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Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 27, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-19447
NATIONAL BEVERAGE CORP.
(Exact name of registrant as specified in its charter)
Delaware 59-2605822
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One North University Drive, Ft. Lauderdale, FL 33324
---------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(954) 581-0922
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(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
6, 1996 was 9,219,764.
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NATIONAL BEVERAGE CORP.
QUARTERLY REPORT ON FORM 10-Q
FOR QUARTER ENDED JULY 27, 1996
INDEX
PART I - FINANCIAL INFORMATION
Page
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
as of July 27, 1996 and April 27, 1996 ...................... 3
Condensed Consolidated Statements of Income
for the three months ended July 27, 1996
and July 29, 1995............................................ 4
Condensed Consolidated Statement of Shareholders' Equity
for the three months ended July 27, 1996..................... 5
Condensed Consolidated Statements of Cash Flows
for the three months ended July 27, 1996 and
July 29, 1995................................................ 6
Notes to Condensed Consolidated Financial Statements......... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................ 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.................................... 14
Item 6. Exhibits and Reports on Form 8-K..................... 14
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NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JULY 27, 1996 AND APRIL 27, 1996
(In thousands, except share amounts)
(Unaudited)
July 27, April 27,
1996 1996
---------- ----------
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 28,628 $ 35,231
Trade receivables (net of allowance of $758 at July 27, 1996
and $694 at April 27, 1996) 36,193 33,726
Inventories 24,625 22,977
Deferred income taxes 2,428 3,630
Prepaid and other 6,339 6,618
---------- ----------
Total current assets 98,213 102,182
PROPERTY - NET 56,169 56,226
INTANGIBLE ASSETS - NET 15,081 15,207
OTHER ASSETS 4,793 3,945
---------- ----------
TOTAL $ 174,256 $ 177,560
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 28,904 $ 38,201
Accrued liabilities 19,718 17,534
Income taxes payable 2,775 1,376
Current portion of long-term debt 713 929
---------- ----------
Total current liabilities 52,110 58,040
LONG-TERM DEBT 61,338 62,568
DEFERRED INCOME TAXES 6,712 6,805
ACCRUED INSURANCE - NONCURRENT 3,128 3,095
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, 7% cumulative, $1 par value, aggregate liquidation
preference of $15,000 (Authorized 1,000,000 shares; Issued 150,000 150 150
shares; no shares outstanding)
Common stock, $.01 par value (Authorized 20,000,000 shares; Issued:
12,750,488 shares in July 1996; 12,741,488 shares in April 1996;
Outstanding: 9,219,764 shares in July 1996; 9,310,764 shares in April 1996) 128 127
Additional paid-in capital 14,943 14,873
Retained earnings 49,228 44,178
Treasury stock - at cost
Preferred stock (5,100) (5,100)
Common stock (8,381) (7,176)
---------- ----------
Total shareholders' equity 50,968 47,052
---------- ----------
TOTAL $ 174,256 $ 177,560
========== ==========
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 27, 1996 AND JULY 29, 1995
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
1996 1995
--------- ---------
Net Sales $ 110,204 $101,660
Cost of Sales 77,911 76,259
--------- --------
Gross Profit 32,293 25,401
Selling, General and Administrative Expenses 23,196 17,399
Interest Expense 1,448 1,299
Other Expense (Income) - Net (367) (353)
--------- --------
Income before Income Taxes 8,016 7,056
Provision for Income Taxes 2,966 2,681
--------- --------
Net Income $ 5,050 $ 4,375
========= ========
Earnings Applicable to Common Shares $ 5,050 $ 4,112
========= ========
Earnings per Common Share $ 0.54 $ 0.44
========= ========
Average Shares Outstanding 9,430 9,300
See accompanying notes to condensed consolidated financial statements.
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NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED JULY 27, 1996
(In thousands, except share amounts)
(Unaudited)
Shares Amount
---------- -----------
PREFERRED STOCK
Beginning and end of period 150,000 $ 150
========== ===========
COMMON STOCK
Beginning of period 12,741,488 $ 127
Stock options exercised 9,000 1
---------- -----------
End of period 12,750,488 $ 128
========== ===========
ADDITIONAL PAID-IN CAPITAL
Beginning of period $ 14,873
Stock options exercised 70
-----------
End of period $ 14,943
===========
RETAINED EARNINGS
Beginning of period $ 44,178
Net income 5,050
-----------
End of period $ 49,228
===========
TREASURY STOCK-PREFERRED
Beginning and end of period 150,000 $ (5,100)
========== ===========
TREASURY STOCK-COMMON
Beginning of period 3,430,724 $ (7,176)
Purchase of common stock 100,000 (1,205)
---------- -----------
End of period 3,530,724 $ (8,381)
========== ===========
TOTAL SHAREHOLDERS' EQUITY $ 50,968
===========
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 27, 1996 AND JULY 29, 1995
(In thousands)
(Unaudited)
1996 1995
-------- --------
OPERATING ACTIVITIES:
Net income $ 5,050 $ 4,375
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization 1,858 1,752
Deferred income tax provision (benefit) 1,109 (225)
Provision for doubtful accounts 99 104
Changes in:
Trade receivables (2,566) (6,163)
Inventories (1,648) (2,399)
Prepaid and other assets (1,165) 358
Accounts payable (9,297) (5,571)
Other liabilities 4,050 4,056
-------- --------
Net cash used in operating activities (2,510) (3,713)
-------- --------
INVESTING ACTIVITIES:
Property additions (1,466) (1,715)
Other, net 8 (569)
-------- --------
Net cash used in investing activities (1,458) (2,284)
-------- --------
FINANCING ACTIVITIES:
Debt borrowings 6,300 ---
Debt repayments (7,746) (57)
Preferred stock dividends paid --- (788)
Purchase of common stock (1,205) ---
Proceeds from stock options exercised 16 ---
-------- --------
Net cash used in financing activities (2,635) (845)
-------- --------
NET DECREASE IN CASH AND EQUIVALENTS (6,603) (6,842)
CASH AND EQUIVALENTS-BEGINNING OF YEAR 35,231 33,487
-------- --------
CASH AND EQUIVALENTS-END OF PERIOD $ 28,628 $ 26,645
======== ========
OTHER CASH FLOW INFORMATION:
Interest paid $ 1,444 $ 1,320
Income taxes paid 58 149
See accompanying notes to condensed consolidated financial statements.
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NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 27, 1996
(UNAUDITED)
- - --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
National Beverage Corp. and its subsidiaries (the "Company" or "NBC") 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 April 27, 1996. 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, which are stated at the lower of first-in, first-out cost or
market, are comprised of the following:
(In thousands)
July 27, 1996 April 27, 1996
------------- --------------
Finished goods $ 12,940 $11,225
Raw materials and packaging supplies 11,685 11,752
-------- -------
Total $ 24,625 $22,977
======== =======
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3. PROPERTY
Property consists of the following:
(In thousands)
July 27, 1996 April 27, 1996
------------- --------------
Land $ 9,959 $ 9,959
Buildings and improvements 30,654 30,654
Machinery and equipment 70,882 69,501
-------- --------
Total 111,495 110,114
Less accumulated depreciation (55,326) (53,888)
--------- --------
Property-net $ 56,169 $ 56,226
========= ========
Depreciation expense was $1,515,000 and $1,595,000 for the three month periods
ended July 27, 1996 and July 29, 1995, respectively.
4. DEBT
Debt consists of the following:
(In thousands)
July 27, 1996 April 27, 1996
------------- --------------
9.95% Senior Notes (see below) $ 41,667 $ 41,667
Credit Facility 10,500 17,783
Term Loan Facility 8,300 2,000
Other (including capital leases) 1,584 2,047
---------- --------
Total 62,051 63,497
Less current portion (713) (929)
----------- --------
Long-term portion $ 61,338 $ 62,568
=========== ========
In 1992, a subsidiary of the Company issued 9.95% unsecured senior notes in the
original principal amount of $50 million due November 1, 2000 (the "Senior
Notes") payable in six equal annual principal installments, the first of which
was paid on November 1, 1995. Additionally, the subsidiary has a $25 million
unsecured revolving credit facility (the "Credit Facility") with a bank. The
Credit Facility expires August 31, 1997, and bears interest at 1/2% below the
bank's reference rate or 1% above LIBOR, at the subsidiary's election. In
February 1996, the subsidiary entered into a $16.6 million unsecured term loan
facility ("Term Loan Facility") with a bank expiring in October 1997. The
Term Loan Facility provides credit availability of $8.3 million immediately
and an additional $8.3 million
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commencing October 30, 1996. The Term Loan Facility bears interest at the
bank's reference rate or 1 1/4% above LIBOR, at the subsidiary's election.
The Company intends to utilize its existing long-term credit facilities to fund
the next principal payment due on its Senior Notes.
Certain of the Company's debt agreements contain restrictions which require the
subsidiary to maintain certain financial ratios and minimum net worth, and
limit the subsidiary with respect to incurring certain additional indebtedness,
paying cash dividends and making certain loans, advances or other investments.
At July 27, 1996, net assets of the subsidiary totaling approximately $41
million were restricted from distribution and the Company was in compliance
with all loan covenants and restrictions. Such restrictions are not expected
to have a material adverse impact on the operations of the Company.
5. COMMITMENTS AND CONTINGENCIES
Albert H. Kahn v. Nick A. Caporella, et al., Civil Action No. 11890 was filed
in December 1990 by a shareholder of Burnup & Sims Inc. ("BSI"), now MasTec,
Inc., in the Court of Chancery of the State of Delaware in and for New Castle
County against NBC, the members of the Board of Directors of BSI and against
BSI. In May 1993, plaintiff amended its class action and shareholder
derivative complaint (the "Amended Complaint"). The class action claims
allege, among other things, that the Board of Directors of BSI, and NBC, as its
largest shareholder, breached their respective fiduciary duties in approving
(i) the dividend by BSI of its shares of NBC common stock (the "Distribution")
and (ii) the exchange of certain shares of BSI's common stock held by NBC for
certain indebtedness of NBC held by BSI (the "Exchange"; the Distribution and
the Exchange are hereafter referred to as the "1991 Transaction"), in allegedly
placing the interests of NBC ahead of the interests of other shareholders of
BSI. The derivative action claims allege, among other things, that the Board
of Directors of BSI breached their fiduciary duties by approving executive
officer compensation arrangements, by financing NBC's operations on a current
basis, and by permitting the interests of BSI to be subordinated to those of
NBC. In the lawsuit, plaintiff seeks to rescind the 1991 Transaction and to
recover unspecified damages. The defendants, including the Company, have moved
to dismiss the actions for failure to make a demand and state a claim upon
which relief can be granted. The motion is still pending.
In November 1993, plaintiff filed a class action and derivative complaint,
Civil Action No. 13248 (the "1993 Complaint") against the Company, BSI, the
members of the Board of Directors of BSI, and certain other defendants
(referred to as "Other Defendants"). In December 1993, plaintiff amended the
1993 Complaint (the "1993 Amended Complaint"). The 1993 Amended Complaint
alleges, among other things, that the Board of Directors of BSI, and NBC, as
BSI's largest stockholder, breached their respective fiduciary duties by
approving an agreement dated October 15, 1993, as amended, between BSI and the
Other Defendants (the "Acquisition Agreement") and the exchange of 3,153,847
shares of BSI common stock owned by the Company for certain indebtedness owed
to BSI by the Company (the "Redemption") which, according to the allegations of
the 1993 Complaint, benefits the President and Chief Executive Officer of NBC
at the expense of BSI's stockholders. On November 29, 1993, plaintiff filed a
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motion for an order preliminary and permanently enjoining the transactions
under the Acquisition Agreement and the Redemption. On March 7, 1994, the
court heard oral arguments with respect to plaintiff's motion to enjoin the
transactions and, on March 10, 1994, the court denied plaintiff's request for
injunctive relief finding that plaintiff had not established a likelihood of
success on the merits and that, in any event, the equities did not favor the
imposition of injunctive relief.
The Company believes that the allegations in the complaint, the Amended
Complaint, the 1993 Complaint and the 1993 Amended Complaint are without merit,
and intends to vigorously defend these actions.
The Company is a defendant in various other lawsuits arising in the ordinary
course of business.
In the opinion of management, after taking into account provisions recorded for
legal claims and related costs, the ultimate disposition of the foregoing
lawsuits will not have a material adverse effect on the Company's consolidated
financial position or result of operations.
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.
6. CAPITAL STOCK
In June 1996, the Company purchased 100,000 shares of common stock on the open
market. Such shares have been classified as held in treasury.
On August 23, 1996, the Board of Directors of the Company declared a 2
for 1 stock split effected as a 100% stock dividend to its shareholders of
record on September 9, 1996. The dividend is scheduled to be paid October 25,
1996. Amounts presented in these financial statements have not been adjusted
for the effects of the dividend.
During the three months ended July 27, 1996, the Company granted options to
purchase 96,350 shares of common stock at an exercise price of $10 per share.
At July 27, 1996, options to purchase 570,300 shares at an average exercise
price of $4.74 per share were outstanding and options to purchase 237,300
shares were available for grant.
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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. ("NBC") produces, manufactures, markets and distributes
its full line of branded cola and multi-flavored soft drinks, juice products,
and bottled water under the brand names Shasta (r), Faygo (r), Everfresh (r),
Big Shot (r), nuAnce (r), Body Works (r), a Sante (r), Spree (r), Creepy
Coolers (tm), and St. Nick's (tm). Substantially all of the Company's brands
are produced in the Company's fourteen manufacturing facilities which are
strategically located throughout the continental United States. NBC also
develops and produces branded soft drinks for retail grocery chains, warehouse
clubs, mass merchandisers and wholesalers ("allied brands") as well as soft
drinks for other beverage companies. NBC and its consolidated subsidiaries are
referred to herein as the "Company".
The Company intends to further its growth by increasing its brand awareness
through greater retailer sponsorship and entering into long-term contractual
relationships with national and regional retailers to supply both Company
branded and allied branded soft drinks ("strategic alliances"). The Company
believes that the strength of its regional brands and its manufacturing
facilities position the Company as one of the leading single-source suppliers
for both value-priced flavor soft-drinks, such as Shasta(r) and Faygo(r), as
well as allied branded soft drinks in multiple flavors and packaging throughout
the continental United States. The Company also plans to grow its revenues and
brands by acquiring other regional beverage businesses that meet its strategic
and financial objectives.
Industry soft drink sales are seasonal with the highest volume typically
realized during the months of May through October. 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.
RESULTS OF OPERATIONS
Three Months Ended July 27, 1996 (first quarter of fiscal year 1997) as
compared to Three Months Ended July 29, 1995 (first quarter of fiscal year 1996)
Net sales for the quarter ended July 27, 1996 increased 8.4% to $110.2 million
from $101.7 million for the first quarter of the prior year. This increase is
principally due to the effect of (i) the Company's acquisition of Everfresh
Beverages in the fourth quarter of fiscal year 1996, and (ii) strategic
alliance agreements entered into with three major retailers. Case volume
increased 8.6% for the first quarter of fiscal year 1997 as compared to the
first quarter of fiscal 1996, while per-case selling prices remained relatively
constant.
Gross profit increased to 29.3% of net sales for the first quarter of fiscal
1997 from 25.0% of net sales for the first quarter of fiscal 1996. This
increase in gross margin is due to decreases in certain packaging costs and
higher margins attained on the Company's juice and other branded products. The
gross profit increase also reflects the effect of increased case volume. The
Company believes that inflationary trends do not have a significant impact on
operating results since fluctuations in raw material costs are typically
influenced more by commodity market conditions than inflation. Although there
can be no assurances as to future predictability, the Company does not expect
any significant increases in raw material costs in fiscal 1997 and has
generally been successful in passing through cost increases to maintain profit
margins.
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Selling, general and administrative expenses approximated 21.0% and 17.1% of
net sales for the first quarter of fiscal 1997 and 1996, respectively.
Increased marketing and advertising costs relative to the Company's contractual
commitments with its strategic alliance partners and expanded in-store and
other promotional programs accounted for this change.
Interest expense increased approximately $ .15 million for the three-month
period ended July 27, 1996 due to larger average balances of debt outstanding.
The effective rate for income taxes, based upon estimated annual income tax
rates, approximated 37% and 38% of income before taxes for the quarter ended
July 27, 1996 and July 29, 1995, respectively. The difference between the
effective rate and the federal statutory rate of 35% includes amortization of
non-deductible goodwill and other intangibles, state income taxes and certain
non-deductible expenses.
Accordingly, net income increased 15% to $5.1 million or $.54 per share for the
three months ended July 27, 1996 from $4.4 million or $.44 per share for the
three months ended July 29, 1995. Earnings applicable to common shares
increased to $5.1 million for the quarter ended July 27, 1996 from $4.1
million for the comparable quarter in the prior year. The first quarter of
fiscal year 1997 does not include the effect of preferred stock dividends of
approximately $ .3 million as a result of the Company's purchase of its
preferred stock in the fourth quarter of fiscal 1996.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
July 27, 1996 as compared to April 27, 1996
The Company's cash position decreased approximately $6.6 million to $28.6
million during the three months ended July 27, 1996. Cash used in operating
activities of $2.5 million was comprised of net income of $5.1 million plus
non-cash charges of $3.1 million less cash used for other working capital
requirements based upon seasonal business requirements of $10.6 million. Cash
of $1.5 million was used in investing activities, principally for capital
expenditures. Cash of $2.6 million was used in financing activities,
principally for net debt repayments of $1.4 million and the Company's $1.2
million repurchase of its common stock. The Company's ratio of current assets
to current liabilities approximated 1.9 to 1 and 1.8 to 1 at July 27, 1996 and
April 27, 1996, respectively, and working capital increased to $46.1 million
from $44.1 million for those same periods. The Company believes that its cash
and equivalents, together with funds generated from operations and borrowing
capabilities, will be sufficient to meet its operating cash requirements in the
foreseeable future. At July 27, 1996, the Company had no material commitments
for capital expenditures requiring cash outlays.
At July 27, 1996, the Company had outstanding long-term debt of $61.3 million.
See Note 4 of Notes to Condensed Consolidated Financial Statements.
Certain debt agreements contain restrictions which require a subsidiary to
maintain certain financial ratios and minimum net worth, and limit the
subsidiary with respect to incurring certain additional indebtedness, paying
cash dividends and making certain loans, advances or other investments. At
July 27, 1996, net assets of the subsidiary totaling approximately $41 million
were restricted from distribution and the Company was in compliance with all
loan covenants
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and restrictions. Such restrictions are not expected to have a material
adverse impact on the operations of the Company.
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 express or implied by such forward-looking
statements. Such factors include, but are not limited to, the following:
general economic and business conditions; competition; success of the Company's
strategic alliance objective; fluctuations in the costs of raw materials;
continued retailer support for the Company's brands; changes in consumer
preferences; changes in business strategy or development plans; government
regulations; regional weather conditions; 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.
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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:
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 10, 1996
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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5
1,000
3-MOS
MAY-03-1997
JUL-27-1996
28,628
0
36,951
758
24,625
98,213
111,495
55,326
174,256
52,110
61,338
0
150
128
50,690
174,256
110,204
110,204
77,911
77,911
0
0
1,448
8,016
2,966
5,050
0
0
0
5,050
.54
0
