Table of Contents



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended JanuaryOctober 29, 2022

or

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Commission file number 1-14170

 

NATIONAL BEVERAGE CORP.

(Exact name of registrant as specified in its charter)

 

Delaware59-2605822
(State of incorporation)(I.R.S. Employer Identification No.)

 

8100 SW Tenth Street, Suite 4000, Fort Lauderdale, FL 33324

(Address of principal executive offices including zip code)

(954) 581-0922

(Registrant’s telephone number including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $.01 per shareFIZZThe NASDAQ Global Select Market

 

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.   Yes   No ☐

 

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).   Yes   No ☐

 

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.   Large accelerated filer   Accelerated filer ☐  Non-accelerated filer ☐  Smaller reporting company ☐  Emerging growth company ☐

 

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 ☐  No

 

The number of shares of registrant’s common stock outstanding as of March 7,December 5, 2022 was 93,335,446.93,352,946.

 

 

 

NATIONAL BEVERAGE CORP.

QUARTERLY REPORT ON FORM 10-Q

INDEX

 

PART I - FINANCIAL INFORMATION

   

Item 1. Financial Statements (Unaudited)

Page

   
 Condensed Consolidated Balance Sheets as of JanuaryOctober 29, 2022 and May 1, 2021April 30, 20223

 
 Condensed Consolidated Statements of Income for the Three and NineSix Months Ended  JanuaryOctober 29, 2022 and JanuaryOctober 30, 20214

  

Condensed Consolidated Statements of Comprehensive Income for the Three and NineSix Months Ended JanuaryOctober 29, 2022 and JanuaryOctober 30, 20215
   

Condensed Consolidated Statements of Shareholders’ Equity for the Three and NineSix Months Ended JanuaryOctober 29, 2022 and JanuaryOctober 30, 20216

 
 Condensed Consolidated Statements of Cash Flows for the NineSix Months Ended JanuaryOctober 29, 2022 and JanuaryOctober 30, 20217

  

Notes to Condensed Consolidated Financial Statements

8
   

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

11

 

Item 3. Quantitative and Qualitative Disclosures Aboutabout Market Risk

14

 
Item 4. Controls and Procedures14

PART II - OTHER INFORMATION

   
PART II - OTHER INFORMATION

Item 1A. Risk Factors

16
   

Item 1A. Risk Factors6. Exhibits

1516
   

Item 6. ExhibitsSignature 

15
Signature1617

 

2

PART I - FINANCIAL INFORMATION

 

 PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands, except share data)

 

January 29,

 

May 1,

  

October 29,

 

April 30,

 
 

2022

  

2021

  

2022

  

2022

 

Assets

        

Current assets:

  

Cash and equivalents

 $40,372  $193,589  $92,626  $48,050 

Trade receivables - net

 82,172  86,442  100,445  93,592 

Inventories

 88,679  71,480  88,409  103,318 

Prepaid and other assets

  25,521   13,431   17,195   29,560 

Total current assets

 236,744  364,942  298,675  274,520 

Property, plant and equipment - net

 135,470  131,027  143,162  144,258 

Right-of-use assets

 36,517  41,676 

Right of use assets

 38,791  29,251 

Goodwill

 13,145  13,145  13,145  13,145 

Intangible assets

 1,615  1,615  1,615  1,615 

Other assets

  4,782   4,832   4,734   5,015 

Total assets

 $428,273  $557,237  $500,122  $467,804 
  

Liabilities and Shareholders' Equity

        

Current liabilities:

  

Accounts payable

 $68,517  $88,754  $84,378  $95,299 

Accrued liabilities

 37,454  43,551  51,128  39,090 

Short-term lease obligations

 12,780  14,800  12,042  10,543 

Income taxes payable

  729   89   154   387 

Total current liabilities

 119,480  147,194  147,702  145,319 

Long-term debt

 50,000  0  -  30,000 

Deferred income taxes - net

 18,668  17,294  20,586  23,823 

Long-term lease obligations

 25,738  28,837 

Operating lease liability - non current

 28,801  20,703 

Other liabilities

  8,137   7,915   7,918   8,521 

Total liabilities

  222,023   201,240   205,007   228,366 

Shareholders' equity:

  

Preferred stock, $1 par value - 1,000,000 shares authorized: Series C - 150,000 shares issued

 150  150  150  150 

Common stock, $.01 par value - 200,000,000 shares authorized; 101,708,558 shares issued (101,675,858 shares at May 1)

 1,017  1,016 

Common stock, $.01 par value - 200,000,000 shares authorized; 101,726,258 shares issued (101,712,358 shares at April 30)

 1,017  1,017 

Additional paid-in capital

 39,191  38,375  40,032  39,405 

Retained earnings

 181,837  337,672  287,681  216,181 

Accumulated other comprehensive income

 8,288  3,017 

Accumulated other comprehensive (loss) income

 (9,532) 6,918 

Treasury stock - at cost:

  

Series C preferred stock - 150,000 shares

 (5,100) (5,100) (5,100) (5,100)

Common stock - 8,374,112 shares

  (19,133)  (19,133)  (19,133)  (19,133)

Total shareholders' equity

  206,250   355,997   295,115   239,438 

Total liabilities and shareholders' equity

 $428,273  $557,237  $500,122  $467,804 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

3

 

NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(In thousands, except per share amounts)

 

Three Months Ended

  

Nine Months Ended

  

Three Months Ended

  

Six Months Ended

 
 

January 29,

 

January 30,

 

January 29,

 

January 30,

  

October 29,

 

October 30,

 

October 29,

 

October 30,

 
 

2022

  

2021

  

2022

  

2021

  

2022

  

2021

  

2022

  

2021

 
  

Net sales

 $258,923  $245,931  $853,793  $811,107  $299,633  $283,158  $617,750  $594,870 
  

Cost of sales

  165,124   150,267   533,738   490,176   199,637   181,673   418,353   368,614 
  

Gross profit

 93,799  95,664  320,055  320,931  99,996  101,485  199,397  226,256 
  

Selling, general and administrative expenses

  53,103   47,501   157,470   144,507   53,073   49,924   105,996   104,367 
  

Operating income

 40,696  48,163  162,585  176,424  46,923  51,561  93,401  121,889 
  

Other income (expense)- net

  (81)  64   (103)  402 

Other income (expense) - net

  86   (7)  2   (22)
  

Income before income taxes

 40,615  48,227  162,482  176,826  47,009  51,554  93,403  121,867 
  

Provision for income taxes

  9,547   11,540   38,314   41,811   10,963   12,270   21,903   28,767 
  

Net income

 $31,068  $36,687  $124,168  $135,015  $36,046  $39,284  $71,500  $93,100 
  

Earnings per common share:

  

Basic

 $.33  $.39  $1.33  $1.45  $.39  $.42  $.77  $1.00 

Diluted

 $.33  $.39  $1.33  $1.44  $.39  $.42  $.76  $.99 
  

Weighted average common shares outstanding:

  

Basic

  93,329   93,296   93,319   93,273   93,344   93,321   93,341   93,310 

Diluted

  93,611   93,610   93,608   93,624   93,602   93,640   93,601   93,607 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

4

 

NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(In thousands)

 

Three Months Ended

  

Nine Months Ended

  Three Months Ended  

Six Months Ended

 
 

January 29,

 

January 30,

 

January 29,

 

January 30,

  

October 29,

 

October 30,

 

October 29,

 

October 30,

 
 

2022

  

2021

  

2022

  

2021

  

2022

  

2021

  

2022

  

2021

 
  

Net income

 $31,068  $36,687  $124,168  $135,015  $36,046  $39,284  $71,500  $93,100 
  

Other comprehensive income, net of tax:

 

Other comprehensive loss, net of tax:

 

Cash flow hedges

 7,984  885  5,271  7,774  (5,494) (960) (16,450) (2,713)
                  

Comprehensive income

 $39,052  $37,572  $129,439  $142,789  $30,552  $38,324  $55,050  $90,387 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

5

 

NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)

(In thousands)

 

Three Months Ended

  

Nine Months Ended

  

Three Months Ended

  

Six Months Ended

 
 

January 29, 2022

  

January 30, 2021

  

January 29, 2022

  

January 30, 2021

  

October 29, 2022

  

October 30, 2021

  

October 29, 2022

  

October 30, 2021

 
 

Shares

  

Amount

  

Shares

  

Amount

  

Shares

  

Amount

  

Shares

  

Amount

  

Shares

  

Amount

  

Shares

  

Amount

  

Shares

  

Amount

  

Shares

  

Amount

 

Series C Preferred Stock

                                

Beginning and end of period

  150  $150   150  $150   150  $150   150  $150   150  $150   150  $150   150  $150   150  $150 
  

Common Stock

                                

Beginning of period

 101,696  1,017  101,664  1,017  101,676  1,016  101,606  1,016  101,712  1,017  101,688  1,017  101,712  1,017  101,676  1,016 

Stock options exercised

  13   0   10   0   33   1   68   1   14   -   8   -   14      20   1 

End of Period

  101,709   1,017   101,674   1,017   101,709   1,017   101,674   1,017   101,726   1,017   101,696   1,017   101,726   1,017   101,696   1,017 
  

Additional Paid-In Capital

                                

Beginning of period

    38,836     37,944     38,375     37,422     39,575     38,604     39,405     38,375 

Stock options exercised

    181     72     292     475     285     53     285     111 

Stock-based compensation

      174       171       524       290       172       179       342       350 

End of period

     39,191      38,187      39,191      38,187      40,032      38,836      40,032      38,836 
  

Retained Earnings

                                

Beginning of period

    430,772     541,730     337,672     443,402     251,635     391,488     216,181     337,672 

Net income

    31,068     36,687     124,168     135,015       36,046       39,284       71,500       93,100 

Common stock cash dividend

      (280,003)      (279,876)      (280,003)      (279,876)

End of period

     181,837      298,541      181,837      298,541      287,681      430,772      287,681      430,772 
  

Accumulated Other Comprehensive Income

                

Accumulated Other Comprehensive (Loss) Income

                

Beginning of period

    304     1,469     3,017     (5,420)    (4,038)    1,264     6,918     3,017 

Cash flow hedges, net of tax

      7,984       885       5,271       7,774       (5,494)      (960)      (16,450)      (2,713)

End of period

     8,288      2,354      8,288      2,354      (9,532)     304      (9,532)     304 
  

Treasury Stock - Series C Preferred

                                

Beginning and end of period

  150   (5,100)  150   (5,100)  150   (5,100)  150   (5,100)  150   (5,100)  150   (5,100)  150   (5,100)  150   (5,100)
  

Treasury Stock - Common

                                

Beginning of period

 8,374  (19,133) 8,374  (19,133) 8,374  (19,133) 8,278  (19,133)

Stock repurchase

  0   0   0   0   0   0   96   0 

End of period

  8,374   (19,133)  8,374   (19,133)  8,374   (19,133)  8,374   (19,133)

Beginning and end of period

  8,374   (19,133)  8,374   (19,133)  8,374   (19,133)  8,374   (19,133)
  

Total Shareholders' Equity

    $206,250     $316,016     $206,250     $316,016     $295,115     $446,846     $295,115     $446,846 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

6

 

NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

 

Nine Months Ended

  

Six Months Ended

 
 

January 29,

 

January 30,

  

October 29,

 

October 30,

 
 

2022

  

2021

  

2022

  

2021

 

Operating Activities:

            

Net income

 $124,168  $135,015  $71,500  $93,100 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

Adjustments to reconcile net income to net cash provided by operating activities:

     

Depreciation and amortization

 13,711  13,729  10,436  9,234 

Deferred income tax (benefit) provision

 (283) 337 

Loss on sale of property, net

 11  4 

Deferred income tax provision (benefit)

 1,147  (363)

Gain on sale of property, net

 -  8 

Stock-based compensation

 524  290  342  350 

Amortization of operating right of use assets

 10,117  9,845 

Amortization of operating right to use assets

 6,592  6,872 

Changes in assets and liabilities:

      

Trade receivables

 4,270  9,252  (6,853) (1,799)

Inventories

 (17,199) (7,643) 14,909  (7,309)

Operating lease right of use assets

 (5,827) (4,420)

Operating lease right to use assets

 (16,132) (1,594)

Prepaid and other assets

 (4,730) (4,444) 3,187  510 

Accounts payable

 (20,236) (3,001) (10,921) 1,593 

Accrued and other liabilities

 (7,724) 1,091  (1,566) (9,545)

Operating lease liabilities

  (4,250)  (4,884)

Operating lease obligation

  9,597   (5,093)

Net cash provided by operating activities

  92,552   145,171   82,238   85,964 
      

Investing Activities:

            

Additions to property, plant and equipment

 (16,059) (16,997) (7,974) (6,628)

Proceeds from sale of property, plant and equipment

  1   15   27   1 

Net cash used in investing activities

  (16,058)  (16,982)  (7,947)  (6,627)
      

Financing Activities:

            

Borrowing under loan facility

 50,000  0 

Proceeds from stock options exercised

 292  475  285  111 

Dividend paid

  (280,003)  (279,876)

Net cash used in financing activities

  (229,711)  (279,401)

Repayments of loan facility

  (30,000)  - 

Net cash provided by financing activities

  (29,715)  111 
      

Net Decrease in Cash and Equivalents

 (153,217) (151,212)

Net Increase in Cash and Equivalents

 44,576  79,448 
      

Cash and Equivalents - Beginning of Period

  193,589   304,518   48,050   193,589 
      

Cash and Equivalents - End of Period

 $40,372  $153,306  $92,626  $273,037 
      

Other Cash Flow Information:

            

Interest paid

 $189  $117  $224  $93 

Income taxes paid

 $42,401  $51,031  $21,373  $31,386 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

7

 

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 principlesGenerally 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.April 30, 2022. 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 JanuaryOctober 29, 2022 were comprised of finished goods of $50.3$46.4 million and raw materials of $38.4$42.0 million. Inventories at May 1, 2021April 30, 2022 were comprised of finished goods of $43.3$58.6 million and raw materials of $28.2$44.7 million.

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 $12.9were $10.3 million for the three months ended JanuaryOctober 29, 2022 and $11.3$10.8 million for the three months ended JanuaryOctober 30, 2021. Marketing costs totaled $36.0were $20.6 million for the ninesix months ended JanuaryOctober 29, 2022 and $31.2$23.2 million for the ninesix months ended JanuaryOctober 30, 2021.

8

 

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 $21.1were $22.0 million for the three months ended JanuaryOctober 29, 2022 and $18.0$21.7 million for the three months ended JanuaryOctober 30, 2021. Shipping and handling costs totaled $65.5were $45.6 million for the ninesix months ended JanuaryOctober 29, 2022 and $55.9$44.4 million for the ninesix months ended JanuaryOctober 30, 2021. Although our classification is consistent with many beverage companies, our gross margin may not be comparable to companies that include shipping and handling costs in cost of sales.

 

 

2. PROPERTY, PLANT AND EQUIPMENT

 

Property, plant and equipment consist of the following:

 

 

(In thousands)

  

(In thousands)

 
 

January 29,

2022

  

May 1,

2021

  

October 29,

2022

  

April 30,

2022

 

Land

 $9,835  $9,835  $9,835  $9,835 

Buildings and improvements

 63,529  62,346  67,977  65,697 

Machinery and equipment

  271,469   257,119   281,501   277,163 

Total

 344,833  329,300  359,313  352,695 

Less accumulated depreciation

  (209,363)  (198,273)  (216,151)  (208,437)

Property, plant and equipment – net

 $135,470  $131,027  $143,162  $144,258 

 

Depreciation expense was $3.8 million and $11.6$4.5 million for the three and ninemonths ended JanuaryOctober 29, 2022 respectively, and $3.7 million and $11.2$3.9 million for the three andmonths ended nineOctober 30, 2021. Depreciation expense was $9.0 million for the six months ended JanuaryOctober 29, 2022 and $7.8 million for the six months ended October 30, 2021, 2021.respectively.

 

 

3. DEBT

 

At JanuaryOctober 29, 2022, a subsidiary of the Company maintained unsecured revolving credit facilities with banks aggregating $100 million (the “Credit Facilities”). The Credit Facilities expire from April 30, 2023October 28, 2024 to October 28, 2024May 30, 2025 and any borrowings would currently bear interest at 1.0%1.5% above one-month LIBOR.the Secured Overnight Financing Rate (SOFR). There were 0no borrowings outstanding under the Credit Facilities at JanuaryOctober 29, 2022 or May 1, 2021.April 30, 2022. At JanuaryOctober 29, 2022, $32.5 million of the Credit Facilities was reserved for standby letters of credit and $97$97.5 million was available for borrowings.

 

On December 21, 2021, a subsidiary of the Company entered into an unsecured revolving term loan facility with a national bank aggregating $50 million (the(The “Loan Facility”). The Loan Facility expires December 31, 2023 and borrowings bear interest at .95% above the Adjusted Daily Secured Overnight Funding Rate (SOFR).adjusted daily SOFR. Since closing the Loan Facility, $50 million was borrowed and remains$30 million was outstanding at JanuaryApril 30, 2022. There were no borrowings outstanding under the Loan Facility at October 29, 2022.At January 29, 2022, the interest rate was 1.11%.

 

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)Credit Facilities), and contain other restrictions, none of which are expected to have a material effect on our operations or financial position. At JanuaryOctober 29, 2022, we werethe subsidiary was in compliance with all loan covenants.

4. STOCK-BASED COMPENSATION

During the nine months ended January 29, 2022, options to purchase 30,000 shares of common stock were granted, options to purchase 32,700 shares were exercised and options to purchase 8,400 shares were cancelled at weighted average exercise prices of $44.73, $8.91 and $33.01, respectively. At January 29, 2022, options to purchase 550,000 shares of common stock at a weighted average exercise price of $19.35 per share were outstanding and stock-based awards to purchase 5,377,405 shares of common stock were available for grant.

 

9

 

4. STOCK-BASED COMPENSATION

During the six months ended October 29, 2022, no options were granted and options to purchase 13,900 shares were exercised at a weighted average exercise price of $20.46. At October 29, 2022, options to purchase 522,700 shares at a weighted average exercise price of $18.93 per share were outstanding and stock-based awards to purchase 5,387,005 shares of common stock were available for grant.

 

 

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.hedges. Accordingly, gains or losses attributable to the effective portion of the cash flow hedge are reported in accumulated other comprehensive income (loss) (“AOCI”) and reclassified into cost of sales in the period in which the hedged transaction affects earnings. The ineffective portion of the change in fair value of our cash flow hedge was immaterial. The following summarizes the gains (losses) recognized in the Condensed Consolidated Statements of Income and AOCI:

 

 

(In thousands)

  

(In thousands)

 
 

Three Months Ended

 

Nine Months Ended

  

Three Months Ended

  

Six Months Ended

 
 

2022

 

2021

 

2022

 

2021

  

2022

  

2021

  

2022

  

2021

 

Recognized in AOCI:

          

Gain before income taxes

 $11,007  $2,461  $11,980  $9,672 

Less income tax provision

  2,633   589   2,866   2,314 

(Loss) gain before income taxes

 $(10,327) $221  $(25,337) $974 

Less income tax (benefit) provision

  (2,470)  53   (6,061)  233 

Net

 $8,374  $1,872  $9,114  $7,358   (7,857)  168   (19,276)  741 

Reclassified from AOCI to cost of sales:

          

Gain (loss) before income taxes

 $512  $1,297  $5,052  $(546)

(Loss) gain before income taxes

 (3,106) 1483  (3,714) 4,540 

Less income tax provision (benefit)

  122   310   1,209   (130)  (743)  355   (888)  1,086 

Net

 $390  $987  $3,843  $(416)  (2,363)  1,128   (2,826)  3,454 

Net change to AOCI

 $7,984  $885  $5,271  $7,774  $(5,494

)

 $(960) $(16,450

)

 $(2,713

)

 

As of JanuaryOctober 29, 2022, the notional amount of our outstanding aluminum swap contracts was $71.2$83.5 million and, assuming no change in commodity prices, $10.5$12.1 million of unrealized gainloss before tax will be reclassified from AOCI and recognized in earnings over the next 12 months.

 

As of JanuaryOctober 29, 2022, the fair value of the derivative liability was $13.0 million, which was included in accrued liabilities. At April 30, 2022, the fair value of the derivative asset was $10.5 million, which was included as a component of prepaid and other assets. As of May 1, 2021, the fair value of the derivative asset was $3.6$8.8 million, which was included in prepaid and 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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6. LEASES

 

The Company has entered into various non-cancelable operating lease agreements of ourfor certain offices, buildings and machinery and equipment expiringwhich expire at various dates through January 2030.2029. 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 JanuaryOctober 29, 2022 and JanuaryOctober 30, 2021 was $3.5 million.$3.7 million and $3.6 million, respectively. Operating lease cost totaled $11.1was $7.1 million for the ninesix months ended JanuaryOctober 29, 2022 and $10.8$7.3 million for the ninesix months ended JanuaryOctober 30, 2021. As of JanuaryOctober 29, 2022, the weighted-average remaining lease term and weighted average discount rate of operating leases was 4.54.29 years and 3.1%2.90%, respectively. As of May 1, 2021,April 30, 2022, the weighted-average remaining lease term and weighted average discount rate of operating leases was 3.064.0 years and 3.38%3.08%, respectively. Cash payments were $3.7 million and $4.0 million, respectively, for operating leases for the three months ended JanuaryOctober 29, 2022 and $3.3 million for the three months ended JanuaryOctober 30, 2021. Cash payments totaled $11.3were $7.1 million for the ninesix months ended JanuaryOctober 29, 2022 and $10.3$7.6 million for the ninesix months ended JanuaryOctober 30, 2021.

 

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The following is a summary of future minimum lease payments and related liabilities for all non-cancelable operating leases as of JanuaryOctober 29, 2022:

 

 

(In thousands)

  

(In thousands)

 

Fiscal 2022

 $4,601 

Fiscal 2023

 11,357 

Fiscal 2023 – Remaining two quarters

 $6,632 

Fiscal 2024

 8,836  11,435 

Fiscal 2025

 5,895  8,611 

Fiscal 2026

 3,946  6,783 

Fiscal 2027

 5,841 

Thereafter

  6,536   4,125 

Total minimum lease payments including interest

 41,171  43,427 

Less: Amounts representing interest

  (2,653

)

  (2,584

)

Present value of minimum lease payments

 38,518  40,843 

Less: Current portion of lease liabilities

  (12,780

)

Non-current portion of lease liabilities

 $25,738 

Less: Current portion of lease obligations

  (12,042

)

Non-current portion of lease obligations

 $28,801 

 

 

7. CASH DIVIDEND

On December 2, 2021, the Company's board of directors declared a cash dividend of $3.00 per share payable to shareholders of record on December 13, 2021. The dividend of $280 million was paid on December 29, 2021.

 

ITEM 2. MANAGEMENTS 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. Traditional and typical are not a part of an innovator’s vocabulary.

 

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.

 

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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 JanuaryOctober 29, 2022 (third(second quarter of fiscal 2022)2023) compared to

Three Months Ended JanuaryOctober 30, 2021 (third(second quarter of fiscal 2021)2022)

 

Net sales for the thirdsecond quarter of fiscal 20222023 increased 5.3%5.8% to $258.9$299.6 million from $245.9$283.2 million for the thirdsecond quarter of fiscal 2021.2022. The increase in sales resulted primarily from a 10.1%10.3% increase in average selling price per case partially offsetwith volume declining in total by a 4.1% decline.  Both Power+ Brands and carbonated soft drinks experienced volume declines in case volume.the quarter.

 

Gross profit for the thirdsecond quarter of fiscal 2022 decreased2023 was $100.0 million compared to $93.8 million from $95.7$101.5 million for the thirdsecond quarter of fiscal 2021.2022. 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 costCost of sales per case increased 15.0%2.7% and gross margin decreased to 36.2%33.4% from 38.9%35.8% for the thirdsecond quarter of fiscal 2021.2022; gross margin improved from 31.2% reported in the first quarter of fiscal 2023.

 

Selling, general and administrative expenses for the thirdsecond quarter of fiscal 20222023 increased $5.6$3.1 million to $53.1 million from $47.5$49.9 million for the thirdsecond quarter of fiscal 2021.2022. The increase was primarily due to an increase in shipping and administrative costs partially offset by a decrease in marketing costs. As a percent of net sales, selling, general and administrative expenses increased slightly to 20.5% from 19.3%17.7% for the thirdsecond quarter of fiscal 2021.2023 from 17.6% for the second quarter of fiscal 2022.

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Other income (expense),- net includes interest income of $39,000$151 thousand for the thirdsecond quarter of fiscal 20222023 and $109,000$49 thousand for the thirdsecond 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.2022. The decreaseincrease in interest income is due to lower investment balances.a higher return on investments.

 

The Company’s effective income tax rate, based upon estimated annual income tax rates, was 23.6%23.3% for the thirdsecond quarter of fiscal 20222023 and 23.9%23.8% for the thirdsecond quarter of fiscal 2021.2022. The difference between the effective rate and the federal statutory rate of 21% was primarily due to the effects of state income taxes.

 

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NineSix Months Ended JanuaryOctober 29, 2022 (first ninesix months of fiscal 2022)2023) compared to

Nine Six Months Ended JanuaryOctober 30, 2021 (first ninesix months of fiscal 2021)2022)

 

Net sales for the first ninesix months of fiscal 20222023 increased 5.3%3.8% to $853.8$617.8 million from $811.1$594.9 million for the first ninesix months of fiscal 2021.2022. The increase in sales resulted primarily from a 6.1%10.3% increase in average selling price per case partially offsetwith volume declining in total by a modest decrease in case volume.5.8% .  Both Power+ Brands and carbonated soft drinks experienced volume declines.

 

Gross profit for the first ninesix months of fiscal 2022 was flat2023 decreased to $199.4 million from $226.3 million for the first ninesix months of fiscal 2021.2022. 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 decreasedecline in gross marginprofit is due to increased packaging, ingredients and freightlabor costs along with supply chain disruptions, which adversely affected manufacturing efficiencies.offset in part by increased average selling price.  Cost of sales per case increased 6.4% and gross margin decreased to 32.3% from 38.0% for the first six months of fiscal 2022.

 

Selling, general and administrative expenses for the first ninesix months of fiscal 20222023 increased $13.0$1.6 million to $157.5$106.0 million from $144.5$104.4 million for the first ninesix months of fiscal 2021.2022. The increase was primarily due to increasedan increase in shipping and marketingadministrative costs partially offset by decreased administrativea decrease in marketing costs. As a percent of net sales, selling, general and administrative expenses increaseddecreased to 18.4%17.2% from 17.8%17.5% for the first ninesix months of fiscal 2021.2022.

 

Other income (expense), net includes interest income of $136,000$175 thousand for the first ninesix months of fiscal 20222023 and $506,000$97,000 for the first ninesix months of fiscal 2021.2022. The decreaseincrease in interest income is due to lower investment balances.a higher return on investments.

 

The Company’s effective income tax rate, based upon estimated annual income tax rates, was 23.5% for the first six months of fiscal 2023 and 23.6% for the first ninesix months of fiscal 2022 and for the first nine months of fiscal 2021.2022. 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 JanuaryOctober 29, 2022, we maintained $150 million unsecured revolving credit facilities, under which $50 million inno borrowings were outstanding and $3$2.5 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.

13

 

Cash Flows

The Company’s cash position increased $44.6 million for the first six months of fiscal 2023 compared to an increase of $79.4 million for the first six months of fiscal 2022. The Company repaid $30 million of outstanding indebtedness in the first quarter of 2023.

Net cash provided by operating activities for the first six months of fiscal 2023 was $82.2 million compared to $86.0 million for the six months of fiscal 2022. For the first six months of fiscal 2023, cash flow provided by operating activities was principally provided by net income of $71.5 million, depreciation and amortization of $10.4 million, and amortization of operating lease right of use assets of $6.6 million, offset in part by changes in working capital and other accounts. 

Net cash used in investing activities for the first six months of fiscal 2023 reflects capital expenditures of $8.0 million, compared to capital expenditures of $6.6 million for the first six months of fiscal 2022. Certain production capacity and efficiency improvement projects are in progress and we anticipate fiscal 2023 capital expenditures will be comparable to fiscal 2022 levels

Financial Position

At JanuaryOctober 29, 2022, our working capital decreasedincreased to $117.3$151.0 million compared to $217.7from $129.2 million at May 1, 2021.April 30, 2022. The current ratio was 2.0 to 1 at JanuaryOctober 29, 2022 compared to 2.51.9 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.April 30, 2022. Trade receivables decreased $4.3increased $6.9 million and days sales outstanding declinedincreased to 28.930.5 from 30.1.30.0. Inventories increased $17.2decreased $14.9 million and inventory turns declinedimproved to 8.79.2 times from 9.68.2 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.April 30, 2022.

 

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.

14

 

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.

 

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PART II - OTHER INFORMATION

 

ITEM 1A. RISK FACTORS

 

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.April 30, 2022.

 

ITEM 6. EXHIBITS

 

Exhibit No. Description
   
10.1510.18 NewBevCo- Fifth Amendment to Second Amended and Restated Credit Agreement dated January 5, 2022 between NewBevco, Inc. and lender therein
   
10.1710.19 LoanNewBevCo- Fifth Amendment of Second Amended and Restated Credit 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 JanuaryOctober 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)

                                         

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SIGNATURE

 

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

Date: December 8, 2022

National Beverage Corp.

(Registrant)

   
 By: /s/ George R. BrackenNational Beverage Corp.
 (Registrant)

By:

/s/ George R. Bracken

George R. Bracken

Executive Vice President – Finance

  (Principal Financial Officer)

 

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