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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 January 28, 2023

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 and post 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 6, 2023 was 93,352,946.

 

 
Table of Contents
 

 

 

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 January 28, 2023 and April 30, 2022 3
     
 

Condensed Consolidated Statements of Income for the Three and Nine Months Ended January 28, 2023 and January 29, 2022

 4
     
 

Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended January 28, 2023 and January 29, 2022

 5
     
 

Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended January 28, 2023 and January 29, 2022

 6
     
 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended January 28, 2023 and January 29, 2022

 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 about Market Risk 14
     
Item 4. Controls and Procedures 14
     
PART II - OTHER INFORMATION
     
Item 1A. Risk Factors 15
     
Item 6. Exhibits 15
     
Signature 16

 

2
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Table of Contents
 

 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1.   FINANCIAL STATEMENTS

NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands, except share data)

        
  

January 28,

  

April 30,

 
  

2023

  

2022

 

Assets

        

Current assets:

        

Cash and equivalents

 $118,324  $48,050 

Trade receivables - net

  97,104   93,592 

Inventories

  93,591   103,318 

Prepaid and other assets

  14,899   29,560 

Total current assets

  323,918   274,520 

Property, plant and equipment - net

  142,968   144,258 

Right-of-use assets

  38,844   29,251 

Goodwill

  13,145   13,145 

Intangible assets

  1,615   1,615 

Other assets

  5,904   5,015 

Total assets

 $526,394  $467,804 
         

Liabilities and Shareholders' Equity

        

Current liabilities:

        

Accounts payable

 $68,988  $95,299 

Accrued liabilities

  44,175   39,090 

Short-term lease obligations

  11,892   10,543 

Income taxes payable

  467   387 

Total current liabilities

  125,522   145,319 

Long-term debt

  -   30,000 

Deferred income taxes - net

  24,589   23,823 

Long-term lease obligations

  28,987   20,703 

Other liabilities

  7,792   8,521 

Total liabilities

  186,890   228,366 

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; 101,727,058 shares issued (101,712,358 shares at April 30)

  1,017   1,017 

Additional paid-in capital

  40,204   39,405 

Retained earnings

  322,042   216,181 

Accumulated other comprehensive income

  324   6,918 

Treasury stock - at cost:

        

Series C preferred stock - 150,000 shares

  (5,100)  (5,100)

Common stock - 8,374,112 shares

  (19,133)  (19,133)

Total shareholders' equity

  339,504   239,438 

Total liabilities and shareholders' equity

 $526,394  $467,804 

  

See accompanying Notes to Condensed Consolidated Financial Statements.        

 

3
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NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(In thousands, except per share amounts)

                                
                                 
     

Three Months Ended

      

Nine Months Ended

  
   

January 28,

    

January 29,

    

January 28,

    

January 29,

  
   

2023

    

2022

    

2023

    

2022

  
                                 

Net sales

   $ 268,483     $ 258,923     $ 886,233     $ 853,793  
                                 

Cost of sales

     173,561       165,124       591,914       533,738  
                                 

Gross profit

     94,922       93,799       294,319       320,055  
                                 

Selling, general and administrative expenses

     50,488       53,103       156,484       157,470  
                                 

Operating income

     44,434       40,696       137,835       162,585  
                                 

Other income (expense)- net

     482       (81 )     484       (103 )
                                 

Income before income taxes

     44,916       40,615       138,319       162,482  
                                 

Provision for income taxes

     10,555       9,547       32,458       38,314  
                                 

Net income

   $ 34,361     $ 31,068     $ 105,861     $ 124,168  
                                 

Earnings per common share:

                                

Basic

   $ .37     $ .33     $ 1.13     $ 1.33  

Diluted

   $ .37     $ .33     $ 1.13     $ 1.33  
                                 

Weighted average common shares outstanding:

                                

Basic

     93,353       93,329       93,345       93,319  

Diluted

     93,611       93,611       93,604       93,608  

 

See accompanying Notes to Condensed Consolidated Financial Statements.                

 

4
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NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(In thousands)

                                
                                 
     

 Three Months Ended

      

Nine Months Ended

  
   

January 28,

    

January 29,

    

January 28,

    

January 29,

  
   

2023

    

2022

    

2023

    

2022

  
                                 

Net income

   $ 34,361     $ 31,068     $ 105,861     $ 124,168  
                                 

Other comprehensive income (loss), net of tax:

                          

Cash flow hedges

     9,856       7,984       (6,594 )     5,271  
                                 

Comprehensive income

   $ 44,217     $ 39,052     $ 99,267     $ 129,439  

  

See accompanying Notes to Condensed Consolidated Financial Statements.                

 

5
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NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)

(In thousands)

                                                                
   

Three Months Ended

    

Nine Months Ended

  
   

January 28, 2023

    

January 29, 2022

    

January 28, 2023

    

January 29, 2022

  
   

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  
                                                                 

Common Stock

                                                                

Beginning of period

     101,726       1,017       101,696       1,017       101,712       1,017       101,676       1,016  

Stock options exercised

     1       -       13       -       15             33       1  

End of Period

     101,727       1,017       101,709       1,017       101,727       1,017       101,709       1,017  
                                                                 

Additional Paid-In Capital

                                                                

Beginning of period

             40,032               38,836               39,405               38,375  

Stock options exercised

             7               181               292               292  

Stock-based compensation

             165               174               507               524  

End of period

             40,204               39,191               40,204               39,191  
                                                                 

Retained Earnings

                                                                

Beginning of period

             287,681               430,772               216,181               337,672  

Net income

             34,361               31,068               105,861               124,168  

Common stock cash dividend

             -               (280,003 )             -               (280,003 )

End of period

             322,042               181,837               322,042               181,837  
                                                                 

Accumulated Other Comprehensive Income

                                                                

Beginning of period

             (9,532 )             304               6,918               3,017  

Cash flow hedges, net of tax

             9,856               7,984               (6,594 )             5,271  

End of period

             324               8,288               324               8,288  
                                                                 

Treasury Stock - Series C Preferred

                                                                

Beginning and end of period

     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 )
                                                                 

Total Shareholders' Equity

           $ 339,504             $ 206,250             $ 339,504             $ 206,250  

  

See accompanying Notes to Condensed Consolidated Financial Statements.                                                

 

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NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

        
   

 Nine Months Ended

 
  

January 28,

  

January 29,

 
  

2023

  

2022

 

Operating Activities:

        

Net income

 $105,861  $124,168 

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

        

Depreciation and amortization

  15,552   13,711 

Deferred income tax provision (benefit)

  3,266   (283)

Loss on sale of property, net

  20   11 

Stock-based compensation

  507   524 

Amortization of operating right of use assets

  9,946   10,117 

Changes in assets and liabilities:

        

Trade receivables

  (3,512)  4,270 

Inventories

  9,727   (17,199)

Operating lease right of use assets

  (19,539)  (5,827)

Prepaid and other assets

  1,832   (4,730)

Accounts payable

  (26,311)  (20,236)

Accrued and other liabilities

  5,271   (7,724)

Operating lease liabilities

  9,633   (4,250)

Net cash provided by operating activities

  112,253   92,552 
         

Investing Activities:

        

Additions to property, plant and equipment

  (12,282)  (16,059)

Proceeds from sale of property, plant and equipment

  11   1 

Net cash used in investing activities

  (12,271)  (16,058)
         

Financing Activities:

        

(Repayments) borrowings under Loan Facility

  (30,000)  50,000 

Proceeds from stock options exercised

  292   292 

Dividend paid

  -   (280,003)

Net cash used in financing activities

  (29,708)  (229,711)
         

Net Increase (Decrease) in Cash and Equivalents

  70,274   (153,217)
         

Cash and Equivalents - Beginning of Period

  48,050   193,589 
         

Cash and Equivalents - End of Period

 $118,324  $40,372 
         

Other Cash Flow Information:

        

Interest paid

 $291  $189 

Income taxes paid

 $27,411  $42,401 

  

See accompanying Notes to Condensed Consolidated Financial Statements.        

 

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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 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 January 28, 2023 were comprised of finished goods of $50.9 million and raw materials of $42.7 million. Inventories at April 30, 2022 were comprised of finished goods of $58.6 million and raw materials of $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, were $10.4 million for the three months ended January 28, 2023 and $12.9 million for the three months ended January 29, 2022. Marketing costs were $31.0 million for the nine months ended January 28, 2023, and $36.0 million for the nine months ended January 29, 2022.

 

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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 $20.2 million for the three months ended January 28, 2023 and $21.1 million for the three months ended January 29, 2022. Shipping and handling costs were $65.8 million for the nine months ended January 28, 2023 and $65.5 million for the nine months ended January 29, 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)

 
  January 28,  April 30, 
  

2023

  

2022

 

Land

 $9,835  $9,835 

Buildings and improvements

  70,076   65,697 

Machinery and equipment

  283,352   277,163 

Total

  363,263   352,695 

Less accumulated depreciation

  (220,295)  (208,437)

Property, plant and equipment – net

 $142,968  $144,258 

 

Depreciation expense was $4.5 million and $13.5 million for the three and nine months ended January 28, 2023, respectively, and $3.8 million and $11.6 million for the three and nine months ended January 29, 2022, respectively.

 

 

3. DEBT

 

At January 28, 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% above the Secured Overnight Financing Rate (SOFR). There were no borrowings outstanding under the Credit Facilities at January 28, 2023 or April 30, 2022. At January 28, 2023, $2.2 million of the Credit Facilities was reserved for standby letters of credit and $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 “Loan Facility”). The Loan Facility expires December 31, 2023 and borrowings 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 January 28, 2023.

 

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 loan agreements), and contain other restrictions, none of which are expected to have a material effect on our operations or financial position. At January 28, 2023, the subsidiary was in compliance with all loan covenants.

 

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4. STOCK-BASED COMPENSATION

 

During the nine months ended January 28, 2023, options to purchase 14,700 shares were exercised at weighted average exercise prices of $19.83. At January 28, 2023, options to purchase 521,900 shares of common stock at a weighted average exercise price of $18.94 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 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)

 
  

Three Months Ended

  

Nine Months Ended

 
  

2023

  

2022

  

2023

  

2022

 

Recognized in AOCI:

                

Gain (loss) before income taxes

 $10,918  $11,007  $(14,419) $11,980 

Less income tax provision

  2,612   2,633   (3,449)  2,866 

Net

 $8,306  $8,374  $(10,970) $9,114 

Reclassified from AOCI to cost of sales:

                

(Loss) gain before income taxes

 $(2,036) $512  $(5,750) $5,052 

Less income tax (benefit) provision

  (486)  122   (1,374)  ,1,209 

Net

 $(1,550) $390  $(4,376) $3,843 

Net change to AOCI

 $9,856  $7,984  $(6,594) $5,271 

 

As of January 28, 2023, the notional amount of our outstanding aluminum swap contracts was $61.0 million and, assuming no change in commodity prices, $395,000 of unrealized gain before tax will be reclassified from AOCI and recognized in earnings over the next 12 months.

 

As of January 28, 2023, the fair value of the derivative asset was $1.2 million, which was included in prepaid and other assets and the fair value of the derivative liability was $1.6 million, which was included in accrued liabilities.  At April 30, 2022, the fair value of the derivative asset was $8.8 million, which was included in prepaid and other assets.  Such valuation does not entail a significant amount of judgment as the significant inputs to the fair value measurement are Level 2 as defined by the fair value hierarchy in that 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 for certain offices, buildings, machinery and equipment which expire 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 28, 2023 and January 29, 2022 was $3.6 million and $3.5 million, respectively. Operating lease cost was $10.7 million for the nine months ended January 28, 2023 and $11.1 million for the nine months ended January 29, 2022. As of January 28, 2023, the weighted-average remaining lease term and weighted average discount rate of operating leases was 4.4 years and 3.03%, respectively. As of April 30, 2022, the weighted-average remaining lease term and weighted average discount rate of operating leases was 4.0 years and 3.08%, respectively. Cash payments were $3.7 million for operating leases for the three months ended January 28, 2023 and January 29, 2022. Cash payments totaled $10.8 million for the nine months ended January 28, 2023 and $11.3 million for the nine months ended January 29, 2022.

 

The following is a summary of future minimum lease payments and related liabilities for all non-cancelable operating leases as of January 28, 2023:

 

  

(In thousands)

 

Fiscal 2023 (remainder)

 $3,284 

Fiscal 2024

  12,054 

Fiscal 2025

  9,118 

Fiscal 2026

  7,290 

Fiscal 2027

  6,347 

Thereafter

  5,631 

Total minimum lease payments including interest

  43,724 

Less: Amounts representing interest

  (2,845

)

Present value of minimum lease payments

  40,879 

Less: Current portion of lease liabilities

  (11,892

)

Non-current portion of lease liabilities

 $28,987 

 

 

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.

 

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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 January 28, 2023 (third quarter of fiscal 2023) compared to

Three Months Ended January 29, 2022 (third quarter of fiscal 2022)

 

Net sales for the third quarter of fiscal 2023 increased 3.7% to $268.5 million from $258.9 million for the third quarter of fiscal 2022. The increase in sales resulted primarily from a 6.9% increase in average selling price per case, partially offset by a 3.0% decline in case volume primarily due to reduced carbonated soft drink volume.

 

Gross profit for the third quarter of fiscal 2023 increased to $94.9 million from $93.8 million for the third quarter of fiscal 2022. The increase in gross profit is due to the increase in average selling price, partially offset by increased packaging and ingredient costs.  The cost of sales per case increased 8.4% and gross margin decreased to 35.4% from 36.2% for the third quarter of fiscal 2022.  Although costs per case remain elevated, the third quarter of 2023 is the second consecutive quarter of declining costs per case.

 

Selling, general and administrative expenses for the third quarter of fiscal 2023 decreased $2.6 million to $50.5 million from $53.1 million for the third quarter of fiscal 2022. The decrease was primarily due to a decrease in marketing and shipping costs.  The decline in marketing costs was primarily due to reduced programs with retail partners.  As a percent of net sales, selling, general and administrative expenses decreased to 18.8% from 20.5% for the third quarter of fiscal 2022.

 

Other income (expense), net includes interest income of $369,000 for the third quarter of fiscal 2023 and $39,000 for the third quarter of fiscal 2022. The increase in interest income is due to a higher return on lower average investment balances.

 

The Company’s effective income tax rate, based upon estimated annual income tax rates, was 23.5% for the third quarter of fiscal 2023 and 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.

 

 

Nine Months Ended January 28, 2023 (first nine months of fiscal 2023) compared to

Nine Months Ended January 29, 2022 (first nine months of fiscal 2022)

 

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Net sales for the first nine months of fiscal 2023 increased 3.8% to $886.2 million from $853.8 million for the first nine months of fiscal 2022. The increase in sales resulted primarily from a 9.3% increase in average selling price per case and a 5.0% decline in case volumes which impacted both Power+ Brands and carbonated soft drinks.

 

Gross profit for the first nine months of fiscal 2023 decreased to $294.3 million from $320.1 million for the first nine months of fiscal 2022. The cost of sales per case increased 16.7% and gross margin decreased to 33.2% from 37.5% for the first nine months of fiscal 2022. The decrease in gross margin is due to increased packaging, ingredients and labor costs offset in part by increased average selling prices.

 

Selling, general and administrative expenses for the first nine months of fiscal 2023 decreased $986,000 to $156.5 million from $157.5 million for the first nine months of fiscal 2022. The decrease was primarily due to decreased marketing costs, partially offset by increased shipping and administrative costs.  The decline in marketing costs was primarily due to reduced programs with retail partners.  As a percent of net sales, selling, general and administrative expenses increased to 17.7% from 18.4% for the first nine months of fiscal 2022.

 

Other income (expense), net includes interest income of $544,000 for the first nine months of fiscal 2023 and $136,000 for the first nine months of fiscal 2022. The increase in interest income is due to a higher return on lower average investment balances.

 

The Company’s effective income tax rate, based upon estimated annual income tax rates, was 23.5% for the first nine months of fiscal 2023 and 23.6% for the first nine 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 January 28, 2023, we maintained $150 million unsecured revolving credit facilities, under which no borrowings were outstanding and $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 $70.3 million for the nine months of fiscal 2023 compared to a decrease of $153.2 million for the nine months of fiscal 2022.

 

Net cash provided by operating activities for the first nine months of fiscal 2023 amounted to $112.3 million compared to $92.6 million for the nine months of fiscal 2022. Net cash provided by operating activities for the first nine months of fiscal 2023 was principally provided by net income of $105.9 million, depreciation and amortization of $15.6 million, and amortization of operating right of use assets of $9.9 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 2023 reflects capital expenditures of $12.3 million, compared to capital expenditures of $16.1 million for the first nine months of fiscal 2022. We intend to continue production capacity and efficiency improvement projects, and expect fiscal 2023 capital expenditures to be lower than fiscal 2022 levels.

 

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Financial Position

At January 28, 2023, our working capital increased to $198.4 million compared to $129.2 million at April 30, 2022. The current ratio was 2.6 to 1 at January 28, 2023 compared to 1.9 to 1 at April 30, 2022. Trade receivables increased $3.5 million and days sales outstanding increased to 32.9 from 30.0. Inventories decreased $9.7 million and inventory turns improved to 8.5 times from 8.2 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 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.

 

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 April 30, 2022.

 

ITEM 6. EXHIBITS

 

Exhibit No.   Description
     
10.18   NewBevCo- Fifth Amendment to Second Amended and Restated Credit Agreement(1)
     
10.19   NewBevCo- Fifth Amendment of Second Amended and Restated Credit Agreement(1)
     
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 28, 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   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

             

(1)

Previously filed with the Securities and Exchange Commission as an exhibit to Quarterly Report on Form 10-Q for the fiscal period ended dated October 29, 2022 and is incorporated herein by reference.

 

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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 9, 2023

 

 

National Beverage Corp.

(Registrant)
       
  By: /s/ George R. Bracken
      George R. Bracken
      Executive Vice President – Finance
      (Principal Financial Officer)

 

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