NATIONAL BEVERAGE CORP 10-Q

fizz20220129_10q.htm   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   2 Table of Contents      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,     May 1,       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.   3 Table of Contents     NATIONAL BEVERAGE CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (In thousands, except per share amounts)     Three Months Ended     Nine Months Ended       January 29,     January 30,     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.   4 Table of Contents     NATIONAL BEVERAGE CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (In thousands)     Three Months Ended     Nine Months Ended       January 29,     January 30,     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.   5 Table of Contents     NATIONAL BEVERAGE CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED) (In thousands)     Three Months Ended     Nine Months Ended       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.   6 Table of Contents     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.   7 Table of Contents   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.   8 Table of Contents   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.   9 Table of Contents       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.   10 Table of Contents   The following is a summary of future minimum lease payments and related liabilities for all non-cancelable operating leases as of January 29, 2022:       (In thousands)   Fiscal 2022   $ 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.   11 Table of Contents   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.   12 Table of Contents   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.   13 Table of Contents   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.   14 Table of Contents   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)   15 Table of Contents   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)   16