National Beverage Corp. (FIZZ) — Form 10-Q Summary
Business context and reporting 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 filing covers the fiscal third quarter and first nine months ended January 30, 2021; comparisons are to the periods ended January 25, 2020. Balance-sheet comparisons are to May 2, 2020. Amounts below are in millions except per-share data.
Financial results
| Metric | Three months ended Jan. 30, 2021 | Prior-year quarter | Nine months ended Jan. 30, 2021 | Prior-year period |
|---|---|---|---|---|
| Net sales | $245.9 | $222.8 | $811.1 | $738.0 |
| Gross profit | $95.7 | $82.1 | $320.9 | $271.5 |
| Operating income | $48.2 | $33.2 | $176.4 | $119.4 |
| Net income | $36.7 | $26.6 | $135.0 | $93.8 |
| Diluted EPS | $0.39 | $0.28 | $1.44 | $1.00 |
- Quarterly sales increased 10.4%, primarily on 11% higher case volume; Power+ Brands volume rose 14%, driven mainly by take-home demand. Average selling price per case was approximately flat.
- Quarterly gross margin expanded to 38.9% from 36.8%; cost of sales per case fell 3.8%. For the nine-month period, gross margin rose to 39.6% from 36.8%, with cost of sales per case down 4.7%.
- SG&A declined to $47.5 million from $48.9 million for the quarter and to $144.5 million from $152.0 million for nine months. SG&A as a share of sales fell to 19.3% from 21.9% for the quarter and to 17.8% from 20.6% year to date. Reduced marketing and selling costs were partly offset by higher shipping and handling costs.
- Operating cash flow was $145.2 million for nine months, versus $125.2 million. Capital expenditures were $17.0 million, compared with $15.8 million.
- Cash and equivalents were $153.3 million at January 30, 2021, down from $304.5 million at May 2, 2020. Working capital was $182.6 million versus $319.0 million, and the current ratio was 2.4 versus 3.3.
- No borrowings were outstanding under the $100 million revolving facilities; $96.6 million was available after letters of credit. The company reported compliance with covenants. Operating lease obligations totaled $40.4 million, including $14.3 million current.
Material changes and unusual items
- A $279.9 million cash dividend, or $6.00 per share pre-split, was paid January 29, 2021. It was the principal reason cash, working capital and shareholders’ equity declined. The company used $279.4 million in financing activities during the nine months.
- On February 5, 2021, the board declared a one-for-one stock split as a stock dividend, distributed February 19. Share and EPS data were retroactively adjusted in the filing.
- Other income was lower, including interest income of $0.1 million for the quarter and $0.5 million for nine months, due to lower investment returns. Effective tax rates were 23.9% for the quarter and 23.6% for nine months, primarily above the 21% federal statutory rate because of state taxes.
- Aluminum swaps had a $3.4 million fair-value asset at January 30, 2021. Assuming commodity prices do not change, $3.4 million of unrealized gain before tax was expected to be reclassified into earnings over the following 12 months.
Outlook, commentary and risks
Management said existing capital resources should meet liquidity and capital needs for the next 12 months, and expected fiscal 2021 capital expenditures to be comparable to fiscal 2020. No specific sales or earnings guidance was provided. Management noted beverage seasonality, with higher sales generally in summer, and cautioned that quarterly results may be affected by product development, seasonal weather and promotional timing.
Disclosed risks include raw-material and packaging cost or availability changes, competition and pricing, consumer demand and preferences, retailer support, new-product success, labor interruptions, weather, regulation, taxes and execution of business strategies. The filing reported no material changes to previously disclosed risk factors or market risks. Management concluded disclosure controls were effective and reported no material quarterly change in internal control over financial reporting.
Key facts for investors to verify
- Whether higher case volumes, especially take-home demand for Power+ Brands, continue and translate into sustained sales growth.
- Whether gross-margin improvement persists as product mix, raw-material costs and aluminum hedges change.
- The post-dividend cash and liquidity position, capital spending needs, and continued access to the revolving facilities.
- How the stock split affects per-share comparisons, and the timing and earnings impact of hedge gains.
- That reported interim results are unaudited and may not indicate full-year performance.