NATIONAL BEVERAGE CORP

Quarterly Report • Dec 8, 2022

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended October 29, 2022

or

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number 1-14170

NATIONAL BEVERAGE CORP.

(Exact name of registrant as specified in its charter)

Delaware	59-2605822
(State of incorporation)	(I.R.S. Employer Identification No.)

8100 SW Tenth Street, Suite 4000 , Fort Lauderdale , FL 33324

(Address of principal executive offices including zip code)

( 954 ) 581-0922

(Registrant’s telephone number including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $.01 per share	FIZZ	The NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of registrant’s common stock outstanding as of December 5, 2022 was 93,352,946 .

Table of Contents

NATIONAL BEVERAGE CORP.

QUARTERLY REPORT ON FORM 10-Q

INDEX

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)	Page
Condensed Consolidated Balance Sheets as of October 29, 2022 and April 30, 2022	3
Condensed Consolidated Statements of Income for the Three and Six Months Ended October 29, 2022 and October 30, 2021	4
Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended October 29, 2022 and October 30, 2021	5
Condensed Consolidated Statements of Shareholders’ Equity for the Three and Six Months Ended October 29, 2022 and October 30, 2021	6
Condensed Consolidated Statements of Cash Flows for the Six Months Ended October 29, 2022 and October 30, 2021	7
Notes to Condensed Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3. Quantitative and Qualitative Disclosures about Market Risk	14
Item 4. Controls and Procedures	14
PART II - OTHER INFORMATION
Item 1A. Risk Factors	16
Item 6. Exhibits	16
Signature	17

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands, except share data)

	October 29, — 2022	2022
Assets
Current assets:
Cash and equivalents	$ 92,626	$	48,050
Trade receivables - net	100,445		93,592
Inventories	88,409		103,318
Prepaid and other assets	17,195		29,560
Total current assets	298,675		274,520
Property, plant and equipment - net	143,162		144,258
Right of use assets	38,791		29,251
Goodwill	13,145		13,145
Intangible assets	1,615		1,615
Other assets	4,734		5,015
Total assets	$ 500,122	$	467,804
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$ 84,378	$	95,299
Accrued liabilities	51,128		39,090
Short-term lease obligations	12,042		10,543
Income taxes payable	154		387
Total current liabilities	147,702		145,319
Long-term debt	-		30,000
Deferred income taxes - net	20,586		23,823
Operating lease liability - non current	28,801		20,703
Other liabilities	7,918		8,521
Total liabilities	205,007		228,366
Shareholders' equity:
Preferred stock, $ 1 par value - 1,000,000 shares authorized: Series C - 150,000 shares issued	150		150
Common stock, $ .01 par value - 200,000,000 shares authorized; 101,726,258 shares issued ( 101,712,358 shares at April 30)	1,017		1,017
Additional paid-in capital	40,032		39,405
Retained earnings	287,681		216,181
Accumulated other comprehensive (loss) income	( 9,532	)	6,918
Treasury stock - at cost:
Series C preferred stock - 150,000 shares	( 5,100	)	( 5,100	)
Common stock - 8,374,112 shares	( 19,133	)	( 19,133	)
Total shareholders' equity	295,115		239,438
Total liabilities and shareholders' equity	$ 500,122	$	467,804

See accompanying Notes to Condensed Consolidated Financial Statements.

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NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share amounts)

	Three Months Ended — October 29,	October 30,	October 29,		October 30,
	2022	2021	2022		2021
Net sales	$ 299,633	$ 283,158	$	617,750	$ 594,870
Cost of sales	199,637	181,673		418,353	368,614
Gross profit	99,996	101,485		199,397	226,256
Selling, general and administrative expenses	53,073	49,924		105,996	104,367
Operating income	46,923	51,561		93,401	121,889
Other income (expense) - net	86	( 7	)	2	( 22	)
Income before income taxes	47,009	51,554		93,403	121,867
Provision for income taxes	10,963	12,270		21,903	28,767
Net income	$ 36,046	$ 39,284	$	71,500	$ 93,100
Earnings per common share:
Basic	$ .39	$ .42	$	.77	$ 1.00
Diluted	$ .39	$ .42	$	.76	$ .99
Weighted average common shares outstanding:
Basic	93,344	93,321		93,341	93,310
Diluted	93,602	93,640		93,601	93,607

See accompanying Notes to Condensed Consolidated Financial Statements.

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NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(In thousands)

	Three Months Ended — October 29,	October 30,		October 29,		October 30,
	2022	2021		2022		2021
Net income	$ 36,046	$	39,284	$	71,500	$	93,100
Other comprehensive loss, net of tax:
Cash flow hedges	( 5,494	)	( 960	)	( 16,450	)	( 2,713	)
Comprehensive income	$ 30,552	$	38,324	$	55,050	$	90,387

See accompanying Notes to Condensed Consolidated Financial Statements.

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NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
(In thousands)

October 29, 2022			October 30, 2021			October 29, 2022			October 30, 2021
Shares		Amount	Shares		Amount	Shares		Amount	Shares		Amount
Series C Preferred Stock
Beginning and end of period	150	$ 150		150	$ 150		150	$ 150		150	$ 150
Common Stock
Beginning of period	101,712	1,017		101,688	1,017		101,712	1,017		101,676	1,016
Stock options exercised	14	-		8	-		14			20	1
End of Period	101,726	1,017		101,696	1,017		101,726	1,017		101,696	1,017
Additional Paid-In Capital
Beginning of period		39,575			38,604			39,405			38,375
Stock options exercised		285			53			285			111
Stock-based compensation		172			179			342			350
End of period		40,032			38,836			40,032			38,836
Retained Earnings
Beginning of period		251,635			391,488			216,181			337,672
Net income		36,046			39,284			71,500			93,100
End of period		287,681			430,772			287,681			430,772
Accumulated Other Comprehensive (Loss) Income
Beginning of period		( 4,038	)		1,264			6,918			3,017
Cash flow hedges, net of tax		( 5,494	)		( 960	)		( 16,450	)		( 2,713	)
End of period		( 9,532	)		304			( 9,532	)		304
Treasury Stock - Series C Preferred
Beginning and end of period	150	( 5,100	)	150	( 5,100	)	150	( 5,100	)	150	( 5,100	)
Treasury Stock - Common
Beginning and end of period	8,374	( 19,133	)	8,374	( 19,133	)	8,374	( 19,133	)	8,374	( 19,133	)
Total Shareholders' Equity		$ 295,115			$ 446,846			$ 295,115			$ 446,846

See accompanying Notes to Condensed Consolidated Financial Statements.

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NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)

	Six Months Ended — October 29,	October 30,
	2022	2021
Operating Activities:
Net income	$ 71,500	$	93,100
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	10,436		9,234
Deferred income tax provision (benefit)	1,147		( 363	)
Gain on sale of property, net	-		8
Stock-based compensation	342		350
Amortization of operating right to use assets	6,592		6,872
Changes in assets and liabilities:
Trade receivables	( 6,853	)	( 1,799	)
Inventories	14,909		( 7,309	)
Operating lease right to use assets	( 16,132	)	(1,594	)
Prepaid and other assets	3,187		510
Accounts payable	( 10,921	)	1,593
Accrued and other liabilities	( 1,566	)	( 9,545	)
Operating lease obligation	9,597		( 5,093	)
Net cash provided by operating activities	82,238		85,964
Investing Activities:
Additions to property, plant and equipment	( 7,974	)	( 6,628	)
Proceeds from sale of property, plant and equipment	27		1
Net cash used in investing activities	( 7,947	)	( 6,627	)
Financing Activities:
Proceeds from stock options exercised	285		111
Repayments of loan facility	( 30,000	)	-
Net cash provided by financing activities	( 29,715	)	111
Net Increase in Cash and Equivalents	44,576		79,448
Cash and Equivalents - Beginning of Period	48,050		193,589
Cash and Equivalents - End of Period	$ 92,626	$	273,037
Other Cash Flow Information:
Interest paid	$ 224	$	93
Income taxes paid	$ 21,373	$	31,386

See accompanying Notes to Condensed Consolidated Financial Statements.

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NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

National Beverage Corp. develops, produces, markets and sells a distinctive portfolio of sparkling waters, juices, energy drinks and carbonated soft drinks primarily in the United States and Canada. Incorporated in Delaware in 1985, National Beverage Corp. is a holding company for various operating subsidiaries. When used in this report, the terms “we,” “us,” “our,” “Company” and “National Beverage” mean National Beverage Corp. and its subsidiaries.

1. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The condensed consolidated financial statements include the accounts of National Beverage Corp. and its subsidiaries. Significant intercompany transactions and accounts have been eliminated.

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) and rules and regulations of the Securities and Exchange Commission for interim financial reporting. Accordingly, they do not include all information and notes presented in the annual consolidated financial statements. The condensed consolidated financial statements should be read in conjunction with the annual consolidated financial statements and accompanying notes included in our Annual Report on Form 10 -K for the fiscal year ended April 30, 2022. The accounting policies used in these interim unaudited condensed consolidated financial statements are consistent with those used in the annual consolidated financial statements.

The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in the interim unaudited condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Results for the interim periods presented are not necessarily indicative of results which might be expected for the entire fiscal year.

Inventories

Inventories are stated at the lower of first -in, first -out cost or net realizable market. Inventories at October 29, 2022 were comprised of finished goods of $ 46.4 million and raw materials of $ 42.0 million. Inventories at April 30, 2022 were comprised of finished goods of $ 58.6 million and raw materials of $ 44.7 million.

Marketing Costs

The Company utilizes a variety of marketing programs, including cooperative advertising programs with customers, to advertise and promote its products to consumers. Marketing costs are expensed when incurred, except for prepaid advertising and production costs, which are expensed when the advertising takes place. Marketing costs, which are included in selling, general and administrative expenses, were $ 10.3 million for the three months ended October 29, 2022 and $ 10.8 million for the three months ended October 30, 2021. Marketing costs were $ 20.6 million for the six months ended October 29, 2022 and $ 23.2 million for the six months ended October 30, 2021.

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Shipping and Handling Costs

Shipping and handling costs are reported in selling, general and administrative expenses in the accompanying condensed consolidated statements of income. Such costs were $ 22.0 million for the three months ended October 29, 2022 and $ 21.7 million for the three months ended October 30, 2021. Shipping and handling costs were $ 45.6 million for the six months ended October 29, 2022 and $ 44.4 million for the six months ended October 30, 2021. Although our classification is consistent with many beverage companies, our gross margin may not be comparable to companies that include shipping and handling costs in cost of sales.

2. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

	(In thousands) — October 29, 2022	April 30, 2022
Land	$ 9,835	$	9,835
Buildings and improvements	67,977		65,697
Machinery and equipment	281,501		277,163
Total	359,313		352,695
Less accumulated depreciation	( 216,151	)	( 208,437	)
Property, plant and equipment – net	$ 143,162	$	144,258

Depreciation expense was $ 4.5 million for the three months ended October 29, 2022 and $ 3.9 million for the three months ended October 30, 2021. Depreciation expense was $ 9.0 million for the six months ended October 29, 2022 and $ 7.8 million for the six months ended October 30, 2021.

3. DEBT

At October 29, 2022, a subsidiary of the Company maintained unsecured revolving credit facilities with banks aggregating $ 100 million (the “Credit Facilities”). The Credit Facilities expire from October 28, 2024 to May 30, 2025 and any borrowings would currently bear interest at 1.5 % above the Secured Overnight Financing Rate (SOFR). There were no borrowings outstanding under the Credit Facilities at October 29, 2022 or April 30, 2022. At October 29, 2022, $ 2.5 million of the Credit Facilities was reserved for standby letters of credit and $ 97.5 million was available for borrowings.

On December 21, 2021, a subsidiary of the Company entered into an unsecured revolving term loan facility with a national bank aggregating $ 50 million (The “Loan Facility”). The Loan Facility expires December 31, 2023 and borrowings bear interest at .95% above the adjusted daily SOFR. Since closing the Loan Facility, $ 50 million was borrowed and $ 30 million was outstanding at April 30, 2022. There were no borrowings outstanding under the Loan Facility at October 29, 2022.

The Credit Facilities and Loan Facility require the subsidiary to maintain certain financial ratios, including debt to net worth and debt to EBITDA (as defined in the Credit Facilities), and contain other restrictions, none of which are expected to have a material effect on operations or financial position. At October 29, 2022, the subsidiary was in compliance with all loan covenants.

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4. STOCK-BASED COMPENSATION

During the six months ended October 29, 2022, no options were granted and options to purchase 13,900 shares were exercised at a weighted average exercise price of $ 20.46 . At October 29, 2022, options to purchase 522,700 shares at a weighted average exercise price of $ 18.93 per share were outstanding and stock-based awards to purchase 5,387,005 shares of common stock were available for grant.

5. DERIVATIVE FINANCIAL INSTRUMENTS

From time to time, we enter into aluminum swap contracts to partially mitigate our exposure to changes in the cost of aluminum cans. Such financial instruments are designated and accounted for as cash flow hedges. Accordingly, gains or losses attributable to the effective portion of the cash flow hedge are reported in accumulated other comprehensive income (loss) (“AOCI”) and reclassified into cost of sales in the period in which the hedged transaction affects earnings. The ineffective portion of the change in fair value of our cash flow hedge was immaterial. The following summarizes the gains (losses) recognized in the Condensed Consolidated Statements of Income and AOCI:

	(In thousands)
	Three Months Ended				Six Months Ended
	2022		2021		2022		2021
Recognized in AOCI:
(Loss) gain before income taxes	$ ( 10,327	)	$ 221		$ ( 25,337	)	$ 974
Less income tax (benefit) provision	( 2,470	)	53		( 6,061	)	233
Net	( 7,857	)	168		( 19,276	)	741
Reclassified from AOCI to cost of sales:
(Loss) gain before income taxes	( 3,106	)	1483		( 3,714	)	4,540
Less income tax provision (benefit)	( 743	)	355		( 888	)	1,086
Net	( 2,363	)	1,128		( 2,826	)	3,454
Net change to AOCI	$ ( 5,494	)	$ ( 960	)	$ ( 16,450	)	$ ( 2,713	)

As of October 29, 2022, the notional amount of our outstanding aluminum swap contracts was $ 83.5 million and, assuming no change in commodity prices, $ 12.1 million of unrealized loss before tax will be reclassified from AOCI and recognized in earnings over the next 12 months.

As of October 29, 2022, the fair value of the derivative liability was $ 13.0 million, which was included in accrued liabilities. At April 30, 2022, the fair value of the derivative asset was $ 8.8 million, which was included in prepaid and other assets. Such valuation does not entail a significant amount of judgment and the inputs that are significant to the fair value measurement are Level 2 as defined by the fair value hierarchy as they are observable market based inputs or unobservable inputs that are corroborated by market data.

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6. LEASES

The Company has entered into various non-cancelable operating lease agreements for certain offices, buildings and machinery and equipment which expire at various dates through January 2029. The Company does not assume renewals in the determination of the lease term unless the renewals are deemed to be reasonably assured at lease commencement. Lease agreements generally do not contain material residual value guarantees or material restrictive covenants. Operating lease cost for the three months ended October 29, 2022 and October 30, 2021 was $ 3.7 million and $ 3.6 million, respectively. Operating lease cost was $ 7.1 million for the six months ended October 29, 2022 and $ 7.3 million for the six months ended October 30, 2021. As of October 29, 2022, the weighted-average remaining lease term and weighted average discount rate of operating leases was 4.29 years and 2.90 %, respectively. As of April 30, 2022, the weighted-average remaining lease term and weighted average discount rate of operating leases was 4.0 years and 3.08 %, respectively. Cash payments were $ 3.7 million and $ 4.0 million, respectively, for operating leases for the three months ended October 29, 2022 and October 30, 2021. Cash payments were $ 7.1 million for the six months ended October 29, 2022 and $ 7.6 million for the six months ended October 30, 2021.

The following is a summary of future minimum lease payments and related liabilities for all non-cancelable operating leases as of October 29, 2022:

Fiscal 2023 – Remaining two quarters	(In thousands) — $ 6,632
Fiscal 2024	11,435
Fiscal 2025	8,611
Fiscal 2026	6,783
Fiscal 2027	5,841
Thereafter	4,125
Total minimum lease payments including interest	43,427
Less: Amounts representing interest	( 2,584	)
Present value of minimum lease payments	40,843
Less: Current portion of lease obligations	( 12,042	)
Non-current portion of lease obligations	$ 28,801

ITEM 2. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

National Beverage Corp. innovatively refreshes America with a distinctive portfolio of sparkling waters, juices, energy drinks (Power+ Brands) and, to a lesser extent, Carbonated Soft Drinks. We believe our creative product designs, innovative packaging and imaginative flavors, along with our corporate culture and philosophy, make National Beverage unique as a stand-alone entity in the beverage industry. Traditional and typical are not a part of an innovator’s vocabulary.

Our strategy seeks the profitable growth of our products by (i) developing healthier beverages in response to the global shift in consumer buying habits and tailoring our beverage portfolio to the preferences of a diverse mix of ‘crossover consumers’ – a growing group desiring a healthier alternative to artificially sweetened and high-caloric beverages; (ii) emphasizing unique flavor development and variety throughout our brands that appeal to multiple demographic groups; (iii) maintaining points of difference through innovative marketing, packaging and consumer engagement and (iv) responding faster and more creatively to changing consumer trends than larger competitors who are burdened by legacy production and distribution complexity and costs.

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The majority of our brands are geared to the active and health-conscious consumer including sparkling waters, energy drinks, and juices. Our portfolio of Power+ Brands includes LaCroix®, LaCroix Cúrate®, and LaCroix NiCola® sparkling water products; Clear Fruit® non-carbonated water beverages enhanced with fruit flavor; Rip It® energy drinks and shots; and Everfresh®, Everfresh Premier Varietals™ and Mr. Pure® 100% juice and juice-based products. Additionally, we produce and distribute carbonated soft drinks including Shasta® and Faygo®, iconic brands whose consumer loyalty spans more than 130 years.

Presently, our primary market focus is the United States and Canada. Certain of our products are also distributed on a limited basis in other countries and options to expand distribution to other regions are being considered. To service a diverse customer base that includes numerous national retailers, as well as thousands of smaller “up-and-down-the-street” accounts, we utilize a hybrid distribution system consisting of warehouse and direct-store delivery. The warehouse delivery system allows our retail partners to further maximize their assets by utilizing their ability to pick up product at our warehouses, further lowering their/our product costs.

Our operating results are affected by numerous factors, including fluctuations in the costs of raw materials, holiday and seasonal programming, changes in consumer purchasing habits and weather conditions. Beverage sales are seasonal with higher sales volume realized during the summer months when outdoor activities are more prevalent.

RESULTS OF OPERATIONS

Three Months Ended October 29, 2022 (second quarter of fiscal 2023) compared to Three Months Ended October 30, 2021 (second quarter of fiscal 2022)

Net sales for the second quarter of fiscal 2023 increased 5.8% to $299.6 million from $283.2 million for the second quarter of fiscal 2022. The increase in sales resulted primarily from a 10.3% increase in average selling price per case with volume declining in total by 4.1%. Both Power+ Brands and carbonated soft drinks experienced volume declines in the quarter.

Gross profit for the second quarter of fiscal 2023 was $100.0 million compared to $101.5 million for the second quarter of fiscal 2022. The decrease in gross profit is due to increased packaging, ingredients and freight costs. These cost increases were partially offset by the increase in average selling price. Cost of sales per case increased 2.7% and gross margin decreased to 33.4% from 35.8% for the second quarter of fiscal 2022; gross margin improved from 31.2% reported in the first quarter of fiscal 2023.

Selling, general and administrative expenses for the second quarter of fiscal 2023 increased $3.1 million to $53.1 million from $49.9 million for the second quarter of fiscal 2022. The increase was primarily due to an increase in shipping and administrative costs partially offset by a decrease in marketing costs. As a percent of net sales, selling, general and administrative expenses increased slightly to 17.7% for the second quarter of fiscal 2023 from 17.6% for the second quarter of fiscal 2022.

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Other income (expense)- net includes interest income of $151 thousand for the second quarter of fiscal 2023 and $49 thousand for the second quarter of fiscal 2022. The increase in interest income is due a higher return on investments.

The Company’s effective income tax rate, based upon estimated annual income tax rates, was 23.3% for the second quarter of fiscal 2023 and 23.8% for the second quarter of fiscal 2022. The difference between the effective rate and the federal statutory rate of 21% was primarily due to the effects of state income taxes.

Six Months Ended October 29, 2022 (first six months of fiscal 2023) compared to Six Months Ended October 30, 2021 (first six months of fiscal 2022)

Net sales for the first six months of fiscal 2023 increased 3.8% to $617.8 million from $594.9 million for the first six months of fiscal 2022. The increase in sales resulted primarily from a 10.3% increase in average selling price per case with volume declining in total by 5.8% . Both Power+ Brands and carbonated soft drinks experienced volume declines.

Gross profit for the first six months of fiscal 2023 decreased to $199.4 million from $226.3 million for the first six months of fiscal 2022. The decline in gross profit is due to increased packaging, ingredients and labor costs offset in part by increased average selling price. Cost of sales per case increased 6.4% and gross margin decreased to 32.3% from 38.0% for the first six months of fiscal 2022.

Selling, general and administrative expenses for the first six months of fiscal 2023 increased $1.6 million to $106.0 million from $104.4 million for the first six months of fiscal 2022. The increase was primarily due to an increase in shipping and administrative costs partially offset by a decrease in marketing costs. As a percent of net sales, selling, general and administrative expenses decreased to 17.2% from 17.5% for the first six months of fiscal 2022.

Other income includes interest income of $175 thousand for the first six months of fiscal 2023 and $97,000 for the first six months of fiscal 2022. The increase in interest income is due to a higher return on investments.

The Company’s effective income tax rate, based upon estimated annual income tax rates, was 23.5% for the first six months of fiscal 2023 and 23.6% for the first six months of fiscal 2022. The difference between the effective rate and the federal statutory rate of 21% was primarily due to the effects of state income taxes.

LIQUIDITY AND FINANCIAL CONDITION

Liquidity and Capital Resources

Our principal source of funds is cash generated from operations. At October 29, 2022, we maintained $150 million unsecured revolving credit facilities, under which no borrowings were outstanding and $2.5 million was reserved for standby letters of credit. We believe existing capital resources will be sufficient to meet our liquidity and capital requirements for the next twelve months.

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Cash Flows

The Company’s cash position increased $44.6 million for the first six months of fiscal 2023 compared to an increase of $79.4 million for the first six months of fiscal 2022. The Company repaid $30 million of outstanding indebtedness in the first quarter of 2023.

Net cash provided by operating activities for the first six months of fiscal 2023 was $82.2 million compared to $86.0 million for the six months of fiscal 2022. For the first six months of fiscal 2023, cash flow provided by operating activities was principally provided by net income of $71.5 million, depreciation and amortization of $10.4 million, and amortization of operating lease right of use assets of $6.6 million, offset in part by changes in working capital and other accounts.

Net cash used in investing activities for the first six months of fiscal 2023 reflects capital expenditures of $8.0 million, compared to capital expenditures of $6.6 million for the first six months of fiscal 2022. Certain production capacity and efficiency improvement projects are in progress and we anticipate fiscal 2023 capital expenditures will be comparable to fiscal 2022 levels

Financial Position

At October 29, 2022, our working capital increased to $151.0 million from $129.2 million at April 30, 2022. The current ratio was 2.0 to 1 at October 29, 2022 compared to 1.9 to 1 at April 30, 2022. Trade receivables increased $6.9 million and days sales outstanding increased to 30.5 from 30.0. Inventories decreased $14.9 million and inventory turns improved to 9.2 times from 8.2 times.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in market risks from those reported in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022.

ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of the Company’s management, including our Chief Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective to ensure information required to be disclosed by us in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (2) accumulated and communicated to our management, including our Chief Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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FORWARD-LOOKING STATEMENTS

National Beverage Corp. and its representatives may make written or oral statements relating to future events or results relative to our financial, operational and business performance, achievements, objectives and strategies. These statements are “forward-looking” within the meaning of the Private Securities Litigation Reform Act of 1995 and include statements contained in this report and other filings with the Securities and Exchange Commission and in reports to our stockholders. Certain statements including, without limitation, statements containing the words “believes,” “anticipates,” “intends,” “plans,” “expects,” and “estimates” constitute “forward-looking statements” and involve known and unknown risk, uncertainties and other factors that may cause the actual results, performance or achievements of our Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to, the following: general economic and business conditions, pricing of competitive products, success of new product and flavor introductions, fluctuations in the costs and availability of raw materials and packaging supplies, ability to pass along cost increases to our customers, labor strikes or work stoppages or other interruptions in the employment of labor, continued retailer support for our products, changes in brand image, consumer demand and preferences and our success in creating products geared toward consumers’ tastes, success in implementing business strategies, changes in business strategy or development plans, government regulations, taxes or fees imposed on the sale of our products, unfavorable weather conditions and other factors referenced in this report, filings with the Securities and Exchange Commission and other reports to our stockholders. We disclaim an obligation to update any such factors or to publicly announce the results of any revisions to any forward-looking statements contained herein to reflect future events or developments.

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PART II - OTHER INFORMATION

ITEM 1A. RISK FACTORS

There have been no material changes in risk factors from those reported in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022.

ITEM 6. EXHIBITS

Exhibit No.	Description
10.18	NewBevCo- Fifth Amendment to Second Amended and Restated Credit Agreement
10.19	NewBevCo- Fifth Amendment of Second Amended and Restated Credit Agreement
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following financial information from National Beverage Corp. Quarterly Report on Form 10-Q for the quarterly period ended October 29, 2022, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Income; (iii) Consolidated Statements of Comprehensive Income; (iv) Consolidated Statements of Shareholders’ Equity; (v) Consolidated Statements of Cash Flows; and (vi) the Notes to Consolidated Financial Statements.
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: December 8, 2022
National Beverage Corp.
(Registrant)
By:	/s/ George R. Bracken
	George R. Bracken
	Executive Vice President – Finance
	(Principal Financial Officer)

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