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FIZZ > SEC Filings for FIZZ > Form 10-Q on 5-Sep-2013All Recent SEC Filings

Show all filings for NATIONAL BEVERAGE CORP

Form 10-Q for NATIONAL BEVERAGE CORP


5-Sep-2013

Quarterly Report


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

Overview

National Beverage Corp. is an acknowledged leader in the development, manufacturing, marketing and sale of a diverse portfolio of flavored beverage products. Our primary market focus is the United States, but our products are also distributed in Canada, Mexico, the Caribbean, Latin America, the Pacific Rim, Asia, Europe and the Middle East. A holding company for various operating subsidiaries, National Beverage Corp. was incorporated in Delaware in 1985 and began trading as a public company on the NASDAQ Stock Market in 1991. In this report, the terms "we," "us," "our," "Company" and "National Beverage" mean National Beverage Corp. and its subsidiaries unless indicated otherwise.

Our brands consist of (i) carbonated soft drinks in a variety of flavors as well as regular, diet and reduced-calorie options, and (ii) beverages geared toward the active and health-conscious consumer ("Power+ Brands"), including energy drinks and shots, juices, sparkling waters and enhanced beverages. In addition, we produce soft drinks for certain retailers ("Allied Brands") that endorse the concept ("Strategic Alliance") of having our brands and the Allied Brands marketed to produce the effect of enhanced growth of both. We employ a philosophy that emphasizes vertical integration; our vertically-integrated manufacturing model unites the procurement of raw materials and production of concentrates with the manufacture of finished products in our twelve manufacturing facilities. To service a diverse customer base that includes numerous national retailers as well as hundreds of smaller "up-and-down-the-street" accounts, we have developed a hybrid distribution system that promotes and utilizes customers' warehouse distribution facilities and our own direct-store delivery fleet plus the direct-store delivery systems of independent distributors and wholesalers.

We consider ourselves to be a leader in the development and sale of flavored beverage products. Our carbonated soft drink flavor development spans over 100 years originating with our flagship brands, Shasta® and Faygo®, and includes our Ritz® and Big Shot® brands along with St. Nick's® holiday soft drinks. Our portfolio of products we refer to as Power+ Brands are targeted to consumers seeking healthier and functional alternatives to complement their active lifestyles, and include LaCroix®, Crystal Bay® and Clear Fruit® flavored, sparkling and spring water products; Rip It® energy drinks and shots; Mega Sport® isotonic sports drinks; Everfresh®, Home Juice® and Mr. Pure® 100% juice and juice-based products and Ohana® fruit-flavored non-carbonated fruit drinks, lemonades and teas.

Our strategy emphasizes the growth of our products by (i) offering a beverage portfolio of proprietary flavors with distinctive packaging and broad demographic appeal, (ii) supporting the franchise value of regional brands,
(iii) appealing to the "quality-value" expectations of the family consumer, (iv) responding to demographic trends by developing innovative products designed to expand distribution in higher-margin channels, and (v) expanding our focus on healthier and functional beverages tailored toward healthy, active lifestyles.

The majority of our sales are seasonal with the highest volume typically realized during the summer months. As a result, our operating results from one fiscal quarter to the next may not be comparable. Additionally, our operating results are affected by numerous factors, including fluctuations in the costs of raw materials, changes in consumer preference for beverage products, competitive pricing in the marketplace and weather conditions.


RESULTS OF OPERATIONS

Three Months Ended July 27, 2013 (first quarter of fiscal 2014) compared to

Three Months Ended July 28, 2012 (first quarter of fiscal 2013)

Net sales for the first quarter of fiscal 2014 decreased 5.7% to $172.4 million compared to $182.8 million for the first quarter of fiscal 2013. The lower sales resulted from a 7% decline in case volume, primarily attributable to unfavorable weather conditions throughout the U.S. and the continuing industry-wide decline in carbonated soft drinks. The volume decline was partially offset by a 1.4% improvement in unit pricing due to a favorable mix change related to Power+ Brands.

Gross profit approximated 34.1% of net sales for the first quarter of fiscal 2014 compared to 31.9% of net sales for the first quarter of fiscal 2013. The gross profit improvement is due to product mix changes and higher unit pricing mentioned above. Cost of sales per unit declined 1.9%.

Selling, general & administrative expenses were $40.1 million or 23.3% of net sales for the first quarter of fiscal 2014 compared to $36.3 million or 19.8% of net sales for the first quarter of fiscal 2013. The increase in expenses was due to higher advertising and other marketing expenses.

Interest expense increased to $196,000 for the first quarter of fiscal 2014, primarily due to increased borrowings under credit facilities. Other expense includes interest income of $3,000 for the first quarter of fiscal 2014 and $14,000 for the first quarter of fiscal 2013.

The Company's effective income tax rate, based upon estimated annual income tax rates, was 34.5% for the first quarter of fiscal 2014 and the first quarter of fiscal 2013. The difference between the effective rate and the federal statutory rate of 35% was primarily due to the effect of state income taxes and the manufacturing deduction.

LIQUIDITY AND FINANCIAL CONDITION

Liquidity And Capital Resources

Our principal source of funds is cash generated from operations and borrowings under our credit facilities. At July 27, 2013, we maintained $100 million unsecured revolving credit facilities of which $45 million of borrowings were outstanding and $2.3 million was used for standby letters of credit. We believe that 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 for the first three months of fiscal 2014 increased $10.6 million from April 27, 2013, which compares to an increase of $11.0 million for the similar 2013 fiscal period.

Net cash provided by operating activities for the first three months of fiscal 2014 amounted to $18.2 million compared to $12.3 million for the similar 2013 fiscal period. For the first three months of fiscal 2014, cash flow was principally provided by net income of $12.1 million and depreciation and amortization aggregating $2.9 million, offset in part by a seasonal increase in inventory.

Net cash used in investing activities for the first three months of fiscal 2014, consisting of capital expenditures, amounted to $2.4 million compared to $1.4 million for the similar 2013 fiscal period.


Net cash used in financing activities for the first three months of fiscal 2014 amounted to $5.1 million, which included $5 million in principal payments under Credit Facilities.

Financial Position

During the first three months of fiscal 2014, working capital increased $6.8 million to $74.3 million. The improvement in working capital resulted from higher cash and inventory levels, partially offset by a lower receivables balance. Due to improved collections, trade receivables decreased $1.5 million resulting in a decline in days sales outstanding from 34.7 days at April 27, 2013 to 33.0 days at July 27, 2013. Inventories increased approximately $4.6 million primarily due to higher inventory levels to support the seasonal increase in sales and planned customer promotions. The current ratio was 2.1 to 1 at both July 27, 2013 and April 27, 2013.

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