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FORM 10-Q

 

 



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 October 30, 2021

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 6, 2021 was 93,322,246.

 

 

 
 

 

 

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 October 30, 2021 and May 1, 2021 3
   
Condensed Consolidated Statements of Income for the Three and Six Months Ended October 30, 2021 and October 31, 2020 4
   
Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months End October 30, 2021 and October 31, 2020 5
   
Condensed Consolidated Statements of Shareholders’ Equity for the Three and Six Months Ended October 30, 2021 and October 31, 2020 6
   
Condensed Consolidated Statements of Cash Flows for the Six Months Ended October 30, 2021 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 16
   
Item 6. Exhibits 16
   
Signature 17

                                                               

2

 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1.   FINANCIAL STATEMENTS

NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands, except share data)

 

  

October 30,

  

May 1,

 
  

2021

  

2021

 

Assets

        

Current assets:

        

Cash and equivalents

 $273,037  $193,589 

Trade receivables - net

  88,241   86,442 

Inventories

  78,789   71,480 

Prepaid and other assets

  10,417   13,431 

Total current assets

  450,484   364,942 

Property, plant and equipment - net

  129,852   131,027 

Right-of-use assets

  35,529   41,676 

Goodwill

  13,145   13,145 

Intangible assets

  1,615   1,615 

Other assets

  4,803   4,832 

Total assets

 $635,428  $557,237 
         

Liabilities and Shareholders' Equity

        

Current liabilities:

        

Accounts payable

 $90,347  $88,754 

Accrued liabilities

  35,966   43,551 

Operating lease liabilities

  13,149   14,800 

Income taxes payable

  296   89 

Total current liabilities

  139,758   147,194 

Deferred income taxes - net

  16,078   17,294 

Non-current operating lease liabilities

  24,526   28,837 

Other liabilities

  8,220   7,915 

Total liabilities

  188,582   201,240 

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; 101,696,358 shares issued (101,675,858 shares at May 1)

  1,017   1,016 

Additional paid-in capital

  38,836   38,375 

Retained earnings

  430,772   337,672 

Accumulated other comprehensive income

  304   3,017 

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

  446,846   355,997 

Total liabilities and shareholders' equity

 $635,428  $557,237 

 

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

  Six Months Ended 
  

October 30,

  

October 31,

  

October 30,

  

October 31,

 
  

2021

  

2020

  

2021

  

2020

 
                 

Net sales

 $283,158  $271,809  $594,870  $565,176 
                 

Cost of sales

  181,673   163,760   368,614   339,909 
                 

Gross profit

  101,485   108,049   226,256   225,267 
                 

Selling, general and administrative expenses

  49,924   46,459   104,367   97,006 
                 

Operating income

  51,561   61,590   121,889   128,261 
                 

Other (expense) income - net

  (7)  63   (22)  339 
                 

Income before income taxes

  51,554   61,653   121,867   128,600 
                 

Provision for income taxes

  12,270   14,489   28,767   30,272 
                 

Net income

 $39,284  $47,164  $93,100  $98,328 
                 

Earnings per common share:

                

Basic

 $.42  $.51  $1.00  $1.05 

Diluted

 $.42  $.50  $.99  $1.05 
                 

Weighted average common shares outstanding:

                

Basic

  93,321   93,276   93,310   93,262 

Diluted

  93,640   93,754   93,607   93,632 
                 
                 

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

   

Six Months Ended

 
  

October 30,

  

October 31,

  

October 30,

  

October 31,

 
  

2021

  

2020

  

2021

  

2020

 
                 

Net income

 $39,284  $47,164  $93,100  $98,328 
                 

Other comprehensive (loss) income, net of tax:

             

Cash flow hedges

  (960)  1,630   (2,713)  6,889 
                 

Comprehensive income

 $38,324  $48,794  $90,387  $105,217 

 

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

  

Six Months Ended

 
  

October 30, 2021

  

October 31, 2020

  

October 30, 2021

  

October 31, 2020

 
  

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

  101,688   1,017   101,634   1,016   101,676   1,016   101,606   1,016 

Stock options exercised

  

8

   -   30   -   20   1   58   - 

End of Period

  101,696   1,017   101,664   1,016   101,696   1,017   101,664   1,016 
                                 

Additional Paid-In Capital

                                

Beginning of period

      38,604       37,602       38,375       37,422 

Stock options exercised

      53       251       111       403 

Stock-based compensation

      179       91       350       119 

End of period

      38,836       37,944       38,836       37,944 
                                 

Retained Earnings

                                

Beginning of period

      391,488       494,566       337,672       443,402 

Net income

      39,284       47,164       93,100       98,328 

End of period

      430,772       541,730       430,772       541,730 
                                 

Accumulated Other Comprehensive Income

                                

Beginning of period

      1,264       (161)      3,017       (5,420)

Cash flow hedges, net of tax

      (960)      1,630       (2,713)      6,889 

End of period

      304       1,469       304       1,469 
                                 

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

     $446,846      $558,076      $446,846      $558,076 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

6

 
 

 

NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

 

  

Six Months Ended

 
  

October 30,

  

October 31,

 
  

2021

  

2020

 

Operating Activities:

        

Net income

 $93,100  $98,328 

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

        

Depreciation and amortization

  9,234   9,233 

Deferred income tax provision

  (363)  - 

Gain on sale of property, net

  8   - 

Stock-based compensation

  350   119 

Amortization of operating right to use assets

  6,872   6,636 

Changes in assets and liabilities:

        

Trade receivables

  (1,799)  2,060 

Inventories

  (7,309)  (5,334)

Operating lease right to use assets

  (1,594)  (4,322)

Prepaid and other assets

  510   94 

Accounts payable

  1,593   6,175 

Accrued and other liabilities

  (9,545)  (93)

Operating lease obligation

  (5,093)  (2,019)

Net cash provided by operating activities

  85,964   110,877 
         

Investing Activities:

        

Additions to property, plant and equipment

  (6,628)  (10,369)

Proceeds from sale of property, plant and equipment

  1   15 

Net cash used in investing activities

  (6,627)  (10,354)
         

Financing Activities:

        

Proceeds from stock options exercised

  111   403 

Net cash provided by financing activities

  111   403 
         

Net Increase in Cash and Equivalents

  79,448   100,926 
         

Cash and Equivalents - Beginning of Period

  193,589   304,518 
         

Cash and Equivalents - End of Period

 $273,037  $405,444 
         

Other Cash Flow Information:

        

Interest paid

 $93  $90 

Income taxes paid

 $31,386  $38,007 

 

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 principles (“GAAP”) and rules and regulations of the Securities and Exchange Commission for interim financial reporting. Accordingly, they do not include all information and notes presented in the annual consolidated financial statements. The condensed consolidated financial statements should be read in conjunction with the annual consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended May 1, 2021. The accounting policies used in these interim unaudited condensed consolidated financial statements are consistent with those used in the annual consolidated financial statements.

 

The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in the interim unaudited condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Results for the interim periods presented are not necessarily indicative of results which might be expected for the entire fiscal year.

 

Reclassification

On February 5, 2021, the Company's board of directors declared a one-for-one stock split in the form of a stock dividend. This dividend was distributed on February 19, 2021 to shareholders of record on February 16, 2021. Share information and earnings per share have been retroactively adjusted to reflect the stock split.

 

Certain reclassifications have been made to prior period balances in order to conform to the current period's presentation.

 

Inventories

Inventories are stated at the lower of first-in, first-out cost or net realizable market. Inventories at October 30, 2021 were comprised of finished goods of $44.5 million and raw materials of $34.3 million. Inventories at May 1, 2021 were comprised of finished goods of $43.3 million and raw materials of $28.2 million.

 

Accrued Liabilities

Accrued liabilities includes accrued compensation of $9.5 million and accrued container deposits of $9.1 million at October 30, 2021. 

8

 

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 $10.8 million for the three months ended October 30, 2021 and $10.0 million for the three months ended October 31, 2020. Marketing costs were $23.2 million for the six months ended October 30, 2021, and $19.9 million for the six months ended October 31, 2020.

 

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 $21.7 million for the three months ended October 30, 2021 and $18.5 million for the three months ended October 31, 2020. Shipping and handling costs were $44.4 million for the six months ended October 30, 2021 and $37.9 million for the six months ended October 31, 2020. 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)

 
  

October 30,

2021

  

May 1,

2021

 

Land

 $9,835  $9,835 

Buildings and improvements

  62,856   62,346 

Machinery and equipment

  262,865   257,119 

Total

  335,556   329,300 

Less accumulated depreciation

  (205,704)  (198,273)

Property, plant and equipment – net

 $129,852  $131,027 

 

Depreciation expense was $3.9 million for the three months ended October 30, 2021 and $3.7 million for the three months ended October 31, 2020. Depreciation expense was $7.8 million for the six months ended October 30, 2021 and $7.5 million for the six months ended October 31, 2020.

 

 

3. DEBT

 

At October 30, 2021, 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, 2022 to April 30, 2023 and any borrowings would currently bear interest at 1.0% above one-month LIBOR. There were no borrowings outstanding under the Credit Facilities at October 30, 2021 or May 1, 2021. At October 30, 2021, $2.5 million of the Credit Facilities was reserved for standby letters of credit and $97.5 million was available for borrowings.

 

9

 

The Credit Facilities require the subsidiary to maintain certain financial ratios, including debt to net worth and debt to EBITDA (as defined in the Credit Facilities), and contain other restrictions, none of which are expected to have a material effect on our operations or financial position. At October 30, 2021, we were in compliance with all loan covenants.

 

4. STOCK-BASED COMPENSATION

 

During the six months ended October 30, 2021, options to purchase 30,000 shares were granted and options to purchase 20,500 shares were exercised at weighted average exercise prices of $44.73 and $5.90, respectively. At October 30, 2021, options to purchase 570,600 shares at a weighted average exercise price of $19.47 per share were outstanding and stock-based awards to purchase 5,369,004 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. 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

  

Six Months Ended

 
  

2021

  

2020

  

2021

  

2020

 

Recognized in AOCI:

                

Gain before income taxes

 $221  $2,131  $974  $7,211 

Less income tax provision

  53   510   233   1,725 

Net

  168   1,621   741   5,486 

Reclassified from AOCI to cost of sales:

                

Gain (loss) before income taxes

  1,483   (12

)

  4,540   (1,844

)

Less income tax provision (benefit)

  355   (3

)

  1,086   (441

)

Net

  1,128   (9

)

  3,454   (1,403

)

Net change to AOCI

 $(960

)

 $1,630  $(2,713

)

 $6,889 

 

 

At May 1, 2021, the fair value of the derivative asset was $3.6 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.  There were no outstanding aluminum swap contracts at October 30, 2021.

 

10

 

 

 

6. LEASES

 

The Company has entered into various non-cancelable operating lease agreements for certain of our offices, buildings and machinery and equipment expiring at various dates through January 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 October 30, 2021 and October 31, 2020 was $3.6 million and $3.3 million, respectively. Operating lease cost was $7.3 million for the six months ended October 30, 2021 and $6.6 million for the six months ended October 31, 2020. As of October 30, 2021, the weighted-average remaining lease term and weighted average discount rate of operating leases was 4.25 years and 3.08%, respectively. As of May 1, 2021, the weighted-average remaining lease term and weighted average discount rate of operating leases was 3.06 years and 3.38%, respectively. Cash payments were $4.0 million and $3.5 million, respectively, for operating leases for the three months ended October 30, 2021 and October 31, 2020. Cash payments were $7.6 million for the six months ended October 30, 2021 and $7.0 million for the six months ended October 31, 2020.

 

The following is a summary of future minimum lease payments and related liabilities for all non-cancelable operating leases as of October 30, 2021:

 

  

(In thousands)

 

Fiscal 2022 – Remaining 2 quarters

 $7,962 

Fiscal 2023

  10,548 

Fiscal 2024

  8,230 

Fiscal 2025

  5,289 

Fiscal 2026

  3,339 

Thereafter

  4,720 

Total minimum lease payments including interest

  40,088 

Less: Amounts representing interest

  (2,413

)

Present value of minimum lease payments

  37,675 

Less: Current portion of lease obligations

  (13,149

)

Non-current portion of lease obligations

 $24,526 

 

 

 

7.  SUBSEQUENT EVENTS 

 

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 cash dividend expected to approximate $280 million, will be paid on or before February 11, 2022.

 

 

 

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.

 

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Our strategy seeks the profitable growth of our products by (i) developing healthier beverages in response to the global shift in consumer buying habits and tailoring our beverage portfolio to the preferences of a diverse mix of ‘crossover consumers’ – a growing group desiring a healthier alternative to artificially sweetened and high-caloric beverages; (ii) emphasizing unique flavor development and variety throughout our brands that appeal to multiple demographic groups; (iii) maintaining points of difference through innovative marketing, packaging and consumer engagement and (iv) responding faster and more creatively to changing consumer trends than larger competitors who are burdened by legacy production and distribution complexity and costs.

 

The majority of our brands are geared to the active and health-conscious consumer including sparkling waters, energy drinks, and juices. Our portfolio of Power+ Brands includes LaCroix®, LaCroix Cúrate®, and LaCroix NiCola® sparkling water products; Clear Fruit® non-carbonated water beverages enhanced with fruit flavor; Rip It® energy drinks and shots; and Everfresh®, Everfresh Premier Varietals™ and Mr. Pure® 100% juice and juice-based products. Additionally, we produce and distribute carbonated soft drinks including Shasta® and Faygo®, iconic brands whose consumer loyalty spans more than 130 years.

 

Presently, our primary market focus is the United States and Canada. Certain of our products are also distributed on a limited basis in other countries and options to expand distribution to other regions are being considered. To service a diverse customer base that includes numerous national retailers, as well as thousands of smaller “up-and-down-the-street” accounts, we utilize a hybrid distribution system consisting of warehouse and direct-store delivery. The warehouse delivery system allows our retail partners to further maximize their assets by utilizing their ability to pick up product at our warehouses, further lowering their/our product costs.

 

Our operating results are affected by numerous factors, including fluctuations in the costs of raw materials, holiday and seasonal programming, changes in consumer purchasing habits and weather conditions. Beverage sales are seasonal with higher sales volume realized during the summer months when outdoor activities are more prevalent.

 

RESULTS OF OPERATIONS

 

Three Months Ended October 30, 2021 (second quarter of fiscal 2022) compared to

Three Months Ended October 31, 2020 (second quarter of fiscal 2021)

 

Net sales for the second quarter of fiscal 2022 increased 4.2% to $283.2 million from $271.8 million for the second quarter of fiscal 2021. The increase in sales resulted primarily from a 4.0% increase in average selling price per case and a modest increase in case volume, primarily Power+ Brands.

 

Gross profit for the second quarter of fiscal 2022 decreased to $101.5 million from $108.0 million for the second quarter of fiscal 2021. The decrease in gross profit is due to increased packaging, ingredients and freight costs along with supply chain disruptions, which adversely affected manufacturing efficiencies.  These cost increases were partially offset by the increase in average selling price.  The cost of sales per case increased 10.9% and gross margin decreased to 35.8% from 39.8% for the second quarter of fiscal 2022.

 

Selling, general and administrative expenses for the second quarter of fiscal 2022 increased $3.5 million to $49.9 million from $46.5 million for the second quarter of fiscal 2021. The increase was primarily due to an increase in shipping and marketing costs partially offset by a decrease in administrative costs. As a percent of net sales, selling, general and administrative expenses increased to 17.6%  for the second quarter of fiscal 2022 from 17.1% for the second quarter of fiscal 2021.

 

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Other income (expense) includes interest income of $49,000 for the second quarter of fiscal 2022 and $112,000 for the second quarter of fiscal 2021. The decrease in interest income is due to changes in average invested balances and lower return on investments.

 

The Company’s effective income tax rate, based upon estimated annual income tax rates, was 23.8% for the second quarter of fiscal 2022 and 23.5% for the second quarter of fiscal 2021. The difference between the effective rate and the federal statutory rate of 21% was primarily due to the effects of state income taxes.

 

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

Six Months Ended October 31, 2020 (first six months of fiscal 2021)

 

Net sales for the first six months of fiscal 2022 increased 5.3% to $594.9 million from $565.2 million for the first six months of fiscal 2021. The increase in sales resulted primarily from a 4.3% increase in average selling price per case and a modest increase in case volume. The volume increase includes a 3.3% increase in Power+ Brands offset by a decline in carbonated soft drinks.  

 

Gross profit for the first six months of fiscal 2022 increased to $226.3 million from $225.3 million for the first six months of fiscal 2021. The increase in gross profit is due to increased average selling price offset in part by increased packaging, ingredients and labor costs.  The cost of sales per case increased 8.4% and gross margin decreased to 38% from 39.9% for the first six months of fiscal 2022.

 

Selling, general and administrative expenses for the first six months of fiscal 2022 increased $7.4 million to $104.4 million from $97.0 million for the first six months of fiscal 2021. The increase was primarily due to an increase in shipping and marketing costs partially offset by a decrease in administrative costs.  As a percent of net sales, selling, general and administrative expenses increased to 17.5% from 17.2% for the first six months of fiscal 2022.

 

Other income includes interest income of $97,000 for the first six months of fiscal 2022 and $397,000 for the first six months of fiscal 2021. The decrease in interest income is due to changes in average invested balances and lower return on investments.

 

The Company’s effective income tax rate, based upon estimated annual income tax rates, was 23.6% for the first six months of fiscal 2022 and 23.5% for the first six months of fiscal 2021. The difference between the effective rate and the federal statutory rate of 21% was primarily due to the effects of state income taxes.

 

 

 

LIQUIDITY AND FINANCIAL CONDITION

 

Liquidity and Capital Resources

Our principal source of funds is cash generated from operations. At October 30, 2021, we maintained $100 million unsecured revolving credit facilities, under which no borrowings were outstanding and $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.

 

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 cash dividend, expected to approximate $280 million, will be paid on or before February 11, 2022.

 

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Cash Flows

The Company’s cash position increased $79.4 million for the first six months of fiscal 2022; compared to an increase of $100.9 million for the first six months of fiscal 2021.

 

Net cash provided by operating activities for the first six months of fiscal 2022 was $86.0 million compared to $110.9 million for the six months of fiscal 2021. For the first six months of fiscal 2022, cash flow was principally provided by net income of $93.1 million, depreciation and amortization of $9.2 million, and amortization of operating right of use assets of $6.9 million, offset in part by increases in working capital other than cash.

 

Net cash used in investing activities for the first six months of fiscal 2022 reflects capital expenditures of $6.6 million, compared to capital expenditures of $10.4 million for the first six months of fiscal 2021. We intend to continue production capacity and efficiency improvement projects for the balance of fiscal 2022, and expect capital expenditures to be comparable to total fiscal 2021 levels.

 

Financial Position

At October 30, 2021, our working capital increased to $310.7 million from $217.7 million at May 1, 2021. The current ratio was 3.2 to 1 at October 30, 2021 compared to 2.5 to 1 at May 1, 2021. Trade receivables increased $1.8 million and days sales outstanding improved to 28.4 from 30.1. Inventories increased $7.3 million and inventory turns decreased to 9.2 times from 9.6 times.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

There have been no material changes in market risks from those reported in our Annual Report on Form 10-K for the fiscal year ended May 1, 2021.

 

ITEM 4. CONTROLS AND PROCEDURES

 

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of the Company’s management, including our Chief Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective to ensure information required to be disclosed by us in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (2) accumulated and communicated to our management, including our Chief Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosure.

 

There were no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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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.

 

ITEM 6. EXHIBITS

 

Exhibit No.

 

D1escription

     

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 October 26, 2019, 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: December 9, 2021

 

National Beverage Corp. 

 

  (Registrant)  

 

 

 

 

 

By:

/s/ George R. Bracken

 

 

 

George R. Bracken 

 

 

 

Executive Vice President – Finance 

 

    (Principal Financial Officer)  

 

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