The Vita o pany(COCO) - 2022 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (unaudited) This section presents unaudited condensed consolidated financial statements for Q3 2022 and 2021, showing a 14.6% net sales increase to $335.8 million but a net income decrease from $22.4 million to $10.6 million due to higher costs Condensed Consolidated Balance Sheets Total assets increased to $218.4 million by September 30, 2022, driven by receivables and derivatives, while liabilities rose to $76.8 million and equity to $141.6 million Balance Sheet Summary (in thousands) | Metric | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :--- | :--- | :--- | | Total Current Assets | $190,857 | $173,259 | | Total Assets | $218,378 | $197,484 | | Total Current Liabilities | $65,062 | $73,962 | | Total Liabilities | $76,765 | $74,311 | | Total Stockholders' Equity | $141,613 | $123,173 | Condensed Consolidated Statements of Operations Net sales for the nine months ended September 30, 2022, increased to $335.8 million, but gross profit declined to $80.9 million and net income to $10.6 million due to higher cost of goods sold Statements of Operations Summary (in thousands, except EPS) | Metric (in thousands, except EPS) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net Sales | $335,796 | $292,929 | | Gross Profit | $80,928 | $91,561 | | Income from Operations | $7,910 | $29,664 | | Net Income | $10,624 | $22,409 | | Diluted EPS | $0.19 | $0.42 | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities was $18.2 million for the nine months ended September 30, 2022, while financing activities provided $12.2 million, resulting in a $7.5 million net decrease in cash Cash Flow Summary (in thousands) | Cash Flow Activity (in thousands) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(18,181) | $(16,351) | | Net cash used in investing activities | $(907) | $(127) | | Net cash provided by (used in) financing activities | $12,153 | $(19,676) | | Net decrease in cash | $(7,479) | $(36,271) | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, revenue disaggregation, debt, derivatives, and segment performance, highlighting the adoption of ASC 842 and a 55% revenue concentration with two major customers - The company's main products are Vita Coco Coconut Water, Private Label products, and Other beverages like Runa, Ever & Ever, and PWR LIFT[36][60] - Two major customers accounted for 55% of total net sales for the nine months ended September 30, 2022[51][78] - The company uses forward currency swaps to mitigate currency risk on inventory purchases and intercompany transactions involving BRL, MYR, THB, GBP, and CAD[82][83] Revenue by Segment (Nine Months Ended Sep 30, 2022) | Revenue (Nine Months Ended Sep 30, 2022) | Americas (in thousands) | International (in thousands) | Consolidated (in thousands) | | :--- | :--- | :--- | :--- | | Vita Coco Coconut Water | $217,934 | $30,110 | $248,044 | | Private Label | $68,413 | $9,521 | $77,934 | | Other | $7,553 | $2,265 | $9,818 | | Total | $293,900 | $41,896 | $335,796 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) MD&A discusses a 14.6% net sales increase for the first nine months of 2022, a gross margin decline to 24.1% due to $28 million in transportation costs, and sufficient liquidity for the next 12 months - For the nine months ended September 30, 2022, gross profit absorbed incremental costs of goods of approximately $28 million compared to the prior year, mostly driven by increased transportation costs[135] Results of Operations Results of operations show net sales increased 14.6% to $335.8 million, but gross profit decreased 11.6% to $80.9 million due to higher costs, and SG&A expenses rose 18.0% - Consolidated net sales increased 14.6% for the nine months ended Sep 30, 2022, driven by a 11.9% increase in case equivalent (CE) volume and benefits from net pricing actions[156][157] Gross Profit & Margin | Gross Profit & Margin | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Gross Profit | $80,928 thousand | $91,561 thousand | | Gross Margin | 24.1% | 31.3% | - SG&A expenses increased by 18.0% for the nine months ended Sep 30, 2022, due to higher marketing spend, personnel expenses, insurance, and a $619 thousand impairment loss on assets held for sale in Ecuador[171][172][126] Liquidity and Capital Resources Liquidity sources include cash from operations and a credit facility, with $21.2 million in cash and $9.5 million outstanding on the facility, deemed sufficient for the next 12 months - Cash and cash equivalents were $21.2 million as of September 30, 2022, down from $28.7 million at year-end 2021[188] - The company had $9.5 million outstanding on its 2020 Credit Facility as of September 30, 2022, with a total committed borrowing capacity of $60 million[198] Cash Flow Summary (in thousands) | Cash Flow Summary (in thousands) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Operating Activities | $(18,181) | $(16,351) | | Investing Activities | $(907) | $(127) | | Financing Activities | $12,153 | $(19,676) | Item 3. Quantitative and Qualitative Disclosures About Market Risk Primary market risks include interest rate risk from variable-rate debt, foreign currency risk managed by derivatives, significant inflation risk in transportation, and credit risk concentrated with two major customers - A 100 basis point change in interest rates would impact annual interest expense by approximately $0.1 million based on borrowings as of September 30, 2022[207] - The company uses a 24-month rolling layered approach to hedge a majority of its forecasted yearly foreign currency exposure, with a total notional value of forward contracts at $90.0 million as of September 30, 2022[208][209] - The company is experiencing significant inflation, especially in transportation costs (ocean freight and domestic logistics), which has pressured costs and margins[211] - Credit risk is concentrated with two customers representing approximately 55% of consolidated net sales for the three months ended September 30, 2022[213] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control over financial reporting during the quarter - Management concluded that as of September 30, 2022, the company's disclosure controls and procedures were effective at the reasonable assurance level[215] - There were no material changes in internal control over financial reporting during the quarter ended September 30, 2022[216] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is not currently a party to any material legal proceedings - The company is not currently a party to any material legal proceedings[219] Item 1A. Risk Factors No material changes to risk factors previously disclosed in the 2021 Annual Report on Form 10-K are reported - There have been no material changes to the risk factors disclosed in the company's 2021 Form 10-K[220] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities were reported during the period - None reported[221] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported - None reported[222] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[223] Item 5. Other Information This item is not applicable - Not applicable[224] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and interim CFO certifications and XBRL data files - Lists various filed exhibits, including CEO and CFO certifications pursuant to SEC rules[229]