National Beverage Corp. — Q1 Fiscal 2024 10-Q
Business and period: The company develops, produces, markets, and sells beverages, including LaCroix sparkling water, juices, energy drinks, and Shasta and Faygo soft drinks, primarily in the U.S. and Canada. This unaudited quarter ended July 29, 2023; comparisons are with the three months ended July 30, 2022.
Financial highlights
| Metric | Q1 FY2024 | Q1 FY2023 |
|---|---|---|
| Net sales | $324.2 million | $318.1 million |
| Gross profit / margin | $114.5 million / 35.3% | $99.4 million / 31.2% |
| Operating income | $63.1 million | $46.5 million |
| Net income | $49.6 million | $35.5 million |
| Diluted EPS | $0.53 | $0.38 |
| Operating cash flow | $70.1 million | $40.6 million |
Revenue increased 1.9%, as average selling price per case rose 3.9%, partly offset by a 1.9% decline in case volume. Power+ Brands volume declined, partly offset by higher volume in carbonated soft drinks. Gross margin improved primarily because of higher average selling prices and lower packaging and ingredient costs. SG&A fell to $51.4 million from $52.9 million, largely due to lower shipping costs, partly offset by increased selling and marketing costs; SG&A was 15.8% of sales versus 16.6%.
Other income was $2.1 million, compared with $0.1 million of other expense, including interest income of $1.8 million versus $24,000 a year earlier. The effective tax rate was 23.8%, compared with 23.6%.
Cash, liquidity, and debt
Cash increased $64.7 million to $222.8 million. Operating activities provided $70.1 million; investing activities used $5.4 million, including $5.5 million of capital expenditures; financing activities had no net cash use. Operating cash flow included an $8.7 million increase in taxes payable. Working capital was $274.6 million, up from $222.1 million at April 29, 2023; the current ratio rose to 2.8 from 2.5.
No borrowings were outstanding under the company’s $150 million aggregate revolving facilities. Of the $100 million bank credit facilities, $2.2 million was reserved for letters of credit and $97.8 million was available. The company reported covenant compliance and stated existing capital resources should meet requirements for the next 12 months. Lease liabilities totaled $41.8 million, including $11.9 million current.
Outlook, risks, and notable items
- Management anticipates fiscal 2024 capital expenditures of $25 million to $30 million for production capacity and efficiency projects.
- Management cited raw-material cost fluctuations, supply-chain disruptions, seasonal programming, and weather as factors affecting results; summer generally brings higher sales.
- Forward-looking risks include competition and pricing, consumer preferences and brand support, product introductions, raw-material and packaging availability and costs, labor disruptions, regulation, taxes, and weather. The filing reports no material changes in risk factors or market risks from the prior annual report.
- Aluminum swap contracts had a $49.5 million notional amount and a $4.9 million fair-value liability. Assuming commodity prices do not change, $4.9 million of pretax unrealized losses was expected to be reclassified into earnings over the next 12 months.
Important facts for investors to verify
- Whether the selling-price increases can continue to offset lower case volume, particularly the decline in Power+ Brands.
- Whether improved gross margin persists as packaging and ingredient costs, pricing, and aluminum hedge effects change.
- Capital spending against the $25 million–$30 million fiscal 2024 outlook and its impact on cash generation.
- The timing and earnings impact of reclassifying the aluminum-hedge losses, and the effect of the December 2023 expiration of the $50 million loan facility.
- Cash-flow comparability: this quarter’s operating cash flow benefited in part from increased taxes payable.