National Beverage Corp. — Form 10-K Summary
Business and reporting period. The company develops, produces, markets and sells beverages, including LaCroix and Shasta sparkling waters, juices, energy drinks, and Shasta and Faygo soft drinks. This 10-K reports fiscal 2017, the 52 weeks ended April 29, 2017; it also provides unaudited fourth-quarter results. The company reports one operating segment and does not provide revenue by product category.
Financial performance
| Metric | Fiscal 2017 | Fiscal 2016 | Change / context |
|---|---|---|---|
| Net sales | $826.9 million | $704.8 million | Up 17.3%; case volume rose 16.6%, with a smaller contribution from higher average selling prices. |
| Gross profit / margin | $326.1 million / 39.4% | $241.4 million / 34.3% | Gross profit up 35.1%; management cited volume, favorable mix, higher-margin Power+ Brands and lower cost of sales per case. |
| SG&A | $163.6 million | $148.4 million | Up 10.3%; 19.8% of sales versus 21.1%, reflecting volume-related costs and marketing, offset by operating leverage. |
| Net income | $107.0 million | $61.2 million | Basic EPS was $2.30 versus $1.31; diluted EPS was $2.29 versus $1.31. |
| Operating cash flow | $113.8 million | $79.0 million | Increase primarily reflected higher earnings, partly offset by working-capital needs. |
| Capital expenditures | $14.0 million | $12.1 million | Investing cash outflow was $14.0 million. |
Fourth quarter: Net sales were $212.1 million versus $179.0 million; gross profit was $85.9 million versus $65.4 million; net income was $29.2 million versus $17.5 million. Basic EPS was $0.63 versus $0.37.
Financial position and capital allocation
- At April 29, 2017, cash and equivalents were $136.4 million, working capital was $185.0 million, and the current ratio was 3.1:1. Total assets were $357.9 million and shareholders’ equity was $245.6 million.
- No borrowings were outstanding under the $100 million revolving credit facilities; $97.8 million was available after $2.2 million reserved for standby letters of credit. The company reported compliance with covenants and no debt-related interest-rate exposure at year-end.
- The company paid a $69.9 million special dividend ($1.50 per share) in January 2017. A further $1.50-per-share special dividend, also approximately $69.9 million, was declared in May 2017 for payment by August 4, 2017. Management said it planned to develop a shareholder-distribution program linked to share-ownership duration.
Outlook, risks and notable items
- No specific revenue or earnings guidance was provided. Management expected fiscal 2018 capital expenditures to increase to support volume growth and said existing resources should meet liquidity and capital needs for the next twelve months.
- Power+ Brands volume grew 42.6% in fiscal 2017, while branded carbonated soft-drink volume was flat. Management’s strategy emphasizes healthier offerings, flavor innovation, and growth of its sparkling-water portfolio.
- Key risks include intense competition and retailer bargaining power; changing consumer preferences and brand-reputation exposure; volatility or shortages in raw materials and energy; limited ability to pass cost increases through; weather and seasonality; regulation and potential beverage taxes; and employee-benefit costs. Aluminum swaps partially hedge certain commodity exposure.
- Contractual obligations totaled $45.5 million, comprising $30.3 million of operating leases and $15.2 million of purchase commitments. A $2.5 million leased-equipment residual-value guarantee expires in August 2017; management did not expect a loss. Ordinary-course litigation was not expected to materially affect results or financial position.
- A notable related-party arrangement is the management agreement with Corporate Management Advisors, owned by the chairman and CEO. Fees were $8.3 million in fiscal 2017, based on a fee equal to 1% of consolidated net sales; $2.1 million was payable at year-end.
- The independent auditor issued an unqualified opinion on the financial statements and concluded internal control over financial reporting was effective. The company likewise reported effective disclosure controls.
Important facts for investors to verify
- Whether strong sales and margin growth—particularly LaCroix and other Power+ Brands—continues, and how volume, pricing and product mix contribute.
- Whether fiscal 2018 capacity investment, raw-material costs, marketing and distribution expenses affect margins and cash conversion.
- The terms and governance of the CMA related-party management agreement and the shareholder-distribution program described by management.
- The impact of the declared special dividend on cash resources, alongside the company’s capital-spending plans and available credit.
- Potential exposure from commodity hedges, multi-employer pension plans, self-insurance claims and the leased-equipment guarantee.