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

For the Quarterly Period Ended OctoberJuly 29, 20222023

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 December 5, 2022September 6, 2023 was 93,352,946.93,354,146.

 

 

 

 

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 OctoberJuly 29, 20222023 and April 30, 202229, 2023

3

 

Condensed Consolidated Statements of Income for the Three and Six Months Ended OctoberJuly 29, 20222023 and OctoberJuly 30, 20212022

4

  

Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended OctoberJuly 29, 20222023 and OctoberJuly 30, 20212022

5

  

Condensed Consolidated Statements of Shareholders’ Equity for the Three and Six Months Ended OctoberJuly 29, 20222023 and OctoberJuly 30, 20212022

6

 

Condensed Consolidated Statements of Cash Flows for the SixThree Months Ended OctoberJuly 29, 20222023 and OctoberJuly 30, 20212022

7

  

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

13

 

Item 4. Controls and Procedures

14

13

 

PART II - OTHER INFORMATION

  

Item 1A. Risk Factors

16

15

  

Item 6. Exhibits

16

15

  

Signature

17

16

 

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)

 

October 29,

 

April 30,

  

July 29,

 

April 29,

 
 

2022

  

2022

  

2023

  

2023

 

Assets

        

Current assets:

  

Cash and equivalents

 $92,626  $48,050  $222,769  $158,074 

Trade receivables - net

 100,445  93,592  107,680  104,918 

Inventories

 88,409  103,318 

Inventory

 92,999  93,578 

Prepaid and other assets

  17,195   29,560   8,025   9,835 

Total current assets

 298,675  274,520  431,473  366,405 

Property, plant and equipment - net

 143,162  144,258  149,300  148,423 

Right of use assets

 38,791  29,251 

Right of use assets- net

 39,766  39,506 

Goodwill

 13,145  13,145  13,145  13,145 

Intangible assets

 1,615  1,615  1,615  1,615 

Other assets

  4,734   5,015   5,108   5,248 

Total assets

 $500,122  $467,804  $640,407  $574,342 
  

Liabilities and Shareholders' Equity

        

Current liabilities:

  

Accounts payable

 $84,378  $95,299  $87,323  $85,106 

Accrued liabilities

 51,128  39,090  48,734  47,318 

Short-term lease obligations

 12,042  10,543 

Operating lease liabilities

 11,876  11,745 

Income taxes payable

  154   387   8,898   152 

Total current liabilities

 147,702  145,319  156,831  144,321 

Long-term debt

 -  30,000 

Deferred income taxes - net

 20,586  23,823  24,030  19,814 

Operating lease liability - non current

 28,801  20,703  29,911  29,782 

Other liabilities

  7,918   8,521   7,560   7,938 

Total liabilities

  205,007   228,366   218,332   201,855 

Commitments and contingencies

       

Shareholders' equity:

  

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

 150  150 

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 

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

 150  150 

Common stock, $.01 par value - 200,000,000 shares authorized; 101,727,658 issued at July 29, 2023 and April 29, 2023

 1,017  1,017 

Additional paid-in capital

 40,032  39,405  40,561  40,393 

Retained earnings

 287,681  216,181  407,976  358,345 

Accumulated other comprehensive (loss) income

 (9,532) 6,918 

Accumulated other comprehensive loss

 (3,396) (3,185)

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

  295,115   239,438   422,075   372,487 

Total liabilities and shareholders' equity

 $500,122  $467,804  $640,407  $574,342 
        
See accompanying Notes to Condensed Consolidated Financial Statements.         

NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(In thousands, except per share amounts)

  

Three Months Ended

 
  

July 29,

  

July 30,

 
  

2023

  

2022

 
         

Net sales

 $324,240  $318,117 
         

Cost of sales

  209,759   218,716 
         

Gross profit

  114,481   99,401 
         

Selling, general and administrative expenses

  51,377   52,923 
         

Operating income

  63,104   46,478 
         

Other (income) expense - net

  (2,063)  84 
         

Income before income taxes

  65,167   46,394 
         

Provision for income taxes

  15,536   10,940 
         

Net income

 $49,631  $35,454 
         

Earnings per common share:

        

Basic

 $.53  $.38 

Diluted

 $.53  $.38 
         

Weighted average common shares outstanding:

        

Basic

  93,354   93,338 

Diluted

  93,610   93,599 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

 

NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(In thousands, except per share amounts)thousands)

 

  

Three Months Ended

  

Six Months Ended

 
  

October 29,

  

October 30,

  

October 29,

  

October 30,

 
  

2022

  

2021

  

2022

  

2021

 
                 

Net sales

 $299,633  $283,158  $617,750  $594,870 
                 

Cost of sales

  199,637   181,673   418,353   368,614 
                 

Gross profit

  99,996   101,485   199,397   226,256 
                 

Selling, general and administrative expenses

  53,073   49,924   105,996   104,367 
                 

Operating income

  46,923   51,561   93,401   121,889 
                 

Other income (expense) - net

  86   (7)  2   (22)
                 

Income before income taxes

  47,009   51,554   93,403   121,867 
                 

Provision for income taxes

  10,963   12,270   21,903   28,767 
                 

Net income

 $36,046  $39,284  $71,500  $93,100 
                 

Earnings per common share:

                

Basic

 $.39  $.42  $.77  $1.00 

Diluted

 $.39  $.42  $.76  $.99 
                 

Weighted average common shares outstanding:

                

Basic

  93,344   93,321   93,341   93,310 

Diluted

  93,602   93,640   93,601   93,607 
  

Three Months Ended

 
  

July 29,

  

July 30,

 
  

2023

  

2022

 
         

Net income

 $49,631  $35,454 
         

Other comprehensive loss, net of tax:

        

Cash flow hedges

  (211)   (10,956) 
         

Comprehensive income

 $49,420  $24,498 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

  

NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(In thousands)

  Three Months Ended  

Six Months Ended

 
  

October 29,

  

October 30,

  

October 29,

  

October 30,

 
  

2022

  

2021

  

2022

  

2021

 
                 

Net income

 $36,046  $39,284  $71,500  $93,100 
                 

Other comprehensive loss, net of tax:

                

Cash flow hedges

  (5,494)  (960)  (16,450)  (2,713)
                 

Comprehensive income

 $30,552  $38,324  $55,050  $90,387 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

 

NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)

(In thousands)

 

Three Months Ended

  

Six Months Ended

  

Three Months Ended

 
 

October 29, 2022

  

October 30, 2021

  

October 29, 2022

  

October 30, 2021

  

July 29, 2023

  

July 30, 2022

 
 

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 
  

Common Stock

                        

Beginning of period

 101,712  1,017  101,688  1,017  101,712  1,017  101,676  1,016 

Stock options exercised

  14   -   8   -   14      20   1 

End of Period

  101,726   1,017   101,696   1,017   101,726   1,017   101,696   1,017 

Beginning and end of period

  101,727   1,017   101,712   1,017 
  

Additional Paid-In Capital

                        

Beginning of period

    39,575     38,604     39,405     38,375     40,393     39,405 

Stock options exercised

    285     53     285     111 

Stock-based compensation

      172       179       342       350      168      170 

End of period

     40,032      38,836      40,032      38,836      40,561      39,575 
  

Retained Earnings

                        

Beginning of period

    251,635     391,488     216,181     337,672     358,345     216,181 

Net income

      36,046       39,284       71,500       93,100      49,631      35,454 

End of period

     287,681      430,772      287,681      430,772      407,976      251,635 
  

Accumulated Other Comprehensive (Loss) Income

                

Accumulated Other Comprehensive Loss

        

Beginning of period

    (4,038)    1,264     6,918     3,017     (3,185)    6,918 

Cash flow hedges, net of tax

      (5,494)      (960)      (16,450)      (2,713)     (211)     (10,956)

End of period

     (9,532)     304      (9,532)     304      (3,396)     (4,038)
  

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)
  

Treasury Stock - Common

                            

Beginning and end of period

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

Total Shareholders' Equity

    $295,115     $446,846     $295,115     $446,846     $422,075     $264,106 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

 

NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

 

Six Months Ended

  

Three Months Ended

 
 

October 29,

 

October 30,

  

July 29,

 

July 30,

 
 

2022

  

2021

  

2023

  

2022

 

Operating Activities:

                

Net income

 $71,500  $93,100  $49,631  $35,454 

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

     

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

     

Depreciation and amortization

 10,436  9,234  4,956  5,461 

Deferred income tax provision (benefit)

 1,147  (363)

Gain on sale of property, net

 -  8 

Deferred income taxes

 4,284  1,072 

Loss on disposal of property, net

 3  6 

Stock-based compensation

 342  350  171  170 

Amortization of operating right to use assets

 6,592  6,872 

Amortization of operating right of use assets

 3,329  3,164 

Changes in assets and liabilities:

          

Trade receivables

 (6,853) (1,799) (2,762) (6,681)

Inventories

 14,909  (7,309) 579  12,965 

Operating lease right to use assets

 (16,132) (1,594)

Operating lease right of use assets

 (3,589) (12,468)

Prepaid and other assets

 3,187  510  1,475  11,656 

Accounts payable

 (10,921) 1,593  2,217  (19,148)

Accrued and other liabilities

 (1,566) (9,545) 9,562  (344)

Operating lease obligation

  9,597   (5,093)

Operating lease liabilities

  287   9,310 

Net cash provided by operating activities

  82,238   85,964   70,143   40,617 
          

Investing Activities:

                

Additions to property, plant and equipment

 (7,974) (6,628) (5,474) (2,609)

Proceeds from sale of property, plant and equipment

  27   1   26  3 

Net cash used in investing activities

  (7,947)  (6,627)  (5,448)  (2,606)
          

Financing Activities:

                

Proceeds from stock options exercised

 285  111 

Repayments of loan facility

  (30,000)  -   -  (30,000)

Net cash provided by financing activities

  (29,715)  111 

Net cash used in financing activities

  -   (30,000)
          

Net Increase in Cash and Equivalents

 44,576  79,448  64,695  8,011 
          

Cash and Equivalents - Beginning of Period

  48,050   193,589   158,074   48,050 
          

Cash and Equivalents - End of Period

 $92,626  $273,037  $222,769  $56,061 
          

Other Cash Flow Information:

                

Interest paid

 $224  $93  $112  $192 

Income taxes paid

 $21,373  $31,386 

Income taxes paid (refunded)

 $1  $(79)

 

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 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 April 30, 2022.29, 2023. 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.value. Inventories at OctoberJuly 29, 20222023 were comprised of finished goods of $46.4$52.6 million and raw materials of $42.0$40.3 million. Inventories at April 30, 202229, 2023 were comprised of finished goods of $58.6$54.3 million and raw materials of $44.7$39.2 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, weretotaled $10.8 million for the three months ended July 29, 2023 and $10.3 million for the three months ended October 29, 2022 and $10.8 million for the three months ended OctoberJuly 30, 2021. Marketing costs were $20.6 million for the six months ended October 29, 2022 and $23.2 million for the six months ended October 30, 2021.

2022.

 

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 were $22.0totaled $20.9 million for the three months ended OctoberJuly 29, 20222023 and $21.7$23.6 million for the three months ended OctoberJuly 30, 2021. Shipping and handling costs were $45.6 million for the six months ended October 29, 2022 and $44.4 million for the six months ended October 30, 2021.2022. 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)

 
 

October 29,

2022

  

April 30,

2022

  

July 29,

2023

 

April 29,

2023

 

Land

 $9,835  $9,835  $9,835  $9,835 

Buildings and improvements

 67,977  65,697  70,867  70,615 

Machinery and equipment

  281,501   277,163   294,230   289,567 

Total

 359,313  352,695  374,932  370,017 

Less accumulated depreciation

  (216,151)  (208,437)  (225,632)  (221,594)

Property, plant and equipment – net

 $143,162  $144,258  $149,300  $148,423 

 

Depreciation expense was $4.6 million for three months ended July 29, 2023, and $4.5 million for the three months ended October 29, 2022 and $3.9 million for the three months ended OctoberJuly 30, 2021. Depreciation expense was $9.0 million for the six months ended October 29, 2022 and $7.8 million for the six months ended October 30, 2021.2022.

 

 

 

3. DEBT

 

At OctoberJuly 29, 2022,2023, a subsidiary of the Company maintained unsecured revolving credit facilities with banks aggregating $100 million (the “Credit Facilities”). The Credit Facilities expire from October 28, 2024 to May 30, 2025 and any borrowings would currently bear interest at 1.5%1.05% above the Secured Overnight Financing Rate (SOFR). There were no borrowings outstanding under the Credit Facilities at OctoberJuly 29, 20222023 or April 30, 2022.29, 2023. At OctoberJuly 29, 2022,2023, $2.52.2 million of the Credit Facilities was reserved for standby letters of credit and $97.5$97.8 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”). There were no borrowings outstanding under the Loan Facility at July 29, 2023 or April 29, 2023. The Loan Facility expires December 31, 2023 and any borrowings would bear interest at .95% above the adjusted daily SOFR. Since closing the Loan Facility, $50 million was borrowed and $30 million was outstanding at April 30, 2022. There were no borrowings outstanding under the Loan Facility at October 29, 2022.

 

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 Credit Facilities)credit agreements), and contain other restrictions, none of which are expected to have a material effect on our operations or financial position. At OctoberJuly 29, 2022,2023, the subsidiary was in compliance with all loan covenants.

 

9

 

4. STOCK-BASED COMPENSATION

 

During the sixthree months ended OctoberJuly 29, 2022,2023, no options to purchase shares of common stock were granted and exercised. At July 30, 2022, options to purchase 13,900536,600 shares were exercisedof common stock 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$18.97 per share were outstanding and stock-based awards to purchase 5,387,005 shares of common stock were available for grant.

 

9

 

5. DERIVATIVE FINANCIAL INSTRUMENTS

 

From time to time, we enterthe Company enters 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 cash flow hedges. Accordingly, gains or losses attributable to the effective portion of the cash flow hedge are reported in accumulated other comprehensive income (loss) (“AOCI”) and reclassified into cost of sales in the period in which the hedged transaction affects earnings. The ineffective portion of the change in fair value of our cash flow hedge was immaterial. The following summarizes the gains (losses) recognized in the Condensed Consolidated Statementsconsolidated statements of Income and AOCI: AOCI for the quarters ended July 29, 2023 and July 30, 2022:

 

 

(In thousands)

 
 

Three Months Ended

  

Six Months Ended

  

(In thousands)

 
 

2022

  

2021

  

2022

  

2021

  

2023

 

2022

 

Recognized in AOCI:

              

(Loss) gain before income taxes

 $(10,327) $221  $(25,337) $974 

Less income tax (benefit) provision

  (2,470)  53   (6,061)  233 

Loss before income taxes

 $(4,040) $(15,010)

Less income tax benefit

  (966)  (3,590)

Net

  (7,857)  168   (19,276)  741   (3,074)  (11,420)

Reclassified from AOCI to cost of sales:

              

(Loss) gain before income taxes

 (3,106) 1483  (3,714) 4,540 

Less income tax provision (benefit)

  (743)  355   (888)  1,086 

Loss before income taxes

 (3,763) (608)

Less income tax benefit

  (900)  (144)

Net

  (2,363)  1,128   (2,826)  3,454   (2,863)  (464)

Net change to AOCI

 $(5,494

)

 $(960) $(16,450

)

 $(2,713

)

 $(211) $(10,956)

 

 

As of OctoberJuly 29, 2022,2023, the notional amount of our outstanding aluminum swap contracts was $83.5$49.5 million and, assuming no change in commodity prices, $12.1$4.9 million of unrealized loss before tax will be reclassified from AOCI and recognized in earnings over the next 12 months.

 

As of OctoberJuly 29, 2022,2023, the fair value of the derivative liability was $13.0$4.9 million, which was included in accrued liabilities. At April 30, 2022,29, 2023, the fair value of the derivative assetliability was $8.8$4.6 million, which was included in prepaid and other assets.accrued liabilities. Such valuation does not entail a significant amount of judgment and the inputs that are significant to the fair value measurement are Level 2 as defined by the fair value hierarchy as they are observable market based inputs or unobservable inputs that are corroborated by market data.

 

10

 

6. LEASES

 

The Company has entered into various non-cancelable operating lease agreements for certain of our offices, buildings, and machinery and equipment which expireexpiring at various dates through January 2029.July 2035. 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 OctoberJuly 29, 20222023 and OctoberJuly 30, 20212022 was $3.7 million and $3.6$3.4 million, respectively.  Operating lease cost was $7.1 million for the six months ended October 29, 2022 and $7.3 million for the six months ended October 30, 2021. As of OctoberJuly 29, 2022,2023, the weighted-average remaining lease term and weighted average discount rate of operating leases was 4.294.40 years and 2.90%3.40%, respectively. As of April 30, 2022,29, 2023, the weighted-average remaining lease term and weighted average discount rate of operating leases was 4.04.34 years and 3.08%3.30%, respectively. Cash payments were $3.7 million and $4.0 million, respectively, for operating leases for the three months ended OctoberJuly 29, 20222023 and October 30, 2021. Cash payments were $7.1$3.4 million for the sixthree months ended October 29, 2022 and $7.6 million for the six months ended OctoberJuly 30, 2021.2022.

 

10

The following is a summary of future minimum lease payments and related liabilities for all non-cancelable operating leases as of OctoberJuly 29, 2022:2023:

 

 

(In thousands)

  

(In thousands)

 

Fiscal 2023 – Remaining two quarters

 $6,632 

Fiscal 2024

 11,435 

Fiscal 2024 – Remaining 3 quarters

 $10,061 

Fiscal 2025

 8,611  10,719 

Fiscal 2026

 6,783  8,892 

Fiscal 2027

 5,841  7,428 

Fiscal 2028

 3,522 

Thereafter

  4,125   4,519 

Total minimum lease payments including interest

 43,427  45,141 

Less: Amounts representing interest

  (2,584

)

  (3,354

)

Present value of minimum lease payments

 40,843  41,787 

Less: Current portion of lease obligations

  (12,042

)

  (11,876

)

Non-current portion of lease obligations

 $28,801  $29,911 

 

 

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.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.

 

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 beverageswaters 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, supply chain disruptions, holiday and seasonal programming changes in consumer purchasing habits and weather conditions. BeverageWhile prior years witnessed more seasonality, higher sales are seasonal with higher sales volume realized during the summer months when outdoor activities are more prevalent.

 

RESULTS OF OPERATIONS

 

Three Months Ended OctoberJuly 29, 2022 (second2023 (first quarter of fiscal 2023)2024) compared to

Three Months Ended OctoberJuly 30, 2021 (second2022 (first quarter of fiscal 2022)2023)

 

Net sales for the secondfirst quarter of fiscal 20232024 increased 5.8%1.9% to $299.6$324.2 million from $283.2$318.1 million for the secondfirst quarter of fiscal 2022.2023. The increase in sales resulted primarily from a 10.3%3.9% increase in average selling price per case withpartially offset by a 1.9% decrease in case volume. The volume declining in total by 4.1%.  Bothdeclined for Power+ Brands, and carbonated soft drinks experiencedpartially offset by increased volume declines in the quarter.of Carbonated Soft Drink brands.

 

Gross profit for the secondfirst quarter of fiscal 2023 was $100.02024 increased to $114.5 million compared to $101.5from $99.4 million for the secondfirst quarter of fiscal 2022.2023. The decreaseincrease 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.  Cost of sales per case increased 2.7%price and grossa decline in packaging and ingredient costs. Gross margin decreased to 33.4% from 35.8%was 35.3% for the secondfirst quarter of fiscal 2022; gross margin improved from2024 and 31.2% reported infor the first quarter of fiscal 2023.

 

Selling, general and administrative expenses for the secondfirst quarter of fiscal 2023 increased $3.12024 decreased $1.5 million to $53.1$51.4 million from $49.9$52.9 million for the secondfirst quarter of fiscal 2022.2023. The increasedecrease was primarily due to an increasea decrease in shipping and administrative costs partially offset by a decrease inincreased selling and marketing costs. As a percent of net sales, selling, general and administrative expenses increased slightlydecreased to 17.7%15.8% for the secondfirst quarter of fiscal 20232024 from 17.6%16.6% for the secondfirst quarter of fiscal 2022.2023.

 

Other income (expense)(income) expense - net includes interest income of $151 thousand$1.8 million for the secondfirst quarter of fiscal 20232024 and $49 thousand$24,000 for the secondfirst quarter of fiscal 2022.2023. The increase in interest income is due ato increased average invested balances and higher return on investments.yields.

 

The Company’s effective income tax rate, based upon estimated annual income tax rates, was 23.3%23.8% for the secondfirst quarter of fiscal 20232024 and 23.8%23.6% for the secondfirst quarter of fiscal 2022.2023. The difference between the effective rate and the federal statutory rate of 21% was primarily due to the effects of state income taxes.

 

Six Months Ended October 29, 2022 (first six months of fiscal 2023) compared to Six Months Ended October 30, 2021 (first six months of fiscal 2022)

Net sales for the first six months of fiscal 2023 increased 3.8% to $617.8 million from $594.9 million for the first six months of fiscal 2022. The increase in sales resulted primarily from a 10.3% increase in average selling price per case with volume declining in total by 5.8% .  Both Power+ Brands and carbonated soft drinks experienced volume declines.

Gross profit for the first six months of fiscal 2023 decreased to $199.4 million from $226.3 million for the first six months of fiscal 2022. The decline in gross profit is due to increased packaging, ingredients and labor costs 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 six months of fiscal 2023 increased $1.6 million to $106.0 million from $104.4 million for the first six months of fiscal 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 decreased to 17.2% from 17.5% for the first six months of fiscal 2022.

Other income includes interest income of $175 thousand for the first six months of fiscal 2023 and $97,000 for the first six months of fiscal 2022. The increase in interest income is due to 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 six months of fiscal 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 OctoberJuly 29, 2022,2023, we maintained $150 million unsecured revolving credit facilities, under which no borrowings were outstanding and $2.5$2.2 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 increased $44.6$64.7 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 induring the first quarter of 2023.fiscal 2024.

 

Net cash provided by operating activities for the first six monthsquarter of fiscal 2023 was $82.22024 amounted to $70.1 million compared to $86.0$40.6 million for the six monthsfirst quarter of fiscal 2022. For the first six months of fiscal 2023,2023. Net cash flow provided by operating activities for the first quarter of fiscal 2024 was principally provided by net income of $71.5$49.6 million, depreciation and amortization of $10.4$5.0 million, and amortization of operating lease right ofto use assets of $6.6$3.3 million, deferred income taxes of $3.2 million and an increase in taxes payable of $8.7 million, offset in part by changes in working capital and other accounts.

 

Net cash used in investing activities for the first six monthsquarter of fiscal 20232024 reflects capital expenditures of $8.0$5.5 million, compared to capital expenditures of $6.6$2.6 million for the first six monthsquarter of fiscal 2022.2023. Certain production capacity and efficiency improvement projects are in progress and we anticipate fiscal 20232024 capital expenditures will be comparablein the range of $25 to fiscal 2022 levels$30 million. 

 

Financial Position

At OctoberJuly 29, 2022,2023, our working capital increased to $151.0$274.6 million from $129.2$222.1 million at April 30, 2022.29, 2023. The current ratio was 2.02.8 to 1 at OctoberJuly 29, 2022 compared to 1.92023 and 2.5 to 1 at April 30, 2022.29, 2023. Trade receivables increased $6.9$2.8 million and days sales outstanding increasedimproved to 30.530.2 from 30.0.33.6. Inventories decreased $14.9$.6 million and inventory turns improved to 9.28.2 times from 8.2 times.7.9 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 April 30, 2022.29, 2023.

 

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

 

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 April 30, 2022.29, 2023.

 

ITEM 6. EXHIBITS

 

Exhibit No.Description

 

31.1

10.18NewBevCo- Fifth Amendment to Second Amended and Restated Credit Agreement
10.19NewBevCo- Fifth Amendment of Second Amended and Restated Credit Agreement
31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

31.2

31.2

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

32.1

32.1

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

32.2

32.2

Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

101

101

The following financial information from National Beverage Corp. Quarterly Report on Form 10-Q for the quarterly period ended OctoberJuly 29, 2022,2023, 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

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

 

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: September 7, 2023

Date: December 8, 2022

 

National Beverage Corp.

(Registrant)

(Registrant)

 

 

 

 

 

By:

/s/ George R. Bracken

 

 

 

George R. Bracken

 

Executive Vice President – Finance

 

 

Executive Vice President – Finance(Principal Financial Officer)

 

(Principal Financial Officer)

 

1716