Overview
National Beverage Corp. innovatively refreshes America with a distinctive
portfolio of sparkling waters, juices, energy drinks and, to a lesser degree,
carbonated soft drinks brands. Our carbonated soft drink brands continue to be
modified as we endeavor to make them more adaptable to changing consumer
preferences. 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 that larger competitors who are burdened
by legacy production, distribution complexity and costs cannot quickly adapt
to.
Our brands consist of beverages geared to the active and health-conscious
consumer ("Power+ Brands") including sparkling waters, energy drinks, and
juices. Our portfolio of Power+Brands includes LaCroix®, LaCroix Curate®,
LaCroix NiCola® and Shasta® Sparkling Water products; 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 125 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 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 and weather
conditions. While prior years witnessed more seasonality, higher sales are
realized during the summer when outdoor activities are more prevalent. In
addition, seasonal promotional packaging and the development of beverages for
selective holidays and ceremonial dates further impact quarter-to-quarter
comparisons.
We believe our highly innovative business should not be analyzed solely on the
common three-month (quarterly) periods, traditionally found acceptable.
Traditional and typical are not a part of an innovator's vocabulary.
National Beverage Corp. is incorporated in Delaware and began trading as a
public company on the NASDAQ Stock Market in 1991. In this report, the terms
"we," "us," "our," "Company" and "National Beverage" mean National Beverage
Corp. and its subsidiaries unless indicated otherwise.
Corporate Information
Our principal executive offices are located at 8100 SW Tenth Street, Suite 4000,
Fort Lauderdale, FL 33324. Our telephone number is (954) 581-0922. We maintain
a website at www.nationalbeverage.com. The reference to our website address does
not constitute incorporation by reference of the information contained on this
website. We own numerous trademarks for our brands that are significant to our
business. We intend to continue to maintain all registrations of our
significant trademarks and use the trademarks in the operations of our
businesses. Unless specified otherwise, the financial results in this Quarterly
Report are those of the Company and its subsidiaries on a consolidated basis.
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RESULTS OF OPERATIONS
Three Months Ended January 25, 2020 (third quarter of fiscal 2020) compared to
Three Months Ended January 26, 2019 (third quarter of fiscal 2019)
Net sales for the third quarter of fiscal 2020 increased $1.9 million or .9% to
$222.8 million compared to $220.9 million for the third quarter of fiscal 2019.
The increase in sales resulted primarily from a 2.4% increase in case volume and
a 1.5% decline in average selling price. The volume increase includes growth of
1.4% in Power+ Brands and 3.2% growth in Carbonated Soft Drinks. The volume
growth was attributable to increased velocity while product mix impacted average
price per case.
Gross profit for the third quarter of fiscal 2020 increased 1.8% to $82.0
million compared to $80.6 million for the third quarter of fiscal 2019. The
increase in gross profit is primarily due to increased volume and reflects a
2.1% decline in cost of sales per case. Gross margin increased to 36.8% of
sales from 36.5% for the third
quarter of fiscal 2019.
Selling, general and administrative expenses for the third quarter of fiscal
2020 were $48.9 million and $49.5 million for the third quarter of fiscal 2019.
The decrease was primarily due to lower distribution, marketing and
administrative costs partially offset by increased selling expenses. As a
percent of net sales, selling, general and administrative expenses declined to
21.9% compared to 22.4% for the third quarter of fiscal 2019.
Other income,net includes interest income of $1.0 million for the third quarter
of fiscal 2020 and $1.2 million for the third quarter of fiscal 2019. The
decrease in interest income is due to lower investment yields.
The Company's effective income tax rate, based upon estimated annual income tax
rates, was 22.3% for the third quarter of fiscal 2020 and 23.0% for the third
quarter of fiscal 2019. 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 25.2020 (first nine months of fiscal 2020) compared to
Nine Months Ended January 26, 2019 (first nine months of fiscal 2019)
Net sales for the first nine months of fiscal 2020 decreased 4.7% to $738.0
million compared to $774.2 million for the first nine months of fiscal 2019. The
decrease in sales resulted primarily from a 4.1% decline in case volume and, to
a lesser extent, a lower average selling price. The volume decline includes an
7.8% decline in Power+ Brands, partially offset by a 4.4% increase in Carbonated
Soft Drinks. Average selling price per case declined .6% primarily due to
changes in product mix.
Gross profit for the first nine months of fiscal 2020 decreased 9.5% to $271.4
million compared to $299.8 million for the first nine months of fiscal 2019. The
decrease in gross profit is due to decreased volume and increased manufacturing
costs. The cost of sales per case increased 2.5% and gross margin declined to
36.8% of sales compared to 38.7% for the first nine months of fiscal 2019.
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Selling, general and administrative expenses for the first nine months of fiscal
2020 decreased $1.6 million to $152.0 million from $153.6 million for the first
nine months of fiscal 2019. The change in selling, general and administrative
expenses was primarily due to increased marketing which was more than offset by
decreased distribution and administration expenses. As a percent of net sales,
selling, general and administrative expenses increased to 20.6% from 19.8%.
Other income,net includes interest income of $2.9 million for the first nine
months of fiscal 2020 and $3.3 million for the first nine months of fiscal 2019.
The decrease in interest income is due to changes in average investment balances
and lower investment yields.
The Company's effective income tax rate, based on estimated annual income tax
rates, was 23.3% for the first nine months of fiscal 2020 and 23.2% for the
first nine months of fiscal 2019. 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 25,
2020, we maintained $100 million unsecured revolving credit facilities, under
which no borrowings were outstanding and $3.1 million of the credit facility 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 and equivalents position increased $105.5 million for the
nine months ended January 25, 2020, which compares to an increase of $80.0
million for the nine months ended January 26, 2019.
Operating Activities
Net cash provided by operating activities for the first nine months of fiscal
2020 amounted to $125.2 million compared to $107.0 million for the first nine
months of fiscal 2019. For the first nine months of fiscal 2020, cash flow was
principally provided by net income of $93.8 million, a decrease in accounts
receivable of $12.3 million, depreciation and amortization aggregating $13.4
million, and a decrease in inventory of $9.5 million offset by decreases in
accounts payable and accruals of $4.0 million. For the first nine months of
fiscal 2019, cash flow was primarily provided by net income of $114.7 million, a
decrease in accounts receivable of $8.0 million, and depreciation and
amortization aggregating $11.5 million offset by an increase in inventory of
$11.2 million and decrease in accounts payable and accruals of $17.0 million.
Investing Activities
Net cash used in investing activities for the first nine months of fiscal
2020 reflects capital expenditures of $15.8 million compared to capital
expenditures of $27.5 million for the first nine months of fiscal 2019. We
intend to continue production capacity and efficiency improvement projects in
fiscal 2020 but expect capital expenditures will decline from fiscal 2019
levels.
Financing Activities
Net cash used in financing activities for the first nine months of fiscal 2020
primarily reflects the repurchase of common shares of $4.3 million.
Financial Position
During the first nine months of fiscal 2020, our working capital increased to
$297.8 million from $224.4 million at April 27, 2019. The increase in working
capital was due to an increase in cash generated by operations,
seasonal reduction in accounts receivable, and in inventory offset by an
increase in liabilities mainly related to the adoption of the new lease
accounting standard ASU 842 "Leases". Trade receivables declined, with days
sales outstanding improving from 30.6 days to 29.6 days. Inventories decreased
$9.5 million and inventory turnover improved to 8.8 from 9.3 times. At January
25, 2020, the current ratio was to 3.7 to 1 compared to 3.3 to 1 at April 27,
2019, primarily due to the increase in cash of $105.5 million partially offset
by the $13.8 million lease liability recognized in conjunction with the adoption
of the new lease standard.
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NATIONAL BEVERAGE CORP. 
