NATIONAL BEVERAGE CORP 10-Q

ITEM 1. FINANCIAL STATEMENTS NATIONAL BEVERAGE CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands, except share data) January 25, April 27, 2025 2024 Assets Current assets: Cash and cash equivalents $ 149,222 $ 327,047 Trade receivables, net 90,903 102,837 Inventories 85,032 84,603 Prepaid and other current assets 27,413 22,385 Total current assets 352,570 536,872 Property, plant and equipment, net 165,585 159,730 Operating lease right-of-use assets 53,838 53,498 Goodwill 13,145 13,145 Intangible assets 1,615 1,615 Other assets 7,267 5,293 Total assets $ 594,020 $ 770,153 Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 62,637 $ 78,283 Accrued liabilities 43,260 46,565 Operating lease liabilities 13,076 13,079 Income taxes payable 641 - Total current liabilities 119,614 137,927 Deferred income taxes, net 23,826 23,247 Operating lease liabilities 42,256 41,688 Other liabilities 8,088 7,779 Total liabilities 193,784 210,641 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; 101,994,358 and 101,942,658 shares issued, respectively 1,020 1,019 Additional paid-in capital 43,567 42,588 Retained earnings 372,989 535,077 Accumulated other comprehensive income 6,743 4,911 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 400,236 559,512 Total liabilities and shareholders' equity $ 594,020 $ 770,153 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 25, January 27, January 25, January 27, 2025 2024 2025 2024 Net sales $ 267,050 $ 270,065 $ 887,725 $ 894,379 Cost of sales 168,100 173,034 556,992 575,009 Gross profit 98,950 97,031 330,733 319,370 Selling, general and administrative expenses 48,373 48,850 152,774 153,785 Operating income 50,577 48,181 177,959 165,585 Other income, net 1,398 1,967 7,474 6,745 Income before income taxes 51,975 50,148 185,433 172,330 Provision for income taxes 12,332 10,556 43,373 39,319 Net income $ 39,643 $ 39,592 $ 142,060 $ 133,011 Earnings per common share: Basic $ .42 $ .42 $ 1.52 $ 1.42 Diluted $ .42 $ .42 $ 1.52 $ 1.42 Weighted average common shares outstanding: Basic 93,617 93,454 93,603 93,389 Diluted 93,691 93,640 93,685 93,618 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 25, January 27, January 25, January 27, 2025 2024 2025 2024 Net income $ 39,643 $ 39,592 $ 142,060 $ 133,011 Other comprehensive income, net of tax: Cash flow hedges 237 2,732 1,832 3,376 Comprehensive income $ 39,880 $ 42,324 $ 143,892 $ 136,387 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 25, 2025 January 27, 2024 January 25, 2025 January 27, 2024 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 101,985 1,020 101,766 1,018 101,942 1,019 101,727 1,017 Stock options exercised 9 - 142 1 52 1 181 2 End of Period 101,994 1,020 101,908 1,019 101,994 1,020 101,908 1,019 Additional Paid-In Capital Beginning of period 43,355 41,012 42,588 40,393 Stock options exercised 58 562 514 841 Stock-based compensation expense 154 164 465 504 End of period 43,567 41,738 43,567 41,738 Retained Earnings Beginning of period 333,346 451,764 535,077 358,345 Net income 39,643 39,592 142,060 133,011 Common stock cash dividend - - ( 304,148 ) - End of period 372,989 491,356 372,989 491,356 Accumulated Other Comprehensive Income (Loss) Beginning of period 6,506 ( 2,541 ) 4,911 ( 3,185 ) Cash flow hedges, net of tax 237 2,732 1,832 3,376 End of period 6,743 191 6,743 191 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 $ 400,236 $ 510,221 $ 400,236 $ 510,221 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 25, January 27, 2025 2024 Operating Activities: Net income $ 142,060 $ 133,011 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 15,317 15,089 Deferred income taxes 20 4,024 Stock-based compensation expense 465 504 Other, net 632 3 Non-cash operating lease expense 10,786 10,482 Changes in assets and liabilities: Trade receivables 11,934 3,187 Inventories ( 429 ) 4,908 Prepaid and other assets ( 5,501 ) ( 11,786 ) Accounts payable ( 15,646 ) ( 11,796 ) Accrued and other liabilities ( 2,457 ) 1,115 Operating lease liabilities ( 10,560 ) ( 11,276 ) Net cash provided by operating activities 146,621 137,465 Investing Activities: Purchases of property, plant and equipment ( 20,815 ) ( 19,464 ) Proceeds from sale of property, plant and equipment 2 45 Net cash used in investing activities ( 20,813 ) ( 19,419 ) Financing Activities: Dividends paid on common stock ( 304,148 ) - Proceeds from stock options exercised 515 841 Net cash (used in) provided by financing activities ( 303,633 ) 841 Net (Decrease) Increase in Cash and Cash Equivalents ( 177,825 ) 118,887 Cash and Cash Equivalents - Beginning of Period 327,047 158,074 Cash and Cash Equivalents - End of Period $ 149,222 $ 276,961 Supplemental Cash Flow Information: Interest paid $ 65 $ 146 Income taxes paid $ 46,501 $ 43,549 Non-Cash Activities: Right-of-use assets obtained in exchange for lease liabilities $ 11,125 $ 27,905 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 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 27, 2024. The accounting policies used in these interim unaudited condensed consolidated financial statements are consistent with those used in the annual consolidated financial statements. Segment Reporting The Company operates as a single operating segment for purposes of presenting financial information and evaluating performance. As such, the accompanying consolidated financial statements present financial information in a format that is consistent with the internal financial information used by management. Use of Estimates 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. Fair Value of Financial Instruments The carrying values of the Company’s financial instruments, including cash and cash equivalents, trade receivables, accounts payable and accrued liabilities, approximate fair value due to the relatively short maturity of the respective instruments. As of January 25, 2025 and April 27, 2024, cash and cash equivalents included money-market instruments of $ 77.2 million and $ 240.7 million, respectively. These financial instruments are Level 1 as defined by the fair value hierarchy since they are based on quoted prices in active markets for identical assets and liabilities. Derivative financial instruments which are used to partially mitigate exposure to changes in certain raw material costs are recorded at fair value. Derivative financial instruments are not used for trading or speculative purposes. Credit risk related to derivative financial instruments is managed by requiring high credit standards for counterparties and frequent cash settlements. The estimated fair values of derivative financial instruments are calculated based on market rates to settle the instruments. See Note 5 -Derivative Financial Instruments. 8 Table of Contents Trade Receivables, Net The Company’s estimated allowances for credit losses as of January 25, 2025 and April 27, 2024 were $ 1.3 million and $ 0.9 million, respectively. The Company’s trade receivable, net balances as of January 27, 2024 and April 29, 2023 were $ 101.7 million and $ 104.9 million, respectively. Inventories Inventories are stated at the lower of first -in, first -out cost or net realizable value. Adjustments, if required, to reduce the cost of the inventory to net realizable value are made for estimated excess, obsolete or impaired balances. Inventories at January 25, 2025 were comprised of finished goods of $ 46.1 million and raw materials of $ 38.9 million. Inventories at April 27, 2024 were comprised of finished goods of $ 50.3 million and raw materials of $ 34.3 million. 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 $ 17.5 million and $ 17.7 million for the three months ended January 25, 2025 and January 27, 2024, respectively. Shipping and handling costs were $ 55.5 million and $ 58.3 million for the nine months ended January 25, 2025 and January 27, 2024, respectively. 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. Marketing Costs The Company utilizes a variety of marketing programs, including cooperative advertising programs with customers, to advertise and promote its beverages 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 $ 10.1 million and $ 11.0 million for the three months ended January 25, 2025 and January 27, 2024, respectively. Marketing costs were $ 33.2 million and $ 35.1 million for the nine months ended January 25, 2025 and January 27, 2024, respectively. Earnings Per Common Share Basic earnings per common share is computed by dividing earnings available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per common share is calculated in a similar manner, but includes the dilutive effect of stock options that was 74,000 and 186,000 shares in the three months ended January 25, 2025 and January 27, 2024, respectively. The dilutive effect of stock options was 82,000 and 229,000 shares in the nine months ended January 25, 2025 and January 27, 2024, respectively. Recently Issued Accounting Pronouncements In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024 - 03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220 - 40 ): Disaggregation of Income Statement Expenses,” which requires entities to disaggregate operating expenses into specific categories such as employee compensation, depreciation, and intangible asset amortization, by relevant expense caption on the statement of operations. The standard is effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted on either a prospective or retrospective basis. We are currently evaluating the impact of adopting ASU 2024 - 03 on our consolidated financial statements and related disclosures. 9 Table of Contents In December 2023, the FASB issued ASU 2023 - 09, “Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures,” which requires disclosure of specific categories in the rate reconciliation, including additional information for reconciling items that meet a quantitative threshold and specific disaggregation of income taxes paid and tax expense. The amendment is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of adoption of this standard on its consolidated financial statements and does not expect a material impact upon adoption. In November 2023, the FASB issued ASU 2023 - 07, “Segment Reporting (Topic 280 ): Improvements to Reportable Segment Disclosures,” which requires additional disclosure of significant segment expenses included in the reported measure of segment profit or loss and regularly provided to the Chief Operating Decision Maker. This standard does not change how an entity identifies its operating segments or applies quantitative thresholds to determine its reportable segments. The standard will be effective for our fiscal year ending May 3, 2025. The Company evaluated the impact of adoption of this standards on its consolidated financial statements and does not expect a material impact upon adoption. 2. PROPERTY, PLANT AND EQUIPMENT, NET Property, plant and equipment, net consist of the following: (In thousands) January 25, 2025 April 27, 2024 Land $ 9,835 $ 9,835 Buildings and improvements 73,735 71,754 Machinery and equipment 332,440 314,079 Total 416,010 395,668 Less: accumulated depreciation ( 250,425 ) ( 235,938 ) Property, plant and equipment, net $ 165,585 $ 159,730 Property, plant and equipment included construction-in-progress in the amounts of $ 42.0 million and $ 32.5 million as of January 25, 2025 and April 27, 2024, respectively. Depreciation expense was $ 4.9 million and $ 4.8 million for the three months ended January 25, 2025 and January 27, 2024, respectively. Depreciation expense was $ 15.0 million and $ 14.0 million for the nine months ended January 25, 2025 and January 27, 2024, respectively. Depreciation expense is recorded in cost of sales and selling, general and administrative expenses. 3. LEASES The Company has entered into various non-cancelable operating lease agreements for certain offices, buildings and machinery and equipment which expire at various dates through January 2037. 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 costs were $ 4.2 million and $ 4.1 million for the three months ended January 25, 2025 and January 27, 2024, respectively. Operating lease costs were $ 12.5 million and $ 11.8 million for the nine months ended January 25, 2025 and January 27, 2024, respectively. As of January 25, 2025, the weighted-average remaining lease term and weighted average discount rate of operating leases was 4.85 years and 4.50 %, respectively. As of April 27, 2024, the weighted-average remaining lease term and weighted average discount rate of operating leases was 4.80 years and 4.30 %, respectively. Cash payments were $ 3.9 million and $ 3.5 million for operating leases for the three months ended January 25, 2025 and January 27, 2024, respectively. Cash payments were $ 12.3 million and $ 11.4 million for operating leases for the nine months ended January 25, 2025 and January 27, 2024, respectively. 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 25, 2025: (In thousands) Fiscal 2025 – Remaining quarter $ 3,720 Fiscal 2026 15,120 Fiscal 2027 13,613 Fiscal 2028 8,769 Fiscal 2029 7,640 Thereafter 13,238 Total minimum lease payments including interest 62,100 Less: amounts representing interest ( 6,768 ) Present value of minimum lease payments 55,332 Less: current portion of lease obligations ( 13,076 ) Non-current portion of lease obligations $ 42,256 4. DEBT At January 25, 2025, a subsidiary of the Company maintained unsecured revolving credit facilities with banks aggregating $ 100 million (the “Credit Facilities”). The Credit Facilities expire from May 30, 2025 to September 10, 2027 and any borrowings would currently bear interest at 1.15 % above the Secured Overnight Financing Rate (“ SOFR ”). There were no borrowings outstanding under the Credit Facilities at January 25, 2025 or April 27, 2024. At January 25, 2025, $ 2.2 million of the Credit Facilities was reserved for standby letters of credit and $ 97.8 million was available for borrowings. A subsidiary of the Company also maintains an unsecured revolving term loan facility with a national bank aggregating $ 50 million (the “Loan Facility”). There were no borrowings outstanding under the Loan Facility at January 25, 2025 or April 27, 2024. The Loan Facility expires December 31, 2027 and any borrowings would bear interest at 1.15 % above the adjusted daily SOFR . The Credit Facilities and Loan Facility require the subsidiary to maintain certain financial ratios, including debt to net worth and debt to EBITDA (as defined in the credit agreements), and contain other restrictions, none of which are expected to have a material effect on operations or financial position. At January 25, 2025, the subsidiary was in compliance with all loan covenants. 11 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 containers. Such financial instruments are designated and accounted for as cash flow hedges. Accordingly, gains or losses attributable to the effective portion of the cash flow hedge are reported in accumulated other comprehensive income (loss) (“AOCI”) and reclassified into cost of sales in the period in which the hedged transaction affects earnings. The ineffective portion of the change in fair value of our cash flow hedge was immaterial. The following summarizes the gains (losses) recognized in the Condensed Consolidated Statements of Income and AOCI: (In thousands) Three Months Ended Nine Months Ended January 25, 2025 January 27, 2024 January 25, 2025 January 27, 2024 Recognized in AOCI: Income (loss) before income taxes $ 1,704 $ 1,465 $ 4,927 $ ( 4,916 ) Less: income tax provision (benefit) 402 350 1,157 ( 1,176 ) Net 1,302 1,115 3,770 ( 3,740 ) Reclassified from AOCI to cost of sales: Gain (loss) before income taxes 1,395 ( 2,126 ) 2,536 ( 9,353 ) Less: income tax provision (benefit) 330 ( 509 ) 598 ( 2,237 ) Net 1,065 ( 1,617 ) 1,938 ( 7,116 ) Net change to AOCI $ 237 $ 2,732 $ 1,832 $ 3,376 As of January 25, 2025, the notional amount of our outstanding aluminum swap contracts was $ 73.0 million and, assuming no change in commodity prices, $ 6.7 million of unrealized gain before tax will be reclassified from AOCI and recognized in earnings over the next 12 months. The maximum length of time for which the Company hedges its exposure to the variability of future cash flows is less than three years. The Company is not subject to any legally enforceable master netting arrangements and does not offset fair value amounts recognized for derivative instruments. As of January 25, 2025, the fair value of the derivative asset was $ 8.2 million, of which $ 6.8 million was included in prepaid and other assets and $ 1.4 million in other assets. The fair value of the derivative liability was $ 0.1 million which was included in accrued liabilities . As of April 27, 2024, the fair value of the derivative asset, which was included in prepaid and other current assets , was $ 5.7 million. 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. RELATED PARTIES The Company is a party to a management agreement with Corporate Management Advisors, Inc. (CMA), a corporation owned by our Chairman and Chief Executive Officer. The management agreement provides that the Company will pay CMA an annual base fee equal to one percent of the consolidated net sales of the Company. Management fees to CMA were $ 2.7 million for each of the three months ended January 25, 2025 and January 27, 2024. Management fees to CMA were $ 8.9 million and $ 9.0 million for the nine months ended January 25, 2025 and January 27, 2024, respectively. At January 25, 2025 and April 27, 2024, current liabilities included amounts due to CMA of $ 1.6 million and $ 3.0 million, respectively. 12 Table of Contents 7. CASH DIVIDEND On June 12, 2024, the Company's board of directors declared a special cash dividend of $ 3.25 per share payable to shareholders of record on June 24, 2024. The special cash dividend of $ 304.1 million was paid on July 24, 2024. 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. 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 beverages; 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 beverages. Additionally, we produce and distribute carbonated soft drinks including Shasta® and Faygo®, iconic brands whose consumer loyalty spans more than 135 years. 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. Presently, our primary market focus is the United States and Canada. Certain of our beverages are also distributed on a limited basis in other countries and options to expand distribution to other regions are being pursued. 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 beverages at our warehouses, further lowering their/our costs. Our operating results are affected by numerous factors, including fluctuations in the costs of raw materials, supply chain disruptions, holiday and seasonal programming, and weather conditions. Beverage sales are seasonal with higher sales volume realized during the summer months when outdoor activities are more prevalent. 13 Table of Contents RESULTS OF OPERATIONS Three Months Ended January 25, 2025 (third quarter of fiscal 2025) compared to Three Months Ended January 27, 2024 (third quarter of fiscal 2024) Net sales for the third quarter of fiscal 2025 decreased 1.1% to $267.1 million from $270.1 million for the third quarter of fiscal 2024. The decrease in sales resulted primarily from a 3.4% decrease in case volume, partially offset by a 2.2% increase in average selling price per case. The decrease in case volume primarily impacted Power + Brands, partially offset by a modest increase in carbonated soft drink brands. Gross profit for the third quarter of fiscal 2025 increased to $99.0 million from $97.0 million for the third quarter of fiscal 2024. The increase in gross profit was primarily due to an increase in average selling price per case and a decline in packaging costs, partially offset by the decrease in case volume. The average cost of sales per case remained constant and gross margin increased to 37.1% from 35.9% for the third quarter of fiscal 2024. Selling, general and administrative expenses for the third quarter of fiscal 2025 decreased $0.5 million to $48.4 million from $48.9 million for the second quarter of fiscal 2024. The decrease was primarily due to a decrease in marketing and selling costs. As a percentage of net sales, selling, general and administrative expenses remained constant at 18.1% for the third quarter of fiscal 2025 and fiscal 2024, respectively. Other income, net includes interest income of $1.4 million for the third quarter of fiscal 2025 and $1.8 million for the third quarter of fiscal 2024. The decrease in interest income is due primarily to lower average invested balances. The Company’s effective income tax rate, based upon estimated annual income tax rates, was 23.7% for the third quarter of fiscal 2025 and 21.0% for the third quarter of fiscal 2024. 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 25, 2025 (first nine months of fiscal 2025) compared to Nine Months Ended January 27, 2024 (first nine months of fiscal 2024) Net sales for the first nine months of fiscal 2025 decreased 0.7% to $887.7 million from $894.4 million for the first nine months of fiscal 2024. The decrease in sales resulted primarily from a 2.3% decrease in case volume, partially offset by a 1.7% increase in average selling price per case. The decrease in case volume impacted both Power+ Brands and carbonated soft drink brands. Gross profit for the first nine months of fiscal 2025 increased to $330.7 million from $319.4 million for the first nine months of fiscal 2024. The increase in gross profit was primarily due to a decline in packaging costs and an increase in average selling price per case, partially offset by the decrease in case volume. The average cost of sales per case decreased 0.9% and gross margin increased to 37.3% from 35.7% for the first nine months of fiscal 2024. 14 Table of Contents Selling, general and administrative expenses for the first nine months of fiscal 2025 decreased $1.0 million to $152.8 million from $153.8 million for the first nine months of fiscal 2024. The decrease was primarily due to a decrease in marketing and shipping and handling costs. As a percentage of net sales, selling, general and administrative expenses remained constant at 17.2% for the first nine months of fiscal 2025 and fiscal 2024. Other income, net includes interest income of $7.4 million for the first nine months of fiscal 2025 and $5.8 million for the first nine months of fiscal 2024. The increase in interest income is due to increased average invested balances. The Company’s effective income tax rate, based upon estimated annual income tax rates, was 23.4% for the first nine months of fiscal 2025 and 22.8% for the first nine months of fiscal 2024. 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 sources of liquidity are our existing cash and cash-equivalents, cash generated from operations and borrowing capacity. At January 25, 2025, we maintained unsecured credit facilities totaling $150 million, 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 decreased $177.8 million for the first nine months of fiscal 2025 compared to an increase of $118.9 million for the first nine months of fiscal 2024 primarily due to the special cash dividend of $304.1 million paid on July 24, 2024. Net cash provided by operating activities for the first nine months of fiscal 2025 was $146.6 million compared to $137.5 million for the first nine months of fiscal 2024. For the first nine months of fiscal 2025, cash flow provided by operating activities increased primarily due to an increase in net income, partially offset by increases in working capital excluding cash. Net cash used in investing activities for the first nine months of fiscal 2025 reflects capital expenditures of $20.8 million, compared to capital expenditures of $19.5 million for the first nine months of fiscal 2024. Certain production capacity and efficiency improvement projects are in progress and we anticipate fiscal 2025 capital expenditures will be in the range of $25 to $30 million. Net cash used in financing activities for the first nine months of fiscal 2025 reflects the payment of a special dividend of $304.1 million. No dividends were paid during the first nine months of fiscal 2024. Financial Position At January 25, 2025, working capital decreased to $233.0 million from $398.9 million at April 27, 2024. The current ratio was 2.9 to 1 at January 25, 2025 compared to 3.9 to 1 at April 27, 2024. The decrease in working capital and current ratio was due primarily to the payment of the $304.1 million cash dividend. Trade receivables decreased $11.9 million and days sales outstanding decreased to 31.0 from 31.5 days. Inventories increased $0.4 and inventory turns remained constant at 8.6 times. Subsequent to January 25, 2025, the Company renewed two leases and entered into a new lease which will result in an increase in the operating lease right-of-use assets and associated operating lease liabilities of approximately $18 million. 15 Table of Contents 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 27, 2024.