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.
Traditional and typical are not a part of an innovator's vocabulary.
RESULTS OF OPERATIONS
Three Months Ended July 31, 2021 (first quarter of fiscal 2022) compared to
Three Months Ended August 1, 2021 (first quarter of fiscal 2021)
Net sales for the first quarter of fiscal 2022 increased 6.3% to $311.7 million
from $293.4 million for the first quarter of fiscal 2021. The increase in sales
resulted primarily from a 4.7% increase in average selling price per case and
a 1.5% increase in case volume. The volume increase includes a 5.6% increase
in Power+ Brands primarily attributable to increased consumer demand. Certain
labor, raw material and transportation constraints impacted our ability to meet
customer demand.
Gross profit for the first quarter of fiscal 2022 increased to $124.8 million
from $117.2 million for the first quarter of fiscal 2021. The increase in gross
profit is due to increased average selling price per case, changes in product
mix and increased volume, partially offset by a 4.6% increase in cost of sales
per case. The cost of sales per case increase was primarily due to increases in
packaging, ingredients and labor costs. Gross margin was 40.0% for the first
quarter of fiscal 2022 and fiscal 2021.
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Selling, general and administrative expenses for the first quarter of fiscal
2022 increased $3.9 million to $54.4 million from $50.5 million for the first
quarter of fiscal 2021. The increase was primarily due to an increase
in marketing and shipping costs partially offset by a decrease in administrative
costs. As a percent of net sales, selling, general and administrative expenses
increased to 17.5% from 17.2% for the first quarter of fiscal 2021.
Other income (expense) includes interest income of $48,000 for the first quarter
of fiscal 2022 and $276,000 for the first quarter of fiscal 2021. The decrease
in interest income is due to changes in average invested balances and lower
return on investments.
The Company's effective income tax rate, based upon estimated annual income tax
rates, was 23.5% for the first quarter of fiscal 2022 and 23.6% for the first
quarter of fiscal 2021. 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 July 31,
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. 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 $51.9 million for the first quarter of
fiscal 2022.
Net cash provided by operating activities for the first quarter of fiscal 2022
amounted to $56.7 million compared to $51.5 million for the first quarter of
fiscal 2021. Net cash provided by operating activities for the first quarter of
fiscal 2022 was principally provided by net income of $53.8 million,
depreciation and amortization of $4.7 million, and amortization of operating
right of use assets of $3.6 million, offset in part by changes in working
capital and other accounts.
Net cash used in investing activities for the first quarter of fiscal 2022
reflects capital expenditures of $4.8 million, compared to capital expenditures
of $3.7 million for the first quarter of fiscal 2021. We intend to continue
production capacity and efficiency improvement projects, and expect fiscal 2022
capital expenditures to be comparable to fiscal 2021 levels.
Financial Position
At July 31, 2021, our working capital increased to $269.7 million
from $217.7 million at May 1, 2021. The current ratio was 2.8 to 1 at July 31,
2021 compared to 2.5 to 1 at May 1, 2021. Trade receivables increased $12.2
million and days sales outstanding improved to 28.8 from 30.1. Inventories
decreased $1.5 million and inventory turns increased to 9.9 times from
9.6 times.
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NATIONAL BEVERAGE CORP. 
