National Beverage Corp. — Q1 FY2022 Form 10-Q
Business context and period: National Beverage develops, produces, markets and sells beverages, principally in the U.S. and Canada, including LaCroix sparkling water, juices, energy drinks and carbonated soft drinks. The quarter ended July 31, 2021; income and cash flow are compared with the three months ended August 1, 2020. Balance-sheet figures are compared with May 1, 2021. Amounts below are in millions except per-share data.
Financial performance
| Metric | Q1 FY2022 | Prior-year quarter | Change / note |
|---|---|---|---|
| Net sales | $311.7 | $293.4 | Up 6.3%; average selling price per case rose 4.7% and case volume rose 1.5%. |
| Gross profit / margin | $124.8 / 40.0% | $117.2 / 40.0% | Profit increased; cost of sales per case rose 4.6%. |
| Operating income | $70.3 | $66.7 | Up about 5.5%. |
| Net income | $53.8 | $51.2 | Up about 5.2%. |
| EPS, basic and diluted | $0.58 | $0.55 | Up about 5.5%; share figures reflect the February 2021 stock split. |
| Cash from operations | $56.7 | $51.5 | Higher year over year. |
| Capital expenditures | $4.8 | $3.7 | Cash used in investing activities was $4.8 and $3.7, respectively. |
Liquidity, cash flow and debt
- Cash and equivalents were $245.5 at July 31, up $51.9 during the quarter. Working capital was $269.7, versus $217.7 at May 1; the current ratio improved to 2.8 from 2.5.
- The company had no borrowings on its $100.0 unsecured revolving credit facilities; $97.5 was available after $2.5 reserved for letters of credit. It reported compliance with covenants.
- Total liabilities were $204.4. Operating lease liabilities totaled $40.6, including $14.3 current and $26.3 non-current.
- Operating cash flow was principally supported by net income, with working-capital movements also affecting cash. Cash used in investing was $4.8, primarily capital expenditures.
Material changes, outlook and risks
- Management attributed sales growth primarily to higher average selling prices and volume. Power+ Brands volume rose 5.6%, which management linked primarily to increased consumer demand.
- Gross profit increased on pricing, product mix and volume, partly offset by higher cost of sales per case. Packaging, ingredients and labor costs increased. Labor, raw-material and transportation constraints limited the company’s ability to meet customer demand.
- SG&A rose to $54.4 from $50.5, mainly reflecting higher marketing and shipping costs; SG&A increased to 17.5% of sales from 17.2%. Marketing expense was $12.4 versus $9.9, and shipping and handling costs were $22.7 versus $19.4.
- Management expects FY2022 capital expenditures to be comparable to FY2021 levels and plans continued capacity and efficiency projects. It stated that existing capital resources should meet liquidity and capital needs for the next 12 months. No specific sales or earnings forecast was provided.
- Sales are seasonal, with higher volume in summer. Forward-looking risks include raw-material and packaging costs and availability, labor disruptions, ability to pass cost increases to customers, consumer demand and preferences, retailer support, competition, weather, regulation and taxes. The filing reported no material changes in risk factors or market risks from the FY2021 Form 10-K.
- Aluminum swap hedges generated a net decrease in accumulated other comprehensive income of $1.8 during the quarter. The company reported a $1.3 derivative asset and expected $1.3 of unrealized pre-tax gains to be reclassified into earnings over the next 12 months, assuming no change in commodity prices.
Important facts for investors to verify
- Whether pricing can offset continued increases in packaging, ingredient, labor and transportation costs without weakening volume or demand.
- Whether reported Power+ Brands growth and the company’s ability to serve customer demand persist, considering supply constraints and seasonal sales patterns.
- How working-capital movements, capital spending and planned capacity projects affect cash generation through the rest of FY2022.
- The extent to which aluminum hedges affect future cost of sales and reported earnings.
- The MD&A comparison-period sentence refers to “August 1, 2021,” while the financial statements and surrounding discussion identify the comparison quarter as August 1, 2020; verify against the filed source.