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 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.
RESULTS OF OPERATIONS
Three Months Ended July 30, 2022 (first quarter of fiscal 2023) compared to
Three Months Ended July 31, 2021 (first quarter of fiscal 2022)
Net sales for the first quarter of fiscal 2023 increased 2.1% to $318.1 million
from $311.7 million for the first quarter of fiscal 2022. The increase in sales
resulted primarily from a 10.2% increase in average selling price per case
partially offset by a 7.4% decrease in case volume. The volume decrease includes
a 9.7% decrease in Power+ Brands primarily due to the volume decline of the
sparkling water category, and reduced consumer promotional activity.
Gross profit for the first quarter of fiscal 2023 decreased to $99.4 million
from $124.8 million for the first quarter of fiscal 2022. The decrease in gross
profit is due to a 26.3% increase in cost of sales per case offset in part by
increased average selling prices per case. The cost of sales per case increase
was due to increases in packaging, primarily aluminum, ingredients and labor
costs. Gross margin was 31.2% for the first quarter of fiscal 2023 and 40.0% for
the first quarter of fiscal 2022.
Selling, general and administrative expenses for the first quarter of fiscal
2023 decreased $1.5 million to $52.9 million from $54.4 million for the first
quarter of fiscal 2022. The decrease was primarily due to a decrease in
marketing costs partially offset by increased shipping costs. As a percent of
net sales, selling, general and administrative expenses decreased to 16.6% for
the first quarter of fiscal 2023 from 17.5% for the first quarter of fiscal
2022.
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Other expense- net includes interest income of $24,000 for the first quarter of
fiscal 2023 and $48,000 for the first quarter of fiscal 2022. The decrease in
interest income is due to changes in average invested balances.
The Company's effective income tax rate, based upon estimated annual income tax
rates, was 23.6% for the first quarter of fiscal 2023 and 23.5% for the first
quarter of fiscal 2022. 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 30,
2022, we maintained $150 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 $8.0 million during the first quarter of
fiscal 2023. The Company repaid $30 million of outstanding indebtedness during
the quarter.
Net cash provided by operating activities for the first quarter of fiscal 2023
amounted to $40.6 million compared to $56.7 million for the first quarter of
fiscal 2022. Net cash provided by operating activities for the first quarter of
fiscal 2023 was principally provided by net income of $35.5 million,
depreciation and amortization of $5.5 million and amortization of right to use
assets of $3.2 million, offset in part by changes in working capital and other
accounts.
Net cash used in investing activities for the first quarter of fiscal 2023
reflects capital expenditures of $2.6 million, compared to capital expenditures
of $4.8 million for the first quarter of fiscal 2022. Certain production
capacity and efficiency improvement projects are in progress and anticipate
fiscal 2023 capital expenditures will be comparable to fiscal 2022 levels.
Financial Position
At July 30, 2022, our working capital decreased to $121.8 million from $129.2
million at April 30, 2022. The current ratio was 1.9 to 1 at both July 30, 2022
and April 30, 2022. Trade receivables increased $6.7 million and days sales
outstanding improved to 28.7 from 30.0. Inventories decreased $13.0 million and
inventory turns remained at 9.9 times.
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NATIONAL BEVERAGE CORP. 
