6. LEASES

The Company has entered into various non-cancelable operating lease agreements for certain of our offices, buildings, machinery and equipment expiringwhich expire at various dates through January 2030. The Company does not assume renewals in the determination of the lease term unless the renewals are deemed to be reasonably assured at lease commencement. Lease agreements generally do not contain material residual value guarantees or material restrictive covenants. Operating lease cost for the three months ended July 30,January 28, 2023 and January 29, 2022 and July 31, 2021 was $3.4$3.6 million and $3.6$3.5 million, respectively. Operating lease cost was $10.7 million for the nine months ended January 28, 2023 and $11.1 million for the nine months ended January 29, 2022. As of July 30, 2022,January 28, 2023, the weighted-average remaining lease term and weighted average discount rate of operating leases was 3.94.4 years and 3.06%3.03%, respectively. As of April 30, 2022, the weighted-average remaining lease term and weighted average discount rate of operating leases was 4.0 years and 3.08%, respectively. Cash payments were $3.4$3.7 million for operating leases for the three months ended July 30, 2022January 28, 2023 and $3.6January 29, 2022. Cash payments totaled $10.8 million for the threenine months ended July 31, 2021.January 28, 2023 and $11.3 million for the nine months ended January 29, 2022.

The following is a summary of future minimum lease payments and related liabilities for all non-cancelable operating leases as of July 30, 2022:January 28, 2023:

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

National Beverage Corp. innovatively refreshes America with a distinctive portfolio of sparkling waters, juices, energy drinks (Power+ Brands) and, to a lesser extent, Carbonated Soft Drinks. We believe our creative product designs, innovative packaging and imaginative flavors, along with our corporate culture and philosophy, make National Beverage unique as a stand-alone entity in the beverage industry.

Our strategy seeks the profitable growth of our products by (i) developing healthier beverages in response to the global shift in consumer buying habits and tailoring our beverage portfolio to the preferences of a diverse mix of ‘crossover consumers’ – a growing group desiring a healthier alternative to artificially sweetened and high-caloric beverages; (ii) emphasizing unique flavor development and variety throughout our brands that appeal to multiple demographic groups; (iii) maintaining points of difference through innovative marketing, packaging and consumer engagement and (iv) responding faster and more creatively to changing consumer trends than larger competitors who are burdened by legacy production and distribution complexity and costs.

The majority of our brands are geared to the active and health-conscious consumer including sparkling waters, energy drinks, and juices. Our portfolio of Power+ Brands includes LaCroix®, LaCroix Cúrate®, and LaCroix NiCola® sparkling water products; Clear Fruit® non-carbonated water beverages enhanced with fruit flavor; Rip It® energy drinks and shots; and Everfresh®, Everfresh Premier Varietals™ and Mr. Pure® 100% juice and juice-based products. Additionally, we produce and distribute carbonated soft drinks including Shasta® and Faygo®, iconic brands whose consumer loyalty spans more than 130 years.

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 consisting of warehouse and direct-store delivery. The warehouse delivery system allows our retail partners to further maximize their assets by utilizing their ability to pick up product at our warehouses, further lowering their/our product costs.

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

RESULTS OF OPERATIONS

Three Months Ended July 30, 2022 (firstJanuary 28, 2023 (third quarter of fiscal 2023) compared to

Three Months Ended July 31, 2021 (firstJanuary 29, 2022 (third quarter of fiscal 2022)

Net sales for the firstthird quarter of fiscal 2023 increased 2.1%3.7% to $318.1$268.5 million from $311.7$258.9 million for the firstthird quarter of fiscal 2022. The increase in sales resulted primarily from a 10.2%6.9% increase in average selling price per case, partially offset by a 7.4% decrease3.0% decline in case volume. The volume decrease includes a 9.7% decrease in Power+ Brands primarily due to the volume decline of the sparkling water category, and reduced consumer promotional activity. carbonated soft drink volume.

Gross profit for the firstthird quarter of fiscal 2023 decreasedincreased to $99.4$94.9 million from $124.8$93.8 million for the firstthird quarter of fiscal 2022. The decreaseincrease in gross profit is due to a 26.3%the increase in cost of sales per caseaverage selling price, partially offset in part by increased average selling prices per case.packaging and ingredient costs.  The cost of sales per case increase was dueincreased 8.4% and gross margin decreased to increases in packaging, primarily aluminum, ingredients and labor costs. Gross margin was 31.2%35.4% from 36.2% for the firstthird quarter of fiscal 2023 and 40.0% for2022.  Although costs per case remain elevated, the firstthird quarter of fiscal 2022.2023 is the second consecutive quarter of declining costs per case.

Selling, general and administrative expenses for the firstthird quarter of fiscal 2023 decreased $1.5$2.6 million to $52.9$50.5 million from $54.4$53.1 million for the firstthird quarter of fiscal 2022. The decrease was primarily due to a decrease in marketing costs partially offset by increasedand shipping costs.  The decline in marketing costs was primarily due to reduced programs with retail partners.  As a percent of net sales, selling, general and administrative expenses decreased to 16.6%18.8% from 20.5% for the first quarter of fiscal 2023 from 17.5% for the firstthird quarter of fiscal 2022.

Other expense-income (expense), net includes interest income of $24,000$369,000 for the firstthird quarter of fiscal 2023 and $48,000$39,000 for the firstthird quarter of fiscal 2022. The decreaseincrease in interest income is due to changes ina higher return on lower average investedinvestment balances.

The Company’s effective income tax rate, based upon estimated annual income tax rates, was 23.6%23.5% for the firstthird quarter of fiscal 2023 and fiscal 2022. The difference between the effective rate and the federal statutory rate of 21% was primarily due to the effects of state income taxes.

Nine Months Ended January 28, 2023 (first nine months of fiscal 2023) compared to

Nine Months Ended January 29, 2022 (first nine months of fiscal 2022)

Net sales for the first nine months of fiscal 2023 increased 3.8% to $886.2 million from $853.8 million for the first nine months of fiscal 2022. The increase in sales resulted primarily from a 9.3% increase in average selling price per case and a 5.0% decline in case volumes which impacted both Power+ Brands and carbonated soft drinks.

Gross profit for the first nine months of fiscal 2023 decreased to $294.3 million from $320.1 million for the first nine months of fiscal 2022. The cost of sales per case increased 16.7% and gross margin decreased to 33.2% from 37.5% for the first nine months of fiscal 2022. The decrease in gross margin is due to increased packaging, ingredients and labor costs offset in part by increased average selling prices.

Selling, general and administrative expenses for the first nine months of fiscal 2023 decreased $986,000 to $156.5 million from $157.5 million for the first nine months of fiscal 2022. The decrease was primarily due to decreased marketing costs, partially offset by increased shipping and administrative costs.  The decline in marketing costs was primarily due to reduced programs with retail partners.  As a percent of net sales, selling, general and administrative expenses increased to 17.7% from 18.4% for the first nine months of fiscal 2022.

Other income (expense), net includes interest income of $544,000 for the first nine months of fiscal 2023 and $136,000 for the first nine months of fiscal 2022. The increase in interest income is due to a higher return on lower average investment balances.

The Company’s effective income tax rate, based upon estimated annual income tax rates, was 23.5% for the first quarternine months of fiscal 2023 and 23.6% for the first nine months of fiscal 2022. The difference between the effective rate and the federal statutory rate of 21% was primarily due to the effects of state income taxes.

LIQUIDITY AND FINANCIAL CONDITION

Liquidity and Capital Resources

Our principal source of funds is cash generated from operations. At July 30, 2022,January 28, 2023, we maintained $150 million unsecured revolving credit facilities, under which no borrowings were outstanding and $2.5$2.2 million was reserved for standby letters of credit. We believe existing capital resources will be sufficient to meet our liquidity and capital requirements for the next twelve months.

Cash Flows

The Company’s cash position increased $8.0$70.3 million duringfor the first quarternine months of fiscal 2023.  The Company repaid $302023 compared to a decrease of $153.2 million for the nine months of outstanding indebtedness during the quarter. fiscal 2022.

Net cash provided by operating activities for the first quarternine months of fiscal 2023 amounted to $40.6$112.3 million compared to $56.7$92.6 million for the first quarternine months of fiscal 2022. Net cash provided by operating activities for the first quarternine months of fiscal 2023 was principally provided by net income of $35.5$105.9 million, depreciation and amortization of $5.5$15.6 million, and amortization of operating right toof use assets of $3.2$9.9 million, offset in part by changes in working capital and other accounts.

Net cash used in investing activities for the first quarternine months of fiscal 2023 reflects capital expenditures of $2.6$12.3 million, compared to capital expenditures of $4.8$16.1 million for the first quarternine months of fiscal 2022. CertainWe intend to continue production capacity and efficiency improvement projects, are in progress and anticipateexpect fiscal 2023 capital expenditures willto be comparable tolower than fiscal 2022 levels.

Financial Position

At July 30, 2022,January 28, 2023, our working capital decreasedincreased to $121.8$198.4 million fromcompared to $129.2 million at April 30, 2022. The current ratio was 2.6 to 1 at January 28, 2023 compared to 1.9 to 1 at both July 30, 2022 and April 30, 2022. Trade receivables increased $6.7$3.5 million and days sales outstanding improvedincreased to 28.732.9 from 30.0. Inventories decreased $13.0$9.7 million and inventory turns remained at 9.9improved to 8.5 times from 8.2 times.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in market risks from those reported in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022.

ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, 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). 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.

There were no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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” 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,” and “estimates” constitute “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.

PART II - OTHER INFORMATION

ITEM 1A. RISK FACTORS

There have been no material changes in risk factors from those reported in our Annual Report on Form 10-K for the fiscal year ended April 30, 2022.

ITEM 6. EXHIBITS

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: September 8, 2022March 9, 2023