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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1999
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)
DELAWARE 59-2605822
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One North University Drive, Ft. Lauderdale, Fl 33324
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(Address of principal executive offices) (Zip Code)
(954) 581-0922
(Registrant's telephone number, including area code)
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 (X) No ( )
The number of shares of Registrant's common stock outstanding as of September 9,
1999 was 18,383,618.
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NATIONAL BEVERAGE CORP.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JULY 31, 1999
INDEX
PART I - FINANCIAL INFORMATION
Page
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Item 1. Financial Statements
Condensed Consolidated Balance Sheets
as of July 31, 1999 and May 1, 1999 ............................................ 3
Condensed Consolidated Statements of Income for the three months ended
July 31, 1999 and August 1, 1998 ............................................... 4
Condensed Consolidated Statements of Cash Flows for the three months ended
July 31, 1999 and August 1, 1998 ............................................... 5
Notes to Condensed Consolidated Financial Statements ........................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations .............................. 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk ................. 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings .......................................................... 13
Item 6. Exhibits and Reports on Form 8-K ........................................... 13
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NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JULY 31, 1999 AND MAY 1, 1999
(In thousands, except share amounts)
- -------------------------------------------------------------------------------
(Unaudited)
July 31, May 1,
1999 1999
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ASSETS
Current assets:
Cash and equivalents $ 32,682 $ 37,480
Trade receivables - net of allowances of $558 (July 31, 1999)
and $671 (May 1, 1999) 38,992 34,595
Inventories 30,679 25,207
Deferred income taxes 2,281 1,985
Prepaid and other 4,887 4,878
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Total current assets 109,521 104,145
Property - net 59,846 56,103
Intangible assets - net 16,280 14,475
Other assets 6,177 5,681
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$ 191,824 $ 180,404
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 30,658 $ 30,226
Accrued liabilities 17,746 14,994
Income taxes payable 3,897 1,421
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Total current liabilities 52,301 46,641
Long-term debt 39,267 40,267
Deferred income taxes 8,758 8,344
Other liabilities 3,149 3,147
Commitments and contingencies
Shareholders' equity:
Preferred stock, 7% cumulative, $1 par value, aggregate liquidation
preference of $15,000 - 1,000,000 shares authorized; 150,000
shares issued; no shares outstanding 150 150
Common stock, $.01 par value - authorized 50,000,000 shares; issued
22,068,712 shares (22,062,012 shares at May 1, 1999) 221 221
Additional paid-in capital 15,337 15,304
Retained earnings 87,753 81,142
Treasury stock - at cost:
Preferred stock - 150,000 shares (5,100) (5,100)
Common stock - 3,706,254 shares (3,673,054 shares at May 1, 1999) (10,012) (9,712)
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Total shareholders' equity 88,349 82,005
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$ 191,824 $ 180,404
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See accompanying Notes to Condensed Consolidated Financial Statements.
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NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JULY 31, 1999 AND AUGUST 1, 1998
(In thousands, except per share amounts)
- --------------------------------------------------------------------------------
(Unaudited)
Three Months Ended
1999 1998
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Net sales $130,085 $121,906
Cost of sales 86,570 79,966
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Gross profit 43,515 41,940
Selling, general and administrative expenses 32,494 31,251
Interest expense 704 924
Other income - net 261 371
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Income before income taxes 10,578 10,136
Provision for income taxes 3,967 3,791
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Net income $ 6,611 $ 6,345
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Net income per share -
Basic $ .35 $ .34
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Diluted $ .34 $ .33
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Average common shares outstanding -
Basic 18,464 18,497
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Diluted 19,210 19,343
======== ========
See accompanying Notes to Condensed Consolidated Financial Statements.
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NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JULY 31, 1999 AND AUGUST 1, 1998
(In thousands)
- --------------------------------------------------------------------------------
(Unaudited)
1999 1998
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OPERATING ACTIVITIES:
Net income $ 6,611 $ 6,345
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,778 2,347
Deferred income tax provision 118 29
Loss on sale of property -- 4
Changes in:
Trade receivables (565) (1,764)
Inventories (2,962) (1,222)
Prepaid and other assets (1,137) (1,611)
Accounts payable (3,832) (12,892)
Other liabilities, net 2,193 660
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Net cash provided by (used in) operating activities 3,204 (8,104)
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INVESTING ACTIVITIES:
Property additions (1,521) (1,005)
Acquisition (5,200) --
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Net cash used in investing activities (6,721) (1,005)
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FINANCING ACTIVITIES:
Debt borrowings 6,000 --
Debt repayments (7,000) (46)
Repurchase of common stock (300) --
Proceeds from stock options exercised 19 6
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Net cash used in financing activities (1,281) (40)
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NET DECREASE IN CASH AND EQUIVALENTS (4,798) (9,149)
CASH AND EQUIVALENTS - BEGINNING OF YEAR 37,480 40,447
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CASH AND EQUIVALENTS - END OF PERIOD $ 32,682 $ 31,298
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OTHER CASH FLOW INFORMATION:
Interest paid $ 816 $ 312
Income taxes paid 1,382 2,511
See accompanying Notes to Condensed Consolidated Financial Statements.
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NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
National Beverage Corp. and its subsidiaries (the "Company") have been prepared
in accordance with generally accepted accounting principles for interim
financial information. The financial statements do not include all information
and notes required by generally accepted accounting principles for complete
financial statements. Except for the matters disclosed, however, there has been
no material change in the information disclosed in the notes to consolidated
financial statements for the fiscal year ended May 1, 1999. In the opinion of
management, all adjustments (consisting of normal recurring accruals) 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. Certain prior year amounts have been
reclassified to conform to the current year presentation.
2. INVENTORIES
Inventories are stated at the lower of first-in, first-out cost or market.
Inventories at July 31, 1999 are comprised of finished goods of $14,990,000 and
raw materials of $15,689,000. Inventories at May 1, 1999 are comprised of
finished goods of $11,904,000 and raw materials of $13,303,000.
3. PROPERTY
Property consists of the following:
(In thousands)
July 31, May 1,
1999 1999
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Land $ 10,255 $ 8,897
Buildings and improvements 33,491 32,047
Machinery and equipment 85,728 82,972
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Total 129,474 123,916
Less accumulated depreciation (69,628) (67,813)
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Property - net $ 59,846 $ 56,103
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Depreciation expense was $1,813,000 and $1,561,000 for the three month periods
ended July 31, 1999 and August 1, 1998, respectively.
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4. DEBT
Debt consists of the following: (In thousands)
July 31, May 1,
1999 1999
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Senior Notes $16,667 $16,667
Credit Facilities 2,000 7,000
Term Loan Facilities 20,600 16,600
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Total $39,267 $40,267
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A subsidiary of National Beverage Corp. has outstanding 9.95% unsecured senior
notes in the original principal amount of $50 million (the "Senior Notes")
payable in annual principal installments of $8.3 million through November 1,
2000. Additionally, two subsidiaries have three unsecured revolving credit
facilities aggregating $48 million (the "Credit Facilities") and two unsecured
term loan facilities ("Term Loan Facilities") with banks. The Credit Facilities
expire through December 9, 2000 and bear interest at 1/2% below or equal to the
bank's reference rate or 1% above LIBOR, at the subsidiary's election. The Term
Loan Facilities are repayable in installments through July 31, 2004, and bear
interest at the bank's reference rate or 1 1/4% above LIBOR, at the
subsidiaries' election. The Company intends to utilize its existing long-term
credit facilities to fund the next principal payment due on its Senior Notes and
Term Loan Facilities.
Certain of the Company's debt agreements contain restrictions which require the
affected subsidiaries to maintain certain financial ratios and minimum net
worth, and limit the subsidiaries with respect to incurring additional
indebtedness, paying cash dividends and making certain loans, advances or other
investments. At July 31, 1999, net assets of the subsidiaries totaling
approximately $59 million were restricted from distribution. The Company was in
compliance with all loan covenants and restrictions and such restrictions are
not expected to have a material adverse impact on the operations of the Company.
5. COMMITMENTS AND CONTINGENCIES
The Company is a defendant in various lawsuits arising in the ordinary course of
business. In the opinion of management, the ultimate disposition of these
lawsuits will not have a material adverse effect on the Company's consolidated
financial position or results of operations.
As previously reported, in July 1999, counsel for the plaintiff and all the
defendants entered into a Memorandum of Understanding that sets forth proposed
settlement terms for the actions Albert H. Kahn v. Burnup & Sims Inc., et. al,
Civil Actions 11890 and 13248 filed in Delaware Chancery Court. The proposed
settlement, which is subject to court approval, will not have a material adverse
effect on the Company. Reference is made to the Company's prior public filings
for a description of the claims in these litigations.
In the ordinary course of its business, the Company enters into commitments for
the supply of certain raw materials, none of which are material to the Company's
financial position.
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6. CAPITAL STOCK
During the three months ended July 31, 1999, options for 6,700 shares were
exercised at prices ranging from $2.09 to $5.00 per share. At July 31, 1999,
options to purchase 1,184,576 shares at a weighted average exercise price of
$3.29 (ranging from $.13 to $13.50 per share) were outstanding and stock-based
awards to purchase 572,164 shares of common stock were available for grant.
During the three months ended July 31, 1999, the Company purchased 33,200 shares
of its common stock. Such shares are classified as treasury stock.
7. ACQUISITION
In May 1999, the Company acquired the operations and certain assets of Home
Juice, a Chicago-based producer and distributor of premium juice and juice
products. The assets acquired included a manufacturing facility, receivables,
inventory, and the Mr. Pure and Home Juice trademarks. The acquisition of such
assets has been accounted for using the purchase method of accounting and,
accordingly, the purchase price has been preliminarily allocated to the assets
acquired based upon their estimated fair values at the date of acquisition.
Operating results of the acquired business, which have been included in the
consolidated statement of income from the date of acquisition, do not materially
impact results for the periods presented.
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PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
National Beverage Corp. (the "Company") is a holding company for various
subsidiaries that develop, manufacture, market and distribute a complete
portfolio of quality beverage products throughout the United States. The
Company's proprietary brands include Shasta(R), Faygo(R), And Big Shot(R),
complete lines of multi-flavored and cola soft drinks. In addition, the Company
offers an assortment of premium "good-for-you" beverages geared toward the
health-conscious consumer, including Everfresh(R), Home Juice(R) and Mr. Pure(R)
100% juice and juice-based products; LaCROIX(R), Mt. Shasta(TM) and
ClearFruit(R) flavored and spring water products. The Company also produces
specialty products, including Spree(R), an all natural soda, and VooDoo
Rain(TM), a line of alternative beverages targeted to young consumers.
Substantially all of the Company's brands are produced in its fifteen
manufacturing facilities which are strategically located throughout the
continental United States. The Company also develops and produces soft drinks
for retail grocery chains, warehouse clubs, mass-merchandisers and wholesalers
("allied brands") as well as soft drinks for other beverage companies.
The Company's strategy emphasizes the growth of its branded products by offering
a beverage portfolio of proprietary flavors; by supporting the franchise value
of regional brands; by developing and acquiring innovative products tailored
toward healthy lifestyles; and by appealing to the "quality-price" sensitivity
factor of the family consumer. In addition, the Company seeks to utilize the
strength of its brands and location of its manufacturing facilities to be a
single-source supplier of branded and allied branded beverages for national and
regional retailers.
Various means are utilized by the Company to maintain its position as a
cost-effective producer of its beverage products. These include vertical
integration of the supply of raw materials for the manufacturing process, bulk
delivery to customer distribution centers, regionally targeted media promotions
and the use of multiple distribution systems. Management believes it is able to
offer retailers a higher profit margin on Company branded products and allied
brands than is typically available from the sale of nationally distributed
products.
Beverage industry sales are seasonal with the highest volume typically realized
during the summer months. Additionally, the Company's operating results are
subject to numerous factors, including fluctuations in the costs of raw
materials, changes in consumer preference for beverage products and competitive
pricing in the marketplace.
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RESULTS OF OPERATIONS
THREE MONTHS ENDED JULY 31, 1999 (FIRST QUARTER OF FISCAL 2000) COMPARED TO
THREE MONTHS ENDED AUGUST 1, 1998 (FIRST QUARTER OF FISCAL 1999)
Net sales for the three months ended July 31, 1999 increased approximately $8.2
million or 6.7% over the three months ended August 1, 1998. This sales
improvement was primarily attributable to revenues from Home Juice and an
increase in case volume of the Company's brands. The increase was partially
offset by a volume decline in lower-margin allied brands.
Gross profit decreased to approximately 33.5% of net sales for the first quarter
of fiscal 2000 from 34.4% of net sales for the first quarter of fiscal 1999.
This decrease was primarily due to a change in product mix, an increase in
certain raw material costs, and lower-margins realized from the integration of
the Home Juice acquisition.
Selling, general and administrative expenses increased approximately $1.2
million to $32.5 million for the first quarter of fiscal 2000. This increase is
primarily due to costs related to Home Juice and higher case volume.
Interest expense declined during the first quarter of fiscal 2000 compared to
the prior year due to a reduction in average debt outstanding. See Note 4 of
Notes to Condensed Consolidated Financial Statements.
The Company's effective rate for income taxes, based upon estimated annual
income tax rates, amounted to 37.5% and 37.4% of income before taxes for the
first quarter of fiscal 2000 and fiscal 1999, respectively. The difference
between the effective rate and the federal statutory rate of 35% was primarily
due to the effects of state income taxes and non-deductible expenses.
Net income increased to $6,611,000, or $.35 per share, for the three months
ended July 31, 1999, from $6,345,000, or $.34 per share, for the three months
ended August 1, 1998.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
JULY 31, 1999 COMPARED TO MAY 1, 1999
Management views earnings before interest expense, taxes, depreciation and
amortization ("EBITDA") as a key indicator of the Company's operating
performance and enterprise value, although not as a substitute for cash flow
from operations or operating income. During the three months ended July 31,
1999, the Company generated EBITDA of $14.1 million, as compared to EBITDA of
$13.4 million for the comparable period last year.
For the three months ended July 31, 1999, net cash provided by operating
activities of $3.2 million was comprised of net income of $6.6 million plus
non-cash charges of $2.9 million less cash used primarily for seasonal working
capital requirements of $6.3 million. Cash of $6.7 million was used for capital
expenditures and the acquisition of Home Juice. Net cash used in financing
activities of $1.3 million includes net debt repayments of $1.0 million. At July
31, 1999, the Company's ratio of current assets to current liabilities was 2.1
to 1 and working capital amounted to $57.2 million.
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The Company is evaluating various capital projects to expand capacity at certain
manufacturing facilities. Presently, however, the Company has no material
commitments for capital expenditures and expects that fiscal 2000 capital
expenditures will be comparable to fiscal 1999.
In January 1998, the Board of Directors authorized the Company to repurchase up
to 800,000 shares of its common stock. In the first quarter ended July 31, 1999,
the Company purchased 33,200 shares of its common stock. Since January 1998, the
Company has purchased 175,530 shares of its common stock.
At July 31, 1999, subsidiaries of the Company had outstanding long-term debt of
$39.3 million. Certain debt agreements contain restrictions which require the
affected subsidiaries to maintain certain financial ratios and minimum net
worth, and limit the subsidiaries with respect to incurring additional
indebtedness, paying cash dividends and making certain loans, advances or other
investments. At July 31, 1999, net assets of the subsidiaries totaling
approximately $59 million were restricted from distribution. Management believes
that cash and equivalents, together with funds generated from operations and
borrowing capabilities, will be sufficient to meet the Company's operating cash
requirements, and the cash requirements of the parent company, for the
foreseeable future. The Company was in compliance with all loan covenants and
restrictions at July 31, 1999, and such restrictions are not expected to have a
material adverse impact on the operations of the Company. See Note 4 of Notes to
Condensed Consolidated Financial Statements.
YEAR 2000 COMPLIANCE
Many computer systems were designed using two digits rather than four to
determine the year. This may cause computer applications to fail or create
erroneous results when handling dates beyond the year 1999 unless corrective
measures are taken. The Company has implemented a plan to identify the date
processing deficiencies and replace or modify the information technology (IT)
systems and non-IT systems that are subject to this problem. Projects are in
various stages of completion and management estimates that approximately 90% of
the identified issues have been corrected. Costs incurred to date on the Year
2000 project are immaterial and the estimated cost to complete the project is
approximately $300,000.
The Company has communicated with its significant service providers, suppliers,
and customers to determine their Year 2000 compliance and the extent to which it
is vulnerable if they are not compliant. In addition, contingency plans are
being developed specifying what the Company will do if it or important third
parties experience disruptions as a result of the Year 2000 problem. Such plans
may include stockpiling raw materials, increasing inventory levels, securing
alternate sources of supply and other appropriate measures.
The Company believes that it will be able to replace or modify its critical
systems in time to minimize any significant detrimental effects on its
operations. However, the Company's Year 2000 issues and any potential business
interruptions, costs or losses are dependent, to a significant degree, upon the
Year 2000 compliance of third parties. Consequently, management is unable to
determine whether Year 2000 failures will materially affect the Company.
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FORWARD-LOOKING STATEMENTS
Certain statements in this Quarterly Report on Form 10-Q (this "Form 10-Q"),
including statements under "Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations," constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the 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 the Company's Strategic Alliance objective; success of the
Company in acquiring other beverage businesses; success of new product and
flavor introductions; fluctuations in the costs of raw materials; the Company's
ability to increase prices; continued retailer support for the Company's brands;
changes in consumer preferences; changes in business strategy or development
plans; government regulations; regional weather conditions; unanticipated costs
or problems relating to Year 2000 compliance; and other factors referenced in
this Form 10-Q. The Company will not undertake and specifically declines any
obligation to publicly release the result of any revisions which may be made to
any forward-looking statements to reflect events or circumstances after the date
of such statements or to reflect the occurrence of anticipated or unanticipated
events.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
There are no material changes to the disclosures made on this matter in the
Company's Annual Report on Form 10-K for the fiscal year ended May 1, 1999.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 5 of Notes to Condensed Consolidated Financial Statements.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit
Number Description
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27 Financial Data Schedule (For SEC Use Only)
(b) Reports on Form 8-K: None
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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: September 14, 1999
NATIONAL BEVERAGE CORP.
(Registrant)
By: /s/ Dean A. Mccoy
-------------------------------
Dean A. McCoy
Vice President - Controller
(On behalf of the Registrant and as
Principal Accounting Officer)
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1,000
3-MOS
APR-29-2000
JUL-31-1999
32,682
0
39,550
558
30,679
109,521
129,474
69,628
191,824
52,301
39,267
0
150
221
87,978
191,824
130,085
130,085
86,570
86,570
0
0
704
10,578
3,967
6,611
0
0
0
6,611
.35
.34
