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
National Beverage Corp., in recent years, has transformed to an innovative,
healthier refreshment company. From our corporate philosophy, development of
products and marketing to manufacturing, we are converting consumers to a
'Better for You' thirst quencher that compassionately cares for their
nutritional health. We are committed to our quest to innovate for the joy,
benefit and enjoyment of our consumers' healthier lifestyle!
National Beverage Corp. is uniquely positioned in three distinctive ways:
(1) The retail industry is in revolution. In prior years, each retailer induced
their consumer with a proprietary brand (especially soft drinks), but today
understands that the well-informed, smart consumer is demanding that
retailers provide recognizable brands that have earned their respective
consumer standing on their merits.
(2) Retail today is in the most competitively-indexed service industry, without
exception. Innovation, plus the urgent time demands on the consumer,
requires quick, expedient shopping. Home delivery is even more of a current
shoppers' choice. Retailers cannot carry slower-moving items that home
delivery will not support.
(3) The new consumer is the most competent/knowledgeable product analyzer ever,
and personal mental/physical lifestyles demand that healthier is their
preferred choice. Calories must qualify as worthy; sugar being enemy #1 in
the life of the Millennial and younger consumers.
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.
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.
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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.
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.
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 often make quarter-to-quarter comparisons unworthy statistics
that force companies to decision making that is not truly beneficial for
investors and shareholders alike.
Traditional and typical are not a part of an innovator's vocabulary.
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RESULTS OF OPERATIONS
The following section generally discusses the fiscal years ended May 1, 2021
(Fiscal 2021) and May 2, 2020 (Fiscal 2020) items and year-to-year comparisons
between Fiscal 2021 and Fiscal 2020. Discussions of fiscal year ended April 27,
2019 (Fiscal 2019) items and year-to-year comparisons between Fiscal 2020 and
Fiscal 2019 can be found in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in Part II, Item 7 of our Annual Report on
Form 10-K for the year ended May 2, 2020, which is available free of charge on
our website at www.nationalbeverage.com. Fiscal 2021 and Fiscal 2019 consisted
of 52 weeks while Fiscal 2020 consisted of 53 weeks.
Net sales for Fiscal 2021 increased 7.2% to $1,072 million compared to $1,000
million for Fiscal 2020 (which contained 53 weeks). The increase in sales
resulted from a 7.1% increase in branded case volume and a minor increase in
average selling price per case due primarily to changes in product mix. Power+
Brands volume increased 10.2% and branded carbonated soft drinks volume
Gross profit for Fiscal 2021 was $421.6 million compared to $370.1 million for
Fiscal 2020. The change in gross profit is due to increased volume and growth in
higher margin Power+Brands coupled with a 3.7% reduction in cost per case. The
cost per case decline resulted primarily from increased volume and lower raw
material costs. Gross margin was 39.3% for Fiscal 2021 compared to 37.0% in
Shipping and handling costs are included in selling, general and administrative
expenses, the classification of which is consistent with many beverage
companies. However, our gross margin may not be comparable to companies that
include shipping and handling costs in cost of sales. See Note 1 of Notes to the
Consolidated Financial Statements.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $193.8 million for Fiscal
2021, decreasing $10.6 million from Fiscal 2020. Selling, general and
administrative expenses reflect reduced marketing and selling costs, partially
offset by increased shipping and handling costs. As a percent of net sales,
selling, general and administrative costs decreased to 18.1% in Fiscal 2021 from
20.4% in Fiscal 2020
Other Income - Net
Other income, net is primarily interest income of $.6 million for Fiscal 2021
and $3.9 million for Fiscal 2020. The change in interest income is due to lower
investment yields and reduced average investment balances.
Our effective tax rate was 23.7% for Fiscal 2021 and 23.3% for Fiscal 2020. The
differences between the effective rate and the federal statutory rate were
primarily due to the effects of state income taxes.
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LIQUIDITY AND FINANCIAL CONDITION
Liquidity and Capital Resources
At May 1, 2021, we maintained $100 million unsecured revolving credit
facilities, under which no borrowings were outstanding and $2.5 million was
reserved for standby letters of credit. Cash generated from operations is our
principal source of funds. We believe that existing capital resources will be
sufficient to meet our liquidity and capital requirements for the next twelve
months. See Note 5 of Notes to the Consolidated Financial Statements.
Expenditures for property, plant and equipment amounted to $25.3 million for
Fiscal 2021 primarily for capital projects to expand our production capacity,
enhance packaging capabilities or improve efficiencies at our production
facilities. We intend to continue production capacity and efficiency improvement
projects in Fiscal 2022 and expect capital expenditures to be comparable to
The Company paid special cash dividends on Common Stock of $279.9 million ($3.00
per share) on January 29, 2021.
The Board of Directors has authorized the Company to repurchase up to
3.2 million shares of common stock. During Fiscal 2021, the Company did not
repurchase any shares. As of May 1, 2021, 1,313,144 shares had been purchased
under the program and 1,886,856 shares were available for repurchase.
Pursuant to a management agreement, we incurred a fee to Corporate Management
Advisors, Inc. (CMA) of $10.7 million for Fiscal 2021 and $10.0 million for
Fiscal 2020. At May 1, 2021, management fees payable to CMA were $2.6 million.
See Note 6 of Notes to the Consolidated Financial Statements.
During Fiscal 2021, $193.8 million was provided by operating activities, $25.3
million was used in investing activities and $279.4 million was used in
financing activities. Cash provided by operating activities increased $16.1
million primarily due to increased net income offset in part by increased
working capital requirements. Cash used in investing activities increased due to
capital expenditures, in order to support production efficiencies and volume
growth. Cash used in financing activities primarily consists of $279.9 million
($3.00 per share) special cash dividend was paid on January 29, 2021.
During Fiscal 2021, our working capital declined to $219.8 million from $319.0
million at May 2, 2020. The decrease in working capital resulted from lower cash
and equivalents due to the January 2021 cash dividend and higher accounts
payable, partially offset by increased inventories and prepaid expenses. Trade
receivables increased slightly and days sales outstanding was 30.1 days at May
1, 2021 compared to 29.5 days at May 2, 2020. Inventories increased $8.0 million
or 12.6% as a result of increases in finished goods and raw materials, while
annual inventory turns increased to 9.6 from 9.4 times. As of May 1, 2021, the
current ratio was 2.5 to 1 compared to 3.3 to 1 at May 2, 2020.
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Contractual obligations at May 1, 2021 are payable as follows:
1 Year 2 to 3 3 to 5 More Than
Total Or less Years Years 5 Years
Operating leases $ 46,614 $ 15,729 $ 18,286 $ 8,288 $ 4,311
Purchase commitments 19,976 19,706 270 - -
Total $ 66,590 $ 35,435 $ 18,556 $ 8,288 $ 4,311
We contribute to certain pension plans under collective bargaining agreements
and to a discretionary profit sharing plan. Annual contributions were
$3.7 million for Fiscal 2021, $3.6 million for Fiscal 2020 and $3.8 million for
Fiscal 2019. See Note 11 of Notes to Consolidated Financial Statements.
We maintain self-insured and deductible programs for certain liability, medical
and workers' compensation exposures. Other long-term liabilities include known
claims and estimated incurred but not reported claims not otherwise covered by
insurance based on actuarial assumptions and historical claims experience. Since
the timing and amount of claim payments vary significantly, we are not able to
reasonably estimate future payments for specific periods and therefore such
payments have not been included in the table above. Standby letters of credit
aggregating $2.5 million have been issued in connection with our self-insurance
programs. These standby letters of credit expire through April 2022 and are
expected to be renewed.
OFF-BALANCE SHEET ARRANGEMENTS AND ESTIMATES
We do not have any off-balance sheet arrangements that have, or are reasonably
likely to have, a current or future material effect on our financial condition.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with United States
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Although these estimates are based on management's knowledge
of current events and actions it may undertake in the future, they may
ultimately differ from actual results. We believe that the critical accounting
policies described in the following paragraphs comprise the most significant
estimates and assumptions used in the preparation of our consolidated financial
statements. For these policies, we caution that future events rarely develop
exactly as estimated and the best estimates routinely require adjustment.
We sell products to a variety of customers and extend credit based on an
evaluation of each customer's financial condition, generally without requiring
collateral. Exposure to credit losses varies by customer principally due to the
financial condition of each customer. We monitor our exposure to credit losses
and maintain allowances for anticipated losses based on our experience with past
due accounts, collectability and our analysis of customer data.
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Impairment of Long-Lived Assets
All long-lived assets, excluding goodwill and intangible assets not subject to
amortization, are evaluated for impairment on the basis of undiscounted cash
flows whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. An impaired asset is written down to
its estimated fair value based on the best information available. Estimated fair
value is generally measured by discounting future cash flows. Goodwill and
intangible assets not subject to amortization are evaluated for impairment
annually or sooner if we believe such assets may be impaired. An impairment loss
is recognized if the carrying amount or, for goodwill, the carrying amount of
its reporting unit, is greater than its fair value.
The Company's effective income tax rate is based on estimates of taxes which
will ultimately be payable. Deferred taxes are recorded to give recognition to
temporary differences between the tax bases of assets or liabilities and their
reported amounts in the financial statements. Valuation allowances are
established to reduce the carrying amounts of deferred tax assets when it is
deemed, more likely than not, that the benefit of deferred tax assets will not
We maintain self-insured and deductible programs for certain liability, medical
and workers' compensation exposures. Accordingly, we accrue for known claims and
estimated incurred but not reported claims not otherwise covered by insurance
based on actuarial assumptions and historical claims experience.
We recognize revenue upon delivery to our customers, based on written sales
terms that do not allow a right of return except in rare instances. Our products
are typically sold on credit; however smaller direct-store delivery accounts may
be sold on a cash basis. Our credit terms normally require payment within 30
days of delivery and may allow discounts for early payment. We estimate and
reserve for bad debt exposure based on our experience with past due accounts,
collectability and our analysis of customer data.
We offer various sales incentive arrangements to our customers that require
customer performance or achievement of certain sales volume targets. Sales
incentives are accrued over the period of benefit or expected sales. When the
incentive is paid in advance, the aggregate incentive is recorded as a prepaid
and amortized over the period of benefit. The recognition of these incentives
involves the use of judgment related to performance and sales volume estimates
that are made based on historical experience and other factors. Sales incentives
are accounted for as a reduction of sales and actual amounts ultimately realized
may vary from accrued amounts. Such differences are recorded once determined and
have historically not been significant.
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National Beverage Corp. and its representatives may make written or oral
statements relating to future events or results relative to our financial,
operational and business performance, achievements, objectives and strategies.
These statements are "forward-looking" within the meaning of the Private
Securities Litigation Reform Act of 1995 and include statements contained in
this report and other filings with the Securities and Exchange Commission and in
reports to our stockholders. Certain statements including, without limitation,
statements containing the words "believes," "anticipates," "intends," "plans,"
"expects," and "estimates" constitute "forward-looking statements" and involve
known and unknown risk, uncertainties and other factors that may cause the
actual results, performance or achievements of our 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 new product and flavor introductions,
fluctuations in the costs and availability of raw materials and packaging
supplies, ability to pass along cost increases to our customers, labor strikes
or work stoppages or other interruptions in the employment of labor, continued
retailer support for our products, changes in brand image, consumer demand and
preferences and our success in creating products geared toward consumers'
tastes, success in implementing business strategies, changes in business
strategy or development plans, government regulations, taxes or fees imposed on
the sale of our products, unfavorable weather conditions and other factors
referenced in this report, filings with the Securities and Exchange Commission
and other reports to our stockholders. We disclaim 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
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