# National Beverage Corp: Form 10-K for the period ended Apr 27, 2019 - Company: [National Beverage Corp](/companies/fizz.md) (CIK 69891) - Form: 10-K - Filed: 2019-06-26 - Accepted by EDGAR: Jun 26, 2019, 20:37 ET - Period: 2019-04-27 - Accession: 0001437749-19-012816 - Inline XBRL: yes - Main document: https://www.sec.gov/Archives/edgar/data/69891/000143774919012816/fizz20190427_10k.htm - All documents and exhibits: https://www.sec.gov/Archives/edgar/data/69891/000143774919012816/ ## Figures reported in this filing Standardized XBRL line items for the period ended 2019-04-27. | Line item | Period | Value | XBRL concept | | --- | --- | ---: | --- | | Revenue | 3 months, 2019-01-27 to 2019-04-27 | $239.9m | us-gaap:Revenues | | Revenue | 12 months, 2018-04-29 to 2019-04-27 | $1.01bn | us-gaap:Revenues | | Cost of revenue | 12 months, 2018-04-29 to 2019-04-27 | $629.8m | us-gaap:CostOfRevenue | | Gross profit | 3 months, 2019-01-27 to 2019-04-27 | $84.6m | us-gaap:GrossProfit | | Gross profit | 12 months, 2018-04-29 to 2019-04-27 | $384.4m | us-gaap:GrossProfit | | Selling, general and administrative | 12 months, 2018-04-29 to 2019-04-27 | $204.4m | us-gaap:SellingGeneralAndAdministrativeExpense | | Interest expense | 12 months, 2018-04-29 to 2019-04-27 | $202.0k | us-gaap:InterestExpense | | Income tax | 12 months, 2018-04-29 to 2019-04-27 | $43.0m | us-gaap:IncomeTaxExpenseBenefit | | Net income | 3 months, 2019-01-27 to 2019-04-27 | $26.1m | us-gaap:NetIncomeLoss | | Net income | 12 months, 2018-04-29 to 2019-04-27 | $140.9m | us-gaap:NetIncomeLoss | | Diluted EPS | 3 months, 2019-01-27 to 2019-04-27 | $0.56 | us-gaap:EarningsPerShareDiluted | | Diluted EPS | 12 months, 2018-04-29 to 2019-04-27 | $3.00 | us-gaap:EarningsPerShareDiluted | | Basic EPS | 3 months, 2019-01-27 to 2019-04-27 | $0.56 | us-gaap:EarningsPerShareBasic | | Basic EPS | 12 months, 2018-04-29 to 2019-04-27 | $3.02 | us-gaap:EarningsPerShareBasic | | Diluted shares (weighted) | 12 months, 2018-04-29 to 2019-04-27 | 46,917,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding | | Operating cash flow | 12 months, 2018-04-29 to 2019-04-27 | $139.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities | | Capital expenditure | 12 months, 2018-04-29 to 2019-04-27 | $38.3m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment | | Dividends paid | 12 months, 2018-04-29 to 2019-04-27 | $135.2m | us-gaap:PaymentsOfDividendsCommonStock | | Cash and equivalents | at 2019-04-27 | $156.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue | | Current assets | at 2019-04-27 | $321.5m | us-gaap:AssetsCurrent | | Total assets | at 2019-04-27 | $452.2m | us-gaap:Assets | | Current liabilities | at 2019-04-27 | $97.0m | us-gaap:LiabilitiesCurrent | | Shareholders' equity | at 2019-04-27 | $331.6m | us-gaap:StockholdersEquity | ## Business As filed, 20,254 characters. ### GENERAL 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. 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 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 Innovation –* Building on a rich tradition of flavor and brand innovation with more than a 130 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 our naturally-essenced beverages are developed and tested in-house and only made commercially available 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. *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 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. *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 product concepts to lead the market defines 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®, 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 distribute carbonated soft drinks including Shasta® and Faygo®, iconic brands whose consumer loyalty spans more than 130 years. ### 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, 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-merchandisers, club stores, drug stores, 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 an innovative addition to a brand that is the healthy alternative for today’s consumers. NiCola® by LaCroix, an innovative sparkling water, captures the ‘crossover’ cola consumers with its ‘*innocent’* effect of no calories, sodium, sweetener or any other 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 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 Coffea Exotica (Sumatra coffee and cola). Additional LaCroix themes are in development and feature unique packaging, ground-breaking flavor concepts, and a go-to-market strategy designed to maximize cultural demographic concepts. ### Shasta Sparkling Shasta® Sparkling Water duplicates the iconic flavors that have charmed loyal Shasta consumers over the past 130 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 complements a healthier lifestyle with its eloquent design and packaging in tall 10.5 ounce cans with an industry-first “clean” label. ### 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, the brands’ signature package is a hot-filled, 16 oz. glass bottle primarily 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 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 continues as a “Mission Tradition®” by proudly supporting our troops at home and abroad with 14 unique flavors and six sugar-free options. With its unique positioning, Rip It also continues to energize its growing fan base of gamers and athletes. 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. ### Carbonated Soft Drinks – Celebrating its 130th year, Shasta® is recognized as a bottling industry pioneer and innovator. Shasta features multiple flavors, including products targeted to the growing Hispanic and other ethnic markets, and has earned consumer loyalty by delivering value and convenience with such unique tastes as Raspberry Crème, Tiki Punch, and California Dreamin’. More than 110 years old, Faygo® products are primarily distributed east of the Mississippi River and include numerous unique flavors including Red Pop®, Moon Mist®, and Rock’n’Rye®. We tailor our marketing and promotion programs by geographic area; many 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. In recent years we reformulated many of our brands to reduce caloric content while still preserving their time-tested flavor profiles. Our brands, optically and ingredient-wise, are always a work in process. We continually strive to make all our drinks healthier while maintaining their iconic taste profiles. ### 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. We craft a substantial portion of our flavors and concentrates. By controlling our own formulas throughout our bottling network, we are 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, 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. 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 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. 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 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. Our marketing emphasizes 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 participation in regional events, special event marketing, endorsements, consumer coupon distribution and product sampling. We offer numerous promotional programs to retail customers, including cooperative advertising support, ‘Brand*ED’* 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. 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 While LaCroix® Sparkling Water is the brand of choice as the number one sparkling water in 41 of the 52 Nielsen metropolitan statistical areas, 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. ### 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. 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 proposed in certain other states and localities, as well as 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 27, 2019, we employed approximately 1,640 people, of which 380 are covered by collective bargaining agreements. We believe we maintain good relations with our employees. ### 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. ## Risk factors As filed, 5,246 characters. 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, may tarnish our reputation and brand image and 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. **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 could 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. **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. Compliance 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 and retirement 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. 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. ## Properties As filed, 1,302 characters. 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. 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, we 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. ## Legal proceedings As filed, 592 characters. The Company has been named a defendant in certain legal proceedings, including derivative and class action complaints. Company counsel has asserted various meritorious defenses and is vigorously defending these matters. Certain of these complaints include allegations that the Company’s LaCroix branded products contain synthetic ingredients and thereby violate specific state consumer protection statutes and other laws. The Company believes the litigation is without merit and will not have a material adverse effect on the Company’s financial position, cash flows or results of operations. ## Management's discussion and analysis As filed, 21,119 characters. ### 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. Our carbonated soft drink brands continue to be modified as we endeavor to make them more adaptable to changing consumer preferences. 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. National Beverage Corp., in recent years, has transformed to an innovative healthier refreshment 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 committed to our quest to innovate for the joy, benefit and enjoyment of our consumers’ healthier lifestyle! Presently, National Beverage Corp. is uniquely positioned in three distinctive ways: **(1)** The retail grocery industry is in revolution. In prior years, each retailer induced their consumer with a proprietary brand (especially soft drinks), but today understand**s** 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 grocer today is in the most competitive-indexed service industry, without exception. Innovation, plus the urgent time demands on the consumer, is requiring quick, expedient shopping and home delivery is even more of a current shoppers’ choice. Retailers cannot carry slower-moving items that home delivery will not support. **(3)** The new 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 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 that larger competitors who are burdened by legacy production, distribution complexity and costs cannot quickly comply with. 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. 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 prior 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. ### RESULTS OF OPERATIONS ### Net Sales Net sales for fiscal year ended April 27, 2019 (“Fiscal 2019”) increased 3.9% to $1,014 million compared to $975.7 million for fiscal year ended April 28, 2018 (“Fiscal 2018”). Adjusted for private label carbonated soft drinks no longer produced, net sales increased 6.2% . The increase in sales resulted primarily from a 5.0% increase in branded case volume and a higher average selling price. Power+ Brands volume increased 8.9%; branded carbonated soft drinks volume declined 3.0%. Net sales for Fiscal 2018 increased 18.0% to $975.7 million compared to $826.9 million for the fiscal year ended April 29, 2017 (“Fiscal 2017”). The increase in sales resulted primarily from a 19.8% increase in branded case volume and, to a lesser extent, a higher average selling price. Power+ Brands volume increased 38.9%; branded carbonated soft drinks volume declined 6.2%. The Company concluded production of lower-margin, private-label carbonated soft drinks in the third quarter of Fiscal 2018, allowing greater focus on brand equity appreciation. ### Gross Profit Gross profit for Fiscal 2019 decreased 1.7% to $384.4 million compared to $391.1 million for Fiscal 2018. The decrease in gross profit is due to increased costs per case offset in part by volume growth in higher-margin Power+ Brands. Cost of sales per case increased 7.7% primarily due to higher aluminum and manufacturing costs. Manufacturing costs were temporarily impacted by production disruptions as a result of capital projects designed to increase production capacity and efficiency. Gross margin declined to 37.9%. Gross profit for Fiscal 2018 increased 20.0% to $391.1 million compared to $326.1 million for Fiscal 2017. The increase in gross profit is due to increased volume and growth in higher-margin Power+ Brands, offset in part by increased cost of sales per case. Cost of sales per case increased 1.0% primarily due to higher aluminum costs. Gross margin expanded to 40.1%. 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 $204.4 million or 20.2% of net sales for Fiscal 2019, increasing $17.5 million from Fiscal 2018. Selling, general and administrative expenses increased in total and as a percent of net sales primarily due to increased shipping costs and marketing spending increases. Selling, general and administrative expenses were $186.9 million or 19.2% 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. ### Interest Expense and Other Expense (Income) - Net Interest expense is comprised of fees related to maintaining lines of credit. Interest expense was essentially flat for all years presented. Other income is interest income of $4.1 million for Fiscal 2019, $1.6 million for Fiscal 2018 and $.6 million for Fiscal 2017. The change in interest income is due to changes in average invested balances and increased return on investments. ### Income Taxes Our effective tax rate was 23.4% for Fiscal 2019, 27.1% for Fiscal 2018 and 34.3% for Fiscal 2017. 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 21.0% for Fiscal 2019. 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. The differences between the effective rate and the federal statutory rate were primarily due to the effects of state income taxes, and for Fiscal 2018 and Fiscal 2017, the domestic manufacturing deduction. See Note 7 of Notes to Consolidated Financial Statements. ### LIQUIDITY AND FINANCIAL CONDITION ### Liquidity and Capital Resources At April 27, 2019, we maintained $100 million unsecured revolving credit facilities, under which no borrowings were outstanding and $2.1 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 4 of Notes to Consolidated Financial Statements. We continually evaluate capital projects to expand our production capacity, enhance packaging capabilities or improve efficiencies at our production facilities. Expenditures for property, plant and equipment amounted to $38.3 million for Fiscal 2019 primarily to expand production capacity. We intend to continue production capacity expansion projects in Fiscal 2020, but expect capital expenditures will decline from Fiscal 2019 levels in the near term. 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. Pursuant to a management agreement, we incurred a fee to Corporate Management Advisors, Inc. (“CMA”) of $10.2 million for Fiscal 2019, $9.8 million for Fiscal 2018 and $8.3 million for Fiscal 2017. At April 27, 2019, management fees payable to CMA were $2.4 million. See Note 5 of Notes to Consolidated Financial Statements. ### Cash Flows During Fiscal 2019, $139.4 million was provided by operating activities, $38.3 million was used in investing activities and $134.8 million was used in financing activities. Cash provided by operating activities decreased $15.3 million primarily due to lower net income and increased working capital. Cash used in investing activities increased due to increased capital expenditures to support volume growth. Cash used in financing activities includes the $135.2 million ($2.90 per share) special cash dividend paid on January 29, 2019. During Fiscal 2018, $154.7 million was provided by operating activities, $31.9 million was used in investing activities and $69.3 million was used in financing activities. Cash provided by operating activities increased $40.5 million primarily due to increased earnings offset in part by increased working capital. Cash used in investing activities increased due to increased 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 million ($1.50 per share) special cash dividend paid on August 4, 2017. ### Financial Position During Fiscal 2019, our working capital decreased to $224.4 million from $248.3 million at April 29, 2018. The decrease in working capital resulted from lower cash and equivalents due to the January 2019 cash dividend, primarily offset by higher inventory and lower accounts payable. Trade receivables increased $500,000 and days sales outstanding increased to 32.2 days from 31.4 days. Inventories increased $9.8 million or 16.1% as a result of increased finished goods and raw materials. Annual inventory turns decreased to 8.8 from 9.5 times. As of April 27, 2019, the current ratio was 3.3 to 1 compared to 3.4 to 1 at April 28, 2018. During Fiscal 2018, our working capital increased to $248.3 million from $181.1 million at April 29, 2017. 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 $13.0 million or 18.3% due to increased sales, and days sales outstanding increased to 31.4 days from 30.6 days. Inventories increased $7.6 million or 14.2% as a result of increased finished goods and raw materials to support sales increases. Annual inventory turns remained unchanged at 9.5 times. As of April 28, 2018, the current ratio was 3.4 to 1 compared to 3.1 to 1 at April 29, 2017. ### CONTRACTUAL OBLIGATIONS Contractual obligations at April 27, 2019 are payable as follows: *(In thousands)* | | Total | Less Than 1 Year | 1 to 3 Years | 3 to 5 Years | More Than 5 Years | | --- | ---: | ---: | ---: | ---: | ---: | | Operating leases | $52,037 | $16,105 | $21,978 | $12,251 | $1,703 | | Purchase commitments | 19,874 | 17,485 | 2,060 | 329 | - | | Total | $71,911 | $33,590 | $24,038 | $12,580 | $1,703 | We contribute to certain pension plans under collective bargaining agreements and to a discretionary profit sharing plan. Annual contributions were $3.8 million for Fiscal 2019, $3.4 million for Fiscal 2018 and $3.1 million for Fiscal 2017. See Note 10 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 million have been issued in connection with our self-insurance programs. These standby letters of credit expire through June 2020 and are expected to be renewed. ### OFF-BALANCE SHEET ARRANGEMENTS 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’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 specific customer circumstances, credit conditions and historical write-offs. ### 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 Our 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. ### 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, however smaller direct-store delivery accounts may be sold on a cash basis. Our credit terms normally 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 adopted ASU 2014-09, *Revenue from Contracts with Customers*, and its amendments on April 29, 2018. See Note 1 to our consolidated financial statements. ### FORWARD-LOOKING STATEMENTS National Beverage 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 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 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, litigation risk 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. ## Market risk As filed, 885 characters. ### 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. See Note 6 of Notes to Consolidated Financial Statements. ### Interest Rates At April 27, 2019, the Company had no borrowings outstanding. We had no debt-related interest rate exposure during Fiscal 2019. ## Controls and procedures As filed, 2,881 characters. ### 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”)). 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 are (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 27, 2019. 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 27, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Filed Jun 26, 2019. Source: SEC EDGAR, the filing index for accession 0001437749-19-012816. Last ingested by Listed: Oct 24, 2026, 14:53 ET. No prices; not investment advice.