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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 28, 2001
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-14170
NATIONAL BEVERAGE CORP.
(Exact name of registrant as specified in its charter)
Delaware 59-2605822
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One North University Drive, Ft. Lauderdale, FL 33324
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(Address of principal executive offices) (Zip Code)
(954) 581-0922
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes ( X ) No ( )
The number of shares of Registrant's common stock outstanding as of August 31,
2001 was 18,160,938.
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NATIONAL BEVERAGE CORP.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JULY 28, 2001
INDEX
PART I - FINANCIAL INFORMATION
Page
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Item 1. Financial Statements
Condensed Consolidated Balance Sheets
as of July 28, 2001 and April 28, 2001 ............................. 3
Condensed Consolidated Statements of Income
for the three months ended July 28, 2001
and July 29, 2000 .................................................. 4
Condensed Consolidated Statements of Cash Flows
for the three months ended July 28, 2001
and July 29, 2000 .................................................. 5
Notes to Condensed Consolidated Financial Statements ............... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ...................... 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk .........12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ....................................13
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NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JULY 28, 2001 AND APRIL 28, 2001
(In thousands, except share amounts)
(Unaudited)
July 28, April 28,
2001 2001
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ASSETS
Current assets:
Cash and equivalents $ 37,822 $ 39,625
Trade receivables - net of allowances of $597 ($559 at April 28, 2001) 48,664 41,068
Inventories 34,934 31,747
Deferred income taxes 1,415 1,333
Prepaid and other 4,773 6,518
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Total current assets 127,608 120,291
Property - net 61,339 62,215
Goodwill 13,145 13,145
Intangible assets - net 2,086 2,114
Other assets 5,816 6,103
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$ 209,994 $ 203,868
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 34,607 $ 37,651
Accrued liabilities 22,920 20,131
Income taxes payable 2,224 65
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Total current liabilities 59,751 57,847
Long-term debt 19,986 24,136
Deferred income taxes 10,939 10,208
Other liabilities 3,214 3,189
Commitments and contingencies
Shareholders' equity:
Preferred stock, 7% cumulative, $1 par value, aggregate liquidation
preference of $15,000 - 1,000,000 shares authorized; 150,000
shares issued; no shares outstanding 150 150
Common stock, $.01 par value - authorized 50,000,000 shares;
issued 22,134,612 shares 221 221
Additional paid-in capital 15,638 15,638
Retained earnings 117,321 109,705
Treasury stock - at cost:
Preferred stock - 150,000 shares (5,100) (5,100)
Common stock - 3,972,634 shares (12,126) (12,126)
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Total shareholders' equity 116,104 108,488
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$ 209,994 $ 203,868
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See accompanying Notes to Condensed Consolidated Financial Statements.
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NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JULY 28, 2001 AND JULY 29, 2000
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
2001 2000
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Net sales $152,385 $140,226
Cost of sales 102,259 94,173
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Gross profit 50,126 46,053
Selling, general and administrative expenses 37,689 34,631
Interest expense 315 646
Other income - net 221 451
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Income before income taxes 12,343 11,227
Provision for income taxes 4,727 4,277
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Net income $ 7,616 $ 6,950
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Net income per share -
Basic $ .42 $ .38
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Diluted $ .40 $ .37
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Average common shares outstanding -
Basic 18,162 18,177
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Diluted 18,957 18,861
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See accompanying Notes to Condensed Consolidated Financial Statements.
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NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JULY 28, 2001 AND JULY 29, 2000
(In thousands)
(Unaudited)
2001 2000
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OPERATING ACTIVITIES:
Net income $ 7,616 $ 6,950
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,886 2,627
Deferred income tax provision (benefit) 649 (36)
Loss on sale of property 61 10
Changes in assets and liabilities:
Trade receivables (7,596) (7,803)
Inventories (3,187) (1,344)
Prepaid and other assets 1,301 87
Accounts payable (3,044) (2,465)
Other liabilities, net 4,973 6,024
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Net cash provided by operating activities 3,659 4,050
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INVESTING ACTIVITIES:
Property additions (1,318) (596)
Proceeds from sale of assets 6 --
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Net cash used in investing activities (1,312) (596)
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FINANCING ACTIVITIES:
Debt repayments (150) (200)
Borrowings (payments) on line of credit, net (4,000) (5,000)
Repurchase of common stock -- (184)
Proceeds from stock options exercised -- 18
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Net cash used in financing activities (4,150) (5,366)
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NET DECREASE IN CASH AND EQUIVALENTS (1,803) (1,912)
CASH AND EQUIVALENTS - BEGINNING OF YEAR 39,625 38,482
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CASH AND EQUIVALENTS - END OF PERIOD $ 37,822 $ 36,570
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OTHER CASH FLOW INFORMATION:
Interest paid $ 415 $ 821
Income taxes paid 174 840
See accompanying Notes to Condensed Consolidated Financial Statements.
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NATIONAL BEVERAGE CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 28, 2001
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
National Beverage Corp. and its subsidiaries (the "Company") have been prepared
in accordance with generally accepted accounting principles for interim
financial information. The financial statements do not include all information
and notes required by generally accepted accounting principles for complete
financial statements. Except for the matters disclosed herein, there has been no
material change in the information disclosed in the notes to consolidated
financial statements for the fiscal year ended April 28, 2001. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Results for the interim
periods presented are not necessarily indicative of results which might be
expected for the entire fiscal year. Certain prior year amounts have been
reclassified to conform to the current year presentation.
2. CHANGES IN ACCOUNTING STANDARDS
The company adopted Statement of Financial Accounting Standards ("SFAS") No. 133
"Accounting for Derivative Instruments and Hedging Activities" in the three
months ended July 28, 2001 (first quarter of fiscal 2002). The adoption of SFAS
No. 133 did not have a material impact on the Company's financial position or
operating results and has not resulted in significant changes to its financial
risk management practices. Also, in the first quarter of fiscal 2002, the
Company adopted SFAS No. 142 "Goodwill and Other Intangible Assets". The
adoption of SFAS No. 142 did not materially impact the Company's financial
position or operating results. See Note 5.
3. INVENTORIES
Inventories are stated at the lower of first-in, first-out cost or market.
Inventories at July 28, 2001 are comprised of finished goods of $19,097,000 and
raw materials of $15,837,000. Inventories at April 28, 2001 are comprised of
finished goods of $17,721,000 and raw materials of $14,026,000.
4. PROPERTY
Property consists of the following:
(In thousands)
July 28, April 28,
2001 2001
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Land $ 10,625 $ 10,625
Buildings and improvements 35,203 35,088
Machinery and equipment 95,033 94,356
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Total 140,861 140,069
Less accumulated depreciation (79,522) (77,854)
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Property - net $ 61,339 $ 62,215
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Depreciation expense was $2,127,000 and $1,893,000 for the three-month periods
ended July 28, 2001 and July 29, 2000, respectively.
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5. GOODWILL AND INTANGIBLE ASSETS
In accordance with SFAS No. 142, adopted in the first quarter of fiscal 2002,
the Company discontinued the amortization of goodwill and certain intangible
assets that were determined to have an indefinite life. Had the Company applied
the non-amortization provisions of SFAS No. 142 at the beginning of the first
quarter of fiscal 2001, net income for that period would have increased by
$89,000 or less than $.01 per share. Intangible assets at July 28, 2001 and
April 28, 2001 consist of the following:
(In thousands)
July 28, April 28,
2001 2001
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Unamortized trademarks $ 1,587 $ 1,601
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Amortized distribution rights $ 855 $ 855
Less accumulated amortization (356) (342)
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Net $ 499 $ 513
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Amortization expense related to intangible assets was $14,000 and $35,000 for
the three months ended July 28, 2001 and July 29, 2000, respectively.
6. DEBT
Debt consists of the following:
(In thousands)
July 28, April 28,
2001 2001
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Credit Facilities $ -- $ 4,000
Term Loan Facilities 19,750 19,900
Other 236 236
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Total $ 19,986 $ 24,136
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Certain subsidiaries of the Company maintain unsecured revolving credit
facilities aggregating $48 million (the "Credit Facilities") and unsecured term
loan facilities ("Term Loan Facilities") with banks. The Credit Facilities
expire through December 10, 2002 and bear interest at 1/2% below the banks'
reference rate or 1% above LIBOR, at the subsidiaries' election. The Term Loan
Facilities are repayable in installments through July 31, 2004, and bear
interest at the banks' reference rate or 1 1/4% above LIBOR, at the
subsidiaries' election. The Company intends to utilize its existing long-term
Credit Facilities to fund the current principal payments due on its Term Loan
Facilities.
Certain of the Company's debt agreements contain restrictions which require
subsidiaries to maintain certain financial ratios and minimum net worth, and
limit subsidiaries with respect to incurring additional indebtedness, paying
cash dividends and making certain loans, advances or other investments. These
restrictions are not expected to have a material adverse impact on the
operations of the Company. At July 28, 2001, retained earnings of approximately
$42 million were available for distribution and the Company was in compliance
with all loan covenants.
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7. CAPITAL STOCK
At July 28, 2001, options to purchase 1,269,016 shares at a weighted average
exercise price of $3.72 (ranging from $.13 to $9.88 per share) were outstanding
and stock-based awards to purchase 441,824 shares of common stock were available
for grant. The Company's Board of Directors has approved, subject to
shareholders approval at the Company's fiscal 2001 Annual Shareholders Meeting,
an amendment to the Company's Omnibus Incentive Plan and Special Stock Option
Plan to increase the number of shares available for award by 600,000 and 100,000
shares, respectively.
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PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
National Beverage Corp. (the "Company") is a holding company for various
operating subsidiaries that develop, manufacture, market and distribute a
complete portfolio of quality beverage products throughout the United States.
The Company's brands emphasize distinctive flavor variety, including its
flagship brands Shasta(R) and Faygo(R), complete lines of multi-flavored and
cola soft drinks. In addition, the Company offers an assortment of premium
beverages geared toward the health-conscious consumer, including Everfresh(R),
Home Juice(R) and Mr. Pure(R) 100% juice and juice-based products; and
LaCROIX(R), Mt. Shasta(TM), Crystal Bay(R) and ClearFruit(R) flavored and spring
water products. The Company also provides specialty products, including VooDoo
Rain(TM), a line of alternative beverages geared toward young consumers,
Ohana(R) fruit-flavored drinks, and St. Nick's(R) holiday soft drinks.
Substantially all of the Company's brands are produced in its sixteen
manufacturing facilities, which are strategically located in major metropolitan
markets throughout the continental United States. The Company also develops and
produces soft drinks for retail grocery chains, warehouse clubs,
mass-merchandisers and wholesalers ("allied brands") as well as soft drinks for
other beverage companies.
The Company's strategy emphasizes the growth of its branded products by offering
a diverse beverage portfolio of proprietary flavors; by supporting the franchise
value of regional brands; by developing and acquiring innovative products
tailored toward healthy lifestyles; and by appealing to the "quality-price"
sensitivity factor of the family consumer. Management believes that the
"regional share dynamics" of its brands have a consumer loyalty within local
markets that generates more aggressive retailer sponsored promotional
activities.
The Company occupies a unique position in the industry as a vertically
integrated national company delivering branded and allied brands through a
hybrid distribution network to multiple beverage channels. As part of its sales
and marketing strategy, the Company enters into long-term contractual
relationships that join the expertise of Company sales, marketing and
manufacturing functions with national and regional retailers marketing/sales
expertise to cause the maximum joint effort in generating sales for branded and
allied branded products. These "Strategic Alliances" provide for retailer
promotional support for the Company's brands and nationally integrated
manufacturing and distribution services for the retailer's allied brands.
Over the last several years, the Company has focused on increasing penetration
of its brands in the convenience channel through company-owned and independent
distributors. The convenience channel is composed 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, the Company has
undertaken specific measures to expand its distribution in this channel. These
include the development of products specifically targeted to this market, such
as VooDoo Rain, ClearFruit, Everfresh, Home Juice and Mr. Pure. Also, the
Company has created proprietary and specialized packaging for these products
with specific graphics for the discriminating consumer. Management intends to
continue its focus on enhancing growth in the convenience channel through both
specialized packaging and innovative product development.
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Beverage industry sales are seasonal with the highest volume typically realized
during the summer months. Additionally, the Company's operating results are
subject to numerous factors, including fluctuations in the costs of raw
materials, changes in consumer preference for beverage products and competitive
pricing in the marketplace.
RESULTS OF OPERATIONS
Three Months Ended July 28, 2001 (first quarter of fiscal 2002) compared to
Three Months Ended July 29, 2000 (first quarter of fiscal 2001)
Net sales for the three months ended July 28, 2001 increased approximately $12.2
million, or 8.7%, over the three months ended July 29, 2000. This improvement
was due primarily to increased pricing of certain branded products, volume
growth in flavored carbonated soft drinks and sales of Ritz and Crystal Bay
brands acquired in September 2000. The improvement was partially offset by
declines related to certain non-branded business and product mix. Additionally,
the Company's premium beverages gained volume during the first quarter of fiscal
2002 as a result of increased distribution within the convenience channel.
Gross profit approximated 32.9% of net sales for the first quarter of fiscal
2002 and 32.8% of net sales for the first quarter of fiscal 2001. This
improvement was due to the increased pricing mentioned above and the favorable
effect of volume growth on fixed manufacturing costs, partially offset by
changes in product mix and increased utility costs.
Selling, general and administrative expenses were $37.7 million or 24.7% of net
sales for the first quarter of fiscal 2002, compared to $34.6 million or 24.7%
of net sales for last year. This change was primarily due to higher distribution
and selling costs related to increased volume.
Interest expense declined during the first quarter of fiscal 2002 compared to
the prior year due to reductions in average debt outstanding and interest rates.
Other income decreased primarily due to a decrease in interest income resulting
from lower yields. See Note 6 of Notes to Condensed Consolidated Financial
Statements.
The Company's effective rate for income taxes, based upon estimated annual
income tax rates, approximated 38.3% of income before taxes for the first
quarter of fiscal 2002 and 38.1% for the first quarter of fiscal 2001. The
difference between the effective rate and the federal statutory rate of 35% was
primarily due to the effects of state income taxes and non-deductible expenses.
Net income amounted to $7,616,000 or $.42 per share for the three months ended
July 28, 2001, compared to $6,950,000 or $.38 per share for the three months
ended July 29, 2000.
CAPITAL RESOURCES
The Company's current sources of capital are cash flow from operations and
borrowings under existing credit facilities. The Company maintains unsecured
revolving credit facilities of which approximately $46 million was available for
future borrowings at July 28, 2001. Management believes that existing capital
resources are sufficient to meet the Company's and the parent company's capital
requirements for the foreseeable future.
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Management views earnings before interest expense, taxes, depreciation and
amortization ("EBITDA") as a key indicator of the Company's operating
performance and enterprise value, although not as a substitute for cash flow
from operations or operating income. The Company's EBITDA increased 7.2% to
$15.5 million for the first quarter of fiscal 2002 from $14.5 million last year.
Management believes that EBITDA is sufficient to support additional growth and
debt capacity.
SUMMARY OF CASH FLOWS
The Company's principal source of cash during the first quarter of fiscal 2002
was $3.7 million provided by operating activities. The Company's primary uses of
cash were net debt repayments of $4.2 million and capital expenditures of $1.3
million.
Net cash provided by operating activities decreased to $3.7 million from $4.1
million largely due to an increase in working capital requirements partially
offset by increases in net income and non-cash charges. Net cash used in
investing activities increased to $1.3 million from $.6 million as a result of
an increase in capital expenditures. Net cash used in financing activities
decreased approximately $1.2 million for the first quarter of fiscal 2002 as
compared to last year due to a decline in net debt repayments.
FINANCIAL CONDITION
During the first quarter of fiscal 2002, the Company's working capital improved
to $67.9 million from $62.4 million primarily due to cash generated from
operations and an increase in current assets. Trade receivables, inventories,
and accrued liabilities increased as a result of higher sales. At July 28, 2001,
the current ratio was 2.1 to 1 while the debt-to-equity ratio amounted to .2 to
1.
LIQUIDITY
The Company continually evaluates capital projects designed to expand capacity
and improve efficiency at its manufacturing facilities. The Company presently
has no material commitments for capital expenditures and expects that fiscal
2002 capital expenditures will be comparable to fiscal 2001.
Certain debt agreements contain restrictions which require subsidiaries to
maintain certain financial ratios and minimum net worth, and limit the
subsidiaries with respect to incurring additional indebtedness, paying cash
dividends and making loans, advances or other investments. These restrictions
are not expected to have a material adverse impact on the operations of the
Company. At July 28, 2001, retained earnings of approximately $42 million were
available for distribution and the Company was in compliance with all loan
covenants and restrictions. See Note 6 of Notes to Condensed Consolidated
Financial Statements.
FORWARD-LOOKING STATEMENTS
Certain statements in this Quarterly Report on Form 10-Q (this "Form 10-Q"),
including statements under "Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations," constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results,
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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
the Company's Strategic Alliance objective; success in acquiring other beverage
businesses; success of new product and flavor introductions; fluctuations in the
costs of raw materials; the Company's ability to increase prices; continued
retailer support for the Company's brands; changes in consumer preferences;
success of implementing business strategies; changes in business strategy or
development plans; government regulations; regional weather conditions; and
other factors referenced in this Form 10-Q. The Company disclaims 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There are no material changes to the disclosures made on this matter in the
Company's Annual Report on Form 10-K for the fiscal year ended April 28, 2001.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None
(b) Reports on Form 8-K: None
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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 17, 2001
NATIONAL BEVERAGE CORP.
(Registrant)
By: \s\ Dean A. McCoy
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Dean A. McCoy
Senior Vice President - Controller
(On behalf of the Registrant and as
Principal Accounting Officer)
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