NATIONAL BEVERAGE CORP 10-Q

fizz20230128_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 For the Quarterly Period Ended January 28, 2023 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 and post 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 6, 2023 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 January 28, 2023 and April 30, 2022 3         Condensed Consolidated Statements of Income for the Three and Nine Months Ended January 28, 2023 and January 29, 2022 4         Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended January 28, 2023 and January 29, 2022 5         Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended January 28, 2023 and January 29, 2022 6         Condensed Consolidated Statements of Cash Flows for the Nine Months Ended January 28, 2023 and January 29, 2022 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 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 28,     April 30,       2023     2022   Assets                 Current assets:                 Cash and equivalents   $ 118,324     $ 48,050   Trade receivables - net     97,104       93,592   Inventories     93,591       103,318   Prepaid and other assets     14,899       29,560   Total current assets     323,918       274,520   Property, plant and equipment - net     142,968       144,258   Right-of-use assets     38,844       29,251   Goodwill     13,145       13,145   Intangible assets     1,615       1,615   Other assets     5,904       5,015   Total assets   $ 526,394     $ 467,804                     Liabilities and Shareholders' Equity                 Current liabilities:                 Accounts payable   $ 68,988     $ 95,299   Accrued liabilities     44,175       39,090   Short-term lease obligations     11,892       10,543   Income taxes payable     467       387   Total current liabilities     125,522       145,319   Long-term debt     -       30,000   Deferred income taxes - net     24,589       23,823   Long-term lease obligations     28,987       20,703   Other liabilities     7,792       8,521   Total liabilities     186,890       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; 101,727,058 shares issued ( 101,712,358 shares at April 30)     1,017       1,017   Additional paid-in capital     40,204       39,405   Retained earnings     322,042       216,181   Accumulated other comprehensive income     324       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     339,504       239,438   Total liabilities and shareholders' equity   $ 526,394     $ 467,804      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 28,     January 29,     January 28,     January 29,       2023     2022     2023     2022                                     Net sales   $ 268,483     $ 258,923     $ 886,233     $ 853,793                                     Cost of sales     173,561       165,124       591,914       533,738                                     Gross profit     94,922       93,799       294,319       320,055                                     Selling, general and administrative expenses     50,488       53,103       156,484       157,470                                     Operating income     44,434       40,696       137,835       162,585                                     Other income (expense)- net     482       ( 81 )     484       ( 103 )                                   Income before income taxes     44,916       40,615       138,319       162,482                                     Provision for income taxes     10,555       9,547       32,458       38,314                                     Net income   $ 34,361     $ 31,068     $ 105,861     $ 124,168                                     Earnings per common share:                                 Basic   $ .37     $ .33     $ 1.13     $ 1.33   Diluted   $ .37     $ .33     $ 1.13     $ 1.33                                     Weighted average common shares outstanding:                                 Basic     93,353       93,329       93,345       93,319   Diluted     93,611       93,611       93,604       93,608     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 28,     January 29,     January 28,     January 29,       2023     2022     2023     2022                                     Net income   $ 34,361     $ 31,068     $ 105,861     $ 124,168                                     Other comprehensive income (loss), net of tax:                           Cash flow hedges     9,856       7,984       ( 6,594 )     5,271                                     Comprehensive income   $ 44,217     $ 39,052     $ 99,267     $ 129,439      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 28, 2023     January 29, 2022     January 28, 2023     January 29, 2022       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     101,726       1,017       101,696       1,017       101,712       1,017       101,676       1,016   Stock options exercised     1       -       13       -       15             33       1   End of Period     101,727       1,017       101,709       1,017       101,727       1,017       101,709       1,017                                                                     Additional Paid-In Capital                                                                 Beginning of period             40,032               38,836               39,405               38,375   Stock options exercised             7               181               292               292   Stock-based compensation             165               174               507               524   End of period             40,204               39,191               40,204               39,191                                                                     Retained Earnings                                                                 Beginning of period             287,681               430,772               216,181               337,672   Net income             34,361               31,068               105,861               124,168   Common stock cash dividend             -               ( 280,003 )             -               ( 280,003 ) End of period             322,042               181,837               322,042               181,837                                                                     Accumulated Other Comprehensive Income                                                                 Beginning of period             ( 9,532 )             304               6,918               3,017   Cash flow hedges, net of tax             9,856               7,984               ( 6,594 )             5,271   End of period             324               8,288               324               8,288                                                                     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           $ 339,504             $ 206,250             $ 339,504             $ 206,250      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 28,     January 29,       2023     2022   Operating Activities:                 Net income   $ 105,861     $ 124,168   Adjustments to reconcile net income to net cash provided by operating activities:                 Depreciation and amortization     15,552       13,711   Deferred income tax provision (benefit)     3,266       ( 283 ) Loss on sale of property, net     20       11   Stock-based compensation     507       524   Amortization of operating right of use assets     9,946       10,117   Changes in assets and liabilities:                 Trade receivables     ( 3,512 )     4,270   Inventories     9,727       ( 17,199 ) Operating lease right of use assets     ( 19,539 )     (5,827 ) Prepaid and other assets     1,832       ( 4,730 ) Accounts payable     ( 26,311 )     ( 20,236 ) Accrued and other liabilities     5,271       ( 7,724 ) Operating lease liabilities     9,633       ( 4,250 ) Net cash provided by operating activities     112,253       92,552                     Investing Activities:                 Additions to property, plant and equipment     ( 12,282 )     ( 16,059 ) Proceeds from sale of property, plant and equipment     11       1   Net cash used in investing activities     ( 12,271 )     ( 16,058 )                   Financing Activities:                 (Repayments) borrowings under Loan Facility     ( 30,000 )     50,000   Proceeds from stock options exercised     292       292   Dividend paid     -       ( 280,003 ) Net cash used in financing activities     ( 29,708 )     ( 229,711 )                   Net Increase (Decrease) in Cash and Equivalents     70,274       ( 153,217 )                   Cash and Equivalents - Beginning of Period     48,050       193,589                     Cash and Equivalents - End of Period   $ 118,324     $ 40,372                     Other Cash Flow Information:                 Interest paid   $ 291     $ 189   Income taxes paid   $ 27,411     $ 42,401      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 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 January 28, 2023 were comprised of finished goods of $ 50.9  million and raw materials of $ 42.7 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 $ 10.4 million for the three months ended January 28, 2023 and $ 12.9 million for the three months ended January 29, 2022. Marketing costs were $ 31.0 million for the nine months ended January 28, 2023, and $ 36.0 million for the nine months ended January 29, 2022.   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 were $ 20.2 million for the three months ended January 28, 2023 and $ 21.1 million for the three months ended January 29, 2022. Shipping and handling costs were $ 65.8 million for the nine months ended January 28, 2023 and $ 65.5 million for the nine months ended January 29, 2022. 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 28,     April 30,       2023     2022   Land   $ 9,835     $ 9,835   Buildings and improvements     70,076       65,697   Machinery and equipment     283,352       277,163   Total     363,263       352,695   Less accumulated depreciation     ( 220,295 )     ( 208,437 ) Property, plant and equipment – net   $ 142,968     $ 144,258     Depreciation expense was $ 4.5 million and $ 13.5 million for the three and nine months ended January 28, 2023, respectively, and $ 3.8 million and $ 11.6 million for the three and nine months ended January 29, 2022, respectively.     3. DEBT   At January 28, 2023, 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 January 28, 2023 or April 30, 2022. At January 28, 2023, $ 2.2 million of the Credit Facilities was reserved for standby letters of credit and $ 97.8 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 January 28, 2023.   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 loan agreements), and contain other restrictions, none of which are expected to have a material effect on our operations or financial position. At January 28, 2023, the subsidiary was in compliance with all loan covenants.   9 Table of Contents     4. STOCK-BASED COMPENSATION   During the nine months ended January 28, 2023, options to purchase 14,700 shares were exercised at weighted average exercise prices of $ 19.83 . At January 28, 2023, options to purchase 521,900 shares of common stock at a weighted average exercise price of $ 18.94 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 a 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     Nine Months Ended       2023     2022     2023     2022   Recognized in AOCI:                                 Gain (loss) before income taxes   $ 10,918     $ 11,007     $ ( 14,419 )   $ 11,980   Less income tax provision     2,612       2,633       ( 3,449 )     2,866   Net   $ 8,306     $ 8,374     $ ( 10,970 )   $ 9,114   Reclassified from AOCI to cost of sales:                                 (Loss) gain before income taxes   $ ( 2,036 )   $ 512     $ ( 5,750 )   $ 5,052   Less income tax (benefit) provision     ( 486 )     122       ( 1,374 )     , 1,209   Net   $ ( 1,550 )   $ 390     $ ( 4,376 )   $ 3,843   Net change to AOCI   $ 9,856     $ 7,984     $ ( 6,594 )   $ 5,271     As of January 28, 2023, the notional amount of our outstanding aluminum swap contracts was $ 61.0 million and, assuming no change in commodity prices, $ 395,000 of unrealized gain before tax will be reclassified from AOCI and recognized in earnings over the next 12 months.   As of January 28, 2023, the fair value of the derivative asset was $ 1.2  million, which was included in prepaid and other assets and the fair value of the derivative liability was $ 1.6  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 as the significant inputs to the fair value measurement are Level 2 as defined by the fair value hierarchy in that they are observable market based inputs or unobservable inputs that are corroborated by market data.   10 Table of Contents     6. LEASES   The Company has entered into various non-cancelable operating lease agreements for certain offices, buildings, machinery and equipment which expire 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 28, 2023 and January 29, 2022 was $ 3.6 million and $ 3.5 million, respectively. Operating lease cost was $ 10.7 million for the nine months ended January 28, 2023 and $ 11.1 million for the nine months ended January 29, 2022.  As of January 28, 2023, the weighted-average remaining lease term and weighted average discount rate of operating leases was 4.4  years and 3.03 %, 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 for operating leases for the three months ended January 28, 2023 and January 29, 2022. Cash payments totaled $ 10.8 million for the nine months ended January 28, 2023 and $ 11.3 million for the nine months ended January 29, 2022.   The following is a summary of future minimum lease payments and related liabilities for all non-cancelable operating leases as of January 28, 2023:       (In thousands)   Fiscal 2023 (remainder)   $ 3,284   Fiscal 2024     12,054   Fiscal 2025     9,118   Fiscal 2026     7,290   Fiscal 2027     6,347   Thereafter     5,631   Total minimum lease payments including interest     43,724   Less: Amounts representing interest     ( 2,845 ) Present value of minimum lease payments     40,879   Less: Current portion of lease liabilities     ( 11,892 ) Non-current portion of lease liabilities   $ 28,987       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 28, 2023 (third quarter of fiscal 2023) compared to Three Months Ended January 29, 2022 (third quarter of fiscal 2022)   Net sales for the third quarter of fiscal 2023 increased 3.7% to $268.5 million from $258.9 million for the third quarter of fiscal 2022. The increase in sales resulted primarily from a 6.9% increase in average selling price per case, partially offset by a 3.0% decline in case volume primarily due to reduced carbonated soft drink volume.   Gross profit for the third quarter of fiscal 2023 increased to $94.9 million from $93.8 million for the third quarter of fiscal 2022. The increase in gross profit is due to the increase in average selling price, partially offset by increased packaging and ingredient costs.  The cost of sales per case increased 8.4% and gross margin decreased to 35.4% from 36.2% for the third quarter of fiscal 2022.  Although costs per case remain elevated, the third quarter of 2023 is the second consecutive quarter of declining costs per case.   Selling, general and administrative expenses for the third quarter of fiscal 2023 decreased $2.6 million to $50.5 million from $53.1 million for the third quarter of fiscal 2022. The decrease was primarily due to a decrease in marketing and shipping costs.  The decline in marketing costs was primarily due to reduced programs with retail partners.  As a percent of net sales, selling, general and administrative expenses decreased to 18.8% from 20.5% for the third quarter of fiscal 2022.   Other income (expense), net includes interest income of $369,000 for the third quarter of fiscal 2023 and $39,000 for the third quarter of fiscal 2022. The increase in interest income is due to a higher return on lower average investment balances.   The Company’s effective income tax rate, based upon estimated annual income tax rates, was 23.5% for the third quarter of fiscal 2023 and 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.     Nine Months Ended January 28, 2023 (first nine months of fiscal 2023) compared to Nine Months Ended January 29, 2022 (first nine months of fiscal 2022)   12 Table of Contents   Net sales for the first nine months of fiscal 2023 increased 3.8% to $886.2 million from $853.8 million for the first nine months of fiscal 2022. The increase in sales resulted primarily from a 9.3% increase in average selling price per case and a 5.0% decline in case volumes which impacted both Power+ Brands and carbonated soft drinks.   Gross profit for the first nine months of fiscal 2023 decreased to $294.3 million from $320.1 million for the first nine months of fiscal 2022. The cost of sales per case increased 16.7% and gross margin decreased to 33.2% from 37.5% for the first nine months of fiscal 2022. The decrease in gross margin is due to increased packaging, ingredients and labor costs offset in part by increased average selling prices.   Selling, general and administrative expenses for the first nine months of fiscal 2023 decreased $986,000 to $156.5 million from $157.5 million for the first nine months of fiscal 2022. The decrease was primarily due to decreased marketing costs, partially offset by increased shipping and administrative costs.  The decline in marketing costs was primarily due to reduced programs with retail partners.  As a percent of net sales, selling, general and administrative expenses increased to 17.7% from 18.4% for the first nine months of fiscal 2022.   Other income (expense), net includes interest income of $544,000 for the first nine months of fiscal 2023 and $136,000 for the first nine months of fiscal 2022. The increase in interest income is due to a higher return on lower average investment balances.   The Company’s effective income tax rate, based upon estimated annual income tax rates, was 23.5% for the first nine months of fiscal 2023 and 23.6% for the first nine 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 January 28, 2023, we maintained $150 million unsecured revolving credit facilities, under which no borrowings were outstanding and $2.2 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 increased $70.3 million for the nine months of fiscal 2023 compared to a decrease of $153.2 million for the nine months of fiscal 2022.   Net cash provided by operating activities for the first nine months of fiscal 2023 amounted to $112.3 million compared to $92.6 million for the nine months of fiscal 2022. Net cash provided by operating activities for the first nine months of fiscal 2023 was principally provided by net income of $105.9 million, depreciation and amortization of $15.6 million, and amortization of operating right of use assets of $9.9 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 2023 reflects capital expenditures of $12.3 million, compared to capital expenditures of $16.1 million for the first nine months of fiscal 2022. We intend to continue production capacity and efficiency improvement projects, and expect fiscal 2023 capital expenditures to be lower than fiscal 2022 levels.   13 Table of Contents   Financial Position At January 28, 2023, our working capital increased to $198.4 million compared to $129.2 million at April 30, 2022. The current ratio was 2.6 to 1 at January 28, 2023 compared to 1.9 to 1 at April 30, 2022. Trade receivables increased $3.5 million and days sales outstanding increased to 32.9 from 30.0. Inventories decreased $9.7 million and inventory turns improved to 8.5 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.   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 April 30, 2022.   ITEM 6. EXHIBITS   Exhibit No.   Description       10.18   NewBevCo- Fifth Amendment to Second Amended and Restated Credit Agreement (1)       10.19   NewBevCo- Fifth Amendment of Second Amended and Restated Credit Agreement (1)       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 28, 2023, 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)               (1) Previously filed with the Securities and Exchange Commission as an exhibit to Quarterly Report on Form 10-Q for the fiscal period ended dated October 29, 2022 and is incorporated herein by reference.   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 9, 2023     National Beverage Corp. (Registrant)           By: /s/ George R. Bracken       George R. Bracken       Executive Vice President – Finance       (Principal Financial Officer)   16