National Beverage (FIZZ) - 2020 Q2 - Quarterly Report

PART I Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for the three and six months ended October 26, 2019, with comparative data and accompanying notes Condensed Consolidated Balance Sheets The balance sheet as of October 26, 2019, shows increased total assets and shareholders' equity, driven by higher cash and right-of-use assets Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | Oct 26, 2019 | April 27, 2019 | | :--- | :--- | :--- | | Total Current Assets | $384,553 | $321,457 | | Cash and equivalents | $233,867 | $156,200 | | Total Assets | $566,815 | $452,193 | | Total Current Liabilities | $108,146 | $97,037 | | Total Liabilities | $167,302 | $110,584 | | Total Shareholders' Equity | $399,513 | $331,609 | Condensed Consolidated Statements of Income For the three and six months ended October 26, 2019, the company reported declines in net sales, net income, and diluted EPS compared to the prior year Income Statement Summary (in thousands, except per share data) | Metric | Q2 2020 (3-mos ended Oct 26, 2019) | Q2 2019 (3-mos ended Oct 27, 2018) | H1 2020 (6-mos ended Oct 26, 2019) | H1 2019 (6-mos ended Oct 27, 2018) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $251,611 | $260,709 | $515,179 | $553,299 | | Gross Profit | $92,814 | $103,524 | $189,388 | $219,219 | | Net Income | $32,654 | $41,078 | $67,196 | $89,908 | | Diluted EPS | $0.70 | $0.88 | $1.43 | $1.92 | Condensed Consolidated Statements of Comprehensive Income Comprehensive income for the second quarter of fiscal 2020 decreased to $33.1 million, reflecting lower net income and cash flow hedge fluctuations Comprehensive Income (in thousands) | Period | Three Months Ended | Six Months Ended | | :--- | :--- | :--- | | Oct 26, 2019 | $33,073 | $67,631 | | Oct 27, 2018 | $38,363 | $85,152 | Condensed Consolidated Statements of Shareholders' Equity Total shareholders' equity decreased to $399.5 million as of October 26, 2019, influenced by net income and changes in accumulated other comprehensive loss - Total Shareholders' Equity was $399.5 million at the end of the period, compared to $417.0 million for the same period in the prior year[13] - Retained earnings increased to $380.6 million for the six months ended October 26, 2019, driven by a net income of $67.2 million[12] Condensed Consolidated Statements of Cash Flows For the six months ended October 26, 2019, net cash from operating activities increased, leading to a $77.7 million growth in cash and equivalents Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended Oct 26, 2019 | Six Months Ended Oct 27, 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $87,154 | $76,172 | | Net cash used in investing activities | ($9,634) | ($16,301) | | Net cash provided by financing activities | $147 | $325 | | Net Increase in Cash and Equivalents | $77,667 | $60,196 | | Cash and Equivalents - End of Period | $233,867 | $250,060 | Notes to Condensed Consolidated Financial Statements The notes detail significant accounting policies, including the adoption of a new lease standard, unsecured credit facilities, and aluminum swap contracts for hedging - The company adopted the new lease standard (ASU 2016-02) on April 28, 2019, recording a right-of-use asset and lease liabilities of $55.5 million[32] - As of October 26, 2019, the company had $100 million in unsecured revolving credit facilities with no borrowings outstanding and $96.8 million available[24] - The company uses aluminum swap contracts to hedge against changes in aluminum can costs. As of October 26, 2019, the notional amount of these contracts was $20.1 million[28] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the 6.9% decrease in net sales for the first six months of fiscal 2020, attributing it to lower case volume and increased competition, while highlighting strong liquidity - The company's strategy focuses on developing healthier beverages, emphasizing unique flavor development, and responding creatively to changing consumer trends[39] - The Power+ Brands portfolio, including LaCroix®, is geared towards active and health-conscious consumers[40] Results of Operations Net sales declined in both Q2 and H1 FY2020 due to decreased case volume, particularly in Power+ Brands, and lower gross margins from higher costs Q2 FY2020 vs. Q2 FY2019 Performance | Metric | Q2 FY2020 | Change vs. Q2 FY2019 | | :--- | :--- | :--- | | Net Sales | $251.6M | -3.5% | | Case Volume | N/A | -1.9% | | Power+ Brands Volume | N/A | -5.2% | | Carbonated Soft Drinks Volume | N/A | +5.3% | | Gross Margin | 36.9% | from 39.7% | H1 FY2020 vs. H1 FY2019 Performance | Metric | H1 FY2020 | Change vs. H1 FY2019 | | :--- | :--- | :--- | | Net Sales | $515.2M | -6.9% | | Case Volume | N/A | -6.6% | | Power+ Brands Volume | N/A | -11.2% | | Carbonated Soft Drinks Volume | N/A | +4.4% | | Gross Margin | 36.8% | from 39.6% | Liquidity and Financial Condition The company's liquidity strengthened in the first six months of fiscal 2020, marked by increased cash from operations, improved working capital, and reduced capital expenditures - The company's cash position increased by $77.7 million during the first six months of fiscal 2020[58] - Working capital increased to $276.4 million from $222.4 million at April 27, 2019, with the current ratio improving from 3.3 to 3.6[61] - Capital expenditures for the first six months of fiscal 2020 were $9.6 million, a significant decrease from $16.3 million in the prior year period[60] Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes in its market risk exposures compared to the disclosures in its prior Annual Report on Form 10-K - There have been no material changes in market risks from those reported in the Annual Report on Form 10-K for the fiscal year ended April 27, 2019[62] Controls and Procedures Management, including the CEO and Principal Financial Officer, concluded that disclosure controls and procedures were effective with no material changes in internal control over financial reporting - The Chief Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective[63] - No changes in internal control over financial reporting occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal controls[64] PART II Risk Factors The company reports no material changes in its risk factors compared to those disclosed in the Annual Report on Form 10-K - There have been no material changes in risk factors from those reported in the Annual Report on Form 10-K for the fiscal year ended April 27, 2019[70] Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and PFO certifications and financial statements formatted in iXBRL - Exhibits filed include CEO and PFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[69] - The filing includes financial information formatted in iXBRL (Inline eXtensible Business Reporting Language) as Exhibit 101[71]