Table of Contents

United States Securities and Exchange Commission

Washington, D.C. 20549

 

FORM 10-K

 

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

[✓]              Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended April 28, 2018May 2, 2020

or

[    ]           Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 For the transition period from __________ to _________

 

Commission file number 1-14170

 

NATIONAL BEVERAGE CORP.

(Exact name of Registrant as specified in its charter)

 

Delaware

Delaware

59-2605822

(State of incorporation)

(I.R.S. Employer Identification No.)

 

8100 SW Tenth Street, Suite 4000, FortFort Lauderdale, FloridaFlorida 33324

(Address of principal executive offices including zip code)

 

Registrant’s telephone number, including area code: (954) 581-0922

 

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

FIZZThe NASDAQ Global Select Market

                                                                              

Securities registered pursuant to Section 12(g) of the Act: None

 

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ( ) No (✓)

 

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes ( ) No (✓)

 

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 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months.

Yes (✓) No ( )

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (✓)

 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☑ No ☐

 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ( ) No (✓)

 

The aggregate market value of the common stock held by non-affiliates of Registrant computed by reference to the closing sale price of $95.28$49.89 on October 27, 201725, 2019 was approximately $1.1 billion.$585 million.

 

The number of shares of Registrant’s common stock outstanding as of June 22, 201829, 2020 was 46,618,240.46,625,628.

 

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’sRegistrant's Proxy Statement for the 20182020 Annual Meeting of Shareholders are incorporated by reference in Part III of this report.

 

 

 

table of contents

 

Page

Part I

itemItem 1.

Business

2

ITEM 1A.

Risk Factors

1011

ITEM 1B.

Unresolved Staff Comments

1213

ITEM 2.

Properties

1213

ITEM 3.

Legal Proceedings

1213

ITEM 4.

Mine Safety Disclosures

1213

PART II

ITEM 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

1314

ITEM 6.

Selected Financial Data

1516

ITEM 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

1617

ITEM 7A.

Quantitative and Qualitative Disclosure About Market Risk

23

ITEM 8.

Financial Statements and Supplementary Data

24

ITEM 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

45

ITEM 9A.

Controls and Procedures

45

ITEM 9B.

Other Information

46

PART III

ITEM 10.

Directors, Executive Officers and Corporate Governance

46

ITEM 11.

Executive Compensation

47

ITEM 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

47

ITEM 13.

Certain Relationships and Related Transactions, and Director Independence

47

ITEM 14.

Principal Accounting Fees and Services

47

PART IV

ITEM 15.

Exhibits, Financial Statement Schedules

47

ITEM 15.

Exhibits, Financial Statement SchedulesSIGNATURES

4750

SIGNATURES

50

 

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PART I

ITEM 1.     BUSINESS

 

GENERAL

 

National Beverage Corp. innovatively refreshes America with a distinctive portfolio of sparkling waters, juices, energy drinks and, to a lesser degree, energy drinks. Over the past few years, ourextent, carbonated soft drink brands continue to be modified as we endeavor to make them more adaptable to our consumers.drinks. We believe our ingeniouscreative 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.

 

Points of differentiation include the following:

 

Healthy Transformation – We focus on developing and delighting consumers with healthier beverages in response to the global shift in consumer buying habits.habits and lifestyles. We are committed to tailoring the variety and types of beverages in our portfolio to satisfy the preferences of a diverse mix of consumers including ‘crossover consumers’ – a growing group desiring a healthier alternative to artificially sweetened or high-calorie beverages.

 

Flavor InnovationCreative Innovations Building on a rich tradition of flavor and brand innovation with more than a 125 year130-year history of development with iconic brands such as Shasta® and Faygo®, we have extended our flavor and essence leadership and technical expertise to the sparkling water category.  Proprietary flavors and essencesour naturally-essenced beverages are developed and tested in-house and only made commercially available only after extensive concept and sensory evaluation.  Our variety of distinctive flavors provides us a unique advantage with today’s consumers who demand variety and refreshing beverage alternatives.

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Innovation Ethic – We believe that innovative marketing, packaging and consumer engagement is more effective in today’s marketplace than traditional higher-cost national advertising. In addition to our cost-effective social media platforms, we utilize regionally-focused marketing programs and in-store “brand ambassadors” to interact with and obtain feedback from our consumers. We also believe the design of our packages and the overall optical effect of their placement on the shelf (“shelf marketing”) has become more important as millennials and younger generations become increasingly influential consumers, and are now influencing baby boomers and older generations.

 

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Creative Dynamics – In a beverage industry that is dominated by the “cola giants”, we pride ourselves on being smaller, faster and stronger. We believe we are able to respond faster and more creatively to consumer trends than competitors who are burdened by legacy production and distribution complexity and costs. The ability to identify consumer trends and create new productmarket-leading concepts to lead the market definesdefine our new product development model. Speed to market with the appropriate concept, unique flavor creation and trend-forward ‘better-for-you’ ingredients continues to be our goal. Internal development teams are responsible for concept creation, packaging and design, which allow for rapid ‘go to market’ timing and reduced development costs.

 

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.

 

National Beverage Corp. is incorporated in Delaware and began trading as a public company on the NASDAQ Stock Market in 1991. In this report, the terms “we,” “us,” “our,” “Company” and “National Beverage” mean National Beverage Corp. and its subsidiaries unless indicated otherwise.

BRANDS

Our brands consist of beverages geared to the active and health-conscious consumer (“Power+ Brands”) including sparkling waters, energy drinks, and juices. Our portfolio of Power+ Brands includes LaCroix®, LaCroix Cúrate®,and LaCroix NiCola® sparkling water products; Clear Fruit®; 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 (“CSDs”) including Shasta® and Faygo®, iconic brands whose consumer loyalty spans more than 130 years.

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Power+ Brands –

LaCroix

LaCroix® Sparkling Water, our most significant brand, has uniquely redefined the Sparkling Water category that is rapidly becoming the alternative to traditional carbonated soda.  With zero calories, zero sweeteners and zero sodium, LaCroix leads the premium domestic sparkling water category. Naturally essenced, LaCroix has gained the support of national retailers in multiple channels, including mass-merchandisers, club stores, drug stores, mainstream supermarkets and natural and specialty food retailers.

Early in Fiscal year 2020, LaCroix launched Hi-Biscus, a unique flavor that adds the delicate essence of the hibiscus flower to sparkling water. LaCroix Hi-Biscus delights taste buds with pleasing floral aroma and exquisite taste.

In the fourth quarter of Fiscal year 2020, two new naturally-essenced flavors of LaCroix, the enticing savor of LimonCello and the refreshing taste of Pastèque (French for watermelon), began rolling out to retailers throughout the U.S. Fans are instantly transported to the Italian Riviera with the refreshing finesse of LimonCello. Pastèque, one of LaCroix’s most highly-anticipated flavors to date, captures lusciousness of a sweet picnic watermelon. These innovative new varieties join the LaCroix family of 27 refreshingly innocent flavors.

 

 

BRANDSLaCroix’s dynamic ‘theme’ LaCroix Cúrate® (‘Cure Yourself’) celebrates French sophistication with Spanish zest and bold flavor pairings.  Cúrate naturally refreshes in tall, sleek 12 oz. consumer-friendly cans.  Eloquent graphics, robust aroma, naturally ‘essenced’ and premium-priced, Cúrate is an attractive alternative for today’s consumers.

 

Our brands consistNiCola® by LaCroix, an innovative sparkling water, captures the ‘crossover’ cola consumers with its ‘innocent’ effect of beverages geared tono calories, sodium, sweetener or any other ingredient that the active and health-conscious consumer (“Power+ Brands”) including sparkling waters, energy drinks,avoids. NiCola is designed for those cola and juices. Our portfolio of Power+ Brands includes LaCroix®, LaCroix Cúrate®, LaCroix NiCola® and Shasta® Sparkling Water products; Rip It® energy drinks and shots; and Everfresh®, Everfresh Premier Varietals™ and Mr. Pure® 100% juice and juice-based products. Additionally, we produce and distributediet cola consumers within the $87 billion U.S. carbonated soft drinks including Shasta®drink market that are looking to continue to quench their cola-craving taste without negative health consequences. In late Fiscal year 2019, we introduced three new additions to our LaCroix NiCola theme − Coconut Cola, Cubana (Mojito), and Faygo®, iconic brands whose consumer loyalty spans more than 125 years.Coffea Exotica (Sumatra coffee and cola).

Power+ Brands –

LaCroix

100% naturally-essenced LaCroix® Sparkling Water, our most significant and dominant brand, has uniquely redefined the Sparkling Water category that is rapidly becoming the alternative to traditional carbonated soda. With zero calories, zero sweeteners and zero sodium, the innocence of LaCroix has propelled it to the top-selling domestic sparkling water. Naturally essenced, LaCroix has gained the support of national retailers in multiple channels, including mass merchants, mainstream supermarkets and natural and specialty food retailers.
LaCroix’s dynamic ‘theme’ LaCroix Cúrate® (‘Cure Yourself’) celebrates French sophistication with Spanish zest and bold flavors. Cúrate naturally refreshes in tall 12 oz. consumer-favored cans. Eloquent graphics, robust aroma, naturally ‘essenced’ and premium-priced, Cúrate is a trendsetting addition to a brand that is the healthy alternative for trend-forward consumers.
NiCola® by LaCroix, an innovative sparkling water captures the ‘crossover’ cola consumers with its ‘innocent’ effect of no calories, sodium, sweetener or any ingredient that the health-conscious consumer avoids. NiCola is designed for those cola and diet cola consumers within the $82 billion U.S. carbonated soft drink market who are looking to continue to quench their cola-craving taste without negative health consequences.

 

Additional LaCroix themes are in development andthat feature unique packaging and ground-breaking flavor concepts and a go-to-market strategy designed to maximize cultural demographic concepts.

Shasta Sparkling

Shasta® Sparkling Water duplicatescapitalize on LaCroix brand loyalty and growth of the iconic flavors that have charmed its loyal consumers over the past 125 plus years with the first genuine soft-drink alternative (SDA). Shasta Sparkling is naturally-essenced without calories, sodium and sweeteners. ‘Simply Natural and Smartly Healthy,’ Shasta Sparkling continues to gain focused distribution in progressive retailers backed by enthusiastic consumer and brand experiences.sparkling water category.

This innovative beverage provides consumers nostalgic Shasta flavors in an entirely “innocent” and exciting alternative, including Lemon-Lime Splash, Draft Root Beer, Shasta Cola, California Orange, Original Pure and Big Black Cherry. Shasta Sparkling complements a healthier lifestyle with its eloquent design and packaging in tall 10.5 ounce cans with an industry-first “clean” label.

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Everfresh and Mr. Pure

 

Everfresh® and Mr. Pure® 100% juice and juice drinks are available in a variety of flavors, from such classics as Orange, Cranberry and flavored lemonades to exotics that include Premium Papaya, Pineapple Mango, Peach Watermelon and Island Punch. Distributed primarily in the Midwest, theThe brands’ signature package is a hot-filled, 16 oz. glass bottle primarilydesigned for single-serve consumption.

 

Everfresh Premier Varietals™, a unique theme from Everfresh, is positioned as a stand-alone brand for display in the produce section of supermarkets. Everfresh Premier Varietals is a premium line of 100% natural apple juice derived from a variety of apples specific to the taste of the varietal, such as Granny Smith, McIntosh, Honey Crisp, Golden Delicious, Fuji and Pink Lady.

Rip It

Rip It® Energy Fuel is ‘Real Energy for Real People’ offering flavor freedom in 14 exceptional flavors with 6 sugar free options. With its unique positioning, Rip It continues to gain fans in the growing energy category. Rip It “Tribute” themed energy is a successful military-inspired addition to the lineup. Building on the flavor tradition of original Rip It, a 2 oz. sugar-free shot version in eight flavors is marketed through our distribution system in displayable package configurations.

 

 

ClearFruit

Clear Fruit is a crisp, clear, non-carbonated water beverage enhanced with fruit flavors. Clear Fruit is available in 12 delicious flavors, including consumer favorites Cherry Blast, Strawberry Watermelon, and Fruit Punch. Clear Fruit is available in 20-ounce and 16.9-ounce bottles with consumer-favored sports caps.

Rip It

RIP IT® Energy Fuel is “Real Energy for Real People” with 14 unique flavors and six sugar-free options. Building on the flavor tradition of original Rip It, a 2 oz. sugar-free shot version in eight flavors is marketed in displayable package configurations. RIP IT proudly supports military and first responder heroes at home and abroad with such energetic flavors as Tribute, Citrus X, Cherry Lime and Atomic Pom. 

Carbonated Soft Drinks –

 

More than 125 years old, Shasta® ishas been recognized as a bottling industry pioneer and innovator.innovator for more than 130 years. Shasta features multiple flavors including products targeted to the growing Hispanic and other ethnic markets, and continues to earnhas earned consumer loyalty by delivering value and convenience andwith such unique tastes as Raspberry Crème, Pineapple OrangeTiki Punch, and Very Cherry Twist. MoreCalifornia Dreamin’.

With more than 110 years old,of brand history,  Faygo® products are primarily distributed east of the Mississippi River and include numerous unique flavors includingsuch as Red Pop®, Moon Mist®, and Rock’n’Rye®.  Faygo recently reintroduced fan-favorite Faygo Pineapple Orange.

We tailor our marketing and promotion programs by locale; manyMany of our carbonated soft drink brands enjoy a regional identification that fosters long-term consumer loyalty and makes them more competitive as a consumer choice. In addition, products produced locally may generate retailer-sponsored promotional activities and receive media exposure through community activities rather than costly national advertising.

 

DuringIn recent years, we reformulated many of our brands to reduce the caloric content while still preserving their time-tested flavor profiles. Our brands, optically and ingredient-wise, are always a work in process.continually evolving. We continuallyalways strive to make all our drinks healthier while still maintaining their iconic taste profiles. As often as innovation develops, we endeavor to significantly improve our products, always seeking quality and authenticity over cost.

PRODUCTION

We employ a philosophy that emphasizes vertical integration; our production model integrates the procurement of raw materials and crafting of essences

PRODUCTION

Our philosophy emphasizes vertical integration; our production model integrates the procurement of raw materials and crafting flavors and concentrates with the production of finished products.  Our twelve strategically-located production facilities are near major metropolitan markets across the continental United States.  The locations of our facilities enable us to efficiently produce and distribute beverages to substantially all geographic markets in the United States, including the top 25 metropolitan statistical areas.  Each facility is generally equipped to produce both canned and bottled beverage products in a variety of package sizes.

We believe the innovative and controlled vertical integration of our production facilities provides an advantage over certain of our competitors that rely on independent third-party bottlers to manufacture and market their products. Since we control all national production, distribution and marketing of our brands, we believe we can more effectively manage quality control and consumer appeal while responding quickly to changing market conditions.

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We craft a substantial portion of our facilities enable us to efficiently produceflavors and distribute beverages to substantially all geographic markets in the United States, including the top 25 metropolitan statistical areas. Each facility is generally equipped to produce both canned and bottled beverage products in a variety of package sizes.

We believe the innovative and controlled vertical integration of our production facilities provides an advantage over certain of our competitors that rely on independent third-party bottlers to manufacture and market their products. Since we control all national production, distribution and marketing of our brands, we believe we can more effectively manage quality control and consumer appeal while responding quickly to changing market conditions.

We produce substantially all of the concentrates and essences used in our branded products.concentrates. By controlling our own formulas throughout our bottling network, we can craft our productsare able to produce beverages in accordance with uniform quality standards while innovating flavors to meet changing consumer preferences. We believe the combination of a Company-owned bottling network, together with uniform standards for packaging, formulations and customer service, provides us with a strategic advantage in servicing national retailers and mass-merchandisers. We also maintain research and development laboratories at multiple locations. These laboratories continually test products for compliance with our strict quality control standards as well as conduct research for new products and flavors.

DISTRIBUTION

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 to deliver our products through three primary distribution channels: take-home, convenience and food-service.

The take-home distribution channel consists of national and regional grocery stores, club stores, mass-merchandisers, wholesalers, e-commerce stores, drug stores and dollar stores. We distribute our products to this channel primarily through the warehouse distribution system and, to a lesser extent, the direct-store delivery system.

 

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DISTRIBUTION

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 to deliver our products through three primary distribution channels: take-home, convenience and food-service.

The take-home distribution channel consists of national and regional grocery stores, warehouse clubs, mass-merchandisers, wholesalers and dollar stores. We distribute our products to this channel primarily through the warehouse distribution system and to a lesser extent, the direct-store delivery system. 

Under the warehouse distribution system, products are shipped from our production facilities to the retailer’s centralized distribution centers and then distributed by the retailer to each of its store locations with other goods. This method allows our retail partners to further maximize their assets by utilizing their ability to pick-up product at our warehouses, thus further lowering their/our product costs. Products sold through the direct-store delivery system are distributed directly to the customer’s retail outlets by our direct-store delivery fleet and by independent distributors.

 

We distribute our products to the convenience channel through our own direct-store delivery fleet and those of independent distributors. The convenience channel consists of convenience stores, gas stations and other smaller “up-and-down-the-street” accounts. Because of the higher retail prices and margins that typically prevail, we have developed packaging and graphics specifically targeted to this market.

 


 

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Our food-service division distributes products to independent, specialized distributors who sell to hospitals, schools, military bases, airlines, hotels and food-service wholesalers. Also, our Company-owned direct-store delivery fleet distributes products to certain schools and other food-service customers.

Our take-home, convenience and food-service operations use vending machines and glass-door coolers as marketing and promotional tools for our brands. We provide vending machines and coolers on a placement or purchase basis to our customers. We believe vending and cooler equipment expands on-site visual trial, thereby increasing sales and enhancing brand awareness.

SALES AND MARKETING

 

Our take-home, convenience and food-service operations use vending machines and glass-door coolers as marketing and promotional tools for our brands. We provide vending machines and coolers on a placement or purchase basis to our customers. We believe vending and cooler equipment magnifies on-site visual trial thus increasing sales and enhancing brand awareness.

SALES AND MARKETING

We sell and market our products through an internal sales force as well as specialized broker networks. Our sales force is organized to serve a specific market, focusing on one or more geographic territories, distribution channels or product lines. We believe this focus allows our sales group to provide high level, responsive service and support to our customers and markets.

 

The emphasis of ourOur marketing consists ofemphasizes programs designed to reach consumers directly through innovative digital marketing, digital social marketing, social media engagement, sponsorships and creative content. We are focused on increasing our digital presence and capabilities to further enhance the consumer experience across our brands. We may retain agencies to assist with social media content creative and platform selection for our brands.

 

Additionally, we maintain and enhance consumer brand recognition and loyalty through a combination of regional event participation, special event marketing, endorsements, consumer coupon distribution and product sampling. Additionally, we maintain and enhance consumer brand recognition and loyalty through a combination of participation in regional events, special event marketing, endorsements, consumer coupon distribution and product sampling. We also offer numerous promotional programs to retail customers, including cooperative advertising support, ‘BrandED’ ambassadors, in-store promotional activities and other incentives. These elements allow marketing and other consumer programs to be tailored to meet local and regional demographics.

RAW MATERIALS

Our centralized procurement group maintains relationships with numerous suppliers of ingredients and packaging. By consolidating the purchasing function for our production facilities, we believe we are able to procure more competitive arrangements with our suppliers, thereby enhancing our ability to compete as an efficient producer of beverages.

The products we produce and sell are made from various materials including aluminum cans, glass and plastic bottles, water, carbon dioxide, juice and flavor concentrates, sweeteners, cartons and closures. We craft a substantial portion of our flavors and concentrates while purchasing the remaining raw materials from multiple suppliers.

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Substantially all of the materials and ingredients we purchase are presently available from several suppliers, although strikes, weather conditions, utility shortages, governmental control or regulations, national emergencies, quality, price or supply fluctuations or other events outside our control could adversely affect the supply of specific materials. A significant portion of our raw material purchases, including aluminum cans, plastic bottles, high fructose corn syrup, corrugated packaging and juice concentrates, are derived from commodities. Therefore, pricing and availability tend to fluctuate based upon worldwide commodity market conditions. In certain cases, we may elect to enter into multi-year agreements for the supply of these materials with one or more suppliers, the terms of which may include variable or fixed pricing, minimum purchase quantities and/or the requirement to purchase all supplies for specified locations. Additionally, we use derivative financial instruments to partially mitigate our exposure to changes in certain raw material costs.

Seasonality

Our operating results are affected by numerous factors, including fluctuations in costs of raw materials, holiday and seasonal programming and weather conditions. Beverage sales are seasonal with higher volume realized during summer months when outdoor activities are more prevalent.

Competition

 

Raw Materials

Our centralized procurement group maintains relationships with numerous suppliers of ingredients and packaging. By consolidating the purchasing function for our production facilities, we believe we are able to procure more competitive arrangements with our suppliers, thereby enhancing our ability to compete as an efficient producer of beverages.

The products we produce and sell are made from various materials including aluminum cans, glass and plastic bottles, water, carbon dioxide, juice and flavor concentrates, sweeteners, cartons and closures. We craft a substantial portion of our flavor essences and concentrates while purchasing the remaining raw materials from multiple suppliers.

Substantially all of the materials and ingredients we purchase are presently available from several suppliers, although strikes, weather conditions, utility shortages, governmental control or regulations, national emergencies, quality, price or supply fluctuations or other events outside our control could adversely affect the supply of specific materials. A significant portion of our raw material purchases, including aluminum cans, plastic bottles, high fructose corn syrup, corrugated packaging and juice concentrates, are derived from commodities. Therefore, pricing and availability tend to fluctuate based upon worldwide commodity market conditions. In certain cases, we may elect to enter into multi-year agreements for the supply of these materials with one or more suppliers, the terms of which may include variable or fixed pricing, minimum purchase quantities and/or the requirement to purchase all supplies for specified locations. Additionally, we use derivative financial instruments to partially mitigate our exposure to changes in certain raw material costs.

Seasonality

Our operating results are affected by numerous factors, including fluctuations in costs of raw materials, holiday and seasonal programming and weather conditions. While yesteryear witnessed more seasonality, higher sales are realized during the summer when outdoor activities are more prevalent.

Competition

While LaCroix® Sparkling Water achieved double-digit growth in all of the 52 Nielsen metropolitan statistical areas in fiscal 2018 and is the significant brand of choice as the number one premium domestic sparkling water in 42 of those markets,throughout the United States, the beverage industry is highly competitive and our competitive position may vary by market area.  Our products compete with many varieties of liquid refreshment, including water products, soft drinks, juices, fruit drinks, energy drinks and sports drinks, as well as powdered drinks, coffees, teas, dairy-based drinks, functional beverages and various other nonalcoholic beverages.  We compete with bottlers and distributors of national, regional and private label products. Several competitors, including those  that dominate the beverage industry, such as Nestlé S.A., PepsiCo and The Coca-Cola Company, have greater financial resources than we have and aggressive promotion of their products may adversely affect sales of our brands.

 

Principal methods of competition in the beverage industry are price and promotional activity, advertising and marketing programs, point-of-sale merchandising, retail space management, customer service, product differentiation, packaging innovations and distribution methods. We believe our Company differentiates itself through novel methods of innovation, key brand recognition, focused social media, innovative flavor variety, attractive packaging, efficient distribution methods, and, for some product lines, value pricing.

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Trademarks

 

We own numerous trademarks for our brands that are significant to our business. We intend to continue to maintain all registrations of our significant trademarks and use the trademarks in the operation of our businesses.

 

 

Governmental Regulation

 

The production, distribution and sale of our products in the United States are subject to the Federal Food, Drug and Cosmetic Act; the Dietary Supplement Health and Education Act of 1994; the Occupational Safety and Health Act; the Lanham Act; various environmental statutes; and various other federal, state and local statutes regulating the production, transportation, sale, safety, advertising, labeling and ingredients of such products. We believe that we are in compliance, in all material respects, with such existing legislation.

 

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Certain states and localities require a deposit or tax on the sale of certain beverages. These requirements vary by each jurisdiction. Similar legislation has been or may be proposed in certain other states andor localities as well asor by Congress. We are unable to predict whether such legislation will be enacted or what impact its enactment would have on our business, financial condition or results of operations.

 

All of our facilities in the United States are subject to federal, state and local environmental laws and regulations. Compliance with these provisions has not had any material adverse effect on our financial or competitive position. We believe our current practices and procedures for the control and disposition of toxic or hazardous substances comply in all material respects with applicable law.

 

 

Employees

 

As of April 28, 2018,May 2, 2020, we employed approximately 1,5001,550 people, of which 370360 are covered by collective bargaining agreements. We believe we maintain good relations with our employees.

 

SUSTAINABILITY

National Beverage Corp. is dedicated to sustainable operations and responsible business initiatives. All our beverage products are produced in the U.S., providing thousands of jobs in local communities and boasting a lower carbon footprint than imported brands.

All of our packaging is recyclable and we continually focus on reducing packaging content. More than 80% of our products are in aluminum cans, which generally contain approximately 73% recycled material.  Each of our facilities has programs in place designed to minimize the use of water, energy, and other natural resources. 

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AVAILABLE INFORMATION

 

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and amendments to those reports are available free of charge on our website at www.nationalbeverage.com as soon as reasonably practicable after such reports are electronically filed with the Securities and Exchange Commission. In addition, our Code of Ethics is available on our website. The information on the Company’s website is not part of this Annual Report on Form 10-K or any other report that we file with, or furnish to, the Securities and Exchange Commission.

 

ITEM 1A.     RISK FACTORS

 

In addition to other information in this Annual Report on Form 10-K, the following risk factors should be considered carefully in evaluating the Company’s business. Our business, financial condition and results of operations could be materially and adversely affected by any of these risks. Additional risks and uncertainties, including risks and uncertainties not presently known to the Company, or that the Company currently deems immaterial, may also impair our business and results of operations.

 

Brand image and consumer preferences. Our beverage portfolio is comprised of a number of unique brands with time-tested reputations and consumer loyalty that have been built over time. Our investments in social media and marketing as well as our strong commitment to product quality are intended to have a favorable impact on brand image and consumer preferences. Unfavorable publicity, or allegations of quality issues, even if false or unfounded, couldmay tarnish our reputation and brand image and could cause consumers to choose other products. In addition, if we do not adequately anticipate and react to changing demographics, consumer trends, health concerns and product preferences, our financial results could be adversely affected.

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Competition. The beverage industry is extremely competitive. Our products compete with a broad range of beverage products, most of which are manufactured and distributed by companies with substantially greater financial, marketing and distribution resources. In order to generate future revenues and profits, we must continue to sell products that appeal to our customers and consumers. Discounting and other actions by our competitors may make it more difficultcould adversely affect our ability to sustain revenues and profits.

 

Customer relationships. Our retail customer base has been consolidating over the last several years resulting in fewer customers with increased purchasing power. This increased purchasing power can limit our ability to increase pricing for our products with certain of our customers. Additionally, e-commerce transactions and value stores are experiencing rapid growth. Our inability to adapt to customer requirements could lead to a loss of business and adversely affect our financial results.

 

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Raw materials and energy. The production of our products is dependent on certain raw materials, including aluminum, resin, corn, linerboard, water and fruit juice. In addition, the production and distribution of our products is dependent on energy sources, including natural gas, fuel and electricity. These items are subject to price volatility caused by numerous factors. Commodity price increases ultimately result in a corresponding increase in the cost of raw materials and energy. We may be limited in our ability to pass these increases on to our customers or may incur a loss in sales volume to the extent price increases are taken. In addition, strikes, weather conditions, governmental controls, tariffs, national emergencies, natural disasters, supply shortages or other events could affect our continued supply and cost of raw materials and energy. If raw materials or energy costs increase, or the availability is limited, our financial results could be adversely affected.

 

Governmental regulation. Our business and properties are subject to various federal, state and local laws and regulations, including those governing the production, packaging, quality, labeling and distribution of beverage products. In addition, various governmental agencies have enacted or are considering additional taxes on soft drinks and other sweetened beverages. ChangesCompliance with or changes in existing laws or regulations could require material expenses and negatively affect our financial results through lower sales or higher costs.

 

Sustained increases in the cost of employee benefits. Our profitability is affected by the cost of medical, statutory and retirementother benefits provided to employees, including employees covered under collective bargaining agreements and multi-employer pension plans. In recent years, we have experienced increases in these costs, as a resultcertain of certain factors beyond our control.which are self-insured.  Although we seek to limit these cost increases, continued upward pressure in these costs could reduce our profitability.

 

Unfavorable weather conditions. Unfavorable weather conditions could have an adverse impact on our revenue and profitability. Unusually cold or rainy weather may temporarily reduce demand for our products and contribute to lower sales, which could adversely affect our profitability for such periods. Prolonged drought conditions in the geographic regions in which we do business could lead to restrictions on the use of water, which could adversely affect our ability to produce and distribute products.

 

Dependence on key personnel. Our performance significantly depends upon the continued contributions of our executive officers and key employees, both individually and as a group, and our ability to retain and motivate them. Our officers and key personnel have many years of experience with us and in our industry and it may be difficult to replace them. If we lose key personnel or are unable to recruit qualified personnel, our operations and ability to manage our business may be adversely affected.

 

COVID-19 pandemic. The magnitude and duration of the current COVID-19 pandemic is uncertain, rapidly changing and may be impacted by events beyond our knowledge or control. Such events could include a shutdown of one or more of our facilities resulting from illness or government restrictions, and the disruption of operations of our customers and suppliers. Such events could adversely impact our business, results of operations, financial condition and cash flows.

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ITEM 1B.     UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 2.     PROPERTIES

 

Our principal properties include twelve production facilities located in ten states, which aggregate approximately two million square feet. We own ten production facilities in the following states: California (2), Georgia, Kansas, Michigan (2), Ohio, Texas, Utah and Washington. Two production facilities, located in Maryland and Florida, are leased subject to agreements that expire through 2020.2025. We believe our facilities are generally in good condition and sufficient to meet our present needs.

 

The production of beverages is capital intensive but is not characterized by rapid technological change. The technological advances that have occurred have generally been of an incremental cost-saving nature, such as the industry’s conversion to lighter weight containers or improved blending processes that enhance ingredient yields. Although we are continually investing in more efficient equipment, weWe are not aware of any anticipated industry-wide changes in technology that would adversely impact our current physical production capacity or cost of production.

 

We own and lease trucks, vans and automobiles used in the sale, delivery and distribution of our products. In addition, we lease warehouse and office space, transportation equipment, office equipment and certain manufacturing equipment.

 

 

ITEM 3.     LEGAL PROCEEDINGS

 

From time to time, we areThe Company has been named in certain legal proceedings, including those containing derivative and class action allegations.  One complaint alleges the Company’s LaCroix branded products contain synthetic ingredients and therefore violate state consumer protection statutes and other laws.  A similar consumer complaint was voluntarily dismissed during the fiscal year along with a party to variousfull written retraction of all claims by the plaintiff and counsel. The Company is vigorously defending all legal proceedings and believes litigation matters and claims arising in the ordinary course of business. We dowill not expect the ultimate disposition of such matters to have a material adverse effect on our consolidatedthe Company’s financial position, cash flows or results of operations.

 

 

ITEM 4.     MINE SAFETY DISCLOSURES

 

Not applicable.

 

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PART II

 

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

The common stock of National Beverage Corp., par value $.01 per share, (“Common Stock”) is listed on The NASDAQ Global Select Market under the symbol “FIZZ”. The following table shows the range of high and low prices per share of the Common Stock for the fiscal quarters indicated:

  

Fiscal Year Ended

 
  

April 28, 2018

  

April 29, 2017

 
  

High

  

Low

  

High

  

Low

 
                 

First Quarter

 $110.64  $81.65  $64.73  $46.50 
                 

Second Quarter

  129.82   91.50   58.30   39.14 
                 

Third Quarter

  113.70   93.01   54.65   44.21 
                 

Fourth Quarter

  114.77   83.78   92.85   48.81 

 

At June 6, 201824, 2020, there were approximately 28,00029,500 holders of our Common Stock, the majority of which hold their shares in the names of various dealers and/or clearing agencies.banks, brokers and other financial institutions.

 

The Company paid special cash dividends on Common Stock of $135.2 million ($2.90 per share) on January 29, 2019 and $69.9 million ($1.50 per share) on both August 4, 2017 (Fiscal 2018) and January 27, 2017 (Fiscal 2017).2017.

 

The Company isOur Board of Directors has authorized under its stock buybacka program to repurchase 1.6 million shares of Common Stock. Asour common stock of April 28, 2018, 502,060which 943,428 shares wereremain available and authorized for repurchases. In March 2020, the Company purchased under the program and 1,097,940 shares were available for purchase. No47,651 shares of Common Stock have been repurchased during the last three fiscal years.its common stock at an average price per share of $40.94 for a total of $1.9 million. 

 

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Performance Graph 

 

The following graph shows a comparison of the five-year cumulative returns of an investment of $100 cash on April 27, 2013,May 2, 2015, assuming reinvestment of dividends, in (i)of our Common Stock (ii)with the NASDAQ Composite Index, (iii) the S&P 500 Index, and (iv) a Company-constructed peer group consistingPeer Group (the “Peer Group”) and the newly-added Dow Jones US Soft Drinks Index. The Peer Group consists of Coca-Cola Bottling Company Consolidated and Cott Corporation. Based onCorporation and will be replaced by the cumulative total return below, an investment inDow Jones US Soft Drinks Index to provide a broader representation of our Common Stock on April 27, 2013 provided a compounded annual return of approximately 45% as of April 28, 2018.

industry peers. Going forward, the Peer Group will be excluded from this performance graph.

 

 

 

4/27/2013

  

5/3/2014

  

5/2/2015

  

4/30/2016

  

4/29/2017

  

4/28/2018

  

5/02/2015

  

4/30/2016

  

4/29/2017

  

4/28/2018

  

4/27/2019

  

5/02/2020

 
                                     

National Beverage Corp.

 $100.00  $131.85  $153.88  $320.80  $625.93  $644.46  $100.00  $208.47  $406.77  $418.81  $277.32  $241.48 
                                     

NASDAQ Composite - Total Return

  100.00   127.40   156.45   151.07   193.65   230.40  100.00  96.56  123.78  147.27  170.08  181.89 
                                     

S&P 500 - Total Return

  100.00   121.43   138.89   139.05   163.96   187.24 

Dow Jones US Soft Drinks Index

 100.00  112.05  117.75  119.03  143.22  145.11 
             

S&P 500 Index - Total Return

 100.00  100.11  118.05  134.81  151.44  148.79 
                                     

Peer Group

  100.00   97.62   121.03   178.03   207.92   197.64  100.00  147.10  171.78  163.29  241.14  165.61 

 

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ITEM 6.     SELECTED FINANCIAL DATA

 

The following selected financial data should be read in conjunction with "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and consolidated financial statements and notes thereto contained in "Item 8. Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

The following selected financial data should be read in conjunction with "Item 7. Management's DiscussionNATIONAL BEVERAGE CORP. AND SUBSIDIARIES

(In thousands, except per share and Analysis of Financial Condition and Results of Operations" and consolidated financial statements and notes thereto contained in "Item 8. Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.footnote amounts)

 

NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

(In thousands, except per share and footnote amounts)

 

Fiscal Year Ended

  

Fiscal Year Ended

 
 

April 28,

  

April 29,

  

April 30,

  

May 2,

  

May 3,

  

May 2,

 

April 27,

 

April 28,

 

April 29,

 

April 30,

 
 

2018

  

2017

  

2016

  

2015

  2014(4)  2020 (3)  2019  2018  2017  2016 

SUMMARY OF OPERATIONS:

                 

Summary of Operations:

          

Net sales

 $975,734  $826,918  $704,785  $645,825  $641,135  $1,000,394  $1,014,105  $975,734  $826,918  $704,785 

Cost of sales

  584,599   500,841   463,348   426,685   423,480   630,254   629,755   584,599   500,841   463,348 

Gross profit

  391,135   326,077   241,437   219,140   217,655  370,140  384,350  391,135  326,077  241,437 

Selling, general and administrative expenses

  186,947   163,600   148,384   145,157   153,220  204,394  204,415  186,947  163,600  148,384 

Interest expense

  201   189   203   371   660 

Other (income) expense - net

  (1,502)  (537)  145   (1,101)  666   (3,709)  (3,942)  (1,301)  (348)  348 

Income before income taxes

  205,489   162,825   92,705   74,713   63,109  169,455  183,877  205,489  162,825  92,705 

Provision for income taxes

  55,715   55,780   31,507   25,402   19,474   39,483   43,024   55,715   55,780   31,507 

Net income

 $149,774  $107,045  $61,198  $49,311  $43,635  $129,972  $140,853  $149,774  $107,045  $61,198 
                     

PER SHARE DATA:

                 

Per Share Data:

          

Basic earnings per common share (1)

 $3.21  $2.30  $1.31  $1.06  $.93  $2.79  $3.02  $3.21  $2.30  $1.31 

Diluted earnings per common share (1)

  3.19   2.29   1.31   1.05   .92  2.78  3.00  3.19  2.29  1.31 

Closing stock price

  89.78   88.59   46.74   22.42   19.21  50.07  57.50  89.78  88.59  46.74 

Dividends paid on common stock (2)

  1.50   1.50   -   -   -  -  2.90  1.50  1.50  - 
                     

BALANCE SHEET DATA:

                 

Balance Sheet Data:

          

Cash and equivalents (2)

 $189,864  $136,372  $105,577  $52,456  $29,932  $304,518  $156,200  $189,864  $136,372  $105,577 

Working capital (2) (3)

  248,297   181,115   143,603   97,130   75,933 

Working capital (2)

 319,024  224,420  248,297  181,115  143,603 

Property, plant and equipment - net

  85,807   65,150   61,932   60,182   59,494  120,627  111,316  85,807  65,150  61,932 

Total assets (2) (3)

  458,832   353,983   301,044   243,402   220,156 

Long-term debt

  -   -   -   10,000   30,000 

Deferred income tax liability (3)

  14,502   12,087   10,020   10,897   11,188 

Shareholders' equity (2)

  331,440   245,618   206,152   147,782   106,201 

Total assets (2)

 648,646  452,193  458,832  353,983  301,044 

Long-term lease obligations

 32,159  -  -  -  - 

Deferred income tax liability

 14,823  15,987  14,502  12,087  10,020 

Total shareholders' equity (2)

 452,337  331,609  331,440  245,618  206,152 

Dividends paid on common stock (2)

  69,878   69,850   -   -   -  -  135,247  69,878  69,850  - 

 

(1)

Basic earnings per common share is computed by dividing earnings available to common shareholders by the weighted average number of common shares outstanding.  Diluted earnings per common share includes the dilutive effect of stock options.

(2)

The Company paid special cash dividends on Common Stock of $135.2 million ($2.90 per share) on January 29, 2019 and $69.9 million ($1.50 per share) on August 4, 2017 and January 27, 2017.

(3)

Deferred taxes have been reclassified from current assets to non-current liabilities in accordance with ASU 2015-17. See Note 1 of Notes to Consolidated Financial Statements.

(4)

Fiscal 20142020 consisted of 53 weeks.

 

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ITEM 7.     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 degree, energy drinks. Over the past few years, ourextent, carbonated soft drink brands continue to be modified as we endeavor to make them more adaptable to our consumers.drinks. We believe our ingeniouscreative 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.

 

January 1986 found our infant company in possession of a month-old, typical soda pop manufacturer whose acquisition cost had not yet been determined. One, at the time, could have described it as a ‘Hail Mary’ attempt to thwart another corporate 1980’s raider takeover.

January 2018 ushered in a corporate marvel of focus that we believe not only defies the beverage giants’ power and might, but finds that its creativity and innovation transformed the entire soft drink industry!

We primarily employ the warehouse delivery system, which due to the bricks and mortar costs to all retailers, allows our retail partners to further maximize assets by utilizing their ability to pick up product at our warehouses, thus further lowering their/our product costs.

Within the final quarter of FY2018, with the exception of the warehouse delivery system, National Beverage Corp., in recent years, has completed its transformation from that typical soda pop manufacturer of January 1986transformed to the master innovator of thisan innovative, healthier refreshment company!company. From our corporate philosophy, development of products and marketing to manufacturing, we are converting consumers to a ‘Better for You’ thirst quencher that compassionately cares for their nutritional health. We are in our infancy and have only begun incommitted to our quest to innovate for the joy, benefit and enjoyment of our consumers’ healthier lifestyle!

 

As the cornerstone relative to the lead-in paragraph emphasizing National Beverage’s uniqueness:

Many believe that if you put good in – Great comes out . . .

We believe that if we put excellent in – You get magical out!

Presently, National Beverage Corp. is uniquely positioned in three distinctive ways:

 

 

(1)

The retail grocery industry is in revolution. Yesteryear,In prior years, each retailer induced their consumer with a proprietary brand (especially soft drinks), but today understands that the well-informed, smart consumer is demanding that retailers provide recognizable brands that have earned their respective consumer standing on their merits.

 

 

(2)

The retail grocerRetail today is in the most competitive-indexedcompetitively-indexed service industry, without exception. Innovation, plus the urgent time demands on the consumer, is requiringrequires quick, expedient shopping andshopping. Home delivery is even more of a current shoppers’ choice. Retailers cannot carry slower-moving items that home delivery is even more of a current shoppers’ choice. Retailers cannot carry slower-moving items that home delivery will not support.

 

16

 

(3)

The new Millennial consumer is the most competent/knowledgeable product analyzer ever, and personal mental/physical lifestyles demand that healthier is their preferred choice. Calories must qualify as worthy; sugar being enemy #1 in the life of the Millennial.Millennial and younger consumers.

 

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 thatthan larger competitors who are burdened by legacy production and distribution complexity and costs cannot quickly comply with.costs. 

17

 

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 to deliver our products primarily through theconsisting of warehouse and direct-store delivery. The warehouse delivery system and distributors.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.

 

National Beverage Corp. is incorporated in Delaware and began trading as a public company on the NASDAQ Stock Market in 1991. In this report, the terms “we,” “us,” “our,” “Company” and “National Beverage” mean National Beverage Corp. and its subsidiaries unless indicated otherwise.

 

Our operating results are affected by numerous factors, including fluctuations in the costs of raw materials, holiday and seasonal programming and weather conditions. While yesteryearprior years witnessed more seasonality, higher sales are realized during the summer when outdoor activities are more prevalent.

 

Our highly innovative business, where new beverages are developed and produced for selective holidays and ceremonial dates, should not be analyzed on the common three-month (quarterly) periods, traditionally found acceptable. Today, costly development projects and seasonal weather periods plus promotional packaging, make quarter-to-quarter comparisons unworthy statistics and forces companies to decision making for that purpose, not truly beneficial for investors and shareholders alike.

 

Traditional and typical are not a part of an innovator’s vocabulary.

 

18

RESULTS OF OPERATIONS

The following section generally discusses the fiscal years ended May 2, 2020 (Fiscal 2020) and April 27, 2019 (Fiscal 2019) items and year-to-year comparisons between Fiscal 2020 and Fiscal 2019. Discussions of fiscal year ended April 28, 2018 (Fiscal 2018) items and year-to-year comparisons between Fiscal 2019 and Fiscal 2018 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended April 27, 2019, which is available free of charge on our website at www.nationalbeverage.com. Fiscal 2020 consisted of 53 weeks; Fiscal 2019 and Fiscal 2018 both consisted of 52 weeks. 

 

Net Sales

Net sales for fiscal year ended April 28, 2018 (“Fiscal 2018”) increased 18.0%2020 declined 1.4% to $975.7$1,000 million compared to $826.9$1,014 million for fiscal year ended April 29, 2017 (“Fiscal 2017”).2019.  The increasedecline in sales resulted primarily from a 19.8% increase1.4% reduction in branded case volume and, to a lesser extent, a higher average selling price.price per case due primarily to changes in product mix.  Power+ Brands volume increased 38.9%;declined 3.4% and branded carbonated soft drinks volume declined by 6.2%. The Company discontinued its lower-margin, private-label carbonated soft drink business in the third quarter of Fiscal 2018, allowing future performance to be more focused on brand equity appreciation.

17

Net sales for Fiscal 2017 increased 17.3% to $826.9 million compared to $704.8 million for the fiscal year ended April 30, 2016 (“Fiscal 2016”)6.6%. The increase in sales resulted primarily from a 16.6% increase in case volume and, to a lesser extent, a higher average selling price. Power+ Brands volume increased 42.6%; branded carbonated soft drinks volume was flat.

 

Gross Profit

Gross profit for Fiscal 2018 increased 20.0% to $391.12020 was $370.1 million compared to $326.1million$384.4 million for Fiscal 2017.2019.  The increasechange in gross profit is due to increased volume and growtha 1.0% increase in higher margin Power+ Brands, offset in part by increased cost of sales per case. Cost of sales per case resulting primarily from changes in product mix and increased 1.0% primarily due to higher aluminummanufacturing costs.  Gross margin expanded to 40.1%.

Gross profitwas 37.0% for Fiscal 2017 increased 35.1% to $326.1 million2020 compared to $241.4 million for37.9% in Fiscal 2016. The increase in gross profit was due to increased volume, growth in higher margin Power+ Brands and a decline in cost of sales per case of 5.7%. The decrease in cost of sales per case was due to favorable product mix changes and lower raw material costs. Gross margin expanded to 39.4%.2019.

 

Shipping and handling costs are included in selling, general and administrative expenses, the classification of which is consistent with many beverage companies. However, our gross margin may not be comparable to companies that include shipping and handling costs in cost of sales. See Note 1 of Notes to Consolidated Financial Statements.

 

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $186.9$204.4 million for both Fiscal 2020 and Fiscal 2019 or 19.2%approximately 20% of net sales for Fiscal 2018, increasing $23.3 million from Fiscal 2017. The increase was primarily due to shipping and other volume-related expenses and marketing spending increases. As a percent of net sales, selling, general and administrative expenses decreased primarily due to the leveraging effects of higher volume on fixed costs.

both periods.  Selling, general and administrative expenses were $163.6 million or 19.8% of net sales for Fiscal 2017 compared to $148.4 million or 21.1% of net sales for Fiscal 2016. The increase was primarily due toreflect increased selling and administrative costs offset by reduced shipping and other volume-related expenses and marketing spending increases. As a percent of net sales, selling, general and administrative expenses decreased primarily due to the leveraging effects of higher volume on fixed costs and growth of products distributed by customer pick-up.distribution costs. 

 

Interest Expense and Other Expense (Income) - Net

Other income, net is primarily interest income of $3.9 million for Fiscal 2020 and $4.1 million for Fiscal 2019. The change in interest income is due to  lower investment yields on an increased average investment balances. Interest expense is comprised of fees related to maintaining lines of credit and, for part of Fiscal 2016, interest on borrowings.credit. Interest expense was essentially flat for all years presented. Other expense is net of interest income of $1.6 million for Fiscal 2018, $.6 million for Fiscal 2017 and $.1 million for Fiscal 2016. The change in interest income is due to changes in average invested balances and increased return on investments.

18

 

Income Taxes

Our effective tax rate was 27.1%23.3% for Fiscal 2018, 34.3%2020 and 23.4% for Fiscal 2017 and 34% for Fiscal 2016.2019. The reduction in the effective tax rate was due to the statutory rate decreases set forth in the Tax Cuts and Jobs Act (the “Tax Act”) enacted into law on December 22, 2017. Under the Tax Act, the applicable federal statutory rate was 30.4% for Fiscal 2018. Included in the effective tax rate for Fiscal 2018 is a one-time adjustment reducing income tax expense to remeasure previous deferred tax liabilities of $4.3 million. In all years, the differencedifferences between the effective rate and the federal statutory rate waswere primarily due to the effects of state income taxes, the domestic manufacturing deduction and share-based payment awards. The applicable federal statutory rate under the Tax Act will be reduced to 21% for fiscal 2019. See Note 7taxes.

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LIQUIDITY AND FINANCIAL CONDITION

 

Liquidity and Capital Resources

Our principal source of funds is cash generated from operations. At April 28, 2018,May 2, 2020, we maintained $100 million unsecured revolving credit facilities, under which no borrowings were outstanding and $2.1$3.4 million was reserved for standby letters of credit. Cash generated from operations is our principal source of funds. We believe that existing capital resources will be sufficient to meet our liquidity and capital requirements for the next twelve months. See Note 45 of Notes to Consolidated Financial Statements.

 

Expenditures for property, plant and equipment amounted to $23.9 million for Fiscal 2020 primarily to expand production capacity.  We continually evaluate capital projects to expand our production capacity, enhance packaging capabilities or improve efficiencies at our production facilities.  Expenditures for property, plantWe intend to continue production capacity and equipment amounted to $32.0 million for Fiscal 2018 primarily to expand production capacity. The Company expectsefficiency improvement projects in fiscal year 2021 and expect capital expenditures to increase inbe comparable to Fiscal 2019 to support volume growth.2020.

 

The Company paid special cash dividends on Common Stock of $135.2 million ($2.90 per share) on January 29, 2019 and $69.9 million ($1.50 per share) on both August 4, 20172017.

The Board of Directors has authorized the Company to repurchase up to 1.6 million shares of common stock. During Fiscal 2020, the Company purchased an aggregate 154,512 shares for a cost of $6.2 million. As of May 2, 2020, 656,572 shares were purchased under the program and January 27, 2017. The Company has announced it plans to develop a program to increase distribution to shareholders based on the length of time they have owned their shares.943,428 shares were available for repurchase.

 

Pursuant to a management agreement, we incurred a fee to Corporate Management Advisors, Inc. (“CMA”)(CMA) of $9.8$10.0 million for Fiscal 2018, $8.32020 and $10.2 million for Fiscal 2017 and $7.0 million for Fiscal 2016.2019. At April 28, 2018,May 2, 2020, management fees payable to CMA were $2.4$2.6 million. See Note 56 of Notes to Consolidated Financial Statements.

 

Cash Flows

During Fiscal 2018, $154.72020, $177.7 million was provided by operating activities, $31.9$23.9 million was used in investing activities and $69.3$5.5 million was used in financing activities.  Cash provided by operating activities increased $40.5$38.3 million primarily due to decreased working capital requirements and increased earningsdepreciation and amortization offset in part by increased working capital.lower net income.  Cash used in investing activities increaseddecreased due to increasedreduced capital expenditures. Spending on property, plant and equipment exceeded depreciation expense, our typical investment level, in order to support volume growth.  Cash used in financing activities includes the $69.9$6.2 million of stock repurchased during Fiscal 2020.  In Fiscal 2019, $135.2 million ($1.502.90 per share) special cash dividend paid on August 4, 2017.

During Fiscal 2017, $114.3 million was provided by operating activities, $14.0 million was used in investing activities and $69.5 million was used in financing activities. Cash provided by operating activities increased $33.8 million primarily due to increased earnings and favorable changes in working capital. Cash used in investing activities increased $2.0 million reflecting higher capital expenditures and lower proceeds from the sale of property. Cash used in financing activities includes the $69.9 million ($1.50 per share) special cash dividend paid on January 27, 2017.29, 2019.

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Financial Position

During Fiscal 2018,2020, our working capital increased to $248.3$319.0 million from $181.1$224.4 million at April 29, 2017.27, 2019. The increase in working capital resulted from higherincreased cash trade receivables and inventory, partiallyequivalents generated by operations and reduced inventories offset in part by higher accounts payable and accruedincreased current liabilities. Current liabilities in Fiscal 2020 increased in part due to the adoption of the new lease Accounting Standards Update No. 2016-02, “Leases.” (Topic 842).  Trade receivables increased $13.0 million or 18.3% due to increased sales,slightly and days sales outstanding increasedwas 29.5 days compared to 31.432.2 days from 30.6 days.for 2019. Inventories increased $7.6decreased $7.2 million or 14.2%10.2% as a result of increasedreductions in finished goods and raw materials to support sales increases.materials. Annual inventory turns remained unchanged at 9.5increased to 9.4 from 8.8 times.  As of May 2, 2020 and April 28, 2018,27, 2019, the current ratio was 3.43.3 to 1 compared to 3.1 to 1 at April 29, 2017.1.

 

During Fiscal 2017, our working capital increased to $181.1 million from $143.6 million at April 30, 2016. The increase in working capital resulted from higher cash, trade receivables and inventory, partially offset by higher accounts payable and accrued liabilities. Trade receivables increased $10.3 million or 17% due to increased sales while days sales outstanding improved to 30.6 days from 31.0 days. Inventories increased $5.4 million as a result

20

 

CONTRACTUAL OBLIGATIONS

 

Contractual obligations at April 28, 2018May 2, 2020 are payable as follows:

 

 

(In thousands)

  

(In thousands)

 
 

 

Total

  

Less Than

1 Year

  

 

1 to 3 Years

  

 

3 to 5 Years

  

More Than

5 Years

  

Total

  

1 Year

Or less

  

2 to 3 Years

  

3 to 5 Years

  

More Than

5 Years

 

Operating leases

 $28,448  $9,182  $12,856  $4,879  $1,531  $52,394  $14,206  $22,251  $11,836  $4,101 

Purchase commitments

  15,875   11,287   3,540   1,048   -   22,598   17,505   5,093   -   - 

Total

 $44,323  $20,469  $16,396  $5,927  $1,531  $74,992  $31,711  $27,344  $11,836  $4,101 

 

We contribute to certain pension plans under collective bargaining agreements and to a discretionary profit sharing plan. Annual contributions were $3.6 million for Fiscal 2020, $3.8 million for Fiscal 2019 and $3.4 million for Fiscal 2018, $3.1 million for Fiscal 2017 and $2.9 million for Fiscal 2016.2018. See Note 911 of Notes to Consolidated Financial Statements.

 

We maintain self-insured and deductible programs for certain liability, medical and workers’ compensation exposures. Other long-term liabilities include known claims and estimated incurred but not reported claims not otherwise covered by insurance based on actuarial assumptions and historical claims experience. Since the timing and amount of claim payments vary significantly, we are not able to reasonably estimate future payments for specific periods and therefore such payments have not been included in the table above. Standby letters of credit aggregating $2.1$3.4 million have been issued in connection with our self-insurance programs. These standby letters of credit expire through March 2019June 2021 and are expected to be renewed.

 

20

OFF-BALANCE SHEET ARRANGEMENTS AND ESTIMATES

 

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition.

 

CRITICAL ACCOUNTING POLICIES

 

The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Although these estimates are based on management’smanagement's knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results.  We believe that the critical accounting policies described in the following paragraphs comprise the most significant estimates and assumptions used in the preparation of our consolidated financial statements.  For these policies, we caution that future events rarely develop exactly as estimated and the best estimates routinely require adjustment.

 

 

Credit Risk

We sell products to a variety of customers and extend credit based on an evaluation of each customer’s financial condition, generally without requiring collateral.  Exposure to credit losses varies by customer principally due to the financial condition of each customer.  We monitor our exposure to credit losses and maintain allowances for anticipated losses based on specificour experience with past due accounts, collectability and our analysis of customer circumstances, credit conditions and historical write-offs.data.

 

21

Impairment of Long-Lived Assets

All long-lived assets, excluding goodwill and intangible assets not subject to amortization, are evaluated for impairment on the basis of undiscounted cash flows whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impaired asset is written down to its estimated fair value based on the best information available. Estimated fair value is generally measured by discounting future cash flows. Goodwill and intangible assets not subject to amortization are evaluated for impairment annually or sooner if we believe such assets may be impaired. An impairment loss is recognized if the carrying amount or, for goodwill, the carrying amount of its reporting unit, is greater than its fair value.

 

Income Taxes

OurThe Company's effective income tax rate is based on estimates of taxes which will ultimately be payable. Deferred taxes are recorded to give recognition to temporary differences between the tax bases of assets or liabilities and their reported amounts in the financial statements. Valuation allowances are established to reduce the carrying amounts of deferred tax assets when it is deemed, more likely than not, that the benefit of deferred tax assets will not be realized.

Insurance Programs

We maintain self-insured and deductible programs for certain liability, medical and workers’ compensation exposures. Accordingly, we accrue for known claims and estimated incurred but not reported claims not otherwise covered by insurance based on actuarial assumptions and historical claims experience.

 

21

Revenue Recognition

We recognize revenue upon delivery to our customers, based on written sales terms that do not allow a right of return except in rare instances. Our products are typically sold on credit,credit; however smaller direct-store delivery accounts may be sold on a cash basis. Our credit terms typicallynormally require payment within 30 days of delivery and may allow discounts for early payment. We estimate and reserve for bad debt exposure based on our experience with past due accounts, collectability and our analysis of customer data.

 

We offer various sales incentive arrangements to our customers that require customer performance or achievement of certain sales volume targets. Sales incentives are accrued over the period of benefit or expected sales. When the incentive is paid in advance, the aggregate incentive is recorded as a prepaid and amortized over the period of benefit. The recognition of these incentives involves the use of judgment related to performance and sales volume estimates that are made based on historical experience and other factors. Sales incentives are accounted for as a reduction of sales and actual amounts ultimately realized may vary from accrued amounts. Such differences are recorded once determined and have historically not been significant. We will adoptadopted ASU 2014-09, Revenue from Contracts with Customers, and its amendments on April 29, 2018. See Note 1 to our consolidated financial statements for additional information on revenue recognition and the transition to the new revenue recognition guidance.

 

22

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"“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,"“believes,” “anticipates,” “intends,” “plans,” “expects,” and "estimates"“estimates” constitute "forward-looking statements"“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.

22

 

ITEM 7A.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Commodities

We purchase various raw materials, including aluminum cans, plastic bottles, high fructose corn syrup, corrugated packaging and juice concentrates, the prices of which fluctuate based on commodity market conditions. Our ability to recover increased costs through higher pricing may be limited by the competitive environment in which we operate. At times, we manage our exposure to this risk through the use of supplier pricing agreements that enable us to establish all, or a portion of, the purchase prices for certain raw materials. Additionally, we use derivative financial instruments to partially mitigate our exposure to changes in certain raw material costs.

 

Interest Rates

At April 28, 2018,May 2, 2020, the Company had no borrowings outstanding. We had no debt-related interest rate exposure during Fiscal 2018. 2020.

 

23


 

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

  

May 2,

  

April 27,

 
  

2020

  

2019

 

Assets

        

Current assets:

        

Cash and equivalents

 $304,518  $156,200 

Trade receivables - net

  84,921   84,841 

Inventories

  63,482   70,702 

Prepaid and other assets

  7,791   9,714 

Total current assets

  460,712   321,457 

Property, plant and equipment - net

  120,627   111,316 

Right of use assets, net

  47,884   - 

Goodwill

  13,145   13,145 

Intangible assets

  1,615   1,615 

Other assets

  4,663   4,660 

Total assets

 $648,646  $452,193 
         

Liabilities and Shareholders' Equity

        

Current liabilities:

        

Accounts payable

 $74,369  $66,202 

Accrued liabilities

  42,476   30,433 

Operating lease liabilities

  16,980   - 

Income taxes payable

  7,863   402 

Total current liabilities

  141,688   97,037 

Deferred income taxes - net

  14,823   15,987 

Operating lease liabilities- non current

  32,159    

Other liabilities

  7,639   7,560 

Total liabilities

  196,309   120,584 

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; 50,803,184 shares (2020) and 50,678,084 shares (2019) issued

  508   507 

Additional paid-in capital

  37,930   37,065 

Retained earnings

  443,402   313,430 

Accumulated other comprehensive (loss)

  (5,420)  (1,543)

Treasury stock - at cost:

        

Series C preferred stock - 150,000 shares

  (5,100)  (5,100)

Common stock - 4,187,056 shares (2020) and 4,032,544 shares (2019)

  (19,133)  (12,900)

Total shareholders' equity

  452,337   331,609 

Total liabilities and shareholders' equity

 $648,646  $452,193 

See accompanying Notes to Consolidated Financial Statements.

24

NATIONAL BEVERAGE CORP. 

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)amounts)

 

  

April 28,

  

April 29,

 
  

2018

  

2017

 

Assets

        

Current assets:

        

Cash and equivalents

 $189,864  $136,372 

Trade receivables - net

  84,360   71,319 

Inventories

  60,920   53,355 

Prepaid and other assets

  17,823   7,275 

Total current assets

  352,967   268,321 

Property, plant and equipment - net

  85,807   65,150 

Goodwill

  13,145   13,145 

Intangible assets

  1,615   1,615 

Other assets

  5,298   5,752 

Total assets

 $458,832  $353,983 
         

Liabilities and Shareholders' Equity

        

Current liabilities:

        

Accounts payable

 $74,853  $58,100 

Accrued liabilities

  29,718   29,017 

Income taxes payable

  99   89 

Total current liabilities

  104,670   87,206 

Deferred income taxes - net

  14,502   12,087 

Other liabilities

  8,220   9,072 

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 - 75,000,000 shares authorized; 50,650,784 shares (2018) and 50,616,134 shares (2017) issued

  507   506 

Additional paid-in capital

  36,358   35,638 

Retained earnings

  307,824   227,928 

Accumulated other comprehensive income (loss)

  4,601   (604)

Treasury stock - at cost:

        

Series C preferred stock - 150,000 shares

  (5,100)  (5,100)

Common stock - 4,032,784 shares

  (12,900)  (12,900)

Total shareholders' equity

  331,440   245,618 

Total liabilities and shareholders' equity

 $458,832  $353,983 
  

Fiscal Year Ended

 
  

May 2,

  

April 27,

  

April 28,

 
  

2020

  

2019

  

2018

 
             

Net sales

 $1,000,394  $1,014,105  $975,734 
             

Cost of sales

  630,254   629,755   584,599 
             

Gross profit

  370,140   384,350   391,135 
             

Selling, general and administrative expenses

  204,394   204,415   186,947 
             

Operating income

  165,746   179,935   204,188 
             

Other income, net

  (3,709)  (3,942)  (1,301)
             

Income before income taxes

  169,455   183,877   205,489 
             

Provision for income taxes

  39,483   43,024   55,715 
             

Net income

 $129,972  $140,853  $149,774 
             

Earnings per common share:

            

Basic

 $2.79  $3.02  $3.21 

Diluted

 $2.78  $3.00  $3.19 
             

Weighted average common shares outstanding:

            

Basic

  46,628   46,633   46,598 

Diluted

  46,828   46,917   46,921 

 

See accompanying Notes to Consolidated Financial Statements.

24

NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

  Fiscal Year Ended 
  

April 28,

  

April 29,

  

April 30,

 
  

2018

  

2017

  

2016

 
             

Net sales

 $975,734  $826,918  $704,785 
             

Cost of sales

  584,599   500,841   463,348 
             

Gross profit

  391,135   326,077   241,437 
             

Selling, general and administrative expenses

  186,947   163,600   148,384 
             

Interest expense

  201   189   203 
             

Other (income) expense - net

  (1,502)  (537)  145 
             

Income before income taxes

  205,489   162,825   92,705 
             

Provision for income taxes

  55,715   55,780   31,507 
             

Net income

  149,774   107,045   61,198 
             

Less preferred dividends and accretion

  -   -   (238)
             

Earnings available to common shareholders

 $149,774  $107,045  $60,960 
             

Earnings per common share:

            

Basic

 $3.21  $2.30  $1.31 

Diluted

 $3.19  $2.29  $1.31 
             

Weighted average common shares outstanding:

            

Basic

  46,598   46,564   46,452 

Diluted

  46,921   46,770   46,671 

See accompanying Notes to Consolidated Financial Statements.

25

NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

  Fiscal Year Ended 
  

April 28,

  

April 29,

  

April 30,

 
  

2018

  

2017

  

2016

 
             

Net income

 $149,774  $107,045  $61,198 
             

Other comprehensive income (loss), net of tax:

            
             

Cash flow hedges

  5,227   1,110   783 
             

Other

  (22)  93   (66)
             

Total

  5,205   1,203   717 
             

Comprehensive income

 $154,979  $108,248  $61,915 

See accompanying Notes to Consolidated Financial Statements.

26

NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands)

  Fiscal Year Ended 
  

April 28, 2018

  

April 29, 2017

  

April 30, 2016

 
  

Shares

  

Amount

  

Shares

  

Amount

  

Shares

  

Amount

 
                         

Series C Preferred Stock

                        

Beginning and end of year

  150  $150   150  $150   150  $150 

Series D Preferred Stock

                        

Beginning of year

  -   -   -   -   120   120 

Series D preferred redeemed

  -   -   -   -   (120)  (120)

End of year

  -   -   -   -   -   - 

Common Stock

                        

Beginning of year

  50,616   506   50,589   506   50,418   504 

Stock options exercised

  35   1   27   -   171   2 

End of year

  50,651   507   50,616   506   50,589   506 

Additional Paid-In Capital

                        

Beginning of year

      35,638       34,570       37,759 

Series D preferred redeemed

      -       -       (5,791)

Stock options exercised

      559       365       846 

Stock-based compensation

      161       208       228 

Stock-based tax benefits

      -       495       1,528 

End of year

      36,358       35,638       34,570 

Retained Earnings

                        

Beginning of year

      227,928       190,733       129,773 

Net income

      149,774       107,045       61,198 

Common stock cash dividend

      (69,878)      (69,850)      - 

Preferred stock dividends & accretion

      -       -       (238)

End of year

      307,824       227,928       190,733 

Accumulated Other Comprehensive Income (Loss)

                     

Beginning of year

      (604)      (1,807)      (2,524)

Cash flow hedges

      5,227       1,110       783 

Other

      (22)      93       (66)

End of year

      4,601       (604)      (1,807)

Treasury Stock - Series C Preferred

                        

Beginning and end of year

  150   (5,100)  150   (5,100)  150   (5,100)

Treasury Stock - Common

                        

Beginning and end of year

  4,033   (12,900)  4,033   (12,900)  4,033   (12,900)
                         

Total Shareholders' Equity

     $331,440      $245,618      $206,152 

See accompanying Notes to Consolidated Financial Statements.

27

NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

  Fiscal Year Ended 
  

April 28,

  

April 29,

  

April 30,

 
  

2018

  

2017

  

2016

 

Operating Activities:

            

Net income

 $149,774  $107,045  $61,198 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

            

Depreciation and amortization

  13,226   12,834   12,056 

Deferred income tax provision (benefit)

  676   1,358   (1,299)

Loss on disposal of property, net

  149   72   129 

Stock-based compensation

  161   208   228 

Stock-based tax benefits

  -   495   1,528 

Changes in assets and liabilities:

            

Trade receivables

  (13,041)  (10,273)  (1,095)

Inventories

  (7,565)  (5,433)  (4,998)

Prepaid and other assets

  (5,437)  (2,205)  (485)

Accounts payable

  16,753   8,709   4,495 

Accrued and other liabilities

  25   1,457   8,726 

Net cash provided by operating activities

  154,721   114,267   80,483 
             

Investing Activities:

            

Additions to property, plant and equipment

  (31,974)  (14,015)  (12,140)

Proceeds from sale of property, plant and equipment

  63   28   116 

Net cash used in investing activities

  (31,911)  (13,987)  (12,024)
             

Financing Activities:

            

Dividends paid on common stock

  (69,878)  (69,850)  - 

Dividends paid on preferred stock

  -   -   (186)

Repayments under credit facilities, net

  -   -   (10,000)

Redemption of preferred stock

  -   -   (6,000)

Proceeds from stock options exercised

  560   365   848 

Net cash used in financing activities

  (69,318)  (69,485)  (15,338)
             

Net Increase in Cash and Equivalents

  53,492   30,795   53,121 
             

Cash and Equivalents - Beginning of Year

  136,372   105,577   52,456 
             

Cash and Equivalents - End of Year

 $189,864  $136,372  $105,577 
             

Other Cash Flow Information:

            

Interest paid

 $101  $202  $116 

Income taxes paid

 $56,737  $55,901  $29,473 

See accompanying Notes to Consolidated Financial Statements.

 

 

28
25


NATIONAL BEVERAGE CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

  

Fiscal Year Ended

 
  

May 2,

  

April 27,

  

April 28,

 
  

2020

  

2019

  

2018

 
             

Net income

 $129,972  $140,853  $149,774 
             

Other comprehensive income, net of tax:

            
             

Cash flow hedges

  (3,673)  (6,318)  5,227 
             

Other

  (204)  174   (22)
             

Total

  (3,877)  (6,144)  5,205 
             

Comprehensive income

 $126,095  $134,709  $154,979 

See accompanying Notes to Consolidated Financial Statements.

26

NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands)

  Fiscal Year Ended 
  May 2, 2020  

April 27, 2019

  April 28, 2018 
  

Shares

  

Amount

  

Shares

  

Amount

  

Shares

  

Amount

 
                         

Series C Preferred Stock

                        

Beginning and end of year

  150  $150   150  $150   150  $150 

Common Stock

                        

Beginning of year

  50,678   507   50,651   507   50,616   506 

Stock options exercised

  125   1   27   -   35   1 

End of year

  50,803   508   50,678   507   50,651   507 

Additional Paid-In Capital

                        

Beginning of year

      37,065       36,358       35,638 

Stock options exercised

      740       456       559 

Stock-based compensation

      125       251       161 

End of year

      37,930       37,065       36,358 

Retained Earnings

                        

Beginning of year

      313,430       307,824       227,928 

Net income

      129,972       140,853       149,774 

Common stock cash dividend

      -       (135,247)      (69,878)

End of year

      443,402       313,430       307,824 

Accumulated Other Comprehensive Income (Loss)

                     

Beginning of year

      (1,543)      4,601       (604)

Cash flow hedges

      (3,673)      (6,318)      5,227 

Other

      (204)      174       (22)

End of year

      (5,420)      (1,543)      4,601 

Treasury Stock - Series C Preferred

                        

Beginning and end of year

  150   (5,100)  150   (5,100)  150   (5,100)

Treasury Stock - Common

                        

Beginning of year

  4,033   (12,900)  4,033   (12,900)  4,033   (12,900)

Repurchase of common stock

  154   (6,233)            

End of year

  4,187   (19,133)  4,033   (12,900)  4,033   (12,900)
                         

Total Shareholders' Equity

     $452,337      $331,609      $331,440 

See accompanying Notes to Consolidated Financial Statements.

27

NATIONAL BEVERAGE CORP. 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

  

Fiscal Year Ended

 
  

May 2,

  

April 27,

  

April 28,

 
  

2020

  

2019

  

2018

 

Operating Activities:

            

Net income

 $129,972  $140,853  $149,774 

Adjustments to reconcile net income to net cash provided by operating activities:

            

Depreciation and amortization

  17,234   15,439   13,226 

Deferred income tax provision

  11   3,351   676 

Loss on disposal of property, net

  206   12   149 

Stock-based compensation

  125   251   161 

Amortization of operating right of use assets

  13,351   -   - 

Changes in assets and liabilities:

            

Trade receivables

  (80)  (481)  (13,041)

Inventories

  7,220   (9,782)  (7,565)

Prepaid and other assets

  (5,633)  (2,806)  (5,437)

Accounts payable

  8,168   (8,651)  16,753 

Accrued and other liabilities

  7,118   1,256   25 

Net cash provided by operating activities

  177,692   139,442   154,721 
             

Investing Activities:

            

Additions to property, plant and equipment

  (23,890)  (38,333)  (31,974)

Proceeds from sale of property, plant and equipment

  9   18   63 

Net cash used in investing activities

  (23,881)  (38,315)  (31,911)
             

Financing Activities:

            

Dividends paid on common stock

  -   (135,247)  (69,878)

Proceeds from stock options exercised

  740   456   560 

Repurchase of common stock

  (6,233)  -   - 

Net cash used in financing activities

  (5,493)  (134,791)  (69,318)
             

Net Increase (Decrease) in Cash and Equivalents

  148,318   (33,664)  53,492 
             

Cash and Equivalents - Beginning of Year

  156,200   189,864   136,372 
             

Cash and Equivalents - End of Year

 $304,518  $156,200  $189,864 
             

Other Cash Flow Information:

            

Interest paid

 $51  $51  $101 

Income taxes paid

 $29,364  $36,833  $56,737 

See accompanying Notes to Consolidated Financial Statements.

28

 

NATIONAL BEVERAGE CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

National Beverage Corp. innovatively 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.

1.significant accounting policies

 

Basis of Presentation

The consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”)(GAAP) and rules and regulations of the Securities and Exchange Commission.  The consolidated financial statements include the accounts of National Beverage Corp. and all subsidiaries.  All significant intercompany transactions and accounts have been eliminated.  Our fiscal year ends the Saturday closest to April 30 and, as a result, an additional week is added every five or six years.  AllThe fiscal years presentedyear ended May 2, 2020 (Fiscal 2020) consisted of 53 weeks.  The fiscal year ended April 27, 2019 (Fiscal 2019) and the fiscal year ended April 28, 2018 (Fiscal 2018) both consisted of 52 weeks.

 

Cash and Equivalents

Cash and equivalents are comprised of cash and highly liquid securities (consisting primarily of bank deposits and short-term government money-market investments) with an original maturity of three months or less..

 

Derivative Financial Instruments

We use derivativeDerivative financial instruments are used to partially mitigate our exposure to changes in certain raw material costs. All derivative financial instruments are recorded at fair value in our Consolidated Balance Sheets. We do not use derivativeDerivative 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. See Note 6.

 

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 amounting to 200,000 shares in Fiscal 2020, 284,000 shares in Fiscal 2019, and 323,000 shares in Fiscal 2018, 206,000 shares in Fiscal 2017 and 219,000 shares in Fiscal 2016.2018.

 

Fair Value of Financial Instruments

The estimated fair values of derivative financial instruments are calculated based on market rates to settle the instruments.  These values represent the estimated amounts we would receive upon sale, taking into consideration current market prices and credit worthiness. See Note 6.

 

29

Impairment of Long-Lived Assets

All long-lived assets, excluding goodwill and intangible assets not subject to amortization, are evaluated for impairment on the basis of undiscounted cash flows whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impaired asset is written down to its estimated fair market value based on the best information available. Estimated fair value is generally measured by discounting future cash flows. Goodwill and intangible assets not subject to amortization are evaluated for impairment annually or sooner if we believemanagement believes such assets may be impaired. An impairment loss is recognized if the carrying amount or, for goodwill, the carrying amount of its reporting unit, is greater than its fair value.

Income Taxes

OurThe Company’s effective income tax rate is based on estimates of taxes which will ultimately be payable. Deferred taxes are recorded to give recognition to temporary differences between the tax bases of assets or liabilities and their reported amounts in the financial statements. Valuation allowances are established to reduce the carrying amounts of deferred tax assets when it is deemed, more likely than not, that the benefit of deferred tax assets will not be realized.

 

Insurance Programs

We maintainThe Company maintains self-insured and deductible programs for certain liability, medical and workers’ compensation exposures.  Accordingly, we accruethe Company accrues for known claims and estimated incurred but not reported claims not otherwise covered by insurance based on actuarial assumptions and historical claims experience.  At May 2, 2020, and April 28, 2018 and April 29, 2017, 27, 2019, other liabilities included accruals of $6.5$5.5 million and $6.9$5.7 million, respectively, for estimated non-current risk retention exposures, of which $5.0$4.3 million and $5.4 million werewas covered by insurance.insurance at both dates and included as a component of non-current other assets.

 

Intangible Assets

Intangible assetsAssets as of May 2, 2020 and April 28, 2018 and April 29, 2017 27, 2019 consisted of non-amortizable acquired trademarks.

 

Inventories

Inventories are stated at the lower of first-in, first-outfirst-in, first-out cost or market. Adjustments, if required, to reduce the cost of inventory to market (net realizable value) are made for estimated excess, obsolete or impaired balances. Inventories at April 28, 2018 May 2, 2020 were comprised of finished goods of $37.6$39.1 million and raw materials of $23.3$24.4 million. Inventories at April 29, 2017 27, 2019 were comprised of finished goods of $35.0$48.7 million and raw materials of $18.4$22.0 million.

 

Marketing Costs

We are involved inThe Company utilizes a variety of marketing programs, including cooperative advertising programs with customers, to advertise and promote our 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, totaled $54.8 million in Fiscal 2020, $55.3 million in Fiscal 2019 and $49.7 million in Fiscal 2018, $44.9 million in Fiscal 2017 and $38.8 million in Fiscal 2016.2018.

New Accounting Pronouncements - adopted – Adopted

In MarchFebruary 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-09, “Compensation-Stock Compensation: Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). The updated guidance simplifies and changes how companies account for certain aspects of share-based payment awards to employees, including accounting for income taxes and forfeitures, as well as classification of certain items in the statement of cash flows. The Company adopted ASU 2016-09 effective April 30, 2017 and elected to apply the cash flow guidance retrospectively; therefore, cash flow from operating activities increased and cash flow from financing activities decreased by $495 thousand and $1.5 million for the twelve months ended April 29, 2017 and April 30, 2016, respectively. The Company also elected to continue to estimate the number of awards that are expected to vest using the forfeiture option. The adoption of ASU 2016-09 reduced the Company’s income tax expense by $886 thousand for the twelve months ended April 28, 2018.

In November 2015, the FASB issued Accounting Standards Update No. 2015-17, “Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17”). ASU 2015-17 requires companies to classify all deferred tax liabilities and assets as noncurrent on the balance sheet. We adopted ASU 2015-17 effective for our fiscal year beginning April 30, 2017, electing to apply it retrospectively to all periods presented. As a result, $3.9 million of deferred taxes was reclassified from current to non-current on the consolidated balance sheet as of April 29, 2017.

In February 2018, the FASB issued Accounting Standards Update 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” (“ASU 2018-02”). This update permits the impact of lower corporate income tax rates related to items classified in accumulated other comprehensive income to be reclassified directly to retained earnings. We adopted ASU 2018-02 effective for our third quarter ended January 27, 2018. We elected not to reclassify the income tax effects of the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings.

New Accounting Pronouncements – not yet adopted

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). ASU 2014-09 requires an entity to recognize revenue in an amount that reflects the consideration it expects to receive in exchange for goods or services. On August 12, 2015, the FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-09 by one yearNo.2017-12, “Derivatives and is effective for our fiscal year beginning April 29, 2018. Management has completed its evaluation and adoption is not expected to have a material impact on our financial position, results of operations or cash flows. Disclosure requirements under the new guidance have been significantly expanded.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, “Leases” (“ASU 2016-02”Hedging (Topic 815). ASU 2016-02 requires the lease rights and obligations arising from lease contracts, including existing and new arrangements, to be recognized as assets and liabilities on the balance sheet. ASU 2016-02 is effective for our fiscal year beginning April 28, 2019. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.

In August 2017, the FASB issued Accounting Standards Update 2017-12, “Targeted: Targeted Improvements to Accounting for Hedge Activities” (“ASU 2017-12”). This amendmentHedging Activities,” which expands strategies that qualify for hedge accounting, changes how many hedging relationships are presented in the financial statements, and simplifies the application of hedge accounting and enables companiesin certain situations. Effective for Fiscal 2020, the Company adopted the amendments to better portrayTopic 815 which did not have a material impact on the economics of risk management activities in their financial statements. ASU 2017-12 is effective for our fiscal year beginning April 28, 2019. We are currently evaluating the potential impact of adopting this guidance on ourCompany’s consolidated financial statements.

 

31
30

Effective for Fiscal 2020, the Company adopted Accounting Standards Update No.2016-02, Leases (Topic 842) using the modified retrospective transition approach by applying the new standard to all leases existing at the date of initial application. Results and disclosure requirements for reporting periods beginning after April 27, 2019 are presented under Topic 842, while prior period amounts have not been adjusted and continue to be reported in accordance with our historical accounting under ASC 840, "Leases." Topic 840.

 

The Company elected the package of practical expedients permitted under the transition guidance, which allowed us to carryforward historical lease classification, the assessment on whether a contract was or contains a lease, and the initial direct costs for any leases that existed prior to April 28, 2019. The Company also elected to combine our lease and non-lease components and to keep leases with an initial term of 12 months or less off the balance sheet and recognize the associated lease payments in the consolidated statements of income on a straight-line basis over the lease term.

Under Topic 842, the Company determines if an arrangement is a lease at inception. Right of use assets (ROU) and lease liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most leases do not provide an implicit rate, the Company’s incremental borrowing rate is used, based on the information available at commencement date, in determining the present value of lease payments. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. The Company assesses these options using a threshold of reasonably certain, which is a high threshold and, therefore, the majority of the Company's leases do not include renewal periods or purchase options in the measurement of the right of use asset and the associated lease liability.  Lease agreements may contain variable costs such as common area maintenance, insurance, real estate taxes or other costs.  Variable lease costs are expensed as incurred.  Lease agreements generally do not contain residual value guarantees or restrictive covenants.  

Property, Plant and Equipment

Property, plant and equipment areis recorded at cost. Additions, replacements and betterments are capitalized, while maintenance and repairs that do not extend the useful life of an asset are expensed as incurred. Depreciation is recorded using the straight-line method over estimated useful lives of 5 to 30 years for buildings and improvements and 3 to 15 years for machinery and equipment. Leasehold improvements are amortized using the straight-line method over the shorter of the remaining lease term or the estimated useful life of the improvement. When assets are retired or otherwise disposed, the cost and accumulated depreciation are removed from the respective accounts and any related gain or loss is recognized.

31

Revenue Recognition

We recognize revenueRevenue is recognized upon delivery to our customers, based on written sales terms that do not allow a right of return except in rare instances.  Our products are typically sold on credit,credit; however smaller direct store delivery accounts aremay be sold on a cash basis. Our credit terms typicallynormally require payment within 30 days of delivery and may allow discounts for early payment.  We estimateThe Company estimates and reservereserves for bad debt exposure based on our experience with past due accounts, collectability and our analysis of customer data.

 

We offer variousVarious sales incentive arrangements are offered to our customers that require customer performance or achievement of certain sales volume targets. Sales incentives are accrued over the period of benefit or expected sales volume.sales. When the incentive is paid in advance, the aggregate incentive is recorded as a prepaid and amortized over the period of benefit. The recognition of these incentives involves the use of judgment related to performance and sales volume estimates that are made based on historical experience and other factors. Sales incentives are accounted for as a reduction of sales and actual amounts ultimately realized may vary from accrued amounts. Such differences are recorded once determined and have historically not been significant. We will adopt ASU 2014-09, Revenue from Contracts with Customers, and its amendments on April 29, 2018 using the modified retrospective approach, with no anticipated material impact to the consolidated financial statements.

 

Segment Reporting

We operateThe 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. We do The Company does not accumulate revenues by product classification and, therefore, it is impractical to present such information.

 

Shipping and Handling Costs

Shipping and handling costs are reported in selling, general and administrative expenses in the accompanying consolidated statements of income. Such costs aggregated $69.8 million in Fiscal 2020, $72.4 million in Fiscal 2019 and $63.3 million in Fiscal 2018, $50.0 million in Fiscal 2017 and $44.6 million in Fiscal 2016.2018. 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.

 

Stock-Based Compensation

Compensation expense for stock-based compensation awards is recognized over the vesting period based on the grant-date fair value estimated using the Black-Scholes model. See Note 8.

Trade Receivables

We record tradeTrade receivables are recorded at net realizable value, which includes an estimated allowance for doubtful accounts. We extendThe Company extends credit based on an evaluation of each customer’s financial condition, generally without requiring collateral. Exposure to credit losses varies by customer principally due to the financial condition of each customer. We monitorThe Company continually monitors our exposure to credit losses and maintainmaintains allowances for anticipated losses based on our experience with past due accounts, collectability and our analysis of customer data. ActivityActual future losses from uncollectible accounts could differ from the Company’s estimate. Changes in the allowance for doubtful accounts was as follows:

 

 

(In thousands)

  

(In thousands)

 
 

Fiscal 2018

  

Fiscal 2017

  

Fiscal 2016

  

Fiscal

2020

  

Fiscal

2019

  

Fiscal

2018

 

Balance at beginning of year

 $468  $484  $330  $516  $452  $468 

Net charge to expense

  34   74   232  893  87  34 

Net charge-off

  (50)  (90)  (78)  (59)  (23)  (50)

Balance at end of year

 $452  $468  $484  $1,350  $516  $452 

 

32

As of May 2, 2020, and April 28, 2018 and April 29, 2017, we did not have any27, 2019, the Company had no customer that comprised more than 10% of trade receivables. No one customer accounted for more than 10% of net sales during any of the last three fiscal years.

 

Use of Estimates

The preparation of our financial statements in conformity with United States generally accepted accounting principlesGAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Although these estimates are based on management’smanagement's knowledge of current events and anticipated future actions, actual results may vary from reported amounts.

 

 

2.      PROPERTY, PLANT AND EQUIPMENT

PROPERTY, PLANT AND EQUIPMENT

 

Property, plant and equipment as of May 2, 2020 and April 28, 2018 and April 29, 2017 27, 2019 consisted of the following:

 

 

(In thousands)

  

(In thousands)

 
 

2018

  

2017

  

2020

  

2019

 

Land

 $9,500  $9,500  $9,835  $9,835 

Buildings and improvements

  56,947   51,157  59,618  58,291 

Machinery and equipment

  194,241   172,257   238,300   222,243 

Total

  260,688   232,914  307,753  290,369 

Less accumulated depreciation

  (174,881)  (167,764)  (187,126)  (179,053)

Property, plant and equipment – net

 $85,807  $65,150  $120,627  $111,316 

 

Depreciation expense was $14.4 million for Fiscal 2020, $12.8 million for Fiscal 2019 and $11.1 million for Fiscal 2018, $10.7 million for Fiscal 2017 and $10.1 million for Fiscal 2016.2018.

 

33


 

3.      ACCRUED LIABILITIES

3.

ACCRUED LIABILITIES

 

Accrued liabilities as of May 2, 2020 and April 28, 2018 and April 29, 2017 27, 2019 consisted of the following:

 

 

(In thousands)

  

(In thousands)

 
 

2018

  

2017

  

2020

  

2019

 

Accrued compensation

 $9,790  $9,967  $11,348  $9,506 

Accrued promotions

  7,011   8,403  9,061  6,449 

Accrued freight

  5,984   2,279  3,443  4,387 
Accrued insurance 2,934  3,780 
Recycling deposits 5,688  1,150 

Other

  6,933   8,368   10,002   5,161 

Total

 $29,718  $29,017  $42,476  $30,433 

 

 

4.      Leases

The Company has entered into various non-cancelable operating lease agreements for certain of our offices, buildings, machinery and equipment expiring at various dates through January 2029.  The Company does not assume renewals in our 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 Fiscal 2020 under Topic 842 was $15.1 million.  The weighted-average remaining lease term and weighted average discount rate of operating leases was 4.3 years and 3.38%, respectively as of May 2, 2020.  Net cash provided by operations was impacted by $12.1 million for operating leases for the year ended May 2, 2020.

The following is a summary of future minimum lease payments and related liabilities for all non-cancelable operating leases as of May 2, 2020:

  (In thousands) 

Fiscal 2021

 $14,206 

Fiscal 2022

  13,276 

Fiscal 2023

  8,975 

Fiscal 2024

  7,361 

Fiscal 2025

  4,475 

Thereafter

  4,101 

Total minimum lease payments including interest

  52,394 

Less: Amounts representing interest

  (3,255)

Present value of minimum lease payments

  49,139 

Less: Current portion of lease liabilities

  (16,980)

Non-Current portion of operating lease liabilities

 $32,159 

Under the prior accounting guidance of ASC 840, operating lease expense was $18.2 million and $13.3 million for Fiscal years 2019 and 2018, respectively. 

Minimum lease payments under non-cancelable operating leases as of April 27, 2019 were as follows:

  (In thousands) 

Fiscal 2020

 $16,105 

Fiscal 2021

  12,084 

Fiscal 2022

  9,894 

Fiscal 2023

  7,741 

Fiscal 2024

  4,510 

Thereafter

  1,703 

Total minimum lease payments

 $52,037 

4.

5.      DEBT

DEBT

 

At April 28, 2018, May 2, 2020, a subsidiary of the Company maintained unsecured revolving credit facilities with banks aggregating $100 million (the “Credit Facilities”)Credit Facilities). The Credit Facilities expire from October 3, 2020 to June 18, 2021 and any borrowings would currently bear interest at .9% above one-monthone-month LIBOR. There were no borrowings outstanding under the Credit Facilities at May 2, 2020 or April 28, 2018 or April 29, 2017. 27, 2019. At April 28, 2018, $2.1May 2, 2020, $3.4 million of the Credit Facilities was reserved for standby letters of credit and $97.9$96.6 million was available for borrowings.

 

The Credit Facilities require the subsidiary to maintain certain financial ratios, including debt to net worth and debt to EBITDA (as defined in the Credit Facilities), and contain other restrictions, none of which are expected to have a material effect on our operations or financial position. At April 28, 2018, we wereMay 2, 2020, the Company was in compliance with all loan covenants.

 

34

5.

6.      CAPITAL STOCK AND TRANSACTIONS WITH RELATED PARTIES

The Board of Directors has authorized the Company to repurchase up to 1.6 million shares of common stock. During Fiscal 2020, the Company purchased an aggregate 154,512 shares for a cost of $6.2 million. As of May 2, 2020, 656,572 shares were purchased under the program and 943,428 shares were available for repurchase.

CAPITAL STOCK AND TRANSACTIONS WITH RELATED PARTIES

 

The Company paid a special cash dividend on Common Stock of $135.2 million ($2.90 per share) on January 29, 2019 and $69.9 million ($1.50 per share) on August 4, 2017 and January 27, 2017.

On January 25, 2013, the Company sold 400,000 shares of Special Series D Preferred Stock, par value $1 per share (“Series D Preferred”) for an aggregate purchase price of $20 million. On April 29, 2016, the Company redeemed the final remaining 120,000 shares of Series D Preferred for an aggregate price of $6 million plus accrued dividends. In addition, the Company has 150,000 shares of Series C Preferred Stock, par value $1 per share, which are held as treasury stock.

The Company is authorized under its stock buyback program to repurchase 1.6 million shares of Common Stock. As of April 28, 2018, 502,060 sharesNo dividends were purchased under the program and 1,097,940 shares were available for purchase. No shares of Common Stock have been repurchased during the last three fiscal years.declared or paid in Fiscal year 2020.

 

The Company is a party to a management agreement with Corporate Management Advisors, Inc. (“CMA”)(CMA), a corporation owned by our Chairman and Chief Executive Officer. This agreement was originated in 1991 for the efficient use of management of two public companies at the time. In 1994,one of those public entities, through a merger, no longer was managed in this manner.

Under the terms of the agreement, CMA provides, subject to the direction and supervision of the Board of Directors of the Company, (i) senior corporate functions (including supervision of the Company’s financial, legal, executive recruitment, internal audit and information systems departments) as well as the services of a Chief Executive Officer and Chief Financial Officer, and (ii) services in connection with acquisitions, dispositions and financings by the Company, including identifying and profiling acquisition candidates, negotiating and structuring potential transactions and arranging financing for any such transaction. CMA, through its personnel, also provides, to the extent possible, the stimulus and creativity to develop an innovative and dynamic persona for the Company, its products and corporate image. In order to fulfill its obligations under the management agreement, CMA employs numerous individuals, whom,who, acting as a unit, provide management, administrative and creative functions for the Company.

CMA and the Company are joint owners of a corporate aircraft and each party agreed to pay certain expenses associated with the use of the aircraft.  During the past three years, the Company's operating costs have averaged approximately $.8 million per year and lease buy-down payments and financing costs have averaged approximately $.8 million per year.  In conjunction with an inquiry by the Securities and Exchange Commission, the Company is in the process of reviewing the aircraft usage to ensure that expenses may be properly allocated.  This review is not expected to have a material effect on the Company's consolidated financial statements, but could result in adjustments between CMA and the Company or modify other disclosures.

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, and further provides that the Compensation and Stock Option Committee and the Board of Directors may from time to time award additional incentive compensation to CMA or its personnel.  The Board of Directors on numerous occasions contemplated incentive compensation and, while shareholder value has increased over $4.8 billion (or 11,000%)to CMA, however, since the inception of this agreement, no incentive compensation has been paid.  We incurred management fees to CMA of $10.0 million for Fiscal 2020, $10.2 million for Fiscal 2019, and $9.8 million for Fiscal 2018, $8.3 million for Fiscal 2017 and $7.0 million for Fiscal 2016.2018.  Included in accounts payable were amounts due CMA of $2.6 million at May 2, 2020 and $2.4 million at April 28, 2018 and $2.1 million at April 29, 2017.27, 2019. 

 

35

 

6.

7.      DERIVATIVE FINANCIAL INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTS

 

From time to time, we enterthe Company enters 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 hedge.hedges. Accordingly, gains or losses attributable to the effective portion of the cash flow hedgehedges are reported in Accumulated Other Comprehensive Income (Loss) (“AOCI”)(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 Consolidated Statements of Income and AOCI relative to the cash flow hedgehedges for Fiscal 2018,2020, Fiscal 20172019 and Fiscal 2016:  2018:

 

  

(In thousands)

 
  

Fiscal

  

Fiscal

  

Fiscal

 
  

2018

  

2017

  

2016

 

Recognized in AOCI-

            

Gain (loss) before income taxes

 $9,498  $(984) $(5,743)

Less income tax provision (benefit)

  3,085   (365)  ( 2,131)

Net

  6,413   (619)  (3,612)

Reclassified from AOCI to cost of sales-

            

Gain (loss) before income taxes

  2,569   (2,749)  (6,987)

Less income tax provision (benefit)

  1,383   (1,020)  (2,592)

Net

  1,186   (1,729)  (4,395)
             

Net change to AOCI

 $5,227  $1,110  $783 

  

(In thousands)

 
  

Fiscal

  

Fiscal

  

Fiscal

 
  

2020

  

2019

  

2018

 

Recognized in AOCI-

            

(Loss) gain before income taxes

 $(9,613) $(6,138) $9,498 

Less income tax (benefit) provision

  (2,299)  (1,468)  3,085 

Net

  (7,314)  (4,670)  6,413 

Reclassified from AOCI to cost of sales-

            

Gain (loss) before income taxes

  (4,786)  2,100   2,569 

Less income tax provision (benefit)

  (1,145)  452   1,383 

Net

  (3,641)  1,648   1,186 
             

Net change to AOCI

 $(3,673) $(6,318) $5,227 

 

As of April 28, 2018, May 2, 2020, the notional amount of our outstanding aluminum swap contracts was $37.5$49.3 million and, assuming no change in the commodity prices, $6.2$6.7 million of unrealized gainloss before tax will be reclassified from AOCI and recognized in earningscost of sales over the next 12 months. See Note 1.

 

As of May 2, 2020, and April 28, 2018, 27, 2019, the fair value of the derivative assetliability was $6.2$6.9 million and $2.0 million, respectively, which was included in prepaid and other assets. Asas a component of April 29, 2017, the fair value of the derivative asset, derivative liability and derivative long-term liability was $602 thousand, $848 thousand and $476 thousand, which was included in prepaid and other assets, accrued liabilities and other liabilities, respectively.liabilities. 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.

 

 

7.

8.      INCOME TAXES

INCOME TAXES

 

The provision (benefit) for income taxes consisted of the following:

 

 

(In thousands)

  

(In thousands)

 
 

Fiscal

  

Fiscal

  

Fiscal

  

Fiscal

 

Fiscal

 

Fiscal

 
 

2018

  

2017

  

2016

  

2020

  

2019

  

2018

 

Current

 $55,039  $54,422  $32,806  $40,647  $39,673  $55,039 

Deferred

  676   1,358   (1,299)  (1,164)  3,351   676 

Total

 $55,715  $55,780  $31,507  $39,483  $43,024  $55,715 

 

36


Deferred taxes are recorded to give recognition to temporary differences between the tax bases of assets or liabilities and their reported amounts in the financial statements. Valuation allowances are established to reduce the carrying amounts of deferred tax assets when it is deemed more likely than not that the benefit of deferred tax assets will not be realized. Deferred tax assets and liabilities as of May 2, 2020 and April 28, 2018 and April 29, 2017 27, 2019 consisted of the following:

 

 

(In thousands)

  

(In thousands)

 
 

2018

  

2017

  

2020

  

2019

 

Deferred tax assets:

             

Accrued expenses and other

 $2,900  $4,740  $4,930  $3,705 

Inventory and amortizable assets

  331   538   565   265 

Total deferred tax assets

  3,231   5,278   5,495   3,970 

Deferred tax liabilities:

             

Property

  14,858   15,157  18,872  18,505 

Intangibles and other

  2,875   2,208   1,446   1,452 

Total deferred tax liabilities

  17,733   17,365   20,318   19,957 

Net deferred tax liabilities

 $14,502  $12,087  $14,823  $15,987 

 

The reconciliation of the statutory federal income tax rate to our effective tax rate is as follows:

 

 

Fiscal

  

Fiscal

  

Fiscal

  

Fiscal

 

Fiscal

 

Fiscal

 
 

2018

  

2017

  

2016

  

2020

  

2019

  

2018

 

Statutory federal income tax rate

  30.4%  35.0%  35.0% 21.0% 21.0% 30.4%

State income taxes, net of federal benefit

  2.4   2.2   2.2  2.9  2.9  2.4 

Domestic manufacturing deduction benefit

  (2.4)  (3.0)  (3.0) -  -  (2.4)

Remeasurement of deferred taxes

  (2.9)  -   - 

Re-measurement of deferred taxes

 -  -  (2.9)

Other differences

  (.4)  .1   (.2)  (.6)  (.5)  (.4)

Effective income tax rate

  27.1%  34.3%  34.0%  23.3%  23.4%  27.1%

 

As of April 28, 2018, May 2, 2020, the gross amount of unrecognized tax benefits was $1.7$2.0 million and $191 thousand$91,000 was recognized as a tax expense in Fiscal 2018.2020. If we werethe Company is to prevail on all uncertain tax positions, the net effect would be to reduce our tax expense by approximately $1.4$1.6 million. A reconciliation of the changes in the gross amount of unrecognized tax benefits, which amounts are included in other liabilities in the accompanying consolidated balance sheets, is as follows:

 

 

(In thousands)

  

(In thousands)

 
 

Fiscal

  

Fiscal

  

Fiscal

  

Fiscal

 

Fiscal

 

Fiscal

 
 

2018

  

2017

  

2016

  

2020

  

2019

  

2018

 

Beginning balance

 $1,743  $1,678  $1,801  $1,868  $1,733  $1,743 

Increases due to current period tax positions

  204   150   145  120  139  204 

Decreases due to lapse of statute of limitations and audit resolutions

  (214)  (85)  (268)  (14)  (4)  (214)

Ending balance

 $1,733  $1,743  $1,678  $1,974  $1,868  $1,733 

 

We recognize accruedAccrued interest and penalties related to unrecognized tax benefits inare recognized as a component of income tax expense. As of April 28, 2018, May 2, 2020, unrecognized tax benefits included accrued interest of $238 thousand.$267,000, of which approximately $15,000 was recognized as tax expense in Fiscal 2020.

 

37


On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law. The Tax Act makesmade changes to the U.S. tax code, including reducing the U.S. federal tax rate from 35% to 21% effective January 1, 2018. The phasing in of the lower corporate income tax rate results in a blended federal statutory rate of 30.4% for our fiscal Fiscal 2018, compared with the previous 35% rate. The federal statutory tax rate will be reduced to 21% in subsequent fiscal years. Included in the effective tax rate for Fiscal 2018 is a one-timeone-time adjustment reducing income tax expense to remeasure previous deferred tax liabilities of $4.3 million.

 

We file annualAnnual income tax returns are filed in the United States and in various state and local jurisdictions. A number of years may elapse before an uncertain tax position, for which we havethe Company has unrecognized tax benefits, isare resolved. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, we believeThe Company believes that our unrecognized tax benefits reflect the most probable outcome. We adjustThe Company adjusts these unrecognized tax benefits, as well as the related interest, in light of changing facts and circumstances. The resolution of any particular uncertain tax position could require the use of cash and an adjustment to our provision for income taxes in the period of resolution. Federal income tax returns for fiscal years subsequent to 20152016 are subject to examination. Generally, the income tax returns for the various state jurisdictions are subject to examination for fiscal years ending after fiscal 2011.2013.

 

 

9.      LEGAL PROCEEDINGS

The Company has been named in certain legal proceedings, including those containing derivative and class action allegations.  One complaint alleges the Company’s LaCroix branded products contain synthetic ingredients and therefore violate state consumer protection statutes and other laws.  A similar consumer complaint was voluntarily dismissed during Fiscal 2020 along with a full written retraction of all claims by the plaintiff and counsel. The Company is vigorously defending all legal proceedings and believes litigation will not have a material adverse effect on the Company’s financial position, cash flows or results of operations.  

8.

10.      STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

 

Our stock-based compensation program is a broad-based program designed to attract and retain personnel while also aligning participant’sparticipants’ interests with the interests of the shareholders.

 

The 1991 Omnibus Incentive Plan (the “Omnibus Plan”)Omnibus Plan) provides for compensatory awards consisting of (i) stock options or stock awards for up to 4,800,000 shares of common stock, (ii) stock appreciation rights, dividend equivalents, other stock-based awards in amounts up to 4,800,000 shares of common stock and (iii) performance awards consisting of any combination of the above. The Omnibus Plan is designed to provide an incentive to officers and certain other key employees and consultants by making available to them an opportunity to acquire a proprietary interest or to increase such interest in National Beverage. The number of shares or options which may be issued under stock-based awards to an individual is limited to 1,680,000 during any year. Awards may be granted for no cash consideration or such minimal cash consideration as may be required by law. Options generally have an exercise price equal to the fair market value of our common stock on the date of grant, vest over a five-yearfive-year period and expire after ten years.

 

38

The Special Stock Option Plan provides for the issuance of stock options to purchase up to an aggregate of 1,800,000 shares of common stock. Options may be granted for such consideration as determined by the Board of Directors. The vesting schedule and exercise price of these options are tied to the recipient’s ownership level of common stock and the terms generally allow for the reduction in exercise price upon each vesting period. Also, the Board of Directors authorized the issuance of options to purchase up to 50,000 shares of common stock to be issued at the direction of the Chairman.

 

The Key Employee Equity Partnership Program (“KEEP Program”)(KEEP Program) provides for the granting of stock options to purchase up to 240,000 shares of common stock to key employees, consultants, directors and officers. Participants who purchase shares of stock in the open market receive grants of stock options equal to 50% of the number of shares purchased, up to a maximum of 6,000 shares in any two-yeartwo-year period. Options under the KEEP Program are forfeited in the event of the sale of shares used to acquire such options. Options are granted at an initial exercise price of 60% of the purchase price paid for the shares acquired and the exercise price reduces to the stock par value at the end of the six-yearsix-year vesting period.

 

We accountStock options are accounted for stock options under the fair value method of accounting using a Black-Scholes valuation model to estimate the stock option fair value at date of grant. The fair value of stock options is amortized to expense over the vesting period. Stock options for 9,000 shares were granted werein Fiscal 2019 and 500 shares in Fiscal 2018, no shares in2018.No stock options were issued during Fiscal 2017 and 3,500 shares in Fiscal 2016.2020. The weighted average Black-Scholes fair value assumptions for stock options granted are as follows: weighted average expected life of 8.0 years for Fiscal 20182019 and 8.0 years for Fiscal 2016;2018; weighted average expected volatility of 21.7% for Fiscal 2019 and 23.8% for Fiscal 2018 and 29.0% for Fiscal 2016;2018; weighted average risk free interest rates of 2.6% for Fiscal 2019 and 2.4% for Fiscal 2018 and 2.1% for Fiscal 2016;2018; and expected dividend yield of 1.6% for Fiscal 20182019 and 3.3%1.6% for Fiscal 2016.2018.  The expected life of stock options was estimated based on historical experience.  The expected volatility was estimated based on historical stock prices for a period consistent with the expected life of stock options.  The risk free interest rate was based on the U.S. Treasury constant maturity interest rate whose term is consistent with the expected life of stock options. There were no forfeitures estimated forin Fiscal 20182019 and Fiscal 2016.2018.

 

The following is a summary of stock option activity for Fiscal 2018:2020:

 

 

Number

of Shares

  

 

Price (a)

  

Number

of Shares

 

Price (a)

 

Options outstanding, beginning of year

  383,595  $11.47  322,445  $11.14 

Granted

  500   29.61  -  - 

Exercised

  (34,650)  16.15  (125,100) 5.92 

Cancelled

  (4,500)  17.59   (2,800) 17.59 

Options outstanding, end of year

  344,945   10.84   194,545  14.01 

Options exercisable, end of year

  209,579   8.49   183,145  13.00 

(a) Weighted average exercise price.

 

39

Stock-based compensation expense was $161 thousand$126,000 for Fiscal 2018, $208 thousand2020, $251,000 for Fiscal 20172019, and $228 thousand$161,000 for Fiscal 2016.2018. The total fair value of shares vested was $140 thousand$768,000 for Fiscal 2018, $362 thousand2020, $127,000 for Fiscal 20172019, and $652 thousand$140,000 for Fiscal 2016. 2018.

The total intrinsic value for stock options exercised was $4.9 million for Fiscal 2020, $2.2 million for Fiscal 2019,$3.0 million for Fiscal 2018, $1.5 million for Fiscal 2017 and $5.2 million for Fiscal 2016.2018. Net cash proceeds from the exercise of stock options were $560 thousand$740,000 for Fiscal 2018, $365 thousand2020, $456,000 for Fiscal 2017 and $848 thousand2019, $560,000 for Fiscal 2016.2018. Stock based income tax benefits aggregated $886 thousand$974,000 for Fiscal 2018, $495 thousand2020, $443,000 for Fiscal 20172019, and $1.5 million$886,000 for Fiscal 2016.2018. The weighted average fair value for stock options granted was $44.50$63.71 for Fiscal 2018.2020.

 

As of April 28, 2018, May 2, 2020, unrecognized compensation expense related to the unvested portion of our stock options was $268 thousand,$465,000, which is expected to be recognized over a weighted average period of 3.34.5 years. The weighted average remaining contractual term and the aggregate intrinsic value for options outstanding as of April 28, 2018 May 2, 2020 was 4.43.7 years and $27.3$7.0 million, respectively. The weighted average remaining contractual term and the aggregate intrinsic value for options exercisable as of April 28, 2018 27, 2019 was 3.53.3 years and $17$14.9 million, respectively.

 

39

11.PENSION PLANS

We have a stock purchase plan which provides for the purchase of up to 1,536,000 shares of common stock by employees who (i) have been employed for at least two years, (ii) are not part-time employees and (iii) are not owners of five percent or more of our common stock. As of April 28, 2018, no shares have been issued under the plan.

9.

PENSION PLANS

 

The Company contributes to certain pension plans under collective bargaining agreements and to a discretionary profit sharing plan. Annual contributions (including contributions to multi-employer plans reflected below) were $3.6 million for Fiscal 2020, $3.8 million for Fiscal 2019, and $3.4 million for Fiscal 2018, $3.1 million for Fiscal 2017 and $2.9 million for Fiscal 2016.2018.

 

The Company participates in three multi-employer defined benefit pension plans with respect to certain collective bargaining agreements. If the Company chooses to stop participating in the multi-employer plan or if other employers choose to withdraw to the extent that a mass withdrawal occurs, the Company could be required to pay the plan a withdrawal liability based on the underfunded status of the plan. During Fiscal 2017, a subsidiary of the Company reached a settlement with respect to a notification of withdrawal liability by one of the multi-employer pension plans not considered significant. The settlement did not have a material effect on its financial position or results of operations.

 

Summarized below is certain information regarding the Company’s participation in significant multi-employer pension plans including the financial improvement plan or rehabilitation plan status (“FIP/RP Status”) and the zone status under the Pension Protection Act (“PPA”). The most recent PPA zone status available in Fiscal 20182020 and Fiscal 20172019 is for the plans’ years ending December 31, 20162018 and 2015,2017, respectively.

 

 

 

PPA Zone Status

 

 

 

 

 

 

 

Fiscal

 

Fiscal

 

 

 

Surcharge

 

Pension Fund

 

2018

 

2017

 

FIP/RP Status

 

Imposed

 

Central States, Southeast and Southwest Areas Pension Plan (EIN no. 36-6044243) (the “CSSS Fund”)

 

Red

 

Red

 

Implemented

 

Yes

 

Western Conference of Teamsters Pension Trust Fund (EIN no. 91-6145047) (the “WCT Fund”)

 

Green

 

Green

 

Not applicable

 

No

 
PPA Zone Status
Pension Fund

Fiscal

2020

Fiscal

2019

FIP/RP Status

Surcharge

Imposed

Central States, Southeast and Southwest Areas Pension Plan (EIN no.36-6044243) (the CSSS Fund)

RedRedImplementedYes
Western Conference of Teamsters Pension Trust Fund (EIN no.91-6145047) (the WCT Fund)GreenGreenNot applicableNo

 

40

For the plan years ended December 31,2018 and December 31, 2016 and December 31, 2015, 2017, the Company was not listed in the Form 5500 Annual Returns as providing more than 5% of the total contributions for the above plans. The collective bargaining agreements for employees in the CSSS Fund and the WCT Fund expire on October 18, 2021 and May 14, 2021, respectively.

 

The Company’s contributions for all multi-employer pension plans for the last three fiscal Fiscal years are as follows:follow:

 

 

(In thousands)

  

(In thousands)

 
 

Fiscal

  

Fiscal

  

Fiscal

  

Fiscal

 

Fiscal

 

Fiscal

 

Pension Fund

 

2018

  

2017

  

2016

  

2020

  

2019

  

2018

 

CSSS Fund

 $1,370  $1,262  $1,172  $1,424  $1,465  $1,370 
WCT Fund  619   477   485  799  769  619 

Other multi-employer pension funds

  228   201   448   185   222   228 

Total

 $2,217  $1,940  $2,105  $2,408  $2,456  $2,217 

  

 

10.

COMMITMENTS AND CONTINGENCIES

We lease buildings, machinery and equipment under various non-cancelable operating lease agreements expiring at various dates through 2029. Certain of these leases contain scheduled rent increases and/or renewal options. Contractual rent increases are taken into account when calculating the minimum lease payment and recognized on a straight-line basis over the lease term. Rent expense under operating lease agreements totaled $13.3 million for Fiscal 2018, $12.0 million for Fiscal 2017 and $9.2 million for Fiscal 2016.12.COMMITMENTS AND CONTINGENCIES

 

Our minimum lease payments under non-cancelable operating leases as of April 28, 2018 were as follows:   

  

(In thousands)

 

Fiscal 2019

 $9,182 

Fiscal 2020

  7,615 

Fiscal 2021

  5,241 

Fiscal 2022

  3,223 

Fiscal 2023

  1,656 

Thereafter

  1,531 

Total minimum lease payments

 $28,448 

We enterThe Company enters into various agreements with suppliers for the purchase of raw materials, the terms of which may include variable or fixed pricing and minimum purchase quantities. As of April 28, 2018, weMay 2, 2020 the Company had purchase commitments for raw materials of $11.2$22.6 million through 2022.2023.

 

As of April 28, 2018, weMay 2, 2020, the Company had purchase commitments for plant and equipment of $4.7$5.1 million for Fiscal 2019.

From timeanticipated to time, we are a party to various litigation matters and claims arisingbe completed in the ordinary course of business. We do not expect the ultimate disposition of such matters to have a material adverse effect on our consolidated financial position or results of operations.2021 fiscal year. 

 

41

 

11.

QUARTERLY FINANCIAL DATA (UNAUDITED)

13.      QUARTERLY FINANCIAL DATA (UNAUDITED)

 

 

(In thousands, except per share amounts)

  

(In thousands, except per share amounts)

 
 

First

Quarter

  

Second

Quarter

  

Third

Quarter

  

Fourth

Quarter

  

First

Quarter

  

Second

Quarter

  

Third

Quarter

  

Fourth

Quarter

 

Fiscal 2018

                

Fiscal 2020

                

Net sales

 $259,832  $244,119  $227,477  $244,306  $263,568  $251,611  $222,814  $262,401 

Gross profit

  104,503   96,080   91,193   99,359  96,574  92,814  82,095  98,657 

Net income

  38,272   33,980   41,080   36,442  34,542  32,654  26,563  36,213 

Earnings per common share – basic

 $.82  $.73  $.88  $.78  $.74  $.70  $.57  $.78 

Earnings per common share – diluted

 $.82  $.72  $.88  $.78  $.74  $.70  $.57  $.77 
                

Fiscal 2017

                

Net sales

 $217,108  $203,180  $194,564  $212,066 

Gross profit

  85,494   78,717   75,920   85,946 

Net income

  28,995   24,604   24,285   29,161 

Earnings per common share – basic

 $.62  $.53  $.52  $.63 

Earnings per common share – diluted

 $.62  $.53  $.52  $.62 

Fiscal 2019

                

Net sales

 $292,590  $260,709  $220,892  $239,914 

Gross profit

  115,694   103,524   80,554   84,578 

Net income

  48,830   41,077   24,811   26,135 

Earnings per common share – basic

 $1.05  $.88  $.53  $.56 

Earnings per common share – diluted

 $1.04  $.88  $.53  $.56 

 

42


 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMReport of Independent Registered Public Accounting Firm

 

 

To the Shareholders and the Board of Directors and Shareholders of

National Beverage Corp.

 

Opinions on the Financial Statements and Internal Control Overover Financial Reporting

We have audited the accompanying consolidated balance sheets of National Beverage Corp. (the Company) as of April 28, 2018May 2, 2020 and April 29, 2017,27, 2019, and the related consolidated statements of income, comprehensive income, stockholders'shareholders' equity and cash flows for each of the three years in the period ended April 28, 2018,May 2, 2020, and the related notes (collectively, the financial statements). We also have audited the Company’s internal control over financial reporting as of April 28, 2018,May 2, 2020, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of April 28, 2018May 2, 2020 and April 29, 2017,27, 2019, and the results of theirits operations and theirits cash flows for each of the years in the three-year period ended April 28, 2018,May 2, 2020, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of April 28, 2018,May 2, 2020, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

 

Basis for Opinions

The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's financial statements and an opinion on the company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

 

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

 

 

Definition and Limitations of Internal Control Overover Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Self-Insurance Accruals

As described in Note 1 to the consolidated financial statements, the Company maintains self-insured and deductible programs for workers’ compensation exposures. The Company accrues for known claims and estimated incurred but not reported claims not otherwise covered by insurance based on actuarial assumptions and historical claims experience. While a third party actuary is employed to advise the Company, estimating workers’ compensation exposure is inherently uncertain, as estimates are generally derived using a variety of actuarial estimation techniques that are dependent upon assumptions and expectations about future events, many of which are difficult to quantify. As of May 2, 2020 and April 27, 2019, other liabilities included accruals of $5.5 million and $5.7 million, respectively, for estimated non-current risk retention exposures, of which $4.3 million was covered by insurance at both dates.

We identified the evaluation of the Company’s self-insurance accruals as a critical audit matter due to the significant judgments made by management in estimating the workers’ compensation liability. Auditing management’s judgments used in estimating the value of the workers’ compensation liability involved a high degree of auditor judgment and increased audit effort, including the use of our actuarial specialist.

Our audit procedures related to the Company’s self-insurance accrual assessment included the following, among others:

We obtained an understanding of the relevant controls related to the Company’s workers’ compensation liability, and tested such controls for design and operating effectiveness, including controls related to management’s review of the significant assumptions .

We tested the underlying data, including historical claims and payroll data, which served as the basis for the assumptions used by the third party actuary in the actuarial analysis, to test that the inputs to the actuarial estimates were accurate and complete.

We compared payments made in the current year for prior year claims to prior year recorded reserves.

With the assistance of our actuarial specialist, we evaluated the propriety of the reserving techniques utilized for the workers’ compensation exposures.

/s/ RSM US LLP

 

We have served as the Company's auditor since 2006.

 

Fort Lauderdale, Florida

June 27, 2018July 1, 2020

 

 

ITEM 9.        CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

Not applicable.

 

 

ITEM 9A.CONTROLS AND PROCEDURES

CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

As of the end of the period covered by this Annual Report on Form 10-K, 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, as amended (the “Exchange Act”)Exchange Act)). 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.

 

Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on that evaluation, our management concluded that our internal control over financial reporting was effective as of April 28, 2018.May 2, 2020.

 

Management recognizes that there are inherent limitations in the effectiveness of any internal control over financial reporting, including the possibility of human error and the circumvention or overriding of internal control. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal control may vary over time.

 

RSM US LLP, an independent registered public accounting firm, has audited the consolidated financial statements included in this Annual Report on Form 10-K and, as part of their audit, has issued their report, included herein, on the effectiveness of our internal control over financial reporting.

 

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended April 28, 2018May 2, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

ITEM 9B.     OTHER INFORMATION

 

Not applicable.

 

PART III

 

ITEM 10.      DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

The information required by Item 10 will be included under the captions “Election of Directors”, “Information as to Nominees and Other Directors”, “Information Regarding Meetings and Committees of the Board” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s 20182020 Proxy Statement and is incorporated herein by reference.

 

The following table sets forth certain information with respect to the officers of the Registrant as of April 28, 2018:May 2, 2020:

 

Name AgePosition with Company
   

Nick A. Caporella(1)

82

84

Chairman of the Board and

Chief Executive Officer

Joseph G. Caporella(2)

58

59

President

George R. Bracken(3)

72

75

Executive Vice President – Finance

Gregory P. Cook(4)

60

Vice President – Controller and

Chief Accounting Officer

 

 

(1)

Mr. Nick A. Caporella has served as Chairman of the Board, Chief Executive Officer and Director since the Company’s inception in 1985. Also, he serves as Chairman of the Nominating Committee. Since 1992, Mr. Caporella’s services have been provided to the Company by Corporate Management Advisors, Inc., a company he owns.

(2)

Mr. Joseph G. Caporella has served as President since September 2002 and, prior to that, as Executive Vice President and Secretary since January 1991. Also, he has served as a Director since January 1987. Joseph G. Caporella is the son of Nick A. Caporella.

(3)

Mr. George R. Bracken has served as Executive Vice President - Finance since July 2012. Previously, he served as Senior Vice President – Finance from October 2000 to July 2012 and Vice President and Treasurer from October 1996 to October 2000. Since 1992, Mr. Bracken’s services have been provided to the Company by Corporate Management Advisors, Inc., a company he owns.

(2)

Mr. Joseph G. Caporella has served as President since September 2002 and, prior to that, as Executive Vice President and Secretary since January 1991. Also, he has served as a Director since January 1987. Joseph G. Caporella is the son of Nick A. Caporella.

(3)

Mr. George R. Bracken has served as Executive Vice President - Finance since July 2012. Previously, he served as Senior Vice President – Finance from October 2000 to July 2012 and Vice President and Treasurer from October 1996 to October 2000. Since 1992, Mr. Bracken’s services have been provided to the Company by Corporate Management Advisors, Inc.

(4)

Mr. Gregory P. Cook has served as Vice President – Controller and Chief Accounting Officer since July 15, 2014. Previously, he served as Vice-President – Controller since September 2012 and, prior to that date, as Controller since August 2007.

 

All officers serve until their successors are chosen and may be removed at any time by the Board of Directors. Officers are normally appointed each year at the first meeting of the Board of Directors after the annual meeting of shareholders.

 

 

ITEM 11.     EXECUTIVE COMPENSATION

 

The information required by Item 11 will be included under the captions “Executive Compensation and Other Information” and “Compensation Committee Interlocks and Insider Participation” in the Company’s 20182020 Proxy Statement and is incorporated herein by reference.

 

ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The information required by Item 12 will be included under the captions “Security Ownership” and “Equity Compensation Plan Information” in the Company’s 20182020 Proxy Statement and is incorporated herein by reference.

 

ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTION, AND DIRECTOR INDEPENDENCE

 

The information required by Item 13 will be included under the captions “Certain Relationships and Related Party Transactions” and “Information Regarding Meetings and Committees of the Board” in the Company’s 20182020 Proxy Statement and is incorporated herein by reference.

 

ITEM 14.     PRINCIPAL ACCOUNTING FEES AND SERVICES

 

The information required by Item 14 will be included under the caption “Independent Auditors” in the Company’s 20182020 Proxy Statement and is incorporated herein by reference.

 

PART IV

 

ITEM 15.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

(a)  The following documents are filed as part of this report: Page
 

1.

Financial Statements

 

Consolidated Balance Sheets

24

 

Consolidated Statements of Income

25

 

Consolidated Statements of Comprehensive Income

26

 

Consolidated Statements of Shareholders’ Equity

27

 

Consolidated Statements of Cash Flows

28

 

Notes to Consolidated Financial Statements

29

 

Report of Independent Registered Public Accounting Firm

43

 

2.

Financial Statement Schedules

NA
 

Not applicable

 

3.

Exhibits

 

See Exhibit Index which follows.

 

 

EXHIBIT INDEX
                                             

                                                              

Exhibit

No.

 Description
   

     3.1

 

Restated Certificate of Incorporation(1)

   

     3.2

 

Amended and Restated By-Laws(1)(2)

   

     3.3

 

Certificate of Designation of the Special Series D Preferred Stock of the Company(2)(3)

   
4

Description of the Registrant's Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934(16)

10.1

 

Management Agreement between the Company and Corporate Management Advisors, Inc.(3)(4) *

   

10.2

 

National Beverage Corp. Investment and Profit Sharing Plan(1)(5) *

   

10.3

 

National Beverage Corp. 1991 Omnibus Incentive Plan(3)(4) *

   

10.4

 

National Beverage Corp. 1991 Stock Purchase Plan(3)(4) *

   

10.5

 

Amendment No. 1 to the National Beverage Corp. Omnibus Incentive Plan(4)(6) *

   

10.6

 

National Beverage Corp. Special Stock Option Plan(5)(7) *

   

10.7

 

Amendment No. 2 to the National Beverage Corp. Omnibus Incentive Plan(6)(8) *

   

10.8

 

National Beverage Corp. Key Employee Equity Partnership Program(6)(8) *

   

10.9

 

Second Amended and Restated Credit Agreement, dated June 30, 2008, between NewBevCo, Inc. and lender therein(7)(9)

   

10.10

 

Amendment to National Beverage Corp. Special Stock Option Plan(8)(10) *

   

10.11

 

Amendment to National Beverage Corp. Key Employee Equity Partnership Program(8)(10)*

   

10.12

 

First Amendment to Second Amended and Restated Credit Agreement, dated January 16, 2013, between NewBevCo, Inc. and lender therein(9)(11)

   

10.13

 

Credit Agreement, dated June 18, 2015, between NewBevCo, Inc. and lender therein(10)(12)

   
10.14 Second Amendment to Second Amended and Restated Credit Agreement, dated  July 7, 2015, between NewBevCo, Inc. and lender therein(10)(12)
   

10.15

 

Third Amendment to Second Amended and Restated Credit Agreement, dated  June 29, 2017, between NewBevCo, Inc. and lender therein(11)(13)

   

10.16

 

Amended and Restated Credit Agreement dated October 4, 2017 between NewBevCo. and lender therein (12)(14)

 

 

Exhibit

No.

 

Description

Description

   

10.17

 

Credit Facility Renewal Agreement, dated April 26, 2018 between NewBevCo and lender therein (13)

21

Subsidiaries of Registrant(13)(15)

   
23  21 Subsidiaries of Registrant (16)

23

Consent of Independent Registered Public Accounting Firm(13) (16)

   

31.1

 

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(13)2002(16)

   

31.2

 

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(13)(16)

   
32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(13)(16)
   
32.2 Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(13)(16)
   

101

 

The following financial information from National Beverage Corp.’s Annual Report on Form 10-K for the fiscal year ended April 28, 2018May 2, 2020 is formatted in XBRL (eXtensibleiXBRL (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).


 

*

Indicates management contract or compensatory plan or arrangement.

*(1)

Indicates management contract or compensatory plan or arrangement.Previously filed with the Securities and Exchange Commission as an exhibit to Schedule 14C Information Statement dated June 26, 2018 and is incorporated herein by reference.

(1)(2)

Previously filed with the Securities and Exchange Commission as an exhibit to Form 8-K Current Report dated July 23, 2018 and is incorporated herein by reference.

(3)

Previously filed with the Securities and Exchange Commission as an exhibit to Form 8-K Current Report dated January 31, 2013 and is incorporated herein by reference.

(4)

Previously filed with the Securities and Exchange Commission as an exhibit to Amendment No. 1 to Form S-1 Registration Statement (File No. 33-38986) on July 26, 1991 and is incorporated herein by reference.

(5)

Previously filed with the Securities and Exchange Commission as an exhibit to the Form S-1 Registration Statement (File No. 33-38986) on February 19, 1991 and is incorporated herein by reference.reference

(2)

Previously filed with the Securities and Exchange Commission as an exhibit to Form 8-K Current Report dated January 31, 2013 and is incorporated herein by reference.

(3)

Previously filed with the Securities and Exchange Commission as an exhibit to Amendment No. 1 to Form S-1 Registration Statement (File No. 33-38986) on July 26, 1991 and is incorporated herein by reference.

(4)

Previously filed with the Securities and Exchange Commission as an exhibit to Annual Report on Form 10-K for the fiscal year ended April 27, 1996 and is incorporated herein by reference.

(5)

Previously filed with the Securities and Exchange Commission as an exhibit to Registration Statement on Form S-8 (File No. 33-95308) on August 1, 1995 and is incorporated herein by reference.

(6)

Previously filed with the Securities and Exchange Commission as an exhibit to Annual Report on Form 10-K for the fiscal year ended May 3, 1997April 27, 1996 and is incorporated herein by reference.

(7)

Previously filed with the Securities and Exchange Commission as an exhibit to Quarterly ReportRegistration Statement on Form 10-Q for the fiscal period ended January 29, 2011S-8 (File No. 33-95308) on August 1, 1995 and is incorporated herein by reference.

(8)

Previously filed with the Securities and Exchange Commission as an exhibit to QuarterlyAnnual Report on Form 10-Q10-K for the fiscal periodyear ended January 31, 2009May 3, 1997 and is incorporated herein by reference.

(9)

Previously filed with the Securities and Exchange Commission as an exhibit to Quarterly Report on Form 10-Q for the fiscal period ended January 26, 201329, 2011 and is incorporated herein by reference.

(10)

Previously filed with the Securities and Exchange Commission as an exhibit to Quarterly Report on Form 10-Q for the fiscal period ended August 1, 2015January 31, 2009 and is incorporated herein by reference.

(11)

Previously filed with the Securities and Exchange Commission as an exhibit to AnnualQuarterly Report on Form 10-K10-Q for the fiscal yearperiod ended April 29, 2017January 26, 2013 and is incorporated herein by reference.

(12)

Previously filed with the Securities and Exchange Commission as an exhibit to Quarterly Report on Form 10-Q for the fiscal period ended October 28, 2017August 1, 2015 and is incorporated herein by reference.

(13)

Filed herewith.Previously filed with the Securities and Exchange Commission as an exhibit to Annual Report on Form 10-K for the fiscal year ended April 29, 2017 and is incorporated herein by reference.

(14)

Previously filed with the Securities and Exchange Commission as an exhibit to Quarterly Report on Form 10-Q for the fiscal period ended October 28, 2017 and is incorporated herein by reference.

(15)

Previously filed with the Securities and Exchange Commission as an exhibit to Annual Report on Form 10-K for the fiscal year ended April 28, 2018 and is incorporated herein by reference.

(16)

Filed herewith

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) 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.

 

NATIONAL BEVERAGE CORP. 

By:

/s/ Gregory P. Cook

By:

Gregory P. Cook/s/ George R. Bracken

George R. Bracken

Executive Vice President – Finance

  Vice President – Controller and

 Chief Accounting Officer

(Principal Financial Officer) 
  Date: July 1, 2020 
Date: June 27, 2018

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on June 27, 2018.

July 1, 2020.

 

/s/ Nick A. Caporella  /s/ Cecil D. Conlee 

Nick A. Caporella

 

Cecil D. Conlee

 

Chairman of the Board and

 

Director

 

Chief Executive Officer

 

 

 

 

/s/ Joseph G. Caporella

 

/s/ Samuel C. Hathorn, Jr.

 

Joseph G. Caporella

 

Samuel C. Hathorn, Jr.

 

President and Director

 

Director

 

 

 

/s/ George R. Bracken

 

/s/ Stanley M. Sheridan

 

George R. Bracken

 

Stanley M. Sheridan

 

Executive Vice President – Finance

 

Director

 

(Principal Financial Officer)

 

 

/s/ Gregory P. Cook

Gregory P. Cook

Vice President – Controller and

Chief Accounting Officer

 

50