1 =============================================================================== 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 January 27, 2001 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 -------- ---------- (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 -------------- (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 March 2, 2001 was 18,153,178. =============================================================================== 1
2 NATIONAL BEVERAGE CORP. QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JANUARY 27, 2001 INDEX PART I - FINANCIAL INFORMATION Page ---- Item 1. Financial Statements Condensed Consolidated Balance Sheets as of January 27, 2001 and April 29, 2000 ........... 3 Condensed Consolidated Statements of Income for the three months and nine months ended January 27, 2001 and January 29, 2000 ................................... 4 Condensed Consolidated Statements of Cash Flows for the nine months ended January 27, 2001 and January 29, 2000 ........................... 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 ................................ 13 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K ........................................................... 14 2
3 NATIONAL BEVERAGE CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS AS OF JANUARY 27, 2001 AND APRIL 29, 2000 (In thousands, except share amounts) (Unaudited) January 27, April 29, 2001 2000 ----------- ----------- ASSETS Current assets: Cash and equivalents $ 33,985 $ 38,482 Trade receivables - net of allowances of $468 ($534 at April 29, 2000) 35,468 39,116 Inventories 30,295 29,056 Deferred income taxes 1,574 1,465 Prepaid and other 5,283 5,554 ----------- ----------- Total current assets 106,605 113,673 Property - net 61,934 62,430 Intangible assets - net 15,326 15,754 Other assets 5,105 5,897 ----------- ----------- $ 188,970 $ 197,754 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 24,560 $ 37,199 Accrued liabilities 20,087 19,646 Income taxes payable 970 1,921 ----------- ----------- Total current liabilities 45,617 58,766 Long-term debt 27,859 33,933 Deferred income taxes 7,983 8,011 Other liabilities 3,260 3,358 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 22,122,772 shares (22,117,332 shares at April 29, 2000) 221 221 Additional paid-in capital 15,584 15,556 Retained earnings 105,522 94,725 Treasury stock - at cost: Preferred stock - 150,000 shares (5,100) (5,100) Common stock - 3,972,634 shares (3,939,034 shares at April 29, 2000) (12,126) (11,866) ----------- ----------- Total shareholders' equity 104,251 93,686 ----------- ----------- $ 188,970 $ 197,754 =========== =========== See accompanying Notes to Condensed Consolidated Financial Statements. 3
4 NATIONAL BEVERAGE CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS AND NINE MONTHS ENDED JANUARY 27, 2001 AND JANUARY 29, 2000 (In thousands, except per share amounts) (Unaudited) Three Months Ended Nine Months Ended 2001 2000 2001 2000 --------- --------- ---------- ---------- Net sales $ 97,096 $ 83,130 $ 358,082 $ 318,326 Cost of sales 66,847 56,875 242,863 214,151 --------- --------- ---------- ---------- Gross profit 30,249 26,255 115,219 104,175 Selling, general and administrative expenses 29,234 25,788 97,299 87,720 Interest expense 448 636 1,736 2,136 Other income - net 292 354 1,258 998 --------- --------- ---------- ---------- Income before income taxes 859 185 17,442 15,317 Provision for income taxes 327 70 6,645 5,744 --------- --------- ---------- ---------- Net income $ 532 $ 115 $ 10,797 $ 9,573 ========= ========= ========== ========== Net income per share - Basic $ .03 $ .01 $ .59 $ .52 ========= ========= ========== ========== Diluted $ .03 $ .01 $ .58 $ .50 ========= ========= ========== ========== Average common shares outstanding - Basic 18,150 18,278 18,160 18,365 ========= ========= ========== ========== Diluted 18,825 18,955 18,818 19,074 ========= ========= ========== ========== See accompanying Notes to Condensed Consolidated Financial Statements. 4
5 NATIONAL BEVERAGE CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED JANUARY 27, 2001 AND JANUARY 29, 2000 (In thousands) (Unaudited) 2001 2000 ---------- ---------- OPERATING ACTIVITIES: Net income $ 10,797 $ 9,573 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 8,265 7,891 Deferred income tax provision (benefit) (137) 154 Loss on sale of property 43 12 Changes in: Trade receivables 3,648 8,985 Inventories 2,238 716 Prepaid and other assets (601) (2,201) Accounts payable (12,999) (6,380) Other liabilities, net (1,648) (4,197) ---------- ---------- Net cash provided by operating activities 9,606 14,553 ---------- ---------- INVESTING ACTIVITIES: Property additions (3,698) (5,409) Acquisitions, net of cash acquired (3,780) (5,200) ---------- ---------- Net cash used in investing activities (7,478) (10,609) ---------- ---------- FINANCING ACTIVITIES: Debt borrowings 7,500 19,000 Debt repayments (13,883) (25,334) Repurchase of common stock (260) (1,568) Proceeds from stock options exercised 18 58 ---------- ---------- Net cash used in financing activities (6,625) (7,844) ---------- ---------- NET DECREASE IN CASH AND EQUIVALENTS (4,497) (3,900) CASH AND EQUIVALENTS - BEGINNING OF YEAR 38,482 37,480 ---------- ---------- CASH AND EQUIVALENTS - END OF PERIOD $ 33,985 $ 33,580 ========== ========== OTHER CASH FLOW INFORMATION: Interest paid $ 2,013 $ 2,339 Income taxes paid 7,826 6,857 See accompanying Notes to Condensed Consolidated Financial Statements. 5
6 NATIONAL BEVERAGE CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JANUARY 27, 2001 (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 April 29, 2000. 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 January 27, 2001 are comprised of finished goods of $15,542,000 and raw materials of $14,753,000. Inventories at April 29, 2000 are comprised of finished goods of $15,377,000 and raw materials of $13,679,000. 3. PROPERTY Property consists of the following: (In thousands) January 27, April 29, 2001 2000 ----------- ----------- Land $ 10,625 $ 10,617 Buildings and improvements 34,795 34,416 Machinery and equipment 92,526 89,345 ----------- ----------- Total 137,946 134,378 Less accumulated depreciation (76,012) (71,948) ----------- ----------- Property - net $ 61,934 $ 62,430 =========== =========== Depreciation expense was $2,010,000 and $5,853,000 for the three and nine month periods ended January 27, 2001, respectively, and $1,873,000 and $5,490,000 for the three and nine month periods ended January 29, 2000, respectively. 6
7 NATIONAL BEVERAGE CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JANUARY 27, 2001 (UNAUDITED) 4. DEBT Debt consists of the following: (In thousands) January 27, April 29, 2001 2000 ----------- --------- Senior Notes $ -- $ 8,333 Credit Facilities 7,500 5,000 Term Loan Facilities 20,050 20,600 Other 309 -- --------- --------- Total $ 27,859 $ 33,933 ========= ========= A subsidiary of National Beverage Corp. had outstanding 9.95% unsecured senior notes in the original principal amount of $50 million (the "Senior Notes"), of which the final annual principal installment of $8.3 million was paid on November 1, 2000. Additionally, certain subsidiaries maintain unsecured revolving credit facilities aggregating $48 million (the "Credit Facilities") and unsecured term loan facilities ("Term Loan Facilities") with banks. The Credit Facilities expire through December 9, 2002 and bear interest at 1/2% below the banks' reference rate or 1% above LIBOR, at the subsidiaries' election. The Term Loan Facilities are repayable in installments through July 31, 2004, and bear interest at the banks' 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 Term Loan Facilities. Certain of the Company's debt agreements contain restrictions which require subsidiaries to maintain certain financial ratios and minimum net worth, and limit subsidiaries with respect to incurring additional indebtedness, paying cash dividends and making certain loans, advances or other investments. These restrictions are not expected to have a material adverse impact on the operations of the Company. At January 27, 2001, net assets of these subsidiaries totaling approximately $26 million were available for distribution and the Company was in compliance with all loan covenants. 5. CAPITAL STOCK During the nine months ended January 27, 2001, options for 5,440 shares were exercised at prices ranging from $2.09 to $5.00 per share and options for 200,000 shares were granted at an exercise price of $7.38. At January 27, 2001, options to purchase 1,286,656 shares at a weighted average exercise price of $3.72 (ranging from $.13 to $9.88 per share) were outstanding and stock-based awards to purchase 386,024 shares of common stock were available for grant. During the nine months ended January 27, 2001, the Company purchased 33,600 shares of its common stock. Such shares are classified as treasury stock. 7
8 NATIONAL BEVERAGE CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JANUARY 27, 2001 (UNAUDITED) 6. ACQUISITION In September 2000, the Company acquired certain operations and assets of Beverage Canners International, Inc ("BCI"). The assets acquired include a leased manufacturing facility, inventory, and the Ritz(R) and Crystal Bay(R) brands. The BCI acquisition has been accounted for using the purchase method of accounting and, accordingly, the purchase price has been allocated to the assets acquired based upon their estimated fair values at the date of acquisition. Operating results of the acquired business, which are not material to consolidated results, have been included in the consolidated statements of income from the date of acquisition. 8
9 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), Ritz(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; and LaCROIX(R), Mt. Shasta(TM), Crystal Bay(R) and ClearFruit(R) flavored and spring water products. The Company also provides specialty products, including VooDoo Rain(TM), a line of alternative beverages geared toward young consumers, and St. Nick's(TM) holiday soft drinks. Substantially all of the Company's brands are produced in its sixteen 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 strength of its brands and location of its manufacturing facilities distinguish the Company as a single-source supplier of branded and allied branded beverages for national and regional retailers that rely on the warehouse distribution system. 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 those soft drink companies that utilize the direct-store delivery method. 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. Management believes that brand recognition, quality, customer service, availability and value are primary factors affecting the Company's position in the marketplace. 9
10 RESULTS OF OPERATIONS THREE MONTHS ENDED JANUARY 27, 2001 (THIRD QUARTER OF FISCAL 2001) COMPARED TO THREE MONTHS ENDED JANUARY 29, 2000 (THIRD QUARTER OF FISCAL 2000) Net sales for the three months ended January 27, 2001 increased approximately $14.0 million, or 17%, over the three months ended January 29, 2000. This sales increase was due to broad-based volume growth, an improvement in pricing of branded products, and sales of Ritz and Crystal Bay brands recently acquired from Beverage Canners International, Inc. ("BCI"). See Note 6 of Notes to Condensed Consolidated Financial Statements. Gross profit approximated 31.2% of net sales for the third quarter of fiscal 2001 and 31.6% of net sales for the third quarter of fiscal 2000. This change was the result of increases in certain raw material costs, higher utility costs, and costs related to the integration of operations acquired from BCI, which was partially offset by the pricing improvement mentioned above. Selling, general and administrative expenses increased $3.4 million for the third quarter of fiscal 2001. This increase was primarily due to higher distribution and selling costs related to increased volume, increases in fuel costs, and incremental costs related to the acquired BCI operations. Interest expense declined during the third quarter of fiscal 2001 compared to the prior year due to a reduction in average debt outstanding. Other income decreased to $292,000 primarily due to a decrease in interest income resulting from lower average investment balances. 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, approximated 38.1% of income before taxes for the third quarter of fiscal 2001 and 37.8% for the third quarter of fiscal 2000. 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 amounted to $532,000 or $.03 per share for the three months ended January 27, 2001, compared to $115,000 or $.01 per share for the three months ended January 29, 2000. 10
11 NINE MONTHS ENDED JANUARY 27, 2001 (FIRST NINE MONTHS OF FISCAL 2001) COMPARED TO NINE MONTHS ENDED JANUARY 29, 2000 (FIRST NINE MONTHS OF FISCAL 2000) Net sales for the nine months ended January 27, 2001 increased approximately $39.8 million, or 12%, over the first nine months of the prior year. This sales improvement was due to broad-based volume growth, an improvement in pricing of branded products, increased distribution in the convenience channel, and sales of newly acquired Ritz and Crystal Bay brands. Gross profit approximated 32.2% of net sales for the first nine months of fiscal 2001 and 32.7% of net sales for the first nine months of fiscal 2000. This change was primarily due to an increase in certain raw material costs, higher utility costs, and costs related to the integration of operations acquired from BCI. Selling, general and administrative expenses increased $9.6 million for the first nine months of fiscal 2001. This increase was primarily due to higher distribution and selling costs related to increased volume, increases in fuel costs, and incremental costs related to the acquired BCI operations. Interest expense declined during the nine months ended January 27, 2001 compared to the prior year due to a reduction in average debt outstanding. Other income, primarily consisting of interest income, increased to $1.3 million due to higher average investment balances and yields. The effective rate for income taxes, based upon estimated annual income tax rates, amounted to 38.1% and 37.5% of income before taxes for the first nine months of fiscal 2001 and fiscal 2000, 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 $10.8 million or $.59 per share for the nine months ended January 27, 2001 from $9.6 million or $.52 per share for the nine months ended January 29, 2000. 11
12 FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES JANUARY 27, 2001 COMPARED TO APRIL 29, 2000 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 nine months ended January 27, 2001, the Company generated EBITDA of $27.4 million as compared to EBITDA of $25.3 million for the comparable period last year. For the nine months ended January 27, 2001, net cash provided by operating activities of $9.6 million was comprised of net income of $10.8 million and non-cash charges of $8.2 million less cash used primarily for working capital requirements of $9.4 million. Cash of $7.5 million was used for capital expenditures and the BCI acquisition. At January 27, 2001, the Company's ratio of current assets to current liabilities was 2.3 to 1 and working capital amounted to $61.0 million. The Company continually evaluates capital projects to expand capacity and improve efficiency at its manufacturing facilities. The Company presently has no material commitments for capital expenditures and expects that the capital expenditures for fiscal 2001 will be comparable to fiscal 2000. In January 1998, the Board of Directors authorized the Company to repurchase up to 800,000 shares of its common stock and purchases to date aggregate 441,910 shares. During the nine months ended January 27, 2001 and January 29, 2000, the Company purchased 33,600 shares and 188,980 shares, respectively, of its common stock. On November 1, 2000, a subsidiary of the Company paid the final annual principal installment due on its $50 million Senior Notes. At January 27, 2001, certain subsidiaries of the Company had outstanding long-term debt of $27.9 million. Debt agreements contain restrictions which require these 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. These restrictions are not expected to have a material adverse impact on the operations of the Company. At January 27, 2001, net assets of these subsidiaries totaling approximately $26 million were available for distribution and the Company was in compliance with all loan covenants. See Note 4 of Notes to Condensed Consolidated Financial Statements. 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. 12
13 CHANGES IN ACCOUNTING STANDARDS The Financial Accounting Standards Board issued statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" and statement No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities", which are effective for fiscal years beginning after June 15, 2000. These statements require that all derivatives be recorded on the balance sheet at fair value. The Company believes that the implementation of these statements will not materially affect its operating results or financial position. 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; and other factors referenced in this Form 10-Q. The Company disclaims 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. 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 April 29, 2000. 13
14 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: None (b) Reports on Form 8-K: None 14
15 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 13, 2001 NATIONAL BEVERAGE CORP. (Registrant) By: \s\ Dean A. McCoy ---------------------------------- Dean A. McCoy Senior Vice President - Controller (On behalf of the Registrant and as Principal Accounting Officer) 15