NATIONAL BEVERAGE CORP

Quarterly Report • Mar 10, 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

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

For the Quarterly Period Ended January 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 March 7, 2022 was 93,335,446 .

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 January 29, 2022 and May 1, 2021	3
Condensed Consolidated Statements of Income for the Three and Nine Months Ended January 29, 2022 and January 30, 2021	4
Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended January 29, 2022 and January 30, 2021	5
Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended January 29, 2022 and January 30, 2021	6
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended January 29, 2022 and January 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	15
Item 6. Exhibits	15
Signature	16

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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)

	January 29, — 2022	2021
Assets
Current assets:
Cash and equivalents	$ 40,372	$	193,589
Trade receivables - net	82,172		86,442
Inventories	88,679		71,480
Prepaid and other assets	25,521		13,431
Total current assets	236,744		364,942
Property, plant and equipment - net	135,470		131,027
Right-of-use assets	36,517		41,676
Goodwill	13,145		13,145
Intangible assets	1,615		1,615
Other assets	4,782		4,832
Total assets	$ 428,273	$	557,237
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$ 68,517	$	88,754
Accrued liabilities	37,454		43,551
Short-term lease obligations	12,780		14,800
Income taxes payable	729		89
Total current liabilities	119,480		147,194
Long-term debt	50,000		-
Deferred income taxes - net	18,668		17,294
Long-term lease obligations	25,738		28,837
Other liabilities	8,137		7,915
Total liabilities	222,023		201,240
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; 101,708,558 shares issued ( 101,675,858 shares at May 1)	1,017		1,016
Additional paid-in capital	39,191		38,375
Retained earnings	181,837		337,672
Accumulated other comprehensive income	8,288		3,017
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	206,250		355,997
Total liabilities and shareholders' equity	$ 428,273	$	557,237

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 — January 29,	January 30,		Nine Months Ended — January 29,	January 30,
	2022	2021		2022	2021
Net sales	$ 258,923	$	245,931	$ 853,793	$	811,107
Cost of sales	165,124		150,267	533,738		490,176
Gross profit	93,799		95,664	320,055		320,931
Selling, general and administrative expenses	53,103		47,501	157,470		144,507
Operating income	40,696		48,163	162,585		176,424
Other income (expense)- net	( 81	)	64	( 103	)	402
Income before income taxes	40,615		48,227	162,482		176,826
Provision for income taxes	9,547		11,540	38,314		41,811
Net income	$ 31,068	$	36,687	$ 124,168	$	135,015
Earnings per common share:
Basic	$ .33	$	.39	$ 1.33	$	1.45
Diluted	$ .33	$	.39	$ 1.33	$	1.44
Weighted average common shares outstanding:
Basic	93,329		93,296	93,319		93,273
Diluted	93,611		93,610	93,608		93,624

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 — January 29,	January 30,	Nine Months Ended — January 29,	January 30,
	2022	2021	2022	2021
Net income	$ 31,068	$ 36,687	$ 124,168	$ 135,015
Other comprehensive income, net of tax:
Cash flow hedges	7,984	885	5,271	7,774
Comprehensive income	$ 39,052	$ 37,572	$ 129,439	$ 142,789

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)

January 29, 2022			January 30, 2021			January 29, 2022			January 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	101,696	1,017		101,664	1,017		101,676	1,016		101,606	1,016
Stock options exercised	13	-		10	-		33	1		68	1
End of Period	101,709	1,017		101,674	1,017		101,709	1,017		101,674	1,017
Additional Paid-In Capital
Beginning of period		38,836			37,944			38,375			37,422
Stock options exercised		181			72			292			475
Stock-based compensation		174			171			524			290
End of period		39,191			38,187			39,191			38,187
Retained Earnings
Beginning of period		430,772			541,730			337,672			443,402
Net income		31,068			36,687			124,168			135,015
Common stock cash dividend		( 280,003	)		( 279,876	)		( 280,003	)		( 279,876	)
End of period		181,837			298,541			181,837			298,541
Accumulated Other Comprehensive Income
Beginning of period		304			1,469			3,017			( 5,420	)
Cash flow hedges, net of tax		7,984			885			5,271			7,774
End of period		8,288			2,354			8,288			2,354
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 of period	8,374	( 19,133	)	8,374	( 19,133	)	8,374	( 19,133	)	8,278	( 19,133	)
Stock repurchase	-	-		-	-		-	-		96	-
End of period	8,374	( 19,133	)	8,374	( 19,133	)	8,374	( 19,133	)	8,374	( 19,133	)
Total Shareholders' Equity		$ 206,250			$ 316,016			$ 206,250			$ 316,016

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)

	Nine Months Ended — January 29,	January 30,
	2022	2021
Operating Activities:
Net income	$ 124,168	$	135,015
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	13,711		13,729
Deferred income tax (benefit) provision	( 283	)	337
Loss on sale of property, net	11		4
Stock-based compensation	524		290
Amortization of operating right of use assets	10,117		9,845
Changes in assets and liabilities:
Trade receivables	4,270		9,252
Inventories	( 17,199	)	( 7,643	)
Operating lease right of use assets	( 5,827	)	(4,420	)
Prepaid and other assets	( 4,730	)	( 4,444	)
Accounts payable	( 20,236	)	( 3,001	)
Accrued and other liabilities	( 7,724	)	1,091
Operating lease liabilities	( 4,250	)	( 4,884	)
Net cash provided by operating activities	92,552		145,171
Investing Activities:
Additions to property, plant and equipment	( 16,059	)	( 16,997	)
Proceeds from sale of property, plant and equipment	1		15
Net cash used in investing activities	( 16,058	)	( 16,982	)
Financing Activities:
Borrowing under loan facility	50,000		-
Proceeds from stock options exercised	292		475
Dividend paid	( 280,003	)	( 279,876	)
Net cash used in financing activities	( 229,711	)	( 279,401	)
Net Decrease in Cash and Equivalents	( 153,217	)	( 151,212	)
Cash and Equivalents - Beginning of Period	193,589		304,518
Cash and Equivalents - End of Period	$ 40,372	$	153,306
Other Cash Flow Information:
Interest paid	$ 189	$	117
Income taxes paid	$ 42,401	$	51,031

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 May 1, 2021. 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 January 29, 2022 were comprised of finished goods of $ 50.3 million and raw materials of $ 38.4 million. Inventories at May 1, 2021 were comprised of finished goods of $ 43.3 million and raw materials of $ 28.2 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, totaled $ 12.9 million for the three months ended January 29, 2022 and $ 11.3 million for the three months ended January 30, 2021. Marketing costs totaled $ 36.0 million for the nine months ended January 29, 2022, and $ 31.2 million for the nine months ended January 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 totaled $ 21.1 million for the three months ended January 29, 2022 and $ 18.0 million for the three months ended January 30, 2021. Shipping and handling costs totaled $ 65.5 million for the nine months ended January 29, 2022 and $ 55.9 million for the nine months ended January 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) — January 29, 2022	May 1, 2021
Land	$ 9,835	$	9,835
Buildings and improvements	63,529		62,346
Machinery and equipment	271,469		257,119
Total	344,833		329,300
Less accumulated depreciation	( 209,363	)	( 198,273	)
Property, plant and equipment – net	$ 135,470	$	131,027

Depreciation expense was $ 3.8 million and $ 11.6 million for the three and nine months ended January 29, 2022, respectively, and $ 3.7 million and $ 11.2 million for the three and nine months ended January 30, 2021, respectively.

3. DEBT

At January 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 April 30, 2023 to October 28, 2024 and any borrowings would currently bear interest at 1.0 % above one -month LIBOR. There were no borrowings outstanding under the Credit Facilities at January 29, 2022 or May 1, 2021. At January 29, 2022, $ 3 million of the Credit Facilities was reserved for standby letters of credit and $ 97 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 Secured Overnight Funding Rate (SOFR). Since closing the Loan Facility, $ 50 million was borrowed and remains outstanding at January 29, 2022. At January 29, 2022, the interest rate was 1.11 %.

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 agreements), and contain other restrictions, none of which are expected to have a material effect on our operations or financial position. At January 29, 2022, we were in compliance with all loan covenants.

4. STOCK-BASED COMPENSATION

During the nine months ended January 29, 2022, options to purchase 30,000 shares of common stock were granted, options to purchase 32,700 shares were exercised and options to purchase 8,400 shares were cancelled at weighted average exercise prices of $ 44.73 , $ 8.91 and $ 33.01 , respectively. At January 29, 2022, options to purchase 550,000 shares of common stock at a weighted average exercise price of $ 19.35 per share were outstanding and stock-based awards to purchase 5,377,405 shares of common stock were available for grant.

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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 a cash flow hedge. 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		Nine Months Ended
	2022	2021	2022	2021
Recognized in AOCI:
Gain before income taxes	$ 11,007	$ 2,461	$ 11,980	$ 9,672
Less income tax provision	2,633	589	2,866	2,314
Net	$ 8,374	$ 1,872	$ 9,114	$ 7,358
Reclassified from AOCI to cost of sales:
Gain (loss) before income taxes	$ 512	$ 1,297	$ 5,052	$ ( 546	)
Less income tax provision (benefit)	122	310	1,209	( 130	)
Net	$ 390	$ 987	$ 3,843	$ ( 416	)
Net change to AOCI	$ 7,984	$ 885	$ 5,271	$ 7,774

As of January 29, 2022, the notional amount of our outstanding aluminum swap contracts was $ 71.2 million and, assuming no change in commodity prices, $ 10.5 million of unrealized gain before tax will be reclassified from AOCI and recognized in earnings over the next 12 months.

As of January 29, 2022, the fair value of the derivative asset was $ 10.5 million, which was included as a component of prepaid and other assets. As of May 1, 2021, the fair value of the derivative asset was $ 3.6 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.

6. LEASES

The Company has entered into various non-cancelable operating lease agreements of our offices, buildings, machinery and equipment expiring at various dates through January 2030. 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 January 29, 2022 and January 30, 2021 was $ 3.5 million. Operating lease cost totaled $ 11.1 million for the nine months ended January 29, 2022 and $ 10.8 million for the nine months ended January 30, 2021. As of January 29, 2022, the weighted-average remaining lease term and weighted average discount rate of operating leases was 4.5 years and 3.1 %, respectively. As of May 1, 2021, the weighted-average remaining lease term and weighted average discount rate of operating leases was 3.06 years and 3.38 %, respectively. Cash payments were $ 3.7 million for operating leases for the three months ended January 29, 2022 and $ 3.3 million for the three months ended January 30, 2021. Cash payments totaled $ 11.3 million for the nine months ended January 29, 2022 and $ 10.3 million for the nine months ended January 30, 2021.

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

Fiscal 2022	(In thousands) — $ 4,601
Fiscal 2023	11,357
Fiscal 2024	8,836
Fiscal 2025	5,895
Fiscal 2026	3,946
Thereafter	6,536
Total minimum lease payments including interest	41,171
Less: Amounts representing interest	( 2,653	)
Present value of minimum lease payments	38,518
Less: Current portion of lease liabilities	( 12,780	)
Non-current portion of lease liabilities	$ 25,738

7. CASH DIVIDEND

On December 2, 2021, the Company's board of directors declared a cash dividend of $ 3.00 per share payable to shareholders of record on December 13, 2021. The dividend of $ 280 million was paid on December 29, 2021.

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.

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 January 29, 2022 (third quarter of fiscal 2022) compared to

Three Months Ended January 30, 2021 (third quarter of fiscal 2021)

Net sales for the third quarter of fiscal 2022 increased 5.3% to $258.9 million from $245.9 million for the third quarter of fiscal 2021. The increase in sales resulted primarily from a 10.1% increase in average selling price per case, partially offset by a 4.1% decline in case volume.

Gross profit for the third quarter of fiscal 2022 decreased to $93.8 million from $95.7 million for the third quarter of fiscal 2021. 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. The cost of sales per case increased 15.0% and gross margin decreased to 36.2% from 38.9% for the third quarter of fiscal 2021.

Selling, general and administrative expenses for the third quarter of fiscal 2022 increased $5.6 million to $53.1 million from $47.5 million for the third quarter of fiscal 2021. The increase was primarily due to an increase in shipping and marketing costs. As a percent of net sales, selling, general and administrative expenses increased to 20.5% from 19.3% for the third quarter of fiscal 2021.

Other income (expense), net includes interest income of $39,000 for the third quarter of fiscal 2022 and $109,000 for the third quarter of fiscal 2021. Other income (expense), net for the third quarter of fiscal 2022 also includes interest expense of $62,000 relating to borrowings under the Loan Facility. The decrease in interest income is due to lower investment balances.

The Company’s effective income tax rate, based upon estimated annual income tax rates, was 23.6% for the third quarter of fiscal 2022 and 23.9% for the third quarter of fiscal 2021. The difference between the effective rate and the federal statutory rate of 21% was primarily due to the effects of state income taxes.

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Nine Months Ended January 29, 2022 (first nine months of fiscal 2022) compared to

Nine Months Ended January 30, 2021 (first nine months of fiscal 2021)

Net sales for the first nine months of fiscal 2022 increased 5.3% to $853.8 million from $811.1 million for the first nine months of fiscal 2021. The increase in sales resulted primarily from a 6.1% increase in average selling price per case, partially offset by a modest decrease in case volume.

Gross profit for the first nine months of fiscal 2022 was flat to the first nine months of fiscal 2021. The cost of sales per case increased 9.8% and gross margin decreased to 37.5% from 39.6% for the first nine months of fiscal 2021. The decrease in gross margin is due to increased packaging, ingredients and freight costs along with supply chain disruptions, which adversely affected manufacturing efficiencies.

Selling, general and administrative expenses for the first nine months of fiscal 2022 increased $13.0 million to $157.5 million from $144.5 million for the first nine months of fiscal 2021. The increase was primarily due to increased shipping and marketing costs, partially offset by decreased administrative costs. As a percent of net sales, selling, general and administrative expenses increased to 18.4% from 17.8% for the first nine months of fiscal 2021.

Other income (expense), net includes interest income of $136,000 for the first nine months of fiscal 2022 and $506,000 for the first nine months of fiscal 2021. The decrease in interest income is due to lower investment balances.

The Company’s effective income tax rate, based upon estimated annual income tax rates, was 23.6% for the first nine months of fiscal 2022 and for the first nine months of fiscal 2021. 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 January 29, 2022, we maintained $150 million unsecured revolving credit facilities, under which $50 million in borrowings were outstanding and $3 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.

Cash Flows

The Company’s cash position decreased $153.2 million for the nine months of fiscal 2022, due primarily to the $280 million cash dividend paid on December 29, 2021.

Net cash provided by operating activities for the first nine months of fiscal 2022 amounted to $92.6 million compared to $145.2 million for the nine months of fiscal 2021. Net cash provided by operating activities for the first nine months of fiscal 2022 was principally provided by net income of $124.2 million, depreciation and amortization of $13.7 million, and amortization of operating right of use assets of $10.1 million, offset in part by changes in working capital and other accounts.

Net cash used in investing activities for the first nine months of fiscal 2022 reflects capital expenditures of $16.1 million, compared to capital expenditures of $17.0 million for the first nine months of fiscal 2021. We intend to continue production capacity and efficiency improvement projects, and expect fiscal 2022 capital expenditures to be comparable to fiscal 2021 levels.

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Financial Position

At January 29, 2022, our working capital decreased to $117.3 million compared to $217.7 million at May 1, 2021. The current ratio was 2.0 to 1 at January 29, 2022 compared to 2.5 to 1 at May 1, 2021. The decrease in working capital and current ratio was due primarily to the payment of the $280 million cash dividend. Trade receivables decreased $4.3 million and days sales outstanding declined to 28.9 from 30.1. Inventories increased $17.2 million and inventory turns declined to 8.7 times from 9.6 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 May 1, 2021.

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.

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 May 1, 2021.

ITEM 6. EXHIBITS

Exhibit No.	Description
10.15	Amended and Restated Credit Agreement, dated January 5, 2022 between NewBevco, Inc. and lender therein
10.17	Loan Agreement dated December 21, 2021 between NewBevco, Inc. and lender therein
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 January 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: March 10, 2022

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

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