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| FIZZ > SEC Filings for FIZZ > Form 10-Q on 11-Dec-2008 | All Recent SEC Filings |
11-Dec-2008
Quarterly Report
OVERVIEW
National Beverage Corp. develops, manufactures, markets and distributes a
complete portfolio of quality beverage products throughout the United States.
Incorporated in Delaware in 1985, National Beverage Corp. is a holding company
for various operating subsidiaries. In this report, the terms "we," "us," "our,"
"Company" and "National Beverage" mean National Beverage Corp. and its
subsidiaries.
We consider ourselves to be a leader in the development and sale of flavored
beverage products in the United States, offering the widest selection of
flavored soft drinks, juices, sparkling waters and energy drinks. Our flavor
development spans over 100 years originating with our flagship brands, Shasta®
and Faygo®, each of which has over 50 flavor varieties. We also maintain a
diverse line of flavored beverage products geared to the health-conscious
consumer, including Everfresh®,Home Juice®, and Mr. Pure® 100% juice and
juice-based products; and LaCroix®, Mt. Shasta®, Crystal Bay® and ClearFruit®
flavored, sparkling, and spring water products; and ÀSanté™
nutritionally-enhanced waters. In addition, we produce Rip It® energy drinks,
Ohana®fruit-flavored drinks and St. Nick's® holiday soft drinks. Substantially
all of our brands are produced in thirteen manufacturing facilities that are
strategically located in major metropolitan markets throughout the continental
United States. To a lesser extent, we develop and produce soft drinks for
certain retailers and beverage companies ("allied brands").
Our strategy emphasizes the growth of our products by offering a branded
beverage portfolio of proprietary flavors; by supporting the franchise value of
regional brands and expanding those brands with distinctive packaging and
broader demographic emphasis; by developing and acquiring innovative products
tailored toward healthy lifestyles; and by appealing to the "quality-price"
expectations of the family consumer. We believe that the "regional share
dynamics" of our brands perpetuate consumer loyalty within local regional
markets, resulting in more retailer sponsored promotional activities.
Over the last several years, we have focused on increasing penetration of our
brands in the convenience channel through Company-owned and independent
distributors. The convenience channel consists of convenience stores, gas
stations, and other smaller "up-and-down-the-street" accounts. Because of the
higher retail prices and margins that typically prevail, we have undertaken
several measures to expand convenience channel distribution in recent years.
These include development of products specifically targeted to this market, such
as ClearFruit, Crystal Bay, Rip It, ÀSanté and Sundance®. Additionally, we have
created proprietary and specialized packaging with distinctive graphics for
these products. We intend to continue our focus on enhancing growth in the
convenience channel through both specialized packaging and innovative product
development.
Beverage industry sales are seasonal with the highest volume typically realized
during the summer months. Additionally, our operating results are subject to
numerous factors, including fluctuations in the costs of raw materials, changes
in consumer preference for beverage products and competitive pricing in the
marketplace.
RESULTS OF OPERATIONS
Three Months Ended November 1, 2008 (second quarter of fiscal 2009) compared to
Three Months Ended October 27, 2007 (second quarter of fiscal 2008)
Net sales for the second quarter of fiscal 2009 increased .6% to $144.4 million
compared to $143.5 million for the second quarter of fiscal 2008. The net sales
increase reflects case volume growth of (i) 2.3% for the Company's energy
drinks, juices and waters and (ii) 2.1% for branded carbonated soft drinks. In
addition, unit pricing increased 4.0% due to product mix and price increases
instituted to recover higher raw material costs. This improvement was partially
offset by a decline in allied-branded volume.
Gross profit approximated 29.4% of net sales for the second quarter of fiscal
2009 compared to 31.0% of net sales for the second quarter of fiscal 2008. Gross
profit was affected by higher raw material costs and lower allied-branded
volume. Gross profit last year included a $.9 million business interruption
insurance recovery. Cost of goods sold per unit increased approximately 6.3%.
Selling, general and administrative expenses were $32.9 million or 22.8% of net
sales for the second quarter of fiscal 2009 compared to $34.8 million or 24.3%
of net sales for last year. The decline in expenses is due to lower marketing
and administrative expenses.
Other income includes interest income of $247,000 (fiscal 2009) and $378,000
(fiscal 2008). The decline in interest income is due to lower rates and a
decline in average investment balances as a result of the $36.7 million cash
dividend paid in August 2007.
The Company's effective rate for income taxes, based upon estimated annual
income tax rates, approximated 35.9% of income before taxes for the second
quarter of fiscal 2009 and 35.5% for the comparable period in fiscal 2008. The
difference between the effective rate and the federal statutory rate of 35% was
primarily due to the effects of state income taxes, nondeductible expenses and
nontaxable interest income.
Net income was $6.5 million for the second quarter of fiscal 2009, which was
comparable to last year.
Six Months Ended November 1, 2008 (first six months of fiscal 2009) compared to
Six Months Ended October 27, 2007 (first six months of fiscal 2008)
Net sales for the first six months of fiscal 2009 increased .7% to
$297.3 million compared to $295.3 million for the first six months of fiscal
2008. The net sales increase reflects case volume growth of 3.8% for the
Company's energy drinks, juices and waters along with the effect of a 4.4%
improvement in unit pricing due to product mix and price increases instituted to
recover higher raw material costs. This improvement was partially offset by a
decline in carbonated soft drink volume.
Gross profit approximated 29.8% of net sales for the first six months of fiscal
2009 compared to 30.8% of net sales for the first six months of fiscal 2008.
Gross profit was affected by higher raw material costs and lower carbonated soft
drink volume. Gross profit last year included a $.9 million business
interruption insurance recovery. Cost of goods sold per unit increased
approximately 5.9%.
Selling, general and administrative expenses were $67.1 million or 22.6% of net
sales for the first six months of fiscal 2009 compared to $70.4 million or 23.9%
of net sales for last year. The decline in expenses is due to lower marketing
and administrative expenses.
Other income includes interest income of $449,000 (fiscal 2009) and $740,000
(fiscal 2008). The decline in interest income is due to lower rates and a
decline in average investment balances as a result of the $36.7 million cash
dividend paid in August 2007.
The Company's effective rate for income taxes, based upon estimated annual
income tax rates, approximated 35.9% of income before taxes for the first six
months of fiscal 2009 and 35.5% for the comparable period in fiscal 2008. The
difference between the effective rate and the federal statutory rate of 35% was
primarily due to the effects of state income taxes, nondeductible expenses and
nontaxable interest income.
Net income was $14.2 million for the first six months of fiscal 2009 compared to
$13.7 million for the first six months of fiscal 2008.
LIQUIDITY AND FINANCIAL CONDITION
Liquidity and Capital Resources
Our current sources of capital are cash flows from operations and borrowings
under existing credit facilities. We maintain unsecured revolving credit
facilities aggregating $75 million of which $2.3 million was used for standby
letters of credit at November 1, 2008. There was no debt outstanding under the
credit facilities. We believe that our capital resources are sufficient to fund
our capital expenditures, dividends and working capital requirements for the
foreseeable future.
Cash Flows
During the first six months of fiscal 2009, $12.1 million was provided by
operating activities, $302,000 was provided by investing activities and $258,000
was provided by financing activities. Cash provided by operating activities
decreased $4.2 million due primarily to an increase in inventory. The
improvement in cash provided by investing activities is due to an increase in
net marketable securities sold and a decline in property additions. The
improvement in cash provided by financing activities is due to the effect of the
cash dividend paid last year.
Financial Position
During the first six months of fiscal 2009, our working capital increased
$17.7 million to $107.1 million primarily due to cash provided by operating
activities. Trade receivables and accounts payable decreased due to lower volume
related to seasonality. Prepaid and other assets decreased primarily due to a
decline in income tax refund receivables. The current ratio was 2.8 to 1 at
November 1, 2008 and 2.3 to 1 at May 3, 2008.
NEW ACCOUNTING STANDARDS
See Note 6 of Notes to Condensed Consolidated Financial Statements for
information about recently adopted accounting standards.
FORWARD-LOOKING STATEMENTS
Certain statements in this Quarterly Report on Form 10-Q (this "Form 10-Q")
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the 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 in acquiring other beverage businesses; success of
new product and flavor introductions; fluctuations in the costs of raw
materials; our ability to increase prices; continued retailer support for our
products; changes in consumer preferences; success of implementing business
strategies; changes in business strategy or development plans; government
regulations; regional weather conditions; and other factors referenced in this
Form 10-Q. 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.
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