), and contain other restrictions, none of which are expected to have a material effect on our operations or financial position. At January 29, 2022, we were in compliance with all loan covenants.
4. STOCK-BASED COMPENSATION
During the
nine
months ended
January 29, 2022,
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:
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(In thousands) |
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Three Months Ended |
Nine Months Ended |
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2022 |
2021 |
2022 |
2021 |
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Recognized in AOCI: |
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Gain before income taxes |
$ |
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$ |
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$ |
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$ |
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Less income tax provision |
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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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Gain (loss) before income taxes |
$ |
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$ |
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$ |
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$ |
(
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Less income tax provision (benefit) |
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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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) | |||||||
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Net change to AOCI |
$ |
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$ |
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$ |
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$ |
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As of
January 29, 2022,
the notional amount of our outstanding aluminum swap contracts was $
As of
January 29, 2022,
the fair value of the derivative asset was $
6. LEASES
The Company has entered into various non-cancelable operating lease agreements of our offices, buildings, machinery and equipment expiring at various dates through
January 2030.
The Company does
not
assume renewals in the determination of the lease term unless the renewals are deemed to be reasonably assured at lease commencement. Lease agreements generally do
not
contain material residual value guarantees or material restrictive covenants. Operating lease cost for the
three
months ended
January 29, 2022
and
January 30, 2021
was $
The following is a summary of future minimum lease payments and related liabilities for all non-cancelable operating leases as of January 29, 2022:
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(In thousands) |
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Fiscal 2022 |
$ |
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Fiscal 2023 |
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Fiscal 2024 |
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Fiscal 2025 |
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Fiscal 2026 |
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Thereafter |
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Total minimum lease payments including interest |
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Less: Amounts representing interest |
(
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Present value of minimum lease payments |
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Less: Current portion of lease liabilities |
(
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) |
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Non-current portion of lease liabilities |
$ |
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7. CASH DIVIDEND
On
December 2, 2021,
the Company's board of directors declared a cash dividend of $
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 (Power+ Brands) and, to a lesser extent, Carbonated Soft Drinks. 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 than larger competitors who are burdened by legacy production and distribution complexity and costs.
The majority of our brands are geared to the active and health-conscious consumer including sparkling waters, energy drinks, and juices. Our portfolio of Power+ Brands includes LaCroix®, LaCroix Cúrate®, and LaCroix NiCola® sparkling water products; Clear Fruit® non-carbonated water beverages enhanced with fruit flavor; 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 130 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 further 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, changes in consumer purchasing habits and weather conditions. Beverage sales are seasonal with higher sales volume realized during the summer months when outdoor activities are more prevalent.
RESULTS OF OPERATIONS
Three Months Ended January 29, 2022 (third quarter of fiscal 2022) compared to
Three Months Ended January 30, 2021 (third quarter of fiscal 2021)
Net sales for the third quarter of fiscal 2022 increased 5.3% to $258.9 million from $245.9 million for the third quarter of fiscal 2021. The increase in sales resulted primarily from a 10.1% increase in average selling price per case, partially offset by a 4.1% decline in case volume.
Gross profit for the third quarter of fiscal 2022 decreased to $93.8 million from $95.7 million for the third quarter of fiscal 2021. The decrease in gross profit is due to increased packaging, ingredients and freight costs. These cost increases were partially offset by the increase in average selling price. The cost of sales per case increased 15.0% and gross margin decreased to 36.2% from 38.9% for the third quarter of fiscal 2021.
Selling, general and administrative expenses for the third quarter of fiscal 2022 increased $5.6 million to $53.1 million from $47.5 million for the third quarter of fiscal 2021. The increase was primarily due to an increase in shipping and marketing costs. As a percent of net sales, selling, general and administrative expenses increased to 20.5% from 19.3% for the third quarter of fiscal 2021.
Other income (expense), net includes interest income of $39,000 for the third quarter of fiscal 2022 and $109,000 for the third quarter of fiscal 2021. Other income (expense), net for the third quarter of fiscal 2022 also includes interest expense of $62,000 relating to borrowings under the Loan Facility. The decrease in interest income is due to lower investment balances.
The Company’s effective income tax rate, based upon estimated annual income tax rates, was 23.6% for the third quarter of fiscal 2022 and 23.9% for the third quarter of fiscal 2021. 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 29, 2022 (first nine months of fiscal 2022) compared to
Nine Months Ended January 30, 2021 (first nine months of fiscal 2021)
Net sales for the first nine months of fiscal 2022 increased 5.3% to $853.8 million from $811.1 million for the first nine months of fiscal 2021. The increase in sales resulted primarily from a 6.1% increase in average selling price per case, partially offset by a modest decrease in case volume.
Gross profit for the first nine months of fiscal 2022 was flat to the first nine months of fiscal 2021. The cost of sales per case increased 9.8% and gross margin decreased to 37.5% from 39.6% for the first nine months of fiscal 2021. The decrease in gross margin is due to increased packaging, ingredients and freight costs along with supply chain disruptions, which adversely affected manufacturing efficiencies.
Selling, general and administrative expenses for the first nine months of fiscal 2022 increased $13.0 million to $157.5 million from $144.5 million for the first nine months of fiscal 2021. The increase was primarily due to increased shipping and marketing costs, partially offset by decreased administrative costs. As a percent of net sales, selling, general and administrative expenses increased to 18.4% from 17.8% for the first nine months of fiscal 2021.
Other income (expense), net includes interest income of $136,000 for the first nine months of fiscal 2022 and $506,000 for the first nine months of fiscal 2021. The decrease in interest income is due to lower investment balances.
The Company’s effective income tax rate, based upon estimated annual income tax rates, was 23.6% for the first nine months of fiscal 2022 and for the first nine months of fiscal 2021. 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 29, 2022, we maintained $150 million unsecured revolving credit facilities, under which $50 million in borrowings were outstanding and $3 million 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 position decreased $153.2 million for the nine months of fiscal 2022, due primarily to the $280 million cash dividend paid on December 29, 2021.
Net cash provided by operating activities for the first nine months of fiscal 2022 amounted to $92.6 million compared to $145.2 million for the nine months of fiscal 2021. Net cash provided by operating activities for the first nine months of fiscal 2022 was principally provided by net income of $124.2 million, depreciation and amortization of $13.7 million, and amortization of operating right of use assets of $10.1 million, offset in part by changes in working capital and other accounts.
Net cash used in investing activities for the first nine months of fiscal 2022 reflects capital expenditures of $16.1 million, compared to capital expenditures of $17.0 million for the first nine months of fiscal 2021. We intend to continue production capacity and efficiency improvement projects, and expect fiscal 2022 capital expenditures to be comparable to fiscal 2021 levels.
Financial Position
At January 29, 2022, our working capital decreased to $117.3 million compared to $217.7 million at May 1, 2021. The current ratio was 2.0 to 1 at January 29, 2022 compared to 2.5 to 1 at May 1, 2021. The decrease in working capital and current ratio was due primarily to the payment of the $280 million cash dividend. Trade receivables decreased $4.3 million and days sales outstanding declined to 28.9 from 30.1. Inventories increased $17.2 million and inventory turns declined to 8.7 times from 9.6 times.
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 May 1, 2021.
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 of our Company to be materially different from any future 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 and availability 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 demand and 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.
PART II - OTHER INFORMATION
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 May 1, 2021.
| Exhibit No. | Description | |
| 10.15 | Amended and Restated Credit Agreement, dated January 5, 2022 between NewBevco, Inc. and lender therein | |
| 10.17 | Loan Agreement dated December 21, 2021 between NewBevco, Inc. and lender therein | |
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2 | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.2 | Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101 | The following financial information from National Beverage Corp. Quarterly Report on Form 10-Q for the quarterly period ended January 29, 2022, formatted in iXBRL (Inline 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. | |
| 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 10, 2022
| National Beverage Corp. | ||
| (Registrant) | ||
| By: /s/ George R. Bracken | ||
| George R. Bracken | ||
| Executive Vice President – Finance | ||
| (Principal Financial Officer) | ||