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Table of Contents



 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended August 1, 2020

 

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file number 1-14170

 


NATIONAL BEVERAGE CORP.

(Exact name of registrant as specified in its charter)


 

 

 

Delaware

(State or other jurisdiction of

incorporation or organization)

59-2605822

(I.R.S. Employer Identification No.)

 

 

 

8100 SW Tenth Street, Suite 4000, Fort Lauderdale, FL 33324

(Address of principal executive offices including zip code)

 

(954) 581-0922

(Registrant’s telephone number including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $.01

FIZZ

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (Exchange Act) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.  

 

Large accelerated filer

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

 

The number of shares of registrant’s common stock outstanding as of September 8, 2020 was 46,632,128.

 



 

 

 

NATIONAL BEVERAGE CORP.

 

Form 10Q – QUARTERLY REPORT

For the Quarter Ended August 1, 2020

 

 

 

PART I - FINANCIAL INFORMATION

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 1.

Financial Statements (Unaudited)

Page

 

 

 

 

Condensed Consolidated Balance Sheets as of August 1, 2020 and May 2, 2020

3

 

 

 

 

Condensed Consolidated Statements of Income for the Three Months Ended August 1, 2020 and July 27, 2019

4

 

     

 

 

Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended August 1, 2020 and July 27, 2019

5

 

 

 

 

Condensed Consolidated Statements of Shareholders’ Equity for the Three Months Ended August 1, 2020 and July 27, 2019

6

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended August 1, 2020 and July 27, 2019

7

 

 

 

 

Notes to Condensed Consolidated Financial Statements 

8

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

12

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

13

 

 

 

Item 4.

Controls and Procedures

13

 

 

 

PART II - OTHER INFORMATION

 

 

 

Item 1A.

Risk Factors

15

 

 

 

Item 6.

Exhibits

15

 

 

 

Signatures

16

 

 

 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1.  FINANCIAL STATEMENTS

NATIONAL BEVERAGE CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

 

  

August 1,

   

May 2,

 
  

2020

   

2020

 

Assets

         

Current assets:

         

Cash and equivalents

 $352,519   $304,518 

Trade receivables - net

  103,749    84,921 

Inventories

  63,075    63,482 

Prepaid and other assets

  7,775    7,791 

Total current assets

  527,118    460,712 

Property, plant and equipment - net

  120,550    120,627 

Right-of-use assets, net

  44,485    47,884 

Goodwill

  13,145    13,145 

Intangible assets

  1,615    1,615 

Other assets

  4,748    4,663 

Total assets

 $711,661   $648,646 
          

Liabilities and Shareholders' Equity

         

Current liabilities:

         

Accounts payable

 $74,467   $74,369 

Accrued liabilities

  44,993    42,476 

Operating lease liabilities

  16,481    16,980 

Income taxes payable

  13,724    7,863 

Total current liabilities

  149,665    141,688 

Deferred income taxes - net

  16,054    14,823 

Operating lease liabilities – non current

  29,535    32,159 

Other liabilities

  7,467    7,639 

Total liabilities

  202,721    196,309 

Shareholders' equity:

         

Preferred stock, $1 par value - 1,000,000 shares authorized; Series C - 150,000 shares issued

  150    150 

Common stock, $.01 par value - 200,000,000 shares authorized; 50,817,184 shares issued (50,803,184 at May 2)

  508    508 

Additional paid-in capital

  38,110    37,930 

Retained earnings

  494,566    443,402 

Accumulated other comprehensive (loss)

  (161)

 

  (5,420

)

Treasury stock - at cost:

         

Series C preferred stock - 150,000 shares

  (5,100)

 

  (5,100

)

Common stock - 4,187,056 shares

  (19,133)

 

  (19,133

)

Total shareholders' equity

  508,940    452,337 

Total liabilities and shareholders' equity

 $711,661   $648,646 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

3

 

 

NATIONAL BEVERAGE CORP.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)

 

   

Three Months Ended

 
   

August 1,

   

July 27,

 
   

2020

   

2019

 
                 

Net sales

  $ 293,367     $ 263,568  
                 

Cost of sales

    176,149       166,994  
                 

Gross profit

    117,218       96,574  
                 

Selling, general and administrative expenses

    50,547       51,997  
                 

Operating income

    66,671       44,577  
                 

Other income - net

    276       731  
                 

Income before income taxes

    66,947       45,308  
                 

Provision for income taxes

    15,783       10,766  
                 

Net income

  $ 51,164     $ 34,542  
                 

Earnings per common share:

               

Basic

  $ 1.10     $ .74  

Diluted

  $ 1.09     $ .74  
                 

Weighted average common shares outstanding:

               

Basic

    46,624       46,646  

Diluted

    46,754       46,880  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

4

 

 

NATIONAL BEVERAGE CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

 

   

Three Months Ended

 
   

August 1,

   

July 27,

 
   

2020

   

2019

 
                 

Net income

  $ 51,164     $ 34,542  
                 

Other comprehensive income, net of tax:

               

 

               
Cash flow hedges     5,259       16  
                 

Comprehensive income

  $ 56,423     $ 34,558  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

5

 

 

NATIONAL BEVERAGE CORP.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands)

(Unaudited)

 

   

Three Months Ended

 
   

August 1, 2020

   

July 27, 2019

 
    Shares     Amount     Shares     Amount  

Series C Preferred Stock

                               

Beginning and end of period

    150     $ 150       150     $ 150  
                                 

Common Stock

                               

Beginning of period

    50,803       508       50,678       507  
Stock options exercised     14       -       -       -  
End of period     50,817       508       50,678       507  
                                 

Additional Paid-In Capital

                               

Beginning of period

            37,930               37,065  

Stock options exercised

            139               7  

Stock-based compensation

            41               62  

End of period

            38,110               37,134  
                                 

Retained Earnings

                               

Beginning of period

            443,402               313,430  

Net income

            51,164               34,542  

End of period

            494,566               347,972  
                                 

Accumulated Other Comprehensive (Loss) Income

                               

Beginning of period

            (5,420 )             (1,543

)

Cash flow hedges, net of tax

            5,259               16  

End of period

            (161 )             (1,527

)

                                 

Treasury Stock - Series C Preferred

                               

Beginning and end of period

    150       (5,100 )     150       (5,100

)

                                 

Treasury Stock - Common

                               

Beginning and end of period

    4,187       (19,133 )     4,033       (12,900

)

                                 

Total Shareholders' Equity

          $ 508,940             $ 366,236  

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

6

 

 

NATIONAL BEVERAGE CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

  

Three Months Ended

 
  

August 1,

  

July 27,

 
  

2020

  

2019

 

Operating Activities:

        

Net income

 $51,164  $34,542 

Adjustments to reconcile net income to net cash provided by operating activities:

        

Depreciation and amortization

  4,627   4,446 

Deferred income tax benefit

  (151)  (428

)

Loss on disposal of property, net

  2   46 

Stock-based compensation

  41   62 
Amortization of operating right to use assets  3,399   3,435 

Changes in assets and liabilities:

        

Trade receivables

  (18,828)  38 

Inventories

  407   (2,731)

Prepaid and other assets

  (163)  3,154 

Accounts payable

  98   (493

)

Accrued and other liabilities

  10,933   8,540 

Net cash provided by operating activities

  51,529   50,611 
         

Investing Activities:

        

Additions to property, plant and equipment

  (3,668)  (4,156

)

Proceeds from sale of property, plant and equipment

  1   6 

Net cash used in investing activities

  (3,667)  (4,150

)

         

Financing Activities:

        

Proceeds from stock options exercised

  139   7 

Net cash provided by financing activities

  139   7 
         

Net Increase in Cash and Equivalents

  48,001   46,468 
         

Cash and Equivalents - Beginning of Period

  304,518   156,200 
         

Cash and Equivalents - End of Period

 $352,519  $202,668 
         

Other Cash Flow Information:

        

Interest paid

 $13  $13 

Income taxes paid

 $1,240  $- 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

7

 

NATIONAL BEVERAGE CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

National Beverage Corp. develops, produces, markets and sells a distinctive portfolio of sparkling waters, juices, energy drinks and carbonated soft drinks primarily in the United States and Canada. Incorporated in Delaware in 1985, National Beverage Corp. is a holding company for various operating subsidiaries. When used in this report, the terms “we,” “us,” “our,” “Company” and “National Beverage” mean National Beverage Corp. and its subsidiaries.

 

 

 

1. SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENT

 

Basis of Presentation

The condensed consolidated financial statements include the accounts of National Beverage Corp. and its subsidiaries. Significant intercompany transactions and accounts have been eliminated.

 

The condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and rules and regulations of the Securities and Exchange Commission for interim financial reporting. Accordingly, they do not include all information and notes presented in the annual consolidated financial statements. The condensed consolidated financial statements should be read in conjunction with the annual consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended May 2, 2020. The accounting policies used in these interim condensed consolidated financial statements are consistent with those used in the annual consolidated financial statements.

 

The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Results for the interim periods presented are not necessarily indicative of results which might be expected for the entire fiscal year.

 

Reclassification

Certain reclassifications have been made to prior period balances in order to conform to the current period's presentation.

 

Inventories

Inventories are stated at the lower of first-in, first-out cost or market. Inventories at August 1, 2020 were comprised of finished goods of $33.9 million and raw materials of $29.2 million. Inventories at May 2, 2020 were comprised of finished goods of $39.1 million and raw materials of $24.4 million.

 

Marketing Costs

The Company utilizes a variety of marketing programs, including cooperative advertising programs with customers, to advertise and promote our products to consumers.  Marketing costs are expensed when incurred, except for prepaid advertising and production costs which are expensed when the advertising takes place.  Marketing costs, which are included in selling, general and administrative expenses, totaled $9.9 million for the three months ended August 1, 2020 and $15.1 for the three months ended July 27, 2019. 

 

Shipping and Handling Costs

Shipping and handling costs are reported in selling, general and administrative expenses in the accompanying condensed consolidated statements of income.  Such costs totaled $19.4 million for the three months ended August 1, 2020 and $18.0 for the three months ended July 27, 2019.  Although our classification is consistent with many beverage companies, our gross margin may not be comparable to companies that include shipping and handling costs in cost of sales.  

 

Summary of Significant Accounting Policies

There have been no significant changes in the Company's significant accounting policies during the three months ended August 1, 2020, as compared to the significant accounting policies described in the Form 10-K.

 

Recent Accounting Pronouncement

On December 18, 2019, the Financial Accounting Standards Board issued Accounting Standards Update, “Simplifying the Accounting for Income Taxes” (ASU 2019-12). The new standard reduces the complexity pertaining to certain areas in accounting for income taxes. Key elements include, but are not limited to, the elimination of certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating taxes during the quarters and the recognition of deferred tax liabilities for outside basis differences. This guidance also simplifies aspects of the accounting for franchise taxes and changes in tax laws or rates, as well as clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.  ASU 2019-12 is effective for the Company's first quarter of fiscal year 2022.  The Company is in the process of evaluating the impact of the adoption of this new standard on its condensed consolidated financial statements.

 

8

 
 

2. PROPERTY, PLANT AND EQUIPMENT

 

Property, plant and equipment consist of the following:

 

   

(In thousands)

 
   

August 1,

2020

     

May 2,

2020

 

Land

  $ 9,835       $ 9,835  

Buildings and improvements

    60,358         59,618  

Machinery and equipment

    241,178         238,300  

Total

    311,371         307,753  

Less accumulated depreciation

    (190,821 )

 

    (187,126

)

Property, plant and equipment – net

  $ 120,550       $ 120,627  

 

Depreciation expense was $3.7 million for the three months ended August 1, 2020 and $3.8 million for the three months ended July 27, 2019.

 

 

 

3. DEBT

 

At August 1, 2020, a subsidiary of the Company maintained unsecured revolving credit facilities with banks aggregating $100 million (the “Credit Facilities”). The Credit Facilities expire from October 3, 2020 to June 18, 2021 and any borrowings would currently bear interest at .9% above one-month LIBOR. There were no borrowings outstanding under the Credit Facilities at August 1, 2020 or May 2, 2020. At August 1, 2020, $3.4 million of the Credit Facilities was reserved for standby letters of credit and $96.6 million was available for borrowings.

 

The Credit Facilities require the subsidiary to maintain certain financial ratios, including debt to net worth and debt to EBITDA (as defined in the Credit Facilities), and contain other restrictions, none of which are expected to have a material effect on our operations or financial position. At August 1, 2020, we were in compliance with all loan covenants.

 

 

 

4. STOCK-BASED COMPENSATION

 

During the three months ended August 1, 2020, options to purchase 14,000 shares were exercised (weighted average exercise price of $9.95 per share). At August 1, 2020, options to purchase 173,045 shares (weighted average exercise price of $14.71 per share) were outstanding and stock-based awards to purchase 2,798,252 shares of common stock were available for grant.

 

9

 

 

5. DERIVATIVE FINANCIAL INSTRUMENTS

 

From time to time, we enter into aluminum swap contracts to partially mitigate our exposure to changes in the cost of aluminum cans. Such financial instruments are designated and accounted for as cash flow hedges. Accordingly, gains or losses attributable to the effective portion of the cash flow hedges are reported in Accumulated Other Comprehensive Income (Loss) (“AOCI”) and reclassified into cost of sales in the period in which the hedged transaction affects earnings. The ineffective portion of the change in fair value of our cash flow hedges was immaterial. The following summarizes the gains (losses) recognized in the Condensed Consolidated Statements of Income and AOCI relative to the cash flow hedge for the three months ended August 1, 2020 and July 27, 2019:

 

   

(In thousands)

 
   

2020

   

2019

 

Recognized in AOCI:

               

Gain (loss) before income taxes

  $ 5,080     $ (1,423

)

Less income tax provision (benefit) 

    1,215       (340

)

Net

    3,865       (1,083

)

Reclassified from AOCI to cost of sales:

               

(Loss) before income taxes

    (1,832 )     (1,444

)

Less income tax (benefit) 

    (438 )     (345

)

Net

    (1,394 )     (1,099

)

Net change to AOCI

  $ 5,259     $ 16  

 

As of August 1, 2020, the notional amount of our outstanding aluminum swap contracts was $37.1 million and, assuming no change in commodity prices, $130,000 of unrealized losses before tax will be reclassified from AOCI and recognized in earnings over the next 12 months.

 

As of August 1, 2020, the fair value of the derivative asset was $1.0 million, which was included as a component of prepaid and other assets and the fair value of the derivative liability was $987,000 which was included as a component of accrued liabilities.  At May 2, 2020, the fair value of the derivative liability was $6.9 million, which was included as a component of accrued liabilities. Such valuation does not entail a significant amount of judgment and the inputs that are significant to the fair value measurement are Level 2 as defined by the fair value hierarchy as they are observable market based inputs or unobservable inputs that are corroborated by market data.

 

10

 

 

6. LEASES

 

The Company has entered into various non-cancelable operating lease agreements for certain of our offices, buildings, machinery and equipment expiring at various dates through January 2029. The Company does not assume renewals in the determination of the lease term unless the renewals are deemed to be reasonably assured at lease commencement. Lease agreements generally do not contain material residual value guarantees or material restrictive covenants. Operating lease cost for the three months ended August 1, 2020 and July 27, 2019 was $3.4 million.  As of August 1, 2020, the weighted-average remaining lease term and weighted average discount rate of operating leases was 4.1 years and 3.38%, respectively. As of May 2, 2020, the weighted-average remaining lease term and weighted average discount rate of operating leases was 4.3 years and 3.38%, respectively. Cash payments were $3.5 million and $3.7 million, respectively for operating leases for the three months ended August 1, 2020 and July 27, 2019.

 

The following is a summary of future minimum lease payments and related liabilities for all non-cancelable operating leases as of August 1, 2020:

 

  

(In thousands)

 

Fiscal 2021 - Remaining 3 quarters

 $10,725 

Fiscal 2022

  13,276 

Fiscal 2023

  8,975 

Fiscal 2024

  7,361 

Fiscal 2025

  4,475 

Thereafter

  4,101 

Total minimum lease payments including interest

  48,913 

Less: Amounts representing interest

  (2,897

)

Present value of minimum lease payments

  46,016 

Less: Current portion of lease liabilities

  (16,481

)

Non-current portion of lease liabilities

 $29,535 

 

 

The following is a summary of future minimum lease payments and related liabilities for all non-cancelable operating leases as of May 2, 2020:

 

  

(In thousands)

 

Fiscal 2021

 $14,206 

Fiscal 2022

  13,276 

Fiscal 2023

  8,975 

Fiscal 2024

  7,361 

Fiscal 2025

  4,475 

Thereafter

  4,101 

Total minimum lease payments including interest

  52,394 

Less: Amounts representing interest

  (3,255

)

Present value of minimum lease payments

  49,139 

Less: Current portion of lease liabilities

  (16,980

)

Non-current portion of lease liabilities

 $32,159 

 

11

 

 

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

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.

 

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 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 August 1, 2020 (first quarter of fiscal 2021) compared to Three Months Ended July 27, 2019 (first quarter of fiscal 2020)

 

Net sales for the first quarter of fiscal 2021 increased 11.3% to $293.4 million from $263.6 million for the first quarter of fiscal 2020. The increase in sales resulted primarily from a 12.3% increase in case volume. The volume increase includes a 15.7% increase of our Power+ Brands, and 5.1% growth in Carbonated Soft Drinks. The increase in Power+ Brands volume is primarily attributable to increased consumer demand in the take-home channel.  Average selling price per case was flat.   

 

Gross profit for the first quarter of fiscal 2021 increased to $117.2 million from $96.6 million for the first quarter of fiscal 2020. The increase in gross profit is due to increased volume and reduced raw material costs. The cost of sales per case decreased 5.2% and gross margin increased to 40.0% from 36.6% for the first quarter of fiscal 2020.   

 

Selling, general and administrative expenses for the first quarter of fiscal 2021 decreased $1.5 million to $50.5 million from $52.0 million for the first quarter of fiscal 2020. The decrease was primarily due to reduced marketing and selling costs partially offset by increased shipping costs.  As a percent of net sales, selling, general and administrative expenses decreased to 17.2% from 19.7% for the first quarter of fiscal 2020.

 

Other income includes interest income of $276,000 for the first quarter of fiscal 2021 and $731,000 for the first quarter 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 quarter of fiscal 2021 and 23.8% for the first 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.

 

12

 

LIQUIDITY AND FINANCIAL CONDITION

 

Liquidity and Capital Resources

Our principal source of funds is cash generated from operations. At August 1, 2020, 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 increased $48.0 million for the first quarter of fiscal 2021, which compares to an increase of $46.5 million for the first quarter of fiscal 2020.

 

Net cash provided by operating activities for the first quarter of fiscal 2021 amounted to $51.5 million compared to $50.6 million for the first quarter of fiscal 2020. For the first quarter of fiscal 2021, cash flow was principally provided by net income of $51.1 million, an increase in accrued and other liabilities of $10.9 million and depreciation and amortization aggregating $4.6 million, offset in part by sales volume and other related increases in trade receivables. 

 

Net cash used in investing activities for the first quarter of fiscal 2021 reflects capital expenditures of $3.7 million, compared to capital expenditures of $4.2 million for the first quarter of fiscal 2020. We intend to continue production capacity and efficiency improvement projects in fiscal 2021, and expect capital expenditures to be comparable to fiscal 2020 levels. 

 

Financial Position

At August 1, 2020, our working capital increased to $377.5 million from $319.0 million at May 2, 2020. The current ratio was 3.5 to 1 at August 1, 2020 compared to 3.3 to 1 at May 2, 2020.  The $58.5 million increase in working capital was due to higher cash and trade receivables, partially offset by higher accrued liabilities, and income taxes payable. Trade receivables increased $18.8 million during the first quarter of 2020 due to increased sales and days sales outstanding remained unchanged at 32.2 days.  Inventories decreased slightly during the first quarter of 2020 and inventory turns remained unchanged at 9.4 times. 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

There have been no material changes in market risks from those reported in our Annual Report on Form 10-K for the fiscal year ended May 2, 2020.

 

ITEM 4. CONTROLS AND PROCEDURES

 

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of the Company’s management, including our Chief Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective to ensure information required to be disclosed by us in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (2) accumulated and communicated to our management, including our Chief Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosure.

 

13

 

There were no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

FORWARD-LOOKING STATEMENTS

 

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 developments.

 

14

 

PART II - OTHER INFORMATION

 

ITEM 1A. RISK FACTORS

 

There have been no material changes in risk factors from those reported in our Annual Report on Form 10-K for the fiscal year ended May 2, 2020.

 

ITEM 6. EXHIBITS

 

Exhibit

No.

Description

 

 

 

 

 

 

 31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

 

 31.2

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

 

 32.1

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

 

 32.2

Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

 

 101

The following financial information from National Beverage Corp. Quarterly Report on Form 10-Q for the quarterly period ended August 1, 2020, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Income; (iii) Consolidated Statements of Comprehensive Income; (iv) Consolidated Statements of Shareholders’ Equity; (v) Consolidated Statements of Cash Flows; and (vi) the Notes to Consolidated Financial Statements.

     
   104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

15

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date: September 10, 2020

 

 

National Beverage Corp.

 

 

(Registrant)

 

 

 

 

 

 

By:

/s/ George R. Bracken

 

 

 

George R. Bracken

 

 

 

Executive Vice President – Finance

(Principal Financial Officer)

 

 

 

 

 

  

16
ex_194047.htm

EXHIBIT 31.1

 

CERTIFICATION

 

I, Nick A. Caporella, certify that:

 

1.

I have reviewed this quarterly report on Form 10-Q of National Beverage Corp.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date: September 10, 2020

 

/s/ Nick A. Caporella

Nick A. Caporella

Chairman of the Board and

Chief Executive Officer

 

 
ex_194048.htm

Exhibit 31.2

 

CERTIFICATION

 

I, George R. Bracken, certify that:

 

1.

I have reviewed this quarterly report on Form 10-Q of National Beverage Corp.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date: September 10, 2020

 

/s/ George R. Bracken

George R. Bracken

Executive Vice President – Finance

(Principal Financial Officer)

 

 
ex_194049.htm

EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

 

In connection with the Quarterly Report of National Beverage Corp. (the “Company”) on Form 10-Q for the period ended August 1, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Nick A. Caporella, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: September 10, 2020

 

/s/ Nick A. Caporella

Nick A. Caporella

Chairman of the Board and

Chief Executive Officer

 

 
ex_194050.htm

EXHIBIT 32.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

 

In connection with the Quarterly Report of National Beverage Corp. (the “Company”) on Form 10-Q for the period ended August 1, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, George R. Bracken, Executive Vice President - Finance of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

Date: September 10, 2020

 

/s/ George R. Bracken

George R. Bracken

Executive Vice President – Finance

(Principal Financial Officer)

 

 
v3.20.2
Document And Entity Information - shares
3 Months Ended
Aug. 01, 2020
Sep. 08, 2020
Document Information [Line Items]    
Entity Central Index Key 0000069891  
Entity Registrant Name National Beverage Corp.  
Amendment Flag false  
Current Fiscal Year End Date --05-02  
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2021  
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Aug. 01, 2020  
Document Transition Report false  
Entity File Number 1-14170  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 59-2605822  
Entity Address, Address Line One 8100 SW Tenth Street, Suite 4000  
Entity Address, City or Town Fort Lauderdale  
Entity Address, State or Province FL  
Entity Address, Postal Zip Code 33324  
City Area Code 954  
Local Phone Number 581-0922  
Title of 12(b) Security Common Stock, par value $.01  
Trading Symbol FIZZ  
Security Exchange Name NASDAQ  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   46,632,128
v3.20.2
Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)
$ in Thousands
Aug. 01, 2020
May 02, 2020
Assets    
Cash and equivalents $ 352,519 $ 304,518
Trade receivables - net 103,749 84,921
Inventories 63,075 63,482
Prepaid and other assets 7,775 7,791
Total current assets 527,118 460,712
Property, plant and equipment - net 120,550 120,627
Right-of-use assets, net 44,485 47,884
Goodwill 13,145 13,145
Intangible assets 1,615 1,615
Other assets 4,748 4,663
Total assets 711,661 648,646
Liabilities and Shareholders' Equity    
Accounts payable 74,467 74,369
Accrued liabilities 44,993 42,476
Operating lease liabilities 16,481 16,980
Income taxes payable 13,724 7,863
Total current liabilities 149,665 141,688
Deferred income taxes net 16,054 14,823
Operating lease liabilities – non current 29,535 32,159
Other liabilities 7,467 7,639
Total liabilities 202,721 196,309
Shareholders' equity:    
Preferred stock, $1 par value - 1,000,000 shares authorized; Series C - 150,000 shares issued 150 150
Common stock, $.01 par value - 200,000,000 shares authorized; 50,817,184 shares issued (50,803,184 at May 2) 508 508
Additional paid-in capital 38,110 37,930
Retained earnings 494,566 443,402
Accumulated other comprehensive (loss) (161) (5,420)
Total shareholders' equity 508,940 452,337
Total liabilities and shareholders' equity 711,661 648,646
Treasury Stock, Common [Member]    
Shareholders' equity:    
Treasury stock, value (19,133) (19,133)
Series C Preferred Stock [Member]    
Shareholders' equity:    
Treasury stock, value $ (5,100) $ (5,100)
v3.20.2
Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares
Aug. 01, 2020
May 02, 2020
Preferred stock, par value (in dollars per share) $ 1 $ 1
Preferred stock, shares authorized (in shares) 1,000,000 1,000,000
Preferred stock, shares issued (in shares) 150,000 150,000
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 200,000,000 200,000,000
Common stock, shares issued (in shares) 50,817,184 50,803,184
Treasury Stock, Common [Member]    
Treasury stock, shares (in shares) 4,187,056 4,187,056
Series C Preferred Stock [Member]    
Treasury stock, shares (in shares) 150,000 150,000
v3.20.2
Condensed Consolidated Statements of Income (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Aug. 01, 2020
Jul. 27, 2019
Net sales $ 293,367 $ 263,568
Cost of sales 176,149 166,994
Gross profit 117,218 96,574
Selling, general and administrative expenses 50,547 51,997
Operating income 66,671 44,577
Other income - net 276 731
Income before income taxes 66,947 45,308
Provision for income taxes 15,783 10,766
Net income $ 51,164 $ 34,542
Earnings per common share:    
Basic (in dollars per share) $ 1.10 $ 74
Diluted (in dollars per share) $ 1.09 $ 74
Weighted average common shares outstanding:    
Basic (in shares) 46,624 46,646
Diluted (in shares) 46,754 46,880
v3.20.2
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Aug. 01, 2020
Jul. 27, 2019
Net income $ 51,164 $ 34,542
Other comprehensive income, net of tax:    
Cash flow hedges 5,259 16
Comprehensive income $ 56,423 $ 34,558
v3.20.2
Condensed Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
Total
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
AOCI Attributable to Parent [Member]
Treasury Stock [Member]
Series C Preferred Stock [Member]
Preferred Stock [Member]
Series C Preferred Stock [Member]
Treasury Stock [Member]
Balance (in shares) at Apr. 27, 2019   50,678         150 150
Balance at Apr. 27, 2019   $ 507 $ 37,065 $ 313,430 $ (1,543)   $ 150 $ (5,100)
Stock options exercised     7          
Balance (in shares) at Jul. 27, 2019   50,678       4,033    
Balance at Jul. 27, 2019 $ 366,236 $ 507 37,134 347,972 (1,527) $ (12,900)    
Stock-based compensation     62          
Net income 34,542     34,542        
Cash flow hedges, net of tax 16       16      
Balance (in shares) at May. 02, 2020   50,803         150 150
Balance at May. 02, 2020 452,337 $ 508 37,930 443,402 (5,420)   $ 150 $ (5,100)
Stock options exercised   $ 14 139          
Balance (in shares) at Aug. 01, 2020   50,817       4,187    
Balance at Aug. 01, 2020 508,940 $ 508 38,110 494,566 (161) $ (19,133)    
Stock-based compensation     $ 41          
Net income 51,164     $ 51,164        
Cash flow hedges, net of tax $ 5,259       $ 5,259      
v3.20.2
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Aug. 01, 2020
Jul. 27, 2019
Operating Activities:    
Net income $ 51,164 $ 34,542
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 4,627 4,446
Deferred income tax benefit (151) (428)
Loss on disposal of property, net 2 46
Stock-based compensation 41 62
Amortization of operating right to use assets 3,399 3,435
Changes in assets and liabilities:    
Trade receivables (18,828) 38
Inventories 407 (2,731)
Prepaid and other assets (163) 3,154
Accounts payable 98 (493)
Accrued and other liabilities 10,933 8,540
Net cash provided by operating activities 51,529 50,611
Investing Activities:    
Additions to property, plant and equipment (3,668) (4,156)
Proceeds from sale of property, plant and equipment 1 6
Net cash used in investing activities (3,667) (4,150)
Financing Activities:    
Proceeds from stock options exercised 139 7
Net cash provided by financing activities 139 7
Net Increase in Cash and Equivalents 48,001 46,468
Cash and Equivalents - Beginning of Period 304,518 156,200
Cash and Equivalents - End of Period 352,519 202,668
Other Cash Flow Information:    
Interest paid 13 13
Income taxes paid $ 1,240 $ 0
v3.20.2
Note 1 - Significant Accounting Policies and Recently Adopted Accounting Pronouncement
3 Months Ended
Aug. 01, 2020
Notes to Financial Statements  
Significant Accounting Policies [Text Block]

1. SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENT

 

Basis of Presentation

The condensed consolidated financial statements include the accounts of National Beverage Corp. and its subsidiaries. Significant intercompany transactions and accounts have been eliminated.

 

The condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and rules and regulations of the Securities and Exchange Commission for interim financial reporting. Accordingly, they do not include all information and notes presented in the annual consolidated financial statements. The condensed consolidated financial statements should be read in conjunction with the annual consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended May 2, 2020. The accounting policies used in these interim condensed consolidated financial statements are consistent with those used in the annual consolidated financial statements.

 

The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Results for the interim periods presented are not necessarily indicative of results which might be expected for the entire fiscal year.

 

Reclassification

Certain reclassifications have been made to prior period balances in order to conform to the current period's presentation.

 

Inventories

Inventories are stated at the lower of first-in, first-out cost or market. Inventories at August 1, 2020 were comprised of finished goods of $33.9 million and raw materials of $29.2 million. Inventories at May 2, 2020 were comprised of finished goods of $39.1 million and raw materials of $24.4 million.

 

Marketing Costs

The Company utilizes a variety of marketing programs, including cooperative advertising programs with customers, to advertise and promote our products to consumers.  Marketing costs are expensed when incurred, except for prepaid advertising and production costs which are expensed when the advertising takes place.  Marketing costs, which are included in selling, general and administrative expenses, totaled $9.9 million for the three months ended August 1, 2020 and $15.1 for the three months ended July 27, 2019. 

 

Shipping and Handling Costs

Shipping and handling costs are reported in selling, general and administrative expenses in the accompanying condensed consolidated statements of income.  Such costs totaled $19.4 million for the three months ended August 1, 2020 and $18.0 for the three months ended July 27, 2019.  Although our classification is consistent with many beverage companies, our gross margin may not be comparable to companies that include shipping and handling costs in cost of sales.  

 

Summary of Significant Accounting Policies

There have been no significant changes in the Company's significant accounting policies during the three months ended August 1, 2020, as compared to the significant accounting policies described in the Form 10-K.

 

Recent Accounting Pronouncement

On December 18, 2019, the Financial Accounting Standards Board issued Accounting Standards Update, “Simplifying the Accounting for Income Taxes” (ASU 2019-12). The new standard reduces the complexity pertaining to certain areas in accounting for income taxes. Key elements include, but are not limited to, the elimination of certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating taxes during the quarters and the recognition of deferred tax liabilities for outside basis differences. This guidance also simplifies aspects of the accounting for franchise taxes and changes in tax laws or rates, as well as clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.  ASU 2019-12 is effective for the Company's first quarter of fiscal year 2022.  The Company is in the process of evaluating the impact of the adoption of this new standard on its condensed consolidated financial statements.

 

v3.20.2
Note 2 - Property, Plant and Equipment
3 Months Ended
Aug. 01, 2020
Notes to Financial Statements  
Property, Plant and Equipment Disclosure [Text Block]

2. PROPERTY, PLANT AND EQUIPMENT

 

Property, plant and equipment consist of the following:

 

   

(In thousands)

 
   

August 1,

2020

     

May 2,

2020

 

Land

  $ 9,835       $ 9,835  

Buildings and improvements

    60,358         59,618  

Machinery and equipment

    241,178         238,300  

Total

    311,371         307,753  

Less accumulated depreciation

    (190,821 )

 

    (187,126

)

Property, plant and equipment – net

  $ 120,550       $ 120,627  

 

Depreciation expense was $3.7 million for the three months ended August 1, 2020 and $3.8 million for the three months ended July 27, 2019.

v3.20.2
Note 3 - Debt
3 Months Ended
Aug. 01, 2020
Notes to Financial Statements  
Debt Disclosure [Text Block]

3. DEBT

 

At August 1, 2020, a subsidiary of the Company maintained unsecured revolving credit facilities with banks aggregating $100 million (the “Credit Facilities”). The Credit Facilities expire from October 3, 2020 to June 18, 2021 and any borrowings would currently bear interest at .9% above one-month LIBOR. There were no borrowings outstanding under the Credit Facilities at August 1, 2020 or May 2, 2020. At August 1, 2020, $3.4 million of the Credit Facilities was reserved for standby letters of credit and $96.6 million was available for borrowings.

 

The Credit Facilities require the subsidiary to maintain certain financial ratios, including debt to net worth and debt to EBITDA (as defined in the Credit Facilities), and contain other restrictions, none of which are expected to have a material effect on our operations or financial position. At August 1, 2020, we were in compliance with all loan covenants.

v3.20.2
Note 4 - Stock-based Compensation
3 Months Ended
Aug. 01, 2020
Notes to Financial Statements  
Share-based Payment Arrangement [Text Block]

4. STOCK-BASED COMPENSATION

 

During the three months ended August 1, 2020, options to purchase 14,000 shares were exercised (weighted average exercise price of $9.95 per share). At August 1, 2020, options to purchase 173,045 shares (weighted average exercise price of $14.71 per share) were outstanding and stock-based awards to purchase 2,798,252 shares of common stock were available for grant.

 

v3.20.2
Note 5 - Derivative Financial Instruments
3 Months Ended
Aug. 01, 2020
Notes to Financial Statements  
Derivative Instruments and Hedging Activities Disclosure [Text Block]

5. DERIVATIVE FINANCIAL INSTRUMENTS

 

From time to time, we enter into aluminum swap contracts to partially mitigate our exposure to changes in the cost of aluminum cans. Such financial instruments are designated and accounted for as cash flow hedges. Accordingly, gains or losses attributable to the effective portion of the cash flow hedges are reported in Accumulated Other Comprehensive Income (Loss) (“AOCI”) and reclassified into cost of sales in the period in which the hedged transaction affects earnings. The ineffective portion of the change in fair value of our cash flow hedges was immaterial. The following summarizes the gains (losses) recognized in the Condensed Consolidated Statements of Income and AOCI relative to the cash flow hedge for the three months ended August 1, 2020 and July 27, 2019:

 

   

(In thousands)

 
   

2020

   

2019

 

Recognized in AOCI:

               

Gain (loss) before income taxes

  $ 5,080     $ (1,423

)

Less income tax provision (benefit) 

    1,215       (340

)

Net

    3,865       (1,083

)

Reclassified from AOCI to cost of sales:

               

(Loss) before income taxes

    (1,832 )     (1,444

)

Less income tax (benefit) 

    (438 )     (345

)

Net

    (1,394 )     (1,099

)

Net change to AOCI

  $ 5,259     $ 16  

 

As of August 1, 2020, the notional amount of our outstanding aluminum swap contracts was $37.1 million and, assuming no change in commodity prices, $130,000 of unrealized losses before tax will be reclassified from AOCI and recognized in earnings over the next 12 months.

 

As of August 1, 2020, the fair value of the derivative asset was $1.0 million, which was included as a component of prepaid and other assets and the fair value of the derivative liability was $987,000 which was included as a component of accrued liabilities.  At May 2, 2020, the fair value of the derivative liability was $6.9 million, which was included as a component of accrued liabilities. Such valuation does not entail a significant amount of judgment and the inputs that are significant to the fair value measurement are Level 2 as defined by the fair value hierarchy as they are observable market based inputs or unobservable inputs that are corroborated by market data.

 

v3.20.2
Note 6 - Leases
3 Months Ended
Aug. 01, 2020
Notes to Financial Statements  
Lessee, Operating Leases [Text Block]

6. LEASES

 

The Company has entered into various non-cancelable operating lease agreements for certain of our offices, buildings, machinery and equipment expiring at various dates through January 2029. The Company does not assume renewals in the determination of the lease term unless the renewals are deemed to be reasonably assured at lease commencement. Lease agreements generally do not contain material residual value guarantees or material restrictive covenants. Operating lease cost for the three months ended August 1, 2020 and July 27, 2019 was $3.4 million.  As of August 1, 2020, the weighted-average remaining lease term and weighted average discount rate of operating leases was 4.1 years and 3.38%, respectively. As of May 2, 2020, the weighted-average remaining lease term and weighted average discount rate of operating leases was 4.3 years and 3.38%, respectively. Cash payments were $3.5 million and $3.7 million, respectively for operating leases for the three months ended August 1, 2020 and July 27, 2019.

 

The following is a summary of future minimum lease payments and related liabilities for all non-cancelable operating leases as of August 1, 2020:

 

  

(In thousands)

 

Fiscal 2021 - Remaining 3 quarters

 $10,725 

Fiscal 2022

  13,276 

Fiscal 2023

  8,975 

Fiscal 2024

  7,361 

Fiscal 2025

  4,475 

Thereafter

  4,101 

Total minimum lease payments including interest

  48,913 

Less: Amounts representing interest

  (2,897

)

Present value of minimum lease payments

  46,016 

Less: Current portion of lease liabilities

  (16,481

)

Non-current portion of lease liabilities

 $29,535 

 

 

The following is a summary of future minimum lease payments and related liabilities for all non-cancelable operating leases as of May 2, 2020:

 

  

(In thousands)

 

Fiscal 2021

 $14,206 

Fiscal 2022

  13,276 

Fiscal 2023

  8,975 

Fiscal 2024

  7,361 

Fiscal 2025

  4,475 

Thereafter

  4,101 

Total minimum lease payments including interest

  52,394 

Less: Amounts representing interest

  (3,255

)

Present value of minimum lease payments

  49,139 

Less: Current portion of lease liabilities

  (16,980

)

Non-current portion of lease liabilities

 $32,159 

 

v3.20.2
Significant Accounting Policies (Policies)
3 Months Ended
Aug. 01, 2020
Accounting Policies [Abstract]  
Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

The condensed consolidated financial statements include the accounts of National Beverage Corp. and its subsidiaries. Significant intercompany transactions and accounts have been eliminated.

 

The condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and rules and regulations of the Securities and Exchange Commission for interim financial reporting. Accordingly, they do not include all information and notes presented in the annual consolidated financial statements. The condensed consolidated financial statements should be read in conjunction with the annual consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended May 2, 2020. The accounting policies used in these interim condensed consolidated financial statements are consistent with those used in the annual consolidated financial statements.

 

The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Results for the interim periods presented are not necessarily indicative of results which might be expected for the entire fiscal year.

 

Reclassification, Comparability Adjustment [Policy Text Block]

Reclassification

Certain reclassifications have been made to prior period balances in order to conform to the current period's presentation.

 

Inventory, Policy [Policy Text Block]

Inventories

Inventories are stated at the lower of first-in, first-out cost or market. Inventories at August 1, 2020 were comprised of finished goods of $33.9 million and raw materials of $29.2 million. Inventories at May 2, 2020 were comprised of finished goods of $39.1 million and raw materials of $24.4 million.

 

Advertising Cost [Policy Text Block]

Marketing Costs

The Company utilizes a variety of marketing programs, including cooperative advertising programs with customers, to advertise and promote our products to consumers.  Marketing costs are expensed when incurred, except for prepaid advertising and production costs which are expensed when the advertising takes place.  Marketing costs, which are included in selling, general and administrative expenses, totaled $9.9 million for the three months ended August 1, 2020 and $15.1 for the three months ended July 27, 2019. 

 

Shipping and Handling Cost, Policy [Policy Text Block]

Shipping and Handling Costs

Shipping and handling costs are reported in selling, general and administrative expenses in the accompanying condensed consolidated statements of income.  Such costs totaled $19.4 million for the three months ended August 1, 2020 and $18.0 for the three months ended July 27, 2019.  Although our classification is consistent with many beverage companies, our gross margin may not be comparable to companies that include shipping and handling costs in cost of sales.  

 

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncement

On December 18, 2019, the Financial Accounting Standards Board issued Accounting Standards Update, “Simplifying the Accounting for Income Taxes” (ASU 2019-12). The new standard reduces the complexity pertaining to certain areas in accounting for income taxes. Key elements include, but are not limited to, the elimination of certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating taxes during the quarters and the recognition of deferred tax liabilities for outside basis differences. This guidance also simplifies aspects of the accounting for franchise taxes and changes in tax laws or rates, as well as clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.  ASU 2019-12 is effective for the Company's first quarter of fiscal year 2022.  The Company is in the process of evaluating the impact of the adoption of this new standard on its condensed consolidated financial statements.

 

v3.20.2
Note 2 - Property, Plant and Equipment (Tables)
3 Months Ended
Aug. 01, 2020
Notes Tables  
Property, Plant and Equipment [Table Text Block]
   

(In thousands)

 
   

August 1,

2020

     

May 2,

2020

 

Land

  $ 9,835       $ 9,835  

Buildings and improvements

    60,358         59,618  

Machinery and equipment

    241,178         238,300  

Total

    311,371         307,753  

Less accumulated depreciation

    (190,821 )

 

    (187,126

)

Property, plant and equipment – net

  $ 120,550       $ 120,627  
v3.20.2
Note 5 - Derivative Financial Instruments (Tables)
3 Months Ended
Aug. 01, 2020
Notes Tables  
Schedule of Derivatives Instruments Statements of Financial Performance and Financial Position, Location [Table Text Block]
   

(In thousands)

 
   

2020

   

2019

 

Recognized in AOCI:

               

Gain (loss) before income taxes

  $ 5,080     $ (1,423

)

Less income tax provision (benefit) 

    1,215       (340

)

Net

    3,865       (1,083

)

Reclassified from AOCI to cost of sales:

               

(Loss) before income taxes

    (1,832 )     (1,444

)

Less income tax (benefit) 

    (438 )     (345

)

Net

    (1,394 )     (1,099

)

Net change to AOCI

  $ 5,259     $ 16  
v3.20.2
Note 6 - Leases (Tables)
3 Months Ended
Aug. 01, 2020
Notes Tables  
Lessee, Operating Lease, Liability, Maturity [Table Text Block]
  

(In thousands)

 

Fiscal 2021 - Remaining 3 quarters

 $10,725 

Fiscal 2022

  13,276 

Fiscal 2023

  8,975 

Fiscal 2024

  7,361 

Fiscal 2025

  4,475 

Thereafter

  4,101 

Total minimum lease payments including interest

  48,913 

Less: Amounts representing interest

  (2,897

)

Present value of minimum lease payments

  46,016 

Less: Current portion of lease liabilities

  (16,481

)

Non-current portion of lease liabilities

 $29,535 

 

  

(In thousands)

 

Fiscal 2021

 $14,206 

Fiscal 2022

  13,276 

Fiscal 2023

  8,975 

Fiscal 2024

  7,361 

Fiscal 2025

  4,475 

Thereafter

  4,101 

Total minimum lease payments including interest

  52,394 

Less: Amounts representing interest

  (3,255

)

Present value of minimum lease payments

  49,139 

Less: Current portion of lease liabilities

  (16,980

)

Non-current portion of lease liabilities

 $32,159 
v3.20.2
Note 1 - Significant Accounting Policies and Recently Adopted Accounting Pronouncement (Details Textual) - USD ($)
$ in Millions
3 Months Ended
Aug. 01, 2020
Jul. 27, 2019
May 02, 2020
Inventory, Finished Goods, Gross, Total $ 33.9   $ 39.1
Inventory, Raw Materials, Gross, Total 29.2   $ 24.4
Marketing Expense 9.9 $ 15.1  
Shipping and Handling Costs $ 19.4 $ 18.0  
v3.20.2
Note 2 - Property, Plant and Equipment (Details Textual) - USD ($)
$ in Millions
3 Months Ended
Aug. 01, 2020
Jul. 27, 2019
Depreciation, Total $ 3.7 $ 3.8
v3.20.2
Note 2 - Property, Plant and Equipment - Summary of Property, Plant and Equipment (Details) - USD ($)
$ in Thousands
Aug. 01, 2020
May 02, 2020
Land $ 9,835 $ 9,835
Buildings and improvements 60,358 59,618
Machinery and equipment 241,178 238,300
Total 311,371 307,753
Less accumulated depreciation (190,821) (187,126)
Property, plant and equipment – net $ 120,550 $ 120,627
v3.20.2
Note 3 - Debt (Details Textual) - Revolving Credit Facility [Member] - USD ($)
$ in Thousands
3 Months Ended
Aug. 01, 2020
May 03, 2020
Line of Credit Facility, Maximum Borrowing Capacity $ 100,000  
Long-term Line of Credit, Total 0 $ 0
Letters of Credit Outstanding, Amount 3,400  
Line of Credit Facility, Remaining Borrowing Capacity $ 96,600  
London Interbank Offered Rate (LIBOR) [Member]    
Debt Instrument, Basis Spread on Variable Rate 9.00%  
v3.20.2
Note 4 - Stock-based Compensation (Details Textual)
3 Months Ended
Aug. 01, 2020
$ / shares
shares
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period (in shares) 14,000
Share-based Compensation Arrangements by Share-based Payment Award, Options, Exercises in Period, Weighted Average Exercise Price (in dollars per share) | $ / shares $ 9.95
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance (in shares) 173,045
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price, Ending Balance (in dollars per share) | $ / shares $ 14.71
Share-based Payment Arrangement, Option [Member]  
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant (in shares) 2,798,252
v3.20.2
Note 5 - Derivative Financial Instruments (Details Textual) - USD ($)
$ in Millions
Aug. 01, 2020
May 02, 2020
Derivative, Notional Amount $ 37.1  
Price Risk Cash Flow Hedge Unrealized Gain (Loss) to be Reclassified During Next 12 Months 130,000.0  
Accrued Liabilities1 [Member]    
Derivative Liability, Current $ 987,000.0 $ 6.9
v3.20.2
Note 5 - Derivative Financial Instruments - Derivatives Instruments, Statements of Financial Performance and Financial Position (Details) - USD ($)
$ in Thousands
3 Months Ended
Aug. 01, 2020
Jul. 27, 2019
Gain (loss) before income taxes $ 5,080 $ (1,423)
Less income tax provision (benefit) 1,215 (340)
Net 3,865 (1,083)
(Loss) before income taxes (1,832) (1,444)
Less income tax (benefit) (438) (345)
Net (1,394) (1,099)
Net change to AOCI $ 5,259 $ 16