National Beverage Corp. — Form 10-Q Summary
Reporting period: Third quarter and first nine months of fiscal 2024, ended January 27, 2024; comparisons are to the periods ended January 28, 2023. National Beverage develops, produces, markets and sells beverages, primarily in the U.S. and Canada, including LaCroix sparkling water, juices, energy drinks and carbonated soft drinks.
Financial performance
| Metric | Q3 FY2024 | Q3 FY2023 | Nine months FY2024 | Nine months FY2023 |
|---|---|---|---|---|
| Net sales | $270.1 million | $268.5 million | $894.4 million | $886.2 million |
| Gross profit | $97.0 million | $94.9 million | $319.4 million | $294.3 million |
| Gross margin | 35.9% | 35.4% | 35.7% | 33.2% |
| Operating income | $48.2 million | $44.4 million | $165.6 million | $137.8 million |
| Net income | $39.6 million | $34.4 million | $133.0 million | $105.9 million |
| Diluted EPS | $0.42 | $0.37 | $1.42 | $1.13 |
Q3 sales rose modestly as average selling price per case increased 0.9%, partly offset by case volume declining 0.7%. For the nine-month period, selling price per case increased 2.6% and volume declined 2.1%. Volume weakness primarily affected Power+ Brands, partly offset by growth in carbonated soft drinks. Nine-month gross profit benefited from higher pricing and lower packaging and ingredient costs; cost of sales per case declined 1.3%.
SG&A was $48.9 million in Q3 and $153.8 million for the first nine months, down from $50.5 million and $156.5 million, respectively. Management attributed the reductions mainly to lower shipping and administrative costs, partly offset by higher selling and marketing costs. SG&A was 18.1% of sales in Q3 (18.8% prior year) and 17.2% year to date (17.7% prior year).
Cash flow, liquidity and debt
- Operating cash flow was $137.5 million for the first nine months, versus $112.3 million a year earlier. Capital expenditures were $19.5 million, compared with $12.3 million.
- Cash increased $118.9 million during the period to $277.0 million. Working capital was $356.0 million, up from $222.1 million at April 29, 2023; the current ratio was 3.7 versus 2.5.
- No borrowings were outstanding under the company’s credit facilities or loan facility. Of $100 million in revolving credit facilities, $97.8 million was available after letters of credit; the company also had a separate $50 million loan facility. The filing reports no debt outstanding.
- Management believes existing capital resources will meet liquidity and capital needs for the next 12 months. The company was in compliance with loan covenants.
Outlook, risks and notable items
- Management anticipates fiscal 2024 capital expenditures of $27–$30 million for production capacity and efficiency projects. No revenue or earnings guidance is provided.
- Other income included interest income of $1.8 million in Q3 and $5.8 million year to date, versus $0.4 million and $0.5 million in the comparable periods, reflecting higher invested balances and yields.
- Aluminum swaps are used to partially hedge container-cost exposure. At January 27, 2024, notional value was $70.4 million; assuming unchanged commodity prices, $0.6 million of unrealized loss before tax was expected to be reclassified into earnings over the next 12 months.
- Management identifies raw-material and packaging costs and availability, ability to pass through cost increases, consumer demand and preferences, retailer support, competition, weather, labor interruptions, and regulation and taxes as risks. It reported no material changes in market risks or risk factors from its latest annual report.
- Management said beverage sales are seasonal, with higher volume generally in summer. Disclosure controls were deemed effective, with no material change in internal control over financial reporting during the quarter.
Key facts for investors to verify
- Whether pricing can continue to offset declining case volumes, particularly in Power+ Brands.
- Whether the improved gross margin and lower shipping and administrative costs are sustainable.
- Execution and returns from planned fiscal 2024 capital spending of $27–$30 million.
- Exposure to aluminum and other input costs, including the timing and earnings impact of hedge reclassifications.
- Cash generation, liquidity needs and the terms and availability of credit facilities as they approach their stated expirations.