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Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 25, 1997
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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One North University Drive, Ft. Lauderdale, FL 33324
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( Address of principal executive offices) (Zip Code)
(954) 581-0922
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(Registrant's telephone number, including area code)
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 ( X ) No ( )
The number of shares of Registrant's common stock outstanding as of March 7,
1997 was 18,457,968.
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NATIONAL BEVERAGE CORP.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JANUARY 25, 1997
<TABLE>
<CAPTION>
INDEX
PART I - FINANCIAL INFORMATION
Page
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
as of January 25, 1997 and April 27, 1996 .................................................................... 3
Condensed Consolidated Statements of Income for the three months and nine months
ended January 25, 1997 and January 27, 1996................................................................... 4
Condensed Consolidated Statement of Shareholders' Equity
for the nine months ended January 25, 1997.................................................................... 5
Condensed Consolidated Statements of Cash Flows for the nine months ended
January 25, 1997 and January 27, 1996......................................................................... 6
Notes to Condensed Consolidated Financial Statements.......................................................... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ................................................................ 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings..................................................................................... 15
Item 6. Exhibits and Reports on Form 8-K...................................................................... 15
</TABLE>
2
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NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JANUARY 25, 1997 AND APRIL 27, 1996
(In thousands, except share amounts)
================================================================================
<TABLE>
<CAPTION>
(Unaudited)
January 25, April 27,
1997 1996
----------------- -----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 22,107 $ 35,231
Trade receivables (net of allowance of $681 at January 25, 1997 33,588 33,726
and $694 at April 27, 1996)
Inventories 24,343 22,977
Deferred income taxes 2,617 3,630
Prepaid and other 5,570 6,056
---------------- ----------------
Total current assets 88,225 101,620
PROPERTY - NET 55,531 56,226
INTANGIBLE ASSETS - NET 16,213 15,207
OTHER ASSETS 3,586 4,507
---------------- ----------------
TOTAL $ 163,555 $ 177,560
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 32,278 $ 38,201
Accrued liabilities 14,748 17,534
Income taxes payable 1,938 1,376
Current portion of long-term debt 721 929
---------------- ----------------
Total current liabilities 49,685 58,040
LONG-TERM DEBT 49,576 62,568
DEFERRED INCOME TAXES 6,821 6,805
ACCRUED INSURANCE - NONCURRENT 3,190 3,095
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, 7% cumulative, $1 par value, aggregate liquidation
preference of $15,000 (Authorized 1,000,000 shares; Issued 150,000 150 150
shares; no shares outstanding)
Common stock, $.01 par value (Authorized 50,000,000 shares; Issued:
21,982,732 shares in January 1997; 12,741,488 shares in April 1996; Out-
standing: 18,452,008 shares in January 1997; 9,310,764 shares in April 1996) 220 127
Additional paid-in capital 14,911 14,873
Retained earnings 52,483 44,178
Treasury stock - at cost
Preferred stock (5,100) (5,100)
Common stock (8,381) (7,176)
---------------- ----------------
Total shareholders' equity 54,283 47,052
---------------- ----------------
TOTAL $ 163,555 $ 177,560
================ ================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND NINE MONTHS ENDED JANUARY 25, 1997 AND JANUARY 27, 1996
(In thousands, except per share amounts)
===============================================================================
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended Nine Months Ended
1997 1996 1997 1996
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Net Sales $ 75,113 $ 67,245 $ 280,285 $ 253,469
Cost of Sales 53,232 50,637 198,707 190,212
------------- ------------- ------------- --------------
Gross Profit 21,881 16,608 81,578 63,257
Selling, General and Administrative Expenses 19,912 14,976 65,307 49,112
Interest Expense 1,118 1,119 3,834 3,722
Other Expense (Income) - Net (145) (198) (745) (861)
------------- ------------- ------------- --------------
Income before Income Taxes 996 711 13,182 11,284
Provision for Income Taxes 368 271 4,877 4,288
------------- ------------- ------------- --------------
Net Income $ 628 $ 440 $ 8,305 $ 6,996
============= ============= ============= ==============
Earnings Applicable to Common Shares $ 628 $ 177 $ 8,305 $ 6,208
============= ============= ============= ==============
Earnings per Common Share $ 0.03 $ 0.01 $ 0.44 $ 0.33
============= ============= ============= ==============
Average Shares Outstanding 19,254 18,600 19,041 18,600
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED JANUARY 25, 1997
(In thousands, except share amounts)
===============================================================================
<TABLE>
<CAPTION>
(Unaudited)
Shares Amount
---------- -------------
<S> <C> <C>
PREFERRED STOCK
Beginning and end of period 150,000 $ 150
========== =============
COMMON STOCK
Beginning of period 12,741,488 $ 127
Stock options exercised 16,040 1
2 for 1 stock split 9,225,204 92
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End of period 21,982,732 $ 220
========== =============
ADDITIONAL PAID-IN CAPITAL
Beginning of period $ 14,873
Stock options exercised 130
2 for 1 stock split (92)
-------------
End of period $ 14,911
=============
RETAINED EARNINGS
Beginning of period $ 44,178
Net income 8,305
-------------
End of period $ 52,483
=============
TREASURY STOCK-PREFERRED
Beginning and end of period 150,000 $ (5,100)
========= =============
TREASURY STOCK-COMMON
Beginning of period 3,430,724 $ (7,176)
Purchase of common stock 100,000 (1,205)
---------- -------------
End of period 3,530,724 $ (8,381)
========== =============
TOTAL SHAREHOLDERS' EQUITY $ 54,283
=============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JANUARY 25, 1997 AND JANUARY 27, 1996
(In thousands)
================================================================================
<TABLE>
<CAPTION>
(Unaudited)
1997 1996
-------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 8,305 $ 6,996
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 5,576 5,273
Deferred income tax provision (benefit) 1,029 (12)
Provision (benefit) for doubtful accounts 28 (75)
Loss on sale of property 73 11
Changes in:
Trade receivables 713 10,419
Inventories (285) (6,709)
Prepaid and other assets (1,700) (3,031)
Accounts payable (5,886) (17,434)
Other liabilities (2,929) (3,447)
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Net cash provided by (used in) operating activities 4,924 (8,009)
----------- -----------
INVESTING ACTIVITIES:
Property additions (4,220) (4,148)
Proceeds from disposal of property 387 1
Other, net 152 (569)
----------- -----------
Net cash used in investing activities (3,681) (4,716)
----------- -----------
FINANCING ACTIVITIES:
Debt borrowings 20,200 10,000
Debt repayments (33,400) (8,481)
Preferred stock dividends paid --- (1,313)
Purchase of common stock (1,205) ---
Proceeds from stock options exercised 38 ---
----------- -----------
Net cash provided by (used in) financing activities (14,367) 206
----------- -----------
NET DECREASE IN CASH AND EQUIVALENTS (13,124) (12,519)
CASH AND EQUIVALENTS-BEGINNING OF YEAR 35,231 33,487
----------- -----------
CASH AND EQUIVALENTS-END OF PERIOD $ 22,107 $ 20,968
=========== ===========
OTHER CASH FLOW INFORMATION:
Interest paid $ 4,118 $ 3,921
Income taxes paid 2,861 3,652
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
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NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 25, 1997
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
National Beverage Corp. ("NBC") and its subsidiaries have been prepared in
accordance with generally accepted accounting principles for interim financial
information. The financial statements do not include all information and notes
required by generally accepted accounting principles for complete financial
statements. Except for the matters disclosed, however, there has been no
material change in the information disclosed in the notes to consolidated
financial statements for the fiscal year ended April 27, 1996. In the opinion of
management, all adjustments (consisting of normal recurring accruals) 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. Certain prior year amounts have been
reclassified to conform to the current year presentation. NBC and its
consolidated subsidiaries are referred to as the "Company".
2. INVENTORIES
Inventories, which are stated at the lower of first-in, first-out cost or
market, are comprised of the following:
<TABLE>
<CAPTION>
(In thousands)
Jan. 25, 1997 April 27, 1996
------------- --------------
<S> <C> <C>
Finished goods $11,354 $11,225
Raw materials and packaging supplies 12,989 11,752
------- -------
Total $24,343 $22,977
======= =======
</TABLE>
7
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3. PROPERTY
Property consists of the following:
<TABLE>
<CAPTION>
(In thousands)
Jan. 25, 1997 April 27, 1996
-------------- --------------
<S> <C> <C>
Land $ 9,959 $ 9,959
Buildings and improvements 30,604 30,654
Machinery and equipment 71,055 69,501
-------- ---------
Total 111,618 110,114
Less accumulated depreciation (56,087) (53,888)
-------- ---------
Property-net $ 55,531 56,226
======== =========
</TABLE>
Depreciation expense was $1,511,000 and $4,545,000 for the three and nine month
periods ended January 25, 1997, respectively, and $1,621,000 and $4,809,000 for
the three and nine month periods ended January 27, 1996, respectively.
4. DEBT
Debt consists of the following:
<TABLE>
<CAPTION
(In thousands)
Jan. 25, 1997 April 27, 1996
-------------- --------------
<S> <C> <C>
Senior Notes (see below) $33,333 $41,667
Credit Facility (see below) 7,500 17,783
Term Loan Facility (see below) 8,300 2,000
Other (including capital leases) 1,164 2,047
------- -------
Total 50,297 63,497
Less current portion (721) (929)
------- -------
Long-term portion $49,576 $62,568
======= =======
</TABLE>
A subsidiary of NBC has outstanding 9.95% unsecured senior notes in the original
principal amount of $50 million (the "Senior Notes") payable in annual principal
installments of $8.3 million through November 1, 2000. Additionally, at January
25, 1997, the subsidiary had a $25 million unsecured revolving credit facility
(the "Credit Facility") and a $16.6 million unsecured term loan facility ("Term
Loan Facility") with a bank. The Credit Facility expires August 31, 1998, and
bears interest at 1/2% below the bank's reference rate or 1% above LIBOR, at the
subsidiary's election. The Term Loan Facility is repayable in quarterly
installments beginning February 1, 1998 and bears interest at the bank's
reference rate or 1 1/4% above LIBOR, at the
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subsidiary's election. In February 1997, the subsidiary entered into an
additional $10 million revolving credit facility with a bank which contains
terms similar to the Credit Facility.
The Company intends to utilize its existing long-term credit facilities to fund
the next principal payment due on its Senior Notes.
Certain of the Company's debt agreements contain restrictions which require the
subsidiary to maintain certain financial ratios and minimum net worth, and limit
the subsidiary with respect to incurring certain additional indebtedness, paying
cash dividends and making certain loans, advances or other investments. At
January 25, 1997, net assets of the subsidiary totaling approximately $42
million were restricted from distribution. The Company was in compliance with
all loan covenants and restrictions and such restrictions are not expected to
have a material adverse impact on the operations of the Company.
5. COMMITMENTS AND CONTINGENCIES
Albert H. Kahn v. Nick A. Caporella, et al., Civil Action No. 11890 was filed in
December 1990 by a shareholder of Burnup & Sims Inc. ("BSI"), now MasTec, Inc.,
in the Court of Chancery of the State of Delaware in and for New Castle County
against NBC, the members of the Board of Directors of BSI and against BSI. In
May 1993, plaintiff amended its class action and shareholder derivative
complaint (the "Amended Complaint"). The class action claims allege, among other
things, that the Board of Directors of BSI, and NBC, as its largest shareholder,
breached their respective fiduciary duties in approving (i) the dividend by BSI
of its shares of NBC common stock (the "Distribution") and (ii) the exchange of
certain shares of BSI's common stock held by NBC for certain indebtedness of NBC
held by BSI (the "Exchange"; the Distribution and the Exchange are hereafter
referred to as the "1991 Transaction"), in allegedly placing the interests of
NBC ahead of the interests of other shareholders of BSI. The derivative action
claims allege, among other things, that the Board of Directors of BSI breached
their fiduciary duties by approving executive officer compensation arrangements,
by financing NBC's operations on a current basis, and by permitting the
interests of BSI to be subordinated to those of NBC. In the lawsuit, plaintiff
seeks to rescind the 1991 Transaction and to recover unspecified damages. The
defendants, including the Company, have moved to dismiss the actions for failure
to make a demand and state a claim upon which relief can be granted. The motion
is still pending.
In November 1993, plaintiff filed a class action and derivative complaint, Civil
Action No. 13248 (the "1993 Complaint") against the Company, BSI, the members of
the Board of Directors of BSI, and certain other defendants (referred to as
"Other Defendants"). In December 1993, plaintiff amended the 1993 Complaint (the
"1993 Amended Complaint"). The 1993 Amended Complaint alleges, among other
things, that the Board of Directors of BSI, and NBC, as BSI's largest
stockholder, breached their respective fiduciary duties by approving an
agreement dated October 15, 1993, as amended, between BSI and the Other
Defendants (the "Acquisition Agreement") and the exchange of 3,153,847 shares of
BSI common stock owned by the Company for certain indebtedness owed to BSI by
the Company (the "Redemption") which, according to the allegations of the 1993
Complaint, benefits the President and Chief Executive Officer of NBC at the
expense of BSI's stockholders. On November 29, 1993, plaintiff filed a
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motion for an order preliminary and permanently enjoining the transactions under
the Acquisition Agreement and the Redemption. On March 7, 1994, the court heard
oral arguments with respect to plaintiff's motion to enjoin the transactions
and, on March 10, 1994, the court denied plaintiff's request for injunctive
relief finding that plaintiff had not established a likelihood of success on the
merits and that, in any event, the equities did not favor the imposition of
injunctive relief.
The Company believes that the allegations in the complaint, the Amended
Complaint, the 1993 Complaint and the 1993 Amended Complaint are without merit,
and intends to vigorously defend these actions.
The Company is a defendant in various other lawsuits arising in the ordinary
course of business.
In the opinion of management, after taking into account provisions recorded for
legal claims and related costs, the ultimate disposition of the foregoing
lawsuits will not have a material adverse effect on the Company's consolidated
financial position or result of operations.
In the ordinary course of its business, the Company enters into commitments for
the supply of certain raw materials, none of which are material to the Company's
financial position.
6. CAPITAL STOCK
In June 1996, the Company purchased 100,000 shares of common stock on the open
market. Such shares are held in treasury.
On October 25, 1996, the Company paid a 100% stock dividend to its shareholders
of record on September 9, 1996 effected as a 2 for 1 stock split. Average shares
outstanding, stock option data, and per share data presented in these financial
statements have been adjusted for the effects of the stock dividend.
During the nine months ended January 25, 1997, the Company granted options to
purchase 192,700 shares of common stock at an exercise price of $5 per share and
there were 30,480 option shares exercised at an exercise price ranging from $.63
to $2.10 per share. At January 25, 1997, options to purchase 1,128,120 shares at
a weighted average exercise price of $2.38 (ranging from $.13 to $5.00 per
share) were outstanding and stock-based awards to purchase 449,600 stock-based
awards were available for grant.
7. ACQUISITIONS
In October 1996, the Company concluded its acquisition of substantially all of
the assets of a company which developed and marketed LaCroix (r) water and
Cascadia (r) branded products. The acquisition of such assets has been accounted
for using the purchase method of accounting and, accordingly, the purchase price
has been preliminarily allocated to the assets acquired based upon their
estimated fair values at the date of acquisition. Operating results of the
acquired business, which have been included in the consolidated statement of
income from the date of acquisition, do not materially impact results for the
periods presented.
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PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
National Beverage Corp. ("NBC") and its subsidiaries produce, manufacture,
market and distribute a full line of branded cola and multi-flavored soft
drinks, juice products, and bottled water under the brand names Shasta (r),
Faygo (r), Everfresh (r), LaCroix (r), Big Shot (r), nuAnce (r), Body Works (r),
a Sante (r), Spree (r), Creepy Coolers (tm), and St. Nick's (tm). Substantially
all of NBC's brands are produced in its fourteen manufacturing facilities which
are strategically located throughout the continental United States. NBC also
develops and produces soft drinks for retail grocery chains, warehouse clubs,
mass merchandisers and wholesalers ("allied brands") as well as soft drinks for
other beverage companies. NBC and its consolidated subsidiaries are referred to
as the "Company".
The Company's growth strategies include increasing its brand awareness through
greater retailer sponsorship by entering into long-term alliances with national
and regional retailers to supply both Company branded and allied branded soft
drinks ("STRATEGIC ALLIANCES"). The Company believes that the strength of its
regional brands and the location of its manufacturing facilities position the
Company as one of the leading single-source suppliers for high quality,
economically valued soft-drinks, such as Shasta (r) and Faygo (r), as well as
allied-branded soft drinks in multiple flavors and packages throughout the
United States.
The Company also plans to grow its revenues and brand portfolio by acquiring
other regional beverage businesses that meet its strategic and financial
objectives. Further, the Company plans to diversify its product lines and
distribution channels through the acquisition of higher margin beverage
products, such as Everfresh juice products and LaCroix spring and
naturally-flavored carbonated waters, both which were acquired during the past
12 months.
Industry soft drink sales are seasonal with the highest volume typically
realized during the summer months. Additionally, the Company's operating results
are subject to numerous factors, including fluctuations in the costs of raw
materials, changes in consumer preference for beverage products and competitive
pricing in the marketplace.
RESULTS OF OPERATIONS
Three Months Ended January 25, 1997 (third quarter of fiscal 1997) compared to
Three Months Ended January 27, 1996 (third quarter of fiscal 1996)
Net sales for the third quarter ended January 25, 1997 increased approximately
$7.9 million or 11.7% over the third quarter of the prior year. During the
period, the Company expanded production and distribution of branded and
allied-branded product under STRATEGIC ALLIANCE agreements with a number of new
customers. Implementation of existing and new STRATEGIC ALLIANCE agreements
are anticipated to favorably impact revenues in future periods. Revenue growth
for the third
11
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quarter of fiscal 1997 also includes increased sales of Company branded
products, including sales of Everfresh, and a change in product mix to larger
package sizes. These increases were partially offset by reduced sales of certain
lower-priced products and shorter than usual holiday selling period. As part of
the Company's STRATEGIC ALLIANCE program, sales of product are supported by
in-store and other product-related advertising, which has the effect of
increasing both net sales and selling expenses.
Gross profit increased to approximately 29.1% of net sales for the third quarter
of fiscal 1997 from 24.7% of net sales for the third quarter of fiscal 1996. As
noted above, changes in promotions related to STRATEGIC ALLIANCE programs and
expanded advertising had the effect of increasing net selling prices, which
resulted in increased gross profit compared to the prior year. The increase in
gross profit was also attributable to higher margins by greater focus on higher
margin packages and juice related products and a slight reduction in the cost of
raw materials. The Company believes that inflationary trends do not have a
significant impact on operating results since fluctuations in raw material costs
are typically influenced more by commodity market conditions than inflation.
Although there can be no assurances as to future predictability, the Company
does not expect any significant increases in raw material costs in fiscal 1997
and has generally been successful in passing through cost increases to maintain
profit margins.
Selling, general and administrative expenses approximated 26.5% and 22.3% of net
sales for the third quarter of fiscal 1997 and 1996, respectively. This
increase is due in part to costs related to additional in-store and point of
sale programs, and additional advertising expense.
Interest expense remained relatively constant during the third quarter compared
to the prior year. See Note 4 of Notes to Condensed Consolidated Financial
Statements.
The effective rate for income taxes, based upon estimated annual income tax
rates, approximated 37% and 38% of income before taxes for the third quarter of
1997 and 1996, respectively. The difference between the effective rate and the
federal statutory rate of 35% includes amortization of non-deductible goodwill
and other intangibles, state income taxes and other non-deductible expenses.
Net income increased to $628 thousand or $.03 per share for the quarter ended
January 25, 1997 from $440 thousand or $.01 per share for the quarter ended
January 27, 1996. Earnings applicable to common shares for the third quarter of
fiscal 1996 includes dividends of $263 thousand related to the Company's
preferred stock which was repurchased during the fourth quarter of fiscal 1996.
Nine Months Ended January 25, 1997 (first nine months of fiscal 1997) compared
to Nine Months Ended January 27, 1996 (first nine months of fiscal 1996)
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Net sales for the nine months ended January 25, 1997 increased approximately
$26.8 million or 10.6% over the nine months ended January 27, 1996. This is
principally due to increased volume related to STRATEGIC ALLIANCE agreements and
the Everfresh acquisition, and the higher unit selling prices noted above. These
increases were partially offset by reduced sales of certain lower priced
products.
Gross profit increased to 29.1% of net sales for the nine months ended January
25, 1997 from 25.0% of net sales for the nine months ended January 27, 1996 due
to the higher net pricing noted above, as well as higher margins attained on
Everfresh juice products.
Selling, general and administrative expenses approximated 23.3% and 19.4% of net
sales for the first nine months of fiscal 1997 and 1996, respectively. This
increase is due in part to costs related to additional in-store and point of
sale programs, and additional advertising expense, as well as increased
administrative costs related to acquired companies.
The effective rate for federal and state income taxes for the first nine months
of fiscal years 1997 and 1996 approximated 37% and 38%, respectively, and is
based upon estimated annual effective income tax rates.
Net income increased 18.7% to $8.3 million or $.44 per share for the nine months
ended January 25, 1997 from $7.0 million or $.33 per share for the nine months
ended January 27, 1996. Earnings applicable to common shares for the first nine
months of fiscal 1996 includes dividends of approximately $ .8 million related
to the Company's preferred stock, which was repurchased in the fourth quarter of
fiscal 1996.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
January 25, 1997 compared to April 27, 1996
The Company views earnings before interest expense, taxes, depreciation and
amortization ("EBITDA") as a key indicator of the Company's financial condition
and enterprise value. During the nine months ended January 25, 1997,
the Company generated EBITDA of $22.6 million, which represents an 11.4%
increase from EBITDA of $20.3 million for the same period last year. EBITDA for
the twelve month period ending January 25, 1997 was $29.0 million. The Company
believes that additional cash flow, to support enhanced growth and debt
capacity, can be achieved by favorably restructuring components of EBITDA
through financing and other means.
For the nine months ended January 25, 1997, cash provided by operating
activities of $4.9 million was comprised of net income of $8.3 million plus
non-cash charges of $6.7 million less cash used for seasonal working capital
requirements of $10.1 million. Cash of $3.7 million was used in investing
activities, principally for capital expenditures. Cash of $14.4 million was used
in financing activities, principally for net debt repayments of $13.2 million
and the Company's $1.2 million repurchase of its common stock. At January 25,
1997, the Company's ratio of current
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assets to current liabilities was 1.8 to 1 and net working capital approximated
$39 million. The Company currently has credit lines of approximately $50
million of which $15.8 million was drawn at January 25, 1997.
The Company believes that its cash and equivalents, together with funds
generated from operations and borrowing capabilities, will be sufficient to meet
its operating cash requirements in the foreseeable future. The Company is
evaluating various capital projects to expand capacity at certain manufacturing
facilities; at the present time, the Company has no material commitments for
capital expenditures requiring cash outlays.
At January 25, 1997, the Company had outstanding long-term debt of $49.6
million. Certain debt agreements contain restrictions which require a subsidiary
to maintain certain financial ratios and minimum net worth, and limit the
subsidiary with respect to incurring certain additional indebtedness, paying
cash dividends and making certain loans, advances or other investments. At
January 25, 1997, net assets of the subsidiary of approximately $42 million were
restricted from distribution. Cash balances of NBC, when combined with funds
available from its subsidiary, provide sufficient liquidity to allow NBC to meet
its current and expected cash obligations. The Company was in compliance with
all loan covenants and restrictions at January 25, 1997 and such restrictions
are not expected to have a material adverse impact on the operations of the
Company. See Note 4 of Notes to Condensed Consolidated Financial Statements.
FORWARD LOOKING STATEMENTS
Certain statements in this Quarterly Report of Form 10-Q (this "Form 10-Q"),
including statements under "Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations," constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements express or implied by such forward-looking
statements. Such factors include, but are not limited to, the following: general
economic and business conditions; competition; success of the Company's
STRATEGIC ALLIANCE objective; fluctuations in the costs of raw materials and the
ability of the Company to maintain margins; continued retailer support of the
Company's brands; changes in consumer preferences; changes in business strategy
or development plans; government regulations; regional weather conditions; and
other factors referenced in this Form 10-Q. The Company will not undertake and
specifically declines any obligation to publicly release the result of any
revisions which may be made to any forward-looking statements to reflect events
or circumstances after the date of such statements or to reflect the occurrence
of anticipated or unanticipated events.
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<PAGE> 15
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 5 of Notes to Condensed Consolidated Financial Statements.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
----------- ------------
<S> <C>
10.1 Fifth Amendment to Credit Agreement, dated
November 14, 1996
27 Financial Data Schedule (For SEC Use Only)
(b) Reports on Form 8-K: None
</TABLE>
15
<PAGE> 16
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 11, 1997
NATIONAL BEVERAGE CORP.
(Registrant)
By: \s\ Dean A. McCoy
--------------------------------
Dean A. McCoy
Vice President - Controller
(On behalf of the Registrant and
as Principal Accounting Officer)
<PAGE> 1
EXHIBIT 10.1
FIFTH AMENDMENT TO CREDIT AGREEMENT
This Fifth Amendment to Credit Agreement ("Fifth Amendment"), dated
November 14, 1996, is by and between NEWBEVCO, INC., a Delaware corporation
("Borrower"), and BARNETT BANK, N.A., SUCCESSOR BY MERGER TO BARNETT BANK OF
BROWARD COUNTY, N.A., a national banking association ("Bank").
WITNESETH
WHEREAS, Bank and Borrower have previously executed and entered into
that certain Credit Agreement dated September 23, 1993 ("Credit Agreement") and
certain other loan documents also dated September 23, 1993;
WHEREAS, pursuant to the Credit Agreement, Bank had previously
extending a Line of Credit to Borrower of up to Fifteen Million and 00/100
Dollars ($15,000,000.00);
WHEREAS, on November 10, 1994, Bank and Borrower extended the term of
the Line of Credit in that certain First Amendment to Credit Agreement;
WHEREAS, on November 21, 1995, Bank and Borrower modified and extended
the terms of the Line of Credit in that certain Second Amendment to Credit
Agreement;
WHEREAS, on February 29, 1996, Bank and Borrower further modified and
amended the terms of the Line of Credit in that certain Third Amendment to
Credit Agreement;
WHEREAS, on April 24, 1996, Bank and Borrower further modified and
amended the terms of the Line of Credit in that certain Fourth Amendment to
Credit Agreement and agreed to increase the Line of Credit to Twenty-Five
Million and 00/100 Dollars as evidenced by that certain Master Revolving
Promissory Note dated April 24, 1996 in the original principle amount of
Twenty-Five Million and 00/100 Dollars ($25,000,000) ("Note"); and
WHEREAS, Borrower has requested that the Line of Credit be further
modified and Bank is willing to do so upon the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the mutual covenants, the parties
agree, for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, as follows:
1. INCORPORATION AND RECITALS. The above recitals are true and
correct and are incorporated herein by reference as though set forth in full.
2. DEFINITIONS. All capitalized terms used herein shall, except
as modified herein, have the meanings ascribed to them in the Credit Agreement.
<PAGE> 2
3. AMENDMENTS TO CREDIT AGREEMENT.
(a) Section 1.1 of the Credit Agreement is amended to
revise the definition of Loan Documents to read as follows: "Loan Documents"
mean the Credit Agreement, the Note, the Guaranties, the Documentary Stamp and
Intangible Tax Indemnification Agreement, the Reaffirmations of Guaranty of the
Guaranties, the First Amendment to Credit Agreement, the Second Agreement to
Credit Agreement, the Third Amendment to the Credit Agreement, the Fourth
Amendment to the Credit Agreement and this Fifth Amendment.
(b) The first portion of the first sentence (up to the
first comma) of Section 2.1(b) of the Credit Agreement is hereby deleted and
replaced with the following: "Prior to August 31, 1998 (as may be extended
pursuant to the terms hereof, the "Termination Date")..."
(c) Section 2.9 is hereby deleted in its entirety and the
following is substitute in its place:
2.9 UNUSED FEE FOR REVOLVING CREDIT. As
consideration for making the Revolving Credit
available, the Borrower shall pay to the Bank an
unused fee from the date hereof through the
Termination Date equal to one-quarter of one
percent (.25%) per annum of the unused portion of
the Committed Amount under the Revolving Credit.
Such fee shall be computed on the basis of the
average daily unused portion of the Committed
Amount and shall be payable quarterly in arrears
beginning on November 10, 1996 and continuing on the
10th day of each of the following months thereafter
during the term of the Revolving Credit: November,
February, May and August.
4. REPRESENTATIONS AND WARRANTIES. To induce Bank to enter into
this Fifth Amendment and to perform the transactions described herein, Borrower
hereby makes the representations and warranties to Bank contained in the Credit
Agreement on and as of the date of this Fifth Amendment.
5. RELIANCE UPON, SURVIVAL OF AND MATERIALLY OF REPRESENTATIONS
AND WARRANTIES, AGREEMENTS, AND COVENANTS. All representations and warranties,
agreements, and covenants made by Borrower herein are material and shall be
deemed to have been relied upon by Bank, notwithstanding any investigation
heretofore or hereafter made by Bank, shall survive the execution and delivery
of this Fifth Amendment, and shall continue in full force and effect so long as
any indebtedness subject to the Credit Agreement is owed to Bank. All
statements contained in a certificate or other writing delivered to Bank at any
time by or on behalf of Borrower pursuant hereto shall constitute
representations and warranties by Borrower hereunder.
<PAGE> 3
6. REQUIRED DOCUMENTS. On or prior to the date of the execution
of this Amendment, Bank shall have received from Borrower the following:
(a) Reaffirmations of Continuing and Unconditional
Guaranties by each Restricted Subsidiary ("Reaffirmations"); and
(b) Execution by Borrower of a Tax Indemnity Agreement.
7. INCORPORATION BY REFERENCE. Except as modified herein, the
terms and conditions of the Credit Agreement are hereby incorporated by
reference and remain in full force and effect, enforceable in accordance with
the terms hereof.
8. WAIVER OF JURY TRIAL. BORROWER AND BANK HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER OF THEM MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH THE LOAN DOCUMENTS OR THIS AMENDMENT AND IN
CONJUNCTION THEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY HERETO, THIS PROVISION
IS A MATERIAL INDUCEMENT FOR BANK ENTERING INTO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed this Fifth Amendment as
of the day and year first above written.
Witnesses: BORROWER:
NEWBEVCO, INC.,
a Delaware corporation (SEAL)
- - -------------------------
By: \s\ Joseph G. Caporella
---------------------------------
Name: Joseph G. Caporella
- - ------------------------- --------------------------
Title: Executive Vice President
--------------------------
BANK:
BARNETT BANK, N.A. SUCCESSOR
BY MERGER TO BARNETT BANK
OF BROWARD COUNTY, N.A.
a national banking association
- - -------------------------
By: \s\ John J. Viadero
- - ------------------------- ----------------------
John J. Viadero
Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS OF THE FILER FOR THE PERIOD ENDED JANUARY 25,
1997 INCLUDED IN ITS QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
JANUARY 25, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-03-1997
<PERIOD-START> OCT-27-1996
<PERIOD-END> JAN-25-1997
<CASH> 22,107
<SECURITIES> 0
<RECEIVABLES> 34,269
<ALLOWANCES> 681
<INVENTORY> 24,343
<CURRENT-ASSETS> 88,225
<PP&E> 111,618
<DEPRECIATION> 56,087
<TOTAL-ASSETS> 163,555
<CURRENT-LIABILITIES> 49,685
<BONDS> 49,576
0
150
<COMMON> 220
<OTHER-SE> 53,913
<TOTAL-LIABILITY-AND-EQUITY> 163,555
<SALES> 280,285
<TOTAL-REVENUES> 280,285
<CGS> 198,707
<TOTAL-COSTS> 198,707
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,834
<INCOME-PRETAX> 13,182
<INCOME-TAX> 4,877
<INCOME-CONTINUING> 8,305
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,305
<EPS-PRIMARY> .44
<EPS-DILUTED> 0
</TABLE>
