National Beverage Corp. — FY2016 Form 10-K
Reporting period: Fiscal year ended April 30, 2016 (52 weeks), compared with fiscal 2015 ended May 2, 2015 (52 weeks). This is an annual report, not a standalone quarterly filing; fourth-quarter figures below are unaudited. The company develops, produces, markets and sells beverages, including LaCroix sparkling water, juices, energy drinks and carbonated soft drinks, primarily in the United States.
Financial performance
| Metric | FY2016 | FY2015 | Change |
|---|---|---|---|
| Net sales | $704.8 million | $645.8 million | +9.1% |
| Gross profit | $241.4 million | $219.1 million | +10.2% |
| Gross margin | 34.3% | 33.9% | +0.4 percentage points |
| Net income | $61.2 million | $49.3 million | +24.1% |
| Diluted EPS | $1.31 | $1.05 | +$0.26 |
| Cash from operations | $79.0 million | $58.0 million | +$20.9 million |
Sales growth reflected a 9.0% increase in case volume and a slight increase in average selling price. Power+ Brands volume grew 31.4%, partly offset by declines in branded carbonated soft drinks and Allied Brands. Management attributed gross-profit improvement to higher sales, favorable product mix and lower raw-material costs. SG&A was $148.4 million, or 21.1% of sales, versus $145.2 million, or 22.5%.
Fourth-quarter net sales were $179.0 million versus $164.6 million; net income was $17.5 million versus $12.2 million, and diluted EPS was $0.37 versus $0.26.
Cash, debt and liquidity
- Cash and equivalents were $105.6 million at year-end, up from $52.5 million. Working capital was $148.1 million versus $101.5 million; the current ratio was 3.0 versus 2.5.
- No borrowings were outstanding under the $100 million unsecured revolving facilities; $97.8 million remained available after $2.2 million reserved for letters of credit. Long-term debt was zero, compared with $10 million a year earlier.
- Investing activities used $12.0 million, including $12.1 million of capital expenditures. Financing activities used $13.8 million, including $10 million of debt repayments and the final $6 million Series D preferred-stock redemption.
- Operating cash flow less capital expenditures was approximately $66.8 million, calculated from reported figures.
Outlook, risks and notable items
- Management expected capital expenditures to increase in FY2017 to support volume growth and said existing capital resources should meet liquidity needs for the next twelve months. No revenue or earnings guidance was provided.
- Key risks include shifting consumer preferences, intense competition, retailer bargaining power, commodity and energy cost volatility, weather, regulation and employee-benefit costs. Sales are seasonal, generally strongest in warmer months.
- Aluminum swap contracts had a $2.5 million fair-value liability at year-end; assuming commodity prices did not change, $2.5 million of unrealized loss before tax was expected to be reclassified to earnings over the next 12 months.
- Purchase commitments totaled $50.6 million, primarily due within one year; operating lease commitments totaled $26.0 million. The company guaranteed up to $4.4 million of leased equipment residual value and expected no loss.
- The company reported a disputed multi-employer pension withdrawal-liability calculation, but expected the liability not to materially affect financial position or results. Ordinary-course litigation was not expected to have a material adverse effect.
- Related-party management fees paid or incurred to Corporate Management Advisors, owned by the Chairman and CEO, were $7.0 million in FY2016; $1.8 million was payable at year-end.
- Auditors gave an unqualified opinion on the financial statements and internal control over financial reporting; management also concluded internal controls were effective.
Important facts for investors to verify
- Whether LaCroix and other Power+ Brands can sustain rapid growth and offset declining carbonated-soft-drink and Allied Brand volume.
- Whether favorable product mix and raw-material costs persist, and how much cost inflation the company can pass through to customers.
- The economics and renewal terms of the revolving credit facilities, and the use of the substantial cash balance after preferred-stock redemption.
- The eventual amount and timing of the disputed pension withdrawal liability and any developments in the aluminum hedges or related earnings effects.
- The terms and governance oversight of the related-party management agreement and its fee, which is based on 1% of consolidated net sales.