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.
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The majority of our brands are geared to the active and health-conscious
consumer including sparkling waters, energy drinks, and juices. Our portfolio of
Power+ Brands includes LaCroix®, LaCroix Cúrate®, and LaCroix NiCola® sparkling
water products; Clear Fruit® non-carbonated water beverages enhanced with fruit
flavor; Rip It® energy drinks and shots; and Everfresh®, Everfresh Premier
Varietals™ and Mr. Pure® 100% juice and juice-based products. Additionally, we
produce and distribute carbonated soft drinks including Shasta® and Faygo®,
iconic brands whose consumer loyalty spans more than 130 years.
Presently, our primary market focus is the United States and Canada. Certain of
our products are also distributed on a limited basis in other countries and
options to expand distribution to other regions are being considered. To service
a diverse customer base that includes numerous national retailers, as well as
thousands of smaller "up-and-down-the-street" accounts, we utilize a hybrid
distribution system consisting of warehouse and direct-store delivery. The
warehouse delivery system allows our retail partners to further maximize their
assets by utilizing their ability to pick up product at our warehouses, further
lowering their/our product costs.
Our operating results are affected by numerous factors, including fluctuations
in the costs of raw materials, holiday and seasonal programming, changes in
consumer purchasing habits and weather conditions. Beverage sales are seasonal
with higher sales volume realized during the summer months when outdoor
activities are more prevalent.
RESULTS OF OPERATIONS
Three Months Ended January 28, 2023 (third quarter of fiscal 2023) compared to
Three Months Ended January 29, 2022 (third quarter of fiscal 2022)
Net sales for the third quarter of fiscal 2023 increased 3.7% to $268.5 million
from $258.9 million for the third quarter of fiscal 2022. The increase in sales
resulted primarily from a 6.9% increase in average selling price per case,
partially offset by a 3.0% decline in case volume primarily due to reduced
carbonated soft drink volume.
Gross profit for the third quarter of fiscal 2023 increased to $94.9 million
from $93.8 million for the third quarter of fiscal 2022. The increase in gross
profit is due to the increase in average selling price, partially offset by
increased packaging and ingredient costs. The cost of sales per case increased
8.4% and gross margin decreased to 35.4% from 36.2% for the third quarter of
fiscal 2022. Although costs per case remain elevated, the third quarter of 2023
is the second consecutive quarter of declining costs per case.
Selling, general and administrative expenses for the third quarter of fiscal
2023 decreased $2.6 million to $50.5 million from $53.1 million for the third
quarter of fiscal 2022. The decrease was primarily due to a decrease in
marketing and shipping costs. The decline in marketing costs was primarily due
to reduced programs with retail partners. As a percent of net sales, selling,
general and administrative expenses decreased to 18.8% from 20.5% for the third
quarter of fiscal 2022.
Other income (expense), net includes interest income of $369,000 for the third
quarter of fiscal 2023 and $39,000 for the third quarter of fiscal 2022. The
increase in interest income is due to a higher return on lower average
investment balances.
The Company's effective income tax rate, based upon estimated annual income tax
rates, was 23.5% for the third quarter of fiscal 2023 and fiscal 2022. 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 28, 2023 (first nine months of fiscal 2023) compared
to
Nine Months Ended January 29, 2022 (first nine months of fiscal 2022)
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Net sales for the first nine months of fiscal 2023 increased 3.8% to $886.2
million from $853.8 million for the first nine months of fiscal 2022. The
increase in sales resulted primarily from a 9.3% increase in average selling
price per case and a 5.0% decline in case volumes which impacted both Power+
Brands and carbonated soft drinks.
Gross profit for the first nine months of fiscal 2023 decreased to $294.3
million from $320.1 million for the first nine months of fiscal 2022. The cost
of sales per case increased 16.7% and gross margin decreased to 33.2% from 37.5%
for the first nine months of fiscal 2022. The decrease in gross margin is due to
increased packaging, ingredients and labor costs offset in part by increased
average selling prices.
Selling, general and administrative expenses for the first nine months of fiscal
2023 decreased $986,000 to $156.5 million from $157.5 million for the first nine
months of fiscal 2022. The decrease was primarily due to decreased marketing
costs, partially offset by increased shipping and administrative costs. The
decline in marketing costs was primarily due to reduced programs with retail
partners. As a percent of net sales, selling, general and administrative
expenses increased to 17.7% from 18.4% for the first nine months of fiscal 2022.
Other income (expense), net includes interest income of $544,000 for the first
nine months of fiscal 2023 and $136,000 for the first nine months of fiscal
2022. The increase in interest income is due to a higher return on lower average
investment balances.
The Company's effective income tax rate, based upon estimated annual income tax
rates, was 23.5% for the first nine months of fiscal 2023 and 23.6% for the
first nine months of fiscal 2022. 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 28,
2023, we maintained $150 million unsecured revolving credit facilities, under
which no borrowings were outstanding and $2.2 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 increased $70.3 million for the nine months of
fiscal 2023 compared to a decrease of $153.2 million for the nine months of
fiscal 2022.
Net cash provided by operating activities for the first nine months of fiscal
2023 amounted to $112.3 million compared to $92.6 million for the nine months of
fiscal 2022. Net cash provided by operating activities for the first nine months
of fiscal 2023 was principally provided by net income of $105.9 million,
depreciation and amortization of $15.6 million, and amortization of operating
right of use assets of $9.9 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 2023
reflects capital expenditures of $12.3 million, compared to capital expenditures
of $16.1 million for the first nine months of fiscal 2022. We intend to continue
production capacity and efficiency improvement projects, and expect fiscal 2023
capital expenditures to be lower than fiscal 2022 levels.
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Financial Position
At January 28, 2023, our working capital increased to $198.4 million compared to
$129.2 million at April 30, 2022. The current ratio was 2.6 to 1 at January 28,
2023 compared to 1.9 to 1 at April 30, 2022. Trade receivables increased $3.5
million and days sales outstanding increased to 32.9 from 30.0. Inventories
decreased $9.7 million and inventory turns improved to 8.5 times from 8.2 times.
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NATIONAL BEVERAGE CORP. 
