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.
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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.
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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.
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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.
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NATIONAL BEVERAGE CORP. 
