fizz20210130_10q.htm
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Table of Contents



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended January 30, 2021

 

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 class   Trading Symbol(s)  Name of each exchange on which registered
Common Stock, par value $.01 per shareFIZZ  The NASDAQ Global Select Market

                                                             

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes ☑ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☑ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☑

 

The number of shares of registrant’s common stock outstanding as of March 8, 2021 was 93,301,146.

 

 

  

 

NATIONAL BEVERAGE CORP.

QUARTERLY REPORT ON FORM 10-Q

INDEX

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements (Unaudited)

Page
   

    Condensed Consolidated Balance Sheets as of January 30, 2021 and May 2, 2020

  3

   

    Condensed Consolidated Statements of Income for the Three and Nine Months Ended January 30, 2021 and January 25, 2020

  4

   

    Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended January 30, 2021 and January 25, 2020

5
   

    Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended January 30, 2021 and January 25, 2020

  6

   

    Condensed Consolidated Statements of Cash Flows for the Nine Months Ended January 30, 2021 and January 25, 2020

  7

 

 

    Notes to Condensed Consolidated Financial Statements

  8

   

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

12
   

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 15

   

Item 4. Controls and Procedures

 15

   

PART II - OTHER INFORMATION

   

Item 1A. Risk Factors

 16

   

Item 6. Exhibits

 16

   

Signature

17

 

  

PART I - FINANCIAL INFORMATION

 

ITEM 1.   FINANCIAL STATEMENTS

NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands, except share data)

 

 

  

January 30,

  

May 2,

 
  

2021

  

2020

 

Assets

        

Current assets:

        

Cash and equivalents

 $153,306  $304,518 

Trade receivables - net

  75,669   84,921 

Inventories

  71,125   63,482 

Prepaid and other assets

  13,094   7,791 

Total current assets

  313,194   460,712 

Property, plant and equipment - net

  126,372   120,627 

Right-of-use assets

  38,637   47,884 

Goodwill

  13,145   13,145 

Intangible assets

  1,615   1,615 

Other assets

  4,513   4,663 

Total assets

 $497,476  $648,646 
         

Liabilities and Shareholders' Equity

        

Current liabilities:

        

Accounts payable

 $71,368  $74,369 

Accrued liabilities

  44,618   42,476 

Short-term lease obligations

  14,334   16,980 

Income taxes payable

  297   7,863 

Total current liabilities

  130,617   141,688 

Deferred income taxes - net

  17,562   14,823 

Long-term lease obligations

  26,099   32,159 

Other liabilities

  7,182   7,639 

Total liabilities

  181,460   196,309 

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; 101,674,058 shares issued (101,606,368 shares at May 2, 2020)

  1,017   1,016 

Additional paid-in capital

  38,187   37,422 

Retained earnings

  298,541   443,402 

Accumulated other comprehensive income (loss)

  2,354   (5,420)

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

  316,016   452,337 

Total liabilities and shareholders' equity

 $497,476  $648,646 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(In thousands, except per share amounts)

 

 

   

Three Months Ended

   

Nine Months Ended

 
   

January 30,

   

January 25,

   

January 30,

   

January 25,

 
   

2021

   

2020

   

2021

   

2020

 
                                 

Net sales

  $ 245,931     $ 222,814     $ 811,107     $ 737,993  
                                 

Cost of sales

    150,267       140,719       490,176       466,510  
                                 

Gross profit

    95,664       82,095       320,931       271,483  
                                 

Selling, general and administrative expenses

    47,501       48,882       144,507       152,049  
                                 
Operating income     48,163       33,213       176,424       119,434  
                                 

Other income - net

    64       981       402       2,734  
                                 

Income before income taxes

    48,227       34,194       176,826       122,168  
                                 

Provision for income taxes

    11,540       7,631       41,811       28,409  
                                 

Net income

  $ 36,687     $ 26,563     $ 135,015     $ 93,759  
                                 

Earnings per common share:

                               

Basic

  $ .39     $ .29     $ 1.45     $ 1.01  

Diluted

  $ .39     $ .28     $ 1.44     $ 1.00  
                                 

Weighted average common shares outstanding:

                               

Basic

    93,296       93,200       93,273       93,266  

Diluted

    93,610       93,604       93,624       93,706  

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(In thousands)

 

  

  

Three Months Ended

  

Nine Months Ended

 
  

January 30,

  

January 25,

  

January 30,

  

January 25,

 
  

2021

  

2020

  

2021

  

2020

 
                 

Net income

 $36,687  $26,563  $135,015  $93,759 
                 

Other comprehensive income, net of tax:

             

Cash flow hedges

  885   123   7,774   558 
                 

Comprehensive income

 $37,572  $26,686  $142,789  $94,317 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)

(In thousands)

 
   

Three Months Ended

   

Nine Months Ended

 
   

January 30, 2021

   

January 25, 2020

   

January 30, 2021

   

January 25, 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

    101,664       1,017       101,390       1,014       101,606       1,016       101,356       1,013  

Stock options exercised

    10               120       1       68       1       154       2  

End of Period

    101,674       1,017       101,510       1,015       101,674       1,017       101,510       1,015  
                                                                 

Additional Paid-In Capital

                                                               

Beginning of period

            37,944               36,830               37,422               36,557  

Stock options exercised

            72               259               475               406  

Stock-based compensation

            171               63               290               189  

End of period

            38,187               37,152               38,187               37,152  
                                                                 

Retained Earnings

                                                               

Beginning of period

            541,730               380,626               443,402               313,430  

Net income

            36,687               26,563               135,015               93,759  

Common stock cash dividend

            (279,876 )             -               (279,876 )             -  

End of period

            298,541               407,189               298,541               407,189  
                                                                 

Accumulated Other Comprehensive Income (Loss)

                                                               

Beginning of period

            1,469               (1,108 )             (5,420 )             (1,543 )

Cash flow hedges, net of tax

            885               123               7,774               558  

End of period

            2,354               (985 )             2,354               (985 )
                                                                 

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 of period

    8,374       (19,133 )     8,066       (12,900 )     8,278       (19,133 )     8,066       (12,900 )

Stock repurchase

    -       -       212       (4,319 )     96       -       212       (4,319 )

End of period

    8,374       (19,133 )     8,278       (17,219 )     8,374       (19,133 )     8,278       (17,219 )
                                                                 
                                                                 

Total Shareholders' Equity

          $ 316,016             $ 422,202             $ 316,016             $ 422,202  

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

 

  

   

Nine Months Ended

 
   

January 30,

   

January 25,

 
   

2021

   

2020

 

Operating Activities:

               

Net income

  $ 135,015     $ 93,759  

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

               

Depreciation and amortization

    13,729       13,415  

Deferred income tax provision

    337       956  

Loss (gain) on sale of property, net

    4       (9 )

Stock-based compensation

    290       189  
Amortization of operating right of use assets     9,845       8,374  

Changes in assets and liabilities:

               

Trade receivables

    9,252       12,318  

Inventories

    (7,643 )     9,500  
Operating lease right of use assets     (4,420 )     (4,366 )

Prepaid and other assets

    (4,444 )     (911 )

Accounts payable

    (3,001 )     (7,271 )

Accrued and other liabilities

    1,091       3,264  
Operating lease liabilities     (4,884 )     (4,008 )

Net cash provided by operating activities

    145,171       125,210  
                 

Investing Activities:

               

Additions to property, plant and equipment

    (16,997 )     (15,847 )

Proceeds from sale of property, plant and equipment

    15       10  

Net cash used in investing activities

    (16,982 )     (15,837 )
                 

Financing Activities:

               

Repurchase of common stock 

    -       (4,319 )

Proceeds from stock options exercised

    475       406  
Dividends paid on Common Stock     (279,876 )     -  

Net cash used in financing activities

    (279,401 )     (3,913 )
                 

Net (Decrease) Increase in Cash and Equivalents

    (151,212 )     105,460  
                 

Cash and Equivalents - Beginning of Period

    304,518       156,200  
                 

Cash and Equivalents - End of Period

  $ 153,306     $ 261,660  
                 

Other Cash Flow Information:

               

Interest paid

  $ 117     $ 38  

Income taxes paid

  $ 51,031     $ 29,335  

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

National Beverage Corp. develops, produces, markets and sells a distinctive portfolio of sparkling waters, juices, energy drinks and carbonated soft drinks primarily in the United States and Canada. Incorporated in Delaware in 1985, National Beverage Corp. is a holding company for various operating subsidiaries. When used in this report, the terms “we,” “us,” “our,” “Company” and “National Beverage” mean National Beverage Corp. and its subsidiaries.

 

 

1. SIGNIFICANT ACCOUNTING POLICIES 

 

Basis of Presentation

The condensed consolidated financial statements include the accounts of National Beverage Corp. and its subsidiaries. Significant intercompany transactions and accounts have been eliminated.

 

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting 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 2, 2020. 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

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 value. Inventories at January 30, 2021 were comprised of finished goods of $43.4 million and raw materials of $27.7 million. Inventories at May 2, 2020 were comprised of finished goods of $39.1 million and raw materials of $24.4 million.

 

Marketing Costs

The Company utilizes a variety of marketing programs, including cooperative advertising programs with customers, to advertise and promote its products to consumers. Marketing costs are expensed when incurred, except for prepaid advertising and production costs, which are expensed when the advertising takes place. Marketing costs, which are included in selling, general and administrative expenses, totaled $11.3 million for the three months ended January 30, 2021 and $13.3 million for the three months ended January 25, 2020. Marketing costs totaled $31.2 million for the nine months ended January 30, 2021, and $42.0 million for the nine months ended January 25, 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 totaled $18.0 million for the three months ended Janaury 30, 2021 and $16.8 million for the three months ended January 25, 2020. Shipping and handling costs totaled $55.9 million for the nine months ended January 30, 2021 and $53.2 million for the nine months ended January 25, 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.

 

Recently Adopted Accounting Pronouncements

On December 18, 2019, the Financial Accounting Standards Board issued Accounting Standards Update, “Simplifying the Accounting for Income Taxes” (ASU 2019-12). The new standard reduces the complexity pertaining to certain areas in accounting for income taxes. Key elements include, but are not limited to, the elimination of certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating taxes during the quarters and the recognition of deferred tax liabilities for outside basis differences. This guidance also simplifies aspects of the accounting for franchise taxes and changes in tax laws or rates, as well as clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. ASU 2019-12 is effective for the Company's first quarter of fiscal year 2022. The Company does not expect the adoption of this new standard to have an impact on its consolidated financial statements.

  

 

2. PROPERTY, PLANT AND EQUIPMENT

 

Property, plant and equipment consist of the following:

 

  

(In thousands)

 
  

January 30,

2021

  

May 2,

2020

 

Land

 $9,835  $9,835 

Buildings and improvements

  60,936   59,618 

Machinery and equipment

  253,173   238,300 

Total

  323,944   307,753 

Less accumulated depreciation

  (197,572)  (187,126)

Property, plant and equipment – net

 $126,372  $120,627 

 

Depreciation expense was $3.7 million and $11.2 million for the three and nine months ended January 30, 2021, respectively, and $3.8 million and $11.4 million for the three and nine months ended January 25, 2020, respectively.

 

  

 

3. DEBT

 

At January 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 January 30, 2021 or May 2, 2020. At January 30, 2021, $3.4 million of the Credit Facilities was reserved for standby letters of credit and $96.6 million was available for borrowings.

 

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 January 30, 2021, we were in compliance with all loan covenants.

  

 

4. STOCK-BASED COMPENSATION

 

During the nine months ended January 30, 2021, options to purchase 263,500 shares of common stock were granted, options to purchase 67,690 shares were exercised and options to purchase 15,000 shares were cancelled at weighted average exercise prices of $23.47, $7.02 and $2.84 respectively. At January 30, 2021, options to purchase 569,900 shares of common stock at a weighted average exercise price of $14.61 per share were outstanding and stock-based awards to purchase 5,353,604 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

  

Nine Months Ended

 
  

2021

  

2020

  

2021

  

2020

 

Recognized in AOCI:

                

Gain (loss) before income taxes

 $2,461  $(581) $9,672  $(2,623)

Less income tax provision (benefit)

  589   (139)  2,314   (628)

Net

 $1,872  $(442) $7,358  $(1,995)

Reclassified from AOCI to cost of sales:

                

Gain (loss) before income taxes

 $1,297  $(742) $(546) $(3,356)

Less income tax provision (benefit)

  310   (177)  (130)  (803)

Net

 $987  $(565) $(416) $(2,553)

Net change to AOCI

 $885  $123  $7,774  $558 

 

As of January 30, 2021, the notional amount of our outstanding aluminum swap contracts was $20.1 million and, assuming no change in commodity prices, $3.4 million of unrealized gain before tax will be reclassified from AOCI and recognized in earnings over the next 12 months. 

 

 

As of January 30, 2021, the fair value of the derivative asset was $3.4 million, which was included as a component of prepaid and other assets. At May 2, 2020, the fair value of the derivative liability was $6.9 million, which was included as a component of accrued liabilities. Such valuation does not entail a significant amount of judgment and the inputs that are significant to the fair value measurement are Level 2 as defined by the fair value hierarchy as they are observable market based inputs or unobservable inputs that are corroborated by market data.

   

 

6. LEASES

 

The Company has entered into various non-cancelable operating lease agreements for certain of our offices, buildings, 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 January 30, 2021 and January 25, 2020 was $3.5 million and $4.0 million, respectively. Operating lease cost totaled $10.8 million for the nine months ended January 30, 2021 and $10.7 million for the nine months ended January 25, 2020. As of January 30, 2021, the weighted-average remaining lease term and weighted average discount rate of operating leases was 3.9 years and 3.1%, respectively. As of May 2, 2020, the weighted-average remaining lease term and weighted average discount rate of operating leases was 4.3 years and 3.38%, respectively. Cash payments were $3.3 million for operating leases for the three months ended January 30, 2021 and January 25, 2020. Cash payments totaled $10.3 million for the nine months ended January 30, 2021 and $9.9 million for the nine months ended January 25, 2020.

 

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

 

  

(In thousands)

 

Fiscal 2021 - Remaining quarter

 $4,539 

Fiscal 2022

  13,345 

Fiscal 2023

  9,367 

Fiscal 2024

  7,308 

Fiscal 2025

  4,399 

Thereafter

  3,824 

Total minimum lease payments including interest

  42,782 

Less: Amounts representing interest

  (2,349

)

Present value of minimum lease payments

  40,433 

Less: Current portion of lease obligations

  (14,334

)

Non-current portion of lease obligations

 $26,099 

 

 

The following is a summary of future minimum lease payments and related liabilities for all non-cancelable operating leases as of May 2, 2020:

 

  

(In thousands)

 

Fiscal 2021

 $14,206 

Fiscal 2022

  13,276 

Fiscal 2023

  8,975 

Fiscal 2024

  7,361 

Fiscal 2025

  4,475 

Thereafter

  4,101 

Total minimum lease payments including interest

  52,394 

Less: Amounts representing interest

  (3,255

)

Present value of minimum lease payments

  49,139 

Less: Current portion of lease liabilities

  (16,980

)

Non-current portion of lease liabilities

 $32,159 

  

 

7. CASH DIVIDEND

 

On November 24, 2020, the Company's board of directors declared a cash dividend of $3.00 per share (pre-split) which was increased to $6.00 per share (pre-split) on December 2, 2020.  The cash dividend totaling $279.9 million was paid on January 29, 2021 to shareholders of record on December 4, 2020.  

  

 

8. SUBSEQUENT EVENTS

 

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.

  

 

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.

 

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.

 

Our highly innovative business, where new beverages are developed and produced for selective holidays and ceremonial dates, should not be analyzed on the common three-month (quarterly) periods, traditionally found acceptable. Today, costly development projects and seasonal weather periods, plus promotional packaging, can distort quarter-to-quarter statistics and result in decision making that is not truly beneficial for investors and shareholders alike.

 

Traditional and typical are not a part of an innovator's vocabulary.

 

RESULTS OF OPERATIONS

 

Three Months Ended January30, 2021 (third quarter of fiscal 2021) compared to

Three Months Ended January25, 2020 (third quarter of fiscal 2020)

 

Net sales for the third quarter of fiscal 2021 increased 10.4% to $245.9 million from $222.8 million for the third quarter of fiscal 2020. The increase in sales resulted primarily from a 11% increase in case volume. The volume increase includes a 14% increase of our Power+ Brands primarily attributable to increased consumer demand in the take-home channel. Average selling price per case was approximately flat.

 

Gross profit for the third quarter of fiscal 2021 increased to $95.7 million from $82.1 million for the third quarter of fiscal 2020. The increase in gross profit is due to changes in product mix and increased volume. The cost of sales per case decreased 3.8% and gross margin increased to 38.9% from 36.8% for the third quarter of fiscal 2020.

 

Selling, general and administrative expenses for the third quarter of fiscal 2021 decreased $1.4 million to $47.5 million from $48.9 million for the third quarter of fiscal 2020. The decrease was primarily due to reduced marketing and selling costs, partially offset by increased shipping and handling costs.  As a percent of net sales, selling, general and administrative expenses decreased to 19.3% from 21.9% for the third quarter of fiscal 2020.

 

Other income includes interest income of $109,000 for the third quarter of fiscal 2021 and $1.0 million for the third quarter of fiscal 2020. The decrease in interest income is due to lower return on investments.

 

 

The Company’s effective income tax rate, based upon estimated annual income tax rates, was 23.9% for the third quarter of fiscal 2021 and 22.3% for the third quarter of fiscal 2020. 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 30, 2021 (first nine months of fiscal 2021) compared to

Nine Months Ended January 25, 2020 (first nine months of fiscal 2020)

 

Net sales for the first nine months of fiscal 2021 increased 9.9% to $811.1 million from $738.0 million for the first nine months of fiscal 2020. The increase in sales resulted primarily from a 10.2% increase in case volume. The volume increase includes a 14% increase of our Power+ Brands primarily attributable to increased consumer demand in the take-home channel. Average selling price per case was flat.

 

Gross profit for the first nine months of fiscal 2021 increased to $320.9 million from $271.5 million for the first nine months of fiscal 2020. The increase in gross profit is due to changes in product mix, increased volume and reduced raw material costs. The cost of sales per case decreased 4.7% and gross margin increased to 39.6% from 36.8% for the first nine months of fiscal 2020.

 

Selling, general and administrative expenses for the first nine months of fiscal 2021 decreased $7.5 million to $144.5 million from $152.0 million for the first nine months of fiscal 2020. The decrease was primarily due to reduced marketing and selling costs, partially offset by increased shipping and handling costs. As a percent of net sales, selling, general and administrative expenses decreased to 17.8% from 20.6% for the first nine months of fiscal 2020.

 

Other income includes interest income of $506,000 for the first nine months of fiscal 2021 and $2.9 million for the first nine months of fiscal 2020. The decrease in interest income is due to lower return on investments.

 

The Company’s effective income tax rate, based upon estimated annual income tax rates, was 23.6% for the first nine months of fiscal 2021 and 23.3% for the first nine months of fiscal 2020. 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 30, 2021, we maintained $100 million unsecured revolving credit facilities, under which no borrowings were outstanding and $3.4 million was reserved for standby letters of credit. We believe existing capital resources will be sufficient to meet our liquidity and capital requirements for the next twelve months.

 

Cash Flows

The Company’s cash position decreased $151.2 million for the nine months of fiscal 2021, due primarily to the $279.9 million cash dividend paid on January 29, 2021.

 

Net cash provided by operating activities for the first nine months of fiscal 2021 amounted to $145.2 million compared to $125.2 million for the nine months of fiscal 2020. Net cash provided by operating activities for the first nine months of fiscal 2021 was principally provided by net income of $135 million, depreciation and amortization of $13.7 million, and amortization of operating right of use assets of $9.8 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 2021 reflects capital expenditures of $17.0 million, compared to capital expenditures of $15.8 million for the first nine months of fiscal 2020. We intend to continue production capacity and efficiency improvement projects, and expect fiscal 2021 capital expenditures to be comparable to fiscal 2020 levels.

 

Financial Position

At January 30, 2021, our working capital decreased to $182.6 million from $319.0 million at May 2, 2020. The current ratio was 2.4 to 1 at January 30, 2021 compared to 3.3 to 1 at May 2, 2020. The decrease in working capital and current ratio was due primarily to the payment of the $279.9 million cash dividend.  Trade receivables decreased $9.3 million and days sales outstanding declined from 29.3 to 28.0. Inventories increased $7.6 million and inventory turns declined to 9.9 times from 10.1 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 2, 2020.

 

ITEM 4. CONTROLS AND PROCEDURES

 

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

 

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

 

FORWARD-LOOKING STATEMENTS

 

National Beverage Corp. and its representatives may make written or oral statements relating to future events or results relative to our financial, operational and business performance, achievements, objectives and strategies. These statements are “forward-looking” within the meaning of the Private Securities Litigation Reform Act of 1995 and include statements contained in this report and other filings with the Securities and Exchange Commission and in reports to our stockholders. Certain statements including, without limitation, statements containing the words “believes,” “anticipates,” “intends,” “plans,” “expects,” and “estimates” constitute “forward-looking statements” and involve known and unknown risk, uncertainties and other factors that may cause the actual results, performance or achievements of our Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to, the following: general economic and business conditions, pricing of competitive products, success of new product and flavor introductions, fluctuations in the costs and availability of raw materials and packaging supplies, ability to pass along cost increases to our customers, labor strikes or work stoppages or other interruptions in the employment of labor, continued retailer support for our products, changes in brand image, consumer demand and preferences and our success in creating products geared toward consumers’ tastes, success in implementing business strategies, changes in business strategy or development plans, government regulations, taxes or fees imposed on the sale of our products, unfavorable weather conditions and other factors referenced in this report, filings with the Securities and Exchange Commission and other reports to our stockholders. We disclaim an obligation to update any such factors or to publicly announce the results of any revisions to any forward-looking statements contained herein to reflect future events or developments.

 

 

PART II - OTHER INFORMATION

 

ITEM 1A. RISK FACTORS

 

There have been no material changes in risk factors from those reported in our Annual Report on Form 10-K for the fiscal year ended May 2, 2020.

 

ITEM 6. EXHIBITS

 

Exhibit No. Description
   
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 31 2021, 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)

 

 

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 11, 2021

 

 

National Beverage Corp.

(Registrant)

 

 

 

 

 

 

By:

/s/ George R. Bracken

 

 

 

George R. Bracken

 

 

 

Executive Vice President – Finance

 

    (Principal Financial Officer)  

 

17
ex_225364.htm

EXHIBIT 31.1

 

CERTIFICATION

 

I, Nick A. Caporella, certify that:

 

1.

I have reviewed this quarterly report on Form 10-Q of National Beverage Corp.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c.

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d.

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

 

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date: March 11, 2021

 

/s/ Nick A. Caporella

Nick A. Caporella

Chairman of the Board and

Chief Executive Officer

 

 
ex_225365.htm

EXHIBIT 31.2

 

CERTIFICATION

 

I, George R. Bracken, certify that:

 

1.

I have reviewed this quarterly report on Form 10-Q of National Beverage Corp.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c.

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d.

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

 

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date: March 11, 2021

 

/s/ George R. Bracken

George R. Bracken

Executive Vice President – Finance

(Principal Financial Officer)

 

 

 
ex_225366.htm

EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of National Beverage Corp. (the “Company”) on Form 10-Q for the period ended January 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Nick A. Caporella, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: March 11, 2021

 

/s/ Nick A. Caporella

Nick A. Caporella

Chairman of the Board and

Chief Executive Officer

 

 
ex_225367.htm

    EXHIBIT 32.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of National Beverage Corp. (the “Company”) on Form 10-Q for the period ended January 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, George R. Bracken, Executive Vice President - Finance of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

Date: March 11, 2021

 

/s/ George R. Bracken

George R. Bracken

Executive Vice President – Finance

(Principal Financial Officer)